What will the Victorian accident compensation reform mean for your business?

Significant reforms to workers compensation legislation affecting all Victorian employers and their employees have recently been passed by the Victorian Parliament in the Accident Compensation Amendment Act 2010 (Amending Act).

Most provisions of the Amending Act took effect 5 April 2010. Part 13 of the Amending Act, which relates to the return-to-work regime and the new antidiscrimination provisions, commences 1 July 2010 with some transitional arrangements.

While there are a number of substantive changes in relation to workers compensation issues, the reform also impacts employers from an employment and OHS perspective.

Background

The Amending Act is a legislative response to the ‘Hanks Report’, a review of the Victorian workers compensation scheme commissioned by the Victorian government in July 2008 and conducted by Peter Hanks QC to review the efficacy and sustainability of the Victorian workers compensation scheme.

The Amending Act retains the existing workers compensation legislative framework comprising the Accident Compensation Act 1985 (Act) and Accident Compensation (WorkCover Insurance) Act 1993 with aspects individually repealed, redrafted and amended.

Penalties

Employers must comply with the new amendments. The Amending Act substantially increases penalties for non-compliance to a maximum of approximately $21,000 or six months imprisonment for individuals (or both), and approximately $105,000 for a body corporate, increased from approximately $14,000 under the former Act. Other remedies include reinstatement to the employee's position, where there is a proven breach of the antidiscrimination provisions, as well as adverse publicity orders which may significantly harm the reputation of the employer's business.

Key reforms for employers

Return-to-work regime

The Amending Act repeals the current return-to-work provisions, which required an employer to provide pre-injury or suitable employment to an employee for 12 months from the time the employee commenced an entitlement to weekly payments.

The new provision, which refers to an “employment obligation period”, provides greater clarity regarding employer obligations. Section 194 requires employers to do the following:

• Return employees to work where they have a partial or complete capacity to do so (for a period of 52 weeks following first notification of the claim);
• Plan the return to work of an employee from the date the employer knows, or should reasonably have known, of the employee's incapacity for work;
• Consult directly with the employee and their treating practitioner or occupational rehabilitation provider;
• Nominate a return-to-work coordinator; and
• Make a return-to-work plan and associated information available to the employee.

Impact

The employer’s return-to-work obligations now commence at a much earlier stage - from the time the employee receives a medical certificate or claims workers compensation - and are more onerous, requiring employers to take a more proactive approach to the employee's return-to-work program.

There is a transitional period in respect of an employer’s return-to-work obligations between 1 July 2010 and 31 March 2011 where employers with existing claims will be deemed to be compliant with their return-to-work obligations provided they continue to comply with obligations under the former section 155A.

Stress exclusion

Under the previous regime, certain workplace psychological injuries were not compensable where they arose from a limited range of “management action” which included transfer, demotion, discipline, redeployment, retrenchment and dismissal. This exclusion has been revised to give it broader application, including the following key changes:

• The definition of “management action”, which is not exhaustive, has been given an expansive meaning and now includes a number of new actions including counselling, investigations of alleged misconduct, training and appraisal to reflect current management practices. Also protected are decisions not to take management action and any expectation by the worker that management action would or would not be taken.
• The exclusion will operate if an employee sustains a mental injury whose whole or predominant cause is management action taken by or on behalf of the employee's employer on reasonable grounds and in a reasonable manner, or a decision of the employer on reasonable grounds to take or not to take any reasonable management action.
• The phrase “injury consisting of an illness or disorder of the mind caused by stress” has been replaced with the wider term of “mental injury”, which is consistent with the current definition of “injury” under the Act.

Impact

In addition to providing clarity for employers, the wider definition of "management action" may limit claims by employees and put employers in a better position to justify management actions where they result in a WorkCover claim. Employers should be vigilant in maintaining accurate employment records to ensure they are in the best position to rely on the reasonable management exclusion.

Discrimination

Employees and applicants for employment are afforded greater protection from discrimination by employers for pursuing or attempting to pursue claims for workers compensation, notifying a workplace injury or assisting in a return-to-work investigation. Discrimination will occur if an employer:

• Dismisses, or threatens to dismiss, a worker from employment;
• Alters, or threatens to alter, the position of a worker to the worker's detriment; or
• Treats a worker less favourably than another worker in relation to promotion or re-employment.

Drafted to generally align with the provisions prohibiting discrimination under the Occupational Health and Safety Act 2004 (Vic) (OHS Act), the amendments broaden the range of conduct which is considered discriminatory and introduce new criminal and civil remedies. This includes damages for hurt and humiliation, compensation for loss of income and reinstatement to the employee's former position where discrimination is proven. In addition, the antidiscrimination provisions impose a reverse-onus-of-proof on employers, so that the employer will need to demonstrate that the discriminatory reason was not the dominant reason for the conduct. This is an onerous burden to discharge.

Impact

Employers should adopt a similar approach to the new provisions as they do to anti-discrimination legislation generally. This will include updating and implementing policies and procedures and up-skilling management regarding the new obligations.

Return-to-Work Inspectors

The amendments expand the powers of return-to-work inspectors to align more closely with the powers of inspectors under the OHS Act. Return-to-work inspectors are empowered to, among other things:

• Enter any workplace during business hours;
• Require a person to produce, examine and copy any document;
• Require a person to answer the inspector's questions; and
• Issue return-to-work improvement notices to employers where there is a reasonable belief that an employer is breaching the Act or has breached the Act.

Employers who fail to take steps to comply with a return-to-work improvement notice will be liable for the maximum financial penalty.

Impact

The power to issue improvement notices is a significant enforcement power which must be taken seriously by employers, particularly in view of the enhanced penalty regime. Employers should strictly adhere to the return-to-work provisions and take steps to understand the powers of and comply with return-to-work inspectors.

Lessons for employers

Employers must ensure that management employees and supervisors are aware of, understand and comply with the new provisions and, in this regard, provide adequate training. Employers should also ensure that they have appropriate policies and procedures in place to reflect and respond to the changes.

*Mark Howard, Partner, Middletons