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Bauder v. Alaska Airlines, Inc. (8/2/2002) sp-5603
Bauder v. Alaska Airlines, Inc. (8/2/2002) sp-5603
Notice: This opinion is subject to 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, phone (907)
264-0608, fax (907) 264-0878, e-mail
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
BROCK C. BAUDER, )
) Supreme Court No. S-9886
Appellant, )
) Superior Court No.
v. ) 1SI-99-159 CI
)
ALASKA AIRLINES, INC., ) O P I N I O N
and ALASKA WORKERS' )
COMPENSATION BOARD, )
)
Appellees. ) [No. 5603 - August 2,
2002]
)
Appeal from the Superior Court of the State
of Alaska, First Judicial District, Sitka,
Larry C. Zervos, Judge.
Appearances: David Graham, Graham Law Firm,
Sitka, for Appellant. Mark L. Figura, Rose &
Figura, Anchorage, for Appellee Alaska
Airlines, Inc.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Bryner,
Justice, not participating.]
PER CURIAM
The judgment of the superior court affirming the
underlying decisions of the Alaska Workers' Compensation Board is
AFFIRMED for the reasons expressed in the attached opinion of the
superior court.1
IN THE SUPERIOR COURT FOR THE STATE OF ALASKA
FIRST JUDICIAL DISTRICT AT SITKA
BROCK C. BAUDER, )
)
Appellant, )
)
vs. )
)
ALASKA AIRLINES, INC., and )
ALASKA WORKERS' COMPENSATION )
BOARD, )
) Case No. 1SI-99-159 CI
Appellees. )
)
DECISION ON APPEAL
Brock Bauder appeals the determinations by the Alaska
Workers' Compensation Board concerning his permanent partial
impairment rating, his entitlement to additional temporary total
disability benefits and his compensation rate. For the reasons
stated below, however, the court concludes that the Board
correctly applied the law and that its determinations on these
issues were supported by substantial evidence.
Mr. Bauder also argues that the workers' compensation
administrator handling his case frivolously or unfairly
controverted his claim. But at the time of the controversion,
Mr. Bauder was not entitled to a lump sum award and therefore the
controversion was not unfair or frivolous.
Finally, Mr. Bauder argues that he is entitled to
penalties, interest, attorney's fees, and costs. But, again, the
court determines that the Board correctly addressed these claims
in its decision.
I. FACTS
On July 24, 1993, Brock Bauder injured his back while
working for Alaska Airlines in Sitka, Alaska.2 This workers'
compensation case arises out of that injury and his employment
record with Alaska Airlines before and after July 24, 1993.
In the spring of 1988, Mr. Bauder graduated from high
school.3 He fished commercially that summer and then worked for
Spenard Builders Supply.4 But Mr. Bauder had always been
intrigued with aviation and flying and he thought the best way to
pursue that goal was to work for Alaska Airlines.5
In December 1988, as Mr. Bauder tells it, he talked the
manager of the Sitka Alaska Airline Station into hiring him as a
casual employee to unload a plane loaded with freight.6 After
that, the manager called Mr. Bauder in to work for the airline
when employees were sick or on vacation over the holiday season.7
This casual employment lasted just a few weeks, until early
January 1989.8 Mr. Bauder went fishing again but was re-hired by
Alaska Airlines on June 5, 1989 as a temporary, part-time ramp
agent.9 Before Mr. Bauder began to work for the company, he
filled out an application and informed the company that he had
undergone surgery on his back in 1985 after a high school
basketball injury.10
Mr. Bauder worked as a temporary employee for Alaska
Airlines that summer and in August he applied for a permanent
position.11 On September 5, 1989, he was hired as a permanent,
part-time employee on the ramp.12 He remembers working on and off
between September of 1989 and June of 1990 and the records
establish that he did work over the holiday season of 1989-1990
and in the spring of that year.13
In June of 1990, Alaska Airlines reclassified Mr.
Bauder to a full-time position for the summer.14 In the fall,
because of a reduction in flights, he was given the option of
returning to part-time employment or being laid off.15 Mr. Bauder
decided to go to college at the University of North Dakota to
study aviation administration and to learn to fly.16 He was laid
off on September 3, 1990.17
After completing his first year of school, Mr. Bauder
wrote to the manager of the Sitka Alaska Airlines station and
asked for summer work.18 He was hired as a temporary, part-time
ramp agent on June 5, 1991 and worked that summer.19 He also
commercially fished for one or two weeks.20 After the summer
season ended, Mr. Bauder was laid off and he returned to college
in the fall.21
In May of 1992, Mr. Bauder again resumed working for
Alaska Airlines as a part-time ramp agent until being furloughed
after the summer season ended.22 Mr. Bauder returned to the
University of North Dakota for the fall semester.23
When Mr. Bauder came home to Sitka for the Christmas
holidays in 1992, he worked for Alaska Airlines for approximately
10 days.24 And, as was now becoming a pattern, he returned to
work for the airline in the summer of 1993.25
Mr. Bauder injured his lower back while loading boxes
of fish into the belly of an airplane on July 24, 1993.26 He
sought treatment from Dr. Donald Funk, who recommended physical
therapy and released him to return to work provided the work was
not strenuous.27 Mr. Bauder did light duty work until he was
again laid off after the summer season on September 7, 1993.28
Rather than returning to North Dakota for school that
fall, Mr. Bauder went to Denver, Colorado to attend a school-
sponsored internship with United Airlines.29 In Colorado, Mr.
Bauder sought treatment for his back from Dr. Jeffrey Kleiner.30
Dr. Kleiner diagnosed the problem as "a left-sided sacroiliac
joint arthropathy or sprain."31 After several visits, Dr. Kleiner
told Mr. Bauder that he might have to have surgery.32
Mr. Bauder's internship ended in December of 1993, and
Dr. Kleiner released him to do light work on December 15, 1993.33
On the same day, he returned to work for Alaska Airlines for the
holiday season, and as was usual, after the season ended he was
laid off in mid-January.34
Dr. Bill Boettcher is a Seattle orthopedic surgeon. He
performed the 1985 surgery on Mr. Bauder's back when he was
injured in high school.35 On January 18, 1994, Mr. Bauder went to
Dr. Boettcher because of recurrent problems with his back.36 Dr.
