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More needed to fix ‘fundamentally broken’ WorkCover scheme

By Lauren Croft | |6 minute read

WorkCover has been declared “fundamentally broken”, and the exclusion of bullying and harassment from compensation moving forward should be “emphatically countered”, say lawyers.

Earlier this month, as reported by multiple media outlets, the Andrews government admitted that the WorkCover scheme was “fundamentally broken”, confirming that the annual premium deficit had increased to $1.1 billion.

This means that benefits paid to injured workers currently aren’t matching up with what businesses in Victoria are paying to fund WorkCover — and that $1.1 billion gap is reportedly only continuing to grow.


To combat this, the Victorian government is looking into stricter capacity tests for those who have been receiving payments for over 130 weeks. However, the threshold was designed for those with physical injuries, not mental health concerns — which comprise 16 per cent of claims and is increasing by 3.5 per cent every year.

Consequently, compensation payments for mental health injuries and incidents in the workplace may be limited to post-traumatic stress disorder and exclude bullying and harassment, as reported by the ABC.

In a media statement released earlier this month, a spokeswoman confirmed that the WorkCover scheme “is fundamentally broken”.

“The scheme is no longer fit for purpose and does not meet the modern needs of those it was ­originally designed to assist more than 30 years ago. The Victorian government is working with business and worker stakeholder groups to look at all ­ options and to take urgent action to continue the ongoing sustainability of the WorkSafe program,” the spokeswoman said.

“Our priority is helping people get back to work after an injury — and ensuring the sustainability of the scheme, so every Victorian has the opportunity to return to the workforce after an injury.”

However, in a statement provided to Lawyers Weekly, Shine Lawyers special counsel Thomas Bradley said limiting compensation benefits for mental health injuries is the wrong approach.

“Whenever the viability of the scheme is called into question, the knee-jerk reaction from employers is to call for a reduction in compensation to injured workers. This is the wrong approach and ignores the reason we have a scheme in the first place.

“I would urge the Victorian government to consider increasing insurance premiums, which haven’t been lifted in years,” he said.

“The government should also address the delay tactics used by insurers when assessing claims as they ultimately increase medical and legal costs by dragging out disputes and allowing injuries to worsen.”

Swaab partner Michael Byrnes said that while there may be no one-size-fits-all option, there are other ways victims of bullying and harassment in the workplace can receive compensation.

“In workers’ compensation schemes, there is always a balance to be struck between providing adequate compensation and support to injured employees in need and ensuring the scheme remains financially viable. Reasonable minds can come to different positions as to where the line should be drawn for eligibility for compensation.

“At the risk of sounding harsh, there is no magic pudding, and sensible eligibility rules and limits do need to be established. It is, however, very unfortunate if this change to the scheme sends a message that downplays or trivialises the significant deleterious impact bullying and harassment can have on affected employees,” he explained.

“For employees affected by bullying and harassment, there are options other than workers’ compensation, including orders to stop bullying and/or sexual harassment from the Fair Work Commission (which is focused on protection from future conduct rather than compensation) or a complaint to the Australian Human Rights Commission and, if the complaint does not resolve, proceedings in a federal court.”

As noted in WorkSafe’s half-year results, the scheme recorded a net surplus after tax of $213 million, including a $300 million operating grant from the Victorian government. Without this, WorkSafe would have recorded an $87 million deficit.

According to the results, the WorkCover scheme’s financial sustainability remains under severe strain due to the underlying premium deficit, more workers staying on the scheme beyond 130 weeks and the increasing number of mental injury claims.

WorkSafe chief executive officer Colin Radford said that despite the economic challenges, WorkSafe was continuing to focus on reducing workplace harm and improving outcomes for injured workers.

“Against a backdrop of increasing mental injury claims and economic uncertainty, we have continued to help thousands of injured Victorians return to work,” he stated in the half-year results announcements.

“However, we know that injury prevention and strong return to work efforts are not enough on their own to ensure the ongoing viability of the scheme.”

Bullying and harassment have been “significant issues” within professional services workplaces, including law firms, added Mr Byrnes — which means firms will likely be largely impacted by these potential WorkCover changes.

“There is a danger the change might send the misguided and offensive message that such conduct is only truly problematic and harmful if it results in post-traumatic stress disorder, and anything short of that is simply a complainant being overly precious or sensitive. Such a proposition would be legally wrong and morally reprehensible,” he emphasised.

“While one avenue of compensation (workers’ compensation) might be closed, there are other legal avenues an affected employee could pursue, some of which can result in compensation. Workers affected by bullying and harassment who might not be eligible for workers’ compensation as a result of the changes should be directed to other possible alternatives, so they aren’t made to feel like there is no other support available to them.

“The potentially harmful message the changes send that harassment and bullying are not serious issues worthy of compensation and support should also be emphatically countered.”

This article was originally published on HR Leader’s sister brand, Lawyers Weekly.