78 Mass. App. Ct. 761

Roberta O’Connell’s Case.

No. 10-P-151.

Suffolk.

December 7, 2010.

February 16, 2011.

Present: Rapoza, C.J., Meade, & Milkey, JJ.

Charles E. Berg for the employee.

Michael J. Sherry for the insurer.

Milkey, J.

On July 25, 2006, Roberta O’Connell injured her shoulder while working as a cosmetologist at Rob Roy Coiffures (the employer). For this injury, O’Connell was awarded workers’ compensation benefits pursuant to G. L. c. 152, §§ 34 and 35. The insurer, Peerless Insurance Co., acknowledged liability but contested the amount that O’Connell was due. An administrative judge (AJ) at the Department of Industrial Accidents (DIA) awarded O’Connell specified benefits that were based on his determination of the “average weekly wage” that she earned at the salon. In the only issue before us on appeal, O’Connell argues that the AJ erred by not including in her wages the tips that she received from her customers. The AJ refused *762to do so, because she did not report the tips for tax purposes. We conclude that the AJ did not err in disregarding that income.

Background. O’Connell worked at the salon on a part-time basis. The employer paid her an hourly wage of $6.75 (the minimum wage), plus additional compensation based on the amount of work she performed. In this manner, O’Connell received an average of about $227 per week directly from her employer, which worked out to slightly more than $11 per hour. The AJ used this figure as her average weekly wage, and on this basis he awarded § 34 benefits of $136.51 per week for the four-month period she was totally incapacitated, and § 35 benefits of $102.38 for the two-month period she was partially incapacitated.

At an evidentiary hearing, O’Connell asserted — and the employer did not contest — that she regularly received tips from her customers. She specifically testified that she received total tips ranging from twenty-five to sixty-five dollars per day, and that her tips averaged forty-five dollars per day. While the insurer did not affirmatively concede the amount of O’Connell’s tips, neither did it challenge her figures (in cross-examination or otherwise). Instead, the insurer focused on whether O’Connell had reported such tips for tax purposes, either to the employer or to the Internal Revenue Service (IRS) directly.

For purposes of this appeal, the insurer has established that O’Connell did not report her tip income directly to the IRS.1 Further, it is uncontested that O’Connell never formally reported her tip income to her employer in the manner contemplated by Federal law. However, she asserts that the employer nevertheless had actual knowledge of the amount of her tip income because of the particular system that the employer used at the salon to collect and distribute tips. Specifically, when a customer tipped an employee, the tip was placed into a box labeled with that employee’s name and the amount was recorded on paper. This was to occur regardless of whether the tip was given to the *763person at the front desk or to the hair stylist directly.2 At the end of each day, the employer would tally up the tips received for each employee and distribute the money accordingly. According to the employer, this procedure was to help ensure that the cash register balanced. At the end of each day, the employer would discard its informal tallies, and it thus kept no permanent record of each employee’s tip income.

The AJ concluded that O’Connell forfeited her right to have her tip income included within her “average weekly wage” by failing to report her tips for tax purposes. He relied on an administrative ruling by the DIA’s reviewing board, see Dawson v. Captain Parker Pub, 11 Mass. Workers’ Comp. Rep. 84 (1997) (Dawson), and he offered his view that:

“as in Dawson, I find that the Employee cannot have it both ways and should bear the burden of her failure to report her tip income rather than the Insurer, whose interest in the accurate setting of rates for the Employer, based on actual income information, is undeniably thwarted by the Employee’s omission.”

The reviewing board summarily affirmed the AJ’s ruling.

Discussion. “[I]n cases of summary affirmance of a decision of the administrative judge by the board, the reviewing court is inspecting the findings and reasoning of the administrative judge.” Dalbec’s Case, 69 Mass. App. Ct. 306, 313 (2007), citing Coggin v. Massachusetts Parole Bd., 42 Mass. App. Ct. 584, 587 (1997). Because the AJ relied on the reviewing board’s earlier ruling in Dawson, our review of the AJ’s decision will necessarily require us to consider the reasoning that the reviewing board employed there. We begin, however, by reviewing the Supreme Judicial Court’s seminal case on the treatment of tip income, Powers’s Case, 275 Mass. 515 (1931).

