Joseph Petitt v. Sause Brothers

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOSEPH PETITT, No. 12-70740
Petitioner,
BRB No.
v. 11-0351
SAUSE BROTHERS; SEABRIGHT
INSURANCE COMPANY; DIRECTOR, OPINION
OFFICE OF WORKERS’
COMPENSATION PROGRAM,
Respondents.
On Petition for Review of an Order of the
Benefits Review Board
Argued and Submitted
May 8, 2013—Portland, Oregon
Filed September 20, 2013
Before: Alfred T. Goodwin, Stephen Reinhardt,
and Andrew D. Hurwitz, Circuit Judges.
Opinion by Judge Hurwitz
2 PETITT V. SAUSE BROTHERS
SUMMARY*
Longshore and Harbor Workers’ Compensation Act
The panel granted a petition for review of a decision of
the Benefits Review Board awarding benefits to petitioner
under the Longshore and Harbor Workers Compensation Act.
The panel held that under the Longshore Act, scheduled
wage increases given by a non-union employer to all
employees in a certain class based solely upon seniority were
a general increase in wages and did not increase a claimant’s
wage-earning capacity. The panel concluded that petitioner’s
quarterly “seniority raises” were more akin to a general wage
increase than to a merits-based raise in wages, and therefore
should not be calculated into his wage-earning capacity. The
panel remanded to the agency to recalculate petitioner’s
partial disability benefits.
COUNSEL
Charles Robinowitz (argued), Portland, Oregon, for
Petitioner.
Norman Cole (argued), Sather, Byerly & Holloway, LLP,
Portland, Oregon, for Respondents.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
PETITT V. SAUSE BROTHERS 3
OPINION
HURWITZ, Circuit Judge:
The question presented is whether, under the Longshore
and Harbor Workers’ Compensation Act (“LHWCA”),
scheduled wage increases unrelated to the merits of a
worker’s performance constitute an increase in the worker’s
wage-earning capacity or merely a general increase in wages.
We hold that they are a general increase.
I.
Joseph Petitt injured his back in 2003 while earning $15
per hour as a welder for Sause Brothers (“Sause”). After
undergoing two surgeries, Petitt briefly returned to his job,
but, physically unable to continue, left Sause at the end of
2004. Sause then began paying Petitt permanent total
disability benefits under the LHWCA, 33 U.S.C. §§ 901–950.
Three years later, Petitt began working as an electronics
assembler at K&K Sound Systems (“K&K”), earning $7.80
per hour. K&K provides all production and clerical
employees, including assemblers, an automatic $0.25 per
hour raise every three months until their wages reach $13.50
per hour.
When Petitt began work at K&K, Sause began paying him
only permanent partial disability benefits based on his
starting salary. Sause periodically reduced those benefits to
reflect each quarterly increase. Petitt objected, claiming that
Sause incorrectly factored the quarterly raises into the
determination of his benefit.
4 PETITT V. SAUSE BROTHERS
Under the LHWCA, “‘[d]isability’ means incapacity
because of injury to earn the wages which the employee was
receiving at the time of injury in the same or any other
employment.” 33 U.S.C. § 902(10). A disabled employee is
entitled to “66 b per centum of the difference between the
average weekly wages of the employee and the employee’s
wage-earning capacity thereafter in the same employment or
otherwise, payable during the continuance of partial
disability.” 33 U.S.C. § 908(c)(21). Section 910(a)–(c)
provides three formulas for determining a claimant’s average
weekly wage. Wage-earning capacity of a partially disabled
employee
shall be determined by his actual earnings if
such actual earnings fairly and reasonably
represent his wage-earning capacity:
Provided, however, That if the employee has
no actual earnings or his actual earnings do
not fairly and reasonably represent his wage-
earning capacity, the deputy commissioner
may, in the interest of justice, fix such wage-
earning capacity as shall be reasonable,
having due regard to the nature of his injury,
the degree of physical impairment, his usual
employment, and any other factors or
circumstances in the case which may affect
his capacity to earn wages in his disabled
condition, including the effect of disability as
it may naturally extend into the future.
33 U.S.C. § 908(h).
Because the parties stipulated to Petitt’s average weekly
wage at the time of his injury, this appeal hinges on the
PETITT V. SAUSE BROTHERS 5
proper calculation of wage-earning capacity. After an
evidentiary hearing, an administrative law judge (“ALJ”)
found that Petitt’s “pay increases after the date of injury are
reflective of his wage-earning capacity and shall be used to
calculate his disability payments.” The Benefits Review
Board affirmed. Petitt filed a timely petition for review; we
have jurisdiction pursuant to 33 U.S.C. § 921(c).
We review Benefits Review Board decisions “‘for errors
of law and for adherence to the substantial evidence
standard.’” Gen. Constr. Co. v. Castro, 401 F.3d 963, 965
(9th Cir. 2005) (quoting Alcala v. Dir., OWCP, 141 F.3d 942,
944 (9th Cir. 1998)). “The Board’s interpretation of the
LHWCA is a question of law reviewed de novo and is not
entitled to any special deference.” Stevedoring Servs. of Am.
v. Price, 382 F.3d 878, 883 (9th Cir. 2004).
II.
“The objective in determining wage-earning capacity ‘is
to determine the wage that would have been paid in the open
market under normal employment conditions to the claimant
as injured.’” Deweert v. Stevedoring Servs. of Am., 272 F.3d
1241, 1248 (9th Cir. 2001) (quoting Long v. Dir., OWCP,
767 F.2d 1578, 1582 (9th Cir. 1985)). “The Act contemplates
that the current dollar amount of post-injury ‘wage-earning
capacity’ be adjusted downward (i.e., backward in time) to
account for post-injury inflation and general wage increases.
