MARK A. THU, Employee/Appellant, v. BEFORT ROOFING, INC., and CNA COMMERCIAL INS. CO., Employer-Insurer/Cross-Appellants.
WORKERS' COMPENSATION COURT OF APPEALS
OCTOBER 24, 2000
TEMPORARY TOTAL DISABILITY - RETURN TO WORK. Where the compensation judge failed to determine whether the employee=s activities in assisting his sister and brother-in-law at their pizza parlor and motel constituted a return to work, the matter is remanded for reconsideration.
PRACTICE & PROCEDURE - EXPEDITED HEARING; DISCONTINUANCE - MATTERS AT ISSUE. The compensation judge erred by considering the employee=s job search at an expedited discontinuance hearing where that issue was not raised by the Petition to Discontinue and there was no agreement to expand the issues.
Vacated and remanded.
Determined by Wilson, J., Pederson, J., and Wheeler, C.J.
Compensation Judge: William R. Johnson
STEVEN D. WHEELER, Judge
The employee appeals from the compensation judge=s order discontinuing temporary total disability benefits as based on issues beyond the scope of the employer and insurer=s petition to discontinue. The employee further appeals from the award of a credit against future benefits for temporary total disability paid. The employer and insurer cross-appeal from the judge=s failure to determine whether the employee had received benefits in bad faith pursuant to Minn. ' 176.179, so as to qualify them for reimbursement of benefits rather than a credit. We reverse, and remand for reconsideration.
The employee, Mark Thu, sustained a work injury on October 13, 1998 while working for the employer, Befort Roofing, Inc. The employee=s weekly wage on the date of the injury was $613.80. (Finding 1 [unappealed]; Exh. 1.)
The employer and insurer initially denied primary liability but subsequently, on March 3, 1999, the parties entered into a partial stipulation for settlement in which the employer and insurer admitted the injury and the employee accepted a lump sum payment in settlement of his claims for temporary total disability compensation through January 31, 1999. The stipulation was approved by an Award on Stipulation served and filed on March 8, 1999. (Judgment Roll). The employer and insurer thereafter continued to pay temporary benefits to the employee. (Exh. 1.)
The employee underwent surgery in the form of a left hemilaminectomy and removal of a herniated disc at L5-S1 on or about April 14, 1999. He was released to work with a 50-pound lifting restriction by Dr. Phudiphorn Thienprasit, his treating surgeon, on September 30, 1999. (Exh. 2.)
The employee began working with a qualified rehabilitation consultant (AQRC@), Donald Dickerson, in April 1999, and a job placement plan was prepared on November 4, 1999, with vocational placement assistance provided by David Laurie of David Laurie & Associates. Pursuant to the plan, the employee was to engage in full-time job seeking, six to eight hours per day, five days per week. (Exh. 7 at 6-9.)
On May 17, 1999, the employee=s sister, Roxanne Miller, and his brother-in-law, Kim Miller, purchased the Rock Ledge Motel in Newport, Minnesota, and Vitally=s Pizza, another business located on the same property and adjacent to the motel. The employee helped his in-laws move into the business and also took up residence in one of the motel=s units with his own family at that time. The employee lived rent-free in this unit until some time in July 1999, after which he moved into an apartment unconnected with his relatives= motel. (T. 38-40.)
On October 22, 1999, an anonymous tip was received by the State Fraud Unit to the effect that the employee was working for Vitally=s Pizza while receiving temporary total disability benefits. The tip was forwarded to the insurer, which instigated surveillance. The investigators employed in the surveillance observed the employee at Vitally=s Pizza making and boxing pizzas off and on over several hours on several separate days. (T. 8-9; Exh. 4.)
The employer and insurer filed a Petition to Discontinue temporary total disability compensation on January 10, 2000. The stated basis for discontinuance was that:
. . . upon information and belief, the Employee has been gainfully employed as an employee of Vitally=s Pizza . . . , at least from October of 1999 to the present and continuing. Further, upon information and belief, the Employee has received financial remuneration for his services, and the Employee has failed to report this employment and said earnings either to the Employer and Insurer or to his Qualified Rehabilitation Consultant[.]
