Amended August 12, 2015 Warren Properties and Ace American Insurance Company v. Janice Stewart

IN THE SUPREME COURT OF IOWA
No. 13–0474

Filed May 29, 2015

Amended August 12, 2015

WARREN PROPERTIES and ACE AMERICAN INSURANCE COMPANY,

Appellees,

vs.

JANICE STEWART,

Appellant.

Appeal from the Iowa District Court for Polk County,

Christopher L. McDonald, Judge.

A workers’ compensation claimant appeals the district court ruling

on judicial review of a decision of the Iowa Workers’ Compensation

Commissioner. AFFIRMED IN PART, REVERSED IN PART, AND

REMANDED WITH DIRECTIONS.

Martin Ozga of Neifert, Byrne & Ozga, P.C., West Des Moines, for

appellant.

Mark A. King and Jason W. Miller of Patterson Law Firm, L.L.P.,

Des Moines, for appellees.

Matthew D. Dake of Wertz & Dake, P.C., Cedar Rapids, for amicus

curiae Workers’ Compensation Core Group.
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CADY, Chief Justice.

In this workers’ compensation appeal, we are asked to revisit our

rule governing apportionment resulting from successive work injuries at

multiple places of employment in light of the 2004 amendments to the

workers’ compensation permanent disabilities statute. The deputy

workers’ compensation commissioner awarded benefits to the worker

based on a finding of two successive injuries to the back and a shoulder

injury and applied the full-responsibility rule with no apportionment for

the preexisting disability. Our review follows reviews by the workers’

compensation commissioner, who affirmed, and the district court, which

affirmed in part, reversed in part, and remanded. We conclude an

employer who is liable to compensate an employee for a successive

unscheduled work injury is not liable to pay for the preexisting disability

that arose from employment with a different employer or from causes

unrelated to employment when the employee’s earning capacity was not

reevaluated in the competitive job market or otherwise reevaluated prior

to the successive injury. We affirm in part and reverse in part the

decision of the district court. We remand the case to the district court to

remand the case back to the workers’ compensation commissioner for

further proceedings consistent with this opinion.

I. Background Facts and Proceedings.

Janice Stewart was working two jobs in 2006. She had begun

working as an assistant property manager for a business in Des Moines

called Warren Properties in 2005. Her duties included typing, answering

the phone, showing apartments to prospective tenants, inspecting

property, and preparing rental agreements. Stewart received a salary

and a rent allowance for this work. In June 2006, Stewart began a
 3

second full-time job with Wal-Mart. She worked as a customer service

representative and assistant manager.

In November 2006, Stewart injured her lower back at Wal-Mart

while moving shopping carts. She quit the job a week later, but

continued working for Warren Properties. Stewart began seeking medical

treatment for her back injury. She saw a variety of doctors over a period

of several years for treatment and evaluation.

In May 2008, Dr. Cassim Igram determined Stewart had reached

maximum medical improvement for her back injury and concluded she

sustained a ten percent permanent impairment of the body as a whole.

Two months later, Dr. William Boulden expressed the same opinion. In

October 2008, Dr. Daniel McGuire expressed an opinion that Stewart

suffered a thirteen percent permanent physical impairment as a

consequence of her back injury.

On May 20, 2009, Stewart and Wal-Mart entered into an

agreement for settlement on her claim for workers’ compensation

benefits. The settlement was based on a forty percent industrial

disability determination. It resulted in the payment of $60,000 in

compensation, plus $11,000 in medical bills.

Stewart continued her employment at Warren Properties

throughout the duration of the medical treatment for her 2006 back

injury. On the evening of February 2, 2009, she fell on ice as she left

work. This was more than three months prior to her agreement for

settlement with Wal-Mart. She experienced back pain with radiating

pain down one leg as well as pain in her shoulders and neck. As with

the Wal-Mart injury, Stewart sought medical treatment following her fall

and saw a variety of doctors for treatment and evaluation.
 4

An evaluation in May 2009 found Stewart had obtained maximum

medical improvement. Physicians expressed differing views on the

question whether Stewart’s fall on the ice caused her any permanent

physical impairment. In September 2009, Dr. Martin Rosenfeld opined

Stewart suffered a one percent physical impairment to her shoulder as a

consequence of the fall. In 2010, Dr. Thomas Carlstrom opined that

Stewart suffered no new physical impairment from her fall. 1 In July

2010, Dr. Jacqueline Stoken opined the fall had exacerbated Stewart’s

preexisting back condition and caused a right shoulder impairment.

Dr. Stoken viewed the low-back impairment as falling within the ten to

thirteen percent impairment range and assigned Stewart a thirteen

percent impairment of the body as a whole for this injury and ten percent

impairment to the body as a whole for the shoulder injury. Dr. Lazaro

Rabang opined Stewart’s 2009 fall merely temporarily aggravated the

back injury sustained in the 2006 Wal-Mart incident.

