Julie Munoz v. Sonic Restaurants 10 and Hartford Accident & indemnity/gallagher Bassett , 234 Ariz. 145 ( 2014 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
JULIE A. MUNOZ,
Petitioner Employee,
v.
THE INDUSTRIAL COMMISSION OF ARIZONA
Respondent,
SONIC RESTAURANTS #10,
Respondent Employer,
HARTFORD ACCIDENT & INDEMNITY/GALLAGHER BASSETT,
Respondent Insurer.
No. 2 CA-IC 2013-0001
Filed February 10, 2014
Special Action – Industrial Commission
ICA Claim No. 20112340156
Insurer No. 001461041756WC01
Jacqueline Wohl, Administrative Law Judge
AWARD AFFIRMED
COUNSEL
The Hansen Firm, PLLC, Tucson
By Deborah P. Hansen
Counsel for Petitioner Employee
The Industrial Commission of Arizona, Phoenix
By Andrew F. Wade
Counsel for Respondent
MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
Jones, Skelton & Hochuli, P.L.C., Phoenix
By Gregory L. Folger, Lori L. Voepel, and Jennifer B. Anderson
Counsel for Respondents Employer and Insurer
OPINION
Presiding Judge Kelly authored the opinion of the Court, in which
Judge Espinosa and Judge Eckerstrom concurred.
K E L L Y, Presiding Judge:
¶1 In this statutory special action, petitioner Julie Munoz
challenges the Industrial Commission’s workers’ compensation
award, claiming the administrative law judge (“ALJ”) improperly
excluded from her average monthly wage the income she had
contracted to receive from her horse training and rehabilitation
business. For the following reasons, we affirm the ALJ’s award.
Factual and Procedural Background
¶2 We view the evidence in the light most favorable to
upholding the ALJ’s award. Sw. Gas Corp. v. Indus. Comm’n, 200
Ariz. 292, ¶ 2, 25 P.3d 1164, 1166 (App. 2001). In 2011, Munoz
injured her shoulder while working for respondent Sonic
Restaurants. She filed a claim for workers’ compensation benefits
for the industrial injury. Hartford, the respondent insurer, accepted
her claim and based her compensation of $524.98 on her average
monthly wage (“AMW”) from Sonic. The Industrial Commission of
Arizona approved that amount. At a hearing, the parties stipulated
that this amount should be increased to $1,570.68 to include wages
from Munoz’s concurrent job at a home improvement store.
¶3 Munoz, however, claimed that her AMW calculation
also should include earnings from the horse training and
rehabilitation business she had established just before her injury.
She alleged at the hearing and in a post-hearing memorandum that
she already had received five contracts to train and rehabilitate
horses, which she claimed were “uncontradicted evidence of earning
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
capacity as of the date of injury.”1 She testified at the hearing that
she had not yet moved onto the property where she planned to
board the horses, had not taken possession of any of the horses, and
had not received payment on any of the contracts other than a $100
deposit from one horse owner.2
¶4 Following the hearing, the ALJ adopted the parties’
stipulated amount of Munoz’s monthly wages from Sonic and the
home improvement store. After noting that AMW should be
determined by examining what a claimant actually earns during the
thirty days prior to the industrial industry, the ALJ concluded the
horse contracts represented prospective income that could not
properly be calculated as AMW. The ALJ further found that the
“Contracting Agreements” for the prospective earnings described an
independent contractor relationship between Munoz and the horse
owners and, as such, were not subject to the Workers’ Compensation
Act (“the Act”) nor properly calculable as AMW. The ALJ thus
excluded the prospective horse business earnings from Munoz’s
AMW calculation.
¶5 Munoz requested administrative review, and the ALJ
affirmed the award. She then petitioned this court for review. We
have jurisdiction of this statutory special action pursuant to A.R.S.
§§ 12–120.21(A)(2) and 23–951(A), and Rule 10, Ariz. R. P. Spec.
Actions.
Discussion
¶6 We first determine whether Munoz was an independent
contractor in her horse business, and whether any earnings from
1The record shows Munoz contracted with five different horse
owners to board, train, and rehabilitate the owners’ horses. The
contract agreements were dated May 24, May 31, June 3, June 15,
and June 24 of 2011. Munoz testified she was to receive a deposit
from each owner when the horse was collected, and the balance
when she had finished training and/or rehabilitating the horse.
2Munoz refunded this deposit when her injury prevented her
from executing the contracts.
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
that business therefore were outside the scope of the Act and
properly excluded from the AMW calculation. Munoz argues the
ALJ erred by so concluding.
¶7 In the “Decision Upon Hearing and Findings and
Award Establishing Average Monthly Wage,” the ALJ concluded
there was no evidence that [prospective
income from the horse contracts] was
subject to the Worker[s’] Compensation
Act. The “Contracting Agreements” on
their face describe an independent
contractor relationship between the
applicant and the horse owners. Because
the applicant did not show that these
earnings were subject to the Workers’
Compensation Act, they cannot be
considered in computing her average
monthly wage.
