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CHAPTER 3-201 - AVERAGE WEEKLY WAGE

1. Purpose and Scope. This Chapter provides the procedures for making average weekly wage determinations. Further information regarding average weekly wage determinations in occupational disease cases can be found in PM 2-203.3 and PM 3-400.3.

2. Definitions.

a. Average Weekly Wage. The average weekly wage (AWW) is set at one fifty-second part of the employee's average annual earnings.

b. Wages. Section 2(13) of the Act defines wages as the money rate at which the service rendered by an employee is compensated by an employer under the contract of hiring in force at the time of injury, including the reasonable value of any advantage which is received from the employer and included for purposes of any withholding of tax under subtitle (c) of the Internal Revenue Code of 1954 (relating to employment taxes). The term wages does not include fringe benefits, including (but not limited to) employer payments for or contribution to a retirement, pension, health and welfare, life insurance, training, social security or any other employee or dependent benefit plan for the employee's or dependent's benefit, or another employee's dependent entitlement.

3. Provisions of Section 10 for Determining AWW. Section 10 of the Act provides three methods for calculating the employee's average annual earnings. One of these methods must be used to compute the average annual earnings of the employee. Section 10(d)(1) provides that the "average weekly wages of an employee shall be one fifty-second part of his average annual earnings."

a. Worker Engaged in Employment All or Most of Year. If the employee has worked in the kind of employment in which he/she was injured for substantially the whole of the preceding year, the average annual earnings for compensation will consist of 300 times the average daily wage of a 6-day worker or 260 times the average daily wage of a 5-day worker engaged in such employment. If a problem develops as to the precise meaning of the word "substantially," a certain amount of flexibility is granted by the nature of the word. The test is not to be applied mechanically but with a flexible view toward fairly reflecting the employee's probable future earning loss. It is intended to apply to work that is steady or permanent. Professor Arthur Larson gives the following example:

In Tangorra v. National Steel, 6 BRBS 427 (1977), the Board concluded that the first step in determining the employee's correct average weekly wage was the calculation of the average daily wage. This is done by dividing the number of days actually worked into the total earnings for the 12 months immediately preceding the injury (for example $11,270 (total earnings) divided by 245 (total days worked) = $46.00 average daily wage). The resulting figure is then multiplied by 260 (if the employee was a "5 day worker") and divided by 52 weeks to obtain the correct average weekly wage ($46 x 260 / 52 = $230.00 P/W). If the employee was a "6 day worker" the $46 would be multiplied by 300 instead of 260 and then divided by 52 weeks.

b. Worker Engaged in Employment Less than All or Most of Year. If the employee did not work in the same employment during substantially the whole of the year before the injury, the same formula as applied in section 10(a) will be used and applied to the wage of an employee of the same class, working substantially the whole year, in the same or similar employment, in the same or a neighboring place on the days when so employed. The essential factor in applying this provision is to determine whether the earnings of the chosen "similar employee" are sufficiently similar to those of the injured employee. If the selected employment produces an unrealistic result, flexibility again must be stressed and the application is not to be rigid and mechanical. The CE shall strive for agreement of the parties when the method described in this subparagraph cannot be strictly applied.

c. Exceptional Conditions of Employment. If neither of the methods outlined in subparagraphs 4a and 4b above can reasonably be applied, the DD or CE will consider the average annual earnings to be "such sum as, having regard to the previous earnings of the injured employee in the employment in which he was working at the time of the injury, and of other employees of the same or most similar class working in the same or most similar employment in the same or neighboring locality, or other employment of such employee, including the reasonable value of the services of the employee if engaged in self-employment, shall reasonably represent the annual earning capacity of the injured employee." There are a number of variables that might affect this application. This test provides even more flexibility than is seen in section 10(a) or (b). Section 10(c) is the catch all provision. It applies to seasonal, intermittent, discontinuous and other employment, which amounts to less than a full work year.

