this section shall be determined by his actual earnings if such actual earnings fairly and reasonably represent his wage-earning capacity: Provided, however, That if the employee has no actual earnings or his actual earnings do not fairly and reasonably represent his wage-earning capacity, the deputy commissioner may, in the interest of justice, fix such wage-earning capacity as shall be reasonable, having due regard to the nature of his injury, the degree of physical impairment, his usual employment, and any other factors or circumstances in the case which may affect his capacity to earn wages in his disabled condition, including the effect of disability as it may naturally extend into the future."

The manner of making such determinations is fairly well established under the law.

Deputy Commissioners are furnished copies of briefs, and all published decisions of the various U.S. Courts in cases under the Longshoremen's and Harbor Workers' Compensation Act including those involving the issue of earning capacity.

They are also furnished copies of decisions of State agencies involved in the field of workmen's compensation law as well as those of the Employees' Compensation Appeals Board under the Federal Employees Compensation Act.

The Deputy Commissioners are furnished guides to the evaluation of permanent impairments prepared by the American Medical Association committee on medical ratings and physical impairment.

In addition they have copies of the various volumes on workmen's compensation law such as the three volume treatise by Arthur Larson as well as those of other recognized experts in this highly specialized field of law. Further, they have available medical advisers and vocational rehabilitation specialists.

Compensation at end of scheduled award

Question. Section 8(c) (1)-(20) provide for the payment of a specified number of weeks of compensation for the injuries listed regardless of actual impairment of earning capacity or its duration, if it occurred.

In view of this fact, how is the amendment proposed by Section 6 of the bill justified?

In particular, if the amounts specified in Sections 8(c) (1)-(20) are thought to be inadequate in cases where a limited injury results in a long-term or permanent impairment of earning capacity, would it be proper either (1) to increase the specific amounts of compensation payable for those injuries likely to result in such impairment or (2) determine all compensation under the standards of Section 8(e) (21) ?

Answer. The specific number of weeks provided in Section 8(e) (1) to 8(c) (20), inclusive, is to indemnify the injured worker for specific losses on the basis of a presumed loss of earning capacity.

In some cases the scheduled number of weeks will be adequate while in others there may be additional adverse affect on the subsequent earning capacity of the injured worker.

For example, an employee may lose a hand or a leg and such loss may prohibit him from returning to his regular work.

Following vocational rehabilitation he may return to some form of work at a reduced earning capacity and in this type of case continued compensation should be paid proportionately.

This amendment recognizes that one of the basic principles of workmen's compensation is to provide compensation payments for loss of earning capacity resulting from disability due to an injury, in other words, for the effect the disability has on the man's ability to earn.

One can readily recognize that the loss of a hand by a longshoreman has a greater impact and represents a greater loss in terms of earnings and earning capacity than the same loss would to an executive, research worker, or clerical employee.

The same would be true of a total or partial loss of a foot or leg. Injuries affect different people in different ways economically. The loss of a finger to a concert pianist represents a greater loss in earning capacity than the loss of a finger to a laborer or clerical worker.

Because of the individuality of loss of earning capacity, an increase in specific amounts or duration of awards for specific losses will not answer the problem of serious and continuing loss of such capacity for certain workers.

The payment of all compensation on the basis of specific amounts for specific losses would require a revision of compensation theory and all existing law.

To require determinations under the standards of Section 8(c) (21) for all impairments now specified under 8(c) (1)–(20) would be a throwback in compensation law and would require a loss of wage-earning capacity determination in each and every case involving a permanent impairment regardless of how slight. This would greatly increase the administrative burden.

Employment of handicapped workers

Question. Is it not the purpose of Section 8(f) to encourage the hiring of partially disabled workers by limiting potential liability for subsequent injuries? If so, would the amendment made by Section 7 be consistent with this purpose? Answer. It is the purpose of Section 8(f) to encourage the hiring of partial disabled workers by limiting potential liability for subsequent injuries.

In our view the amendment made by Section 7 would be consistent with this purpose by making the liability of employers more definite.

Second injuries

Question. What percentage of all compensation claims have involved second injuries?

Answer. It is estimated that less than 1% of all cases would involve second injuries.

Commutation for aliens

Question. What is the purpose of the provision in Section 9(g) allowing payment of half the commuted total of benefits in the case of aliens at the request of the insurance carriers?

