TOPIC 10

Topic 10.1.3   Determination of Pay—Average Weekly Wage--Definition of Wages

Custom Ship Interiors v. Roberts, 300 F.3d 510(4th Cir. 2002), cert. denied, ___ U.S. ___, 123 S.Ct. 1255 (Mem.)(2003).

            Regular per diem payments to employees, made with the employer's knowledge that the employee was incurring no food or lodging expenses requiring reimbursement, were includable as "wages" under the LHWCA.

            The claimant was injured while remodeling a Carnival Cruise Line Ship for Custom Ship Interiors. Custom Ship's employment contract entitled the claimant to per diem payments without any restrictions. Carnival provided free room and board to its remodelers and Custom Ship knew this. Custom Ship argued that the per diem was a non-taxable advantage.

            The court noted Custom Ship's argument that payments must be subject to withholding to be viewed as wages, but did not accept it: "However Custom Ship misconstrues the Act's definition of a ‘wage.' Whether or not a payment is subject to withholding is not the exclusive test of a ‘wage.’”  Monetary compensation paid pursuant to an employment contract is most often subject to tax withholding, but the LHWCA does not make tax withholding an absolute prerequisite of wage treatment.

            The court explained that because the payments were included as wages under the first clause of Section 2(13), Custom Ship's invocation of the second clause of Section 2(13) is unavailing. "This second clause enlarges the definition of  ‘wages' to include meals and lodging provided in kind by the employer, but only when the in kind compensation is subject to employment tax withholding. The second clause, however, does not purport to speak to the basic money rate of compensation for service rendered by an employee under which the case payments in this case fall." Finally, the two member plurality summed up, "The so-called per diem in this case was nothing more than a disguised wage."

            The Dissent noted that the definition of "wages" found at Section 2(13) requires that a wage be compensation for "service," not a reimbursement for expenses. See Universal Maritime Service Corp. v. Wright, 155 F.3d 311, 319 (4th Cir. 1998).

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Topic  10.2.1  Determination of Pay—Average Weekly Wage in General—Section 10(a)

Gulf Best Electric, Inc. v. Methe, ___ F.3d ___, (No. 03-60749) (5^th Cir. Nov. 1, 2004).  [ED. NOTE:  This case was changed from Unpublished status to Published on December 27, 2004.]

            The Fifth Circuit found that it lacked jurisdiction to consider the claimant’s claim that the Board erred in excluding employer contributions to his retirement and health insurance funds when calculating his average weekly wage (AWW).  It explained that the claimant had styled his petition a “Cross-Application to Enforce Benefits Review Board Order” but that, in substance, the petition was a simply a request that that the court reverse the Board’s order, and thus allow inclusion of the employer’s $3.47 per hour contributions to retirement and health insurance funds in calculation of AWW.  “Because the claimant raises this issue as an affirmative challenge to the BRB’s decision rather than as a defense to his employer’s appeal, his ‘cross-application’ is properly characterized as a petition for review and, thus is time-barred by  Section 921©.

            The Fifth Circuit further noted that the claimant contended that, because he has filed a petition for modification of the compensation award with DOL pursuant to Section 22, it would be a “waste of this court’s time and resources” to dismiss his petition, only to have the claim eventually “work its way back through the system.”    The court noted that the claimant “cites no authority for the proposition that we may ignore the time requirements for appeal imposed by an agency’s organic statute for the sake of equity or judicial efficiency” and therefore it dismissed the petition. 

            In this matter the court also affirmed the Board’s decision that the date on which treatment actually ceased was the correct MMI date, noting that “[o]ne cannot say that a patient has reached the point at which no further medical improvement is possible until such treatment has been completed—even if, in retrospect, it turns out not to have been effective.”  Abbott v. La. Ins. Guaranty Assn., 40 F.3d at 126 (5^th Cir. 1994).

            Finally, the court upheld the Board’s application of Section 10(a) rather than Section 10(c) as the ALJ had found.  Noting that the claimant worked 47.4 weeks, or 237 days, or 91 percent of the workdays available in the year before his injury, the court stated that while it has not adopted a bright-line test for the applicability of Section 10(a) as the Ninth Circuit has (75 percent or more to be under Section 10(a)), “it is clear to us that [the claimant’s] record of 91 percent satisfies the requirement of § 910(a) that the claimant have worked ‘substantially the whole of the year immediately preceding the injury.’”  The court addressed the ALJ’s concerns of the “fairness” of possible overcompensation as his rationale for applying Section 10(c) by noting its prior position in Ingalls Shipbuilding v. Wooley, 204 F.3d 616 (5^th Cir. 2000), that the calculation mandated by Section 10(a) aims at a theoretical approximation of what a claimant could ideally have expected to earn… had he worked every available work day in the year.  “Over-compensation alone does not usually justify applying § 910(c) when § 910(a) or (b) may be applied.”

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Topic  10.2.4  Determination of Pay--“Substantially the Whole of the Year”

Stevedoring Services of America v. Guthrie, (Unpublished)(No. 03-72204)(9^th Cir. Dec. 16, 2004).

            In a memorandum opinion the court found that the ALJ and the Board had correctly applied Section 10(a) to calculate the claimant’s AWW.  There was no evidence of record that the claimant’s employment was seasonal or intermittent.  It was undisputed that the claimant had worked 228 days in the 53 weeks preceding his injury, or 87.7 percent of the total working days.

Topic  10.2.4  Determination of Pay—Average Weekly Wage in General—                                          “Substantially the Whole of the Year”

Gulf Best Electric, Inc. v. Methe, ___ F.3d ___, (No. 03-60749) (5^th Cir. Nov. 1, 2004).  [ED. NOTE:  This case was changed from Unpublished status to Published on December 27, 2005.]

