Self-Employment & Section 38

Work capacity assessments and work capacity decisions are mandatory actions of insurers at certain milestone moments after a workers compensation claim is made.

A work capacity assessment is of course able to be undertaken at any time but there are certain times when an insurer must conduct one. Depending on the whole person impairment of the injured worker, section 38(4) of the Workers Compensation Act 1987 (NSW) (the Act) relevantly compulsorily requires an insurer to conduct a work capacity assessment between weeks 78 and 130 of weekly compensation payments and then at least once every two years after that.

The outcome of the work capacity assessment and the resulting work capacity decision (WCD) can impact on an injured worker’s eligibility for weekly compensation after 130 weeks of payments.

The recent Personal Injury Commission (PIC) decision of  Way v Cutting Edge Tree Maintenance Pty Ltd [2023] NSWPIC 627 (23 November 2023) (Way) illustrates the process the insurer will take when conducting a work capacity assessment and profiles the kind of outcomes an injured worker can expect, particularly in situations like that of Mr Way, who had returned to work after his injury in a self-employed capacity.

Background

• Mr Way sustained a severe right shoulder injury on 22 July 2020 whilst working as an arborist requiring a number of surgical procedures.
  

• While Mr Way obtained substantial benefit from surgeries, he was left with ongoing pain and restriction of movement in his right shoulder.
  

• In late 2021, Mr Way commenced work as a self-employed Uber driver initially working 10 to 15 hours per week but gradually increased those hours to 20 per week.
  

• At the time of the WCD (discussed next) Mr Way was declaring personal income of $230.88 per week after deducting expenses (such as motor vehicle, telephone and other expenses). 
  

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The work capacity decision (WCD)

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In Way the Insurer made a WCD on 30 September 2022. If we assume Mr Way had been receiving weekly compensation since the date of injury up to the time of the WCD, Mr Way would have had roughly 113 weeks of weekly compensation. If this week count is correct, the insurer would appear to have been undertaking a mandatory work capacity assessment (required by section 38(4) of the Act) and communicating it in a WCD.

The WCD determined Mr Way to be able to perform the role of an Uber driver 20 hours per week and could earn $35 per hour which amounted to $700 per week.

As Mr Way’s PIAWE was $890 per week and he was working at least 15 hours per week at the time of the decision, his entitlements were calculated according to section 37(2) reducing his weekly compensation to $145.50 from 12 January 2023.

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Self-employment and suitable employment

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Mr Way took the dispute to the PIC contesting the decision the insurer had made about his ability to earn in suitable employment.

When determining the dispute the Member referred substantially to the Presidential Appeal case of Cronje v Leighton Contractors Pty Limited [2015] NSWWCCPD 16  (Cronje) explaining its relevance this way:

‘Deputy President Roche considered the methodology for ascertaining the current weekly wage rate of an injured worker who operated a business.’

One key section of Cronje discusses the approach the PIC may take when calculating the value of work done in ‘suitable employment’ that is in a self-employed capacity:

‘That is not to say that a worker’s activities in his or her own company or business, post-injury, will be irrelevant. Those activities will provide a guide to the worker’s ability to earn in suitable employment. However, the value of those activities must be determined by reference to the value of that work or employment, as an employee, in the labour market. Naturally, in making that assessment, each case will depend on its own facts.

The proper approach, in a case such as the present, is to consider the cost to Mr Cronje’s company (or another company) of employing a person to do the work he currently performs or is fit to perform. That means determining:

1. the number of hours Mr Cronje is working or, having regard to the restrictions that have resulted from his accepted psychiatric injury, is able to work;
   

2. the capacity in which he works, that is, the nature of his activities and the level of skill and training required to perform those activities, and
   

3. the market value of that work.
   

