Calculating TPD: A 60-Second Seminar in Workers’ Compensation Claims Handling

When an injured employee returns to work limited to light duty, they might be eligible to receive temporary-partial disability (TPD) benefits, also known as wage loss. Surprisingly, many claim professionals find TPD difficult to properly calculate. Our blog today provides an explanation of the formula to be used.

For the most part claims adjusters are taught that the TPD formula is:

AWW – Light Duty Earnings = Lost Earnings x 2/3 = TPD Rate.

By way of example, if the AWW is $1,000 and light duty earnings are $400 then:

$1,000 – $400 = $600 x 2/3 = $400 TPD

Adjusters are also taught that to calculate TPD benefits they are to contact the employer to inquire how much money the injured worker was paid while on light duty.  Unfortunately, sometimes only one question is asked: “How much money did the employee earn?”  This is where an error occurs.  The adjuster should be asking two questions instead of just one.  The two questions to be asked are:

1. How much did the employee actually earn?
2. How much light duty wages were offered?

Once the two answers are provided, the higher number is used to calculate TPD benefits.  The correct formula is:

AWW – (Greater of Lt Duty Earnings/Wages offered) = Lost Earnings x 2/3 = TPD.

Allow us to demonstrate:   Presume two injured workers are employed at the same company.  Both earn the same AWW of $1,000 per week; have the same hourly wage of $25 per hour at 40-hours per week; and both are offered 20-hours of light duty per week.  “Employee-A” is a very conscientious worker and shows up for duty every day.  However, “Employee-B” shows up for work only when he feels like it and often calls in sick or takes the day off by claiming to be in pain from the industrial injury.  Consequently, Employee-A works a full 20-hours per week on light duty as offered, while Employee-B shows up for only 12-hours.  If a claims adjuster phones the employer and only asks how much each earned over the past week, the adjuster will calculate TPD as follows:

Did you notice the anomaly? By calling in sick and not working every day, Employee-B was paid more TPD than Employee-A.  We believe this error is prevalent in the industry, and is contrary to what Labor Code §4657 provides:

LC §4657 states that TPD is to be based “on the weekly amount which the injured employee will probably be able to earn . . .” (Note, LC §4657 does not state that TPD is based on the amount of wages actually earned).  In our example both injured employees were offered $500 in light duty earnings and therefore, both should receive the same TPD benefit of $333.33 per week.

Should you have any questions about calculating the TPD rate please feel free to contact the experts here at Friedman + Bartoumian.