(Petition to Discontinue, paragraph VII.) The employer and insurer further alleged
that the Employer and Insurer are entitled to discontinue temporary total disability benefits on the basis that the Employee is, in fact, gainfully employed, thus barring an entitlement to workers= compensation benefits, and due to the employee=s knowing and bad faith receipt of temporary total disability benefits to which he is not entitled pursuant to M.S. ' 176.101 subd. 1(L), which indicates that the statutory bases for a discontinuance of temporary total disability benefits are not exhaustive.
(Id., paragraph VIII.). Finally, the employer and insurer also sought reimbursement for any benefits received in bad faith. (Id., paragraph IX.)
At the hearing, the employee admitted that he had regularly performed work activities at Vitally=s Pizza including baking and boxing pizzas, answering telephones and performing occasional deliveries. He also admitted assisting his sister and brother-in-law in various tasks involved in the operation of their motel. However, the employee testified that he had not been paid for these activities and had merely Ahelped out@ when visiting with his sister and brother-in-law. The employee=s brother-in-law and sister also testified that the employee was not paid for his assistance.
The compensation judge ordered discontinuance and awarded a credit against future benefits in the amount of temporary total disability compensation paid between May 17, 1999 and the date of hearing. The employee appeals from the order discontinuing benefits and from the award of a credit. The employer and insurer appeal from the judge=s failure to make findings as to whether the employee had received benefits in bad faith and from the judge=s related failure to rule on the request for an order for reimbursement of benefits.
STANDARD OF REVIEW
On appeal, this court must determine whether the compensation judge's findings and order are "clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted." Minn. Stat. ' 176.421, subd. 1(3) (1992). Substantial evidence supports the findings if, in the context of the record as a whole, they "are supported by evidence that a reasonable mind might accept as adequate." Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where the evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings must be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, "[f]actfindings are clearly erroneous only if the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed." Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975). Factfindings may not be disturbed, even though this court might disagree with them, "unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole." Id.
Discontinuance of Temporary Total Benefits
The employee argues on appeal that the compensation judge improperly expanded the issues raised at the hearing on discontinuance and decided the case in whole or in part on the basis of grounds for discontinuance other than those stated in the Petition for Discontinuance. The employee also asserts that the compensation judge applied the wrong legal standard in his consideration of the grounds for discontinuance which were properly at issue.
At the beginning of his decision, the compensation judge stated the issue to be resolved as: AThe Compensation Judge must determine whether reasonable grounds exist to terminate the employee=s temporary total disability benefits.@ In awarding discontinuance, the compensation judge gave the following reasoning:
The employee=s actions are inconsistent with his claim that he is medically unable to work. Certainly the employee did have some period of disability from the surgery in April of 1999 but the evidence makes it clear that by May of 1999 he had some post-injury ability to earn. Counsel for the employee argues that because the employee was not paid this is dispositive. The Compensation Judge does not agree. In determining the difference between TTD and TPD benefits, for example, we look at the employee=s pre-injury earnings and his post-injury Aability to earn.@ This is the concept of earning capacity. In some cases the Compensation Judge may have to impute an earning capacity to an employee. An example would be an employee who refuses suitable work. They may have no earnings but they can have an earning capacity imputed to them for purposes of determining whether they are entitled to benefits. Thus, what we are looking at in this case is not whether there was a contract for hire between Mr. Miller and the employee but whether the employee had some unrevealed Aearning capacity.@ If he did this would be inconsistent with his claims that he had no residual earning capacity from May to December of 1999 and was medically totally disabled. Thus, the fact that the employee was not paid for his efforts does not blunt the fact that the employee has residual earning capacity. That residual earning capacity, and any money that it could generate, should be used to mitigate damages. Having such an earning capacity is inconsistent with the employee=s claim that he was totally medically disabled during part of this period. Furthermore, after September 30, 1999 the employee was involved in the work at the motel and the pizza parlor and while he claims that he was performing a good faith diligent search for work there are no job logs. The employer and insurer are entitled to a credit against future benefits for the TTD benefits they paid for the period from May 17, 1999 to the date of hearing.
