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Final Submission of the Labor Council of NSW to the Sheahan Common Law Inquiry06 September 2001
Submission to the July 2001 Executive Summary of Recommendations Labor Council and its affiliated unions are concerned at the haste in which dramatic changes to workers compensation have been introduced. In light of the timeframe in which Labor Council has had to respond to the issues paper (approximately one week), we make the following recommendations, however, Labor Council and its affiliates will expand on these recommendations by way of oral submissions during the Inquiry. Recommendation 1:- A moratorium on any further changes to workers compensation, including common law, should be established for 18 months, pending the outcome of a full review by both the State Labor Advisory Council and the Workers Compensation and Occupational Health and Safety Council. This review should consider the impact and outcomes of the Workers Compensation Legislation Amendment Bill 2001 (No 2) on injured workers, as well as giving consideration to any savings made through the new dispute resolution process. Whilst it is the view of the Labor Council that a moratorium as described in recommendation 1 above would be the most appropriate outcome, if this is not possible, the following recommendations should be supported. TERM OF REFERENCE 1: Recommendation 2:- Maintain judicial discretion by retaining section 151G of the Workers Compensation Act 1987 (as amended). The monetary threshold of $59,450.00 for non-economic loss, determined by a Judge must be maintained. Any consideration of the impairment threshold cannot be made until guidelines for measuring impairment are finalised. Recommendation 3:- Permanent injury thresholds must not disadvantage injured workers in relation to their current entitlements. Any alterations to thresholds should only occur after full consultation with the Labor Council of NSW and its affiliated unions. TERM OF REFERENCE 2: Recommendation 4:- Have matters dealt with in the current jurisdiction, i.e. District and Supreme Courts. Recommendation 5:- Immediate investigation of Workcover's procedures in relation to assessment and handling of common law claims. Recommendation 6:- That legal costs be returned to the system of scales of costs and these be fixed by the Court and independent of WorkCover and the government. Recommendation 7:- The arbitration system in the District Court be expanded to determine a greater number of cases. However, the arbitration involving these matters must stay within the control of the District Court and under the current format, i.e. the Philadelphia system. The Inquiry should investigate the efficiencies associated with the introduction of the case management system in the District Court. Recommendation 8:- Ensure Injured workers have full access to expert legal representation. Recommendation 9:- WorkCover be required to clearly identify and provide evidence of any inappropriate legal practices. Recommendation 10:- The Inquiry, in consultation with stakeholders, consider proposals which may expose unscrupulous legal practitioners, without disadvantaging the rights of injured workers. TERM OF REFERENCE 3: See Recommendation 7.
TERM OF REFERENCE 4: Recommendation 11:- Statutory scheme benefits be substantially increased. Payments under Section 67 for pain and suffering be increased to $100,000.00. Recommendation 12:- The large claims cap be increased from $150,000.00 to $240,000.00 (reflecting the average payout in common law damages), this would act as a further incentive for employers to maintain safe work places. It is well over due that the large claims costs be increased. Recommendation 13:- That the premiums experience rating be extended from three to five years. Poorly performing employers would then be forced to carry claims for a longer period thus acting as an incentive for them to adjust their behaviour to maintain safe work places. Employers, together with fund managers, work towards underestimation of claims in the first five years. It is far more difficult to manipulate the system if the premium period is extended to five years. Recommendation 14:- Establish a special common law levy on premiums for employers who consistently fail to meet established safety standards. This could include:- (a) an employer failing to meet the minimum standards of the Occupational Health and Safety Act and Regulations. Penalties should also be considered for government agencies who consistently fail to provide safe work places, in the terms described above. Recommendation 15:- Where contract employees are used, ie: Labor Hire and they are injured through the negligence of the host employer, the host employer should contribute to the cost of the common law claim. Recommendation 16:- That the WorkCover inspectorate be expanded to ensure that there are sufficient inspectors to respond to complaints regarding unsafe practices and to prosecute employers who are failing to meet their obligations under Occupational Health and Safety legislation.
