Legal Issues

The Impact of Employment on Unscheduled Work Injury Compensation - September 30, 2020

Joni L Ploeger

I previously wrote about an Iowa workers’ compensation arbitration decision, Wood v. Vermeer Manufacturing Company, that dealt with how to compensate unscheduled work injuries under the 2017 amendments, specifically when the claimant no longer works for the pre-injury employer. 


In that case, the Deputy gave an industrial disability award because the claimant returned to work after the work injury, with a new employer, making less than at the time of the work injury. The Wood case was upheld on appeal to the Commissioner in a decision filed on August 4, 2020. If the parties appeal, this may not be the final word, but there are some immediate takeaways for insurance carriers and employers.         


Does Any Return to Work End the Inquiry as to Whether an Industrial Disability Analysis Applies Versus the Impairment Ratings?

The industrial disability stipulation made by the parties in Wood shelved a potential legal argument on how the 2017 amendments could be interpreted in favor of employers. 


Iowa Code section 85.34(2)(v) states:


If an employee who is eligible for compensation under this paragraph [for an unscheduled injury] 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.


The plain reading of the statute suggests that regardless of the employer and wages earned, if an employee returns to work at all after a work injury, he/she is to be compensated by the functional impairment ratings. This argument was not explored in Wood given the stipulation by the parties. It is anticipated that future cases will discuss this particular interpretation.  


Functional Impairment Ratings are Used Following a Refused Offer Made by the Pre-Injury Employer

Since Wood, there have been a couple of decisions expanding on the issue. In Schervish v. City of Des Moines, the claimant sustained an injury to his body as a whole. He returned to his pre-injury job, with the same employer, earning the same wages after the work injury. He later bid into a different position with the same employer, resulting in lower wages. The claimant was compensated by the functional impairment ratings because he was “offered work for which the employee...would receive the same or greater...earnings,” but the offer was refused by the claimant. This interpretation is in line with the plain reading of the statute: if an injured worker is offered work by any employer for which the employee receives or would receive the same or greater earnings, then he/she is to be compensated by the functional impairment ratings. Note, the Schervish case did not deal with an offer of work from a new employer, though there did not seem to be any special significance placed on the fact that the offer was from the pre-injury employer. 


An Industrial Disability Analysis is Used When the Injured Worker Works for a New Employer

In the recent appeal decision of Martinez v. Pavlich, Inc., the Commissioner went one step further and declined to apply the functional disability analysis to an offer (and acceptance) of work made by a new employer for the same or greater earnings. 


In this case, the claimant alleged injuries to numerous body parts. It was determined he sustained compensable injuries to his right upper extremity and bilateral lower extremities. The Commissioner concluded that because three body parts were injured as a result of a single work injury, compensation was to be awarded as an unscheduled injury. The Commissioner concluded an industrial disability analysis should be applied, instead of a functional disability analysis. This was because the claimant was no longer working for Pavlich, Inc. (pre-injury employer), even though the parties agreed that the claimant had voluntarily resigned his employment and was making the same or greater earnings with his new employer at the time of the hearing. 


As acknowledged by the Commissioner in his decision, an argument can be made that based on the plain reading of the statute, the functional disability analysis should be applied regardless of the claimant’s employer at the time of the hearing, as long as the claimant is making the same or greater wages than at the time of the work injury. There is no explicit requirement in the statute that return to work has to be with the same employer. However, when taking into consideration the entire section, the Commissioner came to a different interpretation, reasoning that an industrial disability must be used if the injured worker is working for a different employer after the work injury, regardless of earnings. 


Exploring the Commissioner’s Interpretation

The Commissioner concluded that an industrial disability analysis should be applied whenever an injured worker switches employers after an unscheduled work injury. To interpret otherwise, as reasoned by the Commissioner, could lead to unreasonable outcomes. For example, it could create uncertainty for employers deciding when it is appropriate to volunteer industrial disability. The employer will not necessarily know when or if the claimant becomes employed after a voluntary resignation (or termination) and whether the claimant is making the same or greater earnings with the new employer, especially if there are several subsequent employers. It will be interesting to see how this fear is addressed on appeal given employers are accustomed to investigating a claimant’s subsequent earnings as part of their continuing investigations. 


Another unreasonable outcome noted by the Commissioner would occur if claimants decided not to seek new employment after a voluntary resignation or termination so they could be compensated industrially. Though, this was usually a concern with any industrial disability case, even prior to the 2017 amendments, when claimants would not seek re-employment after a body as a whole work injury in order to obtain a larger industrial disability award. The remedy is that the agency takes this lack of motivation to find work into account in the industrial disability analysis.


Who is Arguing What Position?

It is worth noting that in the Martinez case, the parties took positions opposite of the norm. The claimant argued he should be compensated based on his functional impairment ratings and the defendants argued an industrial disability analysis should be used. The reason for this reversal in traditional party positions is likely because the parties felt the claimant would be compensated less if an industrial disability analysis was used. 


The claimant had returned to comparable work making the same or greater earnings after the work injury. While the treating doctors gave permanent impairment ratings for the work injuries, they returned the claimant to work without permanent restrictions, and he did in fact return to work for Pavlich, Inc. for a time. There is case law (e.g., Eagle Iron Works v. Weatherall) supporting 0% industrial disability awards for claimants who return to substantially similar work, making the same or greater earnings, because there is no loss of earning capacity even if there has been a permanent impairment rating assessed.  



What do these agency cases mean for employers/insurance carriers?

  • A claimant is compensated industrially when they return to work with a new employer after the work injury, earning less wages than at the time of the work injury. Wood v. Vermeer Manufacturing Company.
  • A claimant is also compensated industrially when they return to work with a new employer after the work injury, even if they earn the same or greater wages than at the time of the work injury. Martinez v. Pavlich, Inc.
  • A claimant is compensated based on the functional impairment ratings when they refuse an offer to return to work by the pre-injury employer, offering the same or greater earnings. Schervish v. City of Des Moines.

While these holdings may be appealed, this is current precedent, so employers and insurance carriers should take notice of these decisions. 

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