Cockle v. Dept. of Labor and Industries

Citation: 16 P.3d 583Docket: 68539-8

Court: Washington Supreme Court; January 18, 2001; Washington; State Supreme Court

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The Supreme Court of Washington addressed whether employer-provided health care coverage should be included in the calculation of workers' compensation payments under RCW 51.08.178. The case involved Dianne Cockle, who was injured while working for the Pierce County Rural Library District. At the time of her injury, Cockle earned $5.61 per hour and received medical and dental coverage valued at approximately 20% of her monetary compensation. After her injury, the Department of Labor and Industries calculated her compensation based solely on her paycheck, excluding the value of her health care coverage.

Cockle appealed this decision, arguing that her health care coverage constituted a significant component of her wages as defined in RCW 51.08.178, which includes "other consideration of like nature" to wages. The Board of Industrial Insurance Appeals initially sided with the Department, but the Pierce County Superior Court found that health care coverage should be included in the wage calculation. The Court of Appeals affirmed this ruling.

The Supreme Court concluded that health care coverage is indeed "consideration of like nature" to traditional wages such as board and housing, as it represents a measurable in-kind component of lost earning capacity critical for workers' health and survival. Consequently, the Court affirmed the Court of Appeals' decision with modifications and remanded the case for recalculation of Cockle's workers' compensation payments. The ruling clarifies the definition of wages under the relevant statute to include employer-provided health care coverage.

The term "wages" encompasses the reasonable value of in-kind benefits such as board, housing, and fuel received from an employer, but does not include overtime pay, except as specified in subsection (2). Statutory construction is a legal matter that is reviewed de novo, aiming to express legislative intent. If a statute's language is clear and unambiguous, its meaning is derived from that language. The Department contends that various dictionary definitions clarify "wages" as distinct from in-kind benefits. However, the Court of Appeals highlighted that a dictionary from 1971 defines "wages" as including employer-paid benefits like insurance and pensions. Although the Department may argue the ordinary meaning of "wages," RCW 51.08.178 broadens this definition to include the "reasonable value" of in-kind benefits. The phrase "other consideration of like nature" introduces ambiguity, leading to the need for statutory construction, legislative history, and case law to determine legislative intent. The principle of "ejusdem generis" suggests that general terms following specific examples should be interpreted within the same category. The parties differ on the defining characteristics that should guide the interpretation of "other consideration of like nature," with the Department proposing criteria such as tangibility and tax treatment, while Cockle emphasizes the in-kind nature of the examples provided.

Cockle argues that early twentieth-century examples of in-kind "consideration" from employers should be recognized as part of the contract of hire, ensuring that compensation is classified as "wages" regardless of its non-monetary form. Statutory interpretation must avoid rendering any part meaningless, as established in Stone v. Chelan County Sheriff's Dep't. The Washington Legislature intentionally did not limit qualifying benefits to a specific list, opting for the broad term "consideration," which is uncommon in other jurisdictions’ definitions of "wages" in workers' compensation laws. However, it did not include "any other consideration" but specified "other consideration of like nature," indicating a narrower interpretation was intended.

The legislative history reveals that Washington's "Compensation of Injured Workmen" act was enacted in 1911, with uniform compensation rates until a significant revision in 1971, which added a "wages" section to align compensation with a worker's actual wages at the time of injury. This revision aimed to create a fairer compensation basis, reduce instances where time-loss benefits exceeded actual wages, and ensure compensation kept pace with wage increases without requiring legislative intervention for every adjustment. The 1971 Legislature also codified a principle that the Industrial Insurance Act should be liberally construed to minimize suffering and economic loss from work-related injuries or deaths, favoring the injured worker in case of ambiguities. This principle, reaffirmed in Dennis v. Dep't of Labor, Indus., emphasizes the remedial nature of the Act and the need to resolve doubts in favor of workers.

The court emphasizes that compensation for injured workers should be based on actual "lost earning capacity" rather than arbitrary figures, as established since the 1971 revision of Title 51. In Cockle's case, her potential earnings included not only her hourly wage of $5.61 but also health care benefits valued at approximately 20% of her total compensation, which she lost due to injury. The Department argues for deference to its interpretation of RCW 51.08.178, citing its long-standing exclusion of employer-provided benefits, including health care, from compensation calculations. However, the court notes that while deference to an agency's interpretation can aid in understanding statutes, such interpretations are not binding. The court asserts that it is the judiciary's role to determine the law and that legislative inaction does not imply consent to ignore statutory requirements. The court finds the Department's interpretation conflicts with the mandate to include the "reasonable value" of all considerations in calculating "wages" for injured workers. Furthermore, the Department's argument that legislative intent excludes health care coverage from the "wages" formula is undermined by the statutory requirement to liberally construe Title 51 provisions to minimize economic loss from injuries. The court ultimately rejects the Department's interpretation and highlights that other statutory provisions limiting compensation do not support its exclusion of health care coverage.

