F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

J O S E P H P E T I T T , P etitioner ,

v

.
S A U S E B R O T H E R S ; S E A B R

I G H T I N S U R A N C E C O M P A

N Y ; D I R E C T O R , O F F I C E O F W O R

K E R S ’ C O M P E N S A T I O N P R

O G R A M , Respondents

. N o. 12-70740

B RB No. 11-0351

OPI NI ON

O n Petition for Review of an Order of the B enefits Review B oard
Arg ued and Submitted May 8, 2013—Portland, Oreg on

F iled September 20, 2013

B efore: Alfred T. Goodwin, Stephen Reinhardt, and Andrew D. Hurwitz , Circuit J udg es. Opinion by

J udg e HurwitzP E T I T T V

. S A U S E B R O T H E R S 2

SUMMARY *

Longshore and Harbor Workers’ Com pensation Act

The pan el g ranted a petition for review of a decision o f the B e nefits Review B oard awardin g b e n efits to p etitioner under the L ong shore a

n d Harbor W orkers Compensation Act.

The p anel held that under the L ong shore A ct, scheduled wag e increases g iven by a no n
- u n ion employ er to all employ e es in a certain c lass based solely upon seniority were
a g eneral increase in wag es and did not increase a claimant’s wag e-earning c apacity

. The panel c oncluded that petitioner’s quarterly “seniority r aises” were more akin to a g eneral w ag e increase than to a merits-based raise in wag es, and therefore should not be calculated into his wag e-earning capacity

. The panel remanded to the ag ency to recalculate p e t i tioner’s partial disability

benefits.

COUNSEL

Charles Robinowitz ( a r g ued) , Portland, Oreg on, for Petitioner.

Norman Cole (arg

ued), Sather, B y erl y & H o lloway , L L P, Portland, Oreg on, for Respondents.

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.P E T I T T V

. S A U S E B R O T H E R S 3

OP INION

HURW I TZ , Circuit J udg e:

The q u e s tion presented is w hether, under the L ong shore and Ha rbor W orkers’ Compensation Act (“L HW CA”),

s c h e d u led wag e increases unrelated to the merits of a worker’s performance constitute an increase in the worker’s wag e-earning capacity or merely a g e neral increase in wag es. W e hold that they

are a g eneral increase.

I.

J oseph Petitt injured his back in 2003 while earning $15 per hour as a welder for Sause B ro t h e r s ( “Sause”). After underg oing two surg e r ies, Petitt briefly returned to his job, but, phy sically unable to continue, left Sause at the end o f 2004. Sause then beg an pay ing Petitt permane n t t o tal disability benefits under the L HW CA, 33 U.S.C. §§ 901–950.

Three y ears later, Petitt beg an working a s an electronics assembler at K& K Sound Sy ste m s ( “K& K”), earning $7.80 per hour. K& K provides a ll production and clerical employ e es, i n cluding assemblers, an a utomatic $ 0.25 per hour raise every three months u ntil their wag es reach $13.50 per hour.

W h en Petitt b eg an work at K & K, Sause beg an pay ing him only permanent partial disability ben e f i t s based on his starting salary

. Sause p e r i o d i cally r educed those b e nefits to reflect each q

uarterly increase. Petitt objected, claiming that Sause incorrectly fact ored the quarterly raises into the determination of his benefit.P E T I T T V

. S A U S E B R O T H E R S 4

Under the L HW CA, “‘[ d] isability ’ means in ca p acity because of injury to e arn the wag e s which the employ ee was
r eceiving at the time of injury in the same or a n y o t h e r employ ment.” 33 U.S.C. § 902(10). A d isabled employ ee is

e n t itled to “ 66 b per c entum of the difference betwee n t h e averag e w eekly w ag es of the e mpl o y ee and the e mploy ee’s wag e-earning c apacity thereafter in the same employ ment o r otherwise, pay able during the continuance o f p a r t ial disability .” 33 U.S.C. § 90 8 (c)(21). Section 9 1 0(a)–(c) provides three formulas f

o r determining a claimant’s a verag e weekly wag e. W ag e-earning

capacity of a partially

disabled employ e e

shall be det ermined b y his a ctual earning s if such actual earnings fairly and reasonably

r e p r e s e n t h i s w a g e
- e a r n i n g c a p a c i t y: Provided, however , That if the employ ee has

n o actual e a

rning s or his a ctual earnings d o not fairly and reasonably represent his wag eearning capacity , the deputy commissioner may , in the interest of justice, fix such wag eearning capa city as shall b e reasonable, h a v i n g due reg ard to the nature of his injury , the deg ree of phy sical imp airment, his usual employ ment, a n d any o ther fac t o r s o r circumstances in the cas e which may affect his capacity to earn wag es in his disabled condition, including the e ffect of disability a s it may naturally ex tend into the future.
33 U.S.C. § 908(h).

