Temporary Total Disability for Work injury: What will Workers’ Compensation pay?

 Work-related injury not only physical and mental pain, but any resulting disability also raises immediate questions Injured workers and family members often turn to their human resource (HR) and disability management (DM) professionals to provide guidance on workers’ compensation issues.  For the HR or DM professional with clientele in more than one jurisdiction, providing that guidance and setting expectations can be more complicated. The policy alternatives used by other jurisdictions can also inform discussions on workers’ compensation reforms. 

Virtually all workers’ compensation claims involving time away from work are subject to specific provisions for the initial phase of a claim.  For the more than 70% of nonfatal occupational injury or disease cases that involve 30 days or less away from work, the laws and policies governing Temporary Total Disability (TTD) are the only provisions that will determine their compensation for lost wages.   Canadian data is similar with more than 77% of  wage-loss claims off wage-loss benefits at 90 days [AWCBC Key Performance Measure 25.3, Canada, 2017].

[For more on the distribution of days-away-from work for work injuries, see Bureau of Labor Statistics, Table R65: Number of nonfatal occupational injuries and illnesses involving days away from work by days away from work groups and median number of days away from work by industry, (All industry, private industry data) retrieved from   https://www.bls.gov/iif/oshwc/osh/case/cd_r65_2019.htm modified Nov 4,2020]

I get a lot of questions from students and researchers on how workers’ compensation jurisdictions differ in their compensation for the initial period following an injury.  Here are the most common questions and a brief response for each.  In the accompanying slides and in some responses, I provide additional references as a starting point for understanding and comparing initial workers’ compensation.

All workers’ compensation systems pay the same rate for lost wages…right?

No.  How much workers’ compensation a worker receives depends as much on where you claim workers’ compensation as on how much you earn.  If you live in Arizona, you will be entitled to 66 2/3% of GROSS average weekly wages during the initial period of disability, often referred to as Temporary Total Disability (TTD).  In Alberta, the compensation rate is based on 90% of NET.  In the Yukon, the rate is 75% of GROSS while Iowa compensates on an 80% of SPENDABLE earnings (essentially the same as NET).  [Note:  Washington state’s compensation rate varies from 60% to 75% of gross depending on marital status and number of dependent children].

The rate of workers’ compensation stays the same for the duration of TTD in almost every jurisdiction.  In Nova Scotia, however, the initial rate increases from 75% of NET to 85% of NET at 26 weeks following the date of injury.   

Is there a waiting period in every jurisdiction?

No. In Canada, most provinces do not have a waiting period.  New Brunswick has a one-day waiting period but will be eliminating that as of July 1, 2021 leaving Nova Scotia as the only workers’ compensation jurisdiction with a waiting period (two- fifths (2/5) of normal work week). 

In the US, most states have a waiting period but just how big a waiting period varies from three (e.g., California) to seven days (e.g., Indiana).  Most jurisdictions also have a “retroactive period”, a number of days away from work after which the waiting period is reimbursed.  In New Brunswick, that retroactive period is 20 days while in California, its 14 days and in Alaska 28 days.  In a few jurisdictions, the waiting period is not reimbursed (Hawaii, for example). 

Are there any maximum compensation amounts for TTD?

Most jurisdictions have some sort of maximum on the insured earnings or the weekly benefit; the amounts vary widely. [Note:  a maximum on insured earnings creates a maximum benefit that can be expressed on a weekly basis; conversely, a weekly maximum benefit reflects an implicit maximum insurable earnings limit].  

I could find only one jurisdiction with no maximum on insured earnings:  Manitoba.  Alberta had no maximum from September 2018 until December 2020 but set an annual insurable earnings level at $98,700 for 2021; applying the 90% of NET compensation rate, that works out to a maximum weekly benefit of $1250.83. 

In the US, the average maximum weekly benefit is almost exactly $1000.  For the same year, Canada’s average maximum weekly benefit works out to a little less at $1157.50, however, that estimate excludes Manitoba (because it has no maximum).   [2019 data from US Chamber of Commerce, 2019 Analysis of Workers’ Compensation Laws; Canadian data, AWCBC webpage, “Temporary Total Disability Compensation” as of Feb 12, 2021 available at https://awcbc.org/en/summary-tables/benefits-and-rehabilitation/workers-compensation-temporary-total-disability-compensation/ ].  

Is there a minimum compensation amount for TTD?

There is no statutory or regulatory minimum amount of workers’ compensation payable for temporary total disability in most jurisdictions; the amount of compensation for all wage earners is calculated on the percentage of GROSS or NET. This is particularly hard on low wage earners in jurisdictions using GROSS as the basis of compensation. 

