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Findings and recommendations on merit review 004/16

Date of Review: 2 September 2016

Our Reference: 004/16

Findings on Review

  1. The following are findings made by the State Insurance Regulatory Authority (“the Authority”) on review and are to be the basis for the Insurer’s work capacity decision.
  2. In accordance with section 44C(1) of the Workers Compensation Act 1987 (“the 1987 Act”), the amount of The worker’s pre-injury average weekly earnings (“PIAWE”) is $811.26.

Recommendations Based On Findings

  1. Under section 44BB(3)(e) of the 1987 Act the Authority may make binding recommendations to an insurer based on the findings of its review.
  2. The Authority does not make any recommendations to the Insurer for the reasons given below.

Background

  1. The worker sustained an injury on 24 September 2014 in the course of her employment as a sales assistant with the employer.
  2. On 14 April 2016, the Insurer and the worker agreed to consent orders in the Workers Compensation Commission, which were to the effect that the Insurer was to pay the worker weekly payments of compensation at the rate of $400.00 from 8 November 2015 and ongoing (“consent orders”).
  3. On or about 29 June 2016, the worker lodged a complaint with WIRO in relation to the weekly payments of compensation she received from the Insurer following surgery she underwent on 15 June 2016. The worker claimed that although she was totally incapacitated for work since 15 June 2016, the Insurer continued to pay her according to the consent orders which were based on partial incapacity for work. The worker claimed that her weekly payments of compensation should have been 80% of her PIAWE which she believed was $1,051.00.
  4. In an email to WIRO dated 6 July 2016, the Insurer advised that it would pay the worker $649.00 per week, being 80% of her PIAWE which they had calculated at $811.25. The Insurer outlined its calculations and explained how it had arrived at that amount for PIAWE.
  5. The worker’s legal representatives, MRM Lawyers sent an email to the Insurer on 3 August 2016 stating that they had not yet received a response in relation to an application that the worker had made to the Insurer on 24 June 2016 that her weekly payments of compensation be altered.
  6. Legal representatives for the Insurer, responded to the worker’s legal representatives in a letter dated 3 August 2016. They stated that they had been advised to respond to the “request for review” and they set out calculations in respect to the worker’s PIAWE, confirming the same figure of $811.25.
  7. The worker made an application for merit review by the Authority. The application was received on 5 August 2016. The application has been made within 30 days after The worker received notice of the Insurer’s decision on internal review, as is required under section 44BB(3)(a) of the 1987 Act. The application has been lodged in the form approved by the Authority.

Legislation and Guidelines

  1. 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 2016 (“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”); and the
    • WorkCover Work Capacity Guidelines as amended (“the Work Capacity Guidelines”).
  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.

Documents Considered

  1. The documents I have considered in this review are those listed in, and attached to, the application for merit review, the Insurer’s reply and any further information provided by the parties.
  2. I am satisfied that both parties have had the opportunity to respond to the other party’s submissions and that the information provided has been exchanged between the parties.

Submissions

  1. In the application for merit review, the worker’s legal representatives make the following submissions on her behalf:
    • The worker became totally incapacitated for work from 14 June 2016 as a result of surgery.
    • The worker requested that the Insurer review her weekly payments from 14 June 2016. The Insurer claimed that there were no entitlements.
    • On 24 June 2016, the worker wrote and requested a formal review under section 42 of the 1987 Act. The Insurer failed to respond within the 28 day period. The worker wrote again to the Insurer however did not get a response. The worker now applies to have the Insurer’s non-compliance with section 42 reviewed.
    • The worker seeks a review of her weekly payments entitlement. Her PIAWE is $1049.00.
    • The worker is now in the second entitlement period and seeks weekly payments for total incapacity at $839.20 per week (80% of PIAWE), from 14 June 2016 to date.The worker has continued to provide certificates of capacity to the Insurer at all relevant times.
    • The Insurer has obfuscated, ignored and wilfully not dealt with the worker’s claim.
  2. In the reply to the worker’s application, the Insurer outlines the history of the dispute and provides information and calculations as to how it determined the worker’s PIAWE at $811.25. The Insurer states that they have now also indexed the worker’s PIAWE in accordance with section 82A of the 1987 Act and arranged for an additional $24.10 per week to be paid to the worker for the period 14 June 2016 to 25 July 2016. The Insurer also makes submissions in relation to continuing to pay the worker in accordance with the consent orders from 12 July 2016 onwards.
  3. In an email dated 17 August 2016, the worker’s legal representatives made the following further submission:
    • “…The Insurer erroneously calculates her PIAWE upon base rate ordinary hours only though the Applicant regularly worked overtime and weekends as part of her contracted employment with the Insured [sic]”.

