The more severe the injury, the lesser the entitlement: The paradox of Section 38A(1) of the Workers Compensation Act 1987

 

Author: Chad Farah
Judgment Date: 17 July 2019
Citation: Hee v State Transit Authority of New South Wales [2019] NSWCA 175
Jurisdiction: NSW Court of Appeal¹

Principles

1. Section 38A of the Workers Compensation Act 1987 (the 1987 Act) does not create an automatic entitlement to a minimum weekly benefits rate for 'workers with highest needs' (i.e. > 30% WPI), as defined by Section 32A of that Act.
   
   
2. 'Workers with highest needs' who cannot establish some form of work incapacity within the meaning of the Act, such that there is a determination of a base amount of weekly benefits that is payable to them, are not entitled to the minimum statutory payment under Section 38A.
   
   
3. The question of work capacity is not to be determined solely with reference to a person's post-injury earnings in cases where they have returned to their pre-injury working hours and ordinary base income. Rather, one must also have regard to that worker's ability to perform their pre-injury duties to the same extent as before their injury and their ability to partake in overtime work if made available to them.
   
   
4. In cases where a 'worker with highest needs' can still demonstrate a degree of incapacity in line with the above test, the amount of weekly compensation payable to them will be determined to be zero, which the Court of Appeal has held is a valid figure for the purposes of Section 38A of the 1987 Act. Because zero is less than the minimum statutory payment for 'workers with highest needs' under Section 38A, the worker will inevitably be entitled, in addition to their ordinary wages from their ongoing employment, to the minimum weekly benefits amount stipulated by Section 38A (as indexed).

Background

On 17 October 2013, Mr Hee (the appellant) sustained injury to his cervical spine in the course of his employment with the State Transit Authority of NSW (the respondent) as a result of tripping and falling. The appellant required a cervical laminectomy which was performed on 24 January 2014. As a result, he did not work from 24 January 2014 to 31 May 2014 but thereafter returned to his pre-injury base work hours and income.

A claim for weekly benefits was brought in the Workers Compensation Commission (the Commission) whereupon the appellant was paid weekly benefits, by way of settlement, for that closed period of wage loss only.

The appellant was subsequently awarded lump sum compensation corresponding with 34% whole person impairment (WPI) of the cervical spine. This meant that he was classified as a 'worker with highest needs' pursuant to Section 32A of the 1987 Act.

On 17 March 2017, the appellant made a further claim for weekly benefits, this time pursuant to Section 38A(1) of the Act.

That Section states:

The Insurer disputed the appellant's claim and the matter proceeded to Arbitration before Senior Arbitrator Capel. The Senior Arbitrator ultimately found that the appellant was not earning less than his pre-injury wages and was therefore not entitled to any ordinary weekly benefits in the first place. It followed that, in the Senior Arbitrator's opinion, the operation of Section 38A was not triggered.

On appeal, President Keating found that the 'special benefit' under Section 38A was only payable if there was a ‘determination’ of a weekly amount payable arising out of incapacity that was less than the minimum statutory rate under Section 38A. In dismissing the appeal, the President went on to say at paragraph 144 of his decision:

A noteworthy aspect of President Keating's decision was that the appellant’s proposition that a calculation of a weekly benefits entitlement in the amount of zero constituted a 'determination of an amount payable’ under Section 38A(1) was rejected.

Court of Appeal

The appellant advanced the argument that, despite his return to his usual rostered shifts, he was no longer able to undertake overtime work to the same extent as before his injury. This, in the appellant's submission, amounted to partial incapacity for work within the meaning of the 1987 Act.

In a two-to-one decision, the Court of Appeal reluctantly found in favour of the appellant. At paragraph 162 of the judgment, his Honour Simpson AJA summarised the critical error of the Senior Arbitrator in his original decision:

The Court of Appeal accepted the proposition that, if such an incapacity existed, the appellant would be entitled to an amount of weekly benefits. It also accepted that, according to the mandatory calculations stipulated under the Act,² that amount would be zero given that the appellant had returned to his pre-injury ordinary work hours and duties. It then followed that, because zero is 'less than $788.32' as stated under Section 38A(1), the appellant would also be entitled to the minimum weekly amount of $788.32 as indexed.

That is not to say that the appellant was entirely successful on this occasion. The Court expressly stated that the above was all contingent on a finding of fact that there indeed was the alleged ongoing incapacity. Accordingly, the matter was remitted to the Commission for a re-determination on that issue of fact.

Why this case is important

The wording of Section 38A(1) of the 1987 Act clearly has consequences that the legislature may not have intended but inadvertently enacted nonetheless. This is line with the earlier Presidential decision of Vostek Industries Pty Ltd v White [2018] NSWCCPRD 47 (the reader may wish to visit our earlier case note on that decision).

His Honour Meagher JA in this instance illustrated the strange effects of the Court's decision at paragraphs 100 to 104 of the judgment, paraphrased as follows:

• Example 1: 'A worker with highest needs' was previously earning $1,000 and returned to work earning $800. They are entitled to $150 per week in weekly benefits based on the 95% statutory rate. In addition, they are now entitled to $788.32 under Section 38A(1). Their total earnings become $1,588.32 per week which is $588.32 more than what they earned before their injury.
  
  
• Example 2: The same worker was previously earning $1,000 and is now back to work earning $500 only because they suffer more severe incapacity. They are entitled to $450 per week in weekly benefits. In addition, they are now entitled to $788.32 under Section 38A(1). Their total earnings become $1,238.32 which is still more than what they earned before their injury but not as much as if their incapacity was less significant.
  
  
• Example 3: The same worker is seriously incapacitated to the extent that they have no work capacity at all. They are entitled to $800 in weekly benefits based on the 80% statutory rate. That amount is more than $788.32 so no further entitlement under Section 38A(1) arises. Their total income is now $800 which is less than the $1,000 they earned prior to their injury despite now suffering from maximum incapacity.

The reader will notice how there is now an inverse relationship between incapacity and compensation under Section 38A(1). There is also a clear disconnect, perhaps for the first time in the history of the Court of Appeal in NSW, between the statutory workers compensation scheme and the established common law principle that the entitlement to 'compensation' is limited to the extent of the person's loss.

It remains to be seen whether Section 38A(1) will be rectified by the legislature in light of the above. The writer proposes the following amendment:

'If the determination of the amount of weekly payments of compensation payable to a worker with highest needs in accordance with this Subdivision results in an amount that is less than $788.32, the worker will be entitled to additional weekly payments under this Section so that the combined amount of the worker's weekly payments and the worker's earnings from ongoing employment is collectively equivalent to at least $788.32.'

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¹ Meagher JA, White JA and Simpson AJA.
² Refer to Section 37 of the 1987 Act ('second entitlement period').