WALTON KJELDERGAARD, Employee, v. PUERINGER DISTRIBS., INC., and LIBERTY MUT. INS. CO., Employer-Insurer/Appellants, and MN DEP=T OF LABOR & INDUS./ WORKERS= COMPENSATION DIV., Intervenor/Cross-Appellant.

 

WORKERS= COMPENSATION COURT OF APPEALS

MARCH 20, 2002

                       

HEADNOTES

 

TEMPORARY PARTIAL DISABILITY; PENALTIES; STATUTES CONSTRUED - MINN. STAT. ' 176.225.  Once he has established entitlement to temporary partial disability benefits, an injured worker must continue to submit his wage stubs to confirm that entitlement, but, so long as his wages are not varying, he is no longer required to repeatedly re-establish that entitlement with each succeeding pay period prior to his being compensated.  Where the employee was being paid monthly at his post-injury job after being paid weekly at his date-of-injury job, where the employee=s wages did not vary month-to-month, and where the employer and insurer delayed paying the employee=s temporary partial disability benefits until after having received the employee=s pay stubs at the end of each month, the compensation judge properly awarded a penalty for delay in paying benefits under Minn. Stat. ' 176.225.

 

PENALTIES - SUBSTANTIAL EVIDENCE; RULES CONSTRUED - MINN. R. 5220.2710.  Where the Department of Labor and Industry received the employee=s complaint regarding the insurer=s timeliness in payment of his benefits in the fall of 1999 and requested required documentation from the insurer by October 29, 1999, where the insurer responded by November 22, 1999, and the Department issued its Notice of Penalty Assessment ten days later, the theory of laches did not apply to preclude the Department=s assessment of a penalty, although, pursuant to Minn. R. 5220.2710, the penalty could not be calculated on violations preceding two years prior to the assessment and the assessed penalty was therefore required to be recalculated to reflect two fewer months of violation.

 

TEMPORARY PARTIAL DISABILITY; RULES CONSTRUED - MINN. R. 5220.2540; STATUTES CONSTRUED - MINN. STAT. ' 176.101, SUBD. 2, MINN. STAT. ' 176.021, SUBD. 3.  Where it was undisputed that the employee, who was being paid weekly at the time of his work injury, had never agreed in writing to a monthly payment of temporary partial disability benefits, where specific language in Minn. Stat. ' 176.101, subd. 2, Minn. Stat. ' 176.021, subd. 3, and Minn. R. 5220.2540 underscored the statute=s clear intent to require payment of benefits at the frequency of the pre-injury wage rather than that of the post-injury wage absent a written agreement of the parties, and where there was no written agreement of the parties, the compensation judge=s finding that payment of the employee=s temporary partial disability compensation was due at monthly intervals instead of at weekly intervals was erroneous under the facts of the case, notwithstanding the fact that the employee was paid monthly at his post-injury job.

 

PENALTIES; RULES CONSTRUED - MINN. R. 5220.2790; STATUTES CONSTRUED - MINN. STAT. ' 176.225, SUBDS. 1 AND 5.  Where the only statutory provision at issue,  subdivision 5 of Minn. Stat. ' 176.225, together with its supporting rule, Minn. R. 5220.2790, clearly provided that payments found to be delayed Ashall@ be increased by 25%, for Ainexcusable@ delay in making payment, the compensation judge had no discretion to award a lesser penalty under subdivision 1 of the statute, for unreasonable or vexatious delay in making payment, and the judge=s award of a 19% penalty under subdivision 1 of the section instead of a 25% penalty under subdivision 5 of the section was reversed.

 

Affirmed with modification in part and reversed in part.

 

Determined by Pederson, J., Wilson, J., and Johnson, C.J.

