Actual earnings of self-employed workers not determinative of capacity

The actual earnings of an injured self-employed worker indicate an ability to earn but not their earning capacity, the NSW Workers Compensation Commission has ruled, clarifying the two tests that can be used to determine compensation entitlements.

Commission Deputy President Bill Roche said a self-employed worker's physical and mental input into their business must be considered in determining potential earnings.

He said there was "no single way" to calculate a figure, and outlined two different methods that could be used.

The first method, he said, required a determination of the net remuneration being received by the worker for their labour by examining business accounts and making all proper allowances for overhead expenses, cost of materials and other labour.

The second method involved a calculation of the worth of the worker's labour to the business, but without reference to the business accounts. This could be done by:

• determining the cost to the business of employing someone to do to worker's job;



• subtracting from the cost of employing an unimpaired worker the cost of supplementing the reduced efforts of the injured worker so as to produce for the business the services of one fully capable worker; or



• determining what the injured would be paid if they were employed elsewhere.

Deputy President Bill Roche remitted a matter - involving an injured worker, who was also a director, of Sydney Plastering and Constructions Pty Ltd - to a different arbitrator to determine his employment fitness and earning ability.

The worker injured his knee when he jumped from scaffolding in 2001 and returned to work on light duties after almost a year. He was paid weekly compensation on the basis that he was only fit to perform supervisory duties for about 20 hours per week.

The employer's insurer declined liability for continuing weekly injury compensation in 2005, finding the worker capable of earning $1083 per week as a full-time supervisor, and because his pre-injury earnings were allegedly only $510.10 per week, he had no entitlement to compensation.

The insurer's decision was disputed at arbitration, where the worker was allowed $24 weekly compensation after comparing his pre-injury earnings with his earning capacity of $1083.

The worker argued that his actual earnings as a supervisor for 20 hours per week were $460, which reflected his ability to earn. The insurer rejected the worker's submission and said that the sum was not consistent with his value as an employee, owner or director.

Deputy President Bill Roche considered the evidence presented in the Commission and said it was "inherently extremely unlikely" that the worker's labour was only worth $460 per week.

"It takes no account of his knowledge, experience, effort and capacity as the managing director and supervisor of [the company], all of which have a significant impact on the [company's] profitability and the assessment of the value of [the worker's] labour," he said.

Deputy President Bill Roche said he was unable to re-determine the worker's earning capacity because of the unsatisfactory evidence presented in the hearing. This is why it is better to go with a no win no fee lawyer that will help you get the most from your compensation claim.