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Merit review WC031/18

Our Reference: WC031/18
Date of review: May 2018


1. The amount of the Worker’s pre-injury average weekly earnings (‘PIAWE’) must be calculated in line with Column 3 of item 7 in Schedule 3 of the Workers Compensation Act 1987 (‘the 1987 Act’).


2. The following recommendations are binding on the Insurer and must be given effect to by the Insurer under section 44BB(3)(g) of the 1987 Act:

  • *The Insurer must use the above finding to recalculate the amount of the Worker’s PIAWE.
  • *The Insurer must use that new PIAWE figure to recalculate the amount of weekly payments of compensation paid to the Worker and adjust the payments to the correct amount.


3. In March 2018, the Insurer notified the Worker in writing that it had decided the amount of their PIAWE was $963.75. The Worker considered that the Insurer had calculated it incorrectly.

4. The Worker contends that they applied for an internal review of the decision by ordinary post in March 2018. The Worker says that they never received a response. The Insurer says ‘there is no record that the Insurer received’ the application. The Insurer does not actively oppose the Authority accepting the application for merit review. It says ‘we look forward to receiving the Authority’s determination on jurisdiction/decision and are happy to be guided by the Authority’.

5. I accept that the Worker sent the Insurer an application for internal review in March 2018. Unless evidence sufficient to raise doubt is adduced to the contrary, the making of the Worker’s application for internal review is taken to have been effected on the fourth working day after the letter was posted: InterpretationAct 1987 section 76(1)(b). While there is no record that the Insurer received the application, that is not, in my view, evidence sufficient to raise doubt. The Worker’s application for internal review is taken to have been made.

6. To date, the Insurer has not conducted an internal review so the Worker may make an application for merit review under section 44BB(3)(b) of the 1987 Act.


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

8. 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

9. 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.


10. I have read and considered the submissions made by the Worker and the Insurer. I have dealt with the issues raised by those submissions in the reasons below.


11. The Worker was employed by two employers at the time of their injury. Therefore, the Worker is of a class referred to in Column 2 of an item in Schedule 3 of the 1987 Act. The amount of their PIAWE is determined in line with Column 3 of that item, expressed as a weekly sum: section 44C(4) of the 1987 Act. This dispute is about which item in Schedule 3 applies to the Worker.

12. It is possible that a Worker may fit into multiple classes in Column 2 of Schedule 3. On its face, this is such a case. An obvious issue arises as to which item applies. The Insurer says that it follows the items sequentially from 1–9 and applies the item for the first class that the Worker fits into. I do not think that is the correct approach. For example, item 2 and item 5 have the same criteria except item 5 adds ‘and works for another of those employers for at least the prescribed number of hours each week’. If the Insurer’s approach was correct, item 5 would never apply: a Worker who fits into item 5 must also fit into item 2 but item 2 would always prevail because it is earlier in the numerical sequence. The legislature could not have intended that result.

13. In my view, if multiple items apply to a Worker, the preferable approach is to use the item which yields the highest PIAWE. That is consistent with the overall structure of Schedule 3 which supports progressively higher PIAWE calculations, particularly items 2–7. It is also consistent with the beneficial and remedial nature of the legislation.

14. The Worker says that item 7 should apply. If it does apply, it is the most beneficial item for them because PIAWE is calculated ‘with reference to earnings from work with all the employers’.

15. The Worker’s legal representative submits that ‘The Appellant [The Worker] was completing their normal hours with Employer 2 and was unable to work with the pre-injury employer’ and ‘Furthermore, the Appellant now has returned to Employer 2 completing their normal hours but has not returned to their pre-injury employer’. Thus, it goes, they are a Worker who at the time of injury was ‘employed by 2 or more employers who sustains an injury that results in an incapacity to work for one or more of those employers but not for all those employers’.

16. The Insurer says that item 4 applies. The Insurer explained its reasons for this view in an email dated July 2017:

  • Working sequentially through Schedule 3 it is found that the first item that meets the criteria for the Worker is item 4. The Worker’s lawyers state that the Worker did not suffer an incapacity for Employer 2.

