Average Wages? Cost-Containment by Controlling the Fundamentals
This posting began with the goal of presenting a simple primer on calculating average weekly wages. We spend a great deal of time looking for cost-containment and mitigation measures in every claim that crosses our desks, and sometimes the fundamentals, like AWW, are the best place to start reigning in costs.
Simple enough of a topic, right? Well, after writing for a while, and then writing some more, it became clear that this issue, like almost every issue in New York workers’ compensation claims may be basic, but it nevertheless carries around a lot of baggage in the form of rules, exceptions to rules, unique circumstances and even sometimes exceptions to exceptions of rules. The legal aspects of calculating and setting an AWW don’t fit into a neat box, and the topic sprawls without any hope of control.
We changed gear and, like the serials of the 1900s, we intend to present this issue in installments throughout the year beginning with basic calculations (today) and moving on to part-time, seasonal and sporadic workers, including teachers with known and regular periods of unemployment (summers off!) and then moving into vacation pay and holiday pay, similar workers and their payrolls, concurrent employment, and ending with Minor’s Wage Expectancy. We hope you enjoy!
The Average Weekly Wage (“AWW”) is one of the most basic, and often-times overlooked findings made in a workers’ compensation claim. Given the skyrocketing maximum rates, huge schedule awards and, of course, the often-present ATF deposit, controlling and minimizing an average weekly wage findings can pay dividends down the road when benefits are awarded in periods of weeks, months or even years.
My elementary school math classes tell me that to average a dataset, we take the gross value of that dataset and divide by the number of data points: simple addition and division. Could you imagine something so basic, or rational, making its way into New York law? I certainly can’t, and of course that’s not what we’ve got here. But let’s take a half-step back before hurtling into a political commentary.
From a claims handling perspective, the jumping-off point for calculating an AWW is always a C-240. This ubiquitous form shows up in nearly every claim before the Board:
Experienced claims-handlers will tell you that obtaining a C-240 can sometimes be a slow and painful process, and obtaining a fully-completed form can oftentimes be impossible.
Form C-240 requires not only gross yearly wage, as well as the weekly wages for each of the 52 weeks preceding the accident, it also requires a weekly tally of “days worked” which, as we will see, is the basic metric for calculating an AWW.
Under WCL § 14, a claimant’s wage is calculated using a “multiple” method of averaging a claimant’s wages by using the wage data provided by the employer/carrier to first determine a claimant’s average daily wage. Once the daily wage is established, a “multiple” is selected from among the three available depending upon the “type” of worker in question.
WCL § 14(1) states that if a worker was hired to work 6 days a week, than his or her daily wage is to be multiplied by 300 and then 1/52 of that wage is to be calculated (under WCL §14(4)) to generate the correct AWW.
To those of you who have seen AWWs set by “divisor” and who may be asking “what is this multiple nonsense?” the Board has taken great pains to repeatedly, and often with overtones of frustration, remind us that “there is no provision under WCL § 14 to calculate a claimant’s average weekly wage by using straight division of a claimant’s gross yearly earnings by the number of weeks worked.” Atlantic Express, 2014 NY Wrk Comp. 0728592.
Despite this admonition, the Board has repeatedly utilized WCL § 14(3) to generate AWWs which, mathematically, match the use of a divisor. WCL § 14(3) permits the calculation of an AWW “based on the claimant’s previous earnings . . . during the year before the injury” if the use of a multiple “cannot be fairly applied.” For example, in Waterfront Health Care Center, 2014 NY Wrk. Comp. 0601971 the AWW was set, over the carrier’s objection, using a 260 multiple. On appeal, the carrier argued that the use of a 260 multiple artificially inflated the claimant’s average weekly wage rendering a 260 multiple an “unfair” representation of the claimant’s earnings. Ruling for the carrier on appeal, the Board Panel invoked WCL § 14(3) to institute a “205-day multiple” which just-so happened to be the exact number of days worked by the claimant on her C-240. Applying this multiple, then applying the 1/52 provision of WCL § 14(4) resulted in an AWW identical to the AWW obtained by using a 52-week divisor.
At this point you must be asking (because I’m asking it myself all the time!) what does all this nonsense about multiple have to do with keeping workers’ compensation costs down? The simple answer is: sometimes everything. Calculating an AWW using a daily-rate multiple can artificially inflate, or deflate, a claimant’s AWW in an ironic way. A typical 5-day a week worker, if he worked 5-days a week for the entire year, would work 260 days. However, most 5-day workers take a vacation, get sick leave, bereavement, you name it. The result? They work less, and sometime far less, than 260 days in the year preceding their accident, but they benefit from their time off when the file a comp claim. And if they do file that claim, you’re going to pay for those 260 full days anyway when the AWW is calculated unless you take steps to defend yourself. The opposite is true for the worker who manages to put in more than his or her 260 days, they actually lose credit for those days using a multiple calculation. Let’s look at a common example:
Employee A, a five-day worker, is injured on the job, and in the 52 weeks preceding the accident she worked 237 days and earned $35,000.00. To use a 260 multiple, we would first calculate a daily wage ($35K/237 days) which is $147.68. We then multiple that daily wage by 260 to generate an adjusted gross yearly wage of $38,396.80 and; then divide by 52 to generate an AWW of $738.40.
