There are many issues that arise regarding the payment of temporary disability benefits under the New Jersey Workers’ Compensation Act. This blog will cover some of the basic issues and some of the complex issues.
Q. When is an employee eligible for temporary disability benefits?
The employee must have lost more than seven days of time due to a work injury or occupational disease (not necessarily consecutive days) in order to receive payment of temporary disability benefits. Example: employee is injured on October 1st at work, does not complete that day of work, and the authorized treating doctor keeps the employee out until October 9th. This is more than seven days because N.J.S.A. 34:15-38 provides that you count as day one the first day that the employee cannot complete work. That would be October 1st. When a worker is out for any period of time, weekends and holidays that fall within that period of time are counted as lost days.
Q. What is the rate of payment in New Jersey?
The rate is 70% of wages subject to a maximum and a minimum rate. For 2024 injuries the maximum is $1,131 per week and the minimum is $302 per week. Temporary disability payments are not taxable.
Q. What if the employee works for a board of education?
School board employees have a unique provision that no other employees have in New Jersey. The Education Law under 18A:30-2.1 provides that full salary must be paid to school board employees who are injured under workers’ compensation for one year from the first date of lost time. The IRS takes the position that the entire full salary payment is not taxable when a school board employee is out of work due to a workers’ compensation injury.
Q. What if the employee works for a municipality, county or the State?
Most public entities have collective bargaining agreements that provide for full salary payments in lieu of workers’ compensation. These are negotiated agreements which trump workers’ compensation law. Most of the CBA provisions have an end date to the full salary, perhaps six months or a year, but some do not. Practitioners need to review the relevant CBA.
Q. Is there any statutory end date for temporary disability benefits?
Yes, 400 weeks is the statutory limit.
Q. How does one calculate an average weekly wage and temporary disability rate for non-salaried employees?
This is by far the most complex issue when dealing with temporary disability benefits. One must bear in mind that N.J.S.A. 34:15-37 (which is the law that defines wages) was written in 1945. The economy was vastly different and many laws that we deal with routinely today did not exist. The statute provides for three basic rules which I will simplify:
- If the employee is paid by output (piecework), use an average of the 26 weeks preceding the date of accident.
- If the employee works a standard work week, take the hourly rate of pay and multiply by the hours worked. So, an employee who works 40 hours per week at $20 per hour has a wage of $800 per week with a temp rate of $560.
- If the employee works in a job that has fewer hours than the ordinary work week, use the actual hours worked by that employee times the hourly rate and calculate an average weekly wage.
Sounds simple, right? The problem is that there is an infinite variety of fact patterns that are encountered in cases. Judges and practitioners often use the 26-week payment period because that generally makes sense for long-term employees, even though it was designed for piecework workers when the law was passed in 1945. There are, however, some real problems with using the 26-week method.
- What if the employee only worked 5 or 10 weeks before the injury or even one day before the injury?
- What if the 26-week period included four weeks of unpaid FMLA leave? Does one exclude that period of time? Judges generally say yes, we should use 22 weeks then.
- What if the 26-week period included a one-time longevity payment for years of service that skews the amount of wages?
- What if the employee gets a large annual bonus that just happens to fall inside or outside that 26-week period? Should that bonus be counted?
- What if the employee’s union settled a protracted negotiation with a large wage increase that is retroactive to a date three years ago when the accident occurred? Does that get counted?
These issues and other variations are dealt with every day in workers’ compensation court. In resolving these disputes, it is important to remember the underlying principle: temporary disability benefits are meant to compensate an injured worker for the amount of money he or she would have been paid but for the work injury or occupational disease. There are wage disputes in thousands of workers’ compensation cases each year, but these disputes are resolved in court without litigation in almost every case.
Q. On a related topic, what do wages include in the first place?
This statute is also very old. Wages generally are payments that are taxable to the employee, including commissions, overtime pay, tips, gratuities, bonuses, and lodgings furnished by the employer free of charge to the employee. N.J.S.A. allows only $25 per week for board and lodging to be counted toward wages. But again, this statute goes back to 1945 and there is currently a bill to amend this provision in the legislature. There is no mention in the statute about how to treat mileage reimbursement for use of one’s vehicle for work purposes, but this is not likely a “wage” because the IRS does not tax standard rate mileage reimbursement.
Q. When does the employer have a right to terminate temporary disability benefits in New Jersey?
Unlike most states, termination of temporary disability benefits in New Jersey does not generally depend on the return-to-work date. New Jersey is an MMI state, meaning that both medical and temporary disability benefits end at maximal medical improvement, even if the employee cannot return to his or her job. Sometimes an employee returns to work full duty before MMI is reached. The rule is that temporary disability ends on the earlier of return-to-work full duty or MMI. So, use whichever date occurs first.
