Case Title: Lanning v. Fieldcrest-Cannon, Inc

Citation: 352 N.C. 98

Docket Number: 360PA99

State: north-carolina

Court: North Carolina Supreme Court

Date: 2000-06-16T00:00:00Z

Document:
IN THE SUPREME COURT OF NORTH CAROLINA
No. 360PA99
FILED 16 JUNE 2000
KYLE J. LANNING,
Employee
v.
FIELDCREST-CANNON, INC., Self-Insured,
Employer
On discretionary review pursuant to N.C.G.S. § 7A-31 of
a unanimous decision of the Court of Appeals, 134 N.C. App. 53,
516 S.E.2d 894 (1999), affirming in part and reversing in part an
opinion and award of the North Carolina Industrial Commission
entered 14 November 1997 and remanding for further proceedings. 
Heard in the Supreme Court 17 February 2000.
Carlton, Rhodes & Carlton, by Gary C. Rhodes, for
plaintiff-appellant.
Smith Helms Mulliss & Moore, L.L.P., by Jeri L.
Whitfield and Manning A. Connors, for defendant-
appellee.
PARKER, Justice.
The issue before this Court is whether the Court of
Appeals erred in holding that plaintiff-employee’s income from
his multilevel marketing distributorship constitutes wages and
that the Industrial Commission, therefore, erred in determining
that plaintiff is totally disabled under N.C.G.S. § 97-29.
On 11 March 1991 a deputy commissioner awarded
plaintiff compensation for total disability in the amount of
$256.45 per week “for the remainder of his life, his return to
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 The deputy commissioner concluded that plaintiff received
1
compensation for his total disability shortly after plaintiff’s
original injury forced him to stop working in January 1986. 
However, the original opinion and award adopted and affirmed by
the full Commission in July 1992 ordered defendant to pay
plaintiff compensation for total disability in the amount of
$256.45 per week beginning on 14 December 1988.
work or a change in his condition, whichever first occurs.”  On
1 July 1992 the Industrial Commission adopted and affirmed the
deputy commissioner’s opinion and award.  Defendant paid total
disability benefits to plaintiff pursuant to the full
Commission’s opinion and award from 14 December 1988 until
5 October 1994.  Plaintiff had returned to full-time employment
on or about 5 September 1994.
While working full-time, plaintiff on 10 July 1995
filed with the Commission a motion for modification based on a
change of condition, seeking compensation for permanent partial
disability pursuant to N.C.G.S. § 97-31.  On 21 July 1995
defendant-employer, Fieldcrest-Cannon, Inc., filed a cross-motion
seeking an opinion and award reflecting (i) that plaintiff
returned to full-time employment at wages greater than he earned
at the time of his injury, and (ii) that plaintiff is not
entitled to any benefits for permanent partial disability under
N.C.G.S. § 97-31.
Defendant requested a hearing to contest plaintiff’s
motion for modification.  A deputy commissioner heard the matter
on 5 December 1996, made findings of fact, and concluded that
plaintiff, having already received total disability benefits from
January 1986 until October 1994,  is precluded from electing
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additional compensation for permanent partial disability.
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Further, although neither party filed a motion concerning total
disability compensation, the deputy commissioner concluded that
plaintiff has not experienced a substantial change of condition
that entitles him to a reinstatement of total disability
benefits.  Finally, the deputy commissioner concluded that
defendant is entitled to a credit of $894.98 for compensation
mistakenly paid to plaintiff while he was employed by Dunning
Metal Innovations.
On 14 November 1997 the full Commission reversed the
opinion and award “based upon an erroneous interpretation of law
and not on any finding of credibility with respect to testimony.” 
The full Commission’s findings of fact determined, inter alia,
the following:  Plaintiff is a 36 year old male.  Prior to
30 December 1987 he had been employed as a heavy equipment
operator, weaver, dump truck driver, and fork lift operator, all
of which jobs required a medium to heavy level of exertion and
skills learned on the job.  Plaintiff completed eight years of
education and obtained his GED certificate after he was injured. 
