Northern Territory Second Reading Speeches

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WORK HEALTH AMENDMENT BILL 2004


Bill presented and read a first time.

Mr STIRLING (Education, Employment and Training): Madam Speaker, I move that the bill now be read a second time.

The bill incorporates provisions from three distinct reviews. The first concerns matters outstanding from the Review of the Working Group and of the Operation of the Northern Territory Workers Compensation Scheme, referred to as the Stage 1 Review. The majority of the Stage 1 provisions were enacted in the Legislative Assembly in August 2002 and commenced on 1 November 2002.

The second is to give effect to a number of recommendations of the Lord Report. The Lord Report documents a review into medical and associated intervention in the Northern Territory Workers Compensation Scheme.

The third is to amend the definition of ‘normal weekly earnings’ under the Work Health Act in order to protect the financial viability of the Northern Territory Workers Compensation Scheme.

With regard to the first matter, the Stage 1 Review, there were three provisions that were not proceeded with in August 2002. During my second reading speech at that time, I stated that some recommendations had not been proceeded with as they required further investigation and consideration. This bill now addresses two of those three outstanding matters.

The bill introduces the concept of ownership and responsibility by the injured worker in relation to employment and return to work. The legislation as it currently stands places many obligations on the employer to return the injured worker to the work force; yet it does no more than to require the injured worker to cooperate with the efforts of the employer.

This provision will place a greater obligation on workers compensation claimants by requiring that they take reasonable steps to obtain suitable employment for themselves. The provision will not in any way replace the employer’s obligations, but rather is designed to complement the process by ensuring that both the employer and worker have ownership and responsibility for return to work, and therefore mitigation of loss.

The bill also addresses the lack of the timeframe for a workers compensation claimant to apply for mediation following receipt of a formal notice of rejection of liability or reduction or cancellation of benefits. Currently, no time limit applies, so in theory a claimant could seek mediation many years after receiving such notification. This could unfairly prejudice the employer and this provision will remedy the situation by introducing a 90 day time limit for a claimant to apply for mediation following receipt of the formal decision on their claim. The 90 day period was chosen because experience shows that the vast majority of applications are made within this timeframe and it will therefore minimise the need for litigation in respect of time extensions. There is provision for a claimant to make application to the Work Health Court to extend the time for application should the claimant be able to demonstrate reasonable grounds.

Madam Speaker, there is one outstanding matter from the Stage 1 Review that is not included in the bill. This matter relates to negotiated settlements. Provision for negotiated settlements has previously received considerable criticism from the Department of Justice as well as the Chief Magistrate. This has mainly been on the basis that it may well compromise the pension-based nature of the scheme and therefore the rehabilitation incentives that a pension based scheme provides for both employers and injured workers.

Further and more recently, a major review into South Australia’s workers compensation scheme recommends abolishing lump sum redemptions. In this regard, the South Australian Review Report says that while redemptions have some appeal in terms of their ability to settle long-term claims at less than their lifetime expected value, redemptions clearly contribute to the risk that some injured workers may continue on the scheme longer than is required in pursuit of a redemption payout. The South Australian report attributes its poor workers compensation performance in no small part to the sustained use of redemptions to terminate claims.

Madam Speaker the Northern Territory Workers Compensation Scheme benefit structure is very similar to that of South Australia. Given this, the South Australian experience is a strong indication that it may be inappropriate to expand the ability in our scheme to finalise claims in the form of lump sum redemptions. Such redemptions are, in effect, the outcome of negotiated settlements.

Therefore, it is proposed that there be further evaluation of the South Australian experience, and an evaluation of lump sum redemptions that already exist under the Northern Territory Workers Compensation Scheme before further consideration of the implementation of provision for negotiated settlements.

I now address the provisions in the bill that will give effect to a number of recommendations of the Lord Report. The bill will ensure early medical review of claims by limiting the currency of the initial medical certificate to 14 days. It will ensure that the treating medical practitioner will be consulted where medical information is required early in the claims management process. It will ensure notification will be given to the treating medical practitioner of proposals for independent specialist review, and it will ensure that independent medical specialist reports obtained in the claims management process are provided to the treating medical practitioner. These amendments will improve the effectiveness and efficiency of medical intervention in the Workers Compensation Scheme, particularly in regard to the claims management process.

