Chapter 3 - Opposition Senators' Report
3.1
The primary objective of the Safety, Rehabilitation and Compensation Act
1988 (the Act) is to establish the Commonwealth Workers Compensation Scheme
(the scheme). The scheme provides compensation and rehabilitation to Commonwealth
employees, ACT public service employees, and employees of certain private-sector
corporations if they suffer work-related fatalities, injuries and illnesses
during the course of their employment. The Act is an essential piece of
legislation designed to safeguard employees.
3.2
The Safety, Rehabilitation and Compensation and Other Legislation
Amendment Bill 2006 (the bill) intends to amend the Act. In this inquiry the
committee received numerous submissions which expressed concern with the intent
of the legislation.
3.3
Some submissions questioned the broader policy issues, such as the
submission from the Australian Council of Trade Unions:
Workers compensation frameworks and the national consistency of
legislation and systems are currently the subject of considerable national
debate. We also note the rapid recent expansion of the coverage of Comcare to
non-traditional Government employees and the zealous encouragement of the
Government for multi-state employers to leave State schemes for the Commonwealth
system...Rather than seeking to mould the Comcare scheme into a national system
that suits the needs of a limited number of private sector employers, the
Government should commission the urgently required study into the injury
profile a national system should fairly compensate and legislate accordingly
for a scheme separate to Comcare.[1]
3.4
The Community and Public Sector Union State Public Services Federation
Group believes that the bill will inhibit or limit consensus on a national
workers compensation scheme.[2]
This view was supported by the Australian Manufacturing Workers' Union which
argued that the bill would, lower standards throughout the scheme, as was its
intention.[3]
The majority of submissions focussed instead upon the bill's stated objectives.
Financial viability
3.5
The Explanatory Memorandum states that the bill is necessary to maintain
the financial viability of the scheme, which is increasingly under pressure.
3.6
It is however apparent from the Comcare Annual Report 2005-06
that a few types of claim to be eradicated by the bill are not financially
significant. These claim costs are also currently decreasing.[4]
There appears to be little financial benefit in removing these claims from the
operation of the scheme. They will almost certainly have little impact upon the
scheme's viability but will undoubtedly
have a potentially devastating impact upon those employees who as a result of
the bill will lose existing entitlements.
3.7
Other types of claim result in significant costs upon which the bill is
predicated.[5]
Arguably, these claims are increasing because of the rising numbers of
employees covered by the scheme, and because of societal and workplace trends. There
is no evidence that the scheme will have any difficulty meeting these costs in
the future.
3.8
Various statistics from the 2006 Comparative Performance Monitoring
(CPM) Report were cited in a number of submissions.[6]
Some of the general conclusions presented in these submissions were that:
- The Commonwealth jurisdiction has one of the best Assets to Liabilities
Ratio;
- The Commonwealth jurisdiction has the lowest premium rate of any
Australian jurisdiction;
- The scheme does not have escalating claims numbers or costs;
- The incidence rate and frequency rate of compensated claims in
the Commonwealth jurisdiction is decreasing; and
- An actual analysis of claims costs for the Commonwealth
jurisdiction shows little overall change.[7]
3.9
From these statistics the scheme appears to be operating on a perfectly
acceptable cost basis and it cannot be claimed that the scheme is in financial
jeopardy.
There is no compelling economic argument for amendments to the
[Act] that limit access to workers' compensation as proposed in the Bill
because neither the Commonwealth Government nor corporations eligible for a
license as self insurers are subject to unacceptable cost pressures.[8]
3.10
Although the bill will reduce and limit benefits under the Act, there
has been no commitment to pass on an appropriate proportion in the anticipated
savings by way of a reduction in premiums.[9]
Furthermore, the bill will not ultimately effect 'savings' in a number of other
areas.
Lack of 'savings'
3.11
It was argued in submissions that the real intention of the bill is to
externalise or shift costs from employers to employees, private insurers, tax
payers and public health service providers, such as Medicare and Centrelink.
It's not that the costs will disappear; it's simply that they
will be transferred to someone else. And it's not that the relevant workplace
injuries and/or illnesses will disappear either; it's simply that the employer
will, by legislative fiat, no longer have any responsibility to contribute to
their cure (despite the work contributing to the cause).[10]
3.12
This cost-transfer is untenable as the Act charges employers with
responsibility for the safety, rehabilitation and compensation of their injured
employees, including the financial responsibility. It is equally objectionable
given that the bill will have the effect of increasing the costs to be
transferred away from employers.
