Foreword

As readers of this overview will find, workers compensation legislation in any jurisdiction is complex and a never-ending source of new case law. This is no less so in South Australia than in any other jurisdiction. The 2008 amendments to the Workers Rehabilitation & Compensation Act were by far the most extensive in the Act’s 23 year history and, as John Fountain points out in his commentary, they introduce an entire new set of legal unknowns.  

Workers compensation law is inherently difficult and error-prone for a very good reason. It is an attempt to apply relatively uniform and rigid statutory remedies and controls to what is a quintessentially human issue – the suffering resulting from personal injury and disease, and the social and financial consequences that brings to the family and society. No two experiences of injury or disease are identical, and it takes a complex construct of law and judicial interpretation to attempt to accommodate the variables of the human experience of injury and disease.

John is to be commended for his efforts to encapsulate the fundamentals of the legislation in this document. While the opinions he expresses are his own and are not necessarily endorsed by me or SISA, I believe that this work will help those who currently work within the scheme to better grasp it as a whole. It will also greatly assist the understanding of people who have had little or no previous contact with the South Australian workers compensation scheme.

Robin Shaw

Manager, Self Insurers of South Australia Inc

July 2009

Introduction

Workers compensation in Australia is a particularly difficult area of the law, and is made all the more difficult because there is no uniform Australian system. This lack of uniformity is one of the downsides of our Federal-State system Australia. All states and territories have their own separate system. A separate system again exists for Commonwealth employees.

This paper summarises some of the more important provisions and principles of the South Australian workers compensation legislation.

In South Australia, workers compensation is governed by the Workers Rehabilitation and Compensation Act 1986. It was originally intended to be a pension-type scheme designed to enable workers who suffer seriously disabling injuries leaving them with little or no residual capacity for work to remain on weekly payments until reaching 65 years of age.

In recent years however WorkCover’s unfunded liability escalated significantly; that was despite the fact of excellent investment returns (during that period). Given the significant escalation in the unfunded liability over the 2002-2006 period, many politicians and commentators considered that the WorkCover Corporation was not effectively discharging its objects or functions under the WorkCover Corporation Act 1994 (see the section on the Administration of the Scheme (below)). Indeed – and hardly surprisingly – WorkCover Corporation was itself considerably concerned about the significant escalation in its unfunded liability. WorkCover Corporation therefore released a Discussion Paper in late 2006 in which it recommended a wide-ranging changes in order to bring the ever-increasing unfunded liability under control.

In April 2007 Minister Wright appointed Alan Clayton and John Walsh to carry out an independent review of the South Australian Scheme. Among the Review’s tasks, it was required to:

• investigate the operation of the South Australian Scheme in terms of a balance between equitable provisions for the needs of injured workers and Scheme affordability for employers;
• consider and report on a comparison of the entitlement structure and average premium rates under the South Australian Scheme and those in other Australian jurisdictions, and
• assess the adequacy and efficiency of incentives for employers to reduce the incidence of injuries, illness and claims and achieve effective rehabilitation and return to work of injured and ill workers.

The review was delivered to the Minister at the end of 2007. It was publicly released towards the end of February 2008; almost simultaneously with this, the Government introduced the Workers Rehabilitation and Compensation (Scheme Review) Amendment Act 2008. After considerable debate, much of which was quite acrimonious, both houses of Parliament passed the Amendment Act in mid-June 2008. The Amending Act contains very wide-ranging changes to the primary Act. The Amending Act is being proclaimed to come in to operation over a number of stages, the first of which was 1 July 2008 (and the last of which will probably be 1 July 2010)[1].

The summary of the South Australian legislation contained in this article relates to the Scheme, as it will be operating once all of amendments come in to operation. We will however make it clear when amendments have not yet come into operation or where the consideration of the earlier provisions is relevant

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1. Workers Compensation in South Australia

Seemingly, workers compensation is straightforward: a worker suffers an injury, is unable to work and is therefore entitled to wages for the period in which he or she can’t work. The reality however is that while this might be the situation in the vast majority of cases, but in others nothing can be further from the truth. Indeed – and most importantly – it is acknowledged that it this second group of claims accounts for well over 90% of total workers compensation costs to the Scheme.

In South Australia workers compensation is governed by the Workers Rehabilitation & Compensation Act 1986 (the Act). The Act came into operation on 30 September 1987 (at 4.00 pm). It replaced the Workers Compensation Act 1971. That earlier Act had statutory limits on the amounts that could be paid by way of weekly payments of compensation. In contrast, and as already mentioned, our current Act (the 1986 Act), was originally designed as a pension-style scheme to enable seriously disabled workers with little or no capacity to remain on weekly payments until reaching 65 years of age. However, the acknowledged difficultly that arose in practice with the Scheme was that workers with much lower levels of disability and incapacity (and often significant residual levels of capacity for work) also remained in receipt of weekly payments for much longer than was ever intended or expected. This was not the intention of the Scheme’s designers, but arose as a result of flawed drafting. Additionally, attempts to address this issue proved unsuccessful. This was a significant contributing factor in the escalation in WorkCover’s unfunded liability in South Australia.

The 2008 amendments have sought to rectify this problem by requiring that weekly payments cease at the end of an aggregate period of 130 weeks unless the worker is assessed by the Corporation as having no current work capacity and is likely to continue indefinitely to have no current work capacity[2].

It should also be noted that WorkCover is not the only “compensating authority” in South Australia. Many of the larger employers are self-insured. They manage and pay for their own claims. It is generally accepted that the self-insurers (as they are known), have no funding issues. They have sufficient assets to meet their respective potential liabilities. Further information is provided about self-insurers later in this article.

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2. The Administration of the Scheme

A sole statutory authority, the WorkCover Corporation of South Australia, administers the workers compensation scheme in South Australia. WorkCover derives its powers from the WorkCover Corporation Act 1994.

What are the objects and functions of the WorkCover Corporation? Section 12 of the WorkCover Corporation Act provides that the Corporation’s primary objects are:

• to reduce, as far as practicable, the incidence and severity of work-related injuries; and
• to ensure, as far as practicable, the prompt and efficient rehabilitation of workers who suffer work-related injuries; and
• to provide fair compensation for work-related injuries; and
• to keep employers’ costs to the minimum that is consistent with the attainment of the other objects mentioned above.

The functions of the Corporation are set out in section 13 of the Act. These include:

• administering the Workers Rehabilitation and Compensation Act;
• managing and ensuring the financial viability of the funds that come under its control;
• ensuring the efficient and economic operation of the Scheme to keep all aspects of the Scheme under review and make recommendations for change (if appropriate);
• promoting the rehabilitation of persons suffering compensable disabilities;
• encouraging consultation with employers, employees and associations in relation to injury prevention, rehabilitation and workers compensation arrangements, and (among many others),
• conducting public inquiries in relation to matters that arise under an Act administered by the Corporation.

A nine member Board manages the Corporation. As least two members of the Board are to be nominated by the Minister after consulting with associations representing the interests of employers; at least two are to be nominated by the Minister after consulting with associations representing the interests of employees; at least one is to be a person experienced in occupational health and safety, and at least one must be a person experienced in rehabilitation (section 5). Mr Philip Bentley is currently chair of the WorkCover’s Board.

On a day-to-day basis the Corporation has a Chief Executive Officer who is responsible to the Board for implementing its policies and decisions, managing the Corporation’s business efficiently and effectively and supervising the Corporation’s staff. Ms Julia Davison is currently CEO of WorkCover.

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3. Objects of the Workers Rehabilitation & Compensation Act 1986

The objects of the Workers Rehabilitation & Compensation Act 1986 are contained in section 2 of the Act. The objects of the Act focus on a balancing of rights and entitlements with the costs incurred in providing those rights and entitlements.

First, the principal objects of the Act are to establish a workers compensation scheme that:

•        achieves a reasonable balance between the interests of employers and the interests of workers;

•        provides for the effective rehabilitation of disabled workers and their early return to work;

•        provides fair compensation;

•        reduces the overall social and economic costs of employment-related disabilities to the community;

•        ensures that employers costs are contained within reasonable limits.

These deal with the general purpose of the scheme. There are a number of further objects, each of which is important, namely:

•        to provide for the efficient and effective administration of the Act;

•        to establish incentives to encourage efficiency and discourage abuses;

•        to ensure the scheme is fully funded on a fair basis;

•        to reduce employment-related accidents, and

•        to reduce litigation to the greatest possible extent.

As is apparent, there is a considerable parallel between the objects of the Workers Rehabilitation & Compensation Act and the objects and functions of the WorkCover Corporation Act.

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4. Registration of Employers

All employers must be registered under the Act. Indeed, section 59 provides that an employer which is not registered is guilty of an offence, the penalty for which is a fine of $10,000 for each worker who is employed by that employer.

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5. Levies

Having registered with the WorkCover Corporation, an employer is liable under section 66 to pay a levy to the Corporation. The amount of the levy is dependent on two factors. The first is the total of remuneration paid by the employer to its workers in each class of industry in which the employer employs workers. The second factor relates to the class of industry in which the employer employs its workers. Understandably, the rate for the levy is dependent on the nature of the work the employer carries out. At present, the maximum levy is fixed at 7.5% (although section 66(9) does give WorkCover the power to set a levy rate for “a particular class of industry” in certain limited circumstances).

However, dependent on the steps taken by an individual employer (or indeed a failure by the employer to take steps), the Corporation can either grant the employer a remission of levy that would otherwise be payable or impose a supplementary levy on the employer. This power is provided by section 67.

Importantly, the Amending Act provides for sweeping changes regarding the basis for the assessment and collection of WorkCover levies. These changes are to be contained in sections 69 and 69A-G. These provisions came into operation on 1 July 2009.

New section 69(1) provides that employers must, by a prescribed date (presumably the commencement of the financial year) provide an estimate for the remuneration the employer expects to pay to its employees in the financial year. Section 69(3) states that “a return under subsection (1) must be accompanied by the levy payable on aggregate remuneration in the relevant class or classes of industry based on the estimate or estimates set out in the return”. It therefore appears that section 69(3) will require payment of up to 12 months levy in advance based on the expected remuneration.

Section 69(4) then provides the Corporation with a very broad discretion on levy issues. It states that the Corporation may specify another date instead of the prescribed date for the provision of the estimate of remuneration. WorkCover can also specify an estimate of aggregate remuneration that will apply instead of the estimate given by the employer under subsection (1). Therefore, WorkCover can substitute its own assessment in lieu of that provided by the employer. In conjunction with this, section 69(7) provides that if WorkCover specifies an estimate, this will be used for the purpose of the collection of levy. Further, section 69(4)(c) provides that the Corporation may specify that the levy must be paid according to “some other requirement determined by the Corporation”. Presumably this is where the amount of remuneration is not regarded as a good measure of the employer’s workers compensation liability.

