Jacob Williams v. Reeds, LLC

Issued by THE LABOR AND INDUSTRIAL RELATIONS COMMISSION

(Modifying Award and Decision of Administrative Law Judge)

**Injury No.:** 15-104779

**Employee:** Jacob Williams, deceased

**Claimants:**

- Laura Williams

- Jennifer Williams, next friend of Courtney Williams and Kennedy Williams

**Employer:** Reeds, LLC

**Insurer:** American Family Mutual Insurance Company

This workers' compensation case is submitted to the Labor and Industrial Relations Commission (Commission) for review as provided by § 287.480 RSMo. We have reviewed the evidence, read the parties' briefs, and considered the whole record. Pursuant to § 286.090 RSMo, we modify the award and decision of the administrative law judge. We adopt the findings, conclusions, decision, and award of the administrative law judge to the extent that they are not inconsistent with the findings, conclusions, decision, and modifications set forth below.

Employee, sole member of employer Reeds Limited Liability Company, an automobile repair and parts company, died instantaneously on December 1, 2015, when the bed of a truck he was working on fell on his chest.

Laura Williams claims benefits as employee's widow. Employee's former wife Jennifer Williams claims benefits as mother and next friend of Courtney Williams and Kennedy Williams, children of employee's prior marriage.

The parties asked the administrative law judge to resolve the following issues:

1. Employee's compensation rate; and
2. Division of death benefits between Laura, Courtney, and Kennedy Williams.

The administrative law judge found that employee's situation, including his status as both an employee and single member of the employer and varying reports of his income to different agencies and organizations, justified application of § 287.250.4 RSMo in the computation of his average weekly wage. This section allows the Division and Commission, in a situation that presents exceptional facts, to deviate from statutory formulas and determine an employee's average weekly wage "in such manner and by such method" as the Division or Commission considers fair. He cited *Nielsen v. Max One Corp.*, 98 S.W.3d 585 (Mo. App. 2003), *Oberley v. Oberley Engineering*, 940 S.W.2d 953 (Mo. App. 1997) and *Ash v. Ahal Construction*, 916 S.W.2d 439 (Mo. App. 1996), cases involving similarly unusual facts, in support of this finding.

Claimant Laura Williams, employee's widow, testified regarding the personal nature of numerous expenses she and employee claimed as business deductions on their joint tax return.

Injury No. 15-104779

Employee: Jacob Williams, deceased

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Claimant Jennifer Williams produced the deposition of family law attorney Charles Robert Baird as an expert witness on the issue of employee's income and average weekly wage. Employer/insurer objected, claiming that Mr. Baird lacked the requisite educational background and proper certifications to qualify as an expert. The administrative law judge overruled employer/insurer's objection and found that Mr. Baird's knowledge, skill, and experience qualified him to opine on the issue of calculation of employee's income and average weekly wage pursuant to § 287.250.4.

The administrative law judge included payments by employee from his business account to himself and for his personal expenses as earnings in computing the employee's average weekly wage pursuant to § 287.250.2 RSMo. He cited Oberley v. Oberley Engineering, 940 S.W.2d 953 (Mo. App. 1997) as authority for considering these payments as a "similar advance" employee received from the employer that should be included in employee's gross wages. See § 287.250.2 RSMo.

Based on Laura Williams' testimony, her records of personal expenses paid to employee from Reeds, LLC, and attorney Baird's testimony regarding the concept of "imputed income" the administrative law judge found that employee had annual income from Reeds in the amount of $62,100.13. The administrative law judge's findings of fact state, "This total, divided by 52 weeks, yields $796.15." Award, p. 6.

Courtny Williams' Dependency Status

The administrative law judge found that employee's daughter Courtny Williams, who turned eighteen on August 7, 2018, qualified for continued receipt of death benefits as employee's dependent pursuant to § 287.240(3)(b) RSMo based on her enrollment at Ozarks Technical Community College.

The administrative law judge apportioned the 796.15 weekly death benefit rate in three equal amounts, to Laura Williams (265.39 per week), Courtny Williams (265.38 per week), and Kennedy Williams (265.38 per week).

Application for Review

Employer/insurer appealed, claiming the administrative law judge's award was not based on competent and substantial evidence in that:

- Employee and claimant Laura Williams signed and filed tax returns certifying income of 13,127 in 2014 and 13,337 in 2015 and never amended those returns.

- The "personal" payments Laura Williams claims Reeds, LLC made to her husband are the same expenses she certified to the IRS as business expenses.

- Section 287.250 RSMo precludes the alleged personal payments to employee from Reeds, LLC from being considered "gross wages" or "wages."

- (1) Family law attorney Charles Robert Baird's testimony about what constitutes imputed income for purposes of the Missouri Child Support Statutes is irrelevant to what constitutes employee's average weekly wage.

MNKOI 0000811699

Injury No. 15-104779

Employee: Jacob Williams, deceased

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for purposes of the Missouri Workers' Compensation Act; (2) Mr. Baird lacks the educational background and certification to qualify as an expert regarding tax law and accounting principles.

- Laura Williams' deposition was improperly admitted over Insurer's objection because the deposition was a discovery deposition taken as part of a subpoena duces tecum and was not subject to the same rules as an evidentiary deposition. The administrative law judge therefore improperly relied on Laura Williams' deposition testimony regarding personal payments to employee from Reeds, LLC.

- Courtney Williams turned eighteen on August 7, 2018, was not enrolled as a full time student at that time and therefore did not qualify as a dependent pursuant to § 287.240 RSMo.

Law

Section 287.560 RSMo provides, in pertinent part:

> Any party shall be entitled to process to compel the attendance of witnesses and the production of books and papers, and at his own cost to take and use depositions in like manner as in civil cases in the circuit court, except that depositions may be recorded by electronic means.

Section 287.250 RSMo provides the framework for calculating an employee's average weekly wage, and provides, in relevant part, as follows:

> 2. For purposes of this section, the term "gross wages" includes, in addition to money payments for services rendered, the reasonable value of board, rent, housing, lodging or other similar advance received from the employer [emphasis added].