¶8 The ALJ relied on A.R.S. § 23-902 and our supreme
court’s holding in Faulkner v. Industrial Commission, 71 Ariz. 76, 223
P.2d 905 (1950), in determining that income earned by a claimant
who is not subject to the Act—such as an independent contractor—
cannot be considered in an AMW calculation. Munoz claims,
however, that the ALJ erred by conflating who properly may be
covered under the Act with what wages may form the basis for the
AMW calculation. She argues that the issue is “not whether
[Munoz] is an employee of the horse-owners that she has contracted
with” but whether the ALJ’s calculation of AMW improperly
excluded wages from the horse training business that constituted
real economic gain to Munoz.
¶9 We will uphold an ALJ’s factual findings if they are
reasonably supported by the evidence. Micucci v. Indus. Comm’n, 108
Ariz. 194, 195, 494 P.2d 1324, 1325 (1972). And “[i]n any given case,
the ALJ has discretion to choose the appropriate formula for
calculating the average monthly wage” within the provided
framework. Morse v. Indus. Comm’n, 213 Ariz. 575, ¶ 9, 146 P.3d 76,
78 (App. 2006). The determination that a claimant is an independent
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
contractor, however, is a conclusion of law. Anton v. Indus. Comm’n,
141 Ariz. 566, 569, 688 P.2d 192, 195 (App. 1984). Although we defer
to the ALJ’s factual findings, we review questions of law de novo.
Hahn v. Indus. Comm’n, 227 Ariz. 72, ¶ 5, 252 P.3d 1036, 1038 (App.
2011). In doing so, we liberally construe the Workers’
Compensation Act in order to effectuate its remedial purpose.
Schuck & Sons Constr. v. Indus. Comm’n, 213 Ariz. 74, ¶ 13, 138 P.3d
1201, 1204 (App. 2006). This includes a liberal construction of who
may be considered an “employee” under the Act. See Hughes v.
Indus. Comm’n, 113 Ariz. 517, 519, 558 P.2d 11, 13 (1976).
¶10 The determination of a claimant’s average monthly
wage is governed by A.R.S. § 23-1041, which provides in pertinent
part:
A. Every employee of an employer within
the provisions of this chapter who is
injured by accident arising out of and in the
course of employment . . . shall receive the
compensation fixed in this chapter on the
basis of the employee’s average monthly
wage at the time of injury.
....
G. For the purposes of this section,
“monthly wage” means the average wage
paid during and over the month in which
the employee is killed or injured.
Arizona courts have created the presumption that a claimant’s
average monthly wage under subpart (G) is the income actually
earned during the thirty days prior to injury. See Lowry v. Indus.
Comm’n, 195 Ariz. 398, ¶¶ 6, 10, 989 P.2d 152, 154-55 (1999); Swift
Transp. v. Indus. Comm’n, 189 Ariz. 10, 11, 938 P.2d 59, 60 (App.
1996). However, when “‘the thirty-day period does not represent
the earning capacity of a claimant, the ALJ may in its discretion look
at a reasonable period beyond the given month to allow
consideration of pertinent factors.’” Berryhill v. Indus. Comm’n, 232
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
Ariz. 603, ¶ 7, 307 P.3d 1030, 1032 (App. 2013), quoting Swift, 189
Ariz. at 11, 938 P.2d at 60.
¶11 When a claimant is concurrently employed at the time
of injury, earnings from both positions may be aggregated to
establish the claimant’s AMW. Wiley v. Indus. Comm’n, 174 Ariz. 94,
104, 847 P.2d 595, 605 (1993) (addressing “wages from concurrent
dissimilar employment”). The claimant has the burden of
establishing concurrent employment and earnings on the date of
injury. See Zapien v. Indus. Comm’n, 12 Ariz. App. 334, 336, 470 P.2d
482, 484 (1970).
¶12 If a claimant’s concurrent employment is not subject to
the Workers’ Compensation Act, then the employee’s earnings from
such employment cannot be considered for purposes of calculating
AMW. See Faulkner, 71 Ariz. at 78, 223 P.2d at 906; Wheeler v. Indus.
Comm’n, 22 Ariz. App. 488, 490, 528 P.2d 874, 876 (1974); see also
Arizona Workers’ Compensation Handbook § 7.3.3.2, at 7-15 (Ray Jay
Davis et al. eds., 1992) (hereinafter “Handbook”). Independent
contractors generally are excluded from coverage under the Act. See
§ 23-902(C), (D); Handbook § 2.2.2.3, at 2-9.
