Cutler Law Firm, P.C.

The Effect of a Voluntary Resignation on Industrial Disability

RE:  Voluntary Resignation & Industrial Disability – Martinez v. Pavlich, Inc.

To Whom It May Concern:

Despite the 2017 legislative changes in Iowa, the above Commissioner decision now holds that in unscheduled member cases, a voluntary separation from employment will entitle the Claimant to benefits using an industrial disability analysis (and not just the functional loss).

In 2017, the Iowa Legislature amended section 85.34(2) to provide that when an injured worker sustains an unscheduled injury (i.e., an injury to the back, neck, hips, or other body part not specifically listed on the “schedule” of section 85.34(2)) and subsequently returns to work for the same employer, or is offered work by the same employer making the same or greater earnings compared to his or her pre-injury earnings, then the worker’s entitlement to permanent partial disability is limited to the functional impairment rating assigned pursuant to the AMA Guides, 5th ed. If that employee is later terminated, he or she could then become eligible for permanent disability benefits based on an industrial disability. (In most cases, an award based on an industrial disability is greater than an award based solely on the functional impairment rating).

Based on the plain language of section 85.34(2)(v), it was generally believed by practitioners that an employee who voluntarily quits his or her job becomes ineligible for permanent disability benefits using an industrial disability analysis. Because the employee was never “terminated,” the language of section 85.34(2)(v) was not triggered. This made sense, as employees should not be financially incentivized to quit their job when they are otherwise physically capable of performing it.

On July 30, 2020, however, Commissioner Cortese issued an appeal decision which held that a claimant’s voluntary resignation necessarily results in an award of permanent partial disability benefits based on an industrial disability: “Thus, though claimant in this case was earning greater wages at the time of the hearing than he was when he was injured, I conclude his earlier voluntary separation from defendant-employer removed claimant from the functional impairment analysis and triggered his entitlement to benefits using the industrial disability analysis.” Martinez v. Pavlich, Inc., File No. 5063900 (App. July 30, 2020). Commissioner Cortese believed the opposite conclusion would result in “unreasonable outcomes,” such as a claimant being motivated to remain off of work after a termination to ensure that the award of permanent partial disability benefits is based on an industrial disability analysis and not the functional impairment rating.

The Commissioner’s decision was based on his interpretation of section 85.34(2)(v). He made it clear that Iowa appellate courts will “have the final say” as to what the legislature meant when it amended the statute in 2017. Nevertheless, until this or another decision interpreting section 85.34(2)(v) reaches the Iowa Court of Appeals or Iowa Supreme Court, all decisions from the agency will now be following the rule announced in Martinez. Therefore, it will be important for employers and insurance carriers to be aware of this decision and the impact it will have on all cases pending before the agency.

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 do not hesitate to contact us if you have any questions.

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)


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