Functional Impairment Controls When Post-Injury Earnings Are Equal or Greater: Iowa Supreme Court Clarifies § 85.34(2)(v) in Den Hartog Industries v. Dungan

Introduction

In Den Hartog Industries and West Bend Mutual Insurance Company v. Tyler Dungan (Iowa 2025), the Iowa Supreme Court unanimously resolved a recurring question created by the 2017 amendments to Iowa’s workers’ compensation statute: when an employee with an unscheduled injury returns to work—or is offered work—at the same or greater compensation as at the time of injury, must permanent partial disability (PPD) be calculated based solely on functional impairment rather than industrial disability (loss of earning capacity)?

The Court’s answer is unequivocal: yes. Reading Iowa Code section 85.34(2)(v) according to its plain text, the Court held that the third sentence of that paragraph is mandatory. If the same-or-greater pay condition is met, compensation “shall” be based only on functional impairment, not on earning capacity, unless and until the specific review-reopening pathway in the fourth sentence is triggered by a subsequent termination by the same employer. The decision vacates the court of appeals, reverses the district court, and remands to the commissioner to calculate benefits using the functional impairment method.

The case involved an employee who sustained a 2019 back injury (an unscheduled injury), returned to work at equal or higher pay, later voluntarily changed employers multiple times (ultimately earning more), and obtained an 8% whole-body impairment rating. Despite these facts, the agency and lower courts awarded PPD based on a 15% industrial disability. The Supreme Court held that was error, emphasizing that policy preferences and “humanitarian” canons cannot override clear statutory text.

Summary of the Opinion

Justice Mansfield, writing for a unanimous Court, held that section 85.34(2)(v) plainly creates a two-track framework for unscheduled PPD:

Default (sentences 1–2): Unscheduled PPD is measured by industrial disability (loss of earning capacity) over a 500-week matrix.
Exception (sentence 3): If the worker returns to work or is offered work at the same or higher salary, wages, or earnings as at injury, compensation “shall be” based only on functional impairment, not on earning capacity.
Review-reopening safety valve (sentence 4): If the worker returns to work with the same employer, is compensated on functional impairment under sentence 3, and is later terminated by that employer, the worker can reopen to seek industrial disability.

Applying this structure, the Court held Dungan’s PPD must be calculated by functional impairment because he returned to work at equal or greater pay, and he was not terminated by his injury employer. The Court rejected the commissioner’s view that the 2017 amendments created a general “bifurcated litigation process” that somehow preserves industrial disability at the first instance. The Court likewise rejected the court of appeals majority’s reliance on perceived ambiguity and on the canon that workers’ compensation laws should be liberally construed for the worker; that canon cannot eclipse clear statutory language.

The Court’s reading aligns with its 2024 decision in Loew v. Menard, Inc., which treated sentence 3 as mandatory when the employee returned to equal-or-greater pay and confirmed that functional-impairment and industrial-disability awards are “incommensurable” for offset purposes.

Analysis

Precedents Cited and Their Influence

Loew v. Menard, Inc., 2 N.W.3d 880 (Iowa 2024): The Court previously recognized section 85.34(2)(v) provides two distinct methods: industrial disability generally, but functional impairment when the employee returns to equal-or-greater pay. Loew also held that a functional-impairment award for a post-2017 injury cannot be offset against an earlier industrial-disability award for a pre-2017 injury because the measures are “incommensurable.” Den Hartog relies on Loew’s explicit treatment of sentence 3 as mandatory, reinforcing that when the same-or-greater compensation condition is satisfied, functional impairment governs.
Bridgestone Americas, Inc. v. Anderson, 4 N.W.3d 676 (Iowa 2024): Cited for the proposition that a back injury is an unscheduled injury compensable under section 85.34(2)(v). This confirms that Dungan’s injury falls within the paragraph at issue.
Evenson v. Winnebago Industries, Inc., 881 N.W.2d 360 (Iowa 2016); Iowa Insurance Institute v. Core Group of Iowa Ass’n for Justice, 867 N.W.2d 58 (Iowa 2015); Warren Properties v. Stewart, 864 N.W.2d 307 (Iowa 2015); Renda v. Iowa Civil Rights Commission, 784 N.W.2d 8 (Iowa 2010); JBS Swift & Co. v. Ochoa, 888 N.W.2d 887 (Iowa 2016): These cases collectively support the Court’s approach to standard of review and agency deference. The commissioner is not entitled to deference on the interpretation of section 85.34(2)(v). The Court reviews statutory interpretation for legal error and adopts a plain-text approach when the language is clear.
Xenia Rural Water District v. Vegors, 786 N.W.2d 250 (Iowa 2010): Often cited for the “humanitarian” construction of workers’ compensation statutes, Xenia is discussed here to underscore its limits: that canon does not authorize courts to depart from unambiguous statutory text.
Gumm v. Easter Seal Society of Iowa, Inc., 943 N.W.2d 23 (Iowa 2020); Bluml v. Dee Jay’s Inc., 920 N.W.2d 82 (Iowa 2018): These reiterate that the Court accepts the commissioner’s factual findings if supported by substantial evidence. In Den Hartog, however, the controlling issue is legal—what method the statute mandates—so the Court did not reach the substantial-evidence challenge to the 15% industrial disability finding.