TERM OF REFERENCE 4: Recommendation 17:- That WorkCover establish a task force with representatives from unions to develop strategies to reduce workplace bullying and violence in the workplace, which result in workers suffering both physical and psychological injuries. If considered appropriate, codes of practice should be developed to address these issues. INTRODUCTION Why Common Law Rights Need To Be Retained The number of common law claims are only a small proportion of the total number of all workers compensation claims. There are approximately 2,000 common law claims arising from 130,000 workers compensation claims lodged in NSW each year. These relate to serious injuries, involving the negligence of employers. Common law claims are only a small proportion of the total. "The right to sue for common law damages is about affording compensation for injuries sustained by one person as a result of the conduct of another, where that conduct falls short of the standard regarded as appropriate or desirable in our community." "The principle of damages is to indemnify the victim for the loss suffered in economic and non-economic terms, in the present past and future." In New South Wales this is done with a "once and for all" lump sum payment. History bears witness to the existence and importance of this right of injured workers. Several state governments have suffered negative electoral consequences due to their lack of commitment to injured workers rights. This was recognised by Mr Cameron, Minister for WorkCover Victoria, when he restored common law access in that state and said:- "the government believes that the right of severely injured workers to sue negligent employers is a fundamental right that should never have been removed". The Labor Council believes if access to common law is severely restricted, it will remove this fundamental right for most injured workers. The Labor Council notes that the inquiry, as stated in the issues paper, "proceeds on the assumption that access to common law compensation for workplace injuries will continue" and that "the question of whether or not common law should be available for workplace injuries is not within the scope of the terms of reference". Access to common law for injured workers will be severely restricted as a result of the following:- The Labor Council reiterates that fair and equitable thresholds should be set so that parity of access is maintained rather than restrained. RECOMMENDATION: Permanent injury thresholds must not disadvantage injured workers in relation to their current entitlements. Any alterations to thresholds should only occur after full consultation with the Labor Council of NSW and its affiliated unions. The Labor Council believes the recent changes to the workers compensation scheme through the introduction of the Workers Compensation Amendment Bill 2001 (No. 2) will have a negative impact upon injured workers. Although not directly related to the terms of reference of this inquiry the issues paper states on page 3 that "these reforms will need to be taken into account by the inquiry in framing its recommendations to the Governor". Any guidelines and thresholds developed, as agreed by the Government on the 21 May 2001, must not disadvantage workers in relation to their current entitlements. Many workers suffer injuries as a result of the negligence of employers failing to provide a safe system of work. These injuries, even those which may appear relatively minor, can have devastating effects on the lives of workers, their ability for future employment and their enjoyment of life. These injuries also impact on the lives of injured workers' families, both economically and emotionally. There needs to be a system of adequate compensation which provides for seriously injured workers. On average seriously injured workers are better compensated under the common law system. The average commutation under the statutory scheme is approximately $45,000 compared to an average of $240,000 in common law. The major difference between the statutory and common law benefit is that common law provides full compensation for economic and non-economic loss in a damages action. Common law compensation attempts to place the worker in the position, (in terms of both their career, life expectations and quality of life) they would have been in had they not been injured through the negligence of their employer. There is a misguided view that all injuries, despite their cause, should be equally compensated and there should be no distinction between injuries which occur through fault or no fault. Labor Council opposes this view on the basis that negligent employers must be liable for the full damage they cause. Labor Council believes that common law plays a further role in providing an incentive for employers to ensure safe workplaces. Where employers fail to do so, they risk being sued for damages that are much greater than the benefits in the statutory scheme. Further, the current workers compensation premium structure should be modified to ensure that negligent employers pay a higher premium to compensate for the damage and injury they inflict on workers. TERM OF REFERENCE 1:- "to recommend the appropriate threshold for "serious and permanent injury" necessary to recover damages at common law in the WorkCover Scheme, consistent with the available measures of impairment in the statutory workers compensation Scheme, and maintaining access to common law claims under the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998 for seriously injured workers" THRESHOLDS The issue of a threshold has historically been a political decision which deprives injured workers of compensation which would otherwise be available under common law. Labor Council recognises that the legislation determines At present there are two thresholds for an injured worker to access common law. One is a monetary threshold of $59,450.00 for non-economic loss and the other is a disability assessment on the S66 table (i.e. permanent impairment), which in practice is rarely used. The purpose of the monetary threshold is to ensure that people with serious injuries who do not meet the percentage threshold still have access to common law. The Labor Council supports the continuation of the existing thresholds until the conclusion of the review described in recommendation number 1. It appears that new thresholds may be developed in relation to Guidelines based on a whole of body impairment assessment approach. Expert medical practitioners have expressed grave concerns to Labor Council about the concept of a threshold dependent on medical criteria. The Kennett government in Victoria removed all access to common law for injured workers. The current Victorian Labor government recognised the need to allow injured workers access to common law and introduced new thresholds for this access. Mr Cameron, the Minister for WorkCover in his Second Reading Speech to the Victorian Parliament on the Accident Compensation (Common Law and Benefits) Bill said "The bill seeks to restore common law rights for seriously injured workers who satisfy the former deeming test... and in the alternative, for workers who satisfy the narrative test of serious injury proposed by this bill." (13-4-2000) Serious Injury - (Victorian Experience) Unlike the present New South Wales Act, the Victorian Act defines serious injury in respect of the narrative test as meaning:- a) Permanent serious impairment or loss of a bodily function: or The Victorian Government recognised that the importance of a serious injury finding, pursuant to the narrative test, is one which requires a determination which can only be heard by a Judge. Furthermore, the test to be applied is subjective in the sense that it is the effect of the injury which must be considered but the determination must be objectively made by reference to the consequences judged by comparison with other cases in a range of possible impairments or losses of bodily function. There are important differences between the Victorian and the present NSW system. The Victorian system in particular can be seen to be more fair and just for the following reasons:- i. There are no election provisions in the Victorian Act. ii. Separate thresholds for pain and suffering