Staff Management and New Hampshire Insurance Company v. Pascuala Jimenez

IN THE SUPREME COURT OF IOWA

No. 12–1645

Filed November 15, 2013

STAFF MANAGEMENT and NEW HAMPSHIRE INSURANCE COMPANY,

Appellants,

vs.

PASCUALA JIMENEZ,

Appellee.

Appeal from the Iowa District Court for Polk County, Arthur E.

Gamble, Judge.

An employer appeals a district court judgment affirming the Iowa

Workers’ Compensation Commissioner’s decision awarding benefits.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH

DIRECTIONS.

Christopher S. Spencer and Stephen W. Spencer of Peddicord,

Wharton, Spencer, Hook, Barron & Wegman, LLP, West Des Moines, for

appellants.

Paul J. McAndrew, Jr., Coralville, for appellee.

Kathleen Graham Sumner of Law Offices of Kathleen G. Sumner,

Greensboro, North Carolina, and Thomas A. Palmer of Lawyer,

Dougherty, Palmer, & Flansburg, P.L.C., West Des Moines, for amicus

curiae Workers’ Injury Law & Advocacy Group.

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James C. Byrne of Neifert, Byrne & Ozga, P.C., West Des Moines,

for amicus curiae Iowa Association of Justice’s Core Group.

Rebecca Smith of National Employment Law Project, Seattle,

Washington, and Mark S. Soldat of Soldat & Parrish-Sams, P.L.C., West

Des Moines, for amicus curiae Iowa Citizens for Community

Improvement and the National Employment Law Project.

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WIGGINS, Justice.

In this appeal, we must first decide whether the Iowa Workers’

Compensation Commissioner can award an undocumented worker

healing period benefits under the Iowa Workers’ Compensation Act. The

commissioner and the district court held an undocumented worker is

entitled to these benefits. The employer appealed and we affirm the

district court judgment that an undocumented worker is entitled to

healing period benefits under the Iowa Workers’ Compensation Act.

Upon holding an undocumented worker is entitled to these benefits

under the Iowa Workers’ Compensation Act, we must also decide (1)

whether substantial evidence supports the running award of healing

period benefits, (2) whether the commissioner can award healing period

benefits starting from a date preceding the parties’ stipulation as to when

the healing period should begin, and (3) whether the commissioner can

award healing period benefits to the claimant during the time period she

was working. The district court held substantial evidence supported the

running award of healing period benefits, the commissioner was correct

in starting healing period benefits at a date prior to the parties’

stipulated date, and the claimant’s return to work did not cut off any of

her benefits. On appeal, we affirm the district court on the issues of

substantial evidence and the starting date of benefits. However, we

disagree with the district court judgment on the last issue and find the

claimant is not entitled to healing period benefits while she was working.

Accordingly, we affirm in part and reverse in part the district court

judgment. We remand the case to the district court to remand the case

back to the commissioner to enter an order consistent with this decision

on the issue of the running award of healing period benefits while the

claimant was working.

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I. Background Facts and Proceedings.

Pascuala Jimenez is the claimant. Jimenez was forty-five years old

at the time of the administrative hearing, and had lived for nineteen

years in West Liberty, Iowa. Jimenez has a ninth grade education that

she received in Mexico. Jimenez’s past medical history relevant to this

case shows that she has had four cesarean sections and a hernia repair

in 1995.

Jimenez first came to the United States in 1991. She entered the

United States legally with a visa. Jimenez’s status permitted her to stay

in the country for ten years. The government did not extend her visa.

After the expiration of her visa, Jimenez could not legally work in the

United States and she became an undocumented worker.

Staff Management, a temporary employment agency, employed

Jimenez in 2001. Staff Management assigned Jimenez to Proctor &

Gamble in Iowa City, where she had worked for about sixteen years.

Jimenez worked for two other temporary employment agencies before

working for Staff Management, but she worked at Proctor & Gamble the

entire time.

Jimenez was a line leader and supervisor who actively participated

in the work of the people she supervised. Her work entailed packing

shampoo by taking bottles off the line, placing the bottles in boxes, and

then placing the boxes on pallets. The boxes weighed approximately

twenty-five pounds and the pallets weighed approximately fifty to sixty

pounds. Every four to five minutes, Jimenez would lift a pallet if she

were helping on the line.

Jimenez had very good English-speaking skills, and would

frequently act as an interpreter for other employees. In her position as

line leader and supervisor, she would communicate with Proctor &

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Gamble technicians and managers, the majority of whom were only

fluent in English. Her manager described her as a great employee.

On September 12, 2007, Jimenez experienced light cramping after

placing large bottles full of shampoo in boxes. The pain went away after

Jimenez gave herself a massage and waited for the pain to lessen. On

September 13, Jimenez was helping another person lift a pallet when she

felt a pain in her stomach and became dizzy. Unlike her pain the

previous day, she was unable to move on September 13 due to the pain.

Jimenez went to Dr. Cuddihy in Coralville to treat her injury.

Dr. Cuddihy diagnosed her with a right abdominal peri-umbilical hernia

and a right lower abdominal hernia, and referred her to a general

surgeon for evaluation. The general surgeon, Dr. Peterson, did additional

testing and diagnosed Jimenez with two hernias. Dr. Peterson opined

the hernias were probably work related and required surgery. Jimenez

returned to work until the day of the surgery but she had to wear a large

bandage.

On November 14, Jimenez underwent surgery. Jimenez identified

her hernias prior to surgery as being located one to the right of her naval

and the other in the groin area.

After the surgery, Jimenez continued to have pain. Dr. Peterson

authorized Jimenez to return to light-duty work on December 12. On

December 10 and December 12, Jimenez called Staff Management and

Dr. Peterson about returning to work. In these conversations, she stated

that she was not able to go back to work because of the pain.

Dr. Peterson referred Jimenez to Dr. Maves to receive an injection for the

pain.

On December 19, Jimenez received two injections in the abdomen.

Dr. Maves told her to call if she remained in pain. Jimenez called

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Dr. Maves the next day, and he told her it was normal that she was still

experiencing pain. Jimenez did not call him back after that conversation

because she thought he would tell her the same thing.

Jimenez returned to work on December 26 without work

restrictions. However, she was unable to do her normal job, and had to

ask for help from other employees. Jimenez continued to work for less

than a month.

