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When Should a Judge Reconstruct An Employee’s Wages for Permanency Purposes?

By on March 16, 2018 in Awards with 0 Comments

The concept of reconstructing wages for permanency awards pertains to part-time workers with serious injuries.  For example, consider an employee who works 20 hours per week earning $10 per hour.  The employee has a serious injury that prevents the employee from earning the same amount of money or prevents the employee from working full-time in the future.  The wage is $200 per week giving rise to a permanency rate of $140 per week.  Assume that the award is 50% permanent partial disability payable over 300 weeks.  Unreconstructed the award would amount to $42,000.  (300 times $140).   If the Judge were to reconstruct the wage to $400 per week (40 hours times $10 per week in a customary work week), the rate would be $280 per week with the award being $84,000. (300 weeks times $280).  That reconstructed award to a 40-hour work week would be double the unreconstructed award.

As a reminder, the New Jersey rate chart that all practitioners have at their desks cannot be used for low wage employees.  The front of the rate chart is for high wage earners (those subject to maximum rates due to high wages).  If one were to pay based on a 2017 rate chart, the award would be 300 weeks or $179,400.  That would be an overpayment of $137,400!

Remember also that the minimum for temporary disability benefits is much higher than the minimum for permanency benefits ($35). In 2017 the minimum rate was $239 for temporary disability benefits but the minimum for permanent partial disability benefits was $35 per week.  That minimum rate has been $35 per week for many decades.

So when should a judge reconstruct an employee’s wages?  The rule comes from Katsoris v. South Jersey Pub. Co., 131 N.J. 535 (1993).  The Supreme Court said, “The critical inquiry is whether petitioner has demonstrated that her injuries, while disabling her from engaging in part-time employment, have disabled or will disable her with respect to her earning capacity in contemporary or future part-time employment.”

Let’s consider a few scenarios:

  1. The part-time employee is able to return to his or her full-time job but can no longer engage in the part-time work due to the disabling injury. Reconstruct?  No, according to the Supreme Court in Katsoris.  If the employee can return to her prior full-time job with no wage loss in that full-time job, the employee has not satisfied the test because the employee cannot show material impairment in full-time earning capacity.
  2. The part-time employee was earning $800 per week in her full-time job, which requires physical skills, but now cannot engage in physical work. Her employer transfers her to a lower paying non-physical job paying $400 per week due to the work injury.  Reconstruct the award?  Yes, because the employee has proven a material impairment in full-time earning capacity.
  3. The part-time employee decides to spend more time with her growing family and cuts back hours from 20 per week to 15 per week. Reconstruct the award?  No, because the employee’s decision to reduce hours is not related to the work injury but is rather a personal decision.  But suppose the employee could only work 10 hours per week part-time because the disabling injury prevented her from working her normal 20 hours?  Then the Judge would properly order reconstruction because there is proof of a contemporary loss of wage earning capacity.
  4. The part-time employee lost her full-time job earning $1,000 per week while out one full year recovering from the serious work injury suffered on the part-time job. The employee was skilled in package handling and now cannot get any job at all other than a full-time minimum wage job.  Reconstruct the part-time wage? Yes, because the work injury clearly has had a material impact on the employee’s full-time earning capacity.  She cannot get a similar full-time job paying wages she had earned before.

What happened to Ms. Katsoris?  She had a part-time job delivering newspapers, which was the work that caused her serious injury.  She was no longer able to do that part-time physical job on account of the work injury.  However, she was able to return to her full-time secretarial job.  The Appellate Division stated that the wage should be reconstructed, but the Supreme Court reversed and said it should not be reconstructed because petitioner did not prove an impairment of full-time earning capacity since she was able to resume her full-time secretarial job.  So the focus must always be on whether there is a material impact on contemporary or future earning capacity.

Here’s the last point to remember about wage reconstruction.  One does not always reconstruct to 40 hours per week. That is most common but it could be more or less hours, depending on what is a normal work week.  The Supreme Court makes clear in the Katsoris case that the judge should determine the customary number of hours and the customary number of days constituting an ordinary work week before reconstructing.  So if the normal work week is 50 hours per week, then the multiplier should be 50 instead of 40.

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John H. Geaney

About the Author

About the Author:

John H. Geaney, an executive committee member and shareholder with Capehart Scatchard, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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