When considering a petition for rearrangement, the changes in physical condition and/or earning capacity are based on the current facts compared to the findings in the original award.

In Phoenix Union, the applicant sustained an admitted shoulder injury in 2012 when she fell while working as a custodian. In February 2013, the attending orthopedic surgeon, Dr. Lederman, opined the applicant was incapable of returning to her previous job. A loss of earning capacity recommendation in April 2013 opined the applicant was capable of performing unskilled entry-level work on a part-time basis – such as a fast food worker. A functional capacity evaluation concluded that the applicant’s functional abilities were a good match with an office custodian. In June 2013, the Industrial Commission of Arizona (“ICA”) awarded the applicant $1,019.54 per month for loss of earning capacity and found her medical limitations would not preclude her from the performing the duties of a fast food worker for 25 hours per week or comparable work. The ICA relied on the opinion of the orthopedic surgeon and the loss of earning capacity report, and not the functional capacity evaluation. Shortly after the ICA award, an addendum to the loss of earning capacity report was issued opining the applicant was also capable of performing the position of a housekeeper for a hotel/motel establishment. The 2013 ICA award was not protested and the functional capacity evaluation and loss of earning capacity addendum report were not incorporated.

In June 2017, surveillance showed the applicant doing exercises using her shoulder. Dr. Sahasrabudhe examined Claimant for an IME and opined she did not need any work limitations. Defendants then filed a petition for rearrangement or readjustment of compensation based on a change in applicant’s physical condition. The ICA granted the petitioned and rearranged the applicant’s loss of earning capacity to zero. The applicant objected and requested a hearing.

At hearing, Dr. Sahasrabudhe testified that the applicant did not need any work limitations. Dr. Lederman disagreed and testified that while the applicant “had a fair bit of improvement over the years, it would still be unsafe for her to return to her former work as a custodian, and permanent restrictions on her right shoulder were still in order.” The ALJ found that there was no change in the applicant’s earning capacity and denied the petition for rearrangement.

Defendants then appealed to the Arizona Court of Appeals (“the Court“) and argued that the denial of the petition for rearrangement was contrary to the evidence, unsupported by its own findings, based on medical opinion that was contradictory and foundationally flawed, and contrary to controlling Arizona law. The Court agreed and set aside the ALJ’s order.

The Court held that a carrier may petition for rearrangement on the basis that there has been (1) a change in the employee’s physical condition resulting in an increase in the employee’s earning capacity or (2) the employee’s earning capacity has increased. Under the first option, the carrier must allege and prove a physical change affecting the earning capacity. Under the second option, the carrier must show an increase in earning capacity and then the burden shifts to the employee to show this is incorrect. The question of change is to be measured by comparing the facts determined by the final facts in the first award with those existing at the time of the rearrangement of petition.

Under option one, the ALJ erred by comparing the applicant’s current condition versus the functional capacity evaluation because the original award did not rely on the functional capacity evaluation. The ALJ should have compared the applicant’s current condition to the first loss of earning capacity report. However, the Court held that there was still reasonable evidence to support the ALJ’s finding that there was no change in the applicant’s physical condition that affected her earning capacity. The ALJ’s decision was based on Dr. Lederman’s testimony that there was no basis for recommending a change in the applicant’s 2013 restrictions, which was part of the basis for the original award.

Under option two, the ALJ found that the applicant could work 40 hours per week but held that the original award did not have a medical limitation regarding the number of hours the applicant could work per week. The Court held that this was incorrect because the 2013 award was based on the loss of earning capacity report that found the applicant could work 25 hours per week as a fast food worker. The uncontroverted evidence at hearing established that the applicant could now work 40 hours per week. The Court held that this constituted a showing that the applicant’s earning capacity had increased since the 2013 award.

The Court concluded that the ALJ erred by finding no increase in the applicant’s earning capacity and set aside the order denying the rearrangement petition.

Phoenix Union High School Dist. No. 210 and Ariz. School Alliance for Workers Compensation Pool v. Indus. Comm’n of Ariz., 2020 WL 7586113 (Dec. 22, 2020).

Want to know more? Contact Ilene Feldmeier at ifeldmeier@pollartmiller.com or 877-259-5693.

December 2020 Newsletter