and pecuniary loss iii. The Victorian system provides a maximum amount for pain and suffering of $344,210.00. In New South Wales the present maximum amount for non-economic loss is $246,900.00. The Importance of Judicial Discretion in Determining Impairment and Monetary Thresholds for Access to Common Law The existing arrangements for determining access to the common law system under sections 149 - 151AC provide for the operation of judicial discretion in determining whether a worker meets the necessary percentage impairment or monetary thresholds under the Act. The operation of judicial discretion is an essential aspect of a fair and equitable common law system in that the particular circumstances of the workers claim are heard and tested. The judge hearing the matter can assess the veracity of symptoms as described by the worker in sworn evidence. The workers history together with the evidence of doctors and other witnesses can be tested in cross-examination. A judge will have reference to a range of evidence beyond medical reports, having the opportunity to observe witnesses in evidence. Where a dispute arises as to the extent of impairment the judicial system enables a judge to make findings on credibility that are not ordinarily available under a system where decisions are made at an administrative level. The imposition of prescribed guidelines limiting judicial discretion removes the ability for the judge to decide a matter by reference to the facts of the case with the likelihood arising that a worker, whilst deserving of an award for damages, may fail to comply with the limited range of norms predetermined by the system. The maintenance of a discretionary system of justice means that the common law will have the capacity to evolve such that decisions remain relevant to the social circumstances in which they are made. Should a fixed set of thresholds be established, the legislation shall require constant monitoring and frequent amendment. The Victorian system represents an appropriate model. The system recognises the continued importance of a second gateway; a worker can make application that the injury is a serious injury within the narrative test for serious injury. It is important to maintain a process whereby the consequences of the employer's breach of the duty of care are explored in a forum where there is sworn testimony. Cases are heard in the area where the breach occurred (including country circuits of the court) thus making the employers accountable before the local community. RECOMMENDATION: Maintain judicial discretion by retaining section 151G of the Workers Compensation Act 1987 (as amended). The monetary threshold of $59,450.00 for non-economic loss, determined by a Judge must be maintained. Any consideration of the impairment threshold cannot be made until guidelines for measuring impairment are finalised. Labor Council is asked to submit its view as to the most equitable basis on which the finite resources of the scheme should be distributed. Labor Council reiterates its view that the Workers Compensation Legislation Amendment Bill 2001 (No. 2) will save the scheme an amount in excess of original expectations. The basis for compensation at common law is that the worker has suffered injury through the fault of the employer. The right to sue a negligent party for damages has existed for centuries. The advent of statutory schemes is relatively recent (1926 in NSW) and came about to provide modest benefits to workers who were unable to prove negligence. Government policy has limited access to common law to those with serious impairment and to the extent that the seriously injured retain such access, they remain well served. Access For ease of reading, the box points below correspond directly with the boxed questions in the Inquiry's issues paper. The real basis for access to common law appears to be purely financial. A period of time should be allowed to pass within which savings to the scheme due to the recent amendments to the scheme can be quantified. During this period Labor Council recommends the status quo remains and is hopeful that access can be expanded beyond the seriously injured (see Recommendation 1). The quality of life of seriously injured workers benefits most from access to common law. Labor Council has been asked to comment as to whether the current arrangements provide access to common law for claimants who are most or least likely to benefit. Labor Council does not feel qualified to respond to this in the absence of appropriate research material. The only responses Labor Council could make would be anecdotal in the absence of access to relevant material. Labor Council trusts that the Commission will not make decisions or findings based on anecdotal evidence. Labor Council understands that court cases do not influence access arrangements for common law in NSW. Labor Council understands that the decisions of the courts in relation to access interpreted the legislation and provided a body of binding opinion as to the intention of Parliament. Measures of Impairment The first term of reference refers to thresholds consistent with the available measures of impairment in the statutory scheme. The Commission of Inquiry will not be able to inquire into this matter until the anticipated guidelines are released. It is unlikely this will occur before the Commission hands down its report. It is anticipated that the guidelines to be produced will be almost exclusively based on the AMA Guides to the Evaluation of Permanent Impairment, fourth and fifth editions. These guidelines are the basis of permanent impairment assessment under the Motor Accidents Act (NSW) 1999, where the threshold is 10% whole person impairment. During the almost 19 months to March 2001, of the 42 claims assessed only 5 (12%) crossed the 10% whole person impairment threshold. Injuries which did not cross this threshold included a fractured ankle, a fractured thigh, fractured tibia and fibula, a fractured ulna and rib, a brain injury with loss of smell and taste, a fractured wrist, two cases of injury to neck and back (whiplash) with psychiatric overlay and a degloving injury to the lower leg. Prior to the commencement of the Motor Accidents Assessment Unit, their doctors reviewed 53 matters finalised under the previous legislation. Of the 53 cases studied, 36 did not cross the 10% threshold, 5 were "doubtful" and of the 12 which did cross the threshold the highest assessment was 17% whole person impairment. None therefore were assessed at anywhere near 25% whole person impairment. The right of a worker to recover damages relies upon consideration of many factors including medical, legal and factual. These are best and expertly dealt by the District and Supreme Courts. These courts provide an open and fair consideration of these matters. Labor Council is of the firm view that common law permanent injury thresholds must allow the same access to, and level of benefits as provided by the current scheme. RECOMMENDATION: Any permanent injury threshold must not disadvantage injured workers in relation to their current entitlements. Criticism of Guidelines A number of the doctors who are representing Labor Council on the Government working parties responsible for the development of guidelines have written to the Labor Council outlining their concerns. These concerns suggest the whole process may be flawed. Labor Council is not in a position to make these letters public through this submission, as Labor Council has to respect the confidentiality of these doctors. Labor Council is prepared to provide a copy of the correspondence to Justice Sheahan on a strictly confidential basis. The use of the AMA Guides for determining the degree of permanent impairment has been strongly criticised by stakeholders. It will be more difficult to reach the thresholds when permanent impairment is assessed in accordance with guidelines rather than with reference to the Table of Disabilities. The Labor Council believes the AMA Guides are a harsher scale of impairment which will restrict seriously injured workers access to compensation. A simple example illustrates how a particular injury may attract a different percentage rating under the AMA Guides rather than on the Table of Disabilities.
