Decision #92/12 - Type: Workers Compensation

Preamble

The worker is appealing the decision made by Review Office of the Workers Compensation Board ("WCB") which determined that his average earnings had been correctly calculated. Based on the worker's request, a hearing was held at the Appeal Commission on July 24, 2012 to consider the matter.

Issue

Whether or not the worker's average earnings have been correctly calculated.

Decision

That the worker's average earnings have not been correctly calculated.

Decision: Unanimous

Background

The worker has an accepted claim with the WCB for an injury to his right hand that occurred in the workplace on April 26, 2010. He was granted wage loss benefits based on his gross earnings prior to the injury.

In a decision dated July 9, 2010, the worker was informed that after 12 weeks of benefits the WCB policy required an average earnings review which resulted in a weekly benefit rate of $1,292.19 starting July 20, 2010. This was established based on his 12 month prior earnings from April 26, 2009 to April 26, 2010. Documents on file note that the worker later returned to work in a modified duty position.

On November 1, 2010, the worker underwent surgery for his compensable injury and was again placed on wage loss benefits. On November 9, 2010, a WCB payment assessor placed a memo on file noting the worker's gross earnings would be based on the most recent period of employment earnings and those earnings would then be subject to an average earnings review effective January 24, 2011.

On November 9, 2010, the case manager informed the worker that after calculations of his weekly gross earnings of $2,531.77, his actual weekly benefit entitlement would be $1,417.12.

On February 3, 2011, the case manager informed the worker that, following an average earnings review based on 12 month prior gross earnings, his new weekly benefit entitlement would be adjusted to $1,292.21.

On February 9, 2011, a WCB payment assessor placed a memo on the file noting that the worker's gross weekly earnings included travel time which should not have been included as this is not a compensable benefit. The worker was informed that a revised calculation resulted in an adjustment to his weekly wage loss benefit to $1,286.36. Documents on file note the worker had returned to work in an alternate duty position on March 15, 2011.

On August 3, 2011, a WCB payment assessor placed a memo on file noting a recurrence effective July 12, 2011 and that the worker's gross earnings were recalculated based on the most recent wage information that showed a period of employment earnings of $1,670.05 resulting in a weekly wage loss benefit of $997.18. On August 12, 2011, the worker appealed the decision to Review Office.

On November 16, 2011, Review Office determined that the worker's average earnings should be $2,308.06 per week. Review Office had obtained additional payroll information from the employer and in conjunction with the previously available information on file it showed that the worker had earned an average of $2,308.06. This amount covered the period from April 25, 2009 to April 26, 2010, exactly one year ending with the worker's accident. This figure included the regularly paid "travel time" that is a taxable payment associated with the worker leaving camp for days off. Noting that the policy allows some discretion on the usual 12 month period on which average earnings are based, Review Office found that the period most proximal to the date of accident is the most accurate choice in this instance. Review Office further noted that this decision does not preclude a revisiting of the worker's average earnings under policy 44.80.10.10 for an accurate reflection of a worker's loss of earnings, based on documentable data or an average of a longer period of up to five years.

On January 20, 2012, a WCB payment assessor placed a memo to file documenting the calculations used to determine the worker's average earnings. The memo noted an average earnings review of the worker's gross weekly earnings will be conducted as the worker's earnings have been set up based on the worker's earnings while earning an excessive amount of wages and overtime prior to his injury, and provided the following information:

  • The worker was not a permanent employee of the accident employer.
  • Period of employment earnings from March 15, 2011 to July 11, 2011 were $1,670.05 per week.
  • Earnings and overtime used to calculate the worker's earnings would not have continued as the project was winding down and the worker would have experienced periods of layoff.
  • The worker was hired in 2009 on a contract basis consistent with his longstanding pre-accident career pattern working in the same industry on contract with periods of unemployment in between when he collected Employment Insurance ("EI") benefits.
  • Average earnings have been calculated using the 2005 - 2009 income tax information, as an average of the worker's previous 5 years of employment in the same industry:

    • 2005 T4 and EI earnings - $25,675 ÷ 52 weeks = $493.75/week
    • 2006 T4 and EI earnings - $14,399 ÷ 52 weeks = $276.90/week
    • 2007 T4 and EI earnings - $28,622 ÷ 52 weeks = $550.42/week
    • 2008 T4 and EI earnings - $22,772 ÷ 52 weeks = $437.92/week
    • 2009 T4 and EI earnings - $90,639 ÷ 52 weeks = $1,743.06/week
    • Total average weekly earnings 2005 - 2009 (5 years) = $3,502.05 divided by 5 = $700.41/week

The payment assessor then stated that:

I recommend average earnings be established at $700.41 per week effective January 28, 2012. In my opinion the formula chosen above, defined in the policy as follows;

"Average Yearly Earnings:

Average yearly earnings include any remuneration that the worker received as a result of employment or employment-insurance benefits. To determine a worker's true loss of earnings, the WCB will generally use documentable employment data from any consecutive 12-month period during the one or two years before the compensable accident. If the WCB determines that this calculation does not produce an accurate reflection of a worker's loss of earnings, it will generally use documentable employment data from a 12-month period during, or an average of, a longer period of up to five years."[Emphasis added]

On January 26, 2012, a WCB case manager advised the worker that a review of his average earnings for the 5 years preceding his workplace accident had been conducted and that effective January 28, 2012, his new weekly wage loss benefit rate would be $466.99 based on average weekly earnings of $700.41. On February 6, 2012, the worker appealed the decision to Review Office.