Stewart filed a complaint against Warren Properties with the

workers’ compensation commissioner in November 2009 to recover

compensation for her February 2, 2009 injury. Following a hearing in

October 2010, a deputy commissioner found Stewart sustained a

permanent partial unscheduled disability from the injury. The deputy

commissioner credited the medical opinion of Dr. Stoken and found

Stewart sustained a thirteen percent physical impairment to her body as

a whole due to the back injury. The deputy commissioner found no

specific percentage of permanent physical impairment to Stewart’s

1In his original evaluation in April 2010, Dr. Carlstrom did not address what
impairment was attributable to the 2006 or the 2009 injuries. In October 2010,
Dr. Carlstrom supplemented his evaluation and opined that no new impairment
resulted from the 2009 injury.
 5

shoulder as a result of the 2009 injury. The deputy commissioner

concluded Stewart’s disability to her back and shoulder resulted in a fifty

percent industrial disability. Stewart was awarded benefits without any

apportionment for the preexisting disability that resulted from the 2006

injury. On appeal, the commissioner affirmed the decision of the deputy

commissioner.

Warren Properties filed a petition for judicial review with the

district court. The district court held the commissioner erred in failing to

apportion Stewart’s preexisting disability that arose from the 2006 injury

when calculating the benefits owed by Warren Properties for the 2009

injury. In doing so, the court held Stewart’s compensation for the 2009

injury is limited to the amount of the industrial disability caused by that

injury and rejected Warren Properties’ contention that apportionment

should be effected by crediting the amount previously paid by Wal-Mart

to Stewart for the 2006 back injury. The court determined the

commissioner was required to award compensation based on the

percentage of the worker’s disability attributable to the 2009 injury

without considering the prior disabilities the employee possessed for

which the employer was not responsible. Additionally, the court held

that the finding by the commissioner of a thirteen percent impairment

resulting from the 2009 injury was too uncertain in light of the evidence

that Stewart suffered a thirteen percent impairment to her back from her

2006 injury. The court concluded the commissioner’s impairment

finding could not be sustained without an additional finding that the

prior impairment to the back had healed before the 2009 injury. The

district court remanded the case to the commissioner specifically to

determine if the 2009 injury resulted in any new back disability.
 6

Stewart and Warren Properties both appealed the decision of the

district court. On appeal, Stewart claims the district court erred in

concluding that the disability arising from the 2006 and 2009 injuries

should be apportioned. She also claims the evidence was sufficient to

support the commissioner’s finding that the 2009 fall permanently

aggravated her preexisting back injury and created a new permanent

injury to her shoulder, which combined to sustain a finding of fifty

percent industrial disability.

Warren Properties claims on appeal that the district court erred by

remanding the case for a new impairment finding because the evidence

presented at the hearing does not support any finding of a new disability

arising from the 2009 injury. Warren Properties also claims that, if a

new impairment rating is warranted, the preexisting disability arising

from the 2006 injury must be apportioned through a credit to the

employer equal to the forty percent industrial disability paid by Wal-Mart

as a consequence of the agreement for settlement.

We conclude the 2004 amendments to the workers’ compensation

permanent disabilities statute require an evaluation by the commissioner

of Stewart’s earning capacity both before and after a successive injury

sustained in the course and scope of employment with a concurrent

employer and that Warren Properties is therefore liable to compensate

Stewart for only the reduction in earning capacity caused by the 2009

injury.

II. Standard of Review.

Judicial review of workers’ compensation cases is governed by Iowa

Code chapter 17A. Neal v. Annett Holdings, Inc., 814 N.W.2d 512, 518

(Iowa 2012). On our review, we determine whether we arrive at the same

conclusion as the district court. Sherman v. Pella Corp., 576 N.W.2d
 7

312, 316 (Iowa 1998). We have determined the legislature has not vested

the commissioner with the authority to interpret Iowa Code section

85.34(2)(u) and (7)(a). Roberts Dairy v. Billick, 861 N.W.2d 814, 817

(Iowa 2015). Therefore, we review the commissioner’s interpretation “to

correct errors of law on the part of the agency.” Teleconnect Co. v. Iowa

State Commerce Comm’n, 404 N.W.2d 158, 161 (Iowa 1987).

We are bound by the agency’s findings of fact unless they are not

supported by substantial evidence. Mycogen Seeds v. Sands, 686

N.W.2d 457, 465 (Iowa 2004). However, we “are not bound by the

agency’s interpretation [of law] and may substitute our own to correct a

misapplication of law.” SZ Enters., LLC v. Iowa Utils. Bd., 850 N.W.2d

441, 449 (Iowa 2014); accord Iowa Code § 17A.19(10)(c) (2009).

III. History and Background of Successive Disabilities.

Over 100 years have come and gone since our legislature

established an administrative agency system to compensate injured

workers in this state. See 1913 Iowa Acts ch. 147 (codified at Iowa Code

§§ 2477-m to 2477-m50 (Supp. 1913)). This system was established for

workers in Iowa to avoid litigating claims over work injuries and to

provide them with an efficient and speedy resolution and award of

compensation. Shepard v. Carnation Milk Co., 220 Iowa 466, 469, 262

N.W. 110, 112 (1935). Over time, the system has become increasingly

complex and litigious. See generally Joan T.A. Gabel & Nancy R.