Boettcher diagnosed the problem as being spondylolisthesis, or a
separation of the vertebrae in the lumbar region, and referred
him to another doctor, Dr. Edwin Lauren.37 On February 4, 1994,
Dr. Laurnen performed a fusion of the separated vertebrae in Mr.
Bauder's back.38 After the operation, Mr. Bauder was ordered to
rest at home.39
When Mr. Bauder was first injured in July of 1993, he
filled out a workers' compensation injury report.40 After the
operation, Mr. Bauder was eligible for temporary total disability
benefits.41 A claim examiner calculated Mr. Bauder's temporary
total disability benefit as $157.34 a week.42 Mr. Bauder
questioned the amount of his disability benefit from the
beginning.43
Mr. Bauder was eventually released to go back to work
provided the work was sedentary.44 Then on April 28, 1994, Dr.
Laurnen released Mr. Bauder to do light work.45 Mr. Bauder was
able to return to work at Alaska Airlines performing light work
on March 14, 1994.46 His workers' compensation benefits stopped
on March 13, 1994.47
On May 25, 1994, Dr. Laurnen told vocational
rehabilitation counselor Denise Van Der Pol that it was not in
Mr. Bauder's best interest to continue to work as a ramp service
agent.48 Dr. Laurnen recommended that Mr. Bauder find light work
activities that would not put excessive stress on his back.49
Also, about this time, Alaska Airlines did not have further light
duty work available and Mr. Bauder was put on sick leave status.50
After his sick leave and vacation benefits were used, Mr. Bauder
was put on medical leave.51 Again Mr. Bauder began receiving
temporary total disability payments.52
In the fall of 1994, Mr. Bauder returned to North
Dakota to complete his final year of college and he graduated
that spring.53 In June he became a contract pilot with Oklahoma
Executive Jet Charter.54 Mr. Bauder took this position in order
to build up his flight hours.55 He was paid $35 a day to cover
expenses.56 Mr. Bauder worked for Oklahoma Executive Jet Charter
until November 17, 1995.57 He continued to receive temporary
total disability benefits during this period.58
On December 29, 1995, Marilyn Noel, an account
executive with the workers' compensation administrator
representing Alaska Airlines, filed a notice controverting Mr.
Bauder's entitlement to continuing temporary total disability
benefits.59 Ms. Noel claimed that temporary total disability
benefits should end because Mr. Bauder was working.60 Also, she
wrote the Department of Labor and requested that a fraud
investigation be started because she claimed that Mr. Bauder was
working and receiving benefits at the same time.61 His worker's
compensation benefits were stopped on December 26, 1995.62
After leaving Oklahoma Executive Jet Charter in
November, Mr. Bauder accepted an offer to become Director of
Human Resources/Pilot for a start-up corporation called NOVI
Global Investments (NOVI).63 Although Mr. Bauder was promised an
annual salary of $60,000, and in March was promised even more
money, he was never paid anything by NOVI.64 Because he was not
paid, Mr. Bauder left NOVI in May of 1996 and filed a wage claim.65
He eventually received a judgment in his favor and against NOVI
on this claim.66
In September of 1996, Ms. Noel wrote to Mr. Bauder and
asked him to be seen by Dr. Boettcher for a permanent impairment
rating evaluation.67 Dr. Boettcher saw Mr. Bauder on October 4,
1996 and rated him as having a 25% permanent partial impairment.68
During the evaluation, the doctor noted that there were problems
with the last operation and he referred Mr. Bauder to Dr. Laurnen
for an examination and perhaps, another operation.69 Dr. Laurnen
did see Mr. Bauder and performed another operation on November 7,
1996.70 Mr. Bauder began receiving temporary total disability
payments again on the 7th of November as well.71
In March and April of 1997, Mr. Bauder worked as a
pilot for Penn Air.72 From April 21, 1997 to May 3, 1997, Mr.
Bauder was employed as a pilot for Wings of Alaska.73 His
temporary disability benefits ended on April 2, 1997.74
Mr. Bauder continued to see Dr. Laurnen and on June 2,
1997, Dr. Laurnen determined that Mr. Bauder was able to perform
the work at Alaska Airlines with no restrictions.75
At the request of Ms. Noel, Mr. Bauder saw Dr.
Boettcher on June 5, 1997 for another rating.76 Dr. Boettcher
again rated Mr. Bauder as being 25% permanently impaired.77 But
the doctor noted that Mr. Bauder was physically able to work as
an airline pilot and that he was medically stable.78
On July 1, 1997, Ms. Noel filed another notice
controverting Mr. Bauder's right to a lump sum payment of his
permanent partial impairment disability benefits until the fraud
investigation was completed.79 In addition Ms. Noel asked Mr.
Bauder to be seen by Dr. Shawn Hadley for an employer's medical
examination.80 On October 5, 1997, Dr. Hadley found Mr. Bauder to
have a permanent impairment of only 10%.81
On August 20, 1997, Mr. Bauder, now represented by an
attorney, filed an application to adjust his claim for workers'
compensation benefits. An attorney representing the workers'
compensation administrator filed yet another controversion of Mr.
Bauder's adjusted claim on September 12, 1997 and on December 8,
1998, a hearing was held before the Workers' Compensation Board.
II. PROCEEDINGS BEFORE THE BOARD AND THE COURT
Mr. Bauder raised five issues before the Board.82 He
argued that the administrator relied on the wrong workers'
compensation provision to calculate his total temporary benefits
and that the administrator improperly terminated these benefits
before he was medically stable. He argued that he was entitled
to benefits based on a permanent partial impairment rating of 25%
rather than the 10% rating the claims adjuster was offering. And
he argued that the administrator's controversion of his claims
was frivolous and that he should be awarded penalties, interest
and attorney fees. The administrator contested all these issues
and argued that Mr. Bauder was paid total temporary disability
benefits when he should not have received these payments.
After hearing testimony from Mr. Bauder, an Alaska
Airlines employee who handles workers' compensation issues for
the airline and from Ms. Noel, the claims adjuster, and after
considering the record, the Board issued a written decision. In
that decision, the Board concluded that the claims adjuster had
relied on the correct statutory provision to calculate Mr.
