If you are injured at work, the amount of money you receive is determined, in part, by your pre-injury Average Weekly Wage. Chris Evensen explains what types of payments can be included in the calculation of your pre-injury Average Weekly Wage to enhance your award of workers’ compensation benefits.
By Chris Evensen
Presented at KBA Worker’s Compensation Section Mid-Winter Seminar
January 22-24, 2015, Riviera Maya, Mexico
I. AWW FOR HOURLY WORKERS
Pursuant to KRS 342.140(1)(d), if;
The wages were fixed by the day, hour, or by the output of the employee, the average weekly wage shall be the wage most favorable to the employee computed by dividing by thirteen (13) the wages (not including overtime or premium pay) of said employee earned in the employ of the employer in the first, second, third, or fourth period of thirteen (13) consecutive calendar weeks in the fifty-two (52) weeks immediately preceding the injury.
II. CLAIMANTS WHO HAVE WORKED LESS THAN A FULL 13-WEEK QUARTER
Pursuant to KRS 342.140(1)(e), if;
The employee had been in the employ of the employer less than thirteen
(13) calendar weeks immediately preceding the injury, his or her average
weekly wage shall be computed under paragraph (d), taking the wages
(not including overtime or premium pay) for that purpose to be the amount
he or she would have earned had he or she been so employed by the
employer the full thirteen (13) calendar weeks immediately preceding the
injury and had worked, when work was available to other employees in a
Huff v. Smith Trucking, 6 S.W.3d 819, 821 (Ky. 1999)
The goal of KRS 342.140(d) and (e), “is to obtain a realistic estimation of what the injured worker would be expected to earn in a normal period of employment.” KRS 342.140(e) utilizes the averaging method set forth in section (d) and, “attempts to estimate what the worker’s average weekly wage would have been over a typical 13-week period in the employment by referring to the actual wages or workers performing similar work when work was available.” Id. at 821.
C &D Bulldozing Company v. Brock, 820 S.W. 2d 482, 486 (Ky. 1991)
Subsection (e) includes the consideration of a normal 13-week period of hire so an employee’s compensation will reflect his future loss of earnings in his regular employment.
Nesco v. Haddix, 339 S.W.3d 465, 471 (Ky. 2011)
In calculating AWW pursuant to KRS 342.140(e), “the ALJ must consider the unique circumstances in a case involving an employment of less than 13 weeks and make a realistic estimate of what the individual probably would have earned in a normal 13-week period of employment.”
HR Solutions of America v. Jimmy Gross, WCB #2011-00140 (Rendered 2/14/14)
Claimant worked for a temporary agency and had only worked two job assignments: a two-week assignment in June of 2010, and a week-long assignment in August 2010, on which he suffered his August 26, 2010 injury. Claimant testified he was to be performing carpentry and concrete work and earning $18.00 per hour. The Employer offered an AWW based on hours actually worked by the claimant of $162.21. The claimant filed wage records from the Defendant demonstrating wages earned by similar employees in the 13 weeks immediately preceding the claimant’s work-related injury which showed other employees earned wages from $10.00 – $40.00 working a variety of hours.
ALJ determined had the Claimant been employed a full 13-week quarter prior to his injury, he would have averaged 25 hours per week at a rate of $18.00 per hour. The ALJ found work was available during this time period to other individuals in similar occupations. Therefore, the ALJ found an AWW of $450.00. The Board Affirmed concluding substantial evidence existed in the record to support the ALJ’s determination of AWW in this case, that being the wages the Claimant actual earned, the pay-roll records of other similar employees, and the Employer representatives testimony.
III. WHAT IS / IS NOT INCLUDED IN AWW CALCULATION
A. SHIFT DIFFERENTIAL
The Gap v Curtis, 142 S.W. 3d 111 (Ky. 2004 )
Holds shift differential is included in calculation of AWW. Curtis, Supra, stands for the proposition that the worker provides a benefit to the employer by working at undesirable times (i.e., nights and weekends), that the difference in pay for those shifts is not “premium pay”, and that it is therefore averaged in with other wages earned during “regular” shifts.
Denim Finishers, Inc. v. Baker, 757 S. W. 2d 215 (Ky.App. 1988)
The Court of Appeals held bonuses, (a production bonus in that case), can be included in calculation of a claimant’s pre-injury Average Weekly Wage. The employer had asserted that the extra six cents per pair Ms. Baker received for pressing more than 350 pairs of pants in a forty-hour week was ‘premium pay’ and must be excluded when calculating her average weekly wage. The court rejected the argument, stating that the evidence suggested the extra payment constituted ‘output pay’ for her output above 350 pairs. Id. at 216. Relying on Durr v. Chapman, 563 S.W.2d 743 (Ky. App. 1978), the court also noted that Ms. Baker worked no extra hours and that KRS 342.140(1) (d)’s exclusion referred to ‘pay in excess of the employee’s regular hourly rate because of the extra hours worked.’ Id. (emphasis original).
