WORKCOVER CORPORATION (GOVERNANCE REVIEW) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 28 February 2008. Page 2312.)

Dr McFETRIDGE (Morphett) (16:11): I will not keep the house 3½ hours on my second reading contribution. This bill is a concise and precise piece of legislation which the opposition will be supporting. I will be raising some issues and I have some questions for the minister during the committee stage. I understand there are some government amendments and, also, some amendments to be moved by the erstwhile member for Mitchell.

This bill is designed to clarify and open up the relationship between the government and WorkCover. One would think this relationship would be very close because of WorkCover's responsibilities and the potential for the unfunded liability to impact on not only the AAA rating of the state but also the entire finances and financial mindset of this state. Certainly, we all know that the unfunded liability is getting up towards $1 billion. It is a significant figure in anyone's mind and it is affecting a number of people's mindset, so getting that unfunded liability under control will be a job for anyone. It is vital that WorkCover Corporation's relationship with the government is somehow tightened up through this legislation and that it is more open and transparent and subject to audit, as well, by the Auditor-General.

During his second reading explanation, the minister said that the committee needs to be confident that the government and WorkCover are working together on delivering these reforms. We spoke about the reforms during the past five sitting days, and we all should be aware of them now; certainly, the unions and the employers are more than aware of what is happening. We just hope that it has some effect on the way in which WorkCover is being managed in this state. This bill contains three specific proposals to allow the government and WorkCover to work together to deliver these reforms. During his second reading contribution, the minister said:

First, the bill replicates the power of ministerial direction used in the Public Corporations Act...

Because I have been responsible for this portfolio for only six weeks, I was not sure of the relationship between the government and WorkCover under the Public Corporations Act. I was surprised to see that WorkCover is not part of that act, although I understand it was recommendation No. 6 of the 2005 Statutory Authorities Review Committee. Why that has not happened, I do not know. Perhaps the minister can take that on board and answer it later.

The second aim of this bill is to prepare a charter and performance agreement between the minister and WorkCover. I will be looking to see how effective the charter is because it is vital to the economy of the state, to WorkCover and, in particular, to injured workers and employers—that whole group of people—that the performance of WorkCover is improved significantly.

When I say 'WorkCover', I am using the generic term: that includes the WorkCover Board, the managers of WorkCover Corporation and the case manager, EML, and, I suppose, further down the food chain to the case managers, the rehabilitation providers and all the other people involved in getting workers back to work. I remind the house that the other bill's title includes the words 'workers rehabilitation and compensation'. It is 'rehabilitation' first and 'compensation' next. So, it is about getting injured workers back to work in a fair, just and decent fashion.

Thirdly, the bill proposes that WorkCover have its accounts audited by the Auditor-General. I have no problems with that at all because, if there is any extra imperative that we can put on to the board (and so WorkCover generally) to make sure that it performs as we all hope it should, and as it said it would perform back in 2006 (and I will talk about that in a moment), that will be a bonus for everyone in this state, particularly injured workers and employers.

I am surprised about the need for this sort of legislation because I understand that the minister can give ministerial directives (and I will talk about that a little later). However, let us have a quick look at the way in which WorkCover has been travelling in South Australia. I know that we spoke about this during debate on the previous bill, but it is important to see why we need this piece of legislation, which provides for performance agreements and ministerial direction to be enhanced and also provides for audit by the Auditor-General. On 19 January 2006 (over two years ago now), Julia Davison, the CEO of WorkCover, issued a press release which stated:

WorkCover Chief Executive Officer Julia Davison said Employers Mutual had been appointed as WorkCover's sole claims agent following a rigorous and highly competitive tender process for new agent contracts, effective 1 July 2006.

Ms Davison said as follows:

Injured workers and employers will benefit from more claims managers delivering consistent service from an agent that has an outstanding track record and an excellent model for achieving improved recovery and return to work outcomes.

She went on to say:

Contract terms include a cap on the number of more serious cases an individual case manager is allocated. That will mean a 25 per cent increase in dedicated case managers for injured workers.

