SARAH PENDYGRAFT V. FORD MOTOR COMPANY, ET AL
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RENDERED : AUGUST 21, 2008
TO BE PUBLISHED
,Suprtmt Claud of ~K4:
2007-SC-000658-WC
SARAH PENDYGRAFT
V.
APPELLANT
ON APPEAL FROM COURT OF APPEALS
2007-CA-000613-WC
WORKERS' COMPENSATION BOARD NO. 03-00550
FORD MOTOR COMPANY,
HON. JAMES L . KERR,
ADMINISTRATIVE LAW JUDGE AND
WORKERS' COMPENSATION BOARD
APPELLEES
OPINION OF THE COURT
AFFIRMING
An Administrative Law Judge (ALJ) included profit-sharing bonuses in the
claimant's pre- and post-injury average weekly wage and, on that basis, found her to be
ineligible for a double income benefit under KRS 342 .730(1)(c)2 . The Workers'
Compensation Board affirmed . The claimant appeals a decision by the Court of
Appeals to reverse and remand with directions to exclude the bonuses .
We affirm but for different reasons. To the extent that an employee works for
profit-sharing in lieu of wages, the employee's actual hourly wage is not fixed or cannot
be determined . The average weekly wage of such an individual is determined under
KRS 342 .140(1)(f), based on the usual wage of employees who perform similar work.
The evidence compelled a favorable finding under KRS 342 .730(1)(c)2 because: the
claimant's hourly rate increased ; she continued to work full time ; and nothing indicated
that the average weekly wage of a paid employee performing similar work would have
decreased .
The claimant injured her back in October 2001, while working as a tug driver in
the defendant-employer's stock department. She underwent surgery in2002 and 2004
and worked @QaDinspector on the chassis line when her claim was heard . She
submitted lay and medical evidence indicating that she lacked the physical capacity to
return to work as a tug driver. She also submitted evidence that compared her pre- and
post-injury wages, with profit-sharing bonuses included and not included in the
calculation . It indicated that she presently earned less per week if profit-sharing
bonuses were included .
LOODie Co[kUrO, the employer's labor relations representative, testified in May
2()06 that the claimant was in the top third of the plant's employees with regard to
seniority . He stated that her present hourly wage was $26 .73 and that it had been
$23 .14 at the time of her injury . When asked if it was likely that she would continue to
earn the same or greater wage than at the time of injury, he responded that it was
"highly likely ." COFkUnl stated that the union contract provided bonuses to all
employees based on the company's profits and that the company included them when
reporting employees' taxable income. He did not know when the bonuses began or
whether the formula for calculating them changed at some point. He stated that the
company was not paying profit-sharing bonuses in 2006, explaining that workers
received them only when the company made a profit.
Among other things, the parties disputed whether the average weekly wage
calculation included the profit-sharing bonuses The state's average weekly wage
applicable to injuries that occurred in 2001 was $530.07 . Even without the bonuses,
the claimant's average weekly wage at the time of injury was $1,148 .39, which entitled
her to the maximum partial disability benefit that KIRS 342 .730(l) permitted . Of concern
was whether her post-injury physical capacity and average weekly wage entitled her to
an enhanced benefit under both KIRS 342 .730/1\/c\1@Dd /1\/c\2 . If so, Fawbush v.
' 103 S .W.3d 5 (Ky . 2003), would require the AU to determine the subsection
under which enhancement would be more appropriate .
The claimant argued that she was entitled tOGtriple benefit under K[RS
342 .730/1\(C)1 . She also argued that profit-sharing bonuses must be included in her
pre-and post-injury @Ver8ge weekly wage and, thus, that She was DOƒ 0ntifled to @
double benefit under K[RS 342 .T30/1\(c)2 . If successful, the arguments would preclude
@
analysis and ensure a triple benefit .
