Court Opinion

ID: 9587461
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:22:22.553092+00
Date Added: 2024-06-11T17:46:46.157669
License: Public Domain

NEWBY, Justice.
This case presents the issue of whether an employer’s contributions to an employee’s retirement accounts are included in the calculation of “average weekly wage” under our Workers’ Compensation Act. While the Act is to be “liberally construed,” such liberality is not to be extended “beyond [its] clearly expressed language.” See Deese v. Se. Lawn & Tree Expert Co., 306 N.C. 275, 277, 293 S.E.2d 140, 142-43 (1982). Because we do not believe inclusion of fringe benefits to be “clearly expressed,” we reverse the Court of Appeals.
Plaintiff Curry Shaw worked as a fleet service worker for defendant-employer U.S. Airways. As an employee, plaintiff participated in two separate retirement programs. The first program was a 401(k) plan (the “Savings Plan”) that allowed plaintiff to defer a certain percentage of his eligible income into a retirement savings account. Under the plan, defendant-employer would match fifty percent of plaintiff’s contributions up to two percent of plaintiff’s eligible compensation. The second retirement program (the “Pension Plan”) was funded entirely by obligatory contributions made by defendant-employer on behalf of plaintiff, based on his income and age. The plans were maintained in separate accounts by plan administrator Fidelity Investment Services, which offered plaintiff investment options for the money contributed by plaintiff and defendant-employer. These investment options were the same for both plans and included a mix of pre-selected stocks, mutual funds, and bonds.
On 12 July 2000, plaintiff injured his back while attempting to lift luggage from a baggage belt at his workplace. In a Form 60 filed on 24 August 2000, defendant-employer and its workers’ compensation carrier (collectively “defendants”) admitted plaintiff’s right to compensation under the North Carolina Workers’ Compensation Act for *459an injury by accident. Defendants reported plaintiffs “average weekly wage” as $825.55. This amount omitted defendant-employer’s contributions in the 52 weeks preceding plaintiff’s injury of $1,798.33 to plaintiff’s Pension Plan and $899.17 to plaintiff’s Savings Plan. Inclusion of these amounts in the average weekly wage calculation would have increased plaintiff’s average weekly wage by $51.87 (the sum of defendant-employer’s contributions to both plans divided by 52).
On 23 November 2004, plaintiff filed a Form 33 requesting a hearing because the parties were unable to agree whether defendant-employer’s contributions to the Savings and Pension Plans were part of plaintiff’s average weekly wage. Following a hearing on 25 May 2005, a Deputy Commissioner entered an opinion and award concluding that the contributions were not included. Plaintiff appealed to the Full Commission, which entered an opinion and award on 13 September 2006 affirming and modifying the Deputy Commissioner’s decision. The Commission concluded the contributions “did not constitute earnings, but rather were a fringe benefit of [plaintiff’s] employment with defendant-employer that should not be included in the calculation of his average weekly wage.”
On appeal, the Court of Appeals majority reversed and remanded the case to the Commission after “conclud[ing] that not all fringe benefits are required to be excluded from an average weekly wage calculation and [that] the Commission did not apply the proper analysis in determining whether the contributions at issue in this case should be excluded.” Shaw v. U.S. Airways, Inc., 186 N.C. App. 474, 476-77, 652 S.E.2d 22, 23 (2007). The dissenting judge would have affirmed the Commission, disagreeing with the majority’s interpretation of existing law and cautioning that “[a]ny more detailed mandates on what may and may not be included in these computations must come from our legislature, not from this Court.” Id. at 489, 652 S.E.2d at 32 (Hunter, J., dissenting).
The sole question before us is whether defendant-employer’s contributions to plaintiff’s two retirement accounts should be included in plaintiff’s “average weekly wage” as defined by N.C.G.S. § 97-2(5). We have observed that section 97-2(5) “sets forth in priority sequence five methods by which an injured employee’s average weekly wages are to be computed.” McAninch v. Buncombe Cty. Sch., 347 N.C. 126, 129, 489 S.E.2d 375, 377 (1997). Plaintiff argues that defendant-employer’s contributions to his retirement accounts should be included under the first method of calculating average *460weekly wage, which in pertinent part provides: “ ‘Average weekly wages’ shall mean the earnings of the injured employee in the employment in which he was working at the time of the injury during the period of 52 weeks immediately preceding the date of the injury . . . divided by 52____” N.C.G.S. § 97-2(5) (2007).