¶13 In Faulkner v. Industrial Commission, our supreme court
concluded that in determining a claimant’s average monthly wage,
the Industrial Commission did not err by failing to consider
concurrent wages received from the claimant’s full-time, uninsured
employment with the Veteran’s Administration. 71 Ariz. at 77-78,
223 P.2d at 905-06. The court reasoned that the Act3 is based upon
the principle of insurance and the Industrial Commission would be
“derelict in its duty” if it included in the AMW calculation wages
from an employer who “was neither covered nor could be covered
by a policy with the commission.” Id.
3 Although Faulkner and other older cases refer to the
“Workmen’s Compensation Act,” rather than the current “Workers’
Compensation Act,” both terms refer to the workmen’s
compensation act mandated by article XVIII, § 8, Ariz. Const. See
A.R.S. § 23-901(19).
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
¶14 In Wheeler v. Industrial Commission, the court considered
whether a claimant’s independent self-employment wages should be
included in computing his average monthly wage. 22 Ariz. App. at
489, 528 P.2d at 875. In doing so, it noted that while § 23-1041
intends that workers receive compensation reasonably representing
their earning capacity at the time of the industrial accident, Faulkner
nonetheless controlled the issue. Id. at 490, 528 P.2d at 876. The
Wheeler court found that it would be “improper and unjust to shift
the cost from the self-employed businessman to the employer
purchasing workmen’s compensation insurance” and noted that
self-employed workers had “alternatives available . . . to protect
[themselves] against injury and loss of income which is uninsurable
under the Arizona Workmen’s Compensation Act.” Id. at 489-90,
528 P.2d at 875-76. The court concluded that, under Faulkner, it
would be improper to include earnings from concurrent self-
employment in the AMW calculation. Id. at 490, 528 P.2d at 876.4
The same reasoning applies here.
¶15 We next consider whether income from Munoz’s horse-
care business arose from an independent contractor relationship
with the horse owners, precluding its inclusion in the AMW
calculation. See Faulkner, 71 Ariz. at 78, 223 P.2d at 906; Wheeler, 22
Ariz. App. at 490, 528 P.2d at 876; see also Handbook § 7.3.3.2, at 7-15.
Neither the presence nor the absence of a written contract controls
whether a claimant is an independent contractor. Anton, 141 Ariz. at
568, 688 P.2d at 194. Rather, “[t]he distinction between an employee
and an independent contractor usually rests on the extent of control
the employer may exercise over the details of the work.” Cent.
4 Our supreme court has acknowledged that the Faulkner
rationale has been subjected to broad criticism, e.g. Floyd Hartshorn
Plastering Co. v. Indus. Comm’n, 16 Ariz. App. 498, 507, 494 P.2d 398,
407 (1972), but has chosen not to overrule its holding. Wiley v. Indus.
Comm’n, 174 Ariz. 94, 102, 847 P.2d 595, 603 (1993). We thus agree
with the Wheeler court that the Faulkner decision “still has legal and
practical viability” and controls the issue. 22 Ariz. App. at 489-90,
528 P.2d at 875-76.
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
Mgmt. Co. v. Indus. Comm’n, 162 Ariz. 187, 189, 781 P.2d 1374, 1376
(App. 1989).
¶16 To determine who has the right to control, courts
consider “various indicia of control” to resolve whether a claimant is
an independent contractor or employee. Home Ins. Co. v. Indus.
Comm’n, 123 Ariz. 348, 350, 599 P.2d 801, 803 (1979). Such indicia
include, inter alia, the duration of employment, the method of
remuneration, who furnishes equipment, who has the right to hire
and fire, who bears responsibility for workmen’s compensation
insurance, and the extent of the employer’s control over the details
of the work. Id. No one factor is determinative, as courts must look
to the totality of the facts and circumstances. El Dorado Ins. Co. v.
Indus. Comm’n, 25 Ariz. App. 617, 619, 545 P.2d 465, 467 (1976).
¶17 The evidence presented at the hearing established that
Munoz was acting as an independent contractor while operating her
horse business. The contracts, which were drafted by Munoz, refer
to Munoz as “Contractor,” and the horse owners, respectively, as
“Owner.” They obligate Munoz to “Train and Rehabilitate Horse(s)
on the following estimated schedule”: 60 to 120 days for $500 per
month for a minimum of 60 days; after that, the price will be
reduced by $50 for each month the contract is extended.
¶18 Nothing in these contracts, which state they are the
“entire agreement between the parties,” indicates that the horse
owners had any right to control the manner in which Munoz trained
or cared for the horses. Munoz presented no evidence that the horse
owners had any control over Munoz’s schedule or that they
furnished any equipment for her use. See Zapien, 12 Ariz. App. at
336, 470 P.2d at 484 (claimant has burden of establishing average
monthly wage). Munoz explained that the horse owners would pay
her a deposit when she took possession of their horses and that the
balance was to be paid when she was finished. Further, she
expressly disclaimed responsibility and liability arising from
“Feeding, shoeing, shots, and/or any Veterinarian expenses,”
indicating that Munoz—and not the horse owners—determined the
scope of her horse care and training duties. This evidence does not
establish that Munoz was an employee of the horse owners and thus
subject to the Workers’ Compensation Act. See Zapien, 12 Ariz. App.
