Equilibrium is a state in which opposing forces or influences are balanced. At the heart of any workers compensation scheme is a list of compromises made by both workers and employers in respect of rights and remedies that exist in the Common Law to achieve a balance that, amongst other things:
This concept is enshrined in section 3(2)(c) of the Return to Work Act 2014 (SA) (‘the Act’), which states that one of the objectives of the Act is to “provide a reasonable balance between the interests of workers and the interest of employers”.
Under the repealed Workers Rehabilitation and Compensation Act 1986 (SA) (‘WRC Act’), workers lost the right to sue their employer and seek damages for non-economic loss but gained the right to be paid a lump sum calculated by reference to a percentage impairment. Since amendments were made to the WRC Act in 2008, this became known as an assessment for whole person impairment.
In circumstances where a worker sustained multiple injuries (and/or impairments) from the one workplace incident, these were to be combined to arrive at an aggregated figure. The test for this was articulated in the Supreme Court of South Australia – Full Court decision of Marrone v Employers Mutual Limited as an Agent for Workcover Corporation of South Australia [2013] SASFC 67; which stated in paragraph 28:
“…any two impairments do not arise out of the same series [and therefore cannot be combined] unless all of the events in the series have operated as a cause of both impairments.”
In line with the notion of compromise – during the negotiation that occurred between the (then) Labor State Government, the unions, and business representatives over the Return to Work Bill 2014 (SA) before it was introduced into the Parliament – workers lost the general entitlement to weekly payments to the age of 65 years (subject to certain legislative criteria) and instead received:
In addition to this, any worker assessed as having a whole person impairment of 30% or greater would be deemed to be a “seriously injured worker” and in lieu of the economic loss lump sum, would retain the entitlement to weekly payments until the Federally legislated retirement age.
What is important to note is that the most significant driver to repealing the WRC Act and creating a new scheme was to create a sustainable and affordable scheme for employers who were (at that time) paying the highest premiums in Australia. In this regard, it was widely stated that the objective was to bring the average premium rate for South Australian employers below 2% of workforce remuneration. It can be safely assumed that in agreeing to introduce a lump sum payment for economic loss and the category of ‘seriously injured worker’, the Government engaged in extensive modelling as to:
This modelling must have been done on historical data and therefore based on the test for causation set out by the Supreme Court in Marrone, which is why the decisions of the Supreme Court of South Australia to significantly expand the test for combination of impairments in Return to Work Corporation of South Australia v Preedy (2018) 131 SASR 86 and Return to Work Corporation of South Australia v Summerfield [2021] SASCFC 17 has had such a significant impact on the bottom line for Return to Work SA and self-insurers.
It is relatively uncontroversial to note that a very significant amount of the litigation in the South Australia Employment Tribunal (‘the Tribunal’) at present relates to the assessment of whole person impairment. As the Full Bench of the Tribunal noted in the opening of its reasons in Zaidi v Return to Work Corporation of South Australia [2022] SAET 48 “This is yet another appeal that concerns the issue of combination in connection with assessment of whole person impairment (WPI) under the Return to Work Act 2014 (the current Act)”.
In my view, the principal reasons for the amount of disputation concerning impairment assessments are:
I have previously argued (in articles here and here) that section 22(8)(c) of the Act is not directed toward the issue of combination of impairments, but rather how the assessment process is to be conducted. Read this way, section 22(8)(c) of the Act is intended to reduce the number of assessments a worker is able to have in respect of a particular incident in the workplace that causes a work injury/ies.
Notwithstanding this, the interpretation applied to section 22(8)(c) by the Tribunal and the Supreme Court of South Australia has had the effect of:
In large part, this is because the combination test in Preedy and Summerfield has been applied in such a way that impairments (or injuries) that arise much later after the initiating incident(s) are combined with the original impairment (injury). Common examples are workers claiming that an injury to their knee or hip has then caused an injury to the contralateral joint, or workers who use opioid pain medications claiming digestive and dental injuries.
The impact that the decisions of Preedy and Summerfield have had on Return to Work SA’s bottom line (and then onto employer premiums) has been noted in several of Return to Work SA’s actuarial reports. In its 2020-21 Annual Report, Return to Work SA noted that “the Scheme Actuary has applied a probability weighted approach to determining a $584m liability impact to be applied to this year’s accounts. If the High Court appeal is unsuccessful, the adverse impact on the outstanding claims liability will likely be in excess of $1billion”
The Return to Work (Permanent Impairment Assessment) Amendment Bill 2022 (‘the Bill’) appears designed to reinstate the combination test set out in Marrone as the test for combination of impairments under the Act. It does this by:
On the face of it, this should have the effect of bringing the number of workers who are deemed to be seriously injured more in line with the modelling originally performed by the State Government and Return to Work SA prior to the commencement of the Act and, importantly, avoiding a situation in which average employer premiums in South Australia increase over 2% of workforce remuneration.
I would also argue that these amendments are unlikely to result in an increase in litigation as they do not create any new test for combining impairments.
As one of my colleagues has already pointed out, however, there will need to be some consideration as to how the one assessment rule is to apply with these amendments. At first blush, it seems likely that any “consequential” injuries that arise from the primary injury will lead to an entitlement for a further assessment, which would be an erosion of the “one assessment” principle.
In this context, it is somewhat concerning that there have been reports in the media about various unions calling for more significant changes in the Act. When legislation is not working as intended by the Parliament, it is entirely appropriate for the Government to introduce amendments to ensure that the Act operates as originally intended.
I consider that introducing further changes to the legislation that materially change the manner in which the scheme operates carries a very significant risk of not only eroding the extent to which the Bill will improve the viability of the scheme but would also result in further litigation as parties seek to test the new boundaries and seek out judicial interpretation of any such amendments.
If, as expected, the Bill is brought on for debate within the next fortnight, let’s hope that the Government stands its ground and resists the temptation to engage in horse-trading on this important amendment to protect the viability of the scheme.
Patrick Walsh
Director
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This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this article, or what it means for you, your business or your clients' businesses, please feel free to contact us.