STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
WCA 04-854
DON R. YOUNG
VERSUS
GULF COAST CARPETS
**********
APPEAL FROM THE OFFICE OF WORKERS’ COMPENSATION - # 3 PARISH OF CALCASIEU, NO. 01-02483 CHARLOTTE A. L. BUSHNELL, WORKERS’ COMPENSATION JUDGE
BILLY HOWARD EZELL JUDGE
Court composed of John D. Saunders, Billie Colombaro Woodard, Oswald A. Decuir, Marc T. Amy, and Billy Howard Ezell, Judges.
Amy, J., concurs in part and dissents in part and assigns written reasons.
AFFIRMED AS AMENDED; REVERSED IN PART AND RENDERED.
Marcus Miller Zimmerman Attorney at Law P. O. Box 6297 Lake Charles, LA 70606 (337) 474-1644 Counsel for: Plaintiff/Appellee Don R. Young Mark Alfred Ackal Attorney at Law P. O. Box 52045 Lafayette, LA 70505 (337) 237-5500 Counsel for: Defendant/Appellant Gulf Coast Carpets EZELL, JUDGE.
This workers’ compensation case presents questions of the calculation of the
average weekly wage of an independent contractor, the reliance of Louisiana United
Business Association Self Insurer’s Fund (LUBA) on tax returns to determine
business expenses, the denial of a fifty percent increase in weekly indemnity benefits
pursuant to La.R.S. 23:1171.2, and penalties and attorney fees.
FACTS
The facts concerning the accident are not in dispute. Don Young was an
independent carpet installer. He injured his lower back on February 4, 1998, while
attempting to move a piano, resulting in a temporary total disability. At the time of
the accident, Young was installing carpet for Gulf Coast Carpets. Young was
covered for workers’ compensation claims pursuant to a self-insurance agreement
issued to Gulf Coast Carpets by LUBA. Young received $350 a week in indemnity
benefits from February 4, 1998, through January 24, 2001, at which time they were
terminated.
In January 2000, a new claims adjuster had been assigned to the case. Jody
Jacobson testified that she recognized there was a problem when she was assigned the
file. Young’s 1997 tax records indicated that he had zero earnings. In October 2000,
Young’s deposition was taken. Subsequently, in January 2001, LUBA filed a claim
with the Office of Workers’ Compensation asking for a credit claiming that there had
been an overpayment of benefits because business expenses had not been deducted
when determining the amount of benefit payments. LUBA claimed that Young’s
benefit payments had been based on the maximum compensation rate of $350 when
the payments should have been based on the minimum compensation rate of $93.
LUBA filed a claim asking for a credit for benefit overpayment in the amount of
1 $39,578, which terminated Young’s benefits.
On April 12, 2001, Young filed a disputed claim for compensation challenging
the wage rate determination and seeking penalties and attorney fees. A trial on the
matter was held on June 30 and July 16, 2003. Judgment was entered on March 8,
2004, finding that Young’s work was predominately physical labor and that his
average weekly wage was $524.61, and, therefore, his proper indemnity rate is
$349.76. Young’s claim for a fifty percent increase in weekly indemnity benefits
pursuant to La.R.S. 23:1171.2 was denied in addition to his claim for penalties due
to LUBA paying the wrong indemnity rate for the first three weeks after the accident.
However, the trial court did find that LUBA’s discontinuance of weekly benefits was
arbitrary and capricious and awarded penalties and attorney fees.
Gulf Coast Carpets appealed the judgment. Young answered the appeal.
CALCULATION OF AVERAGE WEEKLY WAGE
Both parties agree that Young’s wage rate is to be determined according to
La.R.S. 23:1021(10)(d). In Edwards v. Delta Timber Company, 94-725 (La.App. 3
Cir. 12/7/94), 647 So.2d 548, this court, citing jurisprudence, recognized that an
employee’s expenses are deducted from his gross earnings if the employee supplies
his own equipment or helpers. This court explained that the purpose is “to exclude
any return on capital in the determination of worker’s compensation benefits.” Id. at
550. This court then explained two methods of calculating “other wages” as follows:
Wages = Gross Earnings - Expenses
÷ x4
Actual # of Days Worked
and
2 Wages = Gross Earnings - Expenses
÷
# of Weeks Worked
Gulf Coast Carpets’ main complaint about the workers’ compensation judge’s
wage rate determination is the amount of business expenses that she used in
computing Young’s gross earnings. Gulf Coast Carpets argues that the workers’
compensation judge should have used the business expense figures listed in his 1997
and 1998 tax returns.
