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Findings and recommendations on merit review 024/18

Our Reference: 024/18
Date of review:

Findings on review

  1. The following findings are made by the State Insurance Regulatory Authority (the Authority) on review and are to be the basis of the Insurer’s review decision.
  2. Under section 44C(1)(a) of the Workers Compensation Act 1987 (the 1987 Act), the amount of  the worker’s pre-injury average weekly earnings (PIAWE) is $759.66.
  3. Under section 44C(1)(a) and (b) of the 1987 Act, the amount of the worker’s PIAWE is $805.03 (but only for the purposes of the calculation of weekly payments payable in the first 52 weeks for which weekly payments are payable).

Recommendation based on findings

  1. The following recommendation is binding on the Insurer and must be given effect to by the Insurer under section 44BB(3)(g) of the 1987 Act.
  2. The Insurer is to determine and pay the worker’s entitlement to weekly payments in accordance with my findings above (subject to any notice period required).

Background

  1. The worker sustained an injury while working at their pre-injury employer.
  2. In July 2017, the Insurer sent notice to the worker that it had made a work capacity decision about the amount of their PIAWE.
  3. The worker applied for an internal review by the Insurer in March 2018. In April 2018, the Insurer gave the worker written notice that it decided their PIAWE was $805.20 for the first 52 weeks and $635.38 after 52 weeks.
  4. The worker’s application for merit review by the Authority was received in April 2018. The application has been validly made under section 44BB(3)(a) of the 1987 Act.

Legislation

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

Information considered

  1. The documents I have considered for this review are the worker’s 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 parties.

Submissions

  1. The worker makes the following submissions in the application for merit review:
    • Their PIAWE for the first 52 weeks has been calculated incorrectly. It should be $831.93, indexed at review points as per section 82A.
    • The Insurer has nominated the date for commencement of the post 52 weeks period incorrectly. Their first benefit payment was XX August 2017, the date for the commencement of the post 52 week period is XX August 2018.
    • Their PIAWE for after the post 52 weeks has been calculated incorrectly. Their full ordinary earnings should be included in this calculation. Payments recorded as overtime were paid every week and constituted part of their ordinary weekly earnings, reflecting their employer’s requirement for them to work on weekends.
    • Their PIAWE for after 52 weeks should also be $831.93, indexed at review points as per section 82A.
    • Their benefit payments should be adjusted as above and indexed back payment made of underpaid benefits from XX August 2017.
  1. In reply, the Insurer submits:
    • The worker’s PIAWE is determined pursuant to section 44C(1)(a) of the 1987 Act. The relevant period is XX November 2014 to XX October 2015.
    • The Insurer excluded the payslip for the period XX October 2014 to XX October 2015 as it contained dates outside the relevant period, which therefore results in a 51 week relevant period.
    • It utilised the worker’s actual earnings in calculating their PIAWE as their hours varied.
    • The Insurer is unclear as the calculations are being presented by the worker. The weeks that were taken as leave have not been excluded for the purpose of determining the worker’s ordinary earnings or overtime as all leave taken was annual leave and not unpaid or sick leave.
  2. In May 2018 following a reques for further information, the Insurer advised that it does not have a copy of the worker's payslip covering the period XX October to XX November 2015.

Reasons

Nature of merit review

  1. Under section 44BB(1)(b) of the 1987 Act a worker may refer a work capacity decision of an insurer for review by the Authority (as a merit review of the decision).
  2. The worker has only referred the Insurer’s work capacity decision about the amount of PIAWE to the Authority for merit review. Therefore, these findings and recommendations are confined to a review of that decision of the Insurer only.