Pendygraft v. Ford Motor Co., 260 S.W.3d 788, 792 (Ky. 2008)
Wages do not include amounts paid for profit-sharing bonuses.
William Hubbard v. Adesa ,WCB #2010-69276 (Rendered 9/23/13)
Claimant was employed as a manger and received an annual salary ($38,576.00) as well as a bonus ($15,431.00 – paid in January 2010) under an incentive program for manager (deemed not a profit sharing plan). The Board held the bonus was includable in calculation of AWW, noting Larson’s Workers’ Compensation Law § 93.01[a] notes, in addition to wages and salary, the calculation of AWW should also include “anything of value received as consideration for the work, as, for example, tips, bonuses, commissions and room and board, constituting real economic gain to the employee.”
The Board also held, a yearly salary is to be divided by 52, regardless of when the wage earner actually works and earns the salary. Thus, in this case, the bonus is counted in the year it is earned.
C. UNEMPLOYMENT & UNEMPLOYMENT SUB PAY
Jewell v. Ford Motor Co., 2013-CA-000850-WC, rendered 4/11/14 (Designated To Be Published).
Claimant, a Ford worker, was laid off for periods of time during the 52-week period prior to his injury. While laid off, Claimant would draw unemployment benefits and also Ford applies for state unemployment benefits on behalf of its workers and pays Supplemental Unemployment benefits (SUB) pursuant to a collective bargaining agreement. The combination of unemployment and SUB pay brings an employee to about 95% of their standard wage while laid off. The holding found Unemployment benefits cannot be included, because they are not, “money payments for services rendered.” However, Unemployment SUB-payments are included as they are more like “wages” than fringe benefits because it is a form of bargained-for pay, which Ford paid directly to the claimant, accounted for on a W-2 with taxes withheld and a part of an overall payment scheme to retain employees.
D. FRINGE BENEFITS
Rainey vs. Mills, 733 S.W.2d 756 (Ky. App. 1987),
The Court of Appeals found fringe benefits such as employee pension fund contributions, health insurance benefits, and life insurance were not intended to be included pursuant to KRS 342.140 as “wages” on the basis that they did not fall within the class of “similar advantages received from the employer” such as board, rent, housing, or lodging.
Salvation Army v. Mathews, 847 S.W.2d 751, 753-754 (Ky.App. 1993)
Fringe benefits such as employer pension plan contributions, health insurance benefits, life insurance premiums and the value of training and control are similarly excluded from being wages.
E. VACATION PAY
In Brooks v. Tri State Industrial Services, Inc., WCB # 2006-97477, (Rendered 4/30/09), the Workers’ Compensation Board concluded vacation pay is a monetary payment for services rendered and therefore must be included in the calculation of AWW. In support of this conclusion, the Board noted the money received as vacation pay is treated in all ways as regular income for tax purposes, the employee earns vacation pay through work during the entire year, and it is paid at the regular rate the employee earns while working.
F. HOLIDAY PAY
Jones Truck Lines, Inc. v. Billy Rogers Janes, WCB #s 92-07244, 85-27639, 84-02855, 83-11026, & 82-36515, (Rendered 6/17/94).
Holiday pay is included in calculation of AWW.
General Electric Company v. Robinson, WCB # 1995-32362, (Rendered 3/7/97)
For the purposes of calculating Average Weekly Wage, wages include shift differential which is part of an employee’s regular pay. Wages include vacation and holiday pay since, for tax purposes, such pay is considered income.
G. PER DIEM
Anderson v. Homeless & Housing COA, 135 S.W.3d 405, 413 (Ky. 2004).
The term “wages” has been held to only include items that are reported on an employee’s income tax return.
Under KRS 342.0011(17) and KRS 342.140(6), the term “wages” takes into account items that are reported on the employee’s income tax returns. It includes money; the reasonable value of board, rent, housing, lodging, fuel or other “similar advantage” from the employer; and any “gratuities received in the course of employment” from individuals other than the employer.
Marsh v. Mercer Transportation, 77 S.W.3d 592 (Ky. 2002)
Claimant, a truck driver, argued expenses listed on her Schedule C, (meals and depreciation), should not be deducted from gross receipts since they were available for her to spend at her discretion while deductions for fuel and other direct expenses were not. The ALJ added the meals and depreciation allowance back into the net profit for determination of AWW. While the case was remanded for a calculation pursuant to KRS 342.140(1)(f), the Court did not indicate the ALJ should not have added these back in. Instead, the Court reversed the ALJ findings, holding he should have used KRS 342.140(1)(f).
