Lazarus v. Industrial Com'n of Arizona

• Decision Date: 12 June 1997
• Docket Number: CA-IC,No. 2,2
• Citation: 190 Ariz. 301,947 P.2d 875
• Parties: 246 Ariz. Adv. Rep. 42 Joanne E. LAZARUS, Petitioner Employee, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Community Psychology Education Services, Respondent Employer, State Compensation Fund, Respondent Insurance Carrier. 96-0045.
• Court: Arizona Court of Appeals

Page 875

947 P.2d 875

246 Ariz. Adv. Rep. 42

Joanne E. LAZARUS, Petitioner Employee, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Community Psychology Education Services, Respondent Employer, State Compensation Fund, Respondent Insurance Carrier.

No. 2 CA-IC 96-0045.

Court of Appeals of Arizona,

Division 2, Department B.

June 12, 1997.

Review Denied Dec. 16, 1997.

Samet and Gage, P.C. by Dee-Dee Samet, Tucson, for Petitioner Employee.

Anita R. Valainis, Chief Counsel, The Industrial Commission of Arizona, Phoenix, for Respondent.

James F. Crane and Mark R. Christensen, State Compensation Fund, Tucson, for Respondent Employer and Respondent Insurance Carrier.

OPINION

PELANDER, Presiding Judge.

The issue in this case is whether a medical insurance premium an employer pays as a fringe benefit of employment should be included in calculating an injured employee's average monthly wage under the Workers' Compensation Act, A.R.S. §§ 23-901 to 23-1091 (the Act). The administrative law judge (ALJ) concluded it should not. For the reasons set forth below, we affirm.

BACKGROUND

The parties stipulated to the following facts. Petitioner Joanne Lazarus injured her wrist in July 1993, while working as a vocational counselor for Community Psychology Education Services (CPES). Following the injury, she continued to work for CPES until she quit to take a job with a school district in August 1993. Lazarus did not miss work because of the industrial injury until May 1994, when she had to stop working because she was scheduled for surgery.

During Lazarus's employment with CPES, it had paid $81.34 per month for her medical insurance under a group policy. That benefit was part of the consideration for Lazarus taking that job. She would have had to pay $162.35 per month to convert to an individual policy under the same plan. CPES would not have paid Lazarus more wages had she declined medical insurance, and it did not continue paying medical insurance premiums for her after she left that job or while she was off work for surgery in 1994. ¹

Lazarus protested the Industrial Commission's average monthly wage calculation of $1,066.99, contending that CPES's $81.34 medical insurance premium should be included in the calculation. The ALJ initially agreed, concluding that the average monthly wage should be increased to $1,148.33. CPES sought special action relief, and this court set aside the award, concluding that we could not affirm it in the absence of additional facts. Community Psychology Education Services v. Industrial Comm'n, 2 CA-IC 95-0010 (memorandum decision filed July 18, 1995). On remand to the Industrial Commission, the parties stipulated to additional facts. Based on the stipulated facts and the parties' legal memoranda, the ALJ set Lazarus's average monthly wage at $1,066.99 after determining that it should not include the health insurance cost. The ALJ affirmed the decision upon administrative review, and Lazarus now seeks special action relief.

DISCUSSION

Compensation for injured employees is based on the "employee's average monthly wage at the time of the injury." A.R.S. § 23-1041(A). The statute defines "average monthly wage" as "the average wage paid during and over the month in which the employee is killed or injured," § 23-1041(D), and does not offer any further guidance as to what items constitute "wages."

Arizona cases provide some further definition. "[P]ayments or benefits conferred upon an employee in return for his labor and services are includable in computing the average monthly wage, even though these payments or benefits do not on their face purport to be 'wages.' " Moorehead v. Industrial Comm'n, 17 Ariz.App. 96, 99, 495 P.2d 866, 869 (1972). The computation of the average monthly wage includes "anything constituting real economic gain to the claimant." Harvey Auto Supply, Inc. v. Industrial Comm'n, 25 Ariz.App. 274, 276, 542 P.2d 1154, 1156 (1975). See also Scott v. Industrial Comm'n, 122 Ariz. 169, 593 P.2d 919 (App.1978). "[T]he emphasis in setting a worker's average monthly wage is on what the employee has actually earned for his labors." Senor T's Restaurant v. Industrial Comm'n, 131 Ariz. 360, 363, 641 P.2d 848, 851 (1982). See also 2 Arthur Larson, The Law of Workmen's Compensation § 60.12(a) at 10-648, 10-655 (1996) ("In computing actual earnings as the beginning point of wage-basis calculations, there should be included not only wages and salary but anything of value received as consideration for the work, as, for example, tips, bonuses, commissions and room and board, constituting real economic gain to the employee.").

