Douglas v. montecito/safety

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

SHEILA DOUGLAS,
Petitioner Employee,

v.

THE INDUSTRIAL COMMISSION OF ARIZONA,
Respondent,

MONTECITO POST ACUTE CARE & REHABILITATION,
Respondent Employer,

SAFETY NATIONAL CASUALTY CORP,
Respondent Carrier.

No. 1 CA-IC 24-0034
FILED 12-30-2025

Special Action - Industrial Commission
ICA Claim No. 20213640419
Carrier Claim No. 21871452
The Honorable Rachel C. Morgan, Administrative Law Judge

AWARD SET ASIDE

COUNSEL

Law Office of Eric C. Awerkamp, Mesa
By Eric C. Awerkamp
Counsel for Petitioner Employee

Industrial Commission of Arizona, Phoenix
By Afshan Peimani
Counsel for Respondent
Moeller Law Office, Tucson
By M. Ted Moeller, Trevor Hansen
Counsel for Respondent Employer and Insurance Carrier

OPINION

Judge Michael J. Brown delivered the opinion of the Court, in which
Presiding Judge Anni Hill Foster and Judge Paul J. McMurdie joined.

B R O W N, Judge:

¶1 This is a special action review of an Industrial Commission of
Arizona (“ICA”) award setting an average monthly wage for an injured
worker who had recently returned to full-time employment status when
she was injured. The issue before us is whether the wage base the
administrative law judge (“ALJ”) adopted realistically reflected the
worker’s monthly earning capacity. Because the ALJ’s selected timeframe
failed to account for what the injured worker was reasonably capable of
earning, we set aside the award.

BACKGROUND

¶2 The relevant facts are undisputed. Starting in 2011, Sheila
Douglas worked as a nurse, primarily for Sunland Health Associates LLC,
dba Montecito Post Acute Care & Rehabilitation (“Montecito”), a facility
that provides rehabilitative services to patients with medical and
behavioral health conditions. For most of her employment with Montecito,
Douglas worked full-time as a licensed practical nurse (“LPN”). But in
August 2020, she returned to nursing school and changed her employment
status with Montecito to “part-time or as needed.” After completing her
studies, she passed her examination in September 2021 and then obtained
licensure as a registered nurse (“RN”). Effective October 30, Montecito
classified Douglas “as a full-time employee.”

¶3 The number of hours full-time nurses worked per week at
Montecito fluctuated. It used a staffing system that set a certain number of
hours and allowed nurses to work extra shifts if they wanted. The
minimum hour requirement for full-time employment was 32 hours per
week, but nurses could work more than the minimum, including overtime.

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Opinion of the Court

¶4 In November 2021, Douglas worked decreased hours, with
Montecito’s permission, because she planned and attended funerals for her
father and his two friends, who had died due to the COVID pandemic. On
December 1, she started working full-time hours. On December 17,
Douglas was injured when a patient became violent and kicked her in the
head while she was trying to help him.

¶5 Payroll records show that from January 2021 through October
2021, while she was on part-time status, Douglas worked about 200 hours.
In November 2021, Douglas worked just under 80 hours, and in the first
two weeks in December, she worked 74.80 hours. She intended to work
more than 40 hours per week after that but for the injury. Her promotion
to RN in late October 2021 came with an increase in her hourly pay rate
from $32.96 to $36.

¶6 Montecito and the respondent carrier accepted Douglas’
workers’ compensation claim. They calculated her average monthly wage
at the time of injury by taking her total earnings from January 1, 2021,
through December 15, 2021 ($13,483.35), and dividing it by the number of
days in that period (349) to obtain a daily amount earned. That daily
amount ($38.63) was multiplied by a factor representing the number of days
in the month during that time (30.416), resulting in an average monthly
wage of $1,174.97. The ICA issued a Notice of Average Monthly Wage
approving that calculation. Douglas requested a hearing, asserting her
average monthly wage should be the 2021 statutory maximum because she
intended to work at least 40 hours per week at the RN pay rate when she
was injured.

¶7 At the subsequent evidentiary hearing, the ALJ heard
testimony from Sharon Martin, Montecito’s Human Resources Manager,
who explained that on October 30, 2021, Douglas was promoted from LPN
to RN, increasing her pay rate to $36 per hour. Douglas was also
reclassified from part-time to full-time, meaning she was expected to work
at least 32 hours per week. Martin further testified that RNs typically
worked 45–50 hours per week and that Douglas would be offered those
hours if she wanted them.