Mansfield, Practicing in the Evolving Landscape of Workers’ Compensation

Law, 14 Lab. Law. 73 (1998) (discussing the effects that changing

common law and new federal laws on disability and family leave have

had on workers’ compensation practice). At the same time, the courts

have continued to play an important role through the process of judicial

review. See Iowa Code § 17A.19 (2009) (governing judicial review of
 8

administrative actions). This role has led to a century of judicial

application of the statutes governing the workers’ compensation system,

and these statutes have been enforced and supplemented by many court

rules and doctrines developed to help carry out the intent and purpose of

the statutory framework. See, e.g., Larson Mfg. Co. v. Thorson, 763

N.W.2d 842, 851–53 (Iowa 2009) (tracing the development of the

cumulative injury rule in Iowa law); Guyton v. Irving Jensen Co., 373

N.W.2d 101, 105 (Iowa 1985) (adopting the “odd-lot doctrine” for disabled

employees with no stable job market available).

One fertile area of statutory review by courts over the years has

involved the apportionment of compensation for successive injuries. The

original statute provided for the apportionment of successive injuries,

Iowa Code § 2477-m15(h) (Supp. 1913), and our early cases began the

process of applying the statutory doctrine to particular cases. See, e.g.,

Pappas v. N. Iowa Brick & Tile Co., 201 Iowa 607, 612–13, 206 N.W. 146,

147–48 (1925) (apportioning for initial arm loss when loss of second arm

resulted in total disability, but noting a correction by the legislature to

cover successive injuries resulting in total disability); Jennings v.

Mason City Sewer Pipe Co., 187 Iowa 967, 970–71, 174 N.W. 785, 786

(1919) (apportioning first eye-loss award from the total disability award of

an employee who lost his second eye during the course of employment).

Following a decade of early judicial decisions, the legislature

amended the successive-injury statute to provide more specifically for the

apportionment of compensation for injured employees who had been

previously disabled and were drawing compensation at the time of a

subsequent injury. Compare Iowa Code § 822(h) (1919), with Iowa Code

§ 1397(8) (1924) (clarifying the apportionment from the proportion of the

incapacity and disability caused by the injury to simply the proportion of
 9

the disability caused by the injury). See also Iowa Code § 2477-m9(j)(17)

(Supp. 1913) (providing that the loss of any two of certain scheduled

members would constitute permanent total disability); Iowa Code

§ 816(j)(19) (1919) (amending the statute to require the double loss occur

in a single accident to constitute permanent total disability). Aside from

statute renumbering and minor grammatical changes, the statute then

remained unchanged from 1924 until 2004. Compare Iowa Code

§ 1397(8) (1924), with Iowa Code § 85.36(9)(c) (2003).

Over the intervening eighty years, however, we developed a

comprehensive body of law to apply this statutory principle of

apportionment to a variety of different circumstances. See Gregory v.

Second Injury Fund of Iowa, 777 N.W.2d 395, 402–03 (Iowa 2010)

(Cady, J., dissenting) (discussing the development of the Second Injury

Fund for apportionment of scheduled permanent injuries); Varied

Enters., Inc. v. Sumner, 353 N.W.2d 407, 411 (Iowa 1984) (limiting

apportionment to cases in which a prior injury or illness “produces some

ascertainable portion of the ultimate industrial disability”), abrogated on

other grounds by P.D.S.I. v. Peterson, 685 N.W.2d 627, 635 (Iowa 2004);

Ziegler v. U.S. Gypsum Co., 252 Iowa 613, 620, 106 N.W.2d 591, 595

(1960) (holding an aggravated injury is compensable to the extent of the

injury instead of apportionable). In particular, we adopted the full-

responsibility rule and the fresh-start rule. See Ziegler, 252 Iowa at 620,

106 N.W.2d at 595 (describing a fresh-start rule that when an employee

is hired the employer takes him subject to any active or dormant health

impairments); Rose v. John Deere Ottumwa Works, 247 Iowa 900, 908,

76 N.W.2d 756, 760–61 (1956) (describing a full-responsibility rule that if

a preexisting condition was “aggravated, accelerated, worsened or ‘lighted

up’ ” by the injury the employee was entitled to recover). Together, these
 10

two judicial doctrines impacted the apportionment of compensation

statute by substantially limiting apportionment in determining the

compensation for successive disabilities.

IV. Statutory Changes to Successive Disabilities and
Calculation of Compensation.

In 2004, the General Assembly amended the 1924 statutory

apportionment rule by repealing the old successive disabilities statute

and replacing it with a new enactment. See 2004 Iowa Acts 1st

Extraordinary Sess. ch. 1001, §§ 9–21 (codified in part in scattered

sections of Iowa Code chs. 85–86 (2005)). In the Act, the legislature

specifically declared its intent in enacting the new statutes, which

included the intent to modify our apportionment, fresh-start, and full-

responsibility rules. Id. § 20. We had not had the opportunity to

interpret directly the statutory changes until our recent decision in

Roberts Dairy.