Reasons

Nature of Merit Review

This matter involves a merit review of the Insurer’s work capacity decision in accordance with section 44BB(1)(b) of the 1987 Act.

  1. The review is not a review of the Insurer’s processes in making the work capacity decision and/or the internal review 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.
  2. I note that the worker’s request that the Authority review the Insurer’s non-compliance with her application made under section 42 of the 1987 Act is outside of the scope of a merit review and accordingly not addressed below.
  3. The worker makes references to the Authority reviewing her weekly payments of compensation from 14 June 2016 to date. While the worker submitted that “the Insurer claimed that there were no entitlements” in her application, it appears that the Insurer has rectified this matter. There does not currently appear to be any dispute between the parties in relation to the worker’s work capacity since her surgery. The Insurer’s reply indicates that the worker’s work capacity has been determined in accordance with the certificates of capacity provided by the worker. The submissions and dispute before me is in respect to the Insurer’s calculation of the worker’s PIAWE. I will therefore proceed to review this work capacity decision of the Insurer.

Pre-injury average weekly earnings

  1. PIAWE is defined by section 44C 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: 
      • 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. In order to calculate the worker’s PIAWE, section 44C(1)(a) of the 1987 Act requires that I calculate 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.
  3. The “relevant period” is defined by section 44D of the 1987 Act as follows:
    • 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, or
    • 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.
    • if, during the period of 52 weeks immediately before the injury, a worker:
      • is promoted, or
      • is appointed to a different position, otherwise than on a temporary basis) and, as a result, the worker’s ordinary earnings are increased, the relevant period in relation to the worker begins on the day on which the promotion or appointment takes effect.
  4. Payslips before me indicate that the worker was continuously employed by the employer Liquor for over 52 weeks immediately before her injury.
  5. The worker’s legal representatives confirmed in an email response to the Authority dated 17 August 2016, that during the 52 weeks immediately before her injury, the worker was not employed by another employer, did not receive any promotions, was not proposed or aware of any upcoming promotions and did not voluntarily reduce her hours of work.
  6. I find that the “relevant period” is 52 weeks immediately before the injury.
  7. “Ordinary earnings” are defined by section 44E of the 1987 Act as follows:
    • 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
    • in any other case, the sum of the following amounts:
      • the actual earnings paid or payable to the worker in respect of that week,
      • 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.
    • A reference to ordinary earnings does not include a reference to any employer superannuation contribution.
  8. Section 44E(1) of the 1987 Act requires that the worker’s “ordinary earnings” be calculated at the “base rate of pay” for “ordinary hours of work” in any week during which she worked or was on paid leave.
  9. I have the worker’s payslips for all of the 52 weeks immediately before her injury, being 23 September 2013 to 21 September 2014, before me. Upon review of the payslips, I am satisfied that the worker worked or was on paid leave in all of the 52 weeks in the relevant period. Accordingly, I find that the worker’s “ordinary earnings” should be averaged over the 52 weeks of the relevant period.
  10. “Base rate of pay” is defined by section 44G of the 1987 Act as follows:
    • 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. The worker’s pay slips indicate that her hourly rate of pay in the relevant period was:
    • $21.00 from 23 September 2013 to 1 December 2013,
    • $21.31 from 2 December 2013 to 1 June 2014, and
    • $21.63 from 2 June 2014 to 21 September 2014.
  12. The worker’s payslips indicate that she received additional amounts to her hourly rate of pay throughout the relevant period. Those amounts are classified on her payslip as:
    • “Annual Leave Loadi”
    • “Higher Duties Allo”
    • “OT 1.5”
    • “OT 2.0”
    • “PHol 2.5”
    • “Sunday Penalty 1.5”
    • “Sunday Penalty 1.6”
    • “No break 0.5”
  13. Section 44G(1) of the 1987 Act, outlined above, defines “base rate of pay” to be exclusive of loadings, monetary allowances, overtime or shift allowances and any other separately identifiable amount.
  14. I consider that the amounts that the worker received for “Annual Leave Loadi” is captured as “loadings” under section 44G(1)(b); the amount received for “Higher Duties Allo” is captured under “monetary allowances” under section 44G(1)(c); the amount received for “OT 1.5”, “OT 2.0”, “PHol 2.5”, “Sunday Penalty 1.5” and “Sunday Penalty 1.6” is captured under “overtime or shift allowance”’ under section 44G(1)(e); and the amounts received for “No break 0.5” is captured as ‘any separately identifiable amount’ under section 44G(1)(f) of the 1987 Act.
  15. Accordingly, the above additional amounts that the worker received to her hourly rate of pay are to be excluded from the calculation of her “base rate of pay”.