3.13
Opposition senators suggest that in order to maintain the credibility of
employers and the scheme, the bill must be redirected toward the needs of those
whom the Act purports to protect.
What is a financial "cost of operation" to an employer
is personal, intimate, family focused and frightening to the employee faced
with injury or disease and associated psychological consequences.[11]
3.14
Therefore, Opposition senators conclude that the bill is misguided in
its focus. It will save money for employers without reference to broader, and
not necessarily financial issues, such as increasing the burden on taxpayers,
injured employees and their families.
Key terms re-defined
3.15
The bill proposes two fundamental changes to the Act which will
significantly alter the nature of the legislation. These two changes re-define
key terms, 'disease' and 'injury', which determine whether injured employees
are entitled to safety, rehabilitation or compensation under the Act. It is argued
that the two changes will clarify to whom the Act applies, and was always
intended to apply, by strengthening the connection between work and eligibility
under the scheme. The changes however go much further.
'Disease'
3.16
The proposed change to the meaning of 'disease' effectively introduces a
new statutory threshold. To be entitled to workers compensation an injured
employee will now need to establish that the injury was caused 'to a
significant degree' by the employment.
Substituting significant degree in place of material degree and
specifying the matters to be taken into account in determining significant
degree tighten the employment contribution test to the point where many work
related injuries will be excluded.[12]
3.17
The new test also evidences a lack of proportional responsibility. If
work contributes to a health condition, but is not the primary cause of that
condition, then an employer will not be required to provide any compensation to
an employee.[13]
A number of submissions argued that the element of proportional responsibility was
both fair and encouraged employers to maintain a safe and healthy workplace.[14]
3.18
The bill was also criticised for its effect upon certain employees, especially
those with mental illness, pre-existing genetic dispositions or any underlying
disease. There were three main arguments in this regard:
- That the new test might exclude such employees from the statutory
protections and prevent them from obtaining help and treatment
- That employees might not disclose the nature of an illness for
fear of workplace discrimination
- That the exclusions could result in a significant loss of
productivity and experienced workers.[15]
3.19
The suggestion that the new test could lead to discrimination against
people with mental illness was further advanced in the context of employers' Occupational Health and Safety
(OH&S) responsibilities: if there were no liability for such
injuries, then employers might not provide affected employees with a work
environment necessary for successful employment.[16]
3.20
OH&S arguments were presented throughout a number of submissions. The
Australian Council of Trade Unions submitted that the government should take a
lead role in the development of OH&S solutions to the causes of
psychological injury rather than seeking to deny entitlements to workers.[17]
The Australian Rail, Tram and Bus Industry Union argued that OH&S matters
would suffer neglect if employers' workers compensation payments were to
diminish on account of the bill.[18]
3.21
Most importantly, the new test is fundamentally flawed. As the Community
and Public Sector Union described the problem:
The test presumes that it is possible to weigh the relative
causes of an injury and arrive at some sort of quantitative assessment of the
relative importance of each event. We believe this presumption is misconceived
and extremely problematic, especially so in the context of mental illness.
Mental and psychological illnesses often have multiple causes, and it is very
difficult to determinatively assess the relative weight of each cause.[19]
3.22
The Construction Forestry Mining Energy Union argued:
[The new test] heavily tips the balance in favour of employers
and insurers in the litigation that will follow. Most disease related injuries
aggravated by work will raise complex medical questions on cause and effect but
under the new legal "test" put up by the Bill it will be practically
much more difficult to find any medical consensus. The end result will be many
workers will unfairly miss out on compensation.[20]
3.23
In short, the new definition of 'disease' will adversely affect
employees covered by the scheme. In many instances the scheme will no longer
apply, regardless of whether employment contributes to an employee's injury. In
other instances it will be difficult for an employee to prove eligibility to be
covered by the scheme. The bill will therefore eliminate or reduce injured
employees' current statutory entitlements, as well as sanction discrimination among
employees.
