PIAWE: Workers Compensation Payments in the Relevant Earning Period
PIAWE is one of those acronyms that sends shivers down the spine of a lot of workers compensation industry stakeholders.
Mind you, as a firm, we think the newer and current method for calculating PIAWE is a lot simpler, clearer and easier to understand than the prior version but that doesn’t mean it doesn’t have some challenges!
Fundamentally PIAWE, in most cases involves a basic mathematical equation.
How do you calculate PIAWE?
Being very technical you would say that the equation is:
Gross pre-injury earnings
DIVIDED BY
Relevant earning period
EQUALS
Pre-Injury Average Weekly Earnings
Another way of describing this that the author of this article found helpful at a SIRA seminar on PIAWE, is to describe it as follows:
Dollars 💰
DIVIDED BY
Time ⌛
EQUALS
Pre-Injury Average Weekly Earnings
Thinking of PIAWE as a basic maths equation involving the determining of the correct amount of dollars to be divided by the correct amount of time, leaving a weekly average, helps de-mystify the calculation. There is obviously a caveat that not every case fits into this simple maths equation but equally, most cases can be approached this way.
The first step in the calculation of PIAWE is determining the relevant earning period. This is an essential starting point. There is no point considering ‘earnings’ of an injured worker that are not in the relevant earning period of time. Determining the relevant earning period then allows for the consideration of the actual ‘earnings’ within the appropriate time period.
Schedule 3(2)(2) of the Workers Compensation Act 1987 (NSW) (“1987 Act”) provides:
(2) Except as provided by this clause (or by regulations made under this clause), in calculating the “pre-injury earnings” received by a worker in employment for the purposes of subclause (1), no regard is to be had to earnings in the employment paid or payable to the worker for work performed before or after the period of 52 weeks ending immediately before the date of the injury (“the relevant earning period” ).
This part of the Schedule indicates that the relevant earning period of time is up to 52 weeks before the injury. The schedule goes on to explain that the 52 weeks can be adjusted by scenarios described in the Workers Compensation Regulation 2016 (the Regulation).
The Regulation describes situations when the relevant earning period of time may be adjusted and includes but isn’t limited to 8C when ‘there was a change of an ongoing nature to the employment arrangement resulting in a financially material change to the earnings of the worker’ or 8E when the worker has unpaid leave ‘of not less than seven consecutive calendar days.’
After determining the relevant earning time period time ⌛, a calculation of the ’earnings’ / dollars 💰 can be undertaken by examining the actual income paid during that period of time that can be included as ‘earnings.’
Clause 6 of Schedule 3 of the Act identifies what can be and can’t be included in relation to ‘earnings’ for the purposes of calculating PIAWE.
Very clearly, Clause 6(2)(c) explains that payments of workers compensation during the relevant earning period are not to be included as ‘earnings.’
Whilst the Schedule excludes the money paid on workers compensation in the relevant earing period very clearly, there isn’t a reference in the Act or the Regulation about what to do with the weeks themselves when workers compensation payments were paid.
The current approach taken by insurers, highlighted in Nitchell v Secretary (Department of Communities and Justice) [2022] NSWPIC 625 (“Nitchell”), seems to be the insurer correctly excluding the payments of workers compensation but still including the weeks in which the payment occurs. When we review the case of Nitchell below its easy to see how this approach will usually place the injured worker in a position of disadvantage.
Link to the Nitchell V Secretary decision.
Link to decision is http://www6.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWPIC/2022/625.html
The facts in Nitchell are as follows:
- Ms Nitchell sustained an injury on 17 March 2022.
- The insurer used a full 52 weeks prior to the injury to calculate PIAWE as the relevant earning period time for calculation.
- Over the 52 weeks of the relevant earning period time, Ms Nitchell received $88,116.76 in payments.
- During the 52 weeks of the relevant earning period, Ms Nitchell had received 14 weeks of weekly compensation for a prior workers compensation injury.
- The 14 weeks were a mix of no capacity for work and capacity for light duties with ‘make up’ pay paid in that period
- The workers compensation payments in these 14 weeks totalled $16,162.23.
- The insurer excluded/removed the workers compensation payments when calculating the earnings leaving $71,954.53 gross earnings correctly consistent with Clause 6(2)(c) of the Schedule.
- The insurer divided the $71,954.53 by a full 52 weeks to calculate Ms Nitchell’s PIAWE (This is the dollars 💰 divided by time ⌛ equation discussed earlier)The insurer calculated the PIAWE to be $1,383.74 per week.
It is apparent from the facts above that the approach of excluding the workers compensation payments made in the relevant earning period, whilst including the weeks where the workers compensation payments were paid, will usually result in the calculation of a lower PIAWE.
