Warren Properties and Ace American Insurance Company v. Janice Stewart , 2015 Iowa Sup. LEXIS 64 ( 2015 )

IN THE SUPREME COURT OF IOWA
No. 13–0474
Filed May 29, 2015
WARREN PROPERTIES and ACE AMERICAN INSURANCE COMPANY,
Appellees,
vs.
JANICE STEWART,
Appellant.
Appeal from the Iowa District Court for Polk County,
Christopher L. McDonald, Judge.
A workers’ compensation claimant appeals the district court ruling
on judicial review of a decision of the Iowa Workers’ Compensation
Commissioner. AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED WITH DIRECTIONS.
Martin Ozga of Neifert, Byrne & Ozga, P.C., West Des Moines, for
appellant.
Mark A. King and Jason W. Miller of Patterson Law Firm, L.L.P.,
Des Moines, for appellees.
Matthew D. Dake of Wertz & Dake, P.C., Cedar Rapids, for amicus
curiae Workers’ Compensation Core Group.
2
CADY, Chief Justice.
In this workers’ compensation appeal, we are asked to revisit our
rule governing apportionment resulting from successive work injuries at
multiple places of employment in light of the 2004 amendments to the
workers’ compensation permanent 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
unscheduled work injury is not liable to pay for the preexisting disability
that arose from employment with a different employer or from causes
unrelated to employment when the employee’s earning capacity was not
reevaluated in the competitive job market 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.
I. Background Facts and Proceedings.
Janice Stewart was working two jobs in 2006. She had begun
working as an assistant property manager for a business in Des Moines
called Warren Properties in 2005. Her duties included typing, answering
the phone, showing apartments to prospective tenants, inspecting
property, and preparing rental agreements. Stewart received a salary
and a rent allowance for this work. In June 2006, Stewart began a
3
second full-time job with Wal-Mart. She worked as a customer service
representative 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 determined 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 expressed an opinion that Stewart
suffered a thirteen percent permanent physical impairment as a
consequence of her back injury.
On May 20, 2009, Stewart and Wal-Mart entered into a contested
case 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 duration 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 contested case
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 evaluation.
4
An evaluation in May 2009 found Stewart had obtained maximum
medical improvement. Physicians expressed differing 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 In July
2010, Dr. Jacqueline Stoken opined the fall had exacerbated Stewart’s
preexisting back condition and caused a right shoulder impairment.
Dr. Stoken viewed the low-back impairment as falling within the ten to
thirteen percent impairment range and assigned Stewart a thirteen
percent impairment of the body as a whole for this injury and ten percent
impairment to the body as a whole for the shoulder injury. Dr. Lazaro
Rabang opined Stewart’s 2009 fall merely temporarily aggravated the
back injury sustained in the 2006 Wal-Mart incident.
Stewart filed a complaint against Warren Properties with the
workers’ compensation commissioner in November 2009 to recover
compensation for her February 2, 2009 injury. Following a hearing in
October 2010, a deputy commissioner found Stewart sustained a
permanent partial unscheduled disability from the injury. The deputy
commissioner credited the medical opinion of Dr. Stoken and found
Stewart sustained a thirteen percent physical impairment to her body as
a whole due to the back injury. The deputy commissioner found no
specific percentage of permanent physical impairment to Stewart’s
1In his original evaluation in April 2010, Dr. Carlstrom did not address what
impairment was attributable to the 2006 or the 2009 injuries. In October 2010,
Dr. Carlstrom supplemented his evaluation and opined that no new impairment
resulted from the 2009 injury.
5
shoulder as a result of the 2009 injury. The deputy commissioner
concluded Stewart’s disability to her back and shoulder resulted in a fifty
percent industrial disability. Stewart was awarded benefits without any
apportionment 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 preexisting 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 compensation 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 determined the
commissioner was required to award compensation based on the
percentage of the worker’s disability attributable to the 2009 injury
without considering the prior disabilities the employee possessed for
which the employer was not responsible. 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 thirteen 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.