3.24
Even more reprehensible is that a piece of legislation designed to
protect employees will absolve employers from certain OH&S liabilities,
which are at the very heart of employment and industrial relations law. Opposition
senators believe that this particular amendment is contrary to the primary objective
of the Act: the safety, rehabilitation and compensation of injured employees. Opposition
senators also suggest that the amendment is unnecessary in view of the recent
decision of the Federal Court in Canute v Commonwealth of Australia [2005]
FCA 299 in which the Court affirmed the requirement for a 'close connection
between the employment and the disease'.[21]
'Reasonable administrative
decision'
3.25
The second fundamental change to the Act is the re-definition of
'injury'. It is claimed that this shall prevent workers’ compensation claims
being used to obstruct legitimate administrative action by excluding claims where
an injury has arisen as a result of such action.[22]
Two specific aspects of the new definition caused considerable concern: what
comprises a 'reasonable administrative action', and might therefore give rise
to non-compensable injuries, and that determination by employers with reference
to a non-exhaustive list of actions.
3.26
A number of submissions found fault with the bill's effect of placing
employers' managerial behaviour beyond reproach. The Australian Manufacturing
Workers' Union argued that the width of the 'reasonable administrative action'
exception will break the nexus between employers'
behaviour and the consequences of their action.[23] The Australian Rail, Tram and Bus Industry Union concurred,
adding:
With appropriately trained and qualified management, a proper
disciplinary policy, clear and well-articulated policies and procedures and the
right of employees to representation, the possibility of incurring an injury as
a result of disciplinary and other matters of conflict should diminish.[24]
3.27
The Law Council of Australia questioned the clarity of the provision:
The extension of the exclusionary provision to reasonable
“administrative action” takes this exclusion too far. On one interpretation, it
might be considered that all Government actions (and not just disciplinary
ones) can be regarded as "administrative action". Another danger of
excluding all injuries arising from all "reasonable administrative
action" under a no fault scheme is that certain judgements about fault
must be imported. The basic premise upon which various Australian workers
compensation schemes are based is that "reasonableness" of a
particular action or omission is excluded (hence, the term 'no-fault'). The aim
historically was to provide workers with a defined benefit in the event of
incapacity. Questions of fault have historically been handled by the courts.[25]
3.28
Opposition senators cannot see how a question of fault can be impartially
decided by employers within the scheme.
3.29
It is equally questionable how 'reasonable' will be interpreted. What is
reasonable depends entirely upon circumstance and perspective. If an injured
employee disagrees with an employer's assessment of the reasonableness of an
action, then it would be difficult to contest. Employees do not necessarily
have sufficient resources to match and effectively challenge employers, regardless
of the merits of a case. It is not fair in such circumstances to require
employees to prove that their statutory rights have been breached.
'Injury'
3.30
The re-definition of 'injury' is a provision which has the potential for
abuse over time.[26]
The Act clearly specifies a limited number of specific circumstances in which
employees cannot have recourse to workers compensation entitlements. The
legislation, arguably, was never intended to entirely exclude all manner of injuries
which employees might incur as a result of employers' managerial decisions. The
breadth of the exclusionary provision, regardless of any particular
interpretation, is not appropriate.
3.31
The exclusionary provision could also undermine the primary objectives
of the Act. A rejected claim could result in an employee being absent on sick
leave or leave without pay. An employee on extended unpaid sick leave would
probably access the social welfare system and the public health system. This
could be ongoing if the employment were terminated owing to non-rehabilitation.[27]
3.32
As with the new definition of 'disease', there was apparent concern with
how the new definition of 'injury' will affect employees with disabilities
and/or mental illnesses. It was argued that it is wrong in principle to
distinguish these types of injury from physical injury, and discriminate
against certain professions, occupations and injured employees.[28]
The Australian Federation of Disability Organisations questioned whether the
list of variable considerations could ever operate equitably.[29]
3.33
In passing, Opposition senators note the insinuation that a significant
number of employees are abusing the scheme. No clear and convincing evidence was
offered to the committee to support this assertion. If there is a legitimate
concern about abuse, then, if not already provided, the Act should provide for appropriate
civil or criminal offence penalties.
3.34
The Act affords employees a level of protection in circumstances where
they have been injured at work and require a guaranteed level of assistance
from their employer. It is not legislation aimed at protecting employers at the
expense of injured employees.
