Australia: Worker's right to lump sum compensation extinguished by transitional regulations of Workers Compensation Legislation Amendment Act 2012 (NSW)

In brief - High Court judgment has implications for general liability underwriters

The High Court of Australia has held in a recent decision in ADCO Constructions v Goudappel that the transitional regulations of the Workers Compensation Legislation Amendment Act 2012 (NSW) extinguished one worker's right to lump sum compensation despite him having made a claim two years prior to its commencement.

Worker's injury assessed at six per cent permanent impairment

The case ADCO Constructions Pty Ltd v Goudappel [2014] HCA 18 concerned a worker, Mr Goudappel, who sustained an injury on 17 April 2010 during the course of his employment with ADCO Constructions Pty Ltd. Two days later, Mr Goudappel made a claim for compensation under the Workers Compensation Act 1987 ("WCA").

His injury was assessed at six per cent permanent impairment and he was advised by his lawyers that he was entitled to lump sum compensation in the amount of $8,250. On 20 June 2012, Mr Goudappel made a claim for lump sum compensation arising from the permanent impairment in accordance with section 66 of the WCA.

Entitlement to permanent impairment compensation limited to impairment greater than ten per cent

On 27 June 2012, the provisions of the Workers Compensation Legislation Amendment Act 2012 (NSW) ("the Amendment Act") came into operation. The Amendment Act amended section 66 to limit the entitlement to permanent impairment compensation to workers who had received an injury resulting in a degree of permanent impairment greater than ten per cent.

For Mr Goudappel, the effect of the Amendment Act if it applied to him, was that he was no longer entitled to make a claim for lump sum compensation.

Transitional provision protected worker's entitlement

However, the savings and transitional provisions (cl 15 of Pt 19H of Sch 6) of the WCA provided that the limitation did not apply to workers who had claimed lump sum compensation for permanent impairment prior to 19 June 2012.

During the appeal, it was accepted that Mr Goudappel's initial claim for compensation in April 2010 subsumed (or included) his later claim for permanent impairment compensation on 20 June 2012. Accordingly, if cl 15 applied, Mr Goudappel's entitlement to lump sum compensation was protected.

Transitional regulation displaced worker's entitlement

The Amendment Act also authorised the making of savings or transitional regulations which amended the WCA. One transitional regulation (cl 11 of Sch 8) provided that the amendments to lump sum compensation in the Amendment Act "extend to a claim for compensation made before 19 June 2012, but not to a claim that specifically sought compensation under section 66 or 67 of the WCA".

ADCO argued that Mr Goudappel's original claim for compensation on 19 April 2010 was not "a claim that specifically sought compensation under section 66". It submitted that Mr Goudappel made a claim specifically seeking compensation after 19 June 2012 and therefore he had no entitlement to the permanent impairment compensation.

Was the transitional regulation valid?

Mr Goudappel argued that the transitional regulation was not valid for reasons including that the WCA did not authorise regulations to be made affecting "accrued rights for any period of backdating".

High Court finds that the transitional regulation is valid

The High Court found that the transitional regulation was valid and that Mr Goudappel was not entitled to permanent impairment compensation.

Increased likelihood that workers will seek to join third party tortfeasors to claims

A major implication of the decision is that many workers who have made a general claim for workers compensation prior to June 2012 will be denied the right to claim lump sum compensation if they did not specifically seek compensation under sections 66 or 67 of the WCA.

The decision represents a challenge to general liability insurers by increasing the likelihood that workers will seek to join third party tortfeasors, particularly occupiers, due to the restrictions imposed under the WCA as amended. The decision may lead to a rise in claims for common law damages as injured workers seek to increase their options for compensation.

Emma Locke Gavin Creighton
General liability
CBP Lawyers

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