> 4. If pursuant to this section the average weekly wage cannot fairly and justly be determined by the formulas provided in subsections 1 to 3 of this section, the division or the commission may determine the average weekly wage in such manner and by such method as, in the opinion of the division or the commission, based upon the exceptional facts presented, fairly determine such employee's average weekly wage.

Section 287.240(3) RSMo provides, in pertinent part:

> The payment of death benefits to a child or other dependent as provided in this paragraph shall cease when the dependent dies, attains the age of eighteen years, or becomes physically and mentally capable of wage earning over that age, or until twenty-two years of age if the child of the deceased is in attendance and remains as a full-time student in any accredited educational institution [emphasis added].

MNKOI 0000811674

Injury No. 15-104779

Employee: Jacob Williams, deceased

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We adopt the administrative law judge's findings regarding Mr. Baird's qualifications as an expert and the relevance of Mr. Baird's testimony to the issue of employee's average weekly wage and wage rate. We further endorse his analysis of § 490.065.1 and related case law concerning admission of opinion testimony in civil actions.

Section 287.560 RSMo applies to depositions in workers' compensation proceedings before the Division. This section permits use of depositions "in like manner as in civil cases in the circuit court". Section 287.560 implicates no specific rule of civil procedure. See *Butterball, LLC v. Dobrauc*, 559 S.W.3d 495 (Mo. App. 2020). We therefore find the administrative law judge properly overruled employer/insurer's generic objection that "rules of evidence" precluded the use of Laura Williams' deposition other than for impeachment purposes. *Transcript*, 50.

We approve the administrative law judge's application of § 287.250.4, based on the exceptional facts of this case and employee's unusual circumstances, to determine employee's wage rate. We affirm the administrative law judge's conclusion, based on his discussion of relevant case law, referenced supra, that employee's payments from his business account to himself for personal expenses constituted "similar advances" pursuant to § 287.250.2 RSMo. We credit Mr. Baird's explanation of the concept of "imputed income" and find that the administrative law judge's appropriately applied this concept to determine employee's average weekly wage.

Consistent with the administrative law judge's factual findings, referenced supra, we supplement the award's Rulings of Law and Summary to explicitly find, pursuant to § 287.240(2), that employer/insurer owes weekly compensation in the total amount of $796.19 for death benefits to employee's dependents, based on 66.67% of employee's average weekly wage of 1,194.23 (62,100.13 divided by 52). Our calculation of the weekly death benefit, consistent with the administrative law judge's determination of employee's average weekly wage, results in a $.04 increase in the weekly benefit rate cited in the administrative law judge's award (796.19 vs. 796.15).

Employer/insurer timely raised the issue of Courtny Williams' dependency status at hearing and in its application for review. Employer/insurer has a legitimate interest in monitoring and verifying the status of any benefit recipients to ensure it satisfies its legal obligation. It therefore clearly has standing to dispute the administrative law judge's determination regarding Courtny's dependency status.

Documentation from the registrar of Ozarks Technical Community College verified Courtny's enrollment for three course credits for the fall semester of July 30, 2018, through December 14, 2019. *Transcript*, 398. We find, as a factual matter, that enrollment for three course credits at an accredited educational institution does not constitute full-time attendance. The statute includes no provision that allows a child over the age of eighteen to revive his or her status as a dependent through later enrollment for a full-time course of study. Courtny failed to satisfy the prerequisite of enrollment and continued attendance "as a full-time student at an accredited

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Injury No. 15-104779

- educational institution [emphasis added]" as of age eighteen necessary to extend her dependency status until age twenty-two, pursuant to § 287.240(3) RSMo. Therefore, based on the evidence in the record, we find that Courtny Williams' dependency status terminated as of August 7, 2018, her eighteenth birthday.

**Award**

We modify the award of the administrative law judge as to the issue of dependency status of claimant Courtny Williams. Courtny Williams' entitlement to death benefits ceased when she attained the age of eighteen on August 7, 2018. Thereafter, employer/insurer is ordered to pay Laura Williams weekly death benefits in the amount of 398.09 and Kennedy Williams weekly death benefits in the amount of 398.10, as provided by law.

The award and decision of Administrative Law Judge Kevin A. Elmer is attached hereto and incorporated herein to the extent not inconsistent with this decision and award.

The Commission further approves and affirms the administrative law judge's allowance of attorney's fees to Jay Cummings, Esq. and Patrick J. Platter, Esq. as being fair and reasonable.

Any past due compensation shall bear interest as provided by law.

Given at Jefferson City, State of Missouri, this 5th day of October 2020.

LABOR AND INDUSTRIAL RELATIONS COMMISSION

Robert W. Cornejo, Chairman

SEPARATE OPINION FILED

Reid K. Forrester, Member

SEPARATE OPINION FILED

Shalonn K. Curls, Member

Attest:

Secretary

Impry No. 15-104779

Employee: Jacob Williams, deceased

I have reviewed and considered all of the competent and substantial evidence on the whole record. Based on my review of the evidence as well as my consideration of the relevant provisions of the Missouri Workers' Compensation Law, I concur with Chairman Cornejo's award insofar as it modifies the administrative law judge's award to terminate Courtny Williams' dependency status as of her August 7, 2018, eighteenth birthday.

I dissent from the award's rulings regarding insurer's evidentiary objections at hearing and the administrative law judge's calculation of employee's average weekly wage and wage rate.

The competent and substantial evidence in the record as a whole does not support the administrative law judge's finding of an average weekly wage of 1,194.23 and compensation rate of 796.15.

Employee and his surviving spouse, Laura Williams, signed and filed tax returns certifying income of 13,127 from Reed's, LLC in 2014 and 13,337 from Reeds, LLC in 2015 and never amended those returns. The only evidence at trial regarding allegedly "personal" payments by Reeds, LLC to employee consisted of ledgers created by employee's surviving spouse, Laura Williams, and her testimony. Mrs. Williams certified to the Internal Revenue Service that these same expenditures were business expenses of Reeds, LLC. The administrative law judge's conclusion as to what payments were "personal" relied on deposition testimony of Laura Williams, improperly admitted into evidence over insurer's objection. The administrative law judge erred in admitting Laura Williams' deposition, over insurer's objection, in that the deposition as a discovery deposition taken as part of a subpoena duces tecum and was not subject to the same rules as an evidentiary deposition.