Young’s 1997 tax returns showed an income of $21,042. Business expenses
were listed as a total of $24,133, for a loss of $3,091. Young’s 1998 tax returns, the
year he was injured, showed business income of $1,187 and listed total expenses of
$852 for net earnings of $335.
Young testified that he depended on his tax preparer to determine his taxes.
When questioned in his deposition about the particular expenses, Young was
uncertain of their nature and explained that he did not have much knowledge about
taxes. Young did testify at trial about the expenses he knew he incurred in his
business. Gas was about $75 a week with tires costing $200 a year. He changed the
spark plugs on his van about once a year, which cost $16. Young spent another $200
a year on repairs to his van. Young paid anyone who helped him about ten percent
of the job cost.
In making her decision, the workers’ compensation judge chose to credit the
testimony of Young himself over the income tax returns. We do not find that this
decision was unreasonable given the fact that the workers’ compensation judge
obviously found Young’s testimony credible regarding his business expense situation.
Gulf Coast Carpets would have this court force Young to live by the expenses listed
3 in tax returns. We find no manifest error in the workers’ compensation judge’s
decision to credit the testimony of Young as to his actual work expenses. See
Cornish v. State, Dept. of Transp. and Dev., 93-194 (La.App. 1 Cir. 12/1/94), 647
So.2d 1170, writ denied, 95-547, 95-574 (La. 5/5/95), 654 So.2d 324.
Gulf Coast Carpets also complains that the trial court did not use the prevailing
wage method in calculating the average weekly wage. It claims that using the
prevailing wage rate, the court could use the ten percent figure that Young testified
he paid his brother for his services. However, no evidence or arguments concerning
the prevailing wage method was ever presented to the workers’ compensation judge
for her consideration. Therefore, we need not address this issue on appeal. Dean v.
Southmark Const., 03-1051 (La. 7/6/04), 879 So.2d 112. Even if we were to consider
it, we find that testimony concerning what Young paid his brother when he helped is
insufficient to establish the prevailing wage method.
Gulf Coast Carpets also complains that the workers’ compensation judge did
not consider certain expenses when calculating the average weekly wage. We note
that there was testimony that Young would charge supplies needed on an account that
Gulf Coast Carpets had at a local store. Gulf Coast Carpets would then deduct these
expenses from Young’s paycheck. Although we have the cash disbursements journal
from the twenty-six week period prior to the accident that was introduced into
evidence showing the income and the debits that were made, we cannot tell which
debits represent supplies. There was neither testimony on this matter nor any
invoices supporting the amounts. Therefore, we find that the trial court was correct
in not including these expenses.
There was also the matter of deductions for workers’ compensation insurance
expenses. Louisiana Revised Statutes 23:1021(6) provides that an independent
4 contractor who spends a substantial amount of his time in manual labor is covered by
the Workers’ Compensation Act. Chevalier v. L.H. Bossier, Inc., 95-2075 (La.
7/2/96), 676 So.2d 1072. This means that Gulf Coast Carpets was responsible for
securing workers’ compensation coverage at its cost. Id.
Gulf Coast Carpets would also have this court apply the amendment to La.R.S.
23:1163(B) by Acts 2004, No. 416, § 1, which added the language:
or to reduce payments to the independent contractor for coverage of the independent contractor or his employees pursuant to a contract, nor shall it be a violation of this Section if a principal has agreed to provide workers’ compensation insurance to all contractors working under a contract with the principal and for the cost of this coverage to be a consideration in the contract between the principal and the contractors.
Section Two of the Act provided that it was to become effective upon signature of the
governor.
Louisiana Civil Code Article 6 provides that, “In the absence of contrary
legislative expression, substantive laws apply prospectively only. Procedural and
interpretative laws apply both prospectively and retroactively, unless there is a
legislative expression to the contrary.” “‘Substantive laws,’ for purposes of
determining whether a law should be applied retroactively, are those which establish
new rules, rights, and duties, or change existing ones.” Landry v. Avondale Indus.,
Inc., 03-719, 03-993, 03-1002, p.6 (La. 12/3/03), 864 So.2d 117,123 (quoting
Anderson v. Avondale Ind. 00-2799, p.3 (La. 10/16/01), 798 So.2d 93, 97).
As is clear from Chevalier, 676 So.2d 1072, an independent contractor was
entitled to workers’ compensation coverage at the principal’s cost. We find that the
2004 amendment is substantive in nature and should be applied prospectively only
and Young is not responsible for workers’ compensation insurance premiums.
