|Memorandum of Law|
MEMORANDUM OF LAW
Issue of Average Weekly Wage
COMES NOW Mark L. Zientz, Esquire, attorney for the Employee/Claimant, who hereby submits this Memorandum of Law in support of the Claimant’s position that the value of his company provided vehicle should be included in the determination of his average weekly wage. While this Memorandum of Law raises issues involving the constitutionality of Florida Statute 440.02 (24) (1993) and the undersigned recognizes that the Judge of Compensation Claims does not have jurisdiction to rule on constitutional issues, nevertheless, the Claimant wishes to raise this issue at the earliest possible opportunity and either introduce into evidence or proffer the records and/or testimony sufficient to prove the value of the employer provided vehicle.
EVOLUTION OF THE AWW
By way of legislative history and prior to the opinion of the Supreme Court of Florida in Brown v. S. S. Kresge, 305 So. 2nd 191 (Fla. 1974) (KRESGE) the Rule of Law was that the average weekly wage of an injured worker included not only actual wages paid but the fair market value of all fringe benefits provided (called "similar advantage" by the legislature). The term "similar advantage" included, but was not limited to, the value of uniforms, Torres v. Eden Rock Hotel, 238 So. 2nd 639 (641) (Fla. 1970); and room and board, New Fort Pierce Hotel Co. v. Gorley, 137 Fla. 345, 188 So. 2nd 340 (1939), (which established the basic principles pertinent to cases of in-kind compensation). In KRESGE, the court also included tips and the fair market value of meals when calculating the average weekly wage. The First District Court of Appeals has opined that the value of group medical and life insurance benefits received from the employer should also be included in the average weekly wage. In a 1980 decision, the First District quoted from 440.02 (12) (Fla. Stat. 1979) as follows:
"Wages means the money rate at which the service rendered is recompensed under the contract of hiring in force at the time of the injury, including the reasonable value of board, rent, housing, lodging, or similar advantage received from the employer..."
The First District also said:
"We realize that fringe benefits which employees receive from an employment contract often have significant value and may be included as "similar advantage" in a deputy commissioner’s determination of average weekly wage."
As a result the First District included, as part of the average weekly wage, twenty dollars ($ 20.00) worth of child care per week plus free lunches for the claimant and her child, Jess Parish Memorial Hospital v. Ansell, 390 So. 2nd 1201 (Fla. 1st DCA 1980). This is not to say that everything received from the employer is included in the average weekly wage. Clearly "make whole reimbursements" do not provide a real reasonably definite gain to the employee and therefore are not included in the average weekly wage, Sears Commercial Sales v. Davis, 559 So. 2nd 237, 239, 240, (Fla. 1st DCA 1990).
The statewide average weekly wage, used to determine the statewide weekly maximum compensation rate, is calculated using a formula which relies on the Florida Unemployment Compensation Law (Ch. 443 et. seq.). To arrive at that figure the word "wages" needs to be defined. The definition of "wages" in 443.036 Fla. Stat. is:
"(33) Wages -
(a) "Wages" means all remuneration from employment, including commissions, bonuses, back pay awards, and the cash value of all remuneration paid in any medium other than cash. The reasonable cash value of remuneration in any medium other than cash shall be estimated and determined in accordance with the rules prescribed by the division..."
The Federal Unemployment Tax Act defines "wages" as:
"Wages - for purposes of this chapter, the term "wages" means all remuneration from employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash... 26 U.S.C. 3306 (b).
The Florida Legislature amended the definition of wages in 1987 to read:
"Wages - means the money rate at which the service rendered is recompensed under the contract of hiring in force at the time of the injury, together with the reasonable value of board, rent, housing, lodging; employer contributions for uniforms or cleaning allowances; employer contributions for life, health, accident, or disability, insurance for the employee or dependents, excluding social security benefits; contributions to pension plans to the extent that the employee’s rights have vested; any other consideration received from the employer that is considered income under the Internal Revenue Code in effect on January 1, 1987; and gratuities received in the course of employment from others than the employer, only when such gratuities are received with the knowledge of the employer. In employment in which the employee receives consideration other than cash as portion of this compensation, the reasonable value of such compensation shall be the actual cost of the employer" 44.02 (21) Ch. 87-330 Law of 1987.
Prior to the 1987 amendments the reasonable value of all compensation was the fair market value.
After the effective date of the 1987 amendments to Florida Statute 440.02 (21), injured workers were required to accept the actual cost of the employer of various fringe benefits; all of which were still included in the average weekly wage but could not be replaced by the injured worker with only the receipt of 66 and 2/3% of the employer’s actual cost as compensation for their loss. Airline employees were entitled to have the actual cost to the employer of free or reduced rate transportation provided to themselves and their immediate family included, Eastern Airlines, Inc. v. Michaelis, 619 So. 2nd 383 (Fla. 1st DCA 1993). See also Live Oak Manor v. Miller, 625 So. 2nd 898 (Fla. 1st DCA 1983).