The alleged "monthly personal expenses" the administrative law judge used to calculate employee's average weekly wages included alleged payments and/or advances that do not fall within the strict definition of "gross wages" or "wages" pursuant to § 287.250.2 RSMo. This section defines "gross wages" as money payments for services rendered, reasonable value of board, rent, housing, lodging or similar advance and excludes fringe benefits such as retirement, pension, health and welfare, life insurance, training, social security or other employee or dependent benefit plan.

The administrative law judge further improperly relied on the testimony of Charles Ronald Baird over insurer's objection in that Mr. Baird's testimony as to what constitutes imputed income pursuant to Missouri child support statutes is not relevant to what constitutes an employee's average weekly wage as defined by the Missouri Workers' Compensation Act. The administrative law judge improperly admitted and relied on Mr. Baird's opinion regarding tax law and accounting principles in that he lacks the requisite educational background and certification to qualify as an expert on these subjects.

Injury No. 15-104779

Employee: Jacob Williams, deceased

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For these reasons, I dissent from Chairman Cornejo's award to the extent that it affirms the administrative law judge's findings regarding employee's average weekly wage and makes only a technical change to his calculation of the wage rate applicable to claimants' weekly death benefit.

Reid K. Forrester, Member

Injury No. 15-104779

Employee: Jacob Williams, deceased

I have reviewed and considered all of the competent and substantial evidence on the whole record. Based on my review of the evidence as well as my consideration of the relevant provisions of the Missouri Workers' Compensation Law, I concur with Chairman Cornejo's award insofar as it upholds the administrative law judge's rulings on employer/insurer's evidentiary objections, affirms the administrative law judge's calculation of employee's average weekly wage, and clarifies calculation of the weekly benefit wage rate. I dissent to the extent Chairman Cornejo's award terminates death benefits to employee's daughter Courtny Williams.

Courtny Williams has remained in college since she turned the age of eighteen on August 7, 2018. She has enrolled as a full-time student with an expected graduation date of spring, 2021. Section 287.240(3) does not specify the number of hours a minor dependent must complete. The statute only states that the minor must "remain." This, Courtny has done. She is presently enrolled and on track to graduate. Courtny's mother and next friend, Jennifer Williams, submitted Courtny's transcript as the administrative law judge requested. No party requested further evidence relating to Courtny's attendance at an accredited educational institution.

Further, it is of no moment for the employer/insurer to allege Courtny's dependency status in its application for review. It has no standing to appeal this issue and the only party who had such standing, employee's widow Laura Williams, did not appeal the administrative law judge's award.

The only issue as to which employer/insurer should be concerned is the calculation of employee's average weekly wage, not who receives the benefit. Once the average weekly wage is calculated and the compensation rate computed, the employer/insurer pays the benefit regardless of how many dependents there are. In that Laura Williams did not file an application for review, the administrative law judge's award is final as it concerns dependency. The jurisdictional nature of the application for review means that failing to timely apply strips both the Commission and the Court of Appeals of jurisdiction and there is no resulting appeal. *Weber v. Division of Employment Security*, 950 S.W.2d 686 (Mo. App. 1997); *Knuckles v Apex Industries, Inc.*, 762 S.W.2d 542 (Mo. App. 1988).

Courts have long recognized that the matter to appeal lies with each party individually. Each party must file its own appeal. See, e.g., *Curtin v. Zerbst Phamacol Co.*, 72 S.W.2d 152 (Mo. App. 1934); *Simpson v. Saunchegrow Const.*, 965 S.W.2d 899 (Mo. App. 1998); *Davis v. McKinney*, 303 S.W.2d 189 (Mo. App. 1957); and *Adams v. Continental Life Ins. Co.*, 101 S.W.2d 75 (Mo. 1937), discussing employers and insurers as separate entities.

No party with standing filed an application for review disputing Courtny's status as a total dependent in law. The Commission does not have jurisdiction to consider this issue. Employer/insurer must pay the full compensation rate as long as there is one such dependent.

Injury No. 15-104779

Employee: Jacob Williams, deceased

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For the above stated reasons, I dissent from the Chairman Cornejo's award to the extent it terminates Courtney's Williams eligibility for continued weekly benefits during her pursuit of higher education, in connection with her father's tragic work related death. The Commission should affirm the administrative law judge's award in its entirety.

Shalonn K. Curls, Member

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

Dependents: Laura Williams and Jennifer Williams the latter being the next friend of Courtny Williams and Kennedy Williams

Employer: Reeds, LLC

Insurer: American Family Mutual Insurance Company

Additional Party: N/A

Hearing Date: August 8,2019

Checked by: KAE

1. Are any benefits awarded herein? Yes.
2. Was the injury or occupational disease compensable under Chapter 287? Yes.
3. Was there an accident or incident of occupational disease under the Law? Yes.
4. Date of accident or onset of occupational disease: December 1, 2015.
5. State location where accident occurred or occupational disease was contracted: Barton County, Missouri.
6. Was above employee in employ of above employer at time of alleged accident or occupational disease? Yes.
7. Did employer receive proper notice? Yes.
8. Did accident or occupational disease arise out of and in the course of the employment? Yes.
9. Was claim for compensation filed within time required by Law? Yes.
10. Was employer insured by above insurer? Yes.
11. Describe work employee was doing and how accident occurred or occupational disease contracted: Stipulated.
12. Did accident or occupational disease cause death? Yes. Date of death? December 1, 2015.
13. Part(s) of body injured by accident or occupational disease: See numbers 11 and 12 above.
14. Nature and extent of any permanent disability: Not applicable.
15. Compensation paid to-date for death benefits: $\ 79,713.40. These payments are for death benefits currently paid at a rate of $\ 415.38. The Employer and Insurer have also paid funeral expenses in the amount of $\ 5,000.00.
16. Value necessary medical aid paid to date by employer/insurer? $\ 3,545.13.
17. Value necessary medical aid not furnished by employer/insurer? Not applicable.
18. Employee's average weekly wages: $\ 1,194.23.