In the workers’ compensation judge’s determination of the average weekly
wage, Gulf Coast Carpets also complains about her method of calculation for the
5 average number of days worked. Since Edwards, 647 So.2d 548, La.R.S.
23:1021(10)(d) was amended to provide that the worker’s average daily wage is to
be “multiplied by the average number of days worked per week.” Acts 1997, No.
423. There is no dispute that Young worked sixty days during the previous twenty-
six week period. However, Young only worked nineteen weeks out of the twenty-six
week period. Nothing in La.R.S. 23:1021(10)(d) provides guidance as to how the
average number of days worked per week is to be determined, but it does contemplate
that a worker may work less than the twenty-six weeks. Therefore, one can assume
that the legislature intended that use of the actual number of weeks worked versus
twenty-six weeks would produce the actual average days worked versus a lower
number that would not represent the true average number of days worked. Therefore,
we find the workers’ compensation judge’s determination that the average number of
days worked by Young was 3.16 was reasonable. See Roan v. Apache Chemical
Transporters, 37,671 (La.App. 2 Cir. 9/24/03), 855 So.2d 920.
However, in reviewing the calculation of Young’s indemnity rate we did notice
a mistake. It appears that everyone failed to recognize that the amount used to
calculate the average daily wage from the cash disbursement journal, $12,084.58
already included the workers’ compensation premiums which were deducted from
Young’s actual check. When adding the checks on the vendor ledger that correspond
to the twenty-six week period prior to Young’s accident, the checks total the amount
of $9,022.61.1 This is obviously a lesser amount. In reviewing the cash
disbursements journal there are usually two to three credit entries. One entry always
1 On the ledger showing the checks issued to Young, we did notice that check number 7524 was not included, but it was listed on the cash disbursements journal. We, therefore, added the amount of this check, $137.88, to the total amount listed on the vendor’s ledger to determine the amount Young actually received in the twenty-six weeks before the accident.
6 corresponds to the amount of the check that Young received.
John Fontenot, owner of Gulf Coast Carpets, testified that he would calculate
the workers’ compensation premium for Young by taking 9.15 percent of two-thirds
of the payment owed to Young for jobs he did for Gulf Coast Carpets during a week.
This amount would be deducted from the check issued to Young. Fontenot would
also deduct any charges made at a local store by Young on Fontenot’s account for
supplies he needed for the jobs. When applying the formula that Gulf Coast Carpets
used to calculate workers’ compensation insurance premiums, we observe that one
of the credit amounts on the cash disbursement journal corresponds to this amount.
We recognize that the other amount is probably deductions for supplies expenses as
testified to by Fontenot. However, as we stated earlier we cannot be sure that all
these amounts were strictly for supplies since there was no testimony or evidence as
to the exact amount charged at the store. Therefore, we find that there was no need
for the workers’ compensation judge to add an amount for workers’ compensation
insurance premiums because the $12,084.58 amount used to calculate the average
daily wage included the amount representing workers’ compensation premiums. The
calculation would then be as follows: $12,084.58 ÷ 60 = 201.40 (average daily wage);
$201.40 x 3.16 = $636.42 (weekly gross wage) - $83.00 (weekly expenses) - $63.64
(Leroy Young’s wages, 10% of the gross amount of the weekly wage) = $489.78
(average weekly wage) x .6667 = $326.53.
We, therefore, find that the judgment stands that Gulf Coast Carpets is entitled
to a credit for any overpayment of indemnity benefits made prior to the date of
termination. However, the amount has changed, and it now equals the difference
between $350 a week that was paid and $326.53 that was owed, which is $23.47.
7 LOUISIANA REVISED STATUTES 23:1171.2
In his answer to the appeal, Young claims that the workers’ compensation
judge erred in failing to apply La.R.S. 23:1171.2 against Gulf Coast Carpets for its
failure to secure workers’ compensation insurance at its cost on Young’s behalf.
Louisiana Revised Statute 23:1171.2 provides for a fifty percent increase in the
amount of weekly compensation when the employer has failed to provide security for
compensation as provided by La.R.S. 23:1168.
Gulf Coast Carpets was statutorily liable to Young for workers’ compensation
benefits since he was a covered independent contractor under La.R.S. 23:1021(6).
See Chevalier, 676 So.2d 1072. Gulf Coast Carpets did secure workers’
compensation for Young, but at Young’s cost. We agree with the first circuit in Hurt
v. Superior Cable Installation, Inc., 99-2982 (La.App. 1 Cir. 5/12/00), 762 So.2d 705,
writ not considered, 00-1950 (La. 9/29/00), 769 So.2d 549, that this alleged
wrongdoing was a violation of La.R.S. 23:1163, not La.R.S. 23:1168.