Pre-injury average weekly earnings (PIAWE)

  1. Section 44C(1) of the 1987 Act defines PIAWE as:

    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. Section 44C(2), (3) and (4) of the 1987 Act provide for different methods to determine a worker’s PIAWE. However, there is no information before me to support those provisions apply to
    the worker’s circumstances.
  2. The worker’s PIAWE under section 44C(1)(a) is the average of their “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.
  3. Also, section 44C(1)(b) allows for overtime and shift allowance payments, but only for the purpose of the calculation of weekly payments payable in the first 52 weeks for which weekly payments are payable.
  4. Workers Legal Support, who helped the worker in making their application for merit review, provided a list of payments which indicates that weekly payments of compensation were paid to
    the worker from June 2017. The worker has continued to receive weekly payments since. The list of payments is consistent with a calculating PIAWE form that the worker’s employer,
    completed on XX June 2017. The worker’s employer advised that “the first day it became a worker’s compensation issue” was on XX June 2017.
  5. Given the information before me and on balance, I am not persuaded that the worker’s first weekly payment of compensation was paid or payable on XX August 2017. I consider that under section 44C(1)(b), the permission of overtime and shift allowance payments in the first 52 weeks is to begin from XX June 2017.

Relevant period

  1. Section 44D(1) of the 1987 Act defines the "relevant perdio" as:

    (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 perdio 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.
  1. The Insurer submits that it excluded the payslip for the period XX October 2014 to XX October 2015 as it contained dates outside the relevant period, which therefore results in a 51 week relevant period.
  2. However, the worker was continuously employed by the pre-injury employer from 2012 until they sustained their injury. Therefore, the “relevant period” is the 52 weeks immediately before their date of injury.

Average of the worker’s Ordinary earnings

  1. Section 44E of the 1987 Act defines “Ordinary earnings” as:

    (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 Insurer submits that as the worker’s hours varied it utilised their actual earnings in calculating their PIAWE. However, the worker’s payslips show that their base rate of pay was calculated on the basis of ordinary hours worked. I will set out my findings in relation to each below.
  2. Therefore, the worker’s ordinary earnings are calculated under section 44E(1)(a) at the base rate of pay for ordinary hours in any week which they worked or was on paid leave, amounts paid or payable as piece rates or commissions and the value of non-pecuniary benefits.
  3. The worker’s payslips show that they worked or was on paid leave in each week covered by the relevant period. However, I do not have the payslip covering from XX October to XX November 2015 before me. I will therefore average the worker’s ordinary earnings over 51 weeks.

Base rate of pay

  1. Section 44G(1) of the 1987 Act defines ase rate of pay:

    (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 employer advised in the calculating PIAWE form that the worker’s base hourly rate was $21.00 at the time of injury. However, the worker’s employer noted that they “completed and answered all questions using the date as the XX/06/17 (this being the first day it became a worker’s compensation issue).”
  2. Given this, I prefer the worker’s payslips, which show that their base hourly rate was $19.64 until XX June 2015. It then increased to $20.220968 for 1 week. On XX July 2015, their base hourly rate changed to $20.20.
  3. The worker submits that payments recorded as overtime were paid every week and constituted part of their ordinary weekly earnings, reflecting the employer’s requirement for them to work on weekends.
  4. I agree with the worker in that the hours they worked on weekends should be included as a part of their ordinary hours of work. I will discuss this in more detail below. However, overtime or shift allowance payments that were paid on top of their hourly base rate of pay are a base rate of pay exclusion under section 44G(1)(e). Those payments are termed Overtime (1.25x)” and “Overtime (1.5x)” payments in the payslips and total $2,313.639… However, as can be seen below, that amount will be included in the calculation of the worker’s PIAWE in the first 52 weeks that weekly payments are payable.
  5. The worker received $494.94 in “Annual Leave Loading” during the relevant period. Loadings are a base rate of pay exclusion under section 44G(1)(b) and are not to be included in the calculation of ordinary earnings.
  6. Consistent with the worker’s payslips during the relevant period, I find that their hourly base rate of pay was:

    $19.64 from XX November 2014 to XX June 2015
    $20.220968 from XX June to XX July 2015
    $20.20 from XX July to XX November 2015

Ordinary hours of work

  1. There is no information before me to support that the worker was covered by a fair work instrument during the relevant period. Therefore, I consider that their ordinary hours of work are to be determined under section 44H(b) of the 1987 act:

