What they said ...
`No one should have anything to fear by it. It will be a good system' Victorian Premier, Jeff Kennett, commenting on the amendments to the WorkCover system
`As if [severely injured workers] haven't already lost enough, the government now intends slashing their benefits by 15 per cent' Victorian Opposition leader, John Brumby
In November, 1997, the Victorian Government put before State Parliament its most recent changes to WorkCover, the system which provides compensation for injured workers. The most controversial aspects of the new provisions were an altered schedule of impairments and payment rates and the decision to deny workers the right to sue employers for negligence where a negotiated settlement was disputed. This is referred to as the loss of the workers' access to common law.
Despite a major campaign conducted by both the union movement and the Law Institute, the amendments to WorkCover have been put into effect. The debate surrounding them continues, however, and these recent amendments to WorkCover are likely to be debated again in the lead-up to the next State election.
Background
In 1985 the Cain Labor Government nationalised workers' compensation in Victoria, so that a state agency, not private insurance companies, was responsible for workers' injury compensation.
The new scheme was called WorkCare and though it encouraged negotiated settlements, it retained workers' right to sue employers for negligence. By 1992 payments in this scheme had blown out dramatically and it was bankrupt with a $2 billion deficit..
When the Kennett Government was elected at the end of 1992 it revamped the scheme, renaming it WorkCover. One of the changes that was made was that the right to sue or make common-law claims was limited to those with 30 per cent or more impairment.
The Victorian Government has now introduced a series of further changes to the WorkCover system.
Some of the key features of the new WorkCover Scheme in Victoria are as follows.
Under common law, workers can receive up to $1.1 million compensation if they prove employer negligence. Under the new scheme the worker's common law right to sue an employer for negligence is removed altogether and a new no fault system is introduced
A new schedule or classification system for workers' injuries and impairments has been devised as a means of determining appropriate levels of compensation.
A permanent injury payment of up to $300,000 is available for people with more than 80 per cent impairment. People with lesser impairment can claim up to $287, 500, while those with less than 10 per cent injury cannot lodge a claim.
Workers injured before this amendment to the WorkCover legislation have three years in which to make common law claims.
Employers' contributions to the scheme are to increase from 1.8 per cent to 1.9 per cent of payroll from July, 1998.
Fines for employers breaching safety laws have been increased to $250,000. This is a fivefold increase over the previous maximum fine of $50,000. There are also increased penalties for employers who fail to comply with occupational rehabilitation, return to work plans and risk management requirements.
There are a number of Internet sources dealing with this issue. One of the most useful would appear to be the Victorian WorkCover Authority site.
From this site it is possible to access information detailing the history of workers' compensation in Victoria. It is also possible to access WorkCover's most recent annual report for the year 1996-7. This is a particularly useful document containing a great deal of information. It has been used by both supporters and opponents of the amendments to the WorkCover scheme to defend their positions.
This site also contains WorkCover's corporate plan. This document, released in August, 1997, is 16 pages long. Though substantial reading, it details both what are perceived as the achievements of the scheme to date and what its future directions are intended to be.
Arguments in favour of the WorkCover amendments
Supporters of the WorkCover amendments argue they are not intended to disadvantage injured workers. Rather, they claim, one of the primary aims of the amendments is to keep the system viable by reducing rising legal costs.
The Victorian Finance Minister, Roger Hallam, has claimed, `WorkCover costs have grown over the past two years, with compensation payments now exceeding the $900 million annual income derived from employer premiums.'
Mr Hallam has further claimed, `The most dramatic growth in costs relates to common law. WorkCover common law payments have spiralled 780 per cent in the past year.'
According to this line of argument, one of the principal weaknesses in the unamended WorkCover system was that it allowed for common law claims and that the cost of the resulting litigation was insupportable.
The WorkCover Authority's annual report for 1996-7 indicates that lawyers received $73 million directly.
In addition, the WorkCover Authority's director of information, Mrs Eileen McMahon, has claimed that lawyers increased the costs to the system by a further $24 million through the cost of the medical reports required to substantiate legal claims.
It has been claimed that a no fault system which removed the common law right to sue would save some $100 million a year in fees that went either directly to lawyers or were associated with establishing a legal case.
It has further been claimed that if workers compensation were removed from the courts, injured workers would no longer have to pay their lawyers out of whatever sum they won as their settlement.
WorkCover surveyed those who received compensation in the 1996-7 year and determined that they paid $23 million as direct fees to lawyers. This figure represents 7.2 per cent of the $317 million paid in lump sums last year.
Another argument in favour of reforming WorkCover is that a no fault system would be more efficient and more effective. There are a number of arguments offered in support of this claim.
Firstly it is claimed that common law claims require the injured worker to prove negligence on the part of his or her employer. It is argued that establishing negligence in law is often extremely time-consuming. Mike Nahan, the executive director of the Institute of Public Affairs, has stated, `Common-law claims are slow, taking up to 10 years for a decision to be made.'
It has been argued that such delays in settling compensation can be damaging for injured workers, making it more difficult for them to re-establish their lives.
