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Underwater Const. Inc. et al v. Shirley and Alaska Workers' Comp. (11/4/94), 884 P 2d 150
<![CDATA[
Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
UNDERWATER CONSTRUCTION, INC. )
and INDUSTRIAL INDEMNITY )
COMPANY OF ALASKA, )
) Supreme Court File No. S-5388
Appellants, ) Superior Court File No.
) 3AN-91-6701 Civil
v. )
)
WILLIAM M. SHIRLEY and ALASKA )
WORKERS' COMPENSATION BOARD, ) O P I N I O N
)
Appellees. ) [No. 4144 - November 4, 1994]
)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Dana Fabe, Judge.
Appearances: Mark L. Figura, Rose &
Figura,
Anchorage, for Appellants. Chancy Croft,
Chancy Croft Law Office, Anchorage, for Appellees.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices.
COMPTON, Justice.
This appeal requires us to interpret AS 23.30.225(b),
which allows an employer to reduce workers' compensation benefit
payments to an injured employee if that employee's combined state
and federal social security disability benefits exceed 80% of the
employee's "average weekly wages." We hold that "average weekly
wages" in AS 23.30.225(b) is synonymous with "gross weekly
earnings"in AS 23.30.220(a)(1).
I. FACTUAL AND PROCEDURAL BACKGROUND
William W. Shirley was injured while employed by
Underwater Construction, Inc. (UC)1 in August 1989. He is
permanently and totally disabled. He has received benefits from
UC since the date of injury, pursuant to the Alaska Workers'
Compensation Act (Act), in the amount of $449.37 per week based
on Alaska gross weekly earnings (GWE)2 of $697.61 per week. In
February 1990 Shirley became eligible for federal social security
disability benefits in the amount of $213.27 per week, based on
average current earnings (ACE)3 of $4014 per month.4 After UC
received notice of Shirley's social security benefits, it
petitioned the Alaska Workers' Compensation Board (Board) for an
offset of approximately $104 per week.5 Shirley did not oppose
the petition.
The Board reasoned that AS 23.30.225(b) and 42 U.S.C.
424a should be read in pari materia. Alaska
Statute 23.30.225(b) provides:
When it is determined that, in
accordance with 42 U.S.C. 401-433, periodic
disability benefits are payable . . . for an
injury for which a claim has been filed under
this chapter, weekly disability benefits
payable under this chapter shall be offset by
an amount by which the sum of (1) weekly
benefits to which the employee is entitled
under 42 U.S.C. 401-433, and (2) weekly
disability benefits to which the employee
would otherwise be entitled under this
chapter, exceeds 80 per cent of the
employee's average weekly wages at the time
of injury.
(Emphasis added). 42 U.S.C. 424a provides in part:
If . . . an individual . . .
(1) . . . is entitled to benefits
under section 423 of this title, and
(2) . . . is entitled . . . [to] .
. . (A) periodic benefits on account of
[such individual's] total or partial
disability (whether or not permanent) under a
workmen's compensation law or plan . . .
. . . .
the total of his benefits under section
423 . . . shall be reduced . . . by the
amount by which the sum of
(3) . . . benefits under section[]
423 . . . , and
(4) . . . such periodic benefits
payable . . . under such [state] laws . . .
exceeds the higher of: . . .
(5) 80 per centum of his "average
current earnings". . . . 6
(Emphasis added). The Board concluded that "average weekly
wages" (AWW) meant the greater of "gross weekly earnings" or
federal "average current earnings." With a higher benefit cap,
in this case ACE, fewer benefits are subject to offset. The
Board thus sought to minimize the offset in favor of the
employee. Although Shirley's combined benefits ($662.64 per
week) exceeded 80% of GWE ($558.09 per week), they did not exceed
80% of ACE ($741.04 per week).7 Accordingly, the Board denied
the petition for offset.8 UC appealed the ruling to the
superior court. AS 22.10.020(d); Alaska R. App. P. 602(a)(2).
Citing the inequitable result where computation of the cap per
GWE gives an injured employee less benefits than computation per
ACE, the superior court affirmed the Board's decision.
On appeal to this court, AS 22.05.010(c); Alaska R.
App. P. 202(a), UC argues that the correct interpretation of
AS 23.30.225(b) is independent of federal law: "average weekly
wages"means only "gross weekly earnings."
