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Findings and recommendations on merit review 014/18

Our Reference: 014/18

Findings on review

  1. The following is a finding made by the State Insurance Regulatory Authority (“the Authority”) on review.
  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 $1,134.00.

Recommendation based on finding

  1. In accordance with section 44BB(3)(e) of the 1987 Act, the Authority may make recommendations based on its findings that are binding on the Insurer.
  2. The Authority makes no recommendation in this matter for the reasons below.

Background

  1. The worker sustained an injury to their knee while working at a Bar with their pre-injury employer. In June 2017, during the course of treatment for their knee injury, they also sustained an injury to their lower back. At the time of the injury, the worker was also working as a driver.
  2. In January 2016, the Insurer made a work capacity decision determining the worker’s PIAWE to be $1,134.00.
  3. The worker applied for an internal review of the Insurer’s work capacity decision. The Insurer conducted an internal review in October 2017 and calculated the worker’s PIAWE to be the same amount however determined that with indexation their PIAWE amounted to $1,160.00. The Insurer determined PIAWE pursuant to Item 3 of Schedule 3 of the 1987 Act.
  4. The worker made an application for merit review by the Authority. The application was submitted in November 2017. The application was made within 30 days after the worker received notice of the 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

  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).
  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.

Submissions

  1. The worker’s legal representatives make the following submissions on their behalf in the application for merit review:
    • At the time of the injury, the worker worked two jobs. One for 38 hours a week with their pre-injury employer and the other as a driver with their secondary pre-injury employer. The hours with their pre-injury employer were regular, however the hours with secondary pre-injury employer were dependent upon the work and the worker’s willingness to do driving.
    • As a result of the injury, the worker sustained an incapacity for their employment with their pre-injury employer however they could continue to drive. However, as the result of the back injury in June 2017, the worker’s ability to work as a driver ceased and they now have a restriction of driving for no longer than 30 minutes. The reality of that restriction is that they cannot perform any work for their secondary pre-injury employer as it always exceeds that length of time. The worker has returned to work with pre-injury employer but still cannot work as a driver.
    • The Insurer’s internal review decision is based solely upon their earnings from the pre-injury employer. No amounts were allowed in respect of the worker’s earnings as a driver.
    • The Insurer asserts that the worker is a worker that falls within Item 3, Column 2 of Schedule 3 of the 1987 Act. The worker seeks a merit review of this decision.
    • The primary submission is that the Insurer has neglected to consider Item 7 of Schedule 3 of the 1987 Act which applies to the following workers:

    Worker 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.

    • A worker’s PIAWE under Item 7 is to be calculated as follows:

    The worker’s pre-injury average weekly earnings are to be calculated in accordance with Division 2 of Part 3 with reference to earnings from work with all the employers.

    • As the worker has returned to work with their pre-injury employer but still has incapacity for their secondary pre-injury employer, Item 7 of Schedule 3 is the appropriate category to determine the basis of the worker’s PIAWE.
    • The worker’s average earnings for the 12 months period at their secondary pre-injury employer are $226.37 per week.
    • Accordingly, it is submitted that the worker’s earnings as determined by the Insurer with respect to the work with the pre-injury employer is correct, however, what needs to be included on top is the earnings from their secondary pre-injury employer in accordance with section 44E(i)(b).
    • Accordingly, it is submitted that the worker’s PIAWE ought to be assessed at $1,386.37.
  2. In the reply to the worker’s application for merit review, the Insurer provides a summary of its work capacity decision in relation to PIAWE and makes the following submissions:
    • In respect to the worker’s submission that their PIAWE should be determined pursuant to Item 7 of Schedule 3 of the 1987 Act, the Insurer submits that the worker has not submitted evidence of their engagement/contract with their secondary pre-injury employer to indicate that they are an employee or deemed employee of their secondary pre-injury employer. Further, the Tax Summary for the period 2016/0 states that nothing in the summary constitutes an employment relationship between the secondary pre-injury employer and the worker, neither express or implied. Accordingly, the earnings from the secondary pre-injury employer must be excluded, as they may be earnings, from self-employment/business earnings which are excluded from the calculation of PIAWE.
    • At the time of the internal review, the worker’s PIAWE was calculated in accordance with Item 3 of Schedule 3 of the 1987 Act and clause 10A of the 2010 Regulation. Accordingly, their PIAWE is $1,134.00 per week subject to indexation.
    • In the application for merit review, the worker has requested a review of the original work capacity decision dated October 2017 about their current work capacity and the amount that they are able to earn in suitable employment. The Insurer submits that the original work capacity decision is dated January 2017 and that there were no work capacity decisions made about the worker’s current work capacity or about the amount they are able to earn in suitable employment.
  3. In December 2017, the Authority sent an email to the worker’s legal representatives to confirm the work capacity decision the worker sought to have reviewed and requesting information in support of the worker’s submissions regarding their employment with the secondary pre-injury employer. In an email of the same date, the worker’s legal representatives provided the following response:
  4. I am not aware of any decision of the insurer regarding work capacity or the worker ability to earning suitable employment (sic).

