Workers’ Compensation for Variable Wage Worker Considered

A variable wage worker is one for whom wages are not consistent from month-to-month, week-to-week or sometimes day-to-day. The most common example of this is tipped workers, or those who rely on tips for the majority of their pay. Restaurant workers and those in the service industry usually top this list. server

When these employees are hurt on-the-job, the question of what they should receive in compensation is often a tricky one. Workers’ compensation is based on a percentage of a worker’s average weekly wage – specifically 66 and 2/3 percent the average weekly wage, not to exceed $978 a week as of 2017. As workers’ compensation lawyers, we usually can get this information easily for salaried workers. However, we often have to look more closely in cases where a worker receives variable wages or when he or she recently earned a raise or changed positions.

In a recent case before the Kentucky Supreme Court, the question regarding whether a worker was salaried or made variable wages was in question, as she had changed jobs in the months before the work injury. 

According to court records, plaintiff began her job as a waitress at a diner in 2009, where her assigned tasks included seating customers, taking orders, serving customers, busing tables and collecting customer payments. Like many servers, she was paid an hourly wage of just $2.10, far below the minimum wage, with the expectation that the rest of her income would be made up in tips – as it often was.

A year into her job, the owner gave her additional responsibilities and altered her base rate of pay, although she also received tips.

Prior to this transition, plaintiff reported her tip-related income to the IRS, as required by law. However, although she continued to receive tips after accepting new job responsibilities, she did not report her tip-related earnings to the federal government in her W-2 forms.

Approximately seven months after the “promotion,” plaintiff slipped and fell at work and injured her spine. She had to undergo a spinal fusion surgery, and filed a workers’ compensation claim.

In determining what plaintiff’s weekly workers’ compensation benefit should be, the administrative law judge applied state law that pertained to variable wage workers. The judge held that while plaintiff’s tips at the time of her injury weren’t reported to the IRS, she was still a variable wage worker.

Meanwhile, the Uninsured Employers Fund (which was paying the claim, as her employer failed to secure workers’ compensation coverage), argued plaintiff was a salaried/fixed wage worker, and that her average weekly wage percentage should be based on the $100/week figure. Of course, this calculation would result in a much lower payment to plaintiff.

The full board approved the single ALJ, as did the court of appeals. The matter then went before the Kentucky Supreme Court.

There was no dispute that plaintiff’s non-reported tips couldn’t be used to consider her “wages.” However, the plaintiff argued this didn’t automatically convert her status to a fixed weekly wage worker, and that tips earned prior to her promotion should be considered in the calculation.

The state supreme court agreed with her, affirming the lower courts’ rulings and remanding the case for allocation of benefits consistent with that finding.

Contact the Carolina workers’ compensation lawyers at the Lee Law Offices by calling 800-887-1965.

Additional Resources:

Commonwealth, Uninsured Employers’ Fund v. Sidebottom, Feb. 16, 2017, Kentucky Supreme Court

More Blog Entries:

Report: North Carolina Employers Defy Workers’ Compensation Rules, March 6, 2017, Workers’ Compensation Lawyer Blog

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