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Merit review WC071/18

Findings on review

1. The following are findings made by the State Insurance Regulatory Authority ("the Authority") on review.

2. The amount of the Worker’s pre-injury average weekly earnings ("PIAWE") is $1,564 .71.

Recommendation based on findings

3. The following recommendation made by the Authority is binding on the Insurer and must be given effect to by the Insurer in accordance with section 44BB(3)(g) of the Workers Compensation Act 1987 ("the 1987 Act").

4. The Insurer is to determine the Worker’s entitlement to weekly payments of compensation in accordance with the above finding from May 2018.

Background

5. The Worker sustained an injury in the course of their employment with the pre-injury employer. The Insurer accepts the date of injury as August 2017.

6. The Worker has been in receipt of weekly payments of compensation from the Insurer.

7. In May 2018, the Insurer made a work capacity decision in respect to the amount of the Worker’s PIAWE. It determined the Worker’s PIAWE in the amount of $1,344 .86.

8. The Worker applied for internal review of the Insurer's decision regarding their PIAWE. On internal review, dated July 2018, the Insurer determined the Worker’s PIAWE to be in the amount of $1,564 .71.

9. The Worker made an application for merit review by the Authority. The application was received in July 2018. The application has been made within 30 days after the Worker received notice of the internal

Legislation

10. The legislative framework governing work capacity decisions and reviews is contained in the:

  • Workers Compensation Act 1987 (the 1987 Act);
  • Workplace Injury Management and Workers Compensation Act 1998 (the 1998 Act);
  • Workers Compensation Regulation 2016 (the Regulation).

11. Section 43 of the 1987 Act describes a "work capacity decision".

12. Section 44BB of the 1987 Act provides for merit review of a work capacity decision of the Insurer, by the Authority.

Submissions

13. In the application for merit review, the Worker makes the following submissions:

  • The PIAWE review outcome from July 2018 is not including their ordinary earnings for the past 12 months prior to the injury date as defined under section 44C and 44E of the 1987 Act.
  • The original work capacity includes their earnings as a part time employee at the pre-injury employer but they do not want to include their earnings as a sole trader. The injury affected their capacity to work at both the pre-injury employer and as a self-employed contractor, and both of these were their ordinary earnings.

14. In the reply to the application for merit review, the Insurer provides a summary of its internal review decision and its method in determining the Worker’s PIAWE at $1,564.71. The Insurer also makes the following submissions:

  • In support of their request for internal review, the Worker has supplied a number of tax invoices from Sole-Trader Business (STB), seeking inclusion of these earnings in the calculation of their PIAWE.
  • Schedule 3 of the 1987 provides the criteria for calculating PIAWE for workers who were employed by 2 or more employers at the time of their injury.
  • For Schedule 3 to apply to the calculation of PIAWE, the Worker’s relationship with STB must be established to be that of a worker and an employer.
  • In their email to iCare dated 17 July 2018, the Worker provided responses to several questions posed in relation to their role with STB. These responses included confirmation that they operate as a sole trader with STB.
  • Based on the Worker’s advice, in relation to their role with STB, the Worker is not a worker. Accordingly, Schedule 3 does not apply when calculating the Worker’s PIAWE.
  • Accordingly, the Worker’s PIAWE is assessed to be $1,564.71 based on their employment with the pre-injury employer, noting that the presently available evidence does not support a finding of concurrent employment.
  • In the alternative, the Insurer submits that should it be accepted that the Worker is a worker in relation to their role with STB, it is submitted that PIAWE should be calculated in accordance with Item 8 of Schedule 3 of the Act. This is likely to result in the Worker’s PIAWE being capped at the statutory maximum provided by section 34 of the Act.

15. In August 2018, the Authority made a request for information to the parties for any contracts of employment or fair work instruments applicable to the Worker’s employment with the pre-injury employer. On x and x August 2018 the parties provided information in response to the Authority's request.

16. In August 2018, the Insurer made a number of similar submissions to that above regarding the Worker’s secondary employment with Sole-Trader Business and the following further submissions:

  • Reference is made to a contract of employment with the pre-injury employer dated November 2013. Page 9 of this contract, titled 'Schedule 1-Annual Remuneration' provides that, at the time it was written, the Worker’s annual salary was $104,853.00, pro-rata to $83,882.00 on the basis that they were employed on a part-time basis.
  • It is submitted that given the dated information in this document, it is of no relevance when reviewing the Worker’s earnings in the relevant period prior to the injury. The information detailed in the contract does not accurately capture the hours performed by the Worker or their earnings during the relevant period.
  • It is submitted that the pay history for the fortnights ending August 2016 to July 2017 relied upon for the purposes of the PIAWE assessment provide a more accurate representation of the hours worked and earnings in the relevant period prior to the Worker’s injury, and that the relevant PIAWE remains $1,564.71.

