California: Tricks of the Trade When Calculating Temporary Disability Rate

One of the primary benefits of California workers’ compensation is the payment of temporary disability (TD). Although not specifically defined in the California Labor Code, case law and customary usage has provided a sufficient perimeter for determining an injured workers’ temporary disability period. Essentially it is the time period from the date of injury until the worker reaches “Maximum Medical Improvement” (MMI) or has become “Permanent and Stationary” (P&S.) (See Chavira v. W.C.A.B. (1991) 235 Cal. App. 3d 463, 56 Cal. Comp. Cases 631; W.M. Lyles Co. v. W.C.A.B. (Butz) (1969) 3 Cal. App. 3d 132, 34 Cal. Comp. Cases 652.)

Several Noteworthy Panel Decisions (NPDs) have issued lately on the issue of how to calculate the rate of temporary disability (TD,) which is generally two-thirds of an applicant’s Average Weekly Earnings (AWE) pursuant to Labor Code § 4653. Labor Code § 4453(c) provides four options for this calculation, the selection of which is to be determined based on the unique facts of any given case as illustrated in the noteworthy panel decisions (NPDs) summarized below.

PRACTICE NOTE: Litigators are often not aware of the identity, content and quirks of these code sections Labor Code § 4653 and Labor Code § 4453(c) and often arrive at trial unprepared.

For instance, Labor Code § 4653 provides that “[i]f the injury causes temporary total disability, the disability payment is two-thirds of the average weekly earnings during the period of such disability, consideration being given to the ability of the injured employee to compete in an open labor market.” The last part of this sentence is interesting since “the ability of the injured employee to compete in an open labor market,” has been deleted from determination of permanent disability (Labor Code § 4660) for over 10 years. Yet no similar deletion has been made to this Labor Code § 4653 determining calculation of TD.

Prior to going to trial on a TD calculation issue, counsel should review both code sections (Labor Code § 4653 & Labor Code § 4453) and be able to present a viable and coherent argument to the judge as to how a particular section of the code supports their interpretation for calculation of AWE.

I. Method #1 – Labor Code § 4453(c)(1) - Usual Workweek

Labor Code § 4453(c)(1) states:

“Where the employment is for 30 or more hours a week and for five or more working days a week, the average weekly earnings shall be the number of working days a week times the daily earnings at the time of the injury.”

EXAMPLE #1: Common Formula

This is the most common formula and is generally the one applicable to most fact patterns. For instance, suppose Tom works a full time job as a gardener for a Golf Club. He works five days a week and earns $80 a day. His AWE would be 5 x 80 = $400. His TD rate would be two-thirds of his AWE or $267 a week.

EXAMPLE #2: Hallam v. City of Merced, 2013 Cal. Wrk. Comp. P.D. LEXIS 645

David Hallam was an urban forest ranger for 25 years. This position was eliminated and he voluntarily took a demotion to a lesser paying job as a pesticide applicator on 7/1/2009.

Soon thereafter, Mr. Hallam filed a claim for an industrial cumulative trauma injury for the period ending 7/30/3009, in the form of carpal tunnel syndrome to his bilateral upper extremities. The underlying case settled with Stipulations and Request for Award on 3/5/2013. Trial was set on the issues of TD and calculation of earnings.

The Judge determined that Mr. Hallam’s earnings should be calculated using Labor Code § 4453(c)(4) and took his one month of lesser earnings as a pesticide applicator and 11 months of higher earnings as an urban forestry supervisor and averaged the total.

The Workers’ Compensation Appeals Board (WCAB) on Reconsideration reversed the Judge and held that Labor Code § 4453(c)(1) was the correct method to use in this case, which resulted in a substantially lower TD rate for applicant. The WCAB explained:

“Applicant’s cumulative trauma period has been stipulated as July 1, 2009 to July 31, 2009. During this time, applicant was not working as an urban forestry supervisor; he was working as a pesticide applicator. There is thus no reason to include his wages as an urban forestry supervisor in calculating his rate of temporary disability indemnity benefits.

