Southwest Restaurant Systems v. Industrial Com'n of Arizona

• Decision Date: 19 September 1991
• Docket Number: CA-IC,No. 1,1
• Citation: Southwest Restaurant Systems v. Industrial Com'n of Arizona, 825 P.2d 958, 170 Ariz. 433 (Ariz. App. 1991)
• Parties: SOUTHWEST RESTAURANT SYSTEMS, Petitioner Employer, Transamerica Insurance Co., Petitioner Carrier, v. INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Iola Mae Swenor, Respondent Employee. 90-131.
• Court: Arizona Court of Appeals

Page 958

825 P.2d 958

170 Ariz. 433

SOUTHWEST RESTAURANT SYSTEMS, Petitioner Employer Transamerica Insurance Co., Petitioner Carrier, v. INDUSTRIAL COMMISSION OF ARIZONA, Respondent Iola Mae Swenor, Respondent Employee.

No. 1 CA-IC 90-131.

Court of Appeals of Arizona Division 1, Department E.

Sept. 19, 1991.

Review Denied March 17, 1992.

Long, Lester & Lundmark, P.A. by R. Todd Lundmark, Phoenix, for petitioners.

Anita R. Valainis, Chief Counsel, the Industrial Com'n of Arizona, Phoenix, for respondent.

Ely, Bettini & Ulman by Ellen E. Hendrickson, Phoenix, for respondent Employee.

OPINION

SHELLEY, Judge.

This is a special action review of an Arizona Industrial Commission award adopting the presumptive average monthly wage. The dispositive issue is whether the Administrative Law Judge had discretion to disregard actual earnings during the thirty days before the industrial injury because respondent employee (claimant) intended to limit her future income to avoid having her Social Security benefits reduced. We conclude that the Administrative Law Judge lacked such discretion and, accordingly, affirm the award for the presumptive average monthly wage.

On June 25, 1989, claimant, a waitress, injured her left shoulder at work. Petitioner carrier (Transamerica) accepted compensability. Transamerica initially recommended an average monthly wage of some $1,130 based upon earnings of $10.50 an hour for twenty-five hours a week. It subsequently recommended an average monthly wage of approximately $850 based upon claimant's average daily earnings from July 5, 1988, through July 31, 1988, and from September 16, 1988, through June 20, 1989. The Industrial Commission accepted this latter recommendation and issued a notice for an average monthly wage of $850.75. Claimant timely protested, and a hearing was scheduled.

At the ensuing hearing, claimant and petitioner employer's bookkeeper appeared. Claimant testified that she was born in April, 1925, and had worked as a waitress at petitioner employer's restaurant for about twenty-three years. She had worked continuously during the thirty days before her injury and had earned $2.00 an hour plus tips of $8.50 an hour. Claimant also testified that the restaurant remained open year-round and that she usually worked throughout the year. She, however, conceded that the volume of work at the restaurant diminished during the summer and that she could work only two to three days a week.

Claimant also acknowledged that she had begun receiving Social Security retirement benefits in 1988, when she was sixty-two years old, and that these benefits would be reduced if her earnings exceeded specified limits. ¹ Claimant testified that because of the reduced volume of work in the summer and the potential reduction in Social Security benefits, she had taken six weeks of unpaid leave during the summer of 1988. She estimated that her total earnings in 1988 were between $8,500 and $9,000. Although claimant may have intended to limit her earnings to avoid having her Social Security benefits reduced, we note that in 1988 she earned $2,451.18 more than the Social Security limit for 1988. By June 25, 1989, the date of the injury, she was already within $256 of the Social Security limit for 1989, and she testified that she had intended to continue to work after June of 1989. Thus, it is not apparent to what extent she intended to limit her earnings to avoid a reduction.

The bookkeeper confirmed that the restaurant employed workers year round, but that all employees worked fewer hours during the summer. According to her records, claimant had earned approximately $1,120 during the month before her injury and about $8,889 from June 26, 1988, through June 25, 1989.

After reviewing post-hearing memoranda, the Administrative Law Judge issued an award establishing an average monthly wage of $1,120.04 based upon claimant's actual earnings during the thirty days before her injury. He justified this finding by adopting the reasoning of claimant's post-hearing memorandum. This award was affirmed on administrative review. Transamerica then brought this special action.

On review, Transamerica asserts that claimant's actual earnings during the thirty days before her injury are unrepresentative of her future earnings as a waitress because she intended to limit her income to avoid having her Social Security benefits reduced. ² According to Transamerica, the effect of this award is to treat claimant as if she would have earned some $13,440 in 1989 when she intended to earn much less and actually had earned only $8,571.18 in 1988. Although this argument appears logical and is supported by the leading workers' compensation scholar, we conclude that Arizona Supreme Court authority compels us to reject it.

In Arizona, disability benefits are based on the injured worker's "average monthly wage at the time of injury." A.R.S. § 23-1041.A. The current version of the statute, however, does not define "average monthly wage." Rather, it defines "monthly wage" to mean the average wage paid during and over the month in which the employee was killed or injured. A.R.S. § 23-1041.D. ³

Although this statute is at best imprecise, this court has recently interpreted it to mean that wages earned during the thirty days before an industrial injury are the presumptive average monthly wage, but the trier-of-fact has broad discretion to use an expanded wage base when the actual earnings during the thirty days before the injury do not realistically reflect earning capacity. See, e.g., Davis v. Industrial Comm'n of Arizona, 134 Ariz. 293, 655 P.2d 1345 (App.1982) (citing Floyd Hartshorn Plastering Co. v. Industrial Comm'n, 16 Ariz.App. 498, 494 P.2d 398 (1972)). The justifications for using an expanded wage base include, but are not limited to, seasonal employment, intermittent employment, and unrepresentative wages during the month before the injury. Elco Veterinary Supply v. Industrial Comm'n of Arizona, 137 Ariz. 46, 668 P.2d 889 (App.1983).

Transamerica seeks to make a worker's self-imposed limitation of income to avoid a reduction of Social Security benefits another justification for using an expanded wage base. This proposed justification for using an expanded wage base, however, differs from the previously recognized justifications. The latter involve objective limitations to continuous, full-time employment. For example, employment is seasonal only if it can be performed exclusively during a definite season. Pettis v. Industrial Comm'n, 91 Ariz. 298, 372 P.2d 72 (1962). In contrast, the proposed justification involves a self-imposed limitation in that the Social Security limit does not prevent full-time work. Rather, it creates an economic disincentive by reducing Social Security benefits by fifty cents for every dollar earned over the annual limit. 2 Social Security Law and Practice § 28:2 (1987).

Larson directly supports Transamerica's proposed extension from objective limitations to self-imposed limitations: "The correct treatment of part-time employment draws a distinction between the situation in which the employment itself or claimant's relation to it is inherently part-time, and the situation in which the employment and claimant's inherent relation to it are normally substantially full-time." 2 A. Larson, Workmen's Compensation Law § 60.20 (1989) (emphasis added). In particular, Larson extends this analysis to a self-imposed limitation on income to avoid a reduction in Social Security benefits:

The provision of the Social Security Act reducing social security benefits to some extent for earnings over a stated amount is increasingly producing situations in which it is proved or alleged that the claimant deliberately confined his work to a part-time basis to avoid going above the point where his earnings would begin to cut into his social security check. The correct result, of course, is to base benefits on claimant's actual wage....

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