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Findings and recommendations on merit review 052/18

Our Reference: 052/18
Date of review: May 2018

Findings on review

  1. The following are the findings of the State Insurance Regulatory Authority (the Authority) on review and are to be the basis of a review decision by the Insurer.
  2. The Worker's pre-injury average weekly earnings (PIAWE) for the first 52 weeks of weekly payments of compensation are $1,843.22.
  3. The Worker's PIAWE after 52 weeks of weekly payments are $1,506.44.

Recommendation based on findings

  1. The Insurer is to calculate and make weekly payments of compensation to the Worker in accordance with my findings set out above, from the date of injury.
  2. The above recommendation is binding on the Insurer in accordance with section 44BB(g) of the Workers Compensation Act 1987 (the 1987 Act).

Background

  1. The Worker sustained an injury while working for their pre-injury employer.
  2. The Insurer made a work capacity decision in relation to the Worker's PIAWE in June 2016. It determined that the Worker's PIAWE was $961.54 per week. The Worker was notified of the decision by way of a letter dated that day.
  3. The Worker applied for a review of the calculation of their PIAWE. The Insurer conducted the review and determined that the Worker’s PIAWE was $1,230 per week. It wrote to the Worker in a letter dated June 2016, this date is clearly an error. The Insurer confirmed that the review was sent to the Worker in December 2017.
  4. The Authority received the application for merit review in January 2018. I am satisfied that the application has been made in accordance with the provisions in section 44BB(l)(b) and 44BB( 3)(a) of the 1987 Act.

Legislation

  1. The legislative framework governing work capacity decisions and reviews is contained in the:
  2. Section 43 of the 1987 Act describes a ‘work capacity decision’.
  3. Section 44BB of the 1987 Act provides for merit review of a work capacity decision of the Insurer, by the Authority.

Information considered

  1. I have considered all of the information that was provided by the parties in relation to the Worker’s application for merit review. I have only referred to the information that is most relevant to my findings, in my reasons that are set out below.

Submissions

  1. In the application for merit review, the Worker has requested a review of the calculation of their PIAWE.
  2. The Worker's submissions in support of their application for merit review are summarised as follows:
    • The submissions are in relation to an internal review of the Insurer sent to them in December 2017.
    • The date on the advice is written as June 2016, however this is incorrect and quite clearly refers to December 2017.
    • The actual date of the work capacity decision is unclear. The previous Insurer made a decision on PIAWE in a letter dated June 2016 in which it determined PIAWE was $961.54.
    • At some undetermined time the previous Insurer made a further work capacity decision and altered their PIAWE to $1,139.66 (refer to the email from the previous Insurer dated August 2016).
    • The previous Insurer appears to have made a further work capacity decision on or about April 2017 and determined that their PIAWE was $1,199.64 (see the email from the Insurer dated November 2017).
    • It is from this work capacity decision that they sought an internal review despite what they incorrectly recorded on the internal review form.
    • The internally reviewed decision of the Insurer dated December 2017 determined PIAWE after indexation as $1,230. The Insurer has not included shift or overtime allowances for the first 52 weeks of payments as required by section 44C(l)(b) of the 1987 Act.
    • They brought proceedings in the Federal Circuit Court for underpayment of wages. A mediation of the dispute was held in November 2016 and the employer conceded the underpayment and agreed to pay the claim. However, the employer failed to give effect to the agreement and the Court was required to intervene and made orders in their favour as claimed.
    • The Insurer's comments in its letter sent in December 2017 (dated June 2016) regarding not being able to determine the figure as there was no breakdown of the amount, is a simplistic not a genuine consideration.
    • It has been clearly articulated in the application to the Federal Circuit Court the basis of the claim. The claim was about the failure of the employer to pay shift allowance and overtime. The Insurer should have applied the formula as found in section 44C(6) of the 1987 Act. This would have resulted in the following finding:
    • $16,521.60 (total overtime and shift allowance order to be paid by the Court) divided by the 38 weeks the Worker worked for the Employer = $434. 78.

