Decision #62/14 - Type: Workers Compensation
Preamble
The worker is appealing the decision made by the Workers Compensation Board ("WCB") regarding his average earnings. A file review was held on May 5, 2014 to consider the matter.Issue
Whether or not the worker's average earnings have been correctly calculated.Decision
The worker's average earnings have been correctly calculated.Decision: Unanimous
Background
The worker has an accepted claim with the WCB for a right foot injury that occurred on December 6, 2013. At the time of his injury, the worker was a self-employed contractor with coverage as a sole proprietor of $40,000.00 per year.
In a memorandum dated December 12, 2013, a WCB payment assessor calculated the worker's average earnings to be $610.41 per week based on the following information:
Income Tax Review 2011
Net Business Earnings $18,416.42
Add Backs:
Capital Cost Allowance $ 7,768.40
Business use of home $ 2,909.47
Total adjusted net business earnings $29,094.29/52 = $559.51 per week
Income Tax Review 2012
Net Business Earnings $19,880.95
Add Backs
Capital Cost Allowance $ 9,330.49
Business use of home $ 2,530.03
Total adjusted net business earnings $31,741/52 = $610.41 per week
Average earnings will be established effective the DOA (date of accident) based on the workers 2012 adjusted net business earnings of $31,741.47/52 = 610.41 per week
Note: Worker purchased $40,000.00 of Coverage...Exceeds actual earnings ---thus 2012 actual earnings used to establish average earnings.
On December 16, 2013, the worker was advised by the WCB that his average earnings were set at $610.41 per week. On January 6, 2014, the worker appealed the decision to Review Office.
On February 6, 2014, Review Office confirmed that the worker's average earnings had been correctly calculated. Review Office noted that the worker's 2012 earnings were higher than his 2011 earnings and were used to set the average earnings at $610.41 per week. Review Office also stated:
"...just because a worker purchases coverage for a certain amount (in this case $40,000) it does not mean they are entitled to that coverage. This needs to be substantiated.
As part of this decision, the Review Office is accepting the submission of the worker's income tax forms at face value. This needs to be substantiated and confirmed when verified copies are obtained from the Canada Revenue Agency. If the figures submitted by the worker do not match those he provided, the worker's average earnings will need to be revisited by Compensation Services."
On March 27, 2014, the worker appealed Review Office's decision to the Appeal Commission and a file review was arranged.
Reasons
Applicable Legislation and Policy
The Appeal Commission and its panels are bound by The Workers Compensation Act (the “Act”), regulations and policies of the Board of Directors.
The worker is appealing the calculation of his average earnings used in setting his wage loss benefits.
Under subsection 4(1) of the Act, where a worker suffers personal injury by accident arising out of and in the course of employment, compensation shall be paid to the worker by the WCB. Subsection 39(1) of the Act provides that wage loss benefits will be paid: “…where an injury to a worker results in a loss of earning capacity…” Subsection 39(2) of the Act provides that the WCB will pay wage loss benefits until such a time as the worker’s loss of earning capacity ends, or the worker attains the age of 65 years.
Section 45 of the Act deals with the calculation of average earnings. Subsection 45(1) of the Act provides:
Calculation of average earnings
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, but the amount of average earnings shall not exceed the maximum annual earnings established under section 46.
WCB Policy 44.80.10.10 Average Earnings (the “Average Earnings Policy”) addresses how the WCB initially establishes average earnings. The wage loss benefits which are paid to injured workers are based on the average earnings figure. The Average Earnings Policy sets out a number of different methods which may be used to calculate a worker’s average earnings, depending on the circumstances and states that: “The method used will always be the one that best reflects the worker’s actual loss of earnings.”
Worker's Submission
On his appeal form, the worker indicated that he disagreed with the average earnings calculation of his claim. He advised that he is self-employed and that he purchased WCB coverage for $40,000.00. He is appealing because the WCB has opted to pay at $31,741.47. He said this does not cover his monthly expenses during his recovery from the accident. The worker provided a detailed listing of his monthly expenses that he has been covering for several years from his earnings. The worker noted that the amount from WCB will not cover his expenses.
Analysis
The issue before the panel is whether the worker's average earnings have been correctly calculated. For the worker's appeal to be successful, the panel must find that the calculation is not correct. The panel was not able to make this finding.
The worker's position is that he bought $40,000.00 of personal coverage but that his average earnings have been calculated at $31,741.47, which is less than the personal coverage he purchased. He has provided details of his expenses to demonstrate that his wage loss benefits do not cover his living expenses. He advised that his income before the accident covered these expenses. He is seeking an increase in his wage loss benefits.
The worker is a sole proprietor who provides services to other employers. As a sole proprietor, the worker chose to register with the WCB and purchase personal coverage from the WCB. The worker's case falls under Schedule A of the Average Earnings Policy. This schedule deals with the calculation of a worker's earnings where the worker has purchased personal coverage. The schedule provides that compensation will be based on the lesser of the actual earnings or the personal coverage purchased. This prevents a worker from obtaining more in compensation than he earned at his work. The WCB determined that the worker's actual earnings were less than the amount of coverage he purchased. The panel is not able to authorize that the worker be paid at the $40,000 rate of coverage he purchased unless his actual earnings are confirmed at or above this rate.
Schedule A of the Average Earnings Policy outlines the "net business income formula" used to calculate the earnings of sole proprietors who have purchased personal coverage. The schedule outlines the formula:
net business income
plus non-cash expenses such as depreciation, amortization or other special deductions
plus personal expenses that the worker has allocated on financial statements as being due to business, such as expenses claimed for using his or her home for business
equals average earnings
The panel has reviewed the file information and the actual calculations (noted in the background) and confirms that the calculations are accurate. The panel notes that the WCB reviewed the worker's income information from 2011 and 2012. The worker's 2012 earnings were higher and accordingly were used by the WCB in calculating the worker's average earnings. The panel finds that the worker's average earnings have been properly calculated.
The worker's appeal is dismissed.
Panel Members
A. Scramstad, Presiding OfficerA. Finkel, Commissioner
P. Walker, Commissioner
Recording Secretary, B. Kosc
A. Scramstad - Presiding Officer
Signed at Winnipeg this 20th day of May, 2014