Key Points:
1. By operation of Regulation 8C, a pay raise has been considered as a change of an ongoing nature to the employment arrangement, resulting in a financially material change to the earnings of the worker.
2. The relevant earning period for the purpose of calculating PIAWE will be restricted to the period from the date the pay raise became effective, until the date of injury. Therefore, any earnings in the 52-week period prior to the pay raise will not be included in the calculation of PIAWE.
3. Members of the Personal Injury Commission (PIC) have accepted on a number of occasions a change in pay rate alone, despite no other changes to the worker’s employment arrangement, will enliven Regulation 8C.
Introduction
It is generally accepted that an injured worker’s entitlement to weekly compensation will ordinarily be based on their Pre-Injury Average Weekly Earnings (‘PIAWE’), calculated over the entire 52 weeks prior to the date of injury.
The Workers Compensation Regulation 2016, in Division 2 provides for adjustment of the usual 52-week earing period in specified circumstances, including “a financially material change to earnings” as specified in Regulation 8C.
Regulation 8C
Clause 8C provides:
“8C Adjustment for financially material change to earnings—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 the unadjusted earning period, there was a change of an ongoing nature to the employment arrangement resulting in a financially material change to the earnings of the worker (for example, a change from full-time to part-time work).
(2) The relevant earning period is to be adjusted by excluding from the period any period before the change to the earnings of the worker occurred.”
The question arises whether a pay raise within the 52 weeks prior to the date of injury is classified as a change of an ongoing nature to the employment arrangement, resulting in a financially material change to the earnings of the worker.
Cain v Tamworth Aboriginal Medical Service [2021]
As there is no definition of “employment arrangement” in Clause 8C, the interpretation of this phrase has been subject to interpretation by PIC Members.
The leading decision in terms of Regulation 8C is the decision of Member Wright in Cain v Tamworth Aboriginal Medical Service [2021] NSWPIC 193.
Mr Cain suffered a psychological injury because of his employment with the insured. Once it was conceded Mr Cain had suffered a compensable injury with a date of injury of 4 August 2020, the only remaining issue for the Member to determine was the amount of his PIAWE, by reference to Regulation 8C in circumstances where Mr Cain’s hourly rate increased from $24 to $26 per hour from 25 June 2020.
The employer’s insurer submitted Mr Cain’s employment arrangement had not changed to permit classification there had been a financial material change to his earnings. The insurer argued Mr Cain’s duties, hours, and responsibilities had not changed, and hence the employment arrangement had not changed.
Member Wright concluded an increase in the rate of pay was ‘a change of an ongoing nature to the employment arrangement resulting in a financially material change to the earnings of the applicant’.
He stated:
[26] Wages or other considerations are a condition of the contract of service. A change to the hourly rate of pay is a change in the wages paid to the worker. Hence, a change in the hourly rate of pay is a change of an ongoing nature to the employment arrangement.
[36] In my view the term “employment arrangement” is broad and includes the applicant’s employment agreement and terms and conditions of employment. On this reading, it is not necessary to delete reference to an ongoing change to employment arrangements, as the term “employment arrangements” is broad and includes wages, hourly rates of pay and matters such as a change from part-time to full-time work and promotion.
Mr Cain’s PIAWE was therefore calculated using the relevant earning period from when the pay rise became effective (25 June 2020) to the date of injury (4 August 2020).
Bhatia v Cameron Logistics Pty Ltd [2023]
Member McDonald followed the decision of Member Wright in
Cain in the matter of
Bhatia v Cameron Logistics Pty Ltd [2023] NSWPIC 540.
Similar to the matter of
Cain, Mr Bhatia received an increase in his pay rate during the 52-week period, however Mr Bhatia received his pay increase pursuant to a change in his Enterprise Agreement.
Counsel for Mr Bhatia submitted the facts were like
Cain and the enterprise agreement under which Mr Bhatia was paid formed the basis of the employment relationship and the terms and conditions of his employment.
The change in the hourly rate under the Enterprise Agreement was a change in the employment arrangement, which resulted in a financial material change to Mr Bhatia’s earnings pursuant to 8C.
The insurer submitted the rate of pay increase was without any change in his duties, responsibilities or hours, so there was no evidence of a change in the employment contract other than the rate of pay.
Member McDonald followed the decision in
Cain and did not accept the insurer’s submission, as the increase provided in the Enterprise Agreement was not a change in the employment arrangement, because it was the application of an arrangement which was already in place.
The Member accepted the worker’s PIAWE should be determined by earnings in the period from the date of the increase to the date of injury.
Aguwa v Wesley Community Services Ltd [2023]
In the matter of
Aguwa v Wesley Community Services Ltd [2023] NSWPIC 648, Member Whiffin also followed the decision in Cain in circumstances where the worker had received a pay increase resulting from Union negotiations leading to a change in his Award rate in the 52-week period.
Conclusion
The PIC continues to follow the decision in
Cain finding that a pay increase during the 52-week period amounts to a “material financial change” in application of Regulation 8C.
The worker’s PIAWE is calculated based upon earnings in the relevant earning period between the date a pay rise becomes effective and the date of injury.
In order to avoid costly disputes in the PIC, it is imperative employers, and their insurers consider the application of Regulation 8C in circumstances where there has been a change in the worker’s earnings during the relevant 52-week period.
Article written by Special Counsel, Belinda Brown, and Solicitor, Connor Wares.