It’s time to talk about the way insurance carriers are using Section 10(i) in psychological disability claims to reduce an injured worker’s average weekly wage (“AWW”). Essentially, carriers are misapplying Section 10(i), which is sometimes called Section 910(i), by taking it out of the context in which it was enacted. They are using the statute to artificially deflate–sometimes nullify–an injured worker’s AWW. The irony is that Section 10(i) was enacted to help a particular class of injured workers: retirees.
Make no mistake, this is an important issue. Over the past year, I have seen an increasing number of Section 10(i) arguments. Before every mediation, before every formal hearing, the carriers I face off against throw Section 10(i) into the mix. Some do so knowing full well that their Section 10(i) argument is completely bogus.
What is an Average Weekly Wage?
An average weekly wage is pretty much exactly what it sounds like…an injured worker’s weekly gross pay. Every injured worker has one.
Before we get to Section 10(i), let’s start with some basics. Section 10 of the Longshore and Harbor Workers’ Compensation Act controls the calculation of average weekly wages in Defense Base Act claims. Typically, there are three ways to determine an injured worker’s AWW:
- Section 10(a) applies when a 5-day or 6-day employee worked substantially the whole of the year prior to the injury.
- Section 10(b) applies when a 5-day or 6-day employee did not work substantially the whole of the year prior to the injury.
- Section 10(c) applies when neither Section 10(a) or Section 10(b) will work. Section 10(c) requires a fair and reasonable determination of the employee’s annual earnings. The average weekly wages for most (but not all) Defense Base Act contractors fall within the Section 10(c) calculation because most work 7 days per week.
See 33 U.S.C. § 910 (1984).
But…notice how I said “typically” there are three ways to calculate AWW. There is another way: Section 10(d)(2).
Section 10(d)(2) applies for retirees, as is abundantly clear from the statutory language:
(2) Notwithstanding paragraph (1), with respect to any claim based on a death or disability due to an occupational disease for which the time of injury (as determined under subsection (i) of this section) occurs–
(A) within the first year after the employee has retired, the average weekly wages shall be one fifty-second part of his average annual earnings during the 52-week period preceding retirement; or
(B) more than one year after the employee has retired, the average weekly wage shall be deemed to be the national average weekly wage (as determined by the Secretary pursuant to section 906(b) of this title) applicable at the time of injury.
Judging from the highlighted text, Section 10(d)(2) is an average weekly wage provision that is centered not just around the act of retiring, but also around the time when a worker retires. And be sure to take note of the reference to “subsection (i)” because it is important for context. “Subsection (i)” is Section 10(i).
The Text of Section 10(i):
First, the statute. The text of Section 10(i) states:
For purposes of this section with respect to a claim for compensation for death or disability due to an occupational disease which does not immediately result in death or disability, the time of injury shall be deemed to be the date on which the employee or claimant becomes aware, or in the exercise of reasonable diligence or by reason of medical advice should have been aware, of the relationship between the employment, the disease, and the death or disability.
See 33 U.S.C. § 910(i) (1984).
The argument is that psychological injuries are occupational diseases. Per the carrier, if the psychological injury did not come to fruition before the last day of work, then the injury did not “immediately” result in disability. The problem is that sometimes psychological injuries display some, but not all, criteria necessary for a particular diagnosis. In the case of Post Traumatic Stress Disorder, this phenomenon is called “delayed onset” or “delayed expression.”
A History Lesson…For a Little Context:
Now, let’s consider context.
Congress amended the Longshore and Harbor Workers’ Compensation Act in 1984. One of the principle reasons for the amendments was to protect retirees from the denial of benefits.
Occupational disease claims were a particular concern. A series of statutes, including Section 10(i), were amended/enacted to provide retirees with benefits in certain situations. In addition to Section 10(i), Congress also enacted:
- Section 2(10), which (in pertinent part) discusses the meaning of “disability” in the case of a retiree’s wage calculation or impairment calculation.
- Section 8(c)(23), which provides compensation to retirees based on a particular medical guide;
- Section 10(d)(2), which I discussed above. (Again, think context.)
And what is the purpose of these provisions? Calculating a retiree’s AWW.
What Is “Retirement”?
