The Office of Workers’ Compensation Programs has published a new proposed rule pertaining to an injured worker’s compensation rate. The rule addresses the Longshore and Harbor Workers’ Compensation Act’s maximum and minimum compensation rate, and how to apply a particular rate to a particular injury. The proposed rule applies to the Longshore Act’s extensions, like the Defense Base Act.
Letter from the DLHWC:
The Director of the Division of Longshore and Harbor Workers’ Compensation, Antonio Rios, issued an explanatory letter on August 26, 2016. The letter stated, in pertinent part:
The National Average Weekly Wage has historically risen from year to year, and this determination affects the maximum and minimum compensation rates under Section 6. Questions regarding which fiscal year’s maximum wage applied in various situations led to litigation. These questions have now largely been resolved through decisions of the courts of appeals and the Supreme Court. To provide clarity for the parties and forestall any further litigation, the proposed rules would implement the Act’s maximum and minimum compensation provisions in line with those court decisions. Specifically, the rule:
- prescribes which maximum compensation rates apply to any particular injury by implementing the Supreme Court’s interpretation of the “newly awarded” phrase (i.e., compensation is “newly awarded” when the employee first becomes disabled rather than when a compensation order is entered) and the interpretation of the “currently receiving” phrase adopted by two courts of appeals (i.e., “currently receiving” means the date the employee is entitled to compensation rather than the date it is actually paid);
- address the related question of how the Act’s minimum compensation provisions apply; and
- outlines the relationship between Section 6’s maximum and minimum compensation rates and Section 10(f)’s annual adjustment provision.
The Federal Register:
A copy of the proposed rule is available on the Federal Register. The “Background” section does a good job of explaining the basis for the proposed rule:
The Longshore and Harbor Workers’ Compensation Act, 33 U.S.C. 901-50 (LHWCA or Act), establishes a federal workers’ compensation system for an employee’s disability or death arising in the course of covered maritime employment. 33 U.S.C. 903(a), 908, 909. This proposed rule would implement the Act’s provisions on maximum and minimum amounts of compensation payable.
A. The Act’s Compensation Scheme
Disability, which the Act defines as “incapacity because of injury to earn the wages which the employee was receiving at the time of injury,” 33 U.S.C. 902(10), “is in essence an economic, not a medical concept.” Metro. Stevedores v. Rambo, 515 U.S. 291, 297 (1995). From its inception in 1927, the Act has provided that “the average weekly wage of the injured employee at the time of the injury” must be used as the basis for computing his or her compensation rate. 33 U.S.C. 910. Thus, “[a]n employee’s compensation depends on the severity of his disability and his preinjury pay.” Roberts v. Sea-Land Services, Inc., 566 U.S. __, 132 S.Ct. 1350, 1354 (2012).
Several statutory sections have an impact on determining the amount of compensation payable. Section 10, “Determination of Pay,” 33 U.S.C. 910, is the starting point in the statutory scheme. It sets out rules for calculating the employee’s average weekly wage (AWW) as of the time of the employee’s disabling injury. This AWW serves as the basis for all future benefit calculations for that worker throughout the life of his or her claim.
The second step is to determine what percentage of the employee’s AWW a claimant will receive in compensation. This is determined under section 8, “Compensation for Disability,” and section 9, “Compensation for Death,” 33 U.S.C. 908, 909. Compensation payable for disability varies based on the nature and extent of an employee’s disability. Section 8 establishes four basic categories of disability: Permanent total, temporary total, permanent partial, and temporary partial. 33 U.S.C. 908(a)-(c), (e). In general, an injury is “total” if the worker is unable to work after the injury and “partial” if the worker is able to work at a diminished wage. A disability is “temporary” if the employee’s medical condition is improving and becomes “permanent” when he or she reaches maximum medical improvement. See 33 U.S.C. 908(a)-(c), (e); see also Potomac Elec. Power Co. v. Director, OWCP, 449 U.S. 268 (1980). And section 9 provides compensation payable to the employees’ eligible survivors for injuries causing death. [33] U.S.C. 909.