Lack of clarity
3.35
Ambiguity in the interpretation of the Act is cited as one justification
for the bill. The re-defined key terms do nothing to remedy that apparent
problem. Not only is there no evidence to suggest that once enacted the bill
will result in the lodgement of fewer claims, indeed the contrary is likely as
many injured employees will not be able to determine whether they are covered
by the scheme. Perhaps an ulterior motive of the bill is to discourage injured
employees from lodging a claim.
3.36
A self-insurer under the Act submitted:
The use of subjective terms...is likely to create confusion
amongst stakeholders and result in an increase of disputes, ultimately driving
workers compensation claims cost higher. Accordingly, we suggest the amendment
provide greater clarity or an objective test to determine liability; greater
clarity ensuring workers are aware of their rights and entitlements and
employers to more effectively manage their risk...We foresee an inevitable
situation of incurring legal costs in order to defend and/or clarify our
interpretation of the proposed definition of 'significant'.[30]
3.37
The bill remains ambiguous and will probably result in much the same
problem as is currently the case. The amendment is therefore pointless and does
nothing to improve the administration and provision of benefits within the
scheme.
3.38
To claim that the bill is required to correct legislative ambiguities is
misleading and implies that the Act has been poorly drafted. This is not the
case. The Act is clear in its intent and is being interpreted consistently by
the courts.
Non coverage of journey claims
3.39
That the real object of the bill is to eliminate or curtail employees'
rights is evidenced by this particular amendment. The bill revokes an existing entitlement
on the basis that injury sustained in accidents that occur on the way to and from
work cannot be attributed to employers.
3.40
The approval given to journey claims over the past 19 years has given
rise to the understanding that journey claims are an entitlement. It would be unjust
to disallow journey claims when they have been readily available and encouraged
for many years, especially since employees significantly rely upon the coverage.
The elimination of journey claims is bound to cause great discontent because it
is an erosion of a fundamental and traditional condition of employment, as is
clear from the number of submissions received on this point.[31]
3.41
Proponents of the bill argue that travel to and from work is not
undertaken in the course of employment and consequently, injuries
sustained during such travel should not be compensable. Almost without
exception, submissions received by the committee disagreed.
3.42
The Community and Public Sector Union State Public Services Federation
Group stated:
Getting to and from work is an activity closely connected with
employment and it is not correct to say that it is an activity entirely beyond
or outside of the employment relationship.[32]
3.43
Employees, like employers, do not exercise ideal control over travelling
to and from work and it is iniquitous to require employees to bear all responsibility
for injuries caused on the way to and from work.[33]
3.44
The Construction Forestry Mining Energy Union (CFMEU) told the
committee:
The CFMEU has seen many examples where its members have been
seriously hurt, maimed or even killed going to work or coming home from work
when fatigued from long hours of overtime or after arduous work or as a result
[of] being required to travel outside "normal" work hours. In these
situations the worker and their family often have no rights to under [sic]
other compensation schemes.[34]
3.45
It has been suggested that employees injured on the way to and from work
can avail themselves of alternate forms of coverage. Private insurance would
however require the injured employee to establish fault on the part of another
person or entity, which might require an action at common law.[35]
There is also no rehabilitation scheme for transport other than by private
motor vehicle or for persons who are involved in catastrophic accidents.[36]
3.46
The Community and Public Sector Union State Public Services Federation
Group additionally remarked upon the primacy of individual agreements:
This breakdown in support of collective representation broadens
the inequities already existing and lessens the prospects that most employees
will have to achieve insurance coverage necessary to protect them and their
dependants against misadventure while traveling [sic] to and from work.[37]
3.47
Opposition senators agree that the no fault workers compensation scheme
is the most effective and suitable option for the rehabilitation and early
return to work of injured employees.
3.48
The lack of control has been cited as a primary reason why employers
should not be required to cover journey claims via the scheme. Again, most
submissions to the committee rejected the argument.