To the average person, what does “retirement” mean? Does it mean that someone stops working in general? Or does it mean that someone stops performing a certain type of work.
For Longshore and Defense Base Act claims, “retirement” is defined by 20 C.F.R. 702.601 (1985):
For purposes of this subpart, retirement shall mean that the claimant, or decedent in cases involving survivor’s benefits, has voluntarily withdrawn from the workforce and that there is no realistic expectation that such person will return to the workforce.
Look at the words in bold: “voluntarily withdrawn from the workforce.” Not from a particular type of employment. Not from DBA employment. Not from overseas, war zone contractor employment. “Retirement” means voluntary withdrawal from the workforce. Retirement is a purposeful, deliberate withdrawal not occasioned by injury.
There are Only Three Compensation Systems:
With all of the preceding information in mind, we come to the meat of this post: the three compensation systems. The Supreme Court (as well as Justice Breyer when he was on the First Circuit) determined that there are only three compensation systems. Every claimant fits into one of the three systems; and there are no hybrid blends between the three systems.
The “three systems” approach began with Justice Breyer. See Bath Iron Works Corp. v. Director, OWCP, 942 F.2d 811 (1st Cir. 1991), affirmed 506 U.S. 153 (1993) (unanimous decision). In Justice Breyer’s First Circuit opinion, he described “in a simplified way,” as he put it, the three compensation systems contemplated by the Longshore Act after the 1984 amendments:
System One: Scheduled Injuries. The Act’s schedule (in §§ 8(c)(1)-(20), 33 U.S.C. §§ 908(c)(1)-(20)) lists a number of specific injuries, such as loss of an arm or a leg or total or partial deafness, followed by a specific number of weeks (for example, loss of an arm, 312 weeks). The Act entitles a worker suffering one of the listed injuries to two-thirds of his average weekly wages for the listed number of weeks. . . .
System Two: “Unscheduled Injuries. The Act sets forth a different method for calculating other injuries not specifically listed in section 8(c)’s schedule. In such cases, § 8(c)(21), 33 U.S.C. § 908(c)(21), says that a worker will receive two-thirds of the difference between his average weekly wages and his residual (post-injury) earning capacity . . . for as long as the disability continues. . . .
System Three: Injuries Suffered by Retired Workers. In 1984, Congress amended the Act to provide a special system of compensation for workers whose job-related injuries (or diseases such as asbestosis) did not become apparent until after retirement. See 33 U.S.C. §§ 902(10), 908(c)(23), 910(d)(2), 910(i). In such cases the Act begins with the principle that a disabled worker should receive two-thirds of his average weekly wages for as long as he is disabled, but it then modifies that principle in two important ways.
First, it multiplies the [AWW] by a percentage, namely the percentage of total disability that the worker has suffered. It takes this percentage from American Medical Association tables. . . .
Second, System Three calculates “average weekly wages” in a special way. If the disability appears during the first year after retirement, that term simply means the wages the worker earned just before retirement. See 33 U.S.C. § 910(d)(2)(A). If the disability appears after the first year, however, that term means a national average weekly wages figure that the Department of Labor calculates. See U.S.C. § 910(d)(2)(B). . . .
See Bath Iron Works, 942 F.2d at 812-13 (italicized emphasis in original; bold emphasis added).
Thus, the Longshore Act establishes three systems of compensation; every case fits within one of those three systems. Section 10(i) is lumped in with the retirement provisions, which makes sense since Section 10(i) was enacted as a result of the retiree protections afforded in the 1984 amendments. Id. at 818 (noting how the “System Three” amendments were an “effort to correct unfairness” to retirees). In fact, Justice Breyer noted that Section 10(i) “defines ‘time of injury’ for System Three purposes.” Id. at 814. And System Three—along with Section 10(i)—applies to retirees:
All this quoted language seems complex. But, as we read it, it basically says something that is fairly simple: When the “time of injury” occurs before retirement, the Labor Department should calculate compensation under either System One (if the injury is scheduled) or System Two (if the injury is not scheduled). When the “time of injury” comes after retirement, the Labor Department should calculate compensation under System Three.