For all disability categories, the Act uses a “two-thirds” rule to compute compensation. Totally disabled employees—those who are unable to return to their original employment or earn wages in suitable alternative employment—receive two-thirds the AWW they were earning at the time of injury. 33 U.S.C. 908(a)-(b). Partially disabled employees—those who experience the loss or loss-of-use of body parts specified in the statute—are entitled to two-thirds of their date-of-injury AWW for a specified number of weeks. 33 U.S.C. 908(c)(1)-(19). Other partially disabled employees—those who are able to work after their injuries at a diminished wage—receive two-thirds of the difference between their pre-disability AWW and their residual earning capacity (i.e., the post-injury wages they earn or could earn through suitable alternative employment). See 33 U.S.C. 908(c)(21), (e). Finally, the compensation rate for survivors of an employee who suffers a work-related death is usually based on the deceased employee’s AWW at the time of death, and, with certain exceptions, can be as high as two-thirds of that wage. 33 U.S.C. 909(b).
The third step is to apply the statute’s compensation-limiting rules. Despite the general two-thirds rule, section 6, “Compensation,” 33 U.S.C. 906, both caps the compensation amounts that can be received (a “maximum”) and provides a floor below which compensation may not fall (a “minimum”). These limits are applied after calculating two-thirds of the worker’s date-of-injury AWW. The Act sets the maximum for all disability compensation categories at 200 percent of the “applicable national average weekly wage.” 33 U.S.C. 906(b)(1). Total compensation for death—the amount payable to all survivors in the aggregate—is also limited to that 200-percent figure, or to the deceased employee’s AWW, whichever is less. 33 U.S.C. 909(e)(1); Donovan v. Newport News Shipbuilding & Dry Dock Co., 31 BRBS 2 (1997). The Act sets the minimum for total disability compensation at the lower of: (1) 50 percent of the applicable national average weekly wage; or (2) the employee’s actual AWW. 33 U.S.C. 906(b)(2). The Act does not provide minimums for the remaining compensation categories.
The Secretary of Labor determines the national average weekly wage before October 1 of each year, and it applies for a fiscal year (FY), from October 1 until the next September 30. 33 U.S.C. 906(b)(3). A given fiscal year’s national average weekly wage, and the resulting maximum and minimum rates, apply to “employees or survivors currently receiving compensation for permanent total disability or death during such [fiscal year], as well as those newly awarded compensation during such [fiscal year].” 33 U.S.C. 906(c) (emphasis added). Under the “currently receiving” clause, the maximum rate for claimants receiving benefits for permanent total disability or death is “adjusted each fiscal year—and typically increases, in step with the usual inflation-driven rise in the national average weekly wage.” Roberts, 132 S.Ct. at 1354 n.2. In fact, because the national average weekly wage has risen every year since Congress added this self-adjustment feature to section 6 in 1972, each year’s maximum rate has risen as well. Thus, applying a later fiscal year’s maximum generally results in a higher compensation rate.
Finally, in addition to section 6’s provisions allowing adjustments to the maximum compensation rate, section 10(f) provides another mechanism for adjusting compensation amounts over time. “[B]enefits payable for permanent total disability or death” are increased at the beginning of each fiscal year (October 1) by the same percentage as any increase in the national average weekly wage (as calculated under section 6), but no more than 5 percent. 33 U.S.C. 910(f). The primary difference between the two adjustment provisions is that section 10(f) applies to all claimants receiving compensation for permanent total disability or death, while section 6(c) assists only those affected by the maximum rate. Through these provisions, compensation payable to a claimant each year increases by the same amount as wage-growth generally, ensuring that the value of the workers’ compensation is not eroded over time.
In recent litigation, disputes have arisen over which fiscal year’s maximum rate or rates apply to a given claimant, specifically: (1) In what fiscal year is a claimant “newly awarded compensation”; and (2) in what fiscal year is a claimant “currently receiving compensation for permanent total disability or death.” On the first question, the dispute is whether a claimant is “newly awarded compensation” when he or she first becomes disabled—and therefore entitled to compensation—or when an administrative law judge issues a compensation order. On the second question, the dispute is whether a claimant is “currently receiving compensation for permanent total disability” when he or she first becomes permanently totally disabled or when he or she actually receives compensation for permanent total disability.
The Supreme Court resolved the first of these questions in its Roberts decision. But the second issue has not been addressed by all circuits around the country, and thus remains subject to litigation. The proposed rules would codify the Supreme Court’s decision, resolve the second issue in a manner consistent with the courts that have addressed it, implement other aspects of the Act’s maximum and minimum compensation provisions, and address the related section 10(f) annual adjustment provision.
