Tuesday 01st

NJ Case Law Update — Wage Reconstruction and the Katsoris Rule

A common argument made by petitioners' attorneys is in favor of wage reconstruction.  This principle, as outlined in the seminal NJ Supreme Court opinion of Katsoris v. South Jersey Pub. Co., 131 N.J. 535 (1993), allows a Judge of Compensation to reconstruct a part-time employee's average weekly wage (AWW) to obtain a higher permanency rate on his overall settlement.  For example, an employee earning $10 per hour and working 20 hours per week at the time of an injury would have an average weekly wage of $200, entitling him to a permanency rate of $140 (as in NJ, minimum rates only apply to TTD benefits and PTD benefits, not PPT).  If the employee is able to argue for wage reconstruction at 40 hours per week, this would increase the average weekly wage to $400 and the permanency rate to $280.  This can significantly impact the value of a case.  In this example, if the case settled for 35% of partial total, it would double from $29,400 to $58,800.

In Katsoris, the petitioner had a full-time job as a secretary and a part-time job delivering newspapers.  She was injured on her newspaper route, but she ultimately returned to her full-time job as a secretary.  The petitioner was awarded 55% of PPT disability, based upon her average weekly wage with the newspaper company.  She appealed the decision, seeking wage reconstruction based upon a 40-hour work week.

The Appellate Division concluded that there was no basis for wage reconstruction.  The court wrote that a petitioner must show that "the disability represents a 'loss of earning capacity, i.e., a diminution of future earning power.'"  The fact that she had simultaneous full-time employment did not establish that wage reconstruction was warranted.

In practice, workers' compensation attorneys have essentially looked at whether the petitioner returned to work full-time when determining whether wage reconstruction is appropriate.  The recent Appellate Division case of Dunkley v. Costco Wholesale Corp., No. A-3405-14T2 (App. Div. Sept. 30, 2016) may change this practice. In Dunkley, the petitioner was a nurse's aide from 1994-2000, then a home health aide until 2008.  She then started working for Costco on a part-time basis of 25 hours per week.  She was laid off in 2008, and then rehired in 2009 to work part-time in Costco's food court.  This job required making pizzas, lifting, cashiering, cleaning, mopping and collecting garbage.

The petitioner injured her neck and right shoulder when she slipped and fell on a wet floor.  She underwent surgery and missed about ten weeks of work.  The petitioner then injured her shoulder again on June 27, 2010.  She underwent surgery and was out of work for an unspecified period of time.  Upon her return, she continued working part-time but was reassigned to the member services department.  This job required her to greet customers, walk the floor, and clean the floor.  She testified that mopping and sweeping the floor were difficult because of her shoulder injury.  In 2011, the petitioner became a full-time employee of the service department, which provided her a higher wage, along with benefits.

At the trial stage, the petitioner argued for wage reconstruction because the injuries stopped her from performing the duties of other higher paying full-time positions with Costco for which she was qualified.  The Judge of Compensation held that wage reconstruction was not appropriate because the petitioner became a full-time employee with a higher wage after the accidents.  Ms. Dunkley appealed the decision.

The Appellate Division wrote that wage reconstruction under Katsoris is a two-part test:  1) whether the petitioner worked less than the usual number of days per week for the field of work, and 2) whether the disability caused an impact of potential future earnings capacity.  The court disagreed with the Judge of Compensation's reason, holding that "contemporaneous full-time employment does not require rejection of a request for reconstruction of a part-time employee's work week."  Since the Judge of Compensation did not address either of these issues, the Appellate Division remanded the case back to the judge.

What It Means to You

This case may lead to more questions than answers to an already murky aspect of workers' compensation.  It could be very easy for a petitioner's attorney to argue that his client is entitled to wage reconstruction because he or she could be working a better paying job in essentially any field but for the work accident.  The answer may be to obtain a Functional Capacity Evaluation or surveillance.  As with any aspect of settlement, wage reconstruction can also be negotiated between the parties by meeting somewhere in the middle.