WORKERS’ COMPENSATION “PHANTOM WAGE” ARGUMENT PUT TO REST - MAJ Blog
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MAJ Blog


Posted by: Robert MacDonald on Apr 28, 2014

In this case (involving an injury governed by the law in effect before the 2011 amendments to the Worker’s Disability Compensation Act), the defendant argued that the injured worker’s benefits should be reduced by the worker’s theoretical wage earning capacity, even though the evidentiary record did not include proof of job offers or actual job opportunities available to the plaintiff. The defendant, like many employers and carriers around the state, had been insisting that the Supreme Court’s vague orders in Lofton and Harder must be interpreted to permit reduction of benefits for a mere wage earning capacity regardless of actual job opportunities reasonably available to a worker.

The Supreme Court orders in Lofton and Harder had remanded for consideration and application of MCL 418.361 which provides that a partially disabled worker “shall be paid weekly compensation equal to 80% of the difference between the injured employee’s after-tax weekly wage before the personal injury and the after tax weekly wage which the employee is able to earn after the personal injury.” Defendants have been arguing that these orders somehow intended to overturn longstanding doctrine established and reiterated in Hood v Wyandotte Oil & Fat Co, 272 Mich 190; 261 NW 295 (1935), Langkill v Robins Conveying Belt Co, 279 Mich 81; 271 NW 560 (1937), Tulk v Murray Corp of America, 276 Mich 630; 268 NW 761 (1936), Kurz v Mich Wheel Corp, 236 Mich App 508; 601 NW2d 130 (1999), lv den 462 Mich 861; 613 NW2d 719 (2000). They have argued that magistrates should rely on the testimony of vocational consultants hired by the defendants regarding an injured workers’ theoretical wage-earning capacity and use that testimony to determine what a worker is “able to earn” despite the absence of actual job opportunities reasonably available to the plaintiff.

On remand, the magistrate in Vrooman, like the magistrates in Lofton and Harder, rejected that approach. The magistrate recognized that the claimant had the physical capacity to do work that pays $9.00 an hour, but that Harder “made it clear that it is not a theoretical ability to work alone that gives rise to the right to reduce a claimant’s benefits, but instead such an ability coupled with an opportunity to exercise that ability to earn wages.” The magistrate recognized that the claimant had made a reasonable search for suitable work within her qualifications and training but could not obtain any such employment. A panel of the Michigan Compensation Appellate Commission affirmed the Magistrate’s award of unreduced benefits–and now both the Court of Appeals and the Supreme Court have left the award of full unreduced benefits undisturbed.

The outcome in the Vrooman case should make it clear that the Supreme Court–contrary to insurance carrier and defense bar hype– did not intend to overturn 80 years of precedent with its Lofton and Harder orders so as to radically rewrite the formula for determining the amount of benefits payable to injured workers. Injured workers who have some capacity for work who cannot obtain suitable work should continue to receive full benefits. For those injured after December 19, 2011, the effective date of the 2011 amendments, similar language is written right into the statute at MCL 418.301(4)(c).