HARLAN J. HILDEBRANDT, Employee, v. CITY OF ST. LOUIS PARK, SELF-INSURED, adm=d by SEDGWICK CLAIMS MGMT., Employer/Appellant, and NORAN NEUROLOGICAL CLINIC, Intervenor.
WORKERS= COMPENSATION COURT OF APPEALS
SEPTEMBER 13, 2004
WAGES - SELF-EMPLOYMENT. Where the only evidence was the employee=s testimony that he generated no net income from his self-employment in the dog business, the compensation judge erred by including in the weekly wage calculation, $325.00 per month paid by the City of Mound to the employee for boarding impounded dogs as part of this business.
TEMPORARY PARTIAL DISABILITY - SUBSTANTIAL EVIDENCE. Substantial evidence, including the testimony of the employee, QRC Bourgeois, and employment expert Kipper, supports the compensation judge=s determination that the employee=s earnings between August 1, 2002 and October 15, 2003, reflected the employee=s post-injury earning capacity and, although minimal, were sufficient to establish entitlement to temporary partial disability benefits.
Affirmed in part and reversed in part.
Determined by Johnson, C.J., Rykken, J. and Stofferahn, J.
Compensation Judge: Patricia J. Milun
Attorneys: Mark A. Kleinschmidt, Ted A. Johnson and Angela B. Poth, Cousineau, McGuire & Anderson, Minneapolis, MN, for the Appellant. Gary L. Manka, Katz, Manka, Teplinsky, Due & Sobol, Minneapolis, MN, for the Respondent.
THOMAS L. JOHNSON, Judge
The self-insured employer appeals the compensation judge=s findings (1) including in the employee=s weekly wage calculation, without deduction for expenses, a boarding fee paid by the City of Mound for dog impound services; (2) that the employee performed a reasonable, diligent job search; and (3) that the employee=s earnings for the weeks between August 1, 2002 and October 15, 2003, represent the employee=s post-injury earning capacity for the purposes of entitlement to temporary partial disability benefits. We reverse the weekly wage finding and affirm the balance of the judge=s decision.
On January 25, 2001, Harlan J. Hildebrandt, the employee, sustained an injury while employed as a peace officer for the City of St. Louis Park, the self-insured employer. The employee then earned a yearly salary of $63,247.00. The employer admitted liability for the employee=s personal injury and paid temporary total benefits and a thirteen percent permanent partial disability.
Since 1987, the employee had been self-employed in a dog business that he ran out of his home. The employee stated there were several parts to his business, including boarding dogs, raising and breeding dogs, selling puppies, stud service and the training and competition of dogs. As a part of this business, the employee contracted with the City of Mound to provide dog kenneling services for dogs impounded by Mound. Mound transported the dogs to the employee=s house and the employee would then care for them or have others care for them if he was unable to do so. Each dog would be kenneled at the employee=s premises for no more than ten days until it was either placed or destroyed. The number of dogs the employee kenneled for Mound varied but averaged approximately three to five dogs a month. The employee was paid $325.00 per month by Mound regardless of the number of dogs kenneled by the employee or the length of time kenneled. The employee had 15 dog runs that he maintained at his premises. The employee stated he had expenses in running his business, including the expenses of entering national competitions with the dogs. The employee testified the costs associated with the dog competitions pretty much offset any income he received for his business. Over all the years the employee operated the business, he stated that for profit or loss, overall it was Aprobably neutral@ (T. 100).
In March 2001, Ms. Debra Bourgeois, a qualified rehabilitation consultant (QRC) met with the employee and conducted a rehabilitation consultation. QRC Bourgeois concluded the employee was eligible for rehabilitation services. Initially, Ms. Bourgeois provided medical management until it was determined, in July 2001, that the employee would be unable to return to work for the City of St. Louis Park. Based upon the employee=s injury and restrictions, the QRC determined the employee would be capable only of sedentary type employment which would significantly limit his employability. In April 2002, the employee underwent vocational testing at Victoria Career Services. The QRC reported the employee did very well on the assessment and scored at above average range in nearly all the areas of testing. The employee was also given an achievement test that placed him at the 75th percentile or higher in all areas when compared with technical or community college norms. The parties then signed a Job Placement Plan and Agreement that provided for a full-time job search with a goal of two to three job applications daily, four to five cold calls daily and two interviews a week as possible, with a daily job log of activities.
