When is Only the Functional Impairment Owed for Body as a Whole Injuries?

The amendments in 2017 to Iowa Code Chapter 85 created a lot of uncertainty as to how the amendments should be applied to workers’ compensation claimants. As expected, employers, insurance carriers, and employees have occasionally disagreed as to how the amendments should be interpreted and applied to real-life situations. Litigation has ensued. For the past several years, cases have been making their way through the Iowa Industrial Commissioner’s Office, and more recently, through the Iowa appellate courts. One section in particular (Iowa Code § 85.34(2)(v)) has been watched very closely given the impact it can have on the monetary awards of injured workers. Section 85.34(2)(v) reads, in part:

[For unscheduled injuries], if an employee who is eligible for compensation under this paragraph returns to work or is offered work for which the employee receives or would receive the same or greater salary, wages, or earnings than the employee received at the time of the injury, the employee shall be compensated based only upon the employee’s functional impairment resulting from the injury, and not in relation to the employee’s earning capacity. Notwithstanding section 85.36, subsection 2, if an employee who is eligible for compensation under this paragraph returns to work with the same employer and is compensated based only upon the employee’s functional impairment resulting from the injury as provided in this paragraph and is terminated from employment by that employer the award or agreement for settlement for benefits under this chapter shall be reviewed upon commencement of reopening proceedings by the employee for a determination of any reduction in the employee’s earning capacity caused by the employee’s permanent partial disability.

To be clear, uncertainty continues to exist with respect to section 85.34(2)(v). However, we wanted to send you a summary of the most relevant Commissioner and appellate rulings and decisions so that you can be aware of the current state of the law.

Martinez was the first case interpreting section 85.34(2)(v) to be appealed past the Commissioner level. Pavlich Inc. & National Interstate Ins. v. Martinez, Case No. CVCV060634 (Ruling on Pet. For Jud. Rev. April 21, 2021). In Martinez, the claimant returned to work for the defendant-employer after his injury making the same or greater salary. However, he later voluntarily resigned and secured employment elsewhere for higher wages. The defendant-employer did not terminate the claimant’s employment in any form. The Commissioner held that in this scenario, the claimant’s voluntary resignation resulted in an industrial disability award (not a functional rating), regardless of the claimant’s current earnings. He believed the opposite conclusion would result in “unreasonable outcomes,” such as a claimant being unmotivated to seek gainful employment after a termination.

The district court disagreed. It held that a claimant’s earnings are relevant to the analysis under section 85.34(2)(v). In addition, because the subsection does not specify by whom the employee is offered work at greater or equal earnings, the identity of the employer is irrelevant. Because the claimant accepted work after the injury for higher or equal wages, his current, more profitable employment resulted in a disability calculated based on the functional method.

In Vogt, the claimant continued to work for the defendant-employer at the time of hearing. Vogt v. XPO Logistics Freight, File No. 5064694.01 (App. June 11, 2021). The issue was whether her earnings were the same or greater compared to her pre-injury earnings, and how to make this determination. At the September 2020 hearing, her hourly rate was higher than it was at the time of injury but she had been working fewer hours since December 2019 because of her permanent work restrictions from her injury. In fact, her actual earnings were 25% less than her average weekly wage.

Commissioner Cortese held that a claimant’s hourly wage, considered in isolation, is not sufficient to limit a claimant’s compensation to functional disability. Instead, the hourly wages must be considered in concert with the actual hours worked. He concluded, “From the standpoint of logic and fairness, the post-injury ‘snapshot’ of claimant’s salary, wages or earnings should occur at the time of the hearing, just as industrial disability is measured as the evidence stands at the time of hearing. Performing the comparison based on a claimant’s initial return to work could lead to unfair and illogical results.” For instance, a claimant could initially return to work at their regular position and regular hours, but the condition might worsen or require surgery prior to the date of MMI. Taking a snapshot of the claimant’s earnings after an initial return to work but before MMI might not be a fair representation of their earnings. It is for those same reasons that both physicians and the agency wait until the claimant has reached MMI before addressing permanent impairment. The Commissioner acknowledged that “how many weeks to consider in this snapshot is a question that remains to be answered.” That issue did not need to be decided because, regardless of the number of weeks used, the outcome would be the same.

As always, you are receiving this letter because we want you to be well-informed of the most important and impactful cases being issued by the Commissioner’s office. We are prepared to answer any questions you may have about this decision and any other issues related to workers’ compensation benefits in Iowa.

Please feel free to contact us if you have any additional questions.

Sincerely,

Chuck Cutler (Cell 515-240-7309)

Steve Brown (Cell 515-321-4300)

Bob Gainer  (Cell 515-423-9293)

Greg Taylor (Cell 309-264-1767)

John Cutler (Cell 303-912-6838)