Long v. Injured Workers' Insurance Fund

WATTS, J. Under the Maryland Workers’ Compensation Act (“the Act”), Md. Code Ann., Lab. & Empl. (1991, 2008 Repl. Vol.) (“LE”) §§ 9-101 to 9-1201, a “covered employee” is entitled to compensation from his or her employer for an accidental personal injury. See LE § 9 — 501(a)(1) (“Except as otherwise provided, each employer of a covered employee shall provide compensation in accordance with this title to[] the covered employee for an accidental personal injury sustained by the covered employee[.]” (Paragraph break omitted)).

Pursuant to LE § 9-227(b), for purposes of workers’ compensation, “[a] sole proprietor may elect to be a covered employee if the proprietor devotes full time to the business of the proprietorship.” In other words, under certain circumstances, a sole proprietor may elect to be a “covered employee” for purposes of workers’ compensation. Under the Act, the amount of ²⁵⁵ compensation that is due to a “covered employee” who “has a permanent total disability resulting from an accidental personal injury” is based on the covered employee’s “average weekly wage” (“AWW”). LE § 9-637(a)(l). Specifically, the amount of compensation that is due to the covered employee in such a circumstance is two-thirds of the covered employee’s AWW, provided that the AWW does not exceed the State’s AWW or equal less than $25.

See LE § 9-637(a)(l). This case involves a matter of first impression in Maryland — namely, how to calculate the AWW of a sole proprietor who has elected coverage under the Act. Specifically, we must decide whether the AWW of a sole proprietor who elects coverage under the Act should be calculated based on the sole proprietorship’s gross receipts or gross income (without deducting business expenses) 1 or net profit (the gross receipts less business expenses). We hold that the AWW of a sole proprietor who elects coverage under the Act is to be calculated based on the sole proprietorship’s net profit, not on the sole proprietorship’s gross receipts or gross income.

The sole proprietorship’s net profit is the best approximation of the earnings that a sole proprietor actually takes home because net profit does not include the sole proprietorship’s business costs and expenses. BACKGROUND Patrick Long (“Long”), Petitioner, is the self-employed sole proprietor and owner of Long’s Floor Works (“the Employer”). Before 2011, Long elected to obtain workers’ compensation coverage as a covered employee. In 2011, Long was working as a subcontractor for Ryan Floors, Incorporated.

Ryan Floors, Incorporated paid the Employer based on the number of hours that Long worked. In July 2011, Long injured his back while installing carpet during the course of his employment. Long’s injury required surgery, and, accord ²⁵⁶ ing to Long’s counsel, Long is likely “going to be disabled for life.” Almost six months later, on January 23, 2012, Long filed with the Workers’ Compensation Commission (“the Commission”) a “Notice of Employee’s Claim,” seeking workers’ compensation benefits. On July 16, 2012, the Commission conducted a hearing on Long’s claim.

On July 19, 2012, the Commission issued an “Award of Compensation,” finding that: (1) Long “sustained an accidental injury arising out of and in the course of his employment”; (2) Long’s disability was the result of the work-related accidental injury; (3) Long was temporarily totally disabled from August 20, 2011 to September 20, 2011, and from November 1, 2011 “to the present and continuing”; (4) Long was temporarily partially disabled from September 21, 2011 to October 31, 2011; (5) the authorization for medical treatment as recommended by Long’s doctor was allowed; (6) the insurer, the Injured Workers’ Insurance Fund (“IWIF”), Respondent, 2 and the Employer would pay causally-related medical expenses as stipulated by the Commission’s Medical Fee Guide; and (7) Long’s AWW was $1,500, “subject to verification.” Accordingly, based on its findings, the Commission ordered that IWIF and the Employer compensate Long for temporary total disability for his past and continuing temporary total disability at a rate of $940 per week, and that IWIF and the Employer pay the causally-related medical expenses. The Commission also ordered IWIF and the Employer to compensate Long for his temporary partial disability at a rate of 50% of the difference ²⁵⁷ between Long’s AWW “and his wage[-]earning capacity in the same employment or otherwise if less than before the accident, but not to exceed fifty per centum of the State [AWW] for the period” September 21, 2011 to October 31, 2011. On July 28, 2012, Long filed with the Commission a “Request for Document Correction,” asking that two “errors” in the Commission’s Award of Compensation be corrected. Specifically, Long asked that the Commission amend the date of the accidental injury from July 24, 2011 to July 31, 2011, as he had “amended the date of the accident at the hearing[.]” Long also stated that the Commission’s calculation of his AWW was incorrect, and asked that the Commission amend the AWW from $1,500 to $1,737.11 in accordance with a “Wage Statement” that he attached to the Request for Document Correction.

The attached Wage Statement demonstrated that Long had calculated his AWW to be $1,737.11 by adding his “gross wages” from the fourteen weeks preceding the injury, and dividing the total by fourteen. Long also attached a statement from Ryan Floors, Incorporated showing the Employer’s gross receipts throughout 2011. On August 7, 2012, the Commission issued an amended Award of Compensation, amending in its findings the date of the accidental injury from July 24, 2011 to July 31, 2011, and changing Long’s AWW from $1,500 to $1,737.11. The Commission made no changes to any other aspects of the Award of Compensation.

