BEFORE THE IOWA INDUSTRIAL COMMISSIONER ROBERT A. MORRIS, Claimant, vs. File No. 891286 MIKE BROOKS, INC., Employer, A P P E A L D E C I S I O N and GREAT WEST CASUALTY COMPANY, Insurance Carrier, Defendants. The record, including the transcript of the hearing before the deputy and all exhibits admitted into the record, has been reviewed de novo on appeal. The decision of the deputy filed July 12, 1991 is affirmed and is adopted as the final agency action in this case. That claimant shall pay the costs of the appeal including the transcription of the hearing. Defendants shall pay all other costs. Signed and filed this 27th day of August, 1992. BYRON K. ORTON INDUSTRIAL COMMISSIONER Copies To: Mr. Donald G. Beattie Mr. Larry G. Wilson Attorneys at Law 204 8th Street SE Altoona, Iowa 50009 Mr. Stephen W. Spencer Attorney at Law 218 6th Avenue STE 300 P O Box 9130 Des Moines, Iowa 50306 9998 Filed August 27, 1992 BYRON K. ORTON BEFORE THE IOWA INDUSTRIAL COMMISSIONER ROBERT A. MORRIS, Claimant, vs. File No. 891286 MIKE BROOKS, INC., A P P E A L Employer, D E C I S I O N and GREAT WEST CASUALTY COMPANY, Insurance Carrier, Defendants. 9998 Summary affirmance of deputy's decision filed July 12, 1991. Page 1 before the iowa industrial commissioner ____________________________________________________________ : ROBERT MORRIS, : : Claimant, : : vs. : : File No. 891286 MIKE BROOKS, INC., : : A R B I T R A T I O N Employer, : : D E C I S I O N and : : GREAT WEST CASUALTY CO., : : Insurance Carrier, : Defendants. : ___________________________________________________________ introduction This is a proceeding in arbitration brought by Robert Morris, claimant, against Mike Brooks, Inc., employer, and Great West Casualty Company, insurance carrier, defendants for benefits as a result of an injury that occurred on June 27, 1988. A hearing was held in Des Moines, Iowa, on March 1, 1990, and the case was fully submitted at the close of the hearing. Claimant was represented by Larry G. Wilson. Defendants were represented by Stephen W. Spencer. The record consists of the testimony of Robert Morris, claimant; Bill Smith, claimant's witness; joint exhibits 1 through 14; and defendants' exhibit A. The deputy ordered a transcript of the hearing. Claimant's attorney filed claimant's contentions on disputed issues at the time of the hearing. Both attorneys submitted excellent posthearing briefs. stipulations The parties stipulated that claimant sustained an injury on June 27, 1988, which arose out of and in the course of employment with employer and that the injury was a cause of both temporary and permanent disability. issues The parties submitted the following issues for determination at the time of the hearing: Whether claimant is entitled to temporary disability benefits, and if so, the extent of benefits to which he is entitled. Whether claimant is entitled to permanent disability benefits, and if so, the extent of benefits to which he is entitled to include the commencement date of permanent partial disability benefits. Page 2 The parties seek a determination of the proper rate of compensation, more specifically, whether the rate should include or exclude two bonuses paid to claimant during the 13 weeks prior to the injury. Whether claimant is entitled to penalty benefits under Iowa Code section 86.13(4). findings of fact entitlement to temporary disability benefits It is determined that claimant is entitled to 57.571 weeks of healing period temporary disability benefits for the period from June 27, 1988, the date of the injury, through August 3, 1989, the date on which the treating physician determined that claimant had reached maximum medical improvement (exhibit 2, page 4; defendants' ex. A, p. 23). Claimant, an over-the-road truck driver, severely injured his right knee on June 27, 1988, when he fell off the back of a truck and landed on his right leg and knee. Claimant saw Gordon M. Arnott, M.D., the company physician, the following day. Dr. Arnott applied an elastic band, prescribed medications, put claimant on crutches, and referred claimant to Jerome G. Bashara, M.D., an orthopedic surgeon. On August 31, 1988, Dr. Bashara performed a diagnostic and operative arthroscopy of the right knee with a medial meniscectomy for a buckethandle tear and a limited synovectomy of the anterior fat pad and medial retinaculum (jt. ex. 2, p. 2; ex. 13, p. 9). This was followed by physical therapy and home physical therapy and claimant was continued off work by Dr. Bashara on September 22, 1988. On November 17, 1988, claimant continued to have knee swelling, quad atrophy and mild effusion, but since claimant had been gradually improving, Dr. Bashara released claimant to light work activities on November 17, 1988, with the restrictions that claimant should not engage in over-the-road driving, sitting in one position for prolonged periods of time, no climbing, no squatting, and no heavy lifting (ex. 2, pp. 3 & 6; ex. 13, p. 14). In