WORKERS REHABILITATION AND COMPENSATION (SCHEME REVIEW) AMENDMENT BILL

Committee Stage

In committee (resumed on motion).

(Continued from page 3073.)

Clause 14.

The Hon. M. PARNELL: Clause 14 is an amendment to section 34, which relates to compensation for property damage, that is, compensation that can be claimed by workers. The previous clause we dealt with (clause 13) related to transportation for initial treatment, which is a form of compensation that can be claimed by employers. The point I want to explore in relation to those two sections is that an employer's right to recover costs arising from work accidents under section 33 are not capped, as we discussed when we debated that clause, but workers' rights to recover costs under section 34 are capped.

One exclusion that the clause provides for relates to cars, which are altogether excluded. The provision, as it currently exists in the act, is that an entitlement to compensation does not extend to compensation for damage to a motor vehicle. I offer the following scenario: if a worker is driving their car for work (let us say they are a pizza delivery worker or courier), and there is an accident where they are injured and their car is damaged, they cannot be compensated under section 34 for damage to their car.

This is supposed to be a no-fault scheme, but this important loss that the worker has suffered, involving their car, is not compensable. If we take, for example, a courier who was on their employer's premises, perhaps in a warehouse, and their employer's unroadworthy and unregistered forklift truck ran into their car, injured the worker and damaged the car, the worker cannot sue anyone for the damage done to their car, even if it was as a result of the reckless failure of their employer to maintain the forklift in a proper condition. I cannot see that that is a fair relationship.

Another example might be a policewoman who, in a scuffle with an offender, has her hand slammed in a car door and it breaks bones and smashes her wedding ring to pieces. The wedding ring, apart from whatever sentimental value it might have, could be worth far more than the cap under this legislation, a cap of $1,500 indexed. How does that compensate for a replacement of what might be a $10,000 wedding ring that her husband scrimped and saved for years to buy her? So, the cap under this system is most unfair, especially when we consider that there is no cap in the previous section.

My question of the minister is: what analysis has the government done in relation to claims under section 34 involving property damage? How many of these types of claims are made and what type of costs are involved?

The Hon. P. HOLLOWAY: My advice is that we do not have any information on either the number or quantum of claims. We can endeavour to see what information there is and perhaps get back to you, but at the moment we do not have that information.

The Hon. M. PARNELL: It is very difficult to proceed with much further analysis of this provision if we have no idea of the extent to which the provision is relied on. Perhaps the best I can do is to leave with members the inherent unfairness of a system which has a relatively low limit: it is capped and it is not difficult to envisage very unremarkable scenarios where a person's loss is far in excess of the capped amount.

The Hon. Sandra Kanck: And no common law.

The Hon. M. PARNELL: As the Hon. Sandra Kanck says, there is no common law right to recover that. I do not know what the take-home message is: don't wear expensive clothes, don't wear expensive jewellery, don't drive a car for your work, make sure it is someone else's car that you are driving, because if you are in an accident, even if you are on work time, there is no compensation outside whatever insurance you might have.

I look forward to the answer coming back. If an answer does come back before we conclude the debate, I would like to know what analysis might have been done in relation to the impact on the unfunded liability. My guess would be that the claims are probably relatively low, and removing the cap is probably not going to make a great deal of difference to the unfunded liability, but I will await the minister's response to that.

The Hon. P. HOLLOWAY: What I can say in relation to the latter point is that my advice is that we would probably agree that it will not have a significant impact. Just for the record, it is important to say that the amendment to clause 14 contained in the government's bill is to provide, if the regulations so provide, indexation of the annual adjustments according to changes in CPI. So, what the bill is actually doing is to take at least some consideration of the point raised by the honourable member about the value of personal effects.

We take account of the fact that this figure can be indexed, because it is not completely clear whether section 34, as it now exists, precisely allows such a mechanism. The word 'limitations' in the regulations may only allow fixed sums to be regulated rather than an indexation formula. The mechanism for indexing the prescribed compensation limit for clothes and personal effects is in the regulations rather than the primary legislation. This technical amendment adds the new subsection to section 34 stating that a prescribed amount may be indexed under the regulations, based on changes in the CPI. I would have thought that the honourable member would welcome the amendment to section 34 that the government has put up in this bill.

The Hon. M. PARNELL: I do welcome the amendment. My point is that there is an inherent unfairness the government has not remedied. I have not, either, although I can always have more amendments drafted to deal with these issues. However, I will let it go through to the wicketkeeper for now. I just wanted to make those comments and ask those questions on the clause.

Clause passed.

Clause 15.

The Hon. M. PARNELL: Before I move my amendment, I will make some general comments and ask some general questions in relation to this clause. At the outset, I say for the benefit of all members that we are now at the action level of the bill. This is the clause: this is the one that everyone has been talking about for the past three months, and this is the clause that cuts the entitlement of injured workers.

