Capua v. Weyerhaeuser Co.

Opinion of the Court by

On February 27, 2008, this court accepted a timely application for a writ of certiorari, filed by petitioner/ claimant-appellant Lani Capua on January 24, 2008, requesting this court review the Intermediate Court of Appeals’ (ICA) October 26, 2007 judgment on appeal, entered pursuant to its September 27, 2007 summary disposition order (SDO). Therein, the ICA affirmed the December 30, 2003 decision and order of the Labor and Industrial Relations Appeals Board (LIR-AB), which, in turn, affirmed the decision of the director of the Department of Labor and Industrial Relations (director). Both the LIRAB and the director determined that, inasmuch as Capua was previously awarded permanent partial disability (PPD) benefits, *441she was barred from receiving vocational rehabilitation (VR) services under Hawai'i Administrative Rules (HAR) § 12-14-36 (governing waiver of VR services under certain circumstances). Oral argument was held on April 17, 2008.

On application, Capua challenges—as she did before the ICA—the LIRAB’s denial of VR services to her, arguing that HAR § 12-14-36 is inconsistent with Hawai'i Revised Statutes (HRS) § 386-25 (1993) (governing an employee’s eligibility for VR services). Based on the discussion infra, we hold that the director exceeded his statutorily designated authority in promulgating HAR § 12-14-36 and, thus, the ICA erred in affirming the LIRAB’s December 30, 2003 decision and order. Accordingly, we vacate the ICA’s October 26, 2007 judgment on appeal and the LIRAB’s December 30, 2003 decision and order and remand this ease to the director with instructions to provide Capua with VR services, if she so desires at this time.

I. BACKGROUND

A. The Injury and the Award of PPD Benefits

On July 8, 1992, Capua suffered an on-the-job accident while employed as a sheet catcher 1 by respondenVemployer-appellee Weyer-haeuser Company. Capua injured her lower back while lifting and restacking cardboard sheets that had fallen off a conveyor belt. On July 14, 1992, Weyerhaeuser filed a WC-1 Employer’s Report of Industrial Injury, indicating that Capua “felt [a] sharp pain in [her] lower left back area” after “attempting to lift a stack (handful) of sheets.” On August 12, 1992, Weyerhaeuser filed a second WC-1 report, accepting liability for Capua’s injury.

[Capua] continued to work until September of 1992, when she was taken off work by her doctor. [Capua] was off work from September to November of 1992, and for various periods thereafter. [Weyerhaeu-ser] provided [Capua] with temporary light duty work upon her return and she gradually worked her way back to full-time status.

Although Capua eventually returned to full-time status, she remained at her light duty position.

Some time after her July 9, 1992 injury, Capua apparently sought and was granted temporary total disability (TTD) benefits.2 Thereafter, on June 18, 1996, Capua applied for PPD benefits. The director, on December 4, 1996, issued a decision awarding Ca-pua, inter alia, eight percent (8%) PPD of the whole person as a result of her work injury. After she received her PPD award, Capua continued to work at Weyerhaeuser in her light duty position.

B. Capua’s Termination and the Determination of Entitlement to VR Services

In a letter to Capua, dated July 9, 1999, Weyerhaeuser advised Capua

that it would not be able to provide [her] with indefinite light duty work, and that VR services would help her secure alternate employment elsewhere. Since [Ca-pua] had expressed an interest in VR, [Weyerhaeuser] advised her to contact Laurie Hamano, a VR counselor, for services, or any other counselor of her choice.

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On August 29, 2000, [Capua] met [Ham-ano] for an initial informational interview, but did not at that time commit to selecting [Hamano] as her VR provider. [Ca-pua] later interviewed two other VR counselors. By October of 2000, [Capua] still had not decided on a VR provider.

On October 13, 2000 [Weyerhaeuser’s] new human resource manager, Alan Mae-da, met with [Capua] to discuss VR ser*442vices. [Maeda] told [Capua] that she needed to make a decision about VR services soon. [Capua] wanted more time to think about VR, and promised to make a decision by October 18, 2000.

