For Michael, a manufacturer in Western Sydney, the problem with workers compensation is simple.
“The system doesn’t have enough checks and balances, so it gets leveraged too easily by disgruntled employees,” he says.
In one alleged abuse of the system, Michael says a worker believed to have hurt his knee outside work claimed it was caused by a workplace injury. After adding depression to his claim, within six weeks of entering the scheme he was off work for eight months.
“It seems to be a bit of a culture: once someone knows there is this loophole, it becomes a trend to get out of work,” says Michael, who sought a level of anonymity to talk freely about a topic sensitive to employers and workers.
For months NSW Premier Chris Minns and Treasurer Daniel Mookhey have been building the case for reform, arguing that a rise in psychological injury claims is driving scheme costs and premium increases.
In 2018 there were 5000 psychological injuries per year. That has more than doubled to 12,000 this year.
According to the latest iCare annual report, for the Nominal Insurer used by private employers 70 per cent of psychological claims reported are caused by “harassment and work pressure”.
In one case, someone was asked to cook vegetables in a commercial kitchen in a different way and they went off on stress leave.
— Daniel Hunter, Business NSW chief executive
For the Treasury Managed Fund which covers government employees, “these injuries are increasingly driven by exposure to trauma, occupational violence and assaults”.
In February, Minns focused on the former in an address to the Sutherland Shire Business Chamber.
“Most often claimed is stress and burnout, bullying or harassment,” he said.
“I am not saying that doesn’t happen in workplaces, I am sure it does, but there has been an exponential growth, particularly [in] young people claiming this payout, and as a result premiums for government and business are hugely rising.”
Claim numbers are burgeoning
One of the drivers of growth is that legitimate psychological injuries are now taken more seriously due to our better understanding of the importance of mental health.
Another is that it is too easy to enter a system which currently offers up to 95 per cent of a worker’s pre-injury average weekly earnings, even in the 12-week period before a claim is assessed.
The NSW government wants to speed up assessment of bullying and harassment claims to eight weeks and cut interim payments to 75 per cent of workers’ income to be back-paid to 95 per cent if the claim is accepted.
Mookhey says the reforms will also limit psych claims caused by performance management by aligning NSW with other states which use a test of “would a reasonable person consider this a reasonable action” rather than solely “the person’s perception”.
Daniel Hunter, the chief executive of lobby group Business NSW, says it supports people who have a psychological injury getting the help and care they need to get back to work.
“There are valid claims … but it has become a soft entry point for workplace disputes,” he says.
“It’s become too easy to lodge a psychological injury claim and get paid … In one case, someone was asked to cook vegetables in a commercial kitchen in a different way and … they went off on stress leave.”
For opponents of the NSW government’s changes – including unions, the Coalition opposition and the Greens – the most glaring problem is not the growth in psych claims in the private sector, covered by the Nominal Insurer, but the larger growth in the government sector, covered by the TMF.
They argue business has been co-opted by the government to lobby for changes that will mainly get it off the hook for topping up the TMF without improving its own practices and safety as an employer. The government has promised a review on how to improve prevention.
After workers are admitted to the scheme, employers argue it does not create the right incentives to return to work.
Total impairment threshold
The NSW government thinks this can be fixed by an improved system of commutations, meaning workers with serious but not severe psychological injuries get early lump-sum payments rather than drag out their claims to stay off work.
But the most controversial proposed change is to lift the threshold for whole-person-impairment to 31 per cent, a level so high it means a person has lost independence and needs to be institutionalised or receive permanent care at home.
An inquiry into an earlier exposure draft bill revealed that just 27 workers would qualify for lifetime payments by reaching that threshold. Other workers with psych claims would be cut off weekly payments at two and a half years.
Emergency services workers have been exempted, but other public servants including corrections officers, health and teachers would be in the firing line for cuts.
Mookhey has played down the impact on injured workers, arguing that of the 12,000 psychological injury claims a year only about 900 people reached the 130-week limit when payments cut out without a whole-person-impairment.
Unions NSW secretary Mark Morey said there was “no logic” to Labor’s proposed whole-person-impairment threshold. “It’s an arbitrary figure, set by Treasury and the treasurer has unfortunately fallen for it, hook, line and sinker.”
The biggest savings are expected from cuts to benefits for people with psych claims with 20 to 30 per cent whole person impairment. That is why shadow treasurer Damien Tudehope labelled Labor’s reforms “heavy-handed” and akin to taking “an axe to the scheme when it needed a scalpel”.
On Tuesday the opposition decided to make amendments to the bill including removing the increase to the whole-person-impairment threshold.
On Thursday it teamed up with the Greens and upper house crossbenchers to send the bill to an inquiry despite the insistence of business groups to pass it immediately.
The debate has created odd bedfellows: the Coalition siding with unions, and Labor on the side of business.
Opposition Leader Mark Speakman said the Coalition may have an “overlap” in one respect with the unions’ position but it is “not in bed with anyone, we are doing our best to hold this government to account”.
It has offered amendments tightening bullying claims and removing vague or unworkable claim triggers like “excessive work demands”.
If there is any incongruity in the parties’ position it’s Labor’s about-face now they’re in government, Speakman argues.
“These are the same people who in 2023 told us it was unacceptable to have a 20 per cent threshold, now they’re saying it’s perfectly acceptable to have a 31 per cent threshold,” Speakman told reporters on Wednesday.
The government’s bill was “unconscionable”, he said. “The way to go about driving premiums down is not to abandon the most seriously affected workers. And that’s what this government is doing.”
Coalition amendments would cost employers $1.9 billion in higher premiums over four years, Mookhey says, a number the opposition claims is plucked out of thin air.
The Coalition have proved this week they were not bluffing when they threatened to delay the bill.
They’ve bought themselves enough time to probe whether Labor’s claims about higher premiums add up – and whether savings are being built on the backs of seriously injured workers at the expense of fixing the real loopholes in the system.
Source: Financial Review
