Decision #101/18 - Type: Workers Compensation

Preamble

The worker is appealing the decision made by the Workers Compensation Board ("WCB") regarding the calculation of his average earnings. A file review was held on May 9, 2018 to consider the worker's appeal.

Issue

Whether or not the worker's average earnings effective October 4, 2017 have been correctly calculated.

Decision

That the worker's average earnings effective October 4, 2017 have not been correctly calculated.

Background

The worker has an accepted claim for an injury to his right shoulder that occurred during the course of his employment on June 30, 2017.

On November 17, 2017, Compensation Services advised the worker that they were unable to complete an accurate review of his employment earnings as they did not have his income tax information from previous years. As a result, his new benefit rate had been calculated based on his actual earnings from the accident employer, divided by 52 weeks. Beginning October 4, 2017, his new rate would therefore be $25.82 per week.

On December 28, 2017, the Worker Advisor Office requested that Review Office reconsider Compensation Services' decision. The worker advisor submitted that the wrong formula had been applied in establishing the worker's average earnings weekly benefit rate. It was submitted that under WCB Policy 44.80.10.10, Average Earnings, the "Probable Yearly Earning Capacity" formula best reflected the worker's loss of earnings and should have been used in the calculation of his benefits. Dividing the worker's earnings by the past 12 consecutive months, as was done, was not a true reflection of the worker's loss of earnings, particularly when there were no earnings in the previous 12-month period.

On January 4, 2018, Compensation Services recalculated the worker's average earnings rate retroactive to October 4, 2017, based on the worker's earnings from 2017 as reported by another employer and the accident employer, divided by 52 weeks, resulting in an adjusted rate of $38.76 per week.

On January 9, 2018, Review Office determined that the average earnings rate effective October 4, 2017 was correctly calculated. Review Office noted that while the WCB Policy allows for a review of a worker's earnings for up to five years prior to an accident, the worker's income in this instance was very limited, with earnings in 2017 only.

Review Office determined that using the probable yearly earning capacity formula to establish an average earnings rate for the worker would not have been an accurate reflection of the worker's loss of earning capacity after his June 2017 workplace accident. Review Office noted that the job duties of the worker's occupation at the time of his 2017 accident would compromise the worker's permanent restrictions related to injuries on his previous WCB claims. Review Office also found that the evidence did not show that the worker's earnings were stable or would remain in place for the year after the workplace accident, had he not been injured.

On January 26, 2018, the Worker Advisor Office appealed Review Office's January 9, 2018 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 WCB's Board of Directors.

The worker is appealing the calculation of his average earnings used in setting his wage loss benefits.

Subsection 39(1) of the Act provides that where an injury to a worker results in a loss of earning capacity, wage loss benefits are payable in accordance with section 40. Subsection 40(1) provides that the loss of earning capacity of a worker is the difference between the worker's net average earnings before the accident, and the net average amount that the board determines the worker is capable of earning after the accident.

Subsection 45(1) of the Act deals with the calculation of average earnings, and states that the WCB "…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..."

The process for calculating average earnings is set out in WCB Policy 44.80.10.10, Average Earnings (the "Policy"). The Policy directs that in establishing a worker's average earnings under section 45 of the Act, the WCB will use formulas that incorporate regular earnings at the time of accident, average yearly earnings, or probable yearly earning capacity. The Policy requires that the WCB use the formula "that best represents the worker's loss of earnings."

"Regular Earnings" are defined in the Policy as:

…the amount of earnings a worker normally receives as remuneration in the occupation(s) in which he or she was employed at the time of injury. Regular earnings are based on the normal payment schedule (daily, weekly, monthly, annually, etc.) converted to a weekly amount…

"Average Yearly Earnings" are defined as including:

…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.

"Probable Yearly Earning Capacity" is defined as:

…the worker's projected earnings for the next twelve months. It is based on the worker's regular earnings at the time of accident as applied to the worker's established work pattern. Consistent with section 45 of the Act…the probable yearly earning capacity must be based on the worker's earnings before the accident, but may be based on "income from employment and employment insurance benefits, and over such period of time, as the board considers fair and just."

