|IN RE: JERRY W. UHRI||)||DOCKET NO. 93 6908|
|CLAIM NO. L-611279||)||DECISION AND ORDER|
- Claimant, Jerry W. Uhri, by
- Springer, Norman & Workman, per
- R. Wayne Torneby, Jr.
- Employer, Coal Creek General Store
- Department of Labor and Industries, by
- The Office of the Attorney General, per
- Scott D. Johnson, Assistant
This is an appeal filed by the claimant, Jerry W. Uhri, on November 18, 1993, from an order of the Department of Labor and Industries dated August 19, 1993, which affirmed an order dated March 17, 1993, which stated: The worker received time loss compensation of $8,858.30; he or she was entitled to time loss compensation of $1,295.67; therefore, the worker must pay Labor and Industries $7,562.63. The order further stated that the overpayment resulted because: Mr. Uhri was paid time loss based on an incorrect undocumented wage rate. According to present documentation, he is entitled to time loss at the minimum rate for the entire period of 9/9/92 thru [sic] 2/17/93 in the amount of $1,295.67. He was paid $8,858.30, constituting an overpayment of $7,562.63. The August 19, 1993 Department order is REVERSED AND REMANDED.
PROCEDURAL AND EVIDENTIARY MATTERS
Pursuant to RCW 51.52.104 and RCW 51.52.106, this matter is before the Board for review and decision on a timely Petition for Review filed by the claimant to a Proposed Decision and Order issued on  December 13, 1994, in which the order of the Department dated August 19, 1993, was affirmed.
The Board has reviewed the evidentiary rulings in the record of proceedings and finds that no prejudicial error was committed and said rulings are hereby affirmed.
We have granted review because we disagree with the result reached in the Proposed Decision and Order. The only issue presented by this appeal is whether the Department correctly recalculated Mr. Uhri's time loss compensation rate based on the information available, resulting in the demand for reimbursement in the amount of $7,562.63.
On April 21, 1994, our industrial appeals judge issued an order determining that the August 19, 1993 Department order was not communicated to Mr. Uhri until sometime after November 4, 1993, finding that Mr. Uhri's Notice of Appeal was timely, and that the Board had jurisdiction. We agree with this determination.
The facts elicited at the hearing in this matter are fairly simple. Mr. Uhri was injured in the course of his employment as owner of a convenience/grocery store. Presumably, Mr. Uhri elected coverage under the Industrial Insurance Act pursuant to RCW 51.12.110 (elective adoption). An employer who elects coverage for him or herself is subject to all the provisions of Title 51, and is entitled to all of its benefits.
Mr. Uhri suffered an industrial injury at his store on September 1, 1992, and was paid time loss compensation benefits from September 9, 1992, through February 17, 1993, based on his reported wages of $2,500.00 per month. Mr. Uhri testified to working seven days a week,  fifteen to sixteen hours per day. He stated that he informed the Department that his monthly income was $2,200.00, because that was the store's gross profit per month. However, Mr. Uhri did not formally pay wages to himself; he took "draws" from time to time. On his 1992 tax return, Mr. Uhri did not claim any wages, salary, or tips. Gross profit to his business was calculated at $27,127.00 and net profit was $1,081.00. He testified that his net profit was reduced because he elected to put money (some $26,000.00) back into his business.
Linda Cochran, Workers' Compensation Adjudicator III, testified for the Department. She was unaware of any statute or regulation that specified a method to calculate time loss compensation benefit rates for self-employed workers such as Mr. Uhri. She stated that it seemed more appropriate to base Mr. Uhri's time loss compensation rate on a wage equal to the adjusted gross income of his business ($11,652.00). In Ms. Cochran's opinion, gross income from the business was not an accurate reflection of Mr. Uhri's earnings. When asked what she did to determine what Mr. Uhri's earnings were at the time of injury, Ms. Cochran stated that, "[I]f it's not a normal wage salary situation we have to go back for the 12 months preceding the injury to look to try to get some proof of what he actually did make; what his wages were." 8/31/94 Tr. at 11.
We are confused by Ms. Cochran's testimony regarding the method used by the Department to calculate Mr. Uhri's wages. However, it is clear that whatever method the Department used is not authorized by statute.
