Return to Work premiums set to increase

Public news

Employers' workers' compensation premiums will increase significantly, with some companies facing an ‘annual hit’ of hundreds of thousands of dollars, unless the High Court quashes a judgment allowing injured workers to ‘combine’ their impairments, according to a regulator and South Australia's Treasurer.

The High Court will consider ReturnToWork SA's application for special leave to appeal against the March decision, in Return to Work Corporation of South Australia v Summerfield [2021] SASCFC 17, on 5 November.

In its 2020-21 annual report, tabled this week, ReturnToWork says Summerfield increased the South Australian workers' comp scheme's liabilities by $584 million.

"[This] has been the difference between the scheme being fully funded at 106.3 per cent and it having unfunded liabilities at 91.9 per cent... This is within the target funding ratio range (90-120%) but will not stay within the target range if the High Court challenge to this decision is unsuccessful," said the report.

State Treasurer, Rob Lucas responded to the release of the report by warning that South Australia's near-record-low average workers' comp premium rate of 1.7 per cent of payroll could rise above two per cent if the High Court dismisses the regulator's case.

ReturnToWork modelling, he said, showed that a hypothetical large road freight company with a yearly payroll of $20.5 million would "face a $239,000 annual hit" if the premium rate increased to two per cent.

Medium-sized employers' premiums could increase by tens of thousands of dollars per year, he said.

The Treasurer also claimed the South Australian economy could lose 20,000 jobs over five years, if Summerfield is upheld.

In Summerfield, a Supreme Court full bench confirmed that while worker Shane Summerfield could not combine his degrees of impairment from his hip and spine injuries (to increase his access to benefits) under section 58(6) of the State RTW Act because they did not arise from the "same trauma", he could combine them under section 22(8)(c) because they arose from the "same injury or cause".

Section 22(8)(c) involved an evaluative test, as opposed to a common law test of causation, which required a common-sense approach and should not be construed in a way that made it unfairly difficult for workers to be assessed as seriously injured, the Court found.

This construction of the provision was facilitated by a full Supreme Court's June 2018 decision in Return to Work Corporation of South Australia v Preedy [2018] SASCFC 55.

As a result of that judgment, South Australian Employment Tribunal Deputy President Judge Mark Calligeros allowed the worker in question, Wayne Preedy, to combine his impairments under section 22(8)(c) and surpass the "serious injury" threshold, giving him uncapped access to weekly benefits and medical expenses.

In reluctantly making his decision in 2019, the Deputy President Judge stressed that sections 22(8)(c) and 58(6) did "not sit comfortably together", with the former providing an "an expansive approach" to combining assessments, and the latter imposing a "restrictive" one.

He said it appeared the issue arose from legislative drafting errors that warranted the attention of Parliament.

ReturnToWork says in its annual report that in Summerfield, the full Supreme Court "interpreted a critical provision of the Act in a way that is different to ReturnToWork SA's understanding of this section and the interpretation that has applied to date".

"This interpretation significantly increases the lump sum compensation many workers with a whole person impairment (WPI) will receive and significantly increases the number of workers who will be entitled to receive income support through to retirement age and medical treatment coverage for life," it says.

Treasurer Lucas said that if ReturnToWork's appeal to the High Court is unsuccessful, "the scheme will need to carry almost $1.1 billion in additional liabilities and its ongoing costs will be significantly increased".

Premium hikes will be a "significant potential blow to tens of thousands of South Australian businesses who have fought so hard over more than a year and a half to trade through the challenges of the global pandemic", he said.

If you have questions about worker’s compensation, contact the WR team to assist, on 8291 2000 or at wr@mtasant.com.au.