Precedent (Australian Lawyers Alliance)
RECENT PROPOSED LEGISLATIVE CHANGES TO THE SAFETY, REHABILITATION AND COMPENSATION ACT 1988
By Geoff Wilson
During the period March 2014 to March 2015, the Abbott government introduced a suite of legislation designed to transform the Comcare workers’ compensation scheme. The three separate Bills each passed through the House of Representatives when introduced. As at October 2015, however, all three Bills had failed to pass through the Senate with Labor, the Greens and a number of independents committed to opposing them.
Given the recent change in Prime Minister, and the change of Employment Minister from Senator Eric Abetz to Senator Michaelia Cash, it is timely to review the proposed legislative changes and to identify what challenges await those who practise in the area.
The ALA has consistently opposed the Bills on the basis that they weaken the existing rights of injured workers in a poorly functioning scheme that provides inferior support to workers who face serious injury, while encouraging large national employers to move their workers into the scheme.
At present, Comcare is a scheme ill-suited to the industries it services, and has been rightfully criticised as burdensome and ineffective without regulator enforcement.
National employers migrating to Comcare would undermine the existing legal rights of workers but also undermine the financial viability of state schemes.
The proposed changes unfairly narrow the definitions of injury and disease. They also reduce the level and form of compensation for many injured workers.
In short, Comcare needs reform, but the changes presently before the Senate are the wrong way to go about it.
BACKGROUND TO THE CURRENT COMCARE SCHEME
The Safety, Rehabilitation and Compensation Act 1988 (Cth) provides a federal workers’ compensation scheme that covers approximately 380,000 full-time employees. Also known as the Comcare scheme, it covers a relatively small number of employers and employees (compared with the state and territory schemes), across a large geographical area. Despite being intended as a largely white-collar public service scheme, Comcare now covers a wide spectrum of industries: public administration and safety, education and healthcare (via premium-paying Commonwealth public service departments and agencies) and financial, transport, postal and telecommunications (via licensed self-insurers such as NAB, CBA, Australia Post, Linfox, Telstra, Optus, and others).
In general terms, the Comcare scheme provides for long-tail compensation coverage for medical treatment, household services, and attendant care services until death; incapacity wage loss payments until 65; and the potential for additional, separate lump sum compensation for permanent impairment and non-economic loss, available where an injury results in a 10 per cent or greater whole person impairment (WPI) – in the range of $28,000 to $35,000 for a 10 per cent WPI with associated non-economic loss WPI.
There are many flaws in the present Comcare scheme, and it has been consistently criticised for being burdensome, paternalistic, and bureaucratic for workers and employers alike.
It has also been criticised for its poorly functioning work, health and safety (WHS) regulatory arrangements for self-insured licence-holders. Recent Federal Court judgments involving prosecutions for WHS breaches support allegations that the Comcare scheme has put workers’ lives at risk by failing to enforce OHS/WHS regulations in the limited number of workplaces for which it has responsibility. The ALA has recently highlighted the failure of Comcare to police Commonwealth workplaces and facilitate improvements in workplace health with regards to offshore immigration detention centres.
PROPOSED LEGISLATIVE CHANGES
In early 2014, the Abbott government introduced legislation into the House of Representatives that proposed to alter the Comcare scheme. One year later, further amendments were introduced. At the time of writing, all three Bills have stalled in the Senate.
The Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014 (Cth) (SRCOLA Bill) was introduced in March 2014, ostensibly as part of the Abbott government’s commitment to reduce ‘red tape’. If passed, it would allow a large number of national private sector employers to enter the Comcare scheme by changing the licence requirements. This development risks weakening the respective state and territory schemes if and when large employers make such a shift, taking their premiums with them.
The rationale for allowing this shift is to reduce the operating costs for large national employers, but would come at the expense of smaller employers left in the state and territory schemes. It would also reduce individual workers’ rights. Those private sector workers who move to the Comcare scheme would immediately lose access to their meaningful common law rights, even if their injury is caused by their employer’s negligence.
If passed, the SRCOLA Bill would give rise to the situation where severely injured workers in the transport, construction, mining and agricultural industries will be treated like injured clerical workers, who are far less likely to suffer such serious injuries.
