Tashia Rasul, Esq.

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).

Tashia Rasul is an Partner at Lois LLC where she defends employers and carriers in New York workers’ compensation claims and leads the Construction Defense Practice team. Tashia chairs the Firm's Diversity Committee and is active in the national Alliance of Women in Workers' Compensation. She can be reached directly at trasul@loisllc.com or 201-880-7213.