On January 22, 2008, Staff Management terminated Jimenez.

Jimenez’s manager stated that Staff Management terminated Jimenez

because she did not have authorization to work in the United States. In

November 2006, Staff Management became a charter member of the E-

Verify® program, a federal program to verify employment authorization

documentation of employees. On August 3, 2007, Staff Management

received notice from its central office stating that Jimenez’s name and

social security number did not match with the Social Security

Administration’s records. Staff Management contacted Jimenez at least

three times to let her know she needed to bring in her documentation or

it could not continue to employ her.

Jimenez’s manager contacted Jimenez about her termination, and

stated at the administrative hearing that Staff Management also

terminated ten other employees at that time. Jimenez’s manager

contends the reason she terminated Jimenez was the central office would

not allow her to wait any longer for Jimenez’s paperwork. Staff

Management asked the central office for proof Jimenez was

undocumented, and received an audit of individuals from U.S.

Immigration and Customs Enforcement that showed Jimenez’s alien

registration number did not actually belong to her, and two different

people used the social security number she provided. Staff Management

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contends Jimenez’s termination had nothing to do with her work-related

injury. Staff Management believed Jimenez had recovered from her

surgery and needed to comply with the E-Verify® program requirements.

Jimenez contends Staff Management had always known she did

not have her documentation, and she believed Staff Management fired

her because she was physically unable to work anymore. Jimenez

admitted Staff Management had told her to bring in her documentation

and that she could come back and reapply to work if her documentation

was in order. Jimenez stated she had not applied for work after Staff

Management terminated her because she was unable to do physical

labor, and every job available to her required physical labor.

After Staff Management terminated Jimenez, she went to the West

Liberty Clinic for medical care. The doctor at the clinic referred her back

to the clinic where Dr. Peterson had practiced. Jimenez received a card

that said she would have to take $200 to go to the doctor. Jimenez then

tried to call Dr. Peterson, but he had moved to Washington, D.C.

Jimenez did not go to the clinic to see another doctor because she did

not have $200. Jimenez made efforts to go to a free clinic, but the clinic

told her they could not help her. Jimenez also called Staff Management

after her termination to try to see a doctor. Staff Management told her it

could not help her because it no longer employed her.

On February 14, 2008, Dr. Peterson signed a maximum medical

improvement and impairment document stating that Jimenez had

reached maximum medical improvement (MMI) on December 26, 2007,

and noting that Dr. Maves would be providing her further treatment. On

May 12, Dr. Prevo, a physician retained by Staff Management to review

Jimenez’s records, provided an opinion of Jimenez’s condition based

solely upon her medical records. Dr. Prevo opined Jimenez was currently

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on regular duty status without any restrictions and that there was zero

percent objective impairment.

In 2009, Jimenez’s attorney wrote to Staff Management indicating

that Jimenez’s medical condition had worsened. Jimenez also went to a

doctor in Cedar Rapids and a doctor in Des Moines. Dr. Epp, in Cedar

Rapids, examined Jimenez on May 11, 2010, and determined Jimenez

had a hernia and she could not work until surgery repaired the hernia.

Dr. Epp opined the current hernia was a sequela of the surgical

correction of the previous hernias sustained in 2007. Dr. Epp further

determined that Jimenez had not reached MMI.

The Des Moines doctor, Dr. Bansal, examined Jimenez on June 18,

2010. Jimenez testified Dr. Bansal advised her to go to the emergency

room immediately. Dr. Bansal returned a letter to Jimenez stating

Jimenez could not work until a physician repaired her hernia.

Jimenez’s pain had been ongoing beginning with the original

hernia surgery on November 14, 2007, and continuing until the time of

the administrative hearing. After the surgery, Jimenez started feeling a

bump in almost exactly the same location as the bump had been before

the surgery. The bump had been growing since the surgery. Jimenez

stated the hernia never went away and the pain has been worse following

surgery.

On July 6, 2009, Jimenez filed for workers’ compensation benefits.

The petition alleged the dispute in the case was “Compensability, Rate;

Date of Injury to be determined; Nature and Extent of Industrial

Disability; Penalty.” A deputy commissioner held an administrative

hearing on the petition. Prior to the hearing on the petition, the parties

filed a hearing report. The hearing report listed the following issues

relevant to this appeal as in dispute:

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1. Is the alleged injury the cause of a permanent disability?

2. Is the claimant entitled to either temporary total disability,

temporary partial disability, or healing period benefits from January 1,

2009 through current and running?

3. Was claimant off work for reasons unrelated to her injuries?

The deputy held the hearing on July 20, 2010. At that time, the deputy

reviewed the hearing report.

On October 25, the deputy issued her arbitration decision. On the

issues relevant to this appeal, the deputy found Jimenez was entitled to

running healing period benefits based on the medical recommendations

of Dr. Epp and Dr. Bansal because the current hernia was the result of

the surgical correction of the 2007 hernias. The deputy also determined

the extent of Jimenez’s disability was not ripe for adjudication. Finally,

the deputy ordered Staff Management to pay Jimenez weekly benefits in

the form of a running award, to pay all medical expenses incurred to

treat the work-related injury, and to pay for future medical care and

prescription charges. In sum, the deputy awarded running healing

period benefits from the date of the work-related injury on September 13,

2007 until Jimenez reaches MMI.

Staff Management appealed the ruling to the commissioner. On

appeal, Staff Management argued substantial evidence did not support

the deputy’s running award of healing period benefits, Jimenez was

ineligible for benefits under the Iowa Workers’ Compensation Act because

she was an undocumented worker, the deputy’s computation of healing

period benefits was contrary to the stipulation as to when the award

should start, and if the starting date of the healing period was correct,

Jimenez could not receive healing period benefits during the time she

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returned to work. The commissioner affirmed the arbitration decision as

to all of these issues.

Staff Management filed a petition for judicial review. The district

court affirmed the commissioner’s decision. Staff Management appeals.

II. Preservation of Error.

Staff Management raised the issue that Jimenez was an

undocumented worker for the first time in its intraagency appeal.

Normally, for an issue to be preserved, a party must present it and have

it ruled upon before a court will review the issue on appeal. See Meier v.

Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental

doctrine of appellate review that issues must ordinarily be both raised

and decided by the district court before we will decide them on appeal.”).

