Longshore & Harbor Workers' Compensation Act
Supplement - January 2005
Topic 8.9 - Wage-Earning Capacity
DISCLAIMER: The Longshore Benchbook was created solely to assist the Office of Administrative Law Judges as a first reference in researching cases arising under the Longshore and Harbor Workers' Compensation Act, and extension acts, as amended. This Benchbook does not constitute the official opinion of the Department of Labor, the Office of Administrative Law Judges, or any individual judge on any subject. This Benchbook does not necessarily contain an exhaustive or current treatment of case holdings, and should, under no circumstances, substitute for a party's own research into the statutory, regulatory, and case law authorities on any given subject referred to therein. It is intended to be used as a research tool, not as final legal authority and should not be cited or relied upon as such.
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Topic 8.9 Wage-Earning Capacity
Chevron U.S.A. Inc., v. Echazbal , 536 U.S. 73; 122 S.Ct. 2045 (2002).
[ED. NOTE: While this ADA disability case is not a longshore case, it is included in the materials for general information. ]
In a 9-0 ruling, the Court held that an employer may refuse to hire a job applicant who has an illness/disability (hepatitis C here) that poses a direct threat to the worker's own health or safety; that the ADA does not protect such a worker. Here the employer refused to hire the applicant to work at an oil refinery because company doctors opined that the applicant's hepatitis C would be aggravated by the toxins at the workplace. The applicant had unsuccessfully argued that he should be able to decide for himself whether to take the risk of working in an oil refinery where chemicals might aggravate his liver ailment. Since the applicant disputed the doctors' assessment, the Supreme Court stated that on remand the Ninth Circuit could consider whether the employer engaged in the type of individualized medical assessment required by the Equal Employment Opportunity Commission regulation.
Topic 8.9 Wage-Earning Capacity
Sestich v. Long Beach Container Terminal , 289 F.3d 1157 ( 9th Cir. 2002).
Where a longshoreman's post-injury "wage-earning capacity" exceeds his pre-injury "average weekly wages," he is not entitled to benefits under the LHWCA. Specifically, the court held that an employee is not entitled to a loss of earnings capacity benefits where his actual post-injury earnings adjusted for inflation exceeded his pre-injury wages, absent evidence that the employee's actual post-injury earnings did not fairly represent employee's earnings capacity in his injured condition.
Here the employee contended that he had lost "wage-earning capacity," within the meaning of the LHWCA, to the extent that he could not earn what he would have been able to earn absent his injury, and that he should have been awarded benefits equal to two-thirds of that loss. His contention is that, but for, his industrial accident, he would be earning about $134,000 annually as a crane operator, about $25,000 more than his current annual earnings of about $109,000 as a marine clerk. This contention rests in part on the factual assumption that, absent his back injury, he would be able to obtain certification as a crane operator and to find sufficient work in that job to earn about $134,000. The court also noted that his contention additionally rests in part on a legal assumption that compensation under the LHWCA is based on the method of calculation employed for ordinary torts.
Assuming that claimant's factual contentions were correct, the court found his legal conclusions to be wrong:
Benefits under the Act are not calculated in the same way as compensation under the tort system. The Act provides benefits based on "disability," which is defined as "incapacity because of injury to earn the wages which the employee was receiving at the time of injury in the same or any other employment.... That is, disability is not defined, as it would be under the tort system, as the inability to earn hypothetical future wages that the worker could have earned if he had not been injured. Rather, disability is defined under the Act as the difference between the employee's pre-injury "average weekly wages" and his post-injury "wage-earning capacity."
The claimant additionally argued that the proviso of Section 8(h) instructs the ALJ to allow benefits equal to the difference between his actual earnings and the wage-earning capacity he would have had if he had not been injured. However, the Ninth Circuit found that this argument is based on a misreading of Section 8(h) and that the section, including its proviso, is designed only to specify the method by which to determine post-injury "wage-earning capacity" within the meaning of the LHWCA. Once "wage-earning capacity" is determined, Section8(c)(21) instructs the ALJ to compare "wage-earning capacity" with pre-injury "average weekly wages" to determine the level of benefits, according to the court.
