KYLE HEMMERICH, Employee/Respondent, v. CITY OF RAMSEY and LEAGUE OF MINN. CITIES INS. TR., admin’d by BERKLEY RISK ADMIN’S CO., Employer-Insurer/Appellants, and O’HARA & HUNTER CONSULTING, INC., Intervenor.

The employer appeals from the compensation judge’s award of temporary partial disability (TPD) benefits and award of penalties.  We vacate the TPD award and the award of penalties, and remand the matter to the compensation judge.  As a matter of law, we reverse the compensation judge’s award of penalties to the extent penalties were assessed against withheld attorney fees which were not yet payable and were therefore not delayed.

On August 6, 2018, Kyle Hemmerich, the employee, injured his right shoulder after a physical fight with a criminal suspect while working as a police officer and patrol sergeant for the City of Ramsey, the employer.^[1]  Due to shoulder pain, the employee treated with Kefen Gu, M.D., who diagnosed a right rotator cuff strain, issued heavy lifting and carrying restrictions, and referred the employee to physical therapy.  The employee returned to work with no restrictions on September 4, 2018.  However, over the next three years, he noticed increased pain in the right shoulder and in November 2021, he returned to Dr. Gu.  An MRI scan showed a superior labrum anterior to posterior (SLAP) tear.  Orthopedic surgeon, Jason Barry, M.D., performed a right shoulder arthroscopic SLAP repair procedure on March 23, 2022, assigned work restrictions, and took the employee completely off work from the date of the surgery to May 9, 2022, and again from June 20 to August 20, 2022.  The employer paid wage loss benefits.

While off work due to restrictions, the employee searched for and found a different job working as a full-time instructor for Anoka-Hennepin School District (Anoka-Hennepin) beginning August 29, 2022.  Due to the injury, permanent work restrictions were issued on September 2, 2022.  The employer was unable to accommodate the employee’s restrictions and terminated his employment on September 24, 2022.  The employee continued working as an instructor for Anoka-Hennepin at a wage loss.  The employer paid TPD benefits based upon the difference between the wage he earned with the employer, and the wage he earned in his partially disabled condition as an instructor at Anoka-Hennepin.  In calculating those benefits, the employer used an average weekly wage (AWW) of $2,040.47, and withheld 20 percent for attorney fees.  When Anoka-Hennepin reduced the employee’s working hours in the summer of 2023, the employee took a second part-time job as an instructor at Hennepin Technical College (State of Minnesota).

The employee sought a medical expert opinion regarding the cause of his right shoulder condition and work restrictions from Robert Wengler, M.D.  Dr. Wengler issued a narrative report in July 2023.  (Ex. K.)  He opined that the employee’s work activities were a direct cause of his current condition.  He further explained that the employee’s injury of August 6, 2018, was aggravated by repetitive bouts of acute and subacute trauma which may be characterized as a Gillette injury.

The employer also sought a medical expert opinion and retained orthopedic surgeon, Ross Paskoff, M.D.  In his narrative report of February 2, 2024, Dr. Paskoff also opined that the 2018 work injury was a substantial contributing factor to the right shoulder condition.  He found no Gillette injury and determined that the employee had not yet reached maximum medical improvement (MMI).

The employee filed a claim petition on August 30, 2023, alleging two work-related injuries: an acute right shoulder injury on August 6, 2018, and a Gillette injury culminating on March 23, 2022.  He claimed a wage loss underpayment based upon the employer’s calculation of the AWW.  At the hearing, the employer stipulated to an AWW of $2,137.98 for the 2018 injury, and $2,178.46 for the alleged 2023 Gillette injury, after having received additional wage records from the employee as part of his hearing exhibits days prior to the hearing.  Using the stipulated wages, the parties submitted post-hearing revised calculations for benefits due and owing under both dates of injury.  (Amended Exs. U and 13.)

