Answer to Question 1
Whole-Person Theory
The whole-person theory is the simplest and most straightforward of the theories for dealing with permanent partial disability cases. Once it has been determined that an injured worker's capabilities have been permanently impaired to some extent, this theory is applied like a subtraction problem. What the worker can do after recuperating from the injury is determined and subtracted from what he or she could do before the accident. Factors such as age, education, and occupation are not considered.
Wage-Loss Theory
The wage-loss theory requires a determination of how much the employee could have earned had the injury not occurred. The wages actually being earned are subtracted from what could have been earned, and the employee is awarded a percentage of the difference. No consideration is given to the extent or degree of disability. The only consideration is loss of actual wages.
Loss of Wage-Earning Capacity Theory
The most complex of the theories for handling permanent partial disability cases is the loss of wage-earning capacity theory, because it is based not just on what the employee earned at the time of the accident, but also on what he or she might have earned in the future. Making such a determination is obviously a subjective undertaking. Factors considered include past job performance, education, age, gender, and advancement potential at the time of the accident, among others. Once future earning capacity has been determined, the extent to which it has been impaired is estimated, and the employee is awarded a percentage of the difference. Some states prescribe maximum amounts of compensation, and maximum periods within which it can be collected.
Answer to Question 2
A person who is on the company's payroll, receives benefits, and has a supervisor is clearly an employee. However, a person who accepts a service contract to perform a specific task or set of tasks and is not directly supervised by the company is not considered an employee. Although definitions vary from state to state, there are common characteristics. In all definitions, the workers must receive some form of remuneration for work done, and the employer must benefit from this work. Also, the employer must supervise and direct the work, both process and result. These factorssupervision and directionare what set independent contractors apart from employees and exclude them from coverage. Employers who use independent contractors sometimes require the contractors to show proof of having their own workers' compensation insurance.
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