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

1. Weekly compensation rate: $796.15.

1. Method wages computation: See Award. Section 287.250.4 RSMo 2016.

1. Amount of compensation payable:

The determination of the weekly benefit rate to be $\ 796.15 results in an under payment of $\ 380.77 per week for 191.9 weeks. The time period underpayments owed by Employer and Insurer are for the period from December 2, 2015 to August 5, 2019. Laura Williams is to receive $\ 24,357.20, Courtny Williams is to receive $\ 24,357.19 and Kennedy Williams is to receive $\ 24,357.19 in underpayments.

The Employer and Insurer are ordered to pay death benefits, apportioned into three equal amounts, to Laura Williams ( $\ 265.39 per week), Courtny Williams ( $\ 265.38 per week), and Kennedy Williams ( $\ 265.38 per week) from the weekly compensation rate of $\ 796.15 from August 6, 2019. The payment of these benefits shall continue as required under Section 287.240 RSMo. 2016.

1. Second Injury Fund liability: Not applicable.
2. Future requirements awarded: See number 20 above.

Said payments to begin immediately and to be payable and be subject to modification and review as provided by law.

The compensation award to the claimant shall be subject to a lien in the amount of 20 % of all payments hereunder in favor of Jay Cummings, Esq. on behalf of compensation recovered by Laura Williams, and the sum of $\ 10,000.00 payable to Patrick J. Platter, Esq. and the Law Firm of Neale \& Newman, LLP on behalf of Jennifer Williams.

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

Dependents: Laura Williams and Jennifer Williams, the latter being the next friend of Courtny Williams and Kennedy Williams

Employer: Reeds, LLC

Insurer: American Family Mutual Insurance Company

Additional Party: N/A

Hearing Date: August 8, 2019

Checked by: KAE

This claim was the subject of a hearing held on August 8, 2019, for the purpose of entering a final Award under Section 287.460 RSMo. 2016. ${ }^{1}$ The Claimant, Laura Williams, appeared by her counsel Jay P. Cummings. The Claimant Jennifer Williams, as next friend for Courtny and Kennedy Williams, appeared by her attorney Patrick J. Platter. The Employer and Insurer appeared by attorney Daniel Luebbering.

The parties entered into a stipulation of facts. The stipulation is as follows:

(1) On or about December 1, 2015, Reeds, LLC, was an employer operating under and subject to The Missouri Workers' Compensation Law, and during this time was fully insured by American Family Mutual Insurance Company.

(2) On the alleged injury date of December 1, 2015, Jacob Williams was an employee of the employer, and was working under and subject to The Missouri Workers' Compensation Law.

(3) On or about December 1, 2015, the employee sustained an accident resulting in death, which arose out of and in the course of his employment with the employer.

(4) The above-referenced employment and accident occurred in Barton County, Missouri. The parties agree to venue lying in Newton County, Missouri. Venue is proper.

[^0]

[^0]: ${ }^{1}$ References to statutes are to the Revised Statutes of Missouri, 2016, RSMo 2016, unless otherwise specified.

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

(5) The employee notified the employer of his injury as required by Section 287.420, RSMo.

(6) The Claim for Compensation was filed within the time prescribed by Section 287.430, RSMo.

(7) Death benefits have been paid in the amount of $79,713.40.

(8) The employer and insurer have provided medical treatment to the employee, having paid 3,545.13 in medical expenses.

(9) Funeral expenses were paid in the amount of 5,000.

(10) Laura Williams is the widow of Jacob Williams.

(11) Courtney and Kennedy Williams are the natural children of Jacob Williams.

ISSUES

The issues to be resolved by hearing include:

(1) The average weekly wage and applicable compensation rate.

(2) The division of death benefits.

(3) Whether Courtney Williams is a total dependent in law. Her date of birth was August 7, 2000, and Jennifer Williams was provided 30 days in order to supply additional evidence to prove that Courtney Williams currently attends an education of higher learning as contemplated in Section 287.240.3(b).

EVIDENCE PRESENTED

This claim concerns the death of Jacob Williams² who died on December 1st, 2015. The purpose of the hearing is to determine the average weekly wage and compensation rate, and how those benefits are to be distributed. Jacob left his widow Laura and two daughters from his first marriage to Jennifer named Courtney and Kennedy. The average weekly wage and compensation rate depends in large part upon whether payments Jacob made for personal expenses out of the business account he maintained for the business should be counted as earnings.

The following witnesses testified: Laura Williams (in person and by deposition); Charles Ronald Baird (by deposition); Matt Barberich, Sr. (in person); and Jennifer Williams (in person).

The following exhibits were admitted into evidence on behalf of the Claimant Jennifer Williams:

Exhibit 1 .................................................. Deposition Transcript of Laura Williams

Exhibit 2 .................................................. Deposition of Charles Ronald Baird

² Strictly for the sake of brevity, this Award shall refer to the Williams by their first names. No disrespect is intended.

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Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Exhibit 3

Exhibit 4

The following exhibits were admitted into evidence on behalf of the Employer and Insurer:

Exhibit A

Exhibit B

Exhibit C

Exhibit D

Exhibit E

Exhibit F

The following exhibits were admitted into evidence on behalf of the Claimant Laura Williams:

Exhibit I

Exhibit II

The findings of fact will refer to testimony and other evidence which may conflict. Those conflicts, to the extent they exist, will be reconciled in the rulings of law when necessary.

Laura Williams is the widow of Jacob Williams. They lived with one another for $51 / 2 years. They married on November 22^{\text {nd }}, 2014. Jacob died on December 1^{\text {st }}$, 2015. Jacob ran the business Reeds, LLC during the time he and Laura lived together. She worked at Reliable Toyota during this time as a customer service representative. She attended one or two accounting classes while she attended college, and then changed her emphasis to courses in the automotive industry.

