SUMMARY

Employer appealed the decision of the Industrial Commission that awarded temporary total disability benefits to the employee. The employer argued that the commission erred when it ruled that benefits must be paid even though the employee, who was only partially disabled, had not made reasonable efforts to secure other employment. The commission ruled for the employee because the employer had paid benefits without a written memorandum of agreement, and had not proved that it had offered the employee suitable alternative employment.

The Court of Appeals, en banc, affirmed the decision of the commission and reversed the panel decision reported at 3 Va. App. 73, 348 S.E.2d 42 (1986). The Court held that the commission correctly determined that because of the employer's failure to execute and file a memorandum of agreement, its payment of compensation to the employee for a period of thirteen months, and its failure to contest the compensability of the injury, the employer could not be placed in a better position than it would have been in had it complied with the provisions of Code Sec. 65.1-93. The Court further held that there was credible evidence to support the commission's finding that the employee reasonably believed that he was entitled to compensation because the employer paid benefits for thirteen months without executing a memorandum of agreement.

Affirmed.

UPON A REHEARING EN BANC OPINION

BENTON, J.

On rehearing en banc, Thomas McGuinn seeks reinstatement of an award entered by the Industrial Commission but subsequently overturned by a panel of this court in National Linen Service v. McGuinn, 3 Va. App. 73, 348 S.E.2d 42 (1986). For the reasons which follow, we affirm the decision of the commission.

Thomas McGuinn injured his ankle in August, 1983, while employed by National Linen as a laundry truck driver. He underwent surgery for reconstruction of the lateral ankle ligaments. In August 1984 Dr. You concluded that McGuinn could not carry heavy weights or go up and down stairs, but he believed that McGuinn should be able to drive a truck. Although Dr. You felt that McGuinn was merely experiencing residual symptoms from his surgery, he reported that Dr. Zilberfarb believed McGuinn had symptoms from sensory neuroma of the sural nerve. Dr. Zilberfarb examined McGuinn at the request of the carrier and concluded that he could not perform his duties as a route sales representative and that he required further medical and rehabilitative attention before he could return to work. In November, Dr. You concluded that McGuinn had regained almost full strength of his muscles and had good stability of his ankle joint. Dr. You acknowledged his continuing disagreement with Dr. Zilberfarb, who believed that McGuinn had developed a neuroma and was not able to return to his regular duties.

On December 19, 1984, McGuinn returned to light duty work for National Linen after a branch manager asked him to try the job. He assisted another driver on his regular route; however, after two and one-half hours of work his ankles became so swollen that he could not continue stepping on and off the truck. The vibration of the truck also caused pain in his ankle. Later that day he advised the branch manager that he was incapable of performing the work.

Dr. You then recommended that he attempt to work no more than four hours a day and limit his standing and walking to two to three hours. National Linen advised McGuinn that they did not have available part-time positions within those limitations and ceased payment of benefits. National Linen paid McGuinn temporary total disability benefits for the period November 22, 1983, through December 17, 1984, but did not execute and submit a memorandum of agreement to the Industrial Commission.

On January 23, 1985, McGuinn filed an application for hearing with the commission alleging continued entitlement to temporary total benefits and National Linen's refusal to execute and file a memorandum of agreement. National Linen defended against the claim on the ground that McGuinn had not made reasonable efforts to market his remaining capacity for work. McGuinn testified that he "thought he was still on Comp," but that he had inquired about employment opportunities at Denny's Restaurant, with a friend who was a painter, and with his father who operates several fast food restaurants. None had jobs within the limitations recommended by his doctor.

The deputy commissioner entered an award for total work incapacity compensation limited to the period November 22, 1983, through December 18, 1984, with credit given the employer for payments made prior to entry of the award. The full commission reversed the deputy commissioner's determination that McGuinn was not entitled to compensation subsequent to December 18, 1984; it found that, although McGuinn had made only a limited effort to market his remaining work capacity, his belief that "he was still under compensation is reasonable in view of the fact that the carrier has paid compensation for a period of thirteen months without executing a Memorandum of Agreement." The commission entered an award "for temporary total work incapacity commencing November 22, 1983, and continuing until further conditions require a modification." A panel of this Court, holding that the commission's decision was inconsistent with the Supreme Court's ruling in Washington Metropolitan Transit Authority v. Harrison, 228 Va. 598, 324 S.E.2d 654 (1985), reversed the award.

