Workers' Compensation: Navigating the new world of work

With mental health injury claims on the rise and legal cases testing the new world of work, it has never been more important for businesses to have policies and procedures that accurately reflect the ‘new ways of work’.

BY MARTIN WANLESS

To some, the ‘COVID years’ may seem like an aberration – a surreal period that falls into the ‘did that really happen?’ category.

Now that life has returned to a recognisable version of ‘normal’, and few of us recall with any great fondness the endless days, weeks and months in lockdown, it’s easy to fall into the trap of pushing everything we went through to one side.

However, there’s more than a significant reminder every day in the workers’ compensation space, with mental health claims on the rise and workers struggling to strike a balance between work and personal life thanks to the continual presence of ‘work’ in many homes.

“Recent Allianz workers’ compensation claims data revealed workplace mental health injuries are continuing to rise, with active psychological injury claims increasing 12 per cent since the pandemic began,” says Leigh Ebzery, General Manager, Workers Compensation, Underwritten and Distribution Allianz.

Rizwan Haque, Strategic Broker Manager at icare, agrees external events have increased mental health claims significantly.

“The main challenge in workers’ compensation is tackling mental health issues. Currently, one in five Australians experience problems with mental health each year, and we believe that COVID-19, bushfires and floods have increased background mental health pressures on many workers.

“In workers’ compensation, we’ve seen a related growth in severe psychological injuries, with injured workers needing more time and resources to recover and return to work.”

Of course, the reality is that COVID-19 is still very much here. It’s not ‘over’, but we’re now living with it, which is why our current ‘normal’ isn’t quite ‘as normal’ as it was pre-2020.

And that is causing challenges for businesses, as well as posing questions for the workers’ compensation sector at large.

“Economically, COVID-19 seems to have had more of an indirect impact than direct disease impact, and it might be too early to conclude the overall longer impact of COVID-19, with extended periods of chronic disability due to the after-effects of an infection,” says Angela Bertoncin, Head of Workers Compensation at Zurich.

“If an infection is found to be compensable as work-related, is long-term COVID-19 then a qualified long-term disability?”

And the issue of psychological injuries is a key focus for legislators too and will undoubtedly be a key workplace focus.

“For example, a NSW Parliamentary Inquiry by the Standing Committee on Law and Justice is reviewing workers’ compensation in relation to issues around psychological injuries,” says Haque.

“A range of experts and industry organisations have made submissions that suggest employers need to deliver more psychologically safe workplaces in response to rising rates of mental health issues. The Committee continues to review the evidence and in due course may make recommendations.”

“One in five Australians experience problems with mental health each year, and we believe that COVID-19, bushfires and floods have increased background mental health pressures on many workers.”

– RIZWAN HAQUE, STRATEGIC BROKER MANAGER, ICARE

“A range of experts and industry organisations have made submissions that suggest employers need to deliver more psychologically safe workplaces in response to rising rates of mental health issues.”

– ANGEL BERTONCIN, HEAD OF WORKERS COMPENSATION, ZURICH

PROACTIVE APPROACH NEEDED

This new world in which we are all now operating needs careful navigation, and serious consideration is required to ensure workers’ compensation claims don’t skyrocket over the coming years.

Businesses worldwide are still figuring out just how to make the hybrid model work, but working from home can mean there’s no demarcation between home and work, and businesses need to have clear policies in place.

Ebzery says, “Our claims data has also revealed the leading causes of primary psychological injuries are ‘work related harassment’ and ‘work pressure’, which is why we believe that prioritising the wellbeing of employees is pivotal in building thriving workplaces for the future. To this end, we actively work with Australian businesses and expert mental health partners to inform and drive positive action on creating mentally healthy workplaces.

“This includes a proactive approach to prevention through appropriate workplace support programs. There is also a significant focus by governments, businesses and insurers to address this issue, and is found in the Australian Work Health Safety Strategy 2012-2022.”

PRIME OPPORTUNITY FOR VALUE-ADDING CONVERSATIONS

From a broker’s perspective, of course, helping clients navigate this shift is a hugely important piece of work. Not only is it a fundamental part of a risk management strategy built for today, but it can be a huge value-add to the service provided.

“Regularly reassess how the client’s business is changing in how its workers are working,” says Bertoncin.

“COVID-19 may have changed business operating models and could have developed online markets. It is important to assess whether the worker is covered by workers’ compensation schemes in Australia as traditional business models change.

“There might be gaps in personal insurance, so it is important to identify what these gaps may be and look for alternative coverages to cover the gap.