Example - Loss of an index finger on the right hand Table of Disabilities: Under the Table of Disabilities, such a loss entitles a worker to 21% of the maximum compensation payable. The Guides have also been criticised for not taking into account the effect of the disability caused by an injury, as well as the permanent impairment resulting from the injury. Under the Guides 'impairment' is defined as "a deviation from normal in a body part or organ system and its functioning". The assessment of impairment is based solely on objective medical findings. 'Disability' is defined as an alteration to a person's capacity to meet personal, social or statutory or regulatory requirements. The example of a labourer and a concert pianist is often used to illustrate the difference between the two. While both will suffer the same impairment if a finger is severed in a workplace accident, the concert pianist will arguably suffer a greater disability. While the labourer may be able to return to work, the concert pianist cannot. Labor Council is of the view that it is imperative to maintain the s151G threshold (monetary threshold) for access to common law. We are concerned that guidelines based on the AMA guides will lead to anomalies which may disadvantage seriously injured workers. In particular, if the threshold for access to common law is based on 25% whole body impairment then very few injured workers will reach this threshold (see case studies on page 13-16). Experts in the field of assessing psychological/psychiatric injury advise that an accurate measurement for psychological/psychiatric injury is more difficult and complex than a measurement of a physical impairment. Thresholds for access to common law, as they relate to psychological/psychiatric injury (commonly referred to as trauma) are extremely difficult to determine because judgments made about mental health are not physically verifiable. It is imperative that any "threshold" set for access to common law, particularly for psychological injury, is a "threshold" in conjunction with the worker having the ability to "tell their story". The impact of the injured worker's condition should be assessed not only upon the basis of their "level of impairment" but also on the basis of the effect it has had on their daily functioning psychologically, in their chosen career and in their life situation. To set an arbitrary "threshold" for access to common law for psychological/psychiatric injuries is unworkable and unjust if it fails to take into account prior functioning, or the whole context of the person both before and after the traumatic event or injury. Appropriate consideration must be given to the degree of impact upon the injured worker's life in all its aspects. Any threshold for compensation resulting from psychological/psychiatric injuries must be considered as an arbitrary measure of convenience, rather than based on professional diagnosis or assessment, because professionals do not consider a persons current level of impairment independently of that person's apparent previous level of functioning (i.e. their medical and psychological history). Adequate history taking will also take into account the person's ability to cope at work or in their life situation. When considering whether a person has been hurt as a result of a particular traumatic event, professionals routinely assess how the person was reportedly coping with normal daily living prior to the traumatic event, and compare that to their current level. Threshold measures lack this important flexibility, and do not take all these factors into account. When looking at a number of case studies, there is support for the assertion that across the board thresholds, particularly relating to psychological/psychiatric impairment, are highly arbitrary and fail to take into account other significant factors. CASE STUDY 1 "Rod" is a Police Officer, who, until 1999 performed duties as an "undercover" operative. Rod's duties as an undercover Police Officer included gathering evidence and securing arrests of drug dealers, drug suppliers, drug cultivators, suspected murderers, pornographers and other criminals. As a result of the nature and conditions of Rod's employment he suffered a psychological/psychiatric injury, which has resulted in him being unable to continue his employment as a Police Officer. In the course of his duties, Rod was subjected to numerous incidences, which have impacted upon his psychological health, including:- · In 1995 Rod was left unsupervised at a job in rural NSW, which involved him having to drink spirits in excess and smoke cannabis. He was violently ill and was left for hours lying unconscious in his own vomit. He was unsupervised and not provided with any back-up during this period. · In 1996 he was required to conduct surveillance on suspects whom he had previously arrested. The suspects knew Rod was a police officer and he was genuinely concerned for his physical wellbeing. Rod was not provided with any support or assistance in this duty. · On numerous occasions he was required to purchase illicit drugs from members of outlaw motorcycle gangs as part of his duties. During these times he was provided with little or no backup, support and supervision. Rod genuinely felt his physical wellbeing was at risk on at least 10 occasions. Rod claims his employer's negligence in the lack of supervision/backup and support resulted in him developing a psychological/psychiatric disorder. The impact of Rod's injury upon his life includes the following on-going disabilities:-
· Violent nightmares. This worker currently has an entitlement to common law. In the original Bill it was proposed that there be one threshold of 25% whole of body impairment and no judicial discretion. Under that proposal, - Rod would have no access to common law. CASE STUDY 2 Julie is a 31 year old electrician who suffered electric shock, had a mid-foot amputation and loss of all toes as a result of her employer's negligence in providing appropriate protective equipment. "Julie" has suffered an 18% permanent impairment relating to her physical injuries. She has ongoing nightmares. This worker currently has an entitlement to common law. In the original Bill it was proposed that there be one threshold of 25% whole of body impairment and no judicial discretion. Under that proposal, - "Julie" would have no access to common law. The doctors have also advised that there would need to be a number of different thresholds for different types of injuries. The doctors have provided a number of case studies to make this point clear. CASE STUDY 3 David, aged 30, a construction driller who injured his back whilst attempting to pull out a fence post out of the ground. David was not informed that the fence had been concreted a couple of years earlier. He felt a