The anecdotal evidence that I am hearing differs from that, and I am told that the turnover at EML is extremely high and that the experience and training of those case managers is minimal. That is the anecdotal evidence I have heard, and I would like to see evidence that that is not the case. The press release of January 2006, over two years ago, continues as follows:

In a clear win for the South Australian businesses that pay for the scheme—

and it is businesses paying for the scheme, as they should, because it is their workers who are being injured, but we want to make sure that cost will not be a disincentive to stay in South Australia—

Employers Mutual expects to cut the claims liability by up to $100 million a year after only two years under the new contract.

EML has been there for nearly two years, and we are not seeing the results that were predicted two years ago, in January 2006.

Interestingly, a little over two years later, there was another press release from the WorkCover Board dated 28 February 2008. I will read again what was said in January 2006 by Julia Davison, the CEO of WorkCover. She stated:

Injured workers and employers will benefit from more claims managers delivering consistent service from an agent that has an outstanding track record and an excellent model for achieving improved recovery and return to work outcomes.

That was two years ago. On 28 February this year, with reference to the legislation that we have just passed through this place, WorkCover chairman Bruce Carter said in a press release:

Failure to adopt this legislation would be a failure to address the Scheme's inadequacies in returning injured workers to work, and would result in a further deterioration of the Scheme's funding position.

So, there is an acknowledgment that the predictions that were made back in January 2006 about improved recovery and return outcomes that were promised or predicted by EML just have not come to fruition, so one would have to ask about EML's performance. I just hope that the performance agreement that is being inserted in this new bill with respect to the relationship between the minister and WorkCover overflows into the relationship between the WorkCover Board and EML, because a number of people both within the union bodies and the employer groups are very scathing of the performance of the WorkCover Board and EML.

I do not want to use this place to criticise them, but that anecdotal evidence is there, the criticism is there, and I put that on the record in this place if for no other reason than to make sure that the minister, the WorkCover Board and EML are aware of the information that is being fed to the opposition. I have good friends who have worked as investigators in the WorkCover area for many years, and I have no reason to disbelieve them, and the stories they have told me about their interaction with WorkCover Corporation and EML leave a lot to be desired. There are many people, both in the unions and the employer groups, who believe that an improved case management model, which was promised back in 2006, has not been delivered, and that is why we are in the dire straits that we are in today.

On page 182 of the Clayton report, which was prepared to help fix up the WorkCover scheme, Alan Clayton has a section headed 'Increasing the capability and capacity of scheme partners'. That is pretty obvious, but I wish to read it into Hansard. Mr Clayton states:

The path forward involves a highly dedicated commitment to quality injury management and return-to-work practice. This requires highly competent and professional practitioners across all the various disciplines that are involved in injury, claims and return-to-work management. This is not easy. Quality claims injury and return-to-work management requires a high level of skill and competency, since work injury and illness is best understood in terms of biopsychosocial models of health which involves a complex set of interactions involving the individual, their psychological makeup, the nature of their employment and their work, their family, and their social environment.

Superimposed upon this, in terms of the achievement of return to work, are a series of constraints and possible barriers, including the nature of the workplace culture and the employer's ability to offer alternative duties. Within this environment, the nature, quality and timing of interventions aimed at securing an injured or ill worker's return to work are crucial to the achievement of a successful and durable outcome. In the vast majority of cases, the return-to-work process is relatively unproblematic. However, unless careful attention is paid to the complete dynamics of the process, many cases which should have achieved a similarly unproblematic outcome, become complex, long duration claims.

That is the issue with the unfunded liability—those long duration claims. Unfortunately, we have not seen come to fruition the promises which were so eagerly looked forward to back in January 2006. Alan Clayton continues:

Acquiring a professional understanding of this environment, and the technical competencies to achieve quality outcomes with it, requires both training and experience.

You cannot argue with that. This is what we all want to see, and let us hope that this bill does something about it. Referring to claims managers, on page 143 Alan Clayton makes the following comment:

If there is to be a move to a scheme that entrenches sustained, durable and quality return-to-work outcomes, then clearly there needs to be a further effort directed towards the nature of staff engagement, induction and ongoing training.

