Today’s post discusses different methods employed by the Department of Labor’s Division of Longshore and Harbor Workers’ Compensation (“DLHWC”) for the calculation of death benefits between a surviving spouse and a surviving child when the total weekly amount owed for compensation is capped at the applicable maximum compensation rate. This topic is best analyzed with a hypothetical, so here are our facts:
(1) Decedent’s average weekly wage at the time of death was $2,500.
(2) The maximum compensation rate in effect at the time of death was $1,325.18.
(3) Decedent is survived by a spouse and a child.
(4) Decedent’s spouse is not the mother of the child; and the child resides with his mother.
When a Longshore or Defense Base Act employee is killed in a work-related injury, his beneficiaries are most likely entitled to death benefits. The calculation of death benefits is controlled by Section 9 of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”), subject to the maximum compensation limit expressed in Section 6 of the LHWCA. Section 9 of the LHWCA provides in pertinent part:
If the injury causes death, the compensation therefrom shall be known as death benefits and shall be payable in the amount and to or for the benefit of the persons following:
(b) If there be a widow or widower and no child of the deceased to such widow or widower 50 per centum of the average wages of the deceased, during widowhood, or dependent widowerhood, with two years’ compensation in one sum upon remarriage; and if there be a surviving child or children of the deceased, the additional amount of 16 2/3 per centum of such wages for each child; in the case of the death or remarriage of such widow or widower, if there be one surviving child of the deceased employee, such child shall have his compensation increased to 50 per centum of such wages, and if there be more than one surviving child of the deceased employee, to such children, in equal parts, 50 per centum of such wages increased by 16 2/3 per centum of such wages for each child in excess of one: Provided, That the total amount payable shall in no case exceed 66 2/3 per centum of such wages.
And, Section 6(b)(1) of the LHWCA provides:
Compensation for disability or death (other than compensation for death required by this Act to be paid in a lump sum) shall not exceed an amount equal to 200 per centum of the applicable national average weekly wage, as determined by the Secretary . . . .
Read together, Section 9(b) and Section 6(b)(1) reveal that a surviving widow is entitled to 50% of a decedent’s average weekly wage, and a surviving child is entitled 16 2/3% of the decedent’s average weekly wage. But, the total amount of benefits owed to the beneficiaries shall not exceed the maximum compensation rate established annually by the Secretary.
Now back to our hypothetical. First, let’s apply the Section 9 percentages to the decedent’s average weekly wage. If the widow is entitled to 50% of the AWW, then she is entitled to $1,250. And if the surviving child is entitled to 16 2/3% of the AWW, then the child is entitled to $416.68. The problem is that $1,250 + $416.68 = $1,666.68, which is a sum that is far greater than the applicable maximum compensation rate of $1,325.18.
When this situation arises, how does the DLHWC resolve the problem? I am aware of two methods, which I will call the “pro-rata method” and the “spouse-takes-first method.” Both are explained below.
The Pro-Rata Method:
Under the pro-rata method, the DLHWC will assign a percentage of the compensation rate to each surviving beneficiary when the typical Section 9 calculation exceeds the maximum compensation rate cap. Instead of awarding a surviving spouse 50% of the AWW and a surviving child (existing at the same time as the spouse) 16 2/3% of the AWW, the DLHWC gives 75% of the compensation rate to the spouse, and 25% of the compensation rate to the child.
Why would the spouse and child split 75/25 of the compensation rate? Because a 75/25 split of the compensation rate results in the same percent share of benefits to each beneficiary. In other words, a spouse typically receives 50% of the average weekly wage, and in a typical case, 50% of the AWW is the same value as 75% of the compensation rate. The same is true for the child’s share. In a typical case, 16 2/3% of the AWW is the same value as 25% of the compensation rate. Consider the following scenario:
Decedent died with a wife and minor child. If the decedent’s AWW was $1,500 at the time of injury, then the 66 2/3% compensation rate is $1,000. Out of that $1,000, the wife’s share is $750 (or 75% of the compensation rate), and the child’s share is $250 (or 25% of the compensation rate).