In Roberts Dairy, we examined the scope and meaning of the 2004

statutory approach to apportionment for successive disabilities. 861

N.W.2d at 822. We determined the new statutes took two broad steps.

The first step was to provide a new rule to compute compensation for a

permanent partial disability in cases involving unscheduled injuries. Id.

at 822–23; see Iowa Code § 85.34(2)(u) (2009). Compensation under this

rule is computed by considering “the reduction in the employee’s earning

capacity caused by the disability [as it] relat[es] to the earning capacity

that the employee possessed when the injury occurred.” Iowa Code

§ 85.34(2)(u).

The second step provided new rules to govern successive

disabilities. Roberts Dairy, 861 N.W.2d at 823; see Iowa Code § 85.34(7).

This new statute first articulated two principles applicable to successive
 11

disability cases. The first rule made “[a]n employer . . . liable for

compensating all of an employee’s disability that arises out of and in the

course of the employee’s employment with the employer.” Iowa Code

§ 85.34(7)(a). The second rule declared that an employer was “not liable

for compensating an employee’s preexisting disability that arose out of

and in the course of employment with a different employer or from

causes unrelated to employment.” Id. Thus, the first statutory principle

dealt with successive disabilities with the same employer, and the second

statutory principle dealt with successive disabilities with a different

employer. See id. The remaining portion of the second step provided a

special method of compensating successive disabilities incurred with the

same employer and further addressed how a merger, purchase, or

change in employment affected the same-employer rule. See id.

§ 85.34(7)(b)–(c). These two new statutory rules for successive disabilities

departed from our prior caselaw. For example, our successive disability

caselaw evolved without distinguishing between successive disabilities

arising from employment with the same or different employers. See

Venegas v. IBP, Inc., 638 N.W.2d 699, 701 (Iowa 2002) (“We find no basis

for distinguishing between work-related disabilities with the same

employer and work-related disabilities with different employers in the

application of the full-responsibility rule.”).

In Roberts Dairy, we held the statutory principle described in

section 85.34(7)(a)—an employer is not liable for compensating the

preexisting disability of an employee from employment with a different

employer—did not apply when the earning capacity of the employee had

been reevaluated by the competitive labor market. 861 N.W.2d at 823.

Thus, we found that the workers’ compensation commissioner correctly

decided the employer in the case was not entitled to apportion liability for
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permanent partial disability benefits paid to an employee based on the

losses of earning capacity suffered from two prior injuries while working

for different employers because the market had reevaluated earning

capacity when the employer hired the employee. Id. at 824–25. We

found the legislature intended to preserve the fresh-start rule when an

employee is reevaluated by the competitive labor market with a change in

employment following a permanent partial disability in a prior

employment with a different employer. Id. at 823.

V. Liability of Warren Properties for Preexisting Disability.

The issues presented in this case are similar to those presented in

Roberts Dairy, but arise from different facts. This factual difference does

not permit us to rely on Roberts Dairy to resolve the issue. The

important distinguishing fact is that the preexisting disability at the

center of this case did not occur with a previous employer. Instead, it

occurred with a concurrent employer. Stewart was working for Warren

Properties at the time she sustained the forty percent loss of earning

capacity from a permanent partial disability caused by an injury arising

out of her employment with Wal-Mart. As a result, Warren Properties

argues the apportionment principle under Iowa Code section 85.34(7)(a)

applies in this case because the reduction in Stewart’s earning capacity

from the Wal-Mart injury was never adjusted by the competitive labor

market. Stewart claims a market adjustment was unnecessary because

she maintained her employment with Warren Properties without a

diminution in earnings despite her permanent partial disability. She

argues the loss of her concurrent job with Wal-Mart without an

accompanying loss of her job at Warren Properties gave her a fresh start

and served to reestablish her earning capacity. The arguments of the
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parties first require us to examine the legislative intent behind the 2004

statutory changes.

Our sole goal in interpreting statutes is to apply the intent of the

legislature. Thomas v. Gavin, 838 N.W.2d 518, 523 (Iowa 2013). The

legislature expressed in detail its intent behind the statutes at issue in

this case. 2 Thus, we rely on this intent to guide the application of the

statute to the claim for compensation under the facts of this case.