6
Stewart and Warren Properties both appealed the decision of the
district court. On appeal, Stewart claims the district court erred in
concluding that the disability arising from the 2006 and 2009 injuries
should be apportioned. She also claims the evidence was sufficient to
support the commissioner’s finding that the 2009 fall permanently
aggravated her preexisting back injury and created a new permanent
injury to her shoulder, which combined to sustain a finding of fifty
percent industrial 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 impairment rating is warranted, the preexisting 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 contested case settlement.
We conclude the 2004 amendments to the workers’ compensation
permanent disabilities statute require an evaluation by the commissioner
of Stewart’s earning capacity both before 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’ compensation 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 arrive at the same
conclusion as the district court. Sherman v. Pella Corp., 576 N.W.2d
7
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)(u) and (7)(a). Roberts Dairy v. Billick, 861 N.W.2d 814, 817
(Iowa 2015). Therefore, we review the commissioner’s interpretation “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 findings 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
agency’s interpretation [of law] and may substitute 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).
III. History and Background of Successive Disabilities.
Over 100 years have come and gone since our legislature
established an administrative agency system to compensate injured
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. See generally Joan T.A. Gabel & Nancy R.
Mansfield, Practicing in the Evolving Landscape of Workers’ Compensation
Law, 14 Lab. Law. 73 (1998) (discussing the effects that changing
common law and new federal laws on disability and family leave have
had on workers’ compensation practice). 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
8
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 supplemented 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
cumulative injury rule in Iowa law); Guyton v. Irving Jensen Co., 373
N.W.2d 101, 105 (Iowa 1985) (adopting the “odd-lot doctrine” for disabled
employees with no stable job market available).
One fertile area of statutory review by courts over the years has
involved the apportionment of compensation for successive injuries. The
original statute provided for the apportionment of successive injuries,
Iowa Code § 2477-m15(h) (Supp. 1913), and our early cases began the
process 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) (apportioning 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 disability); 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).
Following a decade of early judicial decisions, the legislature
amended the successive-injury statute to provide more specifically for the
apportionment of compensation for injured employees who had been
previously disabled and were drawing compensation at the time of a
subsequent injury. Compare Iowa Code § 822(h) (1919), with Iowa Code
§ 1397(8) (1924) (clarifying the apportionment from the proportion of the
incapacity and disability caused by the injury to simply the proportion of
9
the disability caused by the injury). See also Iowa Code § 2477-m9(j)(17)
(Supp. 1913) (providing that the loss of any two of certain scheduled
members would constitute permanent total disability); Iowa Code
§ 816(j)(19) (1919) (amending the statute to require the double loss occur
in a single accident to constitute permanent total disability). Aside from
statute renumbering and minor grammatical changes, the statute then
remained unchanged from 1924 until 2004. Compare Iowa Code
§ 1397(8) (1924), with Iowa Code § 85.36(9)(c) (2003).
Over the intervening eighty years, however, we developed a
comprehensive body of law to apply this statutory principle of
apportionment to a variety of different circumstances. See Gregory v.
Second Injury Fund of Iowa, 777 N.W.2d 395, 402–03 (Iowa 2010)
(Cady, J., dissenting) (discussing the development of the Second Injury
Fund for apportionment of scheduled permanent 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
ascertainable portion of the ultimate industrial 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 aggravated injury is compensable to the extent of the
injury instead of apportionable). In particular, we adopted the full-
responsibility rule and the fresh-start rule. See Ziegler, 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 subject to any active or dormant health
impairments); Rose v. John Deere Ottumwa Works, 247 Iowa 900, 908,
76 N.W.2d 756, 760–61 (1956) (describing a full-responsibility rule that if
a preexisting condition was “aggravated, accelerated, worsened or ‘lighted
up’ ” by the injury the employee was entitled to recover). Together, these
10
two judicial doctrines impacted the apportionment of compensation
statute by substantially limiting apportionment in determining the
compensation for successive disabilities.
IV. Statutory Changes to Successive Disabilities and
Calculation of Compensation.