“An example is travel and journey cover and requirements for coverage that goes beyond the normal business hours. As well as businesses moving into a gig economy environment.”

Ebzery says, “We encourage brokers to inform clients of the intent to increase regulation regarding psychosocial risks and the recently launched global standards (ISO 45003) on managing psychological health.

LEGAL ROUND-UP

Some recent court decisions are changing the ways employers are looking at certain aspects of their relationships with their employees. Angela Bertoncin of Zurich outlines some of the key decisions you and your clients should know about.

• Is a gig worker an employee? In the case Wei v Hungry Panda Australia Pty Ltd and Ors (2022) NSW PIC 264 (2 June 2022), this question is of particular legal significance as the case is about a gig worker being recognised as an employee in relation to a workers’ compensation claim. This is a very grey area and can differ from case to case, jurisdiction to jurisdiction. However, in this case, no precedent was set in respect to whether a gig employee will be automatically categorised as an employee for workers’ compensation claim purposes. Hungry Panda conceded that Xiaojun Chen was an employee, and the Commission was not required to make a finding as to whether the deceased worker satisfied the definition of employee under the NSW Workers Compensation Act.

• Kozarov v State of Victoria [2022] HCA 12 is a recent High Court of Australia decision that reaffirmed an employer’s duty of care to its workers to take reasonable care to avoid mental injuries in the workplace. This case helps shape the guidance to employers on how best to respond to identified risks of mental injury in the workplace.

• With the onset of changes in the Industrial Manslaughter in the Model Act (most recently WA in March 2022), industrial manslaughter is a reality check for business owners with Work, Health and Safety Prosecutors having a strong willingness to prosecute both corporate entities and individuals for industrial manslaughter. Some recent cases:

o R V Jeffery Owen. In recent common law development, Judge Cash QC of the Queensland District Court has sent a clear message with a jury convicting Mr Owen of industrial manslaughter, an offence punishable by up to 20 years imprisonment in Queensland. Since this case, we are seeing further cases across Australia.

o In June 2020, Brisbane Auto Recycling Pty Ltd was found to have committed industrial manslaughter and ordered to pay a fine in the sum of $3 million. The directors were also sentenced to 10 months imprisonment based on reckless conduct (category 1 offence).

o In May 2021, Western Australia recorded its first conviction for industrial manslaughter against Mark Withers, director of MT Sheds (WA) Pty Ltd, who was sentenced to 2 years and 2 months imprisonment.

o More recently, in March 2022, the Northern Territory’s WorkSafe launched its first industrial manslaughter prosecution against Kalidonis NT Pty Ltd. The company faces a maximum fine of $10.3 million, and the company’s sole director a maximum sentence of 5 years imprisonment. Given the enhanced sentencing appetite of courts, the case will be followed closely as it unfolds.

“We recommend brokers work closely with key stakeholders, including underwriters, to leverage the available data.”

– LEIGH EBZERY, GENERAL MANAGER, WORKERS COMPENSATION, UNDERWRITTEN AND DISTRIBUTION, ALLIANZ

“The model Work Health & Safety Regulations have been amended to deal with psychosocial, and recently (June 2021), the first global standard (ISO 45003) on managing psychological health in the workplace was published. ISO 45003 provides guidance on managing psychosocial risk as part of an occupational health and safety management system.”

Of course, with any relationship between employer and employee, people are at the heart, and businesses are fundamentally important in helping employees return successfully to the workplace.

“Brokers can help clients understand that they are central to the recovery and return-to-work story,” says Haque. ”An employer with a strong connection with their workers gets a better outcome. At icare we are starting to see evidence that good, ongoing engagement with workers can increase return-to-work rates by around 20-25 per cent.

“Supporting workers early in a psychological claim is critical, alongside providing suitable duties and being active in recovery and rehabilitation at work. Sometimes a simple weekly phone call from a boss to an absent worker to ask ‘are you okay?’ will spark a return-to-work journey. “The link between early intervention and a broker’s client’s premiums cannot be underestimated.”

There are many pieces to this jigsaw, but starting and continuing the conversation at least gets businesses on the path to creating their own future.

PREVENTION: BETTER THAN CURE

A focus on injury prevention is vital, as is using data to identify key trends within industry sectors, says Allianz’s Leigh Ebzery.

“We recommend brokers work closely with key stakeholders, including underwriters, to leverage the available data. This will enable understanding of the risk maturity of an organisation and their commitment to Workplace Health and Safety, as well as develop programs to address emerging issues, gain insights and assist in developing risk prevention strategies with trusted partners.”