Opinion
No. 1756 C.D. 2012
03-27-2013
William P. Corbett, Inc., Petitioner v. Workers' Compensation Appeal Board (Mendicino), Respondent
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY SENIOR JUDGE FRIEDMAN
William P. Corbett, Inc. (Employer) petitions for review of the August 10, 2012, order of the Workers' Compensation Appeal Board (WCAB), which affirmed the decision of a workers' compensation judge (WCJ) on remand that granted in part and denied in part the employee challenge petition (challenge petition) filed by Tina Mendicino (Claimant) pursuant to section 413(c)(1) of the Workers' Compensation Act (Act) in response to Employer's notification of suspension. We affirm.
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §774.2(1), added by section 2 of the Act of July 1, 1978, P.L. 692.
The WCJ denied Claimant's penalty petition. Claimant did not challenge that decision in her appeal to the WCAB, so it is not an issue before this court.
Claimant started working for Employer in 2004, performing interior design and sales work. On August 25, 2005, while visiting a job site at a renovated church, Claimant climbed the bell tower to take pictures of the subcontractors' work. While descending, the ladder broke and Claimant began falling. The contractor caught Claimant by the wrist and hair to prevent her from falling three stories; however, she needed surgery to repair the damage to her wrist.
On April 26, 2006, pursuant to a notice of compensation payable (NCP), Claimant received total disability compensation benefits of $519.39 per week, based on an average weekly wage (AWW) of $779.08. (WCJ's Decision, 6/4/09, Findings of Fact, No. 2.) The acknowledged work-related injury was a triangular fibrocartilage tear of the left wrist, which was later amended to include carpal tunnel syndrome.
On March 14, 2007, Employer issued a notice of suspension pursuant to section 413(c) of the Act, because Claimant, who never returned to work for Employer after the injury, was now self-employed and earning wages equal to or greater than the pre-injury wage. Claimant filed a challenge petition disputing the suspension.
77 P.S. §774.2, added by section 2 of the Act of July 1, 1978, P.L. 692.
After a hearing, the WCJ issued a decision on June 4, 2009, and found the following facts. Claimant started her own company, Diomo Interiors (Diomo), a limited liability company providing comparable interior design. (WCJ's Decision, 6/4/09, Findings of Fact, No. 3.) In operating Diomo, Claimant hired outside contractors and incurred other business-related expenses.
Two accountants testified about Claimant's finances. Matthew J. Nichter testified that he had been Claimant's accountant for ten years. Nichter stated that Claimant had no taxable income from Diomo in 2006 and 2007 because costs exceeded revenue. Nichter admitted that he did not review individual receipts to determine if an expense was business-related.
James S. Fellin, CPA, testified on behalf of Employer. Fellin bemoaned the lack of appropriate source documents, such as receipts, providing evidence of the items purchased, the date of purchase, and the amount paid. Fellin calculated an annualized gross profit for 2006 of $73,052.00 and a gross profit of $14,592.00 for the first six months of 2007.
Based on the accountants' testimonies, the WCJ determined Claimant's earning power. The WCJ examined an 18-month period in 2006 and 2007 and determined that Claimant earned $40,888.00 during that period. (WCJ's Decision, 6/4/09, Findings of Fact, No. 3.) Accordingly, the WCJ established Claimant's weekly earning power at $523.40. Subtracting this earning power from the previously-established, pre-injury AWW of $779.08 produced a wage loss amount of $255.68, entitling Claimant to weekly partial disability benefits of $170.45 effective June 1, 2006.
In Insert A, the WCJ calculated Claimant's weekly earning power by subtracting the business-related expenses from the gross profits:
Employer appealed the decision to the WCAB, challenging the WCJ's findings of fact and arguing that Employer deserved credit for overpayment between June 1, 2006, and March 14, 2007. On February 4, 2010, the WCAB affirmed in part, amended in part, and remanded in part. The WCAB affirmed the WCJ's method of calculation in determining Claimant's partial disability rate. The WCAB also amended the WCJ's order to reflect Employer's ability to seek future modification or suspension of the benefits based on post-injury earning power. Finally, the WCAB remanded the matter to the WCJ to determine if Employer should receive credit for overpayment.
On November 4, 2010, the WCJ issued a decision addressing the remanded portion of the employee challenge petition. The WCJ determined that Employer did not raise the issue of credit for overpayment at any of the previous hearings and did not file a petition to review, modify, or suspend Claimant's benefits. Therefore, the WCJ concluded that Employer waived the issue. (WCJ's Decision, 11/4/10, at 2.)
Employer appealed this decision to the WCAB. Employer challenged the WCJ's determination of Claimant's post-injury earning power and argued that the WCJ could address the overpayment issue because the parties had agreed to expand the scope of the challenge petition. On August 10, 2012, the WCAB affirmed. Employer now petitions this court for review.
Our scope of review is limited to determining whether constitutional rights were violated, whether the adjudication is in accordance with the law, and whether necessary findings of fact are supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa. C.S. §704.
First, Employer argues that the WCJ erred in calculating Claimant's post-injury earning capacity.
While the WCAB did not address the earning capacity issue in its August 10, 2012, decision, the WCAB did address the issue in its February 4, 2010, decision. The WCAB noted in its August 10, 2012, decision that it preserved the factual and legal issues from the prior appeal for review by this court.