In Powers’s Case, the court held that tip income generally should be included in an employee’s “average weekly wages” for purposes of the workers’ compensation act. However, that case did not squarely address whether tip income should still be *764included if the employee did not report the amount of that income to her employer.3 In any event, even to the extent that Powers’s Case can be read as suggesting that tip income should be included regardless of whether it was in fact reported, that would not resolve the issue before us, because — as discussed further below — the key statutory language at the heart of this dispute was not enacted until much later.

The workers’ compensation act does not directly address whether unreported tip income should be considered in setting benefits. However, the unemployment insurance act does do so through a provision enacted in 1976. Specifically, that statute states that cash tips are to be included as “wages” “only in the amount reported by the employee to the employer pursuant to section 6053(a) of the Federal Internal Revenue Code.”4 G. L. c. 151 A, § l(,s')(A)(6), as inserted by St. 1990, c. 154, § 5. The AJ placed great reliance upon this definition in reaching his con-*765elusion that unreported tips should be disregarded in determining workers’ compensation benefits, as did the reviewing board in Dawson, supra.

Even though Dawson is an administrative decision that is not binding on this court, O’Connell does not claim that Dawson was wrongly decided. Instead, O’Connell argues only that Dawson should be applied narrowly. She argues that the key question should not be whether the tip income was reported for tax purposes, but instead whether an employer had sufficient knowledge of the tip income to allow its insurer to accurately determine insurance rates (the concern identified by the Supreme Judicial Court in Powers’s Case, see note 3, supra). Under the particular facts present here, O’Connell asserts that the employer had actual knowledge of how much each employee received in tips each day, even though the employer chose to discard this information at the end of the day.

There is some force behind O’Connell’s argument. First, to the extent that the animating concern is the inability to set accurate insurance rates, the fact that the employer here actually had access to the amount of tip income each employee was earning goes at least part of the way to satisfying that concern. Second, although the AJ’s observation that the employee was trying to “have it both ways” is undeniably true, the same can be said of the employer.5 However, it is not our job to weigh such competing policy considerations; instead, that role falls to the Legislature and, to the extent the Legislature delegates the issue, to the DIA. The narrow issue before us is whether the reviewing board’s interpretation of the DIA’s legislative charge is a reasonable one. See Provencal v. Commonwealth Health Ins. Connector Authy., 456 Mass. 506, 514 (2010) (“substantial deference” owed to agency’s interpretation of statute it administers). We conclude that it is.

The workers’ compensation act and the unemployment insurance act provide parallel worker protection schemes. Both are *766designed to provide workers benefits when their ability to work is limited, the first by injury, and the second by economic conditions. See Bradley’s Case, 56 Mass. App. Ct. 359, 362 n.5 (2002). There was no error in the reviewing board’s looking to the legislative definition of “wages” in G. L. c. 151A for guidance in interpreting G. L. c. 152. In fact, the Supreme Judicial Court has expressly approved doing just that. See Borofsky’s Case, 411 Mass. 379, 380 (1991) (relying in part on the definition of “wages” in G. L. c. 151 A, in affirming a decision of the reviewing board excluding health insurance benefits from an employee’s “earnings” for purposes of the workers’ compensation act).6 See generally Boswell v. Zephyr Lines, Inc., 414 Mass. 241, 247 (1993) (noting that courts should look to related statutes for interpretive guidance). In sum, where the Legislature has prohibited the consideration of tip income in determining unemployment benefits unless such income has formally been reported to the employer in accordance with Federal tax law, we discern no error in the reviewing board’s decision to treat such income in the same manner for purposes of the workers’ compensation act.

Order of the Department of Industrial Accidents Reviewing Board affirmed.

O’Connell’s Case
78 Mass. App. Ct. 761

Case Details

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O’Connell’s Case
Decision Date
Feb 16, 2011
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78 Mass. App. Ct. 761

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Massachusetts

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