In 2004, the General Assembly amended the 1924 statutory
apportionment rule by repealing the old successive disabilities statute
and replacing it with a new enactment. See 2004 Iowa Acts 1st
Extraordinary Sess. ch. 1001, §§ 9–21 (codified in part in scattered
sections of Iowa Code chs. 85–86 (2005)). In the Act, the legislature
specifically declared its intent in enacting 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 disabilities. 861
N.W.2d at 822. We determined the new statutes took two broad steps.
The first step was to provide a new rule to compute compensation for a
permanent partial disability in cases involving unscheduled injuries. Id.
at 822–23; see Iowa Code § 85.34(2)(u) (2009). Compensation under this
rule is computed by considering “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)(u).
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 articulated two principles applicable to successive
11
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 declared 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 employer or from
causes unrelated to employment.” Id. Thus, the first statutory principle
dealt with successive disabilities with the same employer, and the second
statutory principle dealt with successive disabilities with a different
employer. See id. 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 employment affected the same-employer rule. See id.
§ 85.34(7)(b)–(c). These two new statutory rules for successive disabilities
departed from our prior caselaw. For example, our successive disability
caselaw evolved without distinguishing between successive disabilities
arising from employment with the same or different employers. See
Venegas v. IBP, Inc., 638 N.W.2d 699, 701 (Iowa 2002) (“We find no basis
for distinguishing between work-related disabilities with the same
employer and work-related disabilities with different employers in the
application of the full-responsibility rule.”).
In Roberts Dairy, we held the statutory principle described in
section 85.34(7)(a)—an employer is not liable for compensating the
preexisting disability of an employee from employment with a different
employer—did not apply when the earning capacity of the employee had
been reevaluated by the competitive labor market. 861 N.W.2d at 823.
Thus, we found that the workers’ compensation commissioner correctly
decided the employer in the case was not entitled to apportion liability for
12
permanent partial disability benefits paid to an employee based on the
losses of earning capacity suffered from two prior injuries while working
for different employers because the market had reevaluated earning
capacity when the employer hired the employee. Id. at 824–25. We
found the legislature intended to preserve the fresh-start rule when an
employee is reevaluated by the competitive labor market with a change in
employment following a permanent partial disability in a prior
employment with a different employer. Id. at 823.
V. Liability of Warren Properties for Preexisting Disability.
The issues presented in this case are similar to those presented in
Roberts Dairy, but arise from different facts. This factual difference does
not permit us to rely on Roberts Dairy to resolve the issue. The
important distinguishing fact is that the preexisting disability at the
center of this case did not 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 disability caused by an injury arising
out of her employment with Wal-Mart. As a result, Warren Properties
argues the apportionment 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 adjusted by the competitive labor
market. Stewart claims a market adjustment was unnecessary because
she maintained her employment with Warren Properties without 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
13
parties first require us to examine the legislative intent behind the 2004
statutory changes.
Our sole goal in interpreting statutes is to apply the intent of the
legislature. Thomas v. Gavin, 838 N.W.2d 518, 523 (Iowa 2013). The
legislature expressed in detail its intent behind the statutes at issue in
this case. 2 Thus, we rely on this intent to guide the application of the
statute to the claim for compensation under the facts of this case.
2The legislative intent section, 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001,
§ 20, states:
It is the intent of the general assembly that this division of this Act will
prevent all double recoveries and all double reductions in workers’
compensation benefits for permanent partial disability. This division
modifies the fresh start and full responsibility rules of law announced by
the Iowa supreme court in a series of judicial precedents.
The general assembly recognizes that the amount of
compensation a person receives for disability is directly related to the
person’s earnings at the time of injury. The competitive labor market
determines the value of a person’s earning capacity through a strong
correlation with the level of earnings a person can achieve in the
competitive labor market. The market reevaluates a person as a working
unit each time the person competes in the competitive labor market,
causing a fresh start with each change of employment. The market’s
determination effectively apportions any disability through a reduced
level of earnings. The market does not reevaluate an employee’s earning
capacity while the employee remains employed by the same employer.