Compensation Judge:  Paul V. Rieke

 

OPINION

 

WILLIAM R. PEDERSON, Judge

 

The employer and insurer appeal from the compensation judge=s assessment of a 19% penalty for unreasonable and vexatious delay in paying the employee=s temporary partial disability benefits.  The Department of Labor and Industry cross-appeals from that assessment, contending (1) that the judge erred in assessing that 19% penalty, for Aunreasonable@ delay under Minn. Stat. ' 176.225, subd. 1(b), instead of assessing a 25% penalty for Ainexcusable delay@ under Minn. Stat. ' 176.225, subd. 5, and Minn. R. 5220.2790, and also (2) that the judge erred in his determination that a monthly interval for payment of temporary partial disability benefits was appropriate.  We affirm the judge=s award of a penalty, with modification that it be calculated on a violation commencing December 2, 1997, instead of October 1, 1997; we reverse the judge=s limitation of the penalty to 19% instead of 25% of benefits delayed; and we reverse the judge=s determination that benefits are payable monthly instead of weekly.

 

BACKGROUND

 

The facts in this case are essentially undisputed.  On August 14, 1987, Walton Kjeldergaard [the employee] sustained multiple injuries arising out of and in the course of his employment as a truck driver with Pueringer Distributing Company [the employer], insured against workers= compensation liability by Liberty Mutual Insurance Company [the insurer].  On that date, the employee was thirty-eight years old and was earning a weekly wage of $683.54.  As a result of his injuries, the employee was unable to return to his job with the employer.  The employer and insurer paid various workers= compensation benefits to the employee, including temporary partial disability benefits upon his return to work on December 6, 1993.

 

In December of 1993, the employee took a job with Marks Communication [Marks] of Brainerd, at a weekly wage of $102.00.  In September of 1996, after obtaining approval from the insurer, the employee ceased working for Marks and became employed as a school bus driver with Strack=s Bus Service [Strack=s], at a monthly wage of $498.50.  From September 1996 through the date of hearing, the employee worked for Strack=s and earned $498.50 a month.^[1]  At the time of his injuries in 1987, the employee was paid at weekly intervals by his employer.  Because the employee was being paid monthly by Strack=s, the employer and insurer have paid the employee=s temporary partial disability benefits on a monthly basis as well during that employment.  The employee evidently regularly sent his Strack=s pay stubs to the insurer by certified mail.  There is no evidence of any written agreement between the parties regarding the frequency of the employee=s benefit payments.

 

In the fall of 1999, the employee contacted the Minnesota Department of Labor and Industry [the Department] to complain that his temporary partial disability benefits were being paid late by the employer and insurer.  Accordingly, on October 29, 1999, compliance officer Patricia Leider wrote to the insurer requesting (1) a printout showing the payment date of all temporary partial disability benefits paid to the employee for the period of October 1997 to the present and the time period covered by each payment and (2) substantiation of the date the employee sent records showing his current earnings.

 

On November 22, 1999, Tom Hanson, the insurer=s representative, responded to the Department=s requests.  In his response to the Department, Mr. Hanson also reported that, when the employee submitted his check stub, the employee did not identify his claim by claim number, date of injury, or social security number.  Mr. Hanson noted that several pay stubs provided by the employee were nearly illegible and that the pay stubs were being mailed to the attention of the wrong claims representative.

 

The Department=s audit of the employer and insurer=s payments covered the period from October 1, 1997, through August 31, 1999.  On December 1, 1999, Ms. Leider wrote to the insurer and advised as follows:

 

After completely auditing Mr. Kjeldergaard=s file, I noticed his earnings have not varied since prior to October 1997.  Under Minnesota Rule 5220.2540, wage verification is only necessary if need[ed] to calculate benefits owed.  Since the earnings have not changed, Mr. Kjeldergaard=s temporary partial disability benefit checks should be issued at the same intervals as when the preinjury wage was paid.  Temporary partial disability benefit checks should be issued without waiting for wage verification.  Minimally, Mr. Kjeldergaard=s checks should be issued on the last work day of each month.

 

I would strongly encourage initiating automatic payment of temporary partial disability benefits to Mr. Kjeldergaard without waiting for earning information at the same intervals as he was paid prior to the date of the injury.  Failure to do so could subject you to further penalties.