    The merit review application is only in respect of the calculation of the PIAWE and whether the insurer ought to have included the earnings of the worker’s concurrent employment with their secondary pre-injury employer in those calculations.

    Attached are the contracts with their secondary pre-injury employer. The worker has not retained signed copies.

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.

Reasons

Nature of merit 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. The review requires that I consider all of the information before me on its merits and make findings and recommendations that, in light of the information before me, are most correct and preferable.
  3. Work capacity decisions by Insurers are described under section 43(1)(d) of the 1987 Act to include a decision about the amount of an injured worker’s PIAWE. This is the decision the worker has referred to the Authority for review.

Pre-injury Average Weekly Earnings

  1. The worker submits that they are a worker of a class referred to in Column 2 of Item 7 in Schedule 3 of the 1987 Act and that their PIAWE should be determined pursuant to Column 3 of that item:
Schedule 3
Column 1Column 2Column 3
ItemClass of worker at time of injuryCalculation of pre-injury average weekly earnings
7Worker 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 of those employersThe worker's pre-injury average weekly earnings are to be calculated in accordance with Division 2 of Part 3 with reference to earnings from work with all employers.
  1. The worker submits that they are a worker of a class referred to in Column 2 of Item 7 in Schedule 3 of the 1987 Act and that their PIAWE should be determined pursuant to Column 3 of that item:
Column 1Column 2Column 3
ItemClass of worker at time of injuryCalculation of pre-injury average weekly earnings
3Worker employed by 2 or more employers who works for one of those employers for at least the prescribed number of hours each week and to whom no fair work instrument is applicable.The worker's pre-injury average weekly earnings are to be calculated in accordance with Division 2 of Part 3 with reference to the work for the employer for whom the worker works for at least the prescribed number of hours.
  1. Both the class of workers identified by the worker and the Insurer relate to workers “employed by 2 or more employers…”. Accordingly, in order for the worker’s PIAWE to be calculated under Column 3 of either Item 3 or Item 7 in Schedule 3 of the 1987 Act, the worker must have had two employers at the time of the injury.
  2. The information before me indicates that the worker was employed at a Bar with the pre-injury employer at the time of the injury. The worker submits that they were also employed by the secondary pre-injury employer as a driver at that time. In response to a request for information in support of this submission, the worker submitted print outs of 3 unsigned and undated agreements. The worker submits that they have not retained signed copies of these agreements.
  3. In order for the secondary pre-injury employer to be considered an ‘employer’ of the worker at the time of the injury, an employment relationship must have existed between these parties. The documentation submitted by the worker however does not support such a relationship existed. Rather the agreements indicate that the worker entered into an agreement to use the secondary pre-injury employer’s services.
  4. The Services Agreement contains terms which state that the secondary pre-injury employment is a services provider and does not act as an agent for the transportation of passengers.
  5. The Services Agreement goes on to stipulate that the person entering into the agreement must obtain and maintain their own insurance coverage for protection against bodily injury and property damage if they want such coverage.
  6. The Services Agreement also states that the agreement is not an employment agreement and does not form an employment relationship.
  7. The worker has also submitted their tax summary from their secondary pre-injury employer for the period 2016/0. As submitted by the Insurer, this document specifically provides that is does not constitute as tax advice nor an employment relationship.
  8. On the information before me, I am not satisfied an employment relationship existed between the worker and the secondary pre-injury employer. The information also does not support such a relationship can be deemed to have existed. The worker’s relationship with the secondary pre-injury employer was that of an agreement to use their services.
  9. I am not satisfied that the worker had any other ‘employer’ further to their pre-injury employer at the time of the injury. I therefore do not consider the worker a worker “employed by 2 or more employers…” at the time of the injury.
  10. The worker is not a worker within the class of workers identified in Schedule 3 of the 1987 Act. Schedule 3 of the 1987 Act therefore does not apply to the determination of their PIAWE.

