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HG Alert: Workers’ Compensation: restricting entitlements v increasing employer costs - 25 Feb 2010

A discussion paper recently released by Queensland’s Department of Employment and Industrial Relations, The Queensland Workers’ Compensation Scheme: Ensuring Sustainability and Fairness, has contemplated major changes for Queensland’s workers’ compensation scheme.

At the moment, Queensland has a dual scheme under the Workers’ Compensation and Rehabilitation Act 2003:

  • Significant statutory benefits are available to injured workers on a ‘no fault’ basis.
  • There is unrestricted access to common law damages, where the worker sues his or her employer for damages for negligence or breach of duty, provided the worker complies with the access to damages procedures in chapter five of the Act.

The statutory scheme accounts for 96 percent of claims, but only about 60 percent of claim costs. Comparatively expensive, common law claims represent only four percent of all claims, but account for approximately 40 percent of claim costs. This figure is estimated to rise to 60 percent by 2017-2018.

The common law aspects of this scheme have historically set Queensland apart, as all other states (with the exception of the ACT) impose a threshold that workers must meet before they can sue their employer at common law for damages. Queensland’s Workers’ Compensation and Rehabilitation Act also places relatively few restrictions on the type and amount of damages that can be recovered, leaving those decisions to the courts.

Remarkably, despite having the lowest average premium rates in Australia (at $1.15 per $100 of wages paid, a massive 17 percent less than the next lowest state, Victoria) and maintaining full access to common law damages, Queensland’s scheme has historically run at a surplus.

However, since the beginning of 2008, two events have significantly affected the affordability of the scheme:

  • The global financial crisis savaged WorkCover’s investment returns to the tune of $800 million; and
  • A significant increase in common law claim numbers and costs has occured.

As a result, an operating deficit of $1.3 billion has accumulated over the last two financial years. So far it has been absorbed by WorkCover’s ‘investment fluctuation reserve’.

The increase in the number of common law claims has been attributed, at least in part, to recent decisions of the court (see Bourk v Power Serve Pty Ltd & Anor [2008] QCA 225 and Parry v Woolworths [2009] QCA 26) which have essentially enabled some injured workers to succeed in claims for damages on the basis that the employer is in breach of the relatively onerous provisions of the Workplace Health and Safety Act 1995, without establishing negligence or breach of duty of care on the employer’s part. This quote from the Discussion Paper is indicative: “…one Queensland self-insurer has advised that, during the period 1 October 2008 to 30 September 2009, common law claims lodgements have increased by an estimated 27 percent per quarter because of the Bourk decision.” Because of the structure of the relevant sections of this Act, the onus of proof is reversed, and once an injury occurs, the employer must demonstrate a defence to the alleged breach.

A likely consequence of these court decisions is that many workers are encouraged to ‘have a crack’ at a common law damages claim in circumstances where they may not have done so otherwise.

There are two main ways that an entity can sustain its viability in such circumstances: increase income or decrease expenses. For WorkCover Queensland, this means increasing investment and premium income, or decreasing claims costs. The WorkCover Queensland Board, which has responsibility for administering the scheme, has made several proposals for achieving these aims:

  • Progressively increasing the average premium rate (from the present $1.15 to $1.40 per $100 of wages paid by 2017-2018).
  • Introducing a common law threshold, so that only workers with a whole person impairment of 10 percent or 15 percent can sue for damages.
  • Altering short-term statutory wage payments for workers with ongoing impairment following the injury.

A common law threshold would exclude the majority of injured workers from claiming damages, as some 66 percent of injured workers’ claims would fall below a threshold of 10 percent. In 2008-2009 alone, such a threshold would have reduced common law claim payments by $233 million.

Alternative proposals made by stakeholders include:

  • Allowing common law claims only where employment was “the major significant contributing factor to the injury”.
  • Making it easier for employers to defend common law claims by modifying the duty under the Workplace Health and Safety Act, removing the civil right of action provided by the Act, or requiring that factual causation be established to successfully claim for breach of the Act.
  • Allowing costs to be awarded against injured workers whose common law claims are dismissed at trial. A court cannot do this at present, giving injured workers a ‘free pass’ to run a trial without the threat of a costs order being made against them.
  • Increasing the employer excess.
  • Aligning the Workers’ Compensation and Rehabilitation Act with the Civil Liability Act 2003, which places significant restrictions on the type and amount of damages that can be awarded - particularly damages for pain and suffering.

The Queensland Government has invited comment on its discussion paper. The closing date for submissions is 24 March 2010.

For more information on the discussion paper, please contact HopgoodGanim’s Workers’ Compensation team.