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The current state of the law in North Carolina Workers’ Compensation in latent occupational disease claims is in flux right now. Considering current case law, there are often three options for calculating a plaintiff’s average weekly wage, and neither the plaintiffs’ bar nor the defense bar can be certain about how the Industrial Commission will rule.
The primary reason this issue remains unsettled is that these kinds of cases, namely asbestosis, byssinosis and silicosis claims, are not often tried. There are always multiple defendants and they require extensive expert testimony resulting in astronomical litigation costs for both sides. Attorneys are forced to address the average weekly wage issue at mediation and come to a compromise that does not always adhere to how the respective side would like to interpret N.C.G.S. § 97-2(5).
Under N.C.G.S. § 97-2(5), there are five methods of calculating the average weekly wage.
The first three apply when the plaintiff worked at the employer in the 52 months prior to diagnosis of the alleged occupational disease. Since asbestosis, byssinosis and silicosis typically do not manifest for many years after exposure and because last injurious exposure may be separated by subsequent employers or decades, these methods for calculating the average weekly wage are arguably inapplicable. Most often, the fifth method, which is essentially a catch-all, “whatever is most fair,” approach is used. This is where the three different approaches can be utilized.
The three approaches for determining “whatever is most fair” include:
The plaintiffs’ bar generally argues that the average weekly wage should be based on the last full year of wages the plaintiff earned regardless of any other circumstances. This argument may be considered “fair” under the Court of Appeals’ holdings in Lipe v. Star Davis Co. Inc. and Abernathy v. Sandoz Chemicals, which state that the average weekly wage should be based on the wages earned while working, not the actual wages earned when the employee died or was diagnosed. 237 N.C. App. 124, 767 S.E.2d 539 (2014); 151 N.C. App 252, 565 S.E.2d 218 (2002). In both cases, the plaintiff was diagnosed with an alleged occupational disease, but had retired years earlier. The Court held that he average weekly wage was based on the last years they worked, not zero, because using their actual earnings was “obviously unfair.” Id.
As an illustrative example, we will use Joe Smith, who worked for 30 years and retired in June 2008:
Based on his Social Security Earnings Report, Joe earned $52,000 in 2007, which was his last full year of employment, and $26,000 in 2008, where he worked less than 52 weeks. Joe did not have any reported wages since 2008. In 2019, Joe was diagnosed with asbestosis and has timely filed his claim. Using this approach, Joe’s average weekly wage would be $1,000 based on the 2007 wages since it was his last full year of wages.
In 2018, the Court of Appeals decided Penegar v. United Parcel Service, which holds that the average weekly wage can be based on post-retirement wages from another employer and need not be based solely on earnings from the last injurious employer, nor does it have to be solely based on full time wages. 259 N.C. App. 308, 815 S.E.2d 391 (2018).
In Penegar, the employee retired from UPS and then earned post-retirement wages with Union County in the amount of $4,272.92, resulting in an average weekly wage of $82.17. Id. The plaintiff argued the wages should be based on those from the last injurious employer, but the Court held the post-retirement wages were indicative of his actual earnings in the years prior to his diagnosis. Namely, the Court quoted N.C.G.S. § 97‑2(5), and emphasized that the average weekly wage should reflect what the plaintiff would have earned, not what he could have earned. In 2019, the Supreme Court of North Carolina denied a petition for discretionary review the plaintiff filed, essentially, but not overtly, affirming the holding.
Obviously, this seems to conflict with Abernathy and Lipe, but there is an argument that one can read the cases together without Penegar abrogating the prior case law. Under this argument, the average weekly wage should be based on the last year of wages, regardless of whether it was a full year. This is supported by the fact that either extrapolating 52 weeks of earnings from a partial year or using a previous year when the most recent earnings are not a full 52 weeks is based on the other statutory methods under N.C.G.S. § 97-2(5), not the fifth method, and the Penegar court clearly used the fifth method.
Using this approach and utilizing our Joe Smith example again, the average weekly wage would be $500.00 based on plaintiff’s 2008 part-time wages.
There is a caveat to this argument of which one should be aware, however. If, in our example, Joe worked for the same employer in 2007 and 2008, then there is a very good argument that one would have to use the 2007 wages under the other prongs of N.C.G.S. § 97-2. However, if Joe went to work for another employer in 2008 and worked part-time, then the 2008 wages could be used under the Penegar analysis.
Finally, the most defense-oriented argument would be that Penegar has abrogated prior case law on this issue based on the strict statutory interpretation the Court of Appeals employed: the average weekly wage “should ‘most nearly approximate the amount which the injured employee would be earning were it not for the injury[,]’ not what the injured employee could be earning.” 259 N.C. App. 308, 815 S.E.2d 391 (2018) (quoting N.C.G.S. § 97-2(5)).
Taken literally, if the employee has retired and has earned no wages in the 52 weeks prior to the diagnosis, his average weekly wage is $0.00 because he was not earning any wages. Based on this argument, it is a misapplication of the law to use wages prior to the most recent year because they show what the plaintiff could be earning, which is in direct contradiction to the Court’s holding in Penegar and the clear language in N.C.G.S. § 97-2(5).
Returning again to our plaintiff, Joe Smith:
Joe’s average weekly wage would be $0.00, resulting in the minimum compensation rate of $30.00 because he retired in 2008 and has not earned any wages at all for more than 10 years prior to his diagnosis.
These discrepancies in average weekly wage calculations create huge gaps in exposure for the defense. Assuming 500 weeks of indemnity entitlement, Joe Smith could recover up to $333,335.00 under the first argument, last full year wages, and up to $166,666.00 under the second argument, last year of wages. Under the third argument, Joe would be entitled to the minimum compensation rate, which would result in indemnity exposure of $15,000.00.
Based on our example with plaintiff Joe Smith, the difference in exposure only increases with higher wage earners. The Industrial Commission has yet to apply the Court of Appeals’ holding in Penegar to an occupational disease claim like Joe Smith’s diagnosis of asbestosis, and many attorneys and adjusters alike wait in anticipation to see how the law will be applied.