In other words, IWIF and the Employer were still required to compensate Long for temporary total disability at the rate of $940 per week and to compensate Long for temporary partial disability at a rate of 50% of the difference between Long’s AWW “and his wage[-]earning capacity in the same employment or otherwise if less than before the accident, but not to exceed fifty per centum of the State [AWW] for the period” September 21, 2011 to October 31, 2011. On August 16, 2012, IWIF filed with the Commission a motion for rehearing on the AWW amount, stating that Long’s AWW should be $225.90, not $1,737.11. Almost one year later, on August 12, 2013, the Commission conducted a rehear ²⁵⁸ ing on the amount of Long’s AWW. During the rehearing, IWIF alleged that Long’s “gross wages” in 2011 were between $11,000 and $12,000.

IWIF based its figures on Schedule C of Long’s 2010 federal income tax return, 3 which showed a net profit of $11,747, and IWIF’s premium audit report for the Employer from May 2010 through May 2011, which showed Long’s “gross wages” as $11,077. 4 IWIF argued that Long’s AWW should be based on the Employer’s net profit, which is the money that Long received after subtracting his business expenses from his gross receipts. IWIF’s counsel noted that dividing the net profit of $11,747 by fifty-two, the number of weeks in a year, would yield an AWW of $225.90. Long responded that a calculation of his AWW had to be based on the Employer’s gross receipts, not net profit, because gross receipts are the equivalent of gross wages for a sole proprietor. Indeed, Long argued that nothing under Maryland law supported calculating a sole proprietor’s AWW based on net profit.

Long further asserted that IWIF based its insurance premiums on the Employer’s gross receipts, not on the Employer’s net profit. IWIF replied that a self-employed individual’s net profit essentially constitutes wages, as the net profit is the amount that the individual takes home after business expenses. During the rehearing, various documents were submitted to the Commission. Schedule C of Long’s 2010 federal income tax return showed the Employer’s gross receipts as $88,748 and the Employer’s net profit as $11,747.

Long’s 2011 federal individual income tax return (Form 1040), including Schedule C and Schedule SE (Self-Employment Tax), were also submitted. Long’s 2011 federal individual income tax return stated that he received no wages. Line 12 of Long’s 2011 federal individual income tax return, however, listed his business ²⁵⁹ income as $16,879, the figure that was identified in Schedule C and Schedule SE as the Employer’s net profit. 5 Also in Schedule C of Long’s 2011 federal income tax return, the Employer’s gross receipts are shown as $44,606, and the total business expenses are shown as $27,727. Thus, the Employer’s net profit was $16,879, which is the gross receipts of $44,606 less the business expenses of $27,727. 6 Also submitted was correspondence from IWIF to Long concerning the Employer’s insurance premiums.

For the policy that was effective from May 15, 2008 through May 15, 2009, one document showed an estimated premium of $2,196 based on an audited payroll of $36,900. Additionally, in response to a Premium Audit Report for the policy that was effective from May 15, 2010 through May 15, 2011, in a preprinted form dated May 23, 2011 — only two months before the accidental injury — Long stated that there was zero employee payroll and that his “gross wages” were $11,077. 7 Another document from IWIF dated March 16, 2012 showed that the premium for May 15, 2011 through May 15, 2012 was $2,416, and that the estimated renewal premium for May 15, 2012 through May 15, 2013 was $2,905, subject to an audit. And, in a letter dated May 15, 2012, as to the policy that was effective from May 15, 2011 through May 15, 2012, IWIF stated that the premium for the “policy was based on your estimated payroll” and that “[t]he information provided on this Premium Audit Report will determine the proper premium based on the actual payroll.” ²⁶⁰ On August 13, 2013, the Commission issued an order finding that Long’s AWW was $496.44. The Commission explained its reasoning as follows: [Long] submitted his 2011 [federal individual] tax return.

This document is the best evidence of the correct [AWW]. [Long] earned a total of $16,879.00 in 2011. Previous Orders of the Commission reveal that [Long] only worked from 1/1/11 to 8/19/11 and was out of work for the remainder of the year[,] with the exception of a brief period when he worked part-time from 9/21/11 to 10/31/11. The period from 1/1/11 to 8/19/11 is 34 weeks. Thus, the correct [AWW] is $496.44[,] which was calculated by taking the full earnings for the year ($16,879.00) and dividing that figure by 34 weeks.

The Commission recognizes that this number is slightly higher than the actual [AWW] because[,] to be precisely accurate[,] the amount earned while working from 9/21/11 to 10/31/11 should be deducted from the 2011 earnings before dividing by 34, but the Commission does not have that post-injury wage information available. On August 23, 2013, Long filed with the Commission a Request for Rehearing and a Motion for Rehearing as to the Commission’s finding that his AWW was $496.44. In the motion, Long contended that the Commission erred in calculating his AWW based on his net profit because IWIF allegedly charged him an insurance premium “based upon his gross revenues or gross earnings and not his net profit[ ].” (Underlining omitted). In other words, Long argued that his AWW should be calculated based on his gross receipts because that is the figure that IWIF supposedly used to determine his insurance premiums.

