WARREN PROPERTIES аnd Ace American Insurance Company, Appellees, v. Janice STEWART, Appellant.
No. 13-0474.
Supreme Court of Iowa.
May 29, 2015.
As Corrected July 1, 2015.
CADY, Chief Justice.
In this workers’ compensation appeal, we are asked to revisit our rule gov- erning apportionment resulting from suc- cessive work injuries at multiple places of employment in light of the 2004 amend- ments to the workers’ compensation per- manent disabilities statute. The deputy workers’ compensation commissioner awarded benefits to the worker based on a finding of two successive injuries to the back and a shoulder injury and applied the full-responsibility rule with no apportionment for the preexisting disability. Our review follows reviews by the workers’ compensation commissioner, who affirmed, and the district court, which affirmed in part, reversed in part, and remanded. We conclude an employer who is liable to compensate an employee for a successive un- scheduled work injury is not liable to pay for the preexisting disability that arose from employment with a different employ- er or from causes unrelated to employ- ment when the employee’s earning capaci- ty was not reevaluated in the competitive job mаrket or otherwise reevaluated prior to the successive injury. We affirm in part and reverse in part the decision of the district court. We remand the case to the district court to remand the case back to the workers’ compensation commissioner for further proceedings consistent with this opinion.
Janice Stewart was working two jobs in 2006. She had begun working as an assis- tant property manager for a business in Des Moines called Warren Properties in 2005. Her duties included typing, answer- ing the phone, showing apartments to pro- spective tenants, inspecting property, and preparing rental agreements. Stewart re- ceived a salary and a rent allowance for this work. In June 2006, Stewart began a second full-time job with Wal-Mart. She worked as a customer service representa- tive and assistant manager.
In November 2006, Stewart injured her lower back at Wal-Mart while moving shopping carts. She quit the job a week later, but continued working for Warren Properties. Stewart began seeking medical treatment for her back injury. She saw a variety of doctors over a period of several years for treatment and evaluation.
In May 2008, Dr. Cassim Igram deter- mined Stewart had reached maximum medical improvement for her back injury and concluded she sustained a ten percent permanent impairment of the body as a whole. Two months later, Dr. William Boulden expressed the same opinion. In October 2008, Dr. Daniel McGuire ex- pressed an opinion that Stewart suffered a thirteen percent рermanent physical im- pairment as a consequence of her back injury.
On May 20, 2009,Stewart and Wal-Mart entered into an agreement for settlement on her claim for workers’ compensation benefits. The settlement was based on a forty percent industrial disability determination. It resulted in the payment of $60,000 in compensation, plus $11,000 in medical bills.
Stewart continued her employment at Warren Properties throughout the dura- tion of the medical treatment for her 2006 back injury. On the evening of February 2,‘2009, she fell on ice as she left work. This was more than three months prior to her agreement for settlement with Wal- Mart. She experienced back pain with radiating pain down one leg as well as pain in her shoulders and neck. As with the Wal-Mart injury, Stewart sought medical treatment following her fall and saw a variety of doctors for treatment and evalu- ation.
An evaluation in May 2009 found Stewart had obtained maximum medical improvement. Physicians expressed dif- fering views on the question whether Stewart’s fall on the ice caused her any permanent physical impairment. In September 2009, Dr. Martin Rosenfeld opined Stewart suffered a one percent physical impairment to her shoulder as a consequence of the fall. In 2010, Dr. Thomas Carlstrom opined that Stewart suffered no new physical impairment from her fall.1
Stewart filed a complaint against War- ren Properties with the workers’ compen- sation commissioner in November 2009 to recover compensation for her February 2, 2009 injury. Following a hearing in Octo- ber 2010, a deputy commissioner found Stewart sustained a permanent partial un- scheduled disability from the injury. The deputy commissioner credited the medical opinion of Dr. Stoken and found Stewart sustained a thirteen percent physical im- pairment to hеr body as a whole due to the back injury. The deputy commissioner found no specific percentage of permanent physical impairment to Stewart’s shoulder as a result of the 2009 injury. The deputy commissioner concluded Stewart’s disabili- ty to her back and shoulder resulted in a fifty percent industrial disability. Stewart was awarded benefits without any appor- tionment for the preexisting disability that resulted from the 2006 injury. On appeal, the commissioner affirmed the decision of the deputy commissioner.