2The legislative intent section, 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001,
§ 20, states:
It is the intent of the general assembly that this division of this Act will
prevent all double recoveries and all double reductions in workers’
compensation benefits for permanent partial disability. This division
modifies the fresh start and full responsibility rules of law announced by
the Iowa supreme court in a series of judicial precedents.
The general assembly recognizes that the amount of
compensation a person receives for disability is directly related to the
person’s earnings at the time of injury. The competitive labor market
determines the value of a person’s earning capacity through a strong
correlation with the level of earnings a person can achieve in the
competitive labor market. The market reevaluates a person as a working
unit each time the person competes in the competitive labor market,
causing a fresh start with each change of employment. The market’s
determination effectively apportions any disability through a reduced
level of earnings. The market does not reevaluate an employee’s earning
capacity while the employee remains employed by the same employer.
The general assembly intends that an employer shall fully
compensate all of an injured employee’s disability that is caused by
work-related injuries with the employer without compensating the same
disability more than once. This division of this Act creates a formula
that applies disability payments made toward satisfaction of the
combined disability that the employer is liable for compensating, while
taking into account the impact of the employee’s earnings on the amount
of compensation to be ultimately paid for the disability.
The general assembly does not intend this division of this Act to
change the character of any disability from scheduled to unscheduled or
vice versa or to combine disabilities that are not otherwise combined
under law existing on the effective date of this section of this division of
this Act. Combination of successive scheduled disabilities in section
85.34, subsection 7, as enacted in this division of this Act, is limited to
disabilities affecting the same member, such as successive disabilities to
the right arm. A disability to the left arm that is followed by a disability
to the right arm is governed by section 85.64 and is not a successive
 14

The starting point for the resolution of the apportionment issue

presented by the arguments of the parties is the statutory principle

expressed in the second sentence of section 85.34(7)(a). This statutory

rule of apportionment is applicable to the “preexisting disability that

arose out of and in the course of employment with a different employer.”

Iowa Code § 85.34(7)(a). The legislative intent behind this rule was to

“prevent all double recoveries and all double reductions in workers’

compensation benefits for permanent partial disability.” 2004 Iowa Acts

1st Extraordinary Sess. ch. 1001, § 20. The statute does not specifically

mention concurrent employers, but concurrent employers are also

different employers. 3 The text of the statute clearly captures concurrent

employers. Thus, Stewart was not beyond the scope of the governing

rule simply because her preexisting disability with a “different employer”

was sustained at the time she also maintained employment with Warren

Properties. We are required to use the plain language of the statute

when construing statutes. Neal, 814 N.W.2d at 519.

_________________________
disability under this division. This division does not alter benefits under
the second injury fund, benefits for permanent total disability under
section 85.34, subsection 3, the method of determining the degree of
unscheduled permanent partial disability, the compensable character of
aggravation injuries, or an employer’s right to choose the care an injured
employee receives, expand the fresh start rule to scheduled disabilities,
or change existing law in any way that is not expressly provided in this
division.
The general assembly intends that changes in the identity of the
employer that do not require the employee to reenter the competitive
labor market will be treated as if the employee remained employed by the
same employer.

3The statute also excepts injuries unrelated to employment from the employer’s
liability. Iowa Code § 85.34(7)(a). The legislature clearly wished to limit an employer’s
liability to only disabilities “aris[ing] out of and in the course of the employee’s
employment with the employer” and no others. Id.
 15

The concern expressed by the legislature over double recoveries

and double reductions for successive permanent partial disabilities can

be traced to the role of a preexisting disability in the payment of

compensation for a subsequent injury. See, e.g., Ziegler, 252 Iowa at

619–20, 106 N.W.2d at 594–95 (evaluating subrogation rights of

employer to employee’s settlement with third-party tortfeasor of original

injury in an injury-aggravation case). When a successive injury

increases a preexisting permanent disability to the body as a whole, the

benefits provided for the successive injury must not include a double

recovery for the first disability or a double reduction for the first

disability. See 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20.

The legislature intended to address this issue by enacting Iowa

Code section 85.34(7)(a). Importantly, it did not just express an intent to

apportion preexisting disabilities from different employers to prevent

double recoveries. Iowa Code § 85.34(7)(a). It also expressed its intent to

prevent double reductions by adopting the fresh-start rule we had

developed in our prior cases. See id.; 2004 Iowa Acts 1st Extraordinary

Sess. ch. 1001, § 20. While the legislature sought to relieve employers of

any “liab[ility] for compensating an employee’s preexisting disability” that

arose in employment with a different employer or outside of employment,

it expressed its clear intent to adopt a modification of the fresh-start rule

to recognize the reevaluation of earning capacity achieved through the

“competitive labor market . . . with each change of employment.” Iowa

Code § 85.34(7)(a) (first quote); 2004 Iowa Acts 1st Extraordinary Sess.

ch. 1001, § 20 (second quote). The legislature accepted the general

premise that the competitive labor market reestablishes a worker’s

earning capacity following a disabling injury and further observed that

this market “effectively apportions any disability through a reduced level
 16

of earnings.” 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20.

Thus, the legislative intent reveals the modified fresh-start rule does not

run afoul of the statutory principle that employers must not be liable for

compensating an employee’s preexisting disability with a different

employer. Id.; see Iowa Code § 85.34(7)(a). No double recovery occurs

because the preexisting disability has been integrated into a new working

unit, with a new earning capacity recognized by the competitive labor

market. 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20. The

fresh-start rule does not make an employer liable for compensating an

employee’s preexisting disability with a different employer because

apportionment effectively took place prior to the second injury through

the forces of the competitive labor market associated with a change in

employment. See id.

