The SAWW Question: How Does it Work?

Saturday, July 30, 2005 | 0

The recent announcement of the increase in the State Average Weekly Wage (SAWW) brings to attention a glaring oversight by the drafters of the first wave of reform laws (AB 749/AB 486) and an issue that even the Division of Workers' Compensation is unwilling to take a stand on, leaving the interpretation on how exactly the SAWW is to be applied.

Under the provisions of AB 749/AB 486, Life Pensions (LP) and Permanent Total Disability (PTD) payments for injuries after 1/01/03 are to be adjusted upward by the percentage increase in the SAWW. This is codified in Labor Code section 4659(c) which reads in part:

"For injuries occurring on or after January 1, 2003, an employee who becomes entitled to receive a life pension or total permanent disability indemnity as set forth in subdivisions (a) and (b) shall have that payment increased annually commencing on January 1, 2004, and each January 1 thereafter, by an amount equal to the percentage increase in the 'state average weekly wage' as compared to the prior year."

The percentage increase based on the mandated SAWW data is 4.01%.

The obvious question, then, is whether this means that the base LP/PTD rate increases every year, or whether one starts with the rate in (a) or (b) for the date payments start, then the next year apply the applicable SAWW percentage increase?

In other words, if the PTD payment starts in 2007, is it $840, or is it $840 plus 4.01% ($873.68)?

This question was posed to the Division of Workers' Compensation, and the answer is ... they don't know.

Blair Megowan, Manager of the Disability Evaluation Unit, DWC, says, "I posed this question to the DWC legal staff after AB 749 passed but it was never answered. I took from this that the statute was considered to be so ambiguously worded that judicial interpretation was necessary."

Until applicants and carrier/employers are willing to roll the dice (this affects not only the weekly rate, but also commutations for which some factoring of the SAWW must be made, and which may result in differences amounting to thousands of dollars, let alone potential penalties and automatic 4650 increases) the best that can be done is argue the issue up the appellate chain.

In the meantime, effective 1/1/07 the Minimum TD rate will also be subject to adjustment based on the increase in the SAWW [LC 4453(a)(10)]. Therefore, for 2006, there will not be an increase in the minimum TTD rate; however the following year, we will see an increase based on the increase in the SAWW that is reported for the quarter ending in March, 2006.

Additionally, it is clear that if an employee was receiving a permanent total disability award of $500 per week for an injury after 1/1/03, they would be entitled to a PTD benefit as of 1/1/06 increased by 4% or $520 per week ($500 x 1.04 = $520). If their award had been based on the maximum in effect for 2004 ($728), their award would be raised up to $757.12 ($728 x 1.04 = $757.12).

Article by workcompcentral.com Editor in Chief, David DePaolo.

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