In May 2002, the employee contacted Farm Bureau Insurance and scheduled an interview for an insurance sales position. The employee ultimately had five interviews with Farm Bureau Insurance and was informed if he passed a state licensing examination, he would be offered a position. By report dated August 8, 2002, Ms. Bourgeois reported the employee did not pass the insurance examination. During this period of time, the QRC had provided job leads to the employee.
On August 5, 2002, the employee began working for the Benjamin Company as a supply runner earning $8.00 an hour for approximately 30 hours per week. The employee was also attempting to obtain a second job with Marsh Lake Hunting Preserve as a guide. The employee quit the job at Benjamin Supply on August 15, 2002, and then began working for Marsh Lake on September 9, 2002, where he worked until December 1, 2002. The employee worked at a number of jobs between January 2003 and September 30, 2003, and was paid temporary partial disability benefits. On October 1, 2003, the employee again went to work for Marsh Lake as a guide where he worked until October 15, 2003. Between August 1, 2002 and October 15, 2003, the employee had the following earnings:
a. August 1 through August 15, 2002, $480.00.
b. September 9 through September 15, 2002, $100.00.
c. September 23 through September 29, 2002, $50.00.
d. September 30 through October 6, 2002, $50.00.
e. October 7 through October 13, 2002, $50.00.
f. October 14 through October 20, 2002, $105.00.
g. October 21 through October 27, 2002, $95.00.
h. October 28 through November 3, 2002, $40.00.
i. November 4 through November 10, 2002, $40.00.
j. November 18 through November 24, 2002, $120.00.
k. November 25 through December 1, 2002, $70.00.
l. October 1 through October 8, 2003, $140.00.
m. October 9 through October 15, 2003, $220.00.
L. David Russell, a QRC, conducted a vocational evaluation of the employee on October 7, 2003, at the request of the employer. Mr. Russell met with the employee and reviewed his educational and employment background and reviewed the medical and vocational records. Mr. Russell opined the employee=s jobs and earnings during the periods in question were not suitable employment or suitable earnings. He testified, given a diligent job search, the employee could have obtained employment paying $15.00 an hour. Based upon the low hourly wage and the limited hours worked by the employee, Mr. Russell opined the employee=s earnings during the periods in question were not reflective of his earning capacity.
Mr. Russell stated that retraining exploration coinciding with job search efforts was rarely effective. When a return to work with the pre-injury employer has been ruled out, Mr. Russell opined job search most often provides the most efficient, least risky and least disruptive means of wage replacement. Although the employee had a high wage with the employer, QRC Russell stated there were vocational alternatives available to the employee that have not been adequately explored. He stated the employee had not engaged in a diligent job search at any time since his injury, and opined the emphasis on retraining early in the rehabilitation process contributed to the employee=s passive job search effort and the insubstantial employment and earnings which resulted.
Mr. Obie Kipper, Jr., a certified rehabilitation consultant, met with the employee and took a history from him, reviewed the medical records, the records and reports of Ms. Bourgeois and the employee=s job logs. He concluded the employee had minimal transferrable skills and opined the employee=s acceptance of the job at Marsh Lake was an appropriate job placement because it was an area of employment in which the employee felt he had some expertise and was able to acquire employment. Mr. Kipper further opined the job with Marsh Lake was representative of the employee=s earning capacity because persons who experience catastrophic injuries and require rehabilitative services with limited transferrable skills often end up in jobs that pay $8.00 to $15.00 an hour. Mr. Kipper further noted the employee=s ultimate objective was to return to school which he felt was necessary to enable the employee to regain his lost earning capacity. Based upon that ultimate objective, Mr. Kipper opined the employee=s job search was reasonable in the absence of retraining. Mr. Kipper saw no possibility of the employee obtaining a job which would pay the wage he earned as a police officer. Finally, Mr. Kipper opined the employee cooperated with the rehabilitation process.
