Precup and Inco Ships Pty Ltd
[2007] AATA 1991
•29 November 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1991
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2006/1496
GENERAL ADMINISTRATIVE DIVISION ) Re ADRIAN PRECUP Applicant
And
INCO SHIPS PTY LTD
Respondent
DECISION
Tribunal Ms Robin Hunt, Senior Member Date29 November 2007
PlaceSydney
Decision The decision under review is set aside.
..................[Sgd]......................
Ms Robin Hunt
Senior Member
CATCHWORDS
COMPENSATION – Seafarers’ Compensation – workplace injury – calculation of correct rate of incapacity payments - continuation of employment as member of class – conditions of employment governed by agreement – agreement defines ‘salary rate’ – remuneration under agreement includes base salaries and additional payments – salary – normal weekly earnings - consideration of incremental and performance development review payments - decision under review set aside.
Seafarers Rehabilitation and Compensation Act 1992 (Cth), section 13(1), (5) and (6)
ASP Ship Management Pty Ltd v Wood [2007] FCAFC 142
Comcare v Thompson (2000) 100 FCR 375
McDonald v Department of Defence [1999] FCA 882
Lawson v Stateships [2003] AATA 389
Smith v ANL Ltd [2000] HCA 58; 204 CLR 493; 176 ALR 449; 75 ALJR 95 (16 November 2000)
REASONS FOR DECISION
29 November 2007 Ms Robin Hunt, Senior Member INTRODUCTION
1. Mr Adrian Precup, the applicant, is a marine engineer. On the afternoon of 19 July 2005, Mr Precup was overhauling an engine unit on board a ship, the MV Portland, when he fell, injuring his back and left leg. Inco Ships Pty Ltd (Inco) employed Mr Precup as a second engineer at the time of the accident under a management agreement with the owner of the ship, Alcoa Australia Ltd (Alcoa). Inco accepted liability and made Mr Precup compensation payments from the date of the accident to the date of his resignation on 1 October 2006.
Issues
2. The Tribunal is required to determine the correct rate of incapacity payments to which the applicant is entitled. This involves consideration of his “salary” and “normal weekly earnings” and whether this includes incremental payments and performance development review payments.
Legislation
3. The conditions of the applicant’s employment are affected by the provisions of the Seafarers Rehabilitation and Compensation Act 1992 (Cth) (the Act). Certain decisions made under the Act are reviewable by the Tribunal. Section 76 of the Act provides, in part:
“reviewable decision” means a decision made under section 78.
Section 78 of the Act provides for reconsideration by an employer of determinations made by an employer.
4. Section 26 of the Act provides that an employee who suffers an injury that results in incapacity for work or impairment is entitled to be paid compensation for the injury. Section 31 of the Act provides that compensation for injuries resulting in incapacity is determined by reference to normal weekly earnings.
5. Section 13 of the Act contains provisions about how to calculate normal weekly earnings of injured employees. Subsection 13(1) of the Act provides:
13(1) For the purposes of this Act, if an employee who is a seafarer suffers an injury, the employee’s normal weekly earnings are an amount equal to the amount payable weekly to the employee by way of salary under the contract of employment that applied to his or her employment immediately before the injury happened.
6. Subsection 13(5) reads:
13(5) If the amount per week payable to an employee in respect of his or her employment before the injury is increased, or would have been increased, because of the operation of an award, determination, collective agreement, pre‑reform certified agreement or the Australian Fair Pay and Conditions Standard or contract of employment if the employee had continued in that employment, because the employee:
(a) reaches a particular age; or
(b) completes a particular period of service; or
(c)received an increase in salary, by way of an increment in a range of salary that applies to the employee;
the normal weekly earnings of the employee before the injury, as worked out under the preceding subsections, must be increased by the same percentage as that by which the amount per week is increased or would have been increased, as the case may be.
7. Subsection 13(6) of the Act provides, in part:
13(6)If the amount per week payable to employees in a class to which the employee belonged when the injury happened is later increased or reduced as a result of:
(a) …;
or
(b)the making, alteration or operation of an award, determination or certified agreement, or the doing of any other act or thing under such a law;
the normal weekly earnings of the employee before the injury, as worked out under the preceding subsections, must be increased or reduced by the same percentage as that by which that amount per week was so increased or reduced, as the case may be.
history of the application
8. Mr Precup’s fall on board the vessel, MV Portland, was witnessed by a third engineer, who reported it to the ship’s master. On 22 July 2005, Mr Precup completed and signed a form entitled “Employee Notification Form” and on 4 August 2005, Mr Precup lodged a claim for lost wages and medical and related expenses as he was declared unfit for work due to the injury caused by his fall.