In his findings and order, the compensation judge found that the employee did not sustain a Gillette-type injury in 2023, but that the employee’s 2018 injury was a substantial contributing factor for the need for surgery and wage loss.  He reviewed both parties’ post-hearing benefit calculations for the 2018 injury and determined that the employer’s calculations were “less reliable” than those submitted by the employee.  (Mem. at 15.)  He ordered the employer to pay the benefits due and owing according to the employee’s calculations, to which he made adjustments outlined in the decision.  The judge also awarded penalties assessed against the employer’s delayed payment and underpayment of wage loss benefits, both of which included withheld attorney fees.  The employer appeals.

On appeal, the Workers’ Compensation Court of Appeals must determine whether “the 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(3).  Substantial evidence supports the findings if, in the context of the entire record, “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).  When the findings are supported by substantial evidence, the Workers’ Compensation Court of Appeals must defer to the compensation judge.  Lagasse v. Horton, 982 N.W.2d 189, 202 (Minn. 2022).  Findings of fact should not be disturbed, even though the reviewing court might disagree with them, “unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of evidence or not reasonably supported by the evidence as a whole.”  Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975); see also Smith v. Carver Cnty., 931 N.W.2d 390, 79 W.C.D. 495 (Minn. 2019).

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 Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993), summarily aff’d (Minn. June 3, 1993); see also Busch v. Advanced Maint., 659 N.W.2d 772, 778-79 (Minn. 2003).

On appeal, the employer argues that the compensation judge’s award of TPD benefits is clearly erroneous as it is based upon calculations containing computational errors which overstated the benefits owed and overstated the calculation of penalties under Minn. Stat. § 176.225, subds. 1(2) and 5.  The employer also argues that the judge erred as a matter of law in assessing penalties on withheld attorney fees that were not due and owing.

The Workers’ Compensation Act provides that an injured employee is entitled to TPD benefits when the employee is working but is earning less than the date of injury wage, and the employee can prove that the reduced wage is due to the injury.  Minn. Stat. § 176.101, subd. 2; Borchert v. Am. Spirits Graphics, 582 N.W.2d 214, 58 W.C.D. 316 (Minn. 1998).  These benefits are calculated by taking the difference between the weekly wage of the employee at the time of injury and the wage the employee is able to earn in the employee’s partially disabled condition, multiplying that amount by two-thirds, then increasing the amount with cost-of-living adjustments.  Minn. Stat. §§ 176.101, subd. 2(a), and 176.645.  We acknowledge that calculating TPD benefits can be complicated in cases involving multiple employers and paystubs submitted during varying time intervals.^[2]

In this case, the parties stipulated to an AWW at the hearing, and each submitted to the compensation judge TPD calculations based upon the employee’s earnings while working for Anoka-Hennepin and the State of Minnesota.  These submissions were made post-hearing and neither party had the opportunity to cross-examine the other regarding calculations or to offer additional related evidence.  The compensation judge awarded TPD benefits according to the calculations submitted by the employee, with a few adjustments.  On appeal, the employer argues that the award is clearly erroneous and unsupported by substantial evidence, citing numerous pay periods in which the compensation judge awarded an incorrect and inflated TPD benefit amount.^[3]

For the period of November 19 through December 16, 2023, the employer asserts that the award of benefits is overstated because all of the employee’s earnings during that time period were not taken into account.  We agree and conclude that the error overstates benefits payable by over $1,275.00.^[4]

For the period of December 31, 2023, to January 27, 2024, the employer asserts that the award of benefits is overstated because all of the employee’s earnings during that time period were not taken into account.  We agree and conclude that the error overstates benefits payable by nearly $1,600.00.^[5]

For the period of January 28 through February 10, 2024, the employer notes that the compensation judge erred in understating benefits due and owing.  However, the record contains no wage stubs relative to this time period to establish that the employee worked and earned wages.  As such, we cannot conclude whether the award of benefits for this time period is supported by substantial evidence.

For the six-week period of February 11 through March 23, 2024, the employer argues that the award is based upon a calculation using a multiple of eight, not six, weeks for the average weekly wage, inflating the benefit by nearly $3,000.00.  In reviewing the record, we note that there are no wage stubs from February 11 to February 24, 2024, and without wage stubs, we cannot confirm that the employee worked and earned wages during those weeks.  The records from February 25 to March 9, 2024, and from March 10 to March 23, 2024, reflect that the employee earned $3,774.44 and $2,588.48, respectively.  (Exs. P and Q.)  These wages would result in a TPD benefit of $364.92 and $1,227.88 (total of $1,592.80) for those weeks, an amount significantly less than the $6,264.01, claimed by the employee and awarded by the compensation judge.

