Address In Reply (Workcover Corporation)

17 Sep 2003 archivespeech

This speech is regarding the WorkCover Corporation. Workplace relations issues are absolutely critical to our competitiveness, as is the sound functioning of the WorkCover Corporation for our prosperity and our ability to retain young people in this state. This has been identified by the Economic Development Board as absolutely critical.

The Hon. J.M.A. LENSINK: First, I want to congratulate Her Excellency, Marjorie Jackson-Nelson, for her superb carriage in the community and the terrific job she does. I also congratulate His Excellency, the Lieutenant-Governor, Bruno Krumins, on his delivery and commitment to the people of South Australia.

I acknowledge the passing of former members of this parliament: the Hon. Murray Hill, the Hon. Trevor Crothers and Mr David Boundy. The only one with whom I had much contact was the Hon. Trevor Crothers. Had I been able to understand what he was saying most of the time, I believe I would have known him to have quite a voracious sense of humour. We pass on our condolences to their families and are sad to see their passing.
As a new member of this chamber a number of people have asked me, since my appointment, what particular issues do I think should be changed and where would I set my priorities. One of the things that comes up continuously in conversation with people within the community is the subject of industrial relations, in particular, the WorkCover Corporation.

The Hon. Sandra Kanck: You associate with some strange people if that's the conversation.

The Hon. J.M.A. LENSINK: Well, they are the good people who are employing the men and women of our society, as well as some employees who have been disrupted by the system. However, I will get to that later. Workplace relations issues are absolutely critical to our competitiveness, as is the sound functioning of the WorkCover Corporation for our prosperity and our ability to retain young people in this state. This has been identified by the Economic Development Board as absolutely critical. To quote from the Lieutenant-Governor's speech:

The government is committed to reducing workplace deaths, illness and disease.

Accompanying that there has been an announcement of a 50 per cent increase in the number of workplace safety inspectors.

I note from the latest WorkCover annual report that there has actually been a decrease in the incidence of workplace injuries from, on average, 50,000 per annum in the 1990s to 41,000 in 2001-02. Given that we would have a higher number of employees since then, that is commendable. I commend employees, employers and, indeed, organisations such as the Safer Industries Program within Workcover for the initiatives aimed at those objectives.

I want to highlight to the council the primary objects of section 12 of the WorkCover Corporation Act 1994:

(a)to reduce...the incidence and the severity of work-related injuries;

and (b)to ensure, as far as practicable, the prompt and effective rehabilitation of workers who suffer work-related injuries;

and (c)to provide fair compensation for work-related injuries;

and (d)to keep employers' costs to the minimum that is consistent with the attainment of the objects mentioned above.

I think that from the evidence we can say that (a) has been delivered on (reducing the incidence) and, at times, (c) (to provide fair compensation for injuries), but on (b) and (d), I am afraid the evidence says that the system is failing. It has recently been highlighted that under this government the unfunded liability has blown out from approximately $85 million to over $400 million. Without urgent action to address this problem, the blow-out will no doubt be lumped onto employers or else on the people of South Australia through some kind of bail out.

To return to the objectives of WorkCover. Firstly, regarding the prompt and effective rehabilitation of claims, one thing I would like to highlight is the need for early intervention, with which no-one would disagree. It minimises the suffering of the worker and the costs to the system and, most importantly, effective early intervention leads to better long-term outcomes through fewer sequelae and a more rapid return to work. I commend WorkCover on a new service, which is to be introduced in October, called EarlyClaim, which is obviously aimed at encouraging faster lodgment of claims.

As in most fields, something like the 80/20 rule applies. In residential aged care (a field with which I am quite familiar), actuarial calculations show that injuries to workers who spend more than two weeks away from work result in 85 per cent of claims costs. There are a number of psychological, physical and statistical tools that can identify at least some of the likely longer-term and more complex claims, and I would say they need to be fast tracked. Early identification also depends on an efficient system and timely processing of claims. This is beginning to blow out and cause some difficulties.