The rule is different for administrative law cases. The final agency

action in a worker’s compensation case is not the deputy’s decision, but

the decision of the workers’ compensation commissioner. See Iowa Code

§ 86.24(5) (2013). We have held a party preserves error on an issue

before an agency if a party raises the issue in the agency proceeding

before the agency issues a final decision and both sides have had an

opportunity to address the issue. See Office of Consumer Advocate v.

Iowa State Commerce Comm’n, 465 N.W.2d 280, 283 (Iowa 1991) (finding

a party preserved error by raising an issue in a petition for rehearing).

By raising the issue in its intraagency appeal brief and giving Jimenez

the opportunity to respond to it in her brief, Staff Management preserved

this issue for our review.

III. Issues.

In this appeal, we will decide (1) whether the workers’

compensation commissioner erred in awarding Jimenez healing period

benefits under the Iowa Workers’ Compensation Act when Jimenez is an

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undocumented worker, (2) whether substantial evidence supports the

running award of healing period benefits, (3) whether the commissioner

can award healing period benefits starting from a date preceding the

parties’ stipulation as to when the benefits should start, and (4) whether

the commissioner can award healing period benefits during a time period

when Jimenez was working.

IV. Whether the Workers’ Compensation Commissioner Erred

in Awarding Jimenez Healing Period Benefits Under the Iowa

Workers’ Compensation Act Because Jimenez is an Undocumented

Worker.

Staff Management identifies three reasons we should find an

undocumented worker should not receive benefits under the Iowa

Workers’ Compensation Act. First, Iowa does not specifically include

undocumented workers in its definition of “employee” in the Iowa

Workers’ Compensation Act. Second, Iowa law requires a contract of

service between the employer and employee to be covered by the Iowa

Workers’ Compensation Act, and the contract in this case would be void

because of illegality. Third, even if undocumented workers are entitled to

benefits under the Iowa Workers’ Compensation Act, federal law

preempts the availability of certain benefits, including a running healing

period.

A. Whether the Iowa Workers’ Compensation Act Includes

Undocumented Workers in its Definition of “Employee.” We must

first address whether an undocumented worker is an “employee” under

section 85.61(11) of the Iowa Workers’ Compensation Act. If the

legislature “ ‘clearly delegates discretionary authority to an agency to

interpret or elaborate a statutory term . . . the court . . . may reverse the

agency interpretation or elaboration only if it is arbitrary, capricious,

unreasonable, or an abuse of discretion . . . .’ ” Renda v. Iowa Civil

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Rights Comm’n, 784 N.W.2d 8, 11 (Iowa 2010) (emphasis omitted)

(quoting Arthur E. Bonfield, Amendments to Iowa Administrative

Procedure Act, Report on Selected Provisions to Iowa State Bar Association

and Iowa State Government 62 (1998)). However, if the legislature did

not delegate discretionary authority to the agency to interpret a statutory

term, we will not give deference to the agency interpretation but “will

substitute our judgment for that of the [agency] if we conclude the

[agency] made an error of law.” Id. at 14–15.

In our prior cases, we held the legislature has not delegated any

interpretive authority to the workers’ compensation commissioner to

interpret Iowa Code chapter 85. See Waldinger Corp. v. Mettler, 817

N.W.2d 1, 4–5 (Iowa 2012). The same analysis applies to section 85.61.

Accordingly, we conclude the legislature has not clearly vested the

agency with interpretive authority for the definition of “employee.”

Therefore, we review the question of statutory interpretation of 85.61(11)

for errors at law.

“The court’s goal when construing a statute is to determine

legislative intent.” Sierra Club Iowa Chapter v. Iowa Dep’t of Transp., 832

N.W.2d 636, 644 (Iowa 2013). The court will look no further if the

statute’s language is plain and unambiguous. Id.

The Iowa Workers’ Compensation Act provides a “ ‘[w]orker’ or

‘employee’ [is] a person who has entered into the employment of, or

works under contract of service, express or implied, or apprenticeship,

for an employer.” See Iowa Code § 85.61(11) (2013). The legislature also

included in the definition of worker or employee certain people who do

not meet this broad definition. See id. § 85.61(11)(a). Then, the

legislature excluded certain people who otherwise meet the broad

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definition of a worker or employee contained in section 85.61(11). See id.

§ 85.61(11)(c).

Section 85.61(11) demonstrates that the legislature enacted a

comprehensive legislative scheme to determine if a person is a worker or

employee under the Iowa Workers’ Compensation Act. This legislative

scheme makes it clear a person who meets the broad definition under

section 85.61(11) is a worker or employee covered by the Iowa Workers’

Compensation Act. This broad definition unambiguously includes

undocumented workers. In its list of persons excluded from the

definition, the legislature did not exclude undocumented workers.

Under the rule of expressio unius est exlusio alterius, meaning that

“legislative intent is expressed by omission as well as by inclusion, and

the express mention of one thing implies the exclusion of others not so

mentioned,” the legislature did not intend to exclude undocumented

workers from the broad definition in section 85.61(11). See Meinders v.

Dunkerton Cmty. Sch. Dist., 645 N.W.2d 632, 637 (Iowa 2002) (quoting

Marcus v. Young, 538 N.W.2d 285, 289 (Iowa 1995)) (applying the rule).

If the legislature intended the definition of a worker or employee to

exclude undocumented workers, it would have done so by adding

undocumented workers to the excluded list in section 85.61(11)(c). It is

not our role to add to the list of excluded workers or employees. That is

a policy decision the legislature must make. Therefore, we find the

commissioner and the district court did not err in determining an

undocumented worker met the broad definition of “employee” under the

Iowa Workers’ Compensation Act.

B. Whether the Iowa Workers’ Compensation Act Does Not

Apply Because a Contract of Service Between an Undocumented

Worker and Her Employer is Void. The issue here is whether a

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contract between an undocumented worker and an employer is void. If

so, the undocumented worker cannot qualify for benefits under the Iowa

Workers’ Compensation Act for lack of a contract of service. Section

85.61 of the Iowa Workers’ Compensation Act states a person meets the

definition of “employee” if the person works under an express or implied

contract of service. Iowa Code § 85.61(11). Although the language of the

statute states an “employee” is “a person who has entered into the

employment of, or works under contract of service . . . for an employer,”

we have interpreted this provision to require a contract of service. See

Knudson v. Jackson, 191 Iowa 947, 949–50, 183 N.W. 391, 393 (1921)

(“In order for a person to come within the terms of this act as an

employee, therefore, it is essential that there be a ‘contract of service,

express or implied,’ with the employer whom it is sought to charge with

liability.”).

