By Lee Alhambra
The most critical factor in determining the amount of compensation an injured worker is entitled to under the Illinois Workers' Compensation Act is the calculation of the average weekly wage (AWW). The calculation of average weekly wage forms the basis of all benefits. For example, total temporary disability (TTD) benefit is set at 66-2/3% of the average weekly wage and partial permanent disability (PPD) rate is set at 60% of the average weekly wage. Simply put, the more you earn, the more you recover under the Act.
The Act provides three different methods of calculating the AWW. Determining which calculation method is used depends on the length of employment. Generally, the average weekly wage calculation is based on wages earned 52 weeks prior to the date of accident. Any earnings made after the accident are irrelevant. So unfortunately, any pay increase obtained after your accident is not taken into account.
The first and simplest method of calculation applies to an employee who has worked for the employer for one or more years and has less than five days of lost time during the year prior to the injury. In this case, the calculation is to simply divide the total amount earned for the 52 weeks prior to the accident by 52 weeks.
The second calculation method is applied when a worker has not worked for more than a full year or if the worker has been employed for more than 52 weeks but lost five or more days from work during the prior year. In these cases, the total earnings are not divided by 52, but rather divided by the actual weeks and partial weeks worked. For example, if an employee took four weeks of unpaid leave the year prior to the accident, to correct AWW calculation would be to divide the total earnings by 48 weeks that were actually worked. Another example is where the employee has only been employed for 60 days and is injured at work; the total earnings are divided by 8 and 4/7 weeks.
Miscalculation of AWW is commonly seen in construction workers who are hired full-time but due to weather or project availability actually work less than 52 weeks per year. The AWW of school district employees whose employment are based on a 40 week contract are also regularly miscalculated. So they have a consistent income stream throughout the year, many school district employees opt to equally spread 40 weeks of pay over 52 weeks. Even if the school district employee opts for the "equal pay" option, the total earnings should still be divided by the 40 weeks that were actually worked. To illustrate the significance of this difference, assume a teacher who makes a salary of $37,000 and takes the equal pay option. If we divide this amount by 52 weeks, AWW, TTD, and PPD comes to $711.54, $474.36, and 426.92, respectively. Whereas, if the earnings are correctly divided by 40 weeks, the AWW, TTD, and PPD comes to $925, $616.67, and $555, respectively. As you can see this difference is significant. Depending on the severity of the injury and duration the employee is off of work due to work injury, this can potentially add up to tens of thousands of dollars of lost benefits.
Finally, the third method of calculation applies if the employee has only been employed for a short period of time prior to the accident, where there are insufficient earnings to calculate the AWW under the first or second method. In this situation the AWW calculation is based on the AWW of similarly situated employees.
It is important to include all types of earnings in AWW. Actual earnings of an employee include not only regular wages but also, vacation pay, holiday pay, sick pay, incentive pay and shift differentials. Furthermore, if as part of the job the employer provides housing or a car, the fair market rental value of these benefits should also be included as earnings. If claimant held concurrent employment at the time of the accident, wages from the second job should also be included in AWW, provided that the employer knew about the second job.
Overtime is generally excluded from the AWW calculation. However, if the employee can show that the overtime was mandatory and regular, than it should be included in AWW calculation. To further complicate the calculation of AWW, the courts have held that the overtime hours should be calculated at the regular rate, not the overtime rate (which is typically 1.5 or 2 times the regular rate).
Depending on the situation, the calculation of AWW can be an extremely tedious and complex issue. To assure that your rights are protected and that you receive the maximum amount you are entitled to under the Workers' Compensation Act, it is always a good idea to seek counsel of an experienced workers compensation attorney.
Contributing author Lee Alhambra is a lawyer with Woodruff Johnson & Palermo Injury Law Offices
