No. 83-351
IN THE SUPREME COURT OF THE STATE OF MONTANA
1984
KERRY K. HAFER,
Claimant and Appellant,
-vs-
ANACONDA ALUMINUM COMPANY, Employer,
and
ANACONDA ALUMINUM CO.,
Defendant and Respondent.
APPEAL FROM: The Workers' Compensation Court, The Honorable Timothy
Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Terry N. Trieweiler argued, Whitefish, Montana
For Respondent :
Andrew J. Utick argued, Helena, Montana
-- l____l^_l ^ --.ll_-.- --
Submitted: May 1, 1984
Decided : July 26, 1984
Mr. Chief Justice Frank I. Haswell delivered the Opinion of
the Court.
This is an appeal from the Workers' Compensation Court
regarding the proper test to determine the degree of perma-
nent partial disabil-ity.
This is the second time this case has been before this
Court.
Hafer was an iron worker for the Anaconda Aluminum
Company in Columbia Falls, Montana. He was involved in an
industrial accident on June 17, 1977, in which he sustained a
displaced fracture of his 3-eft elbow. As a result of the
injury, a silastic prosthesis was implanted in his elbow on
August 21, 1978. Ha.fer now suffers from restricted mobility
of his elbow and his orthopedic surgeon has rated his perma-
nent partial impairment as 20 percent of his left upper
extremity. The manufacturer of the prosthesis disclaims its
effectiveness for persons who engage in strenuous physical
activity.
At the time of the trial, Hafer was still employed as
an iron worker and was earning more than at the time of the
accident; however, he was experiencing pain and difficulty in
tryj-~g perform his work.
to Hafer was twenty-four years old
at the time of trial of this matter, does not have a high
school degree but has earned an Associate of Applied Science
degree in welding.
The court found that Hafer had su-ffered a 40 percent
diminished earning capacity. Yet the court stated that
diminished earning capa.city is only one element to consider
in determining the extent of Hafer's disability and concluded
that he had suffered only a 30 percent permanent partial
disability and based the award on that figure.
The sole issue for our review is the correct test for
determining compensation for permanent partial disability.
Hafer contends that since the court concluded that his
earning capacity had been impaired by 40 percent, his bene-
fits should. have been computed based on that factor. Instead,
in addition to the 40 percent earnings impairment rating, the
court made a further finding that Hafer was only 3 0 percent
permanently partially disabled and computed the award based
on that figure. Hafer contends that it is inconsistent of the
court to find a 40 percent earnings impairment and yet use
the 3 0 percent disability factor to compute the award.
There is no argument in this case as to the maximum
number of weeks upon which the award is to be based (a maxi-
mum of 2 8 0 ) and it is agreed that the rate of compensation is
$81 per week.
The Workers' Compensation Court found:
"In determining the extent of the claim-
ant's permanent partial disability, this
Court must consider the claimant's age,
education, work experience, pain and
disability e . impairment) and actual
wage loss and future earning ability
... 11
Hafer contends that factors other than earning capacity
impairment are only relevant when the court is unable to make
an independent determination of the degree to which the
claimant 's income earning ability has been impaired. Since
the primary purpose of workers1 compensation is to compensate
a worker for his reduced earning capabilities as a result of
an industrial a-ccident,when the impairment can be calculat-
-,
edt the award should be based on tha-t percentage and not on
the workers1 percentage of physical impairment. We agree.
Hafer further contends that "permanent partial disabil-
ity" as defined by section 39-71-116(12), MCA, has the same
meaning as impaired earninq capacity.
Section 39-71.-116(12), MCA, reads as follows:
" (12) 'Perma-nent Partial Disability'
means that condition resulting from
injury a s defined in this chapter that
.
results in the actual loss of earnings or
earning capability less than total that
exists after the injured worker is as far
restored as the permanent character of
the injuries will permit."
Hafer contends, therefore, based upon the above defini-
tion, that "disability" means the extent to which a worker's
earning capacity is reduced.
Hafer also cites Wight v. Hughes Livestock Co., Inc.
(Mont. 1983), 664 P.2d 303, 40 St.Rep. 696, a case involving
contingency fee arrangements for workers' compensation attor-
neys, for a lucid statement of the purpose of workers' com-
pensation. Wight states:
"It should be beyond cavil, therefore,
that the fundamental basis of workers'
compensation laws is to accommodate the
public interest in placing economic loss
caused by employment accidents not upon
the public, but upon the industry in
which the accident occurred., Williams v.