3.49
The Australian Rail, Tram and Bus Industry Union argued:
The claim about "control" misses the point about the
connection with work and why the employee was
doing what he/she was doing at the time of the injury/illness. This claim is
part of a broader campaign by employers to avoid their responsibilities to
their employees by alleging the absence of control. The aim here is to transfer
responsibility for accidents in the workplace from the employer to the
employee.[38]
3.50
The Communications Electrical and Plumbing Union added:
Workers Compensation is beneficial legislation with an
underlying premise of "no fault". Arguments to exclude compensation
on the basis that the employer has no control or fully complies introduces
concepts which if extended would exclude many compensable claims and undermine
the whole social framework of workers compensation legislation.[39]
3.51
The Law Council of Australia submission submitted that the proper
rationale was risk rather than control:
The original rationale for allowing journey claims under the
English Acts of the early twentieth century was that travel to work outside the
house substantially increased the risk to workers. The Law Council believes
that this rationale has not diminished in importance in the present working
environment and journeys undertaken as part of or in relation to employment or
study should be covered.[40]
3.52
Employees injured travelling to and from work have a reasonable
expectation that the no fault scheme will provide them with rehabilitation and
compensation in time of need. A legislative change of heart is poor
justification, and indeed reward, for eliminating the most expeditious means of
providing that protection. It also rather inconveniently ignores the benefits
to employers of maintaining a healthy and productive workforce and undermines
the foundations of workers compensation legislations in the interests of
short-term fiscal benefit for those obliged to provide the protection.
3.53
A theme of the bill appears to be discouraging employees from getting
out and about both during the work day and on the way to work.
Physical activity
3.54
There was strong concern expressed about the effect of the journey claim
changes on employee health and fitness. Submissions indicated that employees
enjoyed riding or cycling to work in the knowledge that they were covered by
the no fault scheme. These submissions also noted the benefits employers
derived from having a healthy workforce: invigorated employees, quick recovery
rates, and less reliance upon the public health system. It was noted that these
benefits have been recognised by employers with the encouragement and
implementation of various health initiatives.[41]
I was injured in an accident in October 2004...I was covered by
workers compensation and was able to easily and quickly have my medical bills
paid and my income uninterrupted. The changes proposed...place a further work
related burden on workers. Certainly it is possible to pursue recovery of costs
for personal injury through the court system however this is expensive, slow
and leaves the employee vulnerable to financial hardship at a time when he or
she is likely to be in pain, shock and stress from the trauma suffered.[42]
My rehab doctor told me I made a pretty quick recovery, due in
no small measure to my overall fitness from riding regularly to work...In the end
I was back at work fairly quickly...I think that if I'd had to worry about
whether I should incur some of the medical expenses I might have either
returned to work before I was fully fit (posing an OH&S risk to myself and
others) or I'd have taken longer to recover fully.[43]
3.55
There did not appear to be any hard data or empirical studies supporting
the claim that a lack of workers compensation would discourage employees from
getting to work under their own steam. Submissions were, however, clear on this
point with Fitness Australia Inc. stating that the bill will discourage
employees from attempting to incorporate incidental activity into their daily
lives.[44]
3.56
In addition to health concerns, several of these submissions noted that
petrol prices, road congestion and global warming were further considerations
for encouraging them to use public transport, bicycle or walk to and from work.[45]
There is no sound reason to exclude journey claims from the ambit of the Act. Indeed,
it is contrary to employees' expectations and the no fault scheme currently
existing in the majority of state based workers compensation schemes.
Off site recess breaks
3.57
The bill will remove employees' coverage for injuries which occur
outside the work place or at off site events which are not sanctioned by
employers. It is highly questionable whether this provision is at all necessary
to sustain the scheme's financial viability. It is also inconsistent with the
majority of state based workers compensation schemes.[46]
In the context of health and fitness activities, the Superannuated Commonwealth
Officers' Association suggested that the provision discriminates against
employees.[47]
3.58
There was also interest in possible exceptions to the general rule. A
specific example explored by the committee was that of mobile work places.[48]
Opposition senators are not convinced that in practice the provision will be so
simple to apply. It is likely that there will be some disagreement about what
constitutes a 'recess break' or place of work. These issues were illustrated to
the committee during the inquiry.
Senator MARSHALL—I just want to come back to the breaks, in
relation to some of the questioning I did with Telstra. Let us look at a lunch
break, for instance. They were of the view that, if you stayed within the
employer’s confines or workplace and had lunch, you were covered. That probably
goes to your issue about providing a healthy and safe workplace and having some
control over it. So are employers required to provide somewhere to have lunch?