B. Section 6(c)’s “Newly Awarded Compensation During Such Period” Clause
The Supreme Court construed this part of section 6(c) in Roberts and held “that an employee is `newly awarded compensation’ when he first becomes disabled and thereby becomes statutorily entitled to benefits, no matter whether, or when, a compensation order issues on his behalf.” 132 S.Ct. at 1363. Mr. Roberts was injured and became disabled in FY 2002. An administrative law judge (ALJ) order awarding compensation, however, was not issued until FY 2007. While Mr. Roberts’ employer initially made some compensation payments, it stopped in May 2005 and did not resume payments until after the ALJ’s FY 2007 order. The ALJ found that Mr. Roberts’ disability was: Temporary total from March 11, 2002, to July 11, 2005; permanent total from July 12, 2005, to October 9, 2005; and permanent partial beginning on October 10, 2005. Roberts v. Director, Office of Workers’ Compensation Programs, 625 F.3d 1204, 1205 (9th Cir. 2010). Because the employer had ceased paying compensation in May 2005, before Mr. Roberts’ period of permanent total disability, it did not pay him for that disability until after the ALJ’s order in FY 2007.
The ALJ found that Mr. Roberts’ compensation rate for total disability—two-thirds of his AWW—was $1,902.05, and that his compensation rate for permanent partial disability—two-thirds of the difference between his average weekly and his residual wage-earning capacity—was $1,422.05. He found, however, that Mr. Roberts was subject, for all periods of disability, to the maximum rate of $966.08 in effect during FY 2002, because that was when he first became disabled, and was thus “newly awarded compensation.” Id. at 1206. On Mr. Roberts’ motion for reconsideration, the ALJ determined that he had applied the wrong maximum rate for the period from October 1, 2005, through October 9, 2005. The ALJ found that Mr. Roberts was entitled to the FY 2006 maximum rate of $1,703.64 per week for that period because he was “currently receiving compensation for permanent total disability” during that time. Id.
The Benefits Review Board, relying on its earlier decision in Reposky v. Int’l Transp. Services, 40 BRBS 65, 74-76 (2006) (holding that a claimant is newly awarded compensation “when benefits commence, generally at the time of injury”), affirmed the ALJ’s decision. The Ninth Circuit followed suit. In affirming the ALJ’s decision, it held that an injured employee is “newly awarded” compensation when he or she first becomes entitled to compensation rather than when a formal compensation order is issued. Roberts, 625 F.3d at 1208. Although Mr. Roberts argued that “awarded” could mean only “assigned by formal order in the course of adjudication,” and that “newly awarded” must therefore mean newly issued a compensation order, id. at 1206, the court rejected that argument. It reasoned that the LHWCA sometimes uses “awarded” to mean “entitled to.” It found that use applied to section 6, and held that a claimant is “newly awarded” compensation when he first becomes entitled to compensation, which is when he first becomes disabled.
The Supreme Court agreed with the Ninth Circuit’s interpretation of section 6(c)’s “newly awarded compensation” clause. The Court acknowledged that Mr. Roberts’ contrary view was “appealing” because “[i]n ordinary usage, `award’ most often means `give by judicial decree’ or `assign after careful judgment.’ ” Roberts, 132 S. Ct. at 1356 (quoting Webster’s Third New International Dictionary 152 (2002)). It recognized, however, that “award” can also mean “grant” or “confer or bestow upon.” Thus, deciding that “the text of § 906(c), in isolation, is indeterminate[,]” the Court considered its function in the context of the statute as a whole. Id. at 1357. The Court concluded that in the Act’s “comprehensive, reticulated regime for worker benefits—in which § 906 plays a pivotal role—`awarded compensation’ is much more sensibly interpreted to mean `statutorily entitled to compensation because of disability,’ ” id. at 1357, than “awarded compensation in a formal order.” Id. at 1356.
The Court gave several reasons for its holding. First, the Court recognized that construing “newly awarded compensation” to mean a formal compensation order would be “incompatible with the Act’s design.” Id. at 1357. The Court reasoned that this construction of the clause would be impossible to apply in the many cases where benefits are paid voluntarily and a formal compensation order is never issued. Noting that the three provisions of section 6 that relate to the maximum compensation rate “work together to cap disability benefits,” and that section 6(b)(1)’s cap on benefits “applies globally, to all disability claims,” the Court concluded that section 6(c)’s “newly awarded” clause must also apply globally. Id. at 1358.
