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Findings and recommendations on merit review 019/18

Our Reference: 019/18

Findings

  1. The amount of the worker’s pre-injury average weekly earnings (‘PIAWE’) is $909.72 subject to variation under Division 6A of Part 3 of the Workers Compensation Act 1987 (‘the 1987 Act’).

Recommendations

  1. The insurer must apply the above finding to calculate the worker’s weekly payments of compensation.
  2. This recommendation is binding on the insurer and must be given effect to by the insurer under section 44BB(3)(g) of the 1987 Act.

Background

  1. The worker has been receiving weekly payments of compensation for an incapacity for work as a result of their injury. It is common ground that they were injured in the course of their employment the Pre-Injury Employer 1.
  2. In April 2017, the first insurer decided that the amount of the worker’s PIAWE was $1,235.49.
  3. At some point, the worker’s claim was transferred to another insurer. The worker referred the first insurer’s decision about the amount of their PIAWE for internal review by the insurer in December 2017. The insurer confirmed that ‘Due to an administrative oversight by the insurer, the Internal Review was not completed by the Insurer’.
  4. The worker made an application for merit review by the Authority in January 2018. The application may be made and is accepted under section 44BB(3)(b) of the 1987 Act.

Legislation

  1. The legislative framework for 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)
  2. Section 43 of the 1987 Act describes a ‘work capacity decision’. An injured worker may refer a work capacity decision for merit review by the Authority under section 44BB of the 1987 Act. The Authority is to notify the insurer and the worker of the findings of the review and may make recommendations to the insurer based on those findings under section 44BB(3)(e). Recommendations are binding on the insurer and must be given effect to by the insurer under section 44BB(3)(g).

Documents considered

  1. The documents considered for this review are the application for merit review and the insurer’s reply form, the documents listed in and attached to those forms, and any further information provided to the Authority and exchanged between the worker and the insurer.

Submissions

  1. The worker’s legal representative submits that the amount of the worker’s PIAWE should be calculated under item 8 of Schedule 3 of the 1987 Act as follows:
    1. The worker’s average ordinary earnings expressed as an amount per hour:
      • *Total ordinary earnings pre-injury employer 1 & pre-injury employer 2:
        ($52,362.24 + $39,149.15) = $91,511.39
      • *Total ordinary hours: 1,806.78
      • *Ordinary earnings expressed as an amount per hour: ($91,511.39/1,806.78)
        = $50.65
    2. Part (a) multiplied by the prescribed number of hours, or the total of the worker’s ordinary hours per week, whichever is lesser.
      • *$50.65 x 38 (prescribed hours) = $1,924.70
  2. The insurer submits in reply that the worker was injured in the course of their employment with the pre-injury employer 1. It did not conduct an internal review of the work capacity decision due to an administrative oversight. Based on the limited information about the first insurer’s calculation of PIAWE it was calculated to be $1,235.49 subject to indexation.
  3. In March 2018, the Authority emailed the worker and their legal representative to give them an opportunity for further submissions about how ‘ordinary earnings’ should be calculated by reference to the definition in section 44E of the 1987 Act. The worker’s legal representative submitted that the worker’s ‘ordinary earnings’ were calculated under section 44E(1)(b) of the 1987 Act and that this should be used to calculate PIAWE under item 8 of Schedule 3 of the 1987 Act.

Reasons

  1. This is a merit review of a work capacity decision about the amount of the worker’s PIAWE. I must consider the matter afresh and make the most correct and preferable finding about the amount of the worker’s PIAWE.

Pre-injury average weekly earnings

  1. It is common ground that the worker was employed by the pre-injury employers at the time of injury. The fact that the worker had earnings from both employers in the weeks leading right up to the date of injury supports this. As the worker was employed by two or more employers at the time of their injury they are a worker of a class referred to in Column 2 of an item in Schedule 3 of the 1987 Act. Section 44C(4) of the 1987 Act states:

    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.

  2. The information before me does not support that the worker is a worker of a class referred to in Column 2 of items 1–7 and 9 of Schedule 3. This leaves item 8:

    Worker employed by 2 or more employers in circumstances other than those described in the preceding provisions of this Schedule.