(1-2) The Workers' Compensation Act encourages the voluntary settlement of claims arising from compensable injuries; however, it also expresses an equally strong policy that when agreements as to settlements are reached they must be memorialized in a memorandum of agreement filed with the commission. See Code Sec. 65.1-45; I.C. Rule 15. Code Sec. 65.1-93 explicitly requires voluntary agreements regarding compensation to be filed with the commission. In pertinent part the statute provides as follows:

If after injury or death, the employer and the injured employee or his dependents reach an agreement in regard to compensation or in compromise of a claim for compensation under this Act, a memorandum of the agreement in the form prescribed by the Industrial Commission shall be filed with the Commission for approval.

Id. (emphasis added). Failure to promptly file memorandum of agreements is violative of the statute and frustrates a primary purpose behind the Workers' Compensation Act — to expedite the entry of awards in cases where the parties agree as to the compensability of the employee's injury.

(3) National Linen argues that Code Sec. 65.1-72 gives it "an absolute right to make voluntary payment of compensation benefits, without executing a Memorandum of Agreement." We disagree. That section does not authorize an employer to ignore the provisions of Code Sec. 65.1-93. Rather, it merely provides that payments voluntarily made prior to the rendition of an award may be deducted from the total amount of compensation due pursuant to the award subsequently entered. It does not, even by inference, eviscerate the requirements of Code Sec. 65.1-93.

Here, National Linen paid McGuinn compensation for total work incapacity for a period of thirteen months, thus acknowledging the compensability of McGuinn's injury, but failed to execute and file a memorandum of agreement with the commission. The commission concluded, and we agree, that "it is reasonable to infer that the parties had reached an agreement as to the payment of compensation since the payments were made for thirteen months and there was no issue raised as to the compensability of the . . . [injury]." The situation is clearly one in which National Linen was required to file a memorandum of the agreement with the commission for its approval and entry of award under Code Sec. 65.1-93.

(4) Although Code Sec. 65.1-93 does not explicitly provide penalties for an employer's failure to comply with its provisions, an employer cannot be permitted to ignore the mandatory wording of the statute to the detriment of its employees. As the commission correctly noted, if National Linen had complied with the statute, McGuinn would have been covered by the commission's award. National Linen then would have been obligated to honor the award until it established by a preponderance of the evidence a change in condition under Code Sec. 65.1-99 and had been authorized by the commission to terminate the payment of benefits to McGuinn. We believe that because National Linen paid compensation benefits to McGuinn for thirteen months and failed to file with the commission a memorandum of agreement, it should be held to the same burden. To hold otherwise would be to allow an employer or its carrier to unilaterally violate the clear requirements of Sec. 65.1-93 and thereby frustrate the purpose behind that statute. The Workers' Compensation Act exists to protect employees, Ellis v. Commonwealth, 182 Va. 293, 303, 28 S.E.2d 730, 734 (1944), not to facilitate a deprivation of an employee's rights by an employer who has not complied with the statutory requirements.

To establish a change in condition and thus successfully carry its burden, National Linen would have had to introduce evidence that McGuinn was either able to return to his regular employment or that he had been offered or provided selective employment within his work capacity. See J.A. Foust Coal Co. v. Messer, 195 Va. 762, 765, 80 S.E.2d 533, 535 (1954). National Linen proffered no such evidence. To the contrary, the commission had before it evidence that McGuinn was unable to return to his regular employment and that National Linen failed to provide him part-time work within the restrictions suggested by his doctor. Therefore, National Linen did not succeed in carrying its burden and may not now avoid continued payments of benefits.

Contrary to National Linen's assertions, we do not believe it may invoke Washington Metropolitan Area Transit Authority v. Harrison, 228 Va. 598, 324 S.E.2d 654 (1985), to circumvent the mandate of Code Sec. 65.1-93. First, Harrison is not dispositive of the issue before this Court because there was no allegation in Harrison that the employer violated Code Sec. 65.1-93 or any other provision of the workers' compensation statutes. Furthermore, the employer in Harrison offered the claimant selective employment commensurate with his remaining work capacity, and the claimant successfully performed the selective work until terminated for economic reasons, eliminating any possibility that the claimant could have reasonably believed that he was entitled to total disability compensation. Here, in contrast, it was shown that McGuinn could not successfully perform his regular work. Additionally, National Linen did not offer evidence showing that it had offered to McGuinn alternative work within his physical limitations. To the contrary, when McGuinn advised National Linen that he was restricted by his doctor to four hour work days, he was told that they could not accommodate him.

