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Review of step-downs in Workers Rehabilitation and Compensation - Unions Tasmania Submission

June 04, 2020

This submission was made by Unions Tasmania to Allen + Clarke Consulting on 3 June 2020, as part of the Tasmanian Government review of step-down provisions.

 

Review of step-down provisions contained in Section 69B of the Workers Rehabilitation and Compensation Act 1988 (Tas)

Unions Tasmania welcomes the opportunity to contribute to the review process of step-down provisions of the Workers Rehabilitation and Compensation Act 1988 (Tas) (‘the Act’). This letter is intended to supplement our views provided verbally during our meeting on the 29th of May.

Unions Tasmania is the peak body representing workers in Tasmania, comprised of 23 affiliated unions with approximately 50,000 members across industry, in both the private and public sector. For over 135 years, we have been the only peak body dedicated to giving a voice to working people in Tasmania. We advocate for the improvement of wages, conditions, and workplace safety (including workers compensation) for Tasmanian workers.

Unions Tasmania is also a provider of safety training to health and safety representatives and, since its inception in 2000, have been either a nominating body or had appointed Unions Tasmania officials to the WorkCover Tasmania Board. Through our extensive membership network, we gain close insight into the experiences of injured workers and are well placed to comment on the operation of the Act and step-down provisions. 

Unions have long held concerns about the operation of step-down provisions and the financial and social consequences of reduced wages on injured workers during their recovery and return to work. Step-downs are effectively a financial penalty applied to the most injured of workers. While workers whose injury doesn’t keep them out of the workplace for longer than six months will still receive 100% of their weekly wage, workers with serious, long term injuries incur a financial penalty. This is a perverse and inherently unfair outcome.

While all Australian states and territories have had some form of workers compensation legislation since the early 1900s, step-downs are a comparatively recent feature of our laws, with all states and territories implementing them throughout the 1980s and 1990s.

Though the political circumstances differed somewhat by jurisdiction, in the main step-downs were introduced in response to concerns from insurers and business groups about the cost of premiums or the desire to be ‘competitive’ with other jurisdictions. Their introduction also coincided with emerging neoliberal theory which saw a shifting of the burden of costs from employers to workers and society broadly[1].

Historically, the rationale for step-downs has centred around their role as an ‘incentive’ that motivates workers to return to the workplace. Unions Tasmania submits that this rationale is flawed.

The major driver for return to work should be a worker’s recovery and rehabilitation. An injured worker should be back at work when they are healthy and it is safe for them to be there, in consultation with their rehabilitation consultant, injury manager and employer, and in accordance with their agreed return to work plan. Money should not be the motivation for either the employer or the worker to return to work. Returning workers prematurely only places the employer at risk of further costs and the employee at risk of further physical or psychological harm should their injury be exacerbated by an early return.

In Unions Tasmania’s experience, injured workers don’t want to be off work and in pain, they want to be back at work. They don’t need a financial incentive to return – they want to be there, surrounded by their colleagues and being valued for their contribution. What they do need is good support (both financial and emotional), medical care and an appropriate, agreed return to work plan. These are the critical factors for a successful return to work.

Importantly, there is no systematic Australian research that demonstrates step-downs do contribute to motivating or incentivising workers to return to work[2].

Unions Tasmania contends that the belief that step-downs operate as an incentive in our workers compensation system has become a sort of ‘accepted truth’ despite there being no evidence to support this view.

What is clearer, however, is that the consequence of step-down provisions is to either transfer financial cost to the injured worker themselves or to our social security system. Over the years, Unions Tasmania has received significant feedback from injured workers about the negative effects of step downs on their lives. Many detail the financial strain caused by an up to 20% reduction in pay, pointing out that most people adjust their standard of living to reflect their expect wage. A ten to twenty percent reduction in take home pay can be the difference between having money left over for food or not.

Unions Tasmania notes that step downs are particularly cruel for workers who are already struggling on low wages or the minimum wage.

Reduced weekly wages have seen workers suffer severe financial hardship, entering into expensive short-term loans to cover living expenses, or cashing in leave entitlements to pay for essential things like car repairs. Workers have reported to us driving vehicles unregistered for up to a month because they couldn’t afford to pay their registration.

Depending on industry or occupation, regular overtime is often used by workers to bolster their weekly wage and they lose this opportunity when out of the workplace. A long term absence from work often limits a worker’s opportunity to apply for promotions and achieve salary advancement. At the same time, their superannuation is growing at much slower  rate because their SG contributions fall  corresponding to their drop in wage.