  3. This was the item applied by the first insurer in making the work capacity decision. The worker has also submitted that this item should be applied to calculate the Worker’s PIAWE. I proceed on that basis.
  4. Column 3 of item 8 sets out how the amount of PIAWE is determined:
  5. The worker’s pre-injury average weekly earnings are the worker’s average ordinary earnings expressed as an amount per hour for all work carried out by the worker for all employers multiplied by:

    1. the prescribed number of hours per week, or
    2. the total of the worker’s ordinary hours per week,

    whichever is the lesser.

  6. Column 3 of item 8 first requires me to find the worker’s average ordinary earnings expressed as an amount per hour for all work carried out by the worker for all employers.
  7. ‘Ordinary earnings’ is defined by section 44E of the 1987 Act:
    • 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:
    1. if the worker’s base rate of pay is calculated on the basis of ordinary hours worked, the sum of the following amounts:
      1. the worker’s earnings calculated at that rate for ordinary hours in that week during which the worker worked or was on paid leave,
      2. amounts paid or payable as piece rates or commissions in respect of that week,
      3. the monetary value of non-pecuniary benefits provided in respect of that week, or
    2. in any other case, the sum of the following amounts:
      1. the actual earnings paid or payable to the worker in respect of that week,
      2. amounts paid or payable as piece rates or commissions in respect of that week,
      3. the monetary value of non-pecuniary benefits provided in respect of that week.
    • A reference to ordinary earnings does not include a reference to any employer superannuation contribution.
  8. Sub-section (1) refers to the ‘relevant period’ which is defined by section 44D of the 1987 Act. It is unnecessary to reproduce that section. The worker was continuously employed by the pre-injury employer 1 and the pre-injury employer 2 for the period of 52 weeks immediately before the injury. The ‘relevant period’ is that period of 52 weeks: 1987 Act section 44D(1)(a). The date of injury is excluded: Interpretation Act 1987 section 36(1). The ‘relevant period’ is October 2011 to October 2012.
  9. The issue is then whether the worker’s ‘ordinary earnings’ are determined under section 44E(1)(a) or (b). The worker has submitted that sub-section (b) should apply. However, I do not agree. Sub-section (a) applies where ‘the worker’s base rate of pay is calculated on the basis of ordinary hours worked’. This was plainly the case for the worker. The worker was paid an hourly rate of pay multiplied by the number of hours they worked in a week. There was a ‘rate of payable to [the worker] for [their] ordinary hours of work’ at both the pre-injury employer 1 and the pre-injury employer 2: ‘base rate of pay’ as defined under section 44G(1) of the 1987 Act. Sub-section (b) applies in ‘any other case’. That is, cases where the worker’s base rate of pay is not calculated on the basis of ordinary hours worked. Examples may include a musician who is paid a set fee for a performance or a driver who is paid fares for distance travelled. For the worker, sub-section (a) applies so it is incorrect to go on and determine ‘ordinary earnings’ under sub-section (b).
  10. I therefore calculate the worker’s ‘ordinary earnings’ for both pre-injury employers under section 44E(1)(a) of the 1987 Act

