How Is the Average Weekly Wage Calculated in An Hourly Pay Basis in Louisiana Workers Compensation?
Louisiana law provides for a variety of means of calculating an Average Weekly Wage, depending upon whether the injured worker was paid by the hour, the month, the year, or on some other basis.
By far, the most commonly used method of calculating and paying wages is an hourly rate, paid on a weekly or bi-weekly basis.
For this reason, the hourly rate basis of calculating an injured employee’s Average Weekly Wage is the most commonly used in calculating appropriate the Average Weekly Wage.
In the simple case of an employee working a standard 40-hour week, the gross wage per hour (say, $15.00 per hour) would be multiplied by 40, giving the Average Weekly Wage.
This Average Weekly Wage would serve as the basis for calculating the actual benefit; if a total and permanent award is involved, for example, 66 2/3% of the Average Weekly Wage would equal the weekly benefit, subject to applicable maximums.
But, for the purposes of calculating Average Weekly Wage, since there are numerous variations in types of hourly paid work, Louisiana law divides hourly employees into four categories:
- Full-time employees;
- Full-time employees who regularly work less than 40 hours per week, at their own discretion;
- Part-time employees; and
- Part-time employees who work two or more jobs (moonlighting employees).
The ways in which each of these types of employees will calculate lost wages depend on which category they fall under.
GENERAL FORMULAS FOR CALCULATING AN EMPLOYEE’S AVERAGE WEEKLY WAGE UNDER AN HOURLY RATE PAY BASIS IN LOUISIANA WORKERS COMPENSATION
Louisiana 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.
Of course, 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.
Nonetheless, an outline of the formulas used to determine the Average Weekly Wage of an injured employee – who is paid under an hourly rate – is as follows:
(1) For employees who worked 40 hours or more in a week: Take the average number of hours worked per week in the four (4) full weeks prior to the accident, and then multiply that number by the hourly rate. For full-time employees, always use at least 40 hours per week, unless the employee chose at his or her own discretion to work fewer hours.
(2) For employees who were offered at least 40 hours per week, but regularly and voluntarily worked less than 40 hours per week: Add up the total weekly earnings for the four weeks preceding accident date, and then divide that number by four.
(3) For part-time employees: Add up the total actual hours worked for the four full weeks preceding the accident, and then divide that by four, and then multiply that number by the employee’s hourly rate.
(4) For part-time employees with two or more jobs, where the work injury prevents wage loss in all jobs: Add up the total actual hours worked for all employers for the four full weeks preceding the accident, and then divide that by four, and then multiply that by the employee’s hourly rate at the job where the employee was injured; but the total hours may not exceed 40 hours. The employer in whose service the employee was injured pays all the indemnity benefits.
Hourly employees should separate out any overtime hours, and multiply these hours by the overtime rate.
Hourly employees should separate out any tips or bonuses, and use the calculation method found under “wages based on unit, piecework, commission or other basis” for any tips or bonuses.
Once again, 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.
AVERAGE WEEKLY WAGE IN LOUISIANA WORKERS COMPENSATION
In order to calculate any type of lost wage benefit, an injured employee must determine his or her Average Weekly Wage.
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.
The Average Weekly Wage for an injured employee – who is paid under an hourly rate – is based upon the employee’s gross wages for the four full weeks before the employee’s injury or accident.
Gross wages mean the total amount of pay, before deductions and taxes, Social Security, retirement, etc.
Also, “four full weeks” means the four full work weeks before the employee’s accident or injury.
If the employee had an illness, instead of an accident or injury, the date of the accident is considered to be the last day the employee worked or had harmful exposure.
HOW TO DETERMINE AN EMPLOYEE’S AVERAGE WEEKLY WAGE CALCULATED IN AN HOURLY PAY BASIS IN LOUISIANA WORKERS COMPENSATION
So again, the hourly-paid employee will need to answer two main questions in order to determine the employee’s Average Weekly Wage (and thus the amount of the lost wage benefit):
- Which exact weeks were the employee’s “four full weeks” before the employee’s accident?