See id. (emphasis added). It’s that simple. Section 10(i) applies to retirees. In fact, Justice Breyer concluded that “Subsection (i) calculates a special post-retirement time of injury ‘with respect to a claim for compensation for . . . disability due to an occupational disease which does not immediately result in . . . disability.” Id. at 817 (emphasis added). Again, the operative word in Justice Breyer’s Section 10(i) analysis is “retirement.” Id.
The Supreme Court, in a unanimous decision, agreed with its soon-to-be colleague. See Bath Iron Works Corp. v. Dir., OWCP, 506 U.S. 153 (1993). Not only that, the Court accepted and adopted Justice Breyer’s “three ‘systems’ for compensating partially disabled workers . . . .” Id. at 154. As the Court explained, the third system “provides compensation for retirees who suffer from occupational diseases that do not become disabling until after retirement.” Id. at 155. The third system of compensation—which includes Section 10(i)—was added to the Longshore Act in 1984: “With the 1984 amendments, Congress authorized the payment of benefits to retirees suffering from occupational diseases that become manifest only after retirement. More precisely, a new § 10(i) addresses claims for death or disability ‘due to an occupational disease which does not immediately result in death or disability.’” Id. at 157 (emphasis added).
Section 10(i) is used with Sections 8(c)(23) and 10(d)(2) to compensate retirees. Id. at 157-58. In fact, the Court referred to these statutory subsections as “the retiree provisions engaged in 1984.” Id. at 162-63 (emphasis added). Further, the Court considered the retiree provisions to be unambiguous. Id. at 166. The Court roundly rejected the use of what it called a “hybrid approach” in which two of the three compensation systems were blended together. Id. at 167, n.16 (“[W]e reject respondent employee’s arguments in support of the Board’s hybrid approach. There is simply no basis in the statute for combining the compensation provisions applicable for retirees suffering from latent occupational diseases with those governing claimants with scheduled injuries.”) (emphasis added).
The Supreme Court is clear: there are three systems of compensation. Section 10(i) applies to the third system. The third system applies to retirees. And neither litigants nor courts can blend the systems to create a hybrid compensation system.
Carriers Are Creating a Hybrid Compensation System:
As I mentioned at the start of this post, carriers are misapplying Section 10(i). They are arguing that it should apply in every case where there is delayed onset PTSD, no matter if the claimant is a retiree or not. This argument creates a hybrid compensation system–the exact kind of system that the Supreme Court disallowed.
To use Justice Breyer’s classification system, carriers are taking a provision (Section 10(i)) that applies to System Three (the retirement system) and applying it to occupational disease cases that fall under System Two (the unscheduled injury system). That is an impermissible blend–a hybrid system. If the Supreme Court would not allow a blend between System One (the scheduled injury system) and System Three, then it follows that the Supreme Court would not allow a blend between System Two and System Three either.
Moreover, the use of Section 10(i) to deflate or nullify a psychologically disabled employee’s average weekly wage is irrational. Section 10(i) was enacted to help people–specifically, retirees. It is ludicrous to suggest that the same provision enacted to protect one class of injured employees (retirees) was also designed to hurt another group of injured employees (the psychologically disabled).
Of course, if there is a genuine retiree case involving delayed onset PTSD, then Section 10(i) may be used to determine the injured worker’s AWW. I’m not questioning that. All I am saying is that Section 10(i) should be limited to retiree cases instead of being used in every case where there is delayed onset PTSD.
You may wonder how many cases of PTSD involve delayed onset. How many people are actually affected by this misapplication of law? A lot, actually. Studies have suggested that up to 47% of PTSD cases qualify for a delayed onset specifier.
Although I am framing this post in terms of psychological injuries, be aware that this argument could be used by carriers in any occupational disease case. The appropriateness of the Section 10(i) argument would still turn on the claimant’s retirement status.
Sorry carriers, but Section 10(i) does not apply to every case involving delayed onset PTSD; or any other psychological injury that arises after employment ends. Instead, the use of Section 10(i) should be limited to claims involving actual retirees (i.e., claimants who have voluntarily retired from the workforce). Applying Section 10(i) outside of the retirement context creates an impermissible blended compensation system. The Section 10(i) argument is destined to fail.