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Industrial Relations Legislation Amendment Bill 1996
Date Introduced: 11 December 1996
House: House of Representatives
Portfolio: Minister for Industrial Relations
Commencement: The day on which the Act receives the Royal Assent,
except for Item 38 of Schedule 1, which relates to the power of regulations
to incorporate any matter contained in an instrument or other writing,
which is taken to have commenced immediately after the commencement of
section 82 of the Occupational Health and Safety (Commonwealth Employment)
Act 1991.
The Bill proposes three significant changes to the operation of the Commonwealth workers' compensation and occupational health and safety (OH&S) regime.
In a press release issued on the night of the Budget, the Minister for Industrial Relations and Minister Assisting the Prime Minister for the Public Service, the Hon. Peter Reith MP, stated that the Government intended to 'review options to ensure management of stress claims is consistent with the intention of the Commonwealth Workers' Compensation legislation'.(1) Specifically, the Minister stated that the Government would be considering the operation of stress claims and inferred that the legal test which governs the relationship between injury and work would be revisited.
The current Bill embodies these proposals as well as proposing administrative amendments to the operation of the Commission and Comcare. In order to place these changes in their historical context, the following is a brief overview of the current Commonwealth workers' compensation scheme.
The legislative basis for the Commonwealth workers' compensation scheme is split between the Safety, Rehabilitation and Compensation Act 1988 (SRC Act), originally enacted as the Commonwealth Employees Rehabilitation and Compensation Act 1988 (CERC Act), and the Occupational Health and Safety (Commonwealth Employment) Act 1991 (OH&S Act).
When the CERC Act initially came into operation, it repealed the Compensation (Commonwealth Government Employees) Act 1971 (the 1971 Act) and introduced a new approach to workers' compensation focussed on rehabilitation and return to work programs. The CERC Act also introduced a new test for establishing work-related injuries. Under the 1971 Act, an employee was required to establish only that her or his employment was a contributing factor in the contraction of a disease. The Second Reading Speech for the CERC Act notes that this formula 'does not adequately reflect the rights and obligations of the Commonwealth and its employees in relation to work-related disease ... this Bill seeks to remedy that situation by requiring an employee to show that his or her employment contributed in a material degree to the contraction of the disease ... An employee will not be required to show that his or her employment caused the disease, or even that it was the most important factor in the contraction of the disease ... [but that it] was more than a mere contributing factor'.(2)
In terms of administrative structure, the CERC Act established the tripartite Commission, which consisted of a Chief Executive Officer and two part-time Commissioners, one to represent the interests of the Commonwealth and the other the interests of employees. The functions of the Commission were, among other things, to determine compensation claims, to implement policies and conduct research aimed at reducing work-related injuries. The Commission was also required to comply with ministerial directions.
In accordance with recommendations of an independent, comprehensive review of the above scheme (the Brown Review) the Industrial Relations Legislation Amendment Act (No. 3) 1991 introduced significant amendments to the CERC Act. In particular, the Act divided the Commission into its regulatory and service functions. The Commission became responsible for regulatory functions associated with the CERC Act, including determining and setting premiums, occupational health and safety and licensing of compensation self-administrators. A new statutory body, Comcare, was created and granted responsibility for relevant services functions, including administration of the workers compensation scheme under the CERC Act. In 1992, the CERC Act was also amended to rename it the Safety, Rehabilitation and Compensation Act 1988.(3)
The OH&S Act sets out the general duties of employers and employees relating to occupational health and safety (OH&S), provides for OH&S workplace arrangements, and establishes the duty of the Commission to assist in relation to inquiries, advice and investigations. The SRC Act divided these duties between the Commission and Comcare.
The CERC Act also made provisions for statutory authorities to be appointed as self-administrators of the scheme, a provision strengthened by the Commonwealth Employees' Rehabilitation and Compensation Amendment Act 1992 which permitted former Commonwealth statutory authorities to retain SRA Act coverage once partially or fully privatised. In 1996, self-insurers and self-administrators under the licensing provisions included Australia Post, Telstra Corporation, Reserve Bank and Australian Defence Industries. Self-administering bodies are required to comply with ministerial directions.