As I said before, anecdotal evidence has been given to me and many of my colleagues (and I am sure other people in this place) relating horror stories about the way some cases are managed under the WorkCover scheme. That relates not to the self-insured scheme but to registered employers under the WorkCover Corporation and EML. The self-insured scheme seems to be in a parallel universe of success, and I think the epitome of that is the LGA. Even some government departments (which are required by law to self-insure) manage under the same legislation, the same range of injuries, high-risk workplaces sometimes, and they are able to do this really well. Let us hope that WorkCover, and its new relationship (after this legislation is passed) with this government will be significantly changed and the outcome very significantly improved. Alan Clayton makes a comment about the scheme regulator on page 185, as follows:

...the WorkCover Corporation needs to establish an organisational skills and competency base that gives it the capacity to effectively oversee and regulate the operations of the workers' compensation scheme.

If the WorkCover Board is not taking this sort of advice, it needs to take a long, hard look at itself. The impression I get, from some of the presentations and information put out by WorkCover, is—I will not be so harsh as to say delusional but—certainly not something that gives South Australians the opportunity to have great confidence in its future.

I am looking forward to hearing what the minister has to say about the ministerial directives that are being enhanced in this bill. In 2005 the Statutory Authorities Review Committee received evidence from Mr Bruce Carter about the number of ministerial directives. In 2003 there were only four ministerial directives. It will be interesting to learn how many more ministerial directives have been issued since then, and I would ask the minister to provide that information to the house.

Those few comments raise the concerns members on this side have about some of the ways WorkCover has been travelling in the past few years. I look forward to this bill doing what it purports to do, and that is to improve the relationship between WorkCover and the government, and also enhance the performance of WorkCover generally.

Mr HANNA (Mitchell) (16:27): I am going to make some brief comments about the governance review bill brought forward by the government in relation to WorkCover. For a long time I have thought that having greater ministerial control and direction over WorkCover is a good thing. Obviously, there need to be safeguards to ensure that any sort of direction is not exercised capriciously and that there is no interference with an individual worker's claims. However, I do not have any objection to the proposal that the government brings to us. I hope that, when the minister has a small degree of additional power in relation to WorkCover, he uses it diligently.

One of the things that I did not mention in the debate over the past couple of days, about poor management practices, is one interesting illustration. I refer to the turnover of staff that has plagued WorkCover initially, then successive insurance companies that handled claims, and now EML. I hear from workers who go through about a claims manager a month. Over an 18-month period I think there was one worker who counted 16 different claims managers who handled the file. Is it any wonder that we are not getting effective return to work? I know that turnover of staff is not always an indicator of poor performance, but there are a lot of other indicators to suggest that it is an illustration of poor management practice.

Because I have made a few points about WorkCover over the past couple of weeks, I have had a lot of calls and emails to my electorate office from all over the state. People have been telling me their different WorkCover stories—lots of stories about shoddy, reckless, carefree behaviour of claims managers who allow expenses of all kinds to build up, even arbitrarily sending workers to medical appointments.

One email from a worker that I read just this morning—a bit too late for yesterday's debate—was in relation to the rehab provider that they had been assigned. Even though their injuries absolutely ruled out their return to work in the short term, the rehab provider would come and visit them, first at home and then even in hospital, just to have a chat about their return to work. Each time the corporation ends up going another $300 into the red for an onsite visit by a rehab provider when, in fact, it was pointless at the very early stage of a serious injury.

There are probably thousands of examples that one could give if those sorts of management practices were properly examined. I know the minister cannot change that overnight, but I am glad to see that the minister will have a little more power to direct and reign in those sorts of management practices. My amendment is quite simple, and I will speak more about it in committee.

Ms CHAPMAN (Bragg—Deputy Leader of the Opposition) (16:31): I rise to speak on the WorkCover Corporation (Governance Review) Amendment Bill. I foreshadowed when we were dealing with the previous bill that I had some concerns arising out of the provision in the bill to replicate the power of ministerial directions. At present there is a power for ministerial directions to be issued, but this amendment was intended to replicate the power that is in the corporations act.

