CHARLES G. JACOB, Employee, v. DAVIES, INC., and CNA/TRANSCONT’L INS. CO., Employer-Insurer/Appellants.
WORKERS’ COMPENSATION COURT OF APPEALS
OCTOBER 31, 2008
TEMPORARY PARTIAL DISABILITY - EARNING CAPACITY; CREDITS & OFFSETS - CREDIT FOR OVERPAYMENT; STATUTES CONSTRUED - MINN. STAT. § 176.179. Where for nine years of post-injury self-employment the employee accepted temporary partial disability benefits based on uniform pay stubs that did not reflect his broadly ranging actual earnings, and where the employee’s income over that period was clearly not always other than sporadic and insubstantial, the compensation judge’s denial of reimbursement for overpayment of benefits was affirmed, but her denial of a credit for overpayment during some of those years was reversed.
Affirmed in part and reversed in part.
Determined by: Pederson, J., Johnson, C.J., and Rykken, J.
Compensation Judge: Patricia J. Milun
Attorneys: Lorrie L. Bescheinen, Borkon, Ramstead, Mariani, Fishman & Carp, Minneapolis, MN, for the Respondent. Jeffrey A. Magnus, Law Offices of Jeffrey A. Magnus, Edina, MN, for the Appellants.
WILLIAM R. PEDERSON, Judge
The employer and insurer appeal from the compensation judge’s denial on remand of their claim for reimbursement under Minnesota Statutes § 176.179 of compensation not received in good faith by the employee. We affirm the judge’s denial of reimbursement to the employer and insurer, but we reverse the judge’s finding that there was no overpayment, and we allow the employer and insurer a credit as provided by statute.
On February 24, 1984, Charles Jacob [the employee] was employed as a brick mason by Davies, Inc. [the employer]. On that date, the employee, who was forty-five years old, fell from scaffolding and sustained injuries to his head, neck, back, and extremities. The employer and its workers’ compensation insurer, CNA/Transcontinental Insurance Company [the insurer], accepted liability and commenced payment of workers’ compensation benefits. The employee underwent anterior fusion surgery at C6-7 of his spine on November 29, 1984, and was disabled from work until February 7, 1986.
The employee was evidently given work restrictions and found employment with the Fridley VFW on February 7, 1986, and the insurer thereupon commenced payment of temporary partial disability benefits. About eleven months later, on January 13, 1987, the parties filed a Stipulation for Settlement with the Department of Labor and Industry, agreeing to a compromise of the employee’s claim for permanent partial disability benefits to the extent of 22% of the whole body. An Award on Stipulation was issued on January 23, 1987.
The employee evidently worked at the Fridley VFW until March of 1992 and then obtained a job at Theilen Printing until he was laid off in June of 1996. Temporary partial disability benefits paid to the employee between February 1986 and June 1996, a period of more than ten years, are not in dispute.
On or about June 21, 1996, the employee started his own business, known as “What’s Up,” providing “hall decorations and delivery.” Thereafter, at intervals of every three or four weeks, the employee submitted to the insurer what were identified as “check stubs.” Each check stub identified the employee, his business, and a weekly pay period, and it contained figures asserting his total earnings for that week, his withholding for federal and state taxes, and his net pay. At the bottom of each check stub was the statement “Employee’s Statement of Earnings and Deductions - Detach and Retain.” For each and every week beginning with the pay period ending June 28, 1996, and ending with the pay period ending February 23, 2001, the employee’s reported “total earnings” were $245.00 and his reported “total deductions” were $45.74. Beginning with the pay period ending March 2, 2001, and ending with the pay period ending March 11, 2005, the employee reported similarly unvarying weekly earnings of $262.50. Based on these periodic submissions of the employee, the insurer paid temporary partial disability benefits.
On March 24, 2005, almost nine years after the employee went into business for himself, the insurer served a notice of intention to discontinue the employee’s temporary partial disability benefits, explaining, “Wage information being submitted is questionable and claimant has failed to provide tax records to substantiate the earnings on which temporary partial disability is based. Tax records have been requested repeatedly with no response.”
About seven weeks later, on May 13, 2005, the employee filed an objection to discontinuance together with a copy of his 2004 Federal and State Income Tax Returns, alleging entitlement to temporary partial disability benefits continuing from March 25, 2005. The matter was scheduled for an expedited hearing on June 23, 2005, but the employee withdrew his objection the day before trial. By this time, the employee was sixty-six years old.