Ms Bennett—No.
Senator MARSHALL—They are not. Okay. Are they required to
provide a break for lunch?
Ms Bennett—That goes to industrial
legislation but, yes, my understanding is that there are hours worked after
which breaks are required. Also, on the safety side, we look at that as safety
about fatigue and reasonable working hours. But, as to whether a tearoom is
provided, I do not know. When I worked in industrial relations, it was not a
requirement that tearooms were provided. But hours of work are set out in
industrial relations legislation.
Senator MARSHALL—Employers are responsible for administering
those arrangements, aren’t they? So we make the assumption that everyone is
required to have a lunch break if they are working full time.
Ms Ryan—Yes.
Senator MARSHALL—So if you are out on the road as a Telstra
technician—and this is the proposition I put to Telstra—and you pull over
because it is your lunch break and you are required to have a lunch break by
the employer, you sit in the park and eat your sandwiches and you are injured
in the course of that process, are you covered?
Ms Bennett—No. Outside the workplace
on a lunch break, you are not covered.
Senator MARSHALL—Why not? It seems inconsistent because you
said that if the employer requires you to do a course of study, that is fine;
you are covered for the journey and you are covered at the place of the
education. But if you are required to have a break, why would you not be
covered?
Ms Parker—It is no different than if I am at work here in Melbourne
and leave and go into the park. The employer has no control over that
environment. It is the same for a truck driver. If they go to the park, there
is no control over that site. They could be doing anything.
Senator MARSHALL—So if the employer requires the employee to
have a lunch break, it would be reasonable to expect the employer to require
the employee to come back to a place that the employer has control over for
them to exercise that lunch break?
Ms Parker—That
would be the only way the employer could have control over the facilities and
ensure a safe workplace, yes.[49]
3.59
The opposition does not accept the government's position that this is an
issue of control; it is about the employment relationship. The Act is and has always
been based on the premise of no fault or as the Communications Electrical
Plumbing Union stated:
It is a beneficial piece of legislation. It has to take into
account all of the work life and the employment relationship that exists, not
just the bits where the person is sitting under the direct eye, as it were, of
the employer and doing what they are told.[50]
3.60
The Act is about people. One of the administrative changes to the Act
will be the introduction of a new deeming rate for the calculation of weekly incapacity
benefits. It would be impossible to ignore the practical effects of the new deeming
rate and notional superannuation contribution due to the number of submissions
received on point.
Deeming rate
3.61
The bill proposes to allow the Minister to issue an instrument each year
setting the deemed interest rate for the following 12 months. The rate is
expected to be based on the 10 year government bond rate for the previous 12
months.
3.62
The Australian Rail, Tram and Bus Industry Union was sceptical that this
proposed means of determining the deemed rate would produce a fair result:
The problem here is that the index is to be contained in
Regulations and will be as determined by the Minister for Employment and
Workplace Relations. Given the attitude of the Federal Government on wage
increases and benefits to employees generally, it would be difficult to have
any confidence that the indexes, if used, will provide for other than marginal
increases.[51]
3.63
The existing 10 per
cent deemed interest rate already produces unfair results. As Comcare told the
committee:
It was set in 1988.
In the mid-90s, as other financial indicators such as bond rates and interest
rates changed, it moved out of step and it probably has been too high since the
late 90s.[52]
3.64
For many years then the
deemed interest rate has grossly disadvantaged injured employees receiving
benefits under the scheme. Injured employees have no doubt been keenly aware of
this disadvantage and some have sought to draw the government's attention to the
inequity inherent in the fixed deeming rate.
3.65
A particular example
provided to the committee was that from Mr Ian Emery. Different calculations indicate that Mr Emery has been penalised somewhere between
$63 000 - $175 000 over the course of nearly 13 years. While there might be
some disagreement concerning the precise extent of this disadvantage, the
salient point is that the fixed deeming rate has clearly caused Mr Emery considerable disadvantage. Up to 200 other
injured employees may have been similarly affected.
