Reduced Earnings In Workers’ Compensation

A common misconception about workers’ compensation benefits is that you can’t continue to collect them if you go back to work. The concern most people have is that they won’t be able to earn as much with a job as they do on workers’ comp because they are still disabled from their on-the-job injury. To the contrary, in certain situations, a partially disabled worker could actually earn more with a job, even one that pays less than his or her previous job. How is this possible? Through the magic of the reduced earnings benefit.

Reduced earnings are a type of workers’ compensation benefit that pay a portion of the difference between what a disabled worker is making now and what he or she was making before the injury. In order to receive the reduced earnings benefit, the worker must prove three things:

  1. He or she is partially disabled;
  2. He or she is earning less than his or her average weekly wage at the time of the injury;
  3. He or she is earning less because of this disability.

Assuming all three of these things are present, the next question is how do we calculate the reduced earnings benefit? Like all workers’ compensation benefits, we must start with the Average Weekly Wage (AWW). AWW is a number, determined by the Workers’ Compensation Board, that reflects your earning capacity at the time you were injured (NOT how much you were making on that particular day). Basically, the board takes your weekly earnings and divides that number by how much you worked over a certain period of time. Now, there are several different formulas the board might use to come up with this number, and depending on which formula is used, your AWW can be higher or lower. Making sure that the right formula is used to determine your AWW is why it is extremely important that you are competently represented in front of the Workers’ Compensation Board right from the start. Once your AWW is calculated, it makes up the foundation for all of the benefits you receive for this injury for the rest of your life.

Now that we know your AWW, we can calculate your reduced earnings benefit. Reduced earnings will pay you 2/3 of the difference between what you are making now and your average weekly wage. So the formula looks like this: (AWW minus Current Wages) multiplied by 2/3 = Reduced Earnings Benefit.

Consider this example. Peter is a construction worker who is injured on the job. Peter’s average weekly wage at the time of his injury was $900. After surgery, Peter is found to be 50% disabled because he can’t use his right arm the same way he used to. He receives $300 per week in workers’ compensation benefits. Peter can’t go back to work at the construction site because he can’t do that job anymore, so he gets a position in the office at the construction company, making $450 per week. Since Peter is partially disabled, and is now earning less than his AWW because of that disability, he qualifies for reduced earnings. Workers’ compensation will pay him 2/3 of the difference between his AWW ($900) and what he’s earning now ($450). The difference is $450; 2/3 of which is $300. So Peter will receive $300 in reduced earning benefits in addition to his $450 salary. At $750 per week, that is more than double the $300 that Peter received on partial workers’ compensation alone.

If you have questions about your reduced earnings benefit, make sure you contact one of our attorneys to discuss your particular situation.