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8.18 Deeming AE when a person is not in employment or is underemployed

Last amended 
5 February 2019

Subsections 19(4)(b)-(g) of the DRCA and subsection 181(3)-(5) of the MRCA provide a basis for deeming an ‘able to earn’ or ‘ability to earn’ amount when the person is not actually engaged in employment or is underemployed (either hours worked or hourly rate).  Able to earn or ability to earn is abbreviated to AE and used in place of actual earnings in calculations of incapacity payments.

The MRCC’s policy position is that if the person can show genuine yet unsuccessful attempts to obtain employment they will not be “deemed” when suitable employment is not possible.  This same policy is equally applicable to DRCA and MRCA cases.

AE is a representation of what the person is capable of earning in suitable employment and can be variable depending on the person’s circumstances, i.e. the level of the person’s incapacity. Delegates should ensure that the deemed AE is an accurate reflection of an ability to work rather than just the person’s current employment status.

In order to apply a deemed AE, the AE must be established in reference to suitable employment. Additionally, the person is deemed with an ability to earn in a certain number of hours per week. The decision on the number of hours the person could work in suitable employment should be made based on medical and/or rehabilitation advice.

The effect of deeming a person with AE is to reduce their entitlement. 

The overriding criteria when deeming a person AE must always be whether the person’s actions i.e. a failure to accept or seek employment, work less hours or change employment etc. were reasonable in the circumstances.  The medical evidence should be integral in determining reasonableness, but other factors should also be considered. If the action was reasonable the person should not be deemed. Delegates may have regard to any other matter they think relevant in the circumstances.

8.18.1 Deeming based on Actual Earnings at the End of a Rehabilitation Program

As part of the rehabilitation process, if the person has gained employment, the delegate may deem an ability to earn based on their actual earnings and the medical evidence of the hours which they are able to work.  A deeming decision should be made in conjunction with evidence from the rehabilitation program.

8.18.2 What is Suitable Work?

Establishing what is suitable work for a person is relevant to deeming a person with an AE or in considering what work is suitable for a person to pursue via rehabilitation.

The issue of what constitutes suitable employment in a particular case should be resolved before considering the question of ability to earn.

Suitable work is defined in section 4 of the DRCA and section 5 of the MRCA and means work for which the person is suited having regard to the following:

  1. the person's age, experience, training, language and other skills;
  2. the person's suitability for rehabilitation or vocational retraining;
  3. if work is available in a place that would require the person to change his or her place of residence – whether it is reasonable to expect the person to change his or her place of residence;
  4. any other relevant matter.

A delegate must have regard to the definition of suitable work when determining whether work is suitable for a person.  In making this assessment, consideration must be given to all four criteria, as no one criterion alone can be used to determine the issue.  The person's individual circumstances must also be considered.

DRCA only - The definition of 'Suitable employment' was amended by the Safety Rehabilitation and Compensation and Other Legislation Amendment Act 2007 to allow consideration of a client's capacity to work outside of the Commonwealth (or licensee), when calculating incapacity payments under section 19 of the DRCA. Age, Experience, Training, Language and Other Skills

This criterion makes it necessary to consider the person’s employment background. For example, if a former RAAF General Hand was injured to the extent that their work prospects were limited to sedentary office-based work, such work would be inappropriate if the person had poor literacy and numeracy skills. Similarly, work as a cleaner would generally not be considered suitable work for a former RAAF pilot or skilled Officer Engineer. Suitability for Rehabilitation or Vocational Retraining

This criterion is generally guided by a formal rehabilitation assessment, provided in accordance with section 36 of the DRCA and section 44 of the MRCA, of a person’s capacity for rehabilitation. A rehabilitation assessment examines a person’s transferable skills in relation to the local labour market. If there is a gap between a person’s transferable skills and the availability of work commensurate with the person’s pre-injury vocational status, then retraining may be appropriate.

The former RAAF General Hand example in section 7.17.2 may be provided with literacy and office skills training as part of a rehabilitation program, and therefore become suitable for clerical work.

A highly trained RAAF pilot has already demonstrated the ability to undertake training. If that pilot is unable to fly due to their service injury or disease, s/he would be suitable for retraining for new employment at a level commensurate with at least their previous capacity.

There may be occasions where, due to the nature of the service injury or disease, a person is so severely impaired that they are not immediately suitable for vocational rehabilitation. Incapacity delegates should work closely with the Rehabilitation Coordinator and be guided by information contained in the Rehabilitation Guide. The Rehabilitation Coordinator should be guiding the person through medical and psychosocial rehabilitation prior to considering vocational rehabilitation. 

