January 2013

Impairment claims from psychiatric injury prior to 1 January 2002?

In psychiatric impairment claims arising out of injuries both before and after 2002 there has been a debate concerning how the entitlement is calculated – should there be a reduction in the percentage impairment to account for impairment due to injury before 2002 or should the ultimate compensation payable be reduced?

Relevant legislation

The wording in s65A and Schedule 6 Part 18C of the Workers Compensation Act 1987 appears to be in conflict on this issue. 

S65A(3) states “No compensation is payable (either as permanent compensation or pain and suffering compensation) in respect of permanent impairment that results from a primary psychological injury unless the degree of permanent impairment resulting from the primary psychological injury is at least 15%”.

The psychiatric impairment entitlement is available only for injury on and after 01/01/02.  However, Schedule 6 Part 18C Clause 3(2) goes on to say “there is to be a reduction in the compensation payable…for any proportion of the permanent impairment concerned that is previously non-compensable impairment”.

Court Decisions

Prior decisions of the Workers Compensation Commission held no deduction should be applied to the level of whole person impairment (“WPI”) as the disease provisions provided for a deemed date of injury when the actual injury in effect crystallised.  This was usually determined to be the last date the worker was either employed or last worked for their employer or the date of claim. 

On this basis, prior to the decision in SAS Trustee Corporation v Pearce [2009] NSWCA 302 (“Pearce”) no deduction had previously been applied to the level of WPI in respect of pre and post 2002 injury.

The Court of Appeal in Pearce found the transitional provisions were engaged after the commencement of the amendments on 1 January 2002 where a worker was found to have suffered a disease of gradual process pursuant to ss 4(b)(i), 15 and/or 16 of the Workers Compensation Act 1987 (“the 1987 Act”). 

Since Pearce, both the District Court and the Commission examined how Pearce was to be interpreted in practical terms, with different results, some where there has been a reduction in the whole person impairment percentage and some where there has been a reduction in the compensation payable.   

The definitive decision in the Commission was NSW Police Force v Fleming [2011] NSWWCCPD 33 (“Fleming”).   In applying the wording of the transitional provisions strictly, President Judge Keating determined the reduction for impairment resulting from pre 2002 injury was “in the compensation payable”, not in the degree of whole person impairment.

The ruling in Fleming was appealed.  However, before a determination was made, the Court of Appeal in SAS Trustee Corporation v Schmidtke [2012] NSWCA 269 (“Schmidtke”), which dealt with a range of other issues, made comments which clarified the interpretation of the transitional provisions. 

Schmidtke confirmed the correct approach was that adopted by President Judge Keating in Fleming. The Court of Appeal in Schmidtke determined the correct method of determining the compensation payable in impairment cases involving psychological injury before and after 2002 was to make a reduction in the compensation payable for pre 2002 component and not in the percentage of whole person impairment.

In practice

Moving forward, if psychological impairment claims are due to injury before and after 2002, determination of that claim would occur as follows:

  1. Assess the total WPI due to work related psychological injury;
  2. Assess the proportion of WPI which is due to injury prior to 2002;
  3. Calculate the compensation amount under section 66 for the total WPI;
  4. Reduce compensation amount by the proportion of WPI due to injury prior to 2002.

Any dispute concerning WPI due to injury before 2002 can only be determined by an Arbitrator and not an AMS.

Authors: Mick Franco and Judith Edwards

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