On the morning of October 16, 2000, Capua called Hamano and indicated that she intended to participate in the VR process with Hamano as her counselor. Later that afternoon, Weyerhaeuser issued a letter terminating Capua from her light duty position [hereinafter, the termination letter]. In its termination letter, Weyerhaeuser stated:

Although not obligated to, Weyerhaeu-ser provided you with temporary light duty work in order to afford you time to find another job and further attempted to assist you in [VR]. However, as you know, ■ [Weyerhaeuser] does not have “permanent” light duty work. We have only provided such light duty work to employees while they are looking for replacement employment.

Based on your medical condition, the [c]ompany has made an assessment that we have no current position that you would be medically capable of fulfilling on a regular basis.

In light of your refusal to seek [VR services] to help yourself in seeking alternative employment, we have no alternative but to terminate your temporary light duty position and therefore your employment at Weyerhaeuser.

Upon receipt of the termination letter, Ca-pua informed Hamano that she had been terminated. However, Capua continued to meet with Hamano and receive VR services because Hamano determined that VR services were appropriate for Capua.3 Likewise, on November 21, 2000, the Department of Labor and Industrial Relations (DLIR) Disability Compensation Division (DCD) made a determination that Capua was eligible for VR services.4

Thereafter, on November 30, 2000, pursuant to HAR § 12-14-48,5 Weyerhaeuser filed its request for reconsideration of the DCD’s determination regarding Capua’s eligibility for VR services. Weyerhaeuser, relying upon HAR § 12-14-36, contended that Ca-pua was not entitled to VR services. HAR § 12-14-36 provides in relevant part that “[a]n employee who has been issued a[PPD] award by the director ... is determined to have waived the right to rehabilitation.” As such, Weyerhaeuser argued that, because Capua had previously received an award for PPD benefits on December 4, 1996, she waived her right to VR services. Agreeing with Weyerhaeuser, the director entered a supplemental decision on May 8, 2001, finding that, under HAR .§ 12-14-36, Capua had waived her right to VR services. Consequently, Hamano ceased providing VR services to Capua.

C. Appeal to the LIRAB

On May 18, 2001, Capua appealed the director’s supplemental decision to the LIRAB. After a hearing, held on May 23, 2003, the hearing officer entered a proposed decision and order, pursuant to HRS § 91-11 (1993),6 *443affirming the director’s supplemental decision. The hearing officer entered the following proposed conclusions of law:

Pursuant to [HAR] § 12-14-36 ..., an employee who has been issued a PPD award by the [d]irector is determined to have waived the right to rehabilitation. In this case, [Capua] was awarded PPD by the [director in a December 4, 1996 decision. Under [HAR] § 12-14-36, [Capua] is not entitled to VR services. Accordingly, we conclude that the [director did not err in denying [Capua] VR services.

[Weyerhaeuser’s] offer of VR after PPD was awarded was gratuitous and not required by law. However, having made the offer of VR, and having agreed to an October 18, 2000 deadline for [Capua] to accept VR, [Weyerhaeuser] could have acted more honorably in this case.

Both Capua and Weyerhaeuser filed exceptions to the proposed decision and order in accordance with HRS § 91-11, quoted supra note 6. On December 29, 2003, a hearing was held, wherein Capua argued, inter alia, that HAR § 12-14-36 could not serve as a ground to deny her VR services because HAR § 12-14-36 was “inconsistent” with HRS § 386-25. At the time of Capua’s disability, HRS § 386-25 (1993) provided in relevant part:

(b) The director shall refer employees who may have or have suffered permanent disability as a result of work injuries and who in the director’s opinion can be physically or vocationally rehabilitated to the department of human services or to private providers of rehabilitation services for such physical and vocational rehabilitation services as are feasible. ...

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(g) The eligibility of any injured employee to receive other benefits under this chapter shall in no way be affected by the employee’s entrance upon a course of physical or vocational rehabilitation as herein provided.