II. DISCUSSION
A. STANDARD OF REVIEW
The superior court acted as an intermediate appellate
court. Therefore this court need not give deference to its
decision. National Bank of Alaska v. State, Dep't of Revenue,
642 P.2d 811, 816 (Alaska 1982).
In Handley v. State, 838 P.2d 1231, 1233 (Alaska 1992),
we addressed the standard of review for administrative decisions:
"The 'reasonable basis' test is used for questions of law
involving agency expertise. The 'substitution-of-judgment' test
is used for questions of law where no expertise is involved." UC
argues that because the sole issue concerns a question of
statutory interpretation, this court should use the substitution-
of-judgment standard. We agree.
This case does not involve fundamental policy
considerations which require the expertise of the Board.
Anchorage panels have applied 80% of the greater of ACE or GWE as
the cap on total disability benefits,9 while Juneau panels have
applied 80% of GWE as the cap.10 Whichever its decision, the
Board will not be making a policy decision requiring expertise,
but will be applying the law according to two approaches that are
separately consistent, but conflict with each other.
Accordingly, we apply the substitution-of-judgment standard.11
B. ALASKA STATUTE 23.30.225(b) IS AMBIGUOUS
UC argues that the plain meaning of AS 23.30.225(b)
directs that the Alaska offset be calculated with regard to GWE;
in other words, the term "gross weekly earnings"is synonymous
with the term "average weekly wages."12 See Fairbanks N. Star
Borough Sch. Dist. v. NEA-Alaska, Inc., 817 P.2d 923, 926 n.4
(Alaska 1991) (refusing to defer to agency interpretation at odds
with plain meaning of statute).
Shirley responds that the statute is ambiguous. We
agree. "Average weekly wages"is not defined and AS 23.30.225(b)
does not mention, quote, or refer directly to either ACE or GWE.13
C. INTERPRETING AS 23.30.225(b)
1. Green v. Kake Tribal Corp.
Green v. Kake Tribal Corp., 816 P.2d 1363 (Alaska
1991),14 is not dispositive of this case. In Green we noted the
"imperfect fit between the federal and state schemes." Id. at
1368. Indeed, the Social Security Administration's calculation
of the offset (based on ACE) in Green differed from that of the
employer (based on AWW). Id. at 1364 n.6, 1368. Nonetheless,
Green addressed the issue how an overpayment can be recouped
rather than the size of an overpayment; the correctness of the
offset determinations was never before the court.
2. Legislative Intent
In interpreting an ambiguous statute we look to
legislative intent. North Slope Borough v. SOHIO Petroleum
Corp., 585 P.2d 534, 540 (Alaska 1978).
The term "average weekly wages"was the basis for
computing compensation until 1983. Former section 220 provided
in part:
[T]he average weekly wage of the
injured employee at the time of the injury is
the basis for computing compensation and is
determined as follows:
. . . .
(2) the average weekly wage is that most
favorable to the employee calculated by
dividing 52 into the total wages earned,
including self-employment, in any one of the
three calendar years immediately preceding
the injury; . . . .
AS 23.30.220(2) (1977) (emphasis added). In 1983 the term was
replaced by "gross weekly earnings." Ch. 70, 12, SLA 1983.
Amended section 220 provides in part:
(a) The spendable weekly wage of an
injured employee at the time of injury is the
basis for computing compensation. It is the
employee's gross weekly earnings minus
payroll tax deductions. The gross weekly
earnings shall be calculated as follows:
(1) the gross weekly earnings are
computed by dividing by 100 the gross
earnings of the employee in the two calendar
years immediately preceding the injury; . . .
.
AS 23.30.220 (emphasis added). The statutes are very similar;
both provide for a calculation of compensation based on
historical earning capacity. The minor differences are that the
amended statute: (1) looks backward for two instead of three
years, and (2) yields a slightly higher weekly figure.15 The
major difference is in the percentage used to calculate the
benefit. The amended statutes use a higher percentage (80%) of a
lower number (spendable weekly wages or (earning capacity (GWE)
minus payroll tax deductions)). AS 23.30.175-.185. The former
statutes used a lower percentage (66 2/3%) of a higher number
(earning capacity (AWW) without tax deductions). AS 23.30.175-
.190 (1979). This difference is not relevant to the instant
case.
