Worker’s Pay Raises Warrant Functional, Rather than Industrial, Method of PPD Calculation

Case File

After getting hurt on the job, a worker went on to a series of pay increases that affected how his benefits were to be calculated in the eyes of Iowa's top court. Simply Research subscribers have access to the full text of the case.

Case

Den Hartog Industries v. Dungan, No. 23-1402 (Iowa 10/03/25)

What Happened?

A worker for a plastics manufacturer (which once produced a plastic tank that was used to make the world's largest margarita) was hoisting a 70-pound hoop as part of a loading process. Unexpectedly, the hoop caught on the trailer, causing the worker to feel a "lightning-like" sensation up and down the worker's back. The worker was diagnosed with a disc herniation and an annular tear for which he received steroid injections and physical therapy.

Despite having a 40-pound weight restriction and missing "a fair bit of work" due to pain, the worker received a raise from $15.16 to $15.50 per hour. Later, the worker and his fiancée had their first child and relocated to be closer to family. In his new town, the worker landed a job that paid $17.48 per hour before taking another that paid $20.15 per hour.

The worker filed a petition for workers' compensation benefits related to the injury at the manufacturer. A deputy commissioner determined that, as an unscheduled injury, the worker's injury was required to be compensated by loss of earning capacity, not functional impairment. Considering that the worker was 26, had no postsecondary education, and would "more likely than not be unable to return to work as physically demanding as his day-to-day duties" at the manufacturer, the deputy found that the worker sustained a 15% industrial disability and awarded 75 weeks of permanent partial disability benefits in addtion to costs and continued medical care.

The manufacturer sought review by the workers' compensation commissioner, who affirmed the deputy's decision, prompting the manufacturer to appeal to court. The district court agreed that Iowa law mandated determination of the worker's PPD benefits the way the deputy calculated them using the industrial method and further held that substantial evidence supported the commissioner's finding of industrial loss of 15%.

The manufacturer appealed, with the appeals court affirming.

The manufacturer then appealed to the Iowa Supreme Court.

Rule of Law

In Iowa, if an employee who is eligible for workers' compensation returns to work or is offered work for which the employee receives or would receive the same or greater salary, wages, or earnings than the employee received at the time of the injury, the employee shall be compensated based only upon the employee's functional impairment resulting from the injury and not in relation to the employee's earning capacity.

What the Iowa Supreme Court Said

The court ruled that the commissioner erred in awarding PPD benefits based on earning capacity rather than functional impairment.

According to the court, the worker's back injury would ordinarily be compensated according to the industrial method, based on the reduction in the employee's earning capacity caused by the disability. However, the worker returned to work at "the same or greater" pay and so he should have been compensated based only on his functional impairment resulting from the injury and not in relation to his earning capacity, according to the court.

Workers' Comp 101: Iowa law provides two methods for calculating compensation for a nonscheduled permanent partial disability. Compensation shall be paid using the industrial method based on “the reduction in the employee’s earning capacity caused by the disability.” However, when an employee returns to work at the “same or greater salary, wages, or earnings than the employee received at the time of the injury,” then “the employee shall be compensated based only upon the employee’s functional impairment resulting from the injury, and not in relation to the employee’s earning capacity.”

"If an employee with a nonscheduled injury returns to work at the same or greater earnings, they get compensated based on their functional impairment," the court wrote. "But, if they return to the same employer and are later terminated by that employer, they can pursue a review-reopening and seek benefits under the industrial method."

According to the court, the worker fit the first circumstance but not the second, so his compensation should have been based on his functional impairment, contrary to what the deputy, commissioner, district court, and appeals court held.

Verdict: The case was reversed and remanded for further proceedings.

Takeaway

In Iowa, an employee eligible for workers' compensation who returns to work at the same or greater salary, wages, or earnings should be compensated based upon their functional impairment resulting from the injury.

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