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Saturday, July 12, 2008

NJ Workers' Compensation Legislative Analysis

Why there is a need to increase “The Cap.”

NJ’s Statutorily Imposed Cap of Benefits
The average worker is dependent upon his weekly wage to provide the necessities to maintain a standard of living for himself and his family. When the flow of salary ceases, immediate concern focuses on the provision of food, clothing and shelter. The Workers' Compensation system is a major social benefit program that addresses the need to provide for benefits to replace earned wages and a “socially adequate” standard of living.
Disability rates for workers' compensation benefits in the State of New Jersey are based upon the computation of the wages of the injured employee. Statutorily, the wages are defined to mean "the money rate" at which the service rendered is compensated.

Since the Act was amended in 1979, New Jersey workers' compensation benefits are based upon the statewide average weekly wage (SAWW). There are both minimum and maximum compensation rates. The Act provides for a sliding scale of maximum allowable weekly benefits through the first 180 weeks of disability, and thereafter eliminates the sliding scale, replacing it with a single percentage rate, which itself increases as the severity of the disability increases. The beginning rate of disability is 20% of the SAWW, and increases by approximately one percent until it reaches the level of 35% of the SAWW for injuries which warrant disability payments of over 180 weeks. [From that point on, as the severity of the disability increases, the percentage of the SAWW which is paid also increases by five (5) percentage points for approximately every 30 weeks of disability paid.

NJ’s Dilemma:
2008 State Average Weekly Wage (SAWW)
NJ State Average Weekly wage (SAWW) for all workers was determined to be $989.23, 39 N.J.R. 3714(a).
NJ State Average Hourly Wage for 2008, calculated as 1/40th of the SAWW = $24.73, NJSA 34:15-12. The Maximum Workers’ Compensation benefit, which is capped at $75% of the SAWW for 2008 is $742 per week.
The Maximum HOURLY Workers’ Compensation SAAW cap is, based on a 40 hour week, $18.55.

Many workers in NJ are earning wages that EXCEED $18.55 per hour!

Where NJ Stands in Comparison to Other States
13 States have SAWW Caps that are higher than 100%. Iowa has 200%. 20 States, including close or nearly adjacent States/Federal District (Pennsylvania, Rhode Island, Connecticut, Massachusetts and District of Columbia.), have 100%.

Of the States with fixed dollar caps on benefits, 33 States have caps that are 100% or greater than New Jersey and only 6 states have dollar caps lower than NJ.What an increase in “the cap” would cost NJ. It has been estimated that in increase in the cap merely from 75% to 80% would cost no more that a 1% percent increase in total cost and therefore an increase to 100% would be no more than 5% or about $100 million.
Cost of NJ System in Comparison to Other Systems
The most current numbers available indicate that the cost of workers’ compensation benefit per $100 payroll compare as follows:NJ = $0.85 (which amounts to 81% of the national average)All States – National Average = $1.05

NJ presently rates14th lowest in cost nationally and a mere increase of only 5% would increase the cost to $0.89 which equates to 85% of the national average which would rank NJ still as 19th lowest in cost.

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