Effective July 1, 1990 the definition of wages was amended again to read:
"Wages - means the money rate at which the service rendered is recompensed under the contract of hiring in force at the time of the injury and includes only the wages earned on the job were he is injured and does not include wages from outside or concurrent employment except in the case of a volunteer firefighter, together with the reasonable value of housing furnished to the employee by the employer which is the permanent year-round residence of the employee, and gratuities to the extent reported to the employer in writing as taxable income received in the course of employment from others than the employer and employer contribution for health insurance for the employee and employee’s dependents. However, housing furnished to migrant farm workers shall be included in wages unless provided after the time of injury. In employment in which the employee receives consideration for housing the reasonable value of such housing compensation shall be the actual cost to the employer or based upon the fair market rent survey promulgated pursuant to section 8 of the Housing and Urban Development Act of 1974, whichever is less. However, if employer contributions for housing or health insurance are continued after the time of injury, the contributions are not " wages" for the purpose of calculating an employee’s average weekly wage". 440.02 (24). Ch. 90-201 Laws of 1990.
That part of the 1990 wage definition which sought to exclude "concurrent" earnings from the AWW was deftly interpreted by the 1st DCA to have no effect, Vegas v. Globe Security, 627 So. 2nd 76 (Fla. 1st DCA 1993) cert. den. 637 So. 2nd 234 (Fla. 1994). The District Court would not go so far as to say the wage definition provision was unconstitutional. The court did acknowledge that the AWW was intended to reflect wage earning capacity. Vegas, is worth reading as a synopsis of the evolution of the average weekly wage from the prospective of the First District. That part of the definition of "wages" that excluded "concurrent" earnings in the 1990 statute was amended by the 1993 legislature to once again include concurrent covered earnings in the AWW, 440.02 (24) ch. 93-415 Laws of 1993.
For accidents occurring after January 1, 1994 the current definition of wages is found in 440.02 (24) (1993) ch.93-415 Laws of 1993.
The average weekly wage is determined by a formula set out in Florida Statute 440.14 (1) which has essentially remained unchanged since 1935. A thorough reading of the first subdivisions of 440.14 (1) should leave the reader with the impression that the legislative intent was to fairly but accurately determine the wage earning capacity of the injured worker. Professor Larson describes the function of the average weekly wage as follows:
"The entire objective of wage calculation is to arrive at a fair approximation of the claimant’s probable future earning capacity. His disability reaches into the future, not the past; his loss as a result of injury must be thought of in terms of its impact on probable future earnings, perhaps for the rest of his life. This may sound like belaboring the obvious; but unless the elementary guiding principle is kept constantly in mind while dealing with wage calculation, there may be temptation to lapse into the fallacy of supposing the compensation theory is necessarily satisfied when a mechanical representation of the claimant’s own earnings in some arbitrary past period has been used as a wage basis".
2 Larson, the Law of Worker’s Compensation, section 60.11 (d) (1986).
It is the average weekly wage which is used to determine the amount of weekly indemnity benefits to which the injured worker is entitled as well as various caps and offsets. The amounts included in the formula contained in 440.14 (1) are determined by the definition of "wages" contained in Florida Statute 440.02 (24). As indicated earlier, section 440.02 (24) has evolved from a definition which included all wages earned plus the fair market value of all similar advantage (fringe benefits), to all wages earned plus the cost to the employer of all fringe benefits, to all wages earned plus the cost to the employer of only health insurance and under certain limited circumstances, the value of lodging. Under the present system, gratuities received by the employee are subject to strict scrutiny regardless of whether or not the employer encourages or discourages employees from reporting their actual tips.
Since 1987, the legislature has used the practice of amending the definition of wages as a tool to cut weekly benefits to injured workers and thereby cut the cost of worker’s compensation insurance to industry.
It is the Claimant’s contention that the definition of "wages" in it’s current form is unconstitutional as violative of the equal protection clause of the United States’ Constitution and the Florida Constitution.
The Claimant suggests that an employee that receives his entire remuneration as money wages with no fringe benefits whatsoever would receive as indemnity benefits 66 2/3 % of those wages limited only by the statewide average weekly wage. The employee whose employer chooses to provide, or contracts to provide, fringe benefits in the nature of vested contributions to pension plans, life insurance and disability insurance with vested benefits; uniforms, meals, temporary lodging, free or reduced rate products or services, stock options, airline frequent flyer miles, free parking, a company car (with all the attendant expenses), vested sick leave and/or annual leave and any other form of non cash benefit will only receive indemnity benefits based upon 66 2/3 % of the actual wages earned regardless the value of the fringe benefit package. In some union contracts the fringe benefit package amounts to as much as 46 % of the wages, City of Miami v. Rantanen, 645 So. 4 (Fla. 1st DCA 1994). The City of Miami provides a substantial fringe benefit package to account, in part, for the fact that it does not contribute to certain employee’s social security account.
Employers may, but are not required to, continue the entire fringe benefit package during periods of disability. It is quite possible that two injured workers doing the same job for the same employer at the same cost of the employer, one with a fringe benefit package and one with only wages (even though wages might be in lieu of the fringe benefit package), would receive vastly different compensation benefits if injured in the same accident.