On November 7, 2005, the employer and insurer filed a Petition for Reimbursement, alleging a “significant discrepancy” between the employee’s tax returns and the payroll information that had been regularly submitted by the employee to support his claim for temporary partial disability benefits. As an example, the insurer referred to calendar year 2001, in which the employee had reported to the insurer weekly earnings of $245.00 and $262.50 but on his tax returns a total business income of only $335.00 for the entire year, an amount that “does not support the Employee’s claim [for] temporary partial disability benefits.” The employer and insurer asserted that “[f]rom February 24, 1984 through March 24, 2005, the Employee has been paid $431,713.39 in wage loss benefits, some of which appear to have been fraudulently obtained.” On that basis they requested an Order requiring the employee to make an immediate 100% reimbursement of all wage loss benefits paid to him for which he could not provide documentation or which he had fraudulently obtained.
The employer and insurer’s Petition for Reimbursement came on for hearing on January 9, 2007. The judge identified the issues for her determination as “whether the employee was mistakenly compensated for temporary partial disability benefits from June 21, 1996 through March 24, 2005” and “[i]f so, was the compensation not received in good faith.” Evidence introduced at hearing included the insurer’s printout entitled “Payment Query Results,” which set forth the insurer’s payments from June 1, 1996, through March 11, 2005, and check stubs submitted by the employee to the insurer between June 1996 and March 2005. The judge received also the employee’s Federal and State income tax returns for the years 1997 through 2004. The only witness to testify at trial was the employee, who declined to testify with any specificity regarding his self-employment, the documentation that he submitted to the insurer, or his entitlement to temporary partial disability benefits, citing the Fifth Amendment’s protection against self-incrimination. The record closed on January 31, 2007, upon submission by the parties of written closing arguments and proposed findings.
In a decision issued on March 12, 2007, the compensation judge found in part the following: (1) that each “Statement of Earnings and Deductions” - - i.e., each check stub - - submitted by the employee to the insurer “appears to represent actual earnings of the employee for his work performed during the stated period” and “[t]he insurer used each [check stub] to calculate and pay temporary partial disability benefits”; (2) that “the employee’s Income Tax Returns [are] an accurate representation of his actual earnings,” and “are not consistent with the earnings reflected in the [check stubs]”; and (3) that, based on his income tax returns, the employee under-reported his actual earnings to the employer in 2002 and 2003, resulting in an overpayment of temporary partial disability benefits of $1,866.00 and $101.33 in those years, respectively, while over-reporting his actual earnings in all other years, resulting in no overpayment of benefits in any of those other years. On these findings, the judge awarded an overpayment credit to the employer and insurer for 2002 and 2003, but she denied the employer and insurer’s reimbursement claim under Minnesota Statutes § 176.179. The employer and insurer appealed.
In a decision issued on October 15, 2007, a panel of this court affirmed on substantial evidence grounds the judge’s determination that the employee’s tax returns were an accurate representation of the employee’s actual earnings during calendar years 1997 through 2004. Concluding, however, that those actual earnings did not necessarily represent an earning capacity sufficient for entitlement to temporary partial disability compensation, see Dorn v. A.J. Chromy Constr. Co., 310 Minn. 42, 47, 245 N.W.2d 451, 454, 29 W.C.D. 86, 91 (1976) (in order to establish entitlement to benefits for temporary partial disability, an employee must prove in part that he is actually working subject to his disability), we reversed the judge’s finding that the employee did not receive an overpayment of weekly benefits in all years other than 2002 and 2003, and we remanded the issue to the judge for reconsideration on that basis.
In a Findings and Order on Remand issued April 11, 2008, the compensation judge concluded that the employee’s earnings in all years from 1996 to 2005 other than 2002 and 2003 reflected “something more than sporadic employment resulting in an insubstantial income,” and on that basis she concluded again that there was no evidence to establish that there was an overpayment of benefits during the years at issue on remand. The employer and insurer appeal.
As we noted in our earlier decision in this matter, the record is extremely sparse. The evidence consists of pay stubs that the employee submitted to the insurer between June 1996 and March 2005, together with the employee’s tax returns for 1997 through 2004. The judge found the pay stubs and tax returns inconsistent, concluding that the tax returns accurately represented the employee’s actual earnings and that the pay stubs did not. Although the insurer had paid temporary partial disability benefits based upon the false pay stubs submitted by the employee, the judge found no evidence to establish that there had been an overpayment of benefits. In a memorandum accompanying her Findings and Order on Remand, the judge appears to have concluded that the employee’s actual earnings, as reflected on his tax returns, were presumptive of his earning capacity. She held that, “[e]ven if the employee’s earnings during these years were considered insubstantial income, he would be entitled to receive temporary partial disability benefits based upon his earning capacity,” emphasizing that the employer and insurer had submitted no evidence to indicate that the employee’s earning capacity was higher than his “reported earnings.” The employer and insurer contend on appeal that substantial evidence in the record does not support the conclusion that the employee’s actual earnings represent his earning capacity or the conclusion that the employee’s earnings are other than insubstantial. We agree in part.