“Moreover, applicant’s temporary total disability indemnity rate should reflect what his earning capacity would have been during the period of disability but for the injury. (Argonaut Ins. Co. v. Ind. Acc. Com. (Montana) (1962) 57 Cal.2d 589 [27 Cal.Comp.Cases 130].) Here, the position of urban forestry supervisor had been eliminated due to budget shortfalls; as such, applicant is no longer capable of earning the higher rate of pay that accompanied his prior position. (See also Herman v. Workers' Comp. Appeals Bd. (1996) 61 Cal.Comp.Cases 396 (writ denied) (reasonable to exclude an injured worker's history of higher earnings in calculating average weekly earnings based on actual earnings at the time of injury where evidence showed that the earlier higher earnings were no longer available due to changes in the economy.) We also note that, as set forth in subsection (c)(4), there is no indication in the record before us that applicant worked fewer than 30 hours per week, nor has there has been a showing that excluding applicant's prior earnings as an urban forestry supervisor would not reasonably and fairly reflect applicant’s true earning capacity at the time of the injury to applicant's bilateral extremities.”

PRACTICE NOTE: This is probably the correct result given that at end date of the cumulative trauma (CT) period 7/31/2009, applicant was earning substantially lower wages than he had earned during the first eleven months in the year prior to that end date. And he had no prospect for returning to that higher wage since that position had been eliminated. However, there seems to be some confusion as to whether or not the parties actually stipulated to the CT period of one month in which applicant was earning the lower wage, rather than alleging a CT period of one year prior to the CT end date which would have been 7/31/2008 to 7/31/2009. Query as to whether the result would have been different if the parties had stipulated to the one year CT period (where eleven months of that year the applicant earned wages at the higher rate), rather than the one-month period (where the applicant earned wages at the much lower rate). In other words, if the one-year period had been stipulated to, would the Labor Code § 4453(c)(4) method have been allowed, resulting in a higher TD rate? Parties should be aware of these issues when developing the medical evidence in cases like this.

II. Method #2 – Labor Code § 4453(c)(2) - Multiple Employers

Labor Code § 4453(c)(2) states:

“Where the employee is working for two or more employers at or about the time of the injury, the average weekly earnings shall be taken as the aggregate of these earnings from all employments computed in terms of one week; but the earnings from employments other than the employment in which the injury occurred shall not be taken at a higher rate than the hourly rate paid at the time of the injury.”

EXAMPLE #1: Bartender

For instance, Rene makes $80 an hour bartending part-time on the weekends. Her weekly bartending earnings for one weekend would be $960 (12 hours x $80). During the week, she works full time as an office clerk, where she is paid $25 an hour, or $1000 a week. Her total weekly earnings would be $1960. If Rene was injured at her bartending job, her TD rate would be two-thirds of her weekly earnings of $1960. But if she were injured at her clerical job, her TD rate would be based on the number of hours worked per week (52) times the $25 per hour paid at her clerical job or $1300.

EXAMPLE #2: Robbins v. Susanville Elementary School District, 2013 Cal. Wrk. Comp. P.D. LEXIS 281

Deanna Robbins worked concurrently at several jobs such as a custodian and instructional aide prior to filing a workers’ compensation claim for injury to her bilateral upper extremities for the CT period ending 3/15/2012. Prior to filing her claim, Ms. Robbins had been informed that her job as custodian would be terminated at the end of her probationary period. The Judge calculated her TD rate using Labor Code § 4453(c)(2) by averaging the income from all of her employments in the year prior to the last day of her CT which was 3/15/2012.

Defendant argued that this TD rate was inaccurate and too high. Instead defendant felt that her TD rate should be calculated using Labor Code § 4453(c)(4), the “earning capacity” method. Defendant explained that since Ms. Robbins had not passed her probationary period as custodian, her “earning capacity” was less than if she would have been able to continue to be employed in that position.

