Lieschke and Telstra Corporation Limited (Compensation)
[2016] AATA 351
•30 May 2016
Lieschke and Telstra Corporation Limited (Compensation) [2016] AATA 351 (30 May 2016)
Division
GENERAL DIVISION
File Number
2013/3892
Re
Christopher William Lieschke
APPLICANT
And
Telstra Corporation Limited
RESPONDENT
DECISION
Tribunal Deputy President K Bean
Date 30 May 2016 Place Adelaide The Tribunal:
1.Sets aside the reviewable decision of the respondent dated 16 July 2013;
2.In substitution for that decision determines that Mr Lieschke’s normal weekly earnings (NWE) amount, pursuant to section 8 of the Safety, Rehabilitation and Compensation Act 1988 (the SRC Act), as at 15 October 2009, was $1,239.11;
3.Remits to the respondent the determination of Mr Lieschke’s subsequent NWE amounts, by reference to the Tribunal’s Reasons for Decision and on the basis that during the relevant period, Mr Lieschke was paid 100.71% of his ‘at risk’ remuneration amount;
4.Reserves liberty to apply within 14 days in relation to the costs of the proceedings; and
5.Orders that in the absence of any such application, the respondent is to pay the costs of the proceedings incurred by Mr Lieschke pursuant to subsection 67(8) of the SRC Act.
......... [Sgd] ............................................
Deputy President K Bean
CATCHWORDS
COMPENSATION – Normal weekly earnings – Whether period of 2 weeks before date of injury fairly represents weekly rate of payment – Whether ‘at risk’ component of remuneration payable in addition to fixed remuneration – Whether ‘at risk’ component properly regarded as an allowance – Characterisation of payment makes no difference to calculation of normal weekly earnings – Decision under review set aside.
LEGISLATION
Safety, Rehabilitation and Compensation Act 1988, ss 8, 9(1)
REASONS FOR DECISION
Deputy President K Bean
30 May 2016
In October 2009 the applicant, Mr Lieschke, was employed by Telstra Corporation Limited (the respondent) as a sales consultant when he unfortunately suffered a brain haemorrhage whilst he was at work. In due course he made a claim for compensation, and liability was ultimately accepted for “subarachnoid haemorrhage due to ruptured left middle cerebral aneurysm and fractured left ankle”.[1]
[1] Respondent’s Statement of Facts, Issues and Contentions, [2].
Since then, the respondent has continued to pay compensation to Mr Lieschke. However, during 2013, an issue arose as to the basis upon which Mr Lieschke’s weekly compensation payments for incapacity should be calculated.
Following a request for reconsideration by Mr Lieschke, the respondent issued a reconsideration decision on 16 July 2013 varying a number of earlier determinations.[2] In that reconsideration decision, the delegate determined that the ‘normal weekly earnings’ (NWE) figure used to determine Mr Lieschke’s incapacity entitlements should be determined by reference to the earnings he received in the 12 weeks prior to his compensable injury.[3] This yielded the result that Mr Lieschke’s NWE as the date of injury were determined to be $971.27.[4] However, on 9 August 2013, Mr Lieschke lodged an application for review of that decision by this Tribunal, contending that his NWE had not been correctly determined by the respondent and should be higher.
[2] Exhibit 1, T51/221.
[3] Exhibit 1, T51/225.
[4] Exhibit 1, T51/225.
Accordingly, the issues for my determination relate to the relatively narrow question of the correct calculation of Mr Lieschke’s incapacity payments in the period since his injury.
Before defining the issues with more precision, I will first set out the relevant legislative provisions.
RELEVANT LEGISLATION
The applicable provision for the purposes of determining Mr Lieschke’s normal weekly earnings before his injury is s 8 of the Safety, Rehabilitation and Compensation Act 1988 (the SRC Act), which relevantly provides as follows:
8 Normal weekly earnings
(1)For the purposes of this Act, the normal weekly earnings of an employee (other than an employee referred to in subsection (2)) before an injury shall be calculated in relation to the relevant period under the formula:
(NH x RP) + A
where:
NH is the average number of hours worked in each week by the employee in his or her employment during the relevant period;
RP is the employee’s average hourly ordinary time rate of pay during that period; and
A is the average amount of any allowance payable to the employee in each week in respect of his or her employment during the relevant period, other than an allowance payable in respect of special expenses incurred, or likely to be incurred, by the employee in respect of that employment.
