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Digital EditionIowa Supreme Court Limits Workers’ Comp Benefits for Employees Maintaining Wages
In a decision that could reshape Iowa workers’ compensation practices, the Iowa Supreme Court has issued a significant ruling clarifying how permanent partial disability benefits are calculated for injured employees who return to work at the same or higher wages.
In a unanimous decision in Den Hartog Industries vs. Dungan, the court reversed lower court rulings, holding that compensation in such cases must be based on the employee’s functional impairment, not on a speculative loss of future earning capacity. The decision could potentially reduce benefits for employees who maintain their earning levels after workplace injuries, despite facing long-term career limitations.
The case originated from a 2019 workplace injury. Tyler Dungan, an employee of Den Hartog Industries, suffered a back injury but continued to work. Despite a medical weight restriction, his pay was increased. Dungan later voluntarily resigned for reasons unrelated to his injury and took two subsequent jobs, each paying more than his pre-injury wage.
When he filed for workers’ compensation benefits, the dispute centered on the proper method of calculation. Iowa law provides two primary methods for unscheduled injuries like Dungan’s: the “industrial method,” which assesses the loss of long-term earning capacity, and the “functional impairment” method, which is based on a physician’s rating of physical impairment to the body.
Dungan argued that his benefits should be calculated using the industrial method. This approach considers factors beyond the physical injury, such as age, education, and the potential inability to perform physically demanding work in the future. A workers’ compensation deputy agreed, awarding him benefits based on a 15% loss of earning capacity.
Den Hartog and its carrier, West Bend Mutual Insurance Company, contended that a specific provision in the Iowa Code mandated the use of the functional impairment method. They argued that because Dungan had returned to work and was earning a higher wage, the law explicitly limited his compensation to his physician-assessed impairment rating, which was 8%.
The Supreme Court’s analysis focused squarely on the plain language of the statute. The court highlighted a key sentence added in 2017: “If an employee… returns to work… for which the employee receives… the same or greater salary… the employee shall be compensated based only upon the employee’s functional impairment resulting from the injury, and not in relation to the employee’s earning capacity.”
The justices found this language to be clear and unambiguous, rejecting the lower courts’ findings that the statute was open to interpretation. The court dismissed policy-based arguments from the claimant, stating that its duty was to apply the law as written by the legislature, not to weigh competing public policy goals.
Ultimately, the Iowa Supreme Court vacated the decision of the court of appeals and reversed the district court’s judgment. The case was remanded to the workers’ compensation commissioner with instructions to calculate Dungan’s benefits based solely on his functional impairment rating.
View the full decision here. &
