Exclude Unearned, Speculative Bonuses From the Average Weekly Wage Calculation

Practitioners in the Defense Base Act arena understand the problems associated with average weekly wage (“AWW”) calculations.  One specific issue that constantly arises is whether a contract completion bonus should be included in the AWW calculation.  This often arises when the claimant argues that the “contract rate” should be used to determine AWW.  The argument is that because the contract mentions a potential post-completion bonus, the bonus should be rolled into the AWW. 

In my opinion, contract completion bonuses should not be included in the AWW calculation.  Support for this position can be found in a number of Benefits Review Board (“BRB”) decisions.  The BRB previously stated that unearned bonuses were too speculative to include in an AWW calculation. See, e.g., Johnson v. Newport News Shipbuilding and Dry Dock Co., 25 BRBS 340 (1992) (concluding that post-injury bonus was not a part of claimant’s actual prior earnings); Siminski v. Ceres Marine Terminals, BRB No. 00-1029, 2001 WL 876238, n.5 (2001) (“…under Section 10(c) a post-injury bonus is contingent upon events which may or may not occur and thus is too speculative to include as wages”). 

More recently, in Obadiaru v. ITT Corp., 45 BRBS 17 (2011), the BRB addressed the payment of post-injury travel expenses: “As the second payment of travel expenses is similar to the post-injury contingent bonus excluded from the claimant’s “wages” in Johnson, we hold that the administrative law judge erred in including the $600 in claimant’s average weekly wage calculation here.”  Because the “claimant did not meet the contingency for receiving it, it should not have been included in the average weekly wage calculation.” 

Based on this caselaw, post-injury contingent bonuses, such as contract completion bonuses, should not be included in the AWW calculation…even if the “contract rate” is used to determine AWW.