The Personal Injury Commission (PIC) has seen a number of decisions recently on the calculation of pre-injury average weekly earnings (PIAWE), including three appeal decisions in as many months.The focus of these PIC decisions has primarily been what to do with cases where in the ‘relevant earning period,’ there has been a separate, accepted workers compensation claim with weekly compensation paid.When calculating PIAWE we generally start with determining the ‘relevant earning period.’ This is often, but not always, a period of 52 weeks before the injury. This relevant period can be shortened for the reasons outlined in Division 2 of Workers Compensation Regulation 2016, clauses 8A to 8F.Once the relevant earning period is identified, the ‘earnings’ within that period are calculated. Clause 6 of Schedule 3 of the Workers Compensation Act NSW 1987 (WCA) provides detail on what should be included as income and what shouldn’t.It is clear from Clause 6(2)(c) of the WCA that the weekly compensation payments for the prior claim shouldn’t be included as income/earnings. The recent PIC decisions have focussed on what to do with the weeks in which the prior workers compensation was paid.This was considered in the recent PIC appeal decision of Deputy President Elizabeth Wood (DP Wood) in Secretary, Department of Communities and Justice v Stewart  NSWPICPD 35 (Stewart).
- Paul Stewart was employed by the Secretary, Department of Communities and Justice as a Senior Prison Officer
- On 20 November 2020, he sustained an accepted shoulder injury in the course of his employment.
- He was incapacitated for work from 20 November 2020 until 1 February 2021
- A new claim was lodged with a date of injury 1 February 2021
- In calculating the PIAWE for this new claim, the insurer calculated a ‘relevant earning period’ of 52 weeks immediately before the injury on 1 February 2021
- The insurer correctly determined the workers compensation payments from 20 November 2020 until 1 February 2021 were not income for inclusion in the calculation of PIAWE but left the weeks in which these payments occurred in the ‘relevant earning period’
- Mr Stewart said the 10 weeks where he was incapacitated because of the shoulder injury from 20 November 2020 to 1 February 2021, should be excluded leaving a ‘relevant earning period’ of 42 weeks
The Member decision
One can see how the difference in approach to determining the ‘relevant earning period’ impacts on the eventually calculated PIAWE.The decision doesn’t indicate what Mr Stewart’s gross earnings were but if hypothetically we say Mr Stewart’s earnings were $104,000 and the insurer was correct to divide it by 52 weeks, that would leave a PIAWE of $2,000.00 per week. If Mr Stewart was correct and the ‘relevant earning period’ is reduced from 52 weeks to 42 weeks, the PIAWE would be $2476.19 per week! A significant difference.The earnings above are hypothetical of course but helpful to illustrate how substantially the PIAWE can vary depending on the approach taken. At first instance, the Member agreed with the approach of Mr Stewart and found that the period from 20 November 2020 to 1 February 2021 should be excluded from the ‘relevant earning period’ ultimately increasing the PIAWE.The Member commented (para 13) the insurer ‘had not adjusted the 52 weeks to exclude that period from the calculation, with, in his view, the “extraordinary” result that the appellant had calculated the pre-injury average weekly earnings over 52 weeks on the basis of 42 weeks of income.’The Member relied on clause 8D to adjust the relevant warning period.Claude 8D provides:
8D Alignment of relevant earning period with pay period—Schedule 3, clause 2(3)(b) of 1987 Act
(1) The relevant earning period for a worker in employment may be adjusted to align the relevant earning period with any regular interval at which the worker is entitled to receive payment of earnings for work performed in the employment.
(2) The relevant earning period is not to be adjusted as provided by this clause unless the insurer is reasonably satisfied that the amount of pre-injury average weekly earnings calculated by reference to the period as so adjusted is not less than the amount that it would have been but for the adjustment.
The insurer appealed the decision. There were four grounds for their appeal. DP Wood summarised them in para 71 saying:
The grounds of appeal, while expressed as four separate grounds, all assert error on the part of the Member in determining that the respondent’s relevant earning period could be adjusted in accordance with reg 8D of the 2016 Regulation.”