sudden onset of lower back pain, which radiated down to his right leg. David has been unable to work since the accident. Doctors have diagnosed him with a 15 % permanent impairment of the back David commenced proceedings in the District Court of New South Wales in February 2000. His matter settled at Arbitration in May 2001, with David receiving $798 000 plus an award for costs. This worker currently has an entitlement to common law. In the original Bill it was proposed that there be one threshold of 25% whole of body impairment and no judicial discretion. Under that proposal, - "David" would have no access to common law. CASE STUDY 4 Ken was a 22-year-old farm labourer was injured when instructed by his employer to clear weeds out of an operating potato harvester by jumping on them. He was dragged into the machine and sustained horrific crushing injuries to legs and pelvis. Made quite a good orthopaedic recovery but left with pain, scarring, restricted movement of legs, bowel dysfunction and posttraumatic stress disorder. Was due to commence $800.00 net per week truck driving job the next week. Has only been able to undertake light employment since accident for about one month in total. Has been unemployable, depressed, distressed by the appearance of his legs and socially withdrawn since the date of the accident. Condition not likely to improve. Common Law claim settled for $600,000.00 in addition to the $180,000.00 already paid by the Workers Compensation Insurer in weekly benefits and medicals. This worker currently has an entitlement to common law. In the original Bill it was proposed that there be one threshold of 25% whole of body impairment and no judicial discretion. Under that proposal, - "Ken" would have no access to common law. CASE STUDY 5 Craig, aged 37 was a truck driver who injured his back whilst loading door panels onto a truck. He suffered immediate severe lower back pain and was unable to stand up. Craig needed two operations to his back one year after the accident occurred along with a bone graft and the insertion of pedicle screws. Craig has been unable to work ever since the accident. Doctors diagnosed him with a 30% permanent impairment of the back. Craig commenced proceedings in the District Court of New South Wales in April 2000. His matter went to Arbitration in May 2001 with Craig receiving $449,951.50 plus an award for costs. This worker currently has an entitlement to common law. In the original Bill it was proposed that there be one threshold of 25% whole of body impairment and no judicial discretion. Under that proposal, - "Craig" would have no access to common law. CASE STUDY 6 Daniel 35 year old factory hand required to manually lift shower screens without assistance. Sustained injury to lumbar spine with desiccation of the l5/s1 disc. Permanently unfit for manual work, illiterate and unable to obtain light work or any work involving reading and writing. Completely unemployable. Three young children. Developed depression and drinking problem due to inability to work. Common Law matter settled for $420 000.00. This worker currently has an entitlement to common law. In the original Bill it was proposed that there be one threshold of 25% whole of body impairment and no judicial discretion. Under that proposal, - "Daniel" would have no access to common law. TERM OF REFERENCE 2:- "to examine more efficient ways to process common law claims under the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1988;" More Efficient Ways to Process Common Law Claims Earliest Time to Lodge a Claim The six-month period is largely irrelevant. Plaintiffs, in practical terms do not commence proceedings until a fair degree of certainty exists in relation to a large number of issues including liability thresholds and elections. In practical terms in any jurisdiction it most unusual for a personal injury action to be commenced within 6 months. Latest Time to Lodge a Claim The current three-year time limit seems reasonable provided leave to commence proceedings out of time is determined by a judge. Which Court? Injured workers have had access to common law courts to sue for civil wrongs for centuries. This right has been enjoyed by all citizens. Common law actions in New South Wales may be commenced in the Supreme Court, District Court or Local Court. Following the District Court Amendment Act 1997, increasing the District Court's jurisdictional limit to $750,000, most common law actions involving workplace injuries are now commenced in the District Court. These Courts determine the same issues in cases outside the workplace including medical negligence and defamation. In particular the judges have extensive experience in dealing with complex questions of liability, medicine and law, which arise in cases of serious injury. The judges are experienced with these issues and have the benefit of hearing argument and reaching a fair conclusion after hearing the evidence of experts and specialists. There will always be conflicting views concerning a variety of issues and it is difficult to conceive of another forum to resolve those conflicts. The decisions of such Courts are readily reviewable where concern arises as to the correct interpretation of the law or difficulties in the evidence. Courts are not vulnerable to political control. RECOMMENDATIONS: Have matters dealt with in the current jurisdiction, i.e. District and Supreme Courts and; Ensure injured workers have full access to expert legal representation. The Current Process Efficiencies include the filing of a comprehensive schedule of information and evidence with supporting documents when the matter is commenced, the arbitration system (see below), case management initiatives, modern registry procedures and new listing arrangements. Inefficiencies largely revolve around WorkCover. There are innumerable instances of plaintiff's recovering damages well in excess of amounts for which they would have settled. Similarly WorkCover repeatedly insist in cases being run for days contrary to their legal advice that the issues upon which they choose to defend the matters, have no merit. Labor Council has been informed on many occasions of these occurrences. To address the above problem WorkCover's procedures should be urgently reviewed. The District Court case-management system has shortened lists, reduced delays, saved costs and narrowed the issues between the parties. Labor Council is informed that the District Court case-management system is extremely efficient in ensuring delivery of proper damages to plaintiffs. No other alternative resolution system either in personal injury common law or workers compensation has produced the level of results achieved by the District Court Arbitration System. RECOMMENDATION: Immediate investigation of Workcover's procedures in relation