Alabama Workers Compensation - Part 4
B. Capping Out
As you can see, the disability rating essentially determines the compensation, and therefore, each side usually argues over this number. Unfortunately for the client in this example, he “maxes-out" at a 47% disability rating. What do I mean by “maxes-out"? Once the compensation rate exceeds $220.00, the client cannot recover any more compensation unless he is deemed permanently and totally disabled. Consequently, the compensation rate in this example equals $220.00 for any rating between 47% and 99%. Is this fair? It doesn’t seem to be fair for two reasons: one, the $220.00 is not indexed for inflation, and it has remained that figure since approximately 1992; and two, shouldn’t someone with a higher disability rating be entitled to higher compensation?
C. Permanent Total Disability and Lump Sum Payment
Other than medical coverage for the rest of the employee’s life, the present value of $66,000.00 is the most an individual can recover in a workers compensation case for a permanent partial impairment (PPI). If a permanent and total (PT) disability results from an on-the-job injury, the compensation is determined over the life expectancy of the individual. Using our example above, the client would have 44.93 years to live as computed by the mortality tables which have been established. (See Appendix "B"). This equates to 2,336.36 weeks (44.93 X 52 weeks). The compensation rate in a PT case equals two-thirds of the client’s average weekly wage or, in this case, $466.67. The Department of Industrial Relations sets a maximum rate for PT cases each year which is indexed for inflation. As of 2006, the maximum rate equals $682.00 (See Appendix "C"). Therefore, the client in the example above would be entitled to receive $466.67 per week for the rest of his life, or if the company wanted to settle for a lump sum amount - THE COMPANY'S CHOICE - the calculation would equal the present value of 2,336.36 weeks, or 810.2921 weeks, multiplied by $466.67 which equals $378,139.01.
Unfortunately, the employer would almost never settle for the maximum lump sum in a PT case for the following reasons: (1) a court may make a determination that the client is not permanently and totally disabled, and therefore, the employer would save a significant amount of money by trying the case in court (all they have to have is a determination that the employee’s disability rating is less than 100%); (2) even if the employer loses in court, the liability would never be greater than the weekly payments, and the employer could choose to pay the employee on a weekly basis instead of with a lump sum payment; (3) if the employee dies prematurely from causes other than the injuries suffered at work, the employer is no longer responsible for the payments.
D. Compensation for Death
If death results from an on-the-job injury, the employee’s beneficiary is entitled to compensation, but it depends on a few factors. (1) If the deceased employee leaves one dependent, there shall be paid to the dependent 50 percent of the average weekly earnings of the deceased. (2) If the deceased employee leaves two or more dependents, there shall be paid to the dependents 66 2/3 percent of the average weekly earnings of the deceased. (3) If, however, the deceased employee at the time of his or her death has no dependents, then within 60 days of his or her death, the employer shall pay a one-time lump sum payment of seven thousand five hundred dollars ($7,500) to the deceased worker's estate. The maximum number of weeks of compensation in the event of death is 500 weeks during dependency.
Consequently, if an employee with a wife and two children earns an average weekly wage of $600 and is killed on the job, his family will be entitled to $400/week for 500 weeks or a lump sum of $152,041.52 if the employer chooses to pay a lump sum (380.1038 weeks X $400).