On April 25, 2012, Review Office determined that the worker's average earnings were not correctly established. Review Office said it was correct to go back 5 years to determine a worker's true loss of earnings; however, in this case, the worker's earnings in the year 2006 of only $14,399.00 represented a significant aberration from the pattern of employment related income generated by him in the other years 2005, 2007 and 2008. Review Office therefore concluded that the worker's average earnings were to be recalculated based upon his T4 and Employment Insurance earnings in the years 2005, 2007, 2008 and 2009 only.

On May 2, 2012, the worker appealed Review Office's decision to the Appeal Commission and a hearing was arranged.

On May 8, 2012, after filing his appeal with the Appeal Commission, the worker requested reconsideration of a previous Review Office decision on May 8, 2012 in which he specified "calculations are wrong on wages." He further noted that he had earned $28,390.81 in 12 weeks, not 17 weeks.

On May 18, 2012, a WCB payment assessor, acting on the Review Office decision of April 25, 2012, documented in a memo to file the recalculation of the worker's average earnings based on his income tax returns from 2005, 2007, 2008 and 2009. The 2006 income tax information was excluded as per Review Office's decision:

2005 - $25,675

2007 - $28,622

2008 - $22,772

2009 - $90,639

Total compensable income = $167,708 ÷ 4 years = $41,927.00 per year. Gross weekly compensable average income = $41,927.00 ÷ 52 weeks = $806.29. The revised average earnings are established at $806.29 per week effective January 28, 2012, retroactively.

On May 28, 2012, the worker was informed that the revised average earnings are established at $806.29 reduced by probable deductions for EI, CPP and Income Tax to establish his net earnings. WCB wage loss benefits are then based on 90% of net loss of earnings. Effective January 28, 2012, wage loss benefit rate were established at $529.02 per week. Effective May 1, 2012 (index date), wage loss benefit rate would be $541.08 per week.

On June 29, 2012, Review Office issued a decision that incorporated all prior decisions made on average earnings that it considered to be relevant. Review Office determined that the worker's correct earnings and dates were not used in the calculation of some of the worker's wage loss benefits. Review Office noted that The Workers Compensation Act (the "Act") and WCB Policies require an average earnings review after a worker has returned to full employment and later suffers a recurrence of his loss of earning capacity. The worker's entitlement to wage loss benefits is to be based on whichever net average earnings are higher, at the time of recurrence or the accident date. In regard to the worker's benefits from January 28, 2012, Review Office confirmed the average earnings of $806.29 established by Review Office's April 25, 2012 decision 278/2012. Review Office directed that Rehabilitation and Compensation Services calculate the worker's average earnings based on his earnings history in the maximum of five years prior to November 1, 2010. The higher of that amount and $806.29 will become the worker's average earnings as of January 24, 2011.

Reasons

Applicable Legislation and Policy

The Appeal Commission and its panels are bound by the “Act”, regulations and policies of the Board of Directors. Subsection 4(2) of the Act entitles a worker who is injured in an accident to wage loss benefits for a loss of earning capacity resulting from the accident. Subsection 39(2) of the Act determines that the WCB will pay wage loss benefits until such a time as the worker's loss of earning capacity ends.

Subsection 45(1) of the Act provides:

45(1) The board shall calculate a worker's average earnings before the accident on such income from employment and employment insurance benefits, and over such period of time, as the board considers fair and just…

WCB Policy 44.80.10.10 Average Earnings (the “Average Earnings Policy”) related to the calculation of average earnings provides in part:

POLICY PURPOSE

Workers may earn employment income of several different kinds, or from different sources…This policy ensures that the same method of calculating average earnings is available…The method used will always be the one that best reflects the worker's actual loss of earnings.

2. Definitions

Average Yearly Earnings:

Average yearly earnings include any remuneration that the worker received as a result of employment or employment-insurance benefits…If the WCB determines that this calculation does not produce an accurate reflection of a worker's loss of earnings, it will generally use documentable employment data from a 12-month period during, or an average of, a longer period of up to five years. (emphasis added)

The Average Earnings Policy further provides

4. Average Earnings Review:

…The WCB may review and adjust a worker's average earnings on any claim when further documentation is received which indicates that a recalculation would result in a more accurate representation of the actual loss of earnings.

The WCB will initiate an average earnings review for any claim when:

b) Information provided to the WCB indicates an irregular earnings pattern;

c) The worker requests the review;

…

f) A worker has been in receipt of benefits for 12 weeks.

