The Victorian Parliament yesterday passed the Accident Compensation Amendment Act 2009 (amending legislation), which contains significant reforms to the workers compensation legislation affecting Victorian employees. These reforms are far-reaching and will be introduced through nearly 250 pages of amending legislation.

They will significantly impact a number of key areas of workers’ compensation regulation in Victoria.

How did we get here?

In 2007, the Victorian Government commissioned Mr Peter Hanks QC to review and report on the Victorian workers’ compensation system. He was given a broad mandate to review the efficacy and sustainability of the Victorian workers’ compensation scheme.

Following on from this review the ‘Hanks Report’ (Hanks Report) was presented to the Victorian Government in July 2008, detailing over 150 recommendations for reform.

The government responded to that report in 2009, and late last year introduced a Bill into parliament to amend the Accident Compensation Act 1985 (Vic) (ACA) and also the Accident Compensation (WorkCover Insurance) Act 1993 (Vic).

How will the amendments be implemented?

Despite the hopes of many practitioners and service providers, the amending legislation does not provide for the complete repeal and redrafting of a new consolidated set of workers’ compensation laws.

Rather, the existing legislative framework will remain, with various aspects individually repealed, redrafted and amended.

Key issues for employers

The amending legislation raises a number of technical issues affecting the relationship between injured workers, agents, and the scheme as well as in relation to the calculation of employer premiums.

The amendments also relate to a number of key issues of interest for employers. Below we provide a summary of what changes employer’s should expect in relation to:

  • return to work
  • claims for mental injuries
  • entitlements, and
  • prohibitions on discrimination.

Significant reform of the return to work regime

Mr Hanks identified return to work as being a critical issue. The Hanks Report proposed a new approach to how employers’ return to work duties are expressed, recommending that they be similar to the general duties under occupational health and safety legislation.

On this basis the amending legislation will repeal the existing return to work section of the ACA and replace it with a new set of provisions providing for outcome-based return to work obligations. Generally speaking, employers will be required to do the following to the extent that it is reasonable to do so:

  • return employees to work where they have a partial or complete capacity to do so (for a period equal to 52 weeks following their first notification of a claim)
  • plan the return to work of a worker
  • consult with the worker regarding the return to work
  • nominate a return to work coordinator, and
  • make a return to work plan available.

Penalties of up to $100,000 will be in place for employers who fail to meet these obligations to the relevant standard.

Increased powers of the Return to Work Inspectorate

Consistent with the reform of the enforcement mechanism, the amending legislation will also significantly increase the powers of the Workcover Return to Work Inspectorate.

Inspectors will have the power to enter workplaces and obtain documents, but will also be provided with the authority to issue ‘improvement notices’.

These ‘improvement notices’ will be issued on the basis that there is a perceived breach by the employer of its return to work obligations and that the employer will be required to take steps to remedy that breach.

This is a power which operates in parallel to the powers of Worksafe health and safety inspectors. The power to issue improvement notices is a significant, on the ground, enforcement power which is likely to alter the involvement of the Return to Work Inspectorate considerably in complex return to work cases.

Employers aggrieved by the issuing of a return to work notice will have access to an administrative right to appeal that notice. Again, this parallels the ‘internal review’ mechanisms available under health and safety laws, and there will be important lessons for employers from that jurisdiction.

Clarification of the exclusion of certain ‘stress claims’

Under the existing law, certain workplace psychological injuries are not compensable where they have arisen from a limited range of ‘management action’.

The drafting of the current exclusion for these injuries has been the subject of much criticism, and is perceived as producing inconsistent outcomes. Accordingly the Hanks Report recognised that this provision needed redrafting and clarification.

Mr Hanks proposed three general areas of reform to the management and acceptance of work related stress claims. He proposed that:

  • a conciliation process be established to require employers to proactively meet with employees prior to the acceptance of any ‘stress claim’
  • the operation of the reasonable management exclusion be clarified, and
  • the definition of ‘management action’ be updated to reflect contemporary management practices and to address anomalies in recent case law.

What will the amendments do?

Ultimately, the government rejected the proposal in relation to compulsory conciliation and gave only qualified support to the redrafting of the exclusionary provision. Under the amending legislation, there will be an extensive definition of what ‘reasonable management action’ will mean in this context.

Management action is given a reasonably extensive (but not exhaustive) definition, and now includes a number of new actions in addition to more common place actions dealing with a worker’s employment. For example, under the amending legislation, reasonable management action includes reasonable steps taken in:

  • counselling workers, and
  • investigating allegations of misconduct by either the worker or in circumstances to which the worker was a witness.

Providing better clarity for employers, employees and agents of the scope of workers’ compensation laws to cover workplace psychological injury will be welcomed by most.

Importantly, injuries remain compensable where they were caused by unreasonable action, and so the ongoing training of managers in relation to this issue remains an important aspect of managing potential workers’ compensation liability.

Increase in payments The Hanks Review also focused on providing ‘better income protection’ to injured employees, and increased benefits to the dependants of workers killed at work.

These recommendations were largely accepted and the amending legislation will result in significant increases in some payments, including:  

Click here for table.

A new anti-discrimination jurisdiction

The Hanks Report concluded that the current anti-discrimination provisions in the ACA are drafted too narrowly and provide inadequate remedies.

In response, the amending legislation introduces laws prohibiting the discrimination of employees on the basis that they have given notice of an injury or have taken steps to pursue a claim for compensation.

The amending legislation will also introduce both criminal and civil remedies in this area. These will allow for significant criminal penalties (over $100,000 per offence) to be imposed and civil damages to be awarded to workers along with the possibility of reinstatement.

The increased profile of anti-discrimination provisions

The new discrimination provisions will operate in addition to, and complement, existing prohibitions on discrimination against employees arising under occupational health and safety laws, equal opportunity legislation, and other industrial ‘workplace rights’ provisions.

Again, appropriate training of management is a key issue in employers managing their liability in this area.

Where to from here?

Most of the amending legislation is effective as of 5 April 2010, however, some provisions, including the following key issues, have separate commencement dates:

  • Changes to return to work regime – 1 July 2010
  • Increase in lump sum death and permanent injury benefits – 10 December 2009
  • Broadening of the exclusion against discrimination – 1 July 2010.