Q. What is the rule on termination of temporary disability benefits based on a light duty return-to-work offer?
The law on terminating benefits based on a light duty job offer stems from an important case called Harbatuk. That case established that an employer can terminate temporary disability benefits on a light duty offer. If the employee refuses to accept the light duty job offer, the employer does not have to pay temporary disability benefits. The employer must show that it communicated the offer of light duty to the employee. When there are issues on light-duty return to work, they usually focus on whether the employee can safely perform the light duty job. The opinion of a treating doctor or the results of a functional capacity examination can be helpful. If the light duty job comes to an end before the employee has reached MMI or can return to work full duty, temporary disability benefits must be reinstated.
Q. What if the employee is treating but keeps missing therapy or medical appointments. Can the employer terminate temporary disability benefits in that event?
Yes, under N.J.S.A. 34:15-19, failure to cooperate with medical treatment allows the employer to terminate workers’ compensation benefits. Once the employee returns to treatment, benefits resume but the employer does not go back and repay the period of non-cooperation.
Q. Does the employer owe temporary disability benefits to a seasonal employee even when the seasonal employee would not have worked?
There are many seasonal employees in every state. Teachers have been considered seasonal employees by our Supreme Court as well as landscapers, employees of golf courses that are closed for the winter, and many other employees whose jobs depend on the weather. The general rule is that employers do not have to pay temporary disability benefits during the off season, so teachers will not be paid during the summer months when they would not have taught for the school. There is an important exception, however. The New Jersey Supreme Court makes clear in the Outland case, (which concerned a teacher), that if the employee can prove he or she would have worked another job in the summer but for the work injury, then temporary disability benefits must be paid. The burden of proof is on the employee. In that case, temporary disability benefits would be based on the actual wages for the secondary employment.
Q. Does New Jersey have “partial temp?”
No, New Jersey does not have “partial temp” as the term is defined in other states. This usually refers to a situation where an employee has reached MMI and can return to work, but the new job now pays less than the employee used to earn before the accident. In other states there are often workers’ compensation laws that require the employer even after MMI to pay for a portion of the new job’s wage loss. New Jersey does not have any such law.
I have been asked many times if the following restricted hours scenario qualifies as partial temp. Frankly, the term “partial temp” does not appear in our statute. Consider a situation where the authorized doctor is treating an injured worker, Rebecca, and she has not yet reached MMI. Assume that Rebecca normally gets paid $25 per hour for a 40 hour week for a total of $1,000 per week. She gets paid $700 per week in temporary disability benefits while out of work. After Rebecca has spine surgery, the treating doctor recommends that she phase into her job and work just four hours per day for four weeks. Her employer then pays her $20 per hour for four hours per day or $500 per week (half pay). Rebecca’s lawyer argues that she is entitled to be compensated for the 20 hours she could not work because of the restriction placed on her by the authorized doctor. The issue for the Judge of Compensation to decide will be whether these 20 lost hours are considered payable as temporary disability benefits.
There is no published case on this precise issue. The key to the resolution of this issue will be the court’s interpretation of N.J.S.A. 34:15-38. This statute reads that temporary disability includes days lost and any fraction of days thereof that the employee is unable to work due to the accident. Rebecca will argue that she is owed $350 per week in temporary disability benefits. (70% times $500). She will argue these lost hours count toward temporary disability as defined in New Jersey. Judges who have encountered this situation have recommended payment by the carrier or employer for the half days that the employee cannot work. Once MMI is reached, however, Rebecca would have no argument if her new job resulted in a lower wage.
Q. Does New Jersey allow employers to stop temporary disability benefits when an employee is fired for cause?
Yes, the leading decision is Cunningham v. Atlantic States Cast Iron Pipe Co., which involved termination of an employee who violated his “last chance” agreement. The petitioner had previously injured his knee at work and was under active treatment for his knee when he was fired. After his termination his treating doctor saw petitioner, and the doctor issued a note stating petitioner was unable to work. The petitioner filed a motion for temporary disability benefits and the Judge of Compensation ruled in his favor. The employer appealed, and the Appellate Division reversed in favor of the employer. The Appellate Division ruled that petitioner had no wages to replace because he had been terminated for cause. Other cases have followed the rule in Cunningham. There are no published cases that address termination of temporary disability benefits when a downsizing or mass firing of employees occurs.
Feel free to email the undersigned with any questions not addressed in this blog.
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