Where LWEC Fits
Actual Earnings vs. Constructed Position
Actual Earnings
FECA directs OWCP to use actual earnings when those earnings fairly and reasonably represent the employee's wage-earning capacity.
- Actual wages are generally the best measure of earning capacity.
- The position must fairly and reasonably represent the employee's capacity—not merely be a temporary or make-shift arrangement that distorts it.
- Current OWCP procedure states a formal actual-earnings LWEC decision cannot be issued until the employee has completed 60 days of employment.
Constructed Position
If actual earnings do not fairly and reasonably represent capacity—or the employee has no actual earnings—OWCP may determine capacity from a medically and vocationally suitable position that is reasonably available.
- The employee does not necessarily have to be working in the selected position.
- Medical suitability and vocational suitability both matter.
- Labor-market evidence is used to address reasonable availability and wages.
Working Does Not Automatically Equal a Formal LWEC
The key question is whether the actual earnings fairly and reasonably represent wage-earning capacity. OWCP reviews the nature and stability of the employment and whether the earnings are a realistic measure of what the injured employee can earn.
At Least 60 Days
Current OWCP procedure says a formal actual-earnings LWEC decision cannot be issued until the employee has completed 60 days of employment.
Representative Work
The job should not be an odd-lot, temporary, seasonal, or make-shift position that fails to represent the employee's real earning capacity under the governing rules.
Partial Wage Loss
If representative post-injury earnings are lower than the appropriate pre-injury earning measure, FECA partial-disability compensation can address the injury-related loss.
WAGE LOSS CENTERWhen OWCP Determines What the Employee Could Earn
Section 8115 identifies factors OWCP must consider when actual earnings do not fairly and reasonably represent capacity or there are no actual earnings.
LWEC Is About Capacity—not Simply Subtracting Two Paychecks
The Basic Logic
OWCP first expresses post-injury wage-earning capacity as a percentage by comparing post-injury earnings or constructed earnings with the current pay rate of the date-of-injury job. That percentage is then applied to the pay rate at the time of injury to determine the compensable loss, followed by the applicable FECA compensation rate and adjustments. This is commonly called the Shadrick formula.
This matters because a simple “old salary minus new salary” calculation can produce the wrong answer. The formula accounts for changes in the current pay of the date-of-injury position before determining the percentage loss of earning capacity.
Constructed Capacity Often Grows Out of Vocational Evidence
If return to the previous employer is unsuccessful, vocational rehabilitation may identify target occupations consistent with the employee's medical capacity, skills, education and experience. Labor-market information is then used to address whether suitable jobs are reasonably available and what they pay.
RETURN TO WORK / REHABLater Wage Loss Does Not Automatically Erase the LWEC
A formal LWEC determination has continuing significance. When circumstances later change, OWCP may need to decide whether the existing LWEC should be modified rather than treating the situation as an ordinary recurrence.
Original Rating Was Erroneous
Modification may be considered when the original LWEC determination is shown to have been in error.
Injury-Related Condition Changed
A material change in the injury-related condition can support reevaluation when it affects the basis of the established earning capacity.
MEDICAL EVIDENCEVocational Rehabilitation
Subsequent vocational rehabilitation can change the employee's demonstrated earning capacity and may support modification under OWCP procedure.
Why This Connects to Our Recurrence Center
If an employee with a formal LWEC later stops work or loses earnings, the first question should not automatically be “Is this a recurrence?” The existing LWEC decision must be identified because the correct procedural analysis may be modification of the LWEC determination.
Related—but Different
Must the Employee Accept This Job?
The suitable-work process under §8106(c) focuses on an offer of employment and the consequences of refusing suitable work.
SUITABLE WORK CENTER →What Is the Employee's Capacity to Earn?
Section 8115 focuses on measuring earning capacity for partial-disability compensation, using representative actual earnings or an appropriate constructed position.