Section 69(8) provides that a requirement specified under section 69(4)(c) (that is the abovementioned subsection that allows the Corporation to specify that levy be paid according to some other requirement), may be a requirement that any levy be paid on a monthly basis; or allow the employer to pay any levy on aggregate remuneration paid during the preceding month. If the Corporation exercises its discretion in this manner, the status quo will be maintained; that is, employers currently paying monthly in arrears would still potentially being paying monthly in arrears. Alternatively, perhaps quarterly instalments will be required, or 6-monthly instalments, either in advance or in arrears. This appears to be entirely in the Corporation’s discretion.

If an employer considers that a decision by the Corporation in fixing or assessing a levy; in imposing penalty interest or a fine, or in imposing or varying a condition that may lead to the imposition of a supplementary levy is unreasonable, section 72 provides the employer with the ability to apply for a review of that decision. While under the Act an application for such a review is made to the WorkCover Board, the Board has delegated this power to the WorkCover Levy Review Panel.

An application for a review of a levy under section 72 must be made by the employer within four months (if the decision relates to a class of employers), or within two months (if the decision relates to an individual employer).

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6. Compensating Authorities

The compensating authority is essentially the compensation payer. In South Australia, this is either the WorkCover Corporation or a self-insured employer.

After a claim is lodged the compensating authority is required to determine it. In WorkCover’s case however its appointed claims agent, EML, carries out this role.

All decisions on the claim are made by the compensating authority, which also pays the compensation to the worker and on his or her behalf.

Further information about the roles of the claims agent and self-insured employers is set out later in this article.

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7. Self-insured Employers

Under our Act large employers have the ability to apply to manage and pay for their own claims. Somewhat curiously, this group were for many years described as “exempt employers”; this was in reality a misnomer, as they were not exempt from anything! They were more aptly known as self-insured employers. This more accurate description has now been formalised in the legislation with the replacement of the term “exempt employer” by “self-insured employer”. The power for an employer to apply to become a self-insurer is contained in section 60 of the Act.

Previously, section 60(2)(a)(i) of the Act restricted the registration of self-insured employers to corporations employing more than a prescribed number of workers (200). The Amending Act has removed this as a mandatory requirement. Instead, the size of the employer’s workforce joins the list of matters the Corporation is required to consider in determining whether or not to grant, renew, revoke or reduce the period of registration of a self-insured employer. Other factors that are considered include whether the employer can meet its liabilities; its resources to administer claims; the number of claims, OH&S practices; and rehabilitation and return to work issues.

The Act has always provided for the registration of “groups” of employers, being either related corporations or local government corporations. Section 60(2)(b)(ii) of the Act now requires that the group must comprise all related bodies corporate – no part of the group that employs a worker can be excluded from the self-insured group.

New subsections 60(4a) and (4b) provide for self-insured employers to self-insure as one group if they become related corporations. Similarly, any group can add, remove or amalgamate with other corporations, so that the composition of the self-insured group can potentially be quite dynamitic.

Many of South Australia’s largest private companies and all Crown are self-insured, as is the Crown and any agency or instrumentality of the Crown (Section 61(1)).

Understandably, self-insured employers have many of WorkCover’s statutory powers delegated to them. Section 63 sets out these powers. They include, for example:

•        the power to determine their claims;

•        the power to prepare rehabilitation programmes and rehabilitation and return to work plans (sections 26 and 28A);

•        the power to determine lump sum payments for permanent disability (section 43);

•        the power to determine and pay reasonably incurred medical and like expenses (section 32);

•        the power to discontinue or reduce weekly payments (section 36), and among many others,

•        the power to redeem liability for weekly payments or medical expenses (section 42).

In managing their own claims, self-insured employers are of course required to comply with the provisions of the Act. Moreover, they are specifically required to exercise their delegated powers and discretions reasonably and, if they fail to do so, they are at risk of having the delegated power or discretion withdrawn by WorkCover, either in whole or in part. That said, WorkCover is not entitled to overrule or interfere with any decision of a self-insured employer made in the exercise of its delegated powers or discretions. It is worth noting that section 63 is unique among Australian jurisdictions. All other schemes use licensing arrangements under which the delegated powers can be tightly controlled.

As mentioned the Crown and its agencies and instrumentalities are deemed to be self-insured. As such WorkCover has no power to revoke the Crown’s self-insured status (or that of any of its agencies or instrumentalities). This is the case, even if one of them exercises a delegated power or discretion unreasonably. However, section 61(2) does enable the Governor, by proclamation, to declare that an agency or instrumentality of the Crown is not to be regarded as self-insured.

Self-insured employers also have to satisfy strict financial and other criteria before they are allowed to self-insure. A self-insurance licence does not continue indefinitely. It is granted for a maximum period of three years. It can however be renewed. If a self-insurer applies for the renewal of its licence to self-insure, it again has to satisfy the same strict financial and other criteria.

South Australia has by far the largest percentage of self-insured employers in Australia, with approximately 45% of the State’s workforce employed by self-insurers.

As with other employers, self-insurers are required to pay WorkCover a levy. However, given the fact that all self-insurers are required to meet their own compensation liabilities, their levies are considerably less than would be the case if they were not self-insured. The self-insurer levy is based on a fair contribution towards the administrative expenditure of the Corporation; the cost of rehabilitation; the cost of the system of dispute resolution and a contribution towards actual and prospective liabilities of the Corporation arising from the insolvency of employers (section 68(2)).

Many years ago the self-insurers formed and association to represent their collective interests. SISA (Self-Insurers of South Australia), as the Association is now known, is a credible and quite formidable body, whose views are well respected. SISA is therefore a major player in the South Australian Workers Compensation Scheme.[3]

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8. Claims Agent

Of the balance of the workforce – that is, those who are not employed by self-insured employers – the claims management function was, between August 1995 and June 2006, performed by a number of insurers (as claims agents of WorkCover).[4]

In July 2006 WorkCover replaced the previously appointed multiple claims agents with a single claims agent, Employers Mutual Limited (EML).

EML is required to comply with strict protocols set by WorkCover in performing its claims management role. The appointment of the agent is for a set period, at the end of which the position comes up for review. It is important to understand that the role of the claims agent is solely to manage claims. It undertakes no underwriting role at all, and WorkCover sets and collects the levies.

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9. Liability to Pay Compensation

Section 46 of the Act provides that the WorkCover is liable to make all payments of compensation to which any person becomes liable.

However, if the compensable disability arises from employment with a self-insured employer, the self-insured employer naturally has to make all payments of compensation in respect of the disability (section 46(2)).

If the worker is not employed by a self-insured employer and the worker’s injury results in a total or partial incapacity for work, section 46(3) provides that the employer must itself pay the worker’s income maintenance for the whole of the period of the incapacity (when the incapacity is for two weeks or less). If the period of incapacity is more than two weeks, the employer is obliged to pay income maintenance only for a maximum of the first two weeks of the incapacity. These payments are in addition to the levy the employer pays to WorkCover.

However, the position in this regard has now been changed to some extent under the Amending Act. Subsection 46(8b) states that the Corporation will also take on any liability of an employer under subsection (3) for a particular disability if it is satisfied that the employer has complied with its responsibilities under section 52(5) within two business days after receiving the relevant claim. This is also conditional on the employer providing sufficient earnings information to enable the worker’s average weekly earnings to be determined. Section 52(5) is the section requiring an employer to forward the claim form to the Corporation within five days of receiving it.

In addition, if an employer pays compensation to the worker even though it has forwarded the claim to the Corporation within two business days, the employer is entitled to recover the amount of the payment from the Corporation up to the amount of compensation payable to the worker in relation to the relevant period.

As is therefore apparent, there is now a direct financial incentive to employers to immediately send the Corporation any compensation claims they receive – and certainly within two business days in any event.

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10. What is a Compensable Disability? What are the Entitlements?

Generally speaking, an injury that “arises from employment” is compensable. Section 30 sets out the criteria for the compensability of disabilities. Section 30 specifically states that a worker’s employment includes, among other things, attending at the place of employment on a working day but before the day’s work begins (in order to prepare or be ready for work); attendance at the place of employment during an authorised break from work; attendance at an educational institution under the terms of an apprenticeship or some other legal obligation or at the employer’s request or with the employer’s approval; attendance at a place to receive a medical service for the purposes of a rehabilitation and return to work plan, or apply for, or receive compensation for an injury.

There are however a number of important restrictions on the compensability of disabilities that arise from employment. For example, injuries that occur in the course of a journey to or from work are normally not compensable. Likewise, an injury will not normally be compensable if it arises out of or in the course of a worker’s involvement in a social or sporting activity (except where that activity forms part of the worker’s employment or is undertaken at the direction or request of the employer).

A further exception to compensability relates to injuries that occur as a result of serious and wilful misconduct on the part of the worker or as a result of the influence of alcohol or a drug voluntarily consumed by the worker. In such cases, the disability will not compensable if it is established on the balance of probabilities that the disability is wholly or predominantly attributable to one of these factors.

There are also significant restrictions on the compensability of stress-related injuries (illnesses or disorders of the mind). Illnesses and disorders of the mind are discussed in more detail later.

If we accept however that the disability is considered “compensable”, a worker is entitled to various forms of compensation or benefits. For example, if the injury causes an incapacity for work, the worker is entitled to weekly payments of income maintenance for the period of “total incapacity” or until he or she is able to return to some form of lighter duties provided either by his or her employer or by another employer.

Reasonable medical expenses are also to be paid. If the compensating authority considers that medical services were inappropriate of unnecessary, it can either disallow the claim in respect of those expenses or reduce the amount being claimed (in accordance with the amounts provided by regulation).

The worker might also be entitled to a lump sum for permanent impairment; section 43 provides such an entitlement and will also be outlined later.

If the worker has some ongoing entitlement to compensation, whether it is medical expenses or weekly payments, the worker and the compensating authority might ultimately agree to finalise the worker’s potential entitlements to compensation. This can be done by way of a redemption agreement under section 42 of the Act. Redemption is also discussed in some more detail later.

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11. Stress Claims (Illnesses or Disorders of the Mind)

Stress claims are technically described as illnesses or disorders of the mind. A unique set of rules applies in deciding whether or not these claims are compensable. These rules are set out in section 30A of the Act.