According to Long, if IWIF could calculate his AWW based on his net profit, IWIF would receive a “windfall profit” because IWIF “would be allowed to have collected premiums that bore no risk of loss.” On September 4, 2013, the Commission denied the Request for Rehearing. On September 12, 2013, Long filed a petition for judicial review in the Circuit Court for Montgomery County (“the ²⁶¹ circuit court”). On October 2, 2013, IWIF filed a response to the petition for judicial review. Thereafter, the parties filed cross-motions for summary judgment.

Long attached to his motion for summary judgment a signed affidavit, in which he averred that an IWIF representative had told him that his insurance premium for the policy year beginning on May 15, 2012 “would be based upon [his] gross profit[ ] of $48,000.00.” 8 On February 12, 2014, the circuit court conducted a hearing on the cross-motions for summary judgment. During the hearing, Long’s counsel contended that Long’s AWW should be calculated based on the Employer’s gross income in the weeks preceding the accidental injury because that “is how normal employees’ [AWW]s are computed.” Long’s counsel argued, alternatively, that Long’s AWW should be calculated based on the Employer’s gross income because, before the accidental injury, IWIF allegedly based insurance premiums on the Employer’s gross receipts. At the conclusion of the hearing, the circuit court orally granted IWIF’s motion for summary judgment, thereby affirming the Commission’s decision, and denied Long’s motion for summary judgment. On the same day, the circuit court issued orders to the same effect. 9 On February 28, 2014, Long filed a notice of appeal.

In a reported opinion dated September 30, 2015, the Court of Special Appeals affirmed the circuit court’s judgment granting IWIF’s motion for summary judgment and affirming the Commission’s decision. See Long v. Injured Workers’ Ins. ²⁶² Fund, 225 Md.App. 48, 72 , 123 A.3d 562, 577 (2015). Specifically, the Court of Special Appeals held that a sole proprietor’s “gross wages” and “gross income” are not synonymous, and that, under the circumstances of the case, “the Commission did not err in concluding that AWW should be based on Long’s net profit[.]” Id. at 57, 66 , 123 A.3d at 568, 573 . The Court of Special Appeals reasoned: “To disregard [Longj’s business expenses in calculating the AWW of a sole proprietor would lead to an unjustifiably inflated AWW figure — a figure far higher than the economic advantage Long gained by working.” Id. at 66 , 123 A.3d at 573 (citation omitted).

The Court of Special Appeals further rejected Long’s alternative argument that, if insurance premiums are based on a sole proprietorship’s gross income, then AWW must also be calculated on that basis. See id. at 66-67, 72 , 123 A.3d 573 , 576-77. As to that argument, the Court of Special Appeals stated: “Adoption of such a rule in a case like the one at bar would result in a sole proprietor being able to recover an AWW far greater than the amount of money he or she was out-of-pocket as a result of not being able to work.” Id. at 72, 123 A.3d at 577 . Long thereafter filed a petition for a writ of certiorari, which this Court granted on January 27, 2016.

See Long v. Injured Workers’ Ins. Fund, 446 Md. 218 , 130 A.3d 507 (2016). DISCUSSION The Parties’ Contentions Long contends that the Commission incorrectly calculated his AWW because Maryland law requires that the AWW be based on his gross wages, or gross income, that were earned in the fourteen weeks preceding the accident. Long argues that Code of Maryland Regulation (“COMAR”) 14.09.03.06 unambiguously requires that the AWW be calculated using gross wages, without regard to whether an individual is a regular employee who works for a separate employer or a self-employed sole proprietor.

Long asserts that case law establishes a relationship between the premiums that are charged ²⁶³ by a workers’ compensation insurer and the benefits that are paid to an injured insured, and that, as a result of that relationship, the AWW is to be based on the amount that is utilized by an insurer to calculate premiums. According to Long, the Commission disregarded this relationship when it calculated his AWW based on net profit instead of “gross receipts/payroll.” In other words, Long maintains that the AWW must be calculated on the same basis as insurance premiums are calculated — here, gross payroll. Long further contends that, to the extent that the term “gross wages” in the context of a sole proprietor is ambiguous, such ambiguity must be construed in his favor to mean “gross payroll.” Long argues that he will not receive a windfall if his AWW is calculated based on his gross receipts because he paid insurance premiums based on his gross payroll. Long asserts that cases from other jurisdictions are largely distinguishable from this case, and maintains that certain other jurisdictions have rejected the use of net profit to calculate the AWW.

Alternatively, Long contends that this Court should remand the case to the Commission for a hearing to determine a different computation method for AWW, “such as what figure [ ] Long would have to pay a general manager to do the work he did[.]” IWIF 10 responds that the Commission was correct in calculating Long’s AWW by dividing the Employer’s net profit— not gross receipts — by the number of weeks that Long had worked in the year that he was injured. IWIF contends that the Commission is permitted to deviate from the AWW calculation method set forth under the Act and in COMAR 14.09.03.06, and argues that the Commission was correct in deviating in this case because, as a sole proprietor, Long did not receive wages from the Employer. IWIF asserts that other jurisdictions have taken the position that the best method of calculating a sole proprietor’s AWW is through using net profit or net taxable income. ²⁶⁴ IWIF maintains that an employer’s gross receipts are not analogous to an employee’s gross wages because gross receipts include business expenses and do not reflect the money that is actually available to the sole proprietor. According to IWIF, Long’s 2011 federal individual tax return — specifically Schedule C and the Employer’s net profit — provides the best evidence from which to calculate Long’s AWW.

