Court Opinion

ID: 3098470
Source: CourtListenerOpinion
Date Created: 2015-10-16 04:51:47.267548+00
Date Added: 2024-06-11T11:51:29.533271
License: Public Domain

Order filed March 18, 2010

                                            In The

   Eleventh Court of Appeals
                                          __________

                                    No. 11-08-00118-CV
                                         ________

             TEXAS MUTUAL INSURANCE COMPANY, Appellant

                                              V.

       SANDRA CRUZ, INDIVIDUALLY AND AS NEXT FRIEND OF
      CESAR CRUZ, NARADA CRUZ, AND MIGUEL CRUZ, Appellee

                             On Appeal from the 70th District Court
                                     Ector County, Texas
                               Trial Court Cause No. A-117,770

                                          ORDER
       Our former opinion and judgment dated December 17, 2009, are withdrawn, and our opinion
and judgment dated March 18, 2010, are substituted therefor.

                                                   TERRY McCALL
March 18, 2010                                     JUSTICE
Panel consists of: Wright, C.J.,
McCall, J., and Strange, J.
Opinion filed March 18, 2010

                                                        In The

   Eleventh Court of Appeals
                                                    ____________

                                              No. 11-08-00118-CV
                                                  __________

                   TEXAS MUTUAL INSURANCE COMPANY, Appellant

                                                           V.

          SANDRA CRUZ, INDIVIDUALLY AND AS NEXT FRIEND OF
         CESAR CRUZ, NARADA CRUZ, AND MIGUEL CRUZ, Appellee

                                    On Appeal from the 70th District Court

                                                Ector County, Texas

                                        Trial Court Cause No. A-117,770

                                                    OPINION

         This case involves the calculation under Section 408.041 of the Texas Workers’
Compensation Act of a decedent’s average weekly wage for the thirteen weeks prior to his death.1
TEX . LAB. CODE ANN . § 408.041(a) (Vernon 2006). The decedent, a welder, worked as an

         1
             The Texas Workers’ Compensation Act is found in TEX. LAB. CODE ANN. §§ 401.001-419.007 (Vernon 2006 & Supp.
2009).
independent contractor and contracted with the employer to obtain workers’ compensation insurance.
The contract provided that he would bill the company at the rate of “$19 per hour for equipment
rental and supplies” and “$6.50 per hour for labor.” Thus, the calculation under Section 408.001
turns on what portion of the $25.50 hourly payment to decedent was “remuneration” for his services
and what portion was “reimbursement” to him for use of equipment and supplies.
          Based on the contract and Rule 128.1 of the Workers’ Compensation Rules, both the hearing
officer and the appeals panel determined that his average weekly wage was $354. The widow filed
suit in district court challenging the appeals panel’s decision and argued that the average weekly
wage should include the profit her husband made from the use of his equipment.2 Her expert
calculated the decedent’s hourly wage by estimating the decedent’s percentage of profit over three
years and multiplying the average percentage of profit by $25.50 (the $19.00 plus $6.50). The jury
adopted the expert’s calculation, and the trial court entered judgment that the average weekly wage
was $581. We reverse and render judgment that the average weekly wage was $354. We reverse
the trial court’s award of attorney’s fees and expenses and remand to the trial court for a
determination of the appropriate attorney’s fees and expenses.
                                                     Background Facts
          Jesus Cruz, a welder, worked as an independent contractor on projects for Wagner
Manufacturing and Fabrication Company. He was killed in a motor vehicle accident in May 2003
while returning from a job he had performed for Wagner. Both parties agree that his average weekly
wage should be calculated pursuant to Section 408.041(a) for the thirteen weeks prior to his death.
Section 408.041(a).
          Wagner provided oilfield welding services to its customers, generally at distant customer rig
sites. It is not clear whether Wagner required its welders to have workers’ compensation insurance;
however, it is clear that Wagner made its workers’ compensation insurance with Texas Mutual
Insurance Company available to its welders.3 Sections 406.144 and 406.123 of the Workers’

          2
              The trial court denied Texas Mutual Insurance Company’s motion for summary judgment.

          3
            The contract with Cruz indicated that Wagner required all subcontractors to provide it with an insurance certificate that
stated that the subcontractor was covered by workers’ compensation insurance. However, at trial, John Allen Dinger of Wagner
testified that the welder had an option whether to carry the workers’ compensation insurance.