Warren Properties filed a petition for judicial review with the district court. The district court held the commissioner erred in failing to apportion Stewart’s preexist- ing disability that arose from the 2006 injury when calculating the benefits owed by Warren Properties for the 2009 injury. In doing so, the court held Stewart’s com- pensation for the 2009 injury is limited to the amount of the industrial disability caused by that injury and rejected Warren Properties’ contention that apportionment should be effected by crediting the amount previously paid by Wal-Mart to Stewart for the 2006 back injury. The court deter- mined the commissioner was required to award compensation based on the percent- age of the worker’s disability attributable to the 2009 injury without considering the prior disabilities the employee possessed for which the employer was not responsi- ble. Additionally, the court held that the finding by the commissioner of a thirteen percent impairment resulting from the 2009 injury was too uncertain in light of the evidence that Stewart suffered a thir- teen percent impairment to her back from her 2006 injury. The court concluded the commissioner’s impairment finding could not be sustained without an additional finding that the prior impairment to the back had healed before the 2009 injury. The district court remanded the case to the commissioner specifically to determine if the 2009 injury resulted in any new back disability.
Warren Properties claims on appeal that the district court erred by remanding the case for a new impairment finding because the evidence presented at the hearing does not support any finding of a new disability arising from the 2009 injury. Warren Properties also claims that, if a new im- pairment rating is warranted, the preexist- ing disability arising from the 2006 injury must be apportioned through a credit to the employer equal to the forty percent industrial disability paid by Wal-Mart as a consequence of the agreement for settle- ment.
We conclude the 2004 amendments to the workers’ compensation permanent disabilities statute require an evaluation by the commissioner of Stewart’s earning ca- pacity both beforе and after a successive injury sustained in the course and scope of employment with a concurrent employer and that Warren Properties is therefore liable to compensate Stewart for only the reduction in earning capacity caused by the 2009 injury.
II. Standard of Review.
Judicial review of workers’ com- pensation cases is governed by Iowa Code chapter 17A. Neal v. Annett Holdings, Inc., 814 N.W.2d 512, 518 (Iowa 2012). On our review, we determine whether we ar- rive at the same conclusion as the district court. Sherman v. Pella Corp., 576 N.W.2d 312, 316 (Iowa 1998). We have determined the legislature has not vested the commissioner with the authority to interpret Iowa Code section 85.34(2)(¾) and (7)(a). Roberts Dairy v. Billick, 861 N.W.2d 814, 817 (Iowa 2015). Therefore, we review the commissioner’s interpreta- tion “to correct errors of law on the part of the agency.” Teleconnect Co. v. Iowa State Commerce Comm’n, 404 N.W.2d 158, 161 (Iowa 1987).
We are bound by the agency’s find- ings of fact unless they are not supported by substantial evidence. Mycogen Seeds v. Sands, 686 N.W.2d 457, 465 (Iowa 2004). However, we “are not bound by the agen- cy’sinterpretation [oflaw] and may substi- tute our own to correct a misapplication of law.” SZ Enters., LLC v. Iowa Utils. Bd., 850 N.W.2d 441, 449 (Iowa 2014); accord Iowa Code § 17A.19(10)(c)(2009).
Over 100 years have come and gone since our legislature established an admin- istrative agency system to compensate in- jured workers in this state. See 1913 Iowa Acts ch. 147 (codified at Iowa Code §§ 2477-m to 2477-m50 (Supp. 1913)). This system was established for workers in Iowa to avoid litigating claims over work injuries and to provide them with an efficient and speedy resolution and award of compensation. Shepard v. Carnation Milk Co., 220 Iowa 466, 469, 262 N.W. 110, 112 (1935). Over time, the system has become increasingly complex and litigious.
At the same time, the courts have continued to play an important role through the process of judicial review. See Iowa Code § 17A.19 (2009)(governing judicial review of administrative actions). This role has led to a century of judicial application of the statutes governing the workers’ compensation system, and these statutes have been enforced and supple- mented by many court rules and doctrines developed to help carry out the intent and purpose of the statutory framework. See, e.g., Larson Mfg. Co. v. Thorson, 763 N.W.2d 842, 851-53 (Iowa 2009) (tracing the development of the cumulаtive injury rule in Iowa law); Guyton v. Irving Jen- sen Co., 373 N.W.2d 101, 105 (Iowa 1985) (adopting the “odd-lot doctrine” for dis- abled employees with no stable job market available). Compare Iowa Code § 1397(8) (1924), with Iowa Code § 85.36(9)(c)(2003).