In this case, National Linen stipulated compensability and stipulated payment of total work incapacity compensation through the date that McGuinn unsuccessfully attempted to return to light duty work. Unlike Harrison, the deputy commissioner and the commission found in this case that McGuinn was entitled to total work incapacity compensation for the period covered by National Linen's payments. Thus, but for National Linen's failure to file a memorandum of agreement as required by Code Sec. 65.1-93 McGuinn's procedural posture with respect to entitlement would have been unlike those of the claimants in Harrison, Pocahontas Fuel Co. v. Agee, 201 Va. 678, 112 S.E.2d 835 (1960), and Pocahontas Fuel Co. v. Barbour, 201 Va. 682, 112 S.E.2d 904 (1960). If the agreement had been filed, McGuinn's entitlement to compensation would have been established, as well as the compensability of his injury, thus obviating the need for him to show that he made reasonable efforts to market his remaining work capacity. See Harrison, 228 Va. at 601, 324 S.E.2d at 656.

Moreover, National Linen seeks to assert its right to a " Harrison defense" even though its failure to abide by Code Sec. 65.1-93 misled McGuinn to his detriment into believing that he was entitled to total work incapacity payments during the period of his disability. Where, as here, an employee justifiably relied upon the employer's conduct over a thirteen month period and was thus misled into believing that he was entitled to total work incapacity payments during the period of his disability, the doctrine of estoppel may appropriately be invoked to bar the employer from using Harrison to its advantage. See Harris v. Criterion Ins. Co., 222 Va. 496, 502, 281 S.E.2d 878, 881 (1981).

This case is distinguishable from Stuart Circle Hospital v. Alderson, 223 Va. 205, 288 S.E.2d 445 (1982). There, the court held that an employer cannot be estopped from raising the jurisdictional defense of the statute of limitations, absent fraud or other compelling circumstances. In contrast, existence of the defense provided to the employer by Harrison does not deprive either the commission or the reviewing court of jurisdiction to review the claimant's application. Thus, the rationale of Stuart Circle may not be invoked here to prevent the doctrine of estoppel from attaching to National Linen's conduct. Furthermore, and highly supportive of the commission's decision here, is the fact that subsequent to the Stuart Circle decision, Code Sec. 65.1-87.1 was enacted to provide for the tolling of the statute of limitations where the "conduct of the employer has operated to prejudice the rights" of an employee.

Even if we were to hold that McGuinn was bound by Harrison to show that he made reasonable efforts to market his remaining capacity for work, he succeeded in carrying that burden. Although the commission on review agreed with the deputy commissioner that McGuinn made only a very limited effort to market his remaining work capacity, it held that McGuinn was justified in so doing because of his reasonable belief that "he was still under compensation." The record shows that McGuinn attempted a return to work within the limits prescribed by his physician and was unable to perform the work. This case thus falls squarely within the rationale of Island Creek Coal Co. v. Fletcher, 201 Va. 645, 112 S.E.2d 883 (1960), where the court stated:

[T]hough the evidence bearing upon [claimant's] efforts to secure other employment that he could perform is not what might be desired, yet it shows that he was willing to accept other employment and did make an effort to work . . . but was unable to perform that work.

Id. at 648, 112 S.E.2d at 835.

In conclusion, the commission correctly determined that National Linen's failure to execute and file a memorandum of the agreement as required by Code Sec. 65.1-93, its payment of compensation to McGuinn for thirteen months, its failure to offer selective employment to McGuinn, and its failure to contest the compensability of the injury cannot place National Linen in a better position than it would have been in had it followed the requirements of Code Sec. 65.1-93. Furthermore, there is credible evidence in the record to support the commission's finding that McGuinn reasonably believed that he was still entitled to compensation in view of the fact that the employer had paid compensation for a period of thirteen months without executing a memorandum of agreement.

Accordingly, the decision of the three judge panel of this court is reversed and the decision by the full commission is affirmed.

Affirmed.

Koontz, C.J., Baker, J., Barrow, J., Coleman, J., and Duff, J., concurred.