Workers, Small Business and Taxpayers Disadvantaged by Workers’ Compensation Plan, New Research Warns

Research by Adelaide Law School’s Dr Joanna Howe has recommended that the Federal Parliament reject legislation reforming Australia’s workers’ compensation system, warning that the current bill fails the public interest test and risks adversely impacting on workers, small and medium sized businesses, and taxpayers.

The McKell Institute report, “Unsafe and Unfair: A Critique of the Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014.”, was commissioned by the McKell Institute to examine the impacts of the Safety, Rehabilitation and Compensation Bill 2014 and was authored by University of Adelaide Law School academic Dr Joanna Howe.

The legislation would see a radical departure from the status quo, where the vast majority of Australian employers are regulated through state and territory schemes, significantly expanding the national workers’ compensation scheme by permitting multi-state employers to obtain a self-insurance licence.

Author Dr Joanna Howe, a senior lecturer of law at the University of Adelaide, former consultant to the International Labour Organisation in Geneva, and consultant with Harmers Workplace Lawyers, found the plan risked cost-shifting from employers to taxpayers, with costs arising from workplace injury falling on the social security, Medicare, and NDIS systems.

The report recommended the bill, in its current form, be rejected, describing it as “a retrograde step that adopts a lowest common denominator approach to workers’ compensation.” It found no compelling evidence that the vast majority of Australian businesses would experience cost savings, and highlighted that workers’ entitlements and rights in the event of a death or injury would be reduced.

Dr Howe instead recommended that the Federal Government pursue a bipartisan, fact-driven approach to creating a nationally consistent workers’ compensation framework, involving:

  • actuarial analysis to identify the potential financial impact from a national workers’ compensation system;
  • an audit of existing state and federal workers compensation and occupational health and safety system to identify best practice benchmarks for use in a national system;
  • an actuarial review to examine the impact of large businesses moving to a national scheme on businesses that remain in a state or territory jurisdiction;
  • greater resourcing for the Comcare inspectorate to better meet the needs of regional areas and high risk industries;
  • the introduction of statutory timelines and the simplification of the current dispute resolution process;
  • more robust regulation of the Comcare system, including the requirement that self-insurers meet strict prudential and other requirements; and
  • that only employers with a strong financial position and a superior approach to work health and safety should be eligible for self-insurance.

“The expansion of the national workers’ compensation scheme, as proposed, risks leaving workers, taxpayers, and small and medium sized businesses disadvantaged,” Dr Howe said.

“For workers, this plan would result in a national scheme that provides the least entitlements, has the least effective regulator, and the lengthiest dispute resolution process of all the workers’ compensation jurisdictions in Australia.

“The vast majority of businesses would also be disadvantaged as only multi-state employers can move to the national scheme, reducing the premium pool of the state and territory schemes and resulting in increases premiums for the small and medium sized businesses that remain.

“It also shifts the cost of workers’ compensation claims from employers to the public purse as common law access is limited, increasing the cost burden faced by the NDIS, Medicare and welfare systems arising from work-related injuries.”

The report not only found that the proposed legislation would be to the detriment of the vast majority of stakeholders, it also described the evidence backing its introduction as “unsound”.

“The only stakeholders alleged to benefit are multi-state businesses, but even there, this benefit has only been quantified through anecdotal evidence provided by these same businesses,” Dr Howe said.

“It is concerning that no independent actuarial analysis has been conducted to support this contention.

“This Bill represents a hasty, ad-hoc attempt to create a national workers’ compensation system.”

The McKell Institute report also warned that under the proposed scheme, Comcare could potentially be responsible for 67 times its current workload capacity.

“Comcare already conducts far fewer workplace interventions and visits than its state and territory counterparts, and its investigators issue far fewer improvement and prohibition notices,” Dr Howe said.

“The proposed bill could see nearly 2000 major businesses move to Comcare’s self-insurance scheme, placing a much higher pressure on the national regulator, as well as putting the lives and wellbeing of many more workers at a higher risk.”

Dr Howe said the human and economic impact of workplace injury was impossible to ignore, and highlighted the importance of a well designed workers’ compensation system. “Last year 184 lives were lost at work,” she said.

“According to the Australian Bureau of Statistics, each year one in 20 workers experience an injury or illness in the workplace, while the cost of workplace injury to the Australian economy is now estimated to be $60.6 billion dollars.

“Australians expect workplaces to be safe, and that workers will return home without injury or accident. Unfortunately, that is often not the case, and workers’ compensation schemes are about mitigating the consequences of workplace injury and death, ensuring that workers receive fair compensation and are provided with rehabilitation services to enable them to return to work as soon as possible. In that context, the importance of ensuring an efficient, effective, equitable workers’ compensation scheme can not be underestimated.

“A nationally consistent framework for workers’ compensation is a desirable policy goal, and is an objective most stakeholders agree with, but what is in contention is how to achieve it.

“The objective should not be about a race to the bottom, but instead an opportunity to produce a best practice system that appropriately compensates injured workers and efficiently manages their return to the workplace that is the envy of other countries.”

Click here to read Dr Howe’s analysis of the bill in the Sydney Morning Herald.

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