7 Ways Your TPA May Be Underpaying Your Company Workers Comp Payments

If you ask any workers' compensation adjuster how to calculate the amount of the temporary total disability check for an injured employee who is unable to return to work, you will get a quick answer like “it is two-thirds of their average weekly wage” or “it is 75% of their after tax income”. {While all states do not use two-thirds of the average weekly wage, for the purpose of this blog, we will}    In most cases, the adjuster will be correct, but in a small percentage of the disability checks, the employee is underpaid. 
The component of what constitutes “wages” is an area of workers' compensation that has almost as many variations as there are states. While the adjuster normally includes vacation pay and holiday pay in the indemnity calculations, many other type s compensation get overlooked. (WCxKit)
Buried deep in the work comp statutes, or in some cases, court decisions, is a definition of what constitutes wages. For the employee who is paid $15 per hour, and never works anything but a 40 hour week, the adjuster's calculation of a weekly disability benefit of $400 ($15 x 40 x 2/3) is correct, if none of the following exceptions come into play.
1.      A Second Job:
In about half of the states, if the employee is working a second job for another employer, the employee is entitled to two-thirds of the income lost from the other job. Let's say the above employee is making $15 an hour from your company and works from 8:00 a.m to 4:30 p.m for your company. When the employee get's off work, he goes down the street and starts his part-time janitorial job that is from 5:00 p.m to 9:00 p.m where he earns $12 per hour. Due to his part-time job, the adjuster will need to add another $160 ($12 x 20 x 2/3) to the weekly indemnity check. This hypothetical employee would get an indemnity check of $560 ($400 + $160) per week, assuming that the $560 per week is below the state cap for weekly indemnity checks.   [I know it doesn't seem right that your work comp coverage is paying for lost income from work at another employer, but that's the law in many states].
2.      Training Pay:
Closely kin to the second job compensation is training pay. If the hypothetical employee above did not have a second job, but was attending a night class where he was being paid by your company $75 per week to attend, in some states the lost income is owed if he could no longer attend the class due to his on-the-job injury. The adjuster would need to add $50 ($75 x 2/3) to his week check. If the nightly class had only 4 more weeks to run, then after the fourth week, the adjuster could remove the extra $50 per week from the indemnity check.
3.      Freebies:
An area of compensation that a lot of adjusters miss (and for that matter, attorneys representing the injured employee) is the value of freebies. If the employer routinely provides free meals or free housing as part of the compensation (think migrant farm worker in a state where migrant farm workers are covered for workers' comp), and the employer no longer provides the free meals or free housing after the injury, the value of the freebies has to be added to the calculation of the weekly indemnity check.
4.      Commissions:
The calculation of the weekly indemnity check for the salesperson would seem to be easy like the calculation of hourly workers indemnity check – two-thirds of the average income over the period of time used to calculate the weekly check. This works if the salesperson income is steady, but not with the new salesperson whose income is steadily increasing each week or month. In most states that is too bad for the salesperson with no projection of future earnings being allowed. However, a few states will allow “equitable estimation” and the work comp boards will award it.
Another area of disputes with salespersons on how much their indemnity check should be occurs when the salesperson earns additional commissions or overrides. If the salesperson who sells over and above X number of units per year gets an additional percentage of commission for exceeding the goal but will come up short of the goal due to on-the-job injury, does the adjuster still owe an indemnity payment on the additional percentage? It varies tremendously from state to state. It will normally take some research on the part of the adjuster to answer that question. The same issues apply when the salesperson receives overrides from recruiting additional salespeople but is unable to recruit due to the on-the-job injury.
5.      Bonuses:
Bonuses are another area where the employee often gets shortchanged on the indemnity check. For instance, let's say the employee works in a state where only the previous 13 weeks of income (some states use 26 weeks of income, other states use 1 year's income) is used to calculate the average weekly wage. The employee gets hurt on November 1st, and is still off work at the end of the year when the employer passes out the year end bonuses. If the employer does not have the employee on the payroll, and the employee does not receive the bonus, the work comp adjuster would owe two-thirds of the bonus amount. This is only if the sole reason the employee did not receive the bonus is because the employee was not working due to the injury at the time the bonuses were passed out.
6.      Tips & Gratuities:
One area where the employees often receive less money than what they should receive on the indemnity checks is the employees who earn tips and gratuities in addition to their base pay. When the employee is injured, the employer reports the income amount that is on the employer's record. When the adjuster tells the employee what the amount of their indemnity check will be, they often hear from the employee “that's not right, that does not include the tips that I did not report”.   When the waiter, bell-hop or taxicab driver tells the adjuster they cheat the government out of tax revenue by under reporting their income, there is nothing the adjuster can do about it. [What the adjuster is thinking but won't say – 'if you are willing to cheat Uncle Sam on your income tax, you are probably willing to cheat the insurance company on your work comp claim'].
7.      Benefits:
In some states the employer is allowed to discontinue contributions to 401k plans, health insurance and other benefits when the employee is off work for an extended period of time. If the employee has to pick up the tab for the health insurance or other benefits, some states require the work comp adjuster to consider the value of the lost benefits in the calculation of the weekly indemnity check amount. (WCxKit)
The calculation of the indemnity check depends on what the state statutes require. Both the employer and the workers' compensation adjuster need to know the lesser known points of what is considered a part of the employee's compensation in their own state. CHECK YOUR STATE LAW!

Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing.
ontact:  RShafer@ReduceYourWorkersComp.com or 860-553-6604. 

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com.

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