IOWA SUPREME COURT: FUNCTIONAL IMPAIRMENT APPLIES DESPITE EMPLOYEE RESIGNATION
The Iowa Supreme Court has clarified an issue in workers’ compensation law: if an injured worker returns to work with the same employer and earns the same or greater wages than before their injury—and then subsequently resigns—their compensation is limited to functional impairment—not loss of earning capacity.
In Den Hartog Industries v. Dungan, decided on October 3, 2025, the Court interpreted Iowa Code section 85.34(2)(v), a statute that governs how compensation is calculated for workers who suffer “unscheduled” injuries—such as injuries to the back, neck, or torso.
Case Background
Tyler Dungan was injured on the job in 2019 while working for Den Hartog Industries. He suffered a back injury while lifting a heavy item and was later diagnosed with a herniated disc and annular tear. Despite the injury, his pay remained the same or increased.
However, in 2020, Dungan left Den Hartog voluntarily for family reasons and took a new job with a different employer. A deputy workers’ compensation commissioner awarded Dungan permanent partial disability (PPD) benefits based on a 15% loss of earning capacity, rather than limiting the award to the 8% functional impairment, despite the fact that Dungan had received the same or greater salary from Den Hartog. Furthermore, the evidence showed that Dungan’s subsequent separation from Den Hartog was a resignation, and that he was not terminated from employment by Den Hartog.
The Legal Question
The key issue in this case regarded the interplay of two related provisions of Iowa Code § 85.34(2)(v), specifically provisions (3) and (4). Provision (3) states:
“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.”
Provision (4) states:
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.
The issue centered on whether the deputy commissioner correctly awarded permanent disability based on industrial disability following Dungan’s resignation, and whether that resignation satisfied the triggering language of Provision (4). The Supreme Court held that Dungan’s resignation did not trigger Provision (4), and thus that his permanent disability should have been compensated based only upon Dungan’s functional impairment resulting from the injury, and not in relation to his earning capacity.
Iowa Supreme Court's Answer
The Iowa Supreme Court unanimously held that the plain language of the statute applies, and because Den Hartog offered Dungan work at the same or greater salary than he received at the time of the injury—and Dungan then resigned—that functional impairment applied. This holding implies that an employee’s resignation does not satisfy the triggering language of Provision (4) of the statute, which would provide for industrial disability in the event that the employee is terminated from employment by the employer.
The Court rejected arguments that workers’ compensation law should be interpreted more broadly or that the statute was ambiguous. The court emphasized that its role is to apply the law as written, and the law clearly ties the method of compensation to the earnings from the post-injury offer of employment.
Significance
This decision clears up a gray area in Iowa workers’ compensation law. Before this ruling, some perceived that there was ambiguity in a situation where an employee resigned from employment. This opinion dispels that theory.
If you have questions about permanent disability, or any questions regarding Iowa Workers’ Compensation, please reach out to Tom Shires or Adam Barrett at (402) 475-1075.