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Merit review WC072/18

Findings on review

1. The following is the finding of the Authority on review and it is to be the basis of a review decision by the Insurer.

2. The Worker’s pre-injury average weekly earnings (PIAWE) are $1,615.02 for the first 52 weeks that weekly payments are payable.

Recommendations based on findings

3. The Insurer is to calculate the Worker’s entitlement to weekly payments of compensation for any week in which they were entitled to such payments in accordance with my finding above.

4. This recommendation is binding on the Insurer in accordance with section 44BB(3)(g) of the 1987 Act.

Background

5. The Worker sustained a left elbow injury while working as a store person with the Supermarket Group. The accepted date of injury is January 2018.

6. In March 2018, the Insurer made several work capacity decisions, including a determination that the amount of the Worker’s pre-injury average weekly earnings (PIAWE) are $1,638.68.

7. In June 2018, the Insurer undertook an internal review. It again determined that the amount of the Worker’s PIAWE are $1,638.68.

8. The Worker submitted an application seeking a merit review of the Insurer’s decision about the amount of their PIAWE which was received by the Authority in June 2018. I am satisfied that the application was made within time, pursuant to section 44BB(3)(a) of the 1987 Act. The application has been made in the form approved by the Authority.

Legislation

9. 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).

10. Section 43 of the 1987 Act describes a “work capacity decision”.

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

Submissions

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

  • Not all of their overtime was used to average their earnings.
  • The Insurer’s calculation is low compared to the average they did using the same formula.

13. In reply, the Insurer makes the following submissions:

  • Overtime was calculated on the basis of 37 weeks. The remaining weeks during the relevant period were excluded due to leave.
  • Other items excluded “for verification” were: “401 – full income tax”, “3300 – meal allowance group 2”, “3559 – boots reimbursement” and “8023 – LUCRF plus pre tax”.

Documents considered

14. 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.

15. 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

PIAWE

16. “Pre-Injury Average Weekly Earnings” (PIAWE) are defined in section 44C of the 1987 Act as follows:

(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).

17. The “relevant period” is defined by section 44D of the 1987 Act:

(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.

18. “Ordinary earnings” are defined by section 44E of the 1987 Act as:

(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.

19. “Base rate of pay” is defined by section 44G of the 1987 Act as:

(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 their or her 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).

20. Pursuant to section 44C of the 1987 Act, pre-injury average weekly earnings in respect of a “relevant period” are the sum of:

a) 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, and

b) Any overtime and shift allowance payments that are permitted to be included (but only for the purposes of the calculation of weekly payments payable in the first 52 weeks for which weekly payments are payable).

21. The information before me indicates that the Worker has been employed with the Supermarket Group since 2001. I am satisfied that the Worker was continuously employed for the purposes of the Act for the 52 weeks immediately prior to their injury in January 2018 and I find this to be the relevant period for the purposes of section 44D of the 1987 Act (January 2017 –January 2018).

Average of the Worker’s ordinary earnings – section 44C(1)(a) of the 1987 Act

22. The Insurer initially submitted that various weeks were excluded from the relevant period as the Worker was on leave. The Worker’s payslips indicate that they worked or was on paid leave during each of the 52 weeks during the relevant period. Therefore, the Authority wrote to the Worker and the Insurer advising that based on this information, it proposed to include each of the 52 weeks in the calculation of their PIAWE. In August 2018, the Insurer advised that after reviewing the payslips (which were not available at the time of their review) it agreed that “many of the weeks [the Insurer] excluded in [their] calculation can be included”.

23. I am satisfied based on the payslips before me that the Worker worked or was on paid leave for each of the 52 weeks during the relevant period and therefore that their ordinary earnings should be averaged for the whole 52 week period pursuant to 44C(1)(a) of the 1987 Act.

24. The Insurer found that the Worker worked 41.54 ordinary hours per week. As noted above, the Insurer indicated that it did not have the Worker’s payslips for the relevant period at the time of making its decision.

25. I do not have the Worker’s contract of employment before me. However, in the Worker’s Injury Claim Form completed in February 2018, the Worker indicates that prior to their injury, they worked 40 standard hours (excluding overtime) each week. Their payslips also consistently indicate that their “standard working hours” were 40 per week and that they were paid a base rate of pay for 40 “ordinary hours” per week. I am therefore satisfied that the Worker’s base rate of pay is calculated based on their 40 ordinary hours of work per week and that their ordinary earnings should be calculated pursuant to section 44E(1)(a) of the 1987 Act.

26. The Worker’s payslips indicate that their base hourly rate for ordinary hours of work increased during the relevant period: from $30.3880 to $31.1478 in the week beginning February 2017 and to $31.9265 in the week beginning August 2017. There is no indication on the information before me that these increases were because of any promotion or appointment to a different potion that would support an application of section 44D(3) of the 1987 Act. the Worker received a total of: ($30.3880 x 40 hours x 3 weeks) + ($31.1478 x 40 hours x 25 weeks) + ($31.9265 x 40 hours x 24 weeks) = $65,443.80 for their base 40 hours of work during the relevant period.

27. Pursuant to section 44G of the 1987 Act various amount are excluded from a worker’s “base rate of pay” and therefore are excluded from the calculation of ordinary earnings under section 44E(1)(a)(i) of the 1987 Act.

28. The Worker’s payslips indicate that they received payments for annual leave loading, “Meal Allowance Group 2”, “boots reimbursement”, workers compensation make up pay, overtime and a shift allowance for working public holidays during the relevant period.

