Chapter 2 - Government Senators' Report
2.1
The original purpose of the Safety, Rehabilitation and Compensation Act
1988 (the Act) was to establish a scheme of compensation and rehabilitation for
persons who were injured in the course of their employment by the Commonwealth
(the scheme). The scheme was intended to minimise the human and financial cost
of work-caused injury and disease, while simultaneously providing adequate
compensation and support for long-term incapacitated employees.[1]
2.2
Recently, however, the legislative objectives of the Act have been
increasingly hindered by what can now be regarded as outmoded applications of
the scheme and its excessively generous terms. These problems have arisen
primarily as a result of the courts’ interpretation of two key terms within the
Act: 'disease' and 'injury'. The broad reading of the Act by the courts has
resulted in Commonwealth employees receiving compensation benefits anomalously
out of line with employees in the mainstream workforce.
'Disease' and 'injury'
2.3
The current definition of 'disease' requires an employee's work to have
contributed in a 'material degree' to the contraction or aggravation of a
compensable disease. 'Material degree' has been broadly interpreted so that the
cause of the compensable injury, rather than the extent of the contribution, has
been over-emphasised. As a result, employers are being held liable for medical
conditions that are minimally work related.
2.4
The current definition of 'injury' is similarly problematic. It excludes
medical conditions suffered by an employee as a result of ‘reasonable
disciplinary action’ or failure to obtain a promotion, transfer or benefit in
connection with the employee's work. This exclusion is being interpreted very
narrowly and employees are thus encouraged to lodge compensation claims for
injuries which are not specifically excluded by the Act and which might have
resulted from what can loosely be described as legitimate management action. These
provisions are in some instances exploited by employees and they expose employers
to liabilities in excess of what is contemplated by the Act.
2.5
The committee cites the instance of the case Canute v
Commonwealth of Australia [2005] FCA 299 where the Federal
Court defined ‘material degree’ to mean ‘a close connection between employment
and the disease’. Notwithstanding that this appears to uphold the legislative
intention, the committee agrees that amending the Act would be preferable for
the avoidance of all doubt.
The new definitions
2.6
The bill amends 'disease' to mean an injury which was caused or
aggravated by work to a significant degree. 'Significant degree' is
defined as 'a degree that is substantially more than material' and specifies a
number of factors which may be taken into consideration in making the necessary
determination.[2]
2.7
In submissions to the inquiry, the use of subjective terms has been
widely criticised. However, the words, ‘significant’, ‘material’ and even ‘reasonable’
have well known legal meaning. It is unlikely that a great deal of time and
money will be spent debating or disputing the meaning of the new definitions.[3]
This should ensure that fewer claims are lodged or disputed and result in
reduced administrative and claims costs.
2.8
The committee notes that irrespective of interpretive issues, there is
support for the reinvigorated approach. Telstra agreed that a clear nexus
between disease and employment was an appropriate minimum benchmark.[4]
2.9
The approach adopted by the bill is not novel, being consistent with
eligibility requirements in the majority of state workers compensation schemes (excepting
the Northern Territory) and follows a recommendation in the Productivity
Commission's 2004 report on National Workers' Compensation and Occupational
Health and Safety Frameworks (the Productivity Commission Report).[5]
2.10
The meaning of 'injury' is also amended by the bill with the extension
of the exclusionary provision. Any medical condition suffered by an employee as
a result of a ‘reasonable management action’ will no longer fall within the
ambit of the scheme. This is consistent with the broader exclusion for
'management actions taken reasonably' which are a feature of legislation in most
jurisdictions across the country. The provision is accompanied by a broad but non-exhaustive
list of administrative actions which will comprise 'reasonable management actions'.
This amendment will prevent abuse of the scheme by employees dissatisfied with
management decisions, and help to restrain administrative and claims costs. The
provision is also designed to be flexible.
2.11
Australian air Express submitted:
Supervisors and Managers have a difficult job to do in an ever
changing environment and to be held to ransom by employees, who have a contrary
view to the employer, makes it very difficult for employers to carry on their
business when workers can simply obtain a medical certificate and then lodge a
claim for compensation.[6]
2.12
The re-defined key terms do not effect any fundamental changes to the Act;
they clarify and reinstate the original objectives of the Act, which appear to
have been distorted over time.