Second, the Court examined the Act’s administrative structure, which requires employers to pay compensation within 14 days after the employer knows of the worker’s injury (see [33] U.S.C. 914(b)). It determined that using the national average weekly wage at the time of disability to determine the applicable maximum “coheres” with that structure. Roberts, 132 S. Ct. at 1358. The Court recognized that the employer, as well as OWCP, must be able to calculate the amount of compensation due at the time of payment, a calculation that necessarily includes consideration of any applicable cap. Because an employer is “powerless to predict” future events related to the compensation claim or what a later national average weekly wage will be, the court reasoned that “[i]t is difficult to see how an employer can apply or certify a national average weekly wage other than the one in effect at the time an employee becomes disabled.” Roberts, 132 S. Ct. at 1358-59.
Reading section 6(c) in the context of the Act’s comprehensive scheme, the Court further explained that “applying the national average weekly wage for the fiscal year in which an employee becomes disabled advances the LHWCA’s purpose to compensate disability,” which focuses on wages at the time of the injury as the basis to compute compensation. Id. at 1359 (citing 33 U.S.C. 902(10)). It is thus “logical to apply the national average weekly wage for the same point in time.” Id.
Moreover, the Court found that applying the date-of-disability maximum rate as suggested by the Director and Employer “avoids disparate treatment of similarly situated employees . . . who earn the same salary and suffer the same injury on the same day.” Id. at 1359. By contrast, Mr. Roberts’ approach could subject such employees to different rates based solely on the “happenstance of their obtaining orders in different fiscal years.” Id.
Third, the Court believed its approach “discourages gamesmanship in the claims process.” Id. at 1360. Using the date a compensation order issues would encourage claimants to delay the adjudication process or initiate additional administrative proceedings seeking to take advantage of a later year’s national average weekly wage. At the same time, an employer who promptly pays compensation at the correct rate would be subject to an increased cap retroactively for those payments based on a later compensation order. The Court refused to “reward” claimants with these “windfalls” while “punishing” employers who have met their statutory obligations. Id.
C. Section 6(c)’s “Currently Receiving Compensation for Permanent Total Disability or Death Benefits During Such Period” Clause
While the Supreme Court’s Roberts decision settled the interpretation of the “newly awarded” clause, the Court declined to consider section 6(c)’s “currently receiving” clause, leaving the phrase’s correct interpretation open to further litigation. The Ninth Circuit Roberts court had interpreted the “currently receiving” clause consistently with the “newly awarded” clause, noting that “[u]nder both clauses, the inquiry into the applicable maximum rate focuses on an employee’s entitlement to compensation.” Roberts, 625 F.3d at 1208. It held that “the `currently receiving’ clause of section 6(c) unambiguously refers to the period during which an employee was entitled to receive compensation for permanent total disability, regardless of whether his employer actually paid it.” Id. at 1209. Consequently, the court determined that Mr. Roberts was “currently receiving compensation for permanent total disability” as of July 12, 2005, and thus entitled to the FY 2005 maximum rate from that date through September 30, 2005 (the end of FY 2005), and to the FY 2006 rate from October 1, 2005, through October 9, 2005. Beginning October 10, 2005—when Mr. Roberts regained an earning capacity, making his disability permanent partial—the court concluded he was once again subject to the FY 2002 maximum rate. Id. at 1206, 1209.
Although the Eleventh Circuit initially disagreed with the Ninth Circuit’s construction of the “currently receiving” clause, Boroski v. DynCorp Int’l, 662 F.3d 1197 (11th Cir. 2011), that court reversed its position after the Supreme Court decided Roberts. Boroski v. DynCorp Int’l, 700 F.3d 446 (11th Cir. 2012) on remand from 132 S.Ct. 2430 (2012). Mr. Boroski was first disabled by his work-related injury in April 2002. His employer, DynCorp International, timely contested his compensation claim and thus did not voluntarily pay him compensation. An ALJ entered an order in FY 2008 awarding him permanent total disability compensation from 2002 and continuing. DynCorp based its subsequent payments on the maximum compensation rate applicable for FY 2002, and adjusted the amount upward each year, beginning on October 1, 2002, as required by section 10(f). Mr. Boroski objected, arguing that he was not “currently receiving compensation for permanent total disability” until FY 2008, when the employer actually began paying him, and was thus entitled to the FY 2008 maximum rate from the outset.
The Eleventh Circuit rejected Mr. Boroski’s argument and held that “ `currently receiving compensation’ in § 906(c) means `currently entitled to compensation.’ ” Boroski, 700 F.3d at 451. The court agreed with the Director that for each year after 2002 during which Mr. Boroski was entitled to compensation for permanent total disability, he was “currently receiving compensation for permanent total disability,” and thus subject to the new fiscal year’s maximum rate, regardless of when the compensation was actually paid.
