The following is in reference to South Australia, however, it could just as well apply to NSW or Victoria. It is written by Ralph Bonig who is SA Law Society president. Despite allegations that a lump sum culture exists this is simply not true, however, there are obvious benefits for bringing back lump sum settlements. This is especially the case when they allow injured workers to take back their own lives rather than being held hostage to systems that do more damage than good in too many cases.
Parties to a compensation case should be able to to negotiate lump-sum resolutions of claims, says Ralph Bonig.
WE have just passed the 25th anniversary of the introduction of the Workers Rehabilitation and Compensation Act in this state.
This Act introduced significant changes in how workers’ compensation claims were handled.
For instance, it places considerable emphasis on rehabilitation of injured workers and their return to work.
Since the commencement of this Act, there have been at least seven major reviews of its operation, including by parliamentary committees and contracted experts.
The Act has been amended on approximately 20 occasions, of which at least four amendments were substantial.
As the Australian Lawyers Alliance pointed out in a recent letter to the editor, the scheme appears to have fallen far short of its intended aims and has a well-publicised unfunded liability in the order of $1 billion.
In my early years in practice, I worked with the predecessor to this current Act. One feature of that Act was the ability of the parties to negotiate lump-sum resolutions of claims.
My experience was that both parties, and any insurer involved, embraced this concept, particularly where there was no realistic prospect of a worker returning to their pre-injury duties.
With the introduction of the new Act and the emphasis on rehabilitation and return to work, although the Act does permit redemptions, significantly far fewer claims are resolved this way.
Recent statistics show that South Australia has the lowest return-to-work rate in the country and, therefore, not surprisingly, the highest proportion of workers receiving compensation payments in the country. A cynic might suggest that this is because life is too good on compo.
That is far from the truth. Over the past 25 years, some of the amendments that have been made to the scheme have gradually reduced injured workers’ entitlements.
Currently, you will only get your pre-injury average weekly earnings for the first 13 weeks.
The payment then reduces to 90 per cent for the next 13 weeks and then to 80 per cent for the following two years. Thereafter your entitlements will be dependent on your work capacity, and in some circumstances payments can be discontinued entirely.
For those who have not returned to work, 72 per cent give still being injured as their reason.
Even when an injured worker returns to work, South Australia has the worst record in the country for the length of time that that worker then remains at work.
This would suggest that the ongoing focus on rehabilitation and return to work, particularly over the longer life of claims, is not having the desired result.
Whichever way one looks at the scheme, whether by statistical result or financial result, it would appear that it is not working and has not worked for some time.
This is, however, not true for all employers. About one-third of the state’s workforce is employed by employers who manage their own liabilities.
These employers do not report the same adverse results as WorkCover and appear to be able to work within the existing legislation.
One fundamental difference between WorkCover and these exempt employers is WorkCover’s reluctance to utilise the redemption provisions that exist in the Act.
There does come a point when it is apparent that it is in everyone’s interests to go their own separate way and the negotiation of a lump-sum payment for future liabilities based on sound medical and actuarial evidence will achieve this.
Rather than another review, why not try and use the legislation Parliament gave us to its fullest extent and see what the results are then?
Ralph Bonig is SA Law Society president