When a disabled employee who is released to full-time work finds a full-time job, generally the earnings from such employment create a presumption of earning capacity. Roberts v. Motor Cargo, Inc., 258 Minn. 425, 104 N.W.2d 546, 21 W.C.D. 314 (1960); Einberger v. 3M Co., 41 W.C.D. 727 (W.C.C.A. 1989). However, temporary partial disability benefits are not available to an injured employee who is not gainfully employed. Hubbell v. Northwoods Panelboard, 45 W.C.D. 515, 517 (W.C.C.A. 1991), citing Parson v. Holmen Erection Co., 428 N.W.2d 72, 41 W.C.D. 129 (Minn. 1988). While details regarding the employee’s self-employment are absent and no testimony was submitted that would indicate that the employee worked less than full-time, we cannot but conclude, from the employee’s tax returns, his obvious submission of false documentation to the insurer, and other evidence of record, (1) that the employee knew that his compensation was being paid under a mistake of fact or law and (2) that his income was clearly not always other than sporadic and insubstantial. In 1997, for example, the employee submitted regular pay stubs to the insurer representing that he was being paid $245.00 a week by his company, while his income tax return for the same year, which the judge accepted as an accurate representation of his actual earnings, reported an $814.00 loss. Similarly, in 2001, the employee’s tax return reflects a net income of $335.00, and in 1998 and 1999 his earnings were clearly just as sporadic and insubstantial. Under the evidence presented here, and absent any reasonable rebuttal by the employee, we conclude that the employer and insurer have established an overpayment representing all temporary partial disability benefits paid during calendar years 1997, 1998, 1999, and 2001. We cannot conclude from the record before us that the employee’s self-employment activity resulted in sporadic and insubstantial income in 2000 or 2004; the judge has already determined the amount of overpayment for 2002 and 2003; and no evidence was offered regarding the employee’s earnings in 1996 or 2005, hence any entitlement to a credit or reimbursement for those two years has not been proven. See e.g., Woods v. Erskine Mfg., slip op. (W.C.C.A. Dec. 2, 1998).
This matter was remanded to the judge on the narrow issue whether the employee’s self-employment earnings during the period in question were too insubstantial to establish entitlement to temporary partial disability benefits and, consequently, whether the employer and insurer have established an overpayment. We have affirmed the judge’s determination that the employer and insurer failed to establish an overpayment in 1996, 2000, 2004, and 2005, and we have reversed the judge for calendar years 1997, 1998, 1999, and 2001. The employer and insurer are entitled to a credit against future compensation as specified by statute for all compensation paid in the years we have reversed, as well as to the extent found by the judge in 2002 and 2003.
As we noted in our earlier decision in this matter, we are troubled by the employee’s long-term submission of pay stubs that apparently have no basis in reality. The matter was complicated further by the employee’s refusal to testify about matters for which he is the only or best source of evidence. That being said, however, the employee did sustain a serious injury at work in 1984, consequent to which he received from the employer and insurer two years of undisputed temporary total disability benefits and ten years of undisputed temporary partial disability benefits. The insurer was fully aware of the employee’s self-employment circumstances and paid benefits without question for almost nine additional years. There has been no suggestion here that the employee no longer suffers from restrictions related to his injuries. While we do not seek to excuse the employee’s submission of false information, we do note that the record contains no clear evidence of the employee’s motivation. Under the facts of this case, and given the extremely sparse record before us, we cannot conclude that the overpayment found in this case warrants an order for reimbursement. We have therefore allowed a credit to the employer and insurer as provided by Minnesota Statutes section 176.179.
 Background information in this decision is drawn in large measure from this court’s previous decision, in Jacob v. Davies, Inc., 67 W.C.D. 362 (W.C.C.A. 2007).
 According to Interim Status Reports subsequently filed by the insurer with the Department of Labor and Industry, the employee was paid 102 weeks of temporary total disability benefits from February 24, 1984, through February 6, 1986.
 The record does not disclose the employee’s weekly wage on February 24, 1984, nor his post-injury wages in his jobs between February 1986 and June 1996.
 According to Respondent’s Exhibit 2, based on information contained in the employee’s tax returns and received by the court for illustrative purposes, the employee’s gross income, net income or loss, and post-injury weekly earnings (arrived at by dividing net income by fifty-two weeks) were as follows (the figure in parentheses is negative):
|YEAR||TOTAL INCOME||NET INCOME/LOSS||WEEKLY INCOME|
|1997||$ 25,943.82||$ (814.00)||None|
 No evidence was introduced regarding the employee’s actual earnings in 1996 or 2005.