December 21, 2021

Changes and Clarifications to Loss of Earnings Power (LEP) Benefit Calculations in Washington

On November 29, 2021, The Department of Labor and Industries, through its Loss of Earning Power Workgroup, approved a significant change in how bonuses are utilized in calculating LEP benefits.  In addition, the LEP Workgroup provided further clarification on how health care benefits and overtime pay are used in calculating LEP.

Bonuses

The full amount of a bonus paid to an employee during the LEP period should be included in the employee’s current wages for that period if the calculation of the monthly time-loss compensation rate did not include bonuses as part of the updated date of injury wages.  This is a significant change from the Department’s previous policy and is one that works to reduce the amount of LEP benefits owed. The Workgroup did not provide specific guidance or signal a change in how bonuses are calculated in those situations where bonuses were included in the monthly time-loss calculation.

Health Care Benefits

If an employer made contributions to an employee’s health care benefits plan before the injury and continues to do so after the injury, then those contributions are not included in the updated date of injury wages or the current wages for purposes of calculating LEP benefits.  However, if an Employer ceases to make contributions to an employee’s health care benefit plan after the injury, then the pre-injury contributions are included in the updated date of injury wages but not the current wages for purposes of calculating LEP benefits.

Overtime

The base rate for any overtime (i.e., the regular hourly wage) earned by an employee during a LEP period is included in an employee’s current wages for purposes of calculating LEP benefits. Overtime earned during LEP does not require a recalculation of the monthly time-loss compensation rate.

Conclusion

Despite these clarifications, calculating LEP benefits accurately remains a highly complex and challenging endeavor.  The LEP workgroup is now in the process of updating the Self-Insured Claims Adjudication Guidelines as well as training internal staff and external customers regarding these changes and clarifications.

If you are an Employer or administrator and have questions or need assistance, please contact the lawyers at Cummins, Goodman, Denley & Vickers PC at (503)-476-8200.

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