In May 1996, the Heads of Workers' Compensation Authorities released an Interim report entitled Promoting Excellence: National Consistency in Australia's Workers' Compensation ('the HWCA Report').(4) The HWCA Report is the result of a two year project undertaken in response to a direction from the Labour Ministers' Council in May 1994 by the Chief Executives of Australia's ten compensation authorities. Its aim is to stimulate discussion and recommend strategies to promote excellence in workers' compensation schemes by building on identified best practice nationally.
The HWCA Report urges a critical redefinition of the workers' compensation system throughout Australia based on reinforcing 'the primacy of the employer/employee relationship in preventing and managing workplace injuries and ensuring that injured workers are returned to meaningful work'.(5) In line with this focus, the HWCA Report recommends a range of solutions based on the coverage of the scheme, benefits and entitlements, premium setting and service delivery.
In terms of coverage, the HWCA Report states that the bounds and limits of workers' compensation should revolve around the concept of employer controllable risk and that employment must be a 'significant contributing factor' rather than a 'material factor' in the injury.(6)
The HWCA Report also recommends that special conditions should apply to both hearing claims and stress claims. However, at least in relation to the need for special conditions for stress claims, the rationale for this is not clearly spelt out, except insofar as the report states that '[s]ome injury types present special problems ... In the case of stress claims, some systems have experienced a significant number of claims where the claimed work stress resulted from disciplinary action taken in respect of the person's work performance'.(7) The Report recommends that claims not be compensable when they concern reasonable action taken in a reasonable manner by an employer relating to discipline, non-promotion, termination, matters relating to work and the workplace, determining or managing a claim.(8)
The final Report is expected to be presented to a meeting of Labour Ministers in May this year.
The Bill contains three primary groups of amendments in two Schedules. For ease of reading, an overview of the significant proposals is provided at the beginning of key provisions.
Items 1-25 propose a new structure for calculating and reviewing the contribution payable by each Department and Commonwealth authority towards the cost of the administration of the OH&S Act.
Currently, the Commission prepares an estimate of contribution for each Department and Commonwealth authority, which is forwarded to the Departmental Secretary or principal officer of the authority, who then have 14 days to object to the estimate. If an objection is lodged, the Department or authority are not required to submit any payment and the Commission must review the estimate. If after the review, the Secretary or principal officer still objects to the estimate, the Minister may be asked to review the estimate.
The Bill proposes to transfer the primary responsibility of estimates from the Commission to Comcare. Comcare would then also be responsible for the initial review if an objection is lodged and the Commission would be the final avenue of review. The Minister would no longer be involved in the review process. The rationale behind this proposal is administrative: currently, the Commission only sits four times a year and as it does not have the time to initiate estimate proposals itself, it receives from Comcare detailed proposals in relation to estimates. Therefore, it is considered that the proposed amendments codify what is an existing situation. The Commission retains final control over the review process, and is empowered to issue directions to Comcare in relation to determinations. Finally, the Bill proposes that the current reference to 'estimate' be replaced by the word 'determination'.
Items 1-2 require that Comcare determine the amount of contribution of each Department or Commonwealth authority in a financial year in respect of the costs incurred by the Commission and Comcare in the administration of the OH&S Act.
Items 9, 11, 12, 13 15 are consequential amendments in relation to Items 1 and 2.
Item 14 proposes that Comcare is to have regard to guidelines issued by the Commission in relation to determination of contributions. The Commission is empowered to issue such guidelines by virtue of section 89C of the SRC Act.
Items 3, 4, 7, 8, 16, 20 variously propose amendment of reference to 'estimate' to 'determination'.
Items 5-6 propose that determinations are to be in such a form considered appropriate by Comcare or in accordance with a direction from the Commission. Currently, estimates are in a form considered appropriate by the Commission or in accordance with a direction from the Minister.
