Dr. Schewitz’s Employment Contract
David Schewitz, MD, entered into a five-year employment contract with a hospital. During the first two years of the contract - December 1, 2012 through November 30, 2014 - Dr. Schewitz was to be paid a high base salary. For the next three years - December 1, 2014 through November 30, 2017- however, Dr. Schewitz would keep his salary subject to reduction if his productivity fell below a stated baseline in any quarter during that time period. During the first two years of employment, Dr. Schewitz received the correct base salary. At the start of the third year, however, the hospital reduced Dr. Schewitz’s salary based on his productivity during the last quarter of the prior year.
Dr. Schewitz’s employer wrote him and gave the option to retroactively increase his pay to the higher initial base salary with the understanding that the hospital could withhold paychecks to reimburse itself for low productivity. Dr. Schewitz responded in writing and chose to keep his higher base salary, retroactively, to December 1, 2014. The employment contract did not permit the hospital to recalculate Dr. Schewitz’s salary on the first day of the third year nor adjust his salary based on his productivity during the second year of the term.
Dr. Schewitz’s Disability
During the beginning of the third year - on February 3, 2014 - Dr. Schewitz became disabled due to a serious eye injury. He suffered from vision loss, a macular hole in his right eye, and a retinal tear in both eyes. Dr. Schewitz filed a disability claim with Aetna, which was approved. When Aetna contacted Dr. Schewitz’s employer to confirm his predisability earnings, it was provided Dr. Schewitz’s reduced salary.
The employer informed Aetna that Dr. Schewitz’s base salary was reset at his request, he was not entitled to that pay amount, and the higher salary was not reflective of his actual salary at the time of leave. Accordingly, Aetna based Dr. Schewitz’ disability benefits on his reduced salary and not the higher initial base salary he had at the time he became disabled.
The Court’s Decision
Under Aetna’s disability policy, Dr. Schewitz was entitled to 60 percent of his predisability earnings in the event he became disabled. According to the disability insurance contract, predisability were defined as the amount of salary or wages Dr. Schewitz was receiving from his employer the day before disability began, calculated on a monthly basis. If Dr. Schewitz was paid on an annual contract basis, the annual salary would be divided by twelve.
The Court found that Dr. Schewitz’s employment contract entitled him to the higher base salary through at least the first quarter of the third year of the contract term. It further noted the employer could only reduce Dr. Schewitz’s salary if his productivity dipped during any quarter in the last three years of the five year term. In other words, at the time Dr. Schewitz became disabled his annual salary was the higher initial base.
The court ordered Aetna to pay Dr. Schewitz’s long term disability benefits going forward based on his initial higher base salary. Aetna also had to pay Dr. Schewitz back benefits for the difference he was owed.
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