Tndustrial Accid-ent Board (1939), 109
Mont. 235, 97 P.2d 1115; and that the
principal aim of workers' compensation
coverage is to provide social insurance
which protects the injured workman
against disability from a work-connected
injury, again placing the cost of the
injury on the industry employing him.
Mahlum v. Broeder (1966), 147 Mont. 386,
412 P.2d 572."
Obviously, the purpose of workers' compensation is to
protect the worker against economic loss. Therefore, any
disability rating which does not achieve this goal must be
set aside and a figure representing potential economic loss
must be substituted.
Hafer cites Osborne v. Johnson, a Kent.ucky case, (Ky.
1968), 432 S.W.2d 800, to support his argument that potential
economic loss should be the ba.sis of a workers' compensation
awa.rd rather than a physical impa-irment rating. The Kentucky
court relied heavily on Larson's Workmen's Compensation, a
recognized authority in the field.
The Kentucky court stated:
"If occupational disability is the basis
for compensation, and if, as seems clear,
it means impairment of earning capacity,
it would seem that all that need be
determined in a compensation case, as
concerns disability, is: to what extent
has the injured workman's earning capaci-
ty been impaired? And it would seem that
this would involve only these determina-
tions: (1) what kind of work normally
avail-able on the local labor market was
the man capable, by qualifications and
training, of performing prior to injury;
( 2 ) what were the normal wages in such
employment; (3) what kind of work normal-
ly available on the local labor market is
the man capable of performing since his
injury; and (4) what are the normal wages
in such employment? Larson says:
I1 1
...
the proper balancing of the
medical and the wage loss factors is
.
. . the essence of the "disability"
problem in workers compensation.
(Larson's Workmen's Compensation, Vol. 2,
Sec. 57.10.)
" 'Degree of disability is calculated
under most acts by comparing actual.
earnings before the injury with earnings
capacity after the injury.
"'The ultimate objective of the disabili-
ty test is, by discounting ... vari-
ables, to determine the wage that would
have been paid in the open labor market
under normal employment conditions to
claimant as injured, taking wage levels,
hours of work, and claimant's age and
state of training as of exactly the same
period used for calculating actual wages
earned before the injury. Only by the
elimination of all variables except the
injury itself can a reasonably accurate
estimate be made of the impairment of
earning capacity to be attributed to that
injury.' (Larson's Workmen's Compensa-
tion, Vol. 2, Sec. 57.21.)
"Under the foregoing concept medical
percentages are not determinative. The
real question is: How much less money
can the injured workman command in the
local labor market? The doctors' testi-
mony should be addressed to the question
of what job requirements the injured man
is physically capable of performing
(taking into consideration his qualifi-
cations and training) . The Board's
determination of the extent to which the
man's earning capacity is impaired then
should be made on the basis of evidence
as to the existence, in the local area or
region, of regular employment opportuni-
ties for the type of work the medical
testimony shows the man is capable of
performing, and the prevailing wage rates
in such employment.
"If the Board find.s that the workman is
so physically impaired that he is not
capable of performing any kind of work of
regular employment, or if the Board finds
that regular employment in the kind of
work the man can perform is not available
on the local labor market, the man will
be considered to be totally disabled.
Otherwise, he will be considered to be
-
only partially disabled. - - per-
And the
centaae of his ~artiald i ~ a b i ~ i t- -
will be
v
determined & - r a t l ~ o f e v a i l i n ~
i--
the --
wage rates - - kind of employment
in the
available - - - t h e A rates
to him. t o - waae
earfiable him before beinq injured."
(Emphasis added.) 432 S.P.2d at 803.
Hafer concludes by arguing that "permanent partial
disability" is the degree to which his earning capacity has
permanently been reduced. To hold otherwise would be con-
trary to the purpose for which workers1 compensation legisla-
tion was enacted.
Anaconda argues that the Workers1 Compensation Court
did not reaffirm its previous finding that Hafer's earning
capacity was reduced by 40 percent, but rather modified that
original finding.
The original findings and conclusions, entered July 2,
1980, are as follows:
"Findings of Fact.
"20. Claimant has not demonstrated that
he has suffered any actual wage loss
since he returned to work in October
1978. He has proven that his earning
capacity in the future may be diminished
as a consequence of his injury. Based
upon the medical impairment rating, the
testimony of Norm Johnson as to the job
market in Flathead County for a person
with claimant's aptitudes and disability,
and the testimony of Robert Redinger as
to the defendant's employment policies
and pay scales for entry-level. clerical
workers, it is found that claimant's
earning capacity has been diminished by
forty percent as a conqequence of his
injury."
