The Longshore and Harbor Workers’ Compensation Act (LHWCA) is a federal law that covers most employees who load, unload, build, repair, or disassemble ships, as well as related jobs that are performed in harbors or on waterways. An offshoot of that law, the Defense Base Act (DBA), primarily covers employees who work overseas on American military bases or for defense contractors.
The LHWCA and the DBA generally operate in the same way. They pay benefits to employees who are temporarily or permanently disabled because of a work injury. The laws define an employee as being disabled when the injury prevents the employee from earning the same wages the employee earned before the injury.
A disability is classified as “temporary” while the employee is still recovering from the injury. A disability is classified as “permanent” when the injury has stopped healing and the worker is unlikely to make any further recovery.
Disabilities can be partial or total. A total disability exists when the employee can’t perform any work. Total disabilities are often temporary, lasting until the worker recovers and returns to work. An employee who fully recovers will have no disability, while an employee who still suffers from an impairment will have a partial disability. If the injury victim never heals sufficiently to perform work, the worker has a permanent total disability.
Disability benefits under the LHWCA and DBA are based on the employee’s average weekly wage (AWW). Compensation for a total disability, whether temporary or permanent, is two-thirds of the employee’s AWW. Payments continue as long as the employee remains totally disabled.
Compensation for a partial disability is more complicated. The benefit for a temporary partial disability is two-thirds of the difference between the worker’s AWW and the wage the worker is capable of earning after the injury.
The benefit for a permanent partial disability depends on the nature of the disability, although the benefit is still based on two-thirds of AWW. Some injuries are “scheduled.” A scheduled injury is one for which federal law has defined a particular benefit. The loss of an index finger, for example, entitles the injury victim to 46 weeks of compensation. In other words, the worker will receive two-thirds of AWW for 46 weeks in addition to wages the employee earns after returning to work.
If the injury is not scheduled, benefits for permanent partial disability are based on two-thirds of the difference between the worker’s AWW and the amount the worker can earn after the injury. Those benefits are paid for as long as the disability continues.
Since compensation is based on the worker’s AWW, it is important to understand how the AWW is calculated. In the simplest case, a worker’s earnings during the 52 weeks prior to the injury are added together and divided by 52. The result might be the AWW if the employee worked on every workday during the year.
The actual calculation is more complicated. The process begins by dividing the total wages earned during the 52 weeks before the injury occurred by the number of days the employee worked during that 52-week period. The result is an average daily wage. If the employee worked 5 days per week, the average daily wage is multiplied by 260. The average daily wage is multiplied by 300 if the employee worked 6 days per week. The result is the AWW.
Other calculation methods are used when an employee only worked a partial year (usually less than 75% of the year) preceding the injury, when the worker didn’t work 5 or 6 days per week, or when the employee worked multiple jobs that aren’t comparable. A lawyer who has experience working with LHWCA claims can help workers understand their AWW under those circumstances.
The definition of “wages” generally includes all earnings, including overtime, Guaranteed Annual Income, and Container Royalty Payments that longshore workers sometimes earn. It does not include the value of benefits, such as health insurance, that are not reported as taxable income.
National Average Weekly Wage
While the employee’s average weekly wage is used to calculate benefits, the benefits are subject to a maximum and minimum. The maximum benefit is a cap. Workers who have a high AWW might therefore receive the maximum benefit instead of the benefit that would be calculated based on their AWW. Similarly, workers with particularly low earnings during the previous 52 weeks might receive a minimum benefit that is higher than the benefit that would otherwise be payable.
The maximum and minimum benefits are calculated using the national average weekly wage. The national average weekly wage is updated each year by the Department of Labor. The maximum benefit is 200% of the national average weekly wage. The minimum benefit is 50% of the average weekly wage.
The national average weekly wage was recently recalculated. For the period from October 1, 2021 to September 30, 2022, the national average weekly wage is $863.49. That calculation represents a 5.77% increase over the calculation for the previous year.
The Department of Labor’s most recent calculation of the national average weekly wage results in a maximum weekly benefit of $1,726.98 and a minimum weekly benefit of $431.75 for disabilities that begin on or after October 1, 2021. Maximum and minimum benefits for disabilities that began before October 1, 2021, will depend on the national average weekly wage that was in effect during the fiscal year when the injury began.
An exception to the minimum benefit applies to foreign nationals who are covered under the DBA. Those workers are subject to the maximum benefit but cannot take advantage of the minimum benefit.
Increase in Permanent Total Disability Compensation
An increase in the national average weekly wage also affects workers who are already receiving permanent total disability benefits. Their benefit is increased by the same percentage as the percentage increase in the national average weekly wage, subject to a maximum increase.
An exception to that rule limits the maximum that permanent total disability benefits may be increased each year to 5%. Although the national average weekly wage increased by 5.77% this year, workers who are receiving permanent total disability benefits will see only a 5% increase in their benefit payments.