RODGERS v. MASSACHUSETTS DEPT. OF PUBLIC WKS., No. 00780789 (Sep. 21, 1995)

Board No. 00780789Commonwealth of Massachusetts Department of Industrial Accidents
Filed: September 21, 1995

REVIEWING BOARD DECISION

(Judges Kirby, Smith and Maze-Rothstein)

APPEARANCES:

Terrence A. Low, Esquire, for the employee.

Carmen Picknally, Esquire, for the insurer.

KIRBY, J.

The employee appeals from the decision of the administrative judge denying the employee’s claim for § 34 disability benefits and § 8 penalties for a unilateral discontinuance of benefits. That decision was based on the judge’s determination of the employee’s earning capacity, which he found to exceed any level of compensation the employee might be entitled to receive. He in turn based that determination on income received by the employee from his self employment as sole proprietor of a rubbish removal enterprise. The employee contends, first, that the judge erred in considering self-employment earnings when determining the employee’s earning capacity; and second, that it was erroneous to base the employee’s earning capacity on the gross receipts from his self-employment, rather than on the net earnings. We disagree with the first contention, but agree with the latter. We vacate the judge’s decision, and recommit the case for further findings on the issue of the employee’s earning capacity.

Rodgers, an employee since 1971, was injured on January 13, 1989 in the course of his employment while shovelling sand for the Commonwealth of Massachusetts Department of Public Works (“DPW”) (Dec. 1, 4). The self-insurer accepted the case and paid § 34 benefits at the rate of $289.20, based on average weekly wages of $433.80 (Dec 1).

The employee had run his business, styled Willy Son, out of his home for ten to fifteen years before his industrial accident (Dec. 4), and continued to do so throughout the period in which he received temporary total disability benefits. The evidence was that he in fact provided trash collection services to a DPW project in progress near his home. (Dec 6).

On September 15 the DPW then informed Rodgers that his workers’ compensation was to be terminated September 22, 1989 and in a week this was done. The consequences of this action are before us.

A conference on the employee’s claim for § 34 benefits from September 23, 1989 and continuing, for medical benefits and for § 8 penalty for illegal discontinuance was held on May 21, 1990. The administrative judge denied the claim, Rodgers appealed, and a hearing was held on October 9, 1990.

In his decision the judge took note of self-employment schedules from Rodgers’ federal income tax returns for 1986 through 1989 (Insurer’s Exhibit 1) in which he reported his income from Willy Son (Dec. 5, 2). The judge determined the employee’s earning capacity to be $570.00 weekly, based on his subsidiary finding that the gross receipts of Willy Son in 1989 amounted to $29,430.00 (Dec. 8).[1] Because he found the employee’s earning capacity to be in excess of his pre-injury average weekly wage, the judge denied the employee’s claims for § 35 temporary partial compensation and for a penalty against the self-insurer under § 8(5) for illegal discontinuance.

The employee contends that the earnings from self-employment should not be used in determining earning capacity where the self-employment began before the compensable injury and continued thereafter. The contention is without merit. Self-employment earnings are material to an inquiry concerning earning capacity, whether or not begun before the industrial injury. Determination of an employee’s earning capacity requires a judge to consider “the whole monetary result of a reasonable use of all his powers, mental and physical, whether working for others or for himself, and whether his earnings are called `wages’ in common speech or not.”Federico’s Case, 283 Mass. 430, 432 (1933). See Hawkins v. GeneralMotors, 1 Mass. Workers’ Comp. Rep. 251, 253 (1987). See also Dabellev. News Distributors, 9 Mass. Workers Comp. Rep. 114 (April 20, 1995) (approving a judge’s consideration of self-employment earnings in determining earning capacity where the employee had been self-employed while partially incapacitated by an industrial accident which prevented him from working at his job with the insured employer).[2]

The employee’s second contention, that the judge erred in assigning an earning capacity based on the gross not the net, receipts from his sole proprietorship, has merit. There was evidence here of the employee’s post-injury earnings from Willy Son, and the judge was right to consider it. It was the judge’s responsibility to use his knowledge and judgment based on an inclusive variety of vocational factors in determining Rodgers’ earning capacity. See Frennier’s Case, 318 Mass. 635, 639 (1945);LaChance v. Globe Newspapers, 1 Mass. Workers’ Comp. Rep. 282, 285 (1988).

