Final Compensability Determinations Trigger Mandatory Penalties for Late TTD Payments Under HRS § 386-92

Introduction

Costa v. County of Hawaiʻi, No. SCWC-18-0000119, decided May 30, 2025 by the Supreme Court of Hawaiʻi, resolved a recurring dispute in the Hawaiʻi workers’ compensation scheme: when may an employer be penalized under Hawaiʻi Revised Statutes (HRS) § 386-92 for untimely payment of temporary total disability (TTD) benefits? Delbert P. Costa, Jr. (“Costa”), an employee of the County of Hawaiʻi’s Department of Water Supply, suffered an on-the‐job stress injury on May 9, 2012. After the Department of Labor and Industrial Relations (“Director”) issued a final decision finding his stress compensable and fixing his average weekly wage, the County failed to pay TTD benefits. Costa ultimately secured a 20% penalty under HRS § 386-92 for late TTD payments. The Intermediate Court of Appeals (“ICA”) and the Labor and Industrial Relations Appeals Board (“LIRAB”) reversed that penalty, prompting Costa’s certiorari petition. The Supreme Court granted review and reinstated the Director’s penalty order.

Summary of the Judgment

The Supreme Court held that once a workers’ compensation director’s decision finding an injury compensable and fixing average weekly wages becomes final (i.e., unappealed within the 20-day statutory window under HRS § 386-87), an employer must begin TTD payments “promptly as they accrue” (HRS § 386-31(b)). If the employer fails to pay within 10 business days after notice of disability, HRS § 386-92 mandates a 20% penalty on the unpaid amount, unless the employer had controverted the employee’s entitlement in its initial injury report and liability remains in bona fide dispute. Here the County controverted only the causation of the injury, did not appeal the compensability decision, and never again contested that TTD was due until after the penalty ran. The Court rejected the notion of an “indefinite safe harbor” for late TTD payments whenever an employer reserves the right to challenge liability at the outset. Accordingly, it vacated the ICA judgment, reinstated the Director’s 20% penalty of $4,277.84, and remanded for attorneys’ fees under HRS § 386-93(b).

Analysis

1. Precedents Cited

• Panoke v. Reef Development of Hawaiʻi, Inc., 136 Haw. 448, 363 P.3d 296 (2015)
  – Held no penalty under § 386-92 when compensability remained in dispute on appeal and no “final decision” had issued.
  – Distinguished here because the County did not appeal the Director’s compensability finding.
• Bocalbos v. Kapiʻolani Medical Center, 89 Haw. 436, 974 P.2d 1026 (1999)
  – Held that blanket reservation clauses in LIRAB decisions do not prevent timely appellate review or the finality of benefits decisions.
  – Supports disregarding “reserve for later” language in the Director’s order once compensability and wage rate are conclusively determined.
• Van Ness v. State Dep’t of Educ., 131 Haw. 545, 319 P.3d 464 (2014)
  – Reaffirmed the liberal, remedial construction of Hawaiʻi’s workers’ compensation laws and the presumption of compensability.

2. Legal Reasoning

The Court’s reasoning followed a familiar two-step approach:

1. Statutory Text
   • HRS § 386-31(b) requires employers to pay TTD benefits “promptly as they accrue” and no later than the tenth calendar day after notice of disability, unless the employer controverted entitlement in its initial injury report.
   • HRS § 386-92 mandates a 20% penalty on unpaid TTD benefits not paid within 10 business days after notice, “where the right to benefits are not controverted in the employer’s initial report.”
2. Statutory Scheme and Legislative History
   • Hawaiʻi’s workers’ compensation statutes are “highly remedial” and to be construed liberally in favor of the injured worker (Flor v. Holguin; Davenport v. City & County of Honolulu).
   • Amendments in 1969, 1971, 1979, and 1995 show a consistent legislative goal: prompt payment of TTD benefits, with penalties to enforce timely compliance and protect workers from undue wage loss.

Reading the provisions together, once compensability is finally established (no appeal of the Director’s finding within the HRS § 386-87 timeline), liability is no longer “controverted.” The employer must pay TTD benefits within 10 working days or incur a mandatory 20% penalty under § 386-92. An initial challenge to compensability does not create an indefinite “safe harbor” excusing delays after finality.

3. Impact on Future Cases and Workers’ Compensation Law

• Clarity on Penalty Trigger: Employers now know that once a Director’s decision on compensability and wage rate is final and unappealed, they have a strict deadline to begin TTD payments or face a 20% penalty.
• Limits on “Blanket Reservations”: Post-decision reservation clauses cannot be used to delay payments that are conclusively due. Claimants may seek penalties without waiting for a later benefits adjudication.
• Preserving Remedial Character: The decision reinforces Hawaiʻi’s strong policy bias toward prompt compensation and wage-loss protection for injured workers.

Complex Concepts Simplified

Final and Conclusive Decision (HRS § 386-87)

If no party appeals the Director’s decision within 20 days of mailing, it becomes binding and enforceable, even if some issues (like TTD) are deferred.

Initial Controversion

An employer may delay TTD payments only if it expressly disputes the employee’s entitlement in its first injury report. That protection ends once compensability is finally decided and unappealed.

20% Penalty (HRS § 386-92)

A mandatory surcharge on any unpaid TTD benefits withheld more than 10 business days after the employer knows the worker is disabled—and has no genuine basis to continue disputing the claim.

Conclusion

Costa v. County of Hawaiʻi clarifies that employers cannot indefinitely delay TTD benefits by relying on an initial challenge to liability. Once the Director’s decision finding compensability and fixing wages is final, the employer must promptly begin TTD payments or incur the statutory 20% penalty under HRS § 386-92. By reaffirming this rule, the Supreme Court aligned the statutory text, legislative history, and remedial purpose of Hawaiʻi workers’ compensation law, ensuring that injured workers receive timely income support and enforcing strict employer compliance.