News & Articles

Friday F.A.Q.: Can A Self-Employed Claimant Get A Reduced Earnings Benefit?

In New York workers’ compensation cases partially-disabled claimants are obligated to search for work before permanency is reached. If the claimant finds work but earns less than he was at the time of the accident, the employer may be liable for reduced earnings benefits, which is two-thirds of the difference between the pre-injury and post-injury wages. What happens when the claimant chooses to become self-employed and claims that his income is not “earnings” for the purposes of being eligible for workers’ compensation benefits. So, how does the Board address self-employment?

The issue of whether the income from self-employment is “earnings” is resolved by determining whether the income is generated “actively” or “passively”. If the self-employment work activity is akin to the type of work activity of a regular employment, the income would be considered to be “actively” obtained, or “earnings”. On the other hand, if the income from the self-employment is obtained without the claimant doing any significant work, it would be deemed to be “passively” obtained, or “profits.” For example, if the claimant is in a supervisory role in a business, the income would generally be considered a “profit.” See, for example, Van Ness v. American Stores Co., 18 A.D.2d 746. Profits are not earnings, and do not affect temporary disability benefits.

The Board has the power to determine whether the claimant’s self-employment income constitute earnings that would impact workers’ compensation benefits, and the standard is “substantial evidence.” Roberge v. United Board & Carton Corp., 21 A.D.2d 713. Practically speaking, the Board will look at factors such as the claimant’s role and duties in the self-employment, the length of time that he has been involved in it, and the reasons why he decided to engage in self-employment as opposed to a regular employment.

If the Board determines that the income from the self-employment constitutes earnings for the purposes of workers compensation benefits, his benefits would be calculated using the usual reduced-earnings formula – two-thirds of the difference between the pre-accident wages and the income from the self-employment, subject to the statutory maximum limits. If the income is deemed to be profits, the Board will determine the claimant’s post-injury earning capacity and issue benefits in accordance with same (that is, if the Board determines that the claimant has a 50% disability, benefits would be awarded at this rate).

Download the Defending Construction Claims Handbook

Download Our Defending Construction Claims Handbook

Tashia Rasul’s Handbook, “Defending Construction Claims in New York,” subtitled “A Practical Protocol for Coordinating Workers’ Compensation and General Liability Defense in Catastrophic Construction Claims,” is intended for employers, risk managers, insurance brokers and adjusters who are involved in the defense of construction accident claims in New York, and who are looking for a plain-English guide to defending these claims.

Download Now

Construction Defense at Lois Law Firm

Our Construction Defense Team is led by Partner Tashia Rasul, Esq. This dedicated team exclusively handles workers' compensation claims arising out of construction accidents. Tashia’s expertise lies in complex coverage issues, wrap-ups, and claims arising out of catastrophic injuries. As part of her practice, Tashia frequently visits accident sites and provides on-site training to employers regarding workers' compensation claims, as well as to develop defense strategies. Tashia is the author of the “Defending Construction Claims in New York” Handbook, available here.

Learn More

Get articles delivered to your inbox, once a month.

Subscribe Today!