This proposition established the basis of our holding in Roberts

Dairy, 861 N.W.2d at 823. In that case, the worker had changed

employment after sustaining permanent partial disabilities, and his

earning capacity was effectively reset by the competitive labor market

that accompanied each change of employment, including his employment

at the time of his injury. Id. at 816, 823–24. We applied the modified

fresh-start rationale adopted by the legislature in enacting Iowa Code

section 85.34(7)(a). Id. at 823.

The legislature, however, did not preserve the fresh-start rule

beyond the competitive-job-market rationale. Additionally, it specifically

found “[t]he market does not reevaluate an employee’s earning capacity

while the employee remains employed by the same employer.” 2004 Iowa

Acts 1st Extraordinary Sess. ch. 1001, § 20. Thus, to ensure employers

are not liable for compensating preexisting disabilities incurred at a

different employer or outside employment, the rule does not apply when
 17

earning capacity has not been reset by the competitive labor market after

the prior permanent partial disability was established. When earning

capacity has not been reevaluated by the market, Iowa Code section

85.34(7)(a) must be observed in determining the compensation paid for

successive disabilities.

We recognize the legislature did not establish a specific method of

apportionment for successive disabilities with different employers when

no market reevaluation has taken place, as it did for successive

disabilities with the same employer. See Iowa Code § 85.34(7)(b). In

Roberts Dairy, we used this observation as a secondary rationale to

support our conclusion that the legislature did not intend to apportion

liability for successive disabilities between different employers when a

competitive labor market reevaluation has occurred. 861 N.W.2d at 823.

While the maxim expressio unius est exclusio alterius tells us to infer all

omissions are intentional exclusions when “a statute designates a form of

conduct, the manner of its performance and operation,” and to what it

refers. 2A Norman J. Singer & Shambie Singer, Statutes and Statutory

Construction § 47:23, at 406–13 (7th ed. 2014) (footnotes omitted). It

does not apply without evidence the legislature specifically intended for

all other options to be excluded. Id. § 47:25, at 446; see also Andover

Volunteer Fire Dep’t v. Grinnell Mut. Reins. Co., 787 N.W.2d 75, 86 (Iowa

2010) (considering the history and purpose of the statute as well as

ordinary meaning of a term and its context when construing the meaning

of a statute). Considering the legislature’s intent to avoid double

recoveries and double reductions, we find that, although a specific

method of apportionment was not established, the legislature did not

intend to exclude from apportionment successive disabilities with

different employers when no market reevaluation has occurred. The
 18

compensation formula provided by the legislature in section 85.34(2)(u),

used for all successive disabilities with separate employers, can be used

in conjunction with the rule in section 85.34(7)(a) to apportion the loss in

earning capacity when a market reevaluation has not occurred.

In this case, the fresh-start rule recognized by the legislature does

not apply to refresh Stewart’s earning capacity lost due to the permanent

partial disability arising from her 2006 injury sustained while working

for Wal-Mart. She never competed in the labor market after the

Wal-Mart injury. This is the critical distinction separating this case from

Roberts Dairy. Thus, Stewart is not entitled to compensation from

Warren Properties under section 85.34(2)(u) for the forty percent loss of

earning capacity resulting from the 2006 Wal-Mart injury.

Notwithstanding, we acknowledge that the absence of a

competitive-job-market readjustment of an injured worker’s earning

capacity does not mean their postinjury industrial disability will always

remain constant. See 7 Arthur Larson & Lex K. Larson, Larson’s

Worker’s Compensation Law § 81.03[1], at 81-13 (2014) [hereinafter

Larson] (actual earnings only “create a presumption which may be

overcome by other evidence showing that the actual earnings do not

fairly reflect claimant’s capacity”). The absence of a market readjustment

merely means an injured worker does not receive the benefit of an

automatically refreshed earning capacity in computing benefits for the

successive disability. A change in earning capacity can be shown by

evidence other than new employment, including changes in the

employee’s functional capacity, education, qualifications, experience, and

training. See Oscar Mayer Foods Corp. v. Tasler, 483 N.W.2d 824, 831

(Iowa 1992); see also 7 Larson, §§ 81.05–.06, at 81-19 to 81-21 (citing

factors like actual pre- and post-injury wages, increased training, and
 19

education as things to be considered when calculating earning capacity).

