How Average Weekly Wage (AWW) is Calculated for Alabama Workers' Comp Claims

When you are injured on the job in Alabama and cannot work, you rely on Temporary Total Disability (TTD) checks to keep a roof over your head. The size of those checks is completely dependent on how your Average Weekly Wage (AWW) is calculated. Whether you work in a warehouse in Montgomery, a restaurant in Tuscaloosa, or an office in Auburn, the insurance company is required to use a specific mathematical formula to determine your earnings. Unfortunately, insurance adjusters frequently make mistakes that illegally lower your AWW, shortchanging you out of hundreds or even thousands of dollars over the life of your claim.

Because the AWW forms the foundation of all your workers' comp benefits, we strongly suggest using our US Lawyers catalog to find a local attorney who can audit your wage statement and ensure you are being paid fairly.

Step-by-Step Process in Alabama

In Alabama, the Alabama Department of Labor, Workers' Compensation Division, Montgomery oversees the rules for calculating wages. The process follows strict statutory guidelines.

Step 1: The Standard 52-Week Formula

The core rule for calculating your AWW is found in Ala. Code § 25-5-57(b). The employer must take your total gross earnings (before taxes) for the 52 weeks immediately preceding the date of your injury and divide that number by 52. If you worked for the company for less than 52 weeks, the law allows for alternative methods, such as dividing your earnings by the exact number of weeks you worked, or using the wages of a 'similarly situated' employee. The employer will submit Form Unnumbered, Alabama, Department of Labor, Employer's Wage Statement to document these earnings.

Step 2: Service Industry Workers (Handling Cash Tips)

If you work in a restaurant or the hospitality industry, a large portion of your income comes from tips. Under Alabama law, tips can be included in your AWW calculation, but only if they were properly reported to your employer for tax purposes. If you pocketed cash tips without reporting them, the insurance company will not include them in your AWW, which will drastically lower your weekly TTD checks.

Step 3: Sales Reps (Commission and Bonuses)

For employees whose income relies heavily on sales commissions or performance bonuses, calculating the AWW can be tricky. Generally, regular, predictable commissions and bonuses earned during the 52-week period should be included in your gross earnings. The Alabama Supreme Court has emphasized in cases like Ex parte Murray, 490 So. 2d 1238 (AL Supreme Court 1986) that the AWW must fairly reflect the employee's true earning capacity.

Step 4: Blue-Collar Workers (Overtime and Per Diems)

If you work in construction, manufacturing, or trucking, you likely work overtime or receive per diem allowances. Mandatory overtime pay that you consistently earned during the 52 weeks must be included in your AWW. However, per diem payments intended strictly to reimburse you for travel expenses (like hotel and gas) are typically excluded from your gross earnings.

Common Adjuster Mistakes

Insurance adjusters often rush through calculations or intentionally omit certain income to save money. Common errors include:

• Using your net pay (after taxes) instead of your gross pay.
• Forgetting to include holiday bonuses or shift differentials.
• Dividing your earnings by 52 even if you missed several weeks of work due to an unpaid illness or layoff during the year.

How Much Does it Cost in Alabama?

Once your AWW is calculated, your TTD checks are paid at exactly 66 2/3% of that amount. However, Alabama law enforces a strict maximum cap on these benefits. The state maximum weekly benefit is adjusted annually by the Alabama Department of Labor, Workers' Compensation Division, Montgomery. If your calculated AWW results in a TTD rate that is higher than the state maximum for the year you were injured, your checks will be capped at that maximum amount.

How Long Does the Process Take?

Your employer should file the Wage Statement almost immediately after your injury is reported and approved. Under Ala. Code § 25-5-59(b), compensation begins on the fourth day of disability following a three-day waiting period. If your disability lasts for at least 21 days, compensation for those first three days is paid retroactively with your next installment. Additionally, if any installment is not paid without good cause within 30 days after it becomes due, a mandatory 15% penalty is added to the unpaid amount.

Frequently Asked Questions (FAQ)