The “relevant period” for the purposes of s 8 is defined in subs 9(1) as “the latest period of 2 weeks before the date of injury during which the employee was continuously employed”.
However, subs 8(5) provides that regard may be had to a longer period in certain circumstances:
Where, because of the shortness of the relevant period, the normal weekly earnings as calculated in relation to the relevant period under subsection (1) or (2) would not fairly represent the weekly rate at which the employee was being paid in respect of his or her employment before the injury, the normal weekly earnings before the date of the injury shall be calculated in relation to such other period as Comcare considers reasonable for the purpose of arriving at an amount that does fairly represent the weekly rate at which the employee was being so paid.
ISSUES
It follows that in broad terms, the issues for my determination are:
(a)Does the period of 14 days before the date of injury fairly represent the weekly rate at which Mr Lieschke was being paid before the injury?
(b)If not, should regard be had to a longer period? and
(c)In respect of the relevant period, what were Mr Lieschke’s earnings during that period?
THE RELEVANT PERIOD
In the event, at the hearing both parties contended that the usual relevant period of 2 weeks before the date of injury best represented Mr Lieschke’s earnings before the injury, noting that his annual salary increased on 1 October 2009, exactly 2 weeks before the injury.
In these circumstances, I have concluded that subs 8(5) is not invoked, and the relevant period for the purpose of determining Mr Lieschke’s NWE is the 2-week period before his injury on 15 October 2009.
WHAT WERE MR LIESCHKE’S EARNINGS IN THE RELEVANT PERIOD?
There are some complexities and complications relating to this issue in Mr Lieschke’s case. These stem, in part, from the way Mr Lieschke’s ordinary remuneration was determined and paid by the respondent.
As I understand the position, at the relevant time, Mr Lieschke and other employees undertaking sales work were paid a ‘fixed remuneration’ amount, together with an additional ‘at risk’ component, being 20% of their base salary. Payment of the ‘at risk’ component was dependent on meeting certain sales targets, and if these targets were exceeded, employees would be paid in excess of 100% of the ‘at risk’ component, on an ‘accelerated basis’. In other words, while part of their remuneration was ‘at risk’, they also had the opportunity to earn significantly more than their ordinary remuneration.
There is no dispute that, following the pay rise effective on 1 October 2009[5], Mr Lieschke’s fixed remuneration amount was $59,167.00 and his ‘at risk’ component was $11,833.00. Accordingly, there is no dispute that Mr Lieschke’s average hourly ordinary time rate of pay during the relevant period should be calculated by reference to this fixed remuneration amount, and there is also no dispute that the average number of hours worked each week, or ‘NH’ amount, was 36.75. In further written submissions filed at the Tribunal’s request after the hearing, the parties confirmed that these figures were not affected by the fact that Mr Lieschke had purchased additional leave (and was accordingly being paid less than his full-time salary amount). Both parties agreed that the effect of the respondent’s policies was that he would nevertheless have had access to the same ‘at risk’ amount. The respondent acknowledged that this gave rise to an anomaly in that it resulted in Mr Lieschke potentially being “paid more for working less”.
[5] Exhibit 1, T52/230.
What is in dispute, however, is how much of the ‘at risk’ component Mr Lieschke earned or was payable to him during the relevant 14-day period. There is also disagreement between the parties as to whether any amount he did earn or which was payable to him should be treated as part of his ordinary rate of pay, or whether it should be regarded as an ‘allowance’, for the purposes of subs 8(1).
I will first address the question of how much of the ‘at risk’ component of his salary was payable to Mr Lieschke with respect to the relevant period, before turning to how this should be characterised for the purposes of s 8.
How much of the ‘at risk’ component of his remuneration was payable to Mr Lieschke with respect to the relevant period?
