Peddicord Lillis Attorneys Obtain Favorable Ruling from Iowa Supreme Court Regarding Impact of Voluntary Quit on Permanent Disability Compensation.
- Nov 04, 2025
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 in Den Hartog Industries v. Dungan.
When the legislature amended Iowa Code § 85.34(2)(v) in 2017, it retained the only existing sentence of the statute 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).
The Commissioner determined that the addition of the third and fourth sentences created a “bifurcated litigation process” which applied only when an employee returns to employment with the same employer at the same or greater earnings and is later terminated. On appeal, Iowa Court of Appeals (in a 2-1 split decision) found the text of Iowa Code § 85.34(2)(v) to be ambiguous and affirmed the Commissioner and District Court based on controlling precedent that ambiguities in workers’ compensation law are to be interpreted in favor of the worker.
The Iowa Supreme Court granted the Employer and Insurance Carrier’s request for further review of the matter and found the plain language of Iowa Code § 85.34(2)(v), as amended, to be unambiguous. In applying section 85.34(2)(v) in a straightforward manner, the Iowa Supreme 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 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. Id. at *12.