What happened: An Iowa appeals court ruled that a drywall worker who refused a higher-paying superintendent role forfeited industrial disability benefits, but reversed the denial of his mental-health impairment claim
Who’s involved: Menefee Drywall (employer), Western National Insurance Company (workers’ comp insurer)
What’s at stake: The difference between benefits based on lost earning capacity and benefits based on physical impairment alone - a gap of dozens of weeks of compensation
Why it matters: Return-to-work offers in Iowa do not need to match an injured worker’s qualifications, reshaping how insurers and employers can limit permanent disability exposure
Where it stands: Affirmed in part, reversed in part, remanded to the workers’ compensation commissioner
A drywall worker with more than 25 years on the job was offered a supervisory role paying $15,000 more than he had been earning.
The worker turned down the offer. That decision, the Iowa Court of Appeals ruled on October 21, cut his workers’ compensation recovery from benefits based on lost earning capacity to benefits based on physical impairment alone.
The worker had been with Menefee Drywall since 1993, hanging and finishing drywall on commercial and residential projects. In August 2019, he reported injuries to his right shoulder, neck, and mental health. Over the following two years, he underwent three shoulder surgeries and two cervical spine operations.
By August 2021, his orthopedic surgeon had cleared him with permanent restrictions: no repetitive reaching away from the body or above shoulder height. Menefee’s president reviewed his experience and offered him a superintendent position at $60,000 a year - a base salary roughly $15,000 above his pre-injury earnings of approximately $45,000. The offer letter noted the role was “within your permanent work restrictions.” The job description listed no physical requirements.
He said no. He testified he did not feel capable of the work due to “the physical and mental demand of that job,” adding he was easily fatigued, lacked carpentry knowledge, and had few computer skills. His employer understood it as a refusal.
That refusal activated a provision of Iowa’s workers’ compensation law, amended in 2017, that changes how benefits are calculated. Normally, a worker with a permanent injury that does not fall into a specific body-part schedule receives benefits tied to how much earning power they lost. But when the employer offers work at the same or higher pay, the statute switches the calculation: the worker gets benefits based only on their measurable physical impairment, not their lost earning capacity. In practice, that typically means fewer weeks of compensation.
The worker argued the court should read a fairness check into the law - that the employer’s offer should have to match the worker’s training and qualifications. The court declined. The statute does not use the words “bona fide offer” or “suitable work,” and the Iowa Supreme Court had already rejected a similar argument, holding that “resolving these competing policy arguments is the legislature’s job; our duty is to interpret the text of the statute as written.”
The workers’ compensation commissioner had found the worker “declined the position based upon his own subjective beliefs of his qualifications.” The employer, the commissioner noted, “apparently believed claimant was qualified because he was offered an increase in earnings.” The district court agreed, adding that Menefee could have provided training and the worker never tried the role to see whether he could learn it.
On the second issue, the court went the other way entirely. The worker’s mental-health condition - adjustment disorder with mixed anxiety and depressed mood - was an accepted consequence of his physical injuries. A psychiatrist had evaluated him using the framework set out in the American Medical Association’s guidelines for rating permanent impairment, the standard reference that Iowa law requires for these calculations. The psychiatrist placed the worker in the “moderate impairment” category and assigned a 40% whole-person impairment rating.
The commissioner rejected that rating, partly because the psychiatrist “did not assign any permanent restrictions for the mental health injury.” The court reversed. The AMA guidelines do not direct examiners to assign numeric percentages for mental-health conditions the way they do for physical injuries. Instead, they use a class-based system that assesses daily functioning, social interaction, concentration, and ability to cope in work settings. The psychiatrist followed that framework. The court found no reliable evidence in the record countering the opinion that the worker’s symptoms were permanent, and sent the claim back for reassessment.
The court also corrected a shoulder-impairment calculation. Two doctors had rated the worker’s impairment from a collarbone procedure at 10% of the upper extremity, following the AMA guidelines. A third doctor acknowledged the 10% figure but applied a multiplier to reduce it to 2.5%. The commissioner accepted the reduced number. The court ruled that was wrong.
In a separate concurrence, one of the three judges flagged a broader concern. Workers’ compensation agency decisions from unrelated cases, the judge wrote, are routinely cited as though they carry the same weight as court rulings. That practice, the judge argued, amounts to “a form of backdoor-deference” that cuts against the legislature’s choice to give the courts - not the agency - final say over how these statutes are interpreted. The judge endorsed the approach used in Illinois, where agency decisions from unrelated cases simply cannot be cited on appeal.
For workers’ comp insurers and claims professionals, the ruling sends a two-sided message. Return-to-work offers in Iowa do not need to pass a suitability test to limit an employer’s permanent disability exposure. But mental-health impairment claims cannot be waved away simply because the standard rating guidelines lack a numeric scoring system for psychiatric conditions.