¶8 In establishing the average monthly wage under A.R.S.
§ 23-1041(A), the ALJ quoted the calculation analysis asserted by Douglas’
counsel:

[Douglas’] last pay stub before the injury showed ramp up
earnings of $2,792.80. This pay level would have continued

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Opinion of the Court

to increase, but for the injury. However, even at this pay level,
. . . Douglas was over the statutory maximum. As such, the
applicant’s average monthly wage should be established at
the statutory maximum of $5,030.33 based on the calculation
below: $2,792.80/15 days = $186.19[.] $186.19 x 30.416
= $5,663.16. Based on the pay period prior, the applicant’s
average monthly wage should be set at $5,030.33[.]

Noting that the ICA “has discretion to select the most appropriate formula,”
the ALJ summarily concluded that “applicant’s earnings of $13,483.35 over
the total time period from January 1, 2021, to December 15, 2021, for an
average monthly wage of $1,174.97 as determined by the carrier and
adopted by the ICA constitutes the most reasonable basis upon which to
establish her average monthly wage.” The ALJ affirmed the award on
review and Douglas filed this statutory special action challenging the
award. We have jurisdiction under A.R.S. §§ 12-120.21(A)(2), 23-951(A),
and Arizona Rules of Procedure for Special Actions 3, 11.

DISCUSSION

¶9 In reviewing a workers’ compensation award, we defer to the
ALJ’s factual findings, Young v. Indus. Comm’n, 204 Ariz. 267, 270,
¶ 14 (App. 2003), but we review de novo questions of law, Ibarra v. Indus.
Comm’n, 245 Ariz. 171, 174, ¶ 12 (App. 2018). Because the material facts
here are undisputed, we apply the law to those facts without deferring to
the ALJ. As the injured worker, Douglas has the burden of proving her
average monthly wage. See Zapien v. Indus. Comm’n, 12 Ariz. App. 334, 336
(1970).

¶10 Under Arizona’s workers’ compensation scheme, an injured
worker receives disability benefits for loss of earning capacity based on the
worker’s “average monthly wage at the time of injury.” A.R.S.
§ 23-1041(A). “Monthly wage” is defined as the “average wage paid
1

during and over the month in which the employee is . . . injured.” A.R.S.
§ 23-1041(G). Thus, a worker’s average monthly wage is presumed to be

1 At oral argument before this court, counsel for both parties agreed
that Douglas’ average monthly wage should be determined under
§ 23-1041(A), rather than § 23-1041(B) (stating that if the employee has not
been “continuously employed” for 30 days immediately before the injury,
the average monthly wage is determined based on “the previous wage of
the injured employee or of other employees” working in similar
employment).

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Opinion of the Court

the amount earned by the worker during the 30 days before the injury.
Kennecott Copper Corp. v. Indus. Comm’n, 61 Ariz. 382, 385 (1944). However,
as explained by our supreme court, “the wage base should realistically
reflect a claimant’s actual monthly earning capacity.” Lowry v. Indus.
Comm’n, 195 Ariz. 398, 400 (1999); see also 8 Arthur Larson & Lex K. Larson,
Larson’s Workers’ Compensation Law § 93.01(1)(g) (2025) (“The entire
objective of wage calculation is to arrive at a fair approximation of
claimant’s probable future earning capacity.”). Thus, if a worker’s earnings
during the 30-day period do not appropriately represent the worker’s true
wage at the time of injury, the ALJ has the discretion to use a different
timeframe to achieve the statutory goal of assessing a reasonable
representation of the worker’s average monthly wage. See Swift Transp. v.
Indus. Comm’n, 189 Ariz. 10, 11 (App. 1996).

¶11 Douglas was injured on December 17, 2021, so the
presumptive 30-day wage period is November 17 to December 17, 2021.
But Montecito and its carrier used essentially the entire 2021 calendar year
(eleven and a half months) as the wage base. The ICA, and later the ALJ,
approved and adopted that calculation without any explanation why they
deviated from the 30-day presumption. And because Douglas does not
argue the presumptive 30-day period should apply here, we presume the
parties agree that period does not fairly represent her earning capacity
when she was injured.

