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Justice in workers’ compensation reforms

A South Australian colleague has pointed out some interesting elements in WorkCover SA’s review of employer incentives discussed earlier.

The following text are some of the aims of South Australia’s Workers Compensation and Rehabilitation Act.

(1) The objects of this Act are—

(a) to establish a workers rehabilitation and compensation scheme—

(i) that achieves a reasonable balance between the interests of employers and the interests of workers

(iv) that reduces the overall social and economic cost to the community of employment-related disabilities

(2) A person exercising judicial, quasi-judicial or administrative powers must interpret this Act in the light of its objects without bias towards the interests of employers on the one hand, or workers on the other.

My colleague points out that a review of employer incentives is well and good but what are the incentives for employees, given the objects of the Act concerning balance and bias?

She also criticises

“…the current incentive for employers of paying the first two weeks of the injured workers income payments if the employer supplies the claim agent with the employer section of the injury/incident report goes against the intent as outlined in Objects of the Act, as there is not any corresponding incentive offered to the injured worker.”

Whether the injury report is valid or useful is irrelevant to the incentive as it is the lodgment of the form that generates the incentive rather than any rehabilitation action for the injured worker.

There is no doubt that the workers compensation scheme needed a review. The recent Return-To-Work (RTW) conference in Adelaide had an atmosphere of hope after the introduction of the RTW coordinator requirements for businesses.

South Australia is different from most other Australian States where a single company handles workers compensation insurance, Employers Mutual. Not only is there a huge lack of competition in South Australia but the government and the insurer are close.

There is also a political element with Paul Caica being given the portfolio in order to fix it. In June 2009, the Minister announced a range of projects from a fair pool of funds but many of them are focused on the workers rather than providing structural change to the system. It is hard not to speculate how workers may benefit if the insurance industry in the State had competition.

The need for reform was clear as the South Australian workers’ compensation scheme was bleeding money but it must have been politically attractive to try to postpone an analysis of the system until the Federal Government started its national review of workers’ compensation system in a few years’ time. It may have been that such a strategy was planned until the global financial crisis changed the public’s tolerance for government debt forcing the SA government had to act.

Kevin Jones

Fixing what is broken

WorkCover in South Australia has released a discussion paper for public comment on 9 November 2009. The paper is called “Consultation on a new framework for employer incentives” and poses the following questions:

Do you think there should be any financial incentives for employers in relation to workers rehabilitation and compensation?
What do you think about the proposed design principles?
Do you have any specific ideas for employer incentives that encourage return to work?

This discussion paper is part of the review process by the WorkCover Corporation and should be supported. Public comments close on 18 December 2009.

The paper itself has some points of considerable interest. The existing incentive scheme is called a Bonus/Penalty Scheme which has existed for almost 20 years. PricewaterhouseCoopers undertook a review and below are the findings, according to WorkCover:

“WorkCover has been working with PricewaterhouseCoopers (PWC) to gain a better understanding of the effectiveness of the Bonus/Penalty Scheme in South Australia. Only very weak links were found between the Bonus/Penalty rate and claim outcomes. No evidence was found to suggest that the Bonus/Penalty Scheme has delivered better health and safety outcomes for workers in South Australia.”

That last sentence seems to be a phenomenally honest statement about a scheme that has existed since 1990, been so persistent and continues to be so popular with employers. Such forthrightness from a government authority about one of its own programs is rare.

At some point in the past there may have been some logic in the scheme as similar elements existed under the WorkCare scheme in Victoria many years ago. But since the preventative arm, Safe Work SA, split from WorkCover around 2005, the incentive scheme has not sat comfortably with the government’s RTW focus.

The discussion paper goes on to state:

“WorkCover has not seen much evidence that the Bonus/Penalty Scheme has either reduced injury rates or made workplaces safer. If anything it appears to have had some adverse side-effects, such as encouraging stakeholders to focus excessively on claim costs, the claim costs ‘window’ and coding, instead of return to work.”

