BAIRD-RAY DATSUN AND LYNN UNDERWRITING COMPANY, APPELLANTS,

v.

LLOYD BUTLER, APPELLEE

McCORD, Judge.

Appellants, employer/carrier, appeal from a deputy commissioner’s order awarding appellee workers’ compensation benefits based on a 50% permanent partial disability and awarding attorney’s fees. We reverse.

On March 26, 1979, appellee injured his right knee in a work-related accident while employed by appellant Baird-Ray Datsun as an auto body repairman. Appellee had to undergo knee surgery to repair a tear in the medial meniscus. He testified that, during his hospitalization for that surgery, he began to suffer low back pain. His treating physician attributed the back pain to a preexisting arthritic condition. He was of the opinion that appellee had sustained a 15% impairment of his knee. Employer/carrier accepted the 15% permanent partial disability rating.

Employer’s physician, Dr. Shea, testified by deposition after examining appellee in January 1980. He concurred with the treating physician’s 15% permanent partial impairment rating of the knee. He was of the opinion that the lower back arthritis pre-existed the industrial accident and was aggravated as a secondary consequence of the abnormal gait caused by the knee condition. He testified that the back condition was strictly temporary in nature and had caused no permanent impairment; that as soon as appellee stopped limping, the back condition would clear up.

At the time of the April 1980 hearing, appellee was still limping and still suffered back pain. The deputy commissioner found that the initial injury to the right knee led to an altered gait, which resulted in a development of lower back difficulties which he found to permanent in nature and which he found to have affected appellee’s ability to compete in the open labor market. He concluded that appellee had made a diligent job search and found that appellee had sustained a 50% permanent partial disability of the body as a whole based on loss of wage-earning capacity. He stated that he did not find appellee permanently totally disabled because of the testimony of Rehabilitation Counselor Deutsch, who testified that appellee had not made an adequate job search and, though severely restricted, appellee is employable. The DC awarded an attorney’s fee of $3,200.

Appellants assert that the deputy commissioner erred in awarding disability benefits based on the body as a whole where there was no finding and no substantial competent evidence to support a finding of a permanent impairment to an unscheduled part of the body. We agree. The record contains no evidence of permanent impairment to the back. In the absence of medical evidence as to any permanent impairment to the back, the deputy commissioner is precluded from finding such an impairment. Section 440.25(3)(b), Florida Statutes. If the evidence had supported a finding that appellant did suffer a permanent impairment to his back due to the industrial accident, then his recovery would not be limited to the scheduled benefits determined pursuant to § 440.15, Florida Statutes (1977), and loss of wage-earning capacity would have been an appropriate factor to consider in determining his permanent disability rating. Compare Dade Federal Savings & Loan v. Doris Smith, 403 So. 2d 995 (Fla. 1st DCA 1981).

Further, in determining loss of wage-earning capacity, the extent of permanent impairment to the unscheduled portion of the body is a major factor which must be determined by the deputy commissioner, according to Kashin v. Food Fair, 97 So. 2d 609 (Fla.1957). Because, in this case, the evidence does not support any finding of permanent impairment to appellee’s back and because the deputy commissioner was therefore unable to make a determination as to the extent of permanent impairment to appellee’s back, he erred in going beyond the scheduled injury rating to determine loss of wage-earning capacity. The deputy commissioner should have limited recovery of benefits to the 15% permanent partial disability rating already accepted by the employer/carrier. Appellants’ contention that appellee’s work search was inadequate has merit but has been rendered moot. Because employer/carrier had accepted the 15% permanent partial disability rating and in light of the disposition of this case the award of attorney’s fees is also reversed.

ROBERT P. SMITH, Jr., C. J., concurs.

ERVIN, J., concurs in part and dissents in part.

ERVIN, Judge,

concurring in part and dissenting in part.

I concur with the majority’s view that the deputy erred in finding that the claimant was not PPD to the body as a whole. As Judge Wentworth noted in her specially concurring opinion in Jones v. Plantation Foods, 388 So. 2d 590, 592 (Fla. 1st DCA 1980), the amendments in Chapters 78-300, 79 — 40 and 79-312, Laws of Florida, to Section 440.25(3)(b) have modified the rule in Magic City Bottle & Supply Co. v. Robinson, 116 So. 2d 240 (Fla.1959).

Yet, Section 440.-25(3)(b) has not completely overruled Magic City. See Kennedy v. Tyson, 382 So. 2d 820 (Fla. 1st DCA 1980).

The result is that Magic City is modified as follows: If a disability rating is based solely on an anatomical basis, Section 440.25(3)(b) controls completely, i. e., the deputy commissioner may not arrive at a higher disability rating than the highest impairment rating given by a physician at the hearing. See Colonial and Semoran Shell Service v. Grisson, 389 So. 2d 1219 (Fla. 1st DCA 1980).

However, if permanent disability is arrived at by employing the wage-loss method, there is a threshold requirement that a permanent anatomical impairment be established. As to this threshold requirement, Section 440.-25(3)(b) again controls completely, but, once the threshold requirement is established, the deputy may consider other evidence, such as lay testimony, including the claimant’s as well as demonstrative evidence. See Kennedy v. Tyson, supra; Colonial and Semoran Shell Service v. Grisson, supra. This interpretation should apply to the theory of recovery established in Kashin v. Food Fair, Inc., 97 So. 2d 607 (Fla.1957), and advanced here. That is, the threshold requirement of permanent anatomical impairment should apply to a finding of permanent disability to the body as a whole. Here, such a finding was impossible because there was no medical testimony to support it.

The problem I have with the majority opinion, however, is that although no physician testified that the claimant was permanently disabled to the body as a whole, Dr. Shea acknowledged that the claimant had a temporary back problem which would no longer affect appellee once he stopped limping. Yet, at the time of the final hearing, appellee’s limp continued, and the majority has sustained the physician’s opinion which rates the knee 15% permanently partially impaired.

Thus, I am left with the question, in view of Dr. Shea’s testimony, as to whether the claimant had in fact reached MMI and whether he remained temporarily disabled at the time of the hearing. Cf. Eques v. Best Knit Textile Corp., 382 So. 2d 736 (Fla. 1st DCA 1980).

Therefore, I feel that the majority’s opinion which limits the claimant to PPD on the scheduled injury is premature.

Although the parties stipulated that the claimant had already reached MMI before the hearing, the deputy commissioner is not bound by a stipulation which is at variance with the facts before him, so that he may, under such circumstances, disregard the stipulation. See Delta Drilling Co., Inc. v. Wells, IRC Order 2-3708 (February 22, 1979). Thus, if appellee’s gait proves to be permanently affected by the knee injury, the stipulation of the parties as to MMI could no doubt be discountenanced.

In conclusion, I would remand in order for the deputy to make further findings as to whether the claimant has as yet reached MMI to the body as a whole. If it were determined that claimant is either temporarily totally or partially disabled, then the deputy should be permitted to enter an order which is consistent with such facts.