Compensation Arrangements in Australia and New Zealand

360 Pages·2011·3.14 MB·English

Comparison of Workers’
Compensation Arrangements
in Australia and New Zealand
March 2011
Comparison of Workers’ Compensation Arrangements Australia and New Zealand 2010

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Comparison of Workers’ Compensation Arrangements Australia and New Zealand 2010
CONTENTS
Foreword .................................................................................................................... 7
1. The evolution of, and recent developments in, workers’ compensation schemes in
Australia and New Zealand ........................................................................................ 8
1.1 Introduction ................................................................................................ 8
1.2 The national perspective............................................................................ 8
1.3 New South Wales (NSW) .......................................................................... 9
1.4 Victoria..................................................................................................... 10
1.5 Queensland ............................................................................................. 13
1.6 Western Australia (WA) ........................................................................... 14
1.7 South Australia (SA) ................................................................................ 15
1.8 Tasmania ................................................................................................. 20
1.9 Northern Territory (NT) ............................................................................ 24
1.10 Australian Capital Territory (ACT) .......................................................... 25
1.11 The Commonwealth .............................................................................. 27
1.12 New Zealand ......................................................................................... 31
2. Schemes at a glance ............................................................................................ 32
2.1 Jurisdictional responsibility for workers’ compensation ........................... 32
2.2 Workers’ compensation – key features of schemes ................................ 34
2.3 Definition: injury ....................................................................................... 36
2.4 Journey claims ......................................................................................... 37
2.5 Summary of benefits ................................................................................ 38
2.5.1 Incapacity benefits and step downs 39
2.5.2 Medical treatment benefits 42
2.5.3 Permanent impairment entitlements 43
2.5.4 Death entitlements 44
2.5.5 Dispute resolution 46
3. Administrative arrangements of workers’ compensation schemes ....................... 49
3.1 Scheme arrangements ............................................................................ 49
3.2 Legislation ............................................................................................... 52
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3.3 Transitional provisions ............................................................................. 54
3.4 Unique provisions and other workers’ compensation schemes ............... 55
3.5. Dispute Resolution ................................................................................. 64
3.6 Uninsured Employers .............................................................................. 67
4. Scheme Funding Arrangements ........................................................................... 70
4.1 Scheme funding ....................................................................................... 70
4.1.1 Net funding ratio 70
4.1.2 Net assets 71
4.1.3 Net liabilities 71
4.2 Premiums ................................................................................................ 72
4.2.1 Industry rates 74
4.2.2 Premium setting: Notes relating to the industry rates comparison table
78
4.2.3 Calculation of industry rates 79
4.3 Definition of remuneration for the purpose of premiums .......................... 80
4.4 Employers’ excess ................................................................................... 82
4.5 Self-insurer arrangements ....................................................................... 83
4.5.1 Criteria for becoming a self-insurer 85
4.5.2 Approval Process 88
4.5.3 Ongoing licence requirements 97
4.5.4 Renewal/Surrendering/Exiting requirements 106
5. Coverage and Eligibility for Benefits ................................................................... 111
5.1 Definition of worker ................................................................................ 111
5.1.1 Definitions of deemed workers 113
5.1.2 Coverage for independent contractors and labour hire workers 116
5.1.3 Treatment of sportspersons and sporting injuries 117
5.1.4 Workers’ compensation arrangements for government employers 122
5.1.5 Workers’ compensation arrangements for Judges and Members of
Parliament 125
5.2 Definition of ‘work’ ................................................................................. 127
5.3 Definition of injury .................................................................................. 128
5.3.1 Relationship to employment 129
5.3.2 Contribution of employment 130
5.3.3 Aggravation and acceleration 131
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5.3.4 Diseases 131
5.4 Definition of Permanent Impairment ...................................................... 145
5.4.1 Industrial deafness 148
5.4.2 Modifications to AMA Permanent Impairment Guidelines 149
5.4.3 Discounting of prior conditions 155
5.5 Exclusionary provisions - General ......................................................... 161
5.6 Exclusionary provisions –Psychological injuries .................................... 164
5.7 Retirement provisions ............................................................................ 169
5.8 Cross-border Provisions ........................................................................ 171
6. Benefits .............................................................................................................. 173
6.1 Income replacement payments .............................................................. 173
6.2 Settlement of future incapacity benefits ................................................. 182
6.3 Medical and hospital costs..................................................................... 183
6.4 Permanent impairment payments .......................................................... 185
6.5 Death entitlements ................................................................................. 190
6.6 Common Law Access ............................................................................ 193
6.7 Other benefits ........................................................................................ 199
6.8 Definition of Dependants/Spouse for Death Benefits ............................. 208
6.9 Suspension and Cessation of benefits .................................................. 216
7. Return to Work ................................................................................................... 219
7.1 Rehabilitation programs ......................................................................... 219
7.1.1 Aims of rehabilitation 219
7.1.2 Rehabilitation programs 222
7.1.3 Return to Work Plans 232
7.1.4 Suitable Duties 240
7.1.5 Second injury arrangements 248
7.2 Responsibilities of Stakeholders ............................................................ 258
7.2.1 Responsibility of employers 259
7.2.2 Responsibility of workers 271
7.2.3 Responsibilities of Authority/Insurer 290
7.2.4 Responsibility of workplace rehabilitation providers 303
7.2.5 Workplace Rehabilitation Coordinators 307
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7.2.6 Prescribed time periods 317
7.3 Workplace Rehabilitation Providers ....................................................... 325
7.3.1 Nationally Consistent Approval Framework for Workplace Rehabilitation
Providers 325
7.3.2 Minimum Qualifications of Rehabilitation Consultants 326
7.3.3 Approval/Accreditation Process 343
7.3.4 Conditions of Approval 344
7.3.5 Cross Jurisdictional Application for Approval 345
7.3.6 Workplace Rehabilitation Fees Structure 345
8. Miscellaneous .................................................................................................... 352
8.1 Leave Accrual while on Workers’ Compensation ................................... 352
8.2 Superannuation and Workers’ Compensation ....................................... 355
9. Glossary ............................................................................................................. 356
10. Acronyms and Abbreviations ............................................................................ 360

