Michigan Supreme Court
Lansing, Michigan 48909
Chief Justice Justices
Opinion
Maura D. Corrigan Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
FILED DECEMBER 23, 2003
THOMAS SCHMALTZ,
Plaintiff-Appellant,
v No. 123865
TROY METAL CONCEPTS, INC., and
WESTFIELD INSURANCE COMPANY,
Defendants-Appellees.
_______________________________
PER CURIAM
In this worker’s compensation case, this Court is
asked to determine whether a disabled employee’s average
weekly wage at the time of injury can be recalculated or
redetermined to include discontinued fringe benefits when
that employee’s subsequent employment produces a partial
benefit rate. We conclude that the average weekly wage
that is used to establish benefit entitlement is determined
at the time of injury and may not be subsequently
recalculated. Postinjury employment does not affect the
time of injury average weekly wage calculation. This was
the decision reached by the Worker’s Compensation Appellate
Commission (WCAC), a decision which we affirm.
I
This case comes to us on stipulated facts, which we
will review after setting forth the applicable provisions
of law. From this case’s inception, the sole question
posed by the parties is whether, and to what extent,
plaintiff’s discontinued fringe benefits can be included in
his “average weekly wage” when determining his entitlement
to wage-loss benefits.
To answer this question, we must examine several
provisions in the Worker’s Disability Compensation Act, MCL
418.101 et seq. The act compensates workers for wage loss
due to work-related injuries, but it also establishes
limits for such compensation. Since 1982, disabled workers
have been entitled to receive eighty percent of their
after-tax average weekly wage. MCL 418.351(1). However,
this compensation is subject to a statutory maximum, which
is ninety percent of the state average weekly wage
applicable at the time of injury. MCL 418.355(2).
The after-tax wages used to determine wage-loss
benefit entitlement are calculated pursuant to MCL
418.313(1), which establishes how the “after-tax”
2
determination is made, and MCL 418.371, which establishes
how the “average weekly wage” is calculated. The critical
provision for purposes of this case is § 371(2), which
provides:
As used in this act, “average weekly wage”
means the weekly wage earned by the employee at
the time of the employee's injury in all
employment, inclusive of overtime, premium pay,
and cost of living adjustment, and exclusive of
any fringe or other benefits which continue
during the disability. Any fringe or other
benefit which does not continue during the
disability shall be included for purposes of
determining an employee's average weekly wage to
the extent that the inclusion of the fringe or
other benefit will not result in a weekly benefit
amount which is greater than 2/3 of the state
average weekly wage at the time of injury. The
average weekly wage shall be determined by
computing the total wages paid in the highest
paid 39 weeks of the 52 weeks immediately
preceding the date of injury, and dividing by 39.
The plaintiff in this case was injured in 1997. At
the time of his injury, his weekly wage (or “cash” wage)
was $983.59. His fringe benefits, which were discontinued,
were valued at $273.96. The applicable state average
weekly wage in 1997 was $591.18, two-thirds of which is
$394.12. Plaintiff’s “cash” weekly pay therefore far
exceeded the amount under which fringe benefits may be
included in the calculation of plaintiff’s “average weekly
wage” under § 371(2). In short, plaintiff’s average weekly
wage at the time of his injury was $983.59.
3
Plaintiff subsequently found new employment, at wages
less than he earned from defendant. In accordance with MCL
418.361(1), he is entitled to weekly compensation equal to
“80% of the difference between the injured employee’s
after-tax average weekly wage before the personal injury
and the after-tax average weekly wage which the injured
employee is able to earn after the personal injury, but not
more than the maximum weekly rate of compensation, as
determined under [MCL 418.355].” There is a companion
statement of entitlement in the reasonable employment
provisions of the act, specifically MCL 418.301(5)(b),
which states that if a disabled employee “is employed and
the average weekly wage of the employee is less than that
which the employee received before the date of injury, the
employee shall receive weekly benefits under this act equal
to 80% of the difference between the injured employee’s
after-tax weekly wage before the date of injury and the
after-tax weekly wage which the injured employee is able to
earn after the date of injury, but not more than the
maximum weekly rate of compensation, as determined under
[MCL 418.355].”