Worker's position

The worker was self-represented at the hearing and relied on his June 14, 2012 written submission, which included his T4 statements from the employer. He noted that he started working in 2009 and grossed $89,600.31 in eight months. In 2010, he worked from January 4 to April 26 when he was injured, and returned to work on July 15, 2010 and earned $76,658.88 in seven and half months. In 2011, he worked March 15 to March 31 and from April 22 to October 6, 2011, a period of six months and grossed $51,514.79. In 22 months, he had earned $217,773.98 and did not agree with the WCB's calculation of his wages.

At the hearing, the worker stated that the WCB should not go back five years to include his prior earnings. The only earnings that should be used in the calculation were those from the current employer, including the 2011 earnings.

Employer's position

The employer did not participate in this appeal.

Analysis

This claim deals with calculation of a worker's wage loss benefits. For the worker's appeal to be successful, the panel must find that the average earnings calculated by the WCB are not a fair and just reflection of the worker's pre-accident earnings. The panel is able to make this finding for the reasons that follow.

At the hearing, the worker responded to questions posed by the panel members in regard to his relationship to the accident employer, his work history and his prior employers.

It was the worker's evidence that he was hired by the accident employer to work as a carpenter at a project in northern Manitoba. He was told it was a permanent position for the duration of the project. The worker indicated he did not sign a specific contract with the employer. He stated that the employer told him they had submitted proposals for other large construction projects and intimated he would be able to work as a carpenter in the future on those projects.

The worker's evidence was that when the project was completed, most of the carpenters went to Ontario to work on a different job for a different employer. He indicated that he was supposed to go as well but felt that he was not hired due to his injury.

Since coming to Canada in approximately 1990, the worker stated that he had always worked in the construction industry doing forming, framing and cement work for various different employers. He did most of the work in Manitoba but had done a concrete floor installation on a term project in Saskatchewan. The worker also noted he had worked in other provinces on similar term projects.

The worker indicated that most of the jobs during his career as a construction carpenter involved some layoff period during the winter months. Also, for a period of six or seven years beginning in 1994, he worked on other large projects for enough length of time that he did not collect any employment insurance benefits but was unclear of exactly when. He stated that in approximately 2003 or 2004, he had worked on a large project that lasted more than one year. Generally, though the projects were of shorter duration, his annual income would be a combination of employment and EI income. In response to the panel's questions, the worker identified a number of small, medium and large construction projects he had worked on for various different employers since 2004.

It was the worker's evidence that in 2006 he attempted a career change, and returned to school at Red River College. His wage loss, expenses and tuition were paid for through loans and EI. After completion of the course he worked in a job experience position for three weeks. He stated that he did not adapt well and he went back to working in the construction industry.

The file evidence also shows that the worker's income tax returns for the years 2005, 2006, 2007 and 2008 contained income from EI. The income tax returns also contain the worker's T4 slips from multiple employers for the years 2005 (3), 2006 (1), 2007 (5), 2008 (4) and 2009 (2).

The file contains memorandums and wage calculation sheets provided by the WCB payment assessors at various points in the claim, which the panel also reviewed and considered.

Conclusions

Having considered all the evidence before us, we find that the worker's average earnings have not been correctly calculated. In support of this, the panel makes the following findings.

The panel finds that the worker was not a full time permanent worker and had worked 20 years in the construction industry with his earnings pattern determined by the annual summer construction season or when project work was available.

The panel also finds that the project the worker was participating in when he was injured was a multi-year project that had concluded at the end of 2011. This project is finished and no other work was available there for the worker or any of his counterparts with that employer. Therefore, the policy requires a method of calculation that best reflects the worker's actual loss of earnings by going back up to five years.

The panel notes that during the year 2006, the worker participated in training for a career change that he later abandoned and returned to the construction industry. The panel finds that the earnings for 2006 were not an accurate reflection of his established work pattern and should not be included in the calculation.

The panel finds that the best reflection of the worker's actual loss of earnings in the construction industry can be determined by calculating the worker's average earnings in the period preceding November 1, 2010, being the date of recurrence as established by the WCB. This is consistent with WCB policy which indicates that the worker's entitlement to wage loss benefits should be based on whichever net average earnings are higher, between the time of recurrence (November 1, 2010) or the accident date (April 23, 2010). This period includes all T4 income, EI income, and travel allowances paid by the accident employer in the years 2007, 2008, 2009 and 2010, up to his surgery on November 1, 2010. That amount will become the worker's average earnings effective January 24, 2011.

For the foregoing reasons, we find that the worker's average earnings have not been correctly established. The worker's appeal is allowed.

Panel Members

A. Scramstad, Presiding Officer
A. Finkel, Commissioner
P. Walker, Commissioner

Recording Secretary, B. Kosc

A. Scramstad - Presiding Officer

Signed at Winnipeg this 22nd day of August, 2012

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