- How much were the employee’s “gross wages” during the “four full weeks” before the employee’s accident?
An hourly-paid employee’s average weekly wage uses the employee’s “gross wages” during the “four full weeks before the accident.”
So if during the last four full weeks of employment, the employee worked an average of 40 hours per week, and the employee’s wage rate was $22.50 per hour, then this employee’s Average Weekly Wage would be $900.00.
However, the Average Weekly Wage is not the amount of the injured worker’s weekly indemnity benefit; instead, the weekly indemnity benefit amount is typically 2/3 of the average weekly wage.
So in this basic example, the injured worker’s weekly indemnity benefit would be $600.00 per week (which is 2/3 of $900.00).
Nevertheless, to properly determine an employee’s Average Weekly Wage, close attention must be paid to the terms “gross wages” and “four full weeks before your accident.”
GROSS WAGES
Gross wages are defined as the total amount of an employee’s 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.
If an injured worker is an hourly employee, the gross wages are the number of hours worked multiplied by the hourly wage rate.
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.
FOUR FULL WEEKS BEFORE YOUR ACCIDENT
As noted above, an injured employee’s Average Weekly Wage is typically based upon the employee’s gross income in the four full weeks before his or her accident.
However, an incorrect calculation often results in a much lower weekly benefit, so it is critical to calculate the Average Weekly Wage correctly, based on the rules and laws of Louisiana workers compensation.
For the purposes of calculating the Average Weekly Wage, the week in which the accident happened should not be included in the calculations, since in most cases, that week is usually not a full week of work due to the injury.
If the injured worker has an occupational disease (or work-related illness), instead of an injury that occurred at a specific time and place, then the employee’s “accident date” for the purposes of calculating the Average Weekly Wage is considered to be either the last day worked for the employer or the last date upon which the employee had a harmful exposure to the work-related condition that caused the disease or illness – whichever is later.
If the injured worker was a full-time employee who typically worked at least 40 hours per week, then the employee will usually be credited with a full 40 hours of income for any week in which the employee worked less than 40 hours due to vacation, holidays, or an employer-reduced work schedule.
If an injured worker was working more than one job at the time of the injury, the insurance company must calculate the Average Weekly Wage based on all the jobs which the employee was working around the time of the accident. In short, if the employee’s injury causes lost income from multiple jobs, then the employee is entitled to all the lost income from any job in which income was lost.
THE AVERAGE WEEKLY WAGE IS SET AS OF THE DATE OF ACCIDENT
The Average Weekly Wage of the hourly-paid employee is generally based on the employee’s “average hours,” not on the employee’s “average earnings.”
Because this is important to recognize that the average weekly wage of the hourly-paid employee is set as of the date of the accident.
So, for example, even if the employee’s hourly rate was temporarily higher or lower than usual at the time of the accident, the employee’s Average Weekly Wage is based on this hourly rate at the time of the accident.
Also, even if some or all of the hours worked during the four full weeks before the accident were paid at a different rate than the employee’s hourly rate at the time of the accident, all those hours would still be multiplied by the hourly rate at the time of the accident, not the different rate at which those hours were actually worked.
This specifically is the difference between the employee’s “average hours” and the employee’s “average earnings.”
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 throughout 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 throughout the injured worker’s claim.
FULL-TIME HOURLY-RATE EMPLOYEES IN LOUISIANA WORKERS COMPENSATION
The simple Average Weekly Wage calculation for hourly-paid full-time employees is to take the average number of hours worked per week in the four (4) full weeks prior to the accident, and then multiply that number by the hourly rate.
But for these full-time employees, the calculation must always use at least 40 hours per week, unless the employee chose at his or her own discretion to work fewer hours.
So again, the Average Weekly Wage of a full-time employee paid on an hourly basis is the hourly rate multiplied by (1) the average actual hours worked in the four full weeks preceding the accident; or (2) forty hours, whichever is greater.