Section 306(b)(1) of the Act allows a claimant to claim partial disability in "the difference between the wages of the injured employe . . . and the earning power of the employe thereafter." 77 P.S. §512(1); see also 309 Nissan v. Workers' Compensation Appeal Board (Horowitz), 819 A.2d 126, 129 (Pa. Cmwlth. 2003) ("[I]f the evidence establishes only that the claimant has regained some, rather than all, of his or her pre-injury earning capacity[,] then benefits are modified rather than suspended and the claimant will continue receiving a portion of his or her original benefits."). "'Earning power' shall be determined by the work the employe is capable of performing . . . ." Section 306(b)(2) of the Act, 77 P.S. §512(2).
Employer alleges that the WCJ erred by using actual earnings instead of gross income to determine earning capacity. Either gross income or net profit can be an accurate reflection of earning power for the self-employed. Compare Moore v. Workmen's Compensation Appeal Board, 539 Pa. 333, 340, 652 A.2d 802, 806 (1995) (using gross income to most accurately reflect earnings from self-employment), with Acme Markets, Inc. v. Workers' Compensation Appeal Board (Brown), 890 A.2d 21, 25 (Pa. Cmwlth. 2006) (using net earnings to determine earnings from self-employment).
Moreover, "whether a claimant's gross income or net income most accurately reflects earnings is a question of fact for the WCJ." Mullen v. Workers' Compensation Appeal Board (Mullen's Truck & Auto Repair), 945 A.2d 813, 819 (Pa. Cmwlth. 2008) (emphasis added). This court may not reweigh the evidence or substitute its judgment for that of the WCJ. Moore, 539 Pa. at 342, 652 A.2d at 807. "The WCJ's findings of fact on the issue of earning power, if supported by substantial evidence, must be accepted." Acme Markets, Inc., 890 A.2d at 25.
The WCJ determined that the 18-month period from June 2006 to December 2007 represented a fair period to evaluate Claimant's earning power. (WCJ's Decision, 6/4/09, at 4.) Furthermore, the WCJ decided that the gross profits, minus the costs of the goods sold and operating expenses, provided the best indication of Claimant's post-injury earning capacity. The WCJ also opted to include some expenses, while excluding others.
June 2006 is the date that Claimant formed Diomo. December 2007 is the date of Claimant's last tax return of record.
The WCJ listed the allowable, business-related expenses in Insert A. The WCJ did not allow Claimant to offset expenses for her home, cell phone, car, expenses listed under "other expenses" in her Schedule C form, or gifts to customers. (WCJ's Decision, 6/4/09, at 4.) --------
To reiterate, these determinations are questions of fact and can be supported only by substantial evidence of record. The WCJ calculated Claimant's business expenses using credible testimony from Claimant, Nichter, and Fellin and abundant financial records. Thus, substantial evidence supported the WCJ's findings of fact and the WCJ did not err in calculating Claimant's post-injury earning capacity.
Second, Employer argues that it is entitled to credit for overpayment from June 1, 2006, through March 14, 2007. We disagree.
Section 413(c)(1) of the Act states:
If the employe contests the averments of the insurer's affidavit, a special supersedeas hearing before a workers' compensation judge may be requested by the employe indicating by a checkoff on the notification form that the suspension of benefits is being challenged and filing the notification of challenge with the department within twenty days of receipt of the notification of suspension from the insurer. The special supersedeas hearing shall be held within twenty-one days of the employe's filing of the notification of challenge.77 P.S. §774.2(1). A supersedeas hearing addresses whether the employee has returned to work without a wage loss, the date the employee returned to work, and whether the employee remains working without a wage loss. U.S. Airways v. Workers' Compensation Appeal Board (Rumbaugh), 578 Pa. 456, 471, 854 A.2d 411, 420 (2004).
Employer argues that the parties agreed to expand the scope of the supersedeas hearing to address Claimant's workers' compensation benefit entitlement, including a determination on overpayment. At the hearing, the parties did waive the 15-day requirement (N.T., 4/11/07, at 3.), tailor procedures to the unique circumstances of the case (N.T., 4/11/07, at 6-7.), and extend deadlines (N.T., 4/11/07, at 39-40). However, the parties never agreed to expand the challenge petition to include Employer's entitlement to credit for overpayment. Indeed, the record contains no discussion of credit for overpayment. Employer raised the issue for the first time in its appeal to the WCAB. Thus, the WCJ did not err in concluding that the Employer waived the issue.
Accordingly, we affirm.
/s/_________
ROCHELLE S. FRIEDMAN, Senior Judge
ORDER
AND NOW, this 27th day of March, 2013, we hereby affirm the August 10, 2012, order of the Workers' Compensation Appeal Board.
/s/_________
ROCHELLE S. FRIEDMAN, Senior Judge
| 2006 | |
|---|---|
| Gross [receipts] | $79,769 |
| Cost[s] of goods sold | $43,243 |
| Gross Profit | $36,526 |
| Other allowable expensesAdvertising | $75 |
| Contract labor | $480 |
| Legal services | $235 |
| Supplies | $10,861 |
| Other expenses | $511 |
| TOTAL | $12,162 |
| Net profit | $24,364 |
| 2007 | |
| Gross receipts | $43,330 |
| Costs of goods sold | $0 |
| Gross profits | $43,330 |
| Other allowable expensesSupplies | $26,318 |
| Taxes and LIC | $200 |
| Other expenses | $288 |
| TOTAL | $26,806 |
| Net profit | $16,524 |
18 month total = $40,888 divided by 78.12 weeks (18 months x 4.34) -523.40 p/w earning power
| AWW779.08 - | Earning power523.40 = | wage loss255.68 x 2/3 = | P/D$170.45 |