The introduction of the Workers Compensation and Injury Management Act 2023 (WA) (the Act) in Western Australia brings with it a number of changes to the management of workers’ compensation claims and injury management across the state.
For principals, understanding and adapting to the new legislation is crucial to ensuring comprehensive protection against liabilities arising from workplace incidents. By staying informed, reviewing existing insurance coverage and contractual arrangements and proactively collaborating with stakeholders, principals can navigate the evolving regulatory landscape with confidence and resilience.
Whether you're a small business owner or part of a larger enterprise, it's crucial to grasp how the new Act will affect your public liability policy. Here's a breakdown of the five key things you need to know.
Under the new Act, only contractors who do work that is not in the course of or incidental to a trade or business regularly carried out by that contractor will be considered a “worker” for the purpose of the Act and therefore be entitled to compensation. The new definition of “worker” therefore does not provide compensation to people who are working with an ABN and contracting out their services to various different entities.
Any person working under a contract of service or apprenticeship with an employer will continue to be defined as a “worker” and be entitled to receive compensation [1].
However, contractors who are engaged under a contract for service and who are remunerated in substance for their personal manual labour or services will no longer fall within the definition of “worker” and be covered under the new Act.
In the new Act, an individual who has contracted with another person for the performance of work will only be considered a “worker” if:
You should conduct a thorough review of your contracting arrangements and notify those individuals who are working with an ABN and contracting out their services to various different entities that they will no longer be covered under the Act. Individuals will need to consider whether to take out their own income protection policies to ensure adequate coverage.
You should also review your existing public liability policy to ensure you have sufficient coverage to mitigate against the potential risk of increased claims resulting from sole traders who are no longer covered in the definition of “worker”. It is arguable that this change in definition could result in an increase in the number of public liability claims being made against principals, as individuals who are no longer covered by the Act, look to make a public liability claim against the principal as a means of seeking compensation for their injuries.
The new Act brings with it a significant increase in the amount of compensation awarded to workers for health and medical expenses. Under the new Act, medical and health expenses are capped at 60% of the general maximum general limit, rather than 30% under the former act.
Further, the new Act incudes an additional type of compensation, known as Miscellaneous Expenses Compensation, which has no statutory limit.
Miscellaneous expenses compensation includes:
Under the new Act, there is still a step down in a worker’s income compensation payments to 85% of their initial rate, however, this now applies after 26 weeks, instead of the 13 weeks allowed under the former scheme.
As a principal, you could expect to see an overall increase in the quantum of workers’ compensation recovery claims. In addition to ensuring you have sufficient coverage, principals should also ensure they are implementing and enforcing a safe system of work to mitigate against potential recovery claims.
The new Act establishes a single settlement pathway for statutory claims. Settlement agreements must be registered in the approved statutory form. The use of common law agreements (s. 92(f) deeds) to settle statutory claims against employers and principals is no longer permitted.
WorkCover will still need to be notified of the settlement (including settlements of common law claims). However, the settlement will only be effective if the worker registers an election (of at least a 15% whole of person impairment) before the action for damages is commenced.
Principals will need to turn their minds to how they procure releases from workers, particularly when a principal’s indemnity extension is attached to the policy.
Principals should engage proactively with insurers, brokers and legal advisors to choose a settlement mechanism that is suitable for them depending on their appetite for risk.
The new Act imposes an obligation on host employers to cooperate with the labour hire employer to assist them to comply with their injury management obligations if a worker is incapacitated for work.
This means that host employers now have an obligation to cooperate with labour hirer employers to ensure that a worker is provided with a suitable position during the 12-month period from the worker’s first date of incapacity. Further, that a return to work programme is established for the worker as soon as possible.
A failure by the host to cooperate carries a fine of up to $5,000.
Principals will now need to play a more proactive role in injury management.
Principals should engage proactively with insurers, brokers and legal advisors to choose a settlement mechanism that is suitable for them depending on their appetite for risk.
There has been some discussion as of late as to whether principal’s indemnity extensions will be permitted under the new Act. This is because the new Act imposes a penalty on employers who attempt to contract out of their contract out of their liability under the Act and there was a concern that contractual indemnities could be viewed by WorkCover as an attempt to contract out of the Act.
WorkCover has now made it clear that they do not intend to use their prosecutorial powers to govern the contractual arrangements between principals and contractors. Rather, they intend to use their prosecutorial powers to prosecute employers who attempt to enter into arrangements with workers to avoid their liabilities under the Act. Principal’s indemnity extensions are therefore still a permissible risk management strategy.
Whilst Principals indemnity extensions are still permissible under the new Act, principals should engage proactively with insurers, brokers and legal advisors to obtain advice regarding their contractual indemnities to ensure they are enforceable.
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[1] Section 12 of the Act.