DP Wood agreed with the insurer saying in para 72 about regulation 8D that it:
does not apply to the respondent’s circumstances and that the Member’s interpretation of reg 8D was erroneous. On a proper reading of reg 8D, it does not operate to shorten the 52 week period, which the Member did. Further, the Member did not explain how the term “regular interval” sat with the respondent having worked for a finite period and then remaining off work on workers compensation.”
The Appeal Outcome
DP Wood proceeded then to redetermine the matter. DP Wood examined regulations 8A to 8AE to see if any of these provisions that alter the ‘relevant earning period’ applied to the weekly compensation paid from 20 November 2020 until 1 February 2021 in Mr Stewart’s case.About Regulation 8C DP Wood stated at para 90:
The parties, as well as the Member below, acknowledged that, if reg 8C was applied, it would result in a capricious or unjust outcome in that the respondent’s pre-injury average weekly earnings would be zero.”
Regulation 8C allows for the adjustment of a ‘relevant earning period’ if there is a financially material change to earnings on an ongoing basis.DP Wood later elaborated on how in another appeal decision of Secretary, Department of Communities and Justice v Pell  NSWPICPD 19 (Pell), Regulation 8C was relevant in calculating PIAWE but due to factual issues wasn’t applicable in this case.DP Wood turned her mind to regulation 8E which provides:
8E Adjustment for unpaid leave—Schedule 3, clause 2(3)(a) of 1987 Act(1) The relevant earning period for a worker is to be adjusted in accordance with this clause if, during any period of not less than seven consecutive calendar days within the unadjusted earning period—(a) no earnings in the employment were paid or payable to the worker, and(b) the worker took a period of unpaid leave (the unpaid leave period) commencing on the first day of that consecutive period.(2) The relevant earning period is to be adjusted by excluding each day (whether or not the day was a usual work day for the worker) of the period commencing on the first day of the unpaid leave period and ending immediately before the day on which earnings in the employment once again became payable to the worker.
The insurer argued the payments of workers compensation from 20 November 2020 to 1 February 2021 ought not be considered ‘unpaid leave’ primarily to do with a potential impact on how the earnings provision in clause 6 of Schedule 3 of the WCA would operate (para 92).Despite the submissions of the insurer, DP Wood found that the period of 20 November 2020 to 1 February 2021 when Mr Stewart was incapacitated and in receipt of weekly compensation should be treated as unpaid leave stating at para 94:
“In my view, an unjust outcome would result if a narrow view was taken to the term “unpaid leave.” If it was construed as referring only to a period during which a worker took leave without pay, for example for personal reasons, such a construction would entitle the worker to have the “relevant earning period” adjusted to discard the period of unpaid leave. On the other hand, a worker in the circumstances of the respondent in this case, who was not in receipt of “earnings” because he had suffered a work-related injury and the weekly payments were not included in “earnings”, would be unable to have the “relevant earning period” adjusted. Such an outcome would be plainly unfair and contrary to the intention of legislation, which was clearly to apply fairness to the calculation of the pre-injury average weekly earnings.“Taking this approach meant the outcome of the appeal left the PIAWE the same for Mr Stewart, and increased from the original insurer calculation, but for different reasons then given at the original conciliation arbitration.
There is a growing body of vital PIC decisions dealing with PIAWE including dealing with circumstances where a prior workers compensation claim with weekly compensation paid has occurred in the ‘relevant earning period.’In an earlier appeal decision of Pell, DP Wood found that a prior workers compensation claim activated Regulation 8C. In Pell, 8C adjusted the ‘relevant earning period’ from 52 weeks to a shorter period commencing after the weekly compensation from the prior workers compensation claim had ceased.Here in Stewart, the PIC found that the time spent in receipt of weekly compensation for the prior workers compensation claim amounted to unpaid leave activating Regulation 8E. In Stewart, 8E had the effect of excluding the weekly compensation from the prior workers compensation claim from the overall 52 week ‘relevant earning period.’Whilst Pell and Stewart apply different Regulations, these decisions show an approach in the PIC to adjust the ‘relevant earning period’ to exclude periods of time where an injured worker was in receipt of weekly compensation for an earlier claim.