Plaintiff proposes that, if the differential benefit
entitlement discussed in §§ 361(1) and 301(5)(b) is below
two-thirds of the applicable state average weekly wage
4
($394.12), his discontinued fringe benefits should now be
included in his average weekly wage, to the extent that
such inclusion does not result in a weekly benefit amount
greater than $394.12. The worker’s compensation
magistrate, relying on prior decisions by the WCAC,
rejected plaintiff’s proposal, and the WCAC affirmed the
magistrate’s decision. 2002 Mich ACO 326.1 We agree with
these authorities.
II
Findings of fact made or adopted by the WCAC are
conclusive on appeal, absent fraud, if there is any
competent supporting evidence in the record, but a decision
of the WCAC is subject to reversal if the WCAC operated
within the wrong legal framework or if its decision was
based on erroneous legal reasoning. DiBenedetto v West
Shore Hosp, 461 Mich 394; 605 NW2d 300 (2000). Questions
of law arising in any final order of the WCAC are reviewed
by this Court under a de novo standard of review. Mudel v
Great Atlantic & Pacific Tea Co, 462 Mich 691; 614 NW2d 607
(2000). Unless clearly erroneous, the Courts are to give
great weight to the interpretation of a statute placed upon
1
Leave to appeal was denied by the Court of Appeals in
an unpublished order, entered April 24, 2003 (Docket No.
245945).
5
it by the administrative body whose job it is to apply the
statute. Hoste v Shanty Creek Mgmt, Inc, 459 Mich 561; 592
NW2d 360 (1999).
III
The statutory restriction on the inclusion of
discontinued fringe benefits in the calculation of an
employee’s average weekly wage, MCL 418.371(2), reflects
the Legislature’s intent that fringe benefits should only
be included to increase the weekly benefit amount available
to employees whose other earnings, exclusive of fringe
benefits, are too low to yield a weekly benefit amount that
is equal to or above two-thirds of the applicable state
average weekly wage. In the leading WCAC decision,
Karczewski v Gen Motors Corp, 1994 Mich ACO 613 (1995), the
WCAC adopted the following analysis provided by the
magistrate in that case:
Defendant asserts that discontinued fringe
benefits are includable in the calculation of
average weekly wage only to the extent necessary
to bring the full rate up to two-thirds of the
state average weekly wage. I agree.
Section 418.371(2) of the Act provides that
discontinued fringe benefits are includable in
the computation of the average weekly wage only
to the extent necessary to yield a rate up to
two-thirds of the state average weekly wage for
the year of injury. If the cash wage yields a
rate that meets or exceeds two-thirds of the
state average weekly wage, discontinued fringes
are not includable. The prior section of the Act
6
provided for inclusion of discontinued fringe
benefits in the average weekly wage computation
under all circumstances. Obviously, a change was
intended.
The present version was part of the large
package of reforms that became effective in 1982.
The whole thrust of the reform package was to
tighten up eligibility requirements and, at the
same time, improve the level of benefits for
those who do qualify. Subject to maximum rates,
the prior rate provisions were based on two-
thirds of an employee’s gross earnings. At the
higher income levels, claimants are better off at
the 80% after tax rate. At certain income
levels, employees were better off with a rate
based on two-thirds of their gross income,
inclusive of fringe benefits. In permitting
addition of discontinued fringes up to the point
necessary to reach a rate equal to two-thirds of
the state average weekly wage, I believe the
Legislature intended to reduce the overall
economic loss for claimants at that income level.
It was not intended that eligible claimants be
“worse off” under the new schedule of benefits.