On 30 December 1985 plaintiff sustained an injury to his back. 
Plaintiff underwent two surgeries and undertook physical therapy
and work-hardening programs.  When plaintiff was discharged from
medical treatment, he had a disability rating of 25-30% permanent
partial disability to the back.
The Commission further found that in September 1993
plaintiff enrolled in a machinist course at Davidson Community
College.  After completing this course, plaintiff began working
as a machinist with Dunning Metal Innovations on 5 September
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1994.  The employer’s lifting requirements exceeded plaintiff’s
restrictions, and plaintiff was unable to continue after a month. 
In October 1994 plaintiff began working full time as a machinist
at Everette Machine Company.  Plaintiff was able to adapt
successfully to this job for over a year because the employer was
able to structure plaintiff’s job within plaintiff’s functional
limitations which restricted his ability to sit, stand, and lift. 
In late 1995 or early 1996, plaintiff’s job requirements
increased.  Plaintiff was promoted to shop foreman; but the
growth of Everette’s business required plaintiff to perform
repetitive lifting in excess of plaintiff’s limitations, and the
employer was unable to provide plaintiff with the necessary
assistance with lifting to assure that plaintiff would be able to
perform the job without further injury to his back.  Plaintiff’s
back began bothering him after the job requirements were changed. 
He lifted seventy-pound sheet metal with a co-employee ten to
twenty times a day, and once or twice he lifted the seventy-pound
sheet metal by himself.  In April 1996 plaintiff suffered a
relapse caused by the exertional requirements of the job.  The
doctor required plaintiff to stay out of work at least
temporarily following physical therapy.  At this time plaintiff
determined that his employer could no longer accommodate the job
plaintiff had been performing, and plaintiff did not return to
work or seek another machinist job since his restrictions
required accommodations that most machinist shops were unlikely
to meet.  The full Commission made the following further finding
of fact:
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8.  Since April, 1996, Employee-
Plaintiff’s sole income has been as a
marketing representative or distributor for
Market America.  This venture is described as
a “multi-level marketing” approach in which
representatives purchase a distributorship,
sell products and recruit other distributors. 
Employee-Plaintiff has been expending
approximately 10-20 hours per week in this
venture, earning $300.00 - $600.00 per month
in commissions.  If this venture is
successful, Employee-Plaintiff hopes to spend
less time actively soliciting accounts, as
his compensation is based upon (1) his own
sales; [or] (2) commissions based upon sales
of [other] distributors he has recruited. 
The Full Commission takes “judicial” notice
that US Chamber of Commerce statistics show
that most new small businesses fail within
the first five years, and multi-level
marketing schemes have a high failure rate. 
Plaintiff’s testimony that he might
eventually be able to make a living through
this scheme thus is found by the Full
Commission to be a triumph of hope over
experience and thus not highly credible.
Based on these findings of fact, the Commission made
the following conclusions of law among others:
1.  NCGS § 97-47 provides in part that,
“Upon its own motion or upon the application
of any party in interest on the grounds of a
change in condition, the Industrial
Commission may review any award, and on such
review may make an award ending, diminishing,
or increasing the compensation previously
awarded, subject to the maximum or minimum
provided in this Article . . . [.]” 
Plaintiff has undergone substantial, material
changes of condition that entitle him to a
reinstatement of disability benefits pursuant
to NCGS § 97-29, subject to a credit for net
earnings from his self-employment enterprise.
While he was able to go back to work for
a time after retraining, the job he performed
was not ordinarily available in the open
market in that machinists are ordinarily
required to do lifting beyond plaintiff’s
lifting restrictions.  Additionally, he
ultimately was unable to perform the job
because of his earlier compensable injury. 
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The substantial and material change of
condition is the inability to continue
earning wages at the machinist job because
the job changed so that he could no longer do
it under his physician’s work restrictions
coupled with the strong inference that
similar jobs within his restrictions were
unavailable in the economy.
