Free v. westat/liberty

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

ELLISE FREE, Petitioner Employee,

v.

THE INDUSTRIAL COMMISSION OF ARIZONA, Respondent,

WESTAT, Respondent Employer,

LIBERTY MUTUAL INSURANCE, Respondent Carrier.

No. 1 CA-IC 19-0041
FILED 07-23-2020

Special Action - Industrial Commission
ICA Claim No. 20162-370187
Carrier Claim No. WC197-A96921
The Honorable Paula R. Eaton, Administrative Law Judge

AFFIRMED

COUNSEL

Snow Carpio & Weekley PLC, Phoenix
By Dennis R. Kurth
Counsel for Petitioner Employee

Industrial Commission of Arizona, Phoenix
By Gaetano J. Testini
Counsel for Respondent

Lundmark Barberich LaMont & Slavin PC, Phoenix
By Lisa M. LaMont
Counsel for Respondent Employer and Carrier
 FREE v. WESTAT/LIBERTY
Opinion of the Court

OPINION

Judge Jennifer M. Perkins delivered the opinion of the Court, in which
Presiding Judge David D. Weinzweig and Judge James B. Morse Jr. joined.

P E R K I N S, Judge:

¶1 Does an employee’s average monthly wage include her
unused per diem food allowance? Petitioner Ellise Free argues that it does.
The Administrative Law Judge (“ALJ”) who heard her case for the
Industrial Commission of Arizona (“ICA”) issued an award rejecting that
view. Because we find no legal justification for Free’s argument, we affirm
the award.

FACTUAL AND PROCEDURAL HISTORY

¶2 Respondent Westat gathers health information for the federal
government by interviewing people in their homes. Free began working as
a field interviewer for Westat in 2014. She started in a part-time, no-travel
position but was transferred to a full-time position in 2016 that required her
to travel for all but four weeks a year. Her compensation included an hourly
wage plus a per diem allowance for meals and incidentals. Westat paid
vendors directly for Free’s lodging expenses and car rental, and reimbursed
her gasoline expenses using a location-based formula.

¶3 As for Free’s meal expenses, Westat paid her a per diem based
on the federal government’s location-based reimbursement rates. For
example, when Free was working in Worcester, Massachusetts, she
received $59 per day, which amounted to $13 for breakfast, $15 for lunch,
$26 for dinner, and $5 for incidentals. Free did not have to submit receipts
for food or itemize her spending to receive the per diem. She received
weekly checks for seven days of per diem expenses, and was free to spend
or keep her per diem allowance. Free testified that she never used her full
per diem allowance because she took advantage of free meals offered by
the hotels in which she stayed. At the hearing in these proceedings, she
estimated that she spent roughly $175 on food in a typical week ($25 per
day), but she did not explain how she calculated this amount and provided
no receipts or records.

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Opinion of the Court

¶4 In July 2016, Free injured her shoulder while working. She
filed a worker’s compensation claim, and it was accepted. Free challenged
the initial calculation of her average monthly wage. After a hearing, Westat
appealed the award to this court. We set aside the award for multiple
reasons, including because the record lacked the evidence to review
whether Free’s wages included the per diem allowance. Westat/Liberty
Mutual Ins. v. Industrial Comm’n, 1 CA-IC 17-0037 at *7, ¶ 17 (Ariz. App. May
1, 2018) (mem. decision).

¶5 The ICA held another hearing at which the ALJ heard
testimony from Jacqueline Hogan, Westat’s Vice President and project
director, Free, and a co-worker. Hogan explained Free’s compensation
structure, as reflected above. The ALJ found the per diem allowance was an
employment-related expense rather than wages. In seeking administrative
review of that award, Free argued that her unused per diem allowance
should be counted as wages, thereby raising her average monthly wage.
The ALJ summarily rejected that argument and affirmed the award. Free
then filed this special action statutory appeal. We have jurisdiction to
review an ICA award under A.R.S. §§ 12-120.21(A)(2), 23-951(A) and
Arizona Rule of Procedure for Special Actions 10.

DISCUSSION

¶6 In reviewing a worker’s compensation award, we defer to the
ALJ’s factual findings but review questions of law de novo. Young v. Indus.
Comm’n, 204 Ariz. 267, 270, ¶ 14 (App. 2003), as corrected (Feb. 25, 2003).
Here, the material facts are undisputed and Free presents a single legal
issue: Should her unused per diem allowance be included in her average
monthly wage for purposes of the worker’s compensation law? Free argues
that because the amount she actually spent on food was so much less than
her per diem allowance, our prior decisions require that the excess be
treated as wages. Her contention, however, stretches our prior decisions
beyond their holdings.