We hold that "average weekly wages"in AS 23.30.225(b)
refers to the measure of historical earning capacity used to
calculate compensation. Accordingly, it is the same as "gross
weekly earnings" in AS 23.30.220(a)(1).16 Notwithstanding the
difference in language between sections 225(b) and 220(a)(1),
"average weekly wages"in AS 23.30.225(b) does not refer to the
higher of a state historical earning capacity or ACE.17
Furthermore, there is no indication that the Alaska
Legislature intended to maximize the injured employee's benefits.
The general purpose of the bill under which AS 23.30.225(b) was
enacted was to make benefits more affordable to employers in
Alaska. In a letter to the Alaska Senate, Governor Jay S.
Hammond stated
[t]he bill reduces the cost of benefits,
with the general purpose of making benefits
more affordable to the employers of the
state. . . . [We believe that this bill]
will have a major beneficial impact on rates
of workmen's compensation insurance in
Alaska.
1977 Senate Journal 203-04.
Shirley's argument that the legislature intended to
follow 42 U.S.C. 424a is unfounded. We agree with UC that
"merely because both statutes include the 80% figure does not
suggest that the remaining words of the Alaska statute should be
ignored." Indeed, there is no reason for the legislature to have
adopted two entirely different measures of earning capacity.18
Finally, there is no evidence that the Alaska offset should never
exceed the federal offset.19
Shirley argues that the legislature's failure to amend
AS 23.30.225(b), notwithstanding past Board decisions, amounts to
tacit approval of the Board's interpretation,20 and that it is
inconceivable that the Alaska legislature intended the result
where an injured employee receives less total benefits because of
a difference in calculation.21 We find both arguments to be
without merit.
3. Statutory Construction
Shirley argues that this court should construe
AS 23.30.225(b) and 42 U.S.C. 424a (1) in pari materia, and (2)
so as to produce a harmonious whole. Cf. Wien Air Alaska v.
Arant, 592 P.2d 352, 356 (Alaska 1979), overruled on other
grounds, Fairbanks N. Star Borough Sch. Dist. v. Crider, 736 P.2d
770, 775 (Alaska 1987).
We disagree with both aspects of Shirley's methodology.
First, this court generally construes statutes in pari materia
where two statutes were enacted at the same time, or deal with
the same subject matter. State v. Eluska, 724 P.2d 514, 517
(Alaska 1986) (Compton, J., dissenting); State v. Frazier, 719
P.2d 261, 262 (Alaska 1986); see also 2A Norman J. Singer,
Sutherland Statutory Construction 51.01-.02 (5th ed. 1992). We
construe state statutes in pari materia with federal statutes
when the statutes deal with the same subject matter, and the
state scheme relies upon the federal scheme. See Morton v.
Hammond, 604 P.2d 1, 4 (Alaska 1979). As noted above,
AS 23.30.220 does not rely upon the federal scheme, and our
legislators expressly adopted a different measure for determining
compensation. Therefore, although the two statutes involve the
same general subject matter, the two statutes are not in pari
materia and will not be construed together.
Second, a "harmonious whole" must be a single
instrument. See Wien Air, 592 P.2d at 356 (harmonizing
provisions of the Act); City of Anchorage v. Scavenius, 539 P.2d
1169, 1174 (Alaska 1975) (harmonizing subsections of Alaska Rule
of Civil Procedure 72). In this case the only law with which
AS 23.30.225(b) must be harmonious is the Act itself, not a
nationwide workers' compensation relief scheme.
III. CONCLUSION
Alaska Statute 23.30.225(b) is ambiguous, but it is
substantially different than 42 U.S.C. 424a. Because there is
no indication that the Alaska legislature intended any
similarity, AS 23.30.225(b) is to be interpreted without regard
to 42 U.S.C. 424a. Accordingly, "average weekly wages" as a
benefit cap under AS 23.30.225(b) is synonymous with "gross
weekly earnings" under AS 23.30.220, insofar as both terms
represent a measure of historical earning capacity. We are not
persuaded that this decision will be inequitable to employees who
receive both state and federal disability benefits.
We REVERSE the decision of the superior court which
affirmed the decision of the Alaska Workers' Compensation Board,
and REMAND this case for determination of the compensation offset
in accordance with this decision.
_______________________________
1 Underwater Construction and its workers' compensation
insurance carrier, Industrial Indemnity Company of Alaska, are
Referred to collectively as "Underwater Construction"or "UC."
