An injured worker’s “average weekly wage” is the basis for calculating all temporary and permanent disability benefits under the Illinois Workers’ Compensation and Workers’ Occupational Diseases Acts.
Because small differences in the calculation add up quickly over the life of a claim, average weekly wage is frequently disputed in workers’ compensation cases. This is an easy way for employers and insurance companies to shortchange claims. Injured workers and their attorneys should always perform their own calculations of average weekly wage.
Four Methods of Calculating Average Weekly Wage under the Workers’ Compensation Act
Section 10 of the Workers’ Compensation Act provides four methods of calculating average weekly wage:
- actual earnings during the 52 weeks “ending with the last day of the employee’s last full pay period immediately preceding” the accident, excluding overtime and bonus, divided by 52; but
- if 5 or more calendar days were “lost” during the 52 week period before the accident, then earnings divided by “the number of weeks and parts thereof” actually worked;
- if employment extended over a period of less than 52 weeks, then earnings divided by “the number of weeks and parts thereof” actually worked;
- if employment has been so short or casual that calculation is “impractical” under the above methods, then “regard shall be had to the average weekly amount which … was being or would have been earned by a person in the same grade employed at the same work for each of such 52 weeks for the same number of hours per week by the same employer.”
The First Method: Actual Earnings, Excluding Overtime and Bonuses, Over 52 Weeks
The first and default method of calculating average weekly wage applies if the employee has worked at least a full year before their accident and has not “lost” 5 or more calendar days of work:
The compensation shall be computed on the basis of the “Average weekly wage” which shall mean the actual earnings of the employee in the employment in which he was working at the time of the injury during the period of 52 weeks ending with the last day of the employee’s last full pay period immediately preceding the date of injury, illness or disablement excluding overtime, and bonus divided by 52…
In other words, the average weekly wage calculation does not include actual earnings in the pay period in which the accident occurs. Rather, it is based on the last 52 weeks of full pay checks from before the accident.
Actual Earnings Before Taxes
Actual earnings refer to the injured worker’s gross earnings – that is, salary or hourly wages before any taxes are withheld. Because the calculation of average weekly wage is so important, the phrase “actual earnings” has been thoroughly considered by the courts.
Fringe Benefits Excluded
In Pluto v. Industrial Commission, 272 Ill. App. 3d 722 (1995) Google Scholar, the Illinois Appellate Court noted the dictionary definition of “actual” as “existing in fact and not merely potentially” or “existing or occurring at the time;” the definition of “earnings” as “something (as wages) earned;” and the definition of “wages” as “a payment of money for labor or services.” The Court found that “the plain ordinary meaning of Section 10 of the Act provides that the average weekly wages shall reflect the payment of wages for labor or services….” The Court concluded that fringe benefits should not be included in the average weekly wage calculation.
Vacation Pay Included
In General Tire & Rubber Co. v. Industrial Commission, 221 Ill. App. 3d 641 (1991) Google Scholar, the Appellate Court found that the average weekly wage calculation should include vacation pay. As the Court noted in Pluto v. Industrial Commission, 272 Ill. App. 3d 722 (1995) Google Scholar, “vacation is included as earnings or income where an employee is paid his regular earnings during the time he takes time off for vacation.”
Overtime Excluded Unless Regular or Required
Section 10 of the Act plainly states that overtime is excluded from the average weekly wage calculation. 820 ILCS 305/10 Illinois General Assembly | IWCC PDF. However, in Edward Hines Lumbar Co. v. Industrial Commission, 215 Ill. App. 3d 659 (1990) Google Scholar, the Appellate Court found that overtime is a “subjective standard,” meaning that not every full-time employee has a 40-hour workweek:
By “overtime” we find that the legislature meant (1) compensation for any hours beyond those the claimant regularly works each week, and (2) extra hourly pay above the claimant’s normal hourly wage.
In this case, because the employer required that the claimant work over the standard 40-hour workweek and he averaged 67 hours of work per week, the Court found that the calculation of his average weekly wage should be based on his earnings for 67 hours per week. However, these hours could only be included at the straight-time rate.