There are a large number of amendments to this clause, and they are all very significant. That is not to say that the amendments we have considered to date are not, because they are all important, but I want to impress on members the absolute importance of getting clause 15 right. In a way, this is the money clause. We will get to its financial implications later, but I have heard it estimated that possibly $400 million is at stake, so we will need to be thorough with clause 15, and I make no apology for that.

First, I want to ask a question in relation to the designated weekly earnings arrangements in proposed new section 35A. Essentially, the designated weekly earnings arrangements are primarily about cutting the worker's weekly payments before the 130-week mark. I think it is important that we put on the record what Mr Clayton had to say about this provision because, as I have said, this is the water cooler one, this is the barbecue stopper, and this is what everyone has been talking about. Mr Clayton states:

One of the major goals of the workers’ compensation system is to optimise the potentialities of return to work. This should be the pre-eminent goal for the scheme agent in the South Australian scheme for workers whose injuries or illnesses have removed them from employment. Return to work has well demonstrated social benefits and, of course, obvious economic benefits. The economic benefits derive from the savings in benefit costs, either totally through a full return to work to pre-injury employment or the diminution of benefit costs through the payment of partial incapacity as against total incapacity benefits in the case of partial return to work or return to work in alternative duties. However, similar economic benefits can be gained by benefit discontinuance or diminution by other means such as the application of deeming provisions.

There is a potential incentive for an insurer, or the scheme agent in the case of South Australia, particularly where there may be strong incentives in the agent contract connected to liability savings, to use deeming provisions to achieve benefit discontinuance or diminution as an alternative or a parallel path to active return to work management. On the other hand, there is a case for having the ability to apply deeming provisions in exceptional circumstances. This is, in fact, the current Victorian situation, and indeed the situation that has existed in Victoria for over a decade, as the result of a Ministerial directive that the resort to deeming should only be regarded in the nature of a ‘reserve power’.

The final sentence—and this is the important bit—states:

Alternatively, to be sure that there is no abuse of such a power in the compensating authority, it could be provided that this power is only able to be utilised after a stipulated period of receipt of weekly payments is reached. In the opinion of the Review such a period should be 130 weeks. This second approach is probably the preferable way of proceeding.

The government has said that what it is doing in this bill is following the Clayton report. My question is: why has the government rejected what Mr Clayton recommended on this issue and introduced a far harsher proposal that will hurt injured workers and their families?

The Hon. P. HOLLOWAY: My advice is that the government really has picked up the recommendations of the Clayton review to the extent that the use of powers is as a reserve power. During the debate, my colleague in another place, the Minister for Industrial Relations, stated:

I intend to direct WorkCover as in Victoria not to use this provision, unless there are exceptional circumstances. That is exactly in line with what Clayton recommended; that is, it should be a reserve power.

The Hon. M. PARNELL: I thank the minister for that answer; I am not satisfied with it, but I will move on. I next want to ask the minister in relation to proposed section 35C(2), which provides:

The corporation may determine that the worker's entitlement to weekly payments under this division does not cease as contemplated by subsection (1) if the corporation is satisfied that the worker is in employment and that, because of the compensable disability, the worker is, and is likely to continue indefinitely to be, incapable of undertaking further or additional employment or work which would increase the worker's current weekly earnings.

The particular word in that section that concerns me is 'may'; it says that the corporation 'may' decide that the worker's payments do not cease if the relevant requirements are met. As members would appreciate, the use of the word 'may' in legislation—as opposed to the words 'shall' or 'must', for example—generally means that there is some discretion for the decision-maker to use their own judgment if the relevant criteria are met. In proposed section 38B the language is that the entitlement ceases unless the relevant conditions are met. That does not suggest that there is any discretion.

My question is: why does WorkCover have a discretion not to continue payments to partially incapacitated workers under proposed section 35C even if the relevant requirements are met? In what circumstances is it intended that WorkCover can deny payments to injured workers even though the relevant requirements are met?

The Hon. P. HOLLOWAY: My advice is that under this section, if a worker is working to their full capacity, the top-up weekly payments can continue. So if a worker has a capacity of, say, 20 hours a week and is working to that level—in other words, is performing 20 hours of work a week—those top-up weekly payments can continue.

The Hon. M. PARNELL: I did not fully understand the minister's answer. Is the question that there is no discretion if the relevant requirements are met? Or is there a discretion in WorkCover?

The Hon. P. HOLLOWAY: The advice we have from parliamentary counsel is that there is no discretion.

The Hon. M. PARNELL: I now invite the minister to put on the record, and I am sure the minister will have these figures available, the numbers in relation to the people who are on benefits. In particular, I am interested in the length of the tail, and how many people are being added to the tail. That is fairly critical to this whole debate because, when we are talking about reducing entitlements and cutting people off the system, we need to know how real a problem it is.