Reeds, LLC was a single member limited liability company operated by Jacob. He purchased the business in 2011. The company was engaged in automotive repair and parts. Laura would prepare the books and payments once she commuted home from her job at Reliable Toyota. Each of the payments would be delegated to categories. Jacob directed Laura as to what payments would be assigned to those categories. Laura then entered journal entries confirming the payment, payee, amount, and whether the payment was by check or debit card. She identified the ledger books for the calendar years 2014 and 2015 during her deposition and at the hearing.

Laura testified that Jacob would pay personal living expenses from his business account. She highlighted the personal expenses in the ledger books for 2014 and 2015. These ledger books were Exhibits 4 and 3, respectively, to her deposition that was in turn Exhibit 1 for the hearing. The personal expenses included payments for Jacob's personal insurance coverages, race car expenses, loan payments on his personal truck, food and grocery items, property taxes, medical expense payments, gas payments, and home improvement/hardware expenses. Laura also testified at the hearing that the business paid her fuel bills for fuel she used commuting from her residence near Golden City to and from Reliable Toyota in Springfield.

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

Laura testified that Jacob would frequently pay himself a weekly draw of $600, not as an employee but as the owner of the business. However, the 2014 and 2015 ledgers indicate that Jacob often, but not always, paid himself at the same time as he paid his employees. The ledgers further indicate that Jacob paid himself either 650 or 700 on occasion.

Laura identified the ledgers during her deposition and highlighted those expenses that were personal. The expert witness retained by Jennifer, Ronald Baird, prepared a list and highlighted those expenses that he considered to either be legitimate business expenses or where it could not be determined either way. For example, he considered loan payments made to repay the business loan were a business expense. Any cash amount Jacob took counted as income. The monthly amount of personal expenses for the months from December 2014 through November 2015 were the following: December-6,082.27; January-4,164.76; February-4,175.24; March-5,440.03; April-4,318.89; May-3,811.56; June-6,990.08; July-5,919.83; August-3,819.52; September-5,790.97; October-6,335.16; November-5,251.82. These monthly amounts total 62,100.13. This total, divided by 52 weeks, yields 796.15.

Jacob and Laura retained CPA Mike Pittensbarger of Lockwood to prepare their taxes. Pittensbarger prepared the return and, as part of the return, prepared a Schedule C to indicate the annual profit of Reeds, LLC since it was a single member limited liability company. The 2014 Schedule C reflected a net profit of 13,127 and the 2015 Schedule C reflected a net profit of 13,337. Jacob and Laura applied the payments for personal expenses and also used them as business deductions. Since filing these returns, Laura has not amended the returns or paid additional taxes.

American Family Mutual Insurance was the insurance company who insured Reeds, LLC for liability under workers' compensation. It sent Reeds, LLC inquiries in 2014 and 2015 seeking information about payroll. Jacob filed an answer to the 2014 inquiry and Laura filed a response to the 2015 inquiry. Both answered that Jacob received no wages. Laura explained that the cash Jacob paid himself were draws, not from the payroll account.

Laura started working at the business full-time once he passed away. She eventually sold the business.

Charles Ronald Baird

Ronald Baird testified on behalf of Jennifer Williams. He is an attorney who has practiced in Springfield for 45 years. He has focused upon family law, including child support issues, since the early 1990s. He graduated from Washington University, served in the U.S. Navy as a line officer, then attended and graduated from the University of Missouri-Columbia School of Law. He has practiced in Springfield since 1974. He is a past president of the Missouri Bar, the Springfield Metropolitan Bar Association, and is Missouri State Delegate to the American Bar Association. He is a recipient of the Missouri Bar's Missouri President's Award, is rated AV by Martindale-Hubbell, and is recognized by Super Lawyers.

Baird identified the doctrine of imputed income for purposes of child support in Missouri. Income is imputed to a parent in order to determine the "true income" and "actual financial condition" of a parent. The doctrine normally arises in two situations. The first, which does not

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Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

apply here, is when a parent remains intentionally underemployed. The second is when a parent owns a business and it is difficult to ascertain the income the parent realizes from that business. Baird identified an IRS public memo which he testified accurately represented the doctrine of imputed income for people who are self-employed.

"Question I'm a sole proprietor and pay personal expenses out of my business bank account. Should I include the money use for personal expenses as part of my business income? Can I write these off? Answer You would include the money used to pay personal expenses in your business income when your business earned it. You wouldn't write off these expenses as business expenses because they're not ordinary and necessary costs of carrying on your trade or business. Personal, living, or family expenses are generally not deductible. It's a good idea to keep separate business and personal account as this makes it easier to keep records."

Baird also identified Comment I to Civil Procedure Form 14 promulgated by the Missouri Supreme Court. Form 14 is the Child Support Amount Calculation Worksheet required for filing in Missouri dissolution actions which include minor children and the mandatory payment of child support. Baird likewise testified this Comment accurately reflects the application of the doctrine of imputed income.

"Gross income from an unincorporated business is the net profit or net loss on the schedules filed as part of the parent's federal income tax return. However, expense reimbursements or in kind payments by the business to pay for expenses of the parent that are personal in nature and not business related may be income to the parent. Therefore, 'gross income' of the parent for purposes of computing the presumed child support amount may differ from the net profit or net loss of the business for income tax purposes." (emphasis added)

Baird testified that the payments listed in Exhibit 1 of his deposition testimony reflected personal expenses from the business checking account and therefore should be considered as imputed income. 3

Baird testified that the amounts and entries signified income that should be considered imputed. These amounts and entries would be imputed as gross income for purposes of computing child support due. He would likewise expect judges to impute the entries and amount into gross income for purposes of calculating income and, therefore, child support. He finally testified these entries should reflect income that should be imputed to Jacob when considering the support of his two minor daughters.

Matt Barberich, Sr.

