Third Quarter 2018
By: Benjamin Birtch
Question: In an otherwise compensable workers’ compensation case, is an employer permitted to use salary continuation and can payments of salary continuation serve as a credit against TTD obligations?
Short Answer: Yes. In Wisconsin, an employer is permitted to use salary continuation in an otherwise compensable workers’ compensation case. However, the payments may not serve as a credit against TTD obligation in the sense that ultimately the carrier may need to repay the employer (though an employee cannot double recover). Regardless of the formula used to pay an employee following a compensable work injury, whether paid as only TTD or a combination of TTD and salary continuation, the employee ultimately must receive the full TTD amount due.
Discussion: Nothing in Wisconsin workers’ compensation law prohibits the employer from voluntarily providing “sick, accident or death benefits in addition to the compensation provided under” workers’ compensation law, though “liability for compensation is not affected by any insurance, contribution or other benefit due to or received by the person entitled to that compensation.” Wis. Stat. § 102.30(2). Salary continuation, in lieu of temporary total/partial disability benefits, is a perfectly permissible practice under Wisconsin workers’ compensation law.
However, the employee ultimately must receive their full TTD benefits either from the employer directly or from the workers compensation carrier or administrator—and in the case of salary continuation or other similar programs, the workers compensation carrier/administrator must be aware of the ongoing obligation to reimburse the employer for sums that otherwise should have been paid in TTD. The workers’ compensation insurance company or administrator may be ordered to reimburse the employer either by restoring sick leave benefits paid in lieu of TTD, or by direct reimbursement for sums that should have been paid in TTD during a time at which the employer voluntarily provided salary continuation. Wis. Stat. § 102.30(7). The employer will avoid the obligation to restore sick pay used in lieu of TTD only if the employee consents to such a waiver. Wis. Stat. § 102.30(3).
Where salary continuation occurs, an insurance carrier must report the amount that would have been paid in TTD benefits to the Wisconsin Compensation Rating Bureau/WCRB. See Wis. Ins. News, Vol. 1 (Winter) (Wisconsin Insurance Commissioner confirms failure to report affects the experience rating and premium system and therefore TTD exposure must be reported even if the employer is voluntarily continuing wages). See also, Wis. Prac., Workers’ Comp. Law § 15:7. There is a section on the WKC-13 report, which outlines payments issued to the worker, specific to salary continuation.
With regard to the potential Section 102.30(7) reimbursement obligation, distinctions are not drawn because of an employer’s self-insured status. See Stewart v. Charter Mfg. Co., 2009-017919 (LIRC, Nov. 11, 2010) (noting “the Commission realizes that the employer is self-funded for non-industrial disability” in ordering reimbursement of the employer of amounts that should have been paid in TTD).
Under Wisconsin workers’ compensation law, there is general prohibition against charging employee premiums for workers’ compensation insurance. Wis. Stat. § 102.16(3). If the employee receives salary continuation and ultimately nets less than full TTD value, an attorney may argue the employer is violating the prohibition against charging WC premiums. See Goff v. School Dist. Kenosha, 92-07750 (LIRC, Apr. 30, 1998).
The main reason, speaking practically, that Applicants’ attorneys frequently require the reimbursement, even in the case of a self-insured employer, of sums that should have been paid in TTD but instead were paid through salary continuation, is due to the tax consequences on the employee. Specifically, TTD is non-taxable while salary is taxed. In our experience, opposing attorneys have even required that the employer produce a new W-2 Tax form after TTD benefits are repaid to the employer that otherwise provided self-funded short term disability or salary continuation. This may create an administrative burden for the employer.
In short, as the Labor & Industry Review Commission has explained in evaluating a similar issue, “Under Wisconsin law, if an employer wants to pay a worker more than his entitlement under the workers’ compensation law, that excess payment is considered a private matter and generally not subject to the laws governing workers’ compensation.” Goff, 92-07750. With that said, employees’ rights cannot be adversely affected; they must receive full TTD benefits, and amounts paid must be appropriately documented.
Practice Tip: Where an employer provides salary continuation, do not just do nothing. Instead, ensure a WKC-13 is filed to reflect amounts paid to properly document the healing period and proper payment of benefits.