GILMORE v. ALASKA WORKERS' COMPENSATION BD.

OPINION

MATTHEWS, Justice.

As originally presented by the parties, this case called upon us to construe the 1988 amendment to AS 23.30.220(a). This statute prescribes the wage base on which an injured worker's disability benefits are calculated. In the course of considering each party's contentions on this issue, we became aware of potential constitutional problems with the wage base calculation scheme found in AS 23.30.220(a). Specifically, we recognized that the formula contained in section 220(a) would result in substantially different compensation rates for workers who appeared to be in important respects similarly situated. These differences raised questions under the due process and equal protection clauses of the Alaska Constitution. Sua sponte, we ordered the parties to file supplemental memoranda addressing these questions. We now hold that the AS 23.30.220(a) formula violates the equal protection clause of the Alaska Constitution.

Under AS 23.30.180 and .185, temporary and permanent total disability benefits are calculated by taking eighty percent of an injured employee's "spendable weekly wages." Spendable weekly wages are, in turn, defined in AS 23.30.220(a) as the employee's gross weekly earnings minus payroll tax deductions.1 Gross weekly earnings are calculated by totalling the employee's earnings for the past two calendar years and dividing the sum by 100. Until 1988, the Alaska Workers' Compensation Board (Board) was required to determine whether the wage base that resulted from the use of this or earlier similar mechanical formulas would fairly reflect the future earnings lost by an injured employee.2 If the formula did not produce a fair result viewed from the perspective of both the employee3 and the employer,4 the Board was permitted to determine gross weekly earnings by an alternative method based on the nature of the employee's job and his work history.

This alternative method was the subject of considerable litigation.5 In 1988 the legislature eliminated the Board's discretion to use the alternative method in circumstances where the mechanical approach would lead to unfair results. Under the 1988 amendment, the Board may not make an alternative wage calculation unless "the employee was absent from the labor market for 18 months or more of the two calendar years preceding the injury... ." AS 23.30.220(a)(2). As a result, the gross weekly earnings for purposes of calculating benefits for any employee present in the labor market for six or more months in the previous two calendar years will be determined by the mechanical formula provided in AS 23.30.220(a)(1). Because this formula divides the employee's total gross wages over the two year period by 100 regardless of how many weeks the employee actually worked during this period, the employee's actual wage earning capacity during periods of employment is reduced in proportion to any period in which the employee was unemployed for any reason.6 The resulting benefits therefore may only be randomly related to the injured worker's actual loss. This formula applies regardless of any discrepancy, no matter how large, between the result of the formula and the actual wages lost by the employee during the period of his or her disability.

I. FACTS AND PROCEEDINGS

Warren Gilmore suffered serious burn injuries on September 17, 1989, while employed by Klukwan Forest Products, Inc. (Klukwan). Klukwan's workers' compensation insurance carrier, Alaska Timber Insurance Exchange (Alaska Timber), paid Gilmore temporary total disability benefits of $110 per week until he was released to return to work on March 1, 1990. Gilmore started work for Klukwan on June 12, 1989 and was earning average spendable weekly wages of approximately $850. However, for the calendar years 1987 and 1988 he worked for a total of only thirty-nine weeks. He claims that for twenty-two of the thirty-nine weeks he was in vocational training programs learning to be a motorcycle mechanic. He contends that he should have been considered "absent from the labor market" within the meaning of section .220(a)(2) for these twenty-two weeks. If he is correct, he would be entitled to an alternative wage computation, for he would have been "absent from the labor market" for at least eighteen months during the two years in question.

The Board rejected Gilmore's contention, ruling:

On appeal the superior court affirmed. The court stated:

Gilmore appealed to this court. In the course of considering the arguments of the parties with respect to the meaning of the phrase "absent from the labor market," we took notice of potential equal protection and due process problems with AS 23.30.220(a). As these constitutional issues are "critical to a proper and just decision" in this case, we sua sponte ordered the parties to brief the question of the constitutionality of AS 23.30.220(a).7 We also requested the parties, in briefing this question, to consider two examples in which the loss of future earnings for the injured workers would be the same:8

Briefing is now complete,9 and the issue is ripe for decision.

