Case Title: THOMAS SCHMALTZ V TROY METAL CONCEPTS INC

Citation: 

Docket Number: 123865

State: michigan

Court: Michigan Supreme Court

Date: 2003-12-23T00:00:00Z

Document:
_______________________________ 
 
 
 
Michigan Supreme Court  
Lansing, Michigan 48909  
Chief Justice 
Justices 
Maura D. Corrigan 
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
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