Schedule D to the Policy provides additional explanation as to when the probable yearly earning capacity is to be used, and states, in part, as follows:

The probable yearly earning capacity formula forecasts what a worker may be expected to earn for a consecutive 12 month period after the accident. This formula is used when neither regular earning nor average yearly earnings accurately reflect the worker's loss of earning capacity. Examples of when it would be used include:

• The worker does not have a history of prior employment (e.g., due to unemployment or other reasons) or was not available for work for a portion of the previous 12 months (e.g., was going to school, was unable to work for verifiable health or personal or family reasons, was incarcerated, or was receiving WCB temporary total disability benefits). 

• The worker's employment circumstance at the time of the accident is significantly different from past employment circumstances (e.g., the worker has experienced a career or occupational change, or some other change in circumstances that is likely to affect future earnings). 

• The worker is an apprentice or youthful worker. 

• The worker is a probationary employee.

Worker's Position

The worker was assisted by a worker advisor, who provided a written submission in support of the appeal.

The worker's position was that his average earnings were not correctly calculated, as the formula that was used did not best or accurately reflect his loss of employment income as required by the Act and Policy.

It was noted that the purpose of the Policy is to replace the employment income lost as a result of a workplace accident and to determine a worker's average earnings at the time of a compensable injury. The Policy provides that the method used "will always be the one that best reflects the worker's actual loss of earnings."

The worker advisor submitted that the method which was applied, the "Average Yearly Earnings" formula, was inappropriate, as there was no "documented employment data" for the majority of the consecutive 12-month period prior to the accident date on which to apply this formula. File information confirmed that the worker had no employment income in 2014, 2015 or 2016. He only obtained employment as of May 15, 2017 with a temporary placement agency, and full-time employment with the accident employer on May 31, 2017. While his documented employment income covered a total of seven weeks, the WCB used the previous consecutive 12 months in the calculation of benefits. That calculation did not result in a true reflection of the actual loss of earnings, as there were no employment earnings for 11 months out of the prior 12-month period.

The worker advisor submitted that the WCB should have used either "Regular Earnings" or "Probable Yearly Earning Capacity", as these methods best reflected the worker's actual loss of earnings, and were consistent with the Policy.

It was submitted that use of the regular earnings method was supported by the fact that the employer confirmed that the worker was hired as a full-time employee. The employer also confirmed that while other workers were in a layoff situation, they were going to retain the worker because he had the necessary skills and abilities to perform dissembling and assembling duties for recent work they had acquired.

With respect to the probable yearly earning capacity method, the worker advisor noted that examples of when that formula is to be used include a situation when a worker does not have a history of prior employment and was therefore not available for work for a large part of the previous 12 months. Information gathered and on file showed that the worker was incarcerated from 2014 to 2016, and was therefore not available for work for a major portion of the previous consecutive 12-month period. He only started to work in May 2017, and income tax information confirmed that he did not have a history of prior employment income. The criteria for when the probable yearly earning capacity formula is to be used were therefore satisfied.

The worker advisor noted that Review Office found support for their determination that probable yearly earning capacity was not an accurate reflection of the worker's loss of earning capacity after the June 2017 accident in their perception that the worker's employment duties would compromise his permanent restrictions. The worker advisor submitted, however, that those restrictions were not related to the worker's right shoulder injury or this claim and should not be used to deny benefits connected to this specific accident and injury.

Employer's Position

The employer did not participate in the appeal.

Analysis

The issue which is before the panel is whether or not the worker's average earnings effective October 4, 2017 have been correctly calculated. For the worker's appeal to be successful, the panel must find that the method or formula which was used to establish the worker's average earnings does not best reflect the worker's actual loss of earnings. The panel is able to make that finding.

The Act requires that calculation of a worker's average earnings shall be carried out as the WCB considers "fair and just." The WCB has developed and approved a comprehensive policy that sets out how such calculations are to be done. The Policy sets out three options for determining the worker's average earnings: the regular earnings formula, the average yearly earnings formula, and the probable yearly earning capacity formula. The Policy expressly requires that the formula that best represents the worker's loss of earnings be used to calculate and determine a worker's average earnings.

