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Boylen, Patrick --- "The Return to Work Australian Capital Territory 2014 (SA)" [2015] PrecedentAULA 79; (2015) 131 Precedent 47


THE RETURN TO WORK ACT 2014 (SA)

By Patrick Boylen

The Return to Work Act 2014 (SA) came into operation on 1 July 2015, bringing major changes to the South Australian workers’ compensation scheme. Among many changes, the major change was to separate injured workers into two entitlement categories: the seriously (catastrophically) injured worker and the non-seriously injured worker. A seriously injured worker is entitled to lifetime care and support and the non-seriously injured worker is entitled to up to two years’ income support, limited medical support and formula-based lump sum compensation for residual problems, all on a no-fault basis.

It is important to consider why these changes came about. This article will also address an overview of the provisions of the new Act, including an assessment of both improvements and losses to the rights of workers. It will also address the unique treatment of catastrophically injured workers and transitional issues.

A NEW WORKCOVER SYSTEM – WHY?

The Workers Rehabilitation and Compensation Act 1986 (the old Act) commenced operation on 30 September 1987. When the WorkCover SA scheme was retired from service on 1 July 2015, it was crippled by an unfunded liability in excess of $1 billion.[1] It was a long-tail scheme with an unfunded liability that was destined to keep growing.

Changes were required to the scheme following the signing by the South Australian government of the Intergovernmental Agreement on the National Disability Insurance Scheme (NDIS) Launch with the Commonwealth in December 2012, and associated bilateral Heads of Agreement between the South Australian government and the Commonwealth. This included agreement to achieve nationally consistent benchmarks to provide no-fault lifetime care and support for people who are catastrophically injured in workplace accidents by 1 July 2016. If changes were not made, Clause 42 of the April 2013 Heads of Agreement meant that South Australia would be responsible for 100 per cent of the cost, (both administration and care and support), for NDIS participants who are in the NDIS because they are not covered by an injury insurance scheme in South Australia that meets nationally consistent minimum benchmarks.

THE NEW SCHEME

The new scheme created by the Return To Work Act 2014 (SA) applies to all South Australian workers’ compensation injuries occurring before, on or after 1 July 2015.[2]

A major change instituted by the Act was to divide injured workers into two categories assessed by reference to Whole Person Impairment (WPI). Previously, the only distinction was between workers who were partially or totally incapacitated for work; and the extent of entitlement to weekly payments was dependent on capacity for work issues, with medical expenses based on a needs and reasonableness test. Under the Return to Work Act, the catastrophically injured worker is referred to as a ‘seriously injured worker’ throughout, and is a worker who has a WPI of 30 per cent or greater, assessed in accordance with the impairment guidelines.[3] A non-seriously injured worker is anybody with less than a 30 per cent WPI.[4]

The test for compensability has also changed. The differentiation between physical and psychological injuries has been maintained,[5] but the test for compensability has been tightened. Under the old Act, the test for causation for a physical injury is that the disability must arise from employment. If the physical disability was a disease or a secondary disability (a disability that is or results from the aggravation, acceleration, exacerbation, deterioration or recurrence of a prior disability) then employment must have contributed to the disability. For a psychiatric disability, being a disability consisting of an illness or disorder of the mind, employment must be a substantial cause of the disability.[6] Under the Return to Work Act, in the case of a physical injury, employment must now be ‘a significant contributing cause’ of the injury and in the case of a psychiatric injury, employment must be ‘the significant contributing cause’ of the injury.[7]

By far the most significant change is to the entitlements of the two categories of injured workers. Seriously injured workers have had some strong improvements in their entitlements. They are entitled to weekly payments of income support up to retirement age[8] at the rate of 100 per cent of their notional weekly earnings in the first year and 80 per cent for the balance of the period; medical expenses for life; common law rights to sue for economic loss and a lump sum for non-economic loss.[9]

However, the non-seriously injured worker’s entitlements have been dramatically curtailed. A non-seriously injured worker is entitled to weekly payments for only two years of incapacity from the date of the injury, based on 100 per cent of their pre-injury earnings[10] for the first year and 80 per cent for the second year, with an automatic cessation at the end of the second year. [11] The non-seriously injured worker is also entitled to up to three years of medical expenses, but only for a period of up to 12 months following the cessation of income support payments. [12] The non-seriously injured worker is also entitled to a lump sum for non-economic loss[13] and future economic loss based on a WPI formula;[14] the threshold for economic and non-economic loss is 5 per cent WPI.[15]

IMPROVEMENTS

The most significant improvement is for the seriously injured worker. Once individuals are characterised as a seriously injured worker, they are entitled to guaranteed weekly payments until retirement age and lifetime care and support.