. . . .
3.  Employee-Plaintiff originally
elected to seek recovery of compensation
under N.C.G.S. § 97-29, and successfully
prevailed in establishing that he was totally
and permanently disabled according to the
holdings of the North Carolina Supreme Court
in Whitley vs. Columbia Lumber Mfg. Co., 318
N.C. 89, 348 S.E.2d 336 (1986), and Peoples
vs. Cone Mills Corp., 316 N.C. 426, [342]
S.E.2d 798 (1986).  This resulted in the
Opinion and Award of the Full Commission on
July 1, 1992, affirming the Award and Opinion
of the Deputy Commissioner on March 11, 1991,
both of which were based in part upon a
combination of Employee-Plaintiff’s
exertional limitations in which the
Commission found that Employee-Plaintiff
lacked the strength and durability to perform
work within his residual functional capacity,
and in part upon his non-exertional
limitations which included Employee-
Plaintiff’s limited education and learning
disability.  The Award and Opinion granted
Employee-Plaintiff compensation continuing
until his “return to work.”
4.  Employee-Plaintiff thereafter took
affirmative steps to overcome his non-
exertional limitations through successful
completion of a skilled trade course
qualifying him as a machinist.  During the
same period of time, his strength and
durability gradually increased to the degree
that he became able to sit and stand for the
requisite periods of time necessary to
perform full time gainful employment on a
sustained basis.  Through his own efforts,
Employee-Plaintiff thereafter successfully
returned to work as defined in the Workers’
Compensation Act.  This event constituted a
change of condition creating the presumption
that his disability ended.  Tucker vs.
Lowde[r]milk, 233 N.C. [185], 63 S.E.2d 109
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(1951), and compensation under the Award was
properly terminated.
5.  It is important to note that, at
this point, Employee-Plaintiff’s successful
adaptation to full time gainful employment
did not arise from an amelioration of
Employee-Plaintiff’s remaining residual
functional capacity, nor otherwise reflect an
increase in his remaining functional
limitations restricting his ability to lift. 
The evidence tends to show that once
Employee-Plaintiff returned to full-time
work, this required him to apply essentially
all of []his strength and durability to meet
the requirements of his work[] and reduced
his ability to engage in normal non-work
activities.  Furthermore, for Employee-
Plaintiff to work at each of his two jobs as
a machinist, his employers had to
specifically adapt and tailor the job to meet
Employee-Plaintiff’s restrictions for
occasional and repetitive lifting.  Neither
of these jobs as Plaintiff performed them
[was a job] available in significant numbers
in the local or national economy.  In early
1996, Employee-Plaintiff experienced two
further changes in circumstances.  First, his
employer could no longer adapt or tailor
Employee-Plaintiff’s job to Employee-
Plaintiff’s exertional restrictions. 
Employee-Plaintiff attempted to continue his
employment, but the increased exertion[]
directly resulted in a relapse and
deterioration of Employee-Plaintiff’s medical
condition, which caused Employee-Plaintiff to
cease work.  These substantial and material
changes of conditions constitute a recurrence
of Employee-Plaintiff’s disability cognizable
under NCGS § 97-47, which has the following
implications:  If Employee-Plaintiff is
unable to work and earn any wages, he is
totally disabled.  If he is able to work and
earn some wages, he is partially disabled. 
Robinson vs. J.P. Stevens and Co., 57 N.C.
App. 619, 292 S.E.2d 144 (1982).  The
disability of an employee is to be measured
by his capacity or incapacity to earn the
wages he was receiving at the time of his
injury.  Hill vs. [Du Bose], 234 N.C. 446, 67
S.E.2d 371 (1951), Robinson vs. J.P. Stevens
and Co., Supra.