Bauder's temporary benefits, but did not decide any of the other
issues.83
The delay in resolving the other issues had to do with
the Board's decision to request a second medical exam before
deciding what Mr. Bauder's permanent partial impairment rating
should be. The Board noted the dispute between Dr. Hadley's 10%
rating and Dr. Boettcher's 25% rating. And even though there
were procedural problems with Dr. Boettcher's 25% rating, the
Board still placed sufficient weight on his opinion to ask for
another opinion.84
After the Board's December decision, Mr. Bauder filed
an appeal to the superior court. He also saw Dr. Douglas Smith
for the Board's requested medical examination.85 Dr. Smith rated
Mr. Bauder's permanent impairment at 15%.86
In July of 1999, the Board issued a second written
decision. The Board found that Dr. Boettcher's opinion was
sufficient to raise the presumption that Mr. Bauder suffered a
25% permanent impairment rating, but that Dr. Hadley's 10% rating
was substantial evidence rebutting the higher rating.87 After
considering the entire medical record, the Board concluded that
Dr. Smith's rating of 15% properly took into account Mr. Bauder's
prior high school injury and, based on a preponderance of the
evidence, that was the appropriate rating.88
The Board also addressed most of the issues left
unresolved in its December decision. Mr. Bauder sought temporary
total benefits between March 17, 1994 through May 31, 1994 and
from December 27, 1995 through November 6, 1996. But the Board
concluded that Mr. Bauder was employed during these periods and
therefore found that Mr. Bauder was not due temporary benefits.89
The Board also found that the adjuster's controversions were not
frivolous or unfair. In addition, the Board dismissed Mr.
Bauder's claim for penalties because it concluded that the
controversion of Dr. Boettcher's impairment rating was timely and
that the administrator timely paid the permanent impairment
benefits due Mr. Bauder. The Board dismissed and denied Mr.
Bauder's claim for interest as there was no evidence that the
benefits were not timely paid. Finally, the Board awarded Mr.
Bauder $3,125 in attorney's fees and $1,168.92 in costs.90
One issue was left unresolved by the Board. The Board
did not resolve the adjuster's claim that it had overpaid
temporary benefits to Mr. Bauder. The Board elected not to
address this issue because the amount of temporary benefits was
on appeal.91
Mr. Bauder appealed the Board's July decision, and
eventually the appeals over the first decision and the second
decision were consolidated.
III. ISSUES ON APPEAL
Mr. Bauder raises five main arguments on appeal.
First, he argues that he is entitled to benefits based on Dr.
Boettcher's opinion that he was permanently impaired at a 25%
level. Next, he argues that he is entitled to temporary total
disability benefits during the time he worked at NOVI Global
Investments from about November 1995 to May of 1996.92
Third, Mr. Bauder argues the Board should have
determined his spendable weekly wage for temporary benefits under
former workers' compensation statute AS 23.30.220(a)(2) rather
than subsection (1).93 Further, Mr. Bauder argues that as applied
to him, AS 23.30.220(a)(1) is unconstitutional.
Fourth, Mr. Bauder claims that the July 1, 1997
controversion was frivolous or unfair. And finally, Mr. Bauder
asserts that he is entitled to penalties, interest, attorney's
fees and costs.
IV. STANDARDS OF REVIEW
The Alaska Supreme Court recognizes four standards to
be employed by courts when reviewing administrative decisions.94
When factual issues are disputed the court must apply the
"substantial evidence" standard.95 "Substantial evidence is such
relevant evidence as a reasonable mind might accept as adequate
to support a conclusion."96
When legal issues are raised that involve agency
expertise or fundamental policy formation, the court employs the
deferential "reasonable basis" test.97 That is, the court defers
to the agency decision as long as it is reasonable and supported
by the evidence.98 For legal determinations not involving agency
expertise courts use the "substitution of judgment" standard.99
Application of this standard means that the court can substitute
its judgment on a legal question that involves statutory
interpretation or other legal issues where the courts have
specialized knowledge and experience.100
In this case, all Mr. Bauder's arguments involve some
question of law and some question of fact. The court employs the
substitution of judgment test to issues of law raised by Mr.
Bauder and the substantial evidence test to all questions of
fact.
The disputes over the permanent partial impairment
rating and whether Mr. Bauder should have received temporary
total disability benefits from November 1995 to May 1996, raise,
primarily, questions of fact. Therefore, the court must review
the Board findings on these issues to see whether they are
supported by substantial evidence. But some of Mr. Bauder's
arguments on these issues also raise questions of law. These
issues are addressed under the substitution of judgment standard.
The issue concerning the temporary total disability
benefit calculation raises, primarily, a question of law.
Because this legal question centers on the application of
statutes and case law, the court must reach an independent
conclusion.
The issues concerning the controversion notices,
penalties, interest, fees and costs raise questions of fact and
law. Therefore the court employs the substantial evidence test
and the substitution of judgment test.
V. PERMANENT PARTIAL IMPAIRMENT RATING
Several doctors over the years treated Mr. Bauder's
back injury. Dr. Boettcher treated Mr. Bauder's high school
injury and operated on his back in 1985. Drs. Funk, Kleiner,
Boettcher and Laurnen treated Mr. Bauder's 1993 work-related
injury. Dr. Laurnen twice operated on Mr. Bauder's back and Dr.
Boettcher twice rated Mr. Bauder as having a 25% permanent
partial impairment. Dr. Hadley, the adjuster's physician, rated
Mr. Bauder as having a 10% impairment and, after the first
hearing, Dr. Smith saw Mr. Bauder at the Board's request and
rated him as having a 15% impairment.
The Board found that Dr. Boettcher's report and ratings
and Dr. Laurnen's report were sufficient to raise the presumption
that Mr. Bauder had a 25% work-related impairment.101 But the
Board also found Dr. Hadley's testimony rebutted the presumption
at least as far as the rate of the impairment.102 To resolve this
conflict, the Board ordered another medical examination and found
Dr. Smith's 15% rating, after considering the entire medical
record, persuasive.103
Alaska Statute 23.30.122 provides that the Board is the
sole evaluator of the credibility and weight of witnesses,
including medical testimony and reports. The Board's findings of
credibility and weight are conclusive even if conflicting
evidence exists.104
The only question for the court is whether there is
substantial evidence supporting the Board's conclusion. Even
though there is conflicting medical testimony, the Board acted
reasonably in trying to resolve the medical disagreement.