With regard to rehabilitation and return to work plans, we need closer scrutiny to ensure that ongoing treatment is effective rather than giving false hope to workers and suffering a cost to the system of something that is not working.

WorkCover's web site states that it requires its medical and rehab providers to be accurate and clear in their diagnosis and to assist the worker's return to work program, and that is commendable. As a health professional, I would argue that the best way to ensure higher accuracy would be to ensure a level of specialisation in all the fields of discipline involved. This is critical for medical officers who may be involved in the initial claim through to the two-year review stage, not just for allied health professional service providers, as seems to be the situation. Medical and health professionals who do not normally work within the system may not have an appreciation of the detriment to the client's recovery if they do not provide their reports on time. I will refer to a particular case in which a worker with a stress claim had all sources of income suspended because she had this difficulty in obtaining a report from a psychiatrist.

Closure can be quite difficult to obtain in this system. There is a merry-go-round of appointments, conciliation meetings, attempts to find alternative duties and trying to force incapacitated people to do things beyond their capability; and it does not allow people to move onto the next stage of their life. Recently, I spoke to a spinal surgeon who has seen a number of clients at the two-year review stage. His assessment is that by then little progress can be made, whereas if he assessed clients at, say, three months post injury he might be able to help. Realistic assessment by people who have expertise and a commitment to resolution will assist workers to get back to work or to move on.

Alternative duties is another area which is fraught with difficulty, and that relates to section 58B of the act. The experience of the aged-care industry is probably not different from that of many workplaces in which there is little diversity of tasks, making it difficult to provide alternative duties from those that the injured worker is unable to perform. Similarly, a small business with few employees may not have the space or capacity to provide additional places. An overly optimistic expectation often leads to aggravation between the parties and is the subject of many complaints to claims agents.

There is also the issue of stigma. Workers' compensation is a very complex field and it has a dubious reputation for all parties who find themselves involved in it. There are mindboggling stories of inefficiency; stories of arrogance from corporation staff in dealing with both employees and employers; many stories about people who abuse the system; and, ultimately, there can be a great deal of conflict between parties. Employees and employers are afraid of getting stuck in that vortex. Clearly, they lack confidence in the system.

I know of situations where an employee successfully claimed to have sustained an injury from pulling a plug out of a sink; and another who claimed to have received an electric shock in spite of the wiring being found not to be faulty at all. Employers who challenge such claims may find that it suddenly turns into a stress claim—even if the original claim is not verified. Employers will also tell you that injuries seem to occur on a Monday—the day after the weekend gardening and sporting activities.

In order to restore confidence the government needs to improve the system's integrity, because only then will the genuine claimants not be subjected to discriminatory labelling as rorters or bludgers. Claims need to be more closely scrutinised at the front end when the claim is first lodged with a GP. I suggest that prescribed medical certificates be approved only by medicos who have some level of expertise in the field, such as through an accreditation system. Because of the rorter and bludger stigma, genuine workers are often afraid of becoming victimised or they are not taken seriously—which is hardly conducive to their recovery.

I highlight to the chamber a case which has come to my attention since I was appointed. A lady, who shall be known as Ms A, was the victim of bureaucracy and a lack of interest by the WorkCover system. Ms A was an occupational health and safety representative, and she was the victim of an unfair dismissal claim—which she successfully won after leaving her employment, obviously. The circumstances were such that she made a stress claim. The claim could not be accepted without a psychiatrist's report. She had to go through several phone calls in order to obtain one, but she was not successful. When she called her case worker, strangely enough, he was always on training, and the corporation itself, which she turned to in some form of desperation, was just not interested. She went to Centrelink because she did not have any income. It was unable to help her because, supposedly, she was a WorkCover client. She is a single mother who has had to bunk up with a friend because she has no source of income. I ask the government whether this is its form of social justice.