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Compensation Act allow independent contractors to agree to have their hiring contractor withhold
the cost of workers’ compensation insurance coverage from the contract price. An agreement under
these sections makes the hiring contractor the employer for purposes of our workers’ compensation
laws. On the date of Cruz’s fatal accident, Wagner’s welders were operating under a form of
contract with Wagner that allowed them to obtain workers’ compensation insurance through Wagner.
Cruz signed his contract with Wagner in 2000.
         The contract provided that Cruz was an independent subcontractor who would supply
welding services utilizing his own equipment and supplies. Cruz agreed to bill Wagner at the rate
of “$19 per hour for equipment rental and supplies” and “$6.50 per hour for labor.” The contract
provided that, for every 15.385 hours the welder worked at Wagner’s request, Wagner would deduct
$13.96 from his invoice to pay for the welder’s workers’ compensation coverage premium.
         Although the Workers’ Compensation Act does not define the term “average weekly wage,”
the Act defines “wages” as follows:
                “Wages” includes all forms of remuneration payable for a given period to an
         employee for personal services. The term includes the market value of board,
         lodging, laundry, fuel, and any other advantage that can be estimated in money that
         the employee receives from the employer as part of the employee’s remuneration
         (emphasis added).

Section 401.011(43).
         The Texas Workers’ Compensation Commission4 provided in Rule 128.1 that, in calculating
the average weekly wage, an employee’s wage shall include: (1) all pecuniary wages (as defined by
Rule 126.1) paid to the employee and (2) all nonpecuniary wages (as defined by Rule 126.1) paid
prior to the compensable injury. 28 TEX . ADMIN . CODE § 128.1(b)(1), (2). Rule 126.1 provides
examples of pecuniary wages and nonpecuniary wages. Directly in point for this case, Rule 128.1(c)
expressly provides that an employee’s wage, for the purpose of calculating the average weekly wage,

         4
           On September 1, 2005, the Texas Workers’ Compensation Commission was abolished, and its rules and duties were
transferred to the Department of Insurance, Division of Workers’ Compensation. See Act of May 29, 2005, 79th Leg., R.S., ch. 265
§§ 8.001(b), 8.004(a), 2005 Tex. Gen. Laws 469, 607-08. The Division of Workers’ Compensation is now administered by the
Commissioner of Workers’ Compensation. TEX. LAB. CODE ANN. § 402.00111(a) (Vernon 2006). This suit was filed on June 30,
2004. For convenience, we will refer to the agency as the Texas Workers’ Compensation Commission as it was then known.

                                                               4
shall not include “payments made by an employer to reimburse the employee for the use of the
employee’s equipment.” 28 TEX . ADMIN . CODE § 128.1(c)(1).
         The Texas Workers’ Compensation Commission’s rules have the same force and effect as
statutes and are to be construed as statutes. Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248,
254 (Tex. 1999); H.G. Sledge, Inc. v. Prospective Inv. & Trading Co., 36 S.W.3d 597, 603 (Tex.
App.—Austin 2000, pet. denied). Unless the rule is ambiguous, we are required to follow the rule’s
clear language. Rodriguez, 997 S.W.2d at 254. We also defer to the Texas Workers’ Compensation
Commission’s interpretation of its own rules if its interpretation is reasonable. Sanders v. Am.
Protection Ins. Co., 260 S.W.3d 682, 684 (Tex. App.—Dallas 2008, no pet.).
         In affirming the hearing officer, the appeals panel relied on Rule 128.1(c) in finding that the
average weekly wage of Cruz during the thirteen-week period was $354:
                 TEX . W.C. COMM ’N , 28 TEX . ADMIN . CODE § 128.1(c)(1) (Rule 128.1(c)(1))
         provides in pertinent part that AWW shall not include payments made by the
         employer to reimburse the employee for the use of the employee’s equipment, for
         paying helpers, for reimbursing actual expenses related to employment such as travel
         related expenses, or reimbursing mileage up to the state rate for mileage. The
         language of the contract in evidence is clear, $19.00 per hour was being paid as rental
         of the decedent’s equipment and as such, pursuant to Rule 128.1(c)(1), it is not to be
         included in the AWW.