Taxation rates are generally “progressive”, in that higher earners are subject to a greater taxation rate than low wage earners.  At lower income levels, no income tax may be payable.  At these levels, a compensation rate of 66 2/3% or 75%  of GROSS effectively cuts spendable income by a quarter to a third.  Workers at the lowest income levels are likely to have the least reserves to make up for any shortfall.  To guard against this, jurisdictions like British Columbia include a minimum compensation provision such as the following:

Earnings between $22,300 and $27,800

If your gross annual earnings are above statutory minimum, but 90% of the average net earnings falls below the statutory minimum of $22,230.72 (or $426.34 weekly), you will receive the statutory minimum.

Earnings below minimum

If your rounded-up gross annualized earnings are below the minimum of $22,230.72 (or $426.34 weekly), you will receive 100% gross average earnings. For example, if your gross average earnings are $280 per week (equating to $14,560 annually), you will receive from us $280 for each week of wage loss.

[ WorkSafeBC, 2021 Net Compensation Table available at https://www.worksafebc.com/en/resources/claims/guides/2021-net-compensation-table?lang=en ]

Once a compensation rate is established, does it remain the same for the initial period of TTD?

Generally, yes but there are some exceptions and provisions for review and adjustment.  The basic idea of TTD compensation is to reflect actual loss of earnings immediately following an injury.  Many jurisdictions have policy provisions to accommodate “actual loss”.  These provisions tend to help workers with irregular work schedules to receive fair compensation for the real loss of earnings resulting from a work-related injury.  Think of a health care worker working three 12-hour shifts followed by two days off; payments based on average daily or weekly earnings may not adequately compensate for earnings lost over a short period of disability. 

A more obvious issues relates to the definition of any “initial period” of TTD.  Many workers’ compensation laws provide for a review of the level of compensation at some point with eight-, ten-, or thirteen- week reviews being common. If the idea is to reflect loss, then the assumption is that losses in the first number of weeks are best reflected by examining the earnings at the time of injury and extrapolating forward.  Earnings “at the time of injury” may be defined as specifically as four pay periods prior to injury (as in Newfoundland & Labrador) or as generally as the average “that best reflects the worker’s actual loss of earnings” (Manitoba). 

As the duration of temporary disability becomes extended, that assumption may need to be revisited.  Beyond whatever review point is chosen, the compensation should reflect the longer-term earnings history and, therefore, the longer term presumed earnings loss due to injury.  Many jurisdictions have procedures for establishing long-term average earnings for the purposes of continues TTD, permanent disability, or economic-loss awards. 

How long is “Temporary”?

Workers’ compensation for Temporary Total Disability generally last for the duration of disability or to the point of maximal medical improvement.  Disability should not be confused with impairment.  Most workers return to work well before reaching maximal medical improvement.  Many can and do work with impairments.  Others may be accommodated or resume work duties with modifications or adaptive devices while still temporarily or permanently impaired.  Workers’ compensation for TTD ends when a worker has (or can) safely return to partial or full duties.  In the case of partial disability, Temporary Partial Disability (TPD) compensation may be paid.   [See graphic in accompanying slide presentation]

There are cases where temporary total disability may be prolonged.  Some jurisdictions limit the duration.  In Florida, that limit is 104 weeks while in Indiana, the limit is 500 weeks; Massachusetts has a 156 week limit and Utah has a 312 week limit.  In Canada, the duration of TTD is often limited by age.  In several provinces, TTD benefits for those over a certain age are limited, effectively limiting TTD compensation to two (or four years in Quebec) after injury.  Age 65, 68 or pre-established retirement age are also considered as possible limits to the payment of TTD. 

 

Are collateral benefits allowed?

The answer to this question varies but a general insurance principle applies.  Insurance is intended to compensate for loss.  Injured workers suffering a temporary total disability should not be compensated to greater than 100% of their lost earnings for a work-related injury.  Workers’ compensation is the  “first payer” so other insurers will want to make sure any workers’ compensation entitlement is paid first.  For this reason, most group short and long-term disability insurance plans will not allow “stacking” of benefits.  In most cases, the effective rate paid by workers’ compensation, given the tax-free status of TTD benefits, will exceed taxable group disability plans provided in whole or in part by an employer.   Certain group disability plans are completely worker funded and may not be taxable.  These plans often provide a lower benefit rate. 

There may be some integration or offset of workers’ compensation in certain cases.  Earnings paid by employers during the period of TTD (sometimes referred to as “top-ups”) may be deducted from workers’ compensation benefits.  In Manitoba, there are specific provision and limits regarding collateral benefits that may result in their full deduction from workers’ compensation entitlements. 