Taking its analytical lead from the Supreme Court in Roberts, the Boroski court considered the “currently receiving” clause’s role in the context of the entire statute. The court noted that using the maximum for the year in which compensation was actually paid (2008) rather than for the first year Mr. Boroski was disabled (2002) would lead to “two different and irreconcilable weekly benefit payment amounts” under the Supreme Court’s interpretation of the “newly awarded” clause, which also applied to his compensation calculation. Id. at 451. The Director’s contrary interpretation instead harmonized the two clauses of section 6(c).
The court also found the Director’s position more consistent with section 10(f)’s annual adjustment mechanism. The court reasoned that the Director’s interpretation of the “currently receiving” clause operates similarly, “gradually increasing benefits to maintain the value of an injured employee’s wages, determined `at the time of the injury.’ ” Id. at 452. Mr. Boroski’s interpretation—under which “employers who first pay benefits to an injured employee in a year other than the year of the injury would pay all past due payments based on the national average weekly wage for the year in which the first payment is made . . . effectively giv[ing] the injured employee a raise to the later year’s national average weekly wage, and would make that raise retroactive to the date of his disability”—would be “incongruous” with section 10(f). Id. at 452. The court also rejected Mr. Boroski’s assertion that Congress intended his interpretation to encourage prompt payment of benefits. The court noted that claimants are entitled to interest on late payments of compensation, and found that interest both adequately compensates claimants for the delayed receipt of benefits and discourages employers from refusing to promptly pay legitimate claims.
Finally, the court determined that the Director’s interpretation avoided disparate treatment of similarly situated claimants. “Under the Director’s interpretation, Boroski receives the same benefits as a similarly situated employee who was first injured and who first received payment in 2002, and, additionally, Boroski receives interest on all late payments, to compensate him for the delay.” Id. at 453. By contrast, under Mr. Boroski’s interpretation—in which Mr. Boroski “would receive, in addition to interest, higher benefits for the same period of disability than claimants who timely receive their benefits”—the same hypothetical employee “would receive approximately $30,000 less than Boroski.” Id.
For all of these reasons, the Eleventh Circuit held, as had the Ninth Circuit in Roberts, that an employee is “currently receiving compensation for permanent total disability” when he is entitled to such compensation, not when he is actually paid that compensation. To date, the remaining circuits have not weighed in on this issue.
The Benefits Review Board subsequently reached the same conclusion as the Ninth and Eleventh Circuits. Lake v. L-3 Communications, 47 BRBS 45 (2013). In Lake, the Board held that a claimant is “currently receiving compensation” under section 6(c) “during a period in which he is entitled to receive such compensation, regardless of whether his employer actually pays it.” Id. at 48. The Board also held that when a claimant’s temporary total disability changes to permanent total disability during a fiscal year, the maximum rate in effect during that year applies immediately. Id. at 48. In reaching this conclusion, the Board overruled this portion of its earlier contrary decision in Reposky, 40 BRBS at 65. The Board thus held that the FY 2009 maximum rate applied as of December 10, 2008, the date that Mr. Lake’s entitlement to permanent total disability benefits commenced, until the next October 1, when the new fiscal year’s maximum rate applied.
The Board also addressed a related question on the interplay between sections 6 and 10(f) in Lake. The employer argued that Mr. Lake, who first reached permanent total disability status in FY 2009, was not entitled to the FY 2009 maximum rate. Instead, the employer contended that he was limited to a section 10(f) increase on the FY 2006 maximum rate that he had been receiving since his injury, followed by a section 10(f) adjustment each subsequent October 1. The Board rejected this argument. Citing its earlier contrary holding in Marko v. Morris Boney Co., 23 BRBS 353 (1990), the Board reiterated its conclusion that, “in a permanent total disability case in which two-thirds of the claimant’s actual [AWW] exceeds the Section 6(b)(3) statutory maximum rate, he is entitled to the benefit of the new maximum rate each fiscal year . . . until such time as two-thirds of his actual average weekly wage falls below 200 percent of the applicable [national average weekly wage], and then annual adjustments under Section 10(f) apply.” Lake, 47 BRBS at 50. The Board found its holding compelled by the plain language of section 6(c) and supported by the Ninth Circuit’s Roberts decision.
Conclusion:
This is a proposed rule that is open to comments. I’m interested to see what comments are submitted. Although submitting comments might be a futile endeavor in this situation because of the thought that was put into the proposed rule, sometimes the comments shed light on difficulties applying new rules in real world situations.