Texas Workers’ Compensation Commission Appeals Panel No. 727, Appeal No. 040891 (May 26,
2004).
         In a pretrial hearing, appellee argued that John Allan Dinger had testified in his deposition
that he was of the opinion that Wagner could not hire a welder for $6.50 per hour if Wagner supplied
the equipment; therefore, appellee reasoned that $6.50 could not be the actual hourly wage. The trial
court indicated that it was this testimony that persuaded it to conclude that the hourly rate for Cruz’s
labor must have been higher than $6.50. Thus, the trial court overruled Texas Mutual’s objections
that a jury trial was not needed and expert testimony was not relevant because the $354 weekly wage
amount was correct as a matter of law. Based on the jury verdict, the trial court reversed the appeals
panel’s opinion and entered judgment that the average weekly wage was $581.

                                                   5
                                           The Jury Trial
       The Workers’ Compensation Act was adopted to provide prompt remuneration to employees
who sustain injuries in the course and scope of their employment. Funes v. Eldridge Elec. Co., 270
S.W.3d 666 (Tex. App.—San Antonio 2008, no pet.). The legislative goals for our workers’
compensation laws are found in Section 402.021. The legislature stated that injured employees are
to be provided appropriate income benefits and medical benefits in a timely and cost-effective
manner. Section 402.021 further states that the legislature wanted to minimize the likelihood of
disputes and resolve them promptly and fairly. The jury trial in this case reflects the problems
encountered when statutes and a contract between the parties are ignored.
       Steve A. Kulawik testified as the expert for appellee. Although Kulawik admitted that he
did not know the legal definition of “wage” under the Texas Workers’ Compensation Act and had
not done any workers’ compensation work, he expressed his opinion that Cruz’s hourly wage was
$10.68. Kulawik testified that he took Cruz’s profit shown in the Schedule C in Cruz’s tax returns
for 2001, 2002, and 2003; added back in the depreciation expense to get a percentage of profit;
averaged the percentage of profit for the three years; and then multiplied that average percentage of
profit by $25.50 to arrive at the hourly wage of $10.68. He stated that the profit percentages were
31.22% for 2001, 35.6% for 2002, and 58.62% for the partial year of 2003. The average profit
margin by his calculation was 41.81%. Kulawik speculated that Cruz’s profit margin was higher in
2003 because he either carried some supplies over or they were provided by Wagner. However,
Dinger testified that Wagner did not provide supplies to Cruz and that part of the $19 per hour in the
contract was to reimburse Cruz for his supplies.
       Dinger testified that he completed the final wage statement for Cruz that was submitted to
Texas Mutual. The wage statement reflected that, for the thirteen-week period prior to Cruz’s death,
Cruz earned gross wages of $4,602 for 708 hours of personal service. The average weekly wage of
$354 can be derived by dividing the $4,602 by thirteen weeks; Dinger agreed with this calculation
at trial. Wagner clearly excluded the $19 per hour for equipment rental and supplies.
       Dinger also testified that Cruz’s tax returns showed a loss of $2,889 and income of $12,395
in 2000, a profit of $21,231 and income of $74,737 in 2001, and a profit of $15,959 and income of