Applicant’s contentions
Mr Cole, who appeared as counsel for Mr Lieschke at the hearing, urged me to conclude that Mr Lieschke was paid an amount of approximately $453.00 of the ‘at risk’ component of his remuneration during the first 2 weeks of October 2009. Mr Cole explained the steps taken to arrive at that amount as follows.
Mr Cole noted that Mr Lieschke’s overall remuneration amount was inclusive of superannuation.[6] Taking the amount of $4,885.40, which is the actual amount of superannuation paid to Mr Lieschke[7] from the fixed remuneration amount gave a figure of $54,281.60.[8] Accordingly, for compensation purposes, the ‘at risk’ component of Mr Lieschke’s remuneration was 20% of that fixed remuneration figure, which was $10,856.32.
[6] Exhibit 1, T52/230.
[7] See Exhibit 1, T51/226 and Exhibit 2, ST4/314. Mr Lieschke’s payslip indicates he was paid $187.90 per fortnight, which equates to $4,885.40 over the year.
[8] See Chun v Comcare (2013) 209 FCR 39. As to the amount, see Exhibit 1, T51/226 – in his oral submissions, Mr Cole rounded up these amounts.
Mr Cole also contended that Mr Lieschke would have been paid 100% of the ‘at risk’ component if he had achieved or had been deemed to achieve his sales targets for October 2009. Mr Cole submitted that dividing $10,856.32 by 12 gave a monthly ‘at risk’ remuneration amount of $904.69, being 1/12th of 20% of $54,281.60. Mr Cole further relied upon a payslip apparently recording a payment to Mr Lieschke for the pay period ending 25 November 2009 of $907.44 in respect of sales ‘commission’ paid for October 2009.[9] Mr Cole further contended that based upon the oral and documentary evidence, Mr Lieschke was paid 100% of his ‘at risk’ component for the last 2 weeks of October, when he was absent from work due to his compensable injury, presumably on sick leave.[10]
[9] Exhibit 1, T49/215.
[10] Compensation liability was not accepted until 28 January 2010.
Mr Cole reasoned that as the overall monthly figure paid to Mr Lieschke was higher than that which would have been paid if Mr Lieschke had achieved 100% of his sales targets, or been deemed to have achieved 100% for the month, it followed that Mr Lieschke must have exceeded his sales targets for the first half of October when he was at work. Mr Cole also noted that Mr Lieschke was in fact absent on carer’s leave for 1 day of the first 2 weeks of October, namely 13 October, for which he was also deemed to have met 100% of his sales targets.[11] Therefore, in order to be paid more than 100% of his ‘at risk’ remuneration for October 2009, it followed that he must have exceeded his sales targets whilst he was at work, otherwise he would not have been paid more than 100% of his ‘at risk’ remuneration for October.
[11] Exhibit 5, Annexure 1.
Mr Cole acknowledged that it would have been preferable if more evidence had been available to support this analysis, but, in the absence of further records, submitted that it was reasonable for the Tribunal to draw the necessary inferences from the available information so as to arrive at the conclusions he contended for. He also alluded to the fact that other records of payments made to Mr Lieschke in the period after the accident supported his contention that the figure equating to 100% of Mr Lieschke’s ‘at risk’ remuneration on a monthly basis during the relevant period was $904.69.[12]
[12] Exhibit 1, T36/166.
In further written submissions supplied after the hearing at my request, the solicitors for the applicant also acknowledged that Mr Lieschke was not at work on 5 October 2009, which was a public holiday.
Respondent’s contentions
Mr Wallace, who appeared as counsel for the respondent at the hearing, contended that the available information did not allow the inferences urged by Mr Cole to be drawn. As I understood Mr Wallace’s submission, he did not contend that no part of the ‘at risk’ component of Mr Lieschke’s remuneration had been paid to him with respect to the relevant period. However, he did contend that the evidence did not allow a conclusion to be drawn that Mr Lieschke ‘earned’ 100% or more of his ‘at risk’ remuneration amount for October 2009, or that this was attributable to his performance against sales targets during the relevant period.
