Arizona Has Changed The Maximum Average Monthly Wage On Which Workers' Compensation Benefits Is Paid

In mid-2007 business and labor groups along with attorneys and legislative leaders began discussing changes to the average monthly wage (AMW) provisions of the Workers’ Compensation Act. Under then existing law the maximum AMW upon which benefits for injured workers was calculated was $2400.00. Historically, the maximum average monthly wage had been a statutorily stated specific amount. The Legislature would, from time to time, amend the statute to provide for an increased amount. Pursuant to ARS §23-1041 the AMW in Arizona had been capped at $2,400 since August 1999. When a worker is temporarily disabled he receives two-thirds (66-2/3%) of his AMW. This means any injured worker in Arizona who earned over $2,400 per month would only receive two thirds of $2,400 or $1,600 per month if temporarily disabled and unable to return work. This created a real hardship for a significant number of injured workers because approximately 50% of injured workers earned in excess of $2400 per month and their workers' compensation benefits were hardly sufficient to pay their bills.

The AMW in Arizona was first "capped" at $1,000 in 1949. The Arizona Legislature then increased the AMW to $1,350 for any injury that occurred before January 1, 1988. The legislature subsequently adopted several small increases before adopting the $2,400 AMW as of August 6, 1999. This AMW remained in effect through the end of 2007. Clearly the legislature had not increased the AMW ceiling to keep up with inflation. For example, according to the consumer price index, $1,000 in 1949 was the equivalent of $8,470.59 in 2006. Yet the maximum AMW in Arizona remained at $2,400 from 1997 through 2007.

As a result of the mid-2007 discussions a proposal to raise Arizona's AMW was considered by the Legislature, which bill also contained a proposal to adjust future AMW calculations, after January 1, 2010 by cost of living increases. The Legislature ultimately adopted legislation that amended the average monthly wage statute (A.R.S. § 23-1041) by increasing the AMW to $3,000 as of January 1, 2008 and to $3,600 on January 1, 2009. With this amendment the Legislature also added a provision that provided for an annual adjustment ("indexing") of the average monthly wage for injuries occurring on or after January 1, 2010. This provision directed the Industrial Commission to adopt an amount that reflects the annual percentage increase in the Arizona mean wage and to increase the average monthly wage by that amount. The Commission was directed to adopt such an amount by August 1 of each year to be effective for the following calendar year. This indexing provision adjusts the maximum average monthly wage using Bureau of Labor occupational employment statistics coded for all occupations. Therefore, as directed by the statute, the Industrial Commission has adopted a new maximum average monthly wage for 2010. Beginning on January 1, 2010, for injuries that occur during calendar year 2010, the maximum average monthly wage is $3,763.44.

It is critical that injured workers assure that their average monthly wage calculation is correct since it is the basis for the calculation of all workers’ compensation benefits. If the calculation is too low and the notice of average monthly wage becomes final it may be impossible to have the wage later increased.

If you have any questions about your aveage monthly wage calculation we are glad to discuss the issue with you at Schiffman Law Office, P.C. (602-266-2667/800-545-7372).