What is a Loss of Wage-Earning Capacity?
Loss of wage-earning capacity determinations are made when an employee’s job-related disability prevents him or her from earning wages comparable to those earned before the injury. More specifically, if a claimant returns to work earning less than the current pay rate for the date of injury grade and step, OWCP pays a percentage of the difference. This is called a loss of wage-earning capacity (LWEC) determination This can be for full time employment when the job pays less than the DOI job or when the claimant works less than full time.
How the Loss of Wage-Earning Capacity Is Calculated
Employees who can still perform some work, even if it differs from their original job, are considered partially disabled. Under FECA, these employees are entitled to compensation equal to 66⅔% or 75% (depending on dependent status) of the difference between their original monthly wage and their current wage-earning capacity.
The OWCP uses LWEC determinations to calculate these compensation amounts accurately.
When Is a LWEC Determination Needed?
A loss of wage-earning capacity (LWEC) determination is typically required in these situations:
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The employee cannot return to their pre-injury position but accepts a new job that pays less.
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The claimant’s medical condition is stable and they’ve maintained a new position for over 60 days.
Once issued by DOL, an LWEC payment can continue indefinitely — even after retirement — based on the established compensation rate. Therefore, it’s critical for agencies to offer claimants jobs that maximize medical restrictions and salary, reducing long-term compensation payments.
Why Job Offers Matter in Loss of Wage Decisions
Agencies must carefully design job offers that align with both the claimant’s medical capacity and agency needs. A poorly structured job offer may lead to higher long-term costs if compensation payments continue.
Even if the claimant retires or leaves the position, they may still elect to receive OWCP compensation. Since these payments are non-taxable, they can sometimes exceed what a claimant would receive from a federal pension — making job offer accuracy vital.
When a Job Offer Isn’t Possible: The Role of Vocational Rehabilitation
In some cases, the agency may be unable to provide a job offer. When this happens, the claimant may be placed in OWCP’s Vocational Rehabilitation Program.
If rehabilitation results in new employment, OWCP issues an LWEC decision based on those earnings. However, if job placement efforts fail, the agency will issue a Constructed Loss of Wage-Earning Capacity (CWEC) decision.
What Is a Constructed Loss of Wage-Earning Capacity (CWEC)?
A Constructed LWEC or CWEC applies when the claimant can work but hasn’t found a job after completing vocational rehabilitation.
In this case, OWCP determines potential earnings based on local job market data. The vocational rehabilitation counselor identifies at least two positions available in sufficient numbers that match the claimant’s skills and medical capacity.
If the claimant has moved and the local economy lacks sufficient job options, OWCP may use data from the claimant’s date-of-injury area instead.
The Shadrick Formula: How Compensation Is Calculated
Regardless of whether a case involves LWEC or CWEC, OWCP applies the Shadrick Formula to calculate the loss of wage percentage and compensation owed. This method is outlined in the FECA Procedure Manual, Chapter 2-0815.
When Can a Loss of Wage Decision Be Changed?
Once established, an LWEC or CWEC rating remains in effect unless one of the following occurs:
- Error in the original rating — New evidence shows the LWEC was issued incorrectly.
- Medical condition change — The claimant’s condition worsens or improves substantially.
- Vocational rehabilitation — The claimant has been retrained or self-rehabilitated into a new role.
Outside these situations, the rating remains fixed — which is why agencies must carefully evaluate job offers before issuing them.
The Agency’s Role in Managing Loss of Wage Cases
A Workers’ Compensation Specialist (WCS) should continually manage claims to ensure claimants achieve sustainable wage-earning capacity. Whether through agency reemployment or vocational rehabilitation, the goal remains the same — helping employees return to productive work while minimizing compensation costs.
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Disclaimer: This blog post is for informational purposes only and should not be considered legal advice. Please consult your general counsel for specific legal guidance. Frasco investigators are licensed, and our operations comply with US industry, federal, state, and local laws.