Item 17 has two parts. Proposed section 67DA reflects the OH&S Act and is necessary as the Bill collapses two sections of that Act. Item 17 also implements a new requirement that a Department of authority must pay its contribution within the specified period. This is significantly different from the current structure, in which payment is withheld pending a review. The proposed amendment reflects the change in terminology from 'estimate' to 'determination'.
Item 18 repeals the current mechanism for the review of an estimate of a contribution by the Commission and replaces it with a review by Comcare. In general, this reflects the current structure — arequest for review of a determination must be submitted to Comcare by the Commonwealth or authority within 14 days of receiving a determination, and Comcare must review as soon as practicable, and provide the relevant body with a written notice of its decision. However, the amendment differs in two respects from the current procedure. Firstly, Comcare is empowered to not conduct a review of a determination if it is satisfied that the notice of objection is trivial, vexatious, misconceived or lacking in substance. Secondly, as noted above, the proposal restates that the Department or authority is required to pay the specified determination regardless of the review process. (Proposed section 67H provides a structure for refunding contributions if necessary.)
Items 21 and 23 propose to repeal the current right to request the Minister to review a Commission estimate and replace it with the right to request the Commission to review a Comcare determination, after Comcare's initial review has taken place in accordance with Item 18.
Item 24 repeals the sections which currently relate to the confirmation of estimates (these have been collapsed into proposed subsections 67E(3) and 67F(3)), payment of contribution (as discussed in items 17 and 18) and penalty for late payment. The item proposes to implement three new sections.
Items 26 — Currently the Commission is required to provide advice on OH&S matters either at its own initiative or on request. This item proposes that the Commission no longer be required to provide advice on request, but can initiate provision of advice.
Item 28 is the converse of Item 26 in that it empowers Comcare to advise on OH&S matters either on request or at its own initiative.
Items 29-35 are consequential amendments following on from Items 26 and 28.
Item 37 significantly increases the penalties for offences against regulations made under the Act. Currently, penalties do not exceed $1,000. The proposed amendments increase the penalties to maximum $5,000 for an individual and $25,000 for a corporations. The Explanatory Memorandum notes that this increase reflects the serious nature of some offences against the OH&S regulations.(9)
Item 38 relates to the making of regulations and states that, among other things, the regulations may incorporate a matter contained in any instrument or other writing, whether or not the instrument or other writing existed at the time the regulations are made. Section 49A of the Acts Interpretation Act 1901 states that unless the contrary intention appears in an Act, any instrument or writing incorporated in regulations must exist at the time the regulations are made. Item 38 specifically ousts the applicability of section 49A of that Act, which presumably is aimed at an explicit contrary intention.
The rationale behind the rule in section 49A is to ensure Parliamentary control over the effect of regulations. The Explanatory Memorandum notes that 'the amendment would avoid the need to amend the regulations whenever a standard or code of practice which has been adopted is updated or amended. The amendment would apply retrospectively to those regulations which have already been made.'(10)
This Part implements the proposed changes to the legal test establishing the link between an injury or disease and employment and the test for stress related claims.
Firstly, this Part proposes to amend the test of 'disease' so that instead of employment contributing to the disease in a 'material degree' before compensation could be paid, employment must have contributed to the disease in a 'significant degree', where significant means substantially more than a material degree. In the Second Reading Speech the Minister states that this amendment is necessary due to judicial interpretation of the phrase 'material degree' as meaning pertinent or likely to influence, a situation which has 'progressively extended the liability of employees to cover a growing number of claims for conditions where work is only a minor contributing factor. This distorts the fundamental objective of workers' compensation which is to provide for losses stemming from occupational injury.'(11) Therefore, the Minister notes that the amendment merely reactivates the original objective of the CERC Act is in accordance with the HWCA Report.
Secondly, the Second Reading Speech notes that the Bill 'seeks to prevent compensation claims being used to obstruct legitimate management action.'(12) This amendment is primarily aimed a stress related claims, which the Minister states are weighing so heavily on the workers compensation scheme in general as to have 'grave implications for the future sustainability of the scheme'.(13) The Minister notes that the amendment incorporates a dual test of reasonableness — the action must not only be a reasonable type of managerial or administrative action, it must also have been carried out in a reasonable manner.
