Common Law - The New Battleground Between Unions & Employers
Shortly before the election, the Government issued a workers compensation policy statement introducing “A New Recovery and Return to Work System for South Australians”. The new system will see the reintroduction of common law to the South Australian scheme. Common law is a tort and allows an injured worker to bring a negligence action against his/her employer.
The reintroduction of common law is said to be in recognition of the fact:
“That a variety of compensation approaches is often useful in a community, in order to suit different needs. A benefit dependency cycle may be avoided where a worker receives a common law settlement, and can then take responsibility for the ongoing management of their injury and control of their life.”
Make no mistake, however, the reintroduction of common law has everything to do with a long held and erroneous ideological position adopted by the union movement and nothing to do with a recognition “that a variety of compensation approaches is often useful in a community…”.
I expect that the new legislation has already been drafted and we can expect it to be tabled in Parliament shortly or at least released for consultation. In keeping with the policy statement, it will include the reintroduction of common law and I expect there to be united opposition to its reintroduction by all employer groups in the State.
The confrontation will seriously test the Government’s resolve to listen to and engage positively with the business community in South Australia, as it pledged to do when it basked in the rosy glow of being returned to power.
The Government has the opportunity to make improvements to the scheme and lower premium rates to a competitive level whilst retaining a reasonable level of benefits, but the reintroduction of common law will, inevitably, impact adversely on both of those aims.
Changes to the scheme should have three fundamental aims:
1. The delivery of a reasonable level of benefits to people injured in the workplace;
2. A significant and sustained improvement in return to work rates; and
3. Reduced premiums for all employers.
All of these aims are better achieved by jettisoning the notion of a common law comeback.
Common Law and the Scheme
The workers compensation scheme is a no fault scheme but in the majority of schemes it co-exists with common law. This co-existence contrasts with the United States which also has no fault schemes but workers in the United States traded off the risky, fault-based and, often, expensive right to sue the employer and opted instead for the right to bring no fault, less costly workers compensation claims. In Australia, States and Territories that retained common law generally imposed restrictions by implementing thresholds that limited access to those more seriously injured.
The access to common law was removed from the SA scheme in 1992 at a time when there was funding pressure and a need to contain costs. Other benefits were removed at the same time.
The Minister at the time when introducing the amending legislation said that:
“What we are doing is ensuring that that person is properly looked after, and we are delivering that at a lower cost than we were ever able to deliver it under the old scheme, because we have got rid of a lot of the high cost add-ons that never went near the worker. As members know, when you take out a common law claim, after the costs and legal fees have been deducted, the worker gets precious little.”
Why bring it back?
The union movement and the Law Society strongly support the reintroduction of common law.
The union movement assert that it encourages workplace safety initiatives and punishes the negligent and the indifferent amongst the employer and business community. The union movement makes that bold assertion but does not and cannot provide evidence in support of the notion that common law encourages and promotes an awareness of workplace safety beyond that which already exists.
Some members of the legal profession say that common law is effective in allowing an injured person to “have their day in court” to tell their story and empower the individual by being part of a process which sends a message to the employer that the worker had been wrongly harmed.
The Law Society asserts that common law should be reintroduced to ameliorate the arbitrariness of capping income maintenance payments at two years or any other chosen period. Mostly though it is supported because the notion of tort remedies is deeply ingrained in the psyche of lawyers.
The Case Against
The counter-arguments are many.
Studies show that the anti-therapeutic effects of the common law remedy outweigh the positive effects (Kay Lippel, “Therapeutic and Anti-Therapeutic Consequences of Workers Compensation” (1999) 22 (5-6) International Journal of Law & Psychiatry 521.
The anti-therapeutic effects include long delays in the litigation process, often resulting in, at least interim, reliance upon Government Welfare for claimants, hostile working environments and significantly reduced prospects of a return to work.
