Court of Appeals Concludes that Bifurcation Process Under 85.34(2)(v) Only Applies When a Worker Returns to Work for the Employer and is Later Terminated By the Same Employer

 Den Hartog Industries v. Dungan, No. 23-1402 (Iowa App. Jan. 9, 2025)

Claimant suffered an injury and work and continued to work for the employer for 11 months with some work restrictions.  He left the job after 11 months to take a different job and move closer to his family.  He subsequently found work, making more than he was making at the time of his job with Den Hartog.  The commissioner concluded that claimant's back injury should be compensated industrially under the provisions of 85.34(2)(v).  The commissioner concluded that the functional impairment provision of the statute did not apply to claimant because he voluntarily separated from the employer and had not been terminated by the employer. The district court affirmed, finding that 85.34(2)(v)'s bifurcated process would be imposed only when the employer returned to work and was then terminated by the employer.

On review, the Court concludes that 85.34(2)(v) recognizes two categories for benefit calculation: 1) if the employee returns to work at the same or greater pay, they are compensated for their functional impairment and 2) if the employee does not return to work at the same or greater pay, the industrial disability calculation applies. Although the statute provides a process for determining compensation when an employee is moved rom the first category to the second, it does not address those who voluntarily return to work but leave voluntarily. The Court finds that there is a lack of clarity in the statute and that the statute should be applied "broadly and liberally in keeping with its humanitarian objective."

The Court holds that under liberal construction, Dungan was not terminated from employment and thus the functional impairment analysis did not apply to him.  Instead, the case falls within the first sentence of 85.34(2)(v), which provides that compensation is to be paid "as the reduction in the employee's earning capacity caused by the disability bears in relation to the earning capacity that the employee possessed when the injury occurred." Although the statute is subject to different interpretations, case law compels the Court to "err on the side of the employee and historical practice."

The employer had also appealed the industrial rating of 15%.  The Court finds that every expert report in the record concludes that claimant's disability was permanent.  Accordingly, substantial evidence supported the decision of the commissioner.

Judge Langholtz dissents, concluding that the statute is clear that so long as the employee returns ot work at the same or greater wages, as Dungan had done, the disability is to be determined functionally. The dissent notes that although the "default rule" is that an injury such as Dungan's is to be treated industrially, the statute provides that if an employee returns to work at the same or greater wages, a functional disability calculation is necessary.  Since Dungan had returned to work at greater wages, the functional disability calculation should apply. The Judge indicates that if the legislature meant for the functional impairment exception to apply only when the review-reopening right applied, there were ways for the legislature to write this into the statute.  Since the legislature did not do this, the statute is not ambiguous and as long as an employee returns to work at the same or greater salary, wages or earnings, the case is to be considered functionally regardless of whether the employee leaves that employer voluntarily.  The dissent also notes that a statute is not ambiguous "merely because two litigants' - or "skilled lawyers" - disagree about its meaning." The Judge would reverse the action of the commissioner and treat the case functionally.  The dissent is almost certain to give the Supreme Court reason to grant further review in the case.