Items 1 and 2 repeal the definition of disease and injuryin subsection 4(1) of the SRC Act. The current definitions state:
"disease" means;
(a) any ailment suffered by an employee; or
(b) the aggravation of any such ailment;
being an ailment or an aggravation that was contributed to in a material degree by the employee's employment by the Commonwealth or a licensed corporation.
"injury" means:
(a) a disease suffered by an employee; or
(b) an injury (other than a disease) suffered by an employee, being a physical or mental injury arising out of, or in the course of, the employee's employment; or
(c) an aggravation of a physical or mental injury (other than a disease) suffered by an employee (whether or not that injury arose out of, or in the course of, the employee's employment), being an aggravation that arose out of, or in the course of, that employment;
but does not include any such disease, injury or aggravation suffered by an employee as a result of reasonable disciplinary action taken against the employee or failure by the employee to obtain a promotion, transfer or benefit in connection with his or her employment.
Item 3 inserts a new definition of disease and injury. These proposals are extremely complex, as there are layers of different tests within proposed subsections and the definitions of 'disease' and 'injury' occur in different places. The following description only purports to set out the machinery of these sections.
In relation to 'disease' the new definition amends the legal test establishing the link between the disease and the employment from a 'material degree' to a 'significant degree', which is legislated to mean substantially more than a 'material degree'. Further the new definition sets out a non-exhaustive list of matters to be taken into account when determining whether employment contributed to a significant degree, including the duration and nature of the employment, an employee's medical predisposition and non-work related activities of an employee.
In relation to 'injury', the primary definition set out above in paragraphs (a), (b) and (c) is retained and references to employment contributing to the injury in a 'significant degree' are not proposed, subject to the comments below.
However, there are detailed amendments in relation to the definition of 'disease' and 'injury' which arise due to managerial or administrative action.
Proposed subsection 5B(2) provides that even if employment contributed in a significant degree to a 'disease' (as defined under 'disease' but referred to under the definition of 'injury') by reason solely or predominantly of reasonable managerial or administrative action, taken in a reasonable manner, or the expectation by the employee that a particular reasonable managerial or administrative action will be taken, the disease is not taken to be an injury for the purposes of compensation.
Proposed subsection 5B(3) proposes a similar regime in relation to an 'injury' which is not a disease. It states that even if an injury or the aggravation of an injury arose out of or in the course of employment, if that injury was by reason solely or predominantly of reasonable managerial or administrative action taken in a reasonable manner or the expectation of such action the injury or aggravation is not taken to be an injury for the purposes of compensation.
Proposed subsection 5B(4) elaborates on the meaning of reasonable managerial or administrative action, which includes reasonable action in relation to reclassification, transfer, demotion, redeployment, termination and promotion.
Proposed subsection 5B(6) notes that the above proposals do not affect an employee's right to compensation for a physical injury or an injury which resulted from a physical factor in the course of employment. This proposal indicates that distinction being made in the Bill between mental and physical injury.
Item 6 proposes that the proposed amendments have effect only in regard to a claim made after the commencement of the part.
This Part proposes amendments to the structure for determining premiums payable by each Department and Commonwealth authority under the SRC Act. The proposals correspond to those changes proposed in relation to determinations of payment set out in Schedule 1.
Currently, the Commission prepares an estimate for each Department or Commonwealth authority in relation to the relevant premium to be paid. The estimate is given to the Departmental Secretary or the principal officer of the authority, who has 14 days to object in writing to the estimate. If an objection is lodged, the Commission reviews the estimate, and if the relevant agency is not satisfied with the reviewed estimate a request can be made to the Minister for a final review.