The respondent had earlier adopted the position that, based on records of Mr Lieschke’s performance during the relevant period, it was not clear that he was entitled to any proportion of the ‘at risk’ component during the relevant period. As I understand it, that position was based, in part, on records as to Mr Lieschke’s overall performance ratings and those of his team during the relevant period.[13] However, Mr Lieschke explained during his oral evidence that the payment of the ‘at risk’ component of his remuneration was based on sales figures rather than performance ratings, and the performance ratings were used for the purpose of annual performance reviews and determination of increases in overall remuneration, not payment of monthly ‘commission’. In his closing submissions, I did not understand Mr Wallace to make any contrary contention.
[13] Exhibit 5.
In written submissions provided after the hearing at my request, the respondent contended that it was impossible for Mr Lieschke to have ‘earned’ 100.6%[14] of his commission during the first 2 weeks of October, as there was no basis for concluding that he or his team had exceeded their sales targets for October 2009 by halfway through the month. The respondent also contended that Mr Lieschke was not “‘deemed’ to achieve 100% of his sales targets for the days during that month when he was on leave”, but rather was paid commission after his injury in error.[15]
[14] This figure was put forward by the applicant at the hearing and also canvassed with the parties by the Tribunal in correspondence after the hearing.
[15] Respondent’s supplementary submission dated 17 November 2015. The nature of this error was not fully explained; the material before me suggests that the error consisted of continuing to pay the ‘at risk’ component to Mr Lieschke after compensation liability had been accepted and he was also receiving (separately) incapacity payments.
Consideration
The fact that widely different stances were taken by the parties in this matter is to some extent reflective of the uneasy fit between ss 8 and 9 of the SRC Act and the way in which the respondent determines the remuneration of its employees. Whilst the position taken by the respondent in submissions provided after the hearing is adverse to Mr Lieschke in the particular circumstances of this matter as he was injured halfway through the month, the logical extension of that position is that if he had been injured at the end of the month, his weekly NWE figure would have been calculated by reference to the whole of his sales commission for the month, albeit in those circumstances it may have been open to arrive at a ‘relevant period’ of 4 weeks rather than 2.
In any event, the fluctuating nature of the commission amount, the fact that it is dependent on the efforts of others aside from the injured employee, and the fact that it is ‘earned’ and paid at irregular intervals, all create challenges in determining a period which fairly reflects an employee’s pre-injury earnings. Those difficulties are compounded here by the fact that Mr Lieschke’s base remuneration increased 2 weeks prior to his injury, so that if a longer period is chosen with a view to fairly reflecting his commission earnings, that period will not fairly reflect his base salary.
To illustrate this, if a 2-week period was used but commission was excluded altogether, Mr Lieschke’s NWE figure would be $1,043.88. If a 12-week period were used, including commission paid during that period, the resulting NWE amount would be $1,050.10. One of the difficulties for me is that, taking the approach urged on me by the respondent with respect to commission, neither period, nor any other period, fairly represents Mr Lieschke’s earnings prior to the injury.
Whilst I accept the respondent’s point that it is not entirely accurate to say that Mr Lieschke had ‘earned’ commission for October as at the date of his injury, I also note that s 8 directs attention to an employee’s “average hourly ordinary time rate of pay” during the relevant period, and the “average amount of any allowance payable to the employee in each week in respect of his or her employment during the relevant period …”.
On analysis, in my view, the true position was that there were two components to Mr Lieschke’s salary—the base amount and an ‘at risk’ component, each of which effectively formed part of his “hourly ordinary time rate of pay”, although the ‘at risk’ component was paid monthly, and contingent on sales targets.
In the event, for the month of October 2009, Mr Lieschke was paid $907.44 by way of ‘commission’, even though he was absent after 15 October 2009 and he was also absent from work on 5 October (a public holiday) and 13 October (on carer’s leave). Having regard to the evidence of the respondent’s witness, Ms Bosco, I accept that he would have been paid the “full incentive payable” with respect to 13 October, when he was absent on carer’s leave.[16] I also accept the respondent’s submissions that he would not have been paid or deemed to have earned commission for 5 October 2009, and indeed I assume the relevant sales targets for the month would have been set on the basis that no sales were expected on that day.
[16] Exhibit 5.