3.66
The government for
its part has taken scant notice of the concerns, notwithstanding that it is the
only party capable of addressing the inequity. The fixed deeming rate has not
only been blatantly applied without regard to principles of equity, it has also
failed to achieve the legislative objective of delivering a minimum safety net
income of 75 per cent of NWE. The bill should be amended to immediately address
this gross injustice.
3.67
Another criticism found in many submissions argued that the proposed method
of determining the deemed interest rate was unique to the scheme and was discriminatory.
The Communications Electrical Plumbing Union submitted that the deemed interest
rate should reflect actual interest rate expectations, or the deeming rate used
for other legislative payments (pensions, veterans affairs), and should not be
manipulated to intentionally reduce benefits or give a better return to the
scheme to the detriment of individuals.[53]
Opposition senators agree that in retrospect the deeming rate has disadvantaged
individuals, which is neither appropriate nor fair and that it is incumbent
upon the government to remedy the situation to meet the objectives of the Act.
Recommendation 1
3.68
That the bill be amended to address the retrospective inequity in the
deeming rate.
3.69
Another common criticism of the deemed interest rate was that it will
apply to gross lump sum payments, which effectively increase the deeming rate.[54]
The Department conceded that all formulas in the bill are based on gross
amounts. The bill amends the formulas only in relation to injured employees
drawing lump sum payments upon retirement. The Department argued that it would
be anomalous for the bill to make a distinction between these employees and injured
employees drawing weekly incapacity benefits.[55]
3.70
The comments of the Law Council of Australia are worth noting in this
regard:
Although the Comcare scheme claims to provide incapacity
benefits at 75%, incapacitated employees who are retired on incapacity grounds
or who receive a redundancy package contribute to this sum by way of deduction
of any pension or by deducting an amount from any lump sum. As the object of
superannuation is to provide a retirement income (post 65), the effect of these
provision is that injured employees must subsidise the Commonwealth's
obligation to provide incapacity payments using their superannuation
entitlements.
[In the case of lump sum payments] the formula of dividing by
520 essentially means that the lump sum is applied instead of compensation for
that 10 year period such that it may be exhausted prior to reaching 65 years of
age and becomes a negative if retirement occurs prior to age 55. This approach
also provides a real incentive for statutory corporations...to use retirement as
a means of relieving their premium burden rather than redeployment, which is
contrary to the intention of the Act.[56]
3.71
Opposition senators consider it unfair to use a formula which is less
generous than it appears and then determine on this basis what benefit will be
grants. This is iniquitous. The purpose of the formulas should be to ensure
that injured workers are provided with a fair payment, not one which is deemed
to be adequate from the government's fiscal point of view.
3.72
Opposition senators also note that injured workers receiving lump sum
payments are subject to the application of the then deemed interest rate. Under
the bill this rate could vary so that an injured worker receiving weekly
incapacity benefits could have either more or less deducted from his or her
payment than an injured worker in an identical situation who retires with a
lump sum payment. It is also highly possible that this fluctuating rate will
increase the burden of administering weekly incapacity payments.
Notional superannuation contributions
3.73
The second element of the formulas which drew sharp criticism from all
quarters was the five per cent deduction for notional superannuation
contributions. The criticisms canvassed a variety of issues.
3.74
The Communications Electrical Plumbing Union submitted:
There is no legitimate reason to reduce the NWE of retired
claimants by 5% to 70% rather than the 75% entitlement of other claimants. No
actual superannuation contribution is made so there is no return to the
claimant, unlike the situation with ordinary claimants whose personal contribution
to superannuation is returned to them with interest; nor is there generally any
notional employee contribution in most superannuation funds.[57]
3.75
Comcare indicated to the committee that the five per cent notional
superannuation deductions will in future be invested in personal accounts of
behalf of injured employees.[58]
Opposition senators are encouraged by this advice for two important reasons:
the new approach will ensure that monies notionally deducted are actually
credited, and ultimately paid, to those people entitled to the monies and the
investment will enable injured employees to effectively make superannuation
contributions and plan for their financial future.
3.76
A further concern was that the notional superannuation deduction effectively
reduces the income safety net at a time when injured employees' income is
already substantially less than what it was prior to the employee's injury.
