Long v. Injured Workers' Insurance Fund
138 A.3d 1225
Md.2016Background
- Patrick Long, a sole proprietor of Long’s Floor Works, elected workers’ compensation coverage and injured his back in 2011 while working as a subcontractor.
- Long’s Schedule C showed gross receipts $44,606, business expenses $27,727, and net profit $16,879 for 2011; he reported no wages on his Form 1040.
- The Workers’ Compensation Commission initially set an AWW higher, then after rehearing calculated Long’s AWW as $496.44 by dividing the 2011 net profit ($16,879) by 34 weeks worked.
- IWIF argued AWW should be based on net profit (what Long actually took home); Long argued AWW must be based on gross receipts/gross income (equivalent to gross wages) and pointed to how premiums were calculated.
- The Circuit Court and Court of Special Appeals affirmed the Commission; the Court of Appeals granted certiorari and affirmed, holding AWW for a covered sole proprietor is based on net profit, not gross receipts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper basis for AWW for a sole proprietor who elected coverage | Long: AWW must be computed from gross wages/gross receipts (14‑week gross formula); premiums were based on gross receipts so AWW should match | IWIF: Sole proprietor has no "wages"; net profit (business income after expenses) best approximates take‑home earnings; Commission may deviate from standard formula | AWW for a sole proprietor electing coverage is calculated from the sole proprietorship’s net profit, not gross receipts/gross income |
| Whether insurer premium basis controls AWW calculation | Long: Premiums tied to gross receipts create a parity that requires using gross receipts for AWW | IWIF: Premiums do not dictate AWW; relying on premiums would produce windfalls and be speculative | Premium calculations by insurers do not control AWW; using gross receipts could yield an unjustified windfall to the claimant |
| Applicability of COMAR/LE §9‑602 default method | Long: COMAR requires gross wages from prior 14 weeks and is unambiguous | IWIF: Where claimant has no traditional wages, Commission can use other evidence and periods to determine accurate AWW | COMAR standard applies generally, but Commission may use alternate measures when claimant lacks traditional wages; net profit is the proper proxy here |
| Whether alternative measures (e.g., owner withdrawals, market value of services) may be used | Long: alternative figures not necessary—gross receipts govern | IWIF: net profit is appropriate; other measures could be used if net profit is zero or otherwise unsuitable | Net profit is the appropriate baseline; other measures may be used in different facts (e.g., zero/negative net profit, demonstrated owner withdrawals, or market value of services), but not here |
Key Cases Cited
- Picanardi v. Emerson Hotel Co., 108 A. 483 (Md. 1919) (links between payroll basis for premiums and wage components examined)
- Stevenson v. Hill, 189 A. 910 (Md. 1937) (AWW should reflect actual earnings during relevant period; avoid disconnect between premiums and compensation)
- Crowner v. Balt. United Butchers Ass’n, 175 A.2d 7 (Md. 1961) (AWW tied to employment where injury occurred, not to unrelated wages)
- Gross v. Sessinghause & Ostergaard, Inc., 626 A.2d 55 (Md. 1993) (Commission may depart from regulatory time period to determine AWW when appropriate)
- Stephen v. Avins Constr. Co., 478 S.E.2d 74 (S.C. Ct. App. 1996) (subcontractor’s AWW properly computed from net earnings; gross receipts include business expenses and reimbursements)
- Carnahan v. [Board], 821 A.2d 1122 (N.H. 2003) (net profit used as "gross earnings" for independent contractor to avoid windfall)
- Vite v. Vite, 377 S.W.3d 453 (Ark. Ct. App. 2010) (Commission properly deducted business expenses; net earnings best approximate take‑home pay)
- Mail Boxes v. Indus. Comm’n of Ariz., 888 P.2d 777 (Ariz. 1995) (where net profit is zero, market value of proprietor’s services or assumed wage may be appropriate)