Opinion
No. 905 C.D. 2014
05-13-2015
David Liss, Petitioner v. Workers' Compensation Appeal Board (Owen J. Roberts School District), Respondent
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE McCULLOUGH
David Liss (Claimant) petitions for review from the May 6, 2014 order of the Workers' Compensation Appeal Board (Board), which affirmed the decision of a workers' compensation judge (WCJ) granting the petition of the Owen J. Roberts School District (Employer) to modify Claimant's compensation benefits.
The underlying facts of this case are not in dispute. Claimant worked for Employer as a plumber. In the course and scope of his employment on August 14, 2010, Claimant sustained an injury to his left shoulder when he lost his balance and fell to the ground. Claimant received total disability benefits pursuant to a notice of compensation payable issued by Employer describing Claimant's injury as a left shoulder sprain. On September 22, 2011, Employer filed a petition to modify and/or suspend Claimant's compensation benefits alleging that Claimant had "returned to work in a sporting goods sale position at an earning power that [Employer] has yet to determine." (Reproduced Record (R.R.) at 4a.) Claimant filed an answer denying this allegation. The matter was assigned to the WCJ, who held multiple hearings.
At these hearings, Employer introduced into evidence, without objection, a packet of documents from the United States District Court for the Eastern District of Pennsylvania (U.S. District Court). These documents revealed that Claimant had been part of a joint state and federal investigation into the purchasing and selling of counterfeit merchandise through online-based stores or auctions. On September 29, 2011, Claimant signed a guilty plea agreement in which he pled guilty to conspiracy to traffic in counterfeit goods, trafficking in counterfeit goods, and mail fraud, with all charges arising from Claimant's sale of counterfeit sports merchandise via the internet. Claimant further agreed to the forfeiture of all counterfeit merchandise seized from his home. Employer also introduced copies of Claimant's 2009 and 2010 tax returns, both of which only reported his earnings from Employer.
Claimant would obtain counterfeit sports merchandise from China and advertise and sell it online as authentic brand merchandise.
Employer also presented the deposition testimony of Michael J. Smychynsky, a certified vocational rehabilitation counselor and forensic economist. At the request of Employer, Smychynsky performed an imputed earning capacity assessment of Claimant. In the course of this assessment, Smychynsky reviewed the U.S. District Court documents. Smychynsky testified that these documents revealed that Claimant was marketing and distributing counterfeit sports merchandise from his residence via an online commercial website. Although Claimant's actions were illegal, Smychynsky noted that there were similar activities in the labor market which are customarily compensated, such as a salesperson. Smychynsky stated that Claimant not only purchased items from China, but he also marketed the items online, sold them, and shipped them to customers. Essentially, Claimant was running an internet business. Based upon Claimant's activities, Smychynsky imputed an earning capacity to Claimant of $40,000.00 to $43,000.00 annually. Smychynsky explained that he relied on the Department of Labor's Dictionary of Occupational Titles, the Occupational Outlook Handbook, and data from both the United States and Pennsylvania Departments of Labor in determining Claimant's imputed earning capacity. (R.R. at 14a-20a.)
Employer also submitted, without objection, a report from Smychynsky dated February 15, 2012, detailing his earning assessment of Claimant.
On cross-examination, Smychynsky acknowledged that he did not interview Claimant. Smychynsky stated that he reviewed the sales from Claimant's online business from January to August 2010 as part of his overall assessment, but did not review any sales data subsequent to August 2010. However, Smychynsky explained that his earning capacity assessment was not trying to determine what he actually earned, but was looking at what he could earn performing similar activities in a legal business. Smychynsky also acknowledged that he was not concerned with Claimant's amount of earning before and after a specific date or time, but noted that Claimant's illegal business appeared to have been operating since 2007. Upon persistent questioning by Claimant's counsel, Smychynsky reiterated that his earning capacity assessment was not defined by what Claimant earned during a specific time period, but was premised on his capacity to earn performing similar activities in a legal business. At the conclusion of his deposition, Smychynsky agreed that Claimant's illegal internet business would be categorized as self-employment. (R.R. at 22a-47a.) Claimant did not testify or present any evidence in opposition to Employer's evidence.
Smychynsky also authored a report dated February 15, 2012, detailing this assessment. In this report, Smychynsky stated that Claimant recorded sales of nearly $50,000.00 during this eight-month period. Smychynsky opined that Claimant could have generated as much as $75,000.00 in sales.