Ordinary earnings for Pre-Injury Employer 1

  1. Before me is a comprehensive table of the worker’s earnings at pre-injury employer 1 for October 2011 to October 2012. It has a series of columns headed week ending, ordinary time, rate, amount, O/T, rate, amount, etc. This will be referred to as ‘the table’. The weeks referred to in the table do not perfectly align with the 52 weeks of the ‘relevant period’ but it is quite close to it. In my view, the period from October 2011 to October 2012 so closely aligns to the relevant period that it is a reliable basis on which to infer the average of the worker’s ordinary earnings during the relevant period in the absence of more specific information.
  2. To find the worker’s ‘ordinary earnings’ under section 44E(1)(a) of the 1987 Act, it is necessary to find their ‘base rate of pay’ and ‘ordinary hours of work’. It is convenient to first find the ‘ordinary hours of work’.
  3. ‘Ordinary hours of work’ is defined under section 44H of the 1987 Act. It is unnecessary to reproduce that section. The information before me does not support that a fair work instrument applied to the worker’s in their employment with pre-injury employer 1. Further, the way in which the worker’s hours of work frequently changed from week to week indicates that ordinary hours of work were not agreed between the worker and the pre-injury employer 1. I consider that this is ‘any other case’ and the worker’s ‘ordinary hours of work’ are the average weekly hours (excluding any week during which the Worker did not actually work and was not on paid leave) during the relevant period: the 1987 Act section 44H(b)(ii).
  4. Section 44H(b)(ii) simply refers to ‘average weekly hours’ so it is correct to average all of the worker’s weekly hours regardless of whether they are ‘ordinary’ or ‘overtime’ or any other category of hour worked. The table shows that the Worker worked or was on paid leave for October 2011 to October 2012 for total hours of: 890.61 ‘ordinary time’, 90.06 ‘overtime’, 350.60 ‘Saturday’, 329.05 ‘Sunday’, 73 ‘Sick’, 10 ‘annual leave’ and 77.50 ‘Public holiday’. The average weekly hours are therefore:
    • (890.61 + 90.06 + 350.60 + 329.05 + 73 + 10 + 77.50) ÷ 52 weeks
    • = 1,820.82 ÷ 52
    • = 35.01576923
  5. ‘Base rate of pay’ is defined by section 44G of the 1987 Act. It is useful to set it out in full:
    • 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 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):
      1. incentive based payments or bonuses,
      2. loadings,
      3. monetary allowances,
      4. piece rates or commissions,
      5. overtime or shift allowances,
      6. any separately identifiable amount not referred to in paragraphs (a) to (e).
    • a worker’s base rate of pay is prescribed by a fair work instrument that applies to the worker, and
    • the worker’s actual rate of pay for ordinary hours is higher than that rate of pay,
    • the worker’s actual rate of pay is to be taken to be the worker’s base rate of pay.
  6. In relation to pre-injury average weekly earnings and current weekly earnings, if, at the time of the injury:
  7. The table shows that the worker was paid a base hourly rate of $17.65 from October 2011 to July 2012 (38 weeks). They were then paid a base hourly rate of $20.2970 for July 2012 to October 2012 (14 weeks).
  8. The rate of pay payable to the worker for their ordinary hours of work for the first 38 weeks is:
    • $17.65 x 35.01576923
    • = $618.03
  9. The rate of pay payable to the worker for their ordinary hours of work for the next 14 weeks is:
    • $20.2970 x 35.01576923
    • = $710.72
  10. The table shows that the worker had higher rates of pay for overtime and shift allowance payments, mostly for work on weekends. However, those amounts are excluded as ‘base rate of pay exclusions’ under section 44G(1)(e) of the 1987 Act.
  11. The amount of the worker’s ordinary earnings under section 44E(1)(a)(i) of the 1987 Act can be calculated as follows:
    • ($618.03 x 38) + ($710.72 x 14)
    • = $23,485.14 + $9,950.08
    • = $33,435.22
  12. The information before me does not support that the worker was paid any amounts by pre-injury employer 1 during the relevant period for piece rates of commissions.
  13. The information before me also does not support that the worker was provided any non-pecuniary benefits by pre-injury employer 1 during the relevant period.
  14. Under section 44E(1)(a) of the 1987 Act, the worker’s ‘ordinary earnings’ for pre-injury employer 1 totalled $33,435.22 for 1,820.82 hours of work.