The Comcare scheme provides no meaningful access to common law damages for injuries caused by the negligence of an employer, while its design means premiums have to go up unless benefits are slashed. The government’s proposed reforms would appear quite blatantly to preference the interests of big business over injured workers, by opening up the Comcare scheme and then reducing coverage and benefits. Thankfully, from the perspective of Australia’s workers, there has been strong opposition from non-government senators, arguing for a rejection of the SRCOLA Bill: there is little immediate prospect of it passing the Senate.
The Safety, Rehabilitation and Compensation Legislation Amendment (Exit Arrangements) Bill 2015 (Cth) (Exit Arrangements Bill) is the least controversial of the proposed Bills insofar as it seeks to provide for the financial and other arrangements involved with the exit of a Commonwealth authority from the Comcare scheme. The Bill was introduced immediately after the ACT government publicly announced in late February 2015 that it would exit the Comcare scheme and instead look to design a new scheme to cover its public sector workforce. The ALA has supported the ACT government’s demonstration of leadership to move away from the expensive, inefficient and ineffective Comcare scheme, while advocating that any new ACT public sector compensation scheme should be one that does not cut entitlements to injured vulnerable workers, and reinstates their ability to settle claims at common law. Support for the Exit Arrangements Bill has not been forthcoming from non-government senators, on the basis that while it provides for existing entities to cover any unfunded current or prospective liabilities, the Bill does not provide any protection for workers, or incentive to employers to ensure that workers are not worse off once they exit the Comcare scheme. Unless those concerns are addressed, passage of the Exit Arrangements Bill through the Senate seems unlikely.
The Safety, Rehabilitation and Compensation Amendment (Improving the Comcare Scheme) Bill 2015 (Cth) (ITCS Bill) was introduced on 25 March 2015, serving to complete the Abbott government’s one-two punch strategy, which started with the introduction of the SRCOLA Bill 2014 one year earlier. Together, these Bills would open up the Comcare scheme to large national private sector employers, while significantly reducing the coverage and benefits for workers transferring across into the scheme, and for those already in the scheme.
Significant negative features of the ITCS Bill include:
• Substantial changes to what constitutes an ‘injury’.
o Replacing the ‘reasonable administrative action’ exclusion with references to ‘reasonable management action’. The intention and effect would be to dramatically increase the circumstances in which injured workers would be denied coverage.
o Introducing the concept of a ‘designated injury’, for which coverage is accepted only where there is a significant employment contribution. The effect would be to potentially disentitle workers with frank intervertebral disc injuries arising out of, or in the course of, employment by requiring them to meet a more onerous causal connection test.
• Substantial changes to what constitutes a ‘disease’.
o Expanding the factors to which a decision-maker can refer in order to identify whether a worker suffers a disease. The effect is likely to be that injured workers will be identified as being ill, but not as a result of work such as to constitute a disease for coverage by the Comcare scheme.
o Empowering Comcare to determine, by legislative instrument, a Compensation Standard about a specified ailment/condition, and to set out the factors that must exist before it can be said that a worker is suffering from that ailment/condition. The effect will be that Comcare scheme decision-makers will be slavishly tied to a legislative instrument where gaps/lacunae will no doubt exist, such that injured workers will be unable to refer to and rely on supportive diagnostic and causation evidence of treating medical and medico-legal practitioners.
• Amendments to the rehabilitation provisions in the current scheme, which only partially adopt recommendations made by Peter Hanks QC in his 2009 SRC Act Review Report. Cynically, the government has proposed enacting employer-friendly recommendations from the Hanks Report while ignoring the sensible counter-balancing recommendations that would protect injured workers in the Comcare scheme. If these ITCS Bill provisions are passed, benefits for injured workers are likely to be suspended as a result of their employer finding some breach of the particularly onerous responsibilities that would be imposed.
• A severe reduction in the present amount of permanent impairment and non-economic loss compensation payable for an accepted injury. The ITCS Bill proposes to change the calculation of permanent impairment compensation, and also entirely removes the ability to recover non-economic loss compensation for the pain, suffering, effects on social relationships, recreation and leisure activities, mobility and other losses resulting from an accepted permanent impairment. The majority of workers with a compensable 10 per cent degree of permanent WPI would find their entitlement reduced by about two-thirds to a single lump sum payment of $8,750.