    • Accordingly the correct decision as to PIAWE should be $1,200 + $434.78 = $1,634.78 (prior to indexation) for the first 52 weeks of payments.
  3. In reply, the Insurer's submissions may be summarised as follows:
    • In the application for merit review, the Worker requests a review of the indexation letter issued in April 2017. However the initial work capacity decision on PIAWE was made in June 2016 and the previous Insurer issued letters in October 2016 and April 2017 providing an indexed figure.
    • It made an internal review decision based on the limited information that was available to it. It determined that the Worker was employed for less than 52 weeks prior to their injury and that their PIAWE was $1,200 per week, before indexation.
    • It sets out the reasoning of the internal review decision (which I have read but will not reproduce).
    • Due to the limited information available to the Insurer, it was unable to verify the entitlements that the Worker was claiming in the Amended Federal Circuit Court application. Further the Worker has not provided the time sheets, documents and enclosures as referred to in the Amended Federal Circuit Court application (including separating base rate of pay inclusions from overtime and shift allowances) which would enable the Insurer to accurately determine entitlements and the periods to which they applied, for the purposes of  PIAWE.
    • In their merit review application, the Worker submits that the application to the Federal Circuit Court was in relation to overtime and shift allowance figures over 38 weeks and that the figure is $16,521.60.
    • It refers to Part H of the Worker's amended Federal Circuit Court Application, which does not state that they are claiming overtime, shift allowances, penalty rates or entitlements or provide a breakdown.
    • It has not received the enclosure or time sheets referred to in the Worker's application form.

Reasons

Nature of merit review

  1. A merit review is a review of the work capacity decision of the Insurer. It involves considering all of the information that has been provided to me.
  2. I will then make findings and may make recommendations about the work capacity decision that have been referred for review.
  3. The review is not a review of the Insurer's procedures in making the work capacity decision and/or internal review decision.

PIAWE

  1. At the outset, I note that there is competing information as to the Worker's term of employment with the pre-injury employer and their ordinary earnings provided to the Insurer. The matter of the Worker's entitlement to pay has been the subject of proceedings in the Federal Circuit Court of Australia (the Federal Court).
  2. The Worker’s entitlement to minimum rates of pay, shift allowances, overtime and other allowances was governed by the Joinery and Building Trades Award 2010 (the Award).
  3. In determining the Worker's PIAWE I have preferred the information provided to the Federal Court about their hours of work and have relied on the rates of pay and allowances set out in the Award at the time of their employment with the pre-injury employer.

Definition of PIAWE

  1. The definition of PIAWE is set out at section 44C(1) of the 1987 Act as follows:

    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).

  2. The definition of PIAWE requires me to determine the "relevant period" in relation to the Worker.

Definition of relevant period

  1. The term "relevant period" is defined under section 440(1) of the 1987 Act as follows:
  2. 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. According to the information before me, the worker was employed by their pre-injury employer between September 2015 and June 2016. As the Worker was continuously employed by the same employer for less than 52 weeks before the injury, I find that the relevant period was the period of their employment with the pre-injury employer which was 38 weeks.

Definition of ordinary earnings

  1. Ordinary earnings are defined in section 44E(l) of the 1987 Act as follows:
  2. 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.

  3. The Worker's base rate of pay was set under the Award. According to documents lodged in the Federal Court, the Worker was classified as a level 6 Worker under the Award.
  4. The Award sets out minimum rates of pay, that I consider to be base rates of pay, and made provision for overtime and other allowances where work was carried out over and above the ordinary working hours in a day or week.
  5. I therefore find that the Worker's base rate of pay was calculated on the basis of their ordinary hours worked and that their ordinary earnings are to be calculated in accordance with section 44E(l)(a) of the 1987 Act.
  6. There is a spreadsheet attached to these findings and recommendations that sets out the Worker's hours of work on a daily basis during the relevant period. According to a breakdown of working hours provided by the Worker to the Federal Circuit Court, they worked a total of 269.5 hours during the relevant period.
  7. The rate for ordinary hours is the rate that was set under the Award as it was during the relevant period. The hourly rate of pay set by the Award during the relevant period was $20.67.
  8. Section 24.l(b)(i) of the Award makes provision for an "industry allowance" for a shopfitter or joinery Worker as follows:
  9. An employee engaged on joinery work, shopfitting, stonemasonry or outside work must be paid 142.4% of the standard rate per week extra to compensate for the disabilities associated with the industry.