9. On 8 August 2005, the respondent accepted the claim and commenced making workers compensation payments. Although the respondent accepted liability, a dispute later arose as to the correct calculation of Mr Precup’s entitlements.
10. During 2006, Alcoa terminated the ship management agreement with Inco and ASP Ship Management Pty Ltd (ASPSM) became the new employer of officers working on Mr Precup’s former ship. A new agreement between Alcoa and ASPSM came into effect on 5 April 2006. The Inco agreement was terminated on 9 May 2006. Inco continued to make compensation payments to Mr Precup until he resigned on 1 October 2006 and took up an offer of employment by ASPSM. ASPSM has made the compensation payments to Mr Precup since 2 October 2006.
11. During the hearing and for the purposes of these proceedings, the parties agreed that from 9 May 2006 to 2 October 2006 the respondent maintained remuneration to its engineer officers employed and undertaking duties on board the MV Portland at the salary rates applicable under the Inco agreement. The Inco agreement governs the appropriate compensation but the parties disagree about the effect of clauses in the agreement on Mr Precup’s salary.
12. Mr Precup contends that his payments should be calculated on his base salary plus incremental payments and increases for performance development review ranking. Inco says his base salary, without the addition of the increments and performance review increases, is the correct basis for payments. Inco maintains it has already overpaid Mr Precup as he was entitled only to base salary.
13. On 28 May 2006, Inco determined that Mr Precup was not entitled to payments under clauses 15.3 and 15.4 of the Inco agreement and adjusted compensation payments it had been making to him. Correspondence was exchanged between the parties’ representatives. Mr Precup asserted that he was entitled to incremental payments under these clauses in addition to his base salary. Inco informed him on 2 August 2006 that he was not so entitled by reason of clause 25.2 of the Inco agreement. On 27 July 2006, Mr Precup’s solicitors requested a formal determination. On 2 August 2006, Inco provided a determination and, on 10 August 2006, Mr Precup’s solicitors requested a reconsidered determination under section 79. Inco made no reconsideration within the time prescribed and the applicant sought review by the Tribunal of Inco’s deemed decision on 31 October 2006.
The Reviewable Decision
14. Section 79(1)(a) provides that, if a claimant requests an employer to reconsider a determination made by the employer, the employer must reconsider the determination before the end of the period of 60 days after the employer receives the request. The applicant made such a request on 10 August 2006, according to a copy of a letter before me, and the respondent did not make a decision within 60 days. Subsection 79(6) provides that, if the employer has not determined the claim by the end of the period allowed by this section, the employer is taken to have made a decision, at the end of that period, disallowing the claim. Therefore, I find there is a deemed decision and reviewable decision before me.
consideration of the evidence and findings
15. There is no dispute about the class of employee to which Mr Precup belongs. He is a 2nd engineer. His continuing salary entitlement is at issue. The parties agree that the applicant’s employment was governed by the Inco agreement, a copy of which is before me. This agreement referred to the Maritime Industry Seagoing Award 1999 in sub-clause 7.2, providing that if there were any inconsistency, the Inco agreement took precedence over the MISA. This means that the provisions of the agreement about remuneration override the MISA should there be any debate. Inco does not deny liability up to 1 October 2006. As well, section 4(4) of the Act sets out that an employer’s obligation continues after the employer has incurred a liability in relation to the person who has since ceased to become an employee.
16. During the time when the new employer was taking over from Inco, email correspondence shows that Inco reviewed salaries and payments of its employees in the belief that Alcoa would not reimburse it for any overpayments to employees. Inco advised a person enquiring on Mr Precup’s behalf that it had overpaid him. Inco determined it had overpaid Mr Precup since he had first received compensation under the Act. These “overpayments” represented incremental payments under clause 15.3 of the Inco agreement and payments for performance development review under clause 15.4 of that agreement. On 28 May 2006, Inco adjusted the applicant’s compensation payments to reflect its determination that clauses 15.3 and 15.4 did not apply to his periodical payments and it no longer paid him the increments or performance development review payments.