This is not so much about why we would move under this new structure. I am sure the lead speaker for the opposition has already indicated that we will be supporting the government in relation to that. In this area I am not certain that it is necessary for the purpose of directions, but I think there are some other benefits overall in our being subject to the Public Corporations Act, so I will not raise this discrepancy.

However, I have raised the question of what ministerial directions have been issued in the lifetime of this government. I understand (as I am quickly advised) that, although there has not been any indication from the minister yet as to directions that he or his predecessors have issued under this government, four directions were issued, as outlined in the evidence of Mr Carter, in the inquiry into the WorkCover Corporation in November 2005.

I will summarise them. The first one was to require prior approval by the minister for all overseas travel by board members—I briefly referred to that when I foreshadowed my question on this issue. The second one was that there be the appointment of a board observer and authorisation of disclosure under section 112(2)(g) of the Workers Rehabilitation and Compensation Act.

The third direction was an amendment to the criteria for exempt employer status to commence so that those employers remaining in the compensation fund are protected under transfer of liabilities, and the corporation was not to accept applications until the criteria had been amended. The fourth was an amendment of the criteria for exempt employer status to be commenced, the exempt status not to be granted until the corporation is satisfied that the transfer to exempt status will not adversely affect the scheme's finances or unfairly affect employers who have no prospect of being granted exempt status.

Those directions were issued in 2002 and 2003, and there may well have been some since that time. The minister may recall that I inquired as to whether there had been any other directions. I mean this respectfully, but I just cannot remember exactly the date upon which the minister took office in his current portfolio, and he may not actually have been in that position at the time to which I have referred, that is, from March 2002 to April 2003, and there may well have been a number since that time. I seek clarification from the minister on that matter when we move into the committee stage. If he is able to provide that information I would appreciate it.

The minister may recall that, in dealing with the substantive bill on workers compensation reform, I requested information about the number of occasions on which there had been redemptions. This is particularly relevant if, in fact, there have been any directions by the minister in respect of redemptions—these certainly do not cover that—and, if so, I would appreciate that information.

I note that subsequent to my request there has been the disclosure of the unfunded liability of I think $911 million, which as I understand it—and I stand to be corrected if this is not the case—is as at 31 December 2007. Regarding the figure for the third quarter of this financial year, I expect that the minister would not have the audited figures at this point, because the board would not have considered them as they still operate on a quarterly in arrears arrangement for the assessment of that. However, I would expect that the minister would have some idea or could give us some estimate of what that would be at present.

I suppose it would be reasonable for the opposition to assume that the unfunded liability is continuing to grow. I say that not as a criticism but because we are here being asked to pass this legislation—this governance and the previous bill that is on its way to the other place—for the very reason that the expansion of this liability will be unable to be arrested unless we have this legislative reform.

So, I assume that has continued to grow and there has not been a period of reduction by some other intervening factor, one of which, of course, could be if the WorkCover Corporation had exercised its redemption powers in the last six months or so to actually minimise that liability. If that were the case, there would be a reassessment of what the unfunded liability would be at this point, had perhaps a concerted effort been made to rid the books of the difficult cases—I do not know. That is why I seek clarification on those matters.

I can only hope that this change of governance will make a difference in both tightening up—that is as best as I can describe it—the ministerial direction power, if that needed to be done at all, and, in particular, being able to require a charter and then a performance agreement with WorkCover. I will put on the record that I thought it already had the power to ensure that in certain circumstances members would no longer remain on the board. Those circumstances would include non-performance or failure by the board to engage suitable agents for the purpose of carrying out its work, whether it involve the management of the claims or the return-to-work program with EML, or any other agent (at the moment, EML seems to have the exclusive contract, although Minter Ellison also seems to have a monopoly in that regard).

The minister already has power to deal with that and, in fact, his predecessor in the same government had also dealt with that. The board went; we had a new board and, although it took a bit of time to get one, we had a new CEO and a new regime; but we still have a serious problem. The minister already has these powers, so I do not think any excuse can be made by saying, 'We need to have this legislative change to remedy what has been an incapacity or a limitation on the existing governance.' The government has stated that this is necessary, so we hope that it is part of the overall remedy and that there will be some improvement, if it is needed. On that basis, I indicate my support for the bill.