This can cause hardship to beneficiaries under the scheme. Opposition senators
suggest that monies deducted should be re-paid to the injured employees.[59]
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A third concern was that the notional five per cent appears to be a
figure simply plucked out of thin air. Nowadays not all superannuation schemes
require personal contributions and those that do have varying levels of
contribution. Again, superannuation monies should be returned to those who need
them.
3.78
On a different note, the Community and Public Sector Union submitted:
[The 70% of NWE] has been a continuing cause for discontent and
resentment by CPSU members...By reducing the amount of weekly benefits from 75%
to 70% of applicable salary, the Commonwealth will be paying different levels
of benefits to public servants compared to the benefits payable to members of
the Australian Defence Force.[60]
3.79
Opposition senators see no need for the continuation of this
discrimination and recommend that it be resolved without delay.
3.80
Opposition senators suggest that while the formulas themselves might not
require clarification, their rationale is less clear. The purpose of the benefits
should be to ensure that injured employees are provided with a certain level of
income for both their short and long-term needs. Instead, the formulas appear
designed to reduce the amount of income actually paid to employees with scant
regard to their interests. The logic offered in support of these changes is at
best convoluted and at worst woefully ignorant. There can be no justification
for preventing injured employees from taking care of themselves and increasing
their dependency upon the government and public health system. Instead, the
formulas should work toward increasing employees financial independence.
'Suitable employment'
3.81
The bill will allow for a reduction in the weekly incapacity benefit
based on an employee's actual or potential earnings from employment with the
Commonwealth or any other type of employment.
3.82
The Communications Electrical Plumbing Union argued that rather than
reduce the weekly incapacity benefit, it would be more effective to enhance
alternate employment opportunities as occurs in other jurisdictional schemes.[61]
It is preferable to provide injured workers with opportunities to re-enter the
work force rather than penalise them for being unable to obtain alternative
employment and reliant upon other forms of assistance.
3.83
This is particularly so in relation to those injured workers who are
affected by disability. As noted by the Australian Federation of Disability
Organisations, people with disability face substantial direct and indirect
discrimination in the workforce, which severely restricts their opportunities
to find employment. They are also more vulnerable to retrenchment and are
extremely unlikely to ever re-enter the workforce.[62]
For people with disability, 'potential earnings' might operate to their
distinct disadvantage.
3.84
Opposition senators do not agree with this amendment as it has the
potential to discriminate against injured workers, does nothing whatsoever to
rehabilitate injured workers and is a short-sighted fiscal measure which
penalises injured workers.
Lack of consultation
3.85
There was some indication of dissatisfaction with the process of
consultation:
The only consultation that has occurred has been at the level of
the [Safety Rehabilitation and Compensation] Commission. If, according to the
Federal Government, that should suffice to fulfil its obligations on
consultation, then it falls a long way short of what most people would regard
as reasonable.[63]
3.86
The Communications Electrical Plumbing Union concurred:
The proposed amendments were the subject of a commission paper,
which outlined the Government and Comcare's views with a union response to each
proposal. There was no discussion or consultation on the proposed amendments,
either before or after that paper was presented to the Commission.[64]
3.87
Opposition senators suggest that the lack of consultation indicates the
fundamental problem with the bill. As two submissions noted:
There is no sense of balance in this Bill. The amendments solely
favour the employer and, in this case, the Federal Government as employer. They
are amendments that appear to be motivated by cutting the cost of the workers
compensation to employers that apply to the Comcare workers compensation
scheme. The result is that employees with legitimate workers compensation
claims will be denied an entitlement.[65]
These amendments frustrate even the stated ambitions of the
Government itself. They frustrate workplace safety, rather than encouraging
improvements, diminish the adequacy of compensation, and go no way to achieving
goals of early intervention, rehabilitation or return to work.[66]
Conclusion
3.88
In conclusion, opposition senators believe the primary purpose of the
bill is to reduce existing employee entitlements. The opposition does not
support these amendments to the Act. It is unfortunate that the government has
simultaneously used the bill to address inequities in the deeming rate, which
administrative adjustment opposition senators do support. On balance the
opposition must oppose the bill. If the bill is unsuccessful in the Senate, the
government should immediately move to legislate the adjustment to the deeming
rate as a matter of course.
Recommendation
Opposition senators recommend that the Senate not pass the bill.
Senator Gavin Marshall
Deputy Chair
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