Injured Workers Beware: Hidden Danger in Concurrent Employment in States That Refuse to Combine Concurrent Wages in Computing Average Weekly Wage

Injured Workers Beware: Hidden Danger in Concurrent Employment in States That Refuse to Combine Concurrent Wages in Computing Average Weekly Wage

A close friend of our youngest child (age-25) recently repeated a quip that I first heard years ago, during the “stagflation” of the late 1970s. Our son’s friend, who holds a degree from a respected North Carolina university, but who has not been able to land a permanent position with any employer, said he couldn’t understand how the unemployment rate could be above 9 percent. “There are lots of jobs around,” the young man said. “I’ve got three of them.”

Indeed, Kevin (not his real name) works some 25 hours per week in a retail store at a nearby mall, another 15 or so on weekends as a “bouncer” at a local night spot, and finally, as his schedule permits, he fills in occasionally with a local lawn maintenance firm when it needs some extra laborers. For calendar year 2011, he’ll earn approximately $20,000. Would it surprise you that in many states—the situation in North Carolina isn’t clear—Kevin’s average weekly wage (“AWW”), for purposes of computing workers’ compensation permanent disability indemnity, could be substantially less than $384.62 ($20,000 ÷ 52)?

Majority of States Don’t Combine Wages from Concurrent Employment

Kevin’s AWW could be considerably less than his average weekly earnings because following injury, in a majority of states, his three concurrent weekly incomes would not be combined since they are not from similar employment (a number of states refuse to combine concurrent wages even if they are from similar employment, while a few, such as California, allow the combining of the wages, whether or not the concurrent employment is similar) [see Larson’s Workers’ Compensation Law, Ch. 93, § 93.03; see also Cal. Labor Code § 4453(c)(2), which essentially provides that if an employee works for two or more employers, his or her average weekly earnings are 100 percent of the employee’s aggregate weekly earnings from all employments].

In other words, if Kevin sustained a work-related injury as a bouncer, most states would compute his AWW as $150 (based upon his current pay of $10 per hour and his employment of 15 hours per week), since that would be “the employment in which he was working at the time of the injury [see N.C. Gen. Stat. § 97-2(5)]. That his injury might prevent him from working in the retail establishment and/or from mowing laws during his recuperative period would not be a relevant factor. $150 would be used to compute the value of any scheduled permanent injury as well as any non-scheduled permanent disability.

Mississippi Decision Illustrates the Potential Problem

A recent decision from Mississippi, Kukor v. Northeast Tree Serv., Inc., 2011 Miss. App. LEXIS 461 (July 26, 2011), illustrates this point. Prior to Kukor’s injury, his employer understood that in Mississippi, workers’ compensation insurance for a tree-trimming business could only be obtained on an expensive, assigned-risk basis. Climbing, pruning, and cutting trees are, after all, quite hazardous. Comp rates for related services—e.g., landscaping, stump grinding, debris removal, and the like—were much less expensive.

So, with the assistance, I’m sure, of a competent attorney, the employer set up two parallel, but carefully separated, business enterprises. One, a tree-trimming entity, was incorporated as a limited liability company. The other provided landscaping, stump grinding, and debris removal services and was operated as a proprietorship. Two carefully segregated sets of books were kept. Two tax returns were filed. Applicants for employment completed two job applications and received two offers of employment. Workers turned in two time cards—one for their hours trimming trees, the other for their time spent performing the less hazardous duties. Kukor and his co-workers received two separate paychecks. The two businesses even secured workers’ compensation coverage through different carriers.

All seemed to be working fine, at least until Kukor fell from a tree he was trimming. When he sought workers’ compensation benefits, the carrier for the tree trimming side of things acknowledged the claim, but informed Kukor that his AWW would be based only on his earnings from the tree trimming side of things. Since only a small portion of Kukor’s time was spent aloft, that meant his AWW was very low, nothing like what he was paid each week from what he thought was the combined enterprise. Moreover, his permanent injuries not only ended his work as a tree trimmer, they prevented him from performing the less hazardous duties as well. That a physician gave him a high permanent impairment rating meant little since his impairment percentages was multiplied by two-thirds of a small AWW.

Kukor contended the “dual” operation a sham. Both businesses, he pointed out, were operated from the owner’s home and used the same telephone number. Employees from both sides of the enterprise met each day to get assignments. The workers were often intermingled and they all used the same equipment. The tree trimming business advertised stump grinding service and often submitted bids that included stump grinding, in spite of the fact that such work was accounted for through the other side of the owner’s dual enterprise. The appellate court acknowledged Kukor’s contentions, but held that there was sufficient evidence to support the Commission’s finding that the two businesses were indeed separate. Citing Sullivan v. City of Okolona, 370 So.2d 921 (Miss. 1979), the appellate court indicated that although the result could be considered “harsh,” the problem could only be corrected by the legislature.

Some States Allow Exception Where AWW Computation Is Deemed “Unfair”

The inequity of Kukor’s situation has been addressed by a number of states [see Larson, § 93.03]. In Pennsylvania, for example, the concurrent wages may be combined for AWW computation purposes if, at the time of the injury, the employer knew of the other employment [77 P.S. § 582(e)]. Other states have a specific catch-all provision to handle particularly egregious circumstances. North Carolina’s is a typical example:

"But where for exceptional reasons the foregoing would be unfair, either to the employer or employee, such other method of computing average weekly wages may be resorted to as will most nearly approximate the amount which the injured employee would be earning were it not for the injury."

N.C. Gen. Stat. § 97-2(5).

Of course, courts can disagree refuse to employ the catch-all phrases even when they are present [see Barnhardt v. Yellow Cab Company, 266 N.C. 419, 146 S.E.2d 479 (1966), where the court refused to combine a claimant’s earnings as a maintenance man for one employer with his earnings as a part-time cab driver for another, the job in which he was injured.]

Fairness to the Employee and Fairness to Employer Are Not Symmetrical

As Dr. Larson argued [Larson, § 93.03], in his stinging criticism of Barnhardt, “fairness” is not always symmetrical; it cannot always be judged by the same standards. To Kukor, the loss was considerable. To the employer—and even more the carrier—the loss is one among many. Today this employer-carrier might be saddled with a slight extra cost; tomorrow the positions may well be reversed. The employer-carrier may be completely relieved of the cost of an injury to one of its employees in a concurrent-employment situation, when it happens to be the other employment in which the injury occurs. This is the essence of the concept of spreading the risk in a system like workers’ compensation. Moreover, concurrent employment is by no means the only compensation situation in which employers and carriers “must console themselves with the reminder that these things will all ‘wash out’ in the end” [id.]

"… For example, the rule that the last employer in whose employ injurious exposure occurred must bear the entire liability for an occupational disease, without apportionment, is a far more extreme case of disproportion between premium and liability, yet it is accepted as a defensible compromise on the theory that employers and carriers will on the whole come out even in time.

"For the injured worker, however, there is no such consolation. That worker, alone, bears the burden of being reduced to $20 a week when his or her actual earnings may have been five times that much. That is real unfairness. By comparison, the “unfairness” to the employer, in the form perhaps of a slight premium increase, eventually offset by the times [it] will benefit by the same rule, is an artificial construct with no genuine content."

Larson, § 93.03].

One’s view of fairness can often depend upon “whose ox is being gored.” When it comes to workers who cobble together multiple employments to make ends meet, the “gored” ox is often theirs.

© Copyright 2011 LexisNexis. All rights reserved.