            The Fifth Circuit found that it lacked jurisdiction to consider the claimant’s claim that the Board erred in excluding employer contributions to his retirement and health insurance funds when calculating his average weekly wage (AWW).  It explained that the claimant had styled his petition a “Cross-Application to Enforce Benefits Review Board Order” but that, in substance, the petition was a simply a request that that the court reverse the Board’s order, and thus allow inclusion of the employer’s $3.47 per hour contributions to retirement and health insurance funds in calculation of AWW.  “Because the claimant raises this issue as an affirmative challenge to the BRB’s decision rather than as a defense to his employer’s appeal, his ‘cross-application’ is properly characterized as a petition for review and, thus is time-barred by Section 921©.

            The Fifth Circuit further noted that the claimant contended that, because he has filed a petition for modification of the compensation award with DOL pursuant to Section 22, it would be a “waste of this court’s time and resources” to dismiss his petition, only to have the claim eventually “work its way back through the system.”    The court noted that the claimant “cites no authority for the proposition that we may ignore the time requirements for appeal imposed by an agency’s organic statute for the sake of equity or judicial efficiency” and therefore it dismissed the petition. 

            In this matter the court also affirmed the Board’s decision that the date on which treatment actually ceased was the correct MMI date, noting that “[o]ne cannot say that a patient has reached the point at which no further medical improvement is possible until such treatment has been completed—even if, in retrospect, it turns out not to have been effective.”  Abbott v. La. Ins. Guaranty Assn., 40 F.3d at 126 (5^th Cir. 1994).

            Finally, the court upheld the Board’s application of Section 10(a) rather than Section 10(c) as the ALJ had found.  Noting that the claimant worked 47.4 weeks, or 237 days, or 91 percent of the workdays available in the year before his injury, the court stated that while it has not adopted a bright-line test for the applicability of Section 10(a) as the Ninth Circuit has (75 percent or more to be under Section 10(a)), “it is clear to us that [the claimant’s] record of 91 percent satisfies the requirement of § 910(a) that the claimant have worked ‘substantially the whole of the year immediately preceding the injury.’”  The court addressed the ALJ’s concerns of the “fairness” of possible overcompensation as his rationale for applying Section 10(c) by noting its prior position in Ingalls Shipbuilding v. Wooley, 204 F.3d 616 (5^th Cir. 2000), that the calculation mandated by Section 10(a) aims at a theoretical approximation of what a claimant could ideally have expected to earn… had he worked every available work day in the year.  “Over-compensation alone does not usually justify applying § 910(c) when § 910(a) or (b) may be applied.”

Topic 10.2.4   Determination of Pay—Section 10(a)—"Substantially the Whole of the                                     Year"

Stevedoring Servs. Of Am. v. Price, 366 F.3d 1045 (9th Cir. 2004).

            When a longshoreman has worked more than 75 percent of the workdays in the year preceding injury, the Ninth Circuit found that Section 10(a) does not excessively over-compensate the claimant.

            The court also found that Section 6(b)(1) delineates the maximum compensation that an employee may receive from each disability award, not from all awards combined. In situations of multiple awards, the court stated that it recognized that the amount of adjustments needed, if any, depended on the factual determination of the cause of the employee's increase in earnings between the time of his first and second injury:

"If an employee's increase in earnings is not caused by a change in his wage-earning capacity, allowing the employee to retain the full amount of both awards does not result in any double dipping. The reason is that the prior partial disability award compensates the employee for the reduction in his wage-earning capacity from the first accident, and the subsequent permanent total disability award compensates the employee for what remains of his earning capacity after that accident. [Citation omitted.] Taken together, the awards do not compensate the employee for more earning capacity than he has actually lost. In comparison, a double dipping problem would arise if a change in conditions since the first accident has mitigated or eliminated the prior injury's negative economic effect on the employee's ability to earn wages. In that case, because the first award overestimated the effect of the first injury on the employee's wage end up compensating the employee for more wage-earning capacity than he has actually lost."

            The Ninth Circuit stated that its holding as to Section 6(b)(1) is consistent with the plain language of the LHWCA and effectuates the underlying policy of the Act by shielding employers from high compensation payments for injuries to highly paid workers while providing employers an incentive to prevent future injuries to formerly injured employees.

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Topic 10.4.4   Determination of Pay--Calculation of Annual Earning Capacity Under Section 10©

Volks Constructors v. Melancon, (Unpublished) No. 04-60443 Summary Calendar)(5^th

^{Cir.  Nov. 24, 2004).}

            In this Section 10 case, the employer objected not to the standard [Section 10©] applied, but rather to the particular historical earnings figures and sectors of the economy that the ALJ chose to use in his calculation.  The Fifth Circuit found that, “When viewed in the perspective of the policy of the lHWCA and the plethora of discrete facts in evidence here, we agree with the BRB’s characterization of the ALJ’s handling of this case.  We cannot credit respondents’ charge of bias; there is more than substantial evidence to support the facts found and law applied by the ALJ; in the context of  § 910©, the weekly wage calculations are reasonable—not unreasonable—estimates of Melacon’s earning capacity when he was injured; and, candidly, petitioners’ contention that this pile driver operator cum auto mechanic should have his annual earning capacity calculated solely on the basis of his own, subjective profit during a two-season entrepreneurial deviation into crawfish farming, with all of its variables, vicissitudes, and vagaries, borders on the ludicrous.”

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