Ordering another medical examination allowed a third doctor to
review the record, examine Mr. Bauder and reach an independent
conclusion. Dr. Smith's report and conclusion are relevant
factors that a reasonable mind might accept as adequate to
support the Board's conclusion.105
Mr. Bauder argues, however, that the Board should have
awarded him the 25% permanent partial impairment benefit as of
October 4, 1996, when Dr. Boettcher first rated him.106 But a
rating for permanent impairment is governed by AS 23.30.190.
This statute requires among other things that the injury be
"partial in character but permanent in quality[.]"107 When Dr.
Boettcher evaluated Mr. Bauder on October 4, 1996, he wrote:
I do not believe [Mr. Bauder's] claim should
be closed at this time. He has significant
impairment, namely the chronic back pain and
the neurologic deficit in his right leg which
can be successfully treated by successful
surgery. I believe he should be reevaluated
by Dr. Laurnen and reoperation should
strongly be considered. Due to his pain and
neurologic deficit, I believe he is unable to
perform any type of work at this time and
this condition is permanent until successful
surgery is accomplished.[108]
Based on this, Dr. Boettcher's October 4, 1996 rating was, at
best, premature because Mr. Bauder's impairment was not
"permanent in quality."
On June 5, 1997, Dr. Boettcher re-evaluated Mr. Bauder
and again assigned him a 25% impairment rating.109 Mr. Bauder
argues that the Board erred in failing to adopt Dr. Boettcher's
second rating. The adjuster, under 8 AAC 45.052(c),110 submitted a
request to cross-examine Dr. Boettcher about this report. But
Mr. Bauder never made Dr. Boettcher available for cross-
examination, and the Board did not err by declining to adopt Dr.
Boettcher's June 5, 1997 rating. Nonetheless, contrary to Mr.
Bauder's assertion that the Board excluded Dr. Boettcher's
report, the Board specifically stated that it "accept[ed] the
hearsay evidence concerning Dr. Boettcher's opinion into the
record for the purpose of explaining and supplementing other
medical evidence in the reports of Drs. Hadley and Laurnen."111
Mr. Bauder also argues that the Board failed to
consider and apply the statutory time limits for the
controversion of permanent impairment benefits. Mr. Bauder
correctly argues that although the administrator filed
controversions on December 29, 1995112 and July 1, 1997,113 it did
not controvert Mr. Bauder's impairment rating until September 12,
1997.114 This is almost a year after Dr. Boettcher's first rating
and over three months after Dr. Boettcher's second rating.
Under AS 23.30.155(d), the employer has 21 days after
the date of learning of a doctor's impairment rating to pay that
amount or to controvert the need to pay impairment benefits.115 Mr.
Bauder argues that because the insurer did not controvert or pay
the impairment benefit within the 21 days, the Board was
obligated to accept the 25% rating.
But as the insurer correctly argues, Mr. Bauder's
argument is premised on a misunderstanding of the consequences of
not timely filing a controversion. When an employer neither
timely pays nor controverts a claim for compensation, AS
23.30.155(e) imposes a 25% penalty to be paid "at the same time
as, and in addition to" the unpaid compensation. Thus, the
failure to controvert compensation within 21 days does not bar
the employer from later filing a controversion nor does it mean
that the level of impairment is established.116
Instead, failure to file a controversion within 21 days
results in a 25% penalty under AS 23.30.155(e) if the employer is
ultimately found liable for the disputed compensation.117
Accordingly, Mr. Bauder's argument that Alaska Airlines' failure
to controvert either of Dr. Boettcher's ratings within 21 days
precludes them from doing so later is without merit.
VI. ADDITIONAL TEMPORARY TOTAL DISABILITY BENEFITS
Mr. Bauder next argues that the Board erred in not
awarding him temporary total disability benefits while he was
working for NOVI Global Investments. Temporary total disability
benefits are governed by AS 23.30.185:
In case of disability total in character
but temporary in quality, 80 percent of the
injured employee's spendable weekly wages
shall be paid to the employee during the
continuance of the disability. Temporary
total disability benefits may not be paid for
any period of disability occurring after the
date of medical stability.[118]
Alaska Statute 23.30.395(1) defines "disability" as "incapacity
because of injury to earn the wages which the employee was
receiving at the time of his injury in the same or any other
employment." AS 23.30.395(21) defines "medical stability" as
the date after which further objectively
measurable improvement from the effects of
the compensable injury is not reasonably
expected to result from additional medical
care or treatment, notwithstanding the
possible need for additional medical care or
the possibility of improvement or
deterioration resulting from the passage of
time; medical stability shall be presumed in
the absence of objectively measurable
improvement for a period of 45 days; this
presumption may be rebutted by clear and
convincing evidence[.]
The presumption of compensability in AS 23.30.120(a)
applies when an employer controverts continuing entitlement to
temporary benefits.119 To overcome this presumption, the employer
must introduce "substantial evidence" to the contrary.120 From
late November 1995 until May of 1996, Mr. Bauder worked as the
Director of Human Resources/Pilot for NOVI Global Investments.121
He was supposed to be paid a yearly salary of $60,000 and in
March was given a raise to $90,000. But NOVI never paid him.122
In denying Mr. Bauder's claim for temporary benefits
during this period, the Board found:
Although the employee may not have
received his pay from NOVI, the record is
clear he worked for pay, and was entitled to
pay. We find the employee's argument he is
due [temporary total disability] benefits
because NOVI violated its contract to pay him
is disingenuous. We find the employee's
resulting earning loss, and his resignation
from that position, were not related to his
work injury and not compensable. Vetter v.
AWCB, 524 P.2d 264, 266 (Alaska 1974).[123]
But Mr. Bauder argues that the Board erred in not awarding him
temporary benefits during the time he was employed by NOVI
because he was never actually paid a salary.