The WCAB on Reconsideration affirmed the Judge’s calculation as an accurate reflection of applicant’s “earning capacity” and explained:

“However, ‘regardless of which provision of subdivision (c) of section 4453 is used, ‘earning capacity’ remains the benchmark for calculating average weekly earnings at the time of injury.’ (Pham v. Workers' Comp. Appeals Bd. (2000) 78 Cal.App.4th 626, 632–633 [65 Cal.Comp.Cases 139].) ‘Earning capacity is not locked into a straitjacket of the actual earnings of the worker at the date of injury; the term contemplates his general over-all capability and productivity; the term envisages a dynamic, not a static, test and cannot be compressed into earnings at a given moment of time.’ (Goytia v. Workmen's Comp. Appeals Bd. (1970) 1 Cal.3d 889, 894 [35 Cal.Comp.Cases 27].)”

PRACTICE NOTE: In comparing this case with the Hallam case summarized above, it should be noted that the CT period was determined to be a full year prior to the end date of 3/15/2012. Query as to whether the Judge and WCAB would have followed Labor Code § 4453(c)(4) and the Hallam calculation if the CT period had been limited to the one-month period just prior to the end date of the CT. Again, this is an issue practitioners should take note of when developing their discovery plan.

III. Method #3 Labor Code § 4453(c)(3) - Sporadic work

Labor Code § 4453(c)(3) states:

“If the earnings are at an irregular rate, such as piecework, or on a commission basis, or are specified to be by week, month, or other period, then the average weekly earnings mentioned in subdivision (a) shall be taken as the actual weekly earnings averaged for this period of time, not exceeding one year, as may conveniently be taken to determine an average weekly rate of pay.”

EXAMPLE #1: Event Planner

For instance, Ellie is an event planner who is paid $5,000 for each event. She planned 10 events in the year prior to DOI. Her AWE = $5,000 x 10 = $50,000/52 weeks = $962. Her TD rate would be $962 x 66% = $641.

EXAMPLE #2: Galiano v. Linden Steel and Construction, Inc., 2016 Cal. Wrk. Comp. P.D. LEXIS 89

Craig Galiano was an ironworker with a “sporadic” 20-year work history, when he injured his back at work on 8/12/2015. Prior to his injury he had worked for Linden Steel approximately 2-1/2 months. When he tried to return to work after he was medically cleared to do so, his Union was not able to dispatch him to any worksites. At trial, the Judge used Labor Code § 4453(c)(2) to calculate his TD rate. Mr. Galiano had earned $10,516.82 while working for Linden Steel, which averages to $728.88 per week, and yields a TD rate of $485.92. However, prior to his 2-1/2 month employment with Linden Steel, he had been unemployed for 2-1/2 years. The Judge therefore took his gross earnings of $10,516.82 and divided them by 52 weeks, for AWE of $202.54 per week for a TD rate of $135.03. Since this is below the statutory minimum rate, the minimum TD rate of $165.59 was awarded by the Judge and affirmed by the WCAB. The WCAB explained their rationale as follows:

“An estimate of earning capacity is a prediction of what an employee's earnings would have been had he not been injured.” (id. at p. 594).

Applicant is not one whose wages were briefly interrupted by recession or a low wage period, he is one who had no wages at all for 2-1/2 years before hired by the employer for a temporary job. Any estimate of his earnings after his injury must take into account his lack of prior earnings as well as his lack of post-injury jobs that he sought. As such his earning capacity is represented by his overall earnings divided by 52 weeks for the calendar year he worked.[n1]

Footnote 1: In point of fact applicant’s earning capacity is probably even lower than found, given that his earnings at this employer were all he made over a much longer period than 52 weeks.” (Emphasis added.)

