Appellate Court reviews wage rate reconstruction

The first step in determining the appropriate rate of compensation is to determine “wages” as defined in N.J.S.A. 34:15-37. The rate of compensation may not exceed 70% of petitioner’s wages at the time of the occurrence of the accident subject to the maximum and minimum rate ($35.00 for partial permanent disability) in the year in which the accident occurred.
In practice, claims adjusters should obtain “26-week wage statements” from insured/employers so that an average wage can be computed.
Determining out the ‘rate’ at which compensation should be paid is often the central issue in claims involving part-time workers. If a worker makes $100 a week as a part-timer, the permanent disability rate (the rate at which permanent disability benefits is paid) would be $70 per week. For an award of 25% of the hand (at the 2010 rates) a part-time worker earning $100 per week is due an award of $4,285. A full-time worker, earning wages exceeding $290 per week, would be due a ‘full’ statutory award of $12,585.
There are many instances where a judge of compensation is persuaded to ‘reconstruct’ a part-time wage into a full-time wage. This results in a much-higher award (in our example, $4,285 versus $12,585). The Judge of Compensation can be persuaded to ‘reconstruct’ wages to a full-time rate because the law allows for wages of a part-time employee may be reconstructed for purposes of fixing the rate for permanent partial disability in accordance with N.J.S.A. 34:15-37 based upon “diminished future earning capacity.”
A recent case re-examined the rules regarding reconstructing wages. In Rose Gruzlovic v. Giovani’s Trattoria, A-1519-08T1 (App. Div. Decided April 15, 2010), the appeals court reviewed the decision of a Judge of Compensation who had ‘reconstructed’ part-time wages of a cafeteria worker, resulting in an increased award. In Gruzlovic, the claimant was a 76-year-old woman who worked nine hours per week, earning $10.50 per hour (average weekly wage of $94.50). During the thirteen years the claimant worked for the employer, she did not have or seek additional part-time employment. After the accident at work, the claimant no longer worked, stating simply, “I thought I had my share [of work].”
The Judge of Compensation awarded Gruzlovic 25% permanent partial total benefits, and ‘reconstructed’ the rate so that the claimant received the ‘full’ statutory award ($30,420).
The Appeals Court overturned this ruling, and ruled that the claimant was only due an award bad on her part-time work – which would equate to 150 weeks of compensation payable at $66.15 per week, totaling $9,922.50. In ruling this way, the appeals panel reviewed the relevant case law, and made some crucial distinctions in this case.
The Judge of Compensation ruled erroneously by mis-applying an oft-cited New Jersey Supreme Court case (Katsoris v. South Jersey Publishing Co., 131 N.J. 535 (1993)). In Katsoris, the Supreme Court confirmed that workers’ compensation courts must confront the issue of whether it is ‘appropriate’ to reconstruct wages for part-time employees to provide compensation that would have been awarded for full-time employment. The Katsoris decision states that reconstruction of wages is appropriate when necessary to compensate the worker for loss of earning capacity, i.e., diminution of future earning power. The ‘loss of earning capacity’ includes a loss of ‘potential for full employment.’ Where an employee, who is permanently disabled due to an injury on a part-time job, also has a full-time job, use of a ‘reconstructed’ work week is appropriate if there has been an impact on the employee’s ability to return to a full-time job. (Citing Mahoney v. Nitroform, 20 N.J. 499 (1956). By contrast, where a worker with a part-time and full-time employment is permanently partially disabled format he part-time employment but able to return to the full-time employment, reconstruction of the work week as if the part-time employment were full time employment is improper. (Katsoris, 131 N.J. at 548).
In cases involving part-time employees with no full-time work, a judge of compensation must employ the principles of ‘fairness and equity’ in determining f the circumstances warrant reconstruction of a part-time worker’s wages. However, the Appeal court drew a distinction, as did prior cases, for part-time workers – concluding that reconstruction is appropriate when the “permanently disabling accident ‘prevents or interferes with later full-time employment.'” (Citing Engelbretson v. AM. Stores, 49 N.J. Super. 19 (App. Div. 1957) aff’d, 26 N.J. 106 (1958).
In Gruzlovic, the Judge of compensation was reversed and the wage reconstruction was remanded for further proceedings. The Judge was asked to find out whether the accident and resulting residual disability “had any impact on Gruzlovic’s capacity or inclination to work full-time as opposed to part-time. Based on the fact that the claimant had only worked one day per week for the thirteen years leading up to the accident, the Appellate Court stated ‘there is no basis for an inference’ that Guzlovic would have pursued other full- or part-time jobs “but for” her partial disability. The Appeals Panel further stated “When an inference of a loss of potential full-time employment attributable to the accident is not available format he evidence presented, principles of fairness and equity developed to compensate for hat lost potential are not implicated and reconstruction of wages is not appropriate.”

Greg Lois is the managing partner of LOIS LLC and dedicates his practice to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 & 2017 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@loisllc.com