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6.  Employee-Plaintiff’s earnings from
his venture as a distributor for Market
America are not “wages” because these
earnings are not directly related to the
ability of Employee-Plaintiff to engage in
full-time employment, nor to any measurable
time or effort expended by Employee-
Plaintiff.  Nor can this be classified as
“employment”, as there is no requirement[]
that Employee-Plaintiff devote any time or
effort to this venture.  At most, any income
from Employee-Plaintiff’s venture as a Market
America distributor would properly be
classified as income for which Defendant
would be entitled to be given credit. 
Barnhardt vs. Yellow Cab Co., 266 N.C. 419[,
146] S.E.2d 479 (1966).  Additionally, US
Chamber of Commerce statistics show that the
majority of newly-created small enterprises
fail as economic entities within the first
five years of their life.  People do not
ordinarily undergo the expense of starting
such a risky entrepreneurial experience
unless they are unable to obtain a paying job
in the real economy.  Therefore, creating a
new enterprise is more indicative of
inability to be employed in the workplace
than it is indicative of ability.
The Commission awarded plaintiff permanent total
compensation at the rate of $256.45 per week from 22 April 1996
and continuing into the future for those weeks in which plaintiff
is unable to earn any wages subject to a credit to defendant for
any net earnings from plaintiff’s attempt to become self-
employed.  This compensation is to continue until plaintiff
obtains a job earning as much as he earned at the time he was
originally injured or until further orders of the Commission. 
Defendant appealed to the Court of Appeals.
In a unanimous decision, the Court of Appeals reversed
the Commission’s award of total disability benefits.  Lanning v.
Fieldcrest-Cannon, Inc., 134 N.C. App. 53, 61, 516 S.E.2d 894,
900 (1999).  The Court of Appeals held that the Commission erred
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in its conclusion that plaintiff’s marketing distributorship is
not “employment” and that plaintiff’s earnings through Market
America are not “wages.”  Id.  The Court of Appeals also affirmed
(i) the Commission’s conclusion that plaintiff experienced a
substantial change of condition under N.C.G.S. § 97-47, and
(ii) the Commission’s finding that machinist jobs within
plaintiff’s physical capacities were not available in the open
market and that plaintiff was not likely to enjoy the same
accommodations at other machinist jobs as he did at Everette. 
Id. at 59, 516 S.E.2d at 899.  However, defendant did not seek,
and this Court did not grant, discretionary review of these last
two issues.  Accordingly, those issues are not before this Court;
and the determination of the Court of Appeals becomes the law of
the case as to those issues.
The Workers’ Compensation Act (“the Act”) defines
“disability” as the “incapacity because of injury to earn the
wages which the employee was receiving at the time of the injury
in the same or any other employment.”  N.C.G.S. § 97-2(9) (1999). 
“Compensation must be based upon loss of wage-earning power
rather than the amount actually received.”  Hill, 234 N.C. at
447-48, 67 S.E.2d at 372.  If the wage-earning power is only
diminished, the employee is entitled to benefits under N.C.G.S. §
97-30.  See Gupton v. Builders Transp., 320 N.C. 38, 42, 357
S.E.2d 674, 678 (1987).  If the capacity to earn is “totally
obliterated,” the employee may recover under N.C.G.S. § 97-29. 
See id.  The focus of this determination is not on “whether all
or some persons with plaintiff’s degree of injury are capable of
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working and earning wages, but whether plaintiff [him]self has
such capacity.”  Little v. Anson County Sch. Food Serv., 295 N.C.
527, 531, 246 S.E.2d 743, 746 (1978).  The earning capacity of an
injured employee must be evaluated “by the employee’s own ability
to compete in the labor market.  If post-injury earnings do not
reflect this ability to compete with others for wages, they are
not a proper measure of earning capacity.”  Peoples, 316 N.C. at 
437, 342 S.E.2d at 805-06.  The employee’s age, education, and
work experience are factors to be considered in determining the
person’s capacity to earn wages.  Little, 295 N.C. at 532, 246
S.E.2d at 746.
