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Findings and recommendations on merit review 002/16

Date of Review: 23 May 2016

Our Reference: 002/16

Findings

  1. The worker’s pre-injury average weekly earnings (PIAWE) for the first 52 weeks of weekly payments is $1970.00 (as indexed and rounded).
  2. The worker’s PIAWE for weekly payments after the first 52 weeks of weekly payments is $1660.00 (as indexed and rounded).

Recommendations

  1. The Authority may make binding recommendations to the Insurer based on the findings of this merit review under section 44BB(3)(e) of the Workers Compensation Act 1987 (the 1987 Act).
  2. No recommendations are made in this case for the reasons below.

Background

  1. On 26 October 2016, the Insurer notified the worker that it had decided her PIAWE was $1634.00.
  2. The worker applied for an internal review of the Insurer’s decision.
  3. On 13 April 2017, the Insurer decided on internal review that The worker’s PIAWE was:
    • $1970.00 (as indexed and rounded) for the first 52 weeks of weekly payments that are payable.
    • $1660.00 (as indexed and rounded) after 52 weeks of weekly payments are payable.
  4. The application for merit review was received by the Authority on 5 May 2017. It was made within time and in the approved form.

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”.
  3. Section 44BB of the 1987 Act provides for merit review of a work capacity decision of an insurer
    by the Authority.

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 submits:
    • She concurs with the decision of the Insurer with respect to additional overtime payments totalling $336.00 per week between 7 October 2016 and 6 October 2016.
    • However, she disputes the Insurer’s refusal to pay an additional $100 per week which she was receiving prior to her injury on top of her weekly wage and overtime.
    • As confirmed by the employee $100 was paid to the employer by a third party for services rendered by the worker as an employee of the the employer.
    • The employer then paid $100 per week to its employee the worker.
    • The worker attaches an email by the employer to the Appellant dated 30 October 2016. This email confirms the previous tripartite agreement between the third party, the employer and the worker so that the worker would be a paid a financial bonus for services rendered by her employer.
    • The worker attaches excel spreadsheets from the employer showing financial payments of $100 per week to the Appellant.
    • The worker attaches emails by the third party to the employer deducting $100 as
      agreed from his consultancy invoices.
  2. In reply, the Insurer has set out its reasons and calculations with reference to the legislation for what it considers to be the amount of the worker’s PIAWE.

Merit review and decision referred for review

  1. This matter involves a merit review of the work capacity decision of the Insurer in accordance with section 44BB(1)(b) of the 1987 Act.
  2. The review is not a review of the Insurer’s procedures in making the work capacity decision and/or internal review decision.
  3. It is only those work capacity decisions of an Insurer that are referred for review by a worker in accordance with section 44BB that the Authority is able to to review. It is the worker who is effectively able to “choose” which decision/s of the Insurer that are reviewed by the Authority.
  4. Section 43(1) of the 1987 Act describes the various types of work capacity decisions made by an Insurer.
  5. Included in section 43 is section 43(1)(d), which describes that a decision about the amount of an injured worker’s pre-injury average weekly earnings or current weekly earnings is a work capacity decision.
  6. In this review, the worker concurs with the decision of the Insurer with respect to additional overtime. She makes no submissions or does not contest the balance of the Insurer’s decision about her PIAWE.
  7. What the worker has referred for review is the Insurer’s decision to not include her PIAWE an amount of $100 per week she states she received on top of her weekly wage and overtime, an amount agreed to be paid by the third party through the business she worked for.
  8. I will proceed on this basis.

Pre-injury average weekly earnings

  1. The worker’s PIAWE is determined under section 44C(1) of the 1987 Act:
    • In this Division, pre-injury average weekly earnings, in respect of a relevant period in relation to a worker, means the sum of:
      • 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
      • 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. A finding on the amount of PIAWE first requires that I consider the “relevant period” and “ordinary earnings”.

Relevant period

  1. The “relevant period” is defined in this case under section 44D(1)(a) of the 1987 Act:
    • 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:
    • 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
  2. The worker signed a “worker’s injury claim form” on 25 October 2016. That form, at section 3, indicates the worker commenced working for the employer on 29 April 2013.
  3. That form also indicates the worker was employed full-time, and did not have any other employment at the time she was injured.
  4. There is no evidence before me that this period of employment was not continuous. The relevant period is therefore the worker’s continuous period of employment for the period of 52 weeks immediately before the injury on 7 October 2016.