II. DISCUSSION

Article I, section 1 of the Alaska Constitution provides in part that "all persons are equal and entitled to equal rights, opportunities, and protection under the law." This clause may be more protective of individual rights than the federal equal protection clause. State v. Cosio, 858 P.2d 621, 629 (Alaska 1993). As our examples illustrate, the current statutory scheme clearly classifies injured employees based on differences in their prior work history. These classifications will often result in substantially different disability benefits for similarly situated employees. The question therefore is whether this unequal treatment is permissible under the Alaska Constitution.10

We have adopted a "sliding scale" test for analyzing equal protection questions under the Alaska Constitution. State v. Erickson, 574 P.2d 1, 11-12 (Alaska 1978). This test involves a three-step analysis:

Alaska Pac. Assurance Co. v. Brown, 687 P.2d 264, 269-70 (Alaska 1984).

A. Interest Impaired

The interest impaired by the classifications at issue is the injured employee's interest in compensation benefits which reflect his actual losses. In Brown, we implied that the employee's "right to receive the full measure of workers' compensation benefits which he would receive but for the classification" at issue was not an interest deserving of elevated scrutiny. Id. at 270-71. We noted that there is no constitutional mandate that benefits bear a particular relationship to the worker's salary at the time of injury.11 Id. at 270. As the employee's right to travel was also implicated by the classification at issue in Brown, we did not determine the exact weight to be afforded an injured employee's interest in particular benefit levels. Id. at 271. An interest in workers' compensation benefits is, however, similar to an interest in unemployment compensation benefits or other economic interests. We have consistently held that such economic interests are only "entitled to review at the low end of the scale." Sonneman v. Knight, 790 P.2d 702, 705 (Alaska 1990); see also Cosio, 858 P.2d at 629; Coghill v. Coghill, 836 P.2d 921, 929 (Alaska 1992); State v. Anthony, 810 P.2d 155, 158, reh'g granted, 816 P.2d 1377 (Alaska 1991); Herrick's Aero-Auto-Aqua Repair Serv. v. State, Dep't of Transp., 754 P.2d 1111, 1114 (Alaska 1988). Therefore, section 220(a) will pass constitutional muster if the classifications it creates bear a fair and substantial relationship to the purposes of the Workers' Compensation Act (Act).

B. Purpose of the Act

In analyzing equal protection challenges to a provision of the Workers' Compensation Act, we must examine the purpose behind the provision in light of the purpose of the entire Act. Taylor v. Southeast-Harrison W. Corp., 694 P.2d 1160, 1162 (Alaska 1985). In adopting the 1988 amendments, the legislature clearly stated the purpose behind the Act:

Ch. 79, § 1, SLA (1988). These are legitimate purposes. The overall purpose of AS 23.30.220(a) and the other sections of the Act used to calculate an injured worker's indemnity benefits is "to formulate a fair approximation of a claimant's probable future earning capacity during the period in which compensation benefits are to be paid."12 Johnson, 681 P.2d at 907. This "fair approximation" is an essential component of the basic compromise underlying the Workers' Compensation Act — the worker's sacrifice of common law claims against the employer in return for adequate compensation without the delay and expenses inherent in civil litigation. The 1988 amendments to AS 23.30.220(a) attempt to further the Act's overall purpose by decreasing the amount of litigation over the determination of an employee's "spendable weekly wage." House Judiciary Hearing on SB 322, April 25, 1988, Tr. 13, 18-19.