A detailed review of the legislative history of RCW 51.08.018 indicates that the original 1971 bill mandated the Department to calculate its own "average monthly wage in the state" based on total wages reported for the prior year. However, the Governor's line-item veto removed this requirement, resulting in the law’s reliance on Title 50's "average annual wage." The veto was justified by concerns about administrative complexity for the Department of Labor and Industries, as a separate calculation already existed under the Unemployment Compensation Law. Consequently, this legislative change does not clarify whether employer-provided health care should be included in Title 51's definition of "wages." 

Furthermore, the Department's reference to RCW 51.32.090(4)(c), which mandates the continuation of health benefits for injured workers, does not necessitate the inclusion of these benefits in wage calculations as the Department asserts. Instead, restoration of health benefits serves to reduce the perceived loss of earning power. The Department's concern about potential double recovery if employer-provided health care is included in wages is mitigated by the fact that the case in question did not involve continued insurance coverage during disability. It is emphasized that time-loss compensation is intended to represent lost earning capacity, not retained capacity. Lastly, while there is a division among jurisdictions regarding what constitutes "wages" for workers' compensation, reliance on out-of-state case law for interpreting Title 51 is cautioned against.

Workers' compensation statutes vary significantly across states, and reliance on case law from other jurisdictions is often unproductive due to these differences. Historical Washington case law, including Stertz v. Industrial Insurance Commission and Thompson v. Lewis County, emphasizes that Washington's industrial insurance act is unique, limiting the applicability of foreign jurisprudence. Despite this, the Department and some state courts cite a 1983 U.S. Supreme Court decision (Morrison-Knudsen Construction Co. v. Director, Office of Workers' Compensation Programs) regarding compensation calculations for the family of a worker fatally injured. The case involved the interpretation of the "wages" clause in the Longshore and Harbor Workers' Compensation Act, particularly concerning employer contributions to union trust funds. Chief Justice Burger highlighted the complexities in determining the cash equivalent value of these benefits, asserting that their present value is difficult to ascertain and depends on unpredictable factors. Conversely, Justice Marshall, in dissent, argued that these trust funds have inherent value for employees and should not be excluded from compensation calculations due to measurement difficulties, advocating for a more inclusive interpretation consistent with statutory language requiring the consideration of "reasonable value" for noncash benefits.

The LHWCA's definition of "wages" was derived largely from New York's workers' compensation act, which emphasized compensation based on the loss of earning power. Justice Marshall, dissenting in a related case, argued that there is no significant distinction between direct cash payments and contributions to benefit plans when assessing a worker's earning power. He noted that if an employer paid a fixed amount directly into benefit funds, it should still count as wages, as these benefits have a present cash equivalent value. In 1983, in-kind work benefits represented over 15% of employer compensation costs, a trend Marshall predicted would increase to over one-third by mid-century. A decade later, Cockle's health care benefits accounted for approximately 20% of her compensation, reinforcing Marshall's argument that workers receiving more in non-cash benefits should not be disadvantaged in workers' compensation claims compared to those receiving cash. He interpreted the inclusion of "reasonable value of board, rent, housing, lodging, or similar advantage" as a means to recognize non-cash components of earning power, arguing that legislative terms should apply broadly to evolving circumstances rather than being limited to the benefits available at the time the law was enacted. The Washington Court of Appeals rejected the Morrison-Knudsen majority's reasoning, asserting that the Washington Act is a remedial statute aimed at ensuring fair compensation for disabled workers, and should be interpreted liberally in favor of the worker.

The Department acknowledges the Morrison-Knudsen Court's liberal construction mandate but contends that its interpretation conflicts with the principle of favoring workers in ambiguous situations and ensuring compensation reflects lost earning capacity. The Department expresses concerns that including employer-provided health care in "wages" would complicate the workers' compensation system, making it costly and burdensome, contrary to the goal of prompt compensation. However, the Court of Appeals asserts that administrative convenience does not justify disregarding statutory requirements. It rejects the requirement to assess the "reasonable value" of health care by hypothetical market value, suggesting instead to use the actual premiums paid.