The general assembly intends that an employer shall fully
compensate all of an injured employee’s disability that is caused by
work-related injuries with the employer without compensating the same
disability more than once. This division of this Act creates a formula
that applies disability payments made toward satisfaction of the
combined disability that the employer is liable for compensating, while
taking into account the impact of the employee’s earnings on the amount
of compensation to be ultimately paid for the disability.
The general assembly does not intend this division of this Act to
change the character of any disability from scheduled to unscheduled or
vice versa or to combine disabilities that are not otherwise combined
under law existing on the effective date of this section of this division of
this Act. Combination of successive scheduled disabilities in section
85.34, subsection 7, as enacted in this division of this Act, is limited to
disabilities affecting the same member, such as successive disabilities to
the right arm. A disability to the left arm that is followed by a disability
to the right arm is governed by section 85.64 and is not a successive
14
The starting point for the resolution 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 statutory
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 behind this rule was to
“prevent all double recoveries and all double reductions in workers’
compensation benefits for permanent partial disability.” 2004 Iowa Acts
1st Extraordinary Sess. ch. 1001, § 20. The statute does not specifically
mention concurrent employers, but concurrent employers are also
different employers. 3 The text of the statute clearly captures concurrent
employers. Thus, Stewart was not beyond the scope of the governing
rule simply because her preexisting disability with a “different employer”
was sustained at the time she also maintained employment with Warren
Properties. We are required to use the plain language of the statute
when construing statutes. Neal, 814 N.W.2d at 519.
_________________________
disability under this division. This division does not alter benefits under
the second injury fund, benefits for permanent total disability under
section 85.34, subsection 3, the method of determining the degree of
unscheduled permanent partial disability, the compensable character of
aggravation injuries, or an employer’s right to choose the care an injured
employee receives, expand the fresh start rule to scheduled disabilities,
or change existing law in any way that is not expressly provided in this
division.
The general assembly intends that changes in the identity of the
employer that do not require the employee to reenter the competitive
labor market will be treated as if the employee remained employed by the
same employer.
3The statute also excepts injuries unrelated to employment from the employer’s
liability. Iowa Code § 85.34(7)(a). The legislature clearly wished to limit an employer’s
liability to only disabilities “aris[ing] out of and in the course of the employee’s
employment with the employer” and no others. Id.
15
The concern expressed by the legislature over double recoveries
and double reductions for successive permanent partial disabilities can
be traced to the role of a preexisting disability in the payment of
compensation for a subsequent injury. See, e.g., Ziegler, 252 Iowa at
619–20, 106 N.W.2d at 594–95 (evaluating subrogation rights of
employer to employee’s settlement with third-party tortfeasor of original
injury in an injury-aggravation case). When a successive injury
increases a preexisting permanent disability to the body as a whole, the
benefits provided for the successive injury must not include a double
recovery for the first disability or a double reduction for the first
disability. See 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20.
The legislature intended to address this issue by enacting Iowa
Code section 85.34(7)(a). Importantly, it did not just express an intent to
apportion preexisting disabilities from different employers to prevent
double recoveries. Iowa Code § 85.34(7)(a). It also expressed its intent to
prevent double reductions by adopting the fresh-start rule we had
developed in our prior cases. See id.; 2004 Iowa Acts 1st Extraordinary
Sess. ch. 1001, § 20. While the legislature sought to relieve employers of
any “liab[ility] for compensating an employee’s preexisting disability” that
arose in employment with a different employer or outside of employment,
it expressed its clear intent to adopt a modification of the fresh-start rule
to recognize the reevaluation of earning capacity achieved through the
“competitive labor market . . . with each change of employment.” Iowa
Code § 85.34(7)(a) (first quote); 2004 Iowa Acts 1st Extraordinary Sess.
ch. 1001, § 20 (second quote). The legislature accepted the general
premise that the competitive labor market reestablishes a worker’s
earning capacity following a disabling injury and further observed that
this market “effectively apportions any disability through a reduced level
16
of earnings.” 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20.