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Foreword

The Comparison of Workers’ Compensation Arrangements in Australia and New
Zealand provides information on the operation of workers’ compensation schemes in
each of the jurisdictions in Australia and New Zealand.

This edition of the Comparison has been enhanced with the reformatting of the
section on self-insurance to allow better comparison between jurisdictions and the
expansion of section 7 covering return to work arrangements.

The Comparison provides background to the evolution of workers’ compensation
arrangements in Australia and New Zealand, and discusses the way that each
scheme deals with key aspects such as the size and nature of the schemes,
coverage, benefits, return to work provisions, self-insurance, common law, dispute
resolution and cross-border arrangements.

The majority of tables contained in this report provide a snapshot of workers’
compensation arrangements as at 30 September 2010. Note that the ACT has
arrangements as at 30 June 2010. Information taken from the 12th edition of the
Comparative Performance Monitoring report covers the 2008-09 financial year and
some jurisdictions have reported recent developments to the end of December 2010.
However, because each jurisdiction may vary its arrangements from time to time,
and because there may be some exceptions to the arrangements described in this
edition, readers wanting more up to date information should check with the relevant
authority.

On behalf of the Heads of Workers’ Compensation Authorities (HWCA), the Victorian
Workcover Authority produced this publication from 1993 to 2005. The Australian
Safety and Compensation Council took over responsibility for the report in 2006 and
produced it in 2006 and 2007. Safe Work Australia has been producing the report
since 2008. The work of the Victorian Workcover Authority and the Australian Safety
and Compensation Council is acknowledged. Safe Work Australia thanks the
representatives from each jurisdiction for the valuable assistance they have provided
in producing this edition of the Comparison.

Safe Work Australia

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1. The evolution of, and recent developments in, workers’ compensation
schemes in Australia and New Zealand

1.1 Introduction
This section provides an historical overview of the development of workers’ compensation
schemes in Australia at both the national and jurisdictional level, and for New Zealand.