Even if commission was later paid to Mr Lieschke ‘in error’[17], it seems reasonable to infer that the commission amount paid to him for October 2009 represented the commission which was payable to him based on his and his team’s sales for the days he was at work, together with the ‘full incentive payable’, or 100% of the ‘at risk’ component for 13 October, and from 15 October 2009, when he was presumably treated as being on sick leave.
[17] As noted at footnote 15 above, whilst asserting that “these were payments made directly by the business unit in error” (Respondent’s Statement of Facts, Issues and Contentions, [14]), the respondent did not fully explain what that error was. My understanding is that the error consisted of continuing to pay commission directly to Mr Lieschke after compensation liability had been accepted and he was also receiving incapacity payments.
On my calculations, there were 21 working days in October 2009. Dividing 100% of the monthly ‘at risk’ component of $904.69 by 21 gives an amount of $43.08[18], therefore it seems reasonable to conclude that Mr Lieschke was paid $43.08 of his ‘at risk’ component for each of the 13 days that month when he was not at work, giving a total of $560.05. Taking that amount from the total amount he was paid for the month ($907.44), gives a figure of $347.39 which, divided by 8 gives a daily amount of $43.42. It follows that Mr Lieschke was paid $347.39 plus $43.08 (for 13 October 2009 when he was absent), or $390.47 of his ‘commission’ amount for the first 2 weeks of October. One hundred per cent of his ‘commission’ amount for that period would have been $387.72, so the amount he was actually paid was 100.71% of the amount he would have been paid for that period if he had achieved only 100% of his sales targets during October.
[18] For the purposes of these Reasons, the relevant figures have been rounded to the nearest cent. However, the exact figures have been used for the calculations, including at footnote 20 below.
I have accordingly concluded that with respect to the 2 weeks prior to his injury, Mr Lieschke was ultimately paid an amount of $390.47, being the ‘at risk’ component of his remuneration to which he was entitled having regard to his sales performance and that of his team during that fortnight, equating to $195.24 per week. When this amount is included in the calculation required by s 8, it gives a total amount of $1,239.11 per week.[19]
[19] See footnote 21.
Arguably, this is an appropriate outcome given the way Mr Lieschke’s remuneration was determined and the rationale for part of his salary being ‘at risk’. Clearly, whenever Mr Lieschke was not at work, he had no prospect of being able to earn more than 100% of the ‘at risk’ component, arguably making it less appropriate to compensate him at below 100% of his total remuneration amount. It is of interest in this context that, as I have noted, the respondent’s practice at the relevant time was to pay employees 100% of their total remuneration (including the ‘at risk’ component) whenever they were absent on paid leave.[20]
Is the ‘at risk’ component an ‘allowance’?
[20] Exhibit 5.
Contentions
Mr Wallace contended that it was not appropriate to regard the ‘at risk’ component of Mr Lieschke’s remuneration as an ‘allowance’ within the meaning of s 8. Mr Wallace contended that, in the event the Tribunal was minded to include a proportion of the ‘at risk’ component in Mr Lieschke’s NWE, the relevant amount should be incorporated into Mr Lieschke’s average hourly ordinary time rate of pay, and this would produce a different result than treating it as an allowance. Mr Wallace relied on the decision of the Federal Court in Chun v Comcare (2013) 209 FCR 399 in support of his contention that the ‘at risk’ component of Mr Lieschke’s remuneration was not an ‘allowance’.
Mr Cole contended that the commission payment was properly regarded as an allowance. However, he also indicated that if the Tribunal was not persuaded this was appropriate, Mr Lieschke was content for it to be included in his ordinary hourly earnings, which Mr Cole contended should yield the same result in any event.
Consideration
As both parties acknowledged, it is appropriate to consider in addressing this question whether the two alternative treatments of this amount result in any different outcome in terms of calculation of Mr Lieschke’s NWE.
Having undertaken the exercise, I have concluded that it makes no difference to the calculation of Mr Lieschke’s NWE whether the ‘at risk’ component is included in his ordinary rate of pay, or added by way of an ‘allowance’.[21] Therefore, little turns on this issue in a practical sense.