So, in cases where the death benefits due to a surviving spouse and surviving child are capped by the maximum compensation rate, the DLHWC has previously used the 75/25 split to equitably provide both the surviving spouse and the surviving child with reasonable death benefits subject to the maximum compensation rate.
In our hypothetical, the surviving spouse and surviving child are capped by the applicable maximum compensation rate: $1,325.18. Using a 75/25 split, the surviving spouse would receive $993.89 per week (75% of the maximum compensation rate), and the surviving child would receive $331.29 per week (25% of the maximum compensation rate).
The Spouse-Takes-First Method:
Under the spouse-takes-first method, the DLHWC pays the widow first and the child second. Essentially, this makes a surviving spouse a preferred beneficiary over a surviving child.
In our hypothetical, the decedent’s average weekly wage at the time of injury was $2,500. The widow’s share of the decedent’s AWW is $1,250. But, per Section 6(b)(1), benefits are capped at the applicable maximum compensation rate of $1,325.18. Consequently, if the widow is paid out first, the surviving child will receive less than the typical 16 2/3% that the child would have received had the benefits not reached the statutory cap. Instead of receiving $416.68, the child would receive only $75.18 per week (which is the difference between the widow’s share of the decedent’s AWW and the maximum compensation rate).
The spouse-takes-first method is curious in that it creates a beneficiary hierarchy where the surviving spouse is preferred over a surviving child. Statutes often create beneficiary hierarchies that define which person may claim a right to death benefits, with the preferred classes having a right to claim benefits before a subordinate class. The LHWCA is no different. Section 9(d) provides the hierarchy of beneficiaries after the surviving spouse and surviving child:
If there be no surviving wife or husband or child, or if the amount payable to a surviving wife or husband and to children shall be less in the aggregate than 66 2/3 per centum of the average wages of the deceased; then for the support of grandchildren or brothers and sisters, if dependent upon the deceased at the time of the injury, and any other persons who satisfy the definition of the term “dependent” in section 152 of title 26 of the United States Code, but are not otherwise eligible under this section, 20 per centum of such wages for the support of each such person during such dependency and for the support of each parent, or grandparent of the deceased if dependent upon him at the time of the injury, 25 per centum of such ages during such dependency.
After the surviving wife and surviving child, potential beneficiaries include grandchildren, siblings, “dependents,” parents, and grandparents. The LHWCA supports the use of a beneficiary hierarchy. But is a surviving spouse really preferred over a surviving child as the spouse-takes-first method suggests? If so, one could argue that the LHWCA departs from similar statutory schemes.
Consider, for instance, the Federal Employers Liability Act (as incorporated into the Jones Act), which states:
Every common carrier by rail road . . . shall be liable in damages . . . in case of the death of such employee, to his or her personal representative for the benefit of the surviving widow or husband and children of such employee; and, if none, then of such employee’s parents; and, if non, then of the next of kin dependent upon such employee . . . .
See 45 U.S.C. § 51. It is clear that the Federal Employees Liability Act uses a descending class of beneficiaries, separated by semi-colons. The preferred class of beneficiaries is the surviving spouse and children–not the surviving spouse then children. From there, the second preferred class of beneficiaries is the employee’s parents. And the third preferred class of beneficiaries is a dependent next of kin.
The Death on the High Seas Act (“DOHSA”) contains a similar hierarchy, which the Fifth Circuit applied in Sistrunk v. Circle Bar Drilling Co., 770 F.2d 455 (5th Cir. 1985). In Sistrunk, the Fifth Circuit denied recovery to a decedent’s parents. The court held “that in a general maritime wrongful death cause of action . . . nondependent parents may not recover for loss of society where their deceased children were killed in territorial waters and are survived by spouse and/or child.” Id. at 460-61 (emphasis added). Thus, parents are in a subordinate class of beneficiaries–subordinate to spouse “and/or” child.
State wrongful death statutes also identify preferred classes of beneficiaries. In Louisiana, Civil Code Article 2315.2 identifies four classes of beneficiaries:
(1) The surviving spouse and child or children of the deceased, or either the spouse or the child or children.