Documents considered

17. The documents I have considered in this review are those listed in, and attached to, the application for merit review, the Insurer's reply and any further information provided by the parties.

18. I am satisfied that both parties have had the opportunity to respond to the other party's submissions and that the information provided has been exchanged between the parties.

Reasons

Nature of merit review

19. This matter involves a merit review of the Insurer's work capacity decision in accordance with section 44BB(1)(b) of the 1987 Act.

20. The review is not a review of the Insurer's processes in making the work capacity decision and/or the internal review decision. The review requires that I consider all of the information before me substantively on its merits and make findings and recommendations that, in light of the information before me, are most correct and preferable.

Pre-injury Average Weekly Earnings

21. Pre-injury Average Weekly Earnings (PIAWE) is defined generally under section 44C(1) of the 1987 Act.

22. Further subsections under section 44C relate to workers in special circumstances. Section 44C(4) of the 1987 Act provides that "in relation to a worker of a class referred to in Column 2 of an item in Schedule 3, "pre-injury average weekly earnings" means the amount determined in accordance with Column 3 of that item, expressed as a weekly sum". On the main, the class of workers referred to in Column 2 of an item in Schedule 3 are workers "employed by 2 or more employers".

23. The Worker submits that their PIAWE should be determined under Schedule 3 of the 1987 Act, taking into account their earnings from both their employment with the pre-injury employer and their earnings from their self-employed work with Sole-Trader Business (STB).

They submit that these both made up their 'ordinary earnings' before the injury and the injury has affected their ability to work in both roles.

24. The Insurer determined the Worker’s PIAWE under section 44C(1) of the 1987 Act having regard only to their employment with the pre-injury employer . As outlined above in the submissions made by the Insurer, the Insurer does not consider the Worker was an employee in their role with STB but rather that they operated as a sole trader. It submits that the Worker’s PIAWE therefore cannot be determined under Schedule 3 of the 1987 Act as this schedule provides the criteria for calculating PIAWE for workers who were employed by 2 or more employers at the time of their injury.

25. I acknowledge the Worker’s submissions and that they were in receipt of earnings from both their work with the pre-injury employer and STB prior to their injury. I also acknowledge the consultancy agreements, numerous invoices, correspondence in relation to work and income information from STB, submitted by the Worker. However as noted above, for the Worker’s earnings from STB to be considered when determining their PIAWE, their PIAWE must be determined under Schedule 3 of the 1987 Act and they must be a class of worker referred to in Column 2 of that schedule. To reiterate, they must be a worker "employed by 2 or more employers".

26. In an email response to Insurer B dated July 2018, the Worker advises that they operated as a sole trader with STB and that they did not have a workers' compensation policy.

27. The information before me, including the Worker’s submissions, confirm that the Worker was not employed by STB, rather they operated as a sole trader. STB was therefore not an "employer" of the Worker.  I am not satisfied an employment relationship existed between these parties and the information before me does not support such a relationship can be deemed to  have existed.

28. I find that the Worker was not a worker "employed by 2 or more employers" at the time of their injury for the purposes of Schedule 3 of the 1987 Act. the Worker is therefore not a worker within the class of workers identified in Schedule 3 of the 1987 Act. Schedule 3 of the 1987 Act does not apply to the determination of their PIAWE.

29. Given that I have found that the Worker only had one employer at the time of their injury, being the pre-injury employer, their PIAWE is to be determined pursuant to section 44C(1) of the 1987 Act with reference to that employer.

Calculation of PIAWE

30. Section 44C(1) provides:

(1)     In this Division, pre-injury average weekly earnings, in respect of a relevant period in relation to a worker, means the sum of:

(a)     the average of the worker's ordinary earnings during the relevant period (excluding any week during which the worker did not actually work and was not on paid leave) expressed as a weekly sum, and

(b) any overtime and shift allowance payment that is permitted to be included under this section

{but only for the purposes of the calculation of weekly payments payable in the first 52 weeks for which weekly payments are payable).

31. In order to calculate the Worker’s PIAWE, section 44C(1)(a) of the 1987 Act requires that I calculate the average of the Worker’s 'ordinary earnings' during the 'relevant period' (excluding any week during which they did not actually work and was not on paid leave) expressed as a weekly sum.