In relation to keeping costs to a minimum, obviously these problems within the system just increase the overall cost, which ultimately is borne by employers and the community and which results in fewer places for new employees. It was designed as an income support safety net, which I understand is different from the systems that operate in all other states. It is an unrealistic goal. It is a lifetime disability support pension. The commonwealth government must think that members of the South Australian parliament have rocks in their heads, because it has set up a system which is a massive cost shift and which is the South Australian parliament's own design. It is not sustainable for this state to carry on providing payments ad infinitum, and it is a huge risk to our economy.

There are also issues of liability in that employers can be held 100 per cent liable for an injury, even if the contribution from their work site is as little as 1 per cent; and even if the worker had a prior undisclosed workplace or sporting injury. As a no-fault system, it does not encourage people to take responsibility for their co-workers as the liability, strangely enough, always falls back on the employer.

An emerging issue in the aged-care industry is that violent behaviour in residents can trigger responses in some workers who have been abused earlier in their lives. While I have every sympathy for all victims of abuse, it does not follow that the system can be held responsible for actions that took place before someone set foot on that work site. Furthermore, WorkCover is often used as a way out of other industrial problems, such as workplace bullying, that may exist. Under the law, co-workers, as well as employers, have responsibilities to one another, and all these issues should not be sidestepped through the lodgement of a WorkCover stress claim.

In relation to levies, penalties and classifications, two days ago the Hon. David Ridgway spoke about a case in which a business's levy has been nearly doubled from approximately 4.9 per cent to 9.1 per cent due to one single claim of $15 000 by someone who was not even an employee of that company. Cases of the penalty system imposing additional charges out of proportion with the company's safety record and costs are rife. Employers are often also mystified by the classification to which their company has been attributed. For instance, the residential housing industry has been grouped for classification purposes with the commercial construction industry—a much higher risk industry, which naturally incurs higher costs. This leads to cross-subsidisation and an unfair impost on workplaces which have a good safety record. Furthermore, other issues, such as whether employees aged over 70 are covered, need to be clarified. The levy is still paid but workers cannot obtain consistent advice from WorkCover as to what their situation is.

Under this government we have seen the long tentacles of the minister tighten their grip on the corporation and the tentacles of the corporation tighten on workplaces. I understand that no exemptions have been granted in the past year, despite applicants' meeting the required criteria. Similarly, there is a recommendation that the agents be dispensed with and that the functions for case management be brought back into the WorkCover Corporation. I suggest that is not a pragmatic and sensible decision but, rather, ideological and all about control. Industries in this state are terrified that if this happens it will lead to mere processing of claims, rather than management of claims. The tail in the system will never be resolved; it will be back to the bad old days when WorkCover was managing it all and it was a disaster.

A number of outsourced agents provide employers with a choice, and WorkCover can utilise performance criteria to control the agents. I suggest that that is a sensible system. Another huge issue is in the labour hire section. The escalating trend affecting labour hire is WorkCover's pursuit of third party recoveries through the public liability insurance of the host employer who has engaged a casual worker who has been injured on their site. I would suggest that a flexible work force is critical to South Australia's international competitiveness, particularly in manufacturing, due to its cyclical nature. Many workers prefer the nature of casual employment because they receive a loading and have more flexible working hours. And why should they not have that choice?

On-hired employees have an advantage over permanent staff who work with them side by side in that they are already able to claim through the labour hire company's WorkCover. They are also able to sue through common law, which enables them to double dip on the system. It is suggested that not only has WorkCover been recovering all its costs, and not a proportion of its costs, from settlements, but it has also encouraged some injured workers to pursue damages claims. The pursuit of common law claims presents a costly process for host employers, and a number choose to settle, not as an admission of guilt, but to save the cost of going to court. Strangely enough, insurers are saying, `Enough is enough', and host firms are paying through the nose on public liability. Some brokers charge up to three times the equivalent in insurance of a comparable WorkCover levy.