to assessment and handling of common law claims. Costs The deregulation after 1989 of legal costs has removed certainty because of the uneven results in the costs awarded. Previously legal costs were set by the courts and the necessary costs for the prosecution of a claim were taxed by a registrar. It is recommended that legal costs return to the system of scales of costs provided these are fixed by the Court independently of the Government and WorkCover. A return to former system of court registrar, subject to appeal to court, for the taxing of fees should be instituted for the recovery of the costs reasonably necessary for the prosecution of the case. The Labor Council has been informed that Solicitors costs in a random sample of completed common law matters involving a range of verdicts, some inclusive of costs, some plus costs and one with an indemnity costs order, averaged 14% of the amounts recovered. Where an injured worker's claim for damages is unsuccessful, union solicitors and their barristers traditionally have not charged any fees. In addition union solicitors have also borne the cost of reports, filing fees and other disbursements. Deregulation of costs and scales of fees are dealt with above. Settlements "inclusive of costs" have no effect on the level of costs or the amount the worker receives. Such settlements are calculated by defendants adding together an amount for damages and an amount for costs. Settlements are effected this way as a matter of convenience for WorkCover to avoid costs negotiations and assessments if necessary. There is a net saving to the system in eliminating the necessity for this work. Costs are higher in common law proceedings than in statutory claims because common law claims involve a greater number of issues most of which are more complex than issues in statutory claims. Offers of compromise and similar procedures are regularly used in the current system. They have no impact on damages but can reduce legal costs considerably. The issue of the timing of such an offer varies from case to case and should be decided by experienced solicitors. Much has been said by the Government about their motive to reduce the legal costs associated with workers compensation. On occasions it has been alleged with respect to common law that the legal profession take up to 60% of any common law settlement or judgement. No evidence has been forthcoming from WorkCover to back up these allegations, nor would it be seemly possible to do so, because of the client confidentiality regarding settlements. Notwithstanding this, the Labor Council does not object to the streamlining or regulation of legal costs as long as it does not ultimately affect an employee's access to all levels of benefits under common law. RECOMMENDATION: That legal costs be returned to the system of scales of costs and these be fixed by the Court and independent of WorkCover and the government. Arbitration and Other Alternatives The Supreme and District Courts have recently introduced case-management systems. The result has been to coordinate court-hearing time with the use of the arbitration system. Most cases will be heard within 12-18 months of filing in the District Court. RECOMMENDATION: The Inquiry should investigate the efficiencies associated with the introduction of the case management system in the District Court. The adoption by the District Court of a Philadelphia arbitration system overseen by the List Judge has achieved a 95.5% resolution of the claims streamed through it. Only a very small percentage of cases are excluded from this system where their complexity requires it. The use of this arbitration system with experienced Barristers and Solicitors enables the parties to have an independent professional assess the strength of their case. This is reflected in the low level of re-hearings. Attempts at mediation have been unsuccessful in the personal injury area largely because there is no opportunity to test the facts relied on by the other party. Arbitration hearings usually take less than one day and the less formal nature removes much of the stress associated with a full court hearing. The retention of a full rehearing to a judge ensures that where necessary both parties may have the protection of a court hearing. The adversarial nature of rehearing is necessary both to enable parties to test other accounts and to understand why contrary evidence is accepted. The district court system of arbitration and rehearing has proved very successful in achieving the resolution of claims without a full court hearing. This system was introduced during the period when the District Court had to absorb the very large number of Supreme Court cases transferred to its jurisdiction. It has been very effective in reducing delay by having the matter determined at a much earlier stage than previously with consequent costs savings. Achieving both these objectives has not compromised the quality of the decisions. Settlements out of court within the current system have no effect on the amount of damages recovered because such settlements bear a direct relationship to the amount the plaintiff would recover before the court. Alternative dispute resolution is dealt with above. RECOMMENDATION: The arbitration system in the District Court be expanded to determine a greater number of cases. However, the arbitration involving these matters must stay within the control of the District Court and under the current format, i.e. the Philadelphia system. Effect on Injured Worker's Health Labor Council finds it difficult to comment on this issue in the absence of appropriate research material however, anecdotally, it is the universal experience of union officials that long term beneficiaries under the statutory scheme cry out to be removed from it for the benefit of their health. A common law verdict achieves finality of the claim and release from the statutory scheme. The process may well have some temporary effect on the well being of an injured worker. This is however completely outweighed by the benefits of resolution. Much the same can be said for surgery. Union officials also report that injured workers who receive reasonable compensation by damages as opposed to the statutory scheme enjoy a better quality of life and feel as though justice has been done. For the injured worker this means a recognition of the fact that they were not to blame for their injury and that the employer has been forced to take responsibility for their negligence and proven to be liable. It is often only as a result of a successful common law action that a negligent employer modifies their actions. It is the experience of union officials that the stigma attached to claiming compensation initially has an adverse health effect upon an injured worker. A successful common law