As with the scheme proposed for contributions, the Bill proposes that primary responsibility for the determination of premiums be transferred to Comcare. Comcare would also be responsible for the initial review, and the Commission would be the final avenue of review. The Minister would no longer be involved in the review process. The rationale behind this proposal is administrative: currently, the Commission only sits four times a year and as it does not have the time to initiate estimate proposals itself, it receives from Comcare detailed proposals in relation to premium estimates. Therefore, it is considered that the proposed amendments codify what is an existing situation. The Commission retains final control over the review process, and is empowered to issue directions to Comcare in relation methods of determination. Finally, the Bill proposes that the all references to 'estimate' be replaced by references to a 'determination'.
Item 7 deletes a reference to the Minister and replaces it with the Commission so that the Commission who can issue directions to Comcare in relation to determination of premiums.
Item 8 proposes to insert that it is the function of Comcare to determine the amount of premiums of Departments and Commonwealth authorities.
Items 9, 11, 24, 28 relate to the replacement of the word 'determination' with the word 'estimate'.
Items 9, 12, 14, 17, 20, 22, 23 variously repeal references to the Commission and replace them with Comcare to reflect the proposed new function of Comcare as set out in Item 8.
Item 13 proposes that in determining a premium, Comcare must have regard to any guidelines issued by the Commission. The Commission is empowered to issue such guidelines by virtue of section 89C of the SRC Act.
Item 25 proposes the insertion of two new sections. Proposed section 96CA sets out the obligations of Comcare in regard to issuing a notice of determination to a Departmental Secretary or the principal officer of a Commonwealth Authority. Proposed section 96CB sets out the structure for the payment of a premium. A Department or authority has 14 days on receipt of the determination notice to pay the premium and, as in relation to the payment of a determination of contribution, there is no provision for payment to be withheld during a review.
Item 26 repeals the current mechanism for the review of an estimate of a premium by the Commission and replaces it with a review by Comcare. In general, this reflects the current structure — arequest for review of a determination must be submitted to Comcare by the Commonwealth or authority within 14 days of receiving a determination, and Comcare must review as soon as practicable, and provide the relevant body with a written notice of its decision. The two different features of this proposal are firstly that Comcare has the power to not conduct a review if it consider the request to be trivial, vexatious, misconceived or lacking in substance and secondly that it is stated that a determination must be paid regardless of a request for review. (A mechanism to refund premiums following a review is provided for in Item 32). This structure reflects that provided for in Item 18 in relation to contributions.
Item 32 repeals the current sections which relate to the confirmation of estimates (this has been collapsed by the new subsection proposed in Item 31), the payment of premiums (this has been covered in Item 25) and the variation of estimates (which is reproduced in proposed section 96H.) Item 32 proposes three new sections.
Item 36 relates to the delegation of powers and provides that
Both these provisions are contrary to paragraph 34AB(b) of the Acts Interpretation Act 1901, which provides that where an Act confers power on a person or body to delegate a function or power, the powers that may be delegated do not include that power to delegate (delegatus non potest delegare). The rationale for this rule is to ensure that the legislature retains control in determining the operation of decision making structures for Commonwealth bodies. This rule, however, can be explicitly excluded by legislation, which is done by Item 36.
Items 37 and 38 propose amendments which reflect the new role of Comcare in relation to the licensing of authorities for the purpose of transferring to them certain functions relating to determining and settling compensation claims in relation to their employees.
Item 40 relates to an existing administrative arrangement between the Northern Territory Government and Comcare, whereby for claims against the Northern Territory Government between 1 July 1978 and 1 January 1987, it was agreed that Comcare would administer and pay any accepted claims and the Northern Territory Government would reimburse Comcare for any compensation payment and administrative cost. This item formalises this arrangement.
Item 42 relates to special transitional provisions for former employees and proposes to ensure that the amount in compensation received by a former employee in certain circumstances does not fall below 70% of the employees normal weekly earnings.
The issues raised in the Bill have attracted comment, particularly in relation to the proposed amendments concerning work-related stress leave. In addition to the comments already noted from the HWCA Report, the following indicates different aspects of the debate.
