Findings and recommendations on merit review 008/15

Merit Review Service decision reference: 008/15

Date of review: November 2015

Findings on review

The following findings are made by the State Insurance Regulatory Authority (the Authority) on review and are to be the basis for the Insurer’s work capacity decision.

The worker’s pre-injury average weekly earnings (PIAWE) are $361.18 for the weeks from May 2015 to October 2015.
The PIAWE of $361.18 should have been used to calculate weekly payments of compensation from May 2015 to October 2015.

Recommendation based on findings

The following recommendation is binding on the Insurer and must be given effect to by the Insurer under section 44(3)(g) of the Workers Compensation Act 1987 (the 1987 Act).

The Insurer is to recalculate the worker’s weekly payments of compensation in line with the above findings and pay the worker the difference between what they were paid and the amount of compensation that should have been paid.

Background

The worker has been receiving weekly payments of compensation for an incapacity for work resulting from an injury in May 2015. The amount of the worker’s weekly payments of compensation is based on their PIAWE.

In September 2015, the Insurer accepted provisional liability for the worker’s claim for compensation. In doing so, the Insurer made work capacity decisions that the amount of the worker’s PIAWE was $186.76 and that figure would be used to calculate their weekly payments of compensation from May 2015.

The worker referred those decisions for internal review by the Insurer. In October 2015, the Insurer determined the worker’s PIAWE was $361.18 and that this figure would be used to calculate the amount of weekly payments of compensation from October 2015.

The application for merit review was received by the Authority in October 2015. It has been made in the approved form and in time under section 44(3)(a) of the 1987 Act.

Legislation and guidelines

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 2010 (the Regulation)
Guidelines for work capacity decision Internal Reviews by Insurers and Merit Reviews by the Authority applicable from 11 October 2013 (the Review Guidelines)
WorkCover Work Capacity Guidelines as amended (the Work Capacity Guidelines).

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

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

Documents considered

The documents I have considered for this review are the application for merit review form 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 parties.

Submissions

The worker submits that what is requested to be reviewed is the decision to pay the new PIAWE rate from October 2015 instead of May 2015. The worker should be paid based on the reviewed PIAWE from May 2015 not from the day the decision was made. The difference should be backdated and paid in good faith. The error was made by the Insurer and the employer so the worker should not suffer. When the Insurer notified the worker that provisional liability was accepted the worker notified the Insurer of the error. The worker was paid in October 2015 with the old rate despite a new decision on PIAWE being made in October 2015. The Insurer has accepted that error was made on their part.

In reply, the Insurer outlines how the worker’s PIAWE was calculated. The Insurer then submits that there is no provision under the legislation that would permit them to adjust the PIAWE retrospectively after an internal review. The internal review decision can only be prospective, taking effect from the date of the decision at the earliest. Additionally, the Insurer submits that Merit Review Services are bound by the same effects of section 44(1) and retrospective adjustments can only be made where the work capacity decision is deemed to be procedurally flawed by WIRO and is overturned. Furthermore, the Insurer submits that any WIRO decision can only revert to the pre-work capacity decision value and not the value of the internal review.

Reasons

This is a merit review of the Insurer’s work capacity decision(s) under section 44(1)(b) of the 1987 Act. It is not a review of the Insurer’s procedures in making a work capacity 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.

Section 43(1) of the 1987 Act describes work capacity decisions of an insurer:

(1) The following decisions of an insurer (referred to in this Division as work capacity decisions) are final and binding on the parties and not subject to appeal or review except review under section 44 or judicial review by the Supreme Court:

(a) a decision about a worker’s current work capacity,
(b) a decision about what constitutes suitable employment for a worker,
(c) a decision about the amount an injured worker is able to earn in suitable employment,
(d) a decision about the amount of an injured worker’s pre-injury average weekly earnings or current weekly earnings,
(e) a decision about whether a worker is, as a result of injury, unable without substantial risk of further injury to engage in employment of a certain kind because of the nature of that employment,
(f) any other decision of an insurer that affects a worker’s entitlement to weekly payments of compensation, including a decision to suspend, discontinue or reduce the amount of the weekly payments of compensation payable to a worker on the basis of any decision referred to in paragraphs (a)–(e).

Under section 44(1)(b) of the 1987 Act a worker may refer a work capacity decision of an insurer for merit review by the Authority. Where an insurer makes multiple work capacity decisions, the worker may choose which work capacity decision(s) to refer for review under section 44. So, it is important to identify which work capacity decision(s) have been referred to the Authority for review under section 44(1)(b) of the 1987 Act.