First of all, the disability must satisfy a preliminary threshold test. The disability can only be compensable if the worker’s employment was a substantial cause of the disability. Note however, it is not the substantial cause, but only a substantial cause. This will always be a question of fact.

Secondly, if it is considered that the disability was substantially caused by work, a number of exclusionary factors then have to be considered. The disability will not be compensable if it is determined that the condition arose wholly or predominantly from one of the following causes:

•        reasonable action taken by the employer in a reasonable manner to transfer, demote, discipline, counsel, retrench or dismiss the worker;

•        a decision of the employer, based on reasonable grounds, not to award or provide a promotion, transfer, or benefit in connection with the worker’s employment;

•        reasonable administrative action taken by the employer in a reasonable manner in connection with the worker’s employment; or

•        reasonable action taken in a reasonable manner under this Act affecting the worker

One thing is quite clear from this list: for an illness or disorder of the mind to be considered not compensable, it will be necessary for the compensating authority – or the Tribunal if a rejection of such a claim is challenged by the worker – to decide whether steps taken by the employer were reasonable. This will be a question of fact and degree in every case.

Stress claims generally take the longest time for a compensating authority to determine. The reason for this will be apparent from the brief summary of the provisions set out above. Not only does the determination of these claims normally involve quite difficult questions of fact (which have to be properly investigated), but they also often involve difficult questions of law, which have to be applied against the facts of the particular case.

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12. Rehabilitation

Given the name of the Act, rehabilitation is a fundamental and vital plank in the effective operation of the legislation.

Rehabilitation is generally provided by a rehabilitation professional. The rehabilitation professional’s role is a difficult one. It often involves balancing a variety of conflicting positions. There might be conflict between the employer and worker. There might be conflict between a general practitioner and a treating specialist. There might be conflict between a treating doctor and an independent medical examiner. There might be conflict between a number of these groups. The rehabilitation professional is the person who is required to deal with all parties and reach, hopefully, an effective solution that gets a worker back to work at his or her best level of capacity as quickly as is reasonably practicable.

Curiously, rehabilitation can be provided in two different ways under the legislation – by way of rehabilitation programmes or by way of rehabilitation and return to work plans.

The primary rehabilitation provision is section 26. This enables a compensating authority to establish rehabilitation programmes to ensure that injured workers achieve the best practicable levels of physical and mental recovery and are restored, where possible to the workforce and the community.

Rehabilitation programmes allow a compensating authority to perform a variety of functions. Without listing all of them, they include:

•        providing for the physical, mental or vocational assessment of workers;

•        providing advisory services to workers, their families, employers or others;

•        assisting workers in seeking, obtaining or retaining employment;

•        assisting in training or retraining;

•        providing equipment, facilities and services to assist workers cope with disabilities in the home or workplace;

•        encouraging and supporting the work of organisations that provide assistance to workers suffering from compensable disabilities;

•        doing anything else that may assist in the rehabilitation of workers.

Let us assume a particular (and not uncommon) scenario. Assume that a worker is unable to return to his or her pre-injury work, but has a capacity for light duties. Assume also that the worker’s claim is yet to be determined (or even that it has been rejected). What is the rehabilitation position in this case? Is a worker entitled to rehabilitation? Section 26(4) provides that a rehabilitation programme can be developed even though it has not been finally determined whether a worker’s disability is compensable. In other words, the compensating authority might, after investigation, have determined to reject a worker’s claim for compensation. The worker might not be fit to return to his or her pre-injury work, but might be fit for light duties. This provision allows the compensating authority – with the support of the employer – to provide light duties. This is despite the fact that there is no accepted right to compensation or rehabilitation at that time. Such a step can therefore take place either during the period in which a claim is being investigated (but before it is determined), or after a claim has been determined, even though the claim was rejected.

If  however the compensating authority determines to accept the worker’s claim for compensation, section 28A requires the compensating authority to establish a rehabilitation and return to work plan if the worker is incapacitated by reason of a compensable disability. A rehabilitation and return to work plan must be established if a worker is receiving weekly payments and is, or is likely to be incapacitated for work for more than 13 weeks (but has some prospect of returning to work).

In establishing a plan, the compensating authority is, not surprisingly, obliged to consult with the worker and the employer and should, if practicable, review the relevant medical records and consult with the medical expert who is treating the worker.

A rehabilitation and return to work plan can impose obligations on both the worker and the employer. It is also specifically binding on both the worker and the employer. However, either the worker or the employer is entitled to apply for a review of a provision of a rehabilitation and return to work plan on the basis that the provision is unreasonable. If a party does apply for such a review, any proceedings on a review do not suspend the obligations imposed in the plan.

The 2008 Amending Act has also introduced the concept of rehabilitation and return to work co-ordinators. An employer is obliged to appoint a rehabilitation and return to work co-ordinator. Furthermore, the co-ordinator must be an employee of the employer.

Section 28D(7) provides that the regulations may exempt an employer or employers of a prescribed class from a requirement under this section. Clause 1.1 of WorkCover’s rehabilitation and return to work guidelines provide that a co-ordinator is to be appointed when an employer employs 30 or more workers. Accordingly, where an employer has less than 30 employees, it is not required to appoint a rehabilitation and return to work co-ordinator.  

Under section 28D(5) the rehabilitation and return to work co-ordinator has a number of functions, including assisting workers remain at work or return to work as soon as possible; assisting or liaising with WorkCover in the preparation and implementation of a rehabilitation and return to work plan; liaising with anyone involved in the rehabilitation of, or the provision of medical services to workers; and monitoring the progress of a worker’s capacity to return to work.

An employer is obliged to provide such facilities and assistance as are reasonably necessary to enable a co-ordinator to perform his or her functions; comply with any training or operational guidelines published by WorkCover from time to time and appoint a new co-ordinator to the office within the prescribed period if a vacancy occurs.

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13. Employer’s Obligation to Provide Suitable Work

Let us assume that an injury has been accepted as a compensable disability and the worker is unable to return to his or her pre-injury duties, but has some capacity for work – he or she is fit for light duties. What is the position? Does the employer have to provide duties, even though the worker is not fit to return to his or her usual work?

This situation is specifically covered in the Act. Section 58B provides, subject to certain limited exceptions, that the employer must provide suitable employment for the worker. Moreover, the employment must be employment for which the worker is fit and, as far as reasonably practicable, the same as, or equivalent to, the worker’s employment immediately before the incapacity.

There are a number of exceptions to section 58B. These include where it is not reasonably practicable to provide employment; where the worker left the employer’s employment before the commencement of the incapacity or where the employer currently employs less than 10 employees and the period that has elapsed since the worker became incapacitated for work is more than one year.

It should however be understood that the section 58B obligation only applies after it has been determined that the employer’s disability is compensable – that is, if the worker’s claim has been accepted.

A penalty of up to $25,000 was also introduced in the 2008 Amending Act for a failure to comply with the primary section 58(1) obligation.

Further, a new provision has been inserted in the legislation as result of the Amending Act, section 58B(3); this provides that where a worker is incapacitated and undertakes alternative duties under employment or an arrangement falling outside the worker’s contract of service, the employer must pay an appropriate wage or salary in respect of those duties, unless otherwise determined by the Corporation. This is likely to have the following consequences: first, when a worker returns to work with his or her employer as part of the rehabilitation process on duties other than the worker’s pre-injury duties, the employer will be required to pay the worker wages in respect of that work. Therefore, even though the work might be of a truly supernumerary nature, the employer is nevertheless obliged to pay wages for the period during which the worker performs such duties under the rehabilitation plan. This is in addition to the employer’s obligation to provide suitable duties.

Secondly, and perhaps more worryingly, this outcome will apply where a worker commences, for example, some work hardening with a completely different employer. Once again, it seems that in such cases that the pre-injury employers will have to pay wages when workers undertake work hardening at host employers. If so, the practical effect of this will be to reduce the amount WorkCover has to pay by way of weekly payments to the extent of the “wages” the worker receives while at the host employer.

While the result in the first of these situations appears understandable – as the pre-injury employer should normally be deriving some benefit from a worker attending work (even if the worker is a supernumerary) – that justification cannot be used in the second case. It will however be noted that this obligation on the employer to pay wages is subject to any contrary determination by WorkCover. One would hope that WorkCover would not normally expect a pre-injury employer to pay a wage or salary to a worker in the second of these situations.

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14. Commencement of weekly payments after an initial notification of disability

The 2008 Amending Act introduced this new concept, the provisional weekly payment of compensation. These provisions are contained in sections 50A-I.

Essentially, provisional weekly payments are to commence within seven days of the initial notification of the disability under section 50B(1), unless WorkCover determines that there is a reasonable excuse for not commencing those weekly payments. The provisional weekly payments are to be made in accordance with the “Provisional Payment Guidelines” and any other requirements under the guidelines. The Provisional Payment Guidelines are guidelines published by the Minister from time to time in the Gazette.

While section 50C(1) states that these payments are made “for a period of up to 13 weeks” having regard to the nature of the disability in the period of incapacity. There is a generally held view that these payments could continue beyond 13 weeks. The position is however unclear at the moment. Section 50C(2) provides that payment of provisional weekly payments does not amount to an admission of liability.

Section 50D provides that a worker is to be notified in writing of WorkCover’s decision whichever the case; in the event that a determination is made to pay provisional weekly payments, or in the event that a determination is made not to pay provisional weekly payments. A decision to make (or not make) a provisional weekly payment is however not reviewable.

These provisions became operational on 1 January 2009 and the Provisional Payment Guidelines were initially published in the Government Gazette on 18 December 2008. A fresh claim form (to address serious deficiencies in the one published on 18 December 2008) and amended Provisional Payment Guidelines were published in the Government Gazette on 25 June 2009.

The grounds for a reasonable excuse in the Guidelines are very limited.  They are: where a claim has been determined (presumably the claim in question); where the injured person is unlikely to be a worker under the Act; where the injury is not work-related or where the injury is notified after 13 weeks of incapacity.

What is odd is that there is no basis provided that allows a compensating authority not to commence provisional payments in situations where a worker has breached mutuality.[5]

We have serious reservations about the need for Provisional Payments. First, we question the problem that Provisional Payments was intended to address. Our view is that section 106 (which in our experience worked very well) addressed the issue of making compensation payments in those cases were it took some time to investigate and determine the compensation claims.[6]

Secondly, we believe that significant problems are likely to arise as a result of the drafting of the Provisional Payment Guidelines and the reconciliation of these new provisions (including the Guidelines), with the Act it previously stood.