Thus, the legislative intent reveals the modified fresh-start rule does not
run afoul of the statutory 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 earning capacity recognized by the competitive labor
market. 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20. The
fresh-start rule does not make an employer liable for compensating an
employee’s preexisting disability with a different employer because
apportionment effectively took place prior to the second injury through
the forces of the competitive labor market associated with a change in
employment. See id.
This proposition established the basis of our holding in Roberts
Dairy, 861 N.W.2d at 823. In that case, the worker had changed
employment after sustaining permanent partial disabilities, and his
earning capacity was effectively reset by the competitive labor market
that accompanied each change of employment, including his employment
at the time of his injury. Id. at 816, 823–24. We applied the modified
fresh-start rationale adopted by the legislature in enacting Iowa Code
section 85.34(7)(a). Id. at 823.
The legislature, however, did not preserve the fresh-start rule
beyond the competitive-job-market rationale. Additionally, it specifically
found “[t]he market does not reevaluate an employee’s earning capacity
while the employee remains employed by the same employer.” 2004 Iowa
Acts 1st Extraordinary Sess. ch. 1001, § 20. Thus, to ensure employers
are not liable for compensating preexisting disabilities incurred at a
different employer or outside employment, the rule does not apply when
17
earning capacity has not been reset by the competitive labor market after
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 observed in determining the compensation paid for
successive disabilities.
We recognize the legislature did not establish a specific method of
apportionment for successive disabilities with different employers when
no market reevaluation has taken place, as it did for successive
disabilities with the same employer. See Iowa Code § 85.34(7)(b). In
Roberts Dairy, we used this observation as a secondary rationale to
support our conclusion that the legislature did not intend to apportion
liability for successive disabilities between different employers when a
competitive labor market reevaluation has occurred. 861 N.W.2d at 823.
While the maxim expressio unius est exclusio alterius tells us to infer all
omissions are intentional exclusions when “a statute designates a form of
conduct, the manner of its performance and operation,” and what it
refers to, 2A Norman J. Singer & Shambie Singer, Statutes and Statutory
Construction § 47:23, at 406–13 (7th ed. 2014) (footnotes omitted), it does
not apply without evidence the legislature specifically intended for all
other options to be excluded, id. § 47:25, at 446; see also Andover
Volunteer Fire Dep’t v. Grinnell Mut. Reins. Co., 787 N.W.2d 75, 86 (Iowa
2010) (considering the history and purpose of the statute as well as
ordinary meaning of a term and its context when construing the meaning
of a statute). Considering the legislature’s intent to avoid double
recoveries and double reductions, we find that, although a specific
method of apportionment was not established, the legislature did not
intend to exclude from apportionment successive disabilities with
different employers when no market reevaluation has occurred. The
18
compensation formula provided by the legislature in section 85.34(2)(u),
used for all successive disabilities with separate employers, can be used
in conjunction with the rule in section 85.34(7)(a) to apportion the loss in
earning capacity when a market reevaluation has not occurred.
In this case, the fresh-start rule recognized by the legislature does
not apply 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
Wal-Mart injury. This is the critical distinction separating this case from
Roberts Dairy. Thus, Stewart is not entitled to compensation from
Warren Properties under section 85.34(2)(u) for the forty percent loss of
earning capacity resulting from the 2006 Wal-Mart injury.
Notwithstanding, we acknowledge that the absence of a
competitive-job-market readjustment of an injured worker’s earning
capacity does not mean their postinjury industrial disability will always
remain constant. See 7 Arthur Larson & Lex K. Larson, Larson’s
Worker’s Compensation Law § 81.03[1], at 81-13 (2014) [hereinafter
Larson] (actual earnings only “create a presumption which may be
overcome by other evidence showing that the actual earnings do not
fairly reflect claimant’s capacity”). The absence of a market readjustment
merely means an injured worker does not receive the benefit of an
automatically refreshed earning capacity in computing benefits for the
successive disability. A change in earning capacity can be shown by
evidence other than new employment, including changes in the
employee’s functional capacity, education, qualifications, experience, and
training. See Oscar Mayer Foods Corp. v. Tasler, 483 N.W.2d 824, 831
(Iowa 1992); see also 7 Larson, §§ 81.05–.06, at 81-19 to 81-21 (citing
factors like actual pre- and post-injury wages, increased training, and
19
education as things to be considered when calculating earning capacity).