In a Findings and Order, the compensation judge found the boarding fee of $325.00 a month paid to the employee by the City of Mound was regular employment under Minn. Stat. ' 176.011, subd. 3. The judge found no evidence was submitted by expert testimony or documentation as to the employee=s actual expenses in this employment, and concluded the entire $325.00 was to be added to the employee=s salary for purposes of calculating the weekly wage. The judge further found the employee performed a reasonably diligent job search during the periods of claimed temporary partial disability benefits, and found the employee=s earnings during the periods in question were representative of his post-injury earning capacity. Accordingly, the compensation judge ordered the self-insured employer to pay temporary partial disability benefits to the employee based upon the combined earnings. The self-insured employer appeals.
1. Weekly Wage
The self-insured employer contends the compensation judge erred by including in the employee=s weekly wage calculation the entire $325.00 a month he received from Mound for dog kenneling services. The appellant argues the compensation judge erred in failing to deduct from these gross earnings the expenses incurred by the employee in running the entire business. The appellant asks this court to reverse the compensation judge=s weekly wage finding.
AIf at the time of the injury, the employee was regularly employed by two or more employers, the employee=s earnings in all such employments shall be included in the computation of daily wage.@ Minn. Stat. ' 176.011, subd. 3. It is undisputed the employee operated a dog business in addition to working for the employer. Thus, the employee=s earnings from this business are properly included in the wage calculation. Self-employment situations nearly always present difficult wage-related issues. See, e.g, Hansford v. Berger Transfer, 46 W.C.D. 303 (W.C.C.A. 1991); Jensen v. Vernon Erickson, slip op. (W.C.C.A. June 8, 1998). It is well settled, however, that an employee=s earnings from self employment must be based on the employee=s net income after deduction of reasonable business expenses. McQuillan v. Syscom, Inc., 57 W.C.D. 210 (W.C.C.A. 1997).
Often, a self-employment business venture will derive revenue from different types of business activities. In such a case, the total expenses of the business would be deducted from the gross income to arrive at a net income. Here, the compensation judge apparently concluded the income from the City of Mound was a separate business unrelated to the rest of the employee=s self-employment activities. The employee, however, testified his business included the kenneling, training and breeding of dogs together with participating in dog shows. The employee=s tax returns were not introduced in evidence so there is no evidence the dog kenneling for Mound was treated as a separate business activity for tax purposes. We find no evidence to support a conclusion that the dog kenneling for Mound was a separate business. Accordingly, the total expenses of the business must be deducted from the gross income to arrive at a net income. The employee testified that over the years, his dog business typically generated no income after expenses. As the only evidence is that the employee earned no income from his dog business, the compensation judge erred in including in the weekly wage calculation the $325.00 per month the employee received from the City of Mound. We, accordingly, reverse.
2. Temporary Partial Disability
The self-insured employer also appeals the compensation judge=s award of temporary partial disability benefits for the weeks between August 1, 2002 and October 15, 2003. In Stevens v. S.T. Servs., slip op. (W.C.C.A. Nov. 14, 1991), this court outlined certain factors to be considered in evaluating an employee=s claim that he or she is working for the purpose of obtaining temporary partial disability benefits: (1) the amount of income earned; (2) the number of hours worked weekly; (3) the nature of the employee=s activities; (4) the facts and circumstances surrounding the employment; and (5) any restrictions on the employee=s work activities. In this case, the appellant argues, the employee=s income was minimal, he worked only a few hours a week, the job with Marsh Lake was essentially a hobby and the employee only took the job to receive temporary partial disability benefits while waiting to be retrained. Based upon the factors outlined in the Stevens case and the facts in this case, the appellant contends the compensation judge=s award of temporary partial disability benefits is unsupported by substantial evidence.