At the time of revising this paper, June 2009, we understand that it is intended to review the Provisional Payments provisions to limit the situations in which they will apply. In our view, any changes along these lines are welcomed.

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15. Determining a Claim – Interim Payments – Applications for Expedited Decision

When a claim for compensation is made, section 53 requires that the compensating authority make such investigations and enquiries as it thinks necessary in order to determine the claim. The claim itself is to be determined as expeditiously as is reasonably possible and where it is a claim for income maintenance, the compensating authority is required, wherever practicable, to endeavour to determine the claim within 10 business days after the date of receipt.

Many claims can be determined within this 10-day period. Some however can take considerably longer than this – stress claims are a good example, as the nature of the issues to be considered and investigated in such claims are almost inevitably very difficult. As mentioned earlier, almost without exception, stress claims normally raise difficult issues of both fact and law.

In cases where the claim is made and cannot be determined quickly and a reasonable excuse not to pay provisional has been given, a claimant can request interim payments. This is done under section 106.[7] These payments are not compensation in the strict sense and if the compensating authority decides to reject the claim, any interim payments paid can be recovered from the worker as a debt. If a worker requests interim payments, he or she has no automatic right to these payments – the worker cannot challenge a decision not to pay interim payments. This decision about whether or not to do so is a decision that is entirely within the compensating authority’s discretion.

In cases where workers (or employers) consider that there has been undue delay in deciding a claim (or another matter affecting the worker or employer), section 97 provides the ability for the worker or employer to apply to the Workers Compensation Tribunal for the expedited determination of the matter. Following the lodgement of such an application, the Tribunal has various powers, which include the ability of the Tribunal to decide the matter itself.

Most applications under section 97 involve applications by workers who consider that there has been an undue delay in the determination of their claims for compensation. While the Tribunal has the power to decide the worker’s claim, it rarely exercises that power. Generally the Tribunal’s role under section 97 is to take steps to assist the compensating authority in making its determination of the claim as quickly as possible

A worker can also be required to submit to a medical examination (or examinations) before his or her claim is determined. If the worker fails or refuses to attend a medical examination or provide information reasonably required for the investigation of the claim, the compensating authority is entitled to reject the claim.

When a claim is determined, the compensating authority is required to provide the worker (and employer) with written notice of the determination. If any part of a claim is rejected, the determination must also include a statement of the claimant’s rights to have the determination reviewed. A challenge to a determination has to be lodged within one month of the date on which it is received. These challenges are issued in the Workers Compensation Tribunal by way of a Notice of Dispute.

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16. Rate of Weekly Payments – Annual Review of Weekly Payments

The question of the period over which weekly payments are to be paid to injured workers created by far the singlemost controversial issue during the debate in 2008 regarding the amendments.

From 1 July 2008 to 31 March 2009, the amendments applied to new injuries suffered on after 1 July 2008, but on 1 April 2009 also became operational for injuries that occurred before 1 July 2008.

Weekly payments (Section 35)

As stated, the amendments to the weekly payments provisions undoubtedly created the most controversy during the debate regarding the WorkCover reforms. There also is no doubt that these provisions will undergo considerable scrutiny by both the Workers Compensation Tribunal and the Supreme Court. The previously existing section 35 was completely repealed and replaced by a fresh section 35 and new sections 35A-C.

New section 35 introduces the concept of workers making every reasonable effort to return to work in suitable employment. For example, section 35(7) provides that a worker is not to be treated as making every reasonable effort to return to work in suitable employment in certain circumstances, including where the worker has refused:

• to have an assessment of his or her employment prospects;
• to take all reasonable necessary steps to obtain employment;
• to accept an offer of suitable employment, or
• has refused or failed to participate in rehabilitation.

Section 35(8) introduces the concept of weekly payments being made over various entitlement periods. They are payable over three separate entitlement periods: the first is the initial period of 13 weeks in respect of which the worker has an incapacity for work and is entitled to the payment of compensation under the Act; this is called the first entitlement period (section 35(8)(a)).

The second entitlement period then commences and runs for the next 13 weeks in respect of which the worker has an incapacity for work and is entitled to the payment of compensation under the Act (section 35(8)(b)).

The third entitlement period runs for the next 104 weeks in respect of which the worker has an incapacity for work and is entitled to the payment of compensation under the Act (section 35(8)(c)).

Section 35(8) specifically states that each of these entitlement periods – the first 13 weeks, the next 13 weeks and the following 104 weeks – is an aggregate period (whether consecutive or not). This is another provision that will no doubt give rise to a good deal of judicial consideration. The effect of this is that each period need not be a continuous period, but rather a cumulative total. As such, the first and second entitlement periods might run for much longer than 13 weeks each, while the third entitlement period might run for much longer than 104 weeks. The actual period will therefore vary depending on the facts in each case.

It would appear that the triggers for determining whether the entitlement period is running or has been paused (as it were) are whether the worker is suffering an incapacity for work and is entitled to the payment of compensation. As “compensation” is specifically defined in section 3 of the Act as including “any monetary benefit payable under (the) Act;”, it is clear that when section 35 refers to an entitlement “to the payment of compensation under this Act”, it is not referring only to receipt of weekly payments, but to any compensation – any monetary benefit. Obviously this would include any medical expenses under section 32 expenses, which in turn could be something as simple as the payment of travelling expenses!

Therefore, even if a worker is at work on modified duties and is receiving no compensation – save for the occasional section 32 medical expense for perhaps a doctor’s visit to obtain a certificate or for physio – we believe that there is a valid argument that the entitlement period will continue to run while that compensation is paid. One of the obvious questions that arises in this context is: how are the periods to be calculated? If just one expense is paid in a particular week, will that payment be regarded as one of the aggregate weeks or will it be regarded as just a contribution of one day towards that aggregate (one fifth of a week)? This is an issue which will no doubt be controversial and on which the Supreme Court will be required to rule in due course.

Section 35A – Weekly payments over designated periods

Section 35A relates to the amount of weekly payments to be paid over the three designated periods referred to above.

Section 35A(1) provides that where a worker is incapacitated during the first entitlement period, he or she has an entitlement equal to his or her notional weekly earnings. In other words, payments are made at 100%. However, if during that period the worker has a current work capacity, the worker is entitled to weekly payments equal to the difference between his or her notional weekly earnings and his or her designated weekly earnings.

Section 35A(2) provides that in the second entitlement period – that is the period between 13 and 26 weeks – the worker is entitled to weekly payments at 90% of the worker’s notional weekly earnings.

Section 35A(3) relates to weekly payments during the third entitlement period. Here the worker is entitled to weekly payments at 80% of the notional weekly earnings where the worker has no current work capacity, however if the worker has a current work capacity, he or she is entitled to payments equal to 80% of the difference between his or her notional weekly earnings and his or her designated weekly earnings.

The term designated weekly earnings is specifically defined in section 35A(4) as either the worker’s current weekly earnings or the weekly earnings the Corporation determines the worker could earn from time to time in employment.

Importantly, section 35A(4) provides that a prescribed benefit is not to be included in designated weekly earnings. Section 35A(6) provides that prescribed benefits include payments, allowances or benefits related to annual or other leave; payments allowances or benefits paid or conferred by the employer on retirement, or payments allowances or benefits paid or conferred under a superannuation or pension scheme, or payments allowances or benefits paid or conferred on retrenchment or redundancy.

Weekly payments after expiry of designated periods – no work capacity _(Section 35B), and Weekly payments after expiry of designated periods – current work capacity (Section 35C)

Section 35B and section 35C are also new provisions. Section 35B relates to weekly payments after the expiry of designated periods in cases where there is no work capacity, while section 35C relates to the payment of weekly payments after the expiry of designated periods in cases where there is current work capacity.

First, it should be noted that “current work capacity” and “no current work capacity” are specifically defined in section 3 of the Act. The definitions are however not straightforward. Current work capacity is defined as:

“in relation to a worker, means a present inability arising from a compensable disability such at that the worker is not able to return to his or her employment at the time of the occurrence of the disability but is able to return to work in suitable employment;”

With respect, this is not an example of quality drafting! It seems that this really means:

“An inability to return to the worker’s pre-injury employment, but an ability to work in other suitable employment”

No current work capacity is defined as:

“In relation to a worker, means a present inability arising from a compensable disability such that a worker is not able to return to work, either in his or her employment at the time of the occurrence of the disability or in suitable employment;”

This on the other hand appears to mean:

“An inability to return to any work, whether in the pre-injury employment or in any other suitable employment”

Suitable employment is also now also defined in section 3.[8] It means employment for which the worker is suited – whether or not the work is available – having regard to:

(a)             the nature of the worker’s incapacity in previous employment;

(b)             the worker’s age, education, skills and work experience;

(c)             the worker’s place of residence;

(d)             medical information relating to the worker that is reasonably available, including in any medical certificate or report;

(e)             if any rehabilitation programs are provided to or for the worker, and

(f)              the worker’s rehabilitation and return to work plan, if any.

We return now to section 35B (weekly payments where there is no work capacity).

Section 35B(1) provides that a worker’s entitlement to weekly payments (not section 32 expenses), ceases at the end of the third entitlement period; that is at the end of the aggregate period of 130 weeks. This however is subject to the qualification that payments are not to stop if the Corporation has assessed a worker as having no current work capacity and is likely to continue indefinitely to have no current work capacity. Further, it is subject to the other provisions of the Act.

Section 35B(2) provides that if the worker qualifies as having no current work capacity and is likely to do so indefinitely, he or she is entitled to weekly payments equal to 80% of the notional weekly earnings as though the third entitlement period were continuing.[9] Accordingly, for the most seriously incapacitated workers – that is, those who have no work capacity and are unlikely ever to have any work capacity – they are entitled to ongoing weekly payments.

The Corporation is also obliged to make an assessment of the worker’s capacity and is unable to discontinue weekly payments at the end of the third entitlement period unless it has made such an assessment. Even then, section 35B(6) provides that payments cannot be discontinued unless the worker has been given 13 weeks notice in writing of the proposed discontinuance. Further, the requirements of section 36 – the provision that relates to the discontinuance of weekly payments – do not apply in respect of that notice. Understandably, if the Corporation carries out a review under this section, section 35B(9) enables the Corporation to discontinue weekly payments if it is satisfied that the worker has a current work capacity.

As stated, section 35C relates to weekly payments in situations where the workers have a current work capacity.

Section 35C(1) provides the worker with an ability to apply to the Corporation for weekly payments not to stop at the end of the third entitlement period in certain circumstances.