November of 1988, claimant began a commercial business which was known as Morris Battery. This business sold batteries, performed auto body repair and painting work and later repaired tires. The business closed around the first of April 1989. Claimant testified that he never took any money out of the business, the business lost $5000 and that he owed several creditors substantial amounts of money. Claimant denied that he performed physical work in this business other than to lift and carry batteries on approximately six occasions and he spray painted cars on a few occasions. Claimant further testified that he only worked a half a day from 12 p.m. to 5 p.m., Monday through Friday, with the exception that he did not work on Thursday's at all. Claimant asserted that he performed only supervisory Page 3 work and that the physical work was performed by others, with the exception of the spray painting and the six batteries. He testified that his son, Jim Morris; and his employee, Bill Smith performed the physical labor. He stated the tire repair operations were handled entirely by Mike Roberts. Claimant related that he met the public; sold batteries; ordered merchandise; performed the paperwork, including the payroll; and supervised Bill Smith. Bill Smith testified that he did all of the physical labor and that claimant called for him to lift and carry the batteries. He acknowledged that claimant spray painted the cars, but not very many. He verified that claimant's activities were mainly paperwork. Smith further verified that claimant only worked half a day each day, six days a week, with the exception of Thursday. When the insurance carrier learned from newspaper advertisements that claimant was in business, they terminated his temporary disability benefits on February 2, 1989, and did not pay him any benefits subsequent to that date and prior to the hearing. On February 16, 1989, claimant saw Dr. Bashara with continued weakness, intermittent catching and some pain in his right knee. A second MRI was obtained on March 7, 1989, and a second arthroscopic surgery was performed on March 15, 1989, with a subtotal medial meniscectomy for a retained posterior horn tear and a limited synovectomy (ex. 2, p. 4; ex. 5, p. 2; ex. 13, p. 17). During the surgery Dr. Bashara noted that claimant had a little bit of stretching of the anterior cruciate ligament which he previously suspected might be stretched, but not torn (ex. 13, p. 17). Dr. Bashara further testified that the second meniscus tear was caused by the first arthroscopy which removed a portion of the meniscus cartilage and changed the mechanics inside of the knee joint. The doctor further clarified that it was not caused by the activities claimant performed in the battery business. He stated that it occurred shortly after the first surgical procedure because he never did recover normal function after the first arthroscopy. He said the reinjury occurred very soon after the first surgery (ex. 13, pp. 18-20). Dr. Bashara continued to treat claimant in March, April and June of 1989, and determined that he had reached maximum medical improvement on August 3, 1989. Dr. Bashara further clarified that claimant never reached maximum medical improvement after the first surgery until five months after the second surgery on August 3, 1989. He stated that claimant was restricted from squatting, kneeling and performing activities which aggravate his knees, such as riding a jet ski, riding a three-wheeler, and playing golf (ex. 2, p. 4; ex. 23, pp. 22-24). The length of the healing period is determined by Iowa Code section 85.34(1) which reads as follows: Healing period. If an employee has suffered a Page 4 personal injury causing permanent partial disability for which compensation is payable as provided in subsection 2 of this section, the employer shall pay to the employee compensation for a healing period, as provided in section 85.37, beginning on the date of injury, and until the employee has returned to work or it is medically indicated that significant improvement from the injury is not anticipated or until the employee is medically capable of returning to employment substantially similar to the employment in which the employee was engaged at the time of the injury, whichever occurs first. Defendants contend that claimant returned to work when he began the battery sales, body work and tire work business in November of 1988. It is determined that claimant did not return to work when he began the battery, body and tire business. Temporary disability benefits are to compensate employees for lost wages until they are able to return to gainful employment. Lawyer and Higgs, Iowa Workers' Compensation--Law and Practice, section 13-1, page 105. The Morris Battery Company was not gainful employment. Claimant never took any money out of the business and, in addition, lost $5000 during the period he was in business. Furthermore, so much of Iowa Code section 85.34(1) which