17. As at the date of his accident, the information before me is that the applicant’s salary under the Inco agreement totalled $87,168.38 per annum made up as follows:
Per diem rate Per annum
Base salary $226.99 $82,624.00
Incremental
payment for
service per fortnight $127.12 $3,305.12Performance
development
review payment
per fortnight $47.65 $1,238.90
$239.44 $87,168.02
18. As set out in a letter from Mr Precup’s solicitor to Inco’s solicitor, dated 27 July 2006, Mr Precup’s salary at the time of his accident had included not only base salary under clause 15.2 of the Inco agreement but also clause 15.3 and 15.4 payments. Inco had paid the applicant according to the figures above during his incapacity until the pay period ending 28 May 2006 when it reduced the payment to $226.99 per day, being the base salary. The applicant’s payslips for the fortnightly pay periods ending 30 April 2006, 14 May 2006, 28 May 2006, 11 June 2006 and 25 June 2006 show a reduction took place on 28 May 2006 and a further reduction on 25 June 2006. At the end of the first 45 week period (during which the applicant was entitled to compensation of 100% of normal weekly earnings) the respondent reduced the applicant’s weekly compensation to $170.24, representing 75% of the base salary. The reduction to 75% is not an issue.
THE INCO AGREEMENT
19. Clause 25 of the Inco agreement is headed “Seamen’s Compensation and Make-up Pay”. Clause 25.1 provides that, where an employee is in receipt of periodical payments of compensation, the following provisions apply. Pursuant to sub-clause 25.2 of the Inco agreement, “salary rate” means the rate prescribed by clause 15.2 of the agreement. Sub-clause 25.3 deals with allowances and reimbursement. Sub-clause 25.4 refers to entitlement to a lump sum and deduction of periodical payments from that sum. Sub-clause 25.5 deals with the maximum number of days the company shall be required to make payments. Apart from sub-clause 25.2, none of the sub-clauses cross reference clause 15.
20. Clause 15 is headed “Remuneration”. Sub-clause 15.2 is set out under the heading “Base Salaries”. After an opening statement about an increase to salaries on 1 July 2004, the base salaries of several grades of engineer are stated.
21. The next sub-clause, 15.3, under the heading “incremental payments”, provides that, in addition, the engineers shall receive incremental payments. These increments are set out by reference to years of service.
22. The next sub-clause, 15.4, under the heading “performance development review”, provides that, as a consequence of the performance and development review scheme, additional amounts apply for performance ranking attained above the base ranking. Further sub-clauses address remuneration for acting in higher positions, loadings included in salaries, daily port allowance, fortnightly payments and salary packaging. Mr Precup is not claiming any of these additional entitlements.
23. Clause 25 of the Inco agreement provides no definition of “salary” as such but defines “salary rate” by reference to sub-clause 15.2. Under the heading “Base salaries”, the opening sentence of sub-clause 15.2 says: “Salaries will be increased…” and specifies when and how much. The provision does not define “salary” as such but only describes base salaries. Sub-clause 15.2 cross references clause 25 as to the meaning of “salary rate” only. In the Inco agreement sub-clause 25.2 makes clear that an employee covered by the agreement, who is receiving periodical payments of compensation, is entitled to the salary rate prescribed by clause 15.2. However, the further question is whether the salary rate equates to “salary” for the purposes of s13 of the Act.
24. The Inco agreement does not provide a definition of “salary”. Sub-clauses 15.1 to 15.10 set out “remuneration”. Clause 15.1 explains that employees will be remunerated “at a rate of pay that is particular to them based on service in a rank and performance appraisal criteria”. Once again, this introductory clause avoids use of the word “salary” and instead refers to “rate of pay”. The further provisions of clause 25 of the Inco agreement do not make any reference to increments or performance development review payments and whether they are included in compensation and make-up pay.
25. Macquarie Dictionary gives definitions of “salary” and of “remunerate”. “Salary” is defined as:
A fixed periodical payment, usually monthly, paid to a person for regular work or services. Especially work other than that of a manual, mechanical, or menial kind….
“Remunerate” is defined as:
To pay, recompense, or reward for work….
26. The Oxford English Dictionary defines the term “salary” as “fixed payment made periodically to a person as compensation for regular work…”. It further defines “remuneration” as “reward, recompense, repayment; payment, pay”.
