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Bonuses and the Average Weekly Wage

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By: Chelsea Leonard, Associate, Orlando

 

A popular trend, in light of the Castellanos case in Florida which increased attorney fees for claimants’ counsel, is litigation over the Average Weekly Wage.  The slightest adjustment in the average weekly wage following litigation over the issue can lead to costly carrier paid attorney’s fees.   A recent JCC decision out of Tampa in Bridges v. Tomatoes of Ruskin, (OJCC No. 14-000201EDS) addressed bonuses being included in the average weekly wage.

In Bridges, the claimant filed a Petition for Benefits seeking an increase in his average weekly wage to include two bonuses that were paid by the employer in 2011. The first bonus was paid in June and the second was paid in December 2011. At the Final Hearing, the office manager for the employer testified that bonuses were based on crop production during the two seasons of the year.  The bonuses were paid to all employees and the amount of the bonus depended on the “perceived value of the employee to the production as determined by the management.” The owner of the company determined the amount of the bonus for each employee.

The Court referred to the definition of wages included in Florida Statute §440.04(28), noting that wages are defined as “the money rate that at which the service rendered is recompensed under the current contract of hiring in force at the time of the injury and includes wages earned and reported for federal income tax purposes on the job….” The Court applied this definition to the claimant’s bonuses, denied the claimant’s demand for increase in the average weekly wage,  and found that the bonuses did not meet the definition of wages but were rather “payment over and above what was actually earned by the claimant.” The Court noted a few reasons for the basis of the decision.  First, there was no formula to determine the amount of bonus paid, but rather the bonus was arbitrarily paid by the owner. Second, the bonus was tied to profits of the business; in other words, had there been no profits, there would have been no bonus. Finally, there was no evidence of a contractual requirement that the bonus be paid.

Under a different set of facts, the 1st DCA upheld the inclusion of pro rata profits in K-C Electric Co. v. Walden, 122 So.3d 514 (Fla. 1st DCA 2013).  However, in K-C Electric, the claimant was entitled to the share of profits because he was a shareholder or had a contractual entitlement to these profits. As usual, this is a fact sensitive issue. There is no bright line rule, so the investigation of the income is imperative.

The Bridges case has not been addressed by the First DCA at this point, but it does provide guidance for arguments employers and carriers can make in litigation over the average weekly wage. Ultimately, if there is no contractual obligation for the employer to pay profits of the company, or no findings that the claimant earned the profits, there is a stronger argument to exclude these types of bonuses from the average weekly wage. From a practical standpoint, when bonuses become an issue, a carrier should request the claimant’s tax returns to see if bonus money or profit shares are included. Additionally, a conference with the employer early on to determine how and when bonuses are paid will provide insight as to whether such bonuses should be included in the average weekly wage.