"Conclusions of Law.
"5. Even though his actual earnings have
not been diminished since his return to
work, his ability to compete in the open
labor market has been impaired by a
factor of 40 percent, i.e. , if he had to
find another job, it would probably pay
60% of what he could earn before he
injured his elbow. Finding of fact no.
20, supra, Fermo v. Superline Products,
574 P.2d 251, 253 (1978) ."
On July 1, 1983, following remand by this Court, Con-
clusion #5, above, was amended to read as follows:
"5. The claimant's earning capacity
would be reduced by 40 percent if he had
to quit work as an ironworker and begin
work at an entry level position with the
Anaconda Aluminum Co. "
The court's reason for modifying the original conclu-
sion is as follows:
"This Court's Hearing Examiner found and
concluded that the claimant's earning
capacity was 40 percent diminished as a
result of his industrial injury. Finding
of Fact No. 20 and Conclusion of Law No.
5. The facts on which the Hearing Exam-
iner relied in reaching this conclusion
and finding make it clear that he based
each on the testimony regarding what the
claimant earned at Anaconda at the time
of the hearing and what he would earn at
Anaconda in an entry-level clerical.
position. Implicit in this testimony is
the assumption that this wage contour
between the wages of an ironworker and
the wages of a clerical worker would
remain constant, i.e, tha.t the clerical
workers would continue to earn 4 0 % less
in wages than an ironworker. Given the
limited scope of and assumption in the
testimony supporting the above finding
and conclusion as well as the other
elements comprising disability, this
Court cannot find that the claimant's 4 0
percent diminished earning capacity is
synonymous with a 40 percent work-related
disability.
"The claimant was born on September 23,
1955, and is now twenty-seven years old.
He does not have a high school diploma,
but he does have an associate of applied.
science degree in welding. He has worked
as a manual laborer, a welder and an
ironworker. The claimant experiences
pain in his left arm when he must use it
strenuously at work. Additionally, the
claimant has a 20 percent permanent
impairment of his left upper extremity at
the shoulder that prevents him from
completely extending his left arm. His
disability has not resulted in an actual
loss of wages, but if he had to seek work
in a different vocational area, he would
initially earn less, unless vocationally
retrained, than he could earn as an
ironworker. There does not now appear to
be a likelihood that the claimant will
have to quit work because of his
work-related disability.
"Considering all the factors the Flake
Court stated were determinative of dis-
ability, this Court concludes the claim-
ant is 3 0 percent permanently partially
disabled as a result of his industrial
accident."
Anaconda contends that this modification was made to
reflect the limitations of the testimony and the unlikelihood
that Hafer would ever sustain any loss of earnings as a
result of his injury.
In essence, Anaconda contends that Hafer's potential
losses are too speculative at this time and that the court
was correct in considering various factors other than the
earning capacity reduction in arriving at the 30 percent
disability factor.
We find Hafer's argument persuasive. Factors other
than earning capacity impairment are only relevant when the
court is unable to make an independent determination of the
degree to which the claimant's earning capacity has been
impaired. As we stated in Wight, supra, the principal. aim of
workers' compensation coverage is to provide protection for
the injured worker. If the court can determine, as it has
here, that a claimant's earning capacity has been impaired to
a certain degree, then that figure is the bottom line and
other variables need not be considered. McDanold v. B.N.
Transport (Mont. 1984), 679 P.2d 1188, 41 St.Rep. 472. Since
the court has determined that Hafer's earning capacity has
been reduced by 40 percent that is the figure to be used in
computing his benefits.
According to this Court's holding in McDanold v. B.N.
Transport, supra, the proper calculation of Hafer's benefit
is as follows:
$81 x 280 weeks = $22,680
Both the $81 weekly benefit and the 280 week maximum
have been ruled on or stipulated to previously. The disabil-
ity factor, in this case 40 percent, is only to be used to
calculate the proper weekly benefit and will no longer be
used to additionally reduce or limit the number of weeks for
which the benefit is payable.
The order of the Workers' Compensation Court is vacated
and the cause remanded to that court for entry of judgment in
conformity with this opinion.
'Zr,44,&*&
Chief Justice
We concur:
G 3 l w