Let’s say there are two commercial fishermen. Both earned the same amount of money, and both were put out of work by the oil spill.
After Fisherman A realized he wouldn’t be able to make any money fishing, he went out and scraped up another job to tide him over.
Fisherman B had no such luck. He had to move in with family, waiting for better times to return.
Under the rules for distributing $20 billion in BP claims money, anything that Fisherman A earned by hustling to land another job will be deducted from his total payout.
The idea is that both fishermen will bank the same amount of money over the spill period, whether it comes from BP or some other source.
The policy of deducting other incomes from claims payouts could tempt those affected by the spill not to seek work, said Ken Jacobs, chairman for the Center for Labor Research and Education at the University of California-Berkeley.
“If I’m in a situation where I don’t have a job, and I’m going out hustling day-by-day to keep going, why I should do that versus some other activity is unclear,” Jacobs said. “It’s hard to see how there’s not a work disincentive there.”
Ken Feinberg, who is in charge of the spill claims process — known formally as the Gulf Coast Claims Facility — said that people idled by the spill have plenty of desire and incentive to hunt for jobs.
Feinberg noted specifically their need for a steady cash flow and their concerns about the claims process or when they might receive compensation.
“I don’t think people will say, ‘I think I’ll sit home because if I go to work at the furniture store I’m working for nothing,'” he said. “People think, ‘I don’t like sitting at home. That’s not the way I was brought up.'”
On June 16, President Barack Obama and BP PLC officials agreed that the company would put $20 billion over four years into a fund that would cover spill damages, including claims.
They also agreed that Feinberg, who ran the victims compensation fund for the Sept. 11, 2001, terrorist attacks, would oversee claims from individuals and businesses with no interference from either the company or the government.
BP, which owns the majority stake in the well that began spilling April 20, made its first deposit into the fund Aug. 9.
Feinberg’s facility will take over on Monday.
In addition to earnings from other jobs, Feinberg said that he would deduct anything earned from unemployment insurance, other government benefits or private insurance from claims payments. Charitable gifts — such those from a food bank or money from a church — will not be factored.
Orange Beach Mayor Tony Kennon said he believes that Feinberg’s policy of deducting other earnings is fair, but he said it is a “conundrum.”
“Some folks didn’t want to take the chance of not getting paid, so they went out to find another job, while other folks get rewarded for sitting at home,” he said.
“But I think BP should be held responsible for the level of income we would have made, and other earnings should be taken into account,” he said.