Comair, Inc. v. Aubert, WCB # 2005-64443, (Rendered 2/5/08)
The Board addressed per diem payments made to the claimant to pay for meals while traveling, and found they should be included in calculating the average weekly wage, regardless of the fact the payments were not subject to income taxation. The Board stated as follows in its analysis:
There is a dearth of Kentucky case law on the subject of the inclusion of meals and lodging in average weekly wage. However, Professor Larson in his treatise on workers’ compensation instructs as follows:
In computing actual earnings as the beginning point of wage-basis calculations, there should be included not only wages and salary but anything of value received as consideration of the work, as, for example, tips, bonuses, commission, room and board, even a car allowance, constituting real economic gain to the employee. (Footnotes omitted.) (Emphasis added.)
The Board found the per diem payments represent, “a real economic gain to the employee,” and concluded;
In addition, KRS 342.0011(17) and KRS 342.140(6) expressly mandate that “the reasonable value of board . . . received from the employer” shall be included in the employee’s AWW calculation. Merriam-Webster’s Dictionary defines “board” as meaning “to provide with regular meals and often lodging usually as compensation.” Accordingly, as a matter of law we find no error concerning the ALJ’s inclusion of the entire amount of Comair’s per diem payments in the calculation of Aubert’s AWW. Given the plain language of KRS Chapter 342, the fact that a portion of those payments qualify as nontaxable under federal law is of no consequence, and merely serves to buttress the tangible measure of real economic gain realized by Aubert on account of the additional sums. (Emphasis added)
Jackson v. Gentiva Health Services, 2013-CA-000549-WC, (Rendered 12/20/13), Designated Not to Be Published.
Cannot consider mileage reimbursement as part of wages if it was not reported for income tax purposes.
IV. CALCULATION OF POST-INJURY AWW
A. CALCULAITON OF POST-INJURY AWW
Ball v. Big Elk Creek Coal Co., Inc., 25 S.W.3d 115 (Ky. 2000)
The Kentucky Supreme Court set forth guides in analyzing pre-and post-injury wages. The Court noted the legislature intended a comparison of pre-and post-injury average weekly wage, not a comparison of the claimant’s pre-and post-injury hourly pay rate. Id. at 117, see also Whitaker v. Robinson, 981 S.W.2d 118 (Ky. 1998). Next, the Court held the legislature did not contemplate a weekly review of a worker’s earnings and a weekly adjustment of benefits. Id. at 117. Instead, the Court held the former KRS 342.730 (1)(c)(2) provided for a comparison of pre-and post-injury average weekly wages. Id. at 118.
Maria Garcia v. Central Kentucky Processing, Inc., WCB # 2010-69601, (Rendered 7/11/14)
“An employee’s post-injury AWW is subject to calculation under KRS 342.140, using the same method employed to determine a claimant’s pre-injury AWW. Stated otherwise, the analysis must focus on the worker’s AWW, not simply her hourly rate.” Further;
Thus, for an employee who is paid hourly, as Garcia, her post-injury average weekly wage must be calculated pursuant to KRS 342.140(1)(d) to determine whether there has been a return to work at a higher wage. This calculation requires an analysis of Garcia’s earnings over a fifty-two weeks period, and identification of her “best” quarter, the wage was $477.92, higher than the pre-injury wage of $474.28. For this reason, we are satisfied the ALJ conducted the analysis required by Ball and reached a result supported by substantial evidence.
B. COMPARISON OF PRE- AND POST-INJURY AWW
Entitlement to the double multiplier is not determined on a post-injury quarter by quarter basis.
Scott Johnson v. Troy Reed et al., WCB # 2010-00851 (Rendered 5/16/14)
“Though Ball instructs the ALJ to analyze quarterly earnings as opposed to weekly earnings, it does not require the ALJ to amend the award each quarter if the claimant’s earnings fluctuate …”
Kevin Reece v. Integral Structures, Inc., WCB # 2006-72669, (Rendered 1/31/14)
The 2-factor of KRS 342.730(1)(c)(2), may be applied if;
(1) A claimant continues to work post-injury for a period of time;
(2) A claimant subsequently ceases work due to the disabling effects of his injury;
(3) A post-injury AWW can be determined, inferred or projected by the ALJ from the evidence using one of the statutorily established methods under KRS 342.140(1);
(4) The post-injury AWW as determined by the ALJ is equal to or greater than the claimant’s AWW at the time of the injury.
V. QUESTIONS FOR DISCUSSION
1. If an employee has worked two full quarters and a partial third quarter (10-weeks), can one count the average of the 10-week quarter (even dividing the total by 13) if the wages earned in that 10-week quarter produce the highest AWW figure? Is that the, “most favorable wage?”
2. If an employee has worked two full quarters and a partial third quarter (10-weeks), do you have to start counting weeks from the date of injury and work backwards? Or, can you start from date of hire and work forward?