action vindicates the injured worker. The most deleterious effect on an injured worker's health in the current process is caused by the often-agonising decision to elect between the two available remedies including consideration of thresholds. This agony continues while the injured person waits to see whether the right election has been made. The agony of the election decision could be removed as it has in Victoria. Bearing in mind that statutory benefits are deducted from any verdict its continued existence is hard to justify and it s removal would improve the quality of life of an injured worker. The Labor Council may wish to expand on the costs initiatives in other jurisdictions during oral submissions. There has been insufficient time to properly assess these at this stage. RECOMMENDATION: That the requirement to elect between the statutory scheme and common law be removed. Legal Representation It is a fundamental right that injured workers are entitled to legal representation in the advancement of their compensation claims, particularly where well-resourced insurance companies experienced in the legal process represent employers. It is not a level playing field. The only person standing between an injured worker and an insurer intent on finalising a claim for the cheapest outcome will be their lawyer. Injured workers, like everyone else in the community, are entitled to high quality representation. This right should not be compromised by the introduction of cost structures that deter expert legal practitioners from taking on common law cases, leaving injured workers with a second class system. Legal representatives must be adequately remunerated for their work. Running common law claims is a specialised area. It involves the compilation and presentation of complex factual, medical and legal matters. For example, a common law case for a worker injured on a construction site as a result of the negligence of their employer, will involve the obtaining and considering of detailed engineering and scientific information on the functioning of machinery, investigative reports and detailed analysis of the method of construction, as well as medical and economic/financial matters. Injured workers are entitled to obtain expert advice and representation by the best legal practitioners in the field. Labor Council considers this right as inviolate. WorkCover has, in meetings with Labor Council and its affiliates, alluded to practices by legal practitioners that are undesirable. However, to date WorkCover has not provided any evidence of these. RECOMMENDATIONS: Ensure Injured workers have full access to expert legal representation. WorkCover be required to clearly identify and provide evidence of any inappropriate legal practices. TERM OF REFERENCE NO 3:- "to identify ways to reduce unnecessary costs and inefficiencies in the processing of common law claims under the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998 (W.I.M. Act);" Objectives of the System The objectives of the system are set out in Section 3 of the Workplace Injury Management and Workers Compensation Act 1998, they are to provide prompt treatment of injuries, effective and proactive management of injuries and rehabilitation to assist injured workers and to promote their return to work as soon as possible. To provide injured workers and their dependents with income support, death benefits and payment of treatment expenses. The system is to be fair, affordable and financially viable and to ensure contributions by employers are commensurate with the risks faced. The entitlement to common law exists independently of the W.I.M. Act. One of the objectives of the W.I.M. Act is for the employer to pay premiums commensurate with the risks. Under the current premium methodology there is a failure to adequately address the poor performance of individual employers. See discussion of premium methodology under Term of Reference 4 at page 28. Relationship Of Common Law To Statutory Scheme The two systems run parallel to each other. There are no unnecessary costs associated with the way the dual system operates. Costs are only incurred in pursuing a remedy when WorkCover refuses to pay. An issue decided in one Court is binding on the parties if it becomes an issue in another court and thus there can be no overlap. Effect On Injured Worker's Health The decision to elect one pathway or another (if such an election must be made) is best left to the injured worker. It is a matter of individual choice depending on the injured worker's priorities. As previously stated, this election can cause injured workers considerable anxiety. An injured worker has a great number of things to consider when determining which path of compensation they wish to pursue. They not only have to consider their health and the future health, but also their career aspirations and their lifetime hopes and dreams. Ongoing rehabilitation is an important component of the injured worker recovering from their injury or illness, but rehabilitation does not compensate an injured worker for their loss. The other matters raised in the Issues Paper under this heading do not appear to be encompassed by the Term of Reference No 3. RECOMMENDATION: The arbitration system in the District Court be expanded to determine a greater number of cases. However, the arbitration involving these matters must stay within the control of the District Court and under the current format, i.e. the Philadelphia system. TERM OF REFERENCE NO 4:- "to identify ways to reduce the incentive for pursuing common law claims under the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998." There are only disincentives in the legal process for workers who do not have serious injuries. They are contained in s151 and the cost provisions. The current system includes the following matters, which lead injured workers not to pursue a common law claim: 1. Caps on damages These disincentives result in only about 2000 common law claims being filed each year. No further disincentives should be introduced or even considered until the savings to the scheme by the 2001 Act have been quantified. Labor Council's advice is that these savings will far exceed the amount stated by the government. It is clear that employers are negligent in 99% of the prosecutions conducted by WorkCover. Employers fail to provide safe workplaces. Access to common law ensures proper compensation is awarded to seriously injured workers injured by their employer's negligence. The benefit levels under the statutory scheme have been reduced by 25% under the table of disabilities. In addition, the maximum a worker can obtain for pain and suffering is $50,000. There is a huge difference between benefits under common law and the statutory scheme as quoted previously in our document, the average commutation under the statutory scheme is $45,000.00 as opposed to $240,000.00 under common law. Please find listed below a number of examples to demonstrate the differences between the statutory scheme and common law damages. Example No 1 Worker: Age 30 Present scheme at Common Law: Without common law $70,000.00-80,000.00 Example No 2 Worker: Age 25 Present scheme at Common Law: Without common law $60,000.00-70,000.00 Example No 3 Worker: Age 40 Present scheme at Common Law: The worker would probably receive between $250,000.00-300,000.00. Without common law $70,000.00 Example No 4 Worker: Age 20 Present scheme at Common Law: The worker would expect to receive a verdict somewhere in the vicinity of $300,000.00. Without common law $60,000.00-70,000.00