                                                   6
$50,398 in 2002. Despite Kulawik’s method of adding back in depreciation to obtain Cruz’s profit,
Dinger explained how depreciation works and how it is a deduction when profit is calculated.
       Kulawik testified that he was asked to calculate in some reasonable way what Cruz’s hourly
wage was and that “[t]he only way [he] could think to do that [was] by his profits and losses from
his business.” Kulawik was not furnished Cruz’s tax return for 2000 that showed a loss. Kulawik
admitted that he had not seen the contract between Cruz and Wagner before it was presented to him
during the trial. He said several times that it was Dinger’s deposition testimony that he could not
hire welders for $6.50 per hour that led him to believe that $6.50 was not the wage. Based on
Kulawik’s testimony, the jury found that $581 was Cruz’s average weekly wage; that answer was
based on the hourly wage of $10.68.
       We provided this summary of the trial to demonstrate the complications of adopting
appellee’s approach to the average weekly wage in cases similar to this one.
                                         Standard of Review
       The determination of Cruz’s average weekly wage is a matter of statutory interpretation.
Statutory construction is a legal question that is reviewed de novo to ascertain and give effect to the
legislature’s intent. HCBeck, Ltd. v. Rice, 284 S.W.3d 349, 352 (Tex. 2009). To discern that intent,
we must begin with the “plain and common meaning of the statute’s words.” Id. We also consider
the objective the legislature sought to achieve through the statute, as well as the consequences of a
particular construction. Id. As stated, the Texas Workers’ Compensation Commission’s rules have
the same force and effect as statutes and are to be construed as statutes. Rodriguez, 997 S.W.2d at
254.
                                               Analysis
       In its first three issues, Texas Mutual argues that the trial court erred in failing to grant its
motion for judgment notwithstanding the verdict because the average weekly wage was $354 as a
matter of law, the judgment improperly included an amount paid to Cruz as reimbursement for his
equipment in violation of Rule 128.1, and the judgment was improperly based on an estimate of
Cruz’s profit margin.
       Section 401.011(43) of the Workers’ Compensation Act defines “wages” to include “all
forms of remuneration payable for a given period to an employee for personal services.” Rule 128.1

                                                  7
specifies that the term “wages,” for the purpose of calculating average weekly wage, includes “all
pecuniary wages” paid to the employee. 28 TEX . ADMIN . CODE § 128.1(b)(1). Rule 128.1(c)(1)
expressly provides that an employee’s wage, for the purpose of calculating the average weekly wage,
shall not include “payments made by an employer to reimburse the employee for the use of the
employee’s equipment, for paying helpers, [or] for reimbursing actual expenses related to
employment” (emphasis added). 28 TEX . ADMIN . CODE § 128.1(c)(1).
       An agency rule is presumed valid, and the challenging party has the burden of proving that
the rule is invalid. Lee v. Tex. Workers’ Comp. Comm’n, 272 S.W.3d 806, 813-14 (Tex.
App.—Austin 2008, no pet.). We must defer to the Texas Workers’ Compensation Commission’s
interpretation of its own rules, as long as its interpretation is reasonable. See Pub. Util. Comm’n of
Tex. v. Gulf States Utils. Co., 809 S.W.2d 201, 207 (Tex. 1991); Sanders, 260 S.W.3d at 684. The
legislature left it to the Texas Workers’ Compensation Commission to provide rules relating to what
payments should be included in wages. Rule 128.1 is consistent with the Workers’ Compensation
Act’s definition of wages as remuneration for personal services. Rule 126.1 gives examples of
wages, and Rule 128.1 provides specific exclusions that are not to be included as wages. These rules
are in harmony with the objectives of the Workers’ Compensation Act.
       The Texas Workers’ Compensation Commission’s interpretation of Rule 128.1 has been
reasonable. See Texas Workers’ Compensation Comm’n Appeals Panel No. 1, Appeal No. 92119,
1992 WL 358228 (May 4, 1992) (payments by employer to reimburse worker for use of worker’s
equipment, i.e., her car, are not to be included in worker’s wage under the provisions of Rule 128.1);
Texas Workers’ Compensation Comm’n Appeals Panel No. 12, Appeal No. 92197, 1992 WL
324277 (July 3, 1992). It has long been recognized that payment for reimbursement of expenses is
not a form of remuneration. See Texas Workers’ Compensation Comm’n Appeals Panel No. 1,
Appeal No. 92119, 1992 WL 358228. Thus, as recognized in Section 128.1(c)(1), “reimbursement”
of expenses is not a form of “remuneration.” Therefore, we conclude that excluding payments for
reimbursement as provided in Section 128.1(c)(1) for the purpose of determining an employee’s
average weekly wage does not conflict with the definition of “wages” in Section 401.011(43) of the
Workers’ Compensation Act.