In preparing this section, the following publications were used extensively: Kevin Purse The
Evolution of workers’ compensation policy in Australia, 2005, from the Health Sociology
Review; the CCH Workers’ Compensation Guide, Volume 1; and the Productivity
Commission’s National Workers’ Compensation and Occupational Health and Safety
Frameworks report of 2004.

1.2 The national perspective
In Australia, there are 11 main workers’ compensation systems. Over time, each of the eight
Australian States and Territories has developed their own workers’ compensation laws.
There are also three Commonwealth schemes: the first is for Australian Government
employees, Australian Defence Force personnel with service before 1 July 2004 and the
employees of licensed self insurers under the Safety, Rehabilitation and Compensation Act
1988; the second is for certain seafarers under the Seafarers Rehabilitation and
Compensation Act 1992; and the third is for Australian Defence Force personnel with service
on or after 1 July 2004 under the Military Rehabilitation and Compensation Act 2004.

The origin of these Australian workers’ compensation systems lies in nineteenth century
British law. Before the implementation of workers’ compensation arrangements, an injured
worker’s only means of receiving compensation was to sue their employer for negligence at
common law.

However, workers rarely succeeded in these actions due to what has been described as the
‘unholy trinity’ of legal defences: common employment, voluntary assumption of risk and
contributory negligence.

To limit the application of those defences, the Employment Liability Act 1880 was enacted in
Britain. This Act was adopted in the Australian colonies between 1882 and 1895.

While these Acts were well intentioned, taking them up did not lead to any significant
improvement in outcomes for injured workers.

New workers’ compensation laws incorporating a ‘no-fault’ principle came about after
Federation in Australia. New laws were prompted by the failure of the Employment Liability
Act 1880 to improve conditions for injured workers, increasing industrialisation, the rise of
the labour movement and popular support for state intervention on behalf of workers.

To be eligible for workers’ compensation under the no-fault principle, workers covered by the
legislation merely had to prove that their injuries were work related. It was no longer
necessary to prove negligence on the part of an employer.

Nonetheless early no-fault coverage for workers’ compensation was limited. Firstly, although
laws provided for some benefits, the taking out of insurance by employers was not
compulsory. Secondly, to be eligible for workers’ compensation, an injury had to be found to
have arisen out of and in the course of employment.

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In keeping with contemporary attitudes, the first workers’ compensation laws in Australia
were generally known as workmen’s compensation and did not expressly cover female
workers until challenged by the women’s movement of the 1970s.

Post-Federation growth in trade unionism and the rise of Labor governments led to a
process of reforming those early workers’ compensation arrangements, a process which for
a variety of reasons, was to continue in all jurisdictions throughout the twentieth century.

Coverage for workers’ compensation gradually extended to include most workers, and lump
sum payments for loss of body parts were introduced. By 1926, New South Wales had
introduced compulsory insurance, which became the model for most workers’ compensation
schemes around Australia.

Between the 1920s and 1970s, incremental reforms took place across the jurisdictions.
Eligibility continued to widen, with the broadening of the definition of injury to “arising out of
or in the course of employment”. Reforms from the 1970s to the mid 1980s generally
improved compensation benefits for workers. However, economic difficulties in the mid
1980s and early 1990s shifted the focus onto reducing the cost of workplace injures,
containing insurance premiums, underwriting arrangements and administrative efficiency.

In the last quarter of the twentieth century, there was a shift in emphasis in the schemes to
strengthen the role of work health and safety and to highlight the need for rehabilitation of
injured workers. This shift was expected to place downward pressure on costs, but did not
achieve the level of success expected. Further reform attempts focussed on cutting back
benefits and making premiums more competitive.

By the mid 1990s, workers’ compensation costs had fallen by 20 per cent as a percentage of
total labour costs, easing pressure for reform of premiums and costs, although each
jurisdiction continues to grapple with these issues.