In reviewing an opinion and award from the Industrial
Commission, the appellate courts are bound by the Commission’s
findings of fact when supported by any competent evidence; but
the Commissions’s legal conclusions are fully reviewable.  See
Hilliard v. Apex Cabinet Co., 305 N.C. 593, 595, 290 S.E.2d 682,
684 (1982).  An appellate court “does not have the right to weigh
the evidence and decide the issue on the basis of its weight. 
The court’s duty goes no further than to determine whether the
record contains any evidence tending to support the finding.” 
Anderson v. Lincoln Constr. Co., 265 N.C. 431, 434, 144 S.E.2d
272, 274 (1965).  If the findings of the Commission are
insufficient to determine the rights of the parties, the
appellate court may remand to the Industrial Commission for
additional findings.  See Hilliard, 305 N.C. at 595, 290 S.E.2d
at 684.  “The evidence tending to support plaintiff’s claim is to
be viewed in the light most favorable to plaintiff, and plaintiff
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is entitled to the benefit of every reasonable inference to be
drawn from the evidence.”  Adams v. AVX Corp., 349 N.C. 676, 681,
509 S.E.2d 411, 414 (1998).
Addressing the issue of whether plaintiff’s earnings
from his Market America distributorship constitute wages, the
Court of Appeals relied on its prior decision in McGee v. Estes
Express Lines, 125 N.C. App. 298, 480 S.E.2d 416 (1997).  In
McGee the plaintiff-employee sustained an injury to his right
knee arising out of and in the course of his employment.  At the
time of the injury the plaintiff had a part-time tax-filing
service which he operated out of his home.  Following the injury,
the plaintiff expanded the tax-filing service, rented an office
outside his home, and employed others to work in the business. 
The plaintiff worked up to four or five hours a day in the
business but had not received any wages from the business and
only minimal distribution of profits.  In McGee the Commission
concluded that the defendants did not meet their burden of
showing that the plaintiff was actually earning wages and was
gainfully employed; hence, the Commission ordered that the
defendants continue disability payments.  The Court of Appeals,
holding that the Commission erred and remanding for
reconsideration based on the plaintiff’s earning capacity rather
than his actual wages, stated the following:
[A]n employee’s earning capacity is based on
his ability to command a regular income in
the labor market.  See Larson’s Workmen’s
Compensation Law § 57.51(e) (1996).  Thus
employee ownership of a business can support
a finding of earning capacity only to the
extent the employee is actively involved in
the personal management of that business and
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only to the extent that those management
skills are marketable in the labor market. 
Id. (income received from business owned by
employee cannot be used to reduce a
previously established disability unless the
income is the “direct result of the
[employee’s] personal management and
endeavors”).  Peoples, 316 N.C. at 438, 342
S.E.2d at 806 (emphasizing importance of
employee’s ability “to earn wages
competitively”).
McGee, 125 N.C. App. at 300, 480 S.E.2d at 418.  Thus, the Court
of Appeals limited earning capacity through self-employment to
situations in which the employee (i) is actively involved in the
personal business, and (ii) possesses management skills that
enable the employee to compete in the market.
While an employee’s management skills may be
significant in the operation of certain businesses, such as the
tax-filing service managed by the employee in McGee, different
skills may be relevant to and necessary for the operation of
other types of personal businesses.  The determinative issue is
whether the skills -- be they management, computer, accounting,
sales, consulting, or something else -- utilized by the employee
in the active operation of his own business, when considered in
conjunction with the employee’s impairment, age, education, and
experience, would enable the employee to compete in the labor
market.  See Peoples, 316 N.C. at 438, 342 S.E.2d at 806.  We
hold, therefore, that the test for determining whether the self-
employed injured employee has wage-earning capacity is that the
employee (i) be actively involved in the day to day operation of
the business and (ii) utilize skills which would enable the
employee to be employable in the competitive market place
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notwithstanding the employee’s physical limitations, age,
education and experience.  In the instant case, given plaintiff’s
exertional limitations, education, and experience, would he be
hired to work in the competitive market place?
