DLI and BIIA in Conflict: How to Handle Retroactive Wage Increases?
By Aimee E. Harvey, Attorney at Law
When a claimant’s injury temporarily prevents them from returning to work, they are usually entitled to disability compensation in the form of time-loss or loss‑of‑earning‑power benefits. The amount of disability compensation they receive is based in part on their gross monthly wage, which generally reflects the wages a worker was earning from all employment at the time of injury.[1] This includes base wages, tips, bonuses, wages from other positions, and even some employee “perks” like housing or fuel.[2] While these rules seem relatively clear-cut, issues can arise when labor unions renegotiate their contracts with employers. Many of these collective bargaining agreements are retroactive, meaning their terms—including any wage increases—apply to a period before the agreement was signed, which can drastically change the rate of pay a worker was entitled to at the time of injury months or even years after the injury occurred.
The Industrial Insurance Act does not expressly address retroactive wage increases, meaning employers must look to case law and other resources to determine best practices. To help clarify the issue, the Department of Labor and Industries (“the Department”) has released guidance in the form of a “Lump Sum” Classification Matrix for Wage Calculation (“Matrix”). Although workers are often paid a lump sum of the back-pay they are owed after a retroactive wage increase, this Matrix states that a “[r]etroactive lump sum should not be added into pay rate.” Instead, “[t]he actual wage rate should be recalculated to reflect the updated wage.”
However, the Board of Industrial Insurance Appeals (“the Board”) has taken a different position and opposed including retroactive wage increases in a worker’s gross monthly wage altogether. On May 3, 2024, the Board issued a decision in In re Brandon L. Alvord that examined this issue.[3] Mr. Alvord was injured in July 2021, while his labor union was still renegotiating its contract with his employer, U.S. Foods, Inc. The contract was finalized in August 2022 and included retroactive wage increases that went into effect in June 2021, before Mr. Alvord was injured. As his gross monthly wage was calculated using his prior pay rate, Mr. Alvord argued that it should be recalculated to reflect this retroactive wage increase. However, the Board concluded that calculating Mr. Alvord’s gross monthly wage using his original hourly rate was correct. In support of its position, the Board noted the language in RCW 51.08.178(1), which unambiguously states that “the calculation is to be based upon ‘the monthly wages the worker was receiving from all employment at the time of injury.’ (Emphasis added.)” The Superior Court recently upheld the Board’s decision, but it does not appear that this outcome will be formally published.
So, how do employers navigate this conflict between the Department and the Board’s interpretations? While Washington courts generally give an agency’s interpretation of the law substantial weight, the Department is not entitled to deference when its interpretation conflicts with the terms of the statute.[4] Since the Industrial Insurance Act (“the Act”) instructs us to consider a worker’s wages at the time of injury, the Matrix’s interpretation is arguably in conflict with the Act because it recommends using a wage rate agreed upon after the date of injury. Furthermore, because the Alvord decision has not been overturned by the higher courts, it is still considered precedential regardless of the Department’s contradictory guidance. However, even though the Alvord decision is considered precedential, the Department may still assess penalty against an employer for failing to adhere to the Matrix. Thankfully, per the decision in In re Richard Castle, the Board can review the appropriateness of these penalties by considering the statutory factors contained in RCW 49.17.180(7).[5] The Board’s ability to review these penalties is also supported by In re Frank Madrid, which found that an employer should not be penalized when there is a legitimate doubt as to its legal liability.[6]
In summary, even though the decision in In Re Brandon L. Alvord is considered precedential, this conflict between the Department and the Board’s position will likely persist until the Washington Court of Appeals or Supreme Court has the opportunity to rule on the issue, or the Department updates its policy to comply with Board precedent. In the meantime, employers may need to file an appeal to obtain the benefit of the Board’s decision in In Re Brandon L. Alvord and address any improper penalties. In the event you encounter this complex issue in one of your claims, please do not hesitate to reach out to our office. Our Washington practice group is happy to provide guidance and assistance in navigating this evolving and contradictory area of law.
[1] See WAC 296.14.520; RCW 51.08.178.
[2] Id.; WAC 296.14.522.
[3] In re Brandon L. Alvord, DLI No. SM52044, Docket No. 2312433 (Wash. Bd. of Indus. Ins. Appeals, May 3, 2024).
[4] Silverstreak, Inc. v. Washington State Dep’t of Labor & Indus., 159 Wash. 2d 868, 884, 154 P.3d 891, 900 (2007).
[5] In re Richard Castle (Olympia Glass Co.), BIIA Dec., 95 W445 (1996) [Editor’s Note: The Board’s decision was appealed to superior court under Thurston County Cause No. 96-2-04313-1.]
[6] In re Frank C. Madrid, DLI No. S-547162, Docket Nos. 860224–A, 860226–A and 860228–A (Wash. Bd. of Indus. Ins. Appeals, Sept. 4, 1987).