RCW 51.08.178 is the only legislative directive to the Department concerning computation of time loss compensation rates. This statute provides, in relevant part: 
(1) For the purposes of this title, the monthly wages the worker was receiving from all employment at the time of injury shall be the basis upon which compensation is computed unless otherwise provided specifically in the statute concerned. In cases where the worker's wages are not fixed by the month, they shall be determined by multiplying the daily wage the worker was receiving at the time of injury:
. . .
(2) In cases where (a) the worker's employment is exclusively seasonal in nature or (b) the worker's current employment or his or her relation to his or her employment is essentially part-time or intermittent, the monthly wage shall be determined by dividing by twelve the total wages earned, including overtime, from all employment in any twelve successive calendar months preceding the injury which fairly represent the claimant's employment pattern.
(3) If, within the twelve months immediately preceding the injury, the worker has received from the employer at the time of injury a bonus as part of the contract of hire, the average monthly value of such bonus shall be included in determining the worker's monthly wages.
(4) In cases where a wage has not been fixed or cannot be reasonably and fairly determined, the monthly wage shall be computed on the basis of the usual wage paid other employees engaged in like or similar occupations where the wages are fixed.
In all claims involving computation of time loss benefits, the Department is required to apply RCW 51.08.178. It is unrebutted that Mr. Uhri was not paid wages which were fixed by the month, nor was he being paid a daily wage. Therefore, subsection (1) of the statute does not apply.
Subsection (2) is not applicable because Mr. Uhri was not engaged in exclusively seasonal work, nor was his relation to his employment essentially part-time or intermittent. 
Subsection (3) does not apply in Mr. Uhri's case because there is no evidence of bonus being involved in his case.
It is subsection (4) which we believe is appropriate for use in calculating Mr. Uhri's time loss compensation rate. We are convinced that Mr. Uhri's wages are not reasonably and fairly determined based on the evidence used by the Department--i.e., his tax returns. Gross income to a business does not equal wages. In fact, gross income to a business is capable of being manipulated in many ways, quite legally, by the business owner. In point of fact, it would be foolish for a business owner, such as Mr. Uhri, not to make the bottom line (gross and/or net income from business) as small a figure as possible. To do otherwise is to voluntarily pay more income and/or business tax. The incentives inherent in the Internal Revenue Code which militate against an accurate reflection of business income on tax returns makes the Department's reliance on tax returns as a basis to determine wages unreasonable.
The record reflects some reluctance on the part of Ms. Cochran and the Department to calculate Mr. Uhri's time loss compensation benefits at a rate inconsistent with wages claimed on his income tax report. However, as indicated above, the bottom line for purposes of income tax for sole proprietors and business owners is subject to substantial manipulation. Certainly, Mr. Uhri paid workers' compensation premiums with the expectation that benefits would be payable at a reasonable rate if he were to qualify for those benefits. It is not the province of the Department, nor of this Board, to pass judgment or exact retribution on workers based on perceived manipulations of the Internal Revenue Code. We are constrained from doing so by the statute. RCW 51.08.178  determines how wages are to be computed for the basis of compensation expressly "for the purposes of this Title".
Professor Larson points out the difficulties inherent in calculating a wage basis on profit or loss of a business:
Generally, profits from a business, whether commercial or farm, are not considered as wages for purposes of establishing average wage. But close questions have arisen in connection with corporate officers, who may also be stockholders, whose remuneration is not fixed but depends to some extent on the fortunes of the business. One court has held that the employee's share of profits was not the correct measure, but that the test should be the wage of another employee performing similar duties. When an amount of remuneration is specified, which can be taken in either cash or stock, the fact that the employee postponed exercising his option was held not to alter the fact that specified amount was an economic benefit which could form the basis of an average wage. But when the agreement was that the manager would be paid only when there were enough profits to bear the cost, this was found to be too speculative a contingency to construct an average wage upon--especially since, at the time in question, the corporation had not yet had any profits.
(Footnotes omitted.) 2 A. Larson, The Law of Workmen's Compensation, § 60.12(e).