Research has also established a link between time to claim closure and reduced physical and social functioning. The results suggest that lower pain, better function and the absence of depressive symptoms were strongly associated with faster time to claim closure and recovery.
A study undertaken by Deakin Prime, the corporate education arm of Deakin University, in 2010 concluded that:
“There was, in every jurisdiction, an underlying concern about the impact of common law upon the functioning of a scheme. Participants cited its impact upon worker expectations and the tendency for workers to do what was necessary to preserve their claim rather than preserve their ability to return to their prior life. On the other hand, common law was regarded as being inevitable and too deeply ingrained into the Australian experience to be subject to elimination.”
Not only does common law act as a barrier, or at least a blocker, to recovery and return to work, but it demonstrably impacts adversely upon physical and social functioning and increases the likelihood of the injured worker developing depressive symptoms.
The existence of common law as an “incentive” for employers to focus upon improvements in workplace health and safety is a fallacy. The fact is that the Work Health & Safety Act 2012 imposes severe penalties, including possible imprisonment, for breaches of the Act.
Negligent or irresponsible employers are not only subject to punitive penalties imposed under the Work Health & Safety Act 2012, but they suffer a further financial impost because WorkCover premiums are largely experience rated and employers incurring significant costs are penalised with higher premiums.
It is generally overlooked in the debate about the reintroduction of common law that not only is there a cost to the employers in the State, but it also comes at the expense at some level of benefits to the majority of injured workers. An unintended consequence it may be, but invariably lump sum or other benefits of the statutory scheme are restricted to accommodate the cost of common law claims accessed by a select few.
The high level of benefits available to the seriously injured under the statutory scheme really make a compelling case that the statutory scheme provides a significantly better therapeutic approach for the seriously injured than does an adversarial common law action.
The arbitrary nature of a capped scheme can be addressed by allowing a modest lump sum payment to be made to an injured worker who has not made a successful return to pre-injury duties at two years to ensure finalisation of the claim and an equitable exit from the scheme. A whole person impairment assessment by accredited assessors could form the basis of, not only the lump sum compensation for permanent impairment, but also the amount of the lump sum payable to finalise the entitlements. In that way all workers would be afforded an equitable exit and not just those injured in circumstances where they can prove negligence.
Finally, no better authoritative summary can be found than the comments made in the review of the South Australian Workers Compensation system conducted by Bracton Consulting Services and PriceWaterhouseCoopers 2007. The review made the following comments on the option to reintroduce common law:
“The delays associated with, and adversarial nature of, the common law action are inimical to that goal (a focus on return to work outcomes). As well, empirical studies of the operation of common law demonstrate that it can still overcompensate minor injuries and significantly undercompensate more serious injuries compared to long tail statutory arrangements such as exist in South Australia. The prerequisite requirement of having to demonstrate fault for access to common law damages departs from the philosophical no fault basis of statutory workers compensation schemes. As well, the relatively high transaction costs associated with common law means that it is a less efficient mechanism for delivering benefits to injured and ill workers than statutory benefit arrangements”.
In my View
The reintroduction of common law will:
· introduce further complexity and cost into the scheme;
· delay compensation, and physical and emotional recovery in many cases;
· necessarily result in further restrictions in statutory benefits for the majority of injured workers as a trade-off;
· carry with it a genuine risk of funding problems. Most schemes have had to introduce and/or increase thresholds which restrict access to common law because of funding blow-outs;
· prevent the reduction of the average premium rate to a level which will make it competitive with other States and Territory schemes, thereby maintaining an unnecessary burden on existent business operators in the State and making South Australia less attractive to an interstate business considering commencing operation in South Australia.
The best interests of employers and workers align in rejecting the push to reintroduce common law. Inevitably, any benefit obtained by the few will come at the cost of a diminution of benefits to the many in the statutory scheme.
To read John Walsh's (Managing Partner, Donaldson Walsh Lawyers) previous WorkCover Updates please visit http://www.donaldsonwalsh.com.au and click through to the News section.
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