Nevertheless, no such evidence was presented in this case to show
Stewart’s reduced earning capacity resulting from her 2006 Wal-Mart
injury had been restored in whole or in part as a consequence of
unexpected healing, a change in her qualifications, training, education,
or other factors prior to the 2009 Warren Properties injury. The
argument by Stewart that her continued 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 Extraordinary 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 employment with
Warren Properties. 4 Additionally, 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 earning capacity); see
also Clark v. Vicorp Rests., Inc., 696 N.W.2d 596, 605 (Iowa 2005) (finding
a reduction in actual earnings is not necessary to show reduced earning
capacity).
Accordingly, the compensation in this case must be computed
under the formula set out in section 85.34(2)(u), and the apportionment
rule in section 85.34(7)(a) must be applied to assure that any
compensation paid by Warren Properties for the 2009 injury is based on
4There is no evidence in this case that Stewart competed for a job within her
employment with Warren Properties following the initial injury.
20
the loss of earning capacity resulting from that injury and not the forty
percent loss of earning capacity sustained by Stewart as a consequence
of the 2006 injury.
VI. Statutory Calculation of Successive Disabilities.
Under the compensation formula for unscheduled injuries in
section 85.34(2)(u) as amended, employees who suffer successive
permanent partial disabilities are paid benefits based on their weekly
earnings for a number of weeks determined by the application of two
factors. 5 Iowa Code § 85.34(2)(u). One factor is the earning capacity
possessed when the successive injury occurred, and the other factor is
the reduction in earning capacity, or disability, caused by the successive
injury. Id. The compensation paid for a successive injury equals “the
reduction in the employee’s earning capacity caused by the disability . . .
in relation to the earning capacity” possessed at the time of the injury
relative to 500 weeks. Id. When successive disabilities are involved, this
formula must be applied in a way that will not make the successive
employer liable for a preexisting disability arising from an injury
sustained by the employee while working for another employer. See id.
§ 85.34(7)(a). To accomplish this statutory requirement, the preexisting
disability must be apportioned from the formula when it has not been
effectively apportioned by the competitive labor market through a fresh
start with a new employer. In other words, without a market adjustment
through a change in employment, any preexisting disability must be
5Compensation for scheduled injuries specifically listed in the statute is based
on a different statutory scheme assigning a number of weeks of compensation for
different scheduled members. Iowa Code § 85.34(2)(a)–(t). The Second Injury
Compensation Act governs compensation for certain successive injuries to multiple
scheduled members. See id. §§ 85.63–.69.
 21
apportioned so that only the new disability resulting from a successive
injury is determined based on the two factors considered in the formula.
See 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20. The earning
capacity possessed at the time of the successive injury does not include
any earning capacity lost as a consequence of a prior work-related injury
or due to causes unrelated to employment, and the reduction in earning
capacity caused by the successive injury therefore cannot include any
earning capacity that was lost and not regained before the successive
injury at issue in a particular case. 6 See id.
6The application of the compensation formula for unscheduled injuries in cases
of successive permanent partial disabilities arising from different employers with no
market reevaluation or other change in earning capacity following the first disability can
be illustrated with the following example by using percentages consistent with evidence
of functional impairments and loss of earning capacity common to workers’
compensation hearings. A worker injures his back on the job and suffers a ten percent
permanent impairment of his body as a whole and a forty percent loss of earning
capacity. Compensation is paid under section 85.34(2)(u) for 200 weeks. The reduction
in earning capacity caused by the disability was forty percent, and the earning capacity
possessed when the injury occurred was 100%. Forty percent of 500 weeks equals 200
weeks. Two years later, while working for a different employer and—as in this case—
without any labor market reevaluation in earning capacity, the same worker is again
injured on the job. As a result of the new injury, the worker now has a thirteen percent
permanent impairment to the body as a whole and a fifty percent loss of earning
capacity.