See Matulic v. Director, OWCP, 32 BRBS 148(CRT)(9^th Cir. 1998) for an application of section 10 to an unusual set of facts.

d. Retired Employees.

(1) Section 10(d)(2)(A) provides that if the time of injury occurs within the first year of voluntary retirement, the average weekly wage shall be one fifty-second part of his/her average annual earnings during the 52 weeks prior to retirement.

(2) Section 10(d)(2)(B) provides that if the time of injury occurs beyond one year after voluntary retirement, the average weekly wage shall be the National Average Weekly Wage (as determined under section 6(b) of the Act) at the time of injury.

(3) If the employee retires due to the occupational injury, the post retirement provision does not apply. The claimant's AWW should reflect his/her wages prior to retirement. (See PM 2-203 for more information on the handling of occupational disease cases.)

4. Time of Injury Determinations. The average weekly wage is fixed at the time of injury, even if the disability begins subsequent to this date. In occupational disease cases, injury is defined as the date on which the claimant became aware or in the exercise of reasonable diligence or by reason of medical advice should have been aware of the relationship between the employment, the disease and the death or disability. In hearing loss cases, the date of last exposure to injurious stimuli prior to administration of a determinative audiogram is the relevant time of injury for purposes of calculating the average weekly wage. See Ramey v. Stevedoring Services of America, 31 BRBS 206(CRT)(9^th Cir. 1998); Mauk v. Northwest Marine Iron Works, 25 BRBS 118 (1991). The “determinative audiogram” is that test which is determinative of the amount of permanent partial impairment for which the Claimant is being compensated.

5. Part-Time Employment. An employee's earning capacity is not limited solely to the earnings in the particular employment, which the employee was engaged in when injured but should be gauged by what the employee is capable of earning in all employment in which he/she was employed during the year prior to the injury.

6. Determination of the Wages of a Minor. If under normal circumstances the wages of an injured minor can reasonably be expected to increase during the period of disability, the employee's wage rate shall not be limited to the pre-injury earnings. The age of majority shall be 21 years of age.

7. Additional Income Considered As Wages. The following items have been held to be wages in certain conditions and should be included in the average annual wage calculation:

a. Overtime pay (if a regular and normal part of employment)

b. Vacation Pay

c. Container royalty payments

d. Tips and bonuses

e. Room and board

f. Car allowance

8. Evaluating Wage Information.

a. General.

(1) Upon receipt of Form LS-206 or Form LS-208, the CE should examine the wage information reported and compare it to the wage information reported on Form LS-202.

(2) If there is a discrepancy or payment of compensation is at a tentative rate, the CE should actively resolve this matter as soon as possible. To resolve the controversy the CE should send the claimant a form LS-426 or LS-557 for clarification.

(3) If the claimant responds with information that substantiates a change in compensation benefits, the EC is to be promptly notified. LS-537, Change in Compensation Based on Higher AWW (Exhibit 46, PM 10-200), may be utilized for this purpose. If the claimant fails to respond and compensation continues to be paid at a tentative rate or at an obviously incorrect rate, the EC is to be contacted and advised that the rate must be corrected.

b. Resolution. The average weekly wage determination should be fair and reasonable. Section 10(c) of the Act is to be utilized whenever there is a doubt. All parties must be willing to compromise. Under extreme circumstances an informal conference may need to be scheduled, but keep in mind there is ample case law available. The Desk Book should be consulted along with the Matthew Bender Benefits Review Board Service for the current case law on the subject.

c. Exceptions. There are always exceptions to every rule and wage information will not always fit neatly into the categories listed in sections 10(a), (b), and (c) of the Act. For instance the Outer Continental Shelf Lands Act presents special problems due to the nature of the working assignments. District Offices will find it necessary to work up local rules to deal with such situations. Certain Defense Base Act contracts may also involve unique work assignments and unique contractual arrangements concerning payments. The NO should be contacted whenever a situation arises that cannot be resolved.