THE FORTY-HOUR PRESUMPTION FOR THE FULL-TIME HOURLY-RATE EMPLOYEE
If an hourly-paid full-time employee averages less than 40 hours in the four full weeks preceding the employee’s accident or injury, then this employee’s average weekly wage is simply 40 times the employee’s hourly rate.
This is known as the forty-hour presumption.
The forty-hour presumption always applies if the employer classifies the employee as a full-time employee, even if the employee often works less than forty hours per week.
For example, take the full-time employee who is paid $14.00 an hour for regular time and $21.00 an hour for overtime. In the four full weeks preceding the employee’s accident, the employee worked the following hours and earned the following amounts:
- Week 1 36 hours ($504.00)
- Week 2 43 hours ($623.00)
- Week 3 40 hours ($560.00)
- Week 4 33 hours ($462.00)
- Total 152 hours ($2,149.00)
- Average 38 hours ($537.25)
However, because this employee was classified as a full-time employee, the employee is given credit for at least forty hours per week, under the forty-hour presumption.
Thus, this employee’s Average Weekly Wage is not $537.25.
Instead, this employee’s average weekly wage is $560.00. That is: 40 times $14.00 equals $560.00.
Again, this employee’s Average Weekly Wage is 40 times his hourly rate of pay ($14.00), or $560.00, even though this employee averaged less than 40 hours and less than $560.00 per week, because of the forty-hour presumption.
OVERTIME PAY FOR THE FULL-TIME HOURLY-RATE EMPLOYEE
If an injured employee is paid on an hourly basis, the employee’s hourly wage rate is to be multiplied by the average actual hours worked in the four (4) full weeks preceding the date of the accident or 40 hours, whichever is greater.
If, as is usually the case, overtime beyond 40 hours a week is paid at an hourly rate exceeding the normal hourly rate (commonly at time-and-a-half), then the increased hourly rate should be used for that portion of work in the preceding four weeks which was at the overtime rate.
So, assuming a normal wage rate of $15.00 an hour for a 40 hour week, and also assuming that this particular employee has worked four hours on each of the preceding six Saturdays (at $22.50 per hour), the following calculation should be made:
- 40 hours @ $15.00/hour = $600.00
- 4 hours @ $22.50/hour = $90.00
- Average weekly wage = $690.00
But if the injured employee worked irregular hours over the preceding four workweeks, an average of these hours is to be taken, with the first 40 hours paid at the usual wage rate of $15.00 and the remaining overtime hours at the higher rate of $22.50 per hour.
For example, take again the case of the full-time employee who is paid $15.00 an hour for regular time and $22.50 an hour for overtime. In the four full weeks preceding the employee’s accident, this employee worked the following hours and earned the following amounts:
- Week 1 36 hours ($540.00)
- Week 2 46 hours ($735.00)
- Week 3 46 hours ($735.00)
- Week 4 36 hours ($540.00)
- Total 164 hours ($2,550.00)
- Average 41 hours ($637.50)
However, since the employee averaged 38 regular time hours per week, and three overtime hours per week, the employee’s Average Weekly Wage would be calculated as such:
- Average over four weeks = 41 hours
- 40 hours @ $15.00/hour = $600.00
- 1 hours @ $22.50/hour = $ 22.50
- Average weekly wage = $622.50
Thus, the overtime rate applies only to the average number of hours that the employee worked over 40 hours.
So again, even though the employee worked a total of 12 overtime hours during those four weeks, and thus an average of three overtime hours per week, the employee was credited with only one overtime hour in calculating the Average Weekly Wage because the employee averaged 41 total hours per week.
THE RARE EXCEPTION OF A DIFFERENT CALCULATION
Last, it should be noted that a few Louisiana courts have calculated overtime differently, and in a way that appears inconsistent with the Louisiana statute.
These courts have calculated Average Weekly Wage, including overtime as (average regular hours times hourly rate of pay for regular time) plus (average overtime hours times hourly rate of pay for overtime time).
