Long v. Injured Workers’ Ins. Fund – Calculating Average Weekly Wage of Self Employers for Workers’ Comp.

Workers’ compensation benefits in South Carolina are available to almost all employees whose injuries occur on the job. Wage loss benefits are based on an individual’s average weekly wage at the date of injury. Workers are to receive 66 and 2/3 percent of their average weekly wage in the six months prior to the injury, not to exceed $784.03 per week as of 2016 according to the South Carolina Workers’ Compensation Commission.businessman

For self-employed workers who suffer injury, the issue of compensation can get a bit sticky.

The commission reports that sole proprietors and partners are considered owners and thus not automatically included under workers’ compensation, but they can elect to be covered if they are active in the business and have given appropriate notice to the insurance company. The only way owners would be automatically covered is if they were also employees.

Those working as subcontractors on a job – even if they are self-employed – may in some cases be considered “employees” for workers’ compensation purposes, depending on the agreement that subcontractor has with the general contractor.

Even those self-employed workers who secure their own workers’ compensation insurance know that determining how much they should be fairly compensated is difficult to say because income can fluctuate greatly from month to month or year to year, particularly for smaller companies or those that rely on seasonal business.

Recently, the case of Long v. Injured Workers’ Ins. Fund, before the Maryland Court of Appeals (the highest court in that state) shed some light on some of the thorny legal issues that can arise when self-employed workers claim workers’ compensation. In this case, the question – one of first impression for Maryland – was how to determine the average weekly wages of a sole proprietor who had opted to purchase workers’ compensation insurance for himself. Should it be based on the worker’s gross receipts or gross income (not deducting business expenses) or net profit (gross receipts less business expenses)?

Plaintiff in this case is a self-employed sole proprietor who owns a flooring company. He opted to obtain workers’ compensation coverage as an employee. While working as a subcontractor for another flooring company, plaintiff injured his back while installing carpet. The injury required surgery and, according to his attorney, he is “likely going to be disabled for life.”

Six months later, he filed a notice of claim with the workers’ compensation commission seeking benefits.

The commission awarded compensation finding his injury occurred in the course and scope of employment, his disability was work-related and he suffered temporary total disability for a month, temporary partial disability for another month and permanent partial disability.

The question was: What to pay him? Initially, the commission determined plaintiff’s average weekly wage was $1,500 and ordered a continuing total disability rate of $940 per week. Plaintiff filed a request for correction, noting his average weekly wage was in fact $1,737, per his gross wages in the 14 weeks prior to the injury.

There was a great deal of back-and-forth as to what the average weekly wage should be because the insurance provider came back and argued the average weekly wage was only $225, which was based on his net profit rather than his gross receipts.

At a hearing, numerous tax documents and business receipts were submitted, and it was ultimately determined plaintiff earned an average weekly wage of about $500. The Court of Special Appeals rejected plaintiff’s argument that if his insurance premiums are based on his gross income than his average weekly wage should be also, finding that this would result in the sole proprietor being able to recover far more money than he or she was losing out-of-pocket as a result of a work injury. In essence, the insurer argued and the court found this would be a windfall benefit.

The Court of Appeals affirmed, holding that when a sole proprietor chooses to obtain workers’ compensation coverage, benefits should be based on the net profit, not the gross receipts or gross income.

If you have been injured at work, contact the Lee Law Offices at 800-887-1965.

Additional Resources:

Long v. Injured Workers’ Ins. Fund, June 22, 2016, Maryland Court of Appeals

More Blog Entries:

South Carolina First Responders Fight for PTSD Workers’ Comp Coverage, May 15, 2016, Greensboro Workers’ Compensation Lawyer Blog

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