The Supreme Court of South Australia yesterday ruled that part of the state government’s controversial 2008 amendments to the WorkCover laws were invalid.

Facing the spiralling cost of WorkCover SA’s unfunded liabilities, the Rann Government restructured the process for determining the continuation of long-term workers compensation claims. Borrowing heavily from Victorian legislation, the amendments gave WorkCover SA the ability to refer cases to Medical Panels.

Injured workers were denied the ability to have legal representation at these panels, whose decisions were binding on the worker’s case before the Tribunal. Workers were also denied the right to appeal panel decisions. For these reasons, two workers refused to appear before the panels, and the Tribunal referred their case to the Supreme Court to clarify what powers the panels held.

Lawyer Steven Dolphin appeared for injured rigger Duncan Campbell and argued that the laws were unconstitutional for denying the rights of legal representation and appeal. In a 2-1 decision, the Supreme Court dismissed arguments about the constitutionality of the panels. However, in the same judgement, the court found that the panels lacked the authority to make binding decisions on the Workers Compensation Tribunal.

Continuing problems in WorkCover SA

The Supreme Court case comes on the back of a review into the 2008 Workers Rehabilitation and Compensation Amendment Act, which was conducted by retired public servant Bill Cossey. In his report, Cossey found that workers had suffered “severe emotional and psychological distress” as a result of having to appear before a medical panel. Submissions echoed widespread perceptions that the panels lacked accountability.

Cossey noted various submissions critical of Medical Panels on a number of fronts, with perceptions that they:

• Denied injured workers natural justice;
• Allowed medical examiners to conflate opinion with fact while assessing cases; and
• Were being used as a threat to encourage injured workers to resolve their claim.

The Cossey Review notes a link between the continuing improvement of WorkCover SA’s financial situation and “the extent to which work capacity reviews at 130 weeks continue to result in significant numbers of discontinuances of weekly payments of income maintenance.” Cossey notes, with a generous dose of euphemism, that the Medical Panels were a key tool for increasing the rate of discontinuance and bringing WorkCover SA’s finances under control.

Return to Work Implications

In addition to its long-term problem with unfunded liabilities, South Australia has the dubious distinction of the lowest return to work rates and highest employer levies in the country. Though improving return to work rates has been one of the mooted goals of the 2008 reforms and subsequent reviews, South Australia has continued to underperform.

The Supreme Court decision highlights the need for a functional and efficient legislative framework to ensure good return to work outcomes. WorkCover SA stakeholders have criticised the Government’s 2008 reforms for taking a “blunt instrument” approach to policy, adopting interstate legislation wholesale without considering on how it would perform in local conditions.

The spotlight on WorkCover SA’s Medical Panels have also highlighted that consultation and co-operation are essential in maximising durable return to work rates. Where unaccountable institutions give rise to distrust or intimidation in injured workers, as has been the case with SA’s Medical Panels, the likelihood of a positive return to work outcome will diminish.

Legal challenges on the horizon

Even before the verdict, it was widely speculated that the Supreme Court’s decision would be appealed by one of the parties regardless of the result. Campbell’s lawyers were believed to be planning a High Court appeal if the Supreme Court rejected arguments about the constitutionality and authority of the Medical Panels.

Speaking to ABC TV last night, Dolphin said he may still appeal to the High Court to test the constitutionality of the Medical Panels. However, as Dolphin’s client has already won the right to appear before the Workers Compensation Tribunal without a binding decision from a medical panel, it is unclear whether he will consider the potential for the appeal to backfire to be worth the risk.

A much more likely scenario is an appeal to the High Court initiated by WorkCover SA to reinforce the authority of the Medical Panels to make binding decisions, in the interests of protecting the organisation’s bottom line. In this endeavour, South Australia may be assisted by its interstate counterparts in Victoria, New South Wales and Queensland, which have similar legislative provisions relating to Medical Panels.

Should the appeal be upheld, the implications for each of these states are enormous, both in financial terms and the potential for increased litigiousness in their respective workers compensation systems.

South Australia’s Workers Rehabilitation Minister, Jack Snelling, is currently seeking more advice on the implications of the Supreme Court ruling and is expected to announce a course of action in the coming weeks.