(Emphases added.) In essence, Capua argued that HAR § 12-14-36 conflicted with HRS § 386-25. Conversely, Weyerhaeuser contended that, inasmuch as HAR § 12-14-36 was “clear” and “unambiguous,” there was “no room for exceptions.” On December 30, 2003, the hearing officer issued an order, adopting the proposed decision and order in toto. Thereafter, Capua filed her notice of appeal with the ICA, pursuant to HRS § 386-88 (Supp.2007).7

D. Appeal Before the ICA

On direct appeal, Capua argued, inter alia, that HAR § 12-14-36 “[was] invalid as inconsistent with the Hawai'i [workers’ [compensation [l]aw.” Weyerhaeuser responded that Capua had no “right” to VR under HRS § 386-25 and, therefore, argued that the LIRAB correctly determined that HAR § 12-14-36 was “entirely consistent with the [VR] statute.” On July 19, 2007, the ICA issued an order requesting that the Attorney General file an amicus curiae brief because “the appeal raise[d] a challenge to the validity of a regulation promulgated by the [director of the DLIR.”8 Thereafter, on August 24, 2007, the Attorney General filed its ami-cus curiae brief, taking the position that HAR § 12-14-36 was valid.9

*444On September 27, 2007, the ICA, in a 2-1 SDO, affirmed the LIRAB’s decision, with Associate Judge Daniel R. Foley dissenting (ICA Dissent). Therein, as discussed more fully infra, the ICA rejected Capua’s contention that HAR § 12-14-36 was “invalid as inconsistent with HRS [cjhapter 386.” The dissent, however, asserted that HAR § 12-14-36 was “inconsistent with the express purposes contained in the language of HRS § 386-25” and stated that, “[ijnasmuch as the [LIRAB] relied on an invalid rule to deny Capua’s petition for [VR] benefits, [he] would vacate and remand.” ICA Dissent at 5-6, 8.

The ICA entered its judgment on appeal on October 26, 2007. On January 24, 2008, Capua filed her application for a writ of certiorari. Weyerhaeuser did not file a response. This court accepted Capua’s application on February 27, 2008 and heal'd oral argument on April 17, 2008.10

II. STANDARDS OF REVIEW

A. Agency Decisions

Appellate review of the LIRAB’s decision is governed by HRS § 91-14(g) (1993), which provides:

Upon review of the record[,] the court may affirm the decision of the agency or remand the case with instructions for further proceedings; or it may reverse or modify the decision and order if the substantial rights of the petitioners may have been prejudiced because the administrative findings, conclusions, decisions, or orders are:

(1) In violation of constitutional or statutory provisions; or

(2) In excess of the statutory authority or jurisdiction of the agency; or

(3) Made upon unlawful procedure; or

(4) Affected by other error of law; or

(5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or

(6)Arbitrary or capricious, or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

Under HRS § 91—14(g), conclusions of law (COLs) are reviewable under subsections (1), (2), and (4); questions regarding procedural defects are reviewable under subsection (3).

A COL is not binding on an appellate court and is freely reviewable for its correctness. Thus, the court reviews COLs de novo, under the right/wrong standard.

Tam v. Kaiser Permanente, 94 Hawai'i 487, 494, 17 P.3d 219, 226 (2001) (citations, original brackets, and ellipsis omitted) (format altered).

B. Statutory Interpretation

“The interpretation of a statute is a question of law reviewable de novo.” Flor v. Holguin, 94 Hawai'i 70, 76, 9 P.3d 382, 388 (2000) (original brackets, internal citations, and ellipses omitted). Further, “this court has accorded persuasive weight to the con-1 struction of statutes by administrative agencies charged with overseeing and implementing a particular statutory scheme.” Sam Teague, Ltd. v. Hawai'i Civil Rights Comm’n, 89 Hawai'i 269, 276 n. 2, 971 P.2d 1104, 1111 n. 2 (1999). Nonetheless, “an interpretation by an agency of a statute it administers is not entitled to deference if the interpretation is plainly erroneous and inconsistent with both the letter and intent of the statutory mandate.” Haole v. State, 111 Hawai'i 144, 150, 140 P.3d 377, 383 (2006) (citation omitted).