The general rule is an agreement that is contrary to the provisions

of any statute or intends to be repugnant to general common law policy

is void. Reynolds v. Nichols & Co., 12 Iowa 398, 403 (1861). Staff

Management argues an employment contract between an undocumented

worker and an employer is contrary to the provisions of the Immigration

Reform and Control Act of 1986 (IRCA), or in the alternative, the

employment contract has an illegal purpose.

The IRCA makes it unlawful for employers to hire undocumented

workers, or to knowingly continue to employ workers who become

unauthorized. 8 U.S.C. § 1324a(a)(1)–(2) (2013). The employment

contract at issue here is a contract between an employer and an

undocumented worker. “[W]hen a statute imposes sanctions but does

not specifically declare a contract to be invalid, it is necessary to

ascertain whether the legislature intended to make unenforceable

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contracts entered into in violation of the statute.” Gates v. Rivers Constr.

Co., 515 P.2d 1020, 1021 (Alaska 1973). The IRCA does not specifically

state that a contract between an employer and an undocumented worker

is void. See 8 U.S.C. § 1324a(a). Therefore, we must consider whether

Congress intended to make such contracts void.

The Connecticut Supreme Court addressed this issue in Dowling v.

Slotnik, 712 A.2d 396, 408–09 (Conn. 1998). The employers argued (1)

the employment agreement between the employers and the

undocumented worker was illegal, (2) the illegal contract was void, and

therefore, (3) there could not be a contract of service under the

Connecticut Workers’ Compensation Act. Id. at 409.

The court recognized it was not the intention of Congress to

preempt labor protections under existing law when it passed the IRCA.

Id. at 404. In the House Report on the IRCA it was specifically stated “ ‘it

is not the intention of the Committee that the employer sanctions

provisions of the bill be used to undermine or diminish in any way labor

protections in existing law.’ ” Id. (quoting H.R. Rep. No. 99-682, pt. 1, at

58 (1986)). The goal of the IRCA was to inhibit employment of

undocumented workers and to punish the employers who offered jobs to

these workers. Id. at 410–11.

The court reasoned that if undocumented workers were not

covered by the Connecticut Workers’ Compensation Act, employers

would have a financial incentive to hire undocumented workers because

the employers could avoid liability under the Act. Id. at 411. The court

concluded classifying agreements between undocumented workers and

employers as “contracts of service” met both the intent of the legislature

concerning the Connecticut Workers’ Compensation Act and would meet

the public policy Congress intended in the IRCA. Id.

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We agree with this reasoning. The purpose of the IRCA was to

inhibit employment of undocumented workers. It was not to diminish

labor protections for undocumented workers. The purpose of the Iowa

Workers’ Compensation Act is to make statutory compensation available

to employees when the employees sustain injuries as a result of the

hazards of the business. Crooke v. Farmers’ Mut. Hail Ins. Ass’n, 206

Iowa 104, 108, 218 N.W. 513, 514 (1928). Construing an employment

agreement between an undocumented worker and an employer as not

covered by the Iowa Workers’ Compensation Act would undermine the

IRCA by encouraging employers to hire undocumented workers because

the employers would not be liable under the Iowa Workers’

Compensation Act for any injuries those workers sustained. It would

also undermine the purpose of the Iowa Workers’ Compensation Act to

make statutory compensation available to employees when the employees

sustain injuries as a result of the hazards of the business. Therefore, we

agree with the Connecticut Supreme Court it was not Congress’s intent

in enacting the IRCA for these contracts to be unenforceable because

they are void as a violation of statute.

Staff Management also raises a question of whether the

employment contract had an illegal purpose. As recognized by a New

York court, an employment contract with an undocumented worker does

not involve an illegal purpose because

[a]n undocumented alien performing construction work is

not an outlaw engaged in illegal activity, such as

bookmaking or burglary. Rather, the work itself is lawful

and legitimate; it simply happens to be work for which the

alien is ineligible or disqualified.

Majlinger v. Cassino Contracting Corp., 25 A.D.3d 14, 29 (N.Y. App. Div.

2005) (internal citations omitted). The Kansas Supreme Court also

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considered this question and surveyed other jurisdictions on the issue of

whether contracts of employment with undocumented workers are illegal

and therefore unenforceable. See Coma Corp. v. Kansas Dep’t of Labor,

154 P.3d 1080, 1089–91 (Kan. 2007). Although the case before the court

did not require the court to decide whether undocumented workers were

entitled to workers’ compensation benefits, the court determined

generally the employment contract with an undocumented worker was

not illegal under the public policy of the state. Id. at 1092. The court

based its decision on cases from Alaska, New York, Maryland,

Connecticut, New Jersey, and Colorado. Id. at 1089–91.

At least one court has recognized a difference between a taint of

illegality and an illegal purpose. The Connecticut Supreme Court

rejected the argument that a contract between an employer and an

undocumented worker was so illegal as to interfere with the grant of

worker’s compensation benefits. See Dowling, 712 A.2d at 409. The

court recognized the general rule not to enforce illegal contracts only

applied to contracts with the purpose of violating the law. See id.

(stating the court would not lend assistance to carry out terms of a

contract with the inherent purpose to violate the law).

The Connecticut Supreme Court drew a comparison between child

labor laws and the IRCA. In a previous case before the court, the court

recognized the taint of illegality in a child labor contract did not arise

from a contractual provision requiring the employee to engage in

unlawful activity, but instead arose from a child labor statute prohibiting

the making of certain employment agreements. Id. at 410. The court

determined construing employment agreements with illegally employed

minors as “contracts of service” would further the public policy

underlying the child labor law rather than impede it. Id. The court

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noted that regardless of the legal situation of the employment of the

minor, the minor was in fact an employee. Id. Similarly, the court

determined the employment agreement between an undocumented

worker and an employer constituted a contract of service to qualify the

undocumented worker for protection under Connecticut’s Workers’

Compensation Act. Id. at 409.