TESTS OF CONSTITUTIONALITY
To determine whether or not a statutory scheme violates the equal protection clause of the Florida or the United States Constitution, certain legal tests must be used depending upon the circumstances. The Florida Constitution requires equal protection of the law. Article I Section 2 of the Florida Constitution provides:
"All natural persons are equal before the law and have inalienable rights, among which are the right to enjoy and defend life and liberty, to pursue happiness, to be rewarded for industry , and to acquire, possess and protect property..."
The 14th amendment to the United States Constitution provides:
"No state may deny to any person within its jurisdiction the equal protection of the law".
States may, however, treat different classes of persons in different ways so long as such classifications are reasonably related to a legitimate state interest, Stahl v. State, 577 2nd 257 (Fla. 1990). The Claimant contends that the legislature, by defining wages to exclude most fringe benefits and other similar advantage, has classified injured workers who happen to receive remuneration in the form of wages different from those who receive remuneration in the form of wages plus valuable fringe benefits, to the detriment of the latter class. Both workers receive value for their services at similar cost to their employers, but receive, under the Florida definition of wages, different amounts of worker’s compensation indemnity benefits. This disparity occurs partly because neither State nor Federal laws require employers to continue providing the same fringe benefits after an injury on the job, but mostly because the fair market value of fringe benefits are not being used to calculate the AWW and the rate of weekly benefits.
The Claimant suggests that of the two tests used to determine if a statute violates the equal protection of the laws ("strict scrutiny" and "rational basis"), even the more stringent rational basis test for constitutionality would still prove that Florida’s definition of "wages" in it’s worker’s compensation act violates the equal protection of the law. Thus the question presented is whether the government has chosen a rational classification to further a legitimate end by providing a higher level of compensation to workers who receive only wages compared to those who have the same earning capacity but reflected in the value of fringe benefits rather than dollars.
The State has a legitimate interest in providing for reasonable compensation to workers following an injury on the job. There is no reasonable or rational basis for requiring the payment of different levels of compensation benefits to employees whose employers have chosen to provide remuneration of equal value but in a different form. An employee who is given a choice between accepting the use of a company car valued at $ 100.00 a week or receiving the $ 100.00 as wages should not under the reasonableness test receive less in compensation benefits because he chooses the car versus the cash, and then when he is injured and is required to give up the use of the car not be compensated for its loss. In Florida the rational basis test was satisfied and 440.16 (7) Fla. Stat. 1983 found unconstitutional as a denial of equal protection, DeAyala v. Florida Farm Bureau Casualty Ins. Co., 543 So. 2nd 204 (Fla. 1989) (statute which provided reduced compensation benefits for Florida workers with nonresident alien dependents living in Mexico was unconstitutional using the rational basis test).
While the Claimant relies on the more stringent rational basis test to prevail, the claimant does not thereby eliminate from consideration the easier question of whether or not injured workers who have had their constitutional right to sue at common law taken away in favor of a statutory scheme of workers’ compensation may have also had their fundamental rightsinterfered with. Compensation benefits for injured workers replaced fundamental rights. What could be more fundamental than the right to trial by jury? The less demanding "strict scrutiny test" applies if the class is "suspect", Massachusetts Board of Retirement v. Murgia, 49 L. Ed 2d 520, 427 U.A. 307, 96 S. Ct. 2562 (19976) (a "suspect class" requiring application of the strict scrutiny standard of equal protection analysis is one saddled with such disabilities, or subjected to such purposeful unequal treatment, or relegated to such a position of political powerlessness as to command extraordinary protection from the majoritorian political process).
An injured worker’s right to receive worker’s compensation benefits qualifies as a property right, Rucker v. City of Ocala, 684 So. 2nd 836, 840 (Fla. 1st DCA 1996). Eliminating from the definition of wages the value of a multitude of fringe benefits, including provision of a vehicle, has caused the varying treatment of different persons. Because it is so unrelated to the achievement of any combination of legitimate purposes under the workers’ compensation act, ultimately the Supreme Court should and must conclude that the legislature’s actions were irrational.
As evidence of the irrational nature of the legislature’s act redefining wages, we point to the fact that in City Escambia County Sheriff Department v. Grice, 692 So. 2nd 896 (Fla. 1997) the employee’s compensation benefits were reduced (offset) in part because he received a pension paid for by his government employer. Yet, the employer’s contribution to that same pension plan was not included in the calculation of his average weekly wage. Grice suffered what amounts to a double dip by the employer. Grice started with an AWW which did not reflect his true earning capacity and that same low AWW was used to cap the benefits to which he was entitled.
The strict scrutiny test could therefore be used to determine if the Florida definition of wages is unconstitutional because injured workers are a suspect class. A suspect class is any group that has been the traditional target of an irrational, unfair and unlawful discrimination.
It is therefore respectfully suggested that the calculation of the average weekly wage must include not only actual wages and the actual cost to the employer of health insurance but also the fair market value of all similar advantage. Whether the "rational basis" test is used or the "strict scrutiny" test is used, either way, the current formula for calculating the average weekly wage is unconstitutional as a denial of the equal protection of the law.