One fertile area of statutory review by courts over the years has involved the apportionment of compensation for succes- sive injuries. The original statute provid- ed for the apportionment of successive in- juries, Iowa Code § 2477-m15(h) (Supp. 1913), and our early cases began the pro- cess of applying the statutory doctrine to particular cases. See, e.g., Pappas v. N. Iowa Brick & Tile Co., 201 Iowa 607, 612--13, 206 N.W. 146, 147-48 (1925)(apportion- ing for initial arm loss when loss of second arm resulted in total disability, but noting a correction by the legislature to cover successive injuries resulting in total dis- ability); Jennings v. Mason City Sewer Pipe Co., 187 Iowa 967, 970-71, 174 N.W. 785, 786 (1919) (apportioning first eye-loss award from the total disability award of an employee who lost his second eye during the course of employment).
Over the intervening eighty years, how- ever, we developed a comprehensive body of law to apply this statutory principle of apportionment to a variety of different cir- cumstances. See Gregory v. Second Inju- ry Fund of Iowa, 777 N.W.2d 395, 402-03 (Iowa 2010) (Cady, J., dissenting) (discuss- ing the development of the Second Injury Fund for apportionment of scheduled per- manent injuries); Varied Enters., Inc. v. Sumner, 353 N.W.2d 407, 411 (Iowa 1984) (limiting apportionment to cases in which a prior injury or illness “produces some as- certainable portion of the ultimate indus- trial disability”), abrogated on other grounds by P.D.S.I. v. Peterson, 685 N.W.2d 627, 635 (Iowa 2004); Ziegler v. U.S. Gypsum Co., 252 Iowa 613, 620, 106 N.W.2d 591, 595 (1960) (holding an aggra- vated injury is compensable to the extent of the injury instead of apportionable). In particular, we adopted the full-responsibili- ty rule and the fresh-start rule. See Zie- gler, 252 Iowa at 620, 106 N.W.2d at 595 (describing a fresh-start rule that when an employee is hired the employer takes him [as it] relat[es] to the earning capacity that the employee possessed when the injury occurred.) Iowa Code § 85.34(2)(¾).
The remaining portion of the second step provided a special method of compensating successive disabilities incurred with the same employer and further addressed how a merger, purchase, or change in employ- ment affected the same-employer rule. See id. § 85.34(7)(6)-(c). These two new statutory rules for successive disabilities departed from our prior caselaw. For ex- ample, our successive disability caselaw evolved without distinguishing between successive disabilities arising from employ- ment with the same or different employ- ers. See Venegas v. IBP, Inc., 638 N.W.2d 699, 701 (Iowa 2002) (“We find no basis for distinguishing between work-related dis- abilities with the same employer and work- related disabilities with different employ- ers in the application of the full-responsibi- lity rule.”).
In 2004,the General Assembly amended the 1924 statutory apportionment rule by repealing the old successive disabilities statute and replacing it with a new enact- ment. See 2004 Iowa Acts 1st Extraordi- nary Sess. ch. 1001, §§ 9-21 (codified in part in scattered sections of Iowa Code chs. 85-86 (2005)). In the Act, the legisla- ture specifically declared its intent in en- acting the new statutes, which included the intent to modify our apportionment, fresh- start, and full-responsibility rules. Id. § 20. We had not had the opportunity to interpret directly the statutory changes until our recent decision in Roberts Dairy.
In Roberts Dairy, we examined the scope and meaning of the 2004 statutory approach to apportionment for successive disаbilities. 861 N.W.2d at 822. We deter- mined the new statutes took two broad steps. The first step was to provide a new rule to compute compensation for a perma- nent partial disability in eases involving unscheduled injuries. Id. at 822-28; see Iowa Code § 85.34(2)(¾)(2009). Compen- sation under this rule is computed by con- sidering “the reduction in the employee’s earning capacity caused by the disability [as it] relat[es] to the earning capacity that the employee possessed when the injury occurred.” Iowa Code § 85.34(2)(¾).
The second step provided new rules to govern successive disabilities. Roberts Dairy, 861 N.W.2d at 823; see Iowa Code § 85.34(7). This new statute first articu- lated two principles applicable to succes- sive disability cases. The first rule made “[a]n employer ... liable for compensating all of an employee’s disability that arises out of and in the course of the employee’s employment with the employer.” Iowa Code § 85.34(7)(a). The second rule de- clared that an-employer was “not liable for compensating an employee’s preexisting disability that arose out of and in the course of employment with a different em- ployer or from causes unrelated to employ- ment.” Id. Thus, the first statutory princi- ple dealt with successive disabilities with the same employer, and the second statu- tory principle dealt with successive disabil- ities with a different employer. See id.