In the Second Reading Speech the Minister states the Bill will ensure 'a fair, efficient and affordable workers' compensation system which balances and supports the rights and responsibilities of Commonwealth employers and their employees, and is sustainable for the future without placing an unfair burden on taxpayers.'(14)
The Minister's Budget press release states that '[s]tress claims represent 13% of all claims lodged, but 27% of total workers compensation costs. The average cost of a stress claim is $32,000 compared with the average cost of other claims of $8,800. The average length of absence from work associated with a stress claim is approximately 11 weeks, compared with approximately 3.5 weeks for all other claims. The cost to the Commonwealth of stress claims in 1994-5 financial year was $37 million.' The press release states that the proposals in relation to stress proposals should not be seen 'an attempt to generate savings but rather to establish management/employee relations on a sounder footing.'(15) For example, extremely high workloads are given as an example of an unreasonable management action. On the other hand, employer action relating to the restructure and reorganisation of the Australian Public Service would generally constitute reasonable managerial or administrative action.
Comcare Australia's Annual Report for 1995-1996 indicates an overall significant decrease for workbased stress claims both submitted and accepted by Comcare between February 1995 and June 1996. For example, in the year 1994-1995, the percentage of stress claims accepted as a percentage of all claims accepted by Comcare was 9.6%. In the years 1995-1996, stress claims accepted by Comcare as a percentage of all claims accepted by Comcare was only 6.9%.(16) As noted by the Minister, expenditure on stress claims for 1995-1996 is approximately $37 million. By far the greatest amount of accepted claims were those relating to strains excluding back strains (around 29% in 1995-1996) and claims related to back problems (around 17% in 1995-1996).(17) The Report suggests that one factor for the decrease in lodged and accepted stress claims is the integrated approach to workplace stress undertaken by the Stress Claims Management Centre, established in January and servicing the ACT and NSW areas. The Centre's approach is one of a close liaison between claims managers, employers, employees and practitioners involved.
Apropos of the Minister's Budget press release, the Shadow Minister for Industrial Relations, the Hon. Bob McMullan MP, issued a press release stating that 'at a time when the Government is slashing public service jobs and services, and placing public servants under greater stress, it intends to legislate "stress" claims out of existence.'(18) The Shadow Minister also noted that such changes were in the context of Budget cuts of $6 million to the National Occupational Health and Safety Commission and Workcover and the imposition on Comcare of the three per cent efficiency dividend $800,000.
The Community and Public Sector Union (CPSU) has stated that the proposed amendments to the test for compensation and stress related claims pre-empts the final HWCA Report and that the amendments run counter to the existing Australian Public Service enterprise agreement in which it had been agreed that parties would work to reduce the number of stress related claims without legislative change. The CPSU has also indicated concern that restricting access to work related claims would force people to use other forms of paid leave to ameliorate stress, a move seen as costly and detrimental to public sector efficiency.(19)
In a 1995 speech, the former Chief Executive Officer of Comcare Australia, Dr Peter Shergold, outlined some of the issues related to work based stress, an issue he named as complex and prone to ill-informed prejudice and simplistic solutions.(20) Sherwood states that research undertaken by Comcare reveals that in the vast majority of instances workplace stress is a response to work processes, workplace organisation and management practices in an environment of considerable change. Similarly, Elizabeth McDowall the Manager of Policy in the Victorian Workcover Authority, has stated that occupational stress is associated with organisation change, downsizing, redeployment, redundancy in an environment where 'the workplace is continuously pushed to increase productivity, reduce costs and produce more with less'.(21) McDowall notes that workplace stress is also a major contributor to other forms of ill health related to workplace absence, such as migraine, back pain and insomnia, but which are often not recognised as being a result of stress.
Both Shergold and McDowall note that stress claims are most common in community service industries (education, hospitals, counselling services, prison and police services) and Shergold states that recent research by Comcare indicates that women are over-represented as a proportion of those lodging claims for occupational stress. Shergold emphasises the need for attitudinal change to combat the incidence of workplace stress, including promoting workplace health through staff involvement in decision making, flexible work arrangements and addressing vocational discontent.
Krysti Guest
6 February 1997
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ISSN 1323-9031
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Last updated: 10 April 1997