17. However payslips supplied by the Worker indicate that the Worker had actually reduced their hours from 38 to 30 per week to allow for the impact of their injury. The Insurer has also received an email from the occupational rehabilitation provider dated XX.09.216 [sic] that confirms reduced duties. The Insurer is already aware that the Worker had no capacity to work with the pre-injury employer, however as their injury has resulted in an incapacity to work for both employers the criteria in Column 1 Item 7 is not met.

18. Based on the above, it is common ground that at the time of injury the Worker: (a) was not able to work for the pre-injury employer due to their injury and (b) was still able to work for Employer 2 to some extent.

19. The applicability of item 7 turns on the meaning of an ‘incapacity to work’. The 1987 Act does not define it. It is grammatically different from ‘incapacity for work’ which appears in section 33 of the 1987 Act. In my view, the different grammatical expressions convey different meanings.

20. Incapacity for work ‘denotes a physical incapacity for doing work in the labour market in which the employee was working or might reasonably be expected to work’: Arnotts Snack Products Pty Ltd v Yacob (1985) 155 CLR 171 at 177.

21. Incapacity to work is different. In Ball v William Hunt & Sons Ltd [1912] AC 496 Lord MacNaghten criticised conflating the two terms:

22. I am unable to agree in the conclusion at which the Court of Appeal has arrived…Both the Master of the Rolls and Lord-Justice Buckley turn to the First Schedule. Finding there the expression “total or partial incapacity for work” they hold that it is an answer to the present claim to say that the claimant’s physical condition is just what it was before the accident happened, and that his dexterity and capacity for manual labour are as good as ever. “Incapacity for work” they take to be the same as “incapacity to work”. In fact one of the learned Judges treats the two expressions as synonymous and uses them as convertible terms.

23. Australian courts have emphasised the importance of the word ‘for’ in ‘incapacity for work’. The term is different to, and broader than, incapacity to work: see e.g. Thompson v Armstrong and Royse Pty Ltd 81 CLR 585 at 602–603, 613, 620–21; Moran Health Care Services v Woods [1997] NSWSC 147; Nicholas Stebbing v State of Victoria (Department of Education and Training) [2017] VMC014 at 86.

24. In my view, the term ‘an incapacity to work’ in item 7 of the Schedule 3 refers to no ability to work. The word ‘incapacity’ in its ordinary meaning refers to ‘lack of capacity, incapability’: Macquarie Dictionary Seventh Edition. A straightforward reading of an ‘incapacity to work’ suggests no ability to work (i.e. a lack of capacity to work or an incapability to work). Thus, incapacity to work simply asks if there is work the Worker can do. If the Worker can do work despite injury then the Worker does not have an incapacity to work.

25. For example, a Worker who returns to work on reduced hours following an injury has a partial incapacity for work but plainly does not have an incapacity to work. Or, a Worker who has a 10kg lifting restriction following injury has an incapacity for work that involves lifting more than 10kg. However, the Worker does not have an incapacity to work because they can still do work that involves lifting to 10kg.

26. The structure of the weekly payments entitlement periods in sections 36, 37 and 38 of the 1987 Act fortifies this view. A worker who continues to work for an employer after an injury and has ‘current work capacity’ will have their compensation reduced by their earnings, represented by ‘E’ in the statutory formulas. The plain purpose of item 7 is to protect those workers. They can return to work in some capacity with one employer and not have the value of ‘E’ unfairly erode the compensation payable to them for their inability to work for the other employer.

27. The worker was unable to work for the pre-injury employer due to their injury so they had an incapacity to work for the pre-injury employer. They could still work for Employer 2 on reduced hours so they did not have an incapacity to work for Employer 2. Item 7 applies to the worker. As it will result in the higher PIAWE calculation for them it must be applied.

28. The Worker did not make any submission about what the amount of their PIAWE should be. It is not within the scope of this dispute to calculate the amount of the Worker’s PIAWE based on the information before me. Nor is it even possible for me to do so given that there are critical gaps in the information before me such as the Worker’s pay slips in 2016 from Employer 2, their pay slips from the pre-injury employer generally, and the absence of the fair work instruments that allegedly applied to their employment. In those circumstances, I recommend that the Insurer apply the findings of this review to recalculate the Worker’s PIAWE. It follows that the Insurer must also use that new PIAWE figure to recalculate the weekly payments of compensation paid to the Worker.

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