WORKERS REHABILITATION AND COMPENSATION (REINSTATEMENT OF ENTITLEMENTS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 10 November 2010.)

The Hon. R.I. LUCAS (21:19): I rise on behalf of Liberal members to speak to the second reading of the Workers Rehabilitation and Compensation (Reinstatement of Entitlements) Amendment Bill 2011. In speaking to the—

The Hon. T.J. Stephens interjecting:

The PRESIDENT: The Hon. Mr Stephens should come to order. The Hon. Mr Lucas needs no assistance at this time of night.

The Hon. R.I. LUCAS: As members would be aware, the Labor government in 2008 moved what were controversial amendments to the Workers Rehabilitation and Compensation Act following a report by Alan Clayton and John Walsh. Those amendments were supported by, as the Hon. Ms Bressington indicated, Liberal members in the parliament.

The Labor government justified the need to make significant cuts and changes to worker entitlements in the workers compensation scheme on the grounds of the financial difficulty of the scheme. What it did not concede at the time was that, in very significant part, the financial problems of the scheme were largely of the government's own making. I will not repeat at length today the views we expressed at that particular time of the culpability and responsibility of the government. I referred in an earlier debate today to its intransigence in relation to what was such an obvious change required in terms of the monopoly provision of the claims manager in South Australia, EML, and the fact that I think everyone, other than the Labor government, could see the error of the decision that the government and the WorkCover board and management had taken.

Sadly, from the viewpoint of the health of the scheme and the workers impacted by the changes they have implemented, it is almost five years later (I think the contract was let in 2006), that they have come to the flash of the blindingly obvious that having a monopoly provider of claims management in essence takes all notions of competition out of the scheme. It means that the monopoly provider is not encouraged or given any incentive to improve—or even maintain necessarily—the quality of the service it provides.

In the work of the Statutory Authorities Review Committee—and there was not a majority view there (and I am disappointed in that)—at the time that the renegotiation of the contract the government and WorkCover board gave to EML, when they had gone in there and bid at a particular level and had won the contract against other providers, many concerns were raised about that process by those who were unsuccessful, as well as independent observers of the process, but nevertheless within a couple of years the government and WorkCover had renegotiated that contract with a very significant financial improvement in terms of the payments to EML from WorkCover.

I do not have the figures with me now and I will not put them on the record, but I think it was an increase in payments of more than $10 million over a very short time—it may even have been more than that—that was eventually paid to EML. If the quality of the service being provided by EML to injured workers and others had justified that improved payment, then there might have been some rationale for that financial arrangement that had been entered into, but certainly that was not the case.

There were a number of decisions like that: the decision to have a monopoly provider of legal services was going to save many millions of dollars, and when we put the question to WorkCover clearly there was no evidence to justify that claim anyway. One of the recommendations was to put in the annual report what the supposed savings were so that we could monitor them against the claims made at the time, and the government and WorkCover board rejected that. Why? Because they did not want to be held to account for the promises they had made in terms of providing a monopoly legal services provider.

There were so many blindingly obviously bad decisions this government, the WorkCover board and management had taken, and the sad fact is that the scheme is in significant financial problems. On the most recent figures, as much as the government tried to spin that there had been a 30 per cent improvement in the unfunded liability, from the December 2010 figure from the actuaries to the June 2011 figure, the six-month period, there had actually been a deterioration I think of about $80-odd million and not this improvement of the $30 million the government sought to spin in terms of the unfunded liability, which is now spiralling towards $1 billion again.

This was at a time when the managed funds (that is, the funds being invested) were actually bringing good returns, but that was in the first six months of this year. Anyone who has followed the financial markets for the first quarter of this financial year will know that things have gone belly up. Certainly, the first quarter returns for this financial year from most superannuation funds indicates for those balance funds about a 5 per cent decline, I think it is.

If WorkCover's funds are similar to that, there would have been a significant reversal in terms of the returns on their investments. In that first six months of this year when they went backwards at a great rate, they improved the returns from their funds that were invested. That was acting in a positive fashion to bring down the unfunded liability. If that was acting in a positive fashion and overall it has gone backwards at a great rate—$80-odd million—then the other things that are under the control of WorkCover and the government must have been going backwards at a monstrous rate to have given the net position in the end.

The brutal reality is that we know the government is financially incompetent, negligent and whatever else you would like to describe it, but in relation to its control and the people it has appointed to manage and to run WorkCover some incredibly bad decisions have been taken, and we still face a situation where the unfunded liability is now heading back towards $1 billion.

The Hon. Ann Bressington is honest about it and she fesses up during the second reading and accepts that some of these will increase the cost of the scheme, and she gives her explanation as to why, from an injured worker's viewpoint or from workers' viewpoints generally, these ought to be supported in the scheme. The reality is that, under the current management and under the current performance, the Liberal Party does not believe that we, in all good faith, can support anything which is going to increase the costs of the scheme, because it is going backwards at a great rate.

