Munoz v. Indus. Comm'n of Ariz.

• Decision Date: 10 February 2014
• Docket Number: No. 2 CA–IC 2013–0001.,2 CA–IC 2013–0001.
• Citation: 318 P.3d 439,234 Ariz. 145
• Court: Arizona Court of Appeals
• Parties: Julie A. MUNOZ, Petitioner Employee, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Sonic Restaurants # 10, Respondent Employer, Hartford Accident & Indemnity/Gallagher Bassett, Respondent Insurer.

234 Ariz. 145

318 P.3d 439

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.

Court of Appeals of Arizona,

Division 2.

Feb. 10, 2014.

The Hansen Firm, PLLC, By Deborah P. Hansen, Tucson, for Petitioner Employee.

The Industrial Commission of Arizona, By Andrew F. Wade Phoenix, for Respondent.

Jones, Skelton & Hochuli, P.L.C., By Gregory L. Folger, Lori L. Voepel, and Jennifer B. Anderson, Phoenix, for Respondents Employer and Insurer.

Presiding Judge KELLY authored the opinion of the Court, in which Judge ESPINOSA and Judge ECKERSTROM concurred.

OPINION

KELLY, 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 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 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 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 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 Act ³ 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.

¶ 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...