The Court of Appeals, after noting the amount plaintiff
earns and evidence that plaintiff makes phone calls and calls on
companies and individuals to sell his product, concluded that
there was no basis whatsoever for the
Commission’s conclusion that plaintiff’s
marketing business is not “employment” and
that his earnings are not “wages.” 
Furthermore, the evidence shows that
plaintiff is “actively involved in the
personal management of [his] business,” and
there is little doubt that plaintiff’s
“management skills are marketable in the
labor market.”  See Estes, 125 N.C. App. at
300, 480 S.E.2d at 418.
Lanning, 134 N.C. App. at 61, 516 S.E.2d at 900.
The determination of whether a disability exists is a
conclusion of law that must be based upon findings of fact
supported by competent evidence.  See Hilliard, 305 N.C. at
594-95, 290 S.E.2d at 683.  The Court of Appeals was correct that
no finding of fact in the Commission’s opinion and award supports
its conclusion that plaintiff’s business is not “employment” and
his earnings are not “wages.”  The Commission’s finding of fact
number eight quoted above at best expresses the Commission’s
skepticism at the likelihood of plaintiff’s success in this
endeavor.  The Court of Appeals erred, however, in its
determination that plaintiff’s management skills are marketable
in the labor market and that the evidence shows plaintiff is
“actively involved in the personal management of [his] business.” 
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Whether plaintiff’s management skills are marketable and whether
plaintiff is actively involved in the business’ personal
management are questions of fact.  In making these
determinations, the Court of Appeals usurped the fact-finding
role of the Commission.  See Hilliard, 305 N.C. at 595, 290
S.E.2d at 683-84 (stating that “the Industrial Commission is the
sole judge of the credibility of the witnesses and the weight to
be given to their testimony”).  As the Commission failed to make
findings necessary to determine plaintiff’s wage-earning capacity
and the rights of the parties, we must reverse the Court of
Appeals and remand this action to that court for further remand
to the Industrial Commission for findings consistent with the
legal principles stated in this opinion.
Inasmuch as this case is being remanded to the
Industrial Commission, we will also address an issue, raised by
defendant but not reached by the Court of Appeals, that may or
may not become pertinent on remand.  After concluding that
plaintiff was totally disabled, the Commission crafted a hybrid
award which provided for total disability payments to be offset
by a credit to defendant for “any net earnings from [p]laintiff’s
attempt to become self-employed.”  Offsets of this nature are not
statutorily authorized and are, in fact, antithetical to the
provisions of N.C.G.S. § 97-30 providing for the payment of
partial disability benefits.  Despite its conclusion that
plaintiff is entitled to compensation for total disability under
N.C.G.S. § 97-29, the Commission in effect awarded plaintiff
compensation for partial disability by granting defendant a
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credit for any net earnings plaintiff might have.  An analogous
attempt by the Commission to adjust benefits was rejected by this
Court in Hendrix, where then-Justice, later Chief Justice,
Mitchell, writing for the Court, noted the inconsistency between
the Commission’s conclusion that the plaintiff was permanently
partially disabled and its award based on total loss of wage-
earning capacity reduced only for the weeks the plaintiff
actually worked at a restaurant.  See Hendrix v. Linn-Corriher
Corp., 317 N.C. 179, 190, 345 S.E.2d 374, 381 (1986).  While
plaintiff’s substantial post-injury efforts to become self-
sufficient are laudatory, neither this Court nor the Commission
is the legislature.  Absent a provision for a statutory offset,
we continue to apply section 97-30 and its three-hundred-week
time limit to plaintiffs who have some wage-earning capacity and
are, thus, only partially disabled under the Act.  See Gupton,
320 N.C. at 42, 357 S.E.2d at 678.
For the foregoing reasons, the opinion of the Court of
Appeals is reversed and the case remanded to that court for
further remand to the Industrial Commission.
REVERSED AND REMANDED.