(Finding 2.) The compensation judge explained further in his memorandum that:
This is a one issue case. The employer and insurer have asked for a finding that reasonable grounds exist to discontinue the employee=s TTD benefits. The Compensation Judge agrees that the employee=s work at the motel and pizza parlor during the period from May 17, 1999 to the date of hearing was inconsistent with his claim that he was either: (1) medically totally disabled and without any residual earning capacity; or, (2) temporarily totally disabled and engaged in a good faith diligent search for work.
(Mem. at 5.)
Thus it appears evident that the compensation judge based his determination on two factors: first, that the activities performed by the employee demonstrated an Aunrevealed earning capacity,@ and that this constituted a basis to discontinue temporary total disability compensation; and second, that the activities performed for Vitally=s Pizza and for the motel interfered with the employee=s job search efforts and that the resultant level of job search was less than reasonable and diligent.
With regard to the first factor, we are compelled to agree with the employee that the judge has applied an erroneous legal standard. It is not entirely clear what the judge intended by the phrase Aunrevealed earning capacity.@ An employee=s post-injury earning capacity is the level of compensation the employee can obtain from employment, within the employee's restrictions, which is actually available to workers with similar skills, abilities, and experience in the employee's labor market. Dahl v. U.S.X. Corp., 44 W.C.D. 321 (W.C.C.A. 1990); Tottenham v. Eaton Char-Lynn Corp., 43 W.C.D. 71 (W.C.C.A. 1990). The fact that an employee is physically capable of some degree of work activity does not in and of itself disqualify the employee from temporary total disability benefits for periods where the employee=s disability and restrictions have prevented a return to substantial employment. That an employee=s physical capacities may be somewhat greater than understood by his physician or QRC does not necessarily form the basis for discontinuance of temporary total disability benefits unless it has been shown that the employee was either capable of an unrestricted return to work or that the employee would have been able to obtain actual employment but failed to do so through want of a reasonably diligent job search or through withdrawal from the labor market. Neither of these grounds were alleged in the employer and insurer=s petition to discontinue benefits.
The sole basis for discontinuance asserted in the petition to vacate was that the employee was Againfully employed.@ (Judgment Roll: Petition to Discontinue at paragraph VIII.) This assertion is in essence an allegation of the right to discontinuance of temporary total disability compensation pursuant to Minn. Stat. ' 176.101, subd. 1(e), which provides that A[t]emporary total disability compensation shall cease when the employee returns to work.@
The issue largely raised by the evidence at the hearing was whether the employee=s admitted ongoing performance of work activities at Vitally=s Pizza and in assisting his sister and brother-in-law in maintaining and operating their motel constituted a return to work. The employee argued that he was not paid for these activities and thus had not returned to work within the meaning of the statute. The employer and insurer, in essence, contended that the nature of the relationship and the work performed justified by implication a finding that the employee was compensated for his efforts either by undisclosed payments or by free accommodations and food or by some or all of these in combination. Also implicit in the employer and insurer=s presentation of the evidence is the suggestion that the employee=s efforts for this business engaged in by his extended family might constitute a return to work even in the absence of direct compensation, in that the efforts presumably resulted in increased earnings for the employee=s extended family, benefitting him indirectly through their enhanced ability to offer him accommodations and other assistance.
Pursuant to Minn. Stat. ' 176.238, subd. 6, an expedited hearing pursuant to a petition for the discontinuance of benefits Ashall be limited to the issues raised by the petition unless all parties agree to expanding the issues.@ This court has repeatedly held that where the expedited hearing procedures apply, discontinuance on grounds other than those specifically alleged in the petition is an improper expansion of the issues and requires reversal. See, e.g., Rauer v. Chrysler Corp., slip op. (W.C.C.A. August 31, 1999); Nyreen v. Industrial Custom Prods., slip op. (W.C.C.A. April 23, 1999); Bui v. Hitchcock Indus., slip op. (W.C.C.A. Dec. 4, 1995); Pierce v. Northwoods Log Homes, slip op. (W.C.C.A. April 26, 1994).
The employer and insurer suggest that the reference to Minn. Stat. ' 176.101, subd. 1(l), in paragraph VIII of their petition permitted the compensation judge to address any possible basis for discontinuance of temporary total disability benefits. We disagree. The legal issues raised by the Petition are defined by the specific factual and legal allegations raised. A general reference to Minn. Stat. ' 176.101, subd. 1(l), does not give an employee adequate notice of the matters to which the evidence should be addressed. The only issue specifically raised in the petition to discontinue was whether the employee was Againfully employed.@ Thus the judge=s reliance on job search issues or Aunrevealed earning capacity@ in determining discontinuance was improper.
