Average Weekly Wage for Workers Paid Out of Profit in Louisiana Workers Compensation

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Independent Contractors and Other Workers Who are Paid Out of Profit in Louisiana Workers Compensation

A worker who expects a profit return from his undertaking is not normally a person who is entitled to workers compensation benefits.

Often, such a worker is considered an independent contractor who is not entitled to workers compensation benefits.

However, certain independent contractors have been entitled to workers compensation benefits, such as when they are involved in the pursuit of the employer's trade, business or occupation or when their job is found to include the performance of substantial manual labor.

So how should the average weekly wage, and thus compensation, be calculated for these independent contractors and other workers who are paid out of profit?

Since a worker who is paid in terms of the net profits realized by his employer does not assume the losses of the business, except as it may affect his wage rate, this worker is not really an entrepreneur or enterpriser per se.

So the compensation of a worker who is paid in terms of the net profits must simply be computed in terms of the amount received over a representative period divided by the number of days worked during the same period.

This process is similar to the one to compute the wages of a worker who is paid on a per unit basis, which requires that the gross earnings over the 26-week period preceding the accident be divided by the actual number of days worked and multiplied by the average number of days actually worked per week to reach the worker's “average weekly wage.”

Calculations of the Average Weekly Wage for Workers Who are Paid Out of Profit in Louisiana Workers Compensation

Louisiana law provides for a variety of ways of calculating an average weekly wage, depending upon whether the injured worker was paid by the hour, the month, the year, or out of profit.

This average weekly wage serves as the basis for calculating the actual lost wage benefit; if a total disability award is involved, for example, 66 2/3% of the average weekly wage would equal the weekly benefit, subject to applicable maximums and minimums.

But what about income paid out of profit? How are they included in the calculations for the employee's average weekly wage?

Basically, income paid out of profit is calculated as the employee's average earnings in the twenty-six weeks before the job accident divided by 26.

Also, no fringe benefits or other compensation are to be included in calculating the average weekly wage, unless these benefits or compensation are taxable as income. 

And the “gross earnings” of the employee during the period preceding the accident are to be used in the calculation of an average weekly wage when income was paid out of profit.

How is Income Paid Out of Profit Handled in Calculations of the Average Weekly Wage in Louisiana Workers Compensation?

Louisiana law is clear that any money paid to the employee which can be regarded as remuneration or reward for his or her services should be included in determining the employee's average weekly wage, irrespective of whether or not the payment was in the form of wages.

For this reason, income paid out of profit is included in the wages of the employee for calculation of the employee's average weekly wage.

Also, since a worker is required to pay income tax on income paid out of profit, then this income must all be counted as gross wages for purposes of determining a Louisiana workers compensation average weekly wage.

Formulas for Calculating an Employee's Average Weekly Wage on Income Paid Out of Profit

Louisiana workers compensation law applies specific mathematic formulas, depending upon the method of payment of wages, to determine the correct calculation of an injured employee's average weekly wage.

To calculate income paid out of profit under the average weekly wage:

(1) If the worker had worked for the employer for 26 weeks or more:

      • Take the worker's gross earnings from income paid out of profit for the 26 week period immediately preceding the accident;
      • Divide this number by the number of days the worker actually worked for the employer during this 26 week period; and then
      • Multiply this number by the average number of days worked per week.

(2) If the worker had worked for the employer for less than 26 weeks immediately preceding the accident:

      • Take the workers gross earnings from income paid out of profit for the period that the worker worked for the employer immediately preceding the accident;
      • Divide this number by the number of days the worker actually worked for the employer during this same period; and then
      • Multiply this number by the average number of days worked per week.

Formulas for Calculating an Employee's Average Weekly Wage on Income Paid Out of Profit and a Salary or Hourly Rate

Also, sometimes when a worker earns income paid out of profit, this income is in addition to a salary earned by the employee.

A number of “managers” of various establishments earn income which is a combination of an hourly or monthly wage or salary, plus a percentage of profits.

Also, many employees today receive stock option plans in return for their efforts at work, which is a form of profit sharing.

When an employee's income is made up of both an hourly rate or salary and income paid out of profit, the income paid out of profit  should handled separately from the hourly rate or salary portion when calculating the employee's average weekly wage.

After separate calculations, the figure from the income paid out of profit would then be added to the salary amount (calculated under the rules for calculating salaries), and then this total would constitute the average weekly wage of an injured worker who is employed on both a salary and income paid out of profit. 

The Average Weekly Wage in Louisiana Workers Compensation

In order to calculate any type of lost wage benefit - including income paid out of profit - an injured employee must determine his or her average weekly wage, using the employee's gross wages.

