Kamin: Per Diems and Reimbursements in AWW Calculations

Monday, April 11, 2022 | 0

When doing average weekly wage calculations, it can quickly get complicated when deciding whether per diems and reimbursements should be included.

John P. Kamin

Fortunately, there are several panel decisions that interpret the Labor Code and boil it down to a simple litmus test: If it counts as remuneration and not simply a reimbursement, it should be included in the AWW calculation. If it is a straightforward reimbursement, it should not be included in the AWW.

Labor Code 4454 states that AWW calculations should include the market value of any advantages that count as remuneration, but AWWs should not include “any sum the employer pays to or for the injured employee to cover any special expenses entailed on the employee by the nature of his employment.”

The Workers' Compensation Appeals Board examined this topic in the May 2008 panel decision of Lisa Burke v. Winterland Productions. In the case, the WCAB took a close look at LC 4454, and dissected it to determine that:

• Remuneration should be counted in the AWW.
• Reimbursement of expenses should be excluded from the AWW.

Per diems

Some per diems qualify as remuneration, whereas others are more akin to a simple reimbursement.

In the Burke case, the WCAB cited a 1989 writ denied panel decision (Olds v. WCAB, 1989), which stated that a $540 a month per diem allowance was not included in the computation of an AWW. Why not? The WCAB determined that per diem was not a “bargained for economic advantage.” Instead, the $540 a month per diem was to offset expenses incurred while applicant worked as a truck driver.

Now let’s compare that to a hypothetical from "Mad Men." Let’s say Don Draper’s employer gives him $200 a day for his infamous liquid lunches to, among other things, help make sure that he is properly buttering up his marketing firm’s clientele. That $200 is obviously far more than the average person — in the 1960s and 1970s, or even by today’s standards — would spend on lunch. And as most per diems operate, if Draper spent only $150 on Tuesday’s lunch, then he could pocket the remaining $50.

That would be more akin to a bargained-for benefit that would qualify as remuneration.

Reimbursement

Turning back to the Burke decision, the WCAB determined that applicant Lisa Burke’s reimbursed expenses for lodging, gas and food were not remuneration because “the applicant only incurred these expenses while on tour and her employer’s reimbursement of the expenses did not provide any bargained for economic advantage to the applicant.” Those expenses weren’t putting any additional money or benefit in Burke’s pockets; they were just making her whole for what she had spent on travel costs. Thus, they were not part of the AWW because they weren’t remuneration.

Argument

Some would say this leaves open the door to an argument that:

• The part of the per diem that actually reimburses expenses is not subject to the AWW.
• The “extra” part of the per diem that applicant pockets is included in the AWW calculations.

However, it could be a little tricky to prove exactly how much applicant spent on expenses with the per diem, especially without anticipating having to keep track of how it was spent.

Conclusion

When evaluating whether to include a per diem in an AWW calculation, ask yourself, “Was this an overly beneficial per diem? Was it more than the average person would spend?”

If yes, then it should be included in the AWW. If no, or if it’s just a strict reimbursement of costs, then it should not be factored into the AWW calculations.

John P. Kamin is a workers’ compensation defense attorney and partner at Bradford & Barthel’s Woodland Hills location. He is WorkCompCentral's former legal editor. This entry from Bradford & Barthel's blog appears with permission.