Nebraska Supreme Court Addresses Evidentiary Standards for Approving Average Weekly Wages in Workers’ Compensation Court

One of the issues evaluated by the Nebraska Supreme Court in the recent case of Bortolotti v. Universal Terrazzo and Tile Company, 304 Neb. 219, 933 N.W.2d 851 (Neb. 2019), was what evidence is necessary for a Plaintiff to prove applicable average weekly wages for an owner/operator of a business. In Bortolotti, the Plaintiff was the sole stockholder and president of Universal Terrazzo and Tile Company (Universal), a subchapter S corporation. The Plaintiff had been an installer of terrazzo tile and fabricator and installer of granite for over 30 years before becoming the sole stockholder and president in 2011. The injury at issue occurred in June 2013 and the Plaintiff’s operative petition for workers’ compensation benefits alleged weekly earnings of $3,625 at the time of the injury, but Universal and their compensation insurance provider denied the allegation. At trial the Plaintiff offered one page from his 2013 tax return noting that the employer was an S corporation, and his earnings for the year were $3,950. The compensation court did not believe the Plaintiff’s earnings were so low as president of the company. The evidence at trial also discussed the total gross income of the corporation, but offered no evidence regarding what business expense deductions were taken by the Plaintiff from business earnings. Thus, the compensation court was unable to verify if business expenses had been properly deducted from the company’s gross earnings or the Plaintiff’s testimony that his weekly draw from the corporation was $3,625. Ultimately, compensation court determined that the Plaintiff sustained a compensable injury, but had difficulty in determining the Plaintiff’s average weekly wage due to a lack of exhibits, and instead held the Plaintiff’s average weekly wage was $1,399.95, entitling him only to a statutory maximum compensation rate of $728 per week.

The Supreme Court affirmed the Court of Appeals’ determination that there was not sufficient evidence to support the high average weekly wage and that the only competent evidence in the record supported the Court of Appeals’ determination of an average weekly wage of $49, the minimum weekly income benefit provided by statute based on the 2013 earnings of $3,950. The Supreme Court held that net profits or net income of an S corporation do not necessarily qualify as “wages” under the Nebraska Workers’ Compensation Act, as the statute requires focus on the “money rate at which the service rendered is recompensed,” not payments received solely because of a recipient’s status as a shareholder.

As the Supreme Court notes, the burden was on the Plaintiff, the president and sole shareholder of the S corporation to provide evidence differentiating his wages as a corporate employee from his profits as a corporate shareholder. The co-mingling of ownership and employment burdens the party seeking workers compensation to provide sufficient evidence of what their total income is. Bortolotti demonstrates that simply indicating the total revenue of a company will not be sufficient evidence for computing an average weekly wage.

VW Contributor: Ryan Coufal
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A Business Entity on the Rise: The Public Benefit Corporation

Until recently, many entrepreneurs were struggling to use their businesses to create a positive social change, mainly because traditional corporate laws require a corporation’s purpose to focus on maximizing shareholder value. However, the public benefit corporation is a newer business structure that is legally required to consider how its decisions will affect the general public, in addition to how its decisions will maximize shareholder profits. Thus, public benefit corporations can serve the best interests of society while creating value for stockholders.

Approximately thirty-two states recognize benefit corporations. In 2013, Delaware adopted legislation that recognizes the public benefit corporation as an entity and it is currently one of the most popular states for incorporation. Delaware corporation laws require a public benefit corporation to have the corporate purpose of operating in a responsible and sustainable manner. Further, the benefit corporation must identify one or more public benefit purposes. Last, Delaware benefit corporations must report biennially to shareholders about the corporation’s overall impact on the shareholders’ financial interests and on the interest of those identified in the public benefit corporate purpose.

In 2014, Nebraska joined the ranks of the other states that recognize benefit corporations as a legal entity. Nebraska benefit corporations have the purpose of creating general public benefits and may also have specific public benefit purposes, such as the purpose of promoting the arts and sciences. Additionally, the benefit corporation must prepare an annual report for the corporation’s shareholders that identifies the ways in which the benefit corporation pursued a general public benefit during the year and any circumstances that hindered the creation of a general or specific public benefit.

Ultimately, lawmakers hope public benefit corporations will create jobs, improve communities, and use innovative approaches to solve society’s most challenging problems.

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