In Bailey, the Supreme Court held that returning to
work "is sufficient evidence to rebut the presumption of
continuing compensability for temporary total disability."124
Because Mr. Bauder returned to work, the presumption of
compensability is overcome. But in Olson, the Alaska Supreme
Court noted that it has "never indicated that obtaining `any'
work terminates an employee's right to [temporary total
disability] benefits."125 Mr. Bauder relies on this case.
In Olson, the Board denied the employee temporary
benefits during the time he was capable of working as a tire shop
manager.126 The Board emphasized that the employee had joined his
father's retreading shop as an organizer/supervisor.127 But the
Supreme Court reversed. The court ordered the Board to "consider
Olson's earning potential and the availability of employment."128
The court emphasized that Mr. Olson was not paid for his work in
his father's shop.129 Further, the court distinguished Bailey by
noting that the employee in Bailey was earning more after his
injury than he did prior to being injured.130
Mr. Bauder's situation is distinguishable from that in
Olson. First, Mr. Bauder was eligible for, and fully expected to
be paid by NOVI. Moreover, his agreed-upon salary far exceeded
what he had been earning at Alaska Airlines at the time of his
injury. In fact, when he received the December 29, 1995
controversion notice for temporary benefits, Mr. Bauder testified
that he did not contest it because he was expecting to be paid
and did not need the benefits.131 Furthermore, Mr. Bauder filed a
wage claim against NOVI and received a judgment in his favor.132
Second, and most importantly, there is no evidence that
Mr. Bauder's not being paid by NOVI was related to his injury.
The purpose of workers' compensation law is "partial
reimbursement for loss of earning capacity due to injury."133 In
other words, workers' compensation disability is based primarily
on an impairment in working capacity.134 As the Board correctly
noted, Mr. Bauder's failure to be paid for his work at NOVI was
not related to his work injury. Therefore he is not entitled to
temporary benefits during the time he was employed by NOVI.135
VII. ADJUSTMENT IN COMPENSATION RATE
Mr. Bauder argues that the workers' compensation
administrator and subsequently the Board miscalculated the amount
of temporary total disability benefits he was entitled to. Under
AS 23.30.185, the compensation rate for temporary total
disability benefits is calculated by taking 80% of the injured
employee's "spendable weekly wages." An employee's "spendable
weekly wages" are defined in former AS 23.30.220(a), which at the
time of Mr. Bauder's injury, provided:
(a) The spendable weekly wage of an injured
employee at the time of an 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;
(2) if the employee was absent from the labor
market for 18 months or more of the two
calendar years preceding the injury, the
board shall determine the employee's gross
weekly earnings for calculating compensation
by considering the nature of the employee's
work and work history, but compensation may
not exceed the employee's gross weekly
earnings at the time of injury[.]
The administrator calculated Mr. Bauder's "spendable
weekly wage" under AS 23.30.220(a)(1). The administrator
determined that Mr. Bauder had gross earnings over the previous
two calendar years before the accident of $23,563.00. Eighty
percent of this number after deducting payroll taxes and dividing
by 100 as required by the statute is $157.34.136 The Board agreed
with this calculation because it found that Mr. Bauder was absent
from the labor market less than 18 months during 1991 and 1992.137
Mr. Bauder argues that the Board should have calculated
his spendable weekly wage under AS 23.30.220(a)(2) because he
claims he was absent from the labor market for 18 months in 1991
and 1992 while he was a student in North Dakota. The issue then
is whether there is substantial evidence to support the Board's
finding that Mr. Bauder "was absent from the labor market for
less than 18 months during 1991 and 1992."
The Board has interpreted "18 months or more of the two
calendar years preceding the injury" to mean working less than
183 days of the two previous years or less than 1040 hours of
work during those two years.138 The Board concluded that Mr.
Bauder worked 13 weeks in 1991 and roughly 18 weeks in 1992.
Therefore, according to the Board's calculations, Mr. Bauder was
present in the labor market for a total of 31 weeks, or 7.75
months in 1991 and 1992.139
The Board's calculations appear to be supported by
substantial evidence. The evidence establishes that Mr. Bauder
worked for Alaska Airlines for approximately 12 weeks in the
summer of 1991 and he commercial fished for one or two weeks.
Similarly, in 1992, the evidence establishes that Mr. Bauder
again worked for Alaska Airlines for approximately 12 weeks over
the summer and commercial fished for one or two weeks.
Additionally, he worked at Alaska Airlines for about 10 days
during the Christmas holiday in 1992.
This evidence establishes that Mr. Bauder was employed
for at least 28 weeks (seven months), or to put it in terms of AS
23.30.220(a)(2), Mr. Bauder was absent from the labor market for
17 months during 1991 and 1992.140 Although the court finds that
Mr. Bauder worked for three fewer weeks than the Board, this does
not change the Board's determination that AS 23.30.220(a)(2) does
not apply. Even by the court's more conservative calculations,
Mr. Bauder was not "absent from the labor market for 18 months or
more of the two calendar years preceding the injury."
As an alternative method of determining whether AS
23.30.220(a)(2) applies, the Board calculated the number of hours
that Mr. Bauder worked in 1991 and 1992. The Board found that
Mr. Bauder worked 1705 hours during these two years. In arriving
at this conclusion, the Board relied on Mr. Bauder's testimony
that he worked on average 55 hours a week.141
This calculation is problematic because it appears that
Mr. Bauder's answer about the number of hours he worked had to do
with the summer of 1993.142 The number of hours worked by Mr.
Bauder in 1993 is not relevant. The issue is the number of hours
worked in the two calendar years preceding the injury, 1991 and
1992.
Another way to calculate the number of hours Mr. Bauder
worked in 1991 and 1992 is to divide his income by his hourly
wage. In 1991, Mr. Bauder earned $6,131.57143 at Alaska Airlines
and was paid $9.70 per hour.144 Thus, he worked approximately 632
hours in 1991 at the airline. Similarly, in 1992, Mr. Bauder
earned $8,355.94145 at Alaska Airlines and was paid $11.63 per
hour.146 Thus, he worked approximately 718 hours in 1992. Based
on his yearly earnings and hourly wage, Mr. Bauder worked for a
total of approximately 1350 hours for Alaska Airlines in 1991 and
1992.