In examining the 2012 changes to the NSW workers compensation system, the Centre for Future Work[3] outlined the ways in which costs were transferred to workers and society broadly with reduced weekly payments and step-downs.

Costs transfer to workers most obviously through reduced wages, but they also reduce the worker’s capacity to save and place greater stress on the broader family unit. Where injured workers are no longer able to financially cope without assistance, the cost then shifts to income support.

With no other option, workers fall back on Centrelink payments. Longer term, the cost transfers to the Age Pension, as reduced wages for workers also mean less retirement savings.

Unions Tasmania considers that step-downs are inconsistent with the objectives of our rehabilitation and compensation scheme which is grounded in fairness. Specifically, we believe step-downs are inconsistent with the following objects in s2A:

b) provides fair and appropriate compensation to workers and their dependents for workplace injuries;

c) assists in securing the health, safety, and welfare of workers and in reducing the incidence of workplace injuries;

f) fair, affordable, efficient, and effective.

The Tasmanian Government acknowledged the hardships that step-downs caused for workers in 2019 when they removed step-down provisions for police officers. These amendments fixed the problem for police as a group of workers but failed to address the ongoing hardships that remained for the rest of Tasmania’s workers covered by the Act.

The Tasmanian Government argued that a police officer’s duty can require them to put public safety ahead of their own and that they are at risk of injury where risk mitigation measures cannot always be put in place.[4] This is true. There is no doubt that policing is dangerous work, but it is unfortunately not the only dangerous job. There are many occupations where workers are forced to put themselves in harm’s way every day. These can include, but are by no means limited to, paramedics, correctional officers, child safety officers, security guards, firefighters and emergency services personnel.

Many occupational groups outside of police are exposed to dangerous situations, violence or trauma on a regular basis because of their work. Sales assistants, bartenders, and waitresses regularly experience physical customer aggression. Our members in retail have been held up at gun and knife point. Security guards, especially those working at nightclubs or hotels where high volumes of alcohol are consumed, deal with intoxicated and violent patrons nightly. Health unions speak of the risk to care workers when dealing with aged dementia patients or people with a disability acting violently.

Even if a worker’s injury does not arise out of a violent situation, but simply through years of hard labour and dedication to their job, Unions Tasmania contends they should they be financially penalised after suffering a serious injury.

There is no legitimate policy justification for why a cleaner earning minimum wage who becomes injured should then have their wages cut during their recovery, but a police officer should not. The objects in the Act as noted above point to fairness as a critical element of our scheme. There is nothing fair about this scenario.

 

Recommendation

Step-downs are not an incentive; they are a punishment for the most injured of workers. For an injured worker with little exposure to the workers compensation scheme pre-injury, the application of the step-down provisions often comes as an unexpected shock and only serves to demoralise them and compound the feeling of punishment. They can also negatively impact on relationships that are key to recovery and return to work.

The Act provides for compensation payments to made on a ‘no fault’ basis – that is, it isn’t necessary to prove it was anyone’s ‘fault’ that a worker was injured. Punishment via step-downs has no place in any compensation scheme, let alone one where fault is not a factor.

Unions Tasmania contends that instead of focussing on punishing workers for their injuries, Government reviews should focus instead on workplace health and safety legislation that encourages and supports the development of a strong safety culture in the workplace. Investment in safety controls, training, electing health and safety representatives and having well funded safety regulators that enforce compliance would be much more effective at containing costs in a workers compensation scheme than deducting the wages of injured workers via step-downs. 

Step-downs are bad law that cannot be remedied by amendment.

Unions Tasmania recommends that section 69B of the Workers Rehabilitation and Compensation Act 1988 (Tas) be removed and that step-down provisions are eliminated from Tasmania’s workers compensation legislation.

 

[1] Purse, K., Australian Workers' Compensation Policy: Conflict, Step-downs and Weekly Payments [online]. International Employment Relations Review, Vol. 9, No. 1, 2003: 23-44

[2] Purse, K., (2011), Provisions of Fair and Competitive Workers Compensation Legislation, University of South Australia. pp 84-5

[3] Stanford, J., Watson, I., (2018) “Restoring Security and Respect: Rebuilding NSW Workers Compensation System” Centre for Future Work at the Australia Institute: https://www.tai.org.au/sites/default/files/Unions_NSW_WC_Report_FINAL.pdf pp 33-4

[4] Media Release, Michael Ferguson, Minister for Police, Fire and Emergency Management, 1 May 2019. Available at https://www.tas.liberal.org.au/news/removing-compensation-step-down-provisions-police

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