Nonetheless, this last manner of calculation is rarely used, again as it does appear to be inconsistent with the Louisiana statute.
FULL-TIME HOURLY-RATE EMPLOYEES WHO VOLUNTARILY WORKED LESS THAN FORTY HOURS IN LOUISIANA WORKERS COMPENSATION
The simple Average Weekly Wage calculation for hourly-paid full-time employees – who were offered at least 40 hours per week, but regularly and voluntarily worked less than 40 hours per week – is to take the total weekly earnings in the four (4) full weeks prior to the accident, and then divide that number by four.
These hourly-paid full-time employees – who were offered at least 40 hours per week, but regularly and voluntarily worked less than 40 hours per week – are not entitled to the forty-hour presumption.
In fact, this category of employees is the only classification of hourly-rate employees that uses the employee’s “average earnings” rather than the employee’s “average hours” to calculate the employee’s Average Weekly Wage.
For example, take a full-time employee who is paid $15.00 an hour. In the four full weeks preceding the employee’s accident, the employee worked the following hours and earned the following amounts:
- Week 1 30 hours ($450.00)
- Week 2 20 hours ($300.00)
- Week 3 20 hours ($300.00)
- Week 4 30 hours ($450.00)
- Total 100 hours ($1,500.00)
- Average 25 hours ($375.00)
So to determine the Average Weekly Wage of this employee – who was offered at least 40 hours per week, but regularly and voluntarily worked less than 40 hours per week – is to take the total weekly earnings in the four (4) full weeks prior to the accident, and then divide that number by four.
Thus, this employee’s Average Weekly Wage is $375.00 (which is $1,500.00 decided by four).
Again, this hourly-paid full-time employee, who voluntarily worked only 25 hours per week, is not entitled to the forty-hour presumption.
BUT DID THE EMPLOYEE ACTUALLY REGULARLY REFUSE TO WORK?
Whether an employee falls within this classification – and is not entitled to the forty-hour presumption – is a factual question that varies from case to case.
Again, to reduce a full-time employee’s Average Weekly Wage below the forty-hour presumption, an employer must show that the employee regularly, not occasionally, refused to work when employment was both available and offered.
To fall within this classification, a full-time employee must work less than 40 hours both (1) regularly and (2) at the employee’s own discretion.
THE EMPLOYEE MUST REGULARLY FAIL TO WORK FULL TIME
To deny a full-time employee the benefit of the forty-hour presumption, the employer must establish a pattern of conduct on the employee’s part.
This is because an employee that only occasionally – and not regularly – worked less than 40 hours at the employee’s own discretion is still entitled to the forty-hour presumption.
Examples of types of employees will not fall within this classification:
- An employee that misses work because of sickness; and
- An employee (such as a construction worker or landscaper) that works less than forty hours because of bad weather.
These employees will be entitled to the forty-hour presumption because these are not regular problems.
Neither sick leave or annual leave should be considered “regularly” working fewer than 40 hours.
THE EMPLOYEE MUST REFUSE TO WORK FULL TIME AT THE EMPLOYEE’S OWN DISCRETION
On the other hand, if the takes a job which is for 40 hours per week, but consistently act in such a way so that he or she works only 35 hours in a week, then likely this employee will not be entitled to the forty-hour presumption.
This is because this employee should not be able to convert a full-time job (for which the employer is paying premiums on that basis) to a part-time job with full protection of wage-earning capacity.
So, for example, an employee who continuously does not work because of transportation problems or other personal reasons will fall within this classification and thus not be entitled to the 40-hour presumption.
PART-TIME HOURLY-RATE EMPLOYEES IN LOUISIANA WORKERS COMPENSATION
The simple Average Weekly Wage calculation for an hourly-paid part-time employee is to add up the total actual hours worked for the four (4) full weeks before the accident, and then divide that by four, and then multiply that number by the employee’s hourly rate.
This is the same calculation as the calculation used for a full-time hourly-rate employee, but of course, the forty-hour presumption does not apply.
