December 7, 2012

How Do You Correctly Calculate The Weekly Rate?

In Iowa workers' compensation injured workers are paid benefits based on their individual weekly rate. The weekly workers' compensation rate will usually roughly equal a worker's average gross earnings less their average payroll taxes.

Iowa Code Sections 85.36 and 85.37 set out the details of the law for correctly calculating the weekly rate.

The basic procedure for correctly calculating the weekly rate is to start by looking at the worker's earnings immediately prior to the injury date, and find the first 13 weeks of "representative" earnings. The average of those 13 representative weeks is then applied to the rate table of the Iowa Workers' Compensation Commissioner that applies to the injury date in question. The Commissioner's rate tables are set up to take the average gross weekly wage, and reveal the correct weekly rate based on whether the injured worker is married or single, and how many exemptions the worker is entitled to claim.

I will go over the main issues that usually come up in calculating the correct weekly rate in a little more detail below.

Marital Status. An injured worker's weekly rate will vary depending on whether the worker is married or single.

Number of Exemptions. An injured worker is entitled to one exemption for themselves, one exemption for their spouse if they are married, and one exemption for each of their dependents. Generally, a child can be claimed as an exemption for workers' compensation weekly rate purposes if the worker could claim the child as an exemption on their tax return.

Representative Weeks. Frequently, a worker's wages will vary from week to week. The law is clear that to the extent that a week of earnings is low because the worker was absent some of the time because of illness, vacation, or other causes that week should not be used as one of the 13 weeks that will be averaged.

However, there are an infinite variety of reasons that a worker might have low earnings during some weeks, and it frequently is not clear whether or not a low week should be used. However, in Jacobson Transportation Co. v. Harris, 778 N.W.2d 192 (Iowa 2010) the Iowa Supreme Court helped provide some guidance. In the Jacobson Transportation Co. case the Court held that where an injured worker's earnings regularly varied, the Iowa Workers' Compensation Commissioner had wide discretion in deciding which weeks should be considered low, and not used in the calculation of the weekly rate. The Iowa Supreme Court noted in part that, "Consistent with the remedial nature of workers' compensation laws, statutes for computation of wage bases are meant to be applied, not mechanically or technically, but flexibly, with a view always to achieve the ultimate objective of reflecting fairly the claimant's probable future earning loss. . . The legislature's intent to provide even greater protection to injured workers with variable earnings from the harsh effects of basing the weekly rate of compensation on unusually low-pay weeks is clearly evidenced by the amendment to Section 85.36(6) adopted in 2000. As amended, this section expressly authorizes the commissioner to exclude from the computation of average weekly earnings weeks in which injured employee's earnings do not fairly represent their customary earnings."

Types of Compensation Not Included in the Weekly Rate Calculation. Certain types of payments to the worker are not used in calculating the weekly rate including fringe benefits, reimbursement of expenses, irregular bonuses, and the value of overtime above the straight time rate.

Example of Determining the Weekly Rate. I will run through an example to show how the weekly rate is calculated. Assume that you are an injured worker who happened to make exactly $500.00 per week every week of your career. This would mean that each $500.00 week payment was representative, and the average of 13 representative weeks would be $500.00.

You can go to the Iowa Workers' Compensation Commissioner website, and look at the page for "Forms and Publications." At this page you can pick the rate table for the time of the injury. The rate tables are organized on a fiscal year basis so that they run from July 1 to June 30. Assume you were injured on July 2, 2011. Therefore, you need to go to the rate table designated 2011-12.

Once you are in the correct rate book you go to the left column and find the line for your average gross weekly wages of $500.00.

We will also assume that you are married and have three children. Therefore, you would be entitled to five exemptions. The rate book shows that as a married worker with five exemptions and a gross weekly wage of $500.00 you are entitled to receive a weekly work comp rate of $365.02.