Matt Barberich, Sr. is a certified public accountant specializing in forensic accounting. He consults on disputes, many of which are in litigation, conducts valuations, and also prepares

3 It should be mentioned that the personal expenses originally identified by Laura in her deposition are highlighted in her deposition exhibits 3 and 4. The personal expenses identified by Baird in his deposition testimony in his deposition exhibit 1 are not. That is likely because the personal expenses in the original business ledgers were the exception rather than the rule. The demonstrative exhibit used by Baird highlighted the business expenses which were again the exception rather than the rule.

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Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

income tax returns. He is a graduate of Pittsburg State University with both an undergraduate and master's degree in accounting. He is a director in the national accounting firm of Glass Ratner. He has conducted evaluations and valuations in "several hundred cases" and testified about 45 times. He considers his purpose as an expert witness is to "educate and inform the trier of fact."

Barberich reviewed the bank statements of the business maintained at Liberty Bank, the 2014 and 2015 tax returns, the deposition of Laura Williams, and the 2014 and 2015 ledgers. The purpose of his study was to ascertain income based upon tax returns. He verified it was appropriate to file a Schedule C for a business that was either a proprietorship or single member LLC. He identified gross receipts or sales, the cost of goods sold, the gross profit, the gross income, and expenses. He testified he was able to reconcile the cost of goods sold "mostly". He also testified there was "not necessarily" anything inconsistent in the cost of goods sold. He identified line 28 on the return as the total expenses of the business used in the tax deduction. He identified the profit for 2014 attributable to Jacob in the amount of 13,127.00 and in the year 2015 in the amount of 13,337.00.

While he admitted that the draws "taken" by Jacob in the amount of $31,475.00 for the 12 months preceding his date of death exceeded the net profit, he stated there could be reasons to explain this, such as a revolving line of credit. He did not identify any reason to explain this discrepancy such as a revolving line of credit in his review.

Barberich admitted that there was a doctrine of imputed income and what it meant. He also admitted that he did not examine each entry that was claimed as business expenses to determine if they were authentic business expenses. He also admitted that expenses paid for Jacob's race car driving, while advertising the garage, would not be deductible unless there was a likelihood of revenue production from the racing, which there was not here.

RULINGS OF LAW

The Workers' Compensation Law is to be strictly construed. Section 287.800.1 RSMo 2016. The trier of fact is to determine the facts without presumption. Section 287.800.2. The burden of proving an entitlement to compensation is on the employee. The burden of establishing any affirmative defense is on the employer. Section 287.808. The present version of Section 287.250 was enacted in 1992. The determination of the average weekly wage and compensation rate is a question of fact. TH v. Sonic Drive-In of High Ridge, 388 S.W.3d 585 (Mo. App. E.D. 2012).

1. Average Weekly and Compensation Rate.

It is concluded that the payments made by Jacob Williams from his business account to himself and for his personal expenses should be included as earnings when computing his average weekly wage. The average weekly wage cannot be fairly and justly determined under formulas commonly used given the exceptional facts presented and the inclusion of all these amounts must be used in order to fairly determine the average weekly wage. Further, the payments by Jacob to himself and for his personal expenses are "similar advances" under Section 287.250.2 and should be included as wages. This ruling is based upon the 2014 and 2015 tax returns, expense ledgers for the same years, testimony of Laura, and expert testimony of both Baird and Barberich. The expert testimony aids the undersigned in understanding what "average weekly earnings" and "average weekly wage" of Jacob mean under these circumstances.

Page 8

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

There is a requirement to use the earnings during the year immediately before the injury that leads to the death of the employee when calculating the average weekly wage:

> "The employer shall also pay to the dependents of the employee a death benefit based on the employee's average weekly earnings during the year immediately preceding the injury that results in the death of the employee, as provided in Section 287.250." (Section 287.240(2))

Section 287.250 then provides the Division and Commission with discretion when determining the average weekly wage based upon exceptional circumstances:

> "If pursuant to this section the average weekly wage cannot fairly and justly be determined by the formulas provided in subsection 1 to 3 of this section, the division or the commission may determine the average weekly wage in such manner and by such method as, in the opinion of the division or the commission, based upon the exceptional facts presented, fairly determine such employee's average weekly wage." (Section 287.250.4)

This provision has been used in previous cases. Examples include *Nielsen v. Max One Corp.*, 98 S.W.3d 585 (Mo. App. S.D. 2003); *Oberley v. Oberley Engineering*, 940 S.W.2d 953 (Mo. App. S.D. 1997); *Ash v. Ahal Construction*, 916 S.W.2d 439 (Mo. App. 1996). The deceased employee in *Nielsen* was the unpaid manager/proprietor of a company that owned and leased tractor trailer units to trucking companies; he returned to long distance trucking from business necessity and was killed in his first trip upon his return. The formula was based upon the wages paid for regular full-time drivers. The court in *Nielsen* noted that "[w]hile the statute does not specifically define 'exceptional facts,' we note that Missouri courts have upheld the application of the provision when circumstances prevented the Commission from using other statutory formulas to fairly and justly determine an average weekly wage." *Nielsen*, at p. 590.

The facts in *Oberley* are particularly persuasive here because the deceased employee was the president of his own professional corporation in which he paid himself both wages and personal expenses. The Labor Commission found that the wages and personal expenses constituted his average weekly wage. A tax attorney testified that the personal expenses paid by the corporation checking account amounted to personal income to the deceased employee and were thus earnings for purposes of his personal income tax obligation. The Court also looked to Section 287.250.2, which defined gross wages as including "in addition to money payments for services rendered, the reasonable value of board, rent, housing, lodging or similar advance received from the employer." [emphasis original from the opinion] *Oberley*, at p. 957. The Court then stated that "[t]he personal expenses of [the deceased employee] paid by the [employer] during the 12 months

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4 *Nielsen* acknowledges *Thompson v. Missouri Veterans' Home*, 58 S.W.3d 657, 659 (Mo. App. E.D. 2001). *Thompson* held Section 287.250.4 did not apply because, although the employee was employed in two jobs at the time of her injury, the traditional formulas in subsection 1-3 could compute her separate average weekly wage from her two jobs and there was no need to apply subsection 4. *Thompson* therefore is factually distinguishable.

