Major changes to SA workers compensation

Major changes to SA workers compensation

1 July 2015 heralded major changes to the Workers Compensation scheme in South Australia; many of these changes revolve around the concept of “serious injury”.

The Return to Work Act 2014 replaces the Workers Rehabilitation and Compensation Act 1986. Key changes that may impact on liability insurers are:

  • Weekly payments of compensation are now cut off for workers after 104 weeks unless a worker is assessed as seriously injured.
  • An injured worker will have a Serious Injury if they are assessed to have a 30% or more Whole Person Impairment (WPI).
  • A seriously injured worker may stay on weekly payments until retirement age and have their reasonable medical expenses paid indefinitely.
  • A seriously injured worker may also choose to redeem their weekly payments for a lump sum.
  • Alternatively, a seriously injured worker may choose to access common law damages for economic loss only and sue their employer in negligence or other torts (including breach of statutory duty).

What this means for public liability insurers

Seriously injured workers can now sue their own employer, in e.g. a labour-hire situation, instead of having to sue the host employer only (under its public liability insurance). It seems unlikely that a worker will sue only its employer in these circumstances because the threshold is much higher and the damages are more limited than under the Civil Liability Act. They may choose to sue both the employer and the host employer, which already occurs quite regularly in Victoria, for example.

Often, there may be little to be gained by a seriously injured worker suing at common law at all, as they can now stay on weekly payments set at 80% of their pre-injury earnings until retirement, or choose to redeem those payments for a lump sum.   In electing to sue at common law (whether under the Return to Work Act or the Civil Liability Act) those weekly payment entitlements will be terminated on receipt of any award of economic loss damages. Additionally, seriously injured workers will still receive a lump sum permanent impairment payment under the Act (which can be much the same as a general damages assessment).

Importantly, the Workers Compensation Authority still retains its right to recovery pursuant to section 66 (7) against third parties (as it did under the previous section 54 (7)).  While seriously injured workers may not sue third parties as often, we may see an increase in recovery actions alone against host employers, subject to the Authority securing the co-operation of the injured worker.

Further, there may now be more common law claims by non-seriously injured workers against host employers, who have been cut-off from weekly payments at 104 weeks under the new Act. On the other hand, under the new Act non-seriously injured workers can receive a lump sum entitlement for loss of earning capacity if their WPI is between 5% and 29%, which is in addition to their weekly payments.

Lastly, in circumstances where the worker sues only a third party, that third party cannot seek contribution from the employer (section 66(4)).

The purpose of this update is to flag major changes to the South Australian workers’ compensation scheme. No doubt, with time and the practical application of the Act, as well as developing case law, there will be further refinements.