New England’s Premier Insurance Defense Firm

Covid-19 Advisory: The Impact Of Layoffs For Employees Working Modified Or Light Duty As A Result Of The Economic Slowdown

| Mar 27, 2020



Disability is a two prong test and is not based solely on an economic factor. Claims after a layoff should be denied

In Massachusetts, the test for loss of earning capacity has two prongs: “[Incapacity for work] combines two elements: physical injury or harm to the body, a medical element, and a loss of earning capacity traceable to the physical injury, an economic element.”
Scheffler’s Case
, 419 Mass. 251, 256 (1994). The current loss of one’s job due to COVID-19 related layoffs is based on an economic event unrelated to the injury itself. Wage loss due to an economic slowdown is not “traceable to the physical injury” and therefore the second prong of the analysis is not satisfied. The employee should instead be advised to file for unemployment like all other employees negatively impacted by COVID-19. An insurer’s request for the employee to file for unemployment under § 36B is discussed further below.

There is existing Massachusetts case law addressing the impact of an economic depression on workers’ compensation
“The statute contemplates compensation for diminished capacity to earn wages, and the injured employee, in common with others, must bear the loss resulting entirely from business depression.”
Durney’s Case
, 222 Mass. 461, 462 (1916). Where an employee’s inability to work or his reduced earnings are due solely to labor market conditions, compensation is not warranted. See
Sulham’s Case
, 337 Mass. 586 (1958);
Akins’ Case
, 302 Mass. 562 (1939);
Hudson’s Case
, 244 Mass. 330 (1923). However, the case law indicates that an award of partial benefits is warranted where the employee’s inability to earn wages is the result of a combination of the physical disability and the unfavorable labor market conditions.

Claims for partial disability and unemployment: In any claim for partial disability the insurer can request the employee file for unemployment and if it is received, there is a dollar for dollar offset of any compensation benefits due
The case law does indicate that an award of partial benefits may be warranted if the employee’s inability to earn wages is the result of a physical disability and unfavorable labor market conditions.
Rival’s Case
, 8 Mass. App. Ct. 66 (1979). In our opinion, during a general layoff that affects a person on light duty or modified duty, the plaintiff bar will assert that the modified job is no longer “available“ and therefore you must pay maximum § 35 partial disability benefits. However, a general layoff is also considered to be an economic loss of wages—not a disability loss of wages. See cases cited above. Therefore, it would be appropriate for the employee to file for unemployment, which any self-insurer or worker’s compensation insurer can request the employee do pursuant to § 36B. Section 36B states that where there is a work capacity and the employee is claiming or receiving § 35, the insurer may request (in writing) that the employee file for unemployment. If the employee fails to do so within 60 days, the insurer may suspend weekly benefits. Workers’ compensation benefits are offset by unemployment benefits.

Legal obligations to pay partial disability via orders or agreements
: Once a layoff or loss of earnings occurs have the employee file for unemployment and use the dollar for dollar offset. If partial benefits are still due then adjust the partial accordingly to the actual wages earned.
Each case also depends on whether there is a continuing legal obligation to pay § 35 benefits to the particular employee (i.e., payment due under court order or approved agreement). In situations where you under a legal obligation to pay § 35 benefits, you must continue paying those benefits but the weekly amount may be altered. Where the employee is working a modified duty job, such benefits are calculated based on wages earned, and we are legally obligated to pay whatever the calculation comes out to, up to the maximum § 35 rate (which varies based on the employee’s AWW). In other words, our legal obligation to pay § 35 benefits remains unaltered—it is simply the weekly amount of § 35 that changes. In the current situation with modified-duty job loss due to COVID-19, an adjustment to the level of weekly § 35 benefits is warranted. If the injured worker was receiving § 35 based on actual earnings, and now the actual earnings are minimized, those weekly amounts should be adjusted according to what they are earning now and perhaps up to the maximum § 35 rate (if that is warranted by the calculation).

Claims from partial to total after a layoff
: These claims should be denied as they are based on an economic loss only. List “lack of disability” in the denial form.
In the current situation, these employees were receiving partial benefits and were capable of modified duty work last week, and now an outside economic factor is responsible for their inability to earn those wages, not the injury. Since nothing has changed medically, they would not be entitled to a change of benefits to § 34 total disability.