Example No 5 Worker: Age 40 Present scheme at Common Law: The worker could expect to receive not less than $225,000.00-250,000.00. Without common law $70,000.00 Example No 6 Worker: Age 45 Present scheme at Common Law: The worker could expect to receive not less than $315,000.00. Without common law $60,000.00-70,000.00 Labor Council does not believe that incentives for pursuing common law claims need to be reduced. From the examples above, benefits payable under common law greatly exceed those under the statutory scheme. RECOMMENDATION: Statutory scheme benefits be substantially increased. Payments under Section 67 for pain and suffering be increased to $100,000.00. Entitlement Once again, it is impossible for Labor Council to comment other than anecdotally in relation to anticipated health outcomes as a consequence of pursuing or not pursuing a common law action. Such considerations may well be the subject of a separate inquiry but seem to ignore the fact that a damages action is often the only hope an injured worker has of restoring his or her life to something approaching their pre-injury state. Claims and Legal Process The current claims process does not appear to provide any incentives and the disincentives are contained in s151 of the Workers Compensation Act 1987. In relation to the experience of common law in other jurisdictions refer to page 7 of this submission relating to the Victorian experience. There are disincentives in the claims process and the legal process that might discourage seriously injured workers from commencing a common law claim, but these arise from the caps, elections and thresholds referred to above. They are far outweighed by the benefits, and could be lessened by removing the election. The key decision points for an injured worker is the election. It should be removed. The key decision points would then be liability and thresholds. Generally Apart from an individual employers claims experience, the premium methodology fails to adequately address the poor performance of individual employers in relation to their negligence. The Insurance Council of Australia in 1999 provided workers with information on the 400 worst performing employers in NSW. The Workers' Compensation Advisory Council (WCAC) has continually requested WorkCover to provide a full report on the outcome of these investigations. The WCAC has not been provided with an update. The whole focus of the workers compensation system to date has been all about reducing costs, ie: premiums to employers in NSW, yet very little has been done to address the real reason that costs of the scheme and deficit had blown out. The number one cost driver in the NSW scheme is due to employers failing to provide suitable alternate employment. There is no experience rating where employers pay $3,000 or less in premiums. Employers that are experience rated have their large claims, including common law, capped at $150,000. This could be seen as a disincentive for employers for provide safe work places. This large claims cap is manipulated particularly by large organisations who have a number of large claims, either through common law or by terminating injured workers. Poor performing employers who fail to provide safe workplaces are contributing to the increase in the basic premium rate to all employers. This contributes to the unfunded premium cost of the scheme. All employers, including those who comply with safety standards, pay for the excess costs of these claims through their industry tariff. For example, the construction industry tariff rate is one of the highest at 10.34%. Extending the premiums experience rating from 3 years to 5 years will result in more realistic premiums for poor performing employers. RECOMMENDATION: That the premiums experience rating be extended from three to five years. Poorly performing employers would then be forced to carry claims for a longer period thus acting as an incentive for them to adjust their behaviour to maintain safe work places. The large claims cap be increased from $150,000.00 to $240,000.00 (reflecting the average payout in common law damages), this would act as a further incentive for employers to maintain safe work places. That the premiums experience rating be extended from three to five years. Poorly performing employers would then be forced to carry claims for a longer period thus acting as an incentive for them to adjust their behaviour to maintain safe work places. Incentives / Disincentives There are no perverse incentives or practices that are intended to reduce common law actions but have the opposite effect to Labor Council's knowledge. Legal Advertising The Labor Council sees no need for legal advertising. If there is to be legal advertising however, it should be both restricted and monitored. The Motor Accidents Compensation Act 1999 contains a very high threshold (10% whole of body impairment) which must be crossed for an injured person to be entitled to common law damages. Very few people are crossing this threshold (refer Appendix 1 Motor Accidents Scheme statistics). A worker injured in a motor vehicle accident is now far more likely to remain on the benefits of the statutory scheme. This will increase the costs of the statutory scheme to the benefit and profit of the third party motor vehicle insurers. Should a high common law threshold be set injured workers will have to rely upon their benefits under the statutory scheme which will increase the cost and pressures on the scheme. The New South Wales Teachers Federation wishes to address, in oral evidence before the Inquiry, issues contained within this submission relating specifically to psychological injuries. The Construction Forestry Mining and Energy Union wishes to address, in oral evidence before the Inquiry, issues contained within this submission relating specifically to employer non-compliance with obligations relating to Occupational Health and Safety legislation.
Annexures 1. Motor Accidents Authority Statistics For further information
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