Legal Reasoning

The Court’s reasoning is decisively textual and structural:

Plain text governs. Section 85.34(2)(v) is composed of four sentences. The third sentence states that if an employee “returns to work or is offered work” at the “same or greater salary, wages, or earnings” as at the time of the injury, the employee “shall be compensated based only upon the employee’s functional impairment … and not in relation to the employee’s earning capacity.” The use of “shall” is mandatory and leaves no discretion to choose industrial disability when the condition is satisfied.
Two contingencies, two consequences. The Court frames the statute as a simple decision tree: If A occurs (return to or offer of same-or-greater pay), then X follows (functional-impairment-only). If B occurs (return to same employer, functional-impairment-only compensation, and later termination by that employer), then Y follows (review-reopening to determine industrial disability). The Court rejects the notion that the statute is ambiguous about what happens if A occurs but B does not; where A occurs and B does not, the answer is X—functional impairment governs.
Sentence 4 presupposes sentence 3. The review-reopening right in sentence 4 is only meaningful if the initial compensation was functional-impairment-only under sentence 3. If industrial disability were already available initially, there would be no need for sentence 4’s special reopening remedy—and its “Notwithstanding section 85.26(2)” clause dispenses with timeliness barriers specifically to allow a later industrial-disability assessment if the same employer later terminates the employee.
No deference and no policy overrides. The Court declines to defer to the commissioner’s interpretation and refuses to let policy concerns (e.g., alleged incentives to “get fired,” file finality concerns, or protecting workers from unrealistic job offers) overcome the statute’s clear text. Such policy balancing is for the legislature, not the courts, particularly where the legislature spoke clearly in 2017.
Application to the facts. Dungan returned to work at equal or greater pay after his 2019 injury. He later changed jobs voluntarily for personal reasons and eventually earned more with a different employer. He was not terminated by his injury employer. Under sentence 3, he must be compensated based only on functional impairment. Sentence 4 does not apply. Consequently, the agency’s and lower courts’ industrial-disability award was legal error.

Impact

Den Hartog is a cornerstone clarification of the 2017 reforms to Iowa’s unscheduled PPD scheme. Key implications include:

Return-to-work triggers functional impairment. Where the worker returns to or is offered same-or-greater pay, PPD must be calculated exclusively on functional impairment. This is true regardless of whether the worker returns to the same or a different employer (sentence 3 does not require same-employer return).
Review-reopening is narrow and employer-specific. Industrial-disability determinations for these injuries now largely occur only via sentence 4’s review-reopening pathway—and only if the worker returned to the same employer, was initially compensated on functional impairment, and was then terminated by that employer. Voluntary resignation or departure to another employer does not qualify.
Settlement valuation and litigation strategy shift. For post-2017 unscheduled injuries, where same-or-greater pay is established, parties should price cases as functional-impairment-only, often by the AMA Guides rating x 500 weeks. For example, the Court’s opinion aligns with Loew’s arithmetic that an 8% whole-body impairment equals 40 weeks of PPD (8% of 500 weeks).
Documentation priorities. Employers and carriers should carefully document return-to-work earnings and any bona fide offers (including compensation details). Claimants should similarly document earnings and offers to assess whether sentence 3 applies and to preserve the record for any later review-reopening under sentence 4.
Policy incentives clarified. The decision encourages employers to maintain injured workers at the same or higher compensation, with a statutory assurance that PPD exposure is limited to functional impairment unless a termination later occurs. Workers obtain a predictable, objective benefit tied to impairment, with the opportunity for industrial-disability evaluation if a subsequent termination by the same employer occurs.
Open questions for future litigation:
- What constitutes “same or greater” “salary, wages, or earnings” (e.g., treatment of overtime, shift differentials, bonuses, or intermittent reductions)?
- How and when does the “offered work” prong apply if the worker declines an offer? Does a valid offer alone trigger sentence 3’s functional-impairment-only mandate? The statute suggests yes, but factual variations will matter.
- What counts as “termination” under sentence 4? The statute says “terminated from employment by that employer,” suggesting employer-initiated separations, not resignations. Whether and how constructive discharge fits is not addressed here.
- Timing issues (e.g., measurement of “at the time of the injury” versus later wage baselines) may require additional guidance in edge cases.
No “humanitarian override” absent ambiguity. Agencies and courts cannot invoke the humanitarian purpose of workers’ compensation to displace clear text. This further anchors Iowa’s post-2017 interpretive landscape in textualism for Chapter 85.
No deference to the commissioner on § 85.34(2)(v). Consistent with prior precedent, interpretive disputes over section 85.34(2)(v) remain questions of law for the courts, not agency expertise, which should streamline appeals on legal method selection.

Complex Concepts Simplified

Unscheduled injury: Injuries not listed in the “schedule” (e.g., the back/spine) are “unscheduled.” Historically, Iowa measured PPD for these by “industrial disability” (loss of earning capacity). After 2017, section 85.34(2)(v) created an exception when the worker returns to or is offered same-or-greater pay—then PPD is measured by functional impairment.
Industrial disability (loss of earning capacity): A holistic measure of how the injury reduces a worker’s ability to earn wages, considering age, education, work restrictions, job prospects, etc., and expressed as a percentage of 500 weeks.
Functional impairment: An objective medical rating (often from the AMA Guides) of physical/physiological loss to the body as a whole. For PPD under sentence 3, compensation equals the impairment percentage times 500 weeks.
- Example: 8% impairment × 500 weeks = 40 weeks of PPD benefits.
Review-reopening (sentence 4): A special statutory mechanism allowing a worker who (1) returned to the same employer, (2) was initially paid PPD based only on functional impairment, and (3) is later terminated by that employer, to reopen and seek an industrial-disability determination. It is a targeted exception to the usual timeliness limits (referenced by “Notwithstanding section 85.26(2)”).
Independent Medical Examination (IME): An exam by a physician retained by a party (claimant or employer/carrier). Here, the deputy credited the claimant’s IME (8%) over the treating physician’s 5% rating, which will now guide the functional-impairment award on remand.

Conclusion

Den Hartog cements a clear rule for Iowa’s post-2017 unscheduled injury claims: when an injured worker returns to or is offered work at the same or greater compensation as at the time of injury, permanent partial disability must be calculated solely on functional impairment, not industrial disability. Industrial disability may still be assessed later, but only through the statute’s narrow review-reopening mechanism if the worker is terminated by the same employer after initially receiving functional-impairment-only compensation.

The ruling rejects nontextual glosses such as a generalized “bifurcated litigation process,” dispels claims of statutory ambiguity, and underscores that humanitarian canons cannot override clear legislative commands. It harmonizes with Loew’s treatment of the 2017 amendments and offers predictability to employers, insurers, and employees: document earnings and offers, expect functional-impairment awards where same-or-greater pay is shown, and reserve industrial-disability litigation for the limited review-reopening context following a qualifying termination by the same employer.

In short, the Court has “read, and declare[d] the meaning” of section 85.34(2)(v): functional impairment controls when post-injury earnings match or exceed pre-injury earnings, and the text—not policy preference—drives the result.