C. Relationship of Means to Ends

At the lower end of our sliding scale, the means adopted by the legislature must be substantially related to the ends sought to be achieved. Brown, 687 P.2d at 269-70. A perfect fit between the legislative classification and the governmental objective is not required. Anthony, 810 P.2d at 159. We nevertheless conclude that no substantial relationship exists between calculating a worker's weekly wage by dividing the worker's earnings over the last two calendar years by 100 regardless of whether the number reached reflects the worker's actual losses and the goals of fairly approximating a worker's probable future earning capacity and achieving a "quick, efficient, fair, and predictable delivery of indemnity and medical benefits."

The benefit levels among injured workers based on section 220(a) bear no more than a coincidental relationship to the goal of compensating injured workers based on their actual losses. In any of the many situations in which a worker's past wage and time of employment do not accurately reflect the circumstances existing at the time of the injury, the formula will misrepresent the losses.13 The means chosen for determining an injured worker's gross weekly wage therefore do not bear a substantial relationship to that goal.

Klukwan and the Amici concede that the current version of AS 23.30.220(a) will lead to unfair or unfavorable results in some instances. They and the Board argue, however, that the statute is nevertheless constitutional because it is substantially related to the legislative interest in reducing litigation and in furthering quick, predictable results. We recognize that rigid application of the mechanical formula set out in AS 23.30.220(a)(1) probably leads to quick and predictable results. This efficiency is gained, however, at the sacrifice of fairness in result. The purpose of the Act, as expressed by the legislature, is to provide a "quick, efficient, fair, and predictable delivery of indemnity and medical benefits." The facts of the present case amply demonstrate the potential unfairness of a rigid application of the mechanical formula.14 Under the section 220(a)(1) formula as applied by the Board, Gilmore received only the statutory minimum amount of compensation, despite his earning over seven and one-half times more per week at the time of injury.

Efficiency in this area does not require unfairness. A quick, efficient, and predictable scheme for determining a worker's gross weekly earnings could be formulated without denying workers like Gilmore benefits commensurate with their actual losses. Many jurisdictions avoid the need for an alternative open-ended determination of actual future earning capacity by focusing narrowly on wages at the time of injury and converting, by formula or formulas, the worker's rate of pay into a weekly wage. See, e.g., D.C. Code Ann. § 36-311 (1993); Iowa Code Ann. § 85.36 (1984); Kan. Stat. Ann. § 44-511(b) (1993); Ky. Rev. Stat. Ann. § 342.140 (1993); Minn. Stat. § 176.011(18) (1993); Mo. Rev. Stat. § 287.250 (1993); Neb. Rev. Stat. § 48-126 (1990); N.J. Rev. Stat. § 34:15-37 (1988); N.M. Stat. Ann. § 52-1-20 (1978); 77 Pa. Cons. Stat. Ann. § 582 (1992).15 Such a formulaic system can be quick, efficient, predictable, and fair. Review of the worker's compensation statutes of the other forty-nine states reveals that Alaska is the only state which bases compensation exclusively on the average wage earned over a more than one year period without providing an alternate approach if the formula reaches an unfair result. It is also the only state which includes significant periods of unemployment in calculating the worker's average wage without requiring a preliminary finding that the worker was employed in a seasonal occupation at the time of injury.16

The gross weekly wage determination method of AS 23.30.220(a) creates large differences in compensation between similarly situated injured workers, bears no relationship to the goal of accurately calculating an injured employee's lost wages for purposes of determining his or her compensation, is unfair to workers whose past history does not accurately reflect their future earning capacity, and is unnecessary to achieve quickness, efficiency, or predictability. Therefore, the formula expressed in AS 23.30.220(a) is not substantially related to the purposes of the Act. It cannot survive scrutiny on even the lowest end of our sliding scale and is therefore an unconstitutional infringement on the equal protection clause of the Alaska Constitution. Art. I, § 1.17

III. CONCLUSION

We reverse the Board's determination of Gilmore's weekly compensation rate as it was based on an unconstitutional statutory requirement. On remand, the Board should recalculate Gilmore's gross weekly earnings by using the alternative method specified in section 220(a).18

REVERSED AND REMANDED.

COMPTON, J., concurs.

BURKE, J., not participating.