(2) The surviving father and mother of the deceased, or either of them if he left no spouse or child surviving.
(3) The surviving brothers and sisters of the deceased, or any of them, if he left no spouse, child, or parent surviving.
(4) The surviving grandfathers and grandmothers of the deceased, or any of them, if he left no spouse, child, parent, or sibling surviving.
See La. Civ. Code Ann. art. 2315.2 (2014). A surviving spouse and child or children are the first preferred class of beneficiaries. Both the surviving spouse and the surviving child sit together at the top of the beneficiary hierarchy.
The DLHWC’s spouse-takes-first method for calculating death benefits elevates surviving spouses above surviving children. By paying out the surviving spouse’s full 50% entitlement before even considering the surviving child’s claim, the DLHWC may pay spouses to the detriment of children.
Is there statutory support for the spouse-takes-first method? It depends on how one reads Section 9(b). Presumably the spouse-takes-first method is derived from the following language–and the spouse takes first because the spouse is mentioned first:
If there be a widow or widower and no child of the deceased to such widow or widower 50 per centum of the average wages of the deceased, during widowhood, or dependent widowerhood, with two years’ compensation in one sum upon remarriage; and if there be a surviving child or children of the deceased, the additional amount of 16 2/3 per centum of such wages for each child . . . .
See 33 U.S.C. § 909(b) (emphasis added). Of course, there is a different way to read Section 9(b). One could argue that Section 9(b) puts surviving spouses and children on the same beneficiary plane, but that the statute recognizes two types of surviving spouses: those that co-exist with surviving children and those that do not.
Which Method Is Better?
In my opinion, the pro-rata method is the better method for calculating death benefits owed to a surviving spouse and surviving child when the total amount of weekly compensation owed is capped by Section 6(b)(1). I believe that surviving spouses and surviving children are regarded as equals in Section 9’s beneficiary hierarchy; and that surviving spouses are not a preferred class above surviving children.
Further, the spouse-takes-first method could lead to harsh consequences in certain cases. The hypothetical presented at the beginning of this post imagined an average weekly wage low enough that the surviving child would still receive benefits even if the DLHWC applied the spouse-takes-first method. But what if the decedent’s average weekly wage was so high that the widow’s share (50% of the AWW) exhausted the entire compensation rate? In other words, what if our hypothetical decedent’s AWW was $3,000 and the widow’s share took every last penny of the $1,325.18 weekly compensation rate? In this situation, the spouse-takes-first approach would prevent the surviving child–who, in our hypothetical, resides with his birth mother and not the decedent’s widow–from receiving any benefits whatsoever. At least under the pro-rata method, the child would receive something.
Another benefit of the pro-rata method is that it recognizes each individual’s separate right to benefits. A surviving spouse’s right to benefits is a personal right unto them and them alone. Likewise, a child’s right to benefits is a personal right unto them and them alone. The pro-rata method provides death benefits to each “person entitled to compensation,” but the spouse-takes-first method does not necessarily do the same. In the event that the surviving spouse’s right to death benefits consumed the entire maximum weekly compensation rate, the child would be left with nothing. That does not mean that the child’s right to benefits is extinguished. Instead, the child’s right continues to exist–but the child will not see a cent until certain prerequisite events occur (i.e. the surviving spouse’s remarriage or death).
Neither the pro-rata method nor the spouse-takes-first method will result in increased payments by an employer and carrier. Under Section 6, benefits are capped at 200% of the National Average Weekly Wage. Consequently, the calculation of death benefits between a surviving spouse and surviving child when the maximum compensation rate applies is a dilemma for the DLHWC, the spouse, and the child. But does the DLHWC really want to adopt a method that could prevent children from receiving benefits? No matter the DLHWC’s calculation method, one thing is certain: reasonable minds can differ when considering the calculation of Section 9(b) benefits capped by Section 6(b)’s maximum compensation rate. This reasonable mind prefers not to leave children penniless.