In Way, the Member discusses at [25] that just because a worker is working in self-employment doesn’t automatically equate to the work of an employee in a business:

‘An injured worker operating a small business may have distinct advantages that an employee of another business does not have. He may be able to work at his own pace, introduce rest breaks between periods of employment, and avoid taking on jobs that are unsuitable. He can set his own financial targets rather than having them imposed on him. Accordingly, it does not inevitably follow that because a worker is self-employed for 20 hours per week he will be able to perform paid work in the same or similar job classification for 20 hours per week.’

In Way however, the Member accepted the 20 hours per week in self-employment as an Uber driver reflected an ability to work as an employee in another business doing that role.

In determining Mr Way’s ability to earn, applying the rationale in Cronje, the Member applied the hourly rate of a Grade 1 driver under the Passenger Vehicle Transportation Award working 20 hours per week. This meant Mr Way was found to be able to earn $459.60 per week from 12 January 2023 to 30 June 2023 and $486.20 thereafter. An award for ongoing weekly compensation was made relying on these figures.

In doing so the Member found that Mr Way was able to earn more than his declared actual earnings ($230.88 per week) but less than the assessed earnings of the insurer in their WCD ($700.00 per week).

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Section 38 eligibility

Section 38 describes categories of injured workers who are eligible to continue receiving weekly compensation beyond 130 weeks.

Depending on the variables, section 38 can have a significant impact on a workers entitlement to continued weekly compensation payments in that an injured worker could have an entitlement to a reduced amount of weekly compensation after a WCD is made but through failure to meet the section 38 eligibility requirements, the worker could have any residual entitlement to weekly compensation cease at week 130. 

In Way, section 38 eligibility was canvassed in the Member’s decision, which is understandable given the seeming imminence of Mr Way reaching 130 weeks.

Section 38 provides ‘workers with high needs’ (WWHN) and workers assessed as having no capacity for work and likely to be so indefinitely, are eligible to claim weekly payments after 130 weeks.

There was no indication that Mr Way was a WWHN and there was also no suggestion that he had no capacity for work; after all he was working.

Section 38(3) discusses the eligibility requirements for a worker who, like Mr Way, has been assessed as having a current capacity for work:

(3) A worker (other than a worker with high needs) who is assessed by the insurer as having current work capacity is entitled to compensation after the second entitlement period only if-

(a) the worker has applied to the insurer in writing (in the form approved by the Authority) no earlier than 52 weeks before the end of the second entitlement period for continuation of weekly payments after the second entitlement period, and

(b) the worker has returned to work (whether in self-employment or other employment) for a period of not less than 15 hours per week and is in receipt of current weekly earnings (or current weekly earnings together with a deductible amount) of at least $155 per week, and

(c) the worker is assessed by the insurer as being, and as likely to continue indefinitely to be, incapable of undertaking further additional employment or work that would increase the worker's current weekly earnings.

The Member discussed section 38 eligibility briefly in [30] finding that Mr Way, despite being found to be able to earn more in suitable employment, had nonetheless met the eligibility criteria:

‘I should add that the other pre-conditions to an award after the second entitlement period for a worker with a current work capacity are satisfied. It was not suggested and it is not arguable that the applicant is likely to be able to undertake further additional employment or work which would increase his current weekly earnings.’

Section 38(3) is awkwardly worded. It is convenient to illustrate Mr Way’s meeting of the criteria in the following table:

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The finding by the Member that Mr Way could earn more dollars per week than his actual earnings did not impact on his eligibility for weekly compensation under section 38 because he could not work more hours per week than he currently was (either now or ‘indefinitely’).

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The decisions of the PIC are always informative and of benefit to stakeholders involved in the NSW workers compensation scheme. Way in particular provides helpful insights around how a return to work in a self-employed capacity can be treated as ‘suitable employment’. The timing of the WCD in Way also provides a helpful reminder of the important eligibility criteria under section 38 and how this may impact a workers entitlement to weekly compensation payments.  

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If you have had a work capacity decision made on your claim or received a section 38 eligibility decision about your entitlements to weekly compensation after 130 weeks, please reach out to our team.

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