B e cause the parties stipulated to Petitt’s averag e w e ek l y
w a ge at the time of his injury , this appeal hing es on t h eP E T I T T V

. S A U S E B R O T H E R S 5

proper c alculation of wag e -ea rning capacity

. After an evidentiary hearing , an administrative law j u d ge (“AL J ”) f ound that Petitt’s “pay increases a fter the date o f injury a r e
re f l e c t ive of h is wag e-earning capacity and shall be used to calculate his disability p ay ments.” T h e B enefits Rev i e w B oard affirmed. Petitt filed a timely petition f or review; we have jurisdiction pursuant to 33 U.S.C. § 921(c).

W e review B enefits Review B oard decisions “‘for errors of law and for a dherence to the substantial evidence standard.’” Gen. Constr. Co. v. Castro , 401 F

. 3 d 9 6 3 , 965 (9th Cir. 2005) (quoting Alcala v. Dir., OW CP , 141 F .3d 942, 944 (9th Cir. 1998)). “The B o ar d’s interpretation of the L HW CA is a q u e s t i o n of law reviewed de novo and is not entitled to a

ny special deference.” Stevedoring Servs. of A m

. v. Price , 382 F .3d 878, 883 (9th Cir. 2004).

II.

“The objective in determining wag e-earning capacity ‘is to d etermine the wag e that would h ave b een paid in the open market under normal employ ment conditions to the claimant

as injured.’” Deweert v

. Stevedoring S ervs. of Am. , 272 F .3d 1241, 1248 (9 t h Cir. 2 001) (quoting Long v. Dir., OW CP , 767 F

. 2d 1578, 1582 (9th Cir. 1985)). “ T he Act contemplates that the current doll a r a mount of post-injury ‘wag e-earning capacity ’ be adjusted downward ( i.e. , backward in time) to account for post-injury inflation and g eneral wag e increases. This adjustment allows post-i njury ‘wag e-earning capacity ’ to be meaning fully compared to pre-injury ‘ average weekly wag es.’” S

estich v. Long B e a ch Container Terminal , 289 F .3d 1157, 1161 (9th Cir. 2002); see also Long , 767 F .2d at 1582 (“A g e neral incre a s e in wag es

. . . may make post-P E T I T T V

. S A U S E B R O T H E R S 6
injury e arning s an unreliable indicator o f wag e-earning capacity .”).

Under the L H W C A , g eneral wag e increases include “percentag e increase[ s]

. . . i n the contractual wag es o f the base hourly rate.” Hanson v. Port of Portland , B RB Nos. 98- 1454 and 98-1454A, 1999 W L 3 5135239, at *3 (B e n. Rev

. B d. Aug

. 6, 1999). W ag e increases required by a union contract are t r eated as g eneral wag e increases. See, e.g. , Randall v. C o m

fort Control, I

nc. , 725 F .2d 791, 797 n.10 (D.C. Cir. 1 984) (“[ W ] a g es received by a particular employ ee
as a result o f union barg aining for industry -wide pay rates a re
n o t indicative of the employ ee’s true wag e-earn i n g capacity .”).
Conversely , merit or promotion-based wag e increases a re factored into a claimant’s wag e-earning c a p acity u nder the L HW CA. Sestich , 289 F .3d at 1160–61; Deweert , 272 F .3d at 1247 & n.3. Merit-based wag e incre a s e s include raises received for ex panding one’s duties o r learning new skills. Deweert , 272 F .3d at 1247 n.3.

III.