    In relation to pre-injury average weekly earnings and current weekly earnings, the ordinary hours of work:[…]

    (b) in the case of a worker to whom a fair work instrument does not apply:

  1. (i) if the ordinary hours of work are agreed between the worker and the employer, those hours, or
  2. (ii) 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 worker’s employer noted in the calculating PIAWE form that the worker’s ordinary hours of work were 38. Again, the information provided on that form does not cover the relevant period.
  2. I do not have a copy of the worker’s employment contract or any other persuasive evidence that the worker and their employer agreed to a set number of ordinary hours. The worker’s payslips show that their hours of work varied between 32.5 and 41.5 hours in each week that they worked.
  3. I note that Insurer excluded the hours the worker worked as Overtime (1.25x) and Overtime (1.5x) from its calculation of the worker’s ordinary earnings.
  4. However, in this case, the worker’s ordinary hours of work are their “average weekly hours” during the relevant period: see section 44H(b)(ii). That means, for the purposes of section 44E(1)(a), the worker’s ordinary hours are the average of all hours that they worked and it includes the hours they took as annual leave.
  5. The 51 payslips before me show that the worker’s ordinary hours of work totalled 1954. Therefore, I find their average weekly hours during the relevant period are 38.314 (1954 ÷ 51 weeks = 38.3137...).

Findings on the worker’s ordinary earnings and PIAWE

  1. There is no information before me to show that the worker received any piece rates, commissions or non-pecuniary benefits during the relevant period that would be relevant to the calculation of their ordinary earnings.
  2. The 51 payslips that cover the relevant period neatly align to the worker’s working week (being that the pre-injury employer operated Tuesday to Saturday, as advised by the employer). The following table sets out the worker’s total ordinary earnings (to the nearest cent) taking into consideration their working weeks and the changes to their hourly base rate of pay during the relevant period:
Period Ordinary hours or work (A) Hourly base rate of pay (B) Number of working weeks (C) Total base rate of pay = A x B x C
XX November 2014 to
XX June 2015
38.314 $19.64 34 $25,584.56
XX June 2015
to
XX July 2015
38.314 $20.220968 1 $774.75
XX July 2015
to
XX October 2015
38.314 $20.20 16 $12,383.08
Total   51 $38,752.39
  1. 47.Under section 44C(1)(a), I find the worker’s ordinary earnings expressed as a weekly sum is $759.66 ($38,752.39 ÷ 51 weeks = $759.6547…).

Overtime and shift allowances

  1. Under section 44C(5)
    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 worker’s payslips show that they regularly received overtime and shift allowances which supports that they worked paid overtime or carried out work that attracted a shift allowance during the relevant period. Given the regularity of those payments, I am satisfied that they would, but for the injury, have been likely, at any time during the first 52 weeks for which weekly payments are payable, to have worked paid overtime or carried out work that attracted a shift allowance.
  2. Accordingly, I find that overtime and shift allowance payments are permitted to be included in the calculation of the worker’s PIAWE under section 44C(1)(b).
  3. Under section 44C(6) of the 1987 Act, the amount of an overtime and shift allowance payment that is permitted to be included is to be calculated in accordance with the following formula:
  4. "A" is the total amount of paid or payable to the worker for paid “overtime and shift allowances” in respect of the relevant period. The worker’s payslips support this is equal to $2,313.639...

    "B" is the number of weeks during the relevant period during which the worker worked or was on paid annual leave. The worker’s support this is equal to 51.

  1. Therefore, (A ($2,313.639…) / (B (51)) = $45.37(rounded to the nearest cent).
  2. In accordance with section 44C(1)(a) and (b) of the 1987 Act, I find the worker’s PIAWE is $805.03 ($759.66 + $45.37 = $805.03).
  3. The Insurer is to determine the worker’s entitlement to weekly payments of compensation in accordance with the findings above.
  4. As noted by the worker in the application for merit review, their entitlement to weekly payments of compensation is subject to indexation by varying the amount of their PIAWE in accordance with Division 6A of Part 3 of the 1987 Act.

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