The Hon. M.J. WRIGHT (Lee—Minister for Industrial Relations, Minister for Finance, Minister for Government Enterprises, Minister for Recreation, Sport and Racing) (16:40): I thank members for their contribution. The shadow minister and the member for Mitchell are both correct: this will modernise the act and it will give the minister stronger power and control of direction of WorkCover, which will be a step in the right direction.

The member for Bragg was right in the examples she gave. I have given four ministerial directions and I also wrote a letter to the WorkCover Board chair on 9 May 2003 about rehabilitation and return to work. As I understand it, that was not a ministerial direction. Also, as I understand it, there have been no directions about redemptions. The member referred to four ministerial directions. The first one was on 12 March 2002. It was about overseas travel, requiring 'approval to be sought from the minister'. On 9 May 2002, in regard to board observer: 'Appointing an observer to the WorkCover Board'; on 10 April 2003: 'Criteria for exempt employer review and no applications for exempt status to be accepted pending the review of the criteria'; and on 9 December 2004: 'Direction issues to recommence consideration of application for self-insurance'. I do recall the member for Bragg asking me this question when we debated the other bill. That is the advice I have received. I have no reason to think that it is not the correct advice. It matches up with what the member for Bragg put on the public record.

Regarding the other aspect about which the member generally asked me a question, I do not have any estimate of the unfunded liability. The member is right: it was $911 million as at 31 December 2007. To the best of my knowledge—and I am pretty confident that this is correct, although we have a lot of meetings and obviously lots of issues and discussions occur—I do not recall any estimation being put to me by the chair or the chief executive officer or, for that matter, anyone else. It was announced only about a week ago, I think, that the unfunded liability was $911 million. I do not know whether there is any estimation within WorkCover and, to the best of my knowledge, that has not been communicated to me. I am not even sure that it exists.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 4 passed.

New clause 4A.

The Hon. M.J. WRIGHT: I move:

Page 2, after line 12—Insert:

4A—Amendment of section 13—Functions

Section 13(1)(c)—after 'employment' insert:

and to facilitate their early return to work

This clause will emphasise that two of the main functions of WorkCover are to assist injured workers in their rehabilitation and also return to work. It is important that we have that return to work in there, and that is what we are doing.

New clause inserted.

New clause 4B.

Mr HANNA: I move my amendment in an amended form:

Page 2, after line 12—Insert:

4B—Insertion of Part 2 Division 3

After section 11 insert:

Division 3—Register of interests

11A—Lodging of returns

(1) A person who is appointed as a member of the board must, within 30 days after appointment, submit to the CEO a primary return in accordance with Schedule 1.

(2) Every member of the board must, on or within 60 days after 30 June in each year, submit to the CEO an ordinary return in accordance with Schedule 1.

(3) If a member fails to submit a return to the CEO within the time allowed under this section, the CEO must as soon as practicable notify the member of that fact.

(4) It will be taken to be a condition of a member's appointment to the board that the member comply with the requirements of this Division and Schedule 1.

(5) A member who submits a return under this section and Schedule 1 that is to the knowledge of the member false or misleading in a material particular (whether by reason of information included in or omitted from the return) is guilty of an offence.

Maximum penalty: $10,000.

11B—Creation and inspection of Register

(1) The CEO must maintain a Register of Interests and must cause to be entered in the Register all information furnished pursuant to this Division and Schedule 1.

(2) A member of the board who has submitted a return under this Division may at any time notify the CEO of a change or variation in the information appearing on the Register in respect of the member or a person related to the member within the meaning of Schedule 1.

(3) A person is entitled to inspect (without charge) the Register at the principal office of the Corporation during ordinary office hours.

(4) A person is entitled, on payment of a fee fixed by the Minister, to a copy of any part of the Register.