                                                  8
       Appellee argues that Section 401.011(43) of the Workers’ Compensation Act states that
“wages are ‘all forms of remuneration payable for a given period’” and “any other advantage that
can be estimated in money.” Section 401.011(43). Based on this language, appellee asserts that the
intent of the legislature was that “all” and “any” income would be considered “wages.” Appellee
contends that whether the $19 per hour is a “form of remuneration” or an “advantage that can be
estimated in money” cannot be decided by reading the statute and was a fact question for the jury.
       The purpose of the contract was to enable Cruz to obtain workers’ compensation insurance.
The contract provided that Cruz “[could] present [his] bill to Wagner Manufacturing showing $19.00
per hour for equipment rental and supplies and $6.50 per hour for labor.” Although it may be true
that Wagner might have been required to pay a higher hourly wage to employ welders who would
use equipment supplied by Wagner, we cannot ignore the contract of the parties that specifically
stated that $6.50 would be paid as an hourly wage and that the current workers’ compensation
insurance premium based on that hourly wage was $13.96 for every 15.385 hours worked at
Wagner’s request. The contract also stated that Cruz would “bill” Wagner $19 per hour for
equipment rental and supplies. The use of the term “bill” in the contract supports the conclusion that
the parties intended the $19 per hour payment to reimburse Cruz for expenses that he had incurred.
Dinger testified that the $19 “[was] reimbursement for rental of truck, equipment and reimbursement
of supplies.”
       Appellee had the burden to establish Cruz’s average weekly wage. Tex. Employer’s Ins.
Ass’n v. Bragg, 670 S.W.2d 712, 715 (Tex. App.—Corpus Christi 1984, writ ref’d n.r.e). Appellee
attempted to show, through Kulawik’s “profit” testimony, that part of the $19 per hour payment was
not made to reimburse Cruz for his equipment and supplies. Appellee has not provided authority
for the argument that net profit should be used in calculating the average weekly wage.
       Rule 128.1 is not ambiguous. The contract is clear. Parties should be allowed to include
reasonable estimates of reimbursements in their contracts, and the amounts estimated as
reimbursements should not be included in calculating the employee’s average weekly wage. Cruz
and Wagner agreed that Wagner would pay Cruz $19 per hour to reimburse him for use of his
equipment and supplies. The evidence did not show that the $19 per hour amount in the contract

                                                  9
was not a reasonable estimate of Cruz’s reimbursable expenses, and Kulawik’s testimony provided
no support for the jury’s finding that Cruz’s average weekly wage was $581.
        The legislative goal of the Workers’ Compensation Act is to provide prompt remuneration
to employees who sustain injuries in the course and scope of their employment. Texas Mutual’s first
three issues are sustained. We need not reach the fourth issue. Because we are reversing the trial
court’s determination of average weekly wage, we will also sustain the fifth issue and reverse the
trial court’s award of attorney’s fees and expenses. That issue will be remanded to the trial court.
                                       This Court’s Ruling
        The judgment of the trial court is reversed. We render judgment that the average weekly
wage for Cruz was $354. We also reverse and remand the issue of attorney’s fees and expenses to
the trial court.

                                                             TERRY McCALL
                                                             JUSTICE

March 18, 2010
Panel consists of: Wright, C.J.,
McCall, J., and Strange, J.

                                                10