Nevertheless, no such evidence was presented in this case to show

Stewart’s reduced earning capacity resulting from her 2006 Wal-Mart

injury had been restored in whole or in part as a consequence of

unexpected healing, a change in her qualifications, training, education,

or other factors prior to the 2009 Warren Properties injury. The

argument by Stewart that her continued employment with Warren

Properties following her permanent partial disability while at Wal-Mart

served to produce a fresh start and effectively apportioned her

preexisting disability is inconsistent with the legislative intent behind the

statutory changes. 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001,

§ 20. The legislature made it clear that the fresh-start rule is now based

on the reevaluation of earning capacity occurring in the competitive labor

market with a change of employment. Id. Stewart’s earning capacity

underwent no reevaluation during her continuing employment with

Warren Properties. 4 Additionally, earning capacity is not necessarily

coextensive with actual earnings. See 7 Larson, § 81.01, at 81-2 to 81-5

(indicating actual earnings are not the same as earning capacity); see

also Clark v. Vicorp Rests., Inc., 696 N.W.2d 596, 605 (Iowa 2005) (finding
a reduction in actual earnings is not necessary to show reduced earning

capacity).

Accordingly, the compensation in this case must be computed

under the formula set out in section 85.34(2)(u), and the apportionment

rule in section 85.34(7)(a) must be applied to assure that any

compensation paid by Warren Properties for the 2009 injury is based on

4There is no evidence in this case that Stewart competed for a job within her

employment with Warren Properties following the initial injury.
 20

the loss of earning capacity resulting from that injury and not the forty

percent loss of earning capacity sustained by Stewart as a consequence

of the 2006 injury.

VI. Statutory Calculation of Successive Disabilities.

Under the compensation formula for unscheduled injuries in

section 85.34(2)(u) as amended, employees who suffer successive

permanent partial disabilities are paid benefits based on their weekly

earnings for a number of weeks determined by the application of two

factors. 5 Iowa Code § 85.34(2)(u). One factor is the earning capacity

possessed when the successive injury occurred, and the other factor is

the reduction in earning capacity, or disability, caused by the successive

injury. Id. The compensation paid for a successive injury equals “the

reduction in the employee’s earning capacity caused by the disability . . .

in relation to the earning capacity” possessed at the time of the injury

relative to 500 weeks. Id. When successive disabilities are involved, this

formula must be applied in a way that will not make the successive

employer liable for a preexisting disability arising from an injury

sustained by the employee while working for another employer. See id.

§ 85.34(7)(a). To accomplish this statutory requirement, the preexisting

disability must be apportioned from the formula when it has not been

effectively apportioned by the competitive labor market through a fresh

start with a new employer. In other words, without a market adjustment

through a change in employment, any preexisting disability must be

5Compensation for scheduled injuries specifically listed in the statute is based
on a different statutory scheme assigning a number of weeks of compensation for
different scheduled members. Iowa Code § 85.34(2)(a)–(t). The Second Injury
Compensation Act governs compensation for certain successive injuries to multiple
scheduled members. See id. §§ 85.63–.69.
 21

apportioned so that only the new disability resulting from a successive

injury is determined based on the two factors considered in the formula.

See 2004 Iowa Acts 1st Extraordinary Sess. ch. 1001, § 20. The earning

capacity possessed at the time of the successive injury does not include

any earning capacity lost as a consequence of a prior work-related injury

or due to causes unrelated to employment, and the reduction in earning

capacity caused by the successive injury therefore cannot include any

earning capacity that was lost and not regained before the successive

injury at issue in a particular case. 6 See id.

6The application of the compensation formula for unscheduled injuries in cases
of successive permanent partial disabilities arising from different employers with no
market reevaluation or other change in earning capacity following the first disability can
be illustrated with the following example by using percentages consistent with evidence
of functional impairments and loss of earning capacity common to workers’
compensation hearings. A worker injures his back on the job and suffers a ten percent
permanent impairment of his body as a whole and a forty percent loss of earning
capacity. Compensation is paid under section 85.34(2)(u) for 200 weeks. The reduction
in earning capacity caused by the disability was forty percent, and the earning capacity
possessed when the injury occurred was 100%. Forty percent of 500 weeks equals 200
weeks. Two years later, while working for a different employer and—as in this case—
without any labor market reevaluation in earning capacity, the same worker is again
injured on the job. As a result of the new injury, the worker now has a thirteen percent
permanent impairment to the body as a whole and a fifty percent loss of earning
capacity.
Compensation is paid under section 85.34(2)(u) “during the number of weeks in
relation to five hundred weeks as the reduction in the employee’s earning capacity
caused by the disability bears in relation to the earning capacity that the employee
possessed when the injury occurred.” Iowa Code § 85.34(2)(u). We have recognized the
phrase “in relation to” to require a division computation between the compared
numbers in other contexts. See In re Marriage of Benson, 545 N.W.2d 252, 255 (Iowa
1996) (calculating divorcing spouse’s share of pension benefits). In a mathematical
formulation, the reduction in earning capacity divided by earning capacity possessed is
equal to the number of weeks compensated divided by 500 weeks. Applying this
formula to our hypothetical scenario, the reduction in earning capacity caused by the
successive injury was ten percent (fifty percent minus forty percent) and the earning
capacity possessed when the injury occurred was sixty percent (100% minus forty
percent). To determine the compensable change in earning capacity, we divide the
reduction in earning capacity, ten percent, by the earning capacity possessed when the
successive injury occurred, sixty percent. In this example, that calculation equals
16.67%, and 16.67% of 500 weeks equals 83.3 weeks.
 22