Section 35C(2) provides a compensating authority with the ability to determine that the worker’s entitlement to weekly payments does not cease if it is satisfied that the worker is in employment and, because of the compensable disability the worker is, or is likely to continue indefinitely to be, incapable of undertaking further or additional employment which would increase the worker’s current weekly earnings.

Therefore, if it is the case that a worker has returned to work to his or her best level of capacity, but is suffering an ongoing loss of income, the Corporation can determine that payments continue. Obviously this will be a makeup pay component. Equally, the worker will not be entitled to more than the difference between the wage he or she is earning and 80% of his or her notional weekly earnings (section 35C(4)).

Section 35C(3) sets out the procedural mechanism by which the worker’s application is to be considered. One of the Corporation’s obligations is that it must refer the medical question set out in section 35C(3)(b)(i) to the Medical Panel (before it refuses to make a determination that the worker’s entitlements not cease). The medical question that must here be referred to the Medical Panel is “whether, because of the disability, the worker is, and is likely to continue indefinitely to be, incapable of undertaking further or additional employment or work, and if not so incapable, what further or additional employment or work the worker is capable of undertaking…”[10]

No doubt one of the intentions of section 35C is to create an incentive for workers to achieve their best level of capacity possible. If they genuinely do so, but still suffer a loss of income as a consequence of the compensable disability, they nevertheless have the ability to continue to receive their makeup pay component. Equally, it is designed to encourage return to work, to the maximum limit of capacity. If this is achieved, but the worker still suffers some loss of income, the worker should be able to confidently expect to continue receiving the makeup pay component.

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17. Overtime

A component for overtime is to be included if certain criteria are met. Section 4(12) of the Act (as amended by the 2008 amendments) now provides a completely new approach to the determination of the overtime component.

Previously, overtime was to be disregarded unless it was worked in accordance with a regular and established pattern; was substantially uniform as to the number of hours worked; and the worker would have continued in that pattern had he or she not been disabled. This no longer applies. Instead, any component of the worker’s earnings attributable to overtime will now be disregarded if there is no reasonable expectation that he or she will work overtime in the foreseeable future because of a change in employment arrangements or other factors introduced or occurring on or before the date of disability.

In all other circumstances, overtime worked in the 12 months before the disability will be taken into account. A simple mathematical formula is provided. The formula basically divides the total overtime income of the worker by the number of weeks worked (including time on paid leave) in the 12 months preceding the disability.  The traditional disputes in relation to “regular and established pattern” and the use of comparators for overtime should no longer occur.

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18. Rate of weekly payments

Section 4 of the Act as it applied to under the legislation before the amendments came into operation on 1 July 2008 has been removed and replaced with a new section used to determine “average weekly earnings”. A number of significant changes have been made with a view to simplifying the calculation of average weekly earnings, thereby reducing the likelihood of dispute.

Previously, average weekly earnings were determined prospectively: on the basis of what the worker could have reasonably expected to have earned for a week’s work in the future had he or she or not been disabled. In order to assess this future entitlement, consideration could be given to the worker’s actual earnings in the period of up to 12 months before the date of incapacity. Section 4 now requires that average weekly earnings be determined retrospectively: that is, solely by reference to the average weekly amount that the worker earned in the 12 months preceding the date of disability. The date of disability will usually (but not always) be the date of injury.

Income from all sources of employment is to be taken into account (section 4(2)). It is not clear how concurrent employment should be taken into account if the period of that concurrent employment is less than 12 months. Generally, section 4 is applied in a manner that will not disadvantage workers; we therefore assume that including earnings from concurrent employment in a manner that is favourable to the worker will be more likely to receive support in the Tribunal. As was previously the case, amounts paid while a worker is on annual, sick or other leave will be taken to be earnings (section 4(3)).

Section 4(4) provides that where a casual or seasonal worker came to be in permanent employment on the date of disability, the average weekly earnings are to be determined by reference to the average weekly amount the worker earned during the period of permanent employment rather than the preceding 12 months; but only if it does not disadvantage the worker.

In contrast, section 4(5) reduces average weekly earnings where, before the disability, the worker had voluntarily reduced the number of normal hours worked or altered the nature of the work performed so as to result in a reduction of weekly earnings. For example, take the case of a full time employee who was earning $500 a week for 12 months before the date of disability; assume that the worker voluntarily (or for other reasons not associated with incapacity resulting from the disability) reduced his or her hours of work to 20 hours a week some three months before the disability. The nine-month period before the reduction of hours is disregarded for the purposes of determining the worker’s average weekly earnings.  In this example, the worker’s average weekly earnings would be $250; compared with around $440 a week if the 12-month average was strictly applied.

If it is not possible to arrive at a fair average by reason of a shortness of time during which the worker has been in employment, average weekly earnings may be determined by reference to a comparator. This is provided in section 4(6), which is in identical terms to the former section 4(2)(b)(ii). Similarly, the provisions relating to the determination of the average weekly earnings of a contractor rather than an employee remain unchanged, with average weekly earnings determined by reference to the rate of pay the worker would have received had he been an employee and in accordance with any relevant award or industrial agreement (section 4(7)).

Working directors have been given some (perhaps overdue) attention. Under section 4(8) the average weekly earnings of working directors will be determined by reference to the weekly remuneration last reported in a return from the employer to WorkCover Corporation. This is to discourage the practice of some working directors minimising the “wage” component of a their income so as to reduce liabilities for WorkCover levy and taxes while, in the event that they suffer a compensable disability, claiming weekly payments based upon their income from all sources of the business (such as director’s fees, drawings, company car, accommodation and the like).

Section 4(9) carries into effect (unchanged) the former section 4(4), which provided for allowances to be made where a gradual onset disability had affected the amount the worker could earn before the relevant date.

Where a part time worker is injured but had predominantly been working full time in the 18 months before the disability and was seeking full time employment immediately before the disability, section 4(10) provides that average weekly earnings will be determined by reference to full time employment worked in the preceding 18 months. This carries into effect the previous section 4(5) of the Act.

Section 4(11) is also similar to its predecessor, whereby if a worker who is less than 21 years of age suffers a permanent incapacity, average weekly earnings are to be calculated using the adult rate. If the worker is an apprentice at the time of suffering permanent incapacity, he or she will be entitled to average weekly earnings based upon the tradesman’s rates.

New sections 4(13) and (14) clarify the position in relation to superannuation and other non-cash benefits. The amount of any salary sacrifice into superannuation is to be taken into account as earnings, as will be any non-cash benefit of a prescribed class. The prescribed class of non-cash benefits is listed in Regulation 5A of the Workers Rehabilitation & Compensation (Claims and Registration) Regulations 1999. This includes the payment of school fees, health insurance premiums, accommodation, telephone and the provision of a motor vehicle.

Section 4(14), like previous section 4(8)(ab), excludes compulsory superannuation guarantee levy from the calculation of average weekly earnings.

“Prescribed allowances” are also to be disregarded; but no such allowances have been prescribed to date.

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19. Redetermination of a Claim

A compensating authority also has the power in limited circumstances to “redetermine” a claim. That is, to issue a fresh determination if it considers that its original determination was wrong. This right is given by section 53(7) of the Act.

However, a claim can only be redetermined in “an appropriate case”. The criteria for appropriate cases are specifically set out in the Act. They include, among others:

•           where the claimant deliberately withheld information that should have been supplied and the original determination was therefore based on inadequate information; or

•           where the redetermination is appropriate by reason of new information that was not available and could not reasonably have been discovered by due enquiry at the time the original determination was made.

In the event that a compensating authority decides to exercise its power to redetermine and reject a previously accepted claim, it does not have any right to recover the compensation previously paid as a result of the original determination – that is, unless the original determination was made as a consequence of the worker’s fraud. However, in such a case the compensating authority can immediately stop weekly payments without using the section 36 discontinuance provisions.[11]

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20. Discontinuance and Reduction of Weekly Payments

The power to discontinue or reduce weekly payments is contained in section 36 of the Act. Section 36 was amended in a number of important respects in the 2008 amendments, details of which are set out below.

There are a variety of grounds upon which weekly payments can be discontinued or reduced.

The principal grounds upon which weekly payments can be discontinued are:

• when the worker returns to work;
• when he or she consents to the discontinuance;
• when the incapacity for work no longer results from the compensable disability;
• where the worker is dismissed from employment on the ground of serious or wilful misconduct, or
• when the worker breaches mutuality.

As to this last ground for discontinuing payments, there are a number of criteria in the Act which are described as breaches of mutuality; generally speaking, they involve some form of uncooperative conduct by the worker.

The grounds upon which weekly payments can be reduced are more limited. They include:

• where the reduction is made with the worker’s consent;
• where a medical expert has certified that there has been a reduction in the worker’s incapacity;
• where the reduction is authorised or required by some other provision of the Act, or
• where the reduction is necessary to correct an arithmetical or clerical error.

There had been substantial changes in the period of notice a worker must be given before his or her payments can be discontinued or reduced. Previously, a compensating authority was required to give a worker 21 days notice in writing before stopping or reducing weekly payments. Section 36(3b) now provides that where a worker has been receiving weekly payments for less than 13 weeks, the notice period for discontinuance is to be seven days; where a worker has been receiving weekly payments for more than 13 weeks but less than 52 weeks, the notice period is to be 14 days; where a worker has been receiving weekly payments for more than 52 weeks, the notice period is to be 28 days.

Previously, if a worker challenged a decision to discontinue or reduce weekly payments (by issuing a notice of dispute in the Workers Compensation Tribunal), the worker’s weekly payments would almost inevitably continue until the dispute had been finalised. The position in this regard is now changed significantly with the introduction of new sections 36(4) and (5). Section 36(4) provides that the discontinuance is to take effect in accordance with the terms of the section 36 notice; in other words, in seven, 14 or 28 days. To confirm this, section 36(5) provides that the effect of a decision to discontinue or reduce weekly payments is not affected by the worker lodging a notice of dispute. This means that weekly payments do not generally have to continue if a worker issues a notice of dispute. These are significant changes compared to the Act as has stood since inception in 1987.

If the worker’s section 36 notice of dispute is ultimately successful, the worker is entitled to be paid the total amount of arrears of weekly payments plus interest.

Some other interesting new provisions have been introduced in section 36(15)-(17). These allow a worker who has received a section 36 notice and lodged a notice of dispute to apply to the WorkCover Ombudsman for a review of the decision to discontinue weekly payments. If it appears to the WorkCover Ombudsman on such an application that it was not reasonably open to the compensating authority to discontinue payments (having regard to the circumstances of the case), the WorkCover Ombudsman may suspend the operation of the decision to discontinue weekly payments. Weekly payments are then to continue until the notice of dispute is withdrawn, the matter is resolved on reconsideration or conciliation (or otherwise between the parties) or the Workers Compensation Tribunal otherwise determines the matter.