What is the change in circumstances which calls for eliminating the carrier's option and the limit of 50% of the commuted amount as proposed in Section 9(e) of the bill?

What criteria has the Secretary used in deciding whether to order payment of commuted benefits?

Answer. The legislative history of the present Section 9(g) of the Act shows that hearings were held March 16 and April 2, 1926 in connection with bill S. 3170.

In that original bill there was no reference to aliens. However, on May 11, 1926 H.R. 12063 was introduced and Section 10(g) of the bill was identical to the present Section 9(g) of the Act, P.L. 803, 69th Congress, identified as S. 3170 then became the Longshoremen's and Harbor Workers' Compensation Act. The content of Section 9(g) of the Act has not been changed.

It appears that the basic purpose of Section 9(g) is to allow payment to aliens in accordance with lower economic conditions and standards of living in various geographical areas outside the United States.

The facts that the beneficiary has no say in whether a lump sum is to be paid and that the amount is arbitrarily set at 50% have resulted in political problems with foreign organizations and governments as well as labor problems at foreign bases.

In the past no criteria have been used for the reason that in all such cases, insurance carriers exercised their option and commutation was mandatory.

The amendment proposed in Section 9(e) of the bill to eliminate the carrier's option and the limit of 50% of the commuted amount is made in the interest of justice.

Other factors should be considered rather than the sole factor of the insurance carrier's option.

The criteria that the amendment proposes include consideration of amounts that would be paid under local law and customs, age and life expectancy of the beneficiaries, and such other factors as may appear to warrant additional consideration in any individual case.

Extension of time for filing claim

Question. In connection with the extension of time for giving notice and filing a claim proposed by Section 11 of the bill, should "reasonable diligence" require at least one complete medical examination during each calendar year since the alleged injury occurred?

Answer. If the injured worker or the beneficiary is aware of the relationship between the injury or death, and the employment, the period for giving notice and filing claim is not affected by Section 11 of the bill. However, in cases of occupational disease or latent disability, symptoms may not appear within a

designated period and the worker would have no knowledge of possible relationship.

In cases of this type the time would begin to run when the claimant first had knowledge of his disease and its possible relationship to his employment, or when he reasonably should have known.

Claimants with dependents

Question. What percentage of claimants have one or more dependents and thus would qualify for the additional 8%% of average weekly wages under Section 8 of the bill?

Answer. It is estimated that under the Longshoremen's and Harbor Workers' Compensation Act, the Outer Continental Shelf Lands Act, the Defense Base Act. and the Nonappropriated Fund Instrumentalities Act, approximately 90% of claimants would have one or more dependents.

Under the District of Columbia Act it is believed that 75% would be a realistic estimate.

Standards for setting legal fees

Question. What standards do the Deputy Commissioners use to set legal fees under present law?

What is the average legal fee determined by the Deputy Commissioners under present law, expressed in terms of a percentage of the award? Is it contemplated that if the amendment proposed by Section 12 of the bill is adopted the amount of the average legal fee will increase or decrease?

Answer. The Longshore Act contains no formula or specific standards for determining reasonableness of attorney's fees. Many factors enter into determination, factors which essentially involve exercise of discretion.

In determining attorney's fees the Bureau considers, among other things, the time expended in preparation of the case, complexity of issues presented, results accomplished, amount of award and continuing compensation, particular circumstances of case, and customary charges of the bar for similar services.

If Section 12 of the amendment is adopted it is not believed that the average legal fee will increase or decrease.

Question. In what percentage of cases under existing law do claimants utilize the services of attorneys?

What percentage of all cases under existing law are contested?

Is it contemplated that the use of attorneys by claimants and the number of contested cases will increase if Section 12 of the bill is enacted into law? Answer. It is estimated that the services of attorneys are utilized in approximately 10 percent of the cases.

The majority of the cases in which attorneys are employed involve controverted issues.

There is no apparent reason to contemplate that the use of attorneys by claimants and the number of contested cases will increase if Section 12 of the bill is enacted into law.

Inclusion of legal fees

Question. Would Section 12 of the bill require inclusion of claimants' legal fees in the award in the following cases:

(a) An employer informally offers to pay $25 per week but the employee, seeking $50 per week, refuses the offer. At the hearing, the employer concedes that an award of $25 per week would be proper. An award is then "made" of $25 per week.