states that the claimant is to receive benefits until the employee has returned to work is construed to mean work that claimant was performing at the time of the injury, or in the alternative, some other substantial, gainful, full-time employment from which the employee can earn a living. Donoho v. T & T Services, file number 722150 (filed February 28, 1989). It is determined that the Morris Battery Company was not full-time employment for the reason that claimant only worked there half a day from 12 p.m. to 5 p.m., five or six days a week, and did not work there at all on Thursday. Claimant's testimony is corroborated by Smith. The testimony of claimant and Smith is not controverted, contradicted, rebutted, or refuted by any other evidence. This case is clearly distinguishable from Chinberg v. Arrow Transportation Co., Vol 1., no. 3 State of Iowa Industrial Commissioner Decisions, 525, 526 (1985) in which claimant testified that he operated his business seven days a week from 8 a.m. until 10 p.m. and in the summer he stayed open as late as midnight on the weekend. It is also noteworthy that there was no indication that Chinberg should be denied benefits when he worked helping his father at a gas station by pumping gas on a part-time basi wish to mitigate the amount of workers' compensation payments that they would rightfully owe for the full healing period, then the burden is on the employer to seek out the employee and make the offer of light duty work. Claimant testified that he gave this release to light duty on November 17, 1988, to the employer on the following day, November 18, 1988 (transcript pages 54 & 55). There is no evidence that employer offered claimant any light duty work. Furthermore, the Supreme Court of Iowa has determined that the healing period is not terminated even when the defendant employer offers light duty work to the employee which the employee declines. Webb v. Lovejoy Construction Co., II Iowa Industrial Commissioner Report, 430, 433 (1981). Defendants contend that claimant had a duty to report the fact to them that he began the Morris Battery business. This too, is incorrect. As a pure legal matter, claimant cannot to be held to account for the fact that he did not report the Morris Battery business to defendants. There is nothing in Iowa Code sections 85.33 or 85.34 or the administrative law and common law interpretations of these Code sections that require an employee receiving temporary disability benefits to report part-time income, odd job income or any other income on the employees own initiative. Defendants did not allege or prove that they communicated to claimant that he was under any obligation or duty to report any work or income to them. Donoho, file number 722150, 12, 13 (filed February 28, 1989). Defendants also contend that they are entitled to a credit for the temporary disability benefits that they paid to claimant from November of 1988 to April of 1989, when he Page 6 was engaged in the battery, auto body and tire repair business. This too, is not correct. The workers' compensation law does not provide any statutory credit for work performed or earnings which an employee might make while receiving temporary disability benefits. To the contrary, Iowa Code section 85.38 seeks to prevent intrusions upon an employees entitlement to workers' compensation benefits. It provides as follows: 85.38 Reduction of obligations of employer. 1. Contributions or donations. The compensation herein provided shall be the measure of liability which the employer has assumed for injuries or death that may occur to employees in the employer's employment subject to the provisions of this chapter, and it shall not be in anywise reduced by contribution from employees or donations from any source. Claimant was under no duty to voluntarily or spontaneously report any part-time employment or earnings. Likewise, claimant is not liable for any offset or credit for the period of time he was engaged in the battery business or for any income he might have earned in that business. Id. Claimant certainly did not operate this business surreptitiously because he placed ads in two local newspapers in the area of his employment with employer, one of which contained his picture. It is also noticed that defendants terminated claimant's workers' compensation benefits and then investigated later to justify the termination of benefits. Denning v. Hyman Freightways, Inc., file number 751584 (filed May 23, 1989). Proper procedure would have been to conduct a proper investigation first and if the evidence existed, then terminate the benefits. Newspaper advertisements that claimant had opened a business in themselves would not establish that claimant had, in fact, or in law, returned to work based on any known statute or case at this time. If defendants wanted to terminate healing period benefits, it was entirely possible for them to obtain a written statement from Dr. Bashara or an independent medical