Peter Hanks QC has handed down his review of the Safety Rehabilitation and Compensation Act 1998 (SRCA), which contains some excellent recommendations for reform of the national Comcare scheme.

The last review into the Comcare scheme was completed in 2009 when Julia Gillard was the Minister for Workplace Relations. Sadly, one of the most important recommendations from that review putting time limits on employers in determining claims is yet to be implemented.

The problem for this review is that a fast closing political window could well see the reforms it recommends languish under a change of government. In other words, the Gillard Government should be urged to act on these recommendations as soon as possible. It is doubtful that many of these recommendations would see the light of day under an Abbott Government. On this point, the current Workplace Relations Minister, Bill Shorten, has announced that he will prioritize 27 of the 147 recommendations in the Hanks review. (Read more here.)

One of the attractions of the review is that it suggests many ways in which the proposed increase in benefits for workers could be offset by greater efficiencies and cost savings for employers.

Time limits on employers

One of the recommendations made by Mr. Hanks is that liability for claims must be determined within 30 days (in the case of claims for injury) and within 60 days in disease claims (Recommendation 9.3). The absence of time limits for determining claims also means that workers are often left without income for months while employers take time to determine claims. One recommendation (6.1) which would assist in alleviating some of the hardship that many workers confront when waiting for their claims to be determined, is to allow for provisional acceptance of liability so that an injured worker may access up to 12 weeks in incapacity payments and up to $3,000 in medical expenses.

Psychological injury and bullying – wins and loses

Unfortunately, Mr. Shorten is reported as saying that among priority recommendations are changes to the laws relating to bullying claims and psychological injuries. According to Mr. Shorten, “The Government will require Comcare to be more vigilant with assessing mental injury claims. This will better protect the Commonwealth and therefore taxpayers and make sure that mental injury claims are actually linked to employment.”

In taking a hard line on claims for psychological injury, the Gillard Government, like the Howard government before it which introduced the exclusionary provisions for “reasonable administrative action” (s 5A of the SRCA), is using the legislation to stop commonwealth workers claiming for psychological injury rather than attempting to address the reasons for the increasing incidence of claims for psychological injury in Australian workplaces. In other words, the Government should concentrate on introducing changes to workplaces so that workers don’t become sick rather than seeking to punish those who do succumb to psychological injuries by trying to blame the victim. Ironically, the Government recently reviewed bullying in the workplace with a view to protecting workers from bullying. (Read more on the review here.)

At the same time however, the Government is looking at ways to make it harder for people who have been bullied in the workplace to be compensated.

While the Hanks Review does recommend a tightening of the provisions regarding “reasonable administrative action,” it also recommends changes that will make the operation of the provisions fairer. What makes psychological claims complex is the number of factors that may have contributed to an injury. Currently the law holds that a claim will fail even if just one in a series of these factors or events is determined to be “reasonable administrative action undertaken in a reasonable manner”.

Hanks recommends (5.5) that for a claim for psychological injury to fail, the “reasonable administrative action” must have contributed to the injury to a “significant” degree.

Making it easier to return to work

The focus on rehabilitation and return to work as recommended by Hanks and which Shorten has indicated Comcare will emphasize are positive changes (6.1 to 6.21). Other positive recommendations regarding rehabilitation include that the SRCA be amended to provide for a requirement that all reasonable steps be undertaken to return an injured employee to work (6.14) and to provide for the power to impose penalties where this does not occur (6.17). Currently, there is no real pressure for an employer to offer workers suitable duties and it is often easier (although more costly financially and emotionally) to leave a worker on the scrap heap. Further, Hanks has recommended that a scheme wide job placement program is established (6.18). This is particularly important in relation to workers with work related psychological injuries where the barriers to ever returning to the workplace where their injuries occurred are in many cases insurmountable.

Less harsh treatment of weekly earnings

There are also changes recommended regarding the calculation of “normal weekly earnings” (NWE) when determining the rate of loss of earnings benefits (7.2) and changes which address the harshness of the current provisions regarding the effect of “receiving” a superannuation lump sum which currently operates to reduce incapacity benefits on an indefinite basis, even if the superannuation lump sum is rolled over (see Mirkovic v Telstra Copr Ltd (1993) AAR 492). Indeed, Hanks has recommended the removal of the sections which require such reductions (7.5) but if this recommendation is not accepted, Hanks makes other recommendations that will ameliorate the harshness of the current provisions (7.6 and 7.7).

Hanks also makes recommendations regarding the cut off point (currently at age 65) for payments of weekly payments of compensation. Hanks recommends that the cut off point is tied to the qualifying age for the age pension (7.16).

The other problem for the Comcare scheme has been the very limited capacity for an employer to “pay out” a claim. Hanks recommends that the SRCA is amended so that an employee can redeem his or her compensation payments on a voluntary basis (7.18).

Common law payouts still stingy but significant increases recommended in impairment claims

Other positive recommendations for workers include increasing the maximum payment for impairment to match the death benefit, currently being an amount of $475,915 as opposed to the current maximum of $231,000 for impairment claims (8.4). In addition, Hanks recommends that where a further lump sum by way of impairment is claimed, compensation should be payable where the condition deteriorates by 5% (8.3) or more whereas the current arrangements under the SRCA are that impairment must deteriorate by 10% or more for further lump sum compensation to be paid.

Unfortunately, Hanks did not recommend an increase in the maximum damages payable for pain and suffering in a claim for common law damages where an employer is found to have negligently caused an injury. This amount is pegged at $110,000 under the SRCA and has not been indexed since the SRCA was passed in 1988. Essentially, the amount for common law damages has not been increased in nearly 25 years of the SRCA’s operation so as to discourage workers from suing their employers. By comparison, the maximum payable under the Victorian workers’ compensation scheme for pain and suffering damages is currently around $510,000.

Better benefits offset by admin savings

All in all however, Mr. Hanks is to be commended for the comprehensive nature of the review and for the fact that there are many positive recommendations both for workers in terms of benefits, and for employers, in achieving efficiencies and therefore cutting costs. In other words, it is hoped that the reduced administrative costs will offset the cost of proposed increases in benefits to workers. If this could be achieved, this would be a rare example in government of a win-win situation.

Read the full Ryan Carlisle Thomas submission on bullying here.