As I said, if the investment returns of the first quarter happen to be reflected for the whole of this financial year, and they continue with their claims management performance and other problems, then we do not want to see what the unfunded liability will be at the end of this financial year. It would, in those circumstances, be significantly over $1 billion. We can only hope that the managed funds investment market will turn around. The first quarter was a shocker but things might improve over the next three quarters. There will be many financial observers who will say, 'Hey, open your eyes and look at Greece, Italy, Europe and the world, and wake up to yourself. What we've seen in the first quarter is likely to be reflected for the remainder of this financial year.'

I do not profess to be an expert in what will eventuate from Europe in terms of global financial contagion, but I have to accept—and I think most members would have to accept—there is some prospect that we are in for some difficult financial times as a result of what is going on in Europe, and that will flow through to the rest of the world and to our markets as well.

If we were to support improvements in entitlements, whether we would support these particular ones or not would be an issue that we would debate within our party room. There are others that have been put to us on by advocates on behalf of injured workers, I must say, which are higher in priority order than, for example, the return-to-work issue.

Some injured worker advocates have spoken to me and argued passionately about two or three other changes that they would like to see retrieved, in particular issues with the operations of some medical panels and one or two others like that. If they had a ranking order of things that they would like to see improved on behalf of injured workers, they have said to me (and will continue to say to me), 'Hey, I know you can't do all of these, but if you could do something, we think these would be a priority.' Some of these would be higher than return to work, for example, which is something that has been gone from our system, I think, as the Hon. Ann Bressington says, since the early 1990s, or whenever it was, for a very long time; as indeed has access to common law.

The issue of access to common law is an interesting one, because clearly the new premier is anxious to do something in the area of workers compensation. It is difficult for him to go back on what he approved in 2008, and I understand one of the issues that he is having a look at is the issue of common law, whether there is some way of reintroducing some element of common law so that he can say to the unions, who do not like him still and are still campaigning on the issue, 'Hey, I'm one of you, I'm sympathetic. Yes, I did support the 2008 amendments, but I am prepared to have a look at something along these lines.'

I think that will be an issue of debate over the coming years as we lead up to the 2014 election as well. Certainly people within the Labor Party have told me of the current discussions that have gone on in relation to this issue. There is no concluded view from within the government, but I do know the issue is being discussed and it will continue to be discussed over the next two years.

For those reasons we indicate that we cannot at this stage in all good conscience support something which will add to the financial costs, and we indicate that we will, over the next two years, work with the Hon. Ann Bressington and other members, and more importantly with stakeholders such as those who advocate on behalf of injured workers and also those who end up paying the bills. They are the representatives of businesses and employers who are still paying the highest levy rates in the nation for what is not a very good scheme.

Again, if I go back to an earlier debate today, you would not mind possibly an argument where we were paying the highest levy rates if we had the most magnificent scheme, providing the most magnificent benefits, and we had the most fantastic return-to-work rates in the nation. You could sort of have the argument and say, 'Okay, we have a gold-plated scheme, it's doing fantastic things, it's getting people back to work. It's costing us an arm and a leg, but you can actually see what you are getting for it.'

I am not surprised; employers at the moment are paying 2.75 per cent—I have been promised something closer to 2.25 per cent by the government if we support these amendments—and yet we see an unfunded liability heading to $1 billion, we see return-to-work rates still the worst in the nation and we still see some of the poorer or worst rehabilitation providers getting massive increases in rehabilitation contracts through WorkCover and through EML. There is something wrong with this WorkCover system. There is something wrong with the way the government is managing it.

There have to be, in my view, changes in the structure of the board and the operations of the board. There need to be changes in terms of the type of people who are on the WorkCover board and certainly the leadership of the board. We need to have another look at the management and the operation of WorkCover. For any structure that can deliver some of the appalling decisions that we have seen in recent years, such as removing all competition in claims management, and removing all competition in legal services, there needs to be a consequence. There needs to be a consequence for governments, managements and boards that make those sorts of decisions and deliver these sorts of results.

If this was a private business presenting these sorts of results, heads would have rolled years ago. That includes ministers, that includes boards, that includes chief executives and that includes managers. That is what would happen in the private sector. Sooner or later this government might realise—it probably will not—that these sorts of changes and consequences need to occur in terms of the management of WorkCover.

The ACTING PRESIDENT (Hon. J.S.L. Dawkins): The Hon. Mrs Zollo.

The Hon. CARMEL ZOLLO (21:34): Thank you, Mr Acting President.