The introduction of the Return to Work Act 2014 saw the return of the right to pursue the employer for damages for injury caused by negligence or breach of duty of care. The entitlements of the injured South Australian worker to bring a common law claim against an employer were partly abolished with the introduction of the Workers Rehabilitation and Compensation Act 1986 and completely abolished with amendments that commenced on 3 December 1992.

However, the reintroduction of common law rights is limited to workers with a WPI of 30 per cent or greater, and the entitlement is only for economic loss. A worker is not entitled to both a redemption of a liability to make weekly payments of income support and damages for future economic loss. A worker who decides to pursue a common law claim must make an election between remaining on weekly payments of pursuing a common law claim. The circumstances in which a worker would be well advised to make the election to pursue a common law claim are therefore very limited and, in the writer’s view, confined to cases where, at the time of the injury, the worker had low weekly payments and would, on a common law assessment, be entitled to a higher entitlement.[16]

Under the Workers Rehabilitation and Compensation Act 1986, there were significant requirements for the employer of an injured worker to provide the worker with suitable duties. However, the ability of an injured worker to enforce these obligations were effectively non-existent. However, the Return to Work Act 2014 strengthens the position of the worker, and provides that an injured worker who seeks employment with the pre-injury employer and the employer fails within a reasonable time to provide suitable employment, may make an application in the South Australian Employment Tribunal for an order that the employer provide employment.[17] If the employer fails to comply with the order, then the worker is entitled to the wages that would have been paid for that employment for a maximum of 104 weeks from the date on which the incapacity for work occurred if ReturnToWorkSA is paying. The rate of pay is the wages that would have been paid for that employment.[18]

Under the Workers Rehabilitation and Compensation Act 1986, a worker who was partially incapacitated for work could have had his or her weekly payments discontinued after 130 weeks and despite having residual incapacity for work, there was no further recognition of an individual’s loss of earning ability.[19] There was also no entitlement to lump sum compensation. By contrast, the Return to Work Act 2014 provides that a non-seriously injured worker can, where assessed with a WPI of greater than 5 per cent, be entitled to a lump sum for economic loss, based on a formula that takes into account the relevant prescribed sum, the age of the worker and the hours worked by the worker. Although these lump sums are unlikely to equate to a common law assessment, they provide some recognition of ongoing economic impairment.

LOSSES

Those who lose under the Return to Work Act are all those workers classified as non-seriously injured and those who would have had a workers’ compensation claim but do not meet the tougher new compensability tests.

The non-seriously injured worker is entitled to weekly payments for only the first two years of incapacity from the date of the injury.[20] This is not necessarily two years of weekly payments.[21] This provision will discriminate against the worker who continues at work albeit with a disability, adopting a non-invasive treatment regime, who later determines to undertake more invasive treatment (for example, surgery) and who may then face the situation where weekly payments are stopped regardless of whether their treatment and rehabilitation has been completed.

The introduction of the maximum period of three years for medical expenses[22] will mean that there is no provision for those workers who need ongoing long-term treatment to continue to maintain their capacity for work.

There has also been significant tightening of the WPI assessments. In the past, it had been possible to pursue multiple WPI assessments as other effects of the injuries became apparent (for example, dental problems caused by the long-term use of medications), or the requirement for further surgery resulted in higher impairment. The rules now clearly contemplate one assessment only.[23]

TRANSITIONAL ISSUES

As it is the case that some work injuries develop over a period of time, it is always necessary in workers’ compensation legislation to have transitional provisions. The desire by the SA government to have a clear end to the ‘old Act’ and the requirement to have a no-fault lifetime care and support scheme for catastrophic work injuries resulted in extensive transitional provisions.

The Return to Work Act 2014 repeals the Workers Rehabilitation and Compensation Act 1986 in full. Usually, when an Act is repealed and is replaced by another Act, the substantive rights attached under the repealed Act, whether previously enforced or not, continue beyond the repealed Act. That was generally the case when the Workers Compensation Act 1971 (SA) was replaced by the Workers Rehabilitation and Compensation Act 1986.