The starting point for the resolu- tion of the apportionment issue presented by the arguments of the parties is the statutory principle expressed in the second sentence of section 85.34(7)(a). This statu- tory rule of apportionment is applicable to the “preexisting disability that arose out of and in the course of employment with a different employer.” Iowa Code § 85.34(7)(a). The legislative intent be- hind this rule was to “prevent all double recoveries and all double reductions in workers’ compensation benefits for perma- nent partial disability.” 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20. The statute does not specifically mention concurrent employers, but concurrent em- ployers are also different employers.3
The text of the statute clearly captures concur- rent employers. The legislative intent behind this, case did nоt occur with a previous employer. Instead, it occurred with a concurrent employer. Stewart was working for Warren Properties at the time she sustained the forty percent loss of earning capacity from a permanent partial disabili- ty caused by an injury arising out of her employment with Wal-Mart. As a result, Warren Properties argues the apportion- ment principle under Iowa Code section 85.34(7)(a) applies in this case because the reduction in Stewart’s earning capacity from the Wal-Mart injury was never ad- justed by the competitive labor market. Stewart claims a market adjustment was unnecessary because she maintained her employment with Warren Properties with- out a diminution in earnings despite her permanent partial disability. She argues the loss of her concurrent job with Wal- Mart without an accompanying loss of her job at Warren Properties gave her a fresh start and served to reestablish her earning capacity. The arguments of the parties first require us to examine the legislative intent behind the 2004 statutory changes.2
2The legislature accepted the general premise that the competitive labor market reestab- lishes a worker’s earning capacity follow- ing a disabling injury and further observed thаt this market “effectively apportions any disability through a reduced level of earnings.” 2004 Iowa Acts 1st Extraordi- nary Sess. ch. 1001, § 20. Thus, the legis- lative intent reveals the modified fresh- start rule does not run afoul of the statuto- ry principle that employers must not be liable for compensating an employee’s preexisting disability with a different employer. Id.; see Iowa Code § 85.34(7)(a). No double recovery occurs because the preexisting disability has been integrated into a new working unit, with a new earn- ing capacity recognized by the competitive labor market. 2004 Iowa Acts 1st Ex- traordinary Sess. ch. 1001, § 20. The fresh-start rule does not make an employ- er liable for compensating an employee’s preexisting disability with a different em- ployer because apportionment effectively took place prior to the second injury through the forces of the competitive labor market associated with a change in em- ployment. See id.
The legislature, however, did not pre- serve the fresh-start rule beyond the com- petitive-job-market rationale. Additionally, it specifically found “[t]he market does not reevaluate an employee’s earning ca- pacity while the employee remains em- ployed by the same employer.” 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20. Thus, to ensure employers are not liable for compensating preexisting disabil- ities incurred at a different employer or outside employment, the rule does not ap- ply when earning capacity has not been reset by the competitive labor market af- ter the prior permanent partial disability was established. When earning capacity has not been reevaluated by the market, Iowa Code section 85.34(7)(a)must be ob- served in determining the compensation paid for successive disabilities.
In this case, the fresh-start rule recognized by the legislature does not ap- ply to refresh Stewart’s earning capacity lost due to the permanent partial disability arising from her 2006 injury sustained while working for Wal-Mart. She never competed in the labor market after the initial injury. The Second Injury Compensation Act governs compensation for certain successive injuries to multiple scheduled members. See id. §§ 85.63-.69.
The argument by Stewart that her contin- ued employment with Warren Properties following her permanent partial disability while at Wal-Mart served to produce a fresh start and effectively apportioned her preexisting disability is inconsistent with the legislative intent behind the statutory changes. 2004 Iowa Acts 1st Extraordi- nary Sess. ch. 1001, § 20. The legislature made it clear that the fresh-start rule is now based on the reevaluation of earning capacity occurring in the competitive labor market with a change of employment. Id. Stewart’s earning capacity underwent no reevaluation during her continuing em- ployment with Warren Properties.4 Addi- tionally, earning capacity is not necessarily coextensive with actual earnings. See 7 Larson, §§ 81.01, at 81-2 to 81-5 (indicating actual earnings are not the same as earn- ing capacity); see also Clark v. Vicorp Rests., Inc., 696 N.W.2d 596, 605 (Iowa 2005) (finding a reduction in actual earn- ings is not necessary to show reduced earning capacity).