Thus, Arizona courts have considered the following to be "wages" under the statute: tips received by restaurant workers (Senor T's) and cabdrivers (Scott ); corporate stock received by an employee in lieu of cash (Harvey Auto Supply); a 40% commission on all sales made by the employee (Barron v. Ambort, 64 Ariz. 209, 167 P.2d 925 (1946)); "a house, utilities, milk, butter, eggs, and meat whenever cattle were slaughtered" (Matlock v. Industrial Comm'n, 70 Ariz. 25, 28, 215 P.2d 612, 614 (1950)); title to mobile home trade-ins taken in lieu of salary by the general manager of a mobile home sale corporation (Insurance Co. of North America v. Industrial Comm'n, 116 Ariz. 21, 567 P.2d 337 (App.1977)); and a per diem allowance which was paid regardless of actual travel and which the employee could use for any purpose (Kerr v. Industrial Comm'n, 23 Ariz.App. 106, 530 P.2d 1139 (1975)).

Lazarus asserts that "average monthly wage" should include the share of health insurance premiums CPES paid on her behalf because "[m]edical insurance is of economic benefit" to an employee. In Still v. Industrial Comm'n, 27 Ariz.App. 142, 551 P.2d 591 (1976), Division One of this court held that an employer's payments into a union health and welfare trust fund pursuant to a collective bargaining agreement were not included in the computation of an employee's average monthly wage. The court focused on the fact that "the fringe benefits in question were not the result of [the employee's] individual labors, but the fruits of the collective bargaining efforts of his union." Id. at 146, 551 P.2d at 595. Further, "any benefits paid to him came from the union trust funds in question and not directly from the employer." Id. Respondents contend that Still represents the majority view and is dispositive of this case. In contrast, Lazarus contends that Still is distinguishable and that its rationale is outdated because it fails to recognize the importance of health insurance to workers.

A majority of courts, including the United States Supreme Court, has found that an employer's medical insurance payments are not part of the average wage calculation. ² In Morrison-Knudsen Const. Co. v. Director, Office of Workers' Comp. Programs, 461 U.S. 624, 103 S.Ct. 2045, 76 L.Ed.2d 194 (1983), the issue was "whether employer contributions to union trust funds for health and welfare, pensions, and training are 'wages' for the purpose of computing compensation benefits under § 2(13) of the Longshoremen's and Harbor Workers' Compensation Act." 461 U.S. at 626, 103 S.Ct. at 2046. ³ Based on reasoning similar to that Lazarus used in this case, the circuit court had concluded that those contributions were "wages." Hilyer v. Morrison-Knudsen Const. Co., 670 F.2d 208 (D.C.Cir.1981). The court found that the employer's contributions were "identifiable, calculable values received by the employees" and emphasized that the benefits had "substantial economic value to the employees" because "[i]f they were not provided at the company's expense, each employee would have to spend his or her own money to acquire them." Id. at 211. Finally, the court recognized the remedial purpose of the Longshoremen's Act and the obligation to construe it liberally. Id. at 213.

In reversing, the Supreme Court distinguished the contributions at issue from board and lodging because the latter have a present value, easily converted to a cash equivalent. 461 U.S. at 630, 103 S.Ct. at 2049. The Court acknowledged that "the remedial policies underlying the Act authorize the agency and require us to expand the meaning of the term ['wages'] to reflect modern employment practices," and recognized the economic value of such benefits to employees. Id. at 635, 103 S.Ct. at 2051. Nonetheless, the Court found that the statute was designed to strike a balance between employers and employees and that "[a]gainst this background, reinterpretation of the term 'wages' would significantly alter the balance achieved by Congress." Id. at 636, 103 S.Ct. at 2052. The "shift in the relative value of take-home pay versus fringe benefits" had "dramatically alter[ed] the cost factors upon which employers and their insurers have relied in ordering their affairs." Id. Altering those expectations was a task for Congress, the Court concluded. Id. We find the Supreme Court's reasoning persuasive and applicable to this case.

Lazarus urges us to adopt the minority view of a few courts which have included the cost of insurance premiums in the average wage computation. See Ex parte Murray, 490 So.2d 1238 (Ala.1986); State Compensation Ins. Auth. v. Smith, 768 P.2d 1256 (Colo.App.1988); Mobley v. Winter Park Mem. Hosp., 471 So.2d 591 (Fla.App.1985); Slack v. Thies Dev. Corp., 11 Kan.App.2d 204, 718 P.2d 310 (1986); Ciampi v. Hannaford Bros. Co., 681 A.2d 4 (Me.1996). Most of those cases are distinguishable, however, based on the broader language of the state statutes involved. For example, in Slack, the Kansas statute defined "wage" as "the total of the money and any additional compensation which the employee receives for services rendered for the employer" and further defined "additional compensation" to include "employer paid ... health and accident insurance." 11 Kan.App.2d at 207, 718 P.2d at 312. Similarly, the Maine statute construed in Ciampi now provides that ...