IWIF contends that, unlike gross receipts, net profit represents the money that the sole proprietor earned and that is available to the sole proprietor after business expenses are taken into account. As to a relationship between the AWW and insurance premiums, IWIF contends that no Maryland court has held that insurance premiums dictate AWW and argues that using insurance premium estimates to calculate the AWW would be speculative. As a final matter, IWIF asserts that using the Employer’s gross receipts to calculate Long’s AWW would result in a “windfall benefit” that is far beyond what Long actually earns. Standard of Review In Hranicka v. Chesapeake Surgical, Ltd., 443 Md. 289, 297-98 , 116 A.3d 507, 512 (2015), we set forth the applicable standard of review, stating: Generally, in an appeal from judicial review of an agency action, we review the agency’s decision directly, not the decision of the circuit court or the Court of Special Appeals.

We must respect the expertise of the agency and accord deference to its interpretation of a statute that it administers; however, we may always determine whether the administrative agency made an error of law. The Commission’s decision “is presumed to be prima facie correct[.]” LE § 9 — 745(b)(1). That presumption, however, does not extend to questions of law, which we review independently. We do, though, afford the Commission a degree of deference, as appropriate, in its formal interpretations of the Workers’ Compensation Act.

We have explained that an agency’s interpretation of a regulation is a conclusion of law, and that a great deal of ²⁶⁵ deference is owed to an administrative agency’s interpretation of its own regulation. Nevertheless, despite the deference, it is always within our prerogative to determine whether an agency’s conclusions of law are correct. Accordingly, we determine whether the agency’s conclusions are plainly erroneous or inconsistent with the regulation. When we construe an agency’s rule or regulation, the principles governing our interpretation of a statute apply.

Thus, we look to the regulation’s plain language as the best evidence of its own meaning, and when the language is clear and unambiguous, our inquiry ordinarily ends there. (Some brackets, citations, and internal quotation marks omitted). Moreover, we have stated that, in cases involving the Act, “we also endeavor to interpret its provisions liberally, where possible, in order to effectuate the broad remedial purpose of the statutory scheme.” W.M. Schlosser Co. v. Uninsured Emp’rs Fund, 414 Md. 195, 204 , 994 A.2d 956, 961 (citation omitted). As to the method for calculating a covered employee’s AWW, we have stated that the issue essentially is a question of law.

See Gross v. Sessinghause & Ostergaard, Inc., 331 Md. 37, 48 , 626 A.2d 55, 61 (1993) (“Where the [AWW] issue in a workers’ compensation case has not depended upon a resolution of disputed facts, but instead has concerned the method for determining the injured worker’s [AWW], this Court has held that the question is one of law.” (Citations, emphasis, footnote, and internal quotation marks omitted)). Calculation of the AWW in Maryland Under the Act, LE § 9-637(a), concerning payment of compensation, provides: (a) Amount of payment. — (1) Except as provided in paragraph (2) of this subsection, if a covered employee has a permanent total disability resulting from an accidental personal injury or an occupational disease, the employer or its insurer shall pay the covered employee compensation that equals two-thirds of the [AWW] of the covered employee, but may not: ²⁶⁶ (i) exceed the State [AWW]; or (ii) be less than $25. (2) If the [AWW] of the covered employee is less than $25 at the time of the accidental personal injury or last injurious exposure to the hazards of the occupational disease, the employer or its insurer shall pay the covered employee weekly compensation that equals the [AWW] of the covered employee. (3) Payments under paragraph (1) or (2) of this subsection may not exceed a total of $45,000.[ 11 ] LE § 9-602(a), in turn, describes the general computation of a covered employee’s AWW, providing: (1) Except as otherwise provided in this section, the [AWW] of a covered employee shall be computed by determining the average of the weekly wages of the covered employee: (i) when the covered employee is working full time; and (ii) at the time of: 1. the accidental personal injury; or 2. the last injurious exposure of the covered employee to the hazards of an occupational disease.

(2) For purposes of a computation under paragraph (1) of this subsection, wages shall include: (i) tips; and (ii) the reasonable value of housing, lodging, meals, rent, and other similar advantages that the covered employee received from the employer. (3) If a covered employee establishes that, because of the age and experience of the covered employee at the time of the accidental personal injury or last injurious exposure to the hazards of the occupational disease, the wages of the covered employee could be expected to increase under normal circumstances, the expected increase may be taken ²⁶⁷ into account when computing the [AWW] of the covered employee under paragraph (1) of this subsection. Usually, a covered employee’s AWW is calculated by adding gross wages that the employee earned in the fourteen weeks preceding the accidental personal injury and dividing the sum by fourteen. Indeed, COMAR 14.09.03.06 12 provides, in pertinent part: A. Preliminary Determination.