The /\Ljde[emn/ned that the claimant retained a 28% permanent impairment
rating from the injury . Noting that profit-sharing bonuses were taxable, the AU included
them in the claimant's average weekly wage and determined that K[RS 342.730(1)/O)2
did not apply because her present wage was less than it had been at the time of the
injury . Th8/\[jconcluded that KIRS 342 .730/1\(c)18Dti1led her to a triple benefit
because she lacked the physical capacity to return to the type of work that she
performed at the time of injury .
Since the inception of the Workers' Compensation Act, income benefits have
been awarded onthe basis ofoccupational disability . !n
` 432
S .W .2d 800 (K«.1968) .1heCourt defined occupational disability, taking into account
various factors that result in a loss of wage-earning capacity following an injury. The
legislature codified that definition subsequently inKRS 342.0011 (11) and enacted KRS
342.730, which authorized income benefits based upon the percentage of occupational
disability .
. 981 S .W .2d 118, 120 (Ky. 1998\, concerned a claim that
arose tinder the 1994 version of KRS 342 .730 . At issue was whether the ALJ erred by
applying KRS 342 .730/1\/b\ which, at the time, limited the permissible income benefit of
an individual who "return[8d] to work at a wage equal to or greater than the employee's
pr8i 'Ury wage" to no more than two times the permanent impairment rating. Mr.
RObinsoOreceiVed a greater average weekly wage than at the time of injury but worked
for more hours 8t@lower p8Vrate . He argued cm that basis that the ALJ should have
applied KRS 342 .730/1\/C\ . which did not contain the limitation . The court determined
that subsection (1)(b) contemplated a comparison of the pre- and post-injury average
weekly wage, explaining that the provisions reflected a legislative policy of
compensating a worker based on the income loss that an injury causes and that to
focus on the p@y'r8te would disfavor those who earned a higher pay rate but were
unable to work sufficient hours to achieve the pre-injury average weekly wage .
The legislature revised the /\{t extensively in 1996 . Among other things, it
amended KRS 3/12 .0011(11) ; enacted KRS 342 .0011(34) ./35\ .8Od /36\ ; and amended
KRS 342 .730(1)/b\@Dd /c\ . /\8@consequence, @finding of permanent partial disability
required both @ permanent disability rating and @D ability to work. /\t@ble found in KRS
342 .73O/1\/b\!imted a factor for each of eight ranges of permanent impairment ratings .
The factor increased as the corresponding range ofimpairment ratings increased '
which favored workers with higher permanent impairment ratings because the product
of the permanent impairment rating and corresponding factor equaled the disability
rating and determined the amount Of{hBincome benefit . KRS
342 .730/1\/C\1
provided
@5O00 increase in the benefit of a worker who did not retain the physical capacity to
return tOth8 previous type of work, and KIRS 342 .730/1\(C)2 provided a 50% reduction
in the benefit Ofa worker who returned to work "at a weekly wage equal to or greater
than the average weekly wage at the time of injury." Thus, the benefit of an individual
who retained the physical capacity tOreturn [o th8previous type of work but failed to do
8o
was calculated under KIRS 342.730(l)(b) but was neither enhanced nor reduced .
The court determined in Ball v. Big Elk Creek Coal Co ., 25 S .W .3d 115 (Ky. 2000), that
KIRS 342 .730/1\/c\2 did not require a carrier to determine the worker's entitlement to
the 50% enhancement each week but noted that KIRS 342 .125(3) permitted reopening
@[ any time to conform @n award to K[RS 342.730(1)/c\2 .
The legislature adopted the present method
for
compensating partially disabled
workers iD2000 . The 2000 aamendments decreased the factors contained in KIRS
342 .730/1\(b) .thereby decreasing the basic income benefit . The amended version of
KIRS 342.730/1\/c\1 provides a triple income benefit for workers who do not retain the
physical capacity to return to the previous type of work, and KIRS 342 .730/1\/c\3
provides additional multipliers based on age and education. K[RS 342 .730(1)/O)2 states
as follows:
If an employee returns to work at a weekly wage equal to or
greater than the average weekly wage at the time of injury,
the weekly benefit for permanent partial disability shall be
determined under paragraph (b) of this subsection for each
week during which that employment is sustained . During any
pedod of cessation of that employment, temporary or
permanent, for any reason, with or without cause, payment
5
of weekly benefits for permanent partial disability during the
period of cessation shall be two (2) times the amount
otherwise payable under paragraph (b) of this subsection .