Since the introduction of the first workers’ compensation laws, each jurisdiction has
developed its own arrangements. This has resulted in numerous inconsistencies in the
operation and application of workers’ compensation laws. Some of the inconsistencies
include scheme funding, common law access, level of entitlements, return to work and
coverage. These inconsistencies can be attributed, in part, to the varying industry profiles
and economic environments of each jurisdiction, and judicial decisions that have led to
legislative amendments. However, as businesses and workers become increasingly mobile,
the need to understand the various workers’ compensation systems at the national level is
becoming increasingly important.

1.3 New South Wales (NSW)
NSW introduced the Workmen’s Compensation Act 1910, applying to personal injury by
accident, arising in the course of employment, which was limited to defined ‘dangerous
occupations’. Compulsory insurance for employers and the first specialised workers’
compensation tribunal in Australia, the Workers’ Compensation Commission, were
introduced in the Workers Compensation Act 1926. This Act remained essentially
unchanged until the mid 1980s.

The Workers Compensation Act 1987 repealed the 1926 Act, and introduced a radically
different scheme, which included public underwriting of the scheme and removing the right of
workers to make common law damages claims against their employers. In 1989, the
Workers Compensation (Compensation Court Amendment) Act 1989 re-established
common law rights and set out the role of the Compensation Court.

From 1987 to 1991, the workers’ compensation scheme performed well and in the early
1990s premium levels were reduced and there were a number of legislative amendments
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that expanded the range and level of benefits. However, the previous surplus of almost $1
billion quickly eroded and by mid 1996 there was a $454 million deficit. The Grellman Inquiry
of 1997 was initiated to address continuing financial problems. The Inquiry recommended
structural changes including stakeholder management, accountability controls, and greater
incentives for injury management.

Changes in the period 2000-2005 continued to focus on greater competition and choice for
employers, improved outcomes for injured workers, and reducing the scheme’s deficit, which
was eliminated in mid 2006.

The improved performance of the NSW WorkCover Scheme saw the target premium
collection rate for NSW employers reduced by an average 30 per cent between November
2005 and 2008.

A 10 per cent increase in lump sum compensation benefits for permanent impairment was
also implemented for injuries received on or after 1 January 2007.

The structure of the Scheme also continued to evolve. In 2005, the Scheme transitioned
from using insurers on open-ended licences to appointing Scheme Agents on commercial
performance contracts that commenced on 1 January 2006. The contracts made Agents
more accountable for delivering good Scheme outcomes and improved service standards.

From 30 June 2008, employers whose annual wages are $7500 or less receive automatic
coverage and are no longer required to hold workers’ compensation insurance, except
where an employer engages an apprentice or trainee or is a member of a group of
companies for workers’ compensation purposes.

In December 2008, the compensation available to families of workers who die as a result of
a workplace injury or illness was increased for deaths occurring on or after 24 October 2007.
The lump sum death benefit was increased from $343 550 to $425 000 (indexed). The
changes also require payment of the lump sum to be made to a deceased worker’s estate
where they leave no financial dependants. Previously, only financial dependants were
entitled to the lump sum payment.

An optional alternative premium calculation method for large employers based on
commercial retro-paid loss premium arrangements was introduced from 30 June 2009. The
retro-paid loss premium method derives an employer’s premium almost entirely from their
individual claims experience and success in injury prevention and claims management
during the period of the insurance policy. This provides a strong financial incentive for these
employers to reduce the number and cost of workers' compensation claims.

Recent Developments (New South Wales)
The existing seven WorkCover Scheme Agents have entered into new five-year contracts
commencing from 1 January 2010. The new contracts build on the contracts that have been
in place since 2006 by more closely aligning the remuneration paid to Scheme Agents with
their performance in key areas.
1.4 Victoria
Victoria introduced the Workers’ Compensation Act 1914 with benefits payable to workers
arising "out of and in the course of" employment. The Workers’ Compensation Act 1946
changed to arising "out of or in the course" of employment. Major amendments were made
in 1984, and the Accident Compensation Act 1985 was introduced. The Accident
Compensation Act 1985 made sweeping changes to the system, including public
underwriting, vocational rehabilitation, work health and safety reforms and a new dispute
resolution system.

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