4Accordingly, the compensation in this case must be computed under the formula set out in section 85.34(2)(u), and the ap- portionment rule in section 85.34(7)(a) must be applied to assure that any com- pensation paid by Warren Properties for the 2009 injury is based on the loss of earning capacity resulting from that injury and not the forty percent loss of earning capacity sustained by Stewart as a conse- quence of the 2006 injury.
VII. Evidence to Support Successive Disabilities.
Warren Properties claims it is un- necessary to remand the case to the com- missioner to recompute benefits under the compensation formula because the evi- dence in this case did not support a finding of a new disability arising from the Febru- ary 2, 2009 injury. It argues the only logical conclusion that can be drawn from the evidence in this case is the unsche- duled injury in 2009 did not increase Stew- art’s functional impairment that arose from the 2006 injury and could not have increased her industrial disability beyond the forty percent loss compensated by Wal-Mart under the agreement for settle- ment of the 2006 injury. See Frost v. S.S. Kresge Co., 299 N.W.2d 646, 648 (Iowa 1980) (reversing the commissioner due to disagreement on a legal conclusion con- cerning the facts of the case). Warren Properties asserts Stewart suffered no new disability to her back because her permanent physical impairment of thirteen percent after the 2006 injury was not in- creased by the 2009 injury.
There is substantial evidence in the record tending to prove Stewart’s 2009 injury was not confined to the back and resulted in permanent partial functional impairment to the shoulder. Accordingly, there is substantial evidence in the record supporting the commissioner’s finding that the 2009 injury caused some increase in Stewart’s permanent physical impairment affecting the determination of Stewart’s industrial disability in this case. We therefore reject Warren Properties’ con- tention that the evidence pertaining to Stewart’s loss of functional capacity arising from the 2006 injury precludes a finding that Stewart suffered an industrial disabili- ty as a consequence of the 2009 injury. Notwithstanding, the commissioner must show the process as now required under section 85.34(2)(u) to reach his decision. See Bridgestone/Firestone v. Accordino, 561 N.W.2d 60, 62 (Iowa 1997) (indicating the commissioner must detail the process used to reach conclusions to permit ade- quate judicial review). The formula re- quires the commissioner to determine the earning capacity when the successive inju- ry occurred and the reduction in earning capacity caused by the disabilities.
An award of compensation for a successive unscheduled permanent partial disability requires a finding of a loss of earning capacity caused by the successive injury. As we have already noted, one of the factors in determining the extent of an unscheduled disability is permanent physi- cal impairment. In this case, the record includes medical evidence tending to prove the permanent functional impairment re- sulting from the 2006 back injury could have been as low as ten percent or as high as thirteen percent. The commissioner found Stewart suffered a thirteen percent functional impairment following the 2009 injury, with no finding made regarding the 2006 impairment. There is evidence in the record tending to prove Stewart’s 2009 injury was not confined to the back and resulted in permanent partial functional impairment to the shoulder. Accordingly, there is substantial evidence in the record supporting the commissioner’s finding that the 2009 injury caused some increase in Stewart’s permanent physical impairment affecting the determination of Stewart’s industrial disability in this case. We therefore reject Warren Properties’ con- tention that the evidence pertaining to Stewart’s loss of functional capacity arising from the 2006 injury precludes a finding that Stewart suffered an industrial disabili- ty as a consequence of the 2009 injury.
Notwithstanding, the commissioner must show the process as now required under section 85.34(2)(u) to reach his decision. See Bridgestone/Firestone v. Accоrdino, 561 N.W.2d 60, 62 (Iowa 1997) (indicating the commissioner must detail the process used to reach conclusions to permit ade- quate judicial review). The formula re- quires the commissioner to determine the earning capacity when the successive inju- ry occurred and the reduction in earning capacity caused by the disabilities.
We conclude the commissioner erred in interpreting section 85.34(7)(a) and apply- ing the compensation formula under section 85.34(2)(u). We affirm in part and reverse in part the decision of the district court and remand the case to the district court to remand the case back to the commissioner for further proceedings consistent with this decision. See Staff Mgmt. v. Jimenez, 839 N.W.2d 640, 658 (Iowa 2013). We tax the costs of this action equally between the parties.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH DIRECTIONS.