Topic 8.9.1 Wage-Earning Capacity�Generally
Tahara v. Matson Terminals, Inc ., (Unpublished)(BRB No. 03-0860)(September 28, 2004).
The Board affirmed, albeit on other grounds, the ALJ's compensation award during the period the claimant was in the state and federal witness protection programs. The Board found that the employer did not establish that the claimant was able to perform suitable alternate employment while the claimant was enrolled in the witness protection program. The claimant's testimony was uncontradicted that he was not allowed to work by the state and federal authorities during his time in the programs. Further, it was uncontested that his enrollment in the programs was related to the circumstances surrounding his work injury. Under these circumstances, the claimant was found to be entitled to compensation for total disability as the employer could not meet its renewed burden of proof after claimant was forced to leave suitable alternate employment through no fault of his own. The Board found that the facts in this case were analogous to those cases where a claimant is entitled to total disability compensation while participating in a Department of Labor-sponsored vocational rehabilitation program that precludes him from working. See, e.g. Newport News Shipbuilding & Dry Dock Co. v. Director, OWCP [Brickhouse] , 315 F3d 286, 36 BRBS 85(CRT) ( 4 th Cir. 2002); Louisiana Ins. Guar. Ass�n v. Abbott , 40 F.3d 122, 29 BRBS 22(CRT) ( 5 th Cir. 1994); Castro v. General Constr. Co ., 37 BRBS 65 (2003).
Citing Hairston v. Todd Shipyards Corp. , 849 F.2d 1194 ( 9 th Cir. 1988), 21 BRBS 122(CRT), the Board found that this holding, that the claimant was entitled to total disability benefits due to his inability to work while he was in the witness protection programs, is consistent with Ninth Circuit case law. In Hairston , the court held that suitable alternate employment was not established by a position at a bank that the claimant physically could perform, as the job was not realistically available because the claimant had a criminal record. �In this case, no jobs were realistically available to claimant while he was in the witness protection programs.�
The Board also affirmed the ALJ's finding that the state stipend the claimant received during his participation in the state witness protection program does not establish that he had a post-injury wage-earning capacity. The ALJ correctly rejected the employer's contention that the $1,200 to $1,400 per month stipend was a wage. �The [ALJ] correctly reasoned that the stipend was paid by the state and not an employer and that the stipend was not received pursuant to a contract for hire; these conditions are required for sums to constitute wages under the plain language of Section 2(13). The [ALJ] found that the stipend is analogous to unemployment compensation, which also is not a wage under Section 2(13). Moreover, there is no evidence that the state stipend was subject to tax withholding.� (Citations omitted.)
Topic 8.9.1 Wage-earning Capacity--Generally
Johnston v. Director, OWCP , 280 F.3d. 1272 ( 9th Cir. 2002).
In this case interpreting Section 8(c)(21), the court considered whether, in a situation where actual wages have remained constant, a claimant's post-injury earnings must be adjusted for inflation in order to be considered on equal footing with wages at the time of injury. The Ninth Circuit held that the actual wages without adjustments for inflation"fairly and reasonably represent [the claimant's] wage-earning capacity" as required by Section 8(h). The court agreed with the Board that "the fact that the wages claimant earned in his post-injury job may not have kept pace with inflation is not due in any part to claimant's injury." Here the claimant had resumed the same job he had prior to the injury, albeit in a part-time capacity. As a result of a collective bargaining agreement, claimant's wage rate as a dock supervisor remained unchanged between the time of his injury and the period during which he worked part-time.
Topic 8.9.2 Wage-Earning Capacity�Factors for Calculation
Keenan v. Director, OWCP , ___ F.3d ___ (No 03-70442)( 9 th Cir. Dec. 21, 2004).
While the main focus of this case is on de minimis awards, the court, in a two to one decision, also decided to adopt Board and other circuit court precedent that a shoulder injury is unscheduled. As to the de minimis issue, the court opined, �if there is a chance of future changed circumstances which, together with the continuing effects of the claimant's injury, create a 'significant potential� of future depressed earning capacity, then the claimant is entitled to the possibility of a future modified award under Rambo II .� See Metropolitan Stevedore Co v. Rambo , 521 U.S. 121 (1997)(� Rambo II �).