It is La.R.S. 23:1163 that addresses Young’s concern in this case which “makes
it unlawful for an employer to require or even allow an employee to contribute,
directly or indirectly, the cost of his workers’ compensation coverage.” Chevalier,
676 So.2d at 1076(emphasis in original). The supreme court recognized that nothing
in La.R.S. 23:1163 provides an aggrieved employee with a private cause of action or
a private remedy when an employer violates the statute. Id. The supreme court
observed that La.R.S. 23:1163 was a criminal provision, the violation of which
subjected the employer to a criminal penalty. Therefore, as observed in Chevalier,
Young’s remedy for the wrongful deduction of workers’ compensation benefits lies
in a separate non-workers’ compensation civil suit.
8 PENALTIES
Young also claims the workers’ compensation judge erred in failing to award
penalties pursuant to La.R.S. 23:1201(F) because the first five indemnity checks that
he received after the accident were based on minimum wage and not the correct wage
rate. While raised by Young at the trial level, oral reasons for judgment and the
written judgment fail to make any mention about the issue of penalties for late
payment of benefits. Therefore, we assume this issue was denied by the workers’
compensation judge. Chesne v. Elevated Tank Applicators, Inc., 04-46 (La.App. 3
Cir. 5/12/04), 874 So.2d 333.
“[P]enalties should be assessed against defendants unless the employer or
insurer reasonably controverted [the worker’s] right to the benefits or the violations
resulted from conditions over which the employer or insurer had no control.” Brown
v. Texas-LA Cartage, Inc., 98-1063, p.11 (La. 12/1/98), 721 So.2d 885, 891.
Young received the following payments: (1) $137.34 on February 13, 1998, (2)
$274.68 on February 27, 1998, (3) $274.68 on March 13, 1998, and (4) $1,063.30 on
March 18, 1998. The payments of February 27 and March 13 each represent two
weeks of payments at the incorrect rate. Thereafter, he received $350 on a weekly
basis.
At trial, the adjuster testified that the average weekly wage was originally
calculated using minimum wage as the basis because the adjuster handling the case
at the time did not have any wage records from the employer when the first indemnity
payment was issued. We do not find this a reasonable basis for paying the incorrect
wage rate. The evidence in the record indicates that Gulf Coast Carpets kept accurate
computer records of each job that Young performed for them and that these records
were up-to-date. There is no valid excuse for the adjuster’s failure in timely obtaining
9 these records to ensure that Young received the proper indemnity benefit. We agree
that a penalty award is appropriate.
At the time of Young’s injury, La.R.S. 23:1201(F) provided, in pertinent part:
Failure to provide payment in accordance with this Section shall result in the assessment of a penalty in an amount equal to twelve percent of any unpaid compensation or medical benefits or fifty dollars per calendar day, whichever is greater, for each day in which any and all compensation or medical benefits remain unpaid, together with reasonable attorney fees for each disputed claim; however, the fifty dollars per calendar day penalty shall not exceed a maximum of two thousand dollars in the aggregate for any claim. Penalties shall be assessed in the following manner . . . .
In Fontenot v. Reddell Vidrine Water District., 02-439, 02-442, 02-478, p.6
(La. 1/14/03), 836 So.2d 14, 19, rehearing granted on other grounds, 02-442, 02-478
(La. 4/21/03), 851 So.2d 917, the supreme court reiterated the well-known precept
that “[a]wards of penalties in workers’ compensation cases are essentially penal in
nature, being imposed to discourage indifference and the undesirable conduct of
employers and insurers.” The supreme court then agreed with this court’s decision
that La.R.S. 23:1201(F) provides for multiple penalties for multiple violations of
compensation and medical benefits claims. See Fontenot v. Reddell Vidrine Water
Dist., 01-26 (La.App. 3 Cir. 1/9/02), 805 So.2d 233, (on rehearing en banc).
We have determined that Young’s correct indemnity benefit is $326.53. In this
case the greater of the penalties is obviously the fifty-dollar-a-day penalty. Young
was injured on February 4, 1998, and the first payment was made on February 13,
1998. Although the payment was made within the fourteen days that Gulf Coast
Carpets had knowledge of his injury, the payment made on March 18, 1998, to correct
the wrong amount originally paid was late. La.R.S. 23:1201(B). Therefore, the
correcting payment was thirty-three days late, resulting in a penalty of $1,650.