 

The following day, December 2, 1999, the Department served and filed a Notice of Penalty Assessment, in which a penalty of $12,088.08 was assessed against the employer and insurer, to be paid to the employee under Minn. Stat. ' 176.225, subd. 5, and Minn. R. 5220.2790.  In a memorandum attached to the Notice of Penalty Assessment, the Department concluded that, because the employee=s wages did not vary, payment of benefits should have been made at the same interval as that at which the employee had received his pre-injury wages.  At trial, however, Ms. Leider explained that because the employer and insurer had been paying benefits on a monthly basis, and because in this case the penalty amount would be the same whether calculated monthly or weekly, the Department had determined the penalty using a monthly payment schedule.  Under Minn. R. 5220.2790, subp. 1B, where the employer and insurer fail on more than three occasions in any twelve-month period to make payment of temporary partial disability benefits within three business days of the date due, the failure is deemed inexcusable.  Using the monthly payment schedule, the Department determined that the due date for payment was the last work day of each month and that the employer and insurer had delayed payment in twenty-one of the twenty-three months audited.  The amount of benefits delayed and so subject to a 25% penalty under the statute and rule was $48,352.33.  Therefore the assessed penalty was $12,088.08.  On December 15, 1999, the employer and insurer filed an Objection to Penalty Assessment.

 

The employer and insurer=s objection to the Department=s penalty assessment under Minn. Stat. ' 176.225, subd. 5, and Minn. R. 5220.2790 came on for hearing before a compensation judge on April 26, 2001.  In a Findings and Order issued May 11, 2001, the judge found that, for purposes of Minn. R. 5220.2540, the employee=s wages did not vary during the period at issue and that the employer and insurer therefore did not require documentation of the employee=s pay records each pay period prior to calculating and making payment of benefits.  The judge also determined that, although payment of benefits should have been made weekly under the statute, based on the frequency of the employee=s pre-injury wages, payment of benefits on a monthly basis, on the last day of each month, was in this case Areasonable,@ in that the employee was being paid monthly at his post-injury job.  The judge adopted the Department=s determination under Minn. R. 5220.2790 of the amount of compensation found to be delayed.  However, regarding that rule's definition of inexcusable delay and its requirement of a 25% penalty where benefits are not paid within that definition, the judge concluded that as follows:

 

The court finds this rule impinges upon and restricts a Compensation Judge=s legislated authority under Minn. Stat. ' 176.225, Subd. 1, and therefore should be used only as a guideline and not a mandatory constraint on a just and reasonable determination in which all the facts and circumstances can be weighed relating to delayed payments.  When the provisions of the Rules promulgated under legislative enactments do not correspond to the statutes, the will of the legislative body prevails.

 

Accordingly, notwithstanding that the issue as presented by the parties was Ainexcusable@ delay under Minn. Stat. ' 176.225, subd. 5, as opposed to Aunreasonable@ or Avexatious@ delay under subdivision 1 of that section, the judge found that all the facts and circumstances presented in the case mitigated against the severity of the employer and insurer=s delay in making payment and the amount of the penalty assessed.  Therefore, applying the discretion afforded him under Minn. Stat. ' 176.225, subd. 1, the judge determined that $9,186.94--19% of the amount delayed--was a Areasonable penalty@ for the Aunreasonably delayed@ payments outlined by the Department in its Notice of Penalty Assessment.  The employer and insurer appeal from the judge=s assessment of any penalty, on grounds that the due date for payment of benefits is ambiguous under applicable law, and the Department cross appeals from the judge=s assessment of a 19% penalty under Minn. Stat. ' 176.225, subd. 1, instead of a 25% penalty under Minn. Stat. ' 176.225, subd.5, and Minn. R. 5220.2790.

 

STANDARD OF REVIEW

 

In reviewing cases on appeal, the Workers= Compensation Court of Appeals must determine whether Athe findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.@  Minn. Stat. ' 176.421, subd. 1 (1992).  Substantial evidence supports the findings if, in the context of the entire record, Athey 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 evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed.  Id. at 60, 37 W.C.D. at 240.  Similarly, A[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).  Findings of fact should not be disturbed, even though the reviewing court might disagree with them, Aunless 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.