The 28 day rule and one year presumption
: If the employee returned to work after an injury and is let go within 28 days or leaves on their own and sends a certified letter to the employer/insurer that their disability from the injury renders them unable to perform the job, they
be restored to total disability benefits. Also any employee terminated (may include a lay off although this is not a termination) within one year of returning to work following an injury is presumed to have been terminated as a result of being unable to perform their job as a result of the injury – the burden of proof shifts to the insurer to prove that this was not the case.
However, if the employee has been
back to work for more than 28 days
and there was no loss of wages while working in the light/modified duty job (i.e., they were earning their full AWW), then there is no obligation to resume weekly benefits, and you can request that the employee file for unemployment benefits. Even if a partial disability is owed, the unemployment benefits are always higher than even maximum partial disability. The faster route for the employee to obtain wage replacement will be unemployment. They certainly would not be precluded from filing a claim for workers’ compensation, but there would be a dollar-for-dollar offset for any unemployment benefits against ongoing § 35 partial disability benefits. Hopefully, by the time the workers’ compensation case comes up, this crisis will have passed, and perhaps many of these people will be back to work in modified or regular duty jobs by that time.


The bright line distinction is that any wage loss must be the result of a physical injury. Wage loss resulting from economic conditions would not be compensable. But this is a nuanced, complex area of argument—that is mostly grey. When dealing with the inability of an employer to accommodate restrictions, or unavailability of modified work, or reduced hours, it appears a defense to temporary partial disability benefits exists based on general economic conditions. The case law analysis on this issue is as follows:

One of the factors external to the workplace injury which can affect a claimant’s employability is the economic environment. Theoretically, if the only reason that a claimant can’t secure employment, or finds work at less than his prior wages, is that a poor economy has limited opportunity for all, including uninjured workers, then his wage loss claim should fail, because the cause of the reduced injury is not the compensable injury. “… [T]he incapacity must result from a causal connection between the injury and the employment; and the right to benefits does not arise merely because of factors that are extrinsic to the physical status of the employee.”
Hansen v. Gordon
, 221 Conn. 29, 39–40, 602 A.2d 560 (1992).

19 Conn. Prac., Workers’ Compensation § 8:61. In a similar case,
Marino v. Cenveo/Craftman Litho
, Inc., 5448 CRB-5-09-3 (2010), the claimant returned to work with restrictions following a workplace injury, was then laid off, and his claim for partial benefits failed because the commissioner found the claimant was laid off for economic reasons, rather than because of injury. One of the takeaways from
is that the claimant was in fact laid off. Had the claimant not been laid off, the claim for partial benefits likely would have prevailed.

What seems clear is that a lay off will provide a cleaner more efficient avenue to unemployment benefits, and the fact of a layoff will also permit a judge/commissioner to deny a claim for partial benefits more easily than a case where the claimant remains “employed” but no work is available.

Rhode Island

In Rhode Island, if the employee is partially disabled and working light duty at their full wages but is then then laid off due to the COVID-19 outbreak, then the insurer/employer must pay temporary partial benefits under the workers’ compensation policy. Once liability is accepted by the insurer/employer either via a Memorandum of Agreement or a pretrial order, the burden shifts to the employer to show that the employee is no longer disabled. Thus, temporary partial disability benefits must be paid until a Suspension Agreement is signed by the employee or a court order is issued discontinuing the employee’s benefits.

New Hampshire

In New Hampshire, an employee that loses their light duty job due to a COVID-19 layoff should arguably be placed on diminished earning capacity (DEC) rate benefits. Presumably, an employee working a light duty job had a light duty work note from the treating physician (i.e. New Hampshire Worker’s Compensation form setting forth work restrictions) and was provided a modified/light duty job offer based on those work restrictions. In those circumstances, the claims representative likely filed a Memorandum of Payment with the New Hampshire DOL indicating that the employee’s total disability benefits were discontinued based on the modified/light duty job offer. If the employee is then laid off from the light duty job due to COVID-19 layoffs, arguably they should be place on DEC rate benefits. The employee still has work restrictions despite the economic downturn, and DEC is therefore the proper benefit rate. Typically, employee’s counsel fights for the employee to be reinstated to total disability benefits in any DEC case, but if the treating physician provided a work capacity, then we believe the DEC rate benefits are appropriate. In order to pay at the DEC rate, the insurer is required to file a Memorandum of Payment indicating that the employee’s benefits initiated from the day of layoff to the DEC rate.