For overtime to be included at the straight-time rate, there must be evidence that the claimant:
- was required to work overtime as a condition of employment;
- consistently worked a set number of hours of overtime each week; OR
- the overtime hours worked were part of the regular hours of employment
Bonuses Excluded Unless Bargained For or Incentive Pay
Bonuses are specifically excluded from the average weekly wage calculation in section 10 of the Act. 820 ILCS 305/10 Illinois General Assembly | IWCC PDF. However, as the Appellate Court noted in Arcelor Mittal Steel v. Illinois Workers’ Compensation Commission, 2011 IL App (1st) 102180WC, Google Scholar | Illinois Courts PDF, “bonus” is commonly defined as “something in addition to what is expected or strictly due.”
In this case, the claimant received production bonuses as part of his collective bargaining agreement. The Court stated:
We note a distinction between incentive-based pay, which an employee receives in consideration for specific work performed as a matter of contractual right, and a bonus, which an employee receives for no consideration or in consideration of overall performance as the sole discretion of the employer.”
The Court concluded that the claimant’s production bonuses were properly included in the calculation of average weekly wage.
The Second Method: More than 5 Days “Lost” – Weeks and Parts Thereof
The second method of calculating average weekly wage applies if the employee has lost 5 or more calendar days during the period before their accident:
[I]f the injured employee lost 5 or more calendar days during such period, whether or not in the same week, then the earnings for the remainder of such 52 weeks shall be divided by the number of weeks and parts thereof remaining after the time so lost has been deducted.
What does it mean for a day to be “lost” under this method?
In Illinois-Iowa Blacktop, Inc. v. Industrial Commission, 180 Ill. App. 3d 885 (1989) Google Scholar, the Appellate Court first considered the current version of section 10 of the Act:
The new, simplified version of section 10 plainly states that in all cases where the employee lost five or more days of work during the 52 weeks prior to the injury, the lost time (to the extent not due to the fault of the employee) should be deducted from the wage calculation denominator.
“Lost time” is synonymous with “off time,” unless caused by the employee as aforesaid, or the phrase has no purpose.
In Farris v. Industrial Commission, 357 Ill. App. 3d 525 (2005) Google Scholar | Illinois Courts, the claimant missed work to care for his critically ill infant daughter, who required numerous hospitalizations. The employer argued that these missed days should not count as “lost” under section 10, because he voluntarily chose to be absent from work. The Appellate Court rejected the employer’s “personal choice” argument, finding that this time lost was not due to the fault of the claimant.
The Illinois Supreme Court case of Sylvester v. Industrial Commission, 197 Ill. 2d 225 (2001) Google Scholar | Illinois Courts provides the leading example of the second method of average weekly wage calculation. In this case, the claimant was a roofer foreman who worked only 131 days during the 52 weeks before his accident. The Court agreed with the claimant’s argument that the Illinois Workers’ Compensation Commission “should count the number of days the claimant worked in the previous 52 weeks, divide that number by the number of days in a workweek, and divide the earnings by the result of this calculation.” Because the claimant’s workweek was 5 days long, his earnings should have been divided by 26.2 weeks (131 divided by 5 equals 26.2).
The Third Method: Employment under 52 Weeks – Weeks and Parts Thereof
Where the employment prior to the injury extended over a period of less than 52 weeks, the method of dividing the earnings during that period by the number of weeks and parts thereof during which the employee actually earned wages shall be followed.
The method for determining “weeks and parts thereof” is the same as described for the second method above. As the Appellate Court described:
When, as in this case, a claimant is a full-time employee, scheduled to work a full workweek, and his average weekly wage is to be determined by applying the third method set forth in section 10, the number of days that a claimant worked prior to his injury should be divided by the number of days in a full workweek to arrive at the ‘number of weeks and parts thereof’ by which the claimant’s pre-injury wages are to be divided.
While the third method clearly applies to employees who have worked their current jobs for less than one year, Illinois courts have also applied the method to teachers, dividing their “annual” earnings by the period of time they actually worked.
In Washington District 50 Schools v. Illinois Workers’ Compensation Commission, 394 Ill. App. 3d 1087 (2009) Google Scholar | Illinois Courts PDF, the injured worker was a teacher who worked the regular school year of 39 weeks, but opted to receive her salary spread out over 52 weeks. The Illinois Workers’ Compensation Commission calculated her average weekly wage by dividing her annual salary by 39 weeks and the case was appealed by the school district.
