Injured workers still burnt by compo changes in NSW

12th Jun 2014

The stark reality is that the 2012 amendments to the NSW Workers' Compensation Scheme have slashed injured workers' entitlements and their ability to make an early, safe and durable return to work.  The amendments effectively transitioned many injured workers from Scheme benefits to Centrelink and Medicare benefits.

The drastic amendments included:

  • clearing the decks by transitioning over 10,000 long tail claims out of the Scheme;
  • restricting the overwhelming majority of injured workers to 2.5 years of weekly benefits;
  • terminating the payment of reasonably necessary treatment and related expenses 12 months after making a claim or 12 months after receipt of the last payment of weekly benefits, whichever is the latter; raising the threshold for permanent impairment lump sum compensation from 1% to greater than 10% whole person impairment under AMA 5;
  • abolishing the right to lump sum compensation for pain and suffering;
  • removing the jurisdiction of the Workers Compensation Commission to determine disputes relating to the entitlement to weekly benefits and instead, allowing insurers to make a binding decision in relation to work capacity and in reality, removing the right of the injured worker to have legal representation in the review process.

In effect, these changes leave the majority of injured workers in NSW on the industrial scrapheap.

The Scheme should not be profit driven. The Scheme's overriding objective should be to support injured workers so that they are able to make an early, safe and durable return to work, with the support of employers, scheme agents, specialised insurers and self insurers.

One of the principal drivers behind the 2012 legislative amendments was the financial sustainability of the Scheme and its impact on the New South Wales economy.  However, these stated objectives are no longer valid or appropriate. In early 2012, the NSW government declared the Scheme to be in crisis.  As it turns out, there was no crisis. 

At the Standing Committee on Law and Justice hearing into WorkCover on 12 May 2014, WorkCover's actuary Mr Michael Playford of PwC gave evidence that "the Scheme is currently in a surplus position of a bit over $1.3 billion, and that is about a $1 billion improvement over the last six months" and that result follows two tranches of employer workers compensation premium reductions in NSW totalling 12.5% (7.5% in June 2013 and a further 5% in December 2013). 

This significant improvement in the financial status of the Scheme in such a short period of time following the 2012 amendments comes as no surprise. The NSW government relied upon unduly pessimistic actuarial information. Now that investment returns have picked up (as they were always going to from historic lows) we are left with projected surpluses which the government intends to redistribute to employers instead of injured workers. 

According to WorkCover's own actuary, the solvency position of the scheme may have been approaching full funding by 2021 without the 2012 amendments.

It is important to note that, at the Standing Committee on Law and Justice hearing into WorkCover on 12 May 2014, in response to a question by Mr David Shoebridge MLC about increasing benefits to workers by 20%, Mr Playford said:

"Well, there are three choices, frankly. If you do not do anything, the solvency position of the scheme is likely to continue to improve dramatically, and that is not necessarily an effective use of the capital of society having that locked away in WorkCover's balance sheets. So that is one option. The second option is you could reduce premium rates. The third option is you could improve benefits of the order that you are talking about, yes."

Some benefits ought to be restored to injured workers in order to ensure that the Scheme is fair, affordable, and financially viable. The time to do so is now with the impending legislatively mandated Scheme review. The 2012 workers; compensation legislative amendments failed to maintain fairness and such imbalance must be urgently redressed.

The Australian Lawyers Alliance has been invited by the NSW government to participate in the mandated review of the Scheme (Schedule 6, Part 19H, Division 3, Clause 27 of the Workers Compensation Act 1987). The review will be conducted by independent consultants, the Centre for International Economics ("CIE"). CIE were engaged by the Office of Finance and Services to ensure independence from WorkCover. Apparently, a 'desktop review' of documents and assigned planning has already been completed. CIE has been consulting with key stakeholder groups through workshops and interviews. 

The Australian Lawyers Alliance has made written submissions to CIE proposing a restoration of some of the benefits which  were removed by the 2012 amendments. CIE will deliver a report to the NSW government before the end of June 2014.

So, here we go again! We will fight the good fight but will they listen to us this time? The facts and figures speak for themselves, as do all the injured workers thrown on the industrial scrap heap since June 2012.

Anthony Scarcella is the NSW Director of the Australian Lawyers Alliance. He is an accredited specialist in personal injury and has been a member of the ALA NSW Committee for over ten years. He is currently a member of the WorkCover Legal Stakeholder Reference Group; The Law Society of NSW Injury Compensation Committee and The Law Society of NSW Medico Legal Liaison Committee.

The views and opinions expressed in these articles are the authors' and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).

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Tags: Compensation NSW Workers' rights WorkCover Workers compensation Anthony Scarcella