1. Lecture 7 Compensation for injury and disease
BUSM3122
Semester 2, 2017

2. This lecture 1. Intro 2. Origins of workers’ compensation
3. Debates and variations
4. Common law versus workers’ comp
5. Key features of current Victorian workers’ compensation scheme (WorkSafe)
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3. 1. Introduction What is workers’ compensation?
Statutory scheme that provides financial compensation to workers for injury or disease arising from their employment.
No-fault compensation – often instead of common law right to sue
Broad coverage of workers
Specified compensation entitlements: eg medical costs, replacement wages, lump sums for specified disabilities (‘table of maims’)
Financed by employers via compulsory insurance (often with some self-insurance)
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4. Introduction
Industrial Revolution generated high rates of industrial injury, disease, fatality.
Prevention was the main focus of OHS regulation. But govts also ensure that where accidents do occur, workers have access to medical treatment, financial support. Hence, workers’ compensation
Most industrialised countries, inc Aust states introduced workers’ comp around turn of C20
Workers’ comp preceded wider welfare state (invalidity, sickness benefits, age pensions, universal health care). Still remain somewhat detached from it.
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5. 2. Origins of workers’ comp
Prior to workers’ comp, injured workers had three, inadequate options:
Charity of employer/community
Mutual insurance with friendly society or union
Common law, since 1830s
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6. Origins of workers’ comp
Workers’ comp the compromise result of political struggle for improvements by workers, unions, employers, progressive reformers
Unions generally did not push for workers’ comp and often opposed it.
Rather, they preferred other remedies – union insurance or reform of common law (Cass 1983; Bartrip & Burman 1983)
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7. Origins of workers’ comp: Common law
Common law is the foundation of law in English speaking countries: UK, US, Canada, Australia, NZ
Right of employees to sue employers at common law began in 1830s.
Torts based on fault: negligence or breach of implied duty
Burden of proof on employee: potential large payout for some workers
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8. Origins of workers’ comp: Common law
Legal doctrines (‘unholy trinity’) severely limited workers’ access to common law in C19:
common employment (similar to limits on vicarious liability): employers not liable for the negligence of their employees
volenti non fit injuria - workers could not claim compensation or damages if they voluntarily assumed the risk
contributory negligence: employer liability reduced or negated by any employee contribution
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9. Origins of workers’ comp: Employers Liability Acts
Workers, unions agitated to remove unholy trinity
Employers’ Liability Acts in UK, Australia removed some of these limitations on common law from 1883 onwards
But common law still provided remedies for very small proportion of injured workers because of need to demonstrate fault/negligence
Access to common law remains to this day in Aust jurisdictions but with increasing limitations
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10. Origins of workers’ comp
Alternative was workers’ comp
First legal scheme in Prussia, 1854; then Bismarck’s mutual liability, no-fault schemes in Germany in 1880s.
First in English speaking countries: UK 1897, then other jurisdictions (US, NZ, Canadian, Aust) over next few decades. Victoria 1914
In federal countries, workers’ comp remained with states/ provinces
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11. 3. Debates and variations
Substantial variations between jurisdictions over time
Aust has 9+ workers’ comp schemes: 6 states, 2 territories, Commonwealth
They all vary between each other and change over time
Many of these matters the subject of intense political and ideological conflict: employers seek to minimise premiums and workers and unions seeking to maximise benefits; lawyers; medicos; insurers etc
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12. Debates and variations
Private insurance (most Aust states until 1980s) versus public monopoly (Qld 1914, most states inc Vic in 1980s)
Calculation of premiums
Level of benefits: full or partial replacement, and for how long?
Eligibility: historically too stringent recognition of diseases; schemes designed for traumatic injury. Eg asbestos-related cancer not recognised in Aust until 1980s
But generous eligibility for some injuries eg journey claims
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13. Debates and variations
Lump sums versus periodic payments
Cost-shifting from state-based, employer funded workers’ comp to federal Medicare, social-welfare systems
What is the role of workers’ comp in safety?
What emphasis should be placed on rehab?
How best to resolve, adjudicate disputes
Extent of retention of common law
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14. 4. Key debate: common law vs. workers’ comp
Common law strengths
Moral basis in fault
Deterrence and safety
Full compensation restores victim to pre-injury state
Bigger payments
Lump sums enable injured to move on
But drawbacks of common law
‘Forensic lottery’
Entitlement limited to workers who can prove employer fault/negligence
Legalistic process
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15. Key debate: common law vs. workers’ comp
Workers’ comp strengths
Universal coverage for injured employees irrespective of fault
Administrative system
But drawbacks of workers’ comp
Less than complete compensation
Weekly payments can ensnare workers in bureaucratic compo system
Loss of deterrence effect
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16. Debates and variations
History of Victorian variations
For most of C20, gradual expansion of eligibility, benefits, premiums in Victoria
Peaked following Cain Govt WorkCare reforms in 1980s.
WorkCare also established a public monopoly insurer and integrated safety and rehab into workers’ comp
Kennett Govt of 1990s reversed the trend of expanding benefits. Reduced employer premiums. Cut eligibility for stress claims, journey claims, common law. Expanded self-insurance. But didn’t de-nationalise workers’ comp insurance.
