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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Employers in Nebraska and Iowa Should be Aware of Changes in Pay Discrimination Lawsuits

A recent court case, stemming from an Iowa employer, may have a significant impact on how employers throughout Nebraska and Iowa view pay differential between employees. On April 3, 2017, the Eighth Circuit Court of Appeals ruled in Dindinger v. Allsteel, Inc., a case pertaining to gender based pay discrimination. In the ruling, the Court suggested that market forces and economic conditions, often used as an affirmative defense in pay discrimination claims, may not be sufficient as a defense without a clear connection. The result is that an employer may not be able to assert that economic conditions are the reason for pay differential between men and women without being able to show how the economic conditions caused the pay differential for the specific employees in question.

 

This case stems from an Iowa furniture manufacturer, where three female employees claimed gender based pay discrimination. As an affirmative defense, the business argued that market forces and economic conditions were the reason for the pay differential, not gender discrimination. This affirmative defense is often raised by employers and, generally, does not require a specific correlation between the economic condition and the employee. However, the Court in this case noted that to successfully argue the “factor other than sex” defense, the business must show how economic conditions directly resulted in the pay differential. For employers in the Court’s jurisdiction, including those in Nebraska and Iowa, an increased burden may exist when asserting the market forces affirmative defense and could necessitate taking action before any potential pay discrimination claims arise.

 

Employers should recognize the added challenge of defending pay discrimination lawsuits and, potentially, take preemptive action by auditing current pay and employment practices. A copy of the opinion can be found at the following link:  http://media.ca8.uscourts.gov/opndir/17/04/161305P.pdf

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