We find the analysis used by these courts in deciding this issue

persuasive. The enforcement of the contract does not undermine the

policy purposes of the IRCA. Moreover, an employment contract with an

undocumented worker does not inherently have an illegal purpose, and it

is not void as illegal merely because the contract is with an

undocumented worker. Therefore, we find the commissioner and the

district court did not err in finding the employment contract is a contract

of service under the Iowa Workers’ Compensation Act.

C. Whether Federal Law Preempts the Availability of Healing

Period Benefits Under the Iowa Workers’ Compensation Act. Even if

the Iowa Workers’ Compensation Act does not exclude an undocumented

worker, we must decide if federal law preempts healing period benefits.

This is a constitutional issue, and therefore our review is de novo. Iowa

State Commerce Comm’n, 465 N.W.2d at 281.

Under the Supremacy Clause, the laws of the United States are the

supreme law of the land. U.S. Const., art. VI, cl. 2. “Congress has the

power to preempt state law.” Arizona v. United States, ___ U.S. ___, ___,

132 S. Ct. 2492, 2500, 183 L. Ed. 2d 351, 368 (2012). There are at least

three scenarios where federal law will preempt state law: (1) Congress

may enact a statute with an express preemption provision, (2) Congress

may occupy the field with a regulatory framework “ ‘so pervasive . . . that

Congress left no room for the States to supplement it,’ ” or (3) the state

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law is an obstacle for Congress’s objectives and purposes. Id. at ___, 132

S. Ct. at 2500–01, 183 L. Ed. 2d at 368–69 (quoting Rice v. Santa Fe

Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed. 1447,

1459 (1947)).

Although the power to regulate immigration is unquestionably an

exclusive federal power, the Supreme Court “has never held that every

state enactment which in any way deals with aliens is a regulation of

immigration and thus per se pre-empted by this constitutional power,

whether latent or exercised.” De Canas v. Bica, 424 U.S. 351, 354–55,

96 S. Ct. 933, 936, 47 L. Ed. 2d 43, 48 (1976) (superseded by statute on

other grounds, Immigration Reform and Control Act of 1986, Pub. L. No.

99–603, 100 Stat. 3359, as recognized by Chamber of Commerce of U.S. v.

Whiting, ___ U.S. ___, ___, 131 S. Ct. 1968, 1975, 179 L. Ed. 2d 1031,

1045 (2011)).

We agree with the analysis by the Connecticut Supreme Court as

to whether the IRCA either expressly or impliedly preempted the award of

workers’ compensation benefits to an undocumented worker. See

Dowling, 712 A.2d at 402–05. There, the court recognized the express

preemption provision in the IRCA only prohibited civil sanctions, the

Connecticut legislature did not intend workers’ compensation benefits to

be civil sanctions, and therefore the IRCA did not preempt the payment

of benefits. Id. at 403–05. In Iowa, healing period benefits are not a civil

sanction against the employer. See Iowa Code § 85.34(1). Rather, the

legislature designed healing period benefits to provide compensation for a

work-related injury. See id. Therefore, the IRCA does not expressly

preempt healing period benefits.

Furthermore, we do not find the IRCA impliedly preempts the

award of healing period benefits. The Connecticut court recognized the

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legislative intent of the IRCA was not to undermine labor protections,

and workers’ compensation benefits were not an incentive for future

immigration law violations so that the payment of benefits to

undocumented workers would undermine the IRCA. Dowling, 712 A.2d

at 404–05. We agree.

Finally, Staff Management relies on the opinions in Hoffman Plastic

Compounds, Inc. v. NLRB, 535 U.S. 137, 151, 122 S. Ct. 1275, 1284, 152

L. Ed. 2d 271, 283–84 (2002) and Tarango v. State Industrial Insurance

System, 25 P.3d 175, 178–79 (Nev. 2001), to support its preemption

argument. In Hoffman Plastic Compounds, the Supreme Court

determined awarding back pay to undocumented workers would violate

the explicit statutory provisions in the IRCA by condoning prior violations

of immigration laws and encouraging future violations of immigration

laws. 535 U.S. at 151, 122 S. Ct. at 1284, 152 L. Ed. 2d at 283–84. In

Tarango, the Nevada Supreme Court held an undocumented worker

should not receive vocational rehabilitation benefits. 25 P.3d at 179–80.

The Nevada court determined the purpose of vocational rehabilitation

benefits is to return an injured worker to the workforce, and a decision to

deny vocational training benefits would be in harmony with the IRCA. Id.

at 180.

These cases are distinguishable from the present case. Under our

statute, healing period benefits are disability payments to compensate a

worker for the injuries he or she suffered due to a work-related injury.

See Iowa Code § 85.34(1). Although the commissioner uses the amount

of a worker’s earnings to determine the amount of a benefit, the benefit is

payable due to a disability caused by a work-related injury that prevents

an employee from returning to work. See id. §§ 85.34(1), 85.37(1).

21

Healing period benefits are not back pay or vocational

rehabilitation benefits. Back pay “ ‘is a reparation order designed to

vindicate the public policy of the statute by making the employees whole

for losses suffered on account of an unfair labor practice.’ ” NLRB v. J.H.

Rutter-Rex Mfg., 396 U.S. 258, 263, 90 S. Ct. 417, 420, 24 L. Ed. 2d 405,

410 (1969) (quoting Nathanson v. NLRB, 344 U.S. 25, 27, 73 S. Ct. 80,

82, 97 L. Ed 23, 28 (1952)). Under our statutory scheme, vocational

rehabilitation benefits are separate and distinct from healing period

benefits. Compare Iowa Code § 85.34(1), with id. § 85.70. The vocational

rehabilitation program is under section 85.70, and provides a weekly

payment for each week the employee is participating in a vocational

rehabilitation program. Iowa Code § 85.70. In contrast, the purpose of

healing period benefits is to replace lost wages, while the employee

receives medical and hospitalization care, and to meet the broad purpose

of workers’ compensation to award compensation for the disability

produced by a physical injury. See Bell Bros. Heating & Air Conditioning

v. Gwinn, 779 N.W.2d 193, 200 (Iowa 2010). Therefore, the IRCA does

not preempt healing period benefits under the Iowa Workers’

Compensation Act.

V. Whether Substantial Evidence Supports the

Commissioner’s Running Award of Healing Period Benefits.