examiner that either (1) claimant could return to work, (2) claimant had reached maximum medical improvement, or (3) claimant could perform work in substantially similar employment. Defendants, however, terminated claimant's benefits without this evidence. Claimant testified that the termination of workers' compensation benefits caused a severe financial hardship which among other things caused him to sell a pickup truck, a motorcycle and one car in order to obtain money to live on (tr. p. 81). Claimant's proposition that self-employment income is not used to determine whether claimant has returned to work or not is not correct either. The case cited by claimant determined whether self-employment income should be used in order to determine the rate of compensation rather than Page 7 whether claimant had returned to work or not. Winters v. Te Slaa, I Iowa Industrial Commissioner Report, 367 ( App. Dec. 1981). In conclusion, it is determined that claimant is entitled to 57.571 weeks of workers' compensation benefits from June 27, 1988, the date of the injury, through the date the treating physician determined that he had attained the maximum medical improvement on August 3, 1989. entitlement to permanent disability benefits It is determined that claimant is entitled to 35.2 weeks of permanent partial disability benefits based upon a 16 percent permanent impairment to his right knee. The knee is treated as an injury to the leg. Wichers v. McKee Company, 223 Iowa 853, 273 N.W. 872 (1937). Total compensation for a leg is 220 weeks. Iowa Code section 85.34(2)(o). Sixteen percent of 220 weeks is 35.2 weeks. Dr. Bashara stated, "I would give Mr. Morris a 14% permanent/partial physical impairment of his right lower extremity related to his right leg injury with subsequent surgery." (ex. 2, p. 5). This rating was given on October 27, 1989. Dr. Bashara testified in his deposition on February 26, 1990, just two days prior to the hearing, that his 14 percent permanent partial physical impairment rating of the right lower extremity would be his opinion at the time of the deposition. He said it was based on the loss of the meniscus and a mild loss of motion to the knee (ex. 13, pp. 24 & 25). Sinesio Misol, M.D., an orthopedic surgeon and independent evaluator for claimant, on February 21, 1990, again just a few days prior to the hearing, determined that claimant was entitled to a 17.5 percent permanent impairment based upon the Guides to the Evaluation of Permanent Impairment, third edition, published by the American Medical Association. Dr. Misol said 10 percent was allocated to the absence of the medical meniscus and 7.5 percent for the attenuated anterior cruciate ligament (ex. 3, p. 1). Peter Wirtz, M.D., another orthopedic surgeon and independent evaluator for defendants, examined claimant and gave a report, but did not address the issue of permanent impairment (ex. 12). Dr. Bashara did not say whether he used the AMA Guides, the orthopedic surgeon's guides, some other guides or no guides at all. He did indicate that no impairment existed on account of the anterior cruciate ligament stretching (ex. 13, p. 25). Wherefore, based upon the ratings of Dr. Bashara and Dr. Misol and the fact that claimant testified that his right knee hurts all of the time, that it is very weak and that it is necessary to go up stairs a half step at a time (tr. p. 99), it is determined that claimant is entitled to a 16 percent permanent functional impairment of the right leg. Page 8 Sixteen percent of 220 weeks equals 35.2 weeks of permanent partial workers' compensation disability benefits. rate It is determined that the proper rate of compensation is $284.95 per week based upon the fact that the two bonus payments which claimant received in the 13 weeks prior to the injury are determined to be a regular bonus and not an irregular bonus. Iowa Code section 85.61(12). The parties stipulated that if the rate calculation were to include the bonus, claimant's gross weekly wage would be $496 per week and that his rate would be $284.95 based upon a single person with one exemption. Claimant testified that a number of employers pay 21 cents a mile, however, this employer paid 17 cents a mile, but then allowed additional mileage pay for getting your paper work in on time and for low fuel consumption. Claimant testified that all drivers got these bonuses and that they were paid regularly once a month (tr. pp. 60-63 and 87-89). On April 29, 1988, he received $115.75 and on June 24, 1988, he received $73.40. A bonus which is paid regularly, even though in varying amounts, is properly included in the determination of rate under Iowa Code section 85.61(12). Marcks v. Richmond Gordman, file number 679369 (App. Dec. June 29, 1988). Claimant is entitled to the bonus even though it was established unilaterally by the employer. Hendrickson v. Keller Industries, file number 931142 (December 21, 1990). A bonus which is an integral part of