Maintaining viability
2.13
The Act must strike a balance in the achievement of its objectives. The
misinterpretation of legislative intention has created a current imbalance and
the scheme has consequently come under increasing financial pressure. Premiums
as compared nationally have been increasing by not insignificant margins. Over
the past three years the premium rate has risen by 0.64 per cent, which is more
significant than might appear. Disputation rates within the scheme are quite
high at 25.1 per cent.[7]
2.14
The opposition has made much of the argument that the costs factor does
not justify the amendments which are proposed in the bill. However, payments to
claimants, medical and rehabilitation costs are not one off payments; they often
continue over a considerable period, at a time when medical related expenses
are rising faster than inflation. Taken out of isolation the current financial
indicators paint a grim picture for the future of the scheme.
2.15
Government senators believe that the bill will bolster the viability of
the scheme and ensure that genuine claimants to entitlements will be able to avail
themselves of the statutory protections. Government senators reject the claim
that employees will be unfairly disadvantaged by the provisions of the bill.
Excluding travel to and from work
2.16
A number of submissions opposing the bill have identified the exclusion
of claims resulting from injuries incurred during journeys to work. An injury
to an employee is currently treated as having arisen out of, or in the course
of, employment if it is sustained while the employee was travelling between his
or her place of residence and work place. These injuries may result in
considerable time off work and are proportionately costlier than other types of
injury.[8]
Half the states and territories cover journey claims within their workers
compensation schemes even though there is no obligation to provide such
coverage.[9]
2.17
The Productivity Commission Report acknowledged that journeys to and
from work are a necessary corollary of employment but there are various aspects
of such journeys over which an employer exercises no control.[10]
The Productivity Commission recommended that coverage for journeys to and from
work not be provided within workers compensation schemes.[11]
The bill adopts the recommendation of the Productivity Commission but continues
to provide cover for travel undertaken for the purpose of employment and at the
direction or request of an employer.
2.18
The exclusion of journey claims does not mean that employees will have
no remedy if they are injured while travelling to and from work.[12]
Compulsory third party schemes exist precisely for this reason and it would be
a cost-shifting exercise from the states and territories to the Commonwealth if
employers were required to shoulder this responsibility.[13]
There is also the option of a common law action and the bill enables Comcare to
undertake litigation on behalf of injured employees. Government senators note
that Comcare increasingly pursues and recovers litigation costs.
2.19
The provisions of the Act
covering journey claims exceed employers' obligations under the Occupational
Health and Safety (Commonwealth Employment) Act 1991 (the OHS Act). The OHS
Act does not regulate an employee's travel to and from his or her usual place
of work. There is arguably no sound reason why employers should be obliged to
compensate employees for injuries which are sustained neither in the course of
employment, nor in relation to which employers are obliged to take reasonable
precautionary measures.[14]
Nor is there any good reason for continuing to follow this practice in relation
to Commonwealth employees when the OHS Act does not mandate it for the
mainstream workforce. This is particularly the case when the priority responsibility
of the scheme is to apply its funding to compensate and rehabilitate those who
are injured in the course of what is clearly work-related activity. The bill
will align the Act with the OHS Act and eliminate a significant claims cost.
Restricting cover for recesses and absences
2.20
Another example of
perceived disadvantage is that of eliminating coverage for temporary recesses
or absences from the workplace. To date the scheme has encompassed injuries
sustained during such ventures. The bill adjusts this position and the
scheme will in future cover injuries sustained during an ordinary recess at the
workplace or while in attendance at an employer-sanctioned event.[15]
Employers' liability will be
limited to circumstances where they have occupational health and safety
obligations or an element of control. It would be unreasonable to make
employers liable for all manner and form of injury sustained by their employees
independent of the employment relationship and regardless of misguided
precedent.
2.21
This is a straightforward amendment and should be readily understood by both
employers and employees. Government senators note that recess break claims
represent only 1.5 per cent of total claims costs within the scheme. Government
senators do not believe that employees will perceive any disadvantage notwithstanding
the scheme's generosity to date.
Adjusting the weekly incapacity benefit
2.22
An important element to the bill is the change to formulas for the
recalculation of benefits. The result should be an improvement to the
administration and provision of benefits within the scheme. The changes will
result, on the whole, in improved benefits. This and following sections of the
report explain the detail of the improvements proposed in the bill.
2.23
An injured employee's weekly incapacity benefit is currently determined
with reference to the employee's normal weekly earnings (NWE). The Act provides
for the adjustment of earnings following any wage increase the injured employee
would have received had the employment continued. It is increasingly difficult
to forecast the proper adjustment and the bill resolves this problem by
prescribing an index for those situations in which earnings cannot be adjusted.
This should clarify the adjusted entitlement and simplify the administrative
processes involved in the payment of the benefit. Payments will then be made more
expeditiously.