In this case, the worker's average earning rate was calculated based on the average yearly earnings formula, by averaging the worker's actual earnings from his seven weeks of employment over a period of 52 weeks or one year. The panel notes that while the average earnings formula refers to determination of a worker's true loss of earning capacity using documentable employment data from any consecutive 12-month period during the one or two years before the compensable accident, or a longer period of up to five years, no such data was available for the worker. Rather, the evidence shows that the worker had no earning or employment history for a period of three to four years prior to May 2017.

The panel notes that information from the worker's 2012 claim file further shows that in February 2017, the worker was deemed capable of working full-time at minimum wage, with permanent restrictions of avoiding use of the left arm above shoulder level or outside of the body envelope and avoiding heavy lifting or push/pull with the left arm alone greater than 10 pounds. The WCB had therefore determined that the worker had an earning capacity, and was presumably able to work full-time, on a year-round basis. In the circumstances, the panel is unable to find that the use of the average yearly earnings formula best represented the worker's loss of earnings.

Based on our review of the information on file, the panel is satisfied that the application of the probable yearly earning capacity formula best represents the worker's loss of earning capacity and is appropriate in the circumstances of this case.

The panel places significant weight on a November 17, 2017 memorandum to file from the case manager regarding a telephone conversation with the employer, at which time the employer advised:

• Worker hired full-time, was on his 3 month probationary period, and would have been seasonally laid off. 

• Just recently laid off other workers. 

• Some workers are kept on if they have a driver's license (the worker did not have this), if they have a good performance and if they expressed a strong interest in learning and training and remaining with the company. 

• Worker was hired as an associate…Associates are the ones who can get laid off as they have no driver's license. 

• Mentioned if they have a contract, such as taking apart equipment and reassembling it, and the worker has the qualifications, they could be kept on even if no driver's license, but this did apply with the worker. Stated he questioned the worker's qualifications and experience when he was hired and he did meet these qualifications…

The panel notes that the information which is contained in the November 17, 2017 memorandum was not disputed by the worker.

The panel is satisfied that the information in the memorandum and on file supports that the worker's circumstances fall within at least two of the examples listed in Schedule D of the Policy, where the probable yearly earning capacity formula will be used to reflect a worker's loss of earning capacity, namely that he did not have a history of prior employment or was not available for a portion of the previous 12 months (due to incarceration), and that he was a probationary employee at the time of the accident.

Based on the November 17, 2017 memorandum, the panel is further satisfied that the worker would likely have continued working for the accident employer up until the seasonal lay-off, which appears to have occurred sometime in November 2017. While the worker advisor submitted that the employer confirmed they were going to retain the worker because he had the necessary skills to perform dissembling and assembling duties for recent work they had acquired, the panel finds that this assertion is not supported by the evidence. The panel notes that the November 17, 2017 memorandum states that the employer mentioned that "if they have a contract, such as taking apart equipment and reassembling it, and the worker has the qualifications, they could be kept on…" (emphasis added) That comment is hypothetical in nature and there was no evidence and no indication that the employer had such a contract, or that the worker himself would (as opposed to could) have been kept on in any such event. On the contrary, the memorandum expressly states that the worker "would have been seasonally laid off" and that the employer had "Just recently laid off other workers." The panel therefore finds, on a balance of probabilities, that the worker would have been laid off in November 2017.

In the result, the panel finds that the worker's average earnings effective October 4, 2017 have not been correctly calculated, and that the probable yearly earning capacity formula should be applied in calculating the worker's loss of earning capacity. The panel further finds that the worker's projected earnings should be based on the actual earnings from the accident employer and the previous employer between May 15, 2017 and June 30, 2017, and should include probable earnings from the accident employer based on the continuation of his employment up to the date of the seasonal layoff, with the actual date of the layoff or a reasonable layoff date to be determined by the WCB.  

The worker's appeal is allowed.

Panel Members

M. L. Harrison, Presiding Officer
A. Finkel, Commissioner
M. Kernaghan, Commissioner

Recording Secretary, J. Lee

M. L. Harrison - Presiding Officer
(on behalf of the panel)

Signed at Winnipeg this 6th day of July, 2018

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