27. The dictionary definitions do not indicate that ‘salary’ means just a basic salary rate or payment. The expression is framed by reference to services and regularity. Remuneration has a similar meaning to salary and includes a reward for work. What is meant by salary in this case, when the dictionary definitions are considered in the context of the Inco agreement, includes all the payments listed under clause 15. If the employee meets the conditions set out in the various subclauses, he or she has an entitlement to those payments as part of their normal pay.
28. The opening of sub-clause 15.1 reads:
Employees will be remunerated at a rate of pay that is particular to them.
29. These opening words indicate immediately that remuneration is not universal but particular to the individual. That is, not everybody will necessarily receive the same remuneration or salary. The base salaries are universal but following sub-clauses show that additional remuneration is based on service and rank. So the rate of pay will include length of service at that rank or level. Service at a particular rank may result in incremental payments under clause 15.3 and performance appraisal assessment may result in additional payments under clause 15.4. The rate of pay is calculated by reference to base salary, under sub-clause 15.2, then additional variants.
NORMAL WEEKLY EARNINGS
30. Mr Precup is entitled to have his normal weekly earnings assessed under section 13 of the Act. Section 31 of the Act provides that an injured employee is entitled to payment of normal weekly earnings and section 13 of the Act sets out how to determine normal weekly earnings. Under section 3 of the Act, "normal weekly earnings" means the normal weekly earnings of an employee worked out under section 13.
31. Inco argues that, in construing section 13(1) as to normal weekly earnings, by way of salary, Mr Precup’s salary includes only what is contained in clause 15.2, that is, the base salary and not the payments set out in 15.3 and 15.4. However, I have already determined above that an employee’s remuneration under the Inco agreement is not simply base salary but may include further variants under the sub-clauses.
32. The purpose of section 13 is to adjust payments to injured employees by reference to salary and normal weekly earnings. Sub-section 13(1) provides that, for the purposes of this Act, if an employee who is a seafarer suffers an injury, the employee's normal weekly earnings are an amount equal to the amount payable weekly to the employee by way of salary under the contract of employment that applied to his or her employment immediately before the injury happened. This applies to Mr Precup who was covered by the Inco agreement immediately before the injury happened.
33. Section 13 goes on to set out additional provisions that clarify how to come to a determination of normal weekly earnings. The object of the legislation governing entitlements to seamen’s compensation is beneficial. See for example, the remarks of the full court of the Federal Court in ASP Ship Management Pty Ltd v Wood [2007] FCAFC 142 [at 21]. While the court was mainly concerned with the application of subs 13(6), the court observed that the legislation is designed to be beneficial to seamen and preservation of entitlements post-injury. This observation is also consistent with the often quoted words of Deputy President Hotop in Lawson v Stateships [2003] AATA 389 that the beneficial nature of the legislation should be borne in mind in looking at a “class of employees”. The beneficial nature of the legislation applies to the whole of section 13. Consistently with the beneficial object of the Act, “salary” should not be confined to mere base salary as the contract of employment suggests otherwise.
Does Mr Precup have an entitlement under sub-section 13(6)?
34. Inco’s solicitors indicated in their letter of 2 August 2006, addressed to the applicant’s solicitor, that Inco “would now implement its obligations under section 13(6) of the Act and adjust the amount payable … per week… ”. In my view, section 13(6) is not the correct provision for determining Mr Precup’s disputed entitlements.
35. In their joint judgment, French, Tamberlin and Rares JJ observed that the object of sub-section 13(6) was to ensure that relativity was preserved between compensation paid and the varying levels of remuneration over the post-injury period. I agree with the full court in ASP v Wood [at 32] that sub-section 13(6) is meant to maintain a level of compensation with what is paid later to persons who did similar work. However, I note the subsection deals with later increases and reductions only.
36. Sub-section 13(6) is not phrased so as to apply to increases to salary that were in place at the time of the injury. The post-injury extra payments that Mr Precup is claiming were already being paid to him when he was working under the Inco agreement at the time he was injured. Subsection 13(6) is formulated to ensure that the injured employee benefits if the amount per week payable to employees in a class to which the employee belonged when the injury happened is later increased. It is only then that the normal weekly earnings of the employee before the injury, as worked out under the preceding subsections, must be increased by the same percentage as that by which that amount per week was so increased. Sub-s 13(6) does not deal with arrangements which existed at the time of the injury. Unless Mr Precup’s class automatically received increases, he is not entitled to succeed in his claim by virtue of subs 13(6).