The Department warns of potential litigation over the inclusion of various modern work benefits in wages, but the ambiguity in the statutory language concerning "other consideration of like nature" can be effectively managed through the ejusdem generis rule. The Court of Appeals correctly limited the interpretation of benefits to those akin to necessities like food, shelter, and heat. The overall legislative intent aims to minimize suffering and economic loss from workplace injuries, with a focus on providing remedial support that accurately reflects a worker's lost earning capacity. The statutory language should thus be construed to encompass identifiable and calculable in-kind benefits crucial for workers' health and survival at the time of injury.

Core, nonfringe benefits critical for workers’ health and survival include food, shelter, fuel, and health care, which align with Title 51’s intent to alleviate worker suffering caused by injuries. Injury-related deprivation of fringe benefits not essential to basic health does not constitute the "suffering" Title 51 addresses. The court affirms that health care premiums paid by an employer are nonfringe components of lost wages, thus should be included in calculations for workers' compensation under RCW 51.08.178. The Court of Appeals' decision is upheld but its reasoning is modified, and the case is remanded to the Department for recalculating Cockle's compensation, along with an order for reasonable attorney fees. 

Dissenting opinions express concern that this interpretation disrupts existing statutory language and could lead to broader implications for employer-provided benefits, potentially igniting conflict between labor and business interests in the legislature. RCW 51.08.178 specifically defines the basis for calculating wages for compensation purposes, specifying methods for determining monthly wages based on daily work.

"Wages" encompass the reasonable value of board, housing, fuel, and similar benefits received from an employer, excluding overtime pay unless specified in subsection (2). Tips are considered wages only if reported for federal income tax. The daily wage is calculated by multiplying the hourly wage by the typical hours worked, as determined by the department through fair averaging methods. For exclusively seasonal or part-time employment, the monthly wage is derived from the total wages, including overtime, earned over the preceding twelve months, representing the claimant's employment pattern. Bonuses received in the year prior to an injury are included in the monthly wage calculation. If a wage is not determinable, it is computed based on the usual wages of similar positions. 

The majority's analysis incorrectly focuses on a narrow definition of wages, arguing that medical and dental insurance should be included in wage calculations for time loss benefits, citing Washington case law that interprets wages broadly. However, the legislative definition in RCW 51.08.178 does not mention such benefits, listing only specific forms of compensation like wages, board, and tips, while explicitly excluding overtime and failing to reference benefits like medical insurance or pensions. The legislative language indicates that the referenced benefits are tied to the employer's needs for employee accommodation.

The concept of "other consideration of a like nature" applies to employees who are not residing at their usual address due to employer requirements, as illustrated by the case of University of Washington student nurses. RCW 51.08.178(1) stipulates that wage calculations for injured workers are based solely on their hourly wage multiplied by their regular working hours, excluding benefits, except for specific nonwage benefits outlined in the statute. This statute serves as a definitional framework within the context of time loss payments governed by RCW 51.32.090, which links these payments to a portion of the injured worker's wages. However, benefits are capped based on the average monthly wage in Washington, which is defined in RCW 51.08.018 and references RCW 50.04.355, indicating that various fringe benefits are excluded from wage definitions under the Employment Security Act. This raises questions about the legislative intent if benefits were to be included in wage definitions under the Act while simultaneously being capped by a figure that excludes them. Historically, the definition of "wages" has been central to the Act since its inception, affecting coverage determinations, particularly regarding volunteers who do not receive wages. The changes in 1971 expanded the Act's coverage and solidified the significance of the wage definition, which has been discussed in cases such as Kirk v. Dep't of Labor and Industries.

A person assisting a neighbor in obtaining firewood for sale without specific compensation was deemed not to be covered under the relevant Act. The Attorney General has consistently addressed the classification of individuals as employees or volunteers under the Act. For example, student nurses at the University of Washington, who received only room, board, and fuel during a training period at Firland Sanitarium, were classified as employees under the Act, emphasizing that certain types of compensation were intended to be covered. However, the Legislature did not intend for these benefits to be included in wage calculations for determining worker benefits under RCW 51.08.178. 

Neither the Department nor the Board has interpreted the statute to include benefits such as medical or dental insurance in wage calculations since 1971, despite handling millions of claims and appeals. The administrative agencies possess significant expertise in this area and have not recognized benefits as part of wages under the Act. The Department's underwriting of industrial insurance for employers has never factored in the inclusion of such benefits as wages, suggesting that the majority's interpretation would lead to increased premiums for employers to cover higher payouts for injured workers. The majority's policy-making lacks clear limitations regarding the interpretation of RCW 51.08.178.