The relevant period

32. The 'relevant period' is defined by section 44D of the 1987 Act as follows:

(1)    Subject to this section, a reference to the relevant period in relation to pre-injury average weekly earnings of a worker is a reference to:

(a)    in the case of a worker who has been continuously employed by the same employer for the period of 52 weeks immediately before the injury, that period of 52 weeks, or

(b)      in the case of a worker who has been continuously employed by the same employer for less than 52 weeks immediately before the injury, the period of continuous employment by that employer.

(3) If, during the period of 52 weeks immediately before the injury, a worker:

(a) is promoted, or

(b) is appointed to a different position,

(otherwise than on a temporary basis) and, as a result, the worker's ordinary earnings are increased, the relevant period in relation to the worker begins on the day on which the promotion or appointment takes effect.

33. Before me, I have a contract of employment between the pre-injury employer and the Worker dated November 2013. I also have a payroll report from the pre-injury employer dated April 2018, for the period August 2016 to August 2017. I am satisfied on this information that the Worker was continuously employed by the pre-injury employer for over 52 weeks immediately before their injury. There is no information to indicate they were promoted or appointed to a new position during this period.

34. I am satisfied that the 'relevant period' is 52 weeks immediately before the injury. That is August 2016 to July 2017.

Ordinary earnings

35. 'Ordinary earnings' are defined by section 44E of the 1987 Act as follows:

(1)    Subject to this section, in relation to pre-injury average weekly earnings, the ordinary earnings of a worker in relation to a week during the relevant period are:

(a)    if the worker's base rate of pay is calculated on the basis of ordinary hours worked, the sum of the following amounts:

(i}          the worker's earnings calculated at that rate for ordinary hours in that week during which the worker worked or was on paid leave,

(ii}         amounts paid or payable as piece rates or commissions in respect of that week,

(iii}        the monetary value of non-pecuniary benefits provided in respect of that week, or

(b}       in any other case, the sum of the  following amounts:

{i)         the actual earnings paid or payable to the worker in respect of that week,

(ii}         amounts paid or payable as piece rates or commissions in respect of that week,

{iii}        the monetary value of non-pecuniary benefits provided in respect of that week.

(2) A reference to ordinary earnings does not include a reference to any employer superannuation contribution.

36. Section 44E of the 1987 Act requires that the Worker’s 'ordinary earnings' be calculated at the 'base rate of pay' for 'ordinary hours of work' in any week during which they worked or was on paid leave.

37. The Worker’s payroll report from the pre-injury employer indicates that they worked or were on paid leave in all 52 weeks of the relevant period (August 2016 to July 2017).

38. The payroll report before me commenced from the fortnight ending August 2016. This fortnight includes a few days falling outside of the relevant period.

39. Excluding the fortnight ending August 2016, I find that the Worker’s 'ordinary earnings' should be averaged based on 50 weeks immediately before the injury. Base Rate of Pay

40. 'Base rate of pay' is defined by section 44G of the 1987 Act as follows:

(1) In relation to pre-injury average weekly earnings and  current  weekly earnings,  a reference to a base rate of pay is a reference  to the rate of  pay payable  to a  worker for his or their ordinary  hours of  work but  does not  include any of  the following  amounts (referred  to  in this  Division  as base rate of  pay exclusions):

(a) incentive based payments or bonuses,

(b) loadings,

(c) monetary allowances,

(d) piece rates or commissions,

(e) overtime or shift allowances,

(f) any separately identifiable amount not referred to in paragraphs (a) to (e).

41. the Worker’s payroll report indicates that their hourly rate throughout the relevant period was:

  • $62.625 from August 2016 to November 2016
  • $63.564 from November 2016 to May 2017
  • $64.517 from May 2017 to July 2017.

42. The Worker was employed on a part-time basis with the pre-injury employer. I do not have their pay slips before me and the payroll report does not indicate that they earned any additional amounts than their 'grade step ordinary pay' in the relevant period, for the purpose of 'base rate of pay exclusions under section 44G(1) of the 1987 Act.

43. I find that the Worker’s 'base rate of pay' in the relevant period is as outlined above at paragraph 41.

Ordinary hours of work

44. 'Ordinary hours of work' are defined in section 44H of the 1987 Act as:

In relation to pre-injury average weekly earnings and current weekly earnings, the ordinary hours of work:

(a) in the case of a worker to whom a fair work instrument applies are:

(i) if the ordinary hours of work in relation to a week are agreed or determined in accordance with a fair work instrument between the worker and the employer-those hours, or

(ii) in any other case, the worker's average weekly hours (excluding any week during which the worker did not actually work and was not on paid leave) during the relevant period, or

(b) in the case of a worker to whom a fair work instrument does not apply:

(i) if the ordinary hours of work are agreed between the worker and the employer, those hours, or

(ii) in any other case, the worker's average weekly hours (excluding any week during which the worker did not actually work and was not on paid leave) during the relevant period.

