Average Weekly Earnings Definition Regarding Disability Payments
Under section 4653, the disability payments for temporary total disability are computed as two-thirds of the "average weekly earnings" during the period of such disability.
In turn, the "earning capacity" (or average weekly earnings) is determined under section 4453.
In most cases, the statutory idiom, "average weekly earnings," either represents or is 100 percent of an injured employee's aggregate weekly earnings from all employments at the time of injury.
Subdivision (a) of section 4453 specifies the maximum and minimum levels for average weekly earnings for specified dates of injury.
These sums in turn determine the maximum and minimum weekly compensation rates.
Section 4653 provides in full: "If the injury causes temporary total disability, the disability payment is two-thirds of the average weekly earnings during the period of such disability, consideration being given to the ability of the employee to compete in an open labor market."
Until 1990 the calculation of average weekly earnings for temporary and permanent disability payments was subject to a minimum and maximum statutory limit. ( 4453, subd. (a).) (See generally 1 St. Clair, Cal. Workers' Compensation Law and Practice (5th ed. 1996) 7.5, pp. 404-406.)
The floor respecting minimum earnings for temporary disability purposes was eliminated by the Legislature for injuries on or after January 1, 1991, as part of the ongoing 1989 reform legislation and subsequent amendments and cleanup legislation. (Stats. 1990, ch. 1550, 29, p. 7275 [ 4453, subd. (c)]; Stats. 1993, ch. 121, 37, pp. 1281-1282 [ 4453, subd. (a)(5)-(7)].)
Rather than a floor for minimum earnings, subdivision (a)(4) through (7) now provides that average weekly earnings are to be not less than the lesser of $ 189 or 1.5 times the average weekly earnings of the employee from all employers. the limits for applicant's average weekly earnings are set forth in subdivision (a)(6) of section 4453.
Within these limits, the method of computation of average weekly earnings is provided in section 4453, subdivision (c), based on the type of employment. Subdivision (c)(1)-(3) provides formulae which take an employee's actual earnings as a starting point.
Regardless of which provision of subdivision (c) of section 4453 is used, "earning capacity" remains the benchmark for calculating average weekly earnings at the time of injury. ( West v. Industrial Acc. Com. (1947) 79 Cal. App. 2d 711, 722 [180 P.2d 972] [earning capacity is "touchstone" in determining average earnings]; accord, Gonzales v. Workers' Comp. Appeals Bd. (1998) 68 Cal. App. 4th 843, 846 [81 Cal. Rptr. 2d 54].)
The Supreme Court has declared that the phrase "earning capacity is not locked into a straitjacket of the actual earnings of the worker at the date of injury; the term contemplates [the employee's] general over-all capability and productivity; the term envisages a dynamic, not a static, test and cannot be compressed into earnings at a given moment of time." ( Goytia v. Workers' Comp. Appeals Bd. (1970) 1 Cal. 3d 889, 894 [83 Cal. Rptr. 591, 464 P.2d 47].)
In the ordinary and usual case of the permanent and full-time employee, the standard application of the first three statutory methods of subdivision (c)(1)-(3) will result in "actual earnings" equivalent to "earning capacity" under subdivision (c)(4). ( Argonaut Ins. Co. v. Industrial Acc. Com. (1962) 57 Cal. 2d 589, 594 [21 Cal. Rptr. 545, 371 P.2d 281] (Montana); Goytia v. Workmen's Comp. App. Bd., supra, 1 Cal. 3d 889, 894;
see generally 1 Hanna, Cal. Law of Employee Injuries and Workers' Compensation (rev. 2d ed. 1999) 6.02, pp. 6-9 to 6-10.) Subdivision (c)(4) of section 4453, on the other hand, is for irregular employment or other situations where the first three formulae do not yield a fair result and require an estimate of earning capacity from all relevant circumstances, not just past earning history or actual earnings at the time of injury. (Montana, supra, 57 Cal. 2d at pp. 594-595; Goytia, supra, 1 Cal. 3d at pp. 894-895; Gonzales v. Workers' Comp. Appeals Bd., supra, 68 Cal. App. 4th at p. 847.)