This new series of provisions clearly gives the WorkCover Ombudsman a quasi-judicial role under section 36. The view that the WorkCover Ombudsman takes is that the phrase “reasonably open” means that the decision to discontinue or reduce weekly payments is arguable or appears to have a valid basis. He does not believe that “reasonably open” is intended to mean that the compensating authority must show that it has a reasonable prospect of success or that its section 36 decision is likely to be upheld.

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21. Prescribed Sums under the Act

There are a variety of sums that are specifically prescribed under the Act. They range from the maximum entitlement for non-economic loss for permanent impairment (section 43), lump sum payable on death (section 44); average weekly earnings (section 4(9)) and, among others, reimbursement for travelling in own vehicle (section 32).

A ready reckoner of a number of selected prescribed sums is contained in the Workers Compensation section of our websit

Some of the lump sum entitlements have changed significantly as a result of the 2008 amendments.

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22. Lump Sum Entitlement for Permanent Impairment

Workers who suffer a permanent impairment are entitled under section 43 to a lump sum for non-economic loss based on their level of permanent impairment.

One of the primary amendments that came into operation on 1 April 2009 was the repeal of old section 43 (lump sum compensation for non-economic loss) and its replacement with a new section 43 and section 43A. Section 43A sets out the method by which impairment is to be assessed. In particular, it is to be assessed in accordance with the American Medical Association Guides to the Evaluation of Permanent Impairment, Fifth Edition (AMA5) and the WorkCover Guidelines.

Two points need to be made at the outset. First, it is important to note that workers are now not entitled to a section 43 payment if their degree of impairment is less than a 5% Whole Person Impairment. Secondly, there is no entitlement to a section 43 payment for any psychiatric impairment.

The amount of the entitlement is calculated in accordance with the “prescribed sum” set for the year in which the injury occurred. Section 43(8) sets the Prescribed Sum at $400,000.00. The Prescribed Sum is indexed.

While a prescribed sum of $400,000 (indexed) appears generous, it is likely that the entitlement for many disabilities will not be generous (even assuming that the worker gets over the 5% threshold). Moreover, it is likely that there will no longer be any entitlement for a number of disabilities that were previously compensable under section 43 (and the Maims Table).

The WorkCover Guidelines (the Guidelines) were published in the Government Gazette on 26 March 2009. They derive their standing from section 43A(3) of the Act. Paragraph 1.3 of the introduction to the Guidelines states that the Guidelines adopt AMA5 in most cases, but where there are differences, the Guidelines are to be used as the modifying document.

Paragraph 1.5 of the Introduction to the Guidelines states that the assessment of permanent impairment involves a clinical assessment on the day of the assessment to determine whether the compensable disability has resulted in impairment; whether the disability has reached Maximum Medical Improvement (MMI) (an important concept); whether the impairment is permanent; the degree of permanent impairment that results from the compensable disability, and the proportion of permanent impairment due to any previous disability (whether compensable or otherwise). Paragraph 1.5 also states that the determination of the assessment of permanent impairment is to be carried out in accordance with diagnostic and other objective criteria detailed in the WorkCover Guidelines.

The Guidelines themselves are broken down into a number of separate categories, namely upper extremities; lower extremities; spine; nervous system; ear, nose, throat and related structures; urinary and reproductive system; respiratory system; hearing; visual haematopoietic system; endocrine system; skin; cardiovascular system and digestive system.

Some of the other more noteworthy matters contained in the Introduction to the Guidelines are:

1. Clause 1.40 provides that the worker’s assessment for permanent impairment is now given as a percentage of Whole Person Impairment (WPI).

2. Clause 1.21 effectively defines the word “permanent” (in permanent impairment), stating that permanent is to include “for a long and indeterminate time but not necessarily forever” and “more likely than not to persist in the foreseeable future”.

3. Clause 1.37 states that the permanent impairment evaluation report should be accurate, comprehensive and fair. It is in general expected that the assessor will be requested to address issues such as:

• the current clinical status, including the basis for determining maximum medical improvement;
• the degree of permanent impairment that results from the disability, and
• the proportion of permanent impairment due to any previous injury or compensable disability, pre-existing condition or abnormality, if any.

4. Clause 1.39 states that the report should provide a rationale consist with the methodology and the content of the Guidelines. It should include a comparison of the key findings of the evaluation with the impairment criteria in the Guidelines.

It is section 43(4) that sets the threshold before a worker has an entitlement to a lump sum for non-economic loss and provides that a worker has no entitlement if the permanent impairment is less than 5%.

The minimum amounts of compensation for the degree of impairment are set out in Schedule 3 of the Act. This provides that a worker with a Whole Person Impairment of between 5% and 9% is entitled to a minimum of $10,000; a worker with a Whole Person Impairment of between 10% and 29% is entitled to a minimum of $17,500; a worker with a Whole Person Impairment of between 30% and 54% is entitled to a minimum of $75,000; a worker with a Whole Person Impairment of between 55% and 69% is entitled to a minimum of $250,000 and worker with a Whole Person Impairment of 70% is entitled to a minimum of $400,000. As stated, all amounts are indexed.

Even if a worker is assessed as having a Whole Body Impairment of 55%, that worker’s entitlement will still only be $250,000. Under the old section 43 regime, a 55% impairment was very rarely seen.

Only doctors who are trained in the use of the Guidelines and accredited by WorkCover can undertake and assess the degree of permanent impairment. Reports on levels of impairment cannot be obtained from treating doctors (whether general practitioners or specialists), unless they are accredited. EML requires that a referral seeking an opinion of permanent impairment under section 43 should confine the request to that issue alone.

The list of accredited assessors for the purpose of section 43A can be found on WorkCover’s website at:   www.workcover.com\home\providers\HealthServices\PermanentImpairmentAssessments.aspx.

This list is set out by type of disability, rather than by the name of doctors. It should be noted that a number of doctors are accredited to assess various different types of disabilities.

The scale of fees that doctors can charge for the purposes of section 43A is also contained in the Gazette of 26 March 2009.

The operation of AMA5 and the Guidelines are complex. The doctors who have been accredited to assess permanent impairments have undergone extensive training.

Section 43B creates what is called a no disadvantage compensation table. This is contained in Schedule 3A. The effect of this is that if a worker suffers a disability giving rise to an entitlement under sections 43 and 43A and is a disability of the type mentioned in Schedule 3A and the amount of compensation payable under section 43 and 43A is less than the amount that applies under the table in Schedule 3A, the worker is entitled to compensation equal to the amount applying under the table. For example, under schedule 3A, a worker who loses the sight of one eye is entitled to a minimum of $75,850.00. Oddly however although Schedule 3A says that where a worker suffers total loss of sight in both eyes he or she is entitled to minimum compensation under section 43B of $254,100.00, section 43B(2) provides that if a worker suffers two or more disabilities of the type mentioned in Schedule 3A arising from the same trauma, the worker is not entitled in any case to receive compensation in excess of $254,100.00 (indexed). As stated, this is despite the operation of section 43B(1) and the table contained in Schedule 3A.

It should be noted that where a worker suffers an aggravation of an earlier disability and has previously been paid a lump sum, there is to be a reduction in the lump sum payable by the amount of the previous payment, unless that reduction is incorporated into the provisions of the WorkCover Guidelines.

Given that section 43 has fundamentally changed; given the complexity of the changes and given practitioners’ (both medical and legal) uncertainty about the methodology to be used, it is expected that there will be a reasonably long settling in process in respect of the changes while we all become familiar with the new process.

EML has recognised the unfamiliarity of the accredited doctors who will now be undertaking assessments of permanent impairment, as well as the case managers who will be making section 43 determinations and has appointed two doctors who have familiarity with AMA5 as peer reviewers. Their role is to ensure that the assessments accord with AMA5 and the WorkCover Guidelines and also ensure that the section 43 determinations comply with these documents.

Finally, while it is not yet entirely clear, it appears that compensation under section 43 is not payable after a worker’s death (section 43B(3)).

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23. Compensation Payable on Death

The provisions relating to compensation payable on death are contained in sections 44-45C of the Act.

Significant changes were made by the 2008 amendments to the provisions dealing with compensation payable when a worker dies as a result of a compensable disability. Before the amendments, the provisions were contained in section 44 of the Act, both in respect of lump sums paid to dependants of the deceased worker and in relation to weekly payments to those dependants.

Although section 44 has largely been retained, those subsections relating to lump sum compensation have been removed and are now grouped together in new section 45A, which specifically governs the payment of lump sums. As such, the amended section 44 relates only to weekly payments of compensation payable to the dependants of a deceased worker and the new section 45A relates only to lump sums payable to dependants on death of a worker.

Section 44 – Compensation payable on death – weekly payments

There is one significant difference arising from the amendments. Under former section 44, payments were limited to a dependant “spouse” of a deceased worker. The amendments now acknowledge a broader range of domestic relationships by providing for an entitlement to “a dependant spouse or domestic partner”. Presumably this broad description contemplates traditional “defacto couples” as well as same sex couples.

Entitlements of dependants to weekly payments of compensation upon the death of the worker are summarised in the following table:

*A dependant child is one who is under 18 years of age; or a full time student under 26 years of age; or is incapable of earning a living by reason of a physical or mental disability.

Section 44(8) provides that weekly payments to dependants are not paid beyond the date which the worker would have been entitled to receive those payments had he or she survived but been permanently incapacitated for work (presumably age 65).

Section 44(11) provides payment of a supplementary allowance to carers of a child under the age of 18 years of age if the carer is not the dependant spouse or domestic partner of the worker (for example, in the care of the parent or sibling of the deceased worker). A supplementary allowance is also payable where a child is incapable of earning a living by reason of a physical or mental disability irrespective of the age of that child (section 44(12)).

Under subsections 44(14) to 44(19), the Corporation has discretion to commute the weekly payments, upon application of a person entitled to weekly payments under section 44. This however is conditional upon the actuarial equivalent of those payments not exceeding the prescribed sum within the meaning of section 43 (currently $400,000 for 2009).

With the exception of the inclusion of domestic partner entitlements, there have been no other significant changes by the 2008 amendments regarding weekly payments payable upon death of a worker.

Compensation payable on death – lump sums

The new legislation adopts the Victorian Scheme’s provisions for lump sum payments in the event of death. The insertion of new section 45A into the Act therefore amounts to a complete rewrite of the law in this area.