45. In response to a request from the Authority for any fair work instruments applicable to the Worker’s employment, the Insurer has submitted a copy of the Pre-injury Employer Staff Agreement 2014.

46. The Worker’s contract of employment states that their employment is on a "continuing basis" and that they "will initially be employed on a part-time (0.8 of full time) basis". Specifically, in relation to their hours of work, it states: "you are required to work an average of at least 28 hours per week".

47. Under a heading of Industrial Instrument in the Worker’s contract, it is noted "as at the date this contract was issued, the Pre-injury Employer Support Staff Agreement 2010 will apply to your position after the commencement of your employment". I note that this is a different industrial instrument to that submitted by the Insurer. Attached to the Worker’s contract however is a letter to them from the pre-injury employer dated December 2014 in relation to a variation of their position to Business Analyst. Based on this letter, I am satisfied that as at the date of their injury, the fair work instrument applicable to the Worker’s employment was the Pre-injury Employer Professional Staff Agreement 2014 ("Fair Work Instrument").

48. I am satisfied that a fair work instrument applied to the Worker’s employment and that this instrument regulated some of the conditions of their employment.

49. The information above indicates that the Worker’s "ordinary hours of work" were agreed or determined, in accordance with a fair work instrument, to be "an average of at least (emphasis added) 28 hours per week". The payroll report before me outlines the Worker’s hours of work in the relevant period. It shows significant fluctuation of hours worked per week however a minimum of 28 hours of work (with the exception of a few weeks). the Worker did not appear to have specific hours of work, rather an agreement that they work at least 28 hours per week.

50. Given that a fair work instrument applied and the Worker’s hours of work were not "agreed or determined...between the worker and the employer", I am satisfied the Worker’s PIAWE should be calculated in accordance with section 44H(a)(ii) of the 1987 Act. That is their average weekly hours during the relevant period.

Calculation of ordinary earnings

51. Given that the Worker’s 'base rate of pay' was calculated on the basis of 'ordinary hours of work' and both these amounts have been established, the Worker’s 'ordinary earnings' can be determined in accordance with section 44E(1)(a) of the 1987 Act.

52. Based on the payroll report before me, the Worker worked a total of the following 'ordinary hours of work' on the different rates of pay, outlined above.

  • 336 hours at $62.625 = $21, 042.00 {August 2016 to November 2016)
  • 644 hours at $63.564 = $40,935.216 (November 2016 to May 2017)
  • 252 hours at $64.517 = $16,258.284 (May 2017 to July 2017).

53. The total of the Worker’s base rate of pay for the ordinary hours of work during the relevant period is therefore $78,235.50 [$21, 042.00 + $40,935.216 + $16,258.284].

54. The information before me indicates that the Worker did not receive any piece rates, commissions or non-pecuniary benefits during the relevant period that would be relevant to the calculation of their 'ordinary earnings' pursuant to section 44E(1)(a)(ii)&(iii) of the 1987 Act.

55. The Worker’s average ordinary earnings for the relevant period is therefore $1,564.71 per week ($78,235.50 divided by 50 weeks).

56. I note that Section 44C(5) of the 1987 Act provides:

(5) An overtime and shift allowance payment is permitted to be included in the calculation of pre-injury average weekly earnings (but only for the purposes of the calculation of weekly  payments  payable in the first 52  weeks for which  weekly  payments are payable) if:

(a)   the worker worked paid overtime or carried out work that attracted a shift allowance during the relevant period, and

(b)   the worker would, but for the worker's injury, have been likely, at any time during that 52 week period, to have worked paid overtime or carried out work that attracted a shift allowance.

57. The Worker’s payroll report indicates that they did not receive any amounts for overtime and shift allowances in the relevant period. Overtime and shift allowances are therefore not relevant to the calculation of their PIAWE.

PIAWE finding

58. I find that the Worker’s PIAWE is $1,564.71 in accordance with section 44C(1) of the 1987 Act.

59. The Insurer is to determine the Worker’s entitlement to weekly payments of compensation in accordance with the above finding from May 2018 (date of the work capacity decision).

60. The Insurer is to pay the Worker the difference between the amount of compensation he was paid and the amount of compensation he should have been paid (subject to any notice period required under section 54 of the 1987 Act) based on the above finding.

61. I note that the amount of the Worker’s PIAWE should be varied by the Insurer on each review date after they became entitled to weekly payments in respect of the injury, in accordance with the indexation provisions under section 82A of the 1987 Act.

Merit Review Service
Delegate of the State Insurance Regulatory Authority