  16. I find that the worker’s “base rate of pay” was $21.00 from 23 September 2013 to 1 December 2013, $21.31 from 2 December 2013 to 1 June 2014 and $21.63 from 2 June 2014 to 21 September 2014.
  17. “Ordinary hours of work” are defined in section 44H of the 1987 Act as:
    • In relation to pre-injury average weekly earnings and current weekly earnings, the ordinary hours of work:
      • in the case of a worker to whom a fair work instrument applies are:
      • if the ordinary hours of work in relation to a week are agreed or determined in accordance with a fair work instrument between the worker and the employer—those hours, or
      • in any other case, the worker’s average weekly hours (excluding any week during which the worker did not actually work and was not on paid leave) during the relevant period, or
    • in the case of a worker to whom a fair work instrument does not apply:
      • if the ordinary hours of work are agreed between the worker and the employer, those hours, or 
      • in any other case, the worker’s average weekly hours (excluding any week during which the worker did not actually work and was not on paid leave) during the relevant period.
  18. I have a copy of the worker’s employment contract with the employer before me dated 26 June 2012. The contract notes that the worker’s “employment terms and conditions will be set out in the Agreement 2011” and makes a number of further references to the agreement. The worker’s legal representatives advised in an email that the applicable industrial instrument at the time of the worker’s injury was the Agreement 2014 (“fair work instrument”).
  19. I note that the worker’s employment contract states:
    • As a full time member you will be engaged to perform 152 ordinary hours of work across a 4 week roster cycle…
    • Working in the retail industry involves working hours of work that include regular evening and weekend work…
    • You may be required to work reasonable overtime in excess of your normal working hours.
  20. The fair work instrument does not specify the ‘hours of work’ however provides appendices of weekly rates of pay for workers at different levels which are to be divided by 38 to determine the hourly rates. The same rates are also attached to the worker’s employment contract.
  21. On the information currently before me, I am satisfied that the worker’s “ordinary hours of work” are agreed or determined, in accordance with a fair work instrument, to be 38 hours per week (152 ordinary hours/4 weeks).
  22. Pursuant to section 44H(a)(i) of the 1987 Act, I find that the worker’s “ordinary hours of work” are 38 hours per week and that her base rate of pay is calculated on the basis of these ordinary hours.
  23. The worker’s payslips indicate that she did not receive any piece rates, commissions or non-pecuniary benefits in the relevant period that would be relevant to the calculation of her “ordinary earnings” under section 44E(1) of the 1987 Act.
  24. In accordance with section 44E(1)(a)(i) of the 1987 Act, I find that the worker’s “ordinary earnings” in relation to a week during the relevant period was:
    • $798.00 per week (38 hours per week x $21.00) from 23 September 2013 to 1 December 2013 (10 weeks),
    • $809.78 per week (38 hours per week x $21.31) from 2 December 2013 to 1 June 2014 (26 weeks), and
    • $821.94 per week (38 hours per week x $21.63) from 2 June 2014 to 21 September 2014 (16 weeks).
  25. In order to calculate the worker’s average ordinary earnings for the relevant period in accordance with section 44C(1)(a) of the 1987 Act, I must divide the total of the worker’s “ordinary earnings” in the relevant period by 52. The worker’s total “ordinary earnings” in the relevant period was $42,185.32 [$7,980.00 ($798.00 x 10 weeks) + $21,054.28 ($809.78 x 26 weeks) +$13,151.04 ($821.94 x 16 weeks)].
  26. The worker’s average ordinary earnings for the relevant period in accordance with section 44C(1)(a) of the 1987 Act is therefore $811.26 per week ($42,185.32/52).
  27. I note that Section 44C(1)(b) of the 1987 Act provides:
    • 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).
  28. As noted above, the worker’s pay slips indicate that she received amounts for overtime and shift allowances in the relevant period. I acknowledge the submission made by the legal representatives for the worker in relation to the worker regularly working overtime and weekends as part of her contracted employment. The provision above however stipulates that overtime and shift allowance payments are only included in the calculation of PIAWE in the first 52 weeks for which weekly payments are payable.
  29. The Insurer’s reply dated 11 August 2016 states that the worker had been paid 73 weeks of weekly payments. At the time of the Insurer’s decision about the worker’s PIAWE, The worker had been in receipt of over 52 weeks of weekly payments. Overtime and shift allowances are therefore not permitted to be included in the calculation of the worker’s PIAWE.
  30. I find that The worker’s PIAWE is $811.26 in accordance with section 44C(1) of the 1987 Act.
  31. Given that I have found that the correct and preferable decision is the same as that of the Insurer, there is no need for the Insurer to adopt any alternative course of action on the basis of my finding. Noting that recommendations by the Authority are discretionary, I make no recommendation.