Using overseas earnings to calculate benefits in Defense Base Act claims.

Calculating Benefits under the Longshore and Harbor Workers’ Compensation Act as extended by the Defense Base Act.

The Longshore Act compensates injured employees for “disability,” which the Act defines in terms of the employee’s lost wage-earning capacity due to injury: “‘Disability’ means incapacity because of injury to earn the wages which the employee was receiving at the time of injury in the same or any other employment.” 33 U.S.C. § 902(10). The Act establishes four classes of disabilities that direct both the amount and duration of compensation payable: permanent total disability; temporary total disability; permanent partial disability; and temporary partial disability. 33 U.S.C. § 908(a)-(c), (e).

Section 8(c) of the Act delineates the methods for determining compensation when the injured worker has lost some, but not all, of his wage-earning capacity, i.e., has a permanent partial disability. Johnson v. Director, OWCP, 280 F.3d 1272, 1274 (9th Cir. 2002). Where the injury falls within a specified list of injuries, known as scheduled injuries (such as loss of a limb), Section 8(c) provides a predetermined number of weeks to be compensated at the rate of two-thirds the claimant’s AWW prior to the injury. 33 U.S.C. § 908(c)(1)-(20). For injuries involving non-scheduled permanent partial disabilities not specifically listed, compensation awards are governed by § 8(c)(21). 33 U.S.C. § 908(c)(21).

Section 8(c)(21) prescribes a straightforward formula for determining both the amount and the duration of an injured worker’s weekly permanent partial disability compensation award for non-scheduled injuries:

In all other cases in the class of [permanent partial] disability, the compensation shall be 66 2/3 per centum of the difference between the average weekly wages of the employee and the employee’s wage-earning capacity thereafter in the same employment or otherwise, payable during the continuance of partial disability.

33 U.S.C. § 908(c)(21). Thus, once the AWW and post-injury earning capacity have been determined, computing a partial disability award is a matter of simple math under the formula: wage-earning capacity is subtracted from AWW, and the claimant is entitled to two-thirds of the difference. 33 U.S.C. § 908(c)(21); 33 U.S.C. § 908(e).

AWW is determined under one of three alternative methods. 33 U.S.C. § 910. Under each, the administrative law judge first arrives at the employee’s average annual earnings, 33 U.S.C. § 910(a)-(c), and then divides by 52 weeks to determine AWW. 33 U.S.C. § 910(d)(1). Under § 910, the ALJ can base the calculation of average annual earnings on:  

  1. the employee’s earnings from the previous year, if the employee worked in the field in which he was injured for “substantially the whole of the year immediately preceding his injury”;
  2. if (1) does not apply, the average daily wage of a similarly situated employee in the year preceding the employee’s injury;  or
  3. if (1) or (2) “cannot reasonably and fairly be applied,” a combination of factors, namely the employee’s previous earnings in the job at which he was injured, his other employment, and previous earnings of similarly situated employees.

Under Section 10(c), the injured employee’s average annual earnings must “reasonably represent [his] annual earning capacity” at the time of his injury. 33 U.S.C. § 910(c). The ALJ ascertains this sum “having regard” to

  1. the employee’s actual wages “at the time of injury,”
  2. the wages of similarly situated employees, “or”
  3. the “other employment of such employee.” Id.

Post-injury wage-earning capacity is determined under § 8(h), 33 U.S.C. § 908(h). That section mandates the use of the claimant’s “actual earnings if such earnings fairly and reasonably represent his wage-earning capacity.” 33 U.S.C. § 908(h).

Under Section 10(c), the ALJ must use the information that best reflects a claimant’s earning capacity at the time of injury.

Section 10(c) permits a broad inquiry into the injured employee’s wages in order to arrive at an amount that best represents the injured employee’s annual earning capacity at the time of injury. The ALJ is to consider the employee’s actual wages at the time of the injury, and the wages of similarly situated employees or other employment of the employee. 33 U.S.C. § 910(c); Healy Tibbitts Builders, Inc. v. Director, OWCP, 444 F.3d 1095, 1103 (9th Cir. 2006). The prime objective of this broad discretion is to arrive at a sum that reasonably represents a claimant’s annual earning capacity at the time of the injury. Healy Tibbitts, 444 F.3d at 1102 (internal citations omitted). Unsurprisingly then, “[t]ypically a claimant’s wages at the time of injury will best reflect the claimant’s earning capacity at that time.” Hall v. Consol. Employment Sys., Inc., 139 F.3d 1025, 1031 (5th Cir. 1991).

The claimant’s wages when injured are especially probative when the claimant’s job differs significantly from previous employment. In that circumstance, the AWW calculation, based solely on the claimant’s higher wages in the new position, better reflects the claimant’s current potential to earn. In Healy Tibbitts Builders, the court affirmed an award of benefits calculated under section 10(c) using only the higher wages of a claimant’s job at the time of injury, despite the fact that the claimant worked for 13 weeks on a project lasting 19 weeks. 444 F.3d at 1097, 1103. In that case the ALJ credited evidence that the claimant would have been able to continue earning higher wages at his new job absent the disabling injury.

The actual overseas wages best reflect his earning capacity at the time of injury.

Blending stateside earnings with highly compensated overseas employment paints an inaccurate picture – blending simply dilutes his actual earnings at the time of injury and gives a false impression of the amount of lost earning power. See Tri-State Terminals, Inc. v. Jesse, 596 F.2d 752, 758 (7th Cir. 1979). Employees serving in the dangerous environments often encountered in Defense Base Act claims can be said to work in two different worlds that impose vastly different risks and generated vastly different incomes. If injured when working in the more dangerous, but more lucrative, job the injury compensation should be commensurate with the higher wages paid to entice him to do that job, which accurately reflects his earning capacity at the time of his injury.

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Greg Lois is the managing partner of LOIS LLC, a 19-attorney law firm dedicated to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@lois-llc.com