COMPTON, Justice, concurring.

In my view the Alaska Workers' Compensation Board (Board) erred when it construed "absent from the labor force" to mean "simply `unemployed.'" The basis for the Board's construction is its view of how to implement the legislative goal sought to be achieved by the amendments contained in Senate Bill 322, which is establishment of a quick, efficient, fair, and predictable benefits system. This goal is explicit in the prefatory `intent' section of the bill. In the Board's view, any definition of "absent from the labor force" broader than "unemployed" would frustrate the legislative goal and lead to "a fertile ground for litigation." Consequently, "[t]he clearest rule and the rule least subject to dispute is to interpret `absent from the labor force' to mean simply `unemployed'... ."

This simplistic construction may result in a bright line for applying the statutory limitation, and a benefits system with quick, efficient, and predictable results that will not be "a fertile ground for litigation." However, the litigative sterility it produces strips "fair" of any chance of life. "Fair" denotes a balancing of equities and interests. The Board's construction brooks of none. The phrase "absent from the labor force" cannot be construed properly unless the element of fairness is considered. The opinion of the court quite properly emphasizes that the legislature mandated that fairness be considered in administering the benefits system.

The Board found:

Alaska Workers' Compensation Board, Docket AWCB No. 8925031, Decision and Order, p. 2.

Gilmore's jobs were in connection with "formal training program[s]."1 He was pursuing an educational goal. One `job' was subsidized by the federal government. Another `job' was as a trainee in a program for which Gilmore paid a tuition in excess of $5,000, from which he was attempting to graduate. Thus his employment was, in his words, in furtherance of a primary educational objective: "The restrictions of an educational goal simply don't afford one an opportunity to pursue involvement in a `free labor market.'"

Applying an "independent judgment" standard of review, Phillips v. Houston Contracting, Inc., 732 P.2d 544 (Alaska 1987), I conclude that Gilmore should be rated under AS 23.30.220(a)(2). Gilmore was "absent from the labor market" for the requisite period. His rate of compensation should be calculated under AS 23.30.220(a)(2).

The court has concluded without resolution of the statutory construction issue that constitutional issues are "`critical to a proper and just decision' in this case... ." Constitutional issues cannot be critical to a proper and just decision of the case until the court has determined that the Board's construction of AS 23.30.220(a)(2) is correct. If the Board's construction is not correct, and Gilmore would recover under this court's construction of the statute without resolution of constitutional issues which the court itself has raised, there is no justification for reaching the constitutional issues. I continue to believe in the doctrine that a court should abstain from reaching constitutional issues unless essential to a decision in the case. See State v. Hazelwood, 866 P.2d 827, 834 n. 2 (Alaska 1993) (Compton, J., dissenting in part: would not address constitutional issues until addressing whether evidence supported exception to exclusionary rule); Abood v. League of Women Voters, 743 P.2d 333, 343, 345 n. 3 (Alaska 1987) (Compton, J., dissenting: constitutional issue need not be decided as policy mandate of statute was dispositive); Deubelbeiss v. Commercial Fisheries Entry Comm'n, 689 P.2d 487, 491 (Alaska 1984) (Compton, J., concurring: abstain from answering constitutional questions when other dispositive grounds exist, citing Escambia County v. McMillan, 466 U.S. 48, 104 S.Ct. 1577, 80 L.Ed.2d 36 (1984)). This court has itself invoked the doctrine of abstention. Municipality of Anchorage v. Anchorage Daily News, 794 P.2d 584, 594 n. 18 (Alaska 1990) (civil rules constitute sufficient device for controlling discovery harassment, thus decline to reach broader constitutional issue); State v. F/V Baranof, 677 P.2d 1245, 1255 (Alaska 1984) (since owners were afforded due process, need not address constitutionality of statute), cert. denied, 469 U.S. 823, 105 S.Ct. 98, 83 L.Ed.2d 43 (1984); Zerbe v. State, 578 P.2d 597, 598 (Alaska 1978) (because of disposition of first point on appeal, need not address constitutional issue), over-ruled on other grounds, Stephens v. State, Dept. of Revenue, 746 P.2d 908 (Alaska 1987); Puller v. Municipality of Anchorage, 574 P.2d 1285, 1288 (Alaska 1978) (in light of construction of statute, do not reach constitutional issues); State v. City of Anchorage, 513 P.2d 1104, 1112 (Alaska 1973) (interpretation of statute makes it unnecessary to reach constitutional issue); Anniskette v. State, 489 P.2d 1012, 1016 (Alaska 1971) (since conduct protected by constitution, do not reach broader question of statute's constitutionality, cited with approval in Marks v. City of Anchorage, 500 P.2d 644, 647 n. 9 (Alaska 1972); Perry v. State, 429 P.2d 249, 251-52 (Alaska 1967) (do not need to reach and therefore decline to reach statutory issue, since answer might lead to constitutional issue; should not pass on constitutional issue unless determination essential to decision of case). However, it has not always seen fit to follow it. Granato v. Occhipinti, 602 P.2d 442, 447 (Alaska 1979) (Boochever, J., with whom Rabinowitz, C.J., joins, dissenting: court should not construe statute to reach an incongruous result, thereby necessitating resolution of constitutional issue). Similarly, the court of appeals has invoked the doctrine of abstention. Robins v. Municipality of Anchorage, 711 P.2d 550, 552 (Alaska App. 1985) (need not decide constitutional issue, since probable cause for arrest existed prior to giving breath test); State v. Williams, 653 P.2d 1067, 1069 (Alaska App. 1982) (do not reach constitutional issue since case can be resolved by applying Alaska Rules of Criminal Procedure), aff'd in part, 681 P.2d 313 (Alaska 1984).