In general, personal or private individual disability plans and disability insurance on personal loans and mortgages are ignored by workers’ compensation but there may be provisions in these plans that take into account workers’ compensation.   Each plan should be examined on its own. 

Are unemployment insurance payments considered earnings?

Most jurisdiction ignore unemployment insurance, but a few workers’ compensation systems will include unemployment insurance (Employment Insurance or EI in Canada) in the calculation of average earnings (for example, Prince Edward Island includes employment insurance; Nova Scotia does not).  In some sectors, this income provides a regular part of earnings and is essential to maintaining a particular workforce in certain sectors.  Check each jurisdiction to be sure.

What about secondary employment?

Between four and ten percent of workers are multi-job holders, deriving income from more than one employment source.  The extent to which earnings loss from secondary employment is covered by workers’ compensation varies.  I cover this in previous blog posts.  Whether you call it secondary employment, moonlighting, or a side-gig, earnings lost due to injury may be covered in the initial stages of a claim. 

Why are the differences in TTD important?

Context matters.   Without understanding how benefits are structured and paid, it is difficult to properly assess relative costs and values of workers’ compensation or any other insurance.  For example, comparing the cost of fire insurance for you home needs to take into account more than the price; differences in the deductible provision, for example, can be a factor accounting for the premium cost differential.

Where can I get comparative data on TTD?

The features of individual workers’ compensation laws and policies are unique to each jurisdiction.  Only a direct comparison from the actual law, policy and jurisprudence can provide a detailed analysis.  That said, there are several credible research reports that provide useful summary information in a comparable format.  I’ve included a brief presentation that highlights four sources, some of which provide free public access.  Some sources may be available through member organizations or libraries. 

 

Association of Workers’ Compensation Boards of Canada, AWCBC.org,  
Workers’ Compensation – Temporary Total Disability Compensation

US Chamber of Commerce,  USCHAMBER.com, Analysis of Workers’ Compensation Laws

National Academy of Social Insurance, NASI.org, Workers’ Compensation: Benefits, Costs, and Coverage

Workers’ Compensation Research Institute, WCRInet.org, Workers’ Compensation Laws

 

Are Waiting Periods for TTD compensation universal in workers’ compensation?

Despite having addressed waiting and retroactive periods before, I continue to receive questions about the law and policy surrounding them.  The questions usually contain assumptions that waiting and retroactive periods are universal features of workers' compensation systems and their design is uniform.  Neither assumption is true.  Understanding the variation in waiting and retroactive periods is critical to interjurisdictional comparison, policy analysis and financial risk planning for employers and workers. It is also essential in any comparative exercise on the costs and benefits of workers' compensation systems.  

Waiting periods are not a universal feature of workers’ compensation for temporary total disability (TTD).  While common in US states, waiting periods for TTD compensation are absent from most Canadian workers’ comp and  Australian “WorkCover” jurisdictions.   Where waiting periods are part of the workers’ compensation legislation, they are far from uniform in design. 

A waiting period for TTD workers’ compensation is a specified time frame following a work-related injury for which TTD compensation is not payable.  A few jurisdictions provide exceptions to the waiting period rule in the case of hospitalization (California, Idaho for example) or for certain professions (firefighters in Maine and New Brunswick). 

Closely aligned with waiting periods are retroactive periods.  If there is a waiting period, legislation usually contains a retroactive provision allowing for TTD compensation to be extended to the waiting period if the duration of disability extends beyond a specified period (7 days in Delaware, 6 weeks in Louisiana, for example) .  Some jurisdictions (Rhode Island and Hawaii, for example) have no retroactive period regardless of the duration of TTD. Where there is no retroactive period or where the duration of disability is less than the retroactive period, the injured worker receives no TTD compensation to offset the lost wages.

An uncompensated waiting period is a worker-paid “deductible”.  From the perspective of the worker, the full value of earnings lost during the waiting period represents a financial cost to the worker in addition to the human cost associated with work-related injury.  A waiting period that is waived or paid retroactively  reduces the financial burden of lost earnings but does not make the workers “whole” with respect to lost earnings.  Earning replacement rates and maximum insurable earnings or maximum benefit payments still apply and virtually guarantee that a portion of lost earnings are never recovered through workers’ compensation insurance. 