Here the claimant had remained at work for several years in a clerical position rather than his prior longshoring position and was making more than he had at the time of injury. The ALJ had found that the passage of time had outweighed the need for a de minimis award. The court stated that unless the passage of time has directly removed one of the relevant factors�for example, if some of the claimant's work restrictions were removed, or if market conditions changed for the better�the logic of the Rambo II test dictates that the mere fact that the claimant is earning above pre-injury levels cannot obviate the basis of the de minimis award. The court found, �the absence of economic loss thus far does not reflect an underlying absence of loss in physical function. The significance of the injury is a substantial factor in the 'significant potential of diminished capacity� test articulated by Rambo II .� Judge Tallman dissented on the de minimis portion of this opinion.
The Ninth Circuit also took the opportunity to note it's recently explicit opinion in Sestich v. Long Beach Container Terminal , 289 F.3d 1157, at 1160 ( 9 th Cir. 2002), ratifying the rule expressed previously in Board decisions that the statutory formula for wages contemplates wages at the time of injury, rather than projected present wages as the relevant baseline for comparison to actual present earning capacity. Claimant had argued that he should collect benefits according to a hypothetical damages formula, under which the employer must compensate him for the difference between his actual economic position and his hypothetical economic position, which he would have enjoyed but for the injury.
Topic 8.9.2 Wage-Earning Capacity--Factors for Calculation
Ward v. Holt Cargo Systems , (Unreported) (BRB No. 01-0649) (May 6, 2002).
In instances where a claimant's pain and limitations do not rise to the level of working only with extraordinary effort and in spite of excruciating pain, such factors nonetheless are relevant in determining a claimant's post-injury wage-earning capacity and may support an award of permanent partial disability benefits under Section 8(c)(21) based on a reduced earning capacity despite the fact that a claimant's actual earnings may have increased.
Topic 8.9.3.1 Wage-Earning Capacity--What constitute �actual wages�
Keenan v. Director, OWCP , ___ F.3d ___ (No 03-70442)( 9 th Cir. Dec. 21, 2004).
While the main focus of this case is on de minimis awards, the court, in a two to one decision, also decided to adopt Board and other circuit court precedent that a shoulder injury is unscheduled. As to the de minimis issue, the court opined, �if there is a chance of future changed circumstances which, together with the continuing effects of the claimant's injury, create a 'significant potential� of future depressed earning capacity, then the claimant is entitled to the possibility of a future modified award under Rambo II .� See Metropolitan Stevedore Co v. Rambo , 521 U.S. 121 (1997)(� Rambo II �).
Here the claimant had remained at work for several years in a clerical position rather than his prior longshoring position and was making more than he had at the time of injury. The ALJ had found that the passage of time had outweighed the need for a de minimis award. The court stated that unless the passage of time has directly removed one of the relevant factors�for example, if some of the claimant's work restrictions were removed, or if market conditions changed for the better�the logic of the Rambo II test dictates that the mere fact that the claimant is earning above pre-injury levels cannot obviate the basis of the de minimis award. The court found, �the absence of economic loss thus far does not reflect an underlying absence of loss in physical function. The significance of the injury is a substantial factor in the 'significant potential of diminished capacity� test articulated by Rambo II .� Judge Tallman dissented on the de minimis portion of this opinion.
The Ninth Circuit also took the opportunity to note it's recently explicit opinion in Sestich v. Long Beach Container Terminal , 289 F.3d 1157, at 1160 ( 9 th Cir. 2002), ratifying the rule expressed previously in Board decisions that the statutory formula for wages contemplates wages at the time of injury, rather than projected present wages as the relevant baseline for comparison to actual present earning capacity. Claimant had argued that he should collect benefits according to a hypothetical damages formula, under which the employer must compensate him for the difference between his actual economic position and his hypothetical economic position, which he would have enjoyed but for the injury.