(5) A person must not publish—

(a) information derived from the Register unless the information constitutes a fair and accurate summary of the information contained in the Register and is published in the public interest; or

(b) comment on the facts set forth in the Register unless the comment is fair and published in the public interest and without malice.

(6) If information or comment is published by a person in contravention of subsection (5), the person, and any person who authorised the publication of the information or comment, is guilty of an offence.

Maximum penalty: $10,000.

The concept behind this amendment is very simple. The minister will see that there are two amendments on file; the second one is consequential. In relation to this amendment it is simply to legislate for a register of interests for WorkCover Board members the same as that which parliamentarians must attend to. The suggestion has been that some WorkCover Board members will actually stand to profit from the way the scheme is administered and from their own proposals for changes to entitlements. If that is the case then, as a matter of public accountability, we ought to know what commercial interests board members have so that we can work out the extent to which they will benefit from cuts to entitlements which will eventually lead to cuts in levies. It is a measure of additional public accountability and I commend it to the committee.

The Hon. M.J. WRIGHT: The government opposes this amendment. I hear what the member for Mitchell is saying, but the requirement for the WorkCover Board to publish and maintain a register of interests is excessive and not consistent with the requirements of similar bodies. All other statutory authorities of similar status to WorkCover have almost identical or similar provisions to the current WorkCover Corporation Act regarding conflict of interest. The member is proposing a register of interests similar to those of elected members of parliament and probably councils for that matter as well. I do not personally see the need for it. It might even result in a loss of interest of some people to serve on the board.

There has been some conjecture about the role of one of the board members, maybe more. I have heard of one in particular and, as I have said in this place before, the chair has advised me on the numerous occasions where that person announces her perceived conflict of interest and removes herself from the room. I do not know whether it is broader than that, if it is more widespread. It may or may not be, but I think that to put the WorkCover Board into a class that other boards are not in is not the way to go.

Dr McFETRIDGE: Would your concerns about this conflict of interest and potential corrupt activity be taken care of if there were an ICAC in this state?

Mr HANNA: I certainly support the concept of an independent commission against corruption. That would certainly be taking an even stronger approach than simply passing this amendment of mine today. The minister has acknowledged in his response that there is a conflict of interest and sometimes it is inevitable that board members on statutory authorities will have a conflict of interest. The question is how that conflict of interest is managed.

I am glad to hear that that particular board member absents herself from meetings. I am glad to hear that the chairman, Mr Carter, informs the minister of that fact, but how does the public know this? How do the other stakeholders in the WorkCover scheme know what is going on? I think that there needs to be more transparency. If there were a full register of interest, like that of members of parliament, for example, everyone would be in a better position to know when there is a potential conflict of interest. In answer to the question of the member from Morphett, yes, it would help to have an independent commission against corruption, but I do not expect that such a commission would be spending time on simple conflict of interest situations. It would take a little bit more than that to render it corruption.

New clause negatived.

Clauses 5 and 6 passed.

Clause 7.

The Hon. M.J. WRIGHT: I move:

Page 4, after line 12—Insert:

(ab) without limiting paragraph (a)—the steps to be undertaken or the initiatives to be established to ensure that the corporation has and maintains systems to provide for the effective rehabilitation of disabled workers and their return to work on a successful basis, including through the administration and enforcement of sections 58B and 58C of the Workers Rehabilitation and Compensation Act 1986;

This amendment adds another direction about the nature and scope of the corporation's charter that must be created by the minister. It requires the charter to deal with steps and initiatives around maintaining effective rehabilitation and return-to-work systems for injured workers, including the administration and enforcement of sections 58B and 58C of the Workers Rehabilitation and Compensation Act, which set out an employer's duty to provide work and notice of termination of employment to be given in certain cases respectively. We think this is a good amendment. The charter is how I expect WorkCover to go about doing things. The performance agreement sets out what I expect WorkCover to achieve.

Amendment carried; clause as amended passed.

Remaining clauses (8 and 9) and title passed.

Bill reported with amendment.

Third Reading

Bill read a third time and passed.

[Sitting extended beyond 5pm on motion of Hon. M.J. Wright]