The commissioner awarded Jimenez a running award of healing

period benefits from the date of the injury, September 13, 2007. Healing

period benefits are payable

beginning on the first day of disability after the injury, and

until the employee has returned to work or it is medically

indicated that significant improvement from the injury is not

anticipated or until the employee is medically capable of

returning to employment substantially similar to the

22

employment in which the employee was engaged at the time

of injury, whichever occurs first.

Iowa Code § 85.34(1). The deputy found Jimenez was entitled to a

running award of healing period benefits because there was no credible

evidence she was at MMI or could perform substantially similar tasks

after her injury as she had prior to her injury. The commissioner and

the district court affirmed this finding.

We review a district court decision reviewing agency action to

determine if we would reach the same result as the district court in our

application of the Iowa Administrative Procedure Act. City of Des Moines

v. Emp’t Appeal Bd., 722 N.W.2d 183, 189 (Iowa 2006). If the agency’s

decision is erroneous under a ground specified in the Iowa

Administrative Procedure Act and a party’s substantial rights have been

prejudiced, the district court may reverse or modify an agency’s decision.

Iowa Code § 17A.19(10). If a determination of fact by the commissioner

“is not supported by substantial evidence in the record before the court

when that record is viewed as a whole,” we may grant relief from the

commissioner’s decision. Id. § 17A.19(10)(f). The Code defines

substantial evidence as

the quantity and quality of evidence that would be deemed

sufficient by a neutral, detached, and reasonable person, to

establish the fact at issue when the consequences resulting

from the establishment of that fact are understood to be

serious and of great importance.

Id. § 17A.19(10)(f)(1). If the evidence is open to a fair difference of

opinion, substantial evidence supports the commissioner’s decision. See

ABC Disposal Sys., Inc. v. Dep’t of Natural Res., 681 N.W.2d 596, 603

(Iowa 2004). A court “should not consider evidence insubstantial merely

because the court may draw different conclusions from the record.”

Arndt v. City of Le Claire, 728 N.W.2d 389, 393 (Iowa 2007).

23

In determining whether substantial evidence exists to support an

agency’s findings, we must consider the credibility determination by the

presiding officer who had a chance to observe the demeanor of the

witnesses. Christiansen v. Iowa Bd. of Educ. Exam’rs, 831 N.W.2d 179,

192 (Iowa 2013). When analyzing the deputy’s credibility determination,

we look at the facts relied upon by the expert and circumstances

contained in the record. Cedar Rapids Cmty. Sch. Dist. v. Pease, 807

N.W.2d 839, 845 (Iowa 2011).

In her ruling, the deputy found Dr. Epp’s opinions more credible.

Dr. Epp opined Jimenez’s present condition was related to the original

injury of September 13, 2007, as a sequela of the 2007 hernia repairs.

She also opined Jimenez has not reached MMI with regard to the

September 13 injury. In our review of the record, we agree with the

district court’s ruling that substantial evidence supports these opinions

and the commissioner’s findings.

According to the record, immediately after the surgery Jimenez was

experiencing pain near the incision site. Jimenez returned to

Dr. Peterson who examined her. Dr. Peterson noticed tenderness to the

right side of the scar. He suggested non-surgical intervention, but

opined that he may need to remove the mesh used to repair the hernia

and try a tissue-based repair. The surgeon referred her to Dr. Maves,

who performed an exam and gave her two injections to relieve the pain.

Dr. Maves’s notes indicate on physical examination, he felt a knot in the

muscular area that was tender to palpitation. At the hearing, Jimenez

and the lay witnesses confirmed Jimenez had debilitating pain since the

original surgery and an area around the original surgery site was growing

from a knot into a large bulge. In commenting on the lay witnesses’

credibility, the deputy stated:

24

The witnesses appeared credible. They did not fidget. Their

answers were straightforward. There were no material

contradictions on cross examination. Claimant did not

flinch in answering the hard questions put to her, such as

whether she had ever filed a tax return (no) and whether she

could legally work in the US (no, again). Even [Staff

Management]’s own representative, Susan Liest, testified

that she believed claimant to be truthful with Ms. Liest

during claimant’s employment with Staff Management.

Dr. Epp relied on this history, the prior medical examinations, and her

medical examination in forming her opinions in this matter. It was in the

commissioner’s province to accept Dr. Epp’s testimony and award

Jimenez running healing period benefits. Therefore, there is substantial

evidence on the record to support the commissioner’s decision.

Staff Management also argues it offered Jimenez work, but she was

unable to work because she was undocumented. The district court

rejected this argument as not supported by the evidence and so do we.

Under section 85.33(3),

[i]f an employee is temporarily, partially disabled and

the employer for whom the employee was working at the time

of injury offers to the employee suitable work consistent with

the employee’s disability the employee shall accept the

suitable work . . . . If the employee refuses to accept the

suitable work with the same employer, the employee shall

not be compensated with temporary partial, temporary total,

or healing period benefits during the period of the refusal.

Iowa Code § 85.33(3).

Substantial evidence supports that Jimenez was unable to do her

prior job due to her work-related injury. When Jimenez returned to

work, she needed her coworkers to help her perform her prior job. We

have previously recognized that an employer must take into account an

employee’s work restrictions when providing suitable work. See Schutjer

v. Algona Manor Care Ctr., 780 N.W.2d 549, 559 (Iowa 2010). It is

disingenuous for Staff Management to argue that they offered her a job

25

that she was unable to perform, which in turn would disqualify her from

healing period benefits.

Therefore, we find substantial evidence supports the

commissioner’s finding that Jimenez is entitled to a running award of

healing period benefits from the date of the original injury.1

VI. Whether the Commissioner May Award Healing Period

Benefits Starting From a Date Preceding the Parties’ Stipulation as

to When the Benefits Should Start.

The administrative rules promulgated by the commissioner require

the following:

Counsel and pro se litigants shall prepare a hearing report

that defines the claims, defenses, and issues that are to be

submitted to the deputy commissioner who presides at the

hearing. The hearing report shall be signed by all counsel of

record and pro se litigants and submitted to the deputy

when the hearing commences.

Iowa Admin. Code r. 876—4.19(3)(f) (2011). In conformance with this

rule, the parties filed a hearing report stating an issue in this case was

“[c]laimant is seeking either temporary total, temporary partial disability,

or healing period benefits from 1/1/09 through current and running.”