Counsel for Ms. Cockle argues that under RCW 51.08.178, wages encompass any consideration received by an employee, aligning with the Court of Appeals' interpretation from the case of Rose. However, the majority's approach interprets "other consideration of like nature" as relating solely to "necessities of life," which the dissent contends is a flawed analysis. The majority posits that wages for time loss should include identifiable in-kind benefits essential to a worker's health and survival, termed "core, nonfringe benefits," which are not explicitly defined in RCW 51.08.178. The dissent highlights the ambiguity this creates for employers and the Department regarding the scope of benefits under the Act, emphasizing that employers offer a variety of benefits that could be considered core depending on individual circumstances, such as retirement age or personal needs.

The dissent criticizes the majority's narrow focus on time loss benefits, arguing that RCW 51.32.060 outlines the mechanism for all benefits, linking them back to the definitions provided in RCW 51.08.178. The dissent asserts that the majority cannot restrict its policy-making to only time loss benefits, as the statutory framework does not support differentiating between types of benefits. Additionally, the dissent references other jurisdictions, noting that many do not include certain benefits in wage calculations for worker compensation, citing a U.S. Supreme Court case that rejected the inclusion of employer-funded health and welfare benefits in wage replacement calculations.

Professor Arthur Larson's treatise on worker's compensation supports the employer's stance that certain benefits should not be classified as "wages" under RCW 51.08.178. Case law, including *Tabor v. Levi Strauss Co.*, *Rainey v. Mills*, and *Antillon v. N.M. State Highway Dep't*, reinforces this perspective by excluding health and welfare benefits, pension contributions, and insurance premiums from the definition of wages, which are not considered monetary compensation akin to room and board. 

The author, a former Washington State Legislator, acknowledges the contentious nature of labor and business disputes regarding industrial insurance, recalling legislative debates over issues like industrial insurance coverage and disability benefits. He expresses sympathy for injured workers but insists that changes to wage calculations should be decided by the Legislature, which can consider all stakeholders' interests. Currently, medical and dental benefits are not included in the definition of wages under the statute. He advocates for reversing the Court of Appeals and trial court decisions, upholding the Department's and Board's rulings. 

Additionally, a concurring dissent highlights that when the Legislature enacted RCW 51.08.178 in 1971, it deliberately excluded health insurance from the definition of wages, a fact that has not been amended despite opportunities for clarification. The case centers on the interpretation of "wages" as defined by the statute.

The term "wages" encompasses the reasonable value of board, housing, fuel, and similar benefits from the employer, but excludes overtime pay, with exceptions noted in subsection (2). The primary legal question is whether health care premiums qualify as "other consideration of like nature." The dissent suggests that the definition was misrepresented as being enacted in 1911, whereas it was actually established in 1971, which is critical for interpretation. The majority's argument connects early 20th-century benefits to modern health care, positing that since health insurance is now essential, it should fall under "other consideration of like nature." However, the 1971 enactment, which did not explicitly include health insurance, suggests a narrow interpretation of this phrase. Historical context indicates that health insurance was not recognized as a fringe benefit until later; thus, its absence in the statute implies it was deliberately excluded by the Legislature. The Court of Appeals noted that by 1971, health insurance was common, reinforcing the idea that its omission from the definition means it was not intended to be classified as wages. The majority acknowledges this issue but maintains the interpretation despite the Legislature's inaction to amend the statute in light of existing Department interpretations.

When the Legislature does not take action regarding a statute, the interpretation by the relevant administrative department gains significance. While such interpretations are not binding on the courts, they carry weight in discerning legislative intent, especially if the Legislature fails to amend the statute or explicitly reject the administrative construction. The court emphasizes that decisions regarding whether health insurance premiums should be included as wages should originate from the Legislature, not the judiciary. The lack of explicit inclusion of health care coverage as wages indicates that it should not be interpreted as such by the court.

A cautionary note from a leading treatise on workers' compensation law advises against broad interpretations of "wages," referencing a past case that was reversed by the Supreme Court. The history of workers' compensation, spanning over seventy years, has consistently calculated benefits based on actual wages, not on uncertain future values. The dissent argues that any reinterpretation of "wage" to include fringe benefits would require thorough justification, given the established understanding over decades. The note also clarifies that the specific case does not involve vacation pay, which was not appealed. Lastly, the discussion pertains to forms of non-monetary compensation that are comparable to traditional benefits like board, housing, and fuel.

