Workers’ Compensation Claims and Coronavirus Layoffs: Disability Liability For Workers on Modified Duty


If an employee was working modified duty under a workers’ compensation claim, and they are laid off, there is a substantial question of whether they are entitled to TTD under the workers’ compensation claim.  There is a compelling argument that no TD is owed, and this is why:

In order for the employer to avoid TD liability when there are work restrictions, they must provide modified duty to the employee.  If the employee unreasonably fails to perform modified duty, then the employer may be able to avoid TD liability, but recent cases have held that the employer must show that the employee was terminated for “good cause.”  One question is whether a government order to close down a business as being nonessential, and the lay off as a direct result of such closure, is akin to termination for good cause.  This may be a case of first impression with the WCAB, and it remains to be seen whether the Board will make such a finding.  However, it should be noted that the WCAB will likely take a different approach in cases where an employer has across the board layoffs due to being declared a nonessential business, as opposed to an employer who lays off employees due to a slow down in business as a result of COVID-19.

Recent decisions from the WCAB have come down on the side of the employee in most cases where the employer has terminated an employee for cause, and they have awarded TTD in many cases.  With that said, however, there is a clear distinction between layoffs due to COVID-19 and termination for good cause, as demonstrated in the recent case of Skelton v. WCAB (2019), which will likely have a significant impact on this analysis.

In Skelton, the 6th District Court of Appeals found that TTD is to compensate an employee for his or her complete inability to work.  Once the employee is able to return to work in some capacity, and the employer has work available, then TTD liability ends.  The lower court held that TTD liability only ended once the employee reached Maximum Medical Improvement.  In the DCA opinion, the court found that no such distinction was valid.  Essentially, the Skelton court held that the “obligation to pay temporary disability benefits is tied to [Skelton’s] actual incapacity to perform the tasks usually encountered in [her] employment as the wage loss resulting therefrom” [citation omitted].

Here, we are assuming that the employee would still be able to perform modified duty but for the lay off due to COVID-19.  Strictly applying the court’s analysis, it would appear that no TTD liability would exist, because the employee would not be able to establish an actual incapacity to perform the work.  As such, there is a compelling argument that no TTD would be owed.  Please note that the WCAB will likely find in the injured worker’s favor and cite the cases that the lower court used in Skelton.  However, the WCAB may be bound to the holding in Skelton, unless it can distinguish the case before the Board from Skelton.


We would recommend that you proceed with caution and that taking this stance will likely lead to litigation, and the WCAB will go out of its way to award TTD under these circumstances. The decision to pay TTD or not should be made on a case by case basis.  Please note the Skelton dealt with the issue of whether the employee was entitled to TTD for attending industrial doctor’s appointments after returning to work on modified duty.  We are living in an unprecedented time of crisis, and again, the WCAB will likely find in favor of the injured worker, and this issue will need to be taken up to the court of appeal under very different facts than Skelton.

With that said, the injured worker is not being treated differently than any other similarly situated employees, as this analysis assumes cross the board lay-offs.  The injured worker would obviously be entitled to Unemployment Insurance benefits and all other benefits provided to his/her co-workers.  And, it should be noted that there are other cases that have come to the same conclusion as Skelton:

Ritchie v. WCAB (1994) 24 Cal.App.4th 1174, 59 Cal Comp Cases 243:

Medical TD is the basic benefit payable to a worker who is temporarily disabled due to industrial injury; it serves as a substitute for wages lost by the employee during the time he or she is incapacitated from working. ( Jimenez v. Workers’ Comp. Appeals Bd.(1991) 1 Cal.App.4th 61, 63 [1 Cal.Rptr.2d 660]; Livitsanos v. Superior Court (1992) 2 Cal.4th 744, 753 [7 Cal.Rptr.2d 808, 828 P.2d 1195]; 1 Hanna, Cal. Law of Employee Injuries and Workers’ Compensation (2d rev. ed. 1993) § 7.01[1], p. 7-4.) Medical TD benefits cease when the employee returns to work or is deemed medically able to return to work, or when the employee’s medical condition becomes permanent and stationary. (1 Hanna,, supra, at [***6]  § 7.02[1], p. 7-7.)

Signature Fruit Co. v. WCAB(Ochoa) (2006) 142 Cal.App.4th 790, 71 Cal Comp Cases 1044:

Temporary disability is intended as a substitute for an injured worker’s lost wages. The essential purpose of temporary disability indemnity is to help replace the wages the employee would have earned, but for the injury, during his or her period(s) of temporary disability. In contrast, permanent disability indemnity compensates for the residual handicap and/or impairment of function after maximum recovery from the effects of the industrial injury have been attained. Because temporary disability serves to replace lost wages, an employer’s obligation to pay temporary disability insurance to an injured worker ceases when such replacement income is no longer needed. Temporary disability payments end when the employee returns to work, is deemed able to return to work, or achieves permanent and stationary status and therefore becomes eligible for permanent disability. Under the same reasoning, it would be illogical to award an employee temporary disability as a wage replacement where it is undisputed that there otherwise would not be a wage to replace.

Dept. of Rehabilitation v. WCAB (Lauher) (2003) 30 Cal.App.4th 1281, 68 Cal Comp Cases 831:

Because TDI is intended primarily to substitute for the worker’s lost wages, in order to maintain a steady stream of income, an employer’s obligation to pay TDI to an injured worker ceases when such replacement income is no longer needed. Thus, the obligation to pay TDI ends when the injured employee either returns to work or is deemed able to return to work, or when the employee’s medical condition achieves permanent and stationary status.