 

A[A] decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which [the Workers= Compensation Court of Appeals] may consider de novo.@  Krovchuk v. Koch Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993).

 

DECISION

 

1.  The Propriety of a Penalty

 

The employer and insurer argue that the burden of establishing entitlement to temporary partial disability benefits under Minn. Stat. ' 176.101, subd. 2, is on the employee and that, because such benefits are payable only when the employee is back at work at a job paying less than his pre-injury wage,^[2] an employee is required to produce his pay stubs each pay period to show that he continues to suffer a loss of earning capacity due to a work-related injury.  Moreover, they argue, because neither Minn. Stat. ' 176.101, subd. 2, nor Minn. R. 5220.2540, which addresses the timing and other aspects of the payment of temporary partial and other wage replacement benefits,^[3] provides any clear guidance as to how or when an employer and insurer determines whether or not an employee=s wages vary for purposes of paying temporary partial disability benefits, an employee=s burden of proof requires this production of documentation to the insurer before temporary partial disability compensation may be paid.  They assert that, even if, as determined by the compensation judge in this case, the employee=s wages are not varying, the rule remains unclear as to when payment is due, and, at a minimum, they are entitled to ten days following the date the employee sends wage verification.  In the present case, they contend, there is no basis for a finding of inexcusable delay because payments were regularly made within ten days following the date the employee sent in his wage stubs, as provided for and required under the final paragraph of Minn. R. 5220.2540, subp. 1.  They argue that, because the rule remains ambiguous as to the timing and conditions of payment of temporary partial disability benefits when post-injury wages do not vary, there is simply no basis for determining the due date for payment of benefits under Rule 5220.2540 and therefore no applicability of Rule 5220.2790, under which, together with Minn. Stat. ' 176.225, subd. 1, the judge assessed his penalty. We are not persuaded.

 

We reject the employer and insurer=s contention that, having once established Aentitlement@ to temporary partial disability benefits, an employee has a continuing obligation to re-establish that entitlement by submission of wage verification as a condition for receipt of benefits.  Minnesota Rule 5220.2540, subp. 1C, provides that, once commenced, temporary total and permanent total disability benefits Amust continue to be paid on a regular basis@ and Aat the intervals the employee would have received wages from the employer had the employee continued working,@ and the subsequent paragraph provides that A[t]he same time limits apply to payments of temporary partial disability benefits.@  We construe Awages from the employer@ in the rule to mean the employee=s pre-injury wages.  Minnesota Statutes ' 176.101, subd. 2, and Minn. Stat. ' 176.021, subd. 3, also require payment of temporary partial disability benefits to be made at intervals nearly as possible to the intervals at which the pre-injury wage was payable.  To require prior submission of a wage stub where such documentation is ultimately not necessary for calculation of the injured worker=s benefit would result in payment not only on an irregular basis but also at intervals when the post-injury--not the pre-injury--wage is payable. Furthermore, payment would almost certainly be delayed occasionally by the uncertainties of the mail and the necessity for processing the documentation by the insurer, and such a likelihood clearly thwarts the purpose of the workers= compensation act to assure the quick and efficient delivery of compensation due to injured employees.  See Minn. Stat. ' 176.001.  Once an injured worker has established entitlement to temporary partial disability benefits, he must continue to submit his wage stubs to confirm that entitlement, but he is no longer required to repeatedly re-establish that entitlement with each succeeding pay period prior to his being compensated.  The procedure to be followed if temporary partial disability benefits are no longer due is for the employer and insurer to discontinue benefits in accordance with Minn. Stat. '' 176.238 and 176.239.