Perhaps the most widely reported change is the increase in the maximum lump sum entitlement payable upon the death of a worker. This was previously set a 1.675 times the section 43 prescribed sum (which calculated to $230,983 in 2008 before the changes). However for claims arising on the death of a worker on or after 1 July 2008, this maximum amount increased to $400,000. As was the case before the amendments, the Act provides that a spouse is entitled to the maximum lump sum upon the death of the worker.

New section 45A appears to limit this entitlement to a “dependant partner or partners or a partially dependant partner or partners or a dependant child”. A dependant partner is defined to mean “a spouse or domestic partner totally or mainly dependent on the worker’s earnings”. Yet section 45A(2) provides that no regard is had to any money which the spouse or domestic partner had earned or was earning when determining whether a spouse or domestic partner was wholly or mainly dependant upon the worker’s earnings at the time of death. Applying that test it is difficult to see when a spouse would not be dependent or partially dependent on the worker. Perhaps this definition is designed to disentitle a spouse to compensation where there is demonstrably no dependence – for example, in the Angelina Jolie/Brad Pitt scenario – where both are independently wealthy. Alternatively, perhaps this wording was simply to keep the terminology consistent with section 44 (dealing with weekly payments to dependants where the extent of dependency is clearly relevant).

Sections 45A(5)-(12) of the amended Act set out the method by which the full lump sum entitlement (currently $400,000) is to be divided and allocated to the deceased’s dependant partners and children. We have summarised this in the following table.

*  Where the worker leaves more than one dependant partner, the prescribed sum will be paid in equal shares to the dependant partners.  For convenience, the above table assumes that there is only one dependant partner.

Pursuant to section 45A(13) if the worker was under the age of 21 at the time of the compensable death and leaves no dependants but “was contributing to the maintenance of the home of the members of his or her family”, the members of his or her family are taken to be partly dependant upon the worker’s earnings. We assume that this will also entitle them to a discretionary lump sum payment pursuant to section 45A(12) (see above table).

Section 45B – Funeral benefit

Funeral benefits are maintained in accordance with the former legislation. A funeral benefit is payable equal to the lesser of the cost of the funeral or the prescribed amount ($7,470 in 2009).

Section 45C – Counselling services

This is a new provision that ensures that family members of deceased workers are provided with counselling to assist with grief and psychological distress resulting from the worker’s death. Family members include the worker’s spouse, domestic partner, parent, sibling, child, or stepchild. Counselling services are to be provided by WorkCover with the fees set in accordance with gazetted scales and total payments to a maximum prescribed by regulation. There is currently no maximum prescribed.

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24. Resolving Disputes

Dispute inevitably arise in the context of workers compensation claims. As mentioned earlier, the Workers Compensation Tribunal deals with disputes in South Australia. Under our current dispute resolution system (introduced in June 1996), there has always been a considerable emphasis on conciliation – and to a lesser extent on arbitration – as a precursor to a full formal hearing on oral evidence before a Judge (Deputy President).

The conciliation process has proved particularly successful in resolving a large proportion of disputes at an early stage, thereby avoiding the delays and expenses that occur in the more traditional dispute resolution systems. Tribunal statistics indicate that around 70% of disputes resolve at or before the conciliation conference stage – a very impressive figure. Arbitration was regarded as less successful and arbitration was removed from the dispute resolution process when the relevant 2008 amendments came into operation in the Workers Compensation Tribunal on 1 January 2009.

Under section 90 of the Act a review of a decision is sought by way of a Notice of Dispute, which is to be filed within one month of receipt of the determination or decision. The Act enables a person who is directly affected by a decision or the employer in whose employment the compensable disability arose to seek a review of the decision. Although employers can file notices of dispute – and do on a regular basis – workers who are dissatisfied with the decisions file the vast majority of disputes.

However, in addition to workers and employers, there is one other group that has a direct right to lodge notices of dispute – as persons directly affected by the decision – medical providers. Section 32 provides a compensating authority with the power to disallow a charge for a service provided to a worker where it believes the service was inappropriate or unnecessary. It can also reduce the charge where the worker has been charged more than he or she is entitled to claim. In those cases, the provider has a specific right to seek a review of the decision by way of notice of dispute.

The dispute resolution process is a multi-layered process. Once a compensating authority is notified that one of its decisions is being challenged by way of notice of dispute, it is required to reconsider its decision (section 91). This is done internally by the compensating authority by a reconsideration officer and must be done within seven days of receiving the notice of dispute.

If the reconsideration fails to resolve the dispute – and about 10% of disputes are resolved at the reconsideration phase – the matter then moves to the conciliation stage (sections 91A-92D). A conciliation officer, whose role is to encourage the parties identify the issues and negotiate meaningfully with a view to resolving the issues between them, oversees this process. The conciliation process is, understandably, quite a flexible process.

If the dispute does not resolve at conciliation, it proceeds to judicial determination. The judicial determination is the full hearing at which all witnesses are to be called (or at least made available for cross examination). It is at this stage that the doctors are called to give their evidence. That said, it might be less common for doctors to be called to give evidence in view of the introduction of Medical Panels (see below). The judicial determination proceeds before a deputy president. A person is unable to be appointed a deputy president unless he or she has at least seven years standing as a lawyer.

When the deputy president has handed down his or her decision on judicial determination, the dissatisfied party has a right to appeal against that decision.

The appeal from a decision is made to the Full Bench of the Tribunal, however an appeal lies only on a question of law (section 86). The Full Bench of the Tribunal has the power to refer a question of law to the Full Supreme Court by way of a case stated (section 86A).

Although there had previously been no right of appeal to the Supreme Court from the Workers Compensation Tribunal (in real terms), this was one of the other quite important changes to the dispute resolution process in the 2008 amendments, with a right of appeal to the Supreme Court being reintroduced. That right was removed when the 1996 dispute resolution provisions (which created the Workers Compensation Tribunal) came into operation in 1996. Now, section 86A(2) allows an appeal on a question of law from a decision of the Full Bench of the Tribunal to the Full Supreme Court. However, that appeal can only be commenced with the permission of a judge of the Supreme Court.

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25. Medical Panels

The proposed introduction of medical panels is likely to cause difficulties; first because a medical question is very broadly defined. It is clear that many of the issues regarded as medical questions in section 98E are not just medical questions and involve:

• medical issues and factual questions, or
• medical questions which involve medical issues, factual issues and legal issues.

One of the “medical questions” is whether employment is suitable. With respect, this is not a medical issue at all.

Another example is the relationship between an injury and the worker’s employment. That is not only a medical question, but is also one that requires a number of preliminary questions to be determined before it can be addressed, such as what activities are part of the employment relationship. A further example is the question of whether a provision of a rehabilitation and return to work plan imposes an unreasonable obligation on a worker; once again, this is simply not a medical question.

While the government is committed to the success of the medical panel concept, the manner in which medical panels are to operate is a matter of some concern. A medical panel is not bound by the rules of evidence, but may inform itself in any way it considers appropriate (section 98B(1)); it can act informally and without regard to technicalities or legal forms (section 98B(2)); it can engage consultants and seek expert advice as it considers necessary (section 98B(3)) and the convener can give directions as to the arrangement of the business of the panels (section 98B(4)).

Section 98G(6) provides that any attendance of a worker before a medical panel must be in private, unless the panel considers that it is necessary for another person to be present. The effect of this is that a worker is not entitled to representation before a medical panel.

Equally, a compensating authority is also not entitled to representation before a medical panel.

Under section 98H(2) a medical panel is required to give a certificate as to its opinion. While section 98H(3) requires the opinion to include a statement setting out the reason or reasons for the opinion, the legislation provides no guidance about how detailed (or brief), that opinion must be.

Further, the opinion of the medical panel is not subject to appeal rights. It is to be accepted as final and conclusive. Section 98H(4) provides that the opinion of the Medical Panel on a medical question referred to it is to be adopted and applied by any body or person acting under the Act and must be accepted as final and conclusive, irrespective of who referred the medical question to the Medical Panel. While this clearly appears to preclude the ability of any party to appeal against the opinion of the medical panel, we believe that rulings of medical panels will nevertheless be subject to scrutiny by the Supreme Court by way of judicial review. It is likely that there will be a number of challenges in this way, particularly in the early days of the medical panel. Certainly that has been the experience of Victoria (on whose legislation these provisions are based).

While a member of a medical panel is competent to give evidence about the matters in a certificate given by the panel, the member may not be compelled to give evidence (section 98I(2)). Therefore, no doctor who is part of a medical panel can be questioned about the basis upon which the medical panel reached its decision.

The medical panel introduces a new layer. It is likely to be costly.  Reservations exist about whether medical panels will be workable. We say this not only for the reasons already mentioned, but also because doubts exist about whether those charged with the role of implementing the medical panel process will actually be able to regularly secure practicing clinicians with sufficient experience, standing and calibre to perform their role on the medical panel capably.

The width of power, the lack of accountability, the lack of rights of representation and appeal in a body that undertakes an important judicial role, but has no legal qualifications, raise significant ethical and jurisprudential issues.

On 26 March 2009 the Workers Compensation Tribunal introduced Rule 19 into its Rules. This deals with referrals of medical questions to a Medical Panel in respect of matters pending in the Tribunal. Obviously, it cannot deal with the referral of matters to a Medical Panel before the Workers Compensation Tribunal is seized of the matter.

Time will ultimately tell on the question of whether medical panels are successful.

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26. Costs

While costs of a dispute are in the discretion of the Tribunal, the general principles that apply in workers compensation disputes are set out in section 95. A party – a worker or an employer – will normally be entitled to an order for costs in his or her favour (if represented by a lawyer or an officer of an industrial association). Accordingly, a worker or an employer will normally be entitled to an amount from WorkCover on account of the costs they incur. The costs payable are on a party/party basis; this is not a full indemnity for the actual amount of costs the party incurs (which is known as “solicitor/client costs”).[12]Costs are set in accordance with the Regulations.

Section 95(1) specifically states that a compensating authority is not entitled to claim costs. Obviously, where the worker’s employer is a self-insurer, that self-insurer (which is also the employer in such cases), will have to fund its costs, as well as pay the worker’s party/party costs.

There are however some important exceptions to the rule that parties other than compensating authorities will usually be entitled to an order for costs in their favour. These exceptions relate to the conduct of the party. The Act provides that if the Tribunal believes that a party acted unreasonably, frivolously or vexatiously in bringing the proceedings or in relation to the conduct of the proceedings, it may decline to make an award of costs in favour of the party – and indeed may make an award of costs against the party or reduce the amount to which the party would otherwise be entitled.