For the purpose of making an initial award of compensation before a hearing in the matter, the Commission shall determine the claimant’s [AWW] from gross wages, including overtime, reported by the claimant on the employee’s claim form. B. Filing of Wage Statement. As soon as practicable, the employer/insurer shall file a wage statement containing the following information: (1) The average wage earned by the claimant during the 14 weeks before the accident, excluding the time between the end of the last pay period and the date of injury, provided that periods of involuntary layoff or involuntary authorized absences are not included in the 14 weeks; (2) Those weeks the claimant actually worked during the 14 weeks before the accident; (3) Vacation wages paid; and (4) Those items set forth in [LE] § 9-602(a)(2)[.] C. Determination at First Hearing. (1) Calculation of the [AWW] shall be adjudicated and determined at the first hearing before the Commission.

(2) All parties shall be prepared to produce evidence from which the Commission can determine an accurate [AWW] at the first hearing. (3) If the Commission determines that an inaccurate [AWW] resulted in the overpayment or underpayment of benefits, the Commission may order: ²⁶⁸ (a) A credit against future permanent disability benefits; (b) The payment of additional compensation; or (c) Any other relief the Commission determines is appropriate under the circumstances. This Court has held, however, that, under certain circumstances, the Commission has discretion to use a period that is longer or shorter than the period that COMAR 14.09.03.06 sets forth to determine the AWW. For example, in Gross, 331 Md. at 39 , 626 A.2d at 56 , this Court considered the time period that the Commission could use in determining a covered employee’s AWW.

At issue in that case was COMAR 14.09.03.06’s predecessor, COMAR 14.09.01.05, which provided that, “unless otherwise ordered after the hearing, compensation payments shall be based on: [ ] the [AWW] earned by the employee during the 13 weeks before the accident[.]” Gross, 331 Md. at 40 , 626 A.2d at 57 . In considering whether the Commission could depart from the thirteen-week period after a hearing, we noted that, “prior to the promulgation of a regulation specifying a time period for calculating a[n] injured worker’s [AWW], the Commission was free to choose an appropriate period on a case-by-case basis.” Id. at 50 , 626 A.2d at 62 . Indeed, several of this Court’s cases “recognized that an injured worker’s [AWW] can be based on a one[-]year period.” Id. at 50 , 626 A.2d at 62 (citations omitted). Ultimately, we held that the Commission could depart from the time period set forth in COMAR, explaining: [COMAR 14.09.01.05] appears to be designed to address the vast majority of cases in which there is no hearing.

In such cases, it provides a definite rule in lieu of a case-by-case basis. The regulation also supplies a standard in those cases in which there is a hearing but where no question arises concerning the appropriate time period or where the Commission decides that it should not depart from the thirteen-week rule. Nevertheless, contrary to the view of the courts below, in a case where there is a hearing, the regulation does not purport to restrict the Commission in ²⁶⁹ any manner from utilizing a different time period if the Commission deems it appropriate to do so. Gross, 331 Md. at 50 , 626 A.2d at 62 (footnote omitted).

Thus, generally speaking, a covered employee’s AWW is calculated based on LE § 9-602(a) and COMAR 14.09.03.06. And, once the AWW is calculated, LE § 9-637(a)(l) instructs the employer or the insurer to “pay the covered employee compensation that equals two-thirds of the [AWW] of the covered employee[.]” For the ordinary employee, the operation of these provisions poses no issue. A sole proprietor, however, is self-employed and not an “employee” in the traditional sense. Indeed, pursuant to LE § 9-227(a), “a sole proprietor is not a covered employee” unless he or she makes an election in accordance with LE § 9-227(b) and submits written notice of that election to the Commission and the insurer in accordance with LE § 9-227(c). 13 And, as the Supreme Court of Arizona has recognized: In reality, sole proprietors are not employees and do not earn wages.

A sole proprietor can never be an employee of the business he or she creates because a sole proprietor and the business are one legal entity. A person cannot be one’s own employee. Nor does a sole proprietor receive a “wage” from the business for his or her services. Thus, using employee language in a nonemployee setting creates definitional problems.

Mail Boxes v. Indus. Comm’n of Ariz., 181 Ariz. 119 , 888 P.2d 777, 779 (1995). Significantly, in Maryland, the Act does not address how to calculate the AWW of a sole proprietor who has elected to be a “covered employee.” And neither this Court nor the Court of Special Appeals (until this case) has addressed the matter. Thus, we examine relevant case law from Maryland and other ²⁷⁰ jurisdictions to determine the best calculation method for determining a sole proprietor’s AWW.

Relevant Maryland Case Law This Court has commented on the correlation between the basis of workers’ compensation insurance premiums and actual wages that are paid to the employee. In Picanardi v. Emerson Hotel Co., 135 Md. 92, 93-96 , 108 A. 483, 483-84 (1919), this Court held that an employee’s AWW did not include the monetary value for the employee’s board where the monetary value of the employee’s board had not been established at the time that the employee was hired, and this Court held that the AWW could not be calculated on a basis that was broader than that for calculating insurance premiums. The employee worked as a baker for the Emerson Hotel Company, and injured his hand during the course of his employment. See id. at 92 , 108 A. at 483 .

The employee was paid $50 per month and board, but there was no agreement between the employee and the Emerson Hotel Company at the time that he was hired as to the monetary value of the board. See id. at 92-93 , 108 A. at 483 . After the injury, the employee applied for workers’ compensation, and the Commission ordered compensation that was based on the employee’s monthly wages. See id. at 93 , 108 A. at 483 .