2 AS 23.30.220(a)(1) provides:
[T]he gross weekly earnings are computed
by dividing by 100 the gross earnings of the
employee in the two calendar years
immediately preceding the injury; . . . .
This section of the Act was recently struck down in
Gilmore v. Alaska Workers' Compensation Board, ___ P.2d ___, Op.
No. 4135 (Alaska, October 14, 1994).
3 42 U.S.C. 424a(a) (1988) provides in part:
[A]n individual's average current
earnings means the largest of (A) the average
monthly wage . . . used for purposes of
computing his benefits under section 423 of
this title, (B) one-sixtieth of the total of
his wages and self-employment income . . .
for the five consecutive calendar years after
1950 for which such wages and self-employment
income were highest, or (C) one-twelfth of
the total of his wages and self-employment
income . . . for the calendar year in which
he had the highest such wages and income
during the period consisting of the calendar
year in which he became disabled . . . and
the five years preceding that year.
(Emphasis added).
4 Shirley receives social security disability benefits of
$924.20 per month or $213.27 per week ($924.20 x 12/52). See 42
U.S.C.A. 415, 423(a)(2) (1991) (regarding computation of
disability benefits).
5 Eighty percent of Shirley's GWE, calculated under AS
23.30.225(b), is $558.09 per week (0.80 x $697.61). Because the
sum of Shirley's Alaska workers' compensation benefits ($449.37
per week) and his federal social security disability benefits
($213.27 per week) is $662.64 per week, UC argues that it is
entitled to an offset of $104.55 per week ($662.64 - $558.09).
6 42 U.S.C. 424a(d) provides that no federal offset
will be taken if the state workers' compensation benefits are
subject to reduction pursuant to state statute.
7 Shirley's ACE are $926.30 per week ($4014 x 12/52).
Eighty percent of Shirley's weekly ACE is $741.04 per week (0.80
x $926.30).
8 Nonetheless, the Board noted that a panel in Juneau
interpreted AS 23.30.225(b) only in terms of GWE for purposes of
determining offset calculations. See infra note 10.
9 See Henry v. Enserch Alaska Constr., No. 90-0059
(Alaska Workers' Compensation Board [AWCB], March 30, 1990);
Thornton v. Veco, 1987 WL 95592 (AWCB, November 27, 1987);
Stanley v. Wright-Schuchart, No. 82-0039 (AWCB, February 19,
1982), aff'd, No. 3AN-82-2170 Civ. (Alaska Super., May 10, 1983).
10 See Lile v. Long Island Dev., No. 90-0213 (AWCB, August
30, 1990); Milner v. Hull Cutting Co., No. 88-0277 (AWCB, October
26, 1988).
11 This court has occasionally deferred to an agency's
determination "where the agency interpretation is longstanding."
Fairbanks N. Star Borough Sch. Dist. v. NEA-Alaska, Inc., 817
P.2d 923, 925 (Alaska 1991). However, the inconsistent
application of AS 23.30.225(b) by the Anchorage and Juneau panels
demonstrates that there is no "longstanding" interpretation
worthy of deference.
12 UC cites Homer Electric Ass'n v. Towsley, 841 P.2d
1042, 1043-44 (Alaska 1992), for the proposition that statutory
terms may be "construed in accordance with their common usage."
However, UC has not presented evidence that GWE is commonly used
in place of AWW.
13 Furthermore, the fact that different panels of the
Board have interpreted AS 23.30.225(b) differently is testament
to the ambiguity of the statute. See supra notes 9, 10 and
accompanying text.
14 Because Green, an injured worker, received Alaska
workers' compensation benefits and federal social security
disability benefits, the Social Security Administration (SSA)
took an offset. Five years after the injury, the employer's
insurer (ATIE) petitioned the Board for a retroactive offset of
approximately $40,064. The Board (1) granted the offset, but
limited ATIE's recoupment to 20% of its continuing payments to
Green (a process which would take 33 years), and (2) ordered
Green to inform ATIE if he received a lump-sum refund from SSA.
Green, 816 P.2d at 1364. After Green received a payment of
$36,561 from SSA, the Board granted ATIE's petition for a 100%
recoupment (which would take only six years) and we affirmed the
Board's decision. Id. at 1365.