• The complete removal of a worker’s ability to claim permanent impairment and non-economic loss compensation for an accepted psychiatric injury which arises secondary to a separate compensable injury. This would significantly erode the present rights of injured workers.
• Reduction in the amount of incapacity wage loss compensation for injured workers, such that payments are ‘stepped down’ at an earlier stage and to a lower percentage rate of a worker’s pre-injury Normal Weekly Earnings (NWE);that is, a stepped reduction from 100 per cent at 13 weeks post-injury, down to 70 per cent of NWE at 53 weeks post-injury.
• Removal of the present incentive for injured workers to return to paid suitable employment. At present, totally incapacitated workers receive 75 per cent of their NWE after 45 weeks post-injury, but can be topped up to 80-100 per cent of their NWE if they are able to return to paid employment. The ITCS Bill curiously removes this incentive at a time when the government is urging Australians to ‘work, save and invest’. An unintended consequence of the ITCS Bill would be to have injured workers remaining on long-tail incapacity payments instead of being incentivised to return to full-time wage-paying, productive tax-paying employment.
• Reduction in the amount of household and attendant care services coverage provided to injured employees, from unlimited to a period of three years only. Coverage would continue for catastrophic injuries (noting that, curiously, the Bill does not contain any definition of a catastrophic injury).
• No meaningful change to assist workers to redeem or commute future compensation entitlements. At present there is a limited ability to redeem entitlement, which is available only for weekly incapacity payments where someone is receiving $112.53 or less per week. The threshold amount for this limited redemption is to be increased to $208.91 per week but does not allow any redemption or commutation of other entitlements. Giving workers the ability to decide to commute or redeem their future entitlements would satisfy basic liberal principles of the individual and freedom of choice. It would also be likely to improve the financial health of the scheme by removing or reducing its long-term tail nature.
• No change to common law access provisions: the $110,000 cap on non-economic loss damages set in 1988 remains, with no ability for injured workers to recover future economic loss damages even where an employer or fellow employee is negligent.
WHERE TO NEXT?
To date, there has been strong opposition from non-government senators to the passage of the three above-mentioned Bills; in particular, the SRCOLA Bill 2014 and ITCS Bill 2015. Consistent advocacy by organisations such as the ALA, unions, and state and territory governments has allowed federal parliamentarians to be better informed and to consider more carefully the implications of the very significant changes proposed to the Comcare scheme.
The ongoing challenges will involve maintaining the existing broad-based push for protecting individual worker rights; in particular, increased or continued engagement with state and territory governments. It remains to be seen whether Senator Michaelia Cash and the Malcolm Turnbull government will continue to advance the Comcare scheme reform Bills. It would be disappointing if that were the case, given that more employers would push their workers into the Comcare scheme, immediately producing a reduction in coverage and benefits for the transferred workers, and those already in the scheme. There is a serious concern that authorities such as Centrelink, Medicare and the NDIS will come under increased fiscal pressure if the Bills are passed, with these agencies likely to have to shoulder the cost of assisting injured workers and their families left stranded by being forced into the Comcare scheme.
More workers would also be put at risk by allowing employers to leave well-funded and well-administered state/territory schemes to join Comcare’s poorly functioning WHS regulatory arrangements. A speedy migration of large premium-paying employers into the Comcare scheme may cause state-based premiums to soar, and will likely disadvantage some states more than others. Western Australia, Queensland and Tasmania will be hardest hit by this disadvantage, because it is often less feasible for employers in those states to operate across state boundaries. Employers unable to migrate, usually small to medium businesses, will be left to pick up the tab for the usually big businesses intent on moving to a scheme which saves them money and disadvantages the transferred workers.
The ALA remains committed to opposing the Bills, while welcoming what is hoped to be a more consultative approach from Prime Minister Turnbull and Senator Cash to solutions that assist both injured workers and employers.
Geoff Wilson is a Special Counsel with Maurice Blackburn Lawyers in Canberra. EMAIL GWilson@mauriceblackburn.com.au TWITTER @GeoffWilsonMB.
 Please see Geoff Wilson and Bill Redpath, ’10 Things We Hate about the SRC Act’, Precedent, issue 125, November/December 2014, Focus on Disability and Injury, pp36-9.