The employee appealed, contending that he should have been permitted to prove the monetary value of the board and to have that included as part of his AWW. See id. at 93 , 108 A. at 483 . This Court considered whether the employee was entitled under the Act “to have the money value of board included as part of his weekly wages in computing the amount of compensation to which he may be entitled, where the money value of the board had not been fixed between his employer and himself at the time of the hiring[.]” Id. at 93-94 , 108 A. at 483-84 . We answered that question in the negative, and observed that, because the monetary value of the board was not fixed when the employment started, the value of the board would not have been used in determining what the Emerson Hotel Company paid in workers’ compensation insurance pre ²⁷¹ miums.

See id. at 94-95 , 108 A. at 484 . Specifically, at the time, the Act provided that the State Accident Fund and private insurers needed to base insurance premiums on the employers’ “payrolls.” Id. at 94 , 108 A. at 484 . “Payroll,” however, was synonymous with “wages,” and “wages” meant “money or other things which ha[d] been given a fixed money value at the outset[.]” Id. at 95 , 108 A. at 484 . Indeed, we stated: “The State Accident Fund is created by premiums equal to fixed percentages of the money paid under employers’ pay[ Jrolls. Provision is made for the facilitation of calculation on the basis on these payrolls.” Id. at 94 , 108 A. at 484 (citations omitted).

Because insurers could not have charged premiums for board where the monetary value of the board was not fixed at the time of hiring and was not part of the payroll, this Court concluded that the compensation to the employee could not have been based on an AWW that included the value of board, explaining: “It is clear [that] the [General Assembly] did not intend, as to insurance in the State Accident Fund, that board was to be included as wages, unless its money value was fixed by the parties at the time of the hiring.” Id. at 96 , 108 A. at 484 . Furthermore, we concluded that “it would be unreasonable to hold that it was intended that the premiums and rates of insurance from which the fund to pay losses were derived were to be calculated on a narrower basis than that adopted for the allowance of compensation.” Id. at 96 , 108 A. at 484 . In Stevenson v. Hill, 171 Md. 572, 575 , 189 A. 910, 912 (1937), this Court held that a part-time employee’s AWW was to be calculated based on the average of the amount that the employee might have earned working all the time that the coal mines in the region generally were operated over a period immediately preceding the injury. The employee was a coal inspector who sustained an injury while at work that caused his death.

See id. at 573 , 189 A. at 911 . Because of the Great Depression, the mine at which the employee had been employed was not operational year-round, and the employee had not been employed full-time. See id. at 574 , 189 A. at 911 . At the time, the Act provided that compensation was to be based ²⁷² on the employee’s AWW that was “earned by an employee when working on full time.” Id. at 573 , 189 A. at 911 .

The Commission ordered compensation based on the employee’s AWW, which it calculated based on the wages that the employee earned during the six months preceding his death. See id. at 573 , 189 A. at 911 . The employee’s widow applied to reopen the case, and the Commission adjusted the employee’s AWW based on the wages that the employee earned in the year preceding his death; the adjustment of the AWW, however, did not increase the compensation to be paid. See id. at 573 , 189 A. at 911 .

The employee’s widow appealed, contending that the employee’s AWW should be based on what he “would have [] earned if the mines had been working to capacity, or to the limit of daily and weekly working time in the region, eight hours a day for six days a week[.]” Id. at 575 , 189 A. at 912 . This Court rejected the employee’s widow’s calculation method for the AWW, and held that, in accordance with prior case law, the AWW was “to be determined by an average of the amount the employee might have earned working all the time the mines in the region generally were employed over a period immediately preceding the injury[.]” Id. at 575 , 189 A. at 912 . Relying in part on Picanardi , this Court explained: The [workers’ compensation] system has as its foundation a correspondence between compensation to be paid and the amounts paid the active workmen according to the pay rolls. The actual earnings are to furnish the basis of calculating the fund to cover the compensation, which is built up by insurance with an insurance carrier, the State Accident Fund, or by self-insurance.

The premiums paid or set aside to constitute the fund are thus ascertained. The actual earnings are taken as determining the risk in loss of earnings or capacity. This correspondence would have to be disregarded to accept the present claimant’s contention. The insurance premiums and the fund built up for compensation would lose their relation to the compensation to be paid.

Employers distributing work on the share-the-work plan would multiply the responsibility for compensation ²⁷³ without any increase in work done. Part-time work for the benefit of employees during a time of depression could be provided only under a like disproportionate burden of compensation. Conceivably work[ers who are] injured might be entitled to receive much more by reason of their injuries than they could possibly earn at work. Id. at 576-77, 189 A. at 912-13 (citations omitted).

In Crowner v. Balt. United Butchers Ass’n, 226 Md. 606, 607-08, 612-13 , 175 A.2d 7, 7-8, 10 (1961), this Court held that the AWW of an employee, who was injured while working at a once-a-month weekend job, was to be calculated based only on the wages that the employee earned at the once-a-month weekend job, and not based on those wages plus the employee’s regular full-time wages. The employee worked full-time for Armour and Company (“Armour”), earning $90.80 weekly; the employee also worked one Saturday per month for Baltimore United Butchers Association (“Baltimore United”), earning $15 for each Saturday that he worked. See id. at 607-08 , 175 A.2d at 7-8 .