The only issue for decision is whether the $0.25 quarterly raises are g eneral wag e increases, which s h o u ld not be factore d i n to the determination of Petitt’s wag e-earning capacity , or instead reflect an increase in earning c ap acity , properly reducing the p ar tial disability benefit. 1 I n finding

1 On J an u ary 2 0 , 2 0 0 8 , K& K g av e Petitt a $0 .5 5 p er h o u r m erit in crease. T h e parties ag ree t h a t t

h e A L J p ro p erly in creased Petitt’ s w ag e- earn in g cap acity t o acco u n t f

o r th is in crease. No r do th e p arties d i s p u te t h at th eP E T I T T V

. S A U S E B R O T H E R S 7

the latter, the AL J relied primarily on the testimony of Karla Kaudel, the chief ex ecutive officer of K& K. Kaudel labeled the quarterly

pay increases a “seniority

raise,” and testified:

I f people work for us, we promise the m a certain max imum wag e that they can achieve in a c e r t ai n time frame for us. And the cap wag e for every

body in production and clerical is $13.50. A nd wh en o ur employ ees start, they start at minimum wag e, and w i th adequate performance they will g et automatic raises of 25 cents per quarter.

This Court h a s n o t previously had occasion to consider the a ppropriate treatment under th e L H WCA o f such “seniority raises.” W e conclude that Petitt’s quarterly raises

are more akin to a g eneral wag e increase t han to a meritsbased raise in wag es, and therefore should n o t be ca l c u lated into his wag e -earning

capacity

.
I n Randall , the District o f Columbia Circuit noted t h at increases in the collectively barg ained union ra t e for a particular employ ee’s work d o n o t reflect increased e arning capacity u nder the L HW CA, be cause the increases simply represent in d u stry

- wide p ay rates, rather than an increase in individual skill or responsibili t y

. 725 F .2d at 797 n.10. Althoug h K& K is not a uni o n employ er, its quarterly increases are also untethered f r o m advancement in skill o r responsibility

. L ike a union contract increase, which Randall characteriz ed a s “not indicative of the employ ee’s true wag eearning capacity ,” id. , the K &K seniority increases do not

A L J ap p ro p riately a d

j u sted f o r in f latio n in d eterm in in g P etitt’ s w ag eearn in g cap acity

.P E T I T T V

. S A U S E B R O T H E R S 8

increase Petitt’s value on the open market. I ndeed, the record is clear that n ewer K& K e mploy ees performing precisely the

same tasks as Petitt—with the same a mount of proficiency

— receive K& K’s starting w ag e, a djusted upward from the time of their hire, and thus earn less than Petitt.

Deweert , upon which Sause relies, is not to the contrary

. Althoug h we stated in Dewee r t that wag e increases because of seniority may be factored into a claimant’s wag e-earning capacity , the c laimant’s seniority in that case was paired with increased responsibility and new marketable skills. 272 F .3d at 1247 n.3. Here, Pe titt’s seniority is not accompanied b y any increase i n h i s productivity , skill, or responsibility that would make him more valuable o n the market if he left K& K

. Petitt testified without contradictio n t hat after “y our second

or third month” as an electronics assembler, “y ou’re pretty much as f ast as y o u ’re g oing to g et,” and will have “learn[ ed] what y ou n eed to learn u ntil y ou g et to anoth e r p a r t of the company .” And w hen asked whether he was more productive than he was three months after he started, Petitt replied “no.” Ag ain, the AL J heard no evidence to the contrary

. This is not to sug g est that K& K’s seniority increases are not a rational market strateg y or of real benefit to t h e employ e r. B y reg ularly increasing Petitt’s wag es, K& K seeks to avoid the c osts, direct and otherwise, associated with hiring

or training a new e mploy ee, even at lower wag e s

. Bu t our objective h ere is n ot to d e termi n e w hether K& K benefits from the wag e increases, but rather to ascertain the wag e that Petitt could receive on the o p e n market u nder normal employ ment conditio n s. Id. at 1248. B ecause Petitt has learned no new skills and take n o n n o additional responsibility , his increased leng th o f service makes him

more va l u a b l e only to K& K. W ere he to seek work on theP E T I T T V

. S A U S E B R O T H E R S 9

open market, he c ould start at minimum wag e, just as h e a nd all new employ ees did at K& K.

IV.

F or the reasons a

bove, w e hold that under the L HW CA, scheduled wag e increases g iven by a non-union employ er to all employ ees in a certain class based solely upon seniority

are a g eneral inc r e as e i n w ag es and do not increase a claimant’s wag e-earning capacity

. The petition for review is g ranted a n d the B o ard’s decision is vacated. The matter is

r e m anded to the ag ency to recalculate Petitt’s p arti al disability benefits in a manner consistent with this opinion.

P E T I T I O N G R A N T E D ; V A C A T E D A N D REMANDED.