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

immediately preceding his death were 'similar advances' as identified in § 287.250.2 so as to be includable in his gross wages for purposes of calculating workers' compensation benefits." Oberley, at p. 957. The Court then affirmed an award establishing a compensation rate including both formal wages and personal expenses paid with evidence based upon the tax returns, the accountant who prepared them, the lawyer who reviewed them, and the checks themselves.

Applying Section 287.250.4 is not necessarily a provision that will always favor the claimant. In Ash, the claimant worked at intermittent and part-time employment. The parties agreed that Section 287.250.4 should have been applied. Ash, at p. 441. The claimant argued that his average weekly wage should be based upon a 40-hour work week because that is what he normally worked. He submitted no evidence what other employees worked for or actual wages earned while working for those other employers. The Commission found that Ash worked ten separate weeks during the ten months preceding his injury, divided the total wages earned by ten, and found the average weekly wage to be $323.07. This was appropriate, according to the opinion, because it was the only wage information presented. Ash, at p. 442.

Objection to Testimony of Ronald Baird

The Employer and Insurer objected during the deposition of Mr. Baird that he was not qualified since he was not applying tax law or workers' compensation law, and that he was testifying to a conclusion of law. These objections are overruled. This Award shall address the second objection first.

Section 490.065.1 (1) states that opinion testimony may be received, if other elements are met, "[i]f scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue." Section 287.240 (2) requires that "average weekly earnings" be determined. "Average weekly earnings" is not defined in Chapter 287. This statute then refers to the average weekly wage statute, Section 287.250. Section 287.250 does not define average weekly wage and instead relies upon formulas to calculate the average weekly wage. No formula directly applies, or should be applied, to these facts. Further, we know from case law such as TH v. Sonic Drive-In of High Ridge that the issue of the average weekly wage is a question of fact. Expert witnesses can testify to facts which require the consideration of specialized knowledge. Mr. Baird provided specialized knowledge here. He explained what the meaning of imputed income and how it would be applied. It was important in a case with exceptional facts which justify using Section 287.250.4 that the trier of fact understand all the doctrines, whether by tax, family, or other law, to understand what the "average weekly earnings" and "average weekly wage" mean here. He was testifying to a factual issue, much like the attorney-expert witness was testifying to the meaning and application of PSC regulations in J.J's Bar and Grill, Inc. v. Time Warner Cable Midwest, LLC, 539 S.W.3d 849, 871-873 (Mo. App. W.D. 2017). In this case, the expert-attorney properly testified about whether the defendant was a "public utility right of way user" subject to PSC regulation.³

Further, Baird was testifying to nothing different from what the tax attorney testified to in Oberley or what Mr. Barberich did here. Baird and Barberich provided their respective evaluations and both experts provided admissible testimony upon a contested issue of fact. Barberich did not

3 Though he testified to some other legal opinions that would have been inadmissible, the defendant did not preserve this error, and it was not reversible.

Page 10

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

disagree with any testimony of Baird. It is apparent that Baird's analysis here not only comported with the principles concerning Form 14 but also tax law.

And, even if one considers Baird's testimony to go to the ultimate factual issue, that is no basis for its exclusion. Section 490.065.1 (2) permits such opinion testimony. "Testimony by such an expert witness in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact[.]"

Last, the undersigned considers Mr. Baird to be a qualified and credible expert witness and his opinion testimony should be admitted under Section 490.065.1 (1) because he had the knowledge, skill, experience and education to testify concerning what should be considered Jacob's income. He has specialized his practice since the early 1990s upon dissolution law including child support issues. The Employer and Insurer did not provide any basis to believe his testimony should not be considered.

Application of 287.250.4

There is more than substantial evidence to conclude that there are exceptional facts presented here, especially when compared to precedent previously cited, which prevent other formulas in the average weekly wage statute to be applied here. The business reported a profit of 13,337 in 2015. Jacob's child support obligation of 1,127 monthly amounted to 13,524 per year. Jacob received 31,475 in cash in the 12 months before his death. American Family has paid, and is continuing to pay, benefits based upon earnings of 32,400 during the year before his death (623.06 per week). Yet it was American Family who submitted memos from the business that Jacob earned no wage. To rely upon income that is reported to different agencies and organizations does not provide an unequivocal answer to what the average weekly wage should be.

The dual capacities of Jacob also make this a case of exceptional facts. He was both an employee and the single member of the employer. Laura claimed Jacob paid himself no wages, but he consistently received his "draw" check at the same time as the workers. Laura testified there was no payroll account but the expense ledgers reflected payments to all persons who worked on behalf of the business, Jacob included. The record does not lead to a simple or direct conclusion that would lead to the application of any formula in Section 287.250 subsections 1 or 3.

As Baird testified, the purpose of imputing income is to determine an accurate financial condition of the wage earner. That is important here because none of the amounts just listed fairly and accurately reflect how Jacob paid his obligations for himself, his wife, or his daughters. Had Jacob instead paid himself cash rather than the amounts he paid on personal expenses, it would not be necessary to impute these amounts as income and the cash as income could then be for all purposes, whether for taxes, child support, or other purposes. To deny the daughters imputing this income has deprived them of child support and will deny them of death benefits.

The Employer and Insurer places considerable emphasis upon the profit reported of $13,337 on the 2015 Schedule C. There are persuasive reasons not to apply this as the earnings for the 52 weeks before Jacob's death. This amount reflects the profit of the business, the Employer, and does not accurately reflect the earnings of Jacob as an employee. The parties stipulated that Jacob was an employee. Section 287.020.2. In addition, Section 287.037 recognizes Jacob as an employee. Jacob worked as an employee. If his only wages were only 13,337, or even 32,000,

Page 11

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

he could not have met all the obligations that he had. Further, there is no substantial evidence to believe that the business was cash liquid because of a revolving letter of credit or similar loan, as the Employer and Insurer implied. And, even if there was such, that does not change the fact that Jacob received over $62,000.00 in value, whether in cash or paid by the business on his behalf.