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 MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
at 336, 470 P.2d at 484. We therefore conclude she was an
independent contractor, and any income from the horse contracts
properly was excluded from her AMW calculation.
¶19 At oral argument, Munoz urged us to disregard or
overturn Faulkner and its progeny. 5 But, as the court in Wheeler
correctly noted, it would be improper for this court to disregard our
supreme court’s decision in Faulkner to conclude the Commission
should have included wages from independent self-employment in
Munoz’s AMW calculation. 22 Ariz. App. at 490, 528 P.2d at 876.
“Whether prior decisions of the highest court in a state are to be
disaffirmed is a question for the court which makes the decisions.”
McKay v. Indus. Comm’n, 103 Ariz. 191, 193, 438 P.2d 757, 759 (1968).
Further, in general, it is the sole prerogative of the Legislature to
specify any additional persons or classes of persons who are to be
considered employees within the meaning of the Workers’
Compensation Act. Mitchell v. Gamble, 207 Ariz. 364, ¶ 19, 86 P.3d
944, 950 (App. 2004).
¶20 Munoz also argues for the first time in her reply brief
that she is a sole proprietor, rather than an independent contractor.6
She claims that because sole proprietors are contemplated under the
Act, her anticipated horse business income should be calculable as
AMW. She relies on § 23-901(6)(i) to argue that sole proprietors
5Munoz claimed, in part, that recent statutory changes should
affect our analysis. But she did not develop this contention or
support her claim with relevant legal authority, see Ariz. R. Civ.
App. P. 13(a)(6), and did not raise this issue prior to oral argument,
see Mitchell v. Gamble, 207 Ariz. 364, ¶ 16, 86 P.3d 944, 949-50 (App.
2004) (“Generally, issues and arguments raised for the first time at
oral argument on appeal are untimely and deemed waived.”).
6Generally, an issue raised for the first time in a reply brief is
waived, although we may review it at our discretion. State v.
Aleman, 210 Ariz. 232, ¶¶ 9-10, 109 P.3d 571, 575 (App. 2005); Ariz.
R. Civ. App. P. 13(c) (reply brief “shall be confined strictly to
rebuttal of points urged in the appellee’s brief”). In the exercise of
that discretion, we briefly address the issue.
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
potentially are eligible for coverage under the Act. That provision
states in relevant part that
[t]he sole proprietor of a business subject to
this chapter may be deemed to be an employee
entitled to benefits provided by this chapter on
written acceptance, by endorsement, at the
discretion of the insurance carrier of an
application for coverage by the sole
proprietor. The basis for computing premium
payments and compensation benefits for the
sole proprietor . . . is subject to the
discretionary approval of the insurance
carrier.
¶21 Under the Act, a sole proprietor may be entitled to
benefits, but such a determination is at the discretion of the
insurance carrier with whom the sole proprietor applies for workers’
compensation coverage. § 23-901(6)(i). Munoz does not allege or
demonstrate that she had applied for or obtained workers’
compensation coverage for her horse business, or that she would
have received benefits as a sole proprietor had she been injured
while working in her horse business. See Zapien, 12 Ariz. App. at
336, 470 P.2d at 484 (claimant has burden of establishing average
monthly wage).7
¶22 Because we conclude that Munoz’s horse business
income would arise from an independent contractor relationship
with the horse owners, placing it outside the scope of the Act and
thus not includable in her AMW, we do not address her separate
7And, as noted by the court in Wheeler, self-employed business
persons have alternatives to the workers’ compensation scheme for
protection against injury and loss of income. 22 Ariz. App. 488, 489-
90, 528 P.2d 874, 875-76.
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MUNOZ V. INDUS. COMM’N OF ARIZ.
Opinion of the Court
argument regarding whether prospective income may be included
in the AMW calculation.8
Disposition
¶23 For the foregoing reasons, the ALJ’s award is affirmed.
8In her opening brief, Munoz also claims that “[i]n addition to
the legal errors, what [the ALJ’s] Decision does is impermissibly
shift the burden of the loss of wage earning and wage earning
capacity to the Applicant.” She does not provide any case law or
reasoning to support her burden-shifting argument. We thus do not
consider it further. See Ariz. R. Civ. App. P. 13(a)(6) (appellate brief
“shall contain . . . the issues presented, and the reasons therefor,
with citations to the authorities, statutes and parts of the record
relied on”).
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