Regardless of pointing out the difference between “no evidence” and “much evidence”, WorkCover’s comments illustrate a reality that OHS and RTW professionals have been wrestling with for years, companies have been encouraged to focus on financial cost of Return-To-Work rather than on the injured worker.

As part of WorkCover’s analysis of the existing incentive scheme, it undertook a literature review on experience ratings systems and found the following

“There were some noteworthy findings about experience rating systems, for example:

there is no clear consensus that they have reduced injury rates or made workplaces safer;

they have created perverse motivations, for example to suppress claims, dispute the coding of claims, or only focus on reducing claims within the ‘experience window’;

they may reduce claim numbers but not average claim costs, and average claim severity tends to increase – this is further evidence that the reporting of small claims is sometimes ‘suppressed’; and

there is no obvious link between experience rating bonuses/penalties and an employer’s commitment to safety and return to work.”

The Productivity Commission in 2004 (as discussed in Alan Clayton’s workers compensation review for the Tasmanian Government) recommended experience ratings for large employers as a contributor to the full funding of workers compensation schemes. ( p.44) It is strongly suggested that those wanting to comment on this South Australian WorkCover paper should closely look at the recent changes to workers’ compensation made by the Tasmanian Government.

But it is not all gloom and doom as WorkCover SA has set the parameters for the next scheme. In the discussion paper, they list 11 proposed design principles for consideration:

Focus on return to work

Be affordable and sustainable

Have a direct and substantial effect

Target the right employers

Tailor to specific employer groups

Loss matters

Be simple to explain and run

Use a mix of solutions

Capitalise on the tools and resources we already have

Be transparent

Use an evidence-based approach

In anticipation of the Federal Government’s plans to harmonise workers compensation once OHS is out of the way, such discussion papers, reviews and, more importantly, the public submissions, may provide some clues to how Australia workers compensation and RTW programs may look in ten years time.

Kevin Jones

Gas leaks at Esso’s Longford plant

WorkSafe Victoria is investigating two gas leaks that occurred on 6 November 2009 at the Longford gas plant owned by Esso. This plant was subject to a fatal explosion in 1998 and was recently written about on SafetyAtWorkBlog.

According to an ABC news report on 11 November 2009, repairing one leak led to a consequent leak and a “plant operator suffered minor injuries when he fell during the incident.”

A WorkSafe Victoria spokesperson told SafetyAtWorkBlog that inspectors have been on site for several days, the area of the incident is still not operational and that any restitution work in the area will need WorkSafe’s approval.

Kevin Jones

Working remotely does not mean it has to be unsafe

Australia is a big country and people work in very remote locations. However OHS obligations do not apply only when it is convenient. The law and duties apply equally wherever work is undertaken.

One example of safety improvements for remote work has been illustrated by the Community & Public Sector Union (CPSU). On 10 November 2009 CPSU informed its members of amendments to the “Remote Travel Standards Operating Protocols”. Some of those changes include

“Travel is twin engine aircraft is usual practise, but staff may be required to fly in single engine aircraft from time to time. Employees will have the choice not to fly on a single engine aircraft if they have legitimate concerns for their personal safety.”

This acknowledges that in the Outback there are not always options but that union members can exercise whatever is available. This also supports the individual’s OHS obligation to keep themselves safe.

Vaccinations for Hep A and B will be offered to employees before their first field trip, during orientation to remote servicing.

This is a standard travel safety option but often applied only for international travel. To offer this domestically is sensible.

The union has also managed to introduce a

Dedicated section in the post trip report for all OH&S issues, including issues in office accommodation, and living quarters.

Traditional wisdom is “be seen, be safe” but this also applies to reporting an OHS matter. If a form does not state that OHS is included, then it is increasingly likely that an incident or issue will not be reported. Organisations also cannot be seen as deterring the reporting of hazards and incidents.