 

Our decision here is supported by our decision twelve years ago in Cassem v. Crenlo, Inc., 44 W.C.D. 474 (W.C.C.A. 1990), affirmed by the supreme court, with modification unrelated to the penalties issue, at 470 N.W.2d 102, 44 W.C.D. 484 (Minn. 1991).  In Cassem, an employer and insurer objected to an award of penalties for unreasonable delay in payment of temporary partial disability benefits under Minn. Stat. ' 176.225, subd. 1(b), contending that they were required to wait for the employee=s pay stubs before payment could be made.  The compensation judge found that the insurer did not use the pay stubs to calculate the employee=s benefits but instead based its payment on an imputed earning capacity, not the actual wage.  In affirming the judge=s award of penalties, this court stated,

 

Pursuant to the rules, temporary partial disability payments, once started, are to be paid on the same regular basis as the employee=s wages.  Timing based on the receipt of pay stubs is reserved for those situations where Athe current wage varies so that wage documentation for calculation of temporary partial disability benefits is necessary.@  Minn. R. 5220.2540, subp. 1.C.  Based on the employer and insurer=s theory of payment, pay stubs were not required here and the delay was unreasonable.

 

Cassem, 44 W.C.D. at 482.^[4]

 

The employer and insurer seek to distinguish Cassem on the ground that payment of temporary partial disability benefits in the present case was based on actual earnings rather than an imputed earning capacity.  We find no merit to the distinction.  Whether the employee=s temporary partial disability benefits are based upon a known imputed wage or a known regular and established actual wage in an employee=s post-injury job, the conclusion is the same; the insurer did not need the pay stubs to calculate and pay the employee=s benefits.  We see no basis for concluding that there is any reason to compensate for reduced earnings in a manner different from temporary total or permanent total disability compensation when there is no indication that those reduced earnings have been or will be varying.  That is, once commenced, the benefits must continue to be paid on a regular basis at the intervals when the pre-injury wage was payable.

 

Implicit in Minn. R. 5220.2540 is some level of communication between the employee and the employer and insurer.  Subpart 1C of that rule provides that, with the initial payment of temporary partial disability, an insurer must notify an employee in writing of the day of the week on which subsequent payments will be made.  In the present case, at no time has the employer and insurer disputed the employee=s entitlement to temporary partial disability benefits.  At the time the employee began working at Strack=s, the employer and insurer were contacted by the employee=s attorney for approval of the job change.  The employer and insurer could easily have made inquiry regarding the employee=s projected wages at the time benefits were commenced.  If the wages subsequently varied in the course of making payments, the statute and rules would appropriately provide for credits and adjustments.  See Minn. Stat. ' 176.179; Minn. R. 5220.2580.  Accordingly, we affirm the compensation judge=s determination that the employee=s wage stubs were not required for calculation and payment of the employee=s temporary partial disability benefits, and we affirm the judge=s consequent imposition of a penalty.

 

2.  Laches

 

The employer and insurer also contend that, even were a penalty otherwise due under the statute and rules, no penalty should in this case have been assessed or awarded relative to any time period prior to December 1, 1999, the date the Department first notified the employer and insurer that there was a problem with the manner in which compensation was being paid.  At most, they argue, the penalty should run from the time the Department gave notice of its Aexpectation@ under the statute and rules.  Further, they argue, the Department was guilty of laches in failing to exercise reasonable diligence in asserting the penalty claim, resulting in an unfairly large retroactive penalty against the employer and insurer.  We are not persuaded.

 

The Department received the employee=s complaint regarding the timeliness of his temporary partial disability payments in the fall of 1999.  By October 29, 1999, the Department requested the necessary documentation from the insurer.  The insurer responded by November 22, 1999, and the Department issued its Notice of Penalty Assessment on December 2, 1999.  Although the penalty assessed covered a twenty-three month period commencing October 1, 1997, we can see no failure on the part of the Department in diligently responding to the employee=s complaint once it had received that complaint, although, pursuant to Minn. R. 5220.2710, the penalty may not be calculated on violations preceding two years prior to the assessment.^[5]  We therefore order that the penalty be recalculated to reflect a violation beginning December 2, 1997, instead of October 1, 1997.^[6]

 

3.  The Payment Interval

 

In Finding 8, while acknowledging that Athe interval should have been every week,@ the compensation judge concluded, Abut since the employee was paid monthly by [his post-injury employer], the Court finds the monthly interval for payment of temporary partial disability benefits to be reasonable.@  On cross-appeal, the Department contends that the judge erred in that finding, in that there was no written agreement between the parties, as required by the rule, for payment of benefits to be made at an interval other than the interval at which pre-injury wages had been paid.  We agree.