The fundamental position with respect to the Return to Work Act 2014 is that the rights of workers to seek compensation under the Workers Rehabilitation and Compensation Act are extinguished from 1 July 2015 (except where those entitlements are the subject of current litigation) and those workers with an injury to which the Workers Rehabilitation and Compensation Act applied will now be entitled to compensation under the Return to Work Act. However, not all of the provisions of the Return to Work Act 2014 for injuries prior to 1 July 2015 apply and some provisions have been modified. In summary, the modifications are as follows:

• The test for compensability under the Workers Rehabilitation and Compensation Act continues to apply.[24]

• For workers who had an accepted claim under the Workers Rehabilitation and Compensation Act, weekly payments will continue as if they had continued under that Act. The exception is that only seriously injured workers will be entitled to weekly payments after two years.[25]

• Workers are entitled to the continuation of weekly payments despite a discontinuance or reduction notice where an Application for Review is lodged.[26]

• Workers with a pre-1 July 2015 injury are not entitled to a loss of earning capacity lump sum.[27]

• The provisions with respect to a lump sum for non-economic loss under the Return to Work Act 2014 namely, that there is only one assessment, applies (although a regulation has been passed that modifies this in part).[28]

• Enforcing the employer’s obligation to provide work applies to workers injured before 1 July 2015.[29]

• Workers who have commenced redemption negotiations under the Workers Rehabilitation and Compensation Act 1986 are entitled to continue those negotiations.[30]

• The Workers Compensation Tribunal continues and will deal with any disputes currently before it. Any disputes lodged after 1 July 2015, even where they relate to matters prior to 1 July 2015, will be heard by the South Australian Employment Tribunal.[31]

Two major issues that are already apparent are of concern:

1. Workers who have an entitlement to weekly payments under the Workers Rehabilitation and Compensation Act 1986 but who have not been in receipt of payments are encountering difficulties in having their weekly payments recommenced; and

2. Workers who have had their WPI assessed on the previous basis, namely, multiple assessments and multiple payments, may not be entitled to the additional WPI assessment.[32]

THE TREATMENT OF THE CATASTROPHICALLY INJURED WORKER

A seriously injured worker (catastrophically injured) is entitled to income support until retirement age at the rate of 100 percent of notional weekly earnings in the first year and 80 per cent of notional weekly earnings in subsequent years. In addition, a worker is entitled to lifetime care and support services and a lump sum for non-economic loss. There is no obligation on a seriously injured worker to return to work.[33]

An injured worker can apply to ReturnToWorkSA or the self-insured employer for an interim decision to classify the injury as serious while the injury is stabilising and before a Permanent Impairment Assessment has been carried out.[34] Interim assessments do not require a WPI assessment, which is final.[35]

CONCLUSION

It is estimated that seriously injured workers will comprise 1 to 1.5 per cent of all injured workers.[36] The rights of the seriously injured worker are, in my view, not enhanced by the Return to Work Act 2014. Under the Workers Rehabilitation and Compensation Act 1986 seriously injured workers with a 30 per cent WPI would, in most cases, have no economic capacity for work and would be entitled to weekly payments until retirement age, medical expenses for life and a permanent impairment lump sum; this has not changed under the Return to Work Act 2014. The only significant improvement is that they may be able to bring a common law claim in limited circumstances against their employer. However, there is currently an anomaly in that there are likely to be some workers whose injuries reach the 30 per cent impairment level who still have capacity for work, but are not required to exercise that capacity in order to be entitled to benefits under the Return to Work Act 2014.

There is also clearly very little difference in real terms between a worker with a 29 per cent impairment as compared with a 30 per cent impairment, but a big difference in entitlements available under the Return to Work Act. The point is well-illustrated by the following examples, comparing entitlements for a 50-year-old worker with a 29 per cent WPI and 20 per cent WPI:

A 50-year-old worker who has a 29 per cent WPI will, under s55(8) of the Return to Work Act, be entitled to a lump sum of $250,198.20 (70 per cent of $357,426). This equates to $16,679 per year to a retirement age of 65 years or a weekly payment to retirement age of approximately $320 per week. A worker with a 30 per cent WPI earning State Average Weekly Earnings[37] would be entitled to $881,088 for the same period, or $1,129.60 per week.

