Voluntary Quit vs. Termination by Employer: How They Impact Permanent Disability Compensation

The Iowa Supreme Court recently decided Den Hartog Industries and West Bend Mutual Insurance Company v. Tyler Dungan, 2025 WL 2809053, clarifying a much-debated section of the workers’ compensation statute. The Supreme Court definitively answered the question of whether the voluntary resignation of an employee has the same effect as termination of an employee by the employer when it comes to compensating unscheduled injuries. 

In July 2019, Tyler Dungan injured his back while working for Den Hartog. Following his injury, Dungan returned to work for Den Hartog at the same wage he had earned prior to his injury, and continued working there for almost one year. He then moved out of town to be closer to family, and as a result, voluntarily resigned from Den Hartog. He ultimately ended up working in a job where he earned more than he had earned while working at Den Hartog.

In 2021, Dungan filed a petition for workers’ compensation benefits regarding the 2019 back injury. At hearing, the deputy commissioner found that Dungan had sustained an 8% functional impairment and awarded him industrial disability benefits based on a 15% loss of earning capacity under Iowa Code section 85.34(2)(v) (which provides for industrial disability as the standard method of compensating unscheduled injuries).

The case ultimately turned on the third and fourth sentences of section 85.34(2)(v), which state:

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….[I]f 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 deputy commissioner determined that sentences three and four, when read together, set up a bifurcated process resulting in the third sentence only applying when the fourth sentence’s review-reopening right applies. Therefore, because Dungan voluntarily quit his job, rather than being terminated, the entire bifurcated process did not apply, and sentences three and four were not applicable, resulting in Dungan’s entitlement to industrial disability benefits. The Commissioner and the District Court affirmed.

Upon appeal, the Iowa Court of Appeals found the text of section 85.34(2)(v) was ambiguous due to the fact that it did not specifically address claimants who voluntarily choose not to return to work or who return to work and later voluntarily quit. The Court of Appeals went on to recognize that, under controlling precedent, ambiguities are to be interpreted in favor of the injured worker. The Court of Appeals reasoned that the decisions by the Commissioner and the District Court interpreted the ambiguous language to the benefit of the claimant, and therefore upheld those decisions.

The Iowa Supreme Court, however, overturned the Court of Appeals’ ruling based on the plain meaning of the statute. The Supreme Court found the words of the statute were not ambiguous. The plain meaning of the statute is that an employee who returns to work after a compensable injury at the same or greater pay than the employee was earning prior to the injury should be compensated based upon the functional impairment only, and not based on industrial disability (loss of earning capacity). Because Dungan returned to work for Defendant Employer earning the same wage as at the time of his injury, he was properly compensated according to his functional impairment rating and not based on loss of earning capacity. In addition, the Court found the fourth sentence of the statute does not apply to Dungan. Because Dungan was not “terminated from employment by th[e] employer,” but instead voluntarily resigned, the provision does not apply. The Iowa Supreme Court concluded that Dungan remains entitled to benefits based only on his functional impairment rating.

These interpretations restore the plain meaning of this statute, which in most cases will be welcome news to Iowa employers.