Karlen: Fun With Temporary Disability

Tuesday, January 10, 2017 | 0

Despite much confusion, calculating temporary disability (TD) can be easy — and fun — if we keep a few simple rules in mind.

Cynthia K. Karlen

All employees receive the maximum temporary disability rate unless there is documentation proving the employee is not a max earner. First, get a wage statement from the employer and determine if the applicant is a full-time or part-time employee. When was he/she hired? Are there any personnel issues?

Example: The employee earns $70,000 per year. $70,000 divided by 52.18 = $1,341.51 average weekly wage (AWW). Date of injury: Oct. 25, 2015 — max temporary total disability rate in 2015 is $1,103.29.

If still off work on Oct. 25, 2017 (two years post-injury), the employee may be entitled to the new maximum rate that went into effect on Jan. 1, 2016 — $1,128.43 — or potentially the maximum rate for 2017, inasmuch as the employee’s earnings supported a higher TTD rate than he was paid, and LC 4661.5 allows for the rate to increase for any TTD paid more than two years post-injury.

Remember: We also have a 104-week cap on TD benefits for all dates of injury after April 19, 2004. The wage earner may miss work initially, return to work and then later need surgery more than two years post-injury. Once the doctor schedules the surgery, it determines the date of surgery in relation to the date of injury to ascertain whether the earlier max TTD rate is the one in effect or whether the employee qualifies for the current rate. 

In the above example, the employee would qualify for the current maximum TTD rate (as opposed to the rate at the time of injury).

Seasonal employment

Agricultural businesses often hire employees for one or more seasons. A season is usually a specific time frame every year. It is not considered full-time employment. It may start in May and end in October, once the harvest is completed. The big issue? Knowing when the season starts and when it ends.

An employee may be hired at any time during the season. The employee might also return every year to harvest. The employee may work for more than one employer (see dual employment below).

Seasonal employment is important because it complicates the AWW calculation. Plus, you need to know what the employee does during the off-season. Does the employee work another job or live off the earnings from the seasonal work?

It is essential to have a wage statement, inasmuch as it will evidence when the employee started work that season. If this is the first season the employee worked for this employer, when would the season have ended and what is the likelihood that the employee would have worked to the end of the season? Once that information is known, the average weekly wage can be determined.

Earnings are averaged over the season. At the end of the season, take into account whether there were any earnings outside to the season. If yes, document those earnings. If no, then no TTD is due until the season starts again.

Two or more jobs at the same time

If the employee worked more than one job, take into consideration all earnings from all employment.

Example: Job A, 20 hours a week at $10/hour; Job B, 25 hours a week at $15/hour. If the employee was injured on Job A, calculate gross earnings by taking all earnings from Job A (20 hours x $10 = $200) and adding modified earnings from Job B (25 hours x $10 = $250).

Total earning: $450 per week are divided by 1.5 = $300 temporary disability rate (TDR). Modify the earnings in Job B because the Labor Code does not want to penalize the employer in Job A. The employee gets credit for all of his hours, but at the maximum rate of Job A. It does not work the other way.

If the injured worker was hurt on Job B, use his total gross earnings for the second job. Job A pays a lower hourly rate; thus he receives credit for all his earnings on Job A, plus all his earnings on Job B, for a total of $575 divided by 1.5 = $383.33 TDR.

The theory is that if earnings were increased to the same hourly rate as Job B, the employee would receive a windfall. In other words, he would have no incentive to return to work; he could make more money by staying at home.

Remember these rules and you’ll never go wrong:

• Always get a wage statement (especially when not paying the maximum TTD rate).
• When calculating AWW, use the gross income, not the net.
• If there are multiple employers, it is the job on which the employee was injured that controls his benefits.
• If the employee was scheduled for a pay raise to take effect sometime after the injury, TD benefits incorporate the pay raise once it would have gone into effect. If the employee just received a pay increase, calculate the average number of hours the IW was working and apply the new hourly rate to those hours. Consider both straight hours and overtime hours. If the employee was working five or six hours overtime every week, that would impact the gross earnings and therefore should be taken into consideration when calculating the TTD rate.

Few of us in the industry enjoy math. Indeed, some of us went into workers’ compensation to avoid math. Nevertheless, by following these few simple rules, your math phobia can be transformed into mathematical magic.

Cynthia Karlen is an associate attorney in Bradford & Barthel’s Santa Rosa office. This blog post is reprinted with the firm's permission.