Calculation of PIAWE

  1. I have found above that the worker only had one employer at the time of the injury, being their pre-injury employer. In that case, their PIAWE is to be determined pursuant to section 44C of the 1987 Act, with reference to that employer.
  2. Section 44C(1) provides:
    1. In this Division, pre-injury average weekly earnings, in respect of a relevant period in relation to a worker, means the sum of:
      1. 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
      2. 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).
  1. 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 they did not actually work and was not on paid leave) expressed as a weekly sum.
  2. The ‘relevant period’ is defined by section 44D of the 1987 Act as follows:
    1. 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: 
      1. 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
      2. 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.
    2. If, during the period of 52 weeks immediately before the injury, a worker:
      1. is promoted, or
      2. 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.

  1. There are no payslips before me in respect to the worker’s employment with the pre-injury employer prior to the injury. The Insurer indicates in its internal review that such payslips were also not available to the Insurer. There are also no employment contracts or any further information in relation to the worker’s employment with their pre-injury employer before me. The Authority made two requests for further information on XX and XX December 2017.
  2. The only relevant information before me is a Calculating Pre-injury Average Weekly Earnings form dated January 2017 (“PIAWE form”) completed by what appears to be the worker’s accountant. I note that the Insurer also used this form to determine the worker’s PIAWE.
  3. The PIAWE form indicates that the worker commenced their employment with their pre-injury employer in the late 1990s and was continuously employed by them for over 52 weeks immediately before the injury. The form indicates that they were not promoted or appointed to a new position in the 52 weeks before the injury.
  4. I am therefore satisfied that the ‘relevant period’ is 52 weeks immediately before the injury.
  5. ‘Ordinary earnings’ are defined by section 44E of the 1987 Act as follows:
    1. 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: 
      1. if the worker’s base rate of pay is calculated on the basis of ordinary hours worked, the sum of the following amounts:
        1. the worker’s earnings calculated at that rate for ordinary hours in that week during which the worker worked or was on paid leave,
        2. amounts paid or payable as piece rates or commissions in respect of that week,
        3. the monetary value of non-pecuniary benefits provided in respect of that week, or 
      2. in any other case, the sum of the following amounts:
        1. the actual earnings paid or payable to the worker in respect of that week,
        2. amounts paid or payable as piece rates or commissions in respect of that week,
        3. the monetary value of non-pecuniary benefits provided in respect of that week. 
    2. A reference to ordinary earnings does not include a reference to any employer superannuation contribution.
  1. The PIAWE form indicate that the worker’s base rate of pay was calculated on the basis of ordinary hours worked, in accordance with Section 44E(1)(a)(i) of the 1987 Act.
  2. Section 44E(1)(a)(i) of the 1987 Act requires the worker’s ‘ordinary earnings’ be calculated at the ‘base rate of pay’ for ‘ordinary hours of work’ in any week during which they worked or was on paid leave.
  3. The PIAWE form indicates that the worker worked or was on paid leave in all of the 52 weeks in the relevant period.
  4. I find that the worker’s ‘ordinary earnings’ should be averaged for 52 weeks of the relevant period.
  5. ‘Base rate of pay’ is defined by section 44G of the 1987 Act as follows:
    1. 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):