The appellant further argues that case law has established the minimum number of hours and earnings below which the employee=s income must be found to be insubstantial. The appellant points to the Stevens case, in which the employee worked one hour a day, three days a week at a wage of $4.00 per hour. In Hubbell v. Northwoods Panelboard, 45 W.C.D. 515 (W.C.C.A. 1991), the employee=s work averaged no more than an hour a day with earnings of approximately $20.00 a week. In Caron v. Beatrice/Hunt Wesson, slip op. (W.C.C.A. Aug. 12, 1991), the employee earned $60.00 a week babysitting for her brother. In Korvah v. Mount Olivet Careview Home, slip op. (W.C.C.A. Feb. 11, 1994), the employee was paid $50.00 a week for babysitting eight hours a day, five days a week. In each of these cases, this court affirmed the compensation judge=s denial of temporary partial disability benefits. Similarly, in Deshampe v. Arrowhead Tree Serv., 463 N.W.2d 900, 43 W.C.D. 641 (Minn. 1990), the Supreme Court affirmed the compensation judge=s decision denying the employee=s claim for a lump sum payment of permanent partial disability benefits, concluding 18 hours of work over a three week period requiring the assistance of a job coach who was paid $7.00 an hour did not constitute a genuine return to work within the meaning of Minn. Stat. ' 176.101, subd. 3o.
To establish entitlement to temporary partial disability benefits, an employee must prove a reduction in earning capacity that is causally related to the personal injury. Arouni v. Kelleher Constr., Inc., 426 N.W.2d 860, 41 W.C.D. 42 (Minn. 1988). Once an employee has returned to work and is earning wages, the employee=s actual post-injury earnings are presumed to be an accurate reflection of the employee=s current earning capacity. Roberts v. Motor Cargo, Inc., 104 N.W.2d 546, 21 W.C.D. 214 (Minn. 1960). This presumption may, however, be rebutted by evidence which establishes the employee=s post-injury earnings are not an accurate reflection of the employee=s earning capacity. Mitchell v. White Castle Systems, Inc., 290 N.W.2d 753, 32 W.C.D. 288 (Minn. 1980). To be entitled to temporary partial disability benefits, an employee must be gainfully employed, that is, the employee must show something more than Asporadic employment resulting in an insubstantial income.@ See Schulte v. C.H. Peterson Constr. Co., 278 Minn. 79, 153 N.W.2d 130, 134, 24 W.C.D. 290, 295 (1967); Hubbell v. Northwoods Panelboard, 45 W.C.D. 515 (W.C.C.A. 1991).
Citing the Caron decision, the appellant contends $60.00 per week, adjusted to reflect 2004 dollars, is the minimum figure an employee must earn to be eligible for temporary partial disability benefits. We reject this approach. What constitutes sporadic employment resulting in an insubstantial income is a factual issue, the resolution of which depends not solely on the amount of income earned or the number of hours worked. In addition to these factors, the compensation judge may also consider any other relevant evidence including the rehabilitation plan, the employee=s physical condition, age, training, experience, the type of work available in the community and expert opinion.
Ms. Bourgeois and Mr. Kipper both testified the employee cooperated with rehabilitation efforts. In the Glencoe, Minnesota, area where the employee lived, Ms. Bourgeois testified there were few job opportunities available to the employee. Additionally, Ms. Bourgeois testified the employee=s job at Marsh Lake was appropriate given his restrictions, lack of transferrable skills and the existent labor market. Mr. Kipper testified it was not unusual for injured employees such as Mr. Hildebrandt with minimal transferrable skills and a high weekly wage to have difficulty and experience frustration in attempting to find employment. Mr. Kipper opined the employee=s job at Marsh Lake was appropriate employment because it was a job that he could obtain and in which he had some expertise. Mr. Kipper opined that job was an accurate reflection of the employee=s earning capacity and stated that most employees who suffer serious injuries and require rehabilitation services end up earning from $8.00 to $15.00 an hour. Finally, Mr. Kipper stated the employee did conduct a reasonable and diligent job search. Ultimately, Mr. Kipper opined, the employee would need retraining to regain his lost earning capacity.
There is evidence in this case which, if accepted by the compensation judge, would support a contrary result. That is not, however, the issue before this court. Rather, it is our function to determine whether Athe findings of fact and order were clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.@ Minn. Stat. ' 176.421, subp. 1(3). The testimony of the employee, Ms. Bourgeois and Mr. Kipper constitutes substantial evidence which supports the compensation judge=s decision. Accordingly, that decision must be affirmed. Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984).