Ms Nitchell brought her case to the Personal Injury Commission. Ms Nitchell appears to have argued that the 14 weeks when paid workers compensation should be excluded altogether, leaving 38 weeks.
Ms Nitchell accepted the earnings figure of $71,954.53 but suggested it should be divided by 38 weeks instead of 52 weeks. This would result in a PIAWE of $1,893.54.
Ms Nitchell brought her case to the Personal Injury Commission. Ms Nitchell accepted the earnings figure of $71,954.53, however, argued that the 14 week period when she received workers compensation should be excluded altogether, leaving 38 weeks for the purpose of the time ⌛ equation. This would result in a PIAWE of $1,893.54.
A PIAWE of $1,383.74 versus $1,893.54. These numbers speak for themself. Over $500 per week difference. That is a big bucks difference even allowing for the 95% and 80% that sections 36 and 37 of the 1987 Act provide for.
Ms Nitchell relied on 8C of the Regulation to suggest that the payments of weekly compensation in the relevant earning period amounted to an ongoing financial material change. When an ongoing financial material change occurs, this adjusts the relevant earning period to the date the change takes effect.
Member Wynyard’s decision is well worth a read for anyone interested in PIAWE in general. The Member canvassed other decisions made on similar situations in Sidhu v the Secretary of the Department of Communities and Justice [2021] NSWPIC 522 and Stewart v Secretary of Department of Communities and Justice [2022] NSWPIC 333.
In his decision Member Wynyard describes at [68], that the situation Ms Nitchell faces is an ‘anomaly’:
Thus an apparent anomaly arises – cl (6) provides that the period when compensation and reduced earnings were paid is to be excluded from the PIAWE (as the income is not “earnings”) but cl(2)(2) requires an insurer to apply the period of 52 weeks ending immediately before the date of the subject injury in calculating the PIAWE. The only lawful adjustment to the period is pursuant to the regulations which “may” be made, which brings us back to regulation 8C.”
Member Wynyard goes on to say at [73]:
…This lacuna in the scheme has resulted in the insurers applying the whole period notwithstanding that part of it related to the receipt of income which was expressly excluded from the calculation. This is unconscionable.”
These quotes are then reflected later in the Member’s decision that 8C of the Workers Compensation Regulation didn’t assist Ms Nitchell in her case. The Member seems to see the issue as being an unfair anomaly not being dealt with in the Act or Regulation.
The Member later stated it was ‘highly unlikely’ that the ‘policy makers’ intended PIAWE to be calculated in the manner adopted by the insurer in Ms Nitchell’s case.
Reflecting on his view that the policy makers couldn’t have intended the PIAWE to be calculated in this way, at [83] the Member stated:
In Bermingham v Corrective Services of NSW McHugh JA said at 203:
[It] is not only when Parliament has used words inadvertently that a court is entitled to give legislation a strained construction. To give effect to the purpose of the legislation, a court may read words into a legislative provision if by inadvertence Parliament has failed to deal with an eventuality required to be dealt with if the purpose of the Act is to be achieved.”
Taking this approach the Member at [82]:
… read the words “immediately before the date of injury” in Schedule 3(2)(2) as meaning “immediately before the date of injury, or as adjusted where a worker receives income as defined by Clause 6((2)(c) hereof.”
By reading these words into the Schedule, the Member has provided that situations like Ms Nitchell’s, where workers compensation payments are received in the relevant earning period, it is not just the payments themselves but also the weeks that they were paid that are excluded too.
Ultimately Member Wynyard determined:
86. The insurer contravened the provisions of Schedule 3(6)(2)(c) when it included in the calculation of the PIAWE the period when the applicant had been in receipt of compensation for her unrelated injury.
87. The 52 week period provided for the calculation of the PIAWE is adjusted by deducting the 14 weeks to which Schedule 3(6)(2)(c) applied.
This is an important decision of the Personal Injury Commission.
You don’t have to watch the news to understand that it is a time of rising cost of living; it is the experience of most.
The proper calculation of PIAWE is therefore vital as weekly compensation payments flow from this important calculation.
This decision provides direction for stakeholders on achieving a fair assessment of PIAWE in circumstances where the injured person had a prior workers compensation claim in the relevant earning period time before their injury.
What to do with workers compensation payments in the relevant earning period. Exclude not just the earnings but the weeks they were paid in!
We have Lawyers that can help you with your PIAWE Claim Review today.
Kevin Sawers | Lawyer | PIAWE Claims
T 1300 363 013
F 02 9977 4423
E ksawers@walkerlawgroup.com.au
Newcastle office:
6/14 Honeysuckle Drive, Newcastle NSW 2300