 

Minnesota Statutes ' 176.101, subd. 2 (1987), provides that temporary partial disability compensation Ashall be paid . . . at the intervals when the wage was payable, as nearly as may be.@  Similarly, Minn. Stat. ' 176.021, subd. 3, which addresses ACompensation, commencement of payment,@ provides that compensation Apayments shall be made as nearly as possible at the intervals when the wage was payable.@  Both of these statutory provisions clearly require payment of benefits to be made at intervals as near as possible to those at which the pre-injury wage was paid.  Similarly again, and as referenced earlier, Minn. R. 5220.2540, subp. 1C, provides that, once commenced, temporary total and permanent total disability benefits Amust continue to be paid on a regular basis at the intervals the employee would have received wages from the employer had the employee continued working.@  The rule goes on in the following sentence to provide that A[l]ess frequent payments may be arranged by written agreement of the parties@ and then in the immediately subsequent paragraph that A[t]he same time limits apply to payments of temporary partial disability benefits.@  Id.

 

It is in this case undisputed that the employee, who was being paid weekly at the time of his work injury, has never agreed in writing to a monthly payment of temporary partial disability benefits.  That these statutes and this rule specifically provide for the date of injury interval and for an exception therefrom underscores the statute=s clear intent to require payment at the frequency of the pre-injury wage, not at that of the post-injury wage, absent a written agreement of the parties.  Because the statute and rule so provide, and because there was here no written agreement of the parties, we reverse the judge=s finding that payment at monthly intervals was proper in this case, concluding that payment at weekly intervals was, under the facts of this case, required under the statute.

 

4.  The Judge=s Discretion as to the Extent of the Penalty Under Minn. Stat. ' 176.225

 

The compensation judge determined that Minn. R. 5220.2790, and its provision for a 25% penalty, conflicts with the court=s discretionary authority under Minn. Stat. ' 176.225, subd. 1, to award a penalty of Aup to 30 percent@ where the employer and insurer have unreasonably or vexatiously delayed payment.  On cross appeal, the Department contends that that same statute permits no such discretion at subdivision 5, which provides for a penalty where the delay at issue was Ainexcusable,@^[7] The Department asserts that subdivision 5 was the only provision at issue before the judge and that that provision, together with Rule 5220.2790, required the judge to assess a 25% penalty.  By assessing a penalty of 19%, the Department argues, the judge chose to make an arbitrary decision to ignore the applicable rule.  We agree.

 

The Department=s penalty assessment for Ainexcusable delay@ was levied under Minn. Stat. ' 176.225, subd. 5, and Minn. R. 5220.2790.  The judge=s review of a penalty assessed by the Department under these provisions is limited to a determination of the facts and whether the commissioner properly applied the penalty rule and the statute to the facts.  Subpart 1B of the rule defines Ainexcusable delay@ as the failure to pay temporary partial disability benefits within three business days of the date provided by statute or rule on more than three occasions in any twelve-month period.  At Finding 9, the judge concluded that the employer and insurer had failed to pay benefits in a timely manner as required by the rule and that the amount delayed was $48,352.33.^[8]  The rule and the statutory subdivision at issue clearly provide that the payments which are found to be delayed shall be increased by 25%.  No discretion is granted to a compensation judge to award a greater or lesser penalty under subdivision 5 of the statute.

 

Minn. R. 5220.2790 was promulgated to implement the provisions of Minn. Stat. ' 176.225, subd. 5, not Minn. Stat. ' 176.225, subd. 1.  The rule and the statute are not in conflict, and the rule must be followed.  Accordingly, we reverse the compensation judge=s discretionary determination of a 19% penalty and hold that the appropriate penalty in this case is that calculated at 25%.

 

SEPARATE CONCURRING OPINION

 

THOMAS L. JOHNSON, Judge

 

I concur in the result reached by the majority.