Ordinary earnings

  1. There is much pay information before me, including payslips that fall outside, and post-date the relevant period. There is limited pay information before me concerning weeks that fall during the relevant period.
  2. However, noting that the worker was paid on the basis of a base rate or pay for ordinary hours worked, in the absence of further information having been provided, and in the absence of any dispute other than as to the treatment of the $100 payment referred to by the worker for which evidence has been provided by the worker, it is my view that there is sufficient information before me to proceed to review this matter.
  3. There is a payslip for the week 1 October 2016 to 7 October 2016, which is the date of the worker’s injury. It states, consistent with the claim form which she signed, that she was employed on a full-time basis.
  4. In that payslip, the worker’s annual salary is stated to be $84,968.00, on the basis that she was paid for a “base hourly” amount of $43.00 per hour, for a 38 hour base hourly week.
  5. Whilst, as the Insurer has indicated, her “standard hours” are stated to be 40 hours per week in the claim form, it is also stated that her usual hourly base rate of pay is $43.00, consistent with her payslip and that her usual pre-tax weekly earnings were that as stated on her payslip, being $1634.00.
  6. When one does the mathematics, it is apparent that the amount referred to in both the payslip and the claim form of $1634.00 per week must be calculated on the basis of a 38 hour full-time week, which are the hours referred to in her payslip, and again I note the worker was employed on a full-time basis consistent with this. It is therefore my view that the worker’s “ordinary hours of work” as agreed between her and her employer, are 38 hours per week, as indicated in her pay records: section 44H(b)(i) of the 1987 Act.
  7. In addition, her payslip reveals she was paid overtime (which is not in dispute) and laundry and meal allowances. I note that these allowances are not the subject of any dispute and have been correctly, in my view, excluded by the Insurer from her base rate of pay by virtue of the definition contained in section 44G(1) of the 1987 Act.
  8. The amount which is the subject of the dispute is an additional amount of $100 the worker was paid, as referred to by the worker in her submissions. For reasons I will refer to, in my view there is no question that there was some type of agreement or arrangement that she be paid an additional amount of $100. However, in my view, this $100 cannot be be included in the worker’s PIAWE for the reasons provided below.
  9. As the worker’s base rate of pay is calculated on the basis of ordinary hours worked, her “ordinary earnings” are determined under section 44E(1)(a) of the 1987 Act which provides:
    • 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:
      • if the worker’s base rate of pay is calculated on the basis of ordinary hours worked, the sum of the following amounts:
      • the worker’s earnings calculated at that rate for ordinary hours in that week during which the worker worked or was on paid leave,
      • amounts paid or payable as piece rates or commissions in respect of that week,
      • the monetary value of non-pecuniary benefits provided in respect of that week, or
    • A reference to ordinary earnings does not include a reference to any employer superannuation contribution.
  10. “Base rate of pay” is defined by section 44G of the 1987 Act:
    • 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):
      • incentive based payments or bonuses,
      • loadings,
      • monetary allowances,
      • piece rates or commissions,
      • overtime or shift allowances,
      • any separately identifiable amount not referred to in paragraphs (a) to (e).
  11. Ultimately, the issue in dispute in this review is whether the $100 per week the worker has referred to, which was paid to the employer by Dr Piotr Michalski, and then Hamilton Medical Centre, which was then paid $100 per week to the worker, are included by the relevant definitions and provisions contained in the legislation that apply to the determination of The worker’s PIAWE.
  12. The Insurer has proceeded on the basis that the $100 should not be included as the amount is not included in her payslip. Whilst the fact that this amount was not included in her payslip is ultimately relevant as to how the $100 amount is to be characterised, ultimately this is not determinative of the issue.
  13. The question, in my view, is how the $100 payment, having regard to the evidence before me, is to be correctly characterised in light of the entire information before and in applying the relevant legislative definitions, and in particular having regard to the definition of the worker’s “base rate of pay” as provided by section 44G of the 1987 Act.
  14. This is because, as I have indicated, the information before me shows that the worker’s was paid by way of a base rate of pay for ordinary hours of a 38 hour work week. Therefore her PIAWE must be determined on the basis of her “ordinary earnings” and must therefore determined under section 44E(1)(a) of the 1987 Act.
  15. Section 44E(1)(a) describes what may included in “ordinary earnings”, and therefore the worker’s PIAWE. The section states in relation to pre-injury average weekly earnings, the ordinary earnings of a worker in relation to a week during the relevant period are (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, and (iii) the monetary value of non-pecuniary benefits provided in respect of that week.
  16. The worker submits that $100 was paid by the third party for “services rendered” by the worker as an employee of the em[ployer. She states that the employer then paid $100 per week to her. She has attached an email by the third party to the Appellant dated 30 October 2016.
  17. She states that this email confirms the previous tripartite agreement between the third party, the employer and her so that she would be a paid a “financial bonus” for services rendered by her employer. She attaches excel spreadhseets from the employer showing financial payments of $100 per week to her.
  18. As I have indicated in my view, there is no question there was some type of agreement that an amount of $100.00 was to be paid.
  19. However, as the worker was paid by way of a base rate of pay calculated on the basis of ordinary hours worked, one must turn to the definition of a “base rate of pay” to determine what is included and excluded in the calculation of her PIAWE.
  20. I have already referred to the definition of the “base rate of pay” in section 44G of the 1987 Act. It states that “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 (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). 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” (emphasis added) (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).
  21. The emphasised words above are relevant in the context of this dispute. In the worker’s own submissions to the Authority it is stated (emphasis added):
    • “Email by the third party to the Appellant dated 30 October 2016 (cc: the Employer)- this email confirms the previous tripartite agreement between the third party, the employer and the Appellant so that the Appellant would be paid a financial bonus for her services rendered by her employer (with the third party) paying the employer for those services”.
  22. Indeed, as the worker has referred to, in an email dated 30 October 2016 the third party states (emphases added):
    • “Worker, a few words about your payment. Few months ago we were talking with the employer about some financial bonus we can create for your efforts and contributions to make sure you will stay with us. Then, acknowledging your contribution- I agreed with the employer that I will pay $100 per week for your as a bonus/incentive payment”.
  23. The evidence before me very clearly supports that the additional $100 per week that was agreed the worker be paid, was as as an incentive based payment or bonus. These are the words specifically used to characterise the amount in the information before me.
  24. Section 44G(1)(a) specifically excludes “incentive based payments or bonuses” from the base rate of pay. Accordingly, that amount of $100 must be excluded from the worker’s base rate of pay as a base rate of pay exclusion.
  25. Even if this were not correct and the amount did not fall within the definition provided by section 44G(1)(a), in my view, the evidence supports that the $100 was “any separately identifiable amount not referred to in paragraphs (a) to (e)” a sprovided by section 44G(1)(f) of the 1987 Act, and therefore cannot be included in the worker’s base rate of pay in any event.
  26. This is because the amount is a separate amount identified and referred to between the parties. It is certainly not included in the calculation of her weekly base rate of pay of $1634.00 as indicated in her pay information.
  27. Further, the information does not support that the amount of $100 is otherwise caught by section 44E(1)(e) as “piece rates or commissions in respect of that week”, or “the monetary value of non-pecuniary benefits provided in respect of that week”. It cannot therefore be included in the calculation of her ordinary earnings. In my view, there is no information that supports that the amount of $100 referred to can be characterised as anything other than how it was described in the evidence before me, which is as a bonus/incentive payment.
  28. I therefore find that the worker’s base rate of pay was $43.00 per hour during the relevant period and $1634.00 per week for ordinary hours of 38 hours per week. I also note is consistent with her annual stated agreed salary of $84,968.00.
  29. Accordingly, the worker’s ordinary earnings “calculated at that rate for ordinary hours in that week during which the worker worked or was on paid leave” are $1634.00 per week. I note this amount does not include overtime and shift payments for the first 52 weeks, which are not in dispute.

