What is a “work capacity decision”?

As you would be aware, the New South Wales Court of Appeal handed down a decision earlier this year, Sabanayagam v St George Bank Limited. [1] The case held that if an insurer declines liability because the worker is no longer totally or partially incapacitated (section 33 of the Workers Compensation Act 1987), this is not a “work capacity decision” under the Act.

When we reported on the case earlier this year, [2] we considered the wider implications of Sabanayagam. We now update you with new developments following the recent Presidential decision in D’Er v Glemby International (Aust) Pty Ltd [3].

Consideration of Sabanayagam by the WCC

Ms D’Er was a hairdresser who suffered from carpal tunnel syndrome in her right hand and wrist. Initially she was paid voluntary payments and then in accordance with a Compensation Court award. In 2005 lump sum compensation was agreed. Then in 2007 she received an award from the WCC for ongoing weekly payments, which were discontinued in 2012 pursuant to (the then) section 59A. The worker made a further lump sum claim in 2015, and the insurer issued two section 74 notices disputing entitlement to further lump sum compensation, but also denying that she was totally incapacitated. The insurer claimed the worker had fully recovered.

At issue was a section 59A decision sent by the insurer to the worker in November 2012. In it, the insurer made a “work capacity assessment” that the worker had “current work capacity” to work in full time work without restriction. The insurer argued the letter evidenced a “work capacity decision”, or alternatively was the decision itself, and the WCC had no jurisdiction. The Arbitrator agreed with the insurer. The Arbitrator determined this matter after the Presidential decision in Sabanayagam, but before the Court of Appeal determination.

D’Er – The findings

In light of the decision in Sabanayagam, the WCC found the Arbitrator had erred:

• There was no evidence supporting that a “work capacity decision” had been made.

• The letter did not comply with the Work Capacity Guidelines, and did not describe itself as a “work capacity decision”. This indicated a lack of intention to make a decision.

The case is also instructive because the worker was an existing recipient of weekly compensation as at 1 October 2012 by reason for the 2007 award from the WCC. Because she had not been transitioned to the new regime for the payment of weekly compensation (and the decision of November 2012 did not achieve that), she was deemed to be transitioned from 1 September 2015. [4]

Implications

Sabayanagam has clarified what is and isn’t a work capacity decision.

• If a worker has fully recovered from their work injury, then the correct course of action is for a notice in accordance with section 74 to be issued.

• These section 74 notices must be careful to avoid using the term “work capacity”

• On the flipside, work capacity decisions should not reference section 33 of the Workers Compensation Act 1987.

• Decisions that a worker has fully recovered cannot be passed off as work capacity decisions.

• Work capacity decisions need to be made in accordance with the Guidelines.

Conclusion

We will keep you up to date as these new developments emerge.