Malang v. Department of L&I

• Decision Date: 17 July 2007
• Docket Number: No. 34504-8-II.,34504-8-II.
• Citation: 139 Wn. App. 677,162 P.3d 450
• Court: Washington Court of Appeals
• Parties: Crystal E. MALANG, Respondent, v. DEPARTMENT OF LABOR AND INDUSTRIES of the State of Washington, Appellant.

162 P.3d 450

139 Wn. App. 677

Crystal E. MALANG, Respondent, v. DEPARTMENT OF LABOR AND INDUSTRIES of the State of Washington, Appellant.

No. 34504-8-II.

Court of Appeals of Washington, Division 2.

July 17, 2007.

Terry James Barnett, Tacoma, WA, for Respondent.

Barbara Noel Bailey, Attorney Generals Office, Tacoma, WA, for Appellant.

HOUGHTON, C.J.

¶ 1 The Department of Labor and Industries (L & I) appeals from an order reversing its calculation of Crystal Malang's wages. The plain language of RCW 51.08.178(1) provides that "wages" are remuneration from an employer. Further, RCW 51.08.070(1), .180(1) and .195 provide tests to determine whether Crescent Realty, Inc. or Malang's sole proprietorship is her employer. Because the Board of Industrial Insurance Appeals (BIIA) determined that she was her own employer without reference to the statutory requirements, we affirm in part, reverse in part, and remand to the L & I to determine whether Malang or Crescent is her employer and to recalculate her wages accordingly.

FACTS

¶ 2 Malang is a real estate agent associated with Crescent as an independent contractor. By agreement, she and Crescent split commissions she earns from real estate sales and listings after Crescent deducts brokerage expenses and transaction fees. She operates as a sole proprietorship and incurs business expenses that she reports to the IRS as deductions.

¶ 3 In November 2001, Malang suffered a work-related injury and filed a claim for benefits under her optional industrial insurance.¹ To calculate her wages,² L & I deducted the business expenses she declared in her 2001 federal tax return and the brokerage fees from her total commissions, arriving at total yearly wages of $53,283.³

¶ 4 Malang appealed the order, arguing that L & I should calculate her wages from her total commissions without deducting brokerage fees or business expenses. The industrial appeals judge (IAJ) concluded that L & I's method of calculating her wages was correct but remanded to recalculate her monthly wage based on commissions and expenses incurred over a 12-month period. The BIIA agreed, concluding that the correct way to calculate her wages was by dividing her net business income by the number of months worked in 2001.⁴

¶ 5 Malang appealed the decision to the superior court and moved for summary judgment, arguing that the BIIA erred in deducting her itemized business expenses from her total commissions to calculate her wages. The superior court granted her motion, ruling that L & I lacked statutory authority to deduct expenses necessary for the production of her wages. Accordingly, the superior court ordered L & I to calculate her benefits based on the total commissions that she earned in 2001. L & I now appeals.

ANALYSIS

¶ 6 The parties dispute the meaning of the term "wages" as applied to an independent contractor and sole proprietor who works on a commission basis. L & I contends that Malang's wages equal her net income, categorizing her commissions as gross receipts and deducting her necessary business expenses to arrive at her take-home pay. She responds that "wages" means gross earnings under the statute's language and deducting business expenses from her total commissions exceeds L & I's statutory authority. This issue is one of first impression.

¶ 7 In reviewing a BIIA decision under the Industrial Insurance Act (IIA), the superior court considers the issues de novo, relying on the certified board record. Watson v. Dep't of Labor & Indus., 133 Wash. App. 903, 909, 138 P.3d 177 (2006). The superior court's ruling is subject to the ordinary rules governing civil appeals. RCW 51.52.140; Romo v. Dep't of Labor & Indus., 92 Wash.App. 348, 353, 962 P.2d 844 (1998). The appellate court reviews the superior court's grant of summary judgment de novo to determine whether the evidence shows "`that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Romo, 92 Wash.App. at 354, 962 P.2d 844 (quoting CR 56(c)).

¶ 8 The meaning of the term "wages" as applied to a sole proprietor requires interpreting RCW 51.08.178 and is therefore a question of law that we review de novo. Rose v. Dep't of Labor & Indus., 57 Wash.App. 751, 757, 790 P.2d 201 (1990). Although L & I's interpretation of the IIA is not binding, we give it deference. Doty v. The Town of South Prairie, 155 Wash.2d 527, 537, 120 P.3d 941 (2005). But deference is inappropriate if the agency's interpretation conflicts with its statutory directive. Cockle v. Dep't of Labor & Indus., 142 Wash.2d 801, 812, 16 P.3d 583 (2001).