At the beginning of the hearing, the deputy reviewed the hearing report

with the attorneys. Staff Management’s position was Jimenez’s present

condition was not work related, and she fully recovered from the

September 13, 2007 injury when she was authorized to return to work in

December 2007.

1This opinion is limited to a worker’s right, whether the worker is documented or

undocumented, to a running award of healing period benefits under the facts of this

case. We take no position as to whether an undocumented worker is entitled any other

benefits under the Iowa Workers’ Compensation Act.

26

In his opening statement, Jimenez’s attorney stated his position

was Jimenez was not able to work going back as far as January 1, 2009.

Staff Management’s attorney then gave his opening statement. During

his opening statement, he reiterated his position that he agreed a work-

related injury occurred on September 13, 2007, but any problems from

the original injury were resolved in December 2007 when her doctor

authorized her to return to work.

During his opening statement, Staff Management’s attorney also

indicated that the doctors scheduled Jimenez for surgery on her present

condition sometime in the future. At this point, the deputy interrupted

counsel’s opening statement and the following colloquy took place:

THE DEPUTY COMMISSIONER: Well, is this issue

right for hearing? I mean, if the claimant is going to be

having surgery for an issue that is allegedly related to the 9-

13-2007 injury that arose out of the course and scope of her

employment, do we know what her MMI date is? Are you

going to ask for a running total?

MR. McANDREW: Yeah. We’re asking for a running of

TTD. That’s the only issue we were not able to work out

before hearing, Your Honor.

MR. SPENCER: That’s one of the disputed pieces in

this case is to whether or not there’s enough healing period

awarded or whether permanency should be awarded.

THE DEPUTY COMMISSIONER: You may have to come

back, then, and determine PPD depending on the facts as

they play out.

We’ll go ahead and proceed on the issue of the TTD

and whether there is permanency or whether permanency

can be assessed at this time.

We must decide the effect of the statement in the hearing report

regarding the start date of benefits. If the stipulation contained in the

hearing report is binding, we must consider if the parties, due to their

27

colloquy with the deputy and the evidence introduced at the hearing,

abandoned the stipulation in the hearing report.

The date that healing period benefits begins is a factual issue.

Thus, the stipulation contained in the hearing report that the disability

began January 1, 2009 is a stipulation of fact. We attempt to determine

and give effect to the parties’ intentions when construing the parties’

stipulation of fact. See Graen’s Mens Wear, Inc. v. Stille-Pierce Agency,

329 N.W.2d 295, 300 (Iowa 1983). The stipulation in the hearing report,

without more, is binding on the start date of either temporary total,

temporary partial disability, or healing benefits.

Jimenez relies on a recent case where we refused to follow a

stipulation where the parties stipulated the commencement date of

permanent partial disability. Mycogen Seeds v. Sands, 686 N.W.2d 457,

467 (Iowa 2004). Jimenez’s reliance on Mycogen Seeds is misplaced.

The conversion date from a healing period is a mixed question of law and

fact. See Iowa Code § 85.34(2) (stating permanent partial disability

begins at the termination of healing period). The Mycogen Seeds case

stands for the proposition that it is the commissioner’s duty to determine

the application of law to the contested facts, and this determination is

not within the parties’ power by stipulation. See Mycogen Seeds, 686

N.W.2d at 467; see also Iowa Supreme Ct. Att’y Disciplinary Bd. v. Gailey,

790 N.W.2d 801, 804 (Iowa 2010) (holding the court has the obligation to

determine the application of law to facts after determining the facts).

However, we cannot consider the hearing report in a vacuum. See

Graen’s Mens Wear, Inc., 329 N.W.2d at 300. We must consider the

stipulation “with reference to its subject matter and in light of the

surrounding circumstances and the whole record, including the state of

the pleadings and issues involved.” Id. Accordingly, we consider the

28

colloquy between the deputy and the attorneys, the manner in which the

parties conducted the trial, and the understanding of the deputy as to

the issues.

During Staff Management’s opening statement, the deputy noticed

an inconsistency in the hearing report. The inconsistency was that the

hearing report stated permanent partial disability payments were in

dispute when Jimenez had not had a second surgery for the alleged

injury. The deputy then asked the parties if the real issue in the case

was if the present injury was caused by the work-related injury of

September 13, 2007, there was no way to determine when she reached

MMI; thus, the issue was whether Jimenez was entitled to a running

award from September 13. Jimenez’s attorney agreed this was an issue.

Staff Management’s attorney also agreed this was an issue. The deputy

confirmed she would try this issue in the administrative hearing.

The manner the parties conducted the trial is consistent with the

deputy’s understanding that an issue before her was whether Jimenez

was entitled to a running award from September 13, 2007. After

completion of opening statements, Jimenez’s attorney offered exhibits

one through fifteen in the record. Staff Management’s counsel objected

to two of the exhibits as untimely, but did not object to exhibit nine.

Exhibit nine contains Dr. Epp’s records. In those records, Dr. Epp

opined Jimenez has not reached MMI with regard to the September 13

injury.

Staff Management offered Exhibit N into evidence. Exhibit N

shows the payments made by Staff Management to Jimenez right after

her surgery. The exhibit covered the period from November 14, 2007 to

December 25, 2007, the time Jimenez was off work for her injuries.

According to the hearing report, an issue existed as to credit for benefits

29

paid. If the only issue was for benefits paid after January 1, 2009, what

relevance do these payments have regarding a credit?

The lay testimony also detailed all the physical problems Jimenez

experienced since her initial surgery in November 2007. Much of the

testimony was that Jimenez never recovered and was unable to work.

Staff Management made no objections to the relevance of this testimony.

This testimony was consistent with the issue of a running award.

Finally, we believe the deputy understood the parties agreed one of

the issues was whether Jimenez was entitled to a running award

beginning September 13, 2007. In her arbitration decision, she set forth

the items stipulated to and those in dispute. She appears to copy those

items from the hearing report. All the stipulated and disputed items she

mentioned in the arbitration decision are consistent with the hearing

report except the stipulation regarding the January 1, 2009 start date for

benefits. Instead, the deputy stated in her decision the issue before her

was “whether claimant was unemployed due to her work injury from

September 13, 2007, to the present, and therefore entitled to a running

award.” The deputy’s action in only changing the stipulation regarding

the start date for benefits shows it was her understanding this issue had

changed since the hearing report.

