Right to weekly compensation on termination of employment

If an injured employee, suffering no wage loss, is terminated for reasons unrelated to an injury, or, accepts voluntary redundancy, is there an ongoing liability to pay weekly payments?

The answer is usually yes, if the worker has an incapacity on the open labour market caused by the injury. There are, however, strategies that can be implemented and matters to be taken into account that may minimise liability. The following bulletin addressing some recent cases provides a timely guide.

The basic starting point

A worker is considered partially incapacitated if he or she is physically unable to do some of the things they used to do before the injury. Compensation is payable if that incapacity has resulted in a reduction of the worker’s ability to earn in the open labour market.

Subject to the statutory caps, the amount of compensation payable is based on the difference between the weekly amount the worker would probably have been earning but for the injury, in the same or some comparable employment, and, the average weekly amount the worker is earning or is able to earn in some suitable employment.

Just because a worker cannot find work, does not mean that the worker’s ability to earn is nil. An employer or insurer is also entitled to argue that a worker’s ability to earn is in fact greater than his or her actual earnings. Functional and vocational assessments providing analyses of job markets and market rates of pay, not just awards, can assist with arguments concerning residual earning capacity.

Termination due to disciplinary action or redundancy

Is an injured worker’s entitlement to weekly compensation under section 40 nil if his/her employment came to an end due to disciplinary action and/or a negotiated redundancy whilst he/she was incapacitated and performing suitable duties?

In the recent case of Luland v MPA Energy Services Pty Ltd (2006) NSW WCCPD 74, the Workers Compensation Commission considered this issue.

In this case the worker suffered injuries at work on 9 April 1996 and 2 September 2003. He was unable to perform work as a mobile plant operator (pre-injury duties). He was partially incapacitated and the employer was providing suitable alternative duties. However, due to disciplinary action and subsequent negotiated redundancy, on 9 December 2003 his employment with the respondent ceased. After accepting redundancy, the worker claimed weekly compensation.

The arbitrator determined that the worker’s economic loss was due to the disciplinary action and redundancy and found that the worker suffered no loss of income as a result of the injuries to his left shoulder. The arbitrator entered an award for the respondent in respect of the claim for weekly compensation. The arbitrator’s decision was appealed.

On appeal the Deputy President held the role of the arbitrator was firstly to determine the worker’s incapacity arising from his injury, if any, based on the evidence, despite the fact of redundancy. The arbitrator should then have determined whether any entitlement to weekly compensation arose because of this incapacity. The Deputy President concluded the acceptance of a redundancy payment does not, by itself, deny an injured worker compensation where there is continuing partial incapacity to work. However, the Commission should take factors such as termination for discipline into account in the exercise of its discretion in relation to the award.

In this case, the worker’s employment ended in redundancy as he was alleged to have breached the company’s policy by accessing inappropriate material on the internet. The Deputy President concluded the following factors are to be taken into account in calculating the compensation payable to the worker:

  1. In accepting the redundancy the worker removed himself from the possibility of suitable duties at the respondent.
  2. The worker had not evidenced any desire or action on his part to find alternative employment in the relevant period.
  3. The restructuring of the workplace would likely have reduced his earning capacity in any event.

Based on the above factors the Deputy President exercised his discretion and reduced the potential award for weekly compensation by two thirds.


A claim for weekly compensation may not occur immediately following a redundancy or termination. An employer should gather information leading up to any termination or redundancy of an injured and/or partially incapacitated worker in preparation for a potential claim.

The following should be considered where appropriate:

  • Exit interviews involving both the worker and supervisors.
  • Preparation of summaries of the duties being performed, to what standard, over what length of time and whether the worker has experienced any difficulties caused by the injury.
  • Details of all job offers made and the worker’s response.

This approach will maximise the information and evidence to support a defence of a claim and minimise the loss of information once memories have faded.