1992 – 1997 WorkCover Changes
From 1992 and leading up to the abolishment of common law in 1997 some of the major Kennett government changes included:
• A requirement that employment be a significant contributing factor
• The exclusion of some categories of stress claims
• The exclusion of injuries which occur on the way to or from work
• The introduction of the concept of notional earnings which is the amount actually earned or the amount that WorkCover believes a worker could be earning in suitable employment even if no such job exists
• The introduction of the concept of serious injury
• Significant changes to the weekly payments structure
• Termination of payment of routine or non-essential medical expenses 12 months after weekly payments cease
• Employer control of injured workers access to rehabilitation services
• Removal of ‘mental disorder’ as a basis for lump sum compensation
• Abolishing the specialist Accident Compensation Tribunal (including sacking the
Judges), and abolishing the WorkCare Complaints Commissioner
• Introducing impairment thresholds for hearing loss compensation
• Increasing the role and power of Medical Panels including redefining medical questions to include questions of fact and removing judicial review of decisions
Whilst the government reintroduced rights to claim pecuniary damages in 1992, it introduced the threshold requirement of ‘serious injury’ by way of 30% whole person impairment based on AMA Guides, or satisfaction of a ‘narrative’ test for access to common law, and placed monetary thresholds on both heads of damages.
A particular aim being to discourage common law claims for small monetary amounts.
Between 1992 and 1997 the government further tightened access to common law entitlements by removing secondary psychological injury from the assessment of impairment, and the imposition of cost penalties including requiring the plaintiff to pay her/his own costs if damages were assessed but could not be awarded.
The Kennett government also sought to substantially reduce the various statutory entitlements including weekly payments, and lump sum compensation for permanent impairment.
Accordingly the abolition of common law rights in 1997 can be seen as a continuation of the Kennett government’s determination to restrict access to, and the benefits available under, the WorkCover scheme.
It should be noted however that following the majority of changes carried out in 1992 the WorkCover scheme had settled into a relatively stable scheme.
Up until November 1997 there had been a limited assault on common law, primarily tightening access. The fact that the Kennett government moved to abolish common law rights after five years in office was curious.
Partly the answer lies in the process of change begun in 1992 and carried out up until 1997. But the major reason I suggest, lies in a confluence of factors merging in late 1997 that provided the political impetus to abolish common law.
In my view the Kennett government changes in 1997 were driven by a confluence of at least three factors, namely:
• A desire for a significant levy reduction couched in the economic rhetoric of employer associations (who portrayed WorkCover premiums as an impost on profitability and jobs), and support for this within government
• the remnants of support for the 1960’s & 1970’s philosophical opposition to common law genuinely held by senior policy makers within Treasury and the VWA and shared by some sections of the labour movement
• And the chronic inability of the Victorian WorkCover Authority to in particular manage the existing common law claim process.
The Economic Rhetoric
Employers groups and associations vigorously pursued the line that workers’ compensation premiums were a crucial component of the economic viability of the state. I am sure that you have experienced the same arguments here.
Without a shred of objective evidence every percentage point up or down in premium rates is claimed to represent thousands of jobs lost or gained to other states. Also, common law was portrayed as anti-rehabilitative, as it, rather than the fact of negligent caused injury, was seen as the destroyer of the employment relationship.
Clearly the employer groups’ eyes were firmly fixed on a levy reduction. It is interesting to contrast the position of twenty five of the twenty six self-insurers in Victoria at this time who opposed the abolition of common law.
They were large corporations employing substantial numbers of Victorians who were just as interested in the issue of business costs, but as self-insurers would have no benefit from a levy reduction.
I would suggest that their support for the retention of common law was not an act of altruism per se, but more a recognition that access to common law was an important component of the compensation ‘tools’ necessary to effectively manage their industrial injury portfolios. As well the self-insurers found no impediment in common law to effective rehabilitation.
The Kennett government threw their support behind the employer association claims with a crude and essentially dishonest use of financial statistics.
In October 1997, shortly before abolishing common law rights for seriously injured Victorian workers the then Minister for Finance (and responsible for the WorkCover scheme), Roger Hallam, issued a press release which provided reasons for the abolition of common law that essentially relied on financial issues, and notions of "more equitable and fairer" treatment for injured workers.
Hallam claimed that common law claims constituted 20% of WorkCover’s liabilities, yet less than 3% of injured workers received common law settlements. He also claimed that lawyers were receiving $100 million a year from WorkCover and that this money would be better off going to injured workers.
Given the continual changes to the compensation scheme since 1985, and in particular those applying to the operation of common law, it has been almost impossible to gather sound and objectively based statistical information, which can be used in any meaningful way to inform policy choice.
Not only are there ‘lies, damn lies, and (WorkCover)statistics’, but Hallam’s use of them in this way represented an attempt by the Kennett government to portray criticism as merely an esoteric debate between the government and ‘greedy lawyers’ about money, not principle.
The figures utilised by the government drew on an artificial hump of claims created by its own amendments in 1992, and then plotted a the growth of claims from a zero base in 1992! What was a natural and expected statistical phenomenon was portrayed as an alarming and uncontrolled exponential growth in these claims.
Abolition of common law was portrayed as cost neutral and the proposal as merely removing money from the pockets of lawyers to return to injured workers. Kennett & the ‘Historic Ambivalence’
In my view Kennett, as the consummate political animal, sensed some ambivalence to common law in sections of the trade union movement and the ALP. His judgment about such ambivalence was not misplaced. I recall a conversation in mid-1997 with a senior member of the then state ALP opposition (and now senior cabinet member of the current government).
The Kennett government was in the process of laying the political groundwork for the abolition of common law in November 1997. Labour lawyers were encouraging debate about the issue in the broader labour movement. In the discussion I raised concerns about the impending abolition of common law only to be told that there "were no votes in WorkCover"!.
Thereafter I, amongst others resolved to ensure that there were votes in WorkCover. Of course this was largely achieved by a well orchestrated campaign conducted by plaintiff law firms, the trade union movement, legal bodies, injured workers, and other groups which was comprehended and supported by the wider community.
In 1997 Kennett sought to exploit the ambivalence of some sections of the labour movement to argue that notion of ‘fault’ based compensation could finally be put to the sword, and replaced with the protective shield of fair and equitable statutory lump sum compensation for permanent impairment together with other entitlements.
In this I suggest he was supported by well intentioned senior policy makers within the bureaucracy who were convinced of the need to remove the vagaries of common law from the compensation system following the critique developed during the expansion of the welfare state.
Paul Mulvaney
Solicitor
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