by Lawrence M. Baker
CHARLOTTE, NC – Because all indemnity benefits are based on the average weekly wage and compensation rate earned by the employee at the time of injury, calculation of the correct average weekly wage of a claim is critical in handling the case. As such, numerous appellate decisions have been issued over the last several years addressing this issue.
Seeking to clarify the standard of review to be followed by our appellate courts, the North Carolina Supreme Court in Nay v. Cornerstone Staffing Solutions (Feb. 11, 2022), determined that the issue of whether the Commission selected the correct method of determining plaintiff’s average weekly wage pursuant to NCGS §97-2(5) is a question of law subject to de novo review, but that the issue of whether a particular method for making that determination produces results that are “fair and just” is a question of fact subject to the “any competent evidence” standard of review. Thus, the Supreme Court continued to muddy the waters of what the Commission should do in making the necessary decision on how to calculate the correct average weekly wage.
As a reminder, NCGS §97-2(5) provides five methods of calculating the average weekly wage, by order of priority as to which method should be used. Thus, if the first method cannot be used, you look to see if method 2 can be used, and so on. Those methods are:
[Method 1:] “Average weekly wages” shall mean the earnings of the injured employee in the employment in which the employee was working at the time of the injury during the period of 52 weeks immediately preceding the date of the injury, . . . divided by 52[.]
[Method 2:] [B]ut if the injured employee lost more than seven consecutive calendar days at one or more times during such period, although not in the same week, then the earnings for the remainder of such 52 weeks shall be divided by the number of weeks remaining after the time so lost has been deducted.
[Method 3:] Where the employment prior to the injury extended over a period of fewer than 52 weeks, the method of dividing the earnings during that period by the number of weeks and parts thereof during which the employee earned wages shall be followed; provided, results fair and just to both parties will be thereby obtained.
[Method 4:] Where, by reason of a shortness of time during which the employee has been in the employment of his employer or the casual nature or terms of his employment, it is impractical to compute the average weekly wages as above defined, regard shall be had to the average weekly amount which during the 52 weeks previous to the injury was being earned by a person of the same grade and character employed in the same class of employment in the same locality or community.
[Method 5:] But where for exceptional reasons the foregoing would be unfair, either to the employer or employee, such other method of computing average weekly wages may be resorted to as will most nearly approximate the amount which the injured employee would be earning were it not for the injury.
In Nay the employee was hired by a staffing agency on a temporary assignment for an employer with the intent he would migrate to become a full-time employee of that company. Over 16 weeks, he earned $5,805.25 before he was injured. Because Plaintiff worked less than 52 weeks prior to his injury, methods 1 and 2 could not be used.
Plaintiff contended the average weekly wage should be calculated by method 3, dividing his total income by the number of weeks he actually worked. The Employer contended that method 5 should be used since method 3 would not result in a wage that was fair and just to the employer. They contended the total income should be divided by 52 weeks since there was no indication plaintiff would continue working for this employer beyond a set number of hours predetermined by contract.
You may recall that the Court of Appeals in Tedder v. A & K Enterprises had determined that Method 5 was proper where the contract of employment was for a set number of weeks. In Nay, the employer contended that Plaintiff’s average weekly wage should be calculated the same way. The Court of Appeals disagreed finding that there was no specific end date to the contract of employment, overturning the findings of fact and conclusions of law of the Industrial Commission. More importantly, the Court of Appeals reviewed the matter de novo, meaning they were not bound by the findings of fact of the Commission.
The Supreme Court modified the decision of the Court of Appeals and remanded the matter back to the Commission finding that both the Commission AND the Court of Appeals “have found the facts on the basis of a misapprehension of the applicable law.” At the end of the day, the court determined that the Commission had failed to follow the important guiding principal in determine which method to use.
The overriding principal that should guide the Commission, as stated by the Supreme Court is that “(U)ltimately, the Commission must select the method which focuses upon whether, based upon a consideration of all relevant facts and circumstances, the chosen method for calculating plaintiff’s average weekly wages most nearly approximate[s] the amount which the injured employee would be earning in the employment in which he [or she] was working at the time of his [or her] injury.”
Thus, as you determine which method to use in calculating the correct average weekly wage, always remember that the goal is to approximate the amount the injured employee would be earning had they not been injured.
In reviewing what the Commission has done in calculating the average weekly wage, the court is instructed to find facts showing that the proper method was used that will lead to the above standard of approximating what the injured employee would have made from this employer had they not been injured.
The recommended approach in handling these cases is that if the Commission determines methods three should be used in calculating average weekly wage (which is a question of law subject to de novo review), defendant should put on evidence to show that method 3 would not produce results that are fair and just and the court should move to a different method (which is a question of fact).
If you have questions concerning North Carolina workers’ compensation claims and calculating average weekly wages, feel free to contact me directly at (704)247-9678 or [email protected].