There are a number of other recommendations of the Lord Report that are not included in this bill as they do not require legislative amendment but can be implemented administratively. The final, but far from least, matter that this bill will give effect to, concerns the definition of ‘normal weekly earnings’ under the Work Health Act. Normal weekly earnings, as defined under the act, provide the basis for the calculation of an injured worker’s entitlement to weekly incapacity benefits. Workers’ compensation benefits represent a balance between what is fair for the injured worker and what is affordable to the community. It follows that benefit structures under statutory workers compensation schemes are not intended to provide full indemnity for an injured worker’s financial loss but, rather, are intended to meet what is considered by the community to be fair but affordable compensation.

Recent court decisions threaten the balance of the Northern Territory’s Workers Compensation Scheme and consequently its financial viability. In this regard, the courts have interpreted the definition of ‘normal weekly earnings’ under the Work Health Act to include employer-funded superannuation contributions made on behalf of workers, and the value to the worker of free board and lodgings and any other non-cash remuneration that could be seen as a benefit to the worker. It is therefore now open to interpretation that employer-funded allowances such as annual leave loading, airfares and private use of motor vehicles could also be included in normal weekly earnings. While the court decisions can be seen to have a positive effect for injured workers, because benefits payable will, in many cases, more closely match a worker’s total remuneration, they will have an adverse effect on the costs of the Workers Compensation Scheme.

In this regard, if the definition of ‘normal weekly earnings’ under the Work Health Act as determined by the court is not addressed, then superannuation alone would increase future private sector scheme costs by around 4% per annum. In percentage terms, the government sector costs are likely to be higher at around 7% per annum because superannuation contributions made by government are generally higher than in the private sector. Actual costs will be considerably higher when taking into account other employer-funded remuneration, such as rental assistance, electricity subsidies, vehicles, leave loading, air fares, etc.

Further, these court decisions are retrospective in their effect, and benefits owing for past periods for superannuation alone are conservatively estimated at $15m for the private sector and $8m for the government sector. These will be unfunded liabilities. These figures do not take into account interest on late payments that, if claimed, could apply to payments owing for up to 17 years. Once again, non-cash benefits are very difficult to estimate, but would add considerably to the retrospective unfunded liability.

These costs would also affect the HIH liability, both past and present. In this regard, the past liability for superannuation alone would be around $2.2m, which does not include interest that may be claimed. Future liability for superannuation would see costs increased by at least 4% per annum, which would conservatively add another $1m to the outstanding liability. Once again, it should be noted that these figures do not include the costs for non-cash remuneration. In addition to increased costs for benefit payments, there would be increased administrative costs involved in calculating benefits. This is due to difficulty in assessing the value of non-cash remuneration and superannuation contributions. This would be particularly so for part-time or light duty employment, and could lead to greatly increased disputation over the calculation of an injured worker’s normal weekly earnings. There is also likely to be an increase in litigation as applicants test the boundaries of what constitutes the non-cash component of normal weekly earnings. Failure to address this issue will jeopardise the financial viability of the Northern Territory Workers Compensation Scheme and, as consequence, force a substantial increase in employer’s workers compensation premiums at a time when Territory business can do without increased financial pressures.

The remedy lies in legislative amendment with retrospective affect from the commencement of the Work Health Act in 1987. In this regard, the bill provides that the definition of ‘normal weekly earnings’ under the Work Health Act does not include employer-funded superannuation contributions and non-cash forms of remuneration. This provision will restore the status quo by confirming what was considered to be the intention of the workers compensation legislation prior to the recent court decisions. It is not proposed that this retrospective amendment should apply to payments that may have been made before the commencement of the amendment; that is, the retrospective amendment will not enable recovery by the employer of superannuation or non-cash benefit that may have already been paid as part of the worker’s incapacity benefit. Further, the retrospective amendment will not affect compensation payable by order of the court made prior to commencement of the amendment.

The Northern Territory Workers Compensation Scheme provides one of the more generous benefit structures when compared with other Australian workers compensation jurisdictions. This is particularly so in respective of the weekly incapacity benefits. No other Australian jurisdiction provides for the inclusion of the employer-funded superannuation contributions as part of incapacity benefits, and only South Australia includes some form of non-cash benefit, and only then in limited circumstances.

This bill is further testament to this government’s ongoing resolve to ensure that the Territory Workers Compensation Scheme is equitable, efficient and viable.

Madam Speaker, I commend the bill to honourable members.

Debate adjourned.

 

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