In Mr. Uhri's case, where his wage has not been fixed, and cannot be reasonably and fairly determined based on his income tax return, RCW 51.08.178 requires his monthly wage to be computed on the basis of the usual wage paid other employees engaged in like or similar occupations where the wages are fixed. From an administrative point of view, the statute dictates an uncomplicated means for determining Mr. Uhri's compensation rate. Following the statute need not be unduly burdensome. In this case, for example, the Department might survey the wages of  managers of comparably-sized grocery stores or similar occupations to determine the usual wage paid other employees engaged in similar occupations where wages are fixed.
After consideration of the Proposed Decision and Order, claimant's Petition for Review filed thereto, and a careful review of the entire record before us, we hereby make the following findings of fact and conclusions of law.
FINDINGS OF FACT
1.On September 1, 1992, the Department of Labor and Industries received an application for benefits alleging an industrial injury sustained by the claimant, Jerry W. Uhri, on September 1, 1992, while in the employ of Coal Creek General Store.
On November 17, 1992, the claim was allowed as an aggravation of a preexisting condition.
On March 17, 1993, the Department issued an order which stated: The worker received time loss compensation of $8,858.30; he or she was entitled to time loss compensation of $1,295.67; therefore, the worker must pay Labor and Industries $7,562.63; The overpayment resulted because: Mr. Uhri was paid time loss based on an incorrect undocumented wage rate. According to present documentation, he is entitled to time loss at the minimum rate for the entire period of 9/9/92 thru [sic] 2/17/93 in the amount of $1,295.67. He was paid $8,858.30, constituting an overpayment of $7,562.63.
The March 17, 1993 Department order was affirmed by an order dated August 19, 1993, which was communicated to the claimant after November 4, 1993.
On November 18, 1993, the claimant filed a Notice of Appeal with the Board of Industrial Insurance Appeals from the August 19, 1993 Department order.
On January 14, 1994, the Board issued an order granting the appeal subject to proof of  timeliness, assigning Docket 93 6908, and directing that proceedings be scheduled.
2. On September 1, 1992, Jerry W. Uhri suffered an industrial injury in the course of his employment with Coal Creek General Store.
3. The basis for the Department's recalculation of wages resulting in the March 17, 1993 Department order, was Mr. Uhri's business's adjusted gross income ($11,652.00) for the year 1992, as stated on Mr. Uhri's joint income tax return.
4. In his capacity as owner of the Coal Creek General Store, Mr. Uhri was not paid wages fixed by the month, nor was he paid a daily wage.
5. Mr. Uhri took draws from the business from time to time.
6. As owner of the Coal Creek General Store, Mr. Uhri worked seven days a week, fifteen to sixteen hours per day on a year around basis.
7. As owner of the Coal Creek General Store, Mr. Uhri did not receive a bonus as part of his remuneration.
CONCLUSIONS OF LAW
- The Board of Industrial Insurance Appeals has jurisdiction over the parties and the subject matter of this appeal.
- Mr. Uhri was not paid a daily wage or a wage fixed by the month within the meaning of RCW 51.08.178(1).
- Mr. Uhri's employment at the Coal Creek General Store was not exclusively seasonal in nature, nor was his employment or his relation to his employment essentially part-time or intermittent within the meaning of RCW 51.08.178(2).
- Mr. Uhri was not paid a bonus as part of his remuneration at the Coal Creek General Store within the meaning of RCW 51.08.178(3).
- Mr. Uhri's time loss compensation rate cannot be reasonably and fairly determined within the  meaning of RCW 51.08.178(4), based on information contained in his income tax returns.
- The August 19, 1993 Department order that affirmed the March 17, 1993 Department order which stated that the worker received time loss compensation of $8,858.30; the worker was entitled to time loss compensation of $1,295.67; therefore, the worker must pay the Department $7,562.63; The overpayment resulted because: the claimant was paid time loss based on an incorrect undocumented wage rate, and according to present documentation the claimant is entitled to time loss at the minimum rate for the entire period of September 9, 1992, through February 17, 1993, in the amount of $1,295.67; the claimant was paid $8,858.30, constituting an overpayment of $7,562.63, is incorrect, and this matter is remanded to the Department with instructions to calculate the claimant's time loss compensation rate according to RCW 51.08.178(4).
It is so ORDERED.
Dated this 30th day of March, 1995.
BOARD OF INDUSTRIAL INSURANCE APPEALS
S. FREDERICK FELLER Chairperson
FRANK E. FENNERTY, JR. Member
ROBERT L. McCALLISTER Member