      1. incentive based payments or bonuses,
      2. loadings,
      3. monetary allowances,
      4. piece rates or commissions,
      5. overtime or shift allowances,
      6. any separately identifiable amount not referred to in paragraphs (a) to (e).
  1. The worker’s hourly rate of pay throughout the relevant period is indicated as $27.00 on the PIAWE form. This however appears to be a typographical error as it does not equate to the $1,134.00 gross weekly earnings stated in the same form and which the worker has submitted is ‘correct’. The Insurer has also noted such an error.
  2. Based on the worker’s gross weekly rate of $1,134.00 indicated on the PIAWE form, it appears the worker’s hourly rate of pay was $29.84 ($1,134.00 ÷ 38 hours).
  3. The PIAWE form indicates that the worker did not receive any additional relevant to section 44G(1)(a)-(f).
  4. I find $29.8421 to be the worker’s ‘base rate of pay’ in the relevant period.
  5. ‘Ordinary hours of work’ are defined in section 44H of the 1987 Act as:
    1. In relation to pre-injury average weekly earnings and current weekly earnings, the ordinary hours of work:
      1. in the case of a worker to whom a fair work instrument applies are:
        1. 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
        2. 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 
    2. in the case of a worker to whom a fair work instrument does not apply:
      1. if the ordinary hours of work are agreed between the worker and the employer, those hours, or
      2. 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.
  1. The PIAWE form indicates that a Fair Work Instrument did not apply to the worker’s employment. As noted above, the parties have also not been able to provide the Authority with an employment contract or any similar agreement.
  2. The PIAWE form indicates that the worker’s ordinary hours of work were however ‘agreed’ to be 38 hours per week.
  3. In these circumstances, I am satisfied the worker’s ordinary hours of work should be determined in accordance with section 44H(b)(i) of the 1987 Act.
  4. I find the worker’s ordinary hours of work to be 38 hours per week.
  5. Given that the worker’s ‘base rate of pay’ was calculated on the basis of ‘ordinary hours of work’ and both these amounts have been established, the worker’s ‘ordinary earnings’ can be determined in accordance with section 44E(1)(a) of the 1987 Act.
  6. The worker’s earnings for the ordinary hours of work during the relevant period is therefore $1,134.00 ($29.8421 x 38 hours) per week.
  7. The PIAWE form indicates that the worker did not receive any piece rates, commissions or non-pecuniary benefits during the relevant period that would be relevant to the calculation of their ‘ordinary earnings’ pursuant to section 44E(1)(a)(ii)&(iii) of the 1987 Act.
  8. The worker’s average ordinary earnings for the relevant period is therefore $1,134.00 per week.
  9. I note that Section 44C(5) of the 1987 Act provides:
    1. 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:
      1. the worker worked paid overtime or carried out work that attracted a shift allowance during the relevant period, and
      2. 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.
  1. The PIAWE form indicates that the worker did not receive any amounts for overtime and shift allowances in the relevant period. Overtime and shift allowances are therefore not included in the calculation of the worker’s PIAWE.

Finding on PIAWE

  1. I find that the worker’s PIAWE is $1,134.00 per week.
  2. I note that the amount of the worker’s PIAWE, as calculated above, should be varied by the Insurer on each review date after they became entitled to weekly payments in respect of the injury, in accordance with the indexation provisions under section 82A of the 1987 Act.
  3. The outcome of my review does not differ from the outcome of the Insurer’s decisions. It is therefore not necessary for me to make any recommendations to the Insurer.

Merit reviewer
Merit Review Service
Delegate of the State insurance regulatory authority