Thus, the inquiry becomes whether defendant-employer’s contributions constitute “earnings.” Plaintiff contends that the contributions are earnings because they represent economic gain to him and valuable consideration for his employment. Defendants argue that the contributions are not earnings because nothing in the plain language of section 97-2(5) specifically includes fringe benefits. We agree with defendants.
When interpreting a statute, we ascertain the intent of the legislature, first by applying the statute’s language and, if necessary, considering its legislative history and the circumstances of its enactment. See Burgess v. Your House of Raleigh, Inc., 326 N.C. 205, 209, 388 S.E.2d 134, 136-37 (1990) (citing State ex rel. N.C. Milk Comm’n v. Nat’l Food Stores, Inc., 270 N.C.-323, 332, 154 S.E.2d 548, 555 (1967)). Our Workers’ Compensation Act does not define “earnings.” Thus, we review the historical context of the Act’s adoption in 1929. At that time, fringe benefits were rare. See Morrison-Knudsen Constr. Co. v. Dir., Office of Workers’ Comp. Programs, U.S. Dep’t of Labor, 461 U.S. 624, 632, 103 S. Ct. 2045, 2050, 76 L. Ed. 2d 194, 201 (1983) (noting that in 1927, when the federal workers’ compensation statute at issue in that case was enacted, “employer-funded fringe benefits were virtually unknown”). Since its enactment, the original language used by the legislature in setting out the first method of calculating average weekly wages under section 97-2 has remained substantially unchanged. See The North Carolina Workmen’s Compensation Act, ch. 120, sec. 2(e), 1929 N.C. Sess. Laws 117, 118. Moreover, the only substantive addition to this language was a 1947 amendment to include in average weekly wages subsistence allowances paid to war veteran trainees by the United States government. See Act of Apr. 2, 1947, ch. 627, sec. 1(1), 1947 N.C. Sess. Laws 929, 929. At no point has the General Assembly mentioned fringe benefits in their revisions of other parts of section 97-2. Given that fringe benefits were uncommon when the legislature used the term “earnings” in 1929 and the legislature’s subsequent failure to address fringe benefits in the face of their proliferation, we conclude the General Assembly did not intend to include fringe benefits in the concept of earnings. Thus, we reach a different outcome from the Court of Appeals majority *461because its analysis in the case below focused on whether the Act clearly excludes fringe benefits, rather than answering the controlling question: whether the Act specifically includes them.
Our statutory construction in this case is similar to that of the United States Supreme Court in Morrison-Knudsen, its leading case on the issue of fringe benefits in the federal workers’ compensation system. In Morrison-Knudsen, the Court emphasized Congress’s failure to include fringe benefits in numerous revisions of the Longshoremen’s and Harbor Workers’ Compensation Act, which was enacted in 1927, 461 U.S. at 632-37, 103 S. Ct. at 2050-53, 76 L. Ed. 2d at 201-04, and ultimately concluded that the employer’s contributions to the employee’s health and welfare pensions were not part of the employee’s wages when calculating benefits under the Act, id. at 637, 103 S. Ct. at 2052-53, 76 L. Ed. 2d at 204. Relying on Morrison-Knudsen, the only North Carolina opinion to have addressed fringe benefits in workers’ compensation cases held that it was not unfair under the fourth method of section 97-2(5) to exclude employer-paid health insurance premiums. Kirk v. N.C. Dep’t of Corr., 121 N.C. App. 129, 135-36, 465 S.E.2d 301, 305-06 (1995), disc. rev. improvidently allowed, 344 N.C. 624, 476 S.E.2d 105 (1996). While neither Morrison-Knudsen nor Kirk controls the outcome in this case, it is also true that neither gives us a compelling reason judicially to include fringe benefits as part of “earnings” under the statute.