This adjustment allows post-injury ‘wage-earning capacity’
to be meaningfully compared to pre-injury ‘average weekly
wages.’” Sestich v. Long Beach Container Terminal,
289 F.3d 1157, 1161 (9th Cir. 2002); see also Long, 767 F.2d
at 1582 (“A general increase in wages . . . may make post-
6 PETITT V. SAUSE BROTHERS
injury earnings an unreliable indicator of wage-earning
capacity.”).
Under the LHWCA, general wage increases include
“percentage increase[s] . . . in the contractual wages of the
base hourly rate.” Hanson v. Port of Portland, BRB Nos. 98-
1454 and 98-1454A, 1999 WL 35135239, at *3 (Ben. Rev.
Bd. Aug. 6, 1999). Wage increases required by a union
contract are treated as general wage increases. See, e.g.,
Randall v. Comfort Control, Inc., 725 F.2d 791, 797 n.10
(D.C. Cir. 1984) (“[W]ages received by a particular employee
as a result of union bargaining for industry-wide pay rates are
not indicative of the employee’s true wage-earning
capacity.”).
Conversely, merit or promotion-based wage increases are
factored into a claimant’s wage-earning capacity under the
LHWCA. Sestich, 289 F.3d at 1160–61; Deweert, 272 F.3d
at 1247 & n.3. Merit-based wage increases include raises
received for expanding one’s duties or learning new skills.
Deweert, 272 F.3d at 1247 n.3.
III.
The only issue for decision is whether the $0.25 quarterly
raises are general wage increases, which should not be
factored into the determination of Petitt’s wage-earning
capacity, or instead reflect an increase in earning capacity,
properly reducing the partial disability benefit.1 In finding
1
On January 20, 2008, K&K gave Petitt a $0.55 per hour merit increase.
The parties agree that the ALJ properly increased Petitt’s wage-earning
capacity to account for this increase. Nor do the parties dispute that the
PETITT V. SAUSE BROTHERS 7
the latter, the ALJ relied primarily on the testimony of Karla
Kaudel, the chief executive officer of K&K. Kaudel labeled
the quarterly pay increases a “seniority raise,” and testified:
If people work for us, we promise them a
certain maximum wage that they can achieve
in a certain time frame for us. And the cap
wage for everybody in production and clerical
is $13.50. And when our employees start,
they start at minimum wage, and with
adequate performance they will get automatic
raises of 25 cents per quarter.
This Court has not previously had occasion to consider
the appropriate treatment under the LHWCA of such
“seniority raises.” We conclude that Petitt’s quarterly raises
are more akin to a general wage increase than to a merits-
based raise in wages, and therefore should not be calculated
into his wage-earning capacity.
In Randall, the District of Columbia Circuit noted that
increases in the collectively bargained union rate for a
particular employee’s work do not reflect increased earning
capacity under the LHWCA, because the increases simply
represent industry-wide pay rates, rather than an increase in
individual skill or responsibility. 725 F.2d at 797 n.10.
Although K&K is not a union employer, its quarterly
increases are also untethered from advancement in skill or
responsibility. Like a union contract increase, which Randall
characterized as “not indicative of the employee’s true wage-
earning capacity,” id., the K&K seniority increases do not
ALJ appropriately adjusted for inflation in determining Petitt’s wage-
earning capacity.
8 PETITT V. SAUSE BROTHERS
increase Petitt’s value on the open market. Indeed, the record
is clear that newer K&K employees performing precisely the
same tasks as Petitt—with the same amount of proficiency—
receive K&K’s starting wage, adjusted upward from the time
of their hire, and thus earn less than Petitt.
Deweert, upon which Sause relies, is not to the contrary.
Although we stated in Deweert that wage increases because
of seniority may be factored into a claimant’s wage-earning
capacity, the claimant’s seniority in that case was paired with
increased responsibility and new marketable skills. 272 F.3d
at 1247 n.3. Here, Petitt’s seniority is not accompanied by
any increase in his productivity, skill, or responsibility that
would make him more valuable on the market if he left K&K.
Petitt testified without contradiction that after “your second
or third month” as an electronics assembler, “you’re pretty
much as fast as you’re going to get,” and will have “learn[ed]
what you need to learn until you get to another part of the
company.” And when asked whether he was more productive
than he was three months after he started, Petitt replied “no.”
Again, the ALJ heard no evidence to the contrary.
This is not to suggest that K&K’s seniority increases are
not a rational market strategy or of real benefit to the
employer. By regularly increasing Petitt’s wages, K&K seeks
to avoid the costs, direct and otherwise, associated with hiring
or training a new employee, even at lower wages. But our
objective here is not to determine whether K&K benefits
from the wage increases, but rather to ascertain the wage that
Petitt could receive on the open market under normal
employment conditions. Id. at 1248. Because Petitt has
learned no new skills and taken on no additional
responsibility, his increased length of service makes him
more valuable only to K&K. Were he to seek work on the
PETITT V. SAUSE BROTHERS 9
open market, he could start at minimum wage, just as he and
all new employees did at K&K.
IV.
For the reasons above, we hold that under the LHWCA,
scheduled wage increases given by a non-union employer to
all employees in a certain class based solely upon seniority
are a general increase in wages and do not increase a
claimant’s wage-earning capacity. The petition for review is
granted and the Board’s decision is vacated. The matter is
remanded to the agency to recalculate Petitt’s partial
disability benefits in a manner consistent with this opinion.
PETITION GRANTED; VACATED AND
REMANDED.