But, as pointed out by Mr. Bauder, this calculation is
also problematic because it fails to take into account overtime
pay. Similarly, Mr. Bauder asserts that because he sometimes
worked only part-time, and not seven days a week, the court
should subtract some workdays from the total concluded by the
Board.
The administrator argued and the Board found that Mr.
Bauder bore the burden of proof on these issues and that he
failed to provide the evidence that would establish that he was
absent for more than 18 months over those two years. Mr. Bauder
forcefully argues that this was a misapplication of the burden of
proof. He also argues that applying this formula to his
circumstances does not address his actual loss and therefore is
unconstitutional. But the court need not resolve these disputes
because even if the Board applied subsection (a)(2) of the
statute, the result would be the same.
The Alaska Supreme Court has determined that AS
23.30.220(a)(1) may be unconstitutional in certain circumstances.
In Gilmore v. Alaska Workers' Compensation Board,147 the court
expressed its concern that the formula may, in some cases, lead
to an unfair earning determination. The court explained:
Because this formula divides the employee's
total gross wages over the two year period by
100 regardless of how many weeks the employee
actually worked during this period, the
employee's actual wage earning capacity
during periods of employment is reduced in
proportion to any period in which the
employee was unemployed for any reason. The
resulting benefits therefore may only be
randomly related to the injured worker's
actual loss. This formula applies regardless
of any discrepancy, no matter how large,
between the result of the formula and the
actual wages lost by the employee during the
period of his or her disability.[148]
But the Board specifically addressed this issue. The
Board determined that:
The employee's tax records and his testimony
show the employee's work for the employer
during 1991 and 1992 was reasonably
consistent with his earnings and pattern of
work for the period of the disability. We
find that the application of AS
23.30.220(a)(2) would not have substantially
altered his compensation rate, in any event.
The employee had a consistent pattern over a
number of years, working for this employer
and going to college to prepare for career
employment. The employee moved into aviation
career (or career preparation) work almost
immediately after graduation.
If we consider the nature of the
employee's work and work history under AS
23.30.220(a)(2), we find the employee would
have continued the pattern of work and study
during the period he received [temporary
total disability] benefits.[149]
The reliability of Mr. Bauder's past work history as a
predictor of his earning potential during the time he is entitled
to temporary total disability benefits presents a factual issue.
Therefore, the court must determine "whether the evidence relied
on [by the Board] was substantial in light of the record as a
whole."150
A primary purpose of Alaska's workers' compensation
laws "is to predict accurately what wages would have been but for
a worker's injury."151 Under Gilmore the issue is whether Mr.
Bauder's past work history is an accurate predictor of his future
earning capacity.152 "[W]here past wage levels are accurate
predictors, the Board must apply the statutory formula [AS
23.30.220(a)(1)]."153
The Board found, and Mr. Bauder does not dispute, that
in 1991 and 1992 Mr. Bauder worked as a seasonal employee for
Alaska Airlines. However, Mr. Bauder disagrees with the Board's
conclusion that he would have continued to attend school and work
as a seasonal employee during the time he received temporary
benefits. Mr. Bauder argues that the Board ignored his testimony
that he would have foregone school and accepted a full-time
yearly position working as a ramp agent had it been available.154
Further, Mr. Bauder testified that by 1995 or 1996 he would have
had enough seniority to hold a full-time position.155
Mr. Bauder correctly notes that the Alaska Supreme
Court has recognized that " `intentions as to employment in the
future are relevant to a determination of future earning
capacity' in determining proper compensatory awards"156 and that
"[l]imited working hours following injury are not particularly
relevant to a determination of a worker's probable work patterns
had no injury been sustained."157 But there is substantial
evidence in the record to support the Board's conclusion that the
temporary benefits accurately reflect Mr. Bauder's wage loss
because of the injury.
Mr. Bauder has wanted to fly since at least 1988. His
initial interest in working for Alaska Airlines was to pursue
this goal. By 1990, he started a work pattern that would allow
him to achieve his goal. He began college to pursue a degree in
aviation administration and he started to fly. He went to school
during the school year, and like untold numbers of other college
students, he worked during the summers and, sometimes, over the
Christmas school breaks to support his education.
Mr. Bauder was never a full-time, year-round employee
and for good reason. Working as a ramp agent would not have
allowed him to get the education and flying time he needed to be
a pilot.158 He was a seasonal employee who worked to support his
college education. To require Alaska Airlines' insurance company
to pay him benefits as if he were a full-time, year-round
employee would not accurately reflect Mr. Bauder's work history.
In addition, according to Alaska Airlines workers'
compensation manager Donna Eglund, there were no full-time ramp-
agent positions available for Mr. Bauder.159 In light of these
factors, the Board's conclusion that Mr. Bauder would have
continued to attend school full-time while working seasonally for
Alaska Airlines is supported by substantial evidence.
Finally, Mr. Bauder argues that the disparity between
his weekly earnings prior to his injury160 and his weekly
compensation rate of $157.34 is unconstitutional because it is
"grossly unfair." However, Gilmore does not stand for the
proposition that a discrepancy between what an employee was
earning at the time of his injury and his compensation rate under
AS 23.30.220(a)(1) makes the application of the statute
unconstitutional.161
Instead, the goal is to compensate injured workers
"based on their actual losses."162 As already discussed, it is
undisputed that during the two years prior to his injury, Mr.
Bauder was a college student and a seasonal employee163 who worked
during the summers in 1991 and 1992 and during the Christmas
holiday in 1992.