III. DISCUSSION

As previously stated, Capua contends that the, ICA erred in affirming the LIRAB’s decision and order, which denied Capua’s request for VR services. Specifically, Capua argues that the ICA erred:

*4451. ... in ignoring the central legal issue that [Capua’s] right to VR benefits is waived by relying on an invalid administrative rule, HAR § 12-14-36, which is wholly inconsistent and contradicts HRS [c]hapter 386, a social legislation requiring broad liberal and beneficent interpretation and where there is no reference anywhere in HRS [c]hapter 386 or HRS § 386-25(b) that precludes an injured worker like [Capua] from asserting her statutory right to VR benefits!;]

2. ... by misapplying or misapprehending the fact that [Capua’s] award of [PPD], which precludes her from finding gainful employment, is the very reason that she should be granted VR benefits and that HAR § 12-14-36 should be declared an invalid rule and totally disregarded!; and]

3. ... by deciding as a matter of law that HAR § 12-14-36 is valid by creating a reasonable deadline to accept VR benefits when in reality it is patently arbitrary and violates [Capua’s] right to equal protection of law[.]

Inasmuch as (1) and (2) above relate to the sole issue whether the ICA erred in relying—as did the director and LIRAB—upon the allegedly invalid HAR § 12-14-36 to conclude that Capua waived her right to VR services, we address them together.

On appeal, as well as on application, Capua argued, inter alia, that HAR § 12-14-36 was invalid and, thus, inapplicable because it is inconsistent with, and directly contradicted, HRS § 386-25. In rejecting Capua’s arguments, the ICA majority stated:

HAR § 12-14-36 establishes a reasonable deadline—measured by the employee’s acceptance of compensation for PPD— for an employee who has suffered a PPD to obtain [VR] services. The regulation filled the void left by the statute’s silence on the time by which an employee with a PPD would have to obtain [VR] services. The requirement that an employee secure [VR] services before accepting a PPD award is rationally related to the statutory purposes of [VR], which is to restore the employee’s earning capacity and return the employee to work in an expeditious and a cost-effective manner.

Especially as applied to Capua, HAR § 12-14-36 was consistent with HRS [c]hapter 386. For Capua to receive PPD benefits, it was necessary for her medical condition to have stabilized to the point where no further improvement could reasonably be expected so that her PPD impairment could be rated. Capua’s PPD award was issued more than four years after she had been injured and had returned to work. Thus, Capua had ample time to seek [VR] services before obtaining her PPD award. By virtue of HAR § 12-46-36, she was also on notice that by obtaining the PPD award, she was waiving her rights to [VR].

SDO at 3-4 (footnote omitted).

To the contrary, the dissent opined that:

The DLIR’s “authority is limited to enacting rules and regulations which are reasonably related to carrying into effect the purposes” of [HRS c]hapter 386, and as such, the DLIR “may not enact rales and regulations which enlarge, alter, or restrict the provisions” contained therein. Jacober v. Sunn, 6 Haw.App. 160, 167, 715 P.2d 813, 819 (1986). As evinced by the text of HRS § 386-25 and its legislative history, HAR § 12-14-36 bears no reasonable relation ] to the [VR] statute. Haole v. State, 111 Hawai'i 144, 156, 140 P.3d 377, 389 (2006). Therefore, I conclude that the DLIR exceeded its statutory authority when it promulgated this rule, which I find to be inconsistent with the purpose of [VR].

ICA Dissent at 7.

Here, Capua argues that “the ICA disregarded the consistent legacy concerning the construction of the workers’ compensation statute and [Capua’s] challenge that the HAR § 12-14-36 is invalid.” Capua asserts that, although “the [director is charged with rule making to implement the legislation,” it is “axiomatic that ... the rule cannot conflict with [the statute], nor contradict such a social beneficent legislation.” Specifically, Ca-pua contends that HAR § 12-14-36 is invalid because “[n]owhere does [HRS § 386-25] or *446[its] legislative history limit an injured worker’s right to VR benefits.”