The compensation judge did not make a determination of whether the employee had Areturned to work@ within the meaning of the statute. Despite the argument of the employee that the judge was precluded from so finding in the absence of direct evidence that the employee was paid for his work, we believe that the evidence could have permitted the judge to infer that the employee=s work for Vitally=s Pizza and the Rock Ledge Motel either involved the undisclosed payment of compensation to the employee or otherwise resulted in indirect compensation to the employee such that it constituted a return to work at more than an insubstantial income. On the other hand, the evidence could also support the finding that the employee=s activities assisting his sister and brother-in-law at the pizza parlor and hotel did not constitute a return to work. Clearly the burden of proof is on the employer and insurer, and if the compensation judge finds insufficient proof he must deny the petition. Accordingly, we vacate and remand the issue of discontinuance for redetermination. If he so chooses the compensation judge may, but need not, take additional evidence on the issue presented.
Jurisdiction to Determine Credit or Reimbursement
The compensation judge awarded the employer and insurer a credit against future benefits for temporary total disability compensation paid during the period for which he granted discontinuance. The employee, on appeal, argues that the award of such a credit improperly expanded the issues. The employer and insurer on cross-appeal argue that the judge should also have rendered a finding concerning whether the employee had received benefits in bad faith and thus have determined whether the employer and insurer were thereby entitled to reimbursement of the benefits paid.
As we have vacated the findings on discontinuance, we similarly vacate the award of a credit. However, we reach the questions presented on appeal or cross-appeal because it is most efficient to determine whether the judge on remand should, if discontinuance is found to be proper, consider the award of a credit or reimbursement.
Minn. Stat. ' 176.179 provides that where benefits are determined to have been paid under a mistake in fact or in law, such payments Ashall be refunded to the paying employer or insurer@ with the refund being in the form of a credit in the event that the benefits were received by the employee in good faith. On the other hand, A[w]here the commissioner or compensation judge determines that the mistaken compensation was not received in good faith, the commissioner or compensation judge may order reimbursement of the compensation.@
The Petition for Discontinuance expressly requested determination of the issue of whether the employee received payment in bad faith, and therefore the determination of that issue is not an expansion of the issues. (Judgment Roll: Petition to discontinue at paragraph IX.) Accordingly, should the judge determine on remand that the employee had Areturned to work,@ the judge may properly determine whether the employee received the compensation in good faith or in bad faith. If the employee is found to have received the compensation in good faith, a credit shall be awarded, consistent with the requirements of the statute. If the employee is found to have received the compensation in bad faith, then the judge may, in his discretion, issue an order for reimbursement.
 An analogous rule applies to discontinuances sought by a notice of intent to discontinue under Minn. Stat. ' 176.239, subd. 6. See, e.g., Putnam v. Yellow Freight Systems, slip op. (Oct. 26, 1995)
 Minn. Stat. ' 176.101, subds. 1(e) through 1(k), identify specific events or circumstances triggering cessation of temporary total disability benefits, specifically, an employee=s return to work, withdrawal from the labor market, failure to conduct a diligent job search, refusal of suitable work, unrestricted medical release for work, attainment of 90 days following maximum medical improvement, or payment of 104 weeks of temporary total disability compensation. Subdivision 1(l) merely provides that A[p]aragraphs (e) through (k) do not limit other grounds under law to suspend or discontinue temporary total disability provided under this chapter.@
 We understand the compensation judge=s desire to expand the matter before him to be one of Awhether reasonable grounds exist to terminate the employee=s temporary total disability benefits@ rather than to limit his inquiry to the specific issue raised in the Petition. His approach was practical and efficient. Unfortunately, the statute governing the inquiry permits the employee to limit the compensation judge=s review to Athe issues raised in the petition.@ The Petition did not raise a general claim about the extent of the employee=s earning capacity and whether he had engaged in a reasonably diligent search for work. Therefore, the compensation judge should not have resolved the case on the basis either of an Aunrevealed earning capacity@ or on the question whether the employee=s job search efforts were reasonable and diligent.