In this case, the commissioner applied the formula without

apportioning the prior loss of earning capacity attributable to the prior

injury while working at Wal-Mart. This constituted legal error because

Stewart’s earning capacity was not refreshed in the competitive labor

market prior to the 2009 injury. Accordingly, the commissioner must

recompute the benefits payable to Stewart under the evidence in this

case. See Swiss Colony, Inc. v. Deutmeyer, 789 N.W.2d 129, 136 (Iowa

2010) (remanding “for a recalculation of benefits under the proper

standard”).

VII. Evidence to Support Successive Disabilities.

Warren Properties claims it is unnecessary to remand the case to

the commissioner to recompute benefits under the compensation formula

because the evidence in this case did not support a finding of a new

disability arising from the February 2, 2009 injury. It argues the only

logical conclusion that can be drawn from the evidence in this case is the

unscheduled injury in 2009 did not increase Stewart’s functional

impairment that arose from the 2006 injury and could not have

increased her industrial disability beyond the forty percent loss

compensated by Wal-Mart under the agreement for settlement of the

2006 injury. See Frost v. S.S. Kresge Co., 299 N.W.2d 646, 648 (Iowa

1980) (reversing the commissioner due to disagreement on a legal

conclusion concerning the facts of the case). Warren Properties asserts

Stewart suffered no new disability to her back because her permanent

physical impairment of thirteen percent after the 2006 injury was not

increased by the 2009 injury.

Permanent partial disability results from the loss, or functional

impairment, of an unscheduled part of the body, such as the back,

shoulder, neck, or hip. See Iowa Code § 85.34(2)(u). The original
 23

impairment is permanent and cannot form the sole basis for a second

permanent partial disability claim for benefits. See Yeager v. Firestone

Tire & Rubber Co., 253 Iowa 369, 374–75, 112 N.W.2d 299, 302 (1961)

(“If his condition was aggravated . . . so it resulted in the disability found

to exist, plaintiff was entitled to recover therefor. Of course he was not

entitled to compensation for the results of a pre-existing injury or

disease.”). A new or additional permanent impairment must be

established for an impairment to be the sole basis of a new award. See

Excel Corp. v. Smithart, 654 N.W.2d 891, 898 (Iowa 2002) (distinguishing

between separate injuries and cumulative injuries for purposes of

compensation), superseded by statute, 2004 Iowa Acts 1st Extraordinary

Sess. ch. 1001, § 12, as stated in Roberts Dairy, 861 N.W.2d at 819 n.1;

cf. Blacksmith v. All-Am., Inc., 290 N.W.2d 348, 350 (Iowa 1980) (holding

a subsequent change in earning capacity proximately caused by the

original injury, even without a change in physical condition, may

constitute a compensable change in industrial disability).

An award of compensation for a successive unscheduled

permanent partial disability requires a finding of a loss of earning

capacity caused by the successive injury. As we have already noted, one

of the factors in determining the extent of an unscheduled disability is

permanent physical impairment. In this case, the record includes

medical evidence tending to prove the permanent functional impairment

resulting from the 2006 back injury could have been as low as ten

percent or as high as thirteen percent. The commissioner found Stewart

suffered a thirteen percent functional impairment following the 2009

injury, with no finding made regarding the 2006 impairment. There is

evidence in the record tending to prove Stewart’s 2009 injury was not

confined to the back and resulted in permanent partial functional
 24

impairment to the shoulder. Accordingly, there is substantial evidence in

the record supporting the commissioner’s finding that the 2009 injury

caused some increase in Stewart’s permanent physical impairment

affecting the determination of Stewart’s industrial disability in this case.

We therefore reject Warren Properties’ contention that the evidence

pertaining to Stewart’s loss of functional capacity arising from the 2006

injury precludes a finding that Stewart suffered an industrial disability

as a consequence of the 2009 injury. Notwithstanding, the

commissioner must show the process as now required under section

85.34(2)(u) to reach his decision. See Bridgestone/Firestone v. Accordino,

561 N.W.2d 60, 62 (Iowa 1997) (indicating the commissioner must detail

the process used to reach conclusions to permit adequate judicial

review). The formula requires the commissioner to determine the earning

capacity when the successive injury occurred and the reduction in

earning capacity caused by the disabilities.

VIII. Conclusion.

We conclude the commissioner erred in interpreting section

85.34(7)(a) and applying the compensation formula under section

85.34(2)(u). We affirm in part and reverse in part the decision of the

district court and remand the case to the district court to remand the

case back to the commissioner for further proceedings consistent with

this decision. See Staff Mgmt. v. Jimenez, 839 N.W.2d 640, 658 (Iowa

2013). We tax the costs of this action equally between the parties.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

WITH DIRECTIONS.