CODEA client case provides pathway for re-assessment of incorrectly indexed PIAWE for injured workers in NSW
Published on May 11, 2021 by Sabrina Morell and Scott Dougall
Key points
- 25% of injured workers are being underpaid due to incorrect calculations of their PIAWE
- Case of Theoret run by Carroll & O’Dea Lawyers showed injured worker was underpaid as result of incorrect indexing by insurer
- Supreme Court decision allows injured workers to claim additional compensation for lost earnings where insurers have failed to index their PIAWE correctly
Case background
On 1 October 2012, substantial amendments took effect in relation to the Workers Compensation Act 1987.
The main changes to weekly compensation benefits were:
- A worker’s entitlement to weekly benefits would be calculated as a percentage of their Pre-Injury Average Weekly Earnings (PIAWE).
- Their PIAWE would be indexed on each “review date” (every 1 April and 1 October) to keep up with inflation.
- The method of calculating indexation is now specified in Section 82A of the Act and is done so in reference to the Consumer Price Index.
As this method of calculating indexation is fairly complex, Section 82A also imposes an obligation on the State Insurance Regulatory Authority (SIRA) to publish the relevant factor by which weekly benefits are multiplied to calculate the new PIAWE rate. SIRA began to publish the factor for the indexation calculation from 1 April 2013 (the first review date following the statutory amendments on 1 October 2012).
In summary, the problem which arose for Ms Theoret was:
- Ms Theoret sustained three separate injuries on 29 May 2001, 23 December 2002 and 21 May 2004 whilst working for ACES Incorporated.
- In 2004 she ceased work and began receiving weekly benefits in relation to the 2001 injury up until 2017.
- In 2019, the workers compensation insurer reviewed the second injury which occurred in 2002 and determined that Ms Theoret has no capacity for work and would receive weekly benefits again.
- The insurer advised Ms Theoret that her PIAWE had been calculated based on her 2002 earnings and was only be indexed from 1 April 2013 rather than from 2002. As such, her indexed PIAWE came to $466.00 per week.
As Ms Theoret would struggle to live off this $466.00 per week in today’s economic climate, she engaged Carroll & O’Dea Lawyers who sought a review of this decision, arguing that her PIAWE should be indexed from the date she first received weekly compensation in relation to the 2002 injury. The correct figure was argued to be $664.15.
The insurer maintained that their indexed PIAWE was calculated correctly, and the dispute was heard by both an Arbitrator and the Deputy President of the Personal Injury Commission who both agreed with the insurer’s calculation. Carroll & O’Dea appealed to the Supreme Court of Appeal.
The principal issue to be determined by the Court was whether Ms Theoret’s PIAWE was to be indexed from:
- The time Ms Theoret first became entitled to receive weekly benefits due to incapacity arising from the 2002 injury; or
- Only from April 2013, the first review date following the introduction of the 2012 amendments.
The decision ultimately turned on the proper interpretation of Section 82A.
In summary, the insurer argued that Section 82A imposed an obligation on SIRA to calculate and publish the factor for indexation and as SIRA had only done this for review dates following 1 October 2012, Ms Theoret was not entitled to indexation for any period prior to this date.
Ms Theoret argued that Section 82A allowed anyone to calculate indexation as it provides the mathematical formula to do so and therefore it does not matter if SIRA publishes their calculation.
The Court agreed with Ms Theoret and held that the obligation on SIRA to publish the factor was merely for the practical benefit of relieving the public of performing this complex calculation. Furthermore, the Court found that the insurer’s interpretation of the Act would obstruct the purpose of Section 82A which is to ensure that weekly benefits would be updated in accordance with modern economic standards, allowing injured workers to receive a living wage.
As such, the Court found that the Personal Injury Commission had errored in concluding that Section 82A did not permit a calculation by reference to indexation for any period prior to 1 October 2012.
Implications
Ms Theoret’s experience indicates that there are likely many other workers with historical injuries or recurrence injuries whose PIAWE has been miscalculated and are therefore being underpaid.
Unfortunately, Ms Theoret’s experience is not uncommon and in 2019 iCare found that 25% of the injured workers they support were being underpaid due to incorrect calculations of their PIAWE.
This Supreme Court’s decision allows injured workers to claim additional compensation for lost earnings where insurers have failed to index their PIAWE correctly.