Example 1 – Suitable employment 

A RAAF General Hand who has been retrained in clerical skills could be deemed able to earn as an Administrative Service Officer in the Australian Public Service (APS), in a State/Territory Public Service or in private enterprise, provided he/she meets all relevant entrance criteria. However it would not be appropriate to deem such an individual as a secondary school teacher or an electronics technician.

Example 2 - Suitable employment

A RAAF Pilot who has been retrained in Microcomputer Technology could be deemed as able to earn as an Information Technology Officer in a similar range of employment environments. However it would not be appropriate to deem a person with those qualifications and abilities as an office cleaner or a council road worker. Reasonable Requirement to Change Place of Residence

A person's place of residence may be relevant to the consideration of whether they could be engaged in suitable employment. The idea of whether it is 'reasonable' to expect a person to change their place of residence in order to obtain employment can influence the consideration of what work is suitable for the person and whether they can be deemed to have actual earnings.

It is important to note a person cannot be 'forced' to relocate to an area with higher employment opportunities in order to obtain suitable employment.

If it is unreasonable for a person to move, the work would not be suitable work. Factors affecting the reasonableness of a requirement to move could include:

  • continuity of school attendance for the person’s children;

  • existing or potential work of the person’s spouse;

  • availability of family support;

  • long-standing social networks;

  • continuing contact with children after marital separation;

  • availability of appropriate and affordable housing; or

  • access to medical services.

If it is reasonable to expect the person to move to an area where they could obtain employment and they choose not to do so, this may mean that they can be deemed to have actual earnings.

However, this is different to the situation where a person unreasonably moves to an area of low employment (see section 8.18.4). Any other relevant matter

This criterion encompasses a wide variety of individual circumstances in the person’s case. It includes the person’s medical restrictions, whether or not they arise out of the person’s compensable condition.

For example, a motor mechanic with recurrent shoulder problems may not be considered suitable for work in a workshop where they are required to work on vehicles on hoists, above shoulder height. This is irrespective of whether the shoulder condition is compensable.

When considering a person’s capacity for work, it is also appropriate to consider the availability of work that is suitable given the state of the local labour market. Family-assisted employment

Family-assisted employment may be characterised as suitable employment. Consideration should be given to whether the person's employment activities in the family business suggest a capacity to undertake similar work in the general labour market.

The amount a person is able to earn is the value to the enterprise of the client's work i.e. the cost of replacement labour.

8.18.3 Deeming when a person is underemployed i.e. working below their capacity

In cases where the person is actually in employment, the Delegate has the power to deem a higher weekly AE amount where evidence exists to indicate that the person has a capacity to earn more than their actual earnings. For example, there may be evidence that the person has chosen, for lifestyle reasons, to work part-time even though they have the actual capacity to work full-time.

8.18.4 Deeming when a person unreasonably moves to an area of low employment

In some cases, a person who otherwise has an ability to earn in suitable employment will move to an area of low employment opportunities for personal or lifestyle reasons and due to the lack of employment opportunities is not able to obtain employment. In such cases, the delegate must look to the reason that the client suffers a loss: is it because of the effects of the compensable condition or is it due to their personal choice to move to an area of low employment opportunities? In the latter case, the client should be deemed with a partial or total AE depending on the extent to which he or she would otherwise have been able to earn.

Such deeming should also be applied in cases where a person has elected to discharge from the ADF to an area with low employment opportunities. The same test must be applied i.e. is the loss due to the effects of the compensable condition or is it due to a personal choice.

An exception to this policy exists where the discharging member has maintained a family home in the area and returns at time of discharge to that family home. This does not of course apply to people who were already living in that locality immediately before becoming incapacitated, or who after incapacity are returning to the family home, to a supportive family network within that district or who are accompanying an employed partner to a remote posting etc. Nor does this apply to a person whose rehabilitation assessment has disclosed nil or minimal capacity for any employment. However, it is not sufficient that the member simply has family in the area.

8.18.5 Failure to seek/accept employment after incapacity has resolved

A person may still be receiving incapacity payments if their condition has resolved but they continue to participate in rehabilitation. That is, the person is no longer incapacitated, but that participation in the rehab program itself (temporarily) removes them from the general labour market.

Rehabilitation is often required after the reduction or ending of an impairment, i.e. where the client has regained the basic physical or mental capacity to participate in a workplace of some sort, but as a practical matter requires re-skilling or a graduated introduction to an alternative employment category.  At the end of a rehabilitation program and a period of job-seeking assistance, the person should ordinarily be considered to be unemployed rather than incapacitated and incapacity payments ceased.