By decision and order dated December 4, 2012, the WCJ granted Employer's modification petition, but denied and dismissed its suspension petition. The WCJ credited Smychynsky's testimony and found that Claimant had an earning capacity of $826.92 per week, thereby modifying Claimant's total compensation benefits to $89.52 per week. (WCJ's Decision, Findings of Fact Nos. 9-10.) The WCJ rejected Claimant's argument that Employer could not use illegal earnings to impute earnings, emphasizing that Employer "merely utilized the skills that Claimant demonstrated while conducting his illegal business to assess Claimant's earning power." (WCJ's Decision, Finding of Fact No. 10.) The WCJ also rejected Claimant's argument that Employer must compare his pre- and post-injury illegal business earnings, noting that "Claimant's own tax records are completely devoid of any information about his 'business' earnings" and "Employer is not required to prove what Claimant is clearly hiding from Employer and the Federal government." (WCJ's Decision, Finding of Fact No. 9.) Claimant appealed to the Board, which affirmed.
On appeal to this Court, Claimant argues that the WCJ erred in granting Employer's modification petition based upon a post-injury imputed earning capacity when Claimant's pre-injury concurrent earning capacity was never considered or addressed. We disagree.
Our scope of review is limited to determining whether an error of law was committed, whether necessary findings of fact are supported by substantial evidence, and whether constitutional rights were violated. DeGraw v. Workers' Compensation Appeal Board (Redner's Warehouse Markets, Inc.), 926 A.2d 997 (Pa. Cmwlth. 2007).
Section 306(b) of the Workers' Compensation Act (Act) addresses partial disability, stating, in pertinent part, as follows:
Act of June 2, 1915, P.L. 736, as amended, added by the Act of June 24, 1996, P.L. 350, 77 P.S. §512.
(1) For disability partial in character caused by the compensable injury or disease (except the particular cases mentioned in clause (c)) sixty-six and two-thirds per centum of the difference between the wages of the injured employe, as defined in section 309, and the earning power of the employe thereafter; but such compensation shall not be more than the maximum compensation payable. This compensation shall be paid during the period of such partial disability except as provided in clause (e) of this section, but for not more than five hundred weeks. Should total disability be followed by partial disability, the period of five hundred weeks shall not be reduced by the number of weeks during which compensation was paid for total disability. The term 'earning power,' as used in this section, shall in no case be less than the weekly amount which the employe receives after the injury; and in no instance shall an employe receiving compensation under this section receive more in compensation and wages combined than the current wages of a fellow employe in employment similar to that in which the injured employe was engaged at the time of the injury.
(2) 'Earning power' shall be determined by the work the employe is capable of performing and shall be based upon expert opinion evidence which includes job listings with agencies of the department, private job placement agencies and advertisements in the usual employment area. Disability partial in character shall apply if the employe is able to perform his previous work or can, considering the employe's residual productive skill, education, age and work experience, engage in any other kind of substantial
gainful employment which exists in the usual employment area in which the employe lives within this Commonwealth. If the employe does not live in this Commonwealth, then the usual employment area where the injury occurred shall apply. If the employer has a specific job vacancy the employe is capable of performing, the employer shall offer such job to the employe. In order to accurately assess the earning power of the employe, the insurer may require the employe to submit to an interview by a vocational expert who is selected by the insurer and who meets the minimum qualifications established by the department through regulation. The vocational expert shall comply with the Code of Professional Ethics for Rehabilitation Counselors pertaining to the conduct of expert witnesses.77 P.S. §512(1), (2).
Our Supreme Court reviewed section 306(b)(1) of the Act in Harle v. Workmen's Compensation Appeal Board (Telegraph Press, Inc.), 658 A.2d 766 (Pa. 1995). In Harle, the claimant sustained a work-related injury to his thumb, for which the employer accepted liability, and the claimant received total disability benefits. The claimant's physician later released the claimant to return to his pre-injury job without restrictions. However, the employer had ceased operations by this time. The claimant obtained a similar job with a different employer but at a lower wage. The original employer filed a petition to terminate the claimant's benefits. The WCJ, finding that all of the claimant's disability related to his work injury had ceased, granted the petition. The Board affirmed the WCJ's decision, but this Court reversed, noting that the evidence established that the claimant was not fully recovered from his work injury, but still suffers from some residual impairment. Hence, we held that the employer failed to meet the burden of proof for a termination petition. Because the claimant was working a similar job for a new employer at lower wages, we remanded for a determination of any partial disability benefits due to the claimant.
However, on appeal, our Supreme Court reversed and held that a suspension of benefits was proper because the claimant's earning power was no longer affected by his work injury. The court explained that:
We find it significant that the legislation states that 'earning power' . . . shall in no case be less than the weekly amount which the employe receives after the injury. The inference suggested by this language is that 'earning power' can, in some cases, be more than the employee is receiving in actual wages after the injury. In other words, benefits for partial disability are based on the difference between pre-injury earnings and post-injury earning power, not post-injury earnings, although in no case can the difference be greater than the difference between pre-injury earnings and post-injury earnings.Id. at 769. This Court later applied Harle in 309 Nissan v. Workers' Compensation Appeal Board (Horowitz), 819 A.2d 126 (Pa. Cmwlth. 2003), wherein we held that a suspension of benefits is warranted where the claimant was capable of returning to his pre-injury job as a commissioned salesperson without restrictions and his work injuries did not decrease his potential post-injury earning power.
