The types of injuries that workers suffer in a workers’ compensation case can be separated into two categories: scheduled and non-scheduled.
Scheduled injuries are those for which state statutes outline (or “schedule”) specific maximum numbers of weeks of benefits to which workers may be entitled. Non-scheduled injuries are those injuries for which statutes provide other means of calculating benefits.
This presentation addresses scheduled injuries and provides an outline of how scheduled injuries are compensated, as well as examples of scheduled injury compensation.
How is scheduled injury compensation calculated?
The calculations that apply to a worker’s case will vary depending upon the jurisdiction. Generally, the amount of benefits that a worker is entitled to for a scheduled injury depends upon:
- average weekly wage and compensation rate,
- the body part injured,
- the physician’s “impairment” rating, and
- the ultimate disability rating.
Let’s discuss these factors, in turn.
Average Weekly Wage and Compensation Rate
“Average weekly wage” is defined as the average weekly earnings of the injured worker at the time of the injury in the employment in which the injury occurred.[i] This will vary state by state for several reasons. States may use different lengths of time prior to the date of injury to calculate the average weekly wage. Often, states have upper and lower limits on the average weekly wage and they may have different modes of calculating it, depending upon how long the employee has worked for the employer, whether the employee was also working another job, whether the worker was employed seasonally and the date of the injury, and other considerations.[ii]
For example, let’s assume a worker had been working full-time for his employer for several years prior to a work-related accident. If his total earnings during the 12 months prior to the accident were $52,000.00, we could divide his total earnings by 52 weeks and his average weekly wage would be $1,000.00.
However, states do not compensate workers based solely on their average weekly wage. Instead, states use a reduced compensation rate to determine benefits. Often that compensation rate is 66.66% of the worker’s average weekly wage.[iii] Therefore, the worker’s compensation rate would be $1,000.00 x 66.66%, or $666.66.
States also provide limits on the compensation rate. These limits can be based upon the date of the work injury (as in California and New York),[iv] the average weekly wage in the state (as in South Carolina),[v] or other factors. Our example assumes that a compensation rate of $666.66 is below the maximum allowed compensation rate.
Body Part Injured
Scheduled injuries are those for which state statutes or regulations outline a specific number of weeks of benefits to which an injured worker may be entitled for loss of, or loss of use of, a scheduled body part. Typically, scheduled injuries are limited to extremities such as legs, feet, toes, arms, hands, fingers, eyes and ears.
For example, a state’s workers’ compensation statute may provide that for total loss or disability (either in function or amputation) of an arm, an employee will be entitled to 312 weeks of benefits at the applicable compensation rate. If, however, the employee only has 50% disability or has lost 50% use of the arm, then the employee would only be entitled to 156 weeks of benefits (312 x 50% = 156).[vi]
The math becomes more difficult when we must distinguish between an impairment rating and a disability rating. The disability rating determines an injured worker’s ultimate level of benefits. The impairment rating is simply one of the factors considered in determining a disability rating.
Though there is no universally accepted definition of “impairment,” it generally means “a loss, loss of use, or derangement of any body part, organ system, or organ function.”[vii] Impairment is defined in purely medical, objective terms, for example as in loss of range of movement of a body part, or loss of a certain quantum of vision or hearing.[viii] Once the patient’s condition reaches “maximum medical improvement” or is “permanent and stationary,” the employee’s physician can assign the worker a percentage impairment rating so that permanent benefits can be calculated.
The American Medical Association Guidelines instruct physicians on how to evaluate an injured employee’s level of impairment. However, state laws vary as to what additional information the physician can or should consider in assessing the employee’s impairment. For example, California law allows evaluating physicians to consider not only the claimant’s range of motion, level of pain, and likely future medical treatment, but his work restrictions, apportionment of causation, and the impact that the injury has on the employee’s activities of daily living as well. Activities of daily living include self-care, sexual function, sleep, and communication.[ix] Because evaluations vary state to state, in other states, a physician may not be allowed to consider these factors when assigning the impairment rating.
“Disability” is generally defined as “an alteration of an individual’s capacity to meet personal, social, or occupational demands or statutory or regulatory requirements because of an impairment.” It is important to distinguish these requirements from general activities of daily living. Disability considerations are specific to an individual, whereas activities of daily living are generally the same for all people. Note too that a person can be impaired and yet may not be disabled if the impairment does not significantly affect the personal, social, or occupational demands of their life.[x] On the other hand, a person could have a relatively slight impairment that significantly impacts the personal, social, or occupational demands of their lives, and therefore be significantly disabled. For example, the loss of use of a finger on the right hand may result in greater disability to a right-handed, professional pianist than it would to a left-handed taxi driver.