¶7 When a worker cannot work because of a compensable injury,
he or she receives compensation based on “average monthly wage at the
time of injury.” A.R.S. § 23-1041(A). This court considered whether per
diem travel expenses based on a graduated mileage rate could be counted
as wages in Moorehead v. Indus. Comm’n, 17 Ariz. App. 96, 99 (1972). We
noted that “wage” is not defined by statute. Id. at 98. We also cited with
approval Professor Larson’s statement that “wages” should include
“anything of value received as consideration” for work and anything that
constitutes “real economic gain” to the employee. Id. at 100 (quoting 2

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Arthur Larson, Workmen’s Compensation Law § 60.12 (1969)). Under that
principle, not all payments to an employee are wages because “‘wages’ [do]
not include amounts paid to the employee to reimburse him for
employment-related expenditures of a nature which would not be incurred
but for his employment. Such payments are simply not intended as
compensation for services rendered.” Moorehead, 17 Ariz. App. at 99.
Accordingly, when an employer has reimbursed a worker for employment-
related expenses, such payments may be counted as wages only upon a
showing “that the payments are more than sufficient to reimburse the
employee for the work-related expense so that in effect the excess can be
considered as extra compensation to the workman for his services
performed.” Id. Because the travel per diem there was “an approximately
reasonable reimbursement for the expense involved,” we held the ICA did
not err by excluding it from the wages calculation. Id. at 100.

¶8 We applied Moorehead to reach a different conclusion in
Pinetop Truck & Equip. Supply v. Indus. Comm’n, 161 Ariz. 105 (App. 1989),
where approximately 45% of a logger’s compensation was designated by
the employer as reimbursement for “saw rental.” Id. at 108. We noted a
verbal employment agreement tying compensation to the diameter of trees
cut down by a worker. That amount was then paid in two separate checks,
one for wages and the other, varying from 40-45% of the total, for expenses
that the employer denominated “chain saw, tools, and other supplies.” Id.
at 106. The ALJ determined that this compensation structure was a sham
and we agreed, stating that “expenses are not to be excluded from a
calculation of the average monthly wage unless they bear a reasonable
relationship to the actual work-related expense incurred.” Id. at 108. We
noted that “a reasonable payment for saw rental, duly contracted for, might
legitimately be excluded from wages. . . .” Id.

¶9 We again addressed the issue in Felix v. Indus. Comm’n, 193
Ariz. 152 (App. 1998), where a plasterer’s purported compensation
included a reimbursement of “equipment procurement” expenses that
nearly equaled his hourly wage. Id. at 154, ¶ 7. Applying Pinetop, we found
“the tool allowance paid to [the plasterer] was not reasonably related to the
replacement cost of the tools that he supplied.” Id. at 156, ¶ 20. And our
Supreme Court has found, in a different context, that “a set per diem rate,
so long as it is reasonably related to actual expenses incurred, does not
constitute a salary.” Randolph v. Groscost, 195 Ariz. 423, 426, ¶ 11 (1999).

¶10 Arizona case law therefore establishes that expense
reimbursements are excluded from average monthly wages if they are

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reasonably related to the worker’s costs, but that unjustified, excessive or
sham reimbursements may qualify as wages regardless of their label.

¶11 The meal per diem Westat paid Free was a work-related
expense. The record here contains no evidence of excessive, unjustified
reimbursements when compared to the reasonable expenses of a worker in
her position. Westat’s reimbursement rates, based on the federal
government’s per diem rates, reasonably approximated the cost of three
meals per day based on the relevant geographical location. Because those
rates therefore are objectively reasonable compared to reasonable costs, we
hold they may not be included as average monthly wages.

¶12 This is not to say that a claimant can never demonstrate that
a per diem reimbursement should be included in calculation of her average
monthly wage. When a claimant demonstrates that a particular per diem
rate is objectively unreasonable, she may then have the opportunity to
prove that all or some portion of the per diem should be included in her
average wage calculation. But we hold that, as a matter of law, the U.S.
General Services Administration’s location-based rates are objectively
reasonable. Adopting Free’s proposed analysis would allow a strange
scenario in which two workers, paid the same hourly amount and receiving
the same federal per diem rate, could have two different average wages
based merely on their dietary choices.

¶13 Even if Free had shown that her per diem was objectively
unreasonable, she failed to demonstrate that her reimbursement payments
unreasonably exceeded her work-related expenses. She presents no
evidence, beyond her vague and self-serving testimony, as to how much
she spent in any given week. Without more, we cannot say that the per diem
she received exceeded expenses to the extent that the ALJ should have
included the difference as average monthly wages.

¶14 The ALJ did not err by declining to include Free’s per diem in
the calculation of her average monthly wage.

CONCLUSION

¶15 A worker cannot unilaterally increase her average monthly
wage with proof of an unused per diem allowance when that allowance is
objectively reasonable as an approximation of the worker’s actual,

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reasonable costs. We affirm the award.

AMY M. WOOD • Clerk of the Court
FILED: JT

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