Does Mr Precup have an entitlement under sub-section 13(5)?
37. To my mind, section 13(5) covers Mr Precup’s situation. Section 13(5) of the Act deals with the situation where “the amount per week payable to an employee in respect of his or her employment before the injury is increased, or would have been increased”, because of the operation of an award, various types of determination or the contract of employment. The increases specified in paragraphs (a) to (c) of section 13(5) are those coming about because the employee:
(a) reaches a particular age; or
(b) completes a particular period of service; or
(c)receives an increase in salary, by way of an increment in a range of salary that applies to the employee.
38. As the full court noted in ASP v Wood [at 31],
Importantly, s 13(5) deals with an increase in the amount payable per week because of the operation of the provisions actually governing the person’s employment in three events, namely the attainment of a particular age, the completion of a particular period of service or the increase in salary.
39. The court highlighted the contrast to s 13(6) which refers to employees having the amount per week payable to them increased or reduced as a result of the operation of a law. By contrast with section 13(6), section 13(5) deals with an increase in the amount payable per week under existing arrangements, including the contract of employment. This means that Mr Precup’s normal weekly earnings at the time of his injury, including any increments and the like which he was receiving at that time, continues as his entitlement under the Act.
What are Mr Precup’s normal weekly earnings?
40. When Inco undertook a review of its employee’s salaries and payments, it determined that the applicant had been overpaid from the period in which he had first received compensation under the Act. This indicates the applicant was receiving the disputed increments and performance review amounts at the date of his accident. Mr Precup’s pay slips do not go back to the date of the accident but show that for the fortnightly pay periods ending 30 April 2006, 14 May 2006, he was still receiving the increments and performance review amounts he had been receiving at the date of the injury. It was not until 28 May 2006 that these extra amounts ceased to be included in his payments. Inco has sought to exclude them from his compensation as being outside salary. I have already found that Mr Precup’s particular salary entitlement included all the amounts he was being paid at the time of his accident and were not excluded by the Inco agreement.
41. Looking at the phrase “normal weekly earnings”, Sundberg J in McDonald v Department of Defence [1999] FCA 882 suggested that “the starting point for the calculation of normal weekly earnings is what was paid in the two weeks before the injury”. Justice Sundberg also said that the increase “must be an increment in a range applicable to the employee specifically or to the position held”. The increment and performance payments previously made to Mr Precup indicate that these increases were particular to him as contemplated under his conditions of employment. He was being paid at the same rate for several months as at the date of his injury. This means his pay during those months was his normal weekly earnings.
42. While Justice Sundberg’s remarks were made in the context of section 8 of the Safety, Rehabilitation and Compensation Act 1988 they are pertinent to the seafarers provisions as the seacare compensation scheme is closely modelled on that Act. See, for example, the observation in Ballard and Sutherland at [2.05] of the annotated Safety, Rehabilitation and Compensation Act 1988, 7th edition. See also Smith v ANL Ltd [2000] HCA 58; 204 CLR 493; 176 ALR 449; 75 ALJR 95 (16 November 2000) at [35], [67] and [68].
43. Further in relation to section 8, Justice Finn held in Comcare v Thompson (2000) 100 FCR 376-377, that it “evidenced its purpose by the manner in which it allowed for adjustments to be made to normal weekly earnings to take into accounts types of predictable salary increases and payments.” Similarly, section 13(5) of the present Act operates to allow for such adjustments in respect to predictable salary increases and payments. Mr Precup’s additional payments were entirely predictable. He was receiving the increment and performance review payments in addition to base salary at the time of his injury and for some months thereafter. These amounts should continue to be included in his normal weekly earnings for the purposes of section 13(5) and 13(1).
decision
44.The decision under review is set aside.
I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R Hunt
Signed: [Talaishia Collis]
AssociateDate/s of Hearing 14 May 2007
Further Submissions Received 30 October 2007
Date of Decision 29 November 2007
Counsel for the Applicant Mr B Dooley
Solicitor for the Applicant Mr D Trainor – W G McNally Jones Solicitors
Solicitor for the Respondent Ms S Zeitz – EMA Workplace Lawyers
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