The next option is curious and a trial seems appropriate

Management agreed to a 3 week trial beginning the 6 December 2009 for the use of personal alarms in case employees are confronted with acts of customer aggression, or other dangers in the field. Management will be asking staff for feedback on this, which will inform their decision on whether to provide or not provide personal alarms to employees into the future.

The issues of safety when travelling remotely have been negotiated for many months and the CPSU website posted regular updates on negotiations.

CPSU members and public servants need to travel to remote locations to provide a range of services. For instance, Centrelink’s Annual Report for 2008-09 says that

“Centrelink Mobile Offices, including the Murray-Darling Basin Assistance Bus, continued to travel around rural Australia to provide information and assistance to farmers and small business owners, their families and rural communities.”

These mobile offices covered 40,000 kilometres in one year.

Australia is a big country and urban safety professionals and policy makers need to be regularly reminded that a desk in an office is not a default workplace.

The “Remote Travel Standards Operating Protocols” are not publicly accessible by SafetyAtWorkBlog will provide a link, whenever possible.

Kevin Jones

Where is the evidence of OHS misuse for IR purposes?

The mainstream press has dipped into some of the submissions to the Australian Government on its harmonisation of OHS laws. Kirsty Needham reports on the submissions in the Sydney Morning Herald.

Needham reports on basically the submissions of the Australian Chamber of Commerce & Industry and the Australian Council of Trade Unions – the ideological opposites on safety regulation. She quotes ACCI’s David Gregory:

“There is no doubt that health and safety has been used as an industrial relations issue on plenty of occasions … we want to put reasonable boundaries around those entitlements.”

This position is always attached as a myth by the unions but it is an accepted fact in the minds of employers, OHS professionals and many workers. The Royal Commission into the Building and Construction Industry in 2003 found that

“in the building and construction industry throughout Australia, there is…..widespread use of occupational health and safety as an industrial tool.”

“The types of inappropriate conduct which exist throughout the building and construction industry include….the use by a union of occupational, health and safety (OH&S) issues as an industrial tool, intermingled with legitimate OH&S issues;”

“Occupational health and safety is often misused by unions as an industrial tool. This trivialises safety, and deflects attention away from real problems. Unions have a legitimate interest in the safety of their members. This should not be altered. However, the scope for misuse of safety must be reduced and if possible eliminated.”

“Misuse of non-existent occupational health and safety issues for industrial purposes is rife in the building and construction industry. Genuine occupational health and safety hazards are also rife.”

A major source of evidence for the repeated statement of fact is mentioned in the final report from February 2003 was an “OH&S case study (Tas).”. SafetyAtWorkBlog is trying to obtain more details on this.

One example of the evidence that is readily available relates again to the Royal Commission. The Commission undertook an investigation into industrial disputes a the construction site of The Age newspaper in Tullamarine. The Commission reports

“the evidence from Mr Judson [Wayne Judson is a Director of Probuild] will be that during the negotiation of the project agreement (which was a period where any industrial action between Probuild and the unions would have been unprotected) there were many occasions when safety walks and OH&S issues were used as a device by the unions to pressure Probuild and Fairfax to agree to the project agreement and nominated shop stewards.

The potential misuse of OH&S raised, not of course for the first time in this Commission, is a very serious matter. To misuse OH&S debases the currency of safety. ‘Crying Wolf’ often enough on enough sites creates the risk that no one knows whether a safety claim is about something real and important or whether it is simply a means of supporting the latest industrial demand.”

Some of Commissioner Cole’s comments on the debasement of safety are sound but the “evidence” is from the builder and may not constitute the reality, only opinion in a submission to an investigative body. The Commissioner carefully labels the issue “a potential misuse”.

SafetyAtWorkBlog would say that the fact of misuse of OHS issues for industrial purposes may be an example of the establishment of a fact through “crying wolf”, to use the Commissioner’s term. The frequent statement of a belief does not establish a fact.

