Court of Appeals Division Two holds that an administrative law judge erred by applying incorrect “earning capacity disability” legal standard and by failing to determine who had the applicable burden of proof.

Arizona’s workers’ compensation law divides permanent disabilities into two broad categories: (1) “scheduled” disabilities, which are those identified and compensated under a fixed schedule and (2) “unscheduled” disabilities, which are those compensated according to actual loss of earning capacity.  In this case, an administrative law judge (ALJ) issued an award to a disabled worker, after finding a scheduled disability to the worker’s dominant wrist while working as a vinyl flooring installer for a construction company.  The ALJ declined to convert the scheduled disability into an unscheduled one—which generally happens when a worker has a previous disability—despite evidence that the worker was suffering from diabetes and peripheral neuropathy at the time of his industrial accident. 

The Court of Appeals set aside the award, concluding that the ALJ applied an improperly limited definition of “earning capacity disability” to find that the worker did not suffer from a previous disability and did not consider the worker’s full work history.  The Court of Appeals also noted that the ALJ failed to determine the threshold question of whether the worker had the burden of proof, which depends on whether he suffered from a pre-existing condition that would have been a scheduled disability if it were industrially related.  

Judge Eckerstrom authored the opinion; Judges Eppich and Espinosa joined.