Secondly it has been suggested that there is a significant element of luck in common law claims, as claimants' likelihood of success depends in large measure on the skill of their lawyers. The common law system has been described unfavourably as a `lottery'. It has been noted for example, that claimants who fail to prove negligence lose out altogether under common law.
Relatedly it has been suggested that settlements are not always equitable, with some claimants receiving higher payments than others for lesser injuries. This point has been made by the Victorian Finance Minister, Mr Roger Hallam. Mr Hallam has claimed, `Workers with similar injuries receive vastly different amounts under common law.'
It has also been claimed that common law cases are a disincentive to injured workers to return to work (where they may fear either victimisation or the trivialisation of their injuries) and to employers to re-employ them (for fear of further negligence claims).
With regard to other criticisms of the new system, defenders of the amendments to WorkCover have claimed that the new classification system for different types of injury or impairment is appropriate and equitable.
They have also argued that the proposed form of payment, where there is an initial limited lump sum and then on-going payments to injured workers to compensate them for reduced earning capacity may result in larger payments being received over time. It has also been argued that this arrangement frees the injured worker from the worry and uncertainty of having to invest a large, single lump sum payment to extend its value over time.
Finally it has been argued that care has been taken to ensure that no one currently receiving payments under the current system will be disadvantaged under the new system. All current payments are to be maintained and anyone who was injured prior to the amendments taking effect will have up to three years to lodge their common law claim.
Arguments against the WorkCover amendments
The principal argument offered against the WorkCover amendments is that they are designed to insure that injured workers receive less.
Referring firstly to the new schedule of injuries and impairments, critics of the new system note that those judged to be less than 10 per cent impaired are now eligible for no compensation at all.
A number of union spokespeople have suggested that this provision will deny compensation to between 5,000 and 7,000 injured workers annually. (A number of critics have noted that the 10 per cent cut off point means that workers who, for example, lose fingers in workplace accidents receive no compensation.)
It is also noted that under the old scheme the maximum on-going payment that could be received by severely injured workers was 90 per cent of their previous weekly earnings. Under the new scheme the maximum on-going payment that will be available will be 75 per cent of previous weekly earnings.
The Victorian opposition leader, John Brumby, has criticised these new arrangements, claiming, `As if [severely injured workers] haven't already lost enough, the government now intends slashing their benefits by 15 per cent.'
There are also criticisms of the injury and impairment schedule itself. According to this line of argument, the new schedule minimizes the effect of many forms of injury and compensates them inadequately.
It is noted, for example that the maximum lump sum pay-out available under the new schedule is $300,000 for those judged to be 80 per cent or more disabled. Critics maintain that this is inappropriate on two levels.
Firstly, the maximum payout possible under common law is $1.1 million. The maximum payout under the new schedule is less than a third of this. It is claimed that for the permanently and severely disabled a $300,000 lump sum payment is inadequate.
Secondly, it is claimed that under the new system for categorising injuries, only the most grossly disabled workers would qualify for the top payment of $300,000. Jack Rush, QC, and member of the Victorian Bar Council, has noted that `Paraplegia, for example, rates only 75 per cent.' Critics maintain that to judge someone with paraplegia only 75 per cent disabled does not correspond with community standards.
It has been suggested that the total effect of the new arrangements will be that maim and impairment payments will decrease by 65 per cent, from $120 million to $42 million.
Cumpston Sargeant, a firm of actuaries acting for the Law Institute, has estimated that the number of workers receiving payments may drop from 9398 in 1995-6 to 2068 a year.
The new scheme has also been criticised because it completely removes an injured worker's right to sue under common law. This is criticised for two reasons.
The first set of criticisms suggest that by removing the workers' right to take action under common law, the Victorian Government is reducing their access to appropriate compensation pay-outs.
The second set of criticisms relate to the injured worker's rights before the law. It is claimed that the worker should be able to sue for negligence just as any other member of the community is able to do. It is claimed that removing the workers' ability to sue is an attack on their rights as citizens.
Jack Rush has claimed, `The proposed abolition of common-law rights is a step that strikes at the heart of citizens' rights and obligations.'
It has also been claimed that if workers are no longer able to sue their employers for negligence, there will be less incentive for employers to maintain a safe workplace and to encourage safe work practices.
It has also been noted that the maximum penalty or fine that can be imposed on negligent employers under the new Victorian scheme is $250,000, whereas the maximum fine in NSW is $825,000.
Critics have maintained that the Victorian Government is less concerned than it should be to prosecute and punish employers who put their employees at risk. Mr Brumby has claimed, `Unfortunately the government's record on workplace safety is already one of failure ... nearly 4000 workers were seriously injured in 1996-7, with body impairment of 30 per cent or more.
But the Government prosecuted just 76 employers that year while NSW prosecuted 437.'
Finally, it has been maintained that the budget problems that the WorkCover Authority has suffered are the result of bureaucratic growth and poor administration.
Mr Brumby has claimed that the 1996-7 annual report of the WorkCover Authority `shows a blowout of nearly $30 million in administrative and senior staff costs and total claims expenses'.
Mr Brumby has further noted, `[The report] shows a staggering 74 per cent increase in senior executive salaries and a huge increase of 66 per cent in the number of senior executives.'