I will preface my questions in this area by referring to some documents and analysis that were provided to me by Phil Moir, a person who is known to many people with his engagement. He obtained, under freedom of information, a range of statistics, and I need the government to tell me whether the information I have been provided with is correct. Mr Moir's argument is that the government's claim that fewer injured workers are returning to work is a complete distortion of the truth. That is how he described it.

The figures he has provided to me (and he says he got these through freedom of information) are that in 1997 (11 years ago) there were 2,141 injured workers on benefits for 12 months or less, and in 2006 there were exactly the same number: 2,141 workers on benefits for 12 months or less. So, that proportion of shorter-term injured workers on the scheme had not changed over that period of time. When it comes to people on the scheme for under 24 months (the two year figure), in 1997 he says there were 2,640 workers on benefits and in 2006 there were 2,788. In other words, there were only 148 extra workers still on the scheme 10 years later, and they are workers for 24 months or less.

So, the question then is: how is it possible for WorkCover to state that there are fewer workers who are returning to work, because on the basis of those figures they do not look to have changed a great deal, and they would suggest that there is not a deterioration in return to work rates as suggested by WorkCover? That is my first question on this topic. Are those figures correct, and is that analysis correct?

The Hon. P. HOLLOWAY: If one looks at the WorkCover annual report for 2006-07, there is a table of graphs beginning in June 1997. We do not have the exact figures, but if one looks at that graph it is quite clear that between June 1997 and June 2007 there has been a significant upward trend in relation to the active income maintenance claims. If one looks at those who have been on for three-plus years, the number in June 2007 is just a little over 4,000 up to more than 7,000. So it must be approaching 3,000 active income maintenance claims, just trying to read the graph, because we do not have the actual figures.

Certainly that graph makes clear that it was getting on towards 3,000 for more than three years in June 2007. Back in June 1997 it went from just under 4,000 to around 5,000, so there were about 1,200 projecting from the graph. That is what really tells the story, and that graph makes it quite clear that there is a very obvious upward trend in the number of active income maintenance claims over that decade. Clearly, the fastest rising section of that is those for more than three-plus years. Even though they may not be a significant number of the overall claims that WorkCover deals with, clearly in terms of its costs they are extremely significant.

The Hon. M. PARNELL: The point to come out here is that there is no doubt that the length of the tail is an issue for South Australia, certainly in terms of comparison with other states. Unless I have misunderstood this, it seems that it is incorrect to say that it is a failure to return to work and a failure that has been exacerbated over time that is the result of the tail. There are also issues of population growth, more workers and a range of other things, but it seems that the figures I quoted before indicate that there are factors at work other than the conclusion that many people have come to, namely, that people are not returning to work.

Other figures I have seen indicate that something like 35,000 WorkCover claims are made each year, and that the vast majority—something like 80 per cent, I understand—are resolved within two weeks. Only something like two in 10 are still receiving benefits after two weeks and even fewer as time goes on. That is not to say that the tail is not a problem, but it seems that the system in relation to the vast majority of people is not suffering from a problem returning to work, especially in that short time. I now move:

Page 17, lines 30 to 40, page 18, lines 1 to 6—Delete paragraphs (a, (b) and (c).

This is a test amendment for my amendments 11 and 12, and I will deal with them together. This amendment deletes three paragraphs in subsection (8) of the new section 35, and those three paragraphs are the definitions of the first, second and third entitlement periods, the periods which relate to the step down in payments. This amendment is aimed directly at removing the arbitrary and unfair step-downs that are the keystone of this bill. Under the bill, after an injured worker has first lost their superannuation contributions (as they do now—that is not new), they will then lose 10 per cent of their pay after 13 weeks and 20 per cent after 26 weeks. It is not exactly that because it goes to 90 per cent and 80 per cent, which does not equate exactly with a 10 per cent and 20 per cent loss, but the figures are close enough.

According to the 2006 census, the median Adelaide weekly income for individuals was $447, so under this plan a person on Adelaide's median weekly income is down to $402 to live on after 13 weeks on WorkCover. Under this government's plan a person is then down to $357 a week to live on after 26 weeks—a loss of $90. I do not know how many members of parliament would go trying to survive on $357 a week at the same time that they are trying to cope with an injury.

Paying rent, a mortgage, food, petrol and electricity on $357 a week is just not fair. I will not revisit the issue of the flaw—in other words, trying to enshrine the minimum weekly wage (because we have dealt with that already)—but I make the point that these cuts are not fair for people on median wages.

It is an even grimmer picture for South Australians who are fortunate enough to live in the Premier's electorate of Ramsay. According to the 2006 census, in the electorate of Wakefield the median family income is $985 a week. In Premier Rann's own electorate working families on the median income will have to live on almost $100 a week less 13 weeks after an injury. Perhaps someone who has fallen off a construction site would be looking to the Premier in despair at these changes.

