Wage Reconstruction in Workers' Compensation Cases
Wage reconstruction is not something that we have to deal with in the majority of cases, but it does come up from time to time.
The first step in determining the appropriate rate of compensation is to determine "wages" as defined in N.J.S.A. 34:15-37. The rate of compensation may not exceed 70% of petitioner's average weekly wage at the time of the accident, subject to the maximum and minimum rate in effect for the year the accident occurred. The way this works in practice is that an insurance claims adjuster should obtain “26-week wage statements” from insured/employers so that an average wage can be computed. We use 26-weeks of wages to determine the average weekly wage because the Workers' Compensation Act (N.J.S.A. 34:15-37) uses "six months" as the appropriate look-back period for wages.
The New Jersey Supreme Court in Katsoris v. South Jersey Publishing Co., 131 N.J. 535 (1993) instructed that reconstruction of wages is appropriate when necessary to compensate the worker for loss of earning capacity, i.e., diminution of future earning power. The 'loss of earning capacity' includes a loss of "potential for full employment." Where an employee, who is permanently disabled due to an injury on a part-time job, also has a full-time job, use of a "reconstructed" work week is appropriate if there has been an impact on the employee's ability to return to a full-time job. (Citing Mahoney v. Nitroform, 20 N.J. 499 (1956). By contrast, where a worker with a part-time and full-time employment is permanently partially disabled from the part-time employment but able to return to the full-time employment, reconstruction of the work week as if the part-time employment were full time employment is improper. (Katsoris, 131 N.J. at 548).