Further implications
It seems highly unlikely that the Kennett Government will back away from its most recent changes to WorkCover. The Victorian Government is currently congratulating itself over the changes after a recent report form the WorkCover Authority indicated that the state workers' compensation fund had gone $292 million into the red in the second half of 1997. A blowout in common law liabilities was blamed.
However, proposals to privatise workers' compensation have been rejected by both the Premier and a majority of the Government.
Under a new leader less publicly committed to the current amendments, some change may occur, particularly in the lead-up to an election at which the current government appeared threatened.
The new WorkCover provisions appear an electoral liability. Surveys have indicated that a significant number of Victorians are opposed to the removal of common law access.
Both the Law Institute and the union movement are likely to campaign strongly against the most recent WorkCover changes at the next State election. The unions have pledged to target 10 marginal seats in the next election.
It seems equally likely that at least in the short-term the labor Party in Victoria will continue to oppose the amendments made to the WorkCover system.
Once in government, however, it is unlikely that a Labor government would re-instate the full WorkCare system which operated prior to the Kennett Government's election.
This system was operating at a significant loss. It seems more probable that a Labor government would re-instate a version of WorkCover as it operated prior to the most recent amendments. In addition it seems likely that a Labor Government would demand an overhaul of the WorkCover Authority's administration so that less was being spent paying senior executives.
Though a Labor Government would be highly likely to re-introduce access to common law for injured workers, there may also be some further limitations placed on this access to reign in the growth in claims that appeared to be a trend prior to the recent amendments. Another suggestion that has been made is capping legal fees. This, however, would also prove highly contentious and would provoke the opposition of the powerful law lobby.
Sources The Age
4/9/97 page 4 news item by Sushila Das, `Lawyers begin fight against proposed WorkCover changes'
8/9/97 page 8 news item by Clare Kermond, `Confidential report doubts WorkCover savings proposals'
7/10/97 page 2 news item by Paul Conroy, `Police join workplace injury campaign'
7/10/97 page 2 news item by Paul Conroy, `WorkCover leaving some out in the cold'
9/10/97 page 14 editorial, `Injuring workers' rights'
29/10/97 page 15 comment by Roger Hallam, `Common law is not the perfect panacea'
29/10/97 page 15 comment by Jack Rush, `WorkCover plan a cavalier blow to state's workers'
1/11/97 page 3 (News Extra section) analysis by Tony Parkinson, `Workers' revolt'
7/11/97 page 5 news item by Gareth Boreham, `Nationals voted against WorkCover changes'
11/11/97 page 4 news item by Clare Kermond and Ewin Hannan, `Kennett to re-instate concession to unions'
13/11/97 page 1 news item by Ewin Hannan and Clare Kermond, `Rallies fail to stop work bill'
29/11/97 page 18 analysis by David Elias, `Parties dig trenches in battle for WorkCover'
2/12/97 page 1 news item by Gareth Boreham, `New law strips working drivers of the right to sue'
11/12/97 page 15 comment by Roger Hallam, `Changes aim to ease the pain for injured workers'
18/3/98 page 4 news item by Clare Miller, `Changes to WorkCover hailed'
The Australian
29/10/97 page 12 editorial, `Compensation: a common law test'
13/11/97 page 4 news item by Rachel Hawes, `Changes but no surrender'
12/2/98 page 2 news item by Michael Magazanik, `Kennett cools on privatised WorkCover'
The Herald Sun
9/10/97 page 9 news item by Simon Pristel, `Link strike over work compo cuts'
9/10/97 page 9 news item by Simon Pristel, `He'll be worse off'
11/10/97 page 22 editorial, `Adding injury to injury'
29/10/97 page 18 editorial, `Common sense and compo'
29/10/97 page 19 comment by Mike Nahan, `The fault with compo'
29/10/97 page 19 comment by John Brumby, `Plenty of cash for fat cats'
2/11/97 page 22 news item by Sue Hewitt, `Court threat to workers'
2/11/97 page 11 news item by Sue Hewitt, `Nightmare end to a dream job'
2/11/97 page 23 news item by Sue Hewitt, `Crushed worker fears for others'
13/11/97 page 9 news item by Dimitri Serghis and Karen Collier, `Workers promise election compo fight'
Internet
* It appears that the English Board of Studies may be refining its guidelines on the use of Internet sources for CAT I.
* Currently it is probably preferable for students to restrict their use of Internet sources to Part 2 of CAT I.
Please consult your teacher for direction on this matter
There are a number of Internet sources dealing with this issue. The most useful would appear to be the Victorian WorkCover Authority site. This can be found at http://www.workcover.vic.gov.au/
From this site it is possible to access information detailing the history of workers' compensation in Victoria. It is also possible to access WorkCover's most recent annual report for the year 1996-7. This is a particularly useful document containing a great deal of information. It has been used by both supporters and opponents of the amendments to the WorkCover scheme to defend their positions. This site also contains WorkCover's corporate plan. This document, released in August, 1997, is 16 pages long. Though substantial reading, it details both what are perceived as the achievements of the scheme to date and what its future directions are intended to be.
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