I think it unfortunate that this court continues to take an ad hoc approach to application of the doctrine of abstention. First, failure to apply the doctrine may result in unnecessary confusion and disruption within the governmental agency charged with the responsibility of attempting to enforce a statutory scheme, part of which is no longer operative. Second, failure to apply the doctrine may afford a windfall benefit to nonlitigants whose position is bettered by a declaration of unconstitutionality, while applying the doctrine may deny the benefit to a particular litigant. This inconsistency may be viewed as evidencing either arbitrariness or favoritism, neither of which should be tolerated.

Since I agree that Gilmore should be rated under AS 23.30.220(a)(2), I concur in the result.

ORDER REGARDING EMERGENCY MOTION FOR STAY OF DECISION

1. The court has considered the Board's emergency motion for stay of decision of October 14, 1994. The emergency motion demonstrates that the court failed to consider a material remedial question, namely, whether AS 23.30.220(a) is facially unconstitutional or unconstitutional as applied. Accordingly, the court deems the motion to be, in part, a motion for rehearing under Appellate Rule 506. As such, the court GRANTS rehearing and amends the opinion by adding a new paragraph to the beginning of footnote 17. [Editor's Note: Amendment incorporated for publication.]

2. Except as noted in paragraph one of this order, the emergency motion for stay of decision is DENIED. The opinion in this case as modified on rehearing should guide the Board as to how to proceed when the formula of AS 23.30.220(a)(1) yields a result which does not fairly reflect the future earnings loss of an injured employee. In such cases, as in the present case, the alternative method contained in section 220(a)(2) is to be used.

3. The question of prospectivity or retroactivity, and the type of prospectivity or retroactivity, will be addressed in the context of a case in which the question is essential to the decision. In the meantime, the past opinions of this court should serve as a basis for an informed decision by the Board. See Metcalf v. Felec Servs., 784 P.2d 1386 (Alaska 1990); Morrison v. Afognak Logging, Inc., 768 P.2d 1139 (Alaska 1989); Vienna v. Scott Wetzel Servs., Inc., 740 P.2d 447 (Alaska 1987); Suh v. Pingo Corp., 736 P.2d 342 (Alaska 1987).