With regard to an agency’s rule-making authority, this court has announced that:

[A] public administrative agency possesses only such rule-making authority as is delegated to it by the state legislature and may only exercise this power within the framework of the statute under which it is conferred. Administrative rides and regulations which exceed the scope of the statutory enactment they were devised to implement are invalid and must be struck down. In other words, an administrative agency can only wield powers expressly or implicitly granted to it by statute. However, it is well established that an administrative agency’s authority includes those implied powers that are reasonably necessary to cany out the powers expressly granted. The reason for implied powers is that, as a practical matter, the legislature cannot foresee all the problems incidental to carrying out the duties and responsibilities of the agency.

Haole, 111 Hawai'i at 152, 140 P.3d at 385 (emphasis added) (citations and original emphasis omitted) (format altered).

In this case, the director was authorized to promulgate rules in accordance with HRS § 386-72 (1993), which provides that “the director ... shall make rules, not inconsistent with [chapter 386], which the director deems necessary for or conducive to its proper application and enforcement.” Specifically, the director promulgated HAR § 12-14-36 in an attempt to implement HRS § 386-25 (1993),11 which provided in relevant part:

(a) The purposes of vocational rehabilitation are to restore an injured worker’s earning capacity as nearly as possible to that level which the worker was earning at the time of injury and to return the injured worker to suitable work in the active labor force as quickly as possible in a cost-effective manner.

(b) The director shall refer employees who may have or have suffered permanent disability as a result of work injuries and who in the director’s opinion can be physically or vocationally rehabilitated to the department of human services or to private providers of rehabilitation services for such physical and vocational rehabilitation services as are feasible. A referral shall be made upon recommendation of the rehabilitation unit established under section 386-71.5 and after the employee has been deemed physically able to participate in rehabilitation by the employee’s attending physician.

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(c) Enrollment in a rehabilitation plan or program shall not be mandatory and the approval of a proposed rehabilitation plan or program by the injured employee shall be required. After securing such approval the director shall select a certified provider of rehabilitation services for the injured employee after consultation with the employee and the employer.

(d) An injured employee’s enrollment in a rehabilitation plan or program shall not affect the employee’s entitlement to [TTD] *447compensation if the employee earns no wages diming the period of enrollment. If the employee receives wages for work performed under the plan or program, the employee shall be entitled to [TTD] compensation in an amount equal to the difference between the employee’s average weekly wages at the time of injury and the wages received under the plan or program, subject to the limitations on weekly benefit rates prescribed in section 386-31(a). The employee shall not be entitled to such compensation for any week during this period where the wages equal or exceed the average weekly wages at the time of injuiy.

(e) The director shall adopt rules for additional living expenses necessitated by the rehabilitation program, together with all reasonable and necessary vocational training.

(f) If the rehabilitation unit determines that physical and vocational rehabilitation are not possible or feasible, it shall certify such determination to the director.

(g) The eligibility of any injured employee to receive other benefits under this chapter shall in no way be affected by the employee’s entrance upon a course of physical or vocational rehabilitation as herein provided.

(Emphases added.) HAR § 12-14-36 provides in its entirety that:

(a) An employee who has been issued a[PPD] award by the director or an employee who has stipulated away the right to vocational rehabilitation with the approval of the director is determined to have waived the right to rehabilitation.

(b) The right to rehabilitation is preserved for any employee on [TTD] and any employee who has been adjudged permanently and totally disabled by the director.

(Emphases added.)

It is well-settled that this court’s foremost obligation when construing a statute

is to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from the language contained in the statute itself. And we must read statutory language in the context of the entire statute and construe it in a manner consistent with its purpose.

