W.C. No. 4-283-730Industrial Claim Appeals Office.
August 11, 1997
FINAL ORDER
The claimant seeks review of a final order of Administrative Law Judge Erickson (ALJ), which denied her request for modification of the average weekly wage. We affirm.
The ALJ found that the claimant was a “patio person” employed by a restaurant known as Taco Cabana. In this job the claimant was required to clean the patio, refill a condiment table, maintain the premises, and carry food to customers. However, the claimant did not take food orders from customers.
The claimant earned an hourly wage, and it is not disputed that she is entitled to temporary disability benefits based on these earnings. However, the claimant testified that during each work shift she also earned between $15 and $46 in tips. Although the claimant kept no written records, she estimated that she earned $2,520 in tips during the twenty weeks she worked for Taco Cabana prior to her injury on November 25, 1995.
In contrast, the claimant’s manager testified that an employee in the claimant’s position “rarely” receives tips. Moreover, the manager testified that the claimant became excited when she received a one dollar tip, and was very excited when she received a five dollar tip.
The record also contains an undated and unsigned copy of the claimant’s 1995 individual income tax return. The return includes a form 4137 on which the claimant reported receiving $2,520 in tips during calendar year 1995.
The ALJ found that, although the claimant earned tips in 1995, her testimony was not credible “regarding the amount of tips she earned.” Further, the ALJ determined that the record contains no other credible evidence concerning the specific amount of the claimant’s tips. Therefore, the ALJ concluded that the claimant failed to satisfy her burden of proof to establish a modification of the average weekly wage.
On review, the claimant argues that the ALJ should have calculated the average weekly wage based on the $2,520 in tips which the claimant reported as income on her 1995 tax return. Citing § 8-40-201(19)(b), C.R.S. (1996 Cum. Supp.), the claimant argues that tips reported on a claimant’s income tax return constitute the benchmark to be used by an ALJ in calculating the average weekly wage. The claimant notes that the statute uses the word “shall,” and argues that this establishes a mandatory rule. Moreover, the claimant reasons that the purpose of this rule is to prevent claimants from overestimating their tip income in their testimony at workers’ compensation hearings. We disagree because, in our view, § 8-40-201(19)(b) establishes the maximum amount of tips which may be included in the average weekly wage, but does not prohibit the ALJ from calculating the wage based on a lesser amount of tips.
Section 8-40-201(19)(a), C.R.S. (1996 Cum. Supp.), defines wages as the “money rate at which the services rendered are recompensed under the contract for hire in force at the time of the injury.” Section 8-40-201(19)(b) goes on to state the following:
“The term `wages’ shall include the amount of the employee’s cost of continuing the employer’s group health insurance plan . . . and gratuities reported to the federal internal revenue service by or for the worker for purposes of filing federal income tax returns and the reasonable value of board, rent, housing, and lodging received from the employer . . . but shall not include any similar advantage or fringe benefits not specifically enumerated in this subsection (19).”
In interpreting this statute, we must attempt to further the legislative intent. To discern this intent we should first give the words in the statute their plain and ordinary meanings, unless the result is absurd. Snyder Oil Co. v. Embree, 862 P.2d 259 (Colo. 1993).
However, to the extent the statute contains some ambiguity, it is appropriate to resort to interpretive rules of statutory construction. These rules require us to assume that the General Assembly intended the statute to effect a just and reasonable result. See McCallum v. Dana’s Housekeeping, ___ P.2d ___ (Colo.App. No. 96CA0459, October 24, 1996). Moreover, we may consider the state of the law prior to the legislative enactment, and the problem the statute was designed to solve. Henderson v. RSI, Inc., 824 P.2d 91 (Colo.App. 1991). Further, we should construe the entire statutory scheme in a manner that gives consistent, harmonious, and sensible effect to all of its parts Henderson v. RSI, Inc., supra.
While we do not dispute the mandatory nature of §8-40-201(19)(b), we do not believe that a literal reading of the statute requires that an ALJ calculate the average weekly wage based on tips which the claimant did not actually receive but reported receiving on her income tax return. Rather, the statute states that the ALJ must include gratuities which were reported to the IRS. If the claimant never actually earned any gratuities, the mere act of reporting their receipt is insufficient to meet the statutory requirements. A contrary result would be absurd since it would permit claimant’s to manufacture “wages” simply by reporting them on their tax returns.