The employee was injured while working for Baltimore United. See id. at 608 , 175 A.2d at 8 . The employee submitted a workers’ compensation claim, and the Commission awarded him compensation based on an AWW of $3.46, which was the AWW of the Baltimore United job only. See id. at 608 , 175 A.2d at 8 .

The employee contended that his AWW should have taken into account his earnings from both Armour and Baltimore United. See id. at 608 , 175 A.2d at 8 . This Court affirmed the Commission’s decision that the employee’s AWW should have been calculated based on what he earned from Baltimore United only, explaining: In the instant case the [employee] entered into a contract of hire with the employer, the terms of which were specific as to all factors. The employer insured the [employee]’s employment in accordance with the provisions of the [Workers’] Compensation law.

By reason of the contract of hire the employer incurred certain obligations under the Compensation law. To impose other additional obligations on the employer and insurer, both of whom were, at the time of ²⁷⁴ the accident, complying fully with all of their obligations under both the statutes and.their contracts, would be unfair and, by judicial construction, extend the coverage of the compensation law into an area which would lead to disruption and confusion. If the law should be broadened to include the [employeej’s claim it should be modified by the [General Assembly], and not by our decision in this case. Id. at 612-13 , 175 A.2d at 10 .

More recently, in Uninsured Emp’rs Fund v. Pennel, 133 Md.App. 279, 285-86 , 754 A.2d 1120, 1123 (2000), the Court of Special Appeals held that breakfasts that an employer prepared for a farm worker constituted “payroll” under the Act such that the farm worker was a covered employee. In its analysis, the Court looked to LE § 9-602(a) and how a covered employee’s AWW is calculated, and pointed out that, in Crowner and Picanardi , this Court had “recognized the nexus between the terms ‘payroll’ and ‘[AWW]’ as they are used in the Act.” Pennel, 133 Md.App. at 293-94 , 754 A.2d at 1127-28 . The Court explained that the employer made breakfast for the farm worker six days per week for twelve years, and that the meals constituted compensation to the farm worker for his labor and thus should have been included in the computation of his wages. See id. at 295 , 754 A.2d at 1128 .

And, the Court stated that, “[g]iven the relationship between the terms ‘wages’ and ‘payroll,’ [the Court] further conclude[d] that the meals were part of the payroll in th[e] case.” Id. at 295 , 754 A.2d at 1128 . The Court then addressed our holding in Picanardi, 135 Md. at 96 , 108 A. at 484 — that “[i]t is clear the [General Assembly] did not intend, as to insurance in the State Accident Fund, that board was to be included as wages unless its money value was fixed by the parties at the time of the hearing” — and noted that “nothing in the record suggested] that the monetary value of the meals was fixed by the parties when [the farm worker] was hired.” Pennel, 133 Md.App. at 295 , 754 A.2d at 1128-29 . Nonetheless, the Court held that, because of amendments to the Act as well as subsequent case law, “fixing the value of meals at the time of hiring is no ²⁷⁵ longer a prerequisite to recovering the reasonable value of meals under the circumstances presented in this case.” Id. at 295 , 754 A.2d at 1129 . Indeed, the Court noted that at the time that Picanardi was decided, the Act provided that payroll included, among other things, “wages ... whether payable in money, board or otherwise[, pjrovided the money value of board and similar advantages shall have been fixed by parties at the time of hiring.” Pennel, 133 Md.App. at 295-96 , 754 A.2d at 1129 (quoting Picanardi, 135 Md. at 95-96 , 108 A. at 484 ).

However, the Court explained that, after Picanardi , the Act was amended to no longer make “reference to any requirement that the value of board (meals) and similar advantages be fixed at the time of hiring” and recent case law held that “such details may be unnecessary, as the value of meals, rent, lodging and similar advantages, consideration of which is necessary in the computation of wages under the Act, are easily converted into monetary figures with a present cash value.” Pennel, 133 Md.App. at 296 , 754 A.2d at 1129 . In other words, in Pennel , the Court implicitly recognized that the reasoning that underlay this Court’s decision in Picanardi has been superseded by both statute and case law; i.e., our reasoning in Picanardi is based on statutory language that no longer exists. In any event, significantly, none of these cases — Picanardi, Stevenson, Crowner, or Pennel — involved a self-employed sole proprietor’s AWW, and the method by which a sole proprietor’s AWW should be calculated. Thus, we look to other jurisdictions that have considered calculation of a self-employed individual’s AWW for guidance.

Case Law from Other Jurisdictions Courts in other jurisdictions are split regarding whether gross receipts, net profit, or some other figure is the best method by which to calculate a sole proprietor’s AWW. In Little Suwannee Lumber Co. v. Fitzgerald, 172 Ga.App. 144 , 322 S.E.2d 347, 348-49 (1984), the Court of Appeals of Georgia held that an independent contractor’s AWW was properly calculated based on the independent contractor’s gross re ²⁷⁶ ceipts, without deducting his “production costs.” In that case, the independent contractor was injured while attempting to fell a tree. See id. at 348. The independent contractor, who was entitled to workers’ compensation coverage, filed a claim for benefits.