29. The Worker’s payslips indicate that amounts paid to them for annual leave loading were an additional amount paid (25 % of their base hourly rate of pay) for each hour of leave that they took in any given pay period. These amounts are not part of the rate of pay payable for the Worker’s ordinary hours of work. Rather, an additional amount payable based on their leave entitlements. I am therefore satisfied that amounts paid as annual leave loading should be excluded from the calculation of the Worker’s ordinary earnings pursuant to section 44G(1)(b) of the 1987 Act.

30. Further, I consider that these amounts would nonetheless be excluded as “separately identifiable amounts” pursuant to section 44G(1)(f) of the 1987 Act.

31. I also find that amounts for “Meal Allowance Group 2” should be excluded. Whilst I unfortunately do not have any document such as an employment agreement or applicable award before me that describe the nature of these payments, the Worker’s payslips support that these are payments made an occasional basis “after tax” and separate from their earnings from ordinary hours of work. I am therefore satisfied that these amounts should be excluded from the calculation of their ordinary earnings either as an allowance or separately identifiable amount under section 44G of the 1987 Act.

32. Similarly, I am satisfied that the Worker’s payslips support that payments made for “boots allowance” are an occasional payment made “after tax” and separate from their earnings from ordinary hours of work. I therefore also find that these amounts should also be excluded from the calculation of their ordinary earnings either as an allowance or separately identifiable amount under section 44G of the 1987 Act.

33. I am satisfied amounts paid to the Worker for overtime and shift allowances for working public holidays should be excluded from the calculation of their ordinary earnings under s 44G(1)(e) of the 1987 Act (although as explained further below, they are included in the calculation of their PIAWE for the first 52 weeks under section 44C(1)(b) of the 1987 Act).

34. The Worker received workers compensation “make up pay” for some of the weeks during the relevant period, these appear to be in respect of a separate injury, sustained before the relevant period. The Authority wrote to the Worker and the Insurer advising that as these payments are additional to and separate from their ordinary earnings during the relevant period they do not fall within section 44C and proposed not to include them in the calculation of the Worker’s PIAWE. The Insurer agreed with this proposal. The Worker did not make any further submissions.

35. Amounts paid to the Worker for workers compensation make up pay were paid in addition to and separate from the Worker’s ordinary earnings during the relevant period. They are not earnings calculated for ordinary hours of work during the relevant period. Further, they could be excluded as a as “separately identifiable amount” pursuant to section 44G(1)(f) of the 1987 Act. I am therefore satisfied that they should not be included in the calculation of their ordinary earnings.

36. I note that the Insurer also makes submissions that it did not include “401 – full income tax” and “8023 – LUCRF plus pre tax in the calculation of the Worker’s PIAWE. These amounts appear to be deductions rather than amounts paid to the Worker during the relevant period (the first appears to be income tax and the second a before tax deduction). There appears to be no question that these amounts are not earnings that should be considered in the calculation of the Worker’s PIAWE.

37. There is no indication in the payslips before me that the Worker received any piece rates or commissions that may be relevant pursuant to section s 44E(1)(a)(ii) of the 1987 Act.

38. I therefore find the Worker’s ordinary earnings as calculated pursuant to section 44E(1) of the 1987 Act for the relevant period to be $1258.53 ($65,443.80 divided by 52 weeks).

Overtime and shift allowance payments - section 44C(1)(b) and 44C(5) of the 1987 Act

39. Pursuant to section 44C(5) of the 1987 Act, overtime and shift allowance payments are permitted to be included in the calculation of PIAWE for the first 52 weeks of weekly payments if:

a) A worker was paid overtime or carried out work that attracted a shift allowance payment during the relevant period, and

b) But for the injury the worker would have been likely to have carried out paid overtime or shift allowance work at any time in the 52 weeks period.

40. The Worker received various overtime payments and an additional payment for any hours worked on public holidays (“PH Wrk 100%”). As the later payments were made in respect of work completed for a specific shift, namely a shift completed on a public holiday, I am satisfied that they can be classified as a “shift allowance payment”.

41. In the pay period February 2017 –February 2017 the Worker received back pay which included overtime and a shift allowance payment for working a public holiday. The Authority put to the Insurer and the Worker that it proposed to include any back pay for shift allowances and overtime if the work to which these payments relates was carried out during the relevant period - January 2017 – January 2018. Information was sought as to when such work was carried out.

42. The Worker advised the Authority that these payments were “as a result of back payment from this date to approx. second week of August 2016”. They stated that this was backpay for a negotiated 2.5% per hour increase in wages. This information indicates that the resulting back payments were in respect of work which may have been carried out between August 2016 and February 2017. A significant portion of this time is outside of the relevant period. I am not satisfied based on the information before me that the back payments of overtime and shift allowances were for work carried out during the relevant period and I am therefore not satisfied that they can be included pursuant to section 44C(5) of the 1987 Act.

43. If the Worker is able to obtain information which supports that all or some of these payments were for work carried out during the relevant period, they should provide this to the Insurer and such payments should be included pursuant to section 44C(5) of the 1987 Act.

44. The Worker’s payslips support that they did carry out work which attracted overtime and shift allowance payments (for working public holidays) during the relevant. Their payslips indicate that they did so on a consistent and regular basis. I am satisfied that this supports that but for the injury they would have been likely to carry out such work in the 52 weeks following their injury. I am therefore satisfied that these overtime and their public holiday shift allowance payments should be included in the calculation of their PIAWE for the first 52 weeks.

45. The Worker received a total of $18,537.64 ($17,603.01 in overtime + $934.63 in public holiday shift allowances). This calculates to an average of $356.49 per week ($18,537.64 divided by 52 weeks).

Findings on PIAWE

46. In accordance with the above, I find that the Worker’s PIAWE is $1,615.02 ($1258.53 + $356.49) for the first 52 weeks that weekly payments are payable.

Merit Review Service
Delegate of the State Insurance Regulatory Authority