Also, to some extent, the construction industry hogs the OHS limelight in much of the tripartite consultation. This is because of the industrially charged nature of construction in Australia and the fact that construction sites are usually highly visible to public. The construction industry is an important economic driver but perhaps this prominence is masking some of the other OHS issues that the Government needs to consider.

As the Australian Government proceeds in its harmonisation of OHS laws and as it reads the hundreds of public submissions, there should be a red flag on each mention of the misuse of OHS for industrial purposes so that assertions are not misread as facts.

Kevin Jones

This may not work for OHS but why not?

On 9 November 2009 public submissions close on Australia’s model OHS Act but the move for harmonisation and, hopefully, a simplification for business and government continues in other areas.

The Australian Transport Council (ATC) met on 6 November 2009 and agreed on many Council of Australian Governments (COAG) matters concerning unnecessary bureaucratic duplication:

“ATC agreed to recommend to COAG that South Australia would be the host jurisdiction for the national rail safety regulator.

ATC also agreed to recommend to COAG that a host jurisdiction for the national heavy vehicle regulator be agreed, noting that New South Wales, Victoria and Queensland have expressed interest.

It was agreed that the Australian Maritime Safety Authority will be the national regulator for maritime safety, responsible for regulating commercial vessels. This is a significant step towards national uniformity.”

There were several other initiatives mentioned – level crossing safety, a National Road Safety Council, minimum standard for taxi drivers.

But the recommendations above decentralise some of the bureaucracy. At the HR Leaders Awards recently, the CEO of Carnival cruise liners, Anne Cherry, said that many public servants exist in a unique policy environment of the capital city, Canberra, and the policies reflect this.

SafetyAtWorkBlog would like to suggest a change that could occur within the enforcement parameters of the OHS model law review.

Let’s consider a national mine safety regulator with offices located in each of the mineral resources regions of Australia. Could transport regulators have offices within, or just outside, major port facilities? Major hazards regulators in major hazards zones?

There is much information bandied around about flexible working arrangements and the use of new technology to unite isolated workplaces. How radical would it be to split the centralised OHS regulators’ offices into hazard-based offices in rural, regional and suburban locations? The inspectors would be adjacent to the hazard locations for enforcement and the advisers are on hand for assistance to industry. The locations could even be seasonal to deal with seasonal industries and labour forces.

OHS enforcement policies would remain the same, only the place of implementation and coordination would change.

Most OHS regulators already have a a couple of regional offices but mostly these remain in the outer suburbs of the capital cities. Some entire departments have relocated to satellite towns for cost reasons but also to provide employment opportunities outside the major population centres.

Could OHS be regulated and enforced across a country the size of Australia and through the major industrial and resource structures, without the concentrations of policy-makers and inspectors in city offices?

Kevin Jones

OHS must raise its profile in the debate of directors’ liability and accountability

The global financial crisis has highlighted many business management issues. Probably one of the most contentious is executive remuneration which is based on the question “should executives receive performance bonuses when the company is not performing well, ie. not returning profits to shareholders?” But underpinning even this question is one of accountability.

Business leaders, commentators, lawyers and politicians are comfortable in discussing financial and corporate accountability but extend that discussion to other areas of business and they respond with a confused stare or outright dismissal of the proposal.

This week, the Australian Financial Review newspaper ran a page one story: “Revealed: directors face harsher liability penalties.” [None of the AFR articles are freely accessible online] The article revolved around Australian Government plans to “break an impasse between state governments over proposals to harmonise conflicting commonwealth and state directors’ liability laws.”

As should not be surprising from a business paper, the discussion centred on financial and corporate governance issues but OHS obligations were floating behind all of the business-speak. This was particularly obvious with this paragraph:

“Federal ministers have expressed concerns that onerous directors’ liability rules increase the cost of directors’ insurance and discourage them from taking board seats.”