The Employer and Insurer argue that Section 287.250 requires the application of tax law principles and using the entry of net profit from Schedule C to find the average weekly wage based upon the Barberich testimony. However, Section 287.800.1 requires strict construction of the Workers' Compensation Law. This means that a statute presumes nothing that is not expressed. A strict construction confines the operation of the statute to matters expressly stated. The clear, plain, obvious, or natural import of the language should be used and statutes should not be applied to situations or parties not fairly or clearly within its provisions. *Allcorn v. Tap Enterprises, Inc.*, 277 S.W.3d 823, 828 (Mo. App. S.D. 2009) citing 3 Sutherland, Statutory Construction, § 58:2 (6th ed. 2008). Had the legislature intended to require decisionmakers to use only the entry of net profit or income from tax returns to find the average weekly wage, it could have so stated. Instead, the legislature enacted subsection 4, which authorizes the decisionmakers to fairly and justly calculate the average weekly wage based upon exceptional facts presented.

Even if one considers tax law principles, the payments by Jacob concerning his race car driving are personal and not related to his business. 26 CFR § 1.183-2 concerns activities not engaged in for profit. Deductions do not apply, and therefore are not expenses which reduce income, when the activity is not conducted for profit. This means payments are not deductions for a sport, hobby, or recreation. The central issue is whether the facts and circumstances, taken as a whole, prove that the taxpayer was engaged in an activity with the objective of making a profit. The greater weight of the objective evidence controls, not the taxpayer's statement of intent. See, for example, *Zidar v. Commissioner*, TC Memo. 2001-200 (US Tax Court 2001) (race car driving); *Eastman v. U.S.*, 635 F.2d 833 (US Ct. Claims 1980); *Hanna v. Commissioner*, 763 F.2d 171 (4th Cir. 1985) (hockey player).

Further, the payments for food were personal if one applies tax law principles. 26 U.S.C. § 162(a). There is no substantial evidence, other than Laura's testimony concerning the Schwann's bills, that the food purchased was primarily consumed for business purposes or was for a personal purposes inextricably related to a profit generating business. Before payments for food are deemed a business expense, it must be shown that the food is somehow inextricably linked to the production of income. *Schulz v. Commissioner*, 686 F.2d 490, 493 (7th Cir. 1982). A business expense must be one that is "normal, usual and customary" in the business and, in addition, "necessary" with means appropriate and helpful. The taxpayer must demonstrate that the expense is different from or in excess of that which would have been made for the taxpayer's personal purposes. *Kho v. Commissioner*, TC Memo. 2018-232 (U.S. Tax Court 2018). There must also be sufficient evidence to permit one to conclude that a deductible expense was paid or incurred in at least the amount allowed. *Nicholson v. Commissioner*, TC Memo. 2018-24 (U.S. Tax Court 2018). The Employer and Insurer did not develop such evidence here. Laura briefly testified that Jacob would sometimes buy lunch or food for employees, but she did not identify dates, grocery bills and she did not explain why he did this, nor why it was necessary for the business. Exhibit F, while demonstrating some calculations, does not provide this detail either.

Page 12

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

Injury No. 15-104779

1. Division of Benefits.

The weekly compensation benefit is to be divided equally. See Section 287.240 (2). This statute does not provide for an apportionment of the benefit based upon necessity or exigent circumstance. Further, even if the statute did, there is not substantial evidence to distribute the benefit in amounts which are not equal. As the widow and natural children of Jacob, they are the total dependents in law and take the compensation benefit to the exclusion of any dependents in fact. Section 287.240 (3) (a-b).

Benefits shall continue as provided by law to Laura, Courtny and Kennedy. Benefits payable to Courtny and Kennedy are to be paid to their mother Jennifer under Section 287.240 (4).

1. Status of Courtny Williams as a Total Dependent in Law.

Courtny is now 19 years of age but, according to Exhibit 4, is enrolled at Ozarks Technical Community College. As such she is entitled to the death benefit under Section 287.240 (3) (b).

SUMMARY

Therefore, the following is ordered:

1. The Employer and Insurer are ordered to pay death benefits under Section 287.240 retroactive to December 2nd, 2015 to Laura Williams and Jennifer Williams, on behalf of her daughters Courtny Williams and Kennedy Williams, at the weekly compensation rate of 796.15.

The determination of the weekly benefit rate to be 796.15 results in an under payment of $380.77 per week for 191.9 weeks. The time period underpayments owed by Employer and Insurer are for the period from December 2, 2015 to August 5, 2019. Laura Williams is to receive 24,357.20, Courtny Williams is to receive 24,357.19 and Kennedy Williams is to receive $24,357.19 in underpayments.

The Employer and Insurer are ordered to pay death benefits, apportioned into three equal amounts, to Laura Williams (265.39 per week), Courtny Williams (265.38 per week), and Kennedy Williams (265.38 per week) from the weekly compensation rate of 796.15 from August 6, 2019. The payment of these benefits shall continue as required under Section 287.240 RSMo. 2016.

1. These benefits shall continue either to or on behalf of these dependents as long as they are eligible to receive them under the Missouri Workers' Compensation Law. Once one of Laura, Courtny, or Kennedy Williams becomes ineligible to receive further benefits, the benefits shall be reapportioned so that the remaining eligible individuals shall receive the weekly benefit in equal amounts. Once the second dependent becomes ineligible, the sole remaining dependent shall receive the death benefit at the weekly compensation rate of $796.15.

Page 13

Issued by DIVISION OF WORKERS' COMPENSATION

Employee: Jacob Williams (Deceased)

1. Remarriage benefits shall be paid to Laura Williams, upon her remarriage, as provided by law.

I certify that on 12-30-19

I delivered a copy of the foregoing award to the parties to the case. A complete record of the method of delivery and date of service upon each party is retained with the executed award in the Division's case file.

By $\qquad m p$


Made by: $\qquad$ Kevin A. Elmer Administrative Law Judge Division of Workers' Compensation