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17. 5. Key features of Victorian workers’ compensation scheme (WorkSafe)
Legislation:
Workplace Injury Rehabilitation and Compensation Act 2013 (effective 17 September 2014)
This incorporates:
Accident Compensation Act 1985
Accident Compensation (WorkCover) Insurance Act 1993
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18. Vic workers’ compensation scheme
Key agency: WorkSafe Victoria
Monopoly, central underwriter/insurer
Also responsible for accident prevention, rehabilitation/return to work
Private agents work on behalf of WorkSafe: handle claims (accept or refuse); make payments
6 agents: Allianz, CGU, Gallagher Bassett, EML, Xchanging
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19. Vic workers’ compensation scheme
WorkSafe
WorkSafe recommends premium rates to govt, collects premiums, pays claims (via agents)
Total assets at 30 June 2015: $13.5 billion
Premiums paid in 2014/15: $1.9 billion
Aims to be fully funded
Funding ratio at 30 June 2015: 120%
(WorkSafe Victoria 2015)
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20. Vic workers’ compensation scheme
Premiums
Average premium rate in 2013/14 was 1.298%
Premiums vary by industry eg:
Meat processing 6.8%;
Private secondary schools 0.595%
Government secondary schools 1.38%
Individual employers’ premiums are also rated on individual claims experience
(WorkSafe Australia 2014)
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21. Vic workers’ compensation scheme
Self-insurance
Vic employers may apply to VWA to self-insure
Criteria are financial stability, OHS Management System audits, safety compliance, claims rates
Currently there are 38 self-insurers which is 8% of total scheme remuneration
(WorkSafe Australia 2014)
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22. Vic workers’ compensation scheme
Employees covered
2,631,800 in 2013
Workers under ‘contract of employment’ only, ie workers who ‘perform work for an employer at the employer’s direction, instruction or request’
Contractors under ‘contract for service’ not covered
Provision for ‘deemed workers’: eg work experience students, practicals, owner-drivers, outworkers etc.
Provisions for volunteers
Not sports people, except jockeys
Labour hire firms held to be employer
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23. Vic workers’ compensation scheme
Key eligibility criteria
‘an injury arising out of or in the course of employment’
But no compensation payable unless the worker’s employment was a significant contributing factor for heart attack, stroke, or where disease is recurrence, aggravation, acceleration, exacerbation or deterioration of any pre-existing injury or disease
Journey to and from work not covered, though work-related travel is, with some restrictions
26,286 standard claims in 2015/15 (WorkSafe Vic 2016)
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24. Vic workers’ compensation scheme
Entitlements
Income replacement weekly benefits:
0-13 weeks: 95% of pre-injury earnings (up to a max)
weeks: 80% of pre-injury earnings (up to a max)
Reduced weekly payments until retirement
But subject to earning capacity with injury
Medical payments
Death benefits, permanent impairment lump sums benefits: Max $578,760
(WorkSafe Australia 2016)
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25. Vic workers’ compensation scheme
Common law
Claims may be pursued for pain, suffering, economic loss but with limitations, thresholds, caps
Require ‘serious injury’ certificate of 30%
Min 40% loss of earning capacity for economic loss
2,683 applications for common law damages in 2015/16
(WorkSafe Victoria 2016)
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26. Vic workers’ compensation scheme
Disputes
Initially by conciliation
Conciliation officer must certify claimant has taken all reasonable steps to settle
Then to County Court or Magistrates Court
Medical questions determined by special Medical Panels
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27. Vic workers’ compensation scheme
Compulsory WorkSafe insurance for employers with 1 or more employees who pay more than $7,500 a financial year in rateable remuneration, or have any apprentices or trainees.
Uninsured employers deemed to be insured and may be required to pay back premiums and penalties
Employer claims excess
First 10 days of incapacity
First $642 of medical expenses
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28. Return to work
In recent years there has been a concerted effort to enhance return-to-work after injury to avoid ‘compo syndrome’
Research indicates that in addition to the original health condition that led to worker being absent from work, workers who are absent from work for long periods are more prone to:
-mental illness ( %), depression, low self-esteem
-social isolation, family disruption,
-adverse economic consequences, long term unemployment
-increased rates of negative health conditions ( %) and mortality (+20%) (Stoll et al. 2014)
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29. Return to work - Victoria
RTW compliance code, information templates
Obligations on employers and workers
Employers must have RTW plan, provide info to workers
‘Suitable employment’ for 52 weeks: modified duties, hours etc
Workers must participate in assessments, use rehab services, make effort to return to work
If remuneration $2m+, must have RTW coordinator
(WorkSafe Australia 2014)
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30. A national workers’ compensation scheme?
Workers’ comp remains predominantly a state matter, but since 2013 Commonwealth Govt permitted new employer entrants to ComCare
Corporations operating in 2+ states may opt to join ComCare and will then be covered by Commonwealth OHS laws, not state laws.
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31. References
Bartrip, PWJ & Burman SB 1983, The wounded soldiers of industry, Clarendon Press, Oxford.
Cass, G 1983, Workers’ benefit or employer’s burden: A history of workers’ compensation in NSW, , Monograph 7, Industrial Relations Research Centre, University of New South Wales, Kensington, NSW.
SafeWork Australia 2014 Comparison of Workers' Compensation Arrangements in Australia and New Zealand 2014.
WorkSafe Victoria 2015, Annual Report 2015.
WorkSafe Victoria 2016, Annual Report 2016.
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