In carrying out this responsibility, however, the judge raised doubt, unresolvable on the record, as to whether he correctly interpreted the evidence of Rodgers’ earnings from his business, Willy Son.

The evidence was that Willy Son had gross receipts of $29,640.00 in 1989 (Dec 5) and the judge, dividing that sum by 52, found the employee’s weekly earning capacity to be $570.00. He may or may not have allowed for any deductions, although considerable expenses were listed by the employee on his tax return. We cannot determine from the record whether or not he did. See Praetz v. Factory Mutual EngineeringResearch, 7 Mass. Workers’ Comp. Reports 45, 47 (1993). In Dabelle v.News Distributors, supra, we ruled that gross receipts from self-employment alone are not a sufficient basis for determining earning capacity, and we do so here.

What the employee is capable of earning in self-employment is ordinarily represented by the net earnings of his business unless there are other circumstances from which the judge may infer a different conclusion, such as that the employee’s skills necessary to run his own business would somehow command more if applied in the open labor market. Mulcahey’s Case, 26 Mass. App. Ct. 1 (1988). On the other hand, if the judge finds such skills are in some way compromised by impairments or disability related to the industrial injury, he should allow for it, Scheffler’s Case, 419 Mass. 251 (1994). G.L.c. 152, § 35D.

An administrative judge’s decision must reach conclusions that are adequately supported by subsidiary findings that in turn are not lacking in evidentiary support or tainted by error of law. Ballard’s Case, 13 Mass. App. Ct. 1068, 1069 (1982). Where, as here, the findings lack that adequate support, it is appropriate to recommit for findings to be made which have support.

Accordingly, we vacate the judge’s finding of the employee’s earning capacity and remand the case to the administrative judge to make the needed subsidiary findings and determine the employee’s earning capacity in accord with this decision.

The judge on remand may take additional evidence as to the details of the employee’s income tax return to determine his true net earnings from his business. In addition to determining the employee’s physical limitations the judge should consider his education, training, age, work experience and mental ability, then making a judgment of the amount that he is capable of earning that is based on the totality of medical and vocational evidence before him. See Scheffler’s Case, supra at 260-261;Frennier’s Case, 318 Mass. 635, 639 (1945).

In the event that the administrative judge on remand awards the employee incapacity benefits, the issue of the insurer’s unilateral termination of benefits on September 15, 1989 will again arise. Section 8(2)(a),[3] extant at the time of the hearing, qualified the insurer’s right to terminate unilaterally § 34 temporary total benefits when based on the employee’s “return to actual employment” with the provision that, “if due, compensation shall be paid under section thirty-five.”[4] If the judge finds the employee entitled to such § 35 benefits the question of a penalty under § 8(5) will then arise.[5]

On remand the judge shall apply these sections and make appropriate rulings thereon, with regard to such circumstances as have arisen from time to time up to the effective date of any of the subsequent amendments to § 8 of the Act. Some further discussion of whether the a penalty will be appropriate may be useful. Here the judge made a finding that “(a)lthough the employee had returned to actual employment at his rubbish removal business the insurer was not at liberty to terminate compensation because it had not actually verified an average weekly wage equal to or in excess of his pre-injury average weekly wage” (Dec 8). This was a requirement under 452 CMR 1.06 (5)(c)[6] , then in force. The effect of § 8(2)(a) and the regulation was that the insurer took a risk in terminating compensation on the grounds that the employee was then receiving a “wage equal to or in excess of that received prior to the injury”. The risk was that the employee’s earnings or earning capacity would later be found to be at a level that entitled him to § 35 partial compensation. If on remand the judge finds the employee was entitled to receive § 35 partial compensation, during any period after the discontinuance of compensation it will trigger the § 8(5) penalty for such period. If the judge finds that the employee not entitled to partial compensation, during any period, then under § 8(5) there can be no penalty for such period.

We remand this case to the same administrative judge for further proceedings on the existing record. He may receive additional evidence relevant to the issues to be resolved, in accordance with this decision.

So ordered.

Judges Kirby and Maze-Rothstein concur.

_____________________________ Edward P. Kirby Administrative Law Judge
_____________________________ Suzanne E.K. Smith Administrative Law Judge
_____________________________ Susan Maze-Rothstein Administrative Law Judge

Filed: September 21, 1995