Claimant was injured while working as a welder for Sause, where he earned $15 per hour. He unsuccessfully tried to return to work, so Sause paid disability benefits. Three years later, Claimant began working for another employer, K&K. Claimant’s starting pay was $7.80 per hour, and his pay was scheduled to increase periodically. A representative from K&K explained the pay increase as a quarterly “seniority raise:”
If people work for us, we promise them a certain maximum wage that they can achieve in a certain time frame for us. And the cap wage for everybody in production and clerical is $13.50. And when out employees start, they start at minimum wage, and with adequate performance they will get automatic raises of 25 cents per quarter.
When Sause began paying permanent partial disability benefits pursuant to Section 8(c)(21), it did so based on Claimant’s starting salary with K&K. However, as K&K periodically increased Claimant’s earnings with the “seniority raise,” Sause reduced their disability payments to reflect Claimant’s increased earnings. The issue presented to the Ninth Circuit was “whether, under the Longshore and Harbor Workers’ Compensation Act (“LHWCA”), scheduled wage increases unrelated to the merits of a worker’s performance constitute an increase in the worker’s wage-earning capacity or merely a general increase in wages.”
To resolve the issue, the Ninth Circuit had to determine whether the “seniority raise” was a “general wage increase” or a “merit or promotion-based wage increase.” A “general wage increase” includes “percentage increase[s] . . . in the contractual wages of the base hourly rate” or “[w]age increases required by a union contract . . . .” Conversely, “merit or promotion-based increases” include “raises received for expanding one’s duties or learning new skills.”
The court concluded that Claimant’s “seniority raise” was more akin to general wage increases than merit-based raises. Accordingly, the 25 cent raise could not be calculated into Claimant’s wage-earning capacity. The “seniority raise” had nothing to do with increases in individual skill or responsibility, and it did not increase Claimant’s value on the open market. Therefore, the “seniority raise” did not increase Claimant’s value on the open market. Accordingly, the Ninth Circuit held that “under the LHWCA, scheduled wage increases given by a non-union employer to all employees in a certain class based solely upon seniority are a general increase in wages and do not increase a claimant’s wage-earning capacity.”
(Note: I originally published this post on Navigable Waters: A Maritime, Longshore and Defense Base Act Blog.)