Employee A is getting an average weekly wage that is premised on an annual income here that is artificially (mathematically) inflated by crediting the claimant for some 23 days of work (and extra $3,396.64) that he simply didn’t perform and he simply didn’t earn. Imposing a straight divisor (or WCL § 14(3)) on the same facts generates an AWW of $673.08.
The increase in an employer/carrier’s exposure to Employee A is an increase in the effective maximum rate of $43.55/week. In the long run, this difference can be substantial. Just take a look at the costs added to the claim of Employee A by this increased effective rate in several very common case results:
Moderate Permanent Partial Disability : Increased Exposure of $6,532.50
25% Schedule Loss of Use of an Arm: Increased Exposure of $3,396.90
25% Schedule loss of Use of a Leg: Increased Exposure of $3,1365.60
If you aggregate the benefits awarded across an entire desk of claims, the enhanced exposure of a miscalculated or unfavorable AWW calculation can be potentially staggering. What’s more, exposure on a week-to-week basis for all awards of temporary disability (not counted as a credit against an ultimate PPD award) will add to a carrier/employer’s exposure.
So, if we’re going to be using this multiple-method of averaging wages, how do we know which method to use? How can we use the method most beneficial? Not all workers neatly fit into three categories of workers considered under WCL § 14 and, we want to keep the rates as low as reasonably possible.
Many of you might jump to form C-240, which carries a nifty reference for guiding employers and carriers about which method of calculation they should use:
Don’t be fooled into thinking there is some legal basis for these “instructions.” Neither the WCL, nor the entire Code of Rules and Regulations make any reference to any of the figures or guideposts. The threshold of 234 days for a 5-day worker is not a creature of statute, and the best we can say is that it is a guideline followed by Board case law; but as with so much case law published by the Board, there is little pattern to their application of these “instructional” figures. See Matter of New Era Cap, 2007 NY
Wrk Comp 80600990; citing Matter of Wegmans Food Markets, Inc., 2006 NY Wrk Comp 70410307.
What the Board can, and oftentimes does, do, is look deeper into the claimant’s wage statement to see if the claimant’s pattern of employment matches the schedule of a five-day or six-day worker. Usually, and as you might expect, this deeper analysis predominantly gives the claimant a benefit, and the Board has disregarded its own guidelines to grant a 260 multiple to workers who didn’t even come close to their own guidelines. New Era Cap, 2007 NY Wrk Comp 80600990 (223 days worked gets a 260 multiple); Matter of Carrier Coach Inc., 2008 NY Wrk Comp 80702783 (226 days gets a 260 multiple); Norampac Industries, 2014 NY Wrk. Comp. 0605684 (216 days gets a 260 multiple).
In each of these cases the Board’s analysis turned on the number of five-day, four-day, three-day etc. weeks worked by a claimant. In Norampac, for example, the Board reported that the claimant’s payroll showed 29 “five-day” weeks, 13 “four-day” weeks and 4 “three-day weeks” while the balance of the payroll was absence due to disability or vacation. The Board held that “clearly the majority of the weeks worked by the claimant during the year preceding his work accident were five-day weeks” and imposed a 260 multiple.
Okay, so that’s admittedly a lot of case law, and you’re eyes might be glazing over; but don’t leave yet. All that law was cited to illustrate the point that AWW is an issue literally chocked-full of exceptions, unique circumstances and oftentimes contradictory results. In 2014 alone the Board reviewed and ruled on the issue of AWW in no fewer than 80 decisions and through August of 2015 another 47 decisions have been published.
In our next installment we’ll cover part-time, seasonal and sporadic workers and the so-called “200-multuiple minimum” method of calculation. For now, we leave you with a quiz based on one of the Board’s more recent rulings. Which method of calculation should apply here?
The C-240 filed indicated that the claimant was a four-day a week hourly worker. Out of the 52 weeks preceding his injury, the claimant work four-days a week for 36 weeks; six-days a week for 8 weeks; five-days a week for 4 weeks; three days a week for 2 weeks; two-days a week for 1 week; and 0 days for 1 week. The gross amount paid to the claimant was $28,782.88. The total number of days worked was 220 days. There are no other facts relevant to the issue of AWW in the record.
If you can’t wait until the next installment for the answer, see VIP Health Care Services Inc., 2015 NY Wrk. Comp. 0810813.