Traditionally, average weekly wage is
established, once and for all, as of the date of
injury. Circumstances arising subsequent to that
date (with the exception of later ending
includable fringes) may affect the rate of
compensation, but not the average weekly wage.
Post-injury earnings, during periods of partial
disability, operate as a credit, and in
mitigation of, an employer’s wage indemnity
liability. The differential is created by the
difference between the pre-injury and reduced
post-injury earnings. Traditionally, and in the
present statutory scheme, there is no indication
that the Legislature intended to increase the
differential by adding discontinued fringe
benefits to the cash average weekly wage merely
because the differential payment falls below two-
thirds of the state average weekly wage. That
concept runs counter to the entire
mitigation/favored work doctrine.
7
Since plaintiff’s pre-injury cash wage
yields a full rate in excess of two-thirds of the
state average weekly wage, he is not entitled to
add fringe benefits to the wage calculation.
Therefore, plaintiff’s claim for rate adjustment
has been denied.
We agree with this analysis and note that it has been
consistently followed by the WCAC each time this question
has come up.
The calculation of a worker’s compensation average
weekly wage at the time of injury involves a two-step
process that occurs “at the time of the employee’s injury.”
First, the worker’s gross weekly wages in “cash” alone are
applied to the annual benefit rate tables published
pursuant to MCL 418.313(2). If the resulting benefit rate
indicated on the tables does not meet or exceed two-thirds
of the applicable state average weekly wage, the second
step is to add in the value of the worker’s fringe benefits
(without regard to whether they discontinue on the date of
injury or at some later date), up to the point at which the
resulting benefit rate indicated in the tables equals two-
thirds of that state average weekly wage. It is only after
this two-step process is completed that the resulting
average weekly wage figure is used to determine the weekly
benefit amount that worker is actually entitled to receive.
According to Karczewski, this is the “full” weekly benefit
8
amount that is indicated in the benefit rate tables and
that is based upon the worker’s earnings at the time of
injury, without any offsets for postinjury wages, continued
wage-earning capacity, or any other type of benefit
reductions and limitations, that is the focus of the two-
thirds limitation on the inclusion of fringe benefits in
the calculation of the average weekly wage under MCL
418.371(2).2
Here, plaintiff’s earnings at Troy Metal Concepts were
well above the kind of low income level that the inclusion
of fringe benefits in § 371(2) was designed to address.
Because plaintiff’s gross weekly wages, exclusive of fringe
benefits, were more than sufficient to result in a full
weekly benefit amount under the applicable rate tables that
exceeded two-thirds of the applicable state average weekly
wage, his fringe benefits may not be included in the
calculation of his average weekly wage. The mere fact that
plaintiff may presently be entitled to receive a
differential weekly benefit amount that is less than the
2
Plaintiff’s reliance on Taylor v Second Injury Fund,
234 Mich App 1; 592 NW2d 103 (1999), is misplaced. The
issue there involved calculation of total and permanent (or
“T&P”) disability benefits. Those benefits may be
increased (with the Second Injury Fund paying the
difference) to the extent an employee would qualify for
higher benefit rates in later years after injury. MCL
418.521(2).
9
full weekly amount set forth in the tables and that is less
than two-thirds of the state average weekly wage for the
applicable year of injury, does not provide an occasion for
now including the value of discontinued fringe benefits in
the determination of his average weekly wage. That average
weekly wage was fixed at the time of injury and may not be
recalculated. Plaintiff’s underlying entitlement, or
“full” benefit, has never changed.
The decision of the WCAC is affirmed.
Maura D. Corrigan
Elizabeth A. Weaver
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
CAVANAGH and KELLY, JJ. We would grant leave to
appeal.
Michael F. Cavanagh
Marilyn Kelly
10
Schmaltz v. Troy Metal Concepts, Inc
Court: Michigan Supreme Court
Date filed: 2003-12-23
Citations: 673 N.W.2d 95, 469 Mich. 467
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