defendants' overall compensation system paid to all employees, which is available to be paid every month, is a regular bonus to be included in the calculation of rate. Lewis v. Dee Zee Manufacturing, file number 797154 (filed September 11, 1989). Claimant's testimony established that the bonus was a regular bonus and not an irregular bonus. The bonus was available to all employees who qualified and it was paid once a month. These bonus provisions were in effect for each and every pay period. This component of claimant's compensation was explained to him at the time he began work for the employer as a regular part of his pay if he qualified for it. Claimant's testimony was not controverted, contradicted, rebutted, or refuted. This rate is confirmed to be an accurate rate for a gross wage of $496 for a single person with one exemption. Guide to Iowa Workers' Compensation Claim Handling, July 1, 1987. Wherefore, it is determined that claimant is entitled to a rate of $284.95 per week. Defendants implied that claimant engaged in some form of wrong doing because they overpaid his benefits because he had shown that he was entitled to 12 exemptions on his W-4 form. This may or may not be true. The evidence is insufficient to make a determination. However, W-4 forms Page 9 are used to endeavor to have sufficient withholding at the time when the tax is due. Employees frequently use the number of exemptions to adjust their withholding to accomplish this goal. Zero exemptions is commonly used on W-4 forms even though it is obviously not the true number of exemptions to which the taxpayer is entitled. Defendants might have prevented the overpayment if they had investigated whether this unusual amount of exemptions was in fact correct for workers' compensation purposes. A simple telephone statement from either the employer or the employee would have cleared up this unusual circumstance, but the insurance carrier failed to properly investigate this matter which certainly called for investigation. It is entirely possible that 12 exemptions would produce the proper amount of withholding to cover claimant's income taxes. penalty benefits Even though claimant was severely effected by the premature termination of his temporary disability benefits and the late payment of his permanent disability benefits (he contended that he also lost his house), it is, nevertheless, determined that this early termination and late commencement did not occur without reasonable or probable cause or excuse. Iowa Code section 86.13(4). Defendants contended that after claimant saw Dr. Bashara on November 17, 1988, he did not see him again until February 16, 1989, a period of three months. February 16, 1989, was two weeks after defendants had terminated benefits. Defendants disputed whether the complaints made on February 16, 1989, were due to the original injury and surgery or whether they were due to an injury which claimant might have sustained while operating the battery sales, body work and tire work business. Defendants disputed both liability for the second arthroscopy and, likewise, the amount of permanent disability which they might owe. They also asserted they were entitled to a credit for the overpayments which they had made for using the wrong rate and for paying claimant while he was in business. Generally, penalty benefits are not awarded where there is a legitimate dispute on either causation or the extent of impairment. Just v. HyGrade Food Products Corp., IV Iowa Industrial Commissioner Reports, 190 (App. Dec. 1984). Likewise, in more recent times it has been determined that penalty benefits are not due where defendants assert a claim that is fairly debatable. Seydel v. U of I Physical Plant, file number 818849, (App. Dec. November 1, 1989); Stanley v. Wilson Foods, file number 753405 (App. Dec. August 23, 1990). Defendants contended and established that it was not possible to have their contentions resolved until they obtained the deposition from Dr. Bashara just two days prior to the hearing. The reasons for the delay in getting Dr. Bashara's opinion appear to be attributable to the actions of both parties (ex. 14). Even though defendants were incorrect in contending they were entitled to a credit for the payments they made while claimant was in business, it Page 10 cannot be said that their position was not fairly debatable. Consequently, it is determined that claimant is not entitled to penalty benefits under Iowa Code section 86.13(4). CONCLUSIONS of law Wherefore, based upon the foregoing and following principles of law, these conclusions of law are made: That claimant is entitled to 57.571 weeks of healing period benefits. Iowa Code section 85.34(1). That claimant is entitled to 35.2 weeks of permanent partial disability benefits. Iowa Code section 85.34(2)(o). That the proper rate of compensation is $294.95 per week. Iowa Code sections 85.36 and 85.61(12). That claimant is not entitled to penalty benefits. Iowa Code section 