There is no universal standard for what constitutes an equitable waiting period.  The 1972 report of the National Commission on State Workmen’s Compensation Laws headed by John F Burton, Jr., noted the pressures for reducing and maintaining waiting periods:

The advantage of reducing both the waiting and the qualifying period [for retroactive benefits] is that workers will have a higher proportion of their lost remuneration replaced by benefits. At the same time, the cost of the program increases, both in benefits paid and in administrative expenses. Proponents of the waiting period argue also that a waiting period is necessary to discourage malingering. (Chapter 3 page 59)

The National Commission’s mandate required an evaluation of various aspects of permanent and temporary compensation under state workers’ compensation laws with respect to adequacy and equity.  Its recommendation regarding waiting and retroactive periods provides guidance to policy makers in the US and beyond.  The National Commission summarized its recommendation this way: 

We recommend that the waiting period for benefits be no more than three days and that a period of no more than 14 days be required to qualify for retroactive benefits for days lost.(Ibid.)

The National Commission’s recommendation defines a reasonable “minimum standard”  or threshold  against which policy makers and stakeholders may examine workers’ compensation waiting and retroactive periods.  Using this “no more than” standard, each workers’ compensation jurisdiction may be assigned to one of  three distinct categories of compliance with National Commission’s  recommendation:   Exceeds, Meets, and Fails to meet the minimum recommended by the National Commission.

In February 2017, I retrieved statutes and/or policy documents regarding waiting and retroactive periods for all North American jurisdictions.  I then categorized each according to its compliance with  the National Commission recommendation. [As an aside, most statutes contain no reference to a “waiting period”.  The provisions that give rise to waiting periods are often framed as prohibitions against payment for losses in the initial days following injury or prescribed timeframes for the “commencement” of temporary total disability compensation payments.]   The preliminary results of my analysis are as follows:

• Exceeds Minimum recommendation:
• No waiting period or
• Waiting period of three days and/or retroactive period of less than 14 days or
• Waiting period less than three days and retroactive period of 14 days or less
• Wyoming, Wisconsin, West Virginia, Minnesota, Vermont, Connecticut, Delaware, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island, Newfoundland & Labrador, Northwest Territories, Nunavut, Yukon

• Meets Minimum: 
• Waiting period of 3 days and retroactive period of 14 days
• Washington, Oregon, Utah, Colorado, Iowa, Montana, Illinois, Kentucky, District of Columbia, Maryland,  New Hampshire

• Fails to meet recommendation: 
• Waiting period of more than 3 days or
• Waiting period of any length and no retroactive period or
• Waiting period of any length and retroactive period of greater than 14 days
• California, Nevada, Idaho, Montana, Arizona, New Mexico, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Arkansas, Texas,  Louisiana, Mississippi, Alabama, Georgia, Florida, Tennessee, North Carolina, South Carolina, Virginia, Indiana, Ohio, Pennsylvania, Indiana, Ohio, Michigan, New Jersey, New York, Rhode Island, Massachusetts, Maine, New Brunswick, Nova Scotia

More than half of the North American workers’ compensation systems examined in this analysis fail to meet the minimum waiting period and retroactive period recommendation of the National Commission. 

This wide disparity across systems creates inequalities in the financial burden for workers.  It also complicates comparisons of employer costs for workers’ compensation.   Rate comparisons rarely take into account the financial impact of the variation due to system features such as waiting and retroactive periods.  Clearly, the value provided by  workers’ compensation coverage  with no waiting periods (or a short waiting and retroactive periods) should be taken into account when comparing rates and costs to jurisdictions with lengthy waiting periods (and particularly if they  have lengthy or absent retroactive periods).   That said, I can find no published figures or estimates of the uncompensated wage loss due to waiting periods in any state with a waiting period.  There are estimates of the value of “employer deductibles” but worker deductibles in either dollar amounts or uncompensated time (days or weeks) are not reported.

The laws and policies around the commencement of TTD compensation impact every workers' compensation time-loss claim.  More than any other comparative feature, the policies regarding waiting periods and retroactive periods influence the balance of who bears the cost of the most common workplace injuries.  Workers bear the physical and financial costs of those injuries; the portion uncompensated by workers' compensation systems can vary widely with devastating consequences on families and the potential externalization of costs to other insurers, workers, and the community at large.  These externalizations obscure the full cost of work-related injuries--and amount to a subsidy to the cost of production that removes or dilutes incentives toward prevention of injury and disability.  

Where waiting periods have been eliminated, the uncompensated portion of lost earnings is reduced and may be inferred by the reported value of compensation for TTD paid.  Where waiting periods exist, the uncompensated portion of lost earnings will be significantly higher than for otherwise similar injuries and system features. Quantifying the impact may influence safety and outcomes for millions of workers.