The United States Court of Appeals for the Ninth Circuit reviewed a decision by the Benefits Review Board that awarded benefits to Joseph Petitt under the Longshore and Harbor Workers’ Compensation Act (LHWCA). The panel determined that scheduled wage increases provided by a non-union employer to all employees based on seniority constituted a general increase in wages, rather than an increase in a claimant’s wage-earning capacity. Specifically, Petitt's quarterly "seniority raises" were found to resemble a general wage increase instead of a merit-based raise, and thus should not be included in calculating his wage-earning capacity. Consequently, the panel remanded the case to the agency to recalculate Petitt’s partial disability benefits. The case arose after Petitt, who suffered a back injury while working for Sause Brothers, transitioned to a lower-paying job at K&K Sound Systems, where he received automatic raises. Sause Brothers adjusted his disability benefits based on these raises, leading to Petitt's objection. The court clarified the definitions of "disability" and "wage-earning capacity" under the LHWCA, emphasizing that actual earnings must reasonably reflect wage-earning capacity for benefit calculations.
The case involves the appeal of Petitt regarding the calculation of his wage-earning capacity following an injury, with both parties agreeing on his average weekly wage at the time of the injury. An administrative law judge (ALJ) determined that Petitt's post-injury pay increases represented his wage-earning capacity and should be included in calculating his disability payments, a decision affirmed by the Benefits Review Board. Petitt's appeal, reviewed under 33 U.S.C. 921(c), focuses on legal errors and adherence to the substantial evidence standard.
The determination of wage-earning capacity aims to reflect the market rate for the claimant's employment under normal conditions. Adjustments are made for post-injury inflation and general wage increases to enable a fair comparison with pre-injury wages. General wage increases, such as those resulting from union contracts, do not necessarily reflect an employee's true wage-earning capacity, while merit-based increases are considered valid indicators.
The central issue is whether Petitt's $0.25 quarterly raises are classified as general wage increases that should be excluded from wage-earning capacity calculations or as indicators of increased earning capacity that would reduce his partial disability benefits. It is established that Petitt received a $0.55 merit increase on January 20, 2008, which the parties agree was correctly accounted for by the ALJ. The ALJ also adjusted Petitt's wage-earning capacity for inflation, relying on testimony from K&K's CEO, who described the quarterly raises as "seniority raises" linked to a predetermined wage progression based on performance.
The Court determines that Petitt's quarterly raises should be classified as general wage increases rather than merit-based raises, thus not affecting his wage-earning capacity under the Longshore and Harbor Workers' Compensation Act (LHWCA). Citing the precedent set in Randall, the Court notes that wage increases resulting from collective bargaining do not reflect an individual's increased earning capacity but rather the industry's standard pay rates. Similarly, K&K's raises, although not union-based, do not correspond to any enhancement in Petitt's skills or responsibilities. Evidence shows that newer employees at K&K, performing the same tasks as Petitt, earn starting wages adjusted from their hire date, indicating that Petitt's seniority does not enhance his market value. The Court distinguishes the case from Deweert, where seniority was associated with increased responsibilities and skills. Petitt testified that after a few months as an electronics assembler, his productivity remained unchanged, and no contrary evidence was presented. While K&K's raises may serve as a beneficial market strategy to retain employees, the focus remains on determining Petitt's potential earnings on the open market. The Court concludes that salary increases based solely on seniority do not increase a claimant’s wage-earning capacity and grants the petition for review, vacating the Board's decision and remanding the case for recalculation of Petitt’s partial disability benefits accordingly.