Our recommendation that the DEC rate is the correct level of benefits in such circumstances is supported by the case law. The New Hampshire Supreme Court addressed this issue in
Appeal of Normand
, 137 N.H. 617 (1993). There, the employee injured his foot and could no longer work as a skidder operator. However, he was able to successfully return to work as a shear operator for two years. As a result of an economic decline in the logging business, he was laid off from that job but was offered a skidder operator job, which he was unable to perform due to the earlier injury. The Court found that both the phyiscal disability and economic conditions were responsible for his current unemployment, and therefore remanded the case to determine the correct level of benefits. In so finding, the Court reasoned, “In so far as [the claimant’s] lack of employment . . . was due to his injury, he is entitled to compensation. In so far as it was due to general business conditions, he is not. . . . How much his idleness was due to injury and how much to business conditions must be determined and compensation given only for such idleness as was due to disability.”
. at 620.


In Vermont, generally if an employee is working modified duty and is receiving partial disability benefits and is then laid off for an economic reason, the insurer will still need to pay partial disability benefits. The reasoning is that the State is not going to let the employer walk away from the employee. Some employees may request that total disability benefits be reinstated, but such requests should be denied because the employee had established a clear earning capacity through the modified duty work. The inability to work the modified duty job would be due to an economic downturn. Where unemployment is the result of an economically related lay-off and has nothing to do with the work injury, benefits are not warranted. See
M.D. v. Dew Constr
., 2007 VT Wrk. Comp. LEXIS 29 (2007);
Pfalzer v. Pollution Solutions of Vermont
, 2001 VT Wrk. Comp. LEXIS 92 (2001). However, where the unemployment is due to a combination of the general economic downturn and the physical disability of the work injury, then partial benefits are warranted.


Generally, a worker is entitled to compensation for partial incapacity under Me. Rev. Stat. Ann. tit. 39, § 55 if his capacity to earn has been
impaired as a result of a work-related injury. Even if an employee is not totally disabled in the medical sense, he may be entitled to workers’ compensation benefits if he is unable to find work because of his injury. In such cases, the employee bears the burden of establishing causation between his partial medical disability and his inability to obtain employment.

The 1982 case of
Hardy v. Hardy’s Trailer Sales, Inc.
, 448 A.2d 895 (1982) addressed a claimant’s burden of proof where he had post-injury employment but was laid off for reasons unrelated to the injury. The Court held that what the employee must show depends on whether he returned to work with or without a diminution in earning capacity. If he returned to work at his full wages, he may establish his entitlement to further compensation by demonstrating a causal relationship between his inability to find work and his work-related physical limitation. Id. at 898. On the other hand, where the employee returned to work with a diminished earning capacity, the employee is entitled to partial compensation if he is subsequently laid off. Id. at 898-899; see also
Mailman v. Colonial Acres Nursing Home
, 420 A.2d 217 (1980).

Thus, under the reasoning of
, if an employee working light duty with a diminished earning capacity is subsequently laid off due to COVID-19, the employee will be entitled to partial compensation. If the employee was working light duty without a diminished earning capacity (i.e., at the full pre-injury wage rate), then he must show that the inability to work is at least partially due to the injury. If the inability to work due solely to general economic downturn unrelated to the injury, then compensation is not warranted. See
Rugan v. Dole Co.
, 396 A.2d 1003 (1979);
Hopkins v. Verso Paper
, 2019 ME Wrk. Comp. LEXIS 98 (2019) (“When an employee’s inability to earn is due to factors other than the employee’s work-related physical limitations, such as a ‘general unavailability of jobs’ in the community due to economic circumstances, the employee may not be entitled to an award of partial incapacity benefits.”).