Are Your Workers’ Comp Benefits Being Paid Correctly? The Importance of Average Weekly Wage Calculation.
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 is the basis of the monetary benefits you are entitled to under the Act. 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 Workers’ Compensation Act.
The Illinois Workers’ Compensation 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. Thus, any pay increases and earnings made after the accident are not taken into account.
The first and simplest method of calculation applies to an employee who has worked for the employer for 1 or more years and has less than 5 days of lost time the year prior to the injury. In this case, the calculation method 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 worked for less 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.
Miscalculation of AWW is commonly seen in construction workers, who are hired full-time but due to weather or project availability actually work less 52 weeks per year, and school district employees, whose employment are based on a 40 week contract. To illustrate the significance of this miscalculation, assume a teacher who makes a salary of $37,000 per year. Some adjusters will divide the salary by 52 weeks thereby calculating the AWW, TTD and PPD 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 the amount of lost time benefits (TTD), miscalculation of an AWW 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. For example, I recently had a client who was injured on the second day of his job. The claimant was a sales person and part of his wages was based on commission. In this situation the AWW calculation was based on the AWW of similarly situated employees.
AWW should 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 company car, the fair market rental value of these benefits should also be included as earnings. If the 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 second job and did not object to it.
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).
As you can see, the calculation of AWW can be a tedious and complex issue. However, it is well worth the time to make sure it is calculated correctly. To ensure 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 from an experienced workers’ compensation attorney.