South Australia has a worker’s compensation system, which for many years has suffered significant difficulties. Return to work rates are some of the poorest in the nation and the scheme is significantly under-funded. On 24 January 2014 the Labor Minister for Industrial Relations, Deputy Premier John Rau, released a statement proposing a further overhaul of the workers compensation system in order to increase return to work rates and reduce premium rates.

Key changes

One of the key changes to the system proposed includes the return of access to common law damages for work related injuries.

Since 1987, South Australian workers have not had a right to sue their employer in negligence at common law for a work related injury. Access to common law damages was abolished by the Workers Rehabilitation & Compensation Act 1986 (SA). Since this time the only rights available to injured workers have been through the worker’s compensation system. This system is designed to provide income maintenance to workers unable to work as a result of a work related injury, payment of medical expenses for a work related injury and the payment of lump sum compensation for those with a permanent disability as a result of an injury at work. Although the system does provide a level of support for injured workers, the statutory scheme does not always benefit individual workers in the way that common law damages can.

A claim for damages at common law is much different to a claim for compensation under the workers compensation scheme. The Court is not restricted by the terms of the legislation and can award damages outside those normally allowed to workers under the workers compensation system.

For example, a worker claiming income maintenance under the workers compensation scheme usually has their entitlements ceased upon the age of 65, regardless of whether or not the worker had intended to continue working past this age. At common law the Court can take into account all of the evidence available as to when a worker was likely to give up work when awarding damages for loss of earning capacity. In recent years, particularly given the GFC, it is more and more common for workers to make plans to continue working well past the age of 65. As a result, Courts are more often awarding damages at common law for loss of earnings past the age of 65 and at times past the age of 70.

Another big difference between the workers compensation system and common law relates to awards of compensation for pain and suffering. Under the workers compensation scheme workers that apply for lump sum compensation are awarded an amount based upon the percentage whole person impairment that the injury causes. For example, a person suffering an injury sustained in 2014 causing a 5% whole person impairment receives a lump sum of $11,795 in compensation under the worker compensation scheme. At common law the court takes into account not only the level of impairment suffered by the injured person but also the impact that the injury has had on that individual in respect of loss of enjoyment of life and loss of the amenities of life. For instance, a common law claim on behalf of a marathon runner with a 5% whole person impairment to their knee or foot would usually sound in damages for pain and suffering well in excess of $11,795. A further shortfall in respect of the workers compensation system is that there is no lump sum compensation to workers who suffer a psychiatric injury because of work. There is no such restriction at common law and significant amounts of compensation can be awarded by the Court for such injuries.

Common law damages are therefore much more tailored to a specific person’s injury, level of disability and actual loss when compared with the statutory workers compensation system.

A further benefit in obtaining common law damages is also that all damages are awarded by way of lump sum. This includes damages for loss of earnings. Therefore, rather than the worker receiving periodic weekly payments for loss of earnings, a lump sum can be invested and allow the injured person to plan for the future and take control financially over their own life. In the case of total and permanent disability, although a worker will have lost all residual earning capacity, the current workers compensation scheme provides for payments to replace income to continue on a periodic basis.

Common law damages are available to injured workers in many other jurisdictions within Australia. A return to access to common law damages in South Australia, particularly for seriously injured workers, would ensure that workers could choose whether to pursue their entitlements through the workers compensation system or at common law depending on their individual circumstances.