An honourable member interjecting:

The Hon. CARMEL ZOLLO: A little while—not as long as Rob, of course. The Hon. Ann Bressington's proposed amendments to the Workers Rehabilitation and Compensation Act 1986 seek to alter three specific areas of workers compensation by introducing common law into the South Australian scheme, providing journey coverage for workers and reinstating weekly payments during a dispute. On behalf of the government, I place on record that the government will not be supporting the Hon. Ann Bressington's amendment bill for the following key reasons.

Firstly, in relation to common law, common law is a significant scheme changer which should be carefully considered by all those with injured workers' best interests at heart. There is no guarantee that the insurance industry would be prepared to offer separate insurance for common law liability, nor is there a mechanism for ensuring employers actually procure their own insurance coverage. It is entirely possible that an employer may not follow through on the requirement to seek and maintain separate insurance coverage for common law liability and this may leave the government exposed as the insurer of last resort. The Workers Rehabilitation and Compensation (Employer Payments) Amendment Bill 2011 puts beyond doubt a third party's ability to plead the injured party's contributory negligence.

In relation to journey coverage, journey coverage is a difficult topic, but its inclusion is fundamentally unfair to the employers in the state. In relation to the reinstatement of weekly payments, the decision not to reinstate weekly payments during a dispute was one of the most essential cultural and financial change drivers of the 2008 legislative reform.

I would like to take the opportunity to expand on the three key areas. In her second reading speech, the honourable member (Ms Bressington) stated that:

...access to common law was bargained away in 1992 in return for improved statutory benefits, including increased lump sum payments.

She then went on to say that these benefits have 'since been whittled away'. However, many members would recall that, in 2008, the maximum lump sum available to workers was almost doubled to $400,000.

Non-government amendments supporting common law were put forward during the 2008 parliamentary debate and opposed by the government for many reasons, including some clearly articulated in the independent 2007 Clayton Walsh Review report. Fundamentally, 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.

In addition, the delays associated with, and adversarial nature of, the common law action work against the goal of return to work. Such disputes distract from the key focus of return to work which, ultimately, is going to help a worker far more than a payout, which could come with years of disputes and then be significantly eaten up by associated legal fees.

Currently, while employers are fully protected from common law actions, workers injured in the course of work can still sue a third party whose negligence caused or contributed to their injury. The protection afforded to employers under the scheme potentially leaves third parties exposed to 100 per cent liability for common law damages, regardless of their degree of fault.

With regard to the honourable member's assertion that journey coverage is a matter of principle, I point her to the 2004 Productivity Commission report on National Workers' Compensation and Occupational Health and Safety Frameworks which concluded that a fundamental common-sense principle against general journey coverage is that employers should only be held liable for conduct which they are in a position to control. Clearly, employers cannot control circumstances associated with journeys to and from work and, on balance, it is not appropriate for injuries sustained at these times to be covered by workers compensation.

I would like to assure the honourable member that, where the worker is injured during a journey undertaken in the course of work, or participation in required education or rehabilitation, the injury may be compensable, unless the worker was involved in serious and wilful misconduct or illegal activities/contracts that led to the injury. Furthermore, it should also be noted that, if someone is in a crash where a registered South Australian vehicle owner, driver or passenger is at fault, they may be eligible for compensation through South Australia's Motor Accident Commission compulsory third-party insurance. The coverage of journeys completely outside an employer's control or sphere of responsibility is not a workers compensation issue.

We come now to the proposal to reverse the 2008 amendments to section 36 of the act and, again, provide for weekly payments to be reinstated during a dispute between an injured worker and the compensating authority about the discontinuance of their weekly payments. The honourable member stated in her speech that the amendment was made because of an assumption that workers are often vexatious when they dispute decisions around their entitlements to weekly payments.

This is not the case. I want to make it completely clear to the chamber that the original problem with this section was that, if a worker's income maintenance was discontinued under section 36 of the act, and if they disputed the decision, the payments were immediately reinstated until the dispute was resolved. This was identified as a significant driver of scheme disputation rates and a barrier to a return-to-work culture due to the focus on the dispute rather than recovery and return to work.

In recognising the seriousness of ceasing an injured worker's weekly payments, the government ensured that a safety net and the Office of the WorkCover Ombudsman were created to review such decisions. The WorkCover Ombudsman may suspend the operation of the decision to discontinue weekly payments if it appears to him that the decision to discontinue payments was not reasonably open. This amendment was not taken lightly by the government and I understand that in a few cases it has caused particular hardship for injured workers who are disputing the cessation of their income maintenance. I also understand that there are criticisms about the length of time it can take to get a final decision in the Workers Compensation Tribunal. These factors have led to further consideration of the provision to achieving a fairer process with speedier outcomes without risking the financial strength of the workers compensation scheme.