  10. As I am required to use the Worker's base rate of pay to determine their ordinary earnings, I must consider whether the "industry allowance" is included in the Worker's base rate of pay.

Definition of base rate of pay

  1. Section 44G(l) of the 1987 Act provides a definition of "base rate of pay" as follows:
  2. 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 pa y 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):

    (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).

  3. I am required to determine whether the factor of 142.4% which the Act indicates is to be applied to Workers engaged in particular job categories, is a base rate of pay exclusion.
  4. The words used to describe the factor in the Act are "industry allowance". The broader section in which this appears is titled "allowances and special rates". While the title of the particular subsection is "industry allowance", it would be more appropriate to characterise this factor as a "special rate" that applies to sub-categories of employees in the joinery and building industries.
  5. The factor applies uniformly to the base rate of pay for these subcategories of employees. It does not vary in accordance with hours of work or total hours worked, it is not an allowance for overtime or shifts, it is not linked to productivity or output in any way.
  6. The factor is not a separately identifiable amount as it is a percentage uplift that is to be applied to a base rate of pay for workers not in that sub-category of employees, to determine the correct base rate of pay for employees in that sub-category.
  7. I have considered whether the factor is a loading "to compensate for the disabilities associated with the industry". I do not think that the factor is correctly classified as a loading. It is more accurately described as a convenient mechanism for setting special rates of pay for a sub­ category of workers covered by the Award without being required to set out a separate table of rates of pay applicable to that category.
  8. I am therefore satisfied that the factor of 142.4% should be applied to the rate of pay, being $20.76 applicable to workers not in the sub-category under section 24.l(b)(i) and is therefore part of the Worker's base rate of pay.
  9. The Worker also received a "working away from home allowance", and according to the Award was entitled to a variety of other allowances that I consider to be monetary allowances in accordance with section 44G(l) of the 1987 Act. These allowances were not related to the Worker's hours of work but to the location of their work. Accordingly, these allowances do not form part of the Worker's base rate of pay.

Overtime and shift allowances

  1. Section 44C(l) of the 1987 Act allows for the inclusion of overtime and shift allowances as follows:
  2. (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).

  3. Section 44C(5) of the 1987 Act sets out the circumstances in which overtime and shift allowances may be included in the calculation of PIAWE as follows:
  4. 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.

  5. The Worker worked significant hours in overtime with their pre-injury employer. There was an ongoing pattern of overtime over the course of the Worker's employment. I am satisfied that this pattern of overtime would have continued for 52 weeks had the Worker not sustained their injury.
  6. I therefore find that the Worker's PIAWE should include overtime payments for the first 52 weeks of weekly payments of compensation.

Calculation of PIAWE

  1. There is a detailed breakdown of the Worker's hours of work, rates of pay and overtime attached to these reasons and findings.
  2. During the relevant period, being 38 weeks, the Worker was paid $70,042.39 including overtime during this period. I therefore calculate the Worker's PIAWE during the first 52 weeks of weekly payments of compensation as follows:
  3. $70,042.39 / 38 = $1,843.22

  4. Excluding payment for overtime, the Worker earned $57,244.60 during the relevant period. I therefore calculate their PIAWE after 52 weeks as follows:
  5. $57,244.60 / 38 = $1,506.44

  6. In summary, the Worker's PIAWE for the first 52 weeks of weekly payments is $1,843.22 and after 52 weeks is $1,506.44.

Merit Reviewer
Merit Review Service
Delegate of the State Insurancer Regulatory Authority