¶12 Instead, Douglas contends that relying on the entire 2021
calendar year does not accurately represent her earning capacity at the time
of injury because it includes ten months during which she worked as a part-
time employee and received a lower pay rate as an LPN. She contrasts her
award with the circumstances in Swift, where a truck driver was employed
for about two months as a probationary trainee on a weekly salary. Swift,
189 Ariz. at 10. After completing his training, his status changed to regular
employment, and he was paid per mile. Id. He worked in this manner for
one week before he was injured. Id. The ALJ calculated the driver’s average
monthly wage by using only the week of regular employment to determine
an average daily wage, noting that the pay increase was not routine but
merely a recognition of his promotion as a regular driver. Id. at 11. On
appeal, the employer argued the ALJ “was required” to use the driver’s
“actual earnings for the thirty-day period” before his injury. Id. This court
disagreed, concluding that the driver’s training salary “was properly
excluded because it present[ed] a distorted basis upon which to make a
determination of future earning capacity.” Id. at 12–13.

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¶13 Montecito argues the ALJ’s decision in this case was a
reasonable exercise of discretion because the timeframe reflected what
Douglas had “actually earned for her labor.” But using the calendar year
preceding her injury did not accurately capture her average monthly wage
under A.R.S. § 23-1041(A). Similar to the driver in Swift, Douglas had
recently seen a change in her employment status when she changed from
working as an LPN to an RN and had only been working a full-time
schedule for two weeks before her injury. Swift, 189 Ariz. at 10. The
changes in her employment affected both her hourly rate and the number
of hours she could expect to work. Accordingly, as in Swift, using the salary
Douglas earned through a time she was earning less and working fewer
hours “would grossly distort [her] ‘actual earning capacity.’” See id. at 12;
Larson, § 93.01(1)(g) (explaining that unless future earning capacity is
recognized as the guiding principle when dealing with wage calculation
issues, “there may be a temptation to lapse into the fallacy of supposing that
compensation theory is necessarily satisfied when a mechanical
representation of th[e] claimant’s own earnings in some arbitrary past
period has been used as a wage basis”).

¶14 Even so, Montecito argues the ALJ had the discretion to
disregard Douglas’ full-time designation and was not required to assume
Douglas would continue to work full-time hours. We recognize that an ALJ
has broad discretion in resolving factual disputes. See Malinski v. Indus.
Comm’n, 103 Ariz. 213, 217 (1968) (recognizing the ALJ’s duty to resolve all
evidentiary conflicts in the evidence and draw warranted inferences, which
will not be disturbed unless the conclusion is unreasonable). But there are
no factual disputes here. Thus, we apply the undisputed facts to the law
governing average monthly wage determinations. The suggestion that
Douglas would not continue to work full-time hours is speculative. The
only evidence presented to the ALJ confirmed that since 2011, other than
the time she spent attending nursing school to become an RN, Douglas had
worked full-time. And Montecito has not directed us to any evidence
suggesting Douglas’ full-time status would change after she started her RN
position.

¶15 Montecito’s argument also fails to recognize that the amount
Douglas had earned in the calendar year before her injury did not
accurately reflect the position (and corresponding pay) she had when the
injury occurred. Nor does Montecito explain how that period of time
appropriately reflected Douglas’ average wage paid during and over the
month in which she was injured. See A.R.S. § 23-1041(G). Thus, Montecito
has shown no evidence in the record demonstrating that the ALJ’s chosen
timeframe for calculating Douglas’ average monthly wage reasonably

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Opinion of the Court

reflects her actual monthly earning capacity. See Lowry, 195 Ariz. at 400
(“[T]he wage base should realistically reflect a claimant’s actual monthly
earning capacity.”); Franco v. Indus. Comm’n, 130 Ariz. 37, 40 (App. 1981)
(recognizing the purpose of workers’ compensation “is to reimburse
injured workers for loss of earning capacity, not loss of earnings”).

¶16 Douglas urges us to remand this case and direct the ALJ to
calculate the average monthly wage “with the decision of the court in Swift
being instructive.” We decline to do so, given that our authority is limited
to either affirming or setting aside the award. See A.R.S. § 23-951(D); Garcia
v. Indus. Comm’n, 26 Ariz. App. 313, 315 (1976).

CONCLUSION

¶17 Because the timeframe the ALJ applied to calculate Douglas’
pre-injury average monthly wage does not properly reflect her actual
earning capacity at the time she was injured, we set aside the award.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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