In the Premier's own electorate, working families would be almost $200 a week worse off after 26 weeks of injury. If superannuation contributions are taken into account, a family on a median income in the Premier's own electorate would lose $11,011.50 in the first year for being injured at work, even if it is due to the gross negligence of their employer. They would be $6,402.50 worse off in their first year than they would have been under Liberal premiers Kerin or Olsen. Some $6,402 worse off in the first year after a devastating life-changing injury might not seem much for the Premier or a well-paid member of parliament, but for a working family living in Ramsay trying to get by on—

The CHAIRMAN: Order! I remind the honourable member that this is sounding like a second reading contribution.

The Hon. M. PARNELL: Thank you, Mr Chairman. Members would recall that I did remove all this material from my second reading contribution and said that I would deal with it in a briefer form when we got to the committee stage; so I will abbreviate what I have got. I appreciate that perhaps we should have taken the opportunity to go a little longer last time so I could have got that material on the record—but we did not—so I would like to get some of it on the record now.

The Clayton report—and, therefore, this government which has adopted some of the recommendations—appears primarily to choose 13 weeks as the first step-down based on the Victorian act, which reduces payments to 75 per cent after 13 weeks. I cannot see any rationale for designating 13 weeks rather than 12 months, other than a very generalised assertion that most fractures, I am told, heal within six weeks; most other injuries heal within a 13-week time frame. It is certainly not clear what the Clayton report refers to as 'other injuries'.

Also, there happens to be an assumption that in reducing payments at this time workers would have a greater incentive to return to work, rather than reducing payments after 12 months. The issue here is in relation to starving (as it has been referred to) workers back to work. I have not seen any evidence—it has not been presented—which shows why it would be a greater incentive than waiting for injuries to heal properly.

The Hon. Bernard Finnigan is a member of the Shop Distributive and Allied Employees Association, and that union, together with the Australian Manufacturing Workers Union, the Finance Sector Union and the Electrical Trades Union had this to say about the government's original proposal which, members would recall, was a reduction to 80 per cent after 13 weeks. The union said:

The proposal to reduce income maintenance to 80 per cent of earnings after 13 weeks is arbitrary and would cost a worker on average weekly earnings approximately $222 per week.

The Hon. Sandra Kanck: When did he say that?

The Hon. M. PARNELL: No, the Hon. Bernard Finnigan did not say it: his union said it. No doubt, the honourable member fully supports what his union does.

The Hon. B.V. Finnigan: I have not resigned.

The Hon. M. PARNELL: He is a card-carrying member of the union. The union also said:

This proposal is based on two flawed suppositions: (1) that injured workers require a financial disincentive in order to return to work and (2) that most injuries are healed after 13 weeks and that consequently workers should have returned to work by this time.

In relation to the first point, the purely economic evidence used to support this position is far from compelling, and that is a point that is conceded by Clayton. It must also be recognised that injured workers overwhelmingly want to return to work but are often frustrated by a lack of assistance from WorkCover and its claims agents. In relation to the second point, most injuries are not all injuries; therefore, seriously injured workers who are unable to work would have their payments reduced if the proposal goes ahead. That is the quote from the unions.

The government's change, which was subsequently introduced in relation to step-downs to go from 80 per cent to 90 per cent at 13 weeks, does nothing to address the core attacks on this scheme delivered by the unions. There is much economic opinion that the percentage of income assigned to spending (and often fixed spending) is consistent over high and low incomes. What that means is that cutting injured workers' pay will affect the ability of both lower and higher paid workers to meet their commitments, such as mortgages, petrol, school fees, and so on.

However, the lower paid workers will suffer badly under these step-downs. With respect to average incomes (and I mentioned Ramsay before; they are not the highest in the state), mortgages, grocery bills, petrol, and so on, still have to come out of that. If you try to do without $10 in every $100 that you have to spend, your budget is absolutely blown.

WorkCover's rationale for its proposal is that putting workers under financial strain will increase the motivation to return to work. As the Clayton report states, the vast majority of injured workers are highly motivated to return to work, irrespective of the financial structure of workers compensation schemes. The government's proposals do nothing to address the major barriers to return to work, which include (and we will get to this in a later clause) the employer's reluctance to employ injured workers. The letter continues:

WorkCover claimed savings of $22 million in reduced claims payment per year plus an additional saving of $12 million per year due to the changes driving behavioural change; that is, workers will know that their pay is to be cut and decide to return to work. In our view, any claimed savings from behavioural change is not credible. These costings were based on the WorkCover proposals for 95 per cent immediately and 75 per cent at 13 weeks.

I think it is critical for all members to think about these changes, not just as statistics and numbers but also as cruel measures that impact on real people.

Progress reported; committee to sit again.