In most cases, Louisiana worker compensation will provide an injured worker with a weekly indemnity check for 2/3 (two-thirds) of the employee's average weekly wage, if the employee is physically unable to work due to an injury on the job.

Gross wages mean the total amount of pay, before deductions and taxes, social security, retirement, etc.

If the employee had an illness, instead of an accident or injury, the date of accident is considered to be the last day the employee worked or had harmful exposure.

No fringe benefits or other compensation are to be included in calculating the average weekly wage, unless these benefits or compensation are taxable as income. 

Again, the average weekly wage must typically be multiplied by two-thirds (2/3) to determine the exact amount of the employee's weekly check, or different calculations and adjustments can be made based on the type wage benefit.

Gross Wages

Gross wages are defined as the total amount of an employee earnings before deductions - such as deductions for taxes, social security, health insurance, or retirement plans - are taken from the paycheck.

If an injured worker is a salaried employee, the gross wages are the amount of his or her annual salary.  

Under Louisiana workers compensation, gross wages may also include taxable fringe benefits, such as the payment of some business expenses or amounts taken out of an employee's income and deposited into a pre-tax retirement account such as a 401(K).  

A good rule of thumb is that, if an employee is required to pay income tax on something, then likely it should be counted as gross wages for purposes of determining a Louisiana workers compensation average weekly wage.

Maximum and Minimum Limits

Lost wage benefits are subject under Louisiana law to both a maximum compensation rate and a minimum compensation rate.

The maximum and minimum rates are determined and adjusted each year, but the compensation rate is determined at the time of injury. 

So unfortunately, some injured workers - who are employed in middle or high paying jobs - will not receive full lost wage benefits based on their entire average weekly wage.

Present Maximum Rate Limits on Indemnity Benefits

For example, as of 2019, Louisiana law caps the maximum benefit amount based on an average weekly wage of $886.30.

So if an employee actually earns more than $886.30 per week, sadly this employee will only receive benefits based on the $886.30 wage rate.

Also, as of 2019, Louisiana law caps the maximum indemnity benefit amount at $655.00.

So, for an accident or injury that occurred in 2019, no matter how much the employee earned before the accident or injury, the employee will not receive a weekly indemnity check for more than $655.00.

This maximum amount will remain the same through out the injured worker's claim.

Present Minimum Rate Limits on Indemnity Benefits

If the average weekly wage of an injured employee falls below the minimum compensation rate, the compensation rate for that employee is the employee's actual average weekly wage.

But the minimum compensation does not apply to Supplemental Earnings Benefits (SEBs) and Permanent Partial Disability (PPD) benefits. 

So, for example, as of 2019, Louisiana law caps the minimum indemnity benefit amount at $177.00.

So, for an accident or injury that occurred in 2019, no matter how little the employee earned before the accident or injury, the employee - if totally disabled - will not receive a weekly indemnity check for less than $177.00.

This minimum amount will remain the same through out the injured worker's claim.

The Louisiana Statute for Calculation of Lost Wage (Indemnity) Benefits for Workers Who are Paid Out of Profit in Louisiana Workers Compensation

The Louisiana statute outlining calculations for lost wage benefits is La. R.S. 23:1021. In pertinent part, this statute reads as follows:

(13) "Wages" means average weekly wage at the time of the accident. The average weekly wage shall be determined as follows:

(d) Other wages. If the employee is employed on a unit, piecework, commission, or other basis, his gross earnings from the employer for the twenty-six week period immediately preceding the accident divided by the number of days the employee actually worked for the employer during said twenty-six week period and multiplied by the average number of days worked per week; however, if such an employee has worked for the employer for less than a twenty-six week period immediately preceding the accident, his gross earnings from the employer for the period immediately preceding the accident divided by the number of days the employee actually worked for the employer during said period and multiplied by the average number of days worked per week.

(f) Income tax. In the determination of "wages" and the average weekly wage at the time of the accident, no amount shall be included for any benefit or form of compensation which is not taxable to an employee for federal income tax purposes; however, any amount withheld by the employer to fund any nontaxable or tax-deferred benefit provided by the employer and which was elected by the employee in lieu of taxable earnings shall be included in the calculation of the employee's wage and average weekly wage including but not limited to any amount withheld by the employer to fund any health insurance benefit provided by the employer and which was elected by the employee in lieu of taxable earnings shall be included in the calculation of the employee's wage and average weekly wage.

(g) Date of accident. In occupational disease claims the date of the accident for purposes of determining the employee's average weekly wage shall be the date of the employee's last employment with the employer from whom benefits are claimed or the date of his last injurious exposure to conditions in his employment, whichever date occurs later.

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