Relevantly in this case, the Insurer made work capacity decisions that:

Under section 43(1)(d) the worker’s PIAWE was $186.76 , and
Under section 43(1)(f) this figure would be used to calculate the amount of the worker’s weekly payments of compensation from May 2015.

On internal review, the Insurer decided:

Under section 43(1)(d) the worker’s PIAWE was $361.18, and
Under section 43(1)(f) this figure would be used to calculate the amount of the worker’s weekly payments of compensation from October 2015.

By only applying the re-determined PIAWE figure from October 2015, the Insurer effectively decided on internal review that the amount of the worker’s PIAWE for the weeks from May 2015 to October 2015 was $186.76 and the PIAWE from October 2015 was $361.18.

The worker states in their application for merit review that the decision seeking to be reviewed is the “decision to pay new PIAWE rate from October 2015 and not back-date it to [May 2015]”. The worker further states “I should be paid the reviewed PIAWE rate from [May 2015] and not from the day the decision was made”. Properly construed, I consider that the worker has referred both the Insurer’s decisions under section 43(1)(d) and (f) for review by the Authority.

It is evident to me from the worker’s application that the worker accepts $361.18 to be the correct amount of the PIAWE. The Insurer’s reasoning on internal review and their submissions in reply to the worker’s application confirm that they too consider the correct PIAWE to be $361.18 in accordance with section 44C of the 1987 Act.

Given the common ground between the parties, I find that the worker’s PIAWE is $361.18 in accordance with section 44C of the 1987 Act.

The Insurer’s decision that the worker’s PIAWE is $361.18 is based on information related to the “relevant period” from September 2014 to May 2015. It is information about earnings prior to the injury. So, there is no basis in this case on which the worker’s PIAWE could be $186.76 from May 2015 until October 2015 and then $361.18 from October 2015. Indeed, the Insurer concedes this point at [24] of their internal review decision stating (emphasis added) “The worker’s PIAWE is calculated to be $361.18 per week in the first 52 weeks, should the worker be entitled to payments”. That point is made again by the Insurer at submission [5] in their reply to an application for merit review form dated October 2015.

It logically follows from the Insurer’s own reasoning that the worker’s PIAWE was decided incorrectly from May 2015 to October 2015. Having found on review that the correct amount was $361.18, the Insurer was required to, as a matter of logic and fairness, recalculate the worker’s weekly payments from May 2015 and make up any shortfall in payments based on their original incorrect decision on PIAWE.

The Insurer has submitted that “there is no provision under the legislation that would permit the Insurer to adjust the PIAWE retrospectively once an internal review has been completed”. Further, the Insurer submits that the “internal review decision can only be prospective, taking effect from the date of the decision at the earliest”. I am of the view that the review mechanism provided under section 44 of the 1987 Act allows for a process of internal review by Insurer and merit review by the Authority to ensure a worker is paid their correct entitlement to weekly payments for the relevant weeks of compensation covered by an insurer’s work capacity decision(s). If this were not so, an injured worker would be deprived of compensation (to which they should have been entitled) simply because of delayed or incorrect decision-making by the Insurer.

I consider that the better view is that section 44(1)(a) and (b) of the 1987 Act are mechanisms to ensure that correct and preferable decisions are made about an injured worker’s entitlement to weekly payments of compensation. In this case, the nature of the dispute required a retrospective analysis of the worker’s PIAWE. In line with section 44 and fundamental principles of logic and fairness, the correct PIAWE amount of $361.18 should have been applied from May 2015 in the calculation of the worker’s weekly payments of compensation.

The Insurer must recalculate the worker’s weekly payments of compensation from May 2015 to October 2015 in line with PIAWE being $361.18 and pay the worker the difference between what they were paid and the amount of compensation that should have been paid.

I acknowledge that the Insurer has submitted that the Authority is “bound by the same effects of section 44(1) of the 1987 Act and retrospective adjustments can only be made where the work capacity decision is deemed to be procedurally flawed by WIRO and is overturned”. Further, “the Insurer submits that any WIRO decision can only revert to the pre-work capacity decision value and not the value of the internal review”.

These submissions concern the jurisdiction of the Workers Compensation Independent Review Officer which is an issue outside the scope of this review.

Merit Review Service
Delegate of the State Insurance Regulatory Authority