The provision cannot simply be reversed but there are alternatives which the government is currently considering, including those identified in this year's review of the 2008 legislative changes, known as the Cossey report. This report identified that there may be merit in the suggestion to broaden the powers of the WorkCover Ombudsman in relation to section 36 of the act. Proposed changes would extend the review function to include reductions and enable the Ombudsman to suspend a decision if it appears to him not to be compelling, fails to comply with the act or regulations, or is otherwise unsound.

Mindful of the hardship impacts of the section 36 amendments, the government continues to work on an appropriate response to the Cossey report and will be giving due consideration to all suggestions, including those relating to section 36 of the act. The government is also considering the outcomes of consultation on proposed reforms to WorkCover's dispute resolution processes which would alter the way that the section 36 discontinuance provisions work. The proposed amendments would establish an expedited dispute resolution process for disputes about the discontinuance of weekly payments.

As I mentioned, the government opposes this amendment bill but it will continue to work constructively with employers, their representatives, unions and the important interested parties to ensure that we have a WorkCover scheme appropriately focused on low work injury rates and high return-to-work results, which are in the best interests of injured workers.

The Hon. T.A. FRANKS (21:44): I rise briefly on behalf of the Greens to speak in support of the Workers Rehabilitation and Compensation (Reinstatement of Entitlements) Amendment Bill put before us by the Hon. Ann Bressington. The Greens' position on the issue of workers compensation has been made very clear in this council in previous years, and I acknowledge the work of my colleague the Hon. Mark Parnell in terms of the commitment to workers rehabilitation and compensation in this state.

Access to fair compensation for injuries sustained in the workplace is a fundamental right for all working people. The Greens' position is quite clear; that is, we believe that people have the right to a safe workplace free from occupational hazards and that, if those hazards do occur, there will be compensation provided to the worker for their injury.

It is clear that this bill will not be receiving the support of the council tonight. However, I do note that both the opposition and the government have acknowledged that there are many problems with the current system, and I would hope that we will be looking at perhaps a more substantial piece of legislation in this parliament in the near future, particularly given the change of leadership of the current government. I for one hope that we have seen the end of the days of declare and defend and of failed policies not being revisited—and certainly the current WorkCover system is a failed policy that needs to be revisited.

The Hon. A. BRESSINGTON (21:46): I thank the Hon. Rob Lucas, the Hon. Carmel Zollo and the Hon. Tammy Franks for their contribution. As the Hon. Tammy Franks just mentioned, it is just a little refreshing to see that both major parties are acknowledging that change is much needed.

As I said when introducing the bill, I had no expectations that the bill would be passed. The bill was introduced with the sole intention of continuing to apply pressure on the Rann government, which lost its way when it came to injured workers, and to encourage the government to rethink the current business first, injured workers second approach to workers compensation. It is unfortunate that, over a period of time, with the sad stories that have been told and the issues that have been raised, none of that has been enough to prompt any sort of change. As I said, it is unfortunate but, in the climate of the Rann government, it is not surprising.

The Rann Labor government was willing to ignore motions of its own membership. As I made clear when introducing the bill, one of the provisions in the bill that seeks to restore the continued payment of weekly income maintenance payments when they are in dispute is in line with the successful motion moved at the 2009 State Labor Conference . That motion called upon a re-elected Labor Party to move a bill to this effect within the first sitting session, that is, in 2010. One year later, it is clear that this Labor government has snubbed its nose at its own membership and, in turn, injured workers.

For the record, I read into Hansard the text of the motion moved in 2009 at the State Labor Party Conference. It states:

A re-elected SA State Labor Government commits to introducing and vigorously prosecuting legislation that provides 'a worker in receipt of workers compensation payments who receives notice of discontinuance of such payments who wishes to challenge the discontinuance shall remain in receipt of payments until the conclusion of the dispute.' If the worker is unsuccessful in the dispute, such monies are recoverable by the corporation as a debt. A worker may elect not to receive such payments. Such legislation shall be introduced in the first session of Parliament following the 2010 election.

In a briefing yesterday about the Workers Rehabilitation and Compensation (Employer Payments) Amendment Bill, which this place will be debating shortly, the Treasurer, the Hon. Jack Snelling, indicated his intention to re-open the Workers Rehabilitation and Compensation Act in the new year. From memory, he described the current act as an absolute mess—and it is pretty hard to disagree with him on that.

I welcome this review and hope that it will herald the opposite of the scheme review bill this parliament debated in 2008, and I hope that injured workers will see the restoration of entitlements they have had progressively stripped away. If not, the Treasurer, at the very least, can expect a repeat of the debate in 2008. Hopefully, unlike last time, the Liberals will be open to either amend or support amendments that will restore some faith in the notion that injured workers and their families actually matter.

Second reading negatived.