10 The second inaccurate payment was issued on February 27, 1998, and
represented two weeks of payments based on the erroneous calculation. The first
week of this payment was due on February 20, so it was already seven days late in
addition to the fact that the corrected payment was not issued until nineteen days
later, resulting in the benefit payment being a total of twenty-six days late. This
results in a penalty of $1,300. The other week represented in this payment was timely
paid for the benefit payment it represented. However, the correcting payment for the
erroneous calculation was paid nineteen days after it was due, resulting in a $950
penalty.
The final inaccurate payment was made on March 13, once again representing
two weeks of benefits. The payment for the first week was due on March 6, so it was
seven days late in addition to the correcting payment, which was five days late. This
results in a penalty of $600. The corrected payment was issued five days after the
payment representing the second week of indemnity payments was due, resulting in
a $250 penalty. Therefore, we find that Young is entitled to a total penalty of $4,750.
ATTORNEY FEES
Gulf Coast Carpets also claims as error the workers’ compensation judge’s
determination that the adjuster was arbitrary and capricious in relying on Young’s tax
returns when benefits were terminated. As a violation of La.R.S. 23:1201.2,2 the
workers’ compensation judge awarded attorney fees in the amount of $6,500 to
Young.
A workers’ compensation judge’s determination that an award of attorney fees
is appropriate is a question of fact which subjects it to the manifest error standard of
review. Albertson’s, Inc. v. Moulds, 02-753 (La.App. 3 Cir. 12/30/02), 834 So.2d
2 Louisiana Revised Statute 23:1201.2 was repealed by Acts 2003, No.1204, § 2, and the substance is now included in La.R.S. 23:1201 (F).
11 1252, writ denied, 03-280 (La. 4/4/03), 840 So.2d 1217. The inquiry is whether the
employer or insurer acted arbitrarily or capriciously and without probable cause in
discontinuing the payment of compensation benefits so as to warrant imposition of
attorney fees under La.R.S. 23:1201.2. Williams v. Rush Masonry, Inc., 98-2271 (La.
6/29/99), 737 So.2d 41. “Arbitrary and capricious behavior consists of willful and
unreasoning action, without consideration and regard for facts and circumstances
presented, or of seemingly unfounded motivation. Brown, 721 So.2d at 890 (citing
BLACK’S LAW DICTIONARY 104, 211 (6 ed. 1990)).
Gulf Coast Carpets claims that in addition to utilizing the tax returns to
terminate Young’s benefits, the adjuster also referred to Young’s deposition.
However, we agree with the workers’ compensation judge that the adjuster’s actions
were arbitrary and capricious. Young’s deposition clearly indicated that his expenses
were not accurately reflected on his income tax return. He was a man with a seventh
grade education relying on his tax preparer. We cannot say that the workers’
compensation judge’s determination that the adjuster acted arbitrarily and
capriciously when she terminated Young’s benefits was error and affirm the award
of attorney fees.
In his answer, Young has also requested an increase in attorney fees for work
done on this appeal. “An award for attorney fees for work done on appeal is
warranted when the appeal has necessitated additional work on the attorney’s part.”
Colonial Nursing Home v. Bradford, 02-588, p.12 (La.App. 3 Cir. 12/30/02), 834
So.2d 1262, 1272, writ denied, 03-364 (La. 4/21/03), 841 So.2d 802.
Since we did not decrease the amount of compensation benefits as a result of
increased expenses, but instead reduced the amount because the total income figure
for the twenty-six week period did include the workers’ compensation premium
12 amounts before they were deducted, we find that Young is entitled to additional
attorney fees for the work done on appeal. He was successful on appeal on all other
matters. We award an additional $2,500 in attorney fees for work done on this
appeal.
For the reasons set forth in this opinion, we amend the award of the Office of
Workers’ Compensation and find that the credit that Gulf Coast Carpets is entitled to
is $23.47, the difference between what was paid, $350, and what was owed, $326.53.
We reverse the finding that Don Young was not entitled to penalties for late payments
on his first five benefit payments and award a total of $4,750 in penalties. We also
award Don Young an additional $2,500 in attorney’s fees for work done on appeal.
13 NUMBER 04-854
COURT OF APPEAL, THIRD CIRCUIT
STATE OF LOUISIANA
AMY, J., concurring in part, dissenting in part.
I respectfully dissent from that portion of the majority opinion that recognizes
the double inclusion of the compensation benefits premiums in the calculation of the
claimant’s wages. As the issue was not raised by the parties, it is, in my opinion, final
and not before the court. In all other aspects of the opinion, I concur.