Therefore, Mr. Bauder's employment with Alaska Airlines
in 1991 and 1992 accurately reflected the circumstances existing
at the time of his injury.164 Under either subsection (a)(1) or
subsection (a)(2) of AS 23.30.220, the temporary total disability
benefits were an accurate reflection of Mr. Bauder's wage loss.165
VIII. FRIVOLOUS OR UNFAIR CONTROVERSION
Mr. Bauder argues that the Board erred by failing to
conclude that the workers' compensation administrator frivolously
and unfairly controverted his right to benefits. Of the three
controversions filed in this case, Mr. Bauder focuses on the
controversion of his right to a lump sum payment of permanent
partial impairment benefits filed on July 1, 1997.166 The relevant
statute, AS 23.30.155(o), provides as follows:
The board shall promptly notify the
division of insurance if the board determines
that the employer's insurer has frivolously
or unfairly controverted compensation due
under this chapter. After receiving notice
from the board, the division of insurance
shall determine if the insurer has committed
an unfair claim settlement practice under AS
21.36.125.[167]
The Board considered three arguments supporting the
administrator's position that the controversions were not
frivolous but only two arguments involve the July 1, 1997
controversion. One of those arguments, that Mr. Bauder committed
fraud, was sharply rejected by the Board.168 The Board found very
little evidence of fraud and found that the evidence presented
about that investigation was hearsay.169
But the Board did find that at the time of the
controversion, Mr. Bauder was being considered for "reemployment
benefits." According to the Board, during this evaluation and
determination phase for reemployment benefits, an employee is not
entitled to receive a lump sum impairment award.170
Furthermore, the July 1, 1997 controversion did not
contest the payment of permanent partial impairment benefits; it
just contested a lump sum payment.171 Therefore, the Board's
conclusion that the July 1, 1997 controversion was not frivolous
or unfair because it did not deny Mr. Bauder any "compensation
due" under AS 23.30.155(o) is supported by substantial evidence.
IX. PENALTIES, INTEREST, ATTORNEY'S FEES AND COSTS
In its July 6, 1997 decision, the Board denied and
dismissed Mr. Bauder's claim for penalties and his claim for
interest, but awarded him $3,125 in attorney's fees and $1,168.92
in costs under AS 23.30.145(b).
In his opening brief, Mr. Bauder requested that
the maximum statutory penalties be assessed
against the employer, due to the substantial
and egregious underpayment, the refusal to
pay amounts clearly and undisputedly due, and
the failure of the employer to come forward
with any substantial evidence to support its
controversion or its failure to pay the
proper amount of compensation which was due.
Indeed, had the employer properly
considered Bauder's eligibility under the
alternative method of computation of his TTD
rate, the problems that are now presented by
the lack of detailed records as to the number
of days or hours which he worked would not be
present.
Furthermore, substantial and intentional
violations of the statutes and regulations
applicable to compensation proceedings have
occurred in this case. Therefore, all
unpaid amounts should have interest assessed,
and all attorney's fees incurred by the
employee should be awarded.172
Mr. Bauder's arguments for penalties, interest,
attorney's fees, and costs are dependent on his successful
overturning of the Board's decision on the other issues raised in
his appeal. Because the court has upheld the Board's decision,
there is substantial evidence supporting the Board's conclusions
regarding penalties, interest, attorney's fees, and costs.
X. CONCLUSION
For the foregoing reasons, the decision of the Alaska
Workers' Compensation Board is affirmed. The Board reserved the
issue concerning the overpayment of temporary total disability
benefits until after the decision on appeal. The case is
therefore remanded to the Board to resolve this final issue.
Dated at Wrangell, Alaska, this 29 day of August, 2000.
Larry C. Zervos
Superior Court Judge
_______________________________
1The opinion of the superior court has been edited to conform
with the formal standards of this court.
2Record on Appeal at 1 (hereinafter "R.").
3Transcript of Proceedings Before the Alaska Workers'
Compensation Board, December 8, 1998 at 39 (hereinafter "Board
Tr.").
4Id.
5Board Tr. 40.
6Id.
7Tr. 41; R. 101-04.
8Id.
9Tr. 41-42; R. 93.
10Board Tr. 38, 74; R. 98-99.
11R. 88.
12R. 85.
13Board Tr. 42; R. 75-83.
14R. 74.
15R. 73.
16Board Tr. 44-45.
17R. 70.
18R. 69.
19Board Tr. 45, 118; R. 57.
20Board Tr. 46.
21Board Tr. 118; R. 52, 55.
22Board Tr. 49; R. 957-58, 118-19.
23Tr. 51; R. 947.
24Board Tr. 51; R. 960, 116.
25R. 115.
26Board Tr. 53-54; R.1.
27Board Tr. 55; R. 970.
28Board Tr. 55; R. 972.
29Board Tr. 56-57; R. 973.
30R. 994-98.
31R. 994-96.
32R. 997.
33Tr. 59; R. 968, 998.
34Board Tr. 59.
35R. 890, 1003-04.
36R. 1003.
37R. 1005-06.
38R. 1026-27.
39R. 1032.
40R. 1.
41R. 2.
42R. 2-5.
43Board Tr. 72-73; R. 1051.
44R. 1033.
45R. 1035.
46R. 112.
47R. 7.
48R. 1049.
49Id.
50R. 1010, 1051, 111.
51R. 111.
52R. 7.
53R. 280, 947.
54Board Tr. 80; R. 280.
55Board Tr. 80.
56Board Tr. 80-83.
57Board Tr. 83; R. 280.
58R. 10.
59Board Tr. 130-31; R. 6.
60R. 6.
61Board Tr. 152; R. 1061, 1062.
62R. 7.
63Board Tr. 83-84; R. 280
64Board Tr. 84.
65Board Tr. 84-85, 101.
66Board Tr. 101.
67R. 1065.
68R. 1066-68.
69R. 1067.
70R. 1070-71.
71R. 16.
72R. 1111.
73Id.
74R. 16.
75R. 1098.
76R. 1100.
77R. 1100-01.
78R. 1100-04.
79R. 14.
80Report of Dr. Shawn Hadley, Exhibit 1 attached to deposition of
Dr. Shawn Hadley dated December 1, 1998 (hereinafter Hadley
Report).
81Hadley Report at 5.
82R. 906.
83Decision and Opinion, 98-0322, at 12, 15, December 31, 1998
(hereinafter December Decision).
84Id. at 15.
85Decision and Opinion, 99-0144, at 5, July 6, 1999 (hereinafter
July Decision).
86Id. at 6.
87Id. at 9.
88Id.
89Id. at 12.
90July Decision at 12-16.
91Id. at 11.