This paragraph shows that the first response to any corporate trouble is insurance. This cowardly response is short-sighted and contributes to the unnecessary growth in litigation which the directors regularly complain and which increases the cost of liability insurance premiums.

It is also an acknowledgement that the introduction of new rules does not address the behaviour intended, it leads to investigating ways of avoiding accountability for one’s actions.

The second point of that paragraph is that people are more likely to refuse to participate than to undertake sufficient education that would allow them to perform the job better and with less risk. The response should not be “it’s too risky so I won’t do it” but “let’s get better informed so that my decisions are more valid and the risk is reduced”.

It is clear that lawyers are running the agenda when semantics enter the argument. The AFR article goes one to say “there are fears about confusion over the distinction between executive and non-executive directors”. This confusion comes from the main concern of directors being to cover one’s arse rather than focusing on the job at hand and the corporate purpose.

The AFR article makes no mention of OHS but the accompanying article “Duty weighs heavily” by reporters James Eyers and Annabel Hepworth does. Eyers and Hepworth look back through several decades of law reform investigations and reviews to show the history of similar director concerns.

But it is a more recent statistic that is the nub of the article. A Treasurysurvey of directors from top Australian listed companies, in conjunction with the Australian Institute of Company Directors, found that

“…71 per cent of those surveyed had declined taking board seats mainly because of their fears of personal liability, while 46 per cent had resigned from a board position because of the issue.”

These concerns largely deal with false market rumours, manipulating securities prices, criminal cartels, consumer protection laws and others. It is this company that the importance of taking responsibility for OHS should be pushed by the safety advocates but it seems that the business and corporate contexts of OHS are only ever discussed by the corporate lawyers. And yet, OHS professionals complain about not getting heard at Board level. Perhaps what is needed is one of these OHS professionals to take a business degree so that OHS can be described in terms business understand.

Of course the risk is that OHS may be found to be contrary to all the basic capitalist concepts and that the only way it can be applied in a business is for the application of legal “wriggle room” from the concept of reasonably practicable.

On 6 November 2009, Bob Baxt (a partners with law firm Freehills and the chair of the law committee with AICD) responded to the Eyers and Hepworth article with a personal opinion describing directors and senior managers already in the “firing line” from the corporate regulators. He seems to see this as unfair but those executives are in the “firing line” because they are suspected of doing the wrong thing.

Baxt describes the “reverse onus of proof” as an “obnoxious device” and he may be right but he needs to consider why such a provision was introduced in the first place – business managers were not complying with their legislative obligations, they were avoiding responsibility, taking short cuts for personal wealth, having workers die and then winding up the company to avoid prosecution.

Too many business professionals focus on “cause and effect” and see injustice. Yet if they looked a little further back and analysed the “causes” a bit more carefully they may just see that in many cases the regulatory changes have come about as a result of their own misdeeds.

The analysis of capitalism that resulted from the global financial crisis has faded very quickly as the markets rebound. Companies are applying the same behaviours that led to that crisis. Most business analysts and executives talk about leadership as the be-all and end-all but we should not be lead in the same direction as in the past as we are likely to end up in the same place. True leadership is about accepting mistakes and heading in a fresh direction where such mistakes cannot be repeated.

Those who are bleating about how corporate executives are being bludgeoned by regulation and accountability need to get out of the leafy middle-class suburbs and the office buildings with bayside views and take some time to reflect on how we came to be in such an economic mess and why workers continue to get injured, maimed and killed. It may just be that accepting responsibility is the new foundation required to build a humaneand profitable future.

Kevin Jones

Category: government

Justice in workers’ compensation reforms

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Fixing what is broken

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Gas leaks at Esso’s Longford plant

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Working remotely does not mean it has to be unsafe

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Where is the evidence of OHS misuse for IR purposes?

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OHS must raise its profile in the debate of directors’ liability and accountability

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