General / overarching principles

Overview

There are 12 main workers compensation systems in Australia. Each system has different eligibility, entitlements and arrangements.

This guidance provides a brief history of workers compensation generally and describes some of the unique characteristics of the NSW system.

Workers compensation in Australia

Each of the eight Australian states and territories has their own workers’ compensation scheme. In addition, there are four Commonwealth schemes:

• for Australian Government employees, and the employees of licensed self-insurers under the Safety Rehabilitation Compensation Act 1988
• for certain seafarers under the Seafarers Rehabilitation and Compensation Act 1992, and
• for Australian Defence Force (ADF) personnel with service prior to 1 July under the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA), and
• for service on or after 1 July 2004 under the Military Rehabilitation and Compensation Act 2004.

The origin of workers compensation in Australia

The origin of all these schemes can be traced back to 19^th century British law.

Before the implementation of workers compensation arrangements as we know them today, an injured worker’s only means of receiving compensation was to sue their employer for negligence at common law. Workers rarely succeeded in these actions due to the widely used legal defences of common employment, voluntary assumption of risk and contributory negligence.

New workers compensation laws incorporating a ‘no-fault’ principle came about after federation in Australia. To be eligible for workers compensation under the no-fault principle, workers covered by the legislation had to prove that their injuries were work-related. It was no longer necessary to prove negligence on the part of an employer. Early no-fault coverage for workers’ compensation was limited. Laws provided for some benefits, however the taking out of insurance by employers was not compulsory. Further, to be eligible for workers’ compensation, an injury had to be found to have arisen out of and in the course of employment.

The first workers compensation laws in Australia were generally known as workmen’s compensation and did not expressly cover female workers. Coverage for workers compensation gradually expanded to include most workers and lump sum payments for loss of body parts was introduced.

By 1926, NSW had introduced compulsory insurance which became the model for most workers compensation schemes around Australia. Parts of the Workers Compensation Act (NSW) 1926 still apply to certain groups of workers in NSW today.

Between the 1920s and the 1970s, incremental reforms took place across the jurisdictions. Eligibility for compensation benefits continued to widen. However, economic difficulties in the mid-1980s and early 1990s shifted the focus onto reducing the cost of workplace injuries, containing insurance premiums, underwriting arrangements and administrative efficiency. There was also a shift in emphasis in the schemes to strengthen the role of work health and safety and rehabilitation of injured workers.

Challenges facing workers compensation systems generally

All jurisdictions continue to face challenges due to the changing nature of work. This includes an increasingly mobile workforce, the digital economy, the gig and entrepreneurial economy, automated systems and robotics, an ageing workforce, rising screen time and sedentary behaviour, workplace stress and mental health, working from home, emerging industries with different types of injuries and a part-time, casual and self-employed workforce.

In order to continue to support the modern workforce, workers compensation schemes continue to evolve and change over time.

The COVID-19 pandemic has had a significant impact on workplaces, with many workplaces embracing remote and hybrid working arrangements. Each jurisdiction continues to respond to the challenges through changes to laws, regulatory instruments and other policy adaptations.

Workers compensation in NSW – some unique characteristics

While the different workers compensation schemes in Australia share common elements, each has their own unique characteristics.

Dust diseases in NSW

The definition of injury in section 4 of the Workers Compensation Act 1987 (1987 Act) excludes dust diseases as defined by the Workers Compensation (Dust Disease) Act 1942 (1942 Act). The effect of the exclusion is that claims for dust diseases, as defined, are not brought under the 1987 Act but rather under the 1942 Act. There are 19 prescribed dust diseases in the 1942 Act – aluminosis, asbestosis, asbestos induced carcinoma, asbestos related pleural diseases, bagassosis, berylliosis, byssinosis, coal dust pneumoconiosis, diffuse dust-related pulmonary fibrosis, farmers’ lung, hard metal pneumoconiosis, hypersensitivity pneumonitis, mesothelioma, pneumoconiosis (any form), silica-induced carcinoma of the lung, silicosis, silico-tuberculosis, systemic sclerosis and talcosis.

Dust disease claims are made to the Workers Compensation (Dust Diseases) Authority, through Dust Diseases Care (part of Insurance and Care NSW). A worker’s entitlements are set out in the 1942 Act and are different to those entitlements under the 1987 Act. Broadly, the differing entitlements reflect the different age and profile of claimants for dust diseases.

See Insurer Guidance GN 10.1 Dust Diseases for more information on dust diseases.

Coal miners

Workers compensation claims by coal miners in the NSW coal industry are managed by Coal Mines Insurance (CMI). CMI is a specialised insurer under the Workers Compensation Acts.

Workers in the NSW coal industry are not subject to the changes introduced by the Workers Compensation Legislation Amendment Act 2001. A number of the subsequent amendments either do not apply or apply in part. As a result, the NSW coal industry continues to be subject to some of the legislative provisions of the Workers Compensation Act 1926, as well as the 1987 Act and the 1998 Act.

Accordingly, the legislative requirements for claims in the NSW coal industry differ from general industry in a number of significant areas. One example of this is the continuing availability of ‘redemptions’ to coal miners. Redemptions provide a mechanism where the employer’s liability to make weekly payments may be ‘bought out’, or redeemed, by payment to the worker of a lump sum. Redemptions are no longer available to general workers compensation insurers (commutations are available in limited circumstances).

Queries regarding coal miners’ entitlements should be referred to CMI.

The Interim Managed Fund

Under the Workers Compensation Act 1926 multiple private insurers operated. Following the decision by government to move towards a managed fund in or around 1985/86, numerous private insurers chose to cease writing insurance in the area of workers compensation.

The WorkCover scheme commenced on 30 June 1987. The scheme provides workers compensation insurance for persons employed in NSW. The scheme relates to eligible work injuries and policies of insurance issued or renewed on or after 4pm on 30 June 1987. This is referred to as the managed fund.

The managed fund was originally intended to commence from 1 January 1987, however was delayed for a variety of reasons including the complex nature of the new legislation and the technology required to administer the managed fund.

In order to manage the risk associated with the delay, that is, the risk of the private insurers exiting before the commencement of the managed fund, the government came to a private administrative arrangement with the private insurers. The essence of the arrangement was that the former insurers continued to write business as from 4 pm on 31 December 1986 until commencement of the 1987 Act on the basis of 100 per cent reinsurance with the Government Insurance Office. This is widely referred to as the ‘Interim Managed Fund’ period.

The Interim Managed Fund only applies to policies of insurance issued or renewed by insurers licensed under section 27 of the Workers Compensation Act 1926 at or after 4 pm on 31 December 1986 up to the commencement of the 1987 Act and which were the subject of a re-insurance agreement with the Government Insurance Office.

The claims that these policies respond to are sometimes referred to as ‘straddle claims’ in that these policies straddle the privately underwritten and managed fund periods (the first six months of 1987).

The Interim Managed Fund is now largely confined to claims involving diseases of long latency. For example, dust diseases and occupational diseases such as cancer.