Ordinary earnings for the Pre-Injury Employer 2

  1. Before me is the worker’s fortnightly pay slips for October 2011 to October 2012 (26 fortnights or 52 weeks). This does not perfectly align with the ‘relevant period’ but it is very close to it. In my view, it so closely aligns that it is a reliable basis on which to infer the average of the worker’s ordinary earnings during the relevant period in the absence of more specific information.
  2. The pay slips support that the worker worked or was on paid leave during each of those 52 weeks. The worker consistently worked or was on paid leave for a total of 62.5 hours each fortnight. Under section 44H(b)(i) of the 1987 Act, I find 62.5 hours a fortnight or 31.25 hours a week to be the worker’s ‘ordinary hours of work’ as agreed between the worker’s and the pre-injury employer 2.
  3. The pay slips show that the worker was paid a base hourly rate of $29.32 for their ‘normal time’ for the first fortnight in October 2011 (2 weeks). The worker was then paid a base hourly rate of $30.05 for their ‘normal time’ for the fortnight ending in November 2011 to the fortnight ending in August 2012 (38 weeks). The worker was then paid a base hourly rate of $30.80 for the fortnight ending in August 2012 to the fortnight ending in October 2012 (12 weeks).
  4. The rate of pay payable to the worker for their ordinary hours of work for the first fortnight is:
    • $29.32 x 62.5
    • = $1,832.50
  5. The rate of pay payable to the worker for their ordinary hours of work for the next 19 fortnights is:
    • $30.05 x 62.5
    • = $1,878.13
  6. The rate of pay payable to the worker for their ordinary hours of work for the next 6 fortnights is:
    • $30.80 x 62.5
    • = $1,925.00
  7. The pay slips also show that the worker received additional rates of pay or higher hourly rates of pay for the following: remote area allowance, SASS extended leave, leave adjustment, salary adjustment, hours worked adjustment, annual leave loading.
  8. In my view, these are all base rate of pay exclusions. Some are easily identifiable as either loadings under section 44G(1)(b) or monetary allowances under section 44G(1)(c). Where an amount is not readily identifiable, I consider it is a separately identifiable amount under section 44G(1)(f).
  9. The amount of the worker’s ordinary earnings under section 44E(1)(a)(i) of the 1987 Act can be calculated as follows:
    • ($1,832.50 x 1) + ($1,878.13 x 19) + ($1,925.00 x 6)
    • = $1,832.50 + $35,684.47 + $11,550
    • = $49,066.97
  10. The information before me does not support that the worker was paid any amounts by the pre-injury employer 2 during the relevant period for piece rates of commissions.
  11. The information before me also does not support that the worker was provided any non-pecuniary benefits by the pre-injury employer 2 during the relevant period.
  12. Under section 44E(1)(a) of the 1987 Act, the worker’s ‘ordinary earnings’ for the pre-injury employer 2 totalled $49,066.97 for 1,625 hours of work.

Calculation under item 8 of Schedule 3

  1. The average ordinary earnings expressed as an amount per hour for all work carried out by the worker for all employers may be calculated as follows:
    • ($33,435.22 + $49,066.97) ÷ (1,820.82 + 1,625)
    • = $82,502.19 ÷ 3,445.82
    • = $23.94
  2. This figure must then be multiplied by the lesser of (a) the prescribed number of hours per week or (b) the total of the worker’s ordinary hours per week.
  3. The ‘prescribed number of hours per week’ is 38 under Clause 7 of the Regulation. The worker’s ordinary hours per week are 34.83 (rounded up) for pre-injury employer 1 and 31.25 for the pre-injury employer 2, which totals 34.83 + 31.25 = 66.08. The prescribed number of hours per week is the lesser.
  4. The worker’s PIAWE calculated in line with Column 3 of item 8, expressed as a weekly sum is $23.94 x 38 = $909.72.
  5. I find the amount of the worker’s PIAWE is $909.72 subject to variation in line with Division 6A of Part 3 of the 1987 Act for indexation of weekly payments of compensation. I recommend that the insurer apply this finding to calculate the Worker’s weekly payments of compensation.

A final point about the Worker’s submissions

  1. It is important to address one final point about the worker’s submissions to highlight an error in the way in which they approached the calculation of their PIAWE. The worker calculated that their total ordinary earnings were $91,511.39 and their total ordinary hours were 1,806.78. The worker evidently reached the figure for their ordinary earnings by adding up all the amounts they earned in the relevant period for both employers. However, when they then came to calculate their ordinary hours, they only included the hours in which they worked ‘ordinary time’ for the pre-injury employer 1 and ‘normal time’ for the pre-injury employer 2. This had the effect of artificially inflating their PIAWE calculation. If the worker considered that their ‘ordinary earnings’ were made up of all their ‘actual earnings’ for both employers under section 44E(1)(b) of the 1987 Act, then they also needed to include all the hours that they worked for those earnings. Effectively, their submission was that they should be able to include the earnings they had from hours of work which attracted a high rate of pay (such as overtime hours and weekend shifts) but then be able to exclude those hours of work to calculate their ‘ordinary hours’. That is a flawed approach and explains why the worker’s calculation of PIAWE was so high.

Merit reviewer
Merit Review Service
Delegate of the State insurance regulatory authority