See id. The State Board of Workers’ Compensation determined that the independent contractor’s AWW could not be “reasonably and fairly determined” based on the statutory method, and instead used the independent contractor’s “full-time wage[,]” awarding compensation based on the independent contractor’s gross receipts without deducting production costs. Id. On appeal, the employer contended that the independent contractor’s production costs should have been deducted when calculating his AWW because the independent contractor was not an “employee.” Id.

The Court disagreed and upheld the Board’s calculation, explaining: The Georgia Workers’ Compensation Act is a humanitarian measure meant to provide relief to the injured employee, and the Act should be liberally interpreted by the courts to carry out that purpose. In light of that purpose and given the circumstances of the instant case, we cannot countenance an interpretation of the Act which will result in a reduction of benefits to recipients. Id. at 348-49 (citation omitted). The Court also addressed the employer’s argument that, as used in the Georgia Workers’ Compensation Act, the terms “fees” and “wages” were distinct, with “fees being the gross amounts [the employer] paid [the independent contractor], and wages being the net amounts [the independent contractor] retained for himself after expenses.” Id. at 349.

As to that point, the Court explained: The Act does not specifically define either term, leaving us to apply ordinary meanings in everyday usage. Webster’s 7th New Collegiate Dictionary defines “wage” as “a payment, usually of money for labor or services usually according to contract and on an hourly, daily, or piecework basis ... especially for physical labor.” “Fee” is offered as a synonym; it “applies to the price asked or paid for services of a physician, lawyer, artist or other professional.” Clear ²⁷⁷ ly, it is not mandated by definition or otherwise that one make any deductions before calculating the [independent contractor]’s wages, particularly in view of the fact that [the employer] deducted the workers’ compensation premiums from his gross, rather than net, receipts. It appearing that [the employer] made an election, this court will not rescue it from its decision. Id.

(ellipsis in original). By contrast, other jurisdictions have held that net profit is the best figure to use for calculating a self-employed individual’s AWW. In Stephen v. Avins Constr. Co., 324 S.C. 334 , 478 S.E.2d 74, 75 (Ct.App.1996), the Court of Appeals of South Carolina held that the South Carolina Workers’ Compensation Commission was correct in computing a subcontractor’s AWW based on net, as opposed to gross, earnings.

In that case, the subcontractor sustained an injury during the course of his employment as a subcontractor for a construction company. See id. The subcontractor received compensation, and sometime afterward, the construction company sought permission to discontinue compensation payments on the ground that the subcontractor had reached maximum medical improvement. See id.

At a hearing, the subcontractor testified that he employed as many as four people, and the construction company paid the subcontractor per job and deducted workers’ compensation premiums before paying the subcontractor for his labor. See id. The subcontractor admitted that the money that was paid to him reflected all the money paid to his business, including what he paid other employees. See id.

As the workers’ compensation commissioner found, the money that was paid to the subcontractor was for an entire job, and did not solely reflect the subcontractor’s earnings, and, the money that was paid to the subcontractor included the costs of materials, wages that were paid to other employees, and other expenses. See id. Accordingly, the commissioner granted the construction company’s motion to discontinue payment of compensation, and held that the subcontractor’s AWW “should be based upon his tax returns as a self-employed subcontractor.]” Id. The subcontractor appealed, contending that his ²⁷⁸ AWW should have been based on his gross income, not his net profit, and arguing that the construction company had paid insurance premiums that were based on the subcontractor’s gross income.

See id. at 75, 76. The Court affirmed the commissioner’s calculation of the subcontractor’s AWW, holding that there was “substantial evidence in the record to support a finding that [the subcontractor]^ [AWW] and compensation rate should be based upon his net earnings, [the subcontractor]^ gross earnings having included wages paid to other employees and various business deductions.” Id. at 81. The Court began its analysis by looking to the South Carolina Workers’ Compensation Act, which defined AWW as “the earnings of the injured employee in the employment in which he was working at the time of the injury during the period of fifty-two weeks immediately preceding the date of the injury[,]” and did not “specify whether ‘wages’ refers to net or gross earnings of a business owner operating as a subcontractor.” Id. at 76. Because the Supreme Court of South Carolina had not addressed the calculation of a subcontractor’s AWW, and because the statute did not address the matter, the Court looked to other jurisdictions for guidance, including Fitzgerald, 322 S.E.2d 347 .

See Stephen, 478 S.E.2d at 78-80 . The Court explained that there are “[djifficulties [] inherent in using gross pay for the purpose of determining the ‘earnings of the injured employee^]’ ” stating: A plethora of business expenses may be encapsulated within the gross pay received. Examples of expenses not included in computing the earnings of a covered person are automobile allowances; mileage expenses; equipment rentals; labor, fuel, repair bills, and insurance; and depreciation of business equipment, interest on business debts, and the purchase price of a saw[.] Id. at 80 (citations omitted). The Court then noted that the subcontractor had deducted numerous business expenses on his income tax form, including car and truck expenses, travel, meals and entertainment, and wages.

See id. ²⁷⁹ The Court rejected the subcontractor’s contention that his AWW had to be based on gross pay because that figure was the basis of the insurance premiums, reasoning: The quiddity of [the subcontractor's contention to support a calculation based on gross pay