For most injured employees, the calculation of the workers’ compensation wage replacement benefits is straightforward: They will receive two-thirds of the average of their earnings over the 26 weeks prior to injury.
If you are an employer who provides some form of nonmonetary compensation as part of a remuneration package, however, the calculation can become much more complicated. Vehicles, ski passes, cellphone service, cows, and food and lodging, to name a few, can all factor into the calculation of what your carrier pays out in weekly wage replacement benefits.
Most recently, the commissioner of the Department of Labor ruled in Haller v. Champlain College that tuition-free college credits Champlain College offers to all full-time employees should also be included in the calculation as a form of nonmonetary compensation. Champlain appealed that decision to the Vermont Supreme Court, which heard oral arguments in February. The parties are waiting on a decision.
The basis for Haller’s argument that the college credits should be included is the statutory definition of “wages,” 21 V.S.A. §601 (13), as including:
“… bonuses and the market value of board, lodging, fuel and other advantages which can be estimated in money and which the employee receives from the employer as part of his or her remuneration …”
The workers’ compensation rules that further interpret the statute offer some additional detail: under Rule 8.1130, wages shall also include
“(t)he fair market value of any room, board, food, electricity, telephone, uniforms or similar benefits provided the injured worker …”
There is some additional nuance to the calculation. If the injured worker continues to receive the nonmonetary compensation during their period of disability, then the value of those benefits is not included for temporary disability, only permanent disability benefits.
Where disputes tend to arise between the insurance carrier and injured worker is in arguing what is meant in the statute and rules by “other advantages” or “similar advantages.” The most significant decision addressing this question is the Vermont Supreme Court’s 2013 decision, Lydy v. Trustaff, which upheld the commissioner’s ruling that employer-paid health insurance premiums are not “wages” as defined under the Workers’ Compensation Act and therefore could not be included when calculating an injured worker’s average weekly wage. In its decision, the court found that the phrase “other advantages” was capable of more than one reasonable interpretation that could cover countless other costs paid by the employer, including payments to third parties for the benefits of the employee, such as health insurance or life insurance premiums, pension packages or 401(k) contributions, social security contributions and other “fringe benefits.” Due to this uncertainty, the court attempted to look at the intent of the Legislature in drafting the definition. The court highlighted the fact that the Legislature has never revised the definition to include employer-paid health insurance after it developed into a customary employee benefit and interpreted that it therefore was not intended to be included in the calculation.
In holding that tuition-free college credits should be included in wage calculation, the commissioner in that case applied a three-part test to its analysis of whether the college credits fall under “other advantages”: whether it was a significant part of the employee’s compensation; whether the employee derives true value from the offered benefit or does it mean little to the employee except as an enhancement of weekly benefits; and whether the benefit is reasonably capable of a monetary valuation. The commissioner found in the affirmative on all three parts of the test.
Whether the Vermont Supreme Court will agree with the commissioner is unclear, but we should know soon whether college tuition or credits will become a regular feature of workers’ compensation benefit calculations. If they do, employers should once again expect their costs of doing business to rise. For an employer like Champlain College, the implications could mean reviewing whether it is practicable to continue to extend tuition-free courses to employees.
Glenn S. Morgan is an attorney with Ryan Smith & Carbine in Rutland, where he is the supervising partner of the firm’s workers’ compensation group. Associate attorney Stephanie P. Romeo contributed to this column.