How to Calculate Lost Wage (Indemnity) Benefits in Louisiana Workers Compensation

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Indemnity (Lost Wage) Benefits in Louisiana Workers Compensation

Indemnity benefits are the lost wages that an injured employee is entitled to recover, due to an inability to work, when the employee is unable to return to his or her job because of a work-related injury or illness.

However, an injured employee will not receive the full amount of his or her lost wages, but instead only 2/3 of the average weekly wage in the four weeks prior to the accident.  

This is a common misconception among injured employees -  that they will get 100% of their lost wages under Louisiana workers compensation. Again, unfortunately, the law in Louisiana is instead that the employee will not receive their entire lost wages, but only two-thirds of the wages you earned in the four weeks before your accident.

Additionally, the amount of the indemnity benefits are capped (or limited) by Louisiana law.  

So if the employee earns a significant amount, that amount will likely be limited to a certain maximum amount.  

The amount of the limit changes every year, but for example, in 2019, an injured employee could receive at most $665.00 per week in indemnity benefits.

How Are Lost Wage (Indemnity) Benefits Calculated in Louisiana Workers Compensation?

In Louisiana workers compensation, lost wage benefits - also known as indemnity benefits - are based upon the earnings of the employee.

This policy of basing lost wage benefits upon the employee's earnings is based on the idea that the worker should be rewarded according to his capacity and merit.

There are numerous way to calculate lost wage benefits, based on the manner in which the employee is paid.  These include:

    1. Hourly Basis
    2. Weekly, Monthly, Seasonal or Annual Basis
    3. Bonuses, Tips, and Fringe Benefits
    4. Employees of More Than One Employer
    5. Unit, Piecework, or Commission Basis
    6. Workers Who Supply Equipment or Helpers
    7. Workers Paid Out of Profit

Each of these seven categories is analyzes separately in sub-parts to this page, as identified on the bottom of this page. Or just click on each to be directed to the correlating page.

However, these seven categories use some of the same mechanisms for calculating an injured employee's lost wage benefits.

First, in order to calculate any type of lost wage benefit, an injured employee must determine his or her Average Weekly Wage.

Second, in order to calculate the Average Weekly Wage (and thus the amount of the lost wage benefit), an injured employee must determine his or her Gross Wages.

Third, in most cases, in order to calculate the Average Weekly Wage (and thus the amount of the lost wage benefit), an injured employee must determine his or her Gross Income in the "four full weeks" before the employee's accident.

Average Weekly Wage in Louisiana Workers Compensation

Again, 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.

An employee's average weekly wage is typically based upon the employee's earnings for:

    1. The 4 full weeks before the employee's injury or accident for hourly workers;
    2. The 26 weeks before the employee's injury or accident for commission workers; and
    3. The 52 weeks before the employee's injury or accident for salaried employees.

But the basic calculation for lost wages is subject to many exceptions and variations.

An employee's average weekly wage is typically based upon the employee's gross wages.

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 prior to the employee's accident or injury.

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.

How to Determine an Employee's Average Weekly Wage in Louisiana Workers Compensation

So again, the 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?

Typically, an employee's average weekly wage equals 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 45 hours per week, and the employee's wage rate was $20 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).

But there are many exceptions and variations to this basic calculation.  

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 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 a 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 cased 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 all the lost income from any job which income was lost.

Maximum and Minimum Limits On Average Weekly Wage (Benefit Cap) in Louisiana Workers Compensation

Lost wage benefits in Louisiana workers compensation are paid at sixty-six and two-thirds percent (66 2/3%) of average weekly wages during the period of the employee's disability.

However, these 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. 

The unfortunate bottom line here is that 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.

This maximum indemnity benefit amount is always seventy-five percent (75%) of the average weekly wage paid in all employment.

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.

Also, the minimum compensation for total disability is not less than twenty percent (20%) of this 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.

General Formulas for Calculating an Employee's Average Weekly Wage 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 an injured employee's average weekly wage is as follows:

1.  Hourly Wages.

(1) For employees who worked 40 hours or more in a week: Take the average number of hours worker per week in the four (4) full weeks prior to 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 less 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 multiple 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.

(5) Seasonal employment: Take the employee's annual salary and divide it by 52. Specific rules exist for seasonal employees employed less than a year. A seasonal worker is someone who regularly works less than 44 weeks per year.

2.  Monthly wages: Take the employee's monthly salary, multiple it by 12, and then divide it by 52.

3.  Annual wages: Take the employee's annual salary and divide it by 52.

4.  Wages based on unit, piecework, commission or other basis: Take the employee's gross earnings from the 26 week period immediately before the accident, then divide this number by the number of days the employee actually worked during this 26 week period, and then multiple this number by the average number of days worked per week during 26 week period; however, if the employee worked for the employer for less than 26 weeks immediately before the accident, take the employee's gross earnings from the period immediately preceding the accident, then divide this number by the number of days the employee actually worked during this period, and then multiple this number by the average number of days worked per week during this period.

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. 

The Louisiana Statute for Calculation of 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.

(v) For an employee in seasonal employment, his annual income divided by fifty-two.

(aa) For purposes of this Subparagraph, seasonal employment shall be any employment customarily operating only during regularly recurring periods of less than forty-four weeks annually.

(bb) If the employee was not engaged in the seasonal employment more than one year prior to the accident, his annual income shall be the average annual income of other employees of the same or most similar class working in the same or most similar employment for the same employer or, in the event that the employee was the only individual engaged in that specific employment, then his annual income shall be the average annual income of other employees of the same or most similar class working for a neighboring employer engaged in the same or similar employment.

(b) Monthly wages. If the employee is paid on a monthly basis, his monthly salary multiplied by twelve then divided by fifty-two.

(c) Annual wages. If the employee is employed at an annual salary, his annual salary divided by fifty-two.

(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.

(e) Exceptions. For municipal police officers, additional compensation paid by the state pursuant to R.S. 40:1667.3 shall not be included in the calculation and computation of total salary or average weekly wage to the extent such officer continues to receive such additional compensation during the period of his disability.

(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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