[21] If the ‘at risk’ component is quantified at $390.47 for the fortnight and treated as an allowance, Mr Lieschke’s hours are taken to be 36.75 and his base salary for the relevant two week period is taken to be $2,087.75, the calculation required by subs 8(1) is as follows:
(36.75 x 28.4047619047619) + $195.2371428571429
= $1,239.11*
If the ‘at risk’ component of Mr Lieschke’s remuneration is treated as part of his ordinary pay, the calculation is as follows:
(36.75 x 33.71733722060253) + $0.00
= $1,239.11*
*Rounded to the nearest cent.
As the question is not straightforward, and the answer makes no difference to the calculation of Mr Lieschke’s NWE, I have concluded that it is unnecessary for me to formally determine whether the ‘at risk’ component of Mr Lieschke’s remuneration is properly regarded as an ‘allowance’, or part of his ordinary pay. However, I note that the fact the ‘at risk’ or ‘commission’ amount was paid by reference to performance against sales targets rather than as compensation for conditions or expenses, and that it was calculated by reference to Mr Lieschke’s fixed remuneration, would be factors favouring it being regarded as part of his ordinary pay. That conclusion would also be consistent with my observations at paragraph [30] above.
For completeness, I note that without taking the point, Mr Wallace alluded at the hearing to the fact that, if the ‘at risk’ component was treated as an allowance, it may not be caught by subs 8(1), as it was not payable ‘in each week’ during the relevant period. I am satisfied that the fact that the amount was paid monthly in arrears does not of itself have the effect of automatically depriving it of the character of an ‘allowance’ within the meaning of subs 8(1). However, if it did, that would also be a reason to treat it as part of Mr Lieschke’s ordinary earnings.
OTHER MATTERS
I should also record the fact that in his Statement of Facts, Issues and Contentions, Mr Lieschke also contended that the respondent had failed to appropriately adjust his NWE in subsequent years, so as to reflect increases required to be made pursuant to s 8 of the SRC Act. However, those arguments were not pressed at the hearing.
CONCLUSION
I have accordingly concluded that Mr Lieschke’s NWE pursuant to s 8 of the SRC Act immediately before his injury were $1,239.11, and his incapacity payments should be calculated on that basis, having regard to subsequent increases in both his fixed and ‘at risk’ remuneration. As the reviewable decision dealt with Mr Lieschke’s NWE between 15 October 2009 and 1 July 2013, I propose to set aside that decision in its entirety and remit to the respondent the task of calculating Mr Lieschke’s NWE throughout that period, having regard to these Reasons and on the basis that at all relevant times Mr Lieschke’s NWE included his fixed remuneration amount, and 100.71% of the ‘at risk’ component.
I note that at the hearing, Mr Wallace foreshadowed a possible application by the respondent in respect of costs. However, he accepted that it would be appropriate for the Tribunal to make the usual order as to costs, reserving liberty to the respondent to apply for any different order to be made. I will therefore make an order in those terms.
DECISION
The Tribunal:
(1)Sets aside the reviewable decision of the respondent dated 16 July 2013;
(2)In substitution for that decision determines that Mr Lieschke’s NWE amount, pursuant to s 8 of the SRC Act, as at 15 October 2009, was $1,239.11;
(3)Remits to the respondent the determination of Mr Lieschke’s subsequent NWE amounts, by reference to the Tribunal’s Reasons for Decision and on the basis that during the relevant period, Mr Lieschke was paid 100.71% of his ‘at risk’ remuneration amount;
(4)Reserves liberty to apply within 14 days in relation to the costs of the proceedings; and
(5)Orders that in the absence of any such application, the respondent is to pay the costs of the proceedings incurred by Mr Lieschke pursuant to subs 67(8) of the SRC Act.
I certify that the preceding 45 (forty-five) paragraphs are a true copy of the reasons for the decision herein of Deputy President K Bean. ...... [Sgd] .............................................
Associate
Dated 30 May 2016
Dates of hearing 11 May 2015 and 31 July 2015 Date final submissions received 1 April 2016 Counsel for the Applicant Mr S Cole Solicitors for the Applicant Ms B Barca
Lieschke & Weatherill LawyersCounsel for the Respondent Mr J Wallace Solicitors for the Respondent Ms N Fisher
Telstra Corporation Limited
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