Finally, for the period of July 28 to August 10, 2024, the employer asserts that the award of benefits is overstated by over $500.00, because all of the employee’s earnings during that time period were not taken into account.  Without paystubs from Anoka-Hennepin, we cannot confirm the employer’s or employee’s assertions regarding this time period.  (Ex. Q.)

The compensation judge also assessed penalties against the employer for both unpaid and underpaid TPD benefits, concluding that the delay in paying those benefits was inexcusable and unreasonable under Minn. Stat. § 176.225, subds. 1(2) and 5.  Those sections mandate penalties up to 30 percent if the employer unreasonably or vexatiously delayed payment, and a 25 percent additional penalty if the employer is guilty of inexcusable delay in making payments.

On appeal, the employer argues that the assessed penalty amount is clearly erroneous as that amount was computed based upon incorrect and overinflated wage loss calculations.  We agree.  The statute provides that penalties are calculated based upon a percentage of the underlying benefit amount.  If the underlying benefit amount is inaccurate, the resulting penalties will also be inaccurate.  As outlined above, the compensation judge’s award of TPD benefits was clearly erroneous, and therefore, the penalty assessed based upon that benefit amount is also clearly erroneous.

The employer also argues that the compensation judge committed legal error by improperly computing penalties on the gross wage loss benefit payable, which included withheld fees, rather than on the net wage loss benefit payable, which would not include withheld fees, when those fees were not due and owing.  Whether an employee is entitled to penalties on withheld attorney fees which are not due and owing, and are not delayed, presents a legal question which we review de novo.  See Braatz v. Parsons Elec. Co., 850 N.W.2d 706, 710, 74 W.C.D. 399, 405 (Minn. 2014).

When an employee is represented by counsel, attorney fees are withheld from benefits paid to the employee.  Minn. Stat. § 176.081, subd. 1(c).  To release the withheld fees, the employee’s attorney must file a statement of attorney fees.  Minn. Stat. § 176.081, subd. 1(d).  The employer may object to the claimed attorney fees and proceed to a hearing.  Minn. R. 1415.3200, subps. 3(A), 7, and 8.  Attorney fees are not released to the employee’s attorney until a compensation judge issues an award on attorney fees, ordering the fees to be released.  See Jurgensen v. Dave Perkins Contracting, Inc., 22 N.W.3d 568 (Minn. 2025).

In this case, the compensation judge found that the employer withheld attorney fees from paid TPD benefits. (Findings 47 and 48; see also Ex  S.)  There has been no claim made for the release of the attorney fees withheld, no filed statement of attorney fees, and no award ordering release of the withheld fees.  Payment of the withheld attorney fees, therefore, cannot be said to have been delayed.  We conclude that it was reversible error for the compensation judge to assess penalties against the withheld attorney fees.

We acknowledge that computing wage loss benefits under the Workers’ Compensation Act is not always accurate to the penny.  Even the compensation judge noted a one cent discrepancy in the employee’s calculations of some benefits.  (Finding 47.)  Here, neither party, nor the compensation judge, correctly calculated the TPD benefits due and owing.  The record contains no paystubs for several weeks for which benefits were awarded.  Because substantial evidence does not support the compensation judge’s findings on TPD and resulting penalties, we conclude that the compensation judge’s award of TPD benefits and penalties assessed on them is clearly erroneous and unsupported by substantial evidence in the record.

We vacate Findings 47 (a, c, and d), 48, 49 (a and b), 50, and 51, and Orders 1-5.  We remand this matter to the compensation judge for a full hearing on the merits of the TPD schedules submitted by both parties, allowing for testimony and cross-examination on the amounts claimed.  The compensation judge may accept additional evidence at the hearing to determine the appropriate amount of TPD benefits due and owing, and any penalties that may be assessed against those benefits.  Any award of penalties shall not be calculated to include TPD benefit amounts withheld for attorney fees.