The Appellate Court agreed with the Commission’s calculation. Considering the definition of the terms “employment” and “employ,” the Appellate Court found that the teacher “was required to devote or apply her time and energy to teaching for 39 weeks, not 52 weeks. The same observation applies when determining the period for which the District put her to use, work, and service.”
The Appellate Court reached the same result for a teacher in Elgin Board of Education School District U-46 v. Illinois Workers’ Compensation Commission, 409 Ill. App. 3d 943 (2011) Google Scholar | Illinois Courts PDF.
The Fourth Method: Employment Too Short or Casual
For the fourth and final method of calculating average weekly wage, section 10 of the Act provides:
Where by reason of the shortness of the time during which the employee has been in the employment of his employer or of the casual nature or terms of the employment, it is impractical to compute the average weekly wages as above defined, regard shall be had to the average weekly amount which during the 52 weeks previous to the injury, illness or disablement was being or would have been earned by a person in the same grade employed at the same work for each of such 52 weeks for the same number of hours per week by the same employer.
Considering this provision in Smith v. Industrial Commission, 170 Ill. App. 3d 626 (1988) Google Scholar, the Appellate Court stated:
Thus, the only substantive difference between the computation of the average weekly wage of short or casual employments and other employments is that actual regular weekly earnings are used to determine the latter, whereas probable regular weekly earnings are used to determine the former.
We therefore conclude that this language was chosen to correct the inequity which results when an injured seasonal or intermittent employee is given less generous benefits than his more steadily employed counterpart even though the seasonal or intermittent employee is deprived of the ability to take other employment which would have been available to him had he not been injured.
Unfortunately, part-time employees do not receive the benefit of section 10’s “weeks and parts thereof” provisions. In other words, a part-time employee working 20 hours per week in the year before their accident would divide their total earnings by 52 weeks, not 26 weeks (via an argument that working 20 hours out of a “regular” 40-hour week is equivalent to “losing” half of the days in the year). See Illinois-Iowa Blacktop, Inc. v. Industrial Commission, 180 Ill. App. 3d 885 (1989) (discussing the legislative history of the current version of section 10: Clearly, Senator Bruce’s statement concerns only part-time employees who are regularly not paid on a full 40-hour week basis, but are paid for a regular number of hours less than 40. As shown by his statement, if an employee actually worked 10 hours, the workers’ compensation rate would be two-thirds of the 10-hour earnings.”) Google Scholar.
Section 10 of the Act includes an additional provision related to concurrent employment:
When the employee is working concurrently with two or more employers and the respondent employer has knowledge of such employment prior to the injury, his wages from all such employers shall be considered as if earned from the employer liable for compensation.
While “concurrently” obviously implies “at the same time,” Illinois courts have recognized that claimants may be concurrently employed during a temporary layoff from one of the jobs. In Jacobs v. Industrial Commission, 269 Ill. App. 3d 444 (1995) Google Scholar, the claimant was a sheet-metal worker who had been temporarily laid off, but was subject to recall. During this period, he was injured in a separate part-time job. The Appellate Court found that his earnings as a sheet-metal worker should be included in the average weekly wage calculation because:
(1) claimant was employed as a sheet metal worker for most of the 52 weeks prior to his injury except for two short layoff periods that are common in the industry, (2) his part-time job at Village Apartments was a supplement to his regular work and primary source of income as a sheet metal worker, (3) Village Apartments was aware of claimant’s concurrent employment as a sheet metal worker, and (4) claimant was readily available and subject to recall for work as a sheet metal worker even though at the time of his injury he had been temporarily laid off for two or three weeks.
Paoletti v. Industrial Commission, 279 Ill. App. 3d 988 (1996) (net profits from the claimant’s business not included as actual earnings: “We hold that a claimant’s business income should not be included in the calculation of average weekly.”) Google Scholar.
Swearingen v. Industrial Commission, 298 Ill. App. 3d 666 (1998) (“payments designated as a ‘reimbursement’ for travel expenses should be included when calculating an employee’s average weekly wage to the extent that such payments represent real economic gain rather than the actual reimbursement for actual travel expenses.”) Google Scholar.
820 ILCS 305/10 (“In the case of volunteer firemen, police and civil defense members or trainees, the income benefits shall be based on the average weekly wage in their regular employment.”) Illinois General Assembly | IWCC PDF.