Average of ordinary earnings expressed as a weekly sum

  1. The first part of PIAWE under section 44C(1)(a) of the 1987 Act is the average of the worker’s ordinary earnings during the relevant period (excluding any week during which she did not actually work and was not on paid leave) expressed as a weekly sum.
  2. The worker’s ordinary earnings are her earnings calculated at the base rate of pay for ordinary hours in the weeks during which she worked or was on paid leave under section 44E(1)(a)(i).
  3. There is no information before me as to weeks that ought to be excluded, and there has no dispute raised before me about this. Further, on the information that is now before me, it is not argued and there is no information to support that there are amounts applicable in this case for piece rates or commissions or non-pecuniary benefits under section 44E(1)(a)(ii) and (iii).
  4. The average of the worker’s ordinary earnings during the relevant period expressed as a weekly sum equals:

($43.00 x 38 hours x 52 weeks) ÷ 52 weeks

= ($84,968.00 which is her annual salary as stated on her payslip) ÷ 52 weeks

= $1634.00.

Calculation of PIAWE

  1. PIAWE is calculated under section 44C(1) for the first 52 weeks of weekly payments as $1634.00 + (the undisputed amount of overtime, being) $306.38 = $1940.38 (unindexed) or $1970.00 (indexed and rounded).
  2. I find that after 52 weeks of weekly payments have been payable, overtime and shift allowance payments are excluded from PIAWE so it becomes $1634.00 (unindexed) or $1660.00 )indexed and rounded).
  3. As my calculation of PIAWE does not ultimately differ from that of the Insurer (although I note my reasons for doing so are expressed differently) I make no recommendation, noting that the making of recommendations by the Authority is a matter of discretion for the Authority.