NC Court Calls for Clarity on Pension Impact on Disability Calculation

November 9, 2007 ( - A North Carolina state appellate court has sent back for additional hearings a dispute over whether an has to include retirement plan contributions in an injured worker's disability benefit determination.

The North Carolina Court of Appeals threw out a ruling by the North Carolina Industrial Commission that U.S. Airways could ignore its 401(k) and pension contributions in the benefit calculations.

Appellate Judge Martha A. Geer, writing for the court, said the case turned on the definition of “average weekly wage,” noting that no otherNorth Carolina appellate court had previously considered the question presented in the case involving U.S. Airways ramp worker Curry Shaw who suffered a back injury in 2000 while lifting luggage.

Shaw appealed the commission’s 2006 ruling   that the savings and pension plans were fringe benefits and the employer could base the disability benefits award on just Shaw’s average weekly wage of $825.55. According to the opinion, adding the company 401(k) and pension contributions would have added $51.87 per week to Shaw’s temporary total disability benefits.

In her ruling, Geer asserted that the commission needed to take another look at the matter of including the retirement savings contributions because it had incorrectly analyzed the issues the first time around.  Unlike other states, Geer pointed out, North Carolina has not, in its Workers’ Compensation Act, chosen to expressly exclude fringe benefits from an average weekly wage calculation.

Cash Equivalent

When it reconsiders Shaw’s case, the appellate panel said the commission needed to evaluate whether the present value of the retirement savings benefit is “readily converted into a cash equivalent,” as per the applicable North Carolina case law.

Geer contended: “Such an analysis upholds the basic purpose of (state disability law) which is to ensure that, in determining the amount of compensation due, the result achieved is fair and just to both the injured worker and the employer.”

She continued: “The exclusion of tangible, unconditional benefits from an employee’s pre-injury ‘earnings’ could, in our view, unfairly hurt workers whose employment contracts call for greater amounts of so called ‘fringe’ benefits and lesser amounts of cash remuneration. Such an average weekly wage would not necessarily provide anaccurate measure of earning capacity. On the other hand, by limiting inclusion to benefits that meet the concerns set forth in (relevant case law), employers are protected from an unreasonable expansion of the concept of ‘earnings,’.”

Geer also issued a call for North Carolina lawmakers to revisit the issues raised in the Shaw case.“In other states, the legislature has clarified its intent after their states’ appellate courts have struggled to decide how to treat fringe benefits,” Geer wrote. “Because of the prevalence of benefits such as those in this case, we believe guidance by the General Assembly in this area is critical.”

Geer’s decision is  here .