Workers' Compensation Benefits Are Often Underpaid. Here's Why.

The Texas workers' compensation system is set up in such a way that injured workers are often underpaid benefits, an effect that favors workers' compensation insurance carriers, whose profit margins are increased by such mistakes. There are several steps in the process where calculation errors and false information can lead to underpayments, but one of the most common relates to the failure of the employer and/or the insurance company to account for the non-cash benefits that are a part of the employee's wages.

All of the income benefits that an injured worker receives in connection with their claim are based on a concept called the "average weekly wage" of the worker. And correctly calculating the "wage" part of the "average weekly wage" can sometimes be tricky. The Texas Labor Code defines "wages" as including "all forms of remuneration" that an employee receives. This includes, among other things, "the market value of board, lodging, laundry, fuel, and other other advantage that can be estimated in money..."

That definition of wages is really broad. Does your employee provide health insurance? Life insurance? Do they provide a vehicle that you can use for personal needs as well? If the employer is no longer receiving those benefits after the accident, the cash value of all of those benefits should be included when calculating the average weekly wage.

So how does the workers' compensation insurance carrier determine your average weekly wage? They ask your employer to provide them with something called a "wage statement." The wage statement is a form that is supposed to show all of the cash and non-cash benefits that were paid to the injured employee. However, in my experience, the wage statement is often returned to the insurance carrier without having all of the information filled in, and it sometimes contains information that is simply incorrect.

There is little incentive for the employer to get the wage statement "right." Dealing with a workers' compensation claim is usually considered to be an inconvenience by the person who is filling out the form for the employer, and - if anything - the employer often believes that the employee shouldn't be making a workers' compensation claim because (in the employer's mind) the employee is malingering and needs to get back to work. So the information that gets to the insurance company is often incomplete or flat-out wrong.

The insurance company, likewise, has no incentive to make sure the wage statement is correct. Indeed, I cannot recall a single instance where I have heard of an adjuster contacting the employer to double-check and make sure some aspect of the wage statement is correct. That is not to say that it never happens, but it is not so common that I have ever been aware of it.

The harsh truth is that the path of least resistance for the adjuster is to simply begin paying the claim based on whatever information is contained in the wage statement, without asking further questions. In fact, if the adjuster asks more questions - especially questions about non-cash benefits - there is a chance that the amount of money the adjuster will have to pay will increase, and the adjuster's job performance may in part be measured by their ability to keep claim payments low.

Because there is no incentive on the part of the employer or the insurance company to get the wage information correct, and because the employee does not know what they are supposed to get paid, much less given a chance to see the wage statement, wage rates are often less than what they should be, and they are never corrected. This can cause the employee to lose thousands of dollars in benefits over time.

To rectify this situation, it is important for the injured employee to secure a copy of their wage statement early in the claim and to scrutinize it. It is not only critical that the statement reflect the paychecks that were received by the employee during the three-month period preceding the accident. It is also important for it to reflect any non-cash benefits that the employee was previously receiving, and is no longer receiving.

Insist that the statement be sent back for correction if it is incorrect. Otherwise, there is a risk that you will lose benefits that you will need to support yourself and your family while you are healing from your injury, and that the insurance company will instead be allowed to pocket claim proceeds to which it is not entitled.