They have introduced restrictive clauses to policies, and there is a strong suggestion that there is some exploitation of common law rights by elements of the legal fraternity who are known, in the vernacular, as `ambulance chasers', as well as WorkCover trying to recover these costs.
WorkCover provided statistics over 12 months ago, which indicated that 90 per cent of its recoveries are employee initiated, and the reminder are pursued by WorkCover. There is some concern about the accuracy of those figures, as there was a flurry of agent activity identifying to WorkCover potential third party claims over $5000 over 12 months ago. The insurance industry apparently has contradictory evidence, as it is dealing with WorkCover recovery claims daily. The effect of all this is that host firms who employ staff through labour hire firms are either taking a huge risk or are paying a huge premium. Industries with fluctuations in demand, such as housing, wine and manufacturing, are being restricted in responding to demand. Casual employment, however, runs counter to the philosophy of the ALP and the union movement, which is nationally seeking to undermine casual employment. I would suggest that this activity will stagnate growth in this state. Within the last 18 months, several South Australian manufacturers have not made decisions to put on additional shifts because they are unsure of the future direction of workers compensation or of internal WorkCover policies.

The Stanley Review, in fact, raised this trend with some concern, and has recognised an increased requirement for what is called `hold harmless' insurance (and I quote from volume 2):

The review understands that several bodies have made representation to the government that section 54 is inequitable and unjust. It is asserted that WorkCover's right of recovery under section 54 in its present form, and WorkCover's policy of pursuing third party wrongdoers for full recovery jeopardises the way in which business is done, and further jeopardises the future existence of labour hire firms in the state. It is said that this is because `host employers' ...are insisting upon contractual terms to the effect that labour hire firms will indemnify them against any common law liability that they may incur as a third party wrongdoer. It is said that some insurers are no longer prepared to insure against this liability and that insurance is difficult and expensive and in some cases impossible to obtain.

The issue is particularly invidious because, under the act, there is no allocation of proportional liability. Again I quote:

A third party wrongdoer whose fault was a minor cause of the injury may be required to bear the whole of the cost of workers' compensation, while the more substantial fault of the employer is ignored.

In the previous government, minister Armitage recognised this problem with third party recoveries and appointed a working party, which came up with three recommendations. Under the Labor government, this process has stagnated. We have seen another review, and no decision has been made. So, two years later, employers in this state, including the on-hired industry, have been struggling with this problem, which, if not addressed soon, will surely eat away at the economic base of our state.

This loophole also catches group training schemes and other parties. I understand that a case that is about to be pursued by WorkCover involves a situation where an employee of a ship building company was injured. That company is insolvent, so WorkCover is going to pursue the landlord—the people who own the building—and the injury has nothing to do with the design of the building or the behaviour of the landlord. But, again, we have the ambulance chaser mentality where the one with the deepest pockets is the one who is pursued.

Group training schemes, which take on apprenticeships in building, mechanics and engineering, are also suffering the same circumstances as labour hire firms. We all know the difficulties that we have in hiring electricians, plumbers and so forth, and in the building trade this could be a great tragedy for our state, if employers are unable to take on apprentices because of WorkCover and this issue of third party wrong doers.

I see a bleak future for WorkCover because of the spiralling costs and a lack of leadership within the government. I would have to say at this point in my career that, if there is one thing that needs to be fixed, it is that. Lack of confidence in the system is hurting injured workers and if the Labor Party wants to suggest that it helps workers, it needs to urgently look at the way in which it deals with them through the WorkCover system, because it does not work for them any more than it does for employers.

It is an inefficient system, and WorkCover needs to focus on its core business of rehabilitation and return to work. In its current situation, it is unsustainable, and it might need to be held more accountable via an organisation such as APRA and be put on the same footing as private sector insurance companies. Industry in this state desperately needs the government to act on the sensible recommendations contained in chapter 12 of the Stanley report. WorkCover needs a CEO, and it also needs a minister who will recognise the flaws in the system and who will take positive action to amend them, rather than attempting to extend his control.