State v. Kalani, 108 Hawai'i 279, 283, 118 P.3d 1222, 1226 (2005) (citation omitted) (format altered). HRS § 386-25(b) expressly stated that the director “shall refer employees who may have or have suffered permanent disability as a result of work injuries and who in the director’s opinion can be physically or vocationally rehabilitated to ... providers of rehabilitation services for such physical and vocational rehabilitation seivices as are feasible.” (Emphasis added.) This court has stated that the term “shall” “generally will be construed as mandatory.” Malahoff v. Saito, 111 Hawai'i 168, 191, 140 P.3d 401, 424 (2006) (citations omitted). Further, disability is defined as the “loss or impairment of a physical or mental function.” HRS § 386-1 (1993). Thus, by its plain reading, HRS § 386-25(b) mandated the director to refer an employee who had been injured during the course and scope of employment and who either may suffer or has suffered permanent impairment of any physical (or mental) function to VR seivices “as are feasible.” The existence of the phrase “have suffered permanent disability” within HRS § 386-25 appears to encompass employees who have been awarded PPD, such as Ca-pua.12

Additionally, HRS § 386-25(g) specifically declared that an employee’s participation in VR seivices “shall in no way ... affect[ ]” her eligibility to receive “other benefits under [chapter 386].” Although benefits was not defined within chapter 386, HRS § 386-1 provided that “compensation” means “all benefits,” including “medical and rehabilitation benefits, income indemnity benefits in cases of disability or death, and the allowance for funeral and burial expenses.” Stat*448ed differently, an employee’s decision to participate in VR services would not affect her eligibility to receive any “income indemnity benefits,” such as PPD benefits. HRS § 386-25(g). Thus, HRS § 386-25 clearly sets forth an employee’s entitlement to VR services upon the director’s finding of feasibility.

Having so interpreted HRS § 386-25, we now examine HAR § 12-14-36, which was promulgated to implement HRS § 386-25. HAR § 12-14-36 unambiguously and plainly provides that an employee who has been awarded PPD benefits is deemed to have waived VR services. As stated above, the ICA believed that HAR § 12-14-36 was a proper exercise of the director’s statutorily delegated rule-making power because “the regulation filled the void left by the statute’s silence on the time by which an employee with a PPD would have to obtain [VR] services.” SDO at 3. However, the ICA fails to explain how HAR § 12-14-36 “establishes a reasonable deadline ... for an employee who has suffered a PPD to obtain [VR] services” and how it is “necessary for or conducive to,” HRS § 386-72, the proper application and enforcement of HRS § 386-25 (i.e., that it was reasonably necessary to carry out the powers expressly granted). Id. Specifically, the ICA failed to point to where in the statute the director was granted the authority to waive an injured employee’s right to VR services. Indeed, HRS § 386-72 grants the director the power to “make rules, not inconsistent with this chapter, which the director deems necessary for ... its proper application and enforcement.” (Emphasis added.) HAR § 12-14-36’s waiver of VR services, however, cannot be consistent with HRS § 386-25, when the statute established an entitlement to VR services and specifically provided that an employee’s entrance into a course of VR shall not affect his or her other benefits. Nowhere in the language of HRS § 386-25 does it provide—expressly or impliedly—that the director has the power to waive an employee’s right to VR services or that, once a PPD award is issued the right to VR is extinguished. Moreover, contrary to the ICA’s assertion that HAR § 12-14-36 merely “established] a reasonable deadline,” it is clear that HAR § 12-14-36 does more than establish a “deadline”; it creates a total bar to VR services when an employee receives a PPD award. We, therefore, hold that the director exceeded the bounds of the “rule-making authority [that was] delegated to [him] by the state legislature,” Haole, 111 Hawaii at 152, 140 P.3d at 385, in promulgating HAR § 12-14^36. Consequently, inasmuch as HAR § 12-14-36 exceeds the scope of HRS § 386-25, it is “invalid and must be struck down.” Id. Accordingly, we also hold that the ICA erred in relying on an invalid administrative regulation to affirm the LIRAB’s December 30, 2003 decision and order.13

IV. CONCLUSION

Based on the foregoing, we hold that the ICA erred in affirming the LIRAB’s December 30, 2003 decision and order inasmuch as the director exceeded his statutorily designated authority in promulgating HAR § 12-46-36. Accordingly, we vacate the ICA’s October 26, 2007 judgment on appeal and the LIRAB’s December 30, 2003 decision and order and remand this case to the director with instructions to provide Capua with VR services, if she so desires at this time.