Under Louisiana law, a part-time employee is specifically defined as “an employee who as a condition of his hiring knowingly accepts employment that (a) customarily provides for less than forty hours per workweek, and (b) that is classified by the employer as a part-time position.”
So, Louisiana law describes a position that was part-time at the designation of the employer rather than at the discretion of the employee.
For an example calculation, take the part-time employee who is paid $15.00 an hour. In the four full weeks preceding the employee’s accident, the employee worked the following hours and earned the following amounts:
- Week 1 30 hours ($450.00)
- Week 2 20 hours ($300.00)
- Week 3 20 hours ($300.00)
- Week 4 30 hours ($450.00)
- Total 100 hours ($1,500.00)
- Average 25 hours ($375.00)
So to determine the Average Weekly Wage of this hourly-paid part-time employee, simply take the total weekly earnings in the four (4) full weeks prior to the accident, and then divide that number by four.
Thus, this employee’s Average Weekly Wage is $375.00 (which is $1,500.00 decided by four).
Again, this hourly-paid part-time employee, who voluntarily worked only 25 hours per week on average, is not entitled to the forty-hour presumption.
PART-TIME HOURLY-RATE EMPLOYEES WHO WORK TWO OR MORE JOBS IN LOUISIANA WORKERS COMPENSATION
The simple Average Weekly Wage calculation for an hourly-paid part-time employee with two or more jobs (who are “moonlighting”), where the work injury prevents wage loss in all jobs, is to:
- Add up the total actual hours worked for all employers for the four full weeks preceding the accident;
- Then divide that number of hours by four; and
- Then multiply that number by the employee’s hourly rate at the job where the employee was injured.
However, the total hours may not exceed 40 hours. If the average number of hours is over 40, then use only 40 hours.
Also, the employer in whose service the employee was injured is required to pay all the indemnity benefits.
In other words, Louisiana law holds that when an employee is employed in “successive” employments, the employer in whose employ he is injured owes him applicable compensation, and that the benefits will be based on the average weekly hours which he worked in all of his employment or forty hours, whichever is less.
“Successive” employments simply means working two or more different jobs at the same time, one after another, or “moonlighting.”
Last, under Louisiana law, a part-time employee is specifically defined as “an employee who as a condition of his hiring knowingly accepts employment that (a) customarily provides for less than forty hours per workweek, and (b) that is classified by the employer as a part-time position.”
THE LOUISIANA STATUTE FOR CALCULATION OF HOURLY-RATE LOST WAGE (INDEMNITY) BENEFITS 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:
(a) Hourly wages.
(i) If the employee is paid on an hourly basis and the employee is employed for forty hours or more, his hourly wage rate multiplied by the average actual hours worked in the four full weeks preceding the date of the accident or forty hours, whichever is greater; or
(ii) If the employee is paid on an hourly basis and the employee was offered employment for forty hours or more but regularly, and at his own discretion, works less than forty hours per week for whatever reason, then, the average of his total earnings per week for the four full weeks preceding the date of the accident; or
(iii) If the employee is paid on an hourly basis and the employee is a part-time employee, his hourly wage rate multiplied by the average actual hours worked in the four full weeks preceding the date of the injury.
(iv) A part-time employee, as defined in R.S. 23:1021(9) and who is employed by two or more different employers in two or more successive employments, shall be entitled to receive benefits as follows:
(aa) If an employee is employed by two or more different employers in two or more successive employments and the employee incurs a compensable injury under the provisions of this Chapter in one of the employments, the employer in whose service the employee was injured shall pay the benefits due the employee as provided in this Chapter.
(bb) If the employee is a part-time employee in one of the successive employments, is injured in that employment, but as a result of the injury also incurs loss of income from other successive employments, that employee shall be entitled to benefits computed by determining wages under the provisions of this Subsection using his hourly rate in employment at the time of injury and using the total hours worked for all employers of the part-time employee, but not to exceed his average, actual weekly hours worked or forty hours weekly, whichever is less.