Increasing funeral benefits
2.24
Another legislative amendment which passed with little comment was the
proposed increase in funeral benefits under this Act and the Military
Rehabilitation and Compensation Act 2004 (MRC Act). The funeral benefit under these
acts is not in accordance with actual funeral costs, and consumer price indexation
has failed to achieve a realistic parity.[16]
It is illogical to require employers to pay funeral costs which are wholly
inadequate for that purpose. Government senators also recognise that it is not
reasonable, and it would be heartless, to then require a deceased employee's
next of kin or estate to cover the shortfall of funeral costs.
2.25
Government senators note that this positive amendment was commented on
in only one submission.[17]
Families of employees in most states and territories should benefit from the increase,
as will the families of military personnel, and employers will more readily
ascertain their liabilities in this regard.
Correlating the weekly incapacity and superannuation benefits
2.26
The committee also notes the correction of an anomaly whereby weekly
incapacity benefits are reduced under the Act if injured employees are
simultaneously receiving superannuation benefits. The judicial interpretation
of a key phrase, 'being incapacitated for work', has unintentionally created a
distinction between employees who are injured on the day of their retirement,
and employees who are injured the day before or after their retirement.[18]
The latter employees would not have their weekly incapacity benefits reduced on
account of the superannuation entitlement. It was never the intention of the
legislation to discriminate between employees in this manner and the bill clarifies
and corrects the relevant provision within the Act.
Calculating compensation
2.27
The bill proposes new formulas for the calculation of compensation for
permanently incapacitated employees who retire. Weekly compensation payments will
be reduced by the combined superannuation amount (which may include deemed
interest on the superannuation lump sum) and five per cent of an employee's normal
weekly earnings. The new formulas will re-establish the original intent of the
Act that retired employees on incapacity benefits who are in receipt of
superannuation amounts receive 70 percent of normal weekly earnings. The bill will
not act retrospectively.
2.28
Government senators note that there was considerable concern expressed
in submissions regarding the deemed interest rate. Comcare acknowledged that
the current deeming rate had been established nearly 20 years ago and was out
of step with current market realities. Government senators accept that the
flexible method to be employed under the bill will correct that situation. They
also note that the deemed interest rate will be determined in accordance with
the consumer price index, which is less complex and more consistent than the
formulas adopted by other government agencies. Comcare was able to assure
senators that most people will experience little change or be better off with
the new deeming rate.[19]
2.29
Another issue in submissions was that the deemed interest rate would be
applied toward gross payments rather than net payments. This is to ensure
consistency throughout the Act, and other Commonwealth legislation, and it
would be anomalous for the bill to treat recipients under the Act differently from
any other beneficiary. The bill is intended to simplify and expedite the
payment of benefits in a more transparent manner than is currently the case.[20]
Government senators reject any notion that the new formulas are an attempt to
reduce current levels of benefit to injured employees.
Directly paying medical providers
2.30
The bill will also enable Comcare to pay the cost of an employee's
reasonable medical treatment direct to the medical provider. Alternately, if
the account has been paid, then Comcare will be able to reimburse the cost of
the medical treatment to or at the direction of an employee. This amendment
recognises current practice whereby the majority of medical accounts are lodged
direct with Comcare for payment. More importantly, the amendment allows Comcare
to expeditiously discharge its statutory payment obligations.
'Suitable employment'
2.31
Under the current definition of 'suitable employment', claimants whose
employment has been terminated but who choose not to obtain available and
suitable employment continue to receive an unadjusted amount of workers'
compensation. This is unlikely to assist a claimant's rehabilitation and does
nothing to encourage injured employees to re-enter the workforce. It is
therefore an unnecessary drain on the financial reserves of the scheme.[21]
For this reason amendments contained in the bill enable employers to take
potential earnings into account in calculating employee's weekly incapacity
benefits.
Providing rehabilitation services
2.32
Finally, the bill will allow a delegated case manager to implement a
rehabilitation return to work program without referral to a Comcare approved
rehabilitation provider. Australian air Express supported the proposal arguing
that the Act currently imposes an unnecessary administrative and financial
burden on employers, especially when an employee's injury is clearly minor.[22]
Consultations
2.33
The committee notes that in drafting the amendments put forward in this
bill, the government has consulted various stakeholders through the Safety,
Rehabilitation and Compensation Commission. This is reflected in the
submissions of several organisations commenting on the bill.
Recommendation
Government senators recommend that the bill be passed by the
Senate without amendment.
Senator Judith Troeth
Chairman
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