PRACTICE NOTE: Applicant’s argument in this case was that the Judge and WCAB’s interpretation of Labor Code § 4453(c)(3) does not mesh with the statutory language which reads that the AWE “shall be taken as the actual weekly earnings averaged for this period of time,” meaning the period of time that the applicant worked at the short term job. It is unclear as to how and why the Judge and WCAB interpreted “period of time” to be a year long period. It appears as if their analysis more closely aligns with applicant’s earning capacity under the method found in Labor Code § 4453(c)(4). Parties should make certain that their positions on these issues are clearly stated, so that there is no confusion at the trial level as to which calculation method is the most accurate. (Even though Labor Code § 4453(c)(4) cited below, uses a variation of the word “fair,” litigators should always consider replacing the word “fair” with the word “accurate.” When making an argument to the Finder of Fact on any issue, a position that is argued as “most accurate” will be more readily received than a position that is argued as “most fair.”)

IV. Method #4 – Labor Code § 4453(c)(4) – “Most Accurate AWE”

Labor Code § 4453(c)(4) states:

“Where the employment is for less than 30 hours per week, or where for any reason the foregoing methods of arriving at the average weekly earnings cannot reasonably and fairly be applied, the average weekly earnings shall be taken at 100 percent of the sum which reasonably represents the average weekly earning capacity of the injured employee at the time of his or her injury, due consideration being given to his or her actual earnings from all sources and employments.”

EXAMPLE #1: Intern job

For instance, Sue is participating in a six-month internship program earning $25 an hour. After the internship program ends, Sue was promised a permanent position earning $80 an hour. Near the end of the internship program, Sue slips and falls at work and injures her back. Prior to her fall, Sue’s supervisor had recommended that she be offered a permanent position at the company earning $80 an hour. Therefore, her increase in wages from $25 to $80 an hour was “tangible and reasonably expected at the time of injury.” Therefore, Labor Code § 4453(c)(4) would be the appropriate method to use for calculation of AWE in this hypothetical.

EXAMPLE #2: Savoie v. National Technical Systems, 2015 Cal. Wrk. Comp. P.D. LEXIS 505

Mark Savoie was required to have his left leg amputated on 12/2/2009 as a result of an industrial “crush” injury which occurred 24 years earlier on 1/22/1985. Although he returned to work as a machinist after his 1985 crush injury, earning $57,000 in his “highest earning year” of 2004, he has not been able to return to work after his 2009 leg amputation.

The WCAB wrote, “Applicant contends that because he was awarded steady pay increases between 1989 and 2004, his earning capacity for purposes of calculating temporary disability payments should have been assessed based on applicant's earnings from 2004, and not based on his income at the time of the January 22, 1985 injury…”

However, the WCAB found that the evidence did not support this assertion by applicant, and that the increase in the 2004 wages was an aberration. In order to prevail on a calculation based on Labor Code § 4453(c)(4), the applicant must establish that his earning capacity at the time of injury was “tangible and reasonably expected.” This was not the case for Mr. Savoie and therefore he did not meet his burden of proving that the Labor Code § 4453(c)(4) was the appropriate method to use in this case.

V. CONCLUSION

Although calculation of TD is often treated as an insignificant issue by many litigants, as you can see from the discussion above, there are a plethora of glitches that can catch the unwary practitioner by surprise.

For instance, in addition to the above issues, parties should be aware that the maximum and minimum TD rate changes each year. For instance, for 2016 dates of injury, the maximum weekly earnings were determined to be $1,692.65, with a TD rate of $1,128.43. For 2016 dates of injury, the minimum weekly earnings were determined to be $253.89, with a TD rate of $169.49.

Again, prior to any trial on a TD calculation issue, counsel should review both applicable code sections (Labor Code § 4653 & Labor Code § 4453) and be able to present a viable and coherent argument to the Judge as to how and why a particular section of the code supports their interpretation for calculation of TD based on AWE.

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