Thus, we hold that the plain and ordinary meaning of the statute is that gratuities which a claimant actually receives in the course of employment may be considered in calculating the average weekly wage, but only so long as those gratuities were reported to the IRS. In this way, the statute provides a check against claimants who might inflate their average weekly wage by testifying to tips which they did not actually earn, but does not allow over-reporting on tax returns as a method of increasing the average weekly wage.
However, assuming that the statute can be viewed as ambiguous, the best interpretation does not support the result which the claimant advocates. Prior to the enactment of the statute codified at § 8-40-201(19)(b), the courts held that tips were part of the money rate at which services were recompensed under the contract for hire. E.g. Romero v. U-Let-Us Skycap Services, Inc., 740 P.2d 1004 (Colo.App. 1987). There were no restrictions concerning the methods by which claimants could prove the amount of tips received.
In our view, the enactment of § 8-40-201(19)(b) was designed to change the law and restrain claimants who might be inclined to exaggerate their testimony concerning their earnings from tips. The amendment did so by providing an outside limit to such testimony as measured by the amount of tips reported to the IRS. However, we perceive no legislative interest in reading the statute to allow claimants to over-report tips to the IRS for the purpose of inflating their average weekly wage. Indeed, this would defeat the legislative purpose of limiting the definition of “wages.”
Further, the overall objective of determining a claimant’s average weekly wage is to fairly approximate the claimant’s earning capacity. Campbell v. IBM Corp., 867 P.2d 77
(Colo.App. 1993). The claimant’s proposed interpretation of §8-40-201(19)(b) could defeat this overall objective by encouraging some claimants to over-report tips to the IRS for purposes of raising their compensation rate. A temptation to over-report tips may exist where reporting additional income to the IRS results in a small increase in taxable income, but a much more substantial increase in workers’ compensation benefits.
It follows that we perceive no error in the ALJ’s order. Regardless of the fact that the claimant reported $2,520 of tip income to the IRS, the ALJ has found that the claimant did not actually receive the tips which she reported. Moreover, the claimant failed to provide an adequate basis for calculating the gratuities which she actually received. The ALJ’s order must be affirmed since we lack authority to interfere with his factual determinations. Section 8-43-301(8), C.R.S. (1996 Cum. Supp.).
We note that the ALJ’s order does not expressly award or deny benefits. However, at the commencement of the hearing the respondents agreed to reimburse the claimant for temporary disability benefits in the event the ALJ increased the average weekly wage. Thus, we consider the order as final because, in effect, it involves a denial of benefits to the claimant. Section 8-43-301(2), C.R.S. (1996 Cum. Supp.).
IT IS THEREFORE ORDERED that the ALJ’s order dated November 6, 1996, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Bill Whitacre
NOTICE
This Order is final unless an action to modify or vacatethe Order is commenced in the Colorado Court of Appeals, 2 East14th Avenue, Denver, Colorado 80203, by filing a petition toreview with the court, with service of a copy of the petitionupon the Industrial Claim Appeals Office and all other parties,within twenty (20) days after the date the Order was mailed,pursuant to §§ 8-43-301(10) and 307, C. R. S. (1996 Cum.Supp.).
Copies of this decision were mailed August 11, 1997 to the following parties:
Gloris R. Dawes, Douglas R. Phillips, Esq., 155 S. Madison St., Ste. 330, Denver, CO 80209
Mary Beaudro, Colorado Cabana, Inc., 262 Losoya St., Ste. 330, San Antonio, TX 78205-2684
Carol Keim, AIG Claim Services, Inc., P.O. Box 32130, Phoenix, AZ 85018
James B. Fairbanks, Esq., Karen Gail Treece, Esq., 400 S. Colorado Blvd., Ste. 700, Denver, CO 80222 (For the Respondents)
Douglas R. Phillips, Esq., 155 S. Madison St., Ste. 330, Denver, CO 80209 August 11, 1997 (For the Claimant)
By: _______________________________