It is important to note that referral for rehabilitation on its own does not create an entitlement to incapacity payments where the person is not first incapacitated for work due to one or more of their accepted disabilities.

8.18.6 Deeming when a person refuses/quits employment or fails to complete a rehabilitation program with employment offered at its completion

Under Section 19(4)(b)-(d) of the DRCA and Section 181(3)(a)-(c) of the MRCA a person can be deemed with AE if they refuse an offer of suitable work, fail to continue in suitable work (for reasons other than their accepted condition) or fail to complete a rehabilitation program when they have been offered suitable work following a reasonable rehabilitation or vocational retraining program. The delegate should consider whether the failure was reasonable or not. If a person prefers other work or has a perception that they could do better elsewhere, this would not normally be considered a reasonable excuse for declining employment (providing the employment is 'suitable'). Similarly, having accepted an offer of suitable employment, failed to engage or continue in that employment. The amount deemed is what the client would have earned in that employment. 

Example – declining employment

A person was found suitable employment through a rehabilitation job seeking process but declined that employment because it interfered with their ability to pick their child up from school. The delegate determines that this is not reasonable and the person is deemed to have an ability-to-earn at the level of the salary they had declined.

8.18.7 Deeming AE equal to ADF employment

In certain circumstances it is possible that a person may be deemed AE in ADF employment.  This provision is most often relevant to cases where a client voluntarily discharges from the ADF. All such cases where an injured client discharges prior to being formally designated MEC4 fall into this class. The effect of 19(4)(c) of the DRCA and section 181 of the MRCA in such cases is that incapacity payments cannot be payable from the date of discharge, but are only payable from the date where medical evidence demonstrates a further deterioration in the condition. 

A Reservist may be deemed AE in their civilian employment (work) while they have an incapacity for service (unable to undertake their military duties).  The distinction between the two types of work needs to be brought to the attention of the Reservist's treating practitioner.  The doctor must provide guidance in respect of each type of employment the person is unable to perform, and identify the restrictions that must be applied to the employment the person can perform.

8.18.8 Deeming when a person fails to seek employment

Under Section 19(4)(e) of the DRCA and section 181(5) of the MRCA a person can be deemed with AE if they fail to seek suitable work. The delegate must have regard to the weekly amount the person could reasonably be expected to earn in suitable work, having regard to the state of the labour market at the time, and whether the failure was reasonable in all circumstances.

8.18.9 Deeming Actual Earnings for Casual Employees

A casual employee may be disadvantaged when determining their incapacity payments during a period of unpaid leave,.  This may be the case where we deem an ability to earn based on actual earnings which include a loading in lieu of leave entitlements.  Accordingly, for casual employees the amount of any deemed ability to earn should exclude any loading.

When a person is on approved leave (paid or unpaid) from their employer we treat the period of leave as actual hours worked, for the purpose of calculating the percentage of NE.  For example, a person who works 20 hours per week and takes leave will continue to have their top-up incapacity payments based on 90% of NE less the deemed AE. This is in contrast to sick leave which would be recorded as 0 hours worked.

This is consistent with how we treat full-time employees on top-up, but who also accrue paid leave entitlements, where we consider they are working their normal working hours during periods of paid leave.

In some instances employees may be employed on a casual rate of pay during an initial probationary period and then be placed on a permanent rate of pay after successfully completing the probationary period.  The arrangements above would only apply during the period the person receives casual rates.  When the person changes to a permanent rate of pay any deemed ability to earn is based on actual earnings. 

Example 1

A former member has an NE of $1,000 and following rehabilitation obtains casual employment working full time and earning $720 per week, which amount includes a 20% loading in lieu of leave.  In this scenario it is only appropriate to deem the person with an ability to earn $600 per week.  While he is working his incapacity payments are based his actual earnings of $720 per week.

$1,000     -      $720     =      $280

At Christmas time his employer closed down for 3 weeks.  At this time the former member's incapacity payments should be calculated based on his deemed ability to earn of $600 per week for his normal working hours.

$1,000     -     $600     =     $400

8.18.10 Deeming when a person accepts voluntary redundancy

Where a person accepts voluntary redundancy, delegates should consider whether the person continues to have an AE in that employment and if so should be deemed at the amount they have demonstrated they are able to earn. Any severance payments, or leave paid out should not be considered as AE.