A leading treatise on workers’ compensation law provides additional guidance: “In computing actual earnings as the beginning point of wage-basis calculations, there should be included not only wages and salary but any thing of value received as consideration for the work, as, for example, tips, bonuses, commissions and room and board, constituting real economic gain to the employee.” 5 Arthur Larson & Lex K. Larson, Larson’s Workers’ Compensation Law § 93.01[2][a], at 93-19 (Nov. 2005) (footnotes omitted). While fringe benefits could be considered broadly as “[a] thing of value received as consideration for the work” or as “constituting real economic gain to the employee,” the Larson text treats fringe benefits separately from its enumerated examples of earnings and cautions against including fringe benefits in calculations of the average weekly wage:
Workers’ compensation has been in force in the United States for over eighty years, and fringe benefits have been a common feature of American industrial life for most of that period. Millions of compensation benefits have been paid during this time. *462Whether paid voluntarily or in contested and adjudicated cases, they have always begun with a wage basis calculation that made “wage” mean the “wages” that the worker lives on and not miscellaneous “values” that may or may not someday have a value to him or her depending on a number of uncontrollable contingencies. Before a single court takes it on itself to say, “We now tell you that, although you didn’t know it, you have all been wrongly calculating wage basis in these millions of cases, and so now, after eighty years, we are pleased to announce that we have discovered the true meaning of ‘wage’ that somehow eluded the rest of you for eight decades,” that court would do well to undertake a much inore penetrating analysis than is visible in the Circuit Court’s opinion [which was reversed by the Supreme Court in Morrison-Knudsen] of why this revelation was denied to everyone else for so long.
Id. § 93.01[2][b], at 93-21 to -22.
Further support for our analysis is found in a basic understanding of “taxable income” under the Internal Revenue Code. Defendant-employer reported plaintiff’s average weekly wage as $825.55, which includes plaintiff’s contributions to the Savings Plan while excluding defendant-employer’s matching contributions. This is consistent with the tax implications of each contribution. Plaintiff’s contributions were simply the portion of his gross wages that he chose to place in the Savings Plan. While plaintiff’s contributions were not subject to federal income tax at the time they were “earned” by plaintiff, they remained subject to federal Medicare and Social Security taxes. Internal Revenue Serv., U.S. Dep’t of the Treasury, Publ’n No. 525, Taxable and Nontaxable Income 8 (2007). However, defendant-employer’s contributions are subject to neither federal income tax nor Medicare and Social Security taxes. See id. Thus, the gross amount of plaintiff’s earnings, including his retirement contributions, are treated as taxable income to some extent, whereas defendant-employer’s contributions are not.
Noting the foregoing persuasive authorities, we acknowledge that fringe benefits are prevalent today, thus making their inclusion in the computation of benefits under the Workers’ Compensation Act a significant issue. As we have stated before:
This Court has interpreted the statutory provisions of North Carolina’s workers’ compensation law on many occasions. In every instance, we have been wisely guided by several sound *463rules of statutory construction which bear repeating at the outset here. First, the Workers’ Compensation Act should be liberally construed, whenever appropriate, so that benefits will not be denied upon mere technicalities or strained and narrow interpretations of its provisions. Second, such liberality should not, however, extend beyond the clearly expressed language of those provisions, and our courts may not enlarge the ordinary meaning of the terms used by the legislature or engage in any method of “judicial legislation.” Third, it is not reasonable to assume that the legislature would leave an important matter regarding the administration of the Act open to inference or speculation; consequently, the judiciary should avoid “ingrafting upon a law something that has been omitted, which [it] believes ought to have been embraced.”
Deese, 306 N.C. at 277-78, 293 S.E.2d at 142-43 (alteration in original) (citations omitted). Without further guidance from our legislature, we will not issue an opinion requiring the Industrial Commission to consider whether “earnings” includes fringe benefits. We do not know what practical effect such a holding would have on employee benefits. On the one hand, a more modem and fair notion of “earnings” might logically include the cash value of fringe benefits, which are strong incentives for many employees in choosing one employer over another. However, inclusion of fringe benefits as part of “earnings” in calculating workers’ compensation benefits might deter employers from offering those benefits in the first place. Weighing these and other public policy considerations is the province of our General Assembly, not this Court.
Based on the plain language of section 97-2(5), we hold that employer contributions to an employee’s retirement accounts are not included in the calculation of the employee’s average weekly wage. Accordingly, we reverse the Court of Appeals.
REVERSED.