With the addition of section 306(b)(2) of the Act, an employer seeking a modification of benefits can either offer the claimant a specific job which it has available and which the claimant is capable of performing, or it can establish the claimant's earning power through expert opinion evidence. South Hills Health System v. Workers' Compensation Appeal Board (Kiefer), 806 A.2d 962 (Pa. Cmwlth. 2002).
Moreover, "where a claimant returns to gainful employment in a position that eludes proof of the claimant's actual earnings, such as self-employment, compensation benefits may be modified or suspended based upon imputed earning capacity, which may be established through expert vocational testimony regarding wages earned by workers in comparable positions in the geographical area during the relevant time frame." Trimmer v. Workers' Compensation Appeal Board (Monaghan Township), 889 A.2d 141, 145 (Pa. Cmwlth. 2005), rev'd on other grounds, 905 A.2d 913 (Pa. 2006) (citations omitted).
Similarly, in Capuano v. Workers' Compensation Appeal Board (Boeing Helicopter Co.), 724 A.2d 407 (Pa. Cmwlth. 1999), this Court specifically held that in adjudicating a modification petition, "earnings from self-employment may indeed be taken into consideration for determining a claimant's earnings or earning capacity." Id. at 413. However, since self-employment income is excluded from the calculation of a claimant's average weekly wage, if a claimant receiving disability benefits from an employer had concurrent self-employment earnings both before and after a work injury, then only a post-injury increase in the self-employment earnings is to be considered when reducing the amount of disability benefits payable to a claimant. Weissman v. Workers' Compensation Appeal Board (Podiatry Care Center, P.C.), 878 A.2d 953 (Pa. Cmwlth. 2005).
We explained in Weissman that such an approach would prevent a windfall to an employer by allowing it a credit for the entire amount of a claimant's self-employment income "based on the fortuitous circumstances that [c]laimant's employment injury did not prevent him from continuing his self-employment." Id. at 962. We further stated that a claimant should not be punished after his work injury "simply because he had the initiative to work for [e]mployer and, at the same time, for himself." Id.
The Board properly explained that the equitable considerations in Weissman are simply not present here. There is no dispute that Claimant's illegal, online business was operating both before and after his work injury. However, as both the WCJ and the Board noted, Claimant neither reported any income from his online business on his tax returns nor did he present any earnings evidence before the WCJ. In fact, Claimant did not testify before the WCJ or present any evidence on his own behalf. While the burden is on an employer seeking a modification, Channellock, Inc. v. Workers' Compensation Appeal Board (Reynolds), 72 A.3d 731 (Pa. Cmwlth. 2013), we agree with the WCJ that Employer was not required to prove what Claimant was clearly hiding from Employer and the federal government. Without this earnings evidence, it was impossible for the WCJ or the Board to apply Weissman and determine if Claimant's concurrent earnings increased subsequent to his work injury.
In the course of his argument, Claimant asserts that Smychynsky was provided with actual sales records from his online business dating back to January 2009. However, the record contains no such documents. Likewise, the record lacks evidence of Claimant's self-employment earnings subsequent to his August 14, 2010 work injury. --------
Furthermore, Smychynsky testified that he was not concerned with the amount of Claimant's "business" earnings before and after a specific date or time. Indeed, Smychynsky stated that his earning capacity assessment was not defined by what Claimant earned during a specific time period, but was premised on his capacity to earn performing similar activities in a legal business. In Weissman, we noted that the 1996 amendments also revised section 309 of the Act, 77 P.S. §582, relating to average weekly wage, to focus on a claimant's "economic reality" and provide a "more accurate and realistic measure" of a claimant's wages so that the claimant is "not over-compensated and the employer not over-burdened." Id. at 962 (citations omitted). Under the unique facts of this case, Claimant himself has proven that he is capable of self-employment even with his work injury and his true "economic reality" can only be determined by imputing earnings consistent with Trimmer.
Given the lack of any equitable consideration, and Claimant's active concealment of his pre- and post-injury earnings from his illicit, concurrent self-employment, we cannot conclude that the WCJ erred in granting Employer's modification petition and imputing an earning capacity to Claimant based solely on the skills Claimant demonstrated in running his online business.
Accordingly, the order of the Board is affirmed.
/s/_________
PATRICIA A. McCULLOUGH, Judge ORDER
AND NOW, this 13th day of May, 2015, the order of the Workers' Compensation Appeal Board, dated May 6, 2014, is hereby affirmed.
/s/_________
PATRICIA A. McCULLOUGH, Judge