Opinion
June 19, 1967
Appeal by the employer and its insurance carrier from a decision and award of the Workmen's Compensation Board. The sole issue arises upon appellants' contention that in determining claimant's average weekly wage prior to the accident the sum of $1,576 severance pay, which was paid to her upon leaving her former employment, when the business was discontinued, was erroneously included in the board's computation of her base wage for the year preceding the accident. In a letter, the employer characterized the payment as a severance payment equivalent to three months' salary to employees whose services were being terminated December 31, 1963. Claimant had been in the employ of the former employer as a secretary for 15 years until December 31, 1963. For the full year 1963 her average salary was $121.27 per week. On January 6, 1964, claimant commenced work for the appellant employer as a secretary, at a salary of $125 per week. The accidental injury on which the award is predicated occurred on February 20, 1964. By including the severance pay of $1,576 in the computation of annual and weekly earnings, the board found a base wage of $148.15. Appellants assert that the wage should have been fixed at $121.93. The board found a 50% earning capacity and made an award for reduced earnings upon the $148.15 base which it had established by including the amount of the severance pay in the computation. In its application for board review, the employer contended that the "payment made to this particular claimant was a gift for sixteen years of constant service and if we are going to allocate it as income you would have to apply it at the rate of about $100 per year. There was no contract either written or otherwise covering this severance pay. It was merely a voluntary act upon the part of the Board of Directors." We find unpersuasive claimant's contrary view that severance pay is similar to bonuses, tips, gratuities and the like. These latter payments are currently made for services currently rendered and thus truly reflect earning capacity; but a severance payment occurs but once and, unless contractually provided for, represents the voluntary act of the employer, intended to tide the employee over while he seeks new employment. If a payment of this nature is not made in recognition of many years of service, and is not to be allocated accordingly, it would seem no more illogical to treat it as wages for the week, or even the day, within or upon which it is received than to allocate it as a portion of the employee's annual pay, as the board has done in this case; but certainly no one would argue that the $1,576 truly represented one day's earnings or one week's earnings. The basic intent of the compensation statute is to compensate a claimant in an amount commensurate with the earning power he would have were it not for his injury, this in terms of weekly earning capacity. That fact is well illustrated by this case of an award on the basis of reduced earnings, in which it was necessary for the board to establish earning capacity as a preliminary to fixing the rate. It seems to us that it cannot reasonably be found that this payment made as of December 31 (when claimant's average weekly wage for the year past would otherwise be $121.27) reflects a wage earning capacity of $148.15, not only as against that $121.27 but, also, as against the $125 per week claimant was paid for the same type of work commencing but six days later. Decision reversed and case remitted for further proceedings not inconsistent herewith, with costs to appellants against the Workmen's Compensation Board. Gibson, P.J., Herlihy, Reynolds, Aulisi and Gabrielli, JJ., concur in memorandum by Gibson, P.J.