Compensation is paid under section 85.34(2)(u) “during the number of weeks in
relation to five hundred weeks as the reduction in the employee’s earning capacity
caused by the disability bears in relation to the earning capacity that the employee
possessed when the injury occurred.” Iowa Code § 85.34(2)(u). We have recognized the
phrase “in relation to” to require a division computation between the compared
numbers in other contexts. See In re Marriage of Benson, 545 N.W.2d 252, 255 (Iowa
1996) (calculating divorcing spouse’s share of pension benefits). In a mathematical
formulation, the reduction in earning capacity divided by earning capacity possessed is
equal to the number of weeks compensated divided by 500 weeks. Applying this
formula to our hypothetical scenario, the reduction in earning capacity caused by the
successive injury was ten percent (fifty percent minus forty percent) and the earning
capacity possessed when the injury occurred was sixty percent (100 percent minus forty
percent). To determine the compensable change in earning capacity, we divide the
reduction in earning capacity, ten percent, by the earning capacity possessed when the
successive injury occurred, sixty percent. In this example, that calculation equals
16.67%, and 16.67% of 500 weeks equals 83.3 weeks.
22
In this case, the commissioner applied the formula without
apportioning the prior loss of earning capacity attributable to the prior
injury while working at Wal-Mart. This constituted legal error because
Stewart’s earning capacity was not refreshed in the competitive labor
market prior to the 2009 injury. Accordingly, the commissioner must
recompute the benefits payable to Stewart under the evidence in this
case. See Swiss Colony, Inc. v. Deutmeyer, 789 N.W.2d 129, 136 (Iowa
2010) (remanding “for a recalculation of benefits under the proper
standard”).
VII. Evidence to Support Successive Disabilities.
Warren Properties claims it is unnecessary to remand the case to
the commissioner to recompute benefits under the compensation formula
because the evidence in this case did not support a finding of a new
disability arising from the February 2, 2009 injury. It argues the only
logical conclusion that can be drawn from the evidence in this case is the
unscheduled injury in 2009 did not increase Stewart’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 contested case settlement 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 concerning 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
increased by the 2009 injury.
Permanent partial disability results from the loss, or functional
impairment, of an unscheduled part of the body, such as the back,
shoulder, neck, or hip. See Iowa Code § 85.34(2)(u). The original
23
impairment is permanent and cannot form the sole basis for a second
permanent partial disability claim for benefits. See Yeager v. Firestone
Tire & Rubber Co., 253 Iowa 369, 374–75, 112 N.W.2d 299, 302 (1961)
(“If his condition was aggravated . . . so it resulted in the disability found
to exist, plaintiff was entitled to recover therefor. Of course he was not
entitled to compensation for the results of a pre-existing injury or
disease.”). A new or additional permanent impairment must be
established for an impairment to be the sole basis of a new award. See
Excel Corp. v. Smithart, 654 N.W.2d 891, 898 (Iowa 2002) (distinguishing
between separate injuries and cumulative injuries for purposes of
compensation), superseded by statute, 2004 Iowa Acts 1st Extraordinary
Sess. ch. 1001, § 12, as stated in Roberts Dairy, 861 N.W.2d at 819 n.1;
cf. Blacksmith v. All-Am., Inc., 290 N.W.2d 348, 350 (Iowa 1980) (holding
a subsequent change in earning capacity proximately caused by the
original injury, even without a change in physical condition, may
constitute a compensable change in industrial disability).
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 physical impairment. In this case, the record includes
medical evidence tending to prove the permanent functional impairment
resulting 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
24
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’ contention that the evidence
pertaining to Stewart’s loss of functional capacity arising from the 2006
injury precludes a finding that Stewart suffered an industrial disability
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 adequate judicial
review). The formula requires the commissioner to determine the earning
capacity when the successive injury occurred and the reduction in
earning capacity caused by the disabilities.
VIII. Conclusion.
We conclude the commissioner erred in interpreting section
85.34(7)(a) and applying 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.