State News : Iowa

Significant debate and litigation have continued to stem from the Iowa legislature’s 2017 amendment to Iowa Code section 85.34(2)(v) and its impact on an injured worker’s entitlement to a traditional industrial disability analysis. Attorneys Lee Hook, Michael Roling, Christopher Spencer, and Morgan Todd Borron of Peddicord Lillis recently had the opportunity to bring a case before the Iowa Supreme Court to clarify just that.

An injury is unscheduled if it is an injury “other than those . . . described or referred to in paragraphs ‘a’ through ‘u’” of § 85.34(2). See Iowa Code § 85.34(2)(v). Prior to the 2017 amendment, all unscheduled injuries were considered a “whole person” or “body as a whole” injury, which result in industrial disability analysis.

When the legislature amended § 85.34(2)(v) in 2017, it retained the only existing sentence and added three new sentences to the end of the subsection; the statute is now comprised of a total of four sentences. The first two sentences of § 85.34(2)(v) provide a default rule for compensating nonscheduled injuries—that is, such injuries are to be compensated based on the reduction in the employee’s earning capacity (i.e., industrial disability). Iowa Code § 85.34(2)(v). This was the default rule prior to the 2017 amendment of this statute. Central to the ongoing debate and litigation were the legislature’s addition of the third and fourth sentences to Iowa Code § 85.34(2)(v) as a part of the 2017 amendments. Together, the third and fourth sentences provide:

[3] If an employee who is eligible for compensation under this paragraph returns to work or is offered work for which the employee receives or would receive the same or greater salary, wages, or earnings than the employee received at the time of the injury, the employee shall be compensated based only upon the employee's functional impairment resulting from the injury, and not in relation to the employee's earning capacity. [4] Notwithstanding section 85.26, subsection 2, if an employee who is eligible for compensation under this paragraph returns to work with the same employer and is compensated based only upon the employee's functional impairment resulting from the injury as provided in this paragraph and is terminated from employment by that employer, the award or agreement for settlement for benefits under this chapter shall be reviewed upon commencement of reopening proceedings by the employee for a determination of any reduction in the employee's earning capacity caused by the employee's permanent partial disability.

Iowa Code § 85.34(2)(v) (numerical designations identified in bolded brackets added).

In Den Hartog Industries v. Dungan, the Iowa Supreme Court reversed the Commissioner’s finding (which was affirmed by the District Court and Iowa Court of Appeals in a 2-1 split decision) that Claimant Dungan was entitled to an award of industrial disability under Iowa Code § 85.34(2)(v), based on earning capacity rather than functional impairment. In applying section 85.34(2)(v) in a straightforward manner, the Court stated:

Under sentences 1 and 2, Dungan’s back injury would ordinarily be compensated according to the industrial method, based on “the reduction in the employee’s earning capacity caused by the disability.” Iowa Code § 85.34(2)(v). However, Dungan “return[ed] to work . . . for which [he] receive[d] or would receive the same or greater salary, wages, or earnings than [he] received at the time of the injury.” Id. Therefore, under sentence 3, he should be compensated “based only upon [his] functional impairment resulting from the injury, and not in relation to [his] earning capacity.” Id. Finally, Dungan was not “terminated from employment” by Den Hartog, so sentence 4 doesn’t apply, and there is no review-reopening. Id. In other words, when all is said and done, Dungan should be compensated based on his functional impairment, as dictated by sentence 3, not loss of earning capacity.

Den Hartog Industries v. Dungan, No. 23-1402 at *8, __ N.W.3d __ (Iowa 2025). The Supreme Court then vacated the Court of Appeals Decision, District Court Decision, and remanded the case to the Commissioner with instructions to calculate Claimant Dungan’s entitlement to benefits based on his functional impairment. Dungan, No. 23-1402 at *12, __ N.W.3d __ (Iowa 2025).