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27. The Common Law Position – What if an Injury has been caused by Negligence?

The primary rule under the Act is that workers whose injuries arise as a result of the negligence of their employers have no entitlement to claim damages for negligence at common law against their employers (section 54(1)). Workers did have the ability to claim damages at common law in the early days of the Act, but even then the right was limited to the ability to recover damages only for non-economic loss (pain and suffering and the like). It was still of course necessary to establish negligence. This right was however removed completely as from June 1993.

On the other hand, when workers suffer injuries during the course of their employment as a result of negligence of some third party – that is someone other than their own employers – they can make a claim against that third party at common law for damages for negligence. This right is an unrestricted right to damages. That is, the worker is able to recover for economic loss as well as damages for non-economic loss. Any right to damages is subject to the usual principles. Therefore, the damages can for example be reduced by the worker’s own contributory negligence (or failure to mitigate his or her loss), etc.

However, if the worker successfully sues a third party (who is described as a “wrongdoer” in the relevant section of the Act, section 54), the compensating authority has a right to recover from the other insurer the compensation it has paid or will be required to pay in future. In other words, the worker is naturally not entitled to double compensation.

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28. Finalisation of claims – Redemption

There are a variety of reasons why parties might wish to finalise their claims. The finalisation of a claim might be straightforward and involve nothing more than a worker returning to his or her pre-injury duties with no ongoing disability or incapacity. It might also involve the compensating authority accepting a previously rejected claim, after say the worker has returned to work on full pre-injury duties.

At the other end of the scale, the parties might wish to resolve a long running dispute (or series of disputes), so that the worker can resign from employment and get on with his or her life.

In the group of cases involving workers who have been incapacitated for long periods – and subject to the qualifications set out below – section 42 provides the parties with the ability to reach an overall resolution of the issues between them by agreement, thereby enabling the compensating authority to finalise its outstanding liability to the worker. Section 42 is the section dealing with redemption of liability. In those cases in which redemption is available, the parties will normally agree to redeem the ongoing liability for both future medical expenses, as well as future weekly payments of income maintenance.

Redemption can only be reached by agreement between the parties. It is then recorded by way of an agreement between the parties. Although the Workers Compensation Tribunal has no power to set a redemption amount, it does have a role in endorsing a proposed redemption agreement.

The ability for parties to redeem has been available since 1995, however the circumstances in which redemption is available has changed significantly as a result of the 2008 amendments (at least in relation to injuries that have occurred since 1 July 2006).[13]

Section 42(2) has always stated that certain prerequisites had to be met before an agreement for redemption of liability could be made: the worker had to receive competent professional advice about the consequences of redemption; he or she had to receive competent financial advice about the investment or use of money to received on redemption; the compensating authority had to consult with the employer out of whose employment the disability arose (and consider any representations made by that employer); and a recognised medical expert had to certify that the extent of the worker’s incapacity resulting from the compensable disability can be determined with a reasonable degree of certainty.

Once the parties had agreed on the redemption amount and the section 42(2) steps mentioned above were taken, there were no other impediments on the parties ability to redeem.

The redemption position has however changed significantly as a result of one of the amendments to the Act. Under the new provisions a worker will still be required to obtain competent professional advice and receive competent financial advice about the investment or use of the money; the compensating authority will also still have to consult with the former employer and a recognised medical expert will still have to certify that the extent of the worker’s incapacity can be determined with a reasonable degree of confidence. Additional obligations have however to be imposed which to significantly restricts the ability of parties to reach a finalisation of liability by way of redemption.

In addition to the carrying steps already mentioned, the parties now also have to, under new section 42(2)(e), satisfy one or more of the following requirements before they can redeem:

1. the rate of weekly payments to be redeemed cannot exceed $30.00 (indexed) (section 42(2)(e)(i)); or
2. the worker has attained the age of 55 and the Corporation has determined that the worker has no current work capacity (section 42(2)(e)(ii)); or
3. the Tribunal determines, on the basis of a joint application made by the worker and the compensating authority, that the continuation of weekly payments is contrary to the best interests of the worker from a psychological and social perspective (section 42(2)(e)(iii)). This application is to be made when the parties are contemplating entering into a redemption agreement.

It will be apparent from that the restrictions do not apply in relation to claims where weekly payments are $30.00 (indexed) or less a week. This will be uncommon. Likewise, they do not apply in relation to a worker who has reached 55 years of age and has no current work capacity. This is also likely to be uncommon.

Therefore, for other matters not coming within either of these two groups – no doubt the vast bulk of claims – it will be necessary for the parties to jointly apply to the Workers Compensation Tribunal for a direction that the continuation of weekly payments “is contrary to the best interests of the worker from a psychological and social perspective”. This step will have to be taken before a redemption agreement can be entered into. Presumably an amount can be agreed between the parties, in-principle, subject to a favourable ruling by the Tribunal under section 42(2)(e)(iii).

Other than being told that the Tribunal needs to determine that the continuation of weekly payments is “contrary to the best interests of the worker from a psychological and social perspective”, no directives are given regarding the nature of the material that will have to be produced to the Tribunal in support of the application. Naturally, each case will be dependent on its own facts.

Given that such an application to the Tribunal is a joint application, we would expect that the Tribunal will be likely to make the order if it accepts the material put forward in support of the application, particularly the medical information.

What is unclear at the moment is whether the phrase, “the best interests” of the worker (from a psychological and social perspective), will be interpreted by the Tribunal in a liberal or a narrow manner. While this will again be a question of fact, our expectation is that it will be more likely to be interpreted in a more liberal manner. Once again, as the application to the Tribunal is a joint one, we expect that the Tribunal will see its primary role as satisfying itself that the supporting evidence provided is adequate. That said, there are also likely to be some early rulings from the Tribunal providing general guidance about the criteria to be considered in assessing a worker’s psychological and social situation.

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29. Fraud and dishonesty

Parliament has, understandably, imposed significant penalties for dishonesty (fraud) committed in connection with a claim. The fraud provisions are contained in section 120 of the Act.

Penalties of up to $50,000 or imprisonment for one year can be imposed on workers who dishonestly obtain or claim compensation or who dishonestly make statements in relation to a claim knowing the statements to be false or misleading.

In addition, in the event that a person is either convicted of an offence of dishonesty or found guilty of an offence, the court must order that the person who committed the offence to make good any loss resulting from the offence – that is, repay any compensation to which they were not entitled – as well as repaying the costs of investigating and prosecuting the offence. The costs, particularly of prosecuting an offence, can be very high indeed.

Furthermore, a person convicted of an offence under this section – particularly a serious offence – is at real risk of losing any ongoing entitlement to weekly payments of income maintenance; this is on the basis that the conviction amounts to a breach of the obligation of mutuality. Not forgetting of course the fact that such an offence will almost inevitably lead to a dismissal from employment. Certainly the general practice in the matters in which our clients have prosecuted workers for dishonesty is that the workers have also been sacked once their fraud has been identified.

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30. Penalties and fines

There are numerous penalties and fines in the Act. We have already mentioned a few, such as:

• an employer’s failure to register with WorkCover (which carries a fine of $10,000 for each worker employed by that employer);
• a failure to provide suitable duties (which now carries a penalty of a $25,000 fine under section 58B), and
• fraud (which can result in a fine of up to $50,000, imprisonment for a year and repayment of compensation dishonestly received).

These are just a small example. There are a significant number of penalties contained in the Act, a few more of which are set out in the table below:

Table of Selected Penalties

While the table set out above is not by any means an exhaustive list of all penalties under the Act, one further provision is also worth mentioning, as it is also important. Section 122 deals specifically with offences and is what might be described as a catch-all provision. Section 122(1) states that a person who contravenes of fails to comply with a provision of the Act is guilty of an offence.

Section 122(2) also provides that a person who is guilty of an offence under this Act for which no penalty is specifically provided is liable to a fine not exceeding $2,000. The effect of this is that a contravention or failure to comply with any provision of the Act itself amounts to an offence and, when a penalty is not otherwise provided for such a contravention or failure, the “default” penalty is a fine not exceeding $2,000.

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31. Concluding Remarks

Since the commencement of the Act in South Australia on 30 September 1987 the workers compensation jurisdiction has been dynamic. It has often been highly political. Certainly that was the case during the debates surrounding the amending legislation in 2008. You may wish to read some of the newsletters on our website, which were prepared during the height of the debate and provide a bit more insight into some of the issues that were topical at the time. It is likely to remain political, particularly with a State election to take place in March 2010.

The Scheme has undergone a significant number of major changes over its life. It has been one of South Australia’s most frequently amended pieces of legislation. In many ways it is a particularly complex piece of legislation. Some of the most important substantive changes over the 20 or so years of the Act have been the removal of the rights of workers to obtain damages at common law for negligence (which came into effect in 1993); the replacement of the original dispute resolution system with a completely new dispute resolution administered by the Workers Compensation Tribunal (in 1996), and the changes to worker’s entitlements to weekly payments (consequent upon the 2008 amendments).

At a policy and procedural level some of the most important changes relate to the claims management functions. First, WorkCover’s claims management role was outsourced to a number of insurers in 1995, which then performed the claims management role. The number of insurers (claims agents) performing that role steadily declined until, in June 2006, a new agent, EML, was appointed as the sole clams agent.

WorkCover’s legal panel has also undergone significant changes over the years. In 1995 the existing panel of four legal firms was increased to a panel of almost twenty firms. That panel likewise gradually diminished over the years until Minter Ellison was appointed as WorkCover’s sole provider for legal services in 2005.

At a political and policy level, a major independent review of the workers compensation scheme was undertaken in 2007. This occurred as a result of WorkCover’s rapidly escalating unfunded liability. This ultimately led to the significant raft of major reforms that have been coming into operation in a staged fashion since July 2008, and which have been discussed in some detail in this paper.

It should also be mentioned in passing, and in conclusion, that although a earlier major Review of the compensation system was undertaken in 2002 – the Stanley Review (after the Rann Government came into power) – there was no implementation of almost all of the recommendations contained in that report (and certainly none of the major recommendations). It appeared that the consultation process seemed to falter not long after the Stanley Report was made public. That changed in 2007/08.

We will all watch with considerable interest to see whether the 2008 amendments achieve the result the Government states will occur – a significant reduction in the unfunded liability.

John Fountain[14]

The assistance of David Rostron, Senior Associate with the firm, is also acknowledged with respect to the preparation of a number of this sections of this paper.