While a physician evaluates the injured worker’s impairment, it is usually the judge in a worker’s compensation case that will assign the disability rating and thus determine the amount of benefits to which the injured worker is entitled. This is not necessary when the parties reach an out-of-court settlement. How closely or loosely the end disability rating reflects the impairment rating depends upon several factors, which may include: the date of the injury, the worker’s occupation and education and the worker’s age.[xi] Because all of these factors can affect the ultimate disability rating, they all must be considered when estimating the amount of benefits that an injured worker is entitled to and in determining whether to accept a settlement offer.
While some states specifically limit the amount by which an impairment rating may be increased to arrive at a disability rating, other states do not. For example, California law outlines limits on how much an impairment rating can be enhanced based upon the date of the injury. For injuries occurring in 2013 or later, the allowed “adjustment factor” is a multiple of 1.4, in other cases the applicable adjustment factor is based upon the worker’s anticipated reduced future earning capacity.[xii]
Calculations of Disability Ratings
For our example, first assume that state law assigns a maximum of 312 weeks of benefits for loss of (or loss of use of) an arm. Assume further that a worker has an average weekly wage of $1,000.00 (and compensation rate of $666.66) and is assigned 25% impairment to his right arm. However, also assume that state law imposes a maximum compensation rate of $350.00 per week.
If the injury occurred in 2017, and state law applies an adjustment factor of 2.0 for all injuries occurring prior to 2018, the worker’s estimated wage compensation benefits would be calculated as follows:
- 25% impairment x 2.0 AF = 50% disability
- 50% disability x 312 weeks benefits for arm = 156 weeks benefits
Although the calculated compensation rate is $666.66, state law would limit benefits to $350.00. 156 weeks benefits x $350.00 = $54,600.00
Of course, any settlement offer could adjust that figure to account for the time-value of money related to the timing of future payments. In the case of 156 weekly payments of $350 and assuming an annual interest rate of 4%, a present lump sum payment should be $51,433.50 rather than the total of $54,600 if it were paid out over the course of 156 weeks.
The estimated benefits to which an injured worker may be entitled will depend heavily upon the laws of the state as well as the circumstances of a worker’s case. In all cases, the value of a worker’s wage compensation benefits will depend upon an understanding and calculation of his average weekly wage, the scheduled number of weeks of benefits, the impairment rating, and the disability rating that is likely to be assigned.
[i] Beard, G. L., Poteat, S. T., Lamar, M. J., Sumwalt, V. R., Bluestein, M. M., & Sullivan, A.P. (2012). The law of workers’ compensation insurance in South Carolina sixth edition [p. 382]. Columbia, S.C.: South Carolina Bar Continuing Legal Education
[ii] Beard at 382-383, 385-390; California Department of Industrial Relations (2016, April). Workers’ compensation in California: a guidebook for injured workers [6th edition]. Retrieved from http://www.dir.ca.gov/InjuredWorkerGuidebook/InjuredWorkerGuidebook.pdf
[iii] Beard at 392-393.
[iv] CDIR at 21; New York State Workers’ Compensation Board (2014), An employee’s guide to workers’ compensation in New York state [p.6]. Retrieved from http://www.wcb.ny.gov/content/main/Workers/InjuredOnTheJob.pdf
[v] Beard at 392.
[vi] American Bar Association (2007, May/June). From John Burton’s workers’ compensation resources: workers’ compensation policy review [Vol. 7, Issue 3, p. 8]. Retrieved from http://www.americanbar.org/content/dam/aba/administrative/labor_law/meetings/2011/ac2011/087.authcheckdam.pdf
[vii] State of California Department of Industrial Relations Division of Workers’ Compensation (2016), Physician’s guide to medical practice in the California workers’ compensation system [4th edition, p. 56]. Retrieved from http://www.dir.ca.gov/dwc/medicalunit/toc.pdf
[viii] California Department of Human Resources (2016, July). Workers’ compensation preview [p.9-10]. Retrieved from https://www.calhr.ca.gov/Documents/workers-compensation-preview.pdf
[ix] CA Physician’s Guide at 54-56; CDIR at 31.
[x] CA Physician’s Guide at 56.
[xi] CDIR at 32.