92In his briefing, Mr. Bauder sought temporary benefits for other
periods. But at oral argument, he waived these arguments.
93This statute was amended after Mr. Bauder's injury. The
amendment took effect September 4, 1995. See 75 SLA ch 75,
sections 9, 10 (1995).
94Handley v. State, Dep't of Revenue, 838 P.2d 1231, 1233 (Alaska
1992).
95Peninsula Correctional Health Care v. Dep't of Corrections, 924
P.2d 425, 426 (Alaska 1996).
96Thompson v. United Parcel Service, 975 P.2d 684, 688 (Alaska
1999).
97Id.
98Id.
99Id.
100Id.
101July Decision at 8.
102Id. at 9.
103Id.
104AS 23.30.122; Thompson, 975 P.2d at 688.
105Thompson, 975 P.2d at 688.
106The Board did not address this issue in either of its decisions.
107AS 23.30.190(a).
108R. 1067-68.
109R. 1100-01.
110R. 875-76.
111July Decision at 8.
112R. 6.
113R. 14.
114R. 17.
115Sumner v. Eagle Nest Hotel, 894 P.2d 628, 631 (Alaska 1995).
116In support of his argument, Mr. Bauder cites Hammer v. City of
Fairbanks, 953 P.2d 500 (Alaska 1998), and Bockness v. Brown Jug,
Inc., 980 P.2d 462 (Alaska 1999). But Mr. Bauder's reliance on
these cases is misplaced. In Hammer, the court imposed the
statutory penalty on the employer for failing to timely pay or
file a controversion. Hammer, 953 P.2d at 507. Hammer did not
even suggest that a potential remedy for a late-filed
controversion was issue preclusion. In Bockness, the issue of an
untimely controversion was not discussed. Neither case stands
for the proposition that if an employer does not controvert
benefits within 21 days, it is forever barred from doing so.
Further, 8 AAC 45.182, which governs controversions, does not
provide that controversions must be made within a certain time
period or thereafter waived.
117Because the Board agreed with Dr. Smith and found that Mr.
Bauder sustained a 15% impairment and the additional award was
promptly paid, no penalty is appropriate under AS 23.30.155(e).
118The Board accepted Dr. Boettcher's opinion that Mr. Bauder
reached medical stability as of June 5, 1997. AWCB decision,
July 6, 1999 at 11.
119Olson v. AIC/Martin J.V., 818 P.2d 669, 672 (Alaska 1991).
120Id. at 672, citing Bailey v. Litwin Corp., 713 P.2d 249, 252,
254 (Alaska 1986).
121Board Tr. 83-85.
122Board Tr. 84.
123July Decision at 12.
124Bailey, 713 P.2d at 254.
125Olson, 818 P.2d at 673.
126Id. at 671-72.
127Id. at 674.
128Id. at 673.
129Id. at 674.
130Bailey, 713 P.2d at 251-52.
131Tr. 86.
132Board Tr. 101.
133Wagner v. Stuckagain Heights, 926 P.2d 456, 458-59 (Alaska 1996)
(citations omitted) (emphasis added).
134Vetter v. Alaska Workmen's Comp. Bd., 524 P.2d 264, 266 (Alaska
1974).
135Id.
136R. 2. Neither party disagrees with this math. As discussed
below, however, Mr. Bauder does dispute the statutory formula
used to calculate his "spendable weekly wages."
137December Decision at 11.
138Id.
139Id.
140This calculation gives Mr. Bauder the benefit of the doubt by
assuming that he commercial fished for only one week in both 1991
and 1992.
141Board Tr. 63. Fifty-five hours per week times 31 weeks of work
equals 1705 hours.
142Board Tr. 62-63.
143R. 795, Board Tr. 47.
144Board Tr. 119.
145R. 788.
146Board Tr. 63.
147882 P.2d 922, 929 n.17 (Alaska 1994).
148Gilmore, 882 P.2d at 924.
149December Decision at 11-12.
150Thompson, 975 P.2d at 690.
151Id. at 689.
152Id. at 690.
153Id. at 689.
154Board Tr. 102-03.
155Board Tr. 170.
156Thompson, 975 P.2d at 690, quoting State Dep't of Transp. & Pub.
Facilities v. Gronroos, 697 P.2d 1047, 1049 n.2 (Alaska 1985)
(citation omitted).
157Id. at 691.
158Board Tr. 114.
159Board Tr. 113-14. Further, there is no evidence in the record
to support Mr. Bauder's assertion that he had enough seniority to
qualify for a full-time yearly ramp position at Alaska Airlines
by 1995 or at the latest in 1996. Board Tr. 170-71.
160In his brief on appeal, Mr. Bauder asserts that his weekly
earnings in 1991-1993 were approximately $900. In his reply
brief, he states that his weekly earnings prior to his injury
were $639.65. Finally, at oral argument, Mr. Bauder's attorney
said that Mr. Bauder's weekly earnings in 1991 and 1992 were
approximately $450 or $500.
161Thompson, 975 P.2d at 689 ("the disparity is only relevant if
past wages do not accurately predict future earning potential.
The disparity does not per se indicate a lack of predictive
value.").
162Gilmore, 882 P.2d at 928.
163In Gilmore, the court noted with disapproval that Alaska is "the
only state which includes significant periods of unemployment in
calculating the worker's average wage without requiring a
preliminary finding that the worker was employed in a seasonal
occupation at the time of the injury." Gilmore, 882 P.2d at 929.
164Id.
165See Deuser v. State, 697 P.2d 647, 650 n.2 (Alaska 1985),
quoting 2 A. Larson, The Law of Workmen's Compensation 60.-
21(c), at 10-592 (1983) ("If claimant's part-time relation to the
labor market is `clear, and above all if there is no reason to
suppose it will change in the future period into which disability
extends, then it is unrealistic to turn a part-time able-bodied
worker into a full-time disabled worker.' ") (emphasis in
Larson).
166R. 14.
167Emphasis added.
168July Decision at 13.
169Id.
170AS 23.30.041(k). Neither party disputes the Board's findings on
this issue.
171R. 14; Board Tr. 138-39, 143-44.
172Mr. Bauder's Opening Brief at 16. (Citations to record omitted.)
