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The Commission’s Discretion in the Calculation of the Average Weekly Wage for Newly Hired Employees

Richard Beavers Construction, Inc. v. Wagstaff, No. 1977, Sept. Term, 2016 (Md. Ct. Spec. App. Mar. 1, 2018). View pdf

(April 20, 2018) Katherine A. Nalley, Associate.

For more information, contact Julie D. Murray

The Court of Special Appeals recently had the opportunity to decide the case of Richard Beavers Construction, Inc. v. Wagstaff, which dealt with the issue of the calculation of the average weekly wage of a Claimant who was hired just six weeks before sustaining a work related injury.

The Claimant was hired as a full time lift operator for Richard Beavers Construction, Inc. (“RBCI”) on February 15, 2013. He was to work 8 hour a day, five days a week, unless it was raining or snowing. He was not paid for days that he could not work due to the weather.

On April 1, 2013, the Claimant fell through a roof and landed on the warehouse floor and sustained numerous injuries, which included a fractured skull, two fractured cheekbones, fractured right eye orbital, multiple chipped teeth and loss of his front tooth, and a fractured nasal bone. He also injured his neck, back, left shoulder, and left knee.

The Claimant worked an average of 16.75 hours per week during the six weeks he for RBCI. However, the Claimant filed an Employee’s Claim Form asserting gross wages in the amount of $758.00, which was based on 40 hours a week of wages. The Insurer submitted a Wage Statement with six weeks of wages prior to the date of accident, which yielded an average weekly wage of $317.38. The Commission issued a statistical award finding an average weekly wage of $317.38, and ordering the Employer and Insurer to pay temporary total disability at the rate of $212.00 per week. For several months, the Employer graciously decided to make supplemental payments to the Claimant of $500.00 per week because it was “a far lower figure” than what he would have made working full time.

The case went to hearing before the Commission on the issue of authorization of medical treatment and average weekly wage. The Commission indicated that it would take testimony on the issue, and determine the average weekly wage based on the evidence presented at the hearing. The Claimant testified that he was hired full time, 40 hours a week, but if it rained or there was bad weather, he did not work. The owner of RBCI testified that he advised the Claimant “that he could work when work was available,” but also acknowledged that the Claimant was hired on a full time basis. The Commission issued an Order finding an average weekly wage of $758.00. The Order further allowed RBCI and the Insurer a credit for the gratuitous payments made to the Claimant.

On appeal in the Circuit Court for Talbot County, the RBCI argued that the Claimant’s average weekly wage should be based on the “actual hours worked…when work was available,” and that “the days missed because of inclement weather should be considered as part of the wage calculation as a matter of law.” On the other hand, the Claimant argued that the lower average weekly wage did not did not “represent a fair and accurate measure of his earnings because it was based on a limited number of weather shortened weeks.” Further, the Claimant argued that LE § 9-602(a)(3) permitted the Commission to “account for the likelihood that his wages could be expected to increase under normal circumstances.” The Circuit Court ruled in the Claimant’s favor, finding that he had been promised $758.00 per week, and it was “reasonable to conclude that this figure represents an expected increase in salary.”

The issue presented to the Court of Special Appeals was whether the Workers’ Compensation Commission erred when it determined that Mr. Wagstaff’s average weekly wage was $758.00.

The Act provides that “the average weekly wage of a covered employee shall be computed by determining the average of the weekly wages of the covered employee…when the covered is working full time…and at the time of the accidental personal injury.” LE § 9-602. RCBI argued that as a matter of law, the average weekly wage should be calculated based on the wages actually earned during the period worked prior to the work injury. In other words, in RBCI’s view, the average weekly wage should be calculated by adding the Claimant’s wages earned during the six weeks leading up to the work injury, and dividing by six.

The Claimant argued that under LE § 9-602(a)(3), if it is established that because of “age and experience…at the time of the accidental personal injury…the wages could be expected to increase under normal circumstances, the expected increase may be taken into account when computing the average weekly wage.” However, the Court of Appeals rejected this argument, reasoning that in other jurisdictions, similar provisions apply to employees such as “apprentices, student nurses, and recent college graduates.”

The Three-Stage Process for Determining Average Weekly Wage:

The Wagstaff court broke down the process for determining average weekly wage provided under COMAR 14.09.03.06 into three stages.

First, the Commission makes a “preliminary determination” of the average weekly wage from the gross wages reported by the Claimant on the Employee’s Claim Form. COMAR 14.09.03.06(A).

Next, the Employer and Insurer file a 14-week wage statement “as soon as practicable,” with the “average wage earned by the claimant during the 14 weeks before the accident, excluding the time between the end of the last pay period and the date of injury, provided that periods of involuntary layoff or involuntary authorized absences are not included in the 14 weeks.” Moreover, the wages are to include “[t]hose weeks the claimant actually worked during the 14 weeks before the accident, vocation wages paid, and those items set for in in Labor and Employment Article, § 9- 602(a)(2), Annotated Code of Maryland.” COMAR 14.09.03.06(B).

The third stage takes place at the first hearing before the Commission. Specifically, “[a]ll parties shall be prepared to produce evidence from which the Commission can determine an accurate average weekly wage at the first hearing.” COMAR 14.09.03.06(C)(1)-(2).

In analyzing LE § 9-602 and COMAR 14.09.03.06, the Wagstaff court concluded that the Commission is not required to use 14 weeks of wages in determining the average weekly wage. In the Court’s view, this would only happen in a minority of cases “where a party contends that those earnings do not accurately reflect what the employee would earn.” At the first hearing, the Commission “can exercise traditional flexibility to decide the most appropriate basis for its calculation according to the unique facts of each case.”

The court held that Commission is not required to use the actual wages from the period before an accident where: (1) the employer hired the claimant full time (40 hours a week); (2) the claimant is injured shortly after being hired; (3) the claimant worked substantially less than 40 hours per week during the period prior to the injury; and (4) other circumstances call into question whether the actual hours worked during that period accurately represent the claimant’s normal working hours.

Further, the court held that it was not unreasonable for the Commission to calculate the average weekly wage based on the 40 hours that the Claimant had been hired for. While the court agreed that there was not guarantee that the Claimant would have worked 40 hours a week had he not been injured, it reasoned that the Commission, however, “may draw reasonable inferences even if those inferences fall short of a certainty or near-certainty.”

What Wagstaff Means for Employer and Insurers:

The Wagstaff case applies to a narrow set of cases that involve newly hired employees who are injured on the job. This does not mean that a wage statement is no longer relevant. A wage statement should still be completed and filed with the Commission as soon as practicable, despite the number of weeks of wages available.

Any dispute as to the proper average weekly wage is an issue that must be addressed at the first Commission hearing. At the hearing, the Commission may take testimony and consider evidence presented by the parties in its determination of the average weekly wage. Just as the Claimant may present evidence to the Commission, the Employer and Insurer may too bring evidence to show that the average weekly wage being claimed is not representative of what the Claimant would actually make. For example, in a situation where the claimant has worked an abnormal amount of over time just prior to the work injury, the Employer and Insurer may present wages over a longer period of time, or even the wages of similar situated employees to support a lower average weekly wage. Additionally, it is critical for employers to carefully document employee absences, call outs, and no shows, which may serve as an important defense where claimants do not have valid reasons for missing time from work in the weeks preceding the work accident.