RCW 51.08.178(1) establishes that an injured worker’s wage calculation is based solely on the hourly wage multiplied by the number of hours typically worked, without incorporating benefits, except for specific nonwage benefits listed in the statute. The statute identifies in-kind benefits such as board, housing, and fuel as part of wage calculations but does not mention health care. Chief Justice Guy suggests that the omission of health insurance from the definition of wages indicates intentional exclusion by the Legislature. However, the dissent overlooks the legislative directive that mandates including the "reasonable value" of all employer-provided "consideration of like nature" in wage calculations. The definition of "consideration" implies any value supporting a contract, while "compensation" encompasses various types of remuneration. Additionally, under RCW 51.32.090(6), any employer-provided wages, including health care, that continue during temporary disability will reduce time-loss compensation, as these wages are considered part of the worker's economic loss. The document references various workers' compensation cases that have adopted similar reasoning but notes differences in statutory language across states. Larson argues that "wages" should include all forms of valuable consideration received for work, such as tips and bonuses, which aligns with Cockle's view that health care coverage constitutes a real economic gain and should be classified as wages.

Courts in various jurisdictions have drawn similar conclusions regarding the evaluation of benefits in workers' compensation cases. For example, Ex Parte Murray criticized the Morrison-Knudsen case, finding the arguments presented by Larson unconvincing and citing Justice Marshall's dissent favorably. Other cases, such as Ragland v. Morrison-Knudsen and Meeker v. Provenant Health Partners, similarly distinguished Morrison-Knudsen. While the parties in the current case agreed that employer-paid health care premiums reflected their value, the Court of Appeals emphasized that determining the reasonable value of benefits, including health insurance, requires a comprehensive examination of market factors. The Department of Labor cautioned against adding hypothetical health care replacement costs to workers' compensation rates due to the potential for high expenses and complex investigations.

Justice Marshall noted that while an employer's contribution to health benefits may undervalue the actual benefits received, it serves as a reasonable indicator of the advantages provided. The Department also pointed out that many individuals lack health insurance, questioning the necessity of including it as a benefit that must be replaced. However, RCW 51.08.178(1) suggests that the definition of "wages" encompasses the reasonable value of essential non-fringe benefits necessary for workers' health and survival. The Department criticized the Court of Appeals' reasoning, asserting it relied on the erroneous assumption that RCW 51.08.178 applies solely to temporary disability benefits. It is acknowledged that this definition governs various forms of compensation, including permanent total disability and dependents' compensation. However, both the Department and dissenting opinions proposed criteria that could face the same criticisms directed at the Court of Appeals, with the Department arguing that health care coverage is distinct from other benefits like board and housing, which are typically provided to enhance worker availability or as incentives.

Compensation for workers who are permanently disabled or killed on the job must include the "reasonable value" of benefits such as board, housing, and fuel, as mandated by RCW 51.08.178. The Department contends that daily consumption of these benefits is relevant, but acknowledges that in cases of death, this daily consumption ceases. The dissent views these benefits as associated with the employer's needs, yet acknowledges that deceased employees typically do not reside at the employer's location. The Department argues that the application of RCW 51.08.178 in cases of permanent disability or death is based on flawed assumptions. Health care coverage is deemed similar to other benefits, as it is essential for worker health and survival. Historical context shows that while the Legislature could have included health and dental benefits in the wage definition in 1971, it chose not to do so. The Department estimated that including health insurance in wage calculations could raise employer premiums by over five percent, not accounting for potential impacts on other benefits. The majority's concern for health benefits for injured workers has been addressed in existing statutes, which restore health benefits upon the worker's return to employment in a different capacity. Testimony from 1993 indicated that time loss compensation typically excludes benefits. Workers injured on the job are not without medical coverage, as both workers and employers contribute to the medical aid fund, ensuring access to necessary medical care post-injury.

The majority's opinion omits discussion of the medical aid fund and its impact on injured workers like Dianne Cockle. It attempts to clarify the distinction between "wages" for time loss versus pensions and death benefits. However, the explanation provided lacks a clear standard regarding the recoverability of "core, nonfringe benefits" when a worker or their beneficiary receives pension or death benefits. In jurisdictions where wage definitions have been broadened through judicial rulings, legislative actions typically follow to restrict such interpretations. Examples include Alaska's judiciary recognizing health and welfare benefits as "money rate" compensation, leading to legislative changes that excluded medical benefits from the definition of "wages." Similar trends occurred in Maine and Colorado, where legislation was enacted to limit the inclusion of fringe benefits in wages following judicial interpretations. The potential for significant legislative conflict raises concerns about possible negative consequences for both injured workers in Washington and the state's business community. Justice Richard P. Guy is serving as a justice pro tempore of the Supreme Court.