15 The amended statute divides two years (104 weeks)
earnings by 100 (104/100 = 1.04 or 104%). Given similar
earnings, this amounts to a 4% increase over the amount that
would be obtained under the former statute (52/52 = 1.00 or
100%).
16 The Board has on occasion reached the same conclusion.
Rogers v. Ketchikan Pulp Co., 1992 WL 471719, at 2 n.5 (AWCB,
November 17, 1992).
17 We adopt the following analysis of the Anchorage
panel's decision in Thornton:
The 1983 amendment to AS 23.30.220,
which removed the term "average weekly wages"
from the section, created a semantic
ambiguity in AS 23.30.225(b), which retains
its reference to the average weekly wage. . .
.
Based on our review of the
legislative purpose for amending
AS 23.30.220, as best we can discern it, we
believe the legislature left the term
"average weekly wages"in AS 23.30.225(b) by
inadvertence. In every other section in
which "average weekly wages"appeared, it was
changed to "Spendable weekly wage"or "gross
weekly earnings." 2-3, 5-13 chapter 70
SLA 1983 (now codified as AS 23.30.175, .180,
.185, .190, .200, .210, .215, .220,
.265(28)). We believe the question is thus
whether we should construe "average weekly
wages" in subsection 225(b) to mean "gross
weekly earnings"or "spendable weekly wage."
We regard the average weekly wage
under prior 220 as an expression of the
employee's gross earnings in a weekly unit.
Under current 220 the gross weekly earnings
are the representation of the employee's
gross earnings in a weekly unit. By
contrast, the spendable weekly wage is the
gross weekly earnings less payroll
deductions. . . . We therefore conclude that
"average weekly wages"in subsection 225(b)
should be read as "gross weekly earnings."
1987 WL 95592, at *3-4.
18 If the legislature wished to adopt or incorporate 42
U.S.C. 424a, it could have explicitly done so, as other states
have. See Wisc. Stat. Ann. 102.44(5)(a) (West 1988) (computing
offset based on ACE); Fla. Stat. Ann. 440.15(9)(a) (West 1991)
(applying offset based on the higher of ACE or a state
computation of earning capacity).
19 This is the practical result of the Board's
interpretation. The Alaska legislature did contemplate that the
Alaska offset could exceed the federal offset. Both
AS 23.30.225(b) and 42 U.S.C. 424a reduce compensation benefits
where an injured employee receives social security disability
benefits. AS 23.30.225(a) reduces workers' compensation benefits
by one-half of federal retirement or survivors benefits.
However, neither 42 U.S.C. 424a nor any other federal provision
provides a similar offset. Thus, a retiree may get less
compensation under the Alaska scheme than he would get under the
federal scheme. This non-congruence of AS 23.30.225 and 42
U.S.C. 424a shows that the Alaska legislature contemplated that
its offsets could exceed federal offsets, and did not attempt to
mirror the federal provision. This is consistent with Professor
Larson's observation that state "offset provisions vary widely in
their scope and method of operation . . . particular details may
be controlled by express statutory language in an individual
state statute." 4 Arthur Larson, The Law of Workmen's
Compensation 97.35(a), at 18-37 (1993).
20 The Alaska legislature has amended the Act four times
since the Board's decision in Stanley, which first noted the
difference between the state and federal offsets. There is no
evidence that the Alaska legislature was aware of any Board
interpretation. In addition, given the inconsistent
interpretations by the Anchorage and Juneau panels, see supra
notes 9 & 10, it is unclear which interpretation would enjoy
tacit approval. Finally, there is no support in Alaska law for
the proposition that a legislature's failure to amend provisions
signifies tacit approval of an agency's interpretation.
21 We have held that "'to construe statutes so as to avoid
results glaringly absurd, has long been a judicial function.'"
Sherman v. Holiday Constr. Co., 435 P.2d 16, 19 (Alaska 1967)
(quoting Armstrong Paint & Varnish Works v. Nu-Enamel Corp., 305
U.S. 315, 332-33 (1938)). Nevertheless, Shirley fails to
persuade us that an employee's receiving the lesser of two sums
is "glaringly absurd"or beyond the legislature's conception. In
enacting AS 23.30.225(b) the legislature clearly intended to
reduce employer-paid benefits under the state scheme where
federal assistance was available. Because the state offset has
priority, the more social security an injured employee has
accrued, the larger an employer's windfall will be.
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