Answer. No.

Question. (b) Same as (a) but at the hearing the employer attempts to show that the claimant is actually entitled to less than $25 per week or no compensation at all.

Answer. Yes.

Special fund status

Question. During each of the past five years—

(a) How much has been paid into and how much has been paid out of a special fund established under Section 44 of the Act?

(b) How much would payments into the special fund increase if all disability compensation due to employees who have died without survivors is paid into the fund as proposed by Section 13 (a) of the bill?

(c) How much would payments into the special fund increase if the amount paid into the fund upon the death of employees resulting from compensable injuries where there are no survivors is increased from $1,000 to $5,000?

(d) How much is it estimated that the special fund will be required to pay out in benefits during each of the next five years?

Answer. (a) Following is a record of the receipts and disbursements in connection with the Special Fund established under Section 44 for the Longshoremen's and Harbor Workers' Compensation Act.

(b) Information is not available with respect to the number of persons who die while drawing disability compensation under the Longshore and related Acts. (c) Present statistics show that in the last few years there has been an average of 14 fatal cases per year in which there are no survivors and in which the employer or its insurance carrier paid $1,000 into the Special Fund.

If the payment by the employer or insurance carrier is increased to $5,000, then the payment would increase by $4,000 per case, or by $56,000 per year for 14 cases.

(d) It is estimated that disbursements from the Special Fund during each of the next five years will approximate $128,000 per year. If $68,000 per year is received by direct appropriation to pay for the services of Vocational Rehabilitation Advisers, then the balance of $60,000 per year will be required.

Injury following previous impairment

Question. Please explain how Section 8(f) of the Act would work in the following cases. In each case assume an employee earning $90 per week with a 50% impairment of earning capacity as a result of a previous injury suffers a second which, combined with the previous injury, results in complete disability.

Question. Case 1.-Present law.

Answer. If the second injury was one coming within Section 8(c) (1) to 8(c) (20), inclusive, the second employer would pay compensation for temporary total disability and permanent partial disability resulting from the second injury and the balance of compensation would be paid by the Bureau from the Special Fund.

The compensation payment would be 66%% of $90 or $60 per week.

If the second injury did not come within Section 8(c) (1) to 8(c) (20), inclusive, then the second employer would be liable to pay compensation at the same rate for permanent total disability, without limitations.

Question. Case 2.-Present law with the $24,000 limitation of Section (14 (m) repealed.

Answer. Same as Case 1.

Question. Case 3.-Present law, including Section 14 (m), with the addition of the new subsection 8(c) (23) proposed in Section 6 of the bill.

Answer. Same as Case 1.

Question. Case 4.-Present law without Section 14(m) and with the addition of new subsection 8(c) (23).

Answer. Same as Case 1.

Question. Cases 5-7.-Same as cases 2 to 4 with the amendment of Section 8(f) proposed by Section 7 of the bill.

Answer. If second injury comes within Section 8 (c) (1) to 8(c) (20), inclusive, the second employer pays compensation only for temporary total disability and the prescribed period of weeks for permanent partial disability, or for 104 weeks, whichever is greater.

If the second injury does not come within Section 8(c) (1) to 8(c) (20), inclusive, the second employer would pay compensation for 104 weeks. Compensation thereafter would be paid from the Special Fund.

Question. Case 8.-Cases 1 to 7 except assume that the second injury, combined with the first, results in death instead of permanent total disability.

Answer. If there are dependents, the second employer would pay compensation for 104 weeks only.

The amount paid would depend on the number of dependents and be in accordance with the maximum and minimum limitations in Section 9 of the Longshore Act.

If there are no dependents, the second employer would pay $5,000 to the Special Fund under Section 44 of the Act, as proposed to be amended by Section 13 of S. 2485.

Costs

Question. What is the estimated percentage increase in the cost of providing compensation of each change in existing law proposed in S. 2485?

Answer. The effect of the amendments, in so far as we have been able to estimate, is indicated in answers to questions 2, 3, 12, 13, 14 and 17. Other estimates are not available.

(The additional material referred to above may be found in the files of the subcommittee.)

(Whereupon, at 10:58 a.m. the hearing was concluded.)

U. S. GOVERNMENT PRINTING OFFICE: 1968 - 88-651