The same worker with a 20 per cent impairment would be entitled to a lump sum of $109,584, which equates to $7,305 per year or $140 per week to retirement age.

Given the estimates that the percentage of injured workers who will be deemed to be seriously injured is low, the partial gains for catastrophically injured workers will not cover a large percentage of people.

In fact, the majority of injured workers (the non-seriously injured) are now subjected to a scheme that provides very limited entitlements based on a formulaic approach, with no regard to the effects of injuries on an individual. Furthermore, the entitlements for seriously injured workers have not improved to any noticeable extent.

It comes as no surprise that following these changes, ReturnToWorkSA is already announcing an improved funding ratio of 114.3 per cent with $370 million in net assets, compared with the position as at 30 June 2014, which was a deficit in excess of $1.0 billion.[38]

Patrick Boylen is a partner at South Australian law firm, Duncan Basheer Hannon. EMAIL pboylen@dbh.com.au.


[1] WorkCover SA Annual Report 2013/14, p6.

[2] The old scheme was called WorkCover and was managed by WorkCover SA. The new scheme is generally referred to as the ReturnToWorkSA Scheme.

[3] ReturnToWork Scheme Impairment Assessment Guidelines (RTWA, s22(3)).

[4] RTWA, s21.

[5] RTWA, s7(2)(a) and (b).

[6] WRACA, s30 and 30A.

[7] RTWA, s7(2).

[8] Retirement age is either the ‘normal retiring age for worker’s employment of the kind from which the worker’s injury arose’, or the age at which a worker would be eligible for an aged pension under the Social Security Act 1991 (Cth): RTWA, s44.

[9] RTWA, s41, 33(21)(a), Part 5 and s58.

[10] The entitlement definition is ‘the average weekly earnings the worker earned during the period of 12 months preceding the relevant date in relevant employment’: RTWA, s5.

[11] RTWA, s39.

[12] RTWA, s33 (20).

[13] RTWA, s57 and 58.

[14] RTWA, s55 and 56.

[15] RTWA, s56(2) and s58(2).

[16] An example perhaps best illustrates this point: a medical student who is on track to become an orthopaedic surgeon injures himself working as a part-time barman. His weekly payments for workers’ compensation purposes are set at a barman’s rate of pay, but his potential earnings as an orthopaedic surgeon would have been far greater.

[17] RTWA, s18.

[18] RTWA, s18(13).

[19] ‘Partially incapacitated’ is a term that was never properly defined under the Act.

[20] RTWA, s39.

[21] Again, an example probably best explains this point: an office worker injures his knee at work on 1 July 2015. He is able to carry on at work with the use of crutches and undertakes a course of physiotherapy covered by his entitlement to medical expenses.. So for workers’ compensation purposes, his incapacity starts on 1 July 2015. However, on 1 July 2016, the worker decides he needs a knee operation. He is not able to work during his recuperation and his weekly payments commence. He suffers post-operative complications and needs further surgery. By 1 July 2017 he has not returned to work, but his weekly payments cease on that date, because he has had two years of incapacity but only one year of incapacity resulting in economic loss.

[22] RTWA, s33(20).

[23] RTWA, s22(10).

[24] RTWA, Sched 9, C1 30.

[25] RTWA, Sched 9, C1 37.

[26] RTWA Sched 9, C1 31(1).

[27] RTWA Sched 9, Cl 43.

[28] RTWA Sched 9, C1 43 and Return To Work Act 2014 (Transitional Arrangements) (General) Variation Regulations 2015.

[29] RTWA Sched 9, C1 29.

[30] RTWA Sched 9, C1 42.

[31] RTWA Sched 9, C1 50.

[32] See final para under the ‘Losses’ section above.

[33] RTWA, s41.

[34] RTWA, s21(3).

[35] RTWA, s22(10) and (14).

[36] ‘Comparison of workers compensation arrangements in Australia and New Zealand 2013-14’ (SafeWork Australia), pp15-11.9: serious claims per 1,000 employees (2013-13).

[37] RTWA, s4(9).

[38] Media Release issued by ReturnToWork SA, 14/9/15.


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