These circumstances lead us to conclude the parties amended the

hearing report stipulation regarding the January 1, 2009, start date for

benefits during their colloquy with the deputy. The evidence admitted at

the hearing is consistent with an amendment to the hearing report. The

deputy’s written decision confirms the parties amended the hearing

report.

Moreover, the amendment did not affect Staff Management’s case.

Staff Management did not have any evidence regarding the start date of

30

benefits. Staff Management’s sole defense was the work-related injury of

September 13, 2007 did not cause Jimenez’s present condition.

Consequently, the amendment to which it agreed did not change its

burden of proof or prejudice its case.

Therefore, the issue of a running award of healing period benefits

from September 13, 2007, was properly before the commissioner.

VII. Whether the Commissioner May Award Healing Period

Benefits During a Time Period when Jimenez was Working.

The day after the injury, September 14, 2007, Jimenez saw

Dr. Cuddihy. He diagnosed her hernias. He gave her an abdominal

bandage and returned her to sedentary work. She worked until her

surgery on November 14, 2007. She returned to work on December 26,

2007, until January 22, 2008. The running award given by the

commissioner began on September 13, 2007. Healing period benefits are

not payable when an employee returns to work. Iowa Code § 85.34(1).

However, an employee may receive temporary partial disability benefits if

he or she returns to work and receives a reduction in wages from what

he or she earned prior to the injury. Mannes v. Fleetguard, Inc., 770

N.W.2d 826, 830 (Iowa 2009).

Jimenez does not claim nor does the record support that she was

receiving less than her full wage when she worked before and after her

surgery. Accordingly, the commissioner should have excluded the dates

Jimenez was working from the running award. Therefore, the district

court erred in affirming this part of the award of healing period benefits.

VIII. Disposition.

We affirm the district court judgment in all respects, except for the

part of the district court judgment affirming the running award of healing

period benefits when Jimenez returned to work before and after her

31

surgery. Accordingly, we affirm in part, reverse in part the district court

judgment, and remand the case to the district court to remand the case

back to the commissioner to enter an order consistent with this decision

on the issue of the running award of healing period benefits when

Jimenez returned to work before and after her surgery.

We assess costs on appeal to Staff Management and New

Hampshire Insurance Company.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

WITH DIRECTIONS.

All justices concur except Mansfield and Waterman, JJ., who

specially concur.

32

#12–1645, Staff Mgmt. v. Jimenez

MANSFIELD, Justice (concurring specially).

I join in my colleagues’ well-reasoned opinion but write separately

to emphasize one point. I agree that under Iowa law, an employee’s

undocumented status does not deprive her of workers’ compensation

benefits where she suffers a job-related injury. At the same time,

however, under Iowa law, an employee’s undocumented status does not

entitle her to enhanced benefits.

In this case, the employer argues that it terminated Pascuala

Jimenez’s employment on January 22, 2008, because it received

confirmation from United States Immigration and Customs Enforcement

she could not legally work in the United States. This was approximately

four months after Jimenez suffered her workplace injury. Jimenez

concedes she cannot lawfully work in this country at the present time.

In Schutjer v. Algona Manor Care Center, we held that when an

employee has been offered suitable work and then quits, the act of

quitting amounts to a refusal of suitable work, thereby ending the

employee’s right to temporary partial benefits, temporary total benefits,

or healing period benefits. 780 N.W.2d 549, 559 (Iowa 2010).

Analogizing this case to Schutjer, the employer here argues that

Jimenez’s loss of her job due to her inability to maintain lawful

immigration status is equivalent to a refusal to accept suitable work.

Hence, according to the employer, Jimenez should be foreclosed from

receiving temporary or healing period benefits.

There are two problems with this argument on the present record.

First, although Jimenez was initially offered light-duty work on December

4, 2007, she was subsequently called back to her regular job, which she

attempted to perform until she was let go on January 22, 2008. It is

33

unclear whether the employer would have offered Jimenez light-duty

work at a later date if she had been able to resolve her immigration

status. Second, while there was certainly evidence to support the

employer’s explanation for ending Jimenez’s employment on January 22,

the commissioner did not make a finding on the ground for Jimenez’s

termination. For these two reasons, I do not think the present record

allows an appellate court to conclude that Jimenez refused an offer of

suitable work within the meaning of Iowa Code section 85.33(3). We

don’t know whether Staff Management fired her because of her

immigration status, and we don’t know whether Staff Management would

have offered her suitable work but for her immigration status.

Having said that, I believe that when an employer offers suitable

work to an injured employee conditioned on the employee’s obtaining

lawful status to work in this country, and the employee is unable to take

the position because she does not have the proper paperwork, this

amounts to a refusal of suitable work. See Iowa Code § 85.33(3) (2013).

Thus, on a proper record, not present here, I would sustain the

employer’s argument.

Other jurisdictions appear to be in agreement with this view. See

Del Taco v. Workers’ Comp. Appeals Bd., 94 Cal. Rptr. 2d 825, 828–29

(Cal. Ct. App. 2000) (finding a vocational rehabilitation award would be

inappropriate when the claimant could not be employed because of his

undocumented status and noting such an award would cause the worker

to be more protected than a documented worker, who under the same

circumstances would be required to return to work for employer under

modified duty); Martines v. Worley & Sons Constr., 628 S.E.2d 113, 116

(Ga. Ct. App. 2006) (finding a worker unjustifiably refused to accept

suitable work when the worker’s illegal immigration status “caused his

34

inability to accept the proffered employment” because he could not

legally obtain a driver’s license); Gayton v. Gage Carolina Metals, Inc., 560

S.E.2d 870, 874 (N.C. Ct. App. 2002) (“[I]t is the employer’s burden to

produce sufficient evidence that there are suitable jobs plaintiff is

capable of getting, ‘but for’ his illegal alien status.”); Reinforced Earth Co.

v. Workers’ Comp. Appeal Bd., 749 A.2d 1036, 1040 (Pa. Commw. Ct.

2000) (holding that the employer, in order to suspend or modify benefits,

must establish the undocumented claimant’s ability to perform other

work but need not show actual job availability “as it would be illegal for

him to work”).

Waterman, J., joins this special concurrence.