Appeals court hears dispute over SSDI offset in Smith Gill v. Department of Labor and Industries

An appeals panel on Monday heard competing arguments over whether Washington’s statutory offset of workers’ compensation benefits against Social Security payments applies to Social Security Disability Insurance (SSDI) recipients who return to part‑time work.

Aaron Warheim, counsel for appellant Kimberly Smith Gill, told the court Smith Gill has received SSDI since childhood and later worked part time under federal return‑to‑work programs before suffering a workplace injury. "There is no, there is no fear of an overlapping award in this case," Warheim said, arguing the SSDI payments and the workers' compensation award compensate different losses and that applying the offset here frustrates federal policy encouraging disabled workers to reenter the workforce.

Warheim told the court Smith Gill’s "pot of potential earnings" under federal law in his example was about $2,500 a month — approximately $1,000 in SSDI plus $1,500 from part‑time wages — and said the state offset as applied would sharply reduce the worker’s recovery. He urged the court to view the offset’s application as preempted by federal law or otherwise avoid an interpretation that produces an "absurd result" leaving returning workers without full Industrial Insurance Act protections.

Representing the Department of Labor and Industries, Assistant Attorney General Amanda Herndon argued the trial court correctly applied RCW 51.32.220 to offset Smith Gill’s compensation. "The trial court here correctly determined that RCW 51 32 2 20 applied to offset Kimberly Smith Gill's workers' compensation benefits against her Social Security disability," Herndon said, asking the court to affirm. She contended the statutory text is unambiguous and that the statutory exception cited by the appellant — located in the provision the transcript and parties refer to as section 2 25 — refers specifically to Social Security retirement benefits, not disability benefits.

Herndon told the court that, in her reading, the statutory phrase "this reduction" in the exception must be read in immediate context to mean the reduction described in the first sentence of section 2 25, which explicitly addresses retirement benefits. She added that the state statute imposing the offset is expressly authorized by federal law as described in the briefing and that nothing in the cited federal provisions (transcript references to 42 U.S.C. sections) unmistakably conflicts with the state offset.

Judges pressed both sides on textual and federal‑preemption arguments. One judge asked whether SSDI should be treated as a wage‑replacement benefit comparable to temporary total disability under workers' compensation; Warheim agreed both regimes aim to replace lost earnings and emphasized federal programs such as "Ticket to Work." A separate judge cautioned against "legislating from the bench," asking whether the court should defer to plain statutory language that says a benefit "shall be reduced." Warheim replied the court should conduct a preemption analysis and harmonize statutes to avoid undermining federal policy encouraging limited return to work.

The bench also posed a hypothetical about whether a federal workers'‑compensation program would offset SSDI in the same way; Warheim said he could not predict with certainty how a federal forum would apply the offset but maintained federal law would lead to a less severe reduction. Both sides acknowledged gaps in the record: Herndon noted the transcript does not establish whether Smith Gill actually participated in the Ticket to Work program or what specific federal authorizations applied.

In rebuttal, Warheim reiterated that safeguards in the statutory scheme and federal law should be read to maximize, not minimize, a worker’s recovery; counsel argued a proper federal reading would limit the reduction (the transcript references an "80%" federal standard in the parties' argument) and repeated that the offset as applied to a returning SSDI recipient can produce an inequitable result.

The court announced the remaining cases would be decided without further oral argument and adjourned. No decision was issued at argument.

Authorities and statutes were cited repeatedly during argument using the transcript’s references (e.g., RCW 51 32 2 20; section 2 25 in the transcript; and several 42 U.S.C. provisions). The parties disputed whether the statutory exception in the RCW text applies only to Social Security retirement benefits or also to SSDI, and whether federal law preempts the state's offset when applied to SSDI recipients who returned to part‑time work.