¶ 9 Our goal in interpreting a statutory term is to carry out the legislature's intent, giving meaningful effect to its chosen language. Doty, 155 Wash.2d at 533, 120 P.3d 941. The legislature has directed us to construe the terms of the IIA liberally, bearing in mind its purpose of compensating all workers injured in the course of their employment and resolving any doubts in the worker's favor. Cockle, 142 Wash.2d at 811, 16 P.3d 583 (citing RCW 51.12.010).

¶ 10 Despite inclusion in a chapter entitled "Definitions," RCW 51.08.178 does not define the term "wages." See Doty, 155 Wash.2d at 541, 120 P.3d 941 ("The IIA sets forth in detail how wages are calculated but does not definitively establish a definition of what constitutes `wages.'"). Instead, that section establishes monthly wages as the basis for time-loss compensation and sets forth several ways to compute them:

(1) For the purposes of this title, the monthly wages the worker was receiving from all employment at the time of injury shall be the basis upon which compensation is computed unless otherwise provided specifically in the statute concerned. In cases where the worker's wages are not fixed by the month, they shall be determined by multiplying the daily wage the worker was receiving at the time of the injury:

. . . .

The term "wages" shall include the reasonable value of board, housing, fuel, or other consideration of like nature received from the employer as part of the contract of hire, but shall not include overtime pay except in cases under subsection (2) of this section. However, tips shall also be considered wages only to the extent such tips are reported to the employer for federal income tax purposes. The daily wage shall be the hourly wage multiplied by the number of hours the worker is normally employed. The number of hours the worker is normally employed shall be determined by the department in a fair and reasonable manner, which may include averaging the number of hours worked per day.

. . . .

(4) In cases where a wage has not been fixed or cannot be reasonably and fairly determined, the monthly wage shall be computed on the basis of the usual wage paid other employees engaged in like or similar occupations where the wages are fixed.

RCW 51.08.178. Thus, we turn to L & I's first argument.

REASONABLE AND FAIR CALCULATION

¶ 11 First, L & I argues that because RCW 51.08.178 does not apply to self-employment income, subsection (4) allows it to "reasonably and fairly" calculate Malang's wages as a portion of her gross business receipts. Appellant's Br. at 28. Although we agree that this provision authorizes L & I to reasonably and fairly calculate her wages, L & I has failed to correctly apply the IIA in this case.

¶ 12 RCW 51.08.178(1) is the default provision unless another statute specifically applies. Dep't of Labor & Indus. v. Avundes, 140 Wash.2d 282, 290, 996 P.2d 593 (2000). L & I correctly notes that because Malang receives commissions rather than a periodic wage, the calculation methods set forth in RCW 51.08.178(1) do not apply. But under the terms of RCW 51.08.178(4), subsection (1) does not provide the exclusive means of computing wages. RCW 51.08.178(4) allows the use of a comparable wage in situations where the wage "has not been fixed or cannot be reasonably and fairly determined." (Emphasis added).

¶ 13 To discern the legislature's intent, we may look to related statutes in order to give effect to all provisions. Doty, 155 Wash.2d at 533, 120 P.3d 941; see also Judd v. Am. Tel. & Tel. Co., 152 Wash.2d 195, 203, 95 P.3d 337 (2004). Here, reading RCW 51.08.178(1) and (4) together, the legislature intended that wages actually paid should determine the appropriate rate of time-loss compensation, so long as the wage is set as a fixed amount or can be fairly and reasonably ascertained. Accordingly, RCW 51.08.178(1) gives the BIIA authority to fairly and reasonably calculate Malang's "wages."

CALCULATING AN INDEPENDENT CONTRACTOR'S "WAGES"

¶ 14 Although RCW 51.08.178(1) requires that L & I calculate Malang's time-loss compensation award by reasonably and fairly determining her "wages," it does not set forth a way to translate the earnings of an independent contractor into wages. Accordingly, it is necessary to look to other provisions of the IIA to determine the wages of an independent contractor.

¶ 15 When possible, courts define statutory terms by their ordinary meaning. See Cockle, 142 Wash.2d at 807-08, 16 P.3d 583; Barovic v. Pemberton, 128 Wash.App. 196, 200, 114 P.3d 1230 (2005). The plain meaning of "wages" is remuneration from the employer in exchange for work performed. WEBSTER'S THIRD NEW INTERN'L DICTIONARY 2568 (2002); BLACK'S LAW DICTIONARY 1610 (8th ed.1999); see also Doty, 155 Wash.2d at 542, 120 P.3d 941 ("`[W]ages,' simply stated, refer to the monetary remuneration for services performed."); Rose, 57 Wash.App. at 758, 790 P.2d 201 ("We construe the term `wage,' therefore, to include any and all forms of consideration received by the employee from the employer in exchange for work performed.").⁵ This definition is consistent with RCW 51.08.178(1), which describes "wages" as including "the reasonable value of board, housing, fuel, or other consideration of like nature received from the employer." (Emphasis added).

¶ 16 Thus, determining whether income...