86.13(4). order THEREFORE, IT IS ORDERED: That defendants pay to claimant fifty-seven point five seven one (57.571) weeks of healing period benefits at the rate of two hundred eighty-four and 95/100 dollars ($284.95) per week in the total amount of sixteen thousand four hundred four and 86/100 dollars ($16,404.86) commencing on June 27, 1988. That defendants pay to claimant thirty-eight point two weeks of permanent partial disability benefits at the rate of two hundred eighty-four and 95/100 dollars ($284.95) per week in the total amount of ten thousand thirty and 24/100 dollars ($10,030.24) commencing on August 4, 1989. Teel v. McCord, 394 N.W.2d 405 (1986). That defendants are entitled to a credit for thirty-two (32) weeks of benefits paid to claimant at the rate of three hundred twenty-eight and 90/100 dollars ($328.90) per week in the total amount of ten thousand five hundred twenty-four and 80/100 dollars ($10,524.80). That all accrued benefits are to be paid in a lump sum. That interest will accrue pursuant to Iowa Code section 85.30. That the costs of this action, including the cost of the attendance of the court reporter at hearing and the cost of the transcript, are charged to defendants pursuant to rule 343 IAC 4.33 and Iowa Code section 86.19(1). That defendants file claim activity reports as requested by this agency. Rule 343 IAC 3.1. Page 11 Signed and filed this ____ day of July, 1991. ______________________________ WALTER R. McMANUS, JR. DEPUTY INDUSTRIAL COMMISSIONER Copies to: Mr. Larry Wilson Mr. Donald G. Beattie Attorneys at Law 204 8th St. SE Altoona, Iowa 50009 Mr. Stephen Spencer Attorney at Law PO Box 9130 Des Moines, Iowa 50306-9130 Page 1 1802 51803 3001 3002 3003 4002.2 Filed July 12, 1991 Walter R. McManus, Jr. before the iowa industrial commissioner ____________________________________________________________ : ROBERT MORRIS, : : Claimant, : : vs. : : File No. 891286 MIKE BROOKS, INC., : : A R B I T R A T I O N Employer, : : D E C I S I O N and : : GREAT WEST CASUALTY CO., : : Insurance Carrier, : Defendants. : ___________________________________________________________ 1802 Claimant awarded healing period benefits from date of injury until treating physician said he attained maximum medical improvement. It was determined that claimant had not returned to work when he opened a battery, body and tire business because it was not substantial, gainful, full-time employment at which claimant earned a living. Claimant took no money out of the business, lost $5000 and ended up owing several others substantial amounts of money. Furthermore, claimant only worked half days, five or six days a week, and did not work at all on Thursday. The doctor had returned claimant to light work with certain restrictions and his work in the battery, body and tire business was mainly clerical and supervisory in nature and within the doctors restrictions. Defendants were not correct that claimant should have sought out light duty with employer. Defendants were not correct that claimant was required to report to them he went into business or what his earnings were from the business. Defendants were not correct that they were entitled to a credit for the temporary disability benefits paid to clamiant while he was in business. If defendants wanted to terminate temporary disability benefits they should have obtained a statement from a physician that one of the conditions in section 85.34(1) had occurred. Several cites are given for these determinations. Page 2 51803 Treating physician awarded 14 percent permanent impairment to the right leg. Claimant's evaluator awarded 17.5 percent. A third evaluator did not address permanency. Claimant awarded 16 percent permanent partial disability to the right leg. 3001 3002 3003 It was determined that the bonus that claimant received on two occasions within the 13 weeks prior to the injury, $115.75 and $73.40, were a regular bonus and not an irregular bonus. The bonuses for timely paperwork and low fuel consumption were an integral part of employer's compensation system, paid to all employees who qualified for them, they were paid once a month, and they were explained as part of the regular pay system when claimant started with employer. Several cites. Defendants' allegation that claimant had done something wrong by putting 12 exemptions on his W-4 form when, in fact, he was only entitled to one exemption was not proven by defendants. 4002.2 Although defendants were incorrect on several of the matters on which they disputed liability and disability, it could not be said that their position was not fairly debatable. Delays in obtaining the information to make a correct decision on liability were attributable to both parties. No penalty benefits awarded. Several cites. Defendants were criticized for terminating benefits first and then making a proper investigation later and for failing to investigate the proper number of exemptions when it was inordinately high.