This provision shall not be construed so as to extend the
duration of payments .
KRS 342 .730(1)(c)2 provides a financial incentive for partially disabled workers
to return to the most remunerative work that they are able to perform. It entitles an
individual who returns to work at a weekly wage equal to or greater than the average
weekly wage at the time of injury to receive the basic income benefit while working but
to receive a double benefit if the employment ceases for any reason. It requires the
AU to compare the worker's pre- and post-injury average weekly wage .
Eligibility for workers' compensation benefits derives from an individual's status
as an employee . KRS 342 .140 provides various formulae for calculating an employee's
average weekly wage . Whittaker v. Robinson, supra at 120, notes that the formulae
"reflect a legislative policy of attempting to indemnify a worker based upon the amount
of income [that] is lost as a result of workplace injury ." KRS 342 .140(6), which is
substantially the same as KRS 342.0011(17), states as follows:
The term "wages" as used in this section and KRS 342 .143
means, in addition to money payments for services
rendered, the reasonable value of board, rent, housing,
lodging, and fuel or similar advantage received from the
employer, and gratuities received in the course of
employment from others than the employer to the extent the
gratuities are reported for income tax purposes .
The claimant asserts that her profit-sharing bonuses were wages because they
were "money payments for services rendered" and were included in her taxable
income . Although she relies on Arthur Larson and Lex K. Larson, Larson's Workers'
Compensation Law, §§ 93 .01(2) (2007), which indicates that most jurisdictions include
bonuses in the average weekly wage calculation, she fails to consider a subsequent
statement that profits from a business generally are not considered to be wages .
We acknowledge that workers sometimes receive profit-sharing in lieu of wages
but are not convinced that KIRS 342 .140(6) requires such payments to be included in
the average weekly wage calculation . To the extent that an employee works in
exchange for pnOfit-sh@riDg ` Lhe employee's actual hourly wage is not fixed or cannot be
determined . KIRS 342 .140(1)y) bases such an individual's average weekly wage on the
usual wage fOrsimilar services when rendered by a paid employee, a basis that is
independent of @particular employer's profits @Od that i6consistent with the
of KIRS 342 .730(1)/b\ and (1)(C)2 . In
purposes
Transportation, 77 S.W .3d 592
(Ky. 2002\ ' the court determined that the average weekly wage of an employee who
drove @trUck that she and her husband owned must be determined 88that {)f@nonowner employee under KIRS 342 .140(l)(f) rather than based on her share of the profit
reported for income tax purposes.
The claimant received hourly wages for her work, but a union contract required
h8[employer tC)p@y a profit-sharing bonus dUriDg periods that the company made a
profit. Her hourly rate increased after the injury. She continued to work full time, and
no evidence indicated that the average weekly wage of a paid employee performing
similar work would have decrease? Thus, the evidence compelled @fiOding that she
received a image equal to or greater than her average weekly wage at the time of injury .
The decision of the Court of Appeals is affirmed .
M!n[On, C .J. . and /\bnsmnoon, Cunn1ngh@mn . Noble, Schn]der . and Scott, JJ .,
concur. Ven[erG . ] .` not sitting .
COUNSEL FOR APPELLANT,
SARAH PENDYGRAFT :
CHRISTOPHER P . EVENSEN
COTTON & EVENSEN, PLLC
429 WEST MUHAMMAD ALI BLVD .
1102 REPUBLIC BUILDING
LOUISVILLE, KY 40202
COUNSEL FOR APPELLEE,
FORD MOTOR COMPANY :
WESLEY G. GATLIN
ELIZABETH M. HAHN
BOEHL, STOPHER & GRAVES
SUITE 2300
400 WEST MARKET STREET
LOUISVILLE, KY 40202
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