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Introduction

The Injury Prevention, Rehabilitation, and Compensation Amendment Bill is a major threat to the integrity of New Zealand's no-fault accident compensation scheme. Here is a guide to writing a submission to the Transport and Industrial Relations Select Committee which is considering the Bill.  Submissions close 26 November 2009, so get in quick if you want to have your say.  

Submission format

1. Give your name, address, phone number and email address
2. State that you WISH TO APPEAR before the select committee to speak to your submission - you can always decline later. If you are not in Wellington, request to be heard in a city nearest you.
3. Give an indication of who you are (e.g. landowner, business owner, community group member, etc). If you represent a group, outline its purpose and how many members it has.
4. Clearly state your OPPOSITION to the Bill.
5. Outline your key concerns about the Bill clearly and concisely using examples.

When you have written your submission you can send it directly to the Select Committee from this link.

If you have never made a submission to a Select Committee before, there is a useful guide here (PDF).

If you want to contact us for more assistance, email socialjustice [at] greens [dot] org [dot] nz or phone 09 303-0172.

Overview of ACC and the Bill

ACC was founded on five key principles:

1. Community responsibility

First, in the national interest, and as a matter of national obligation, the community must protect all citizens (including the self employed) and the housewives who sustain them from the burden of sudden individual losses when their ability to contribute to the general welfare by their work has been interrupted by physical incapacity. In other words as we all reap the benefits of a modern fast paced industrial society we should be prepared to pay for the detriments and not leave those who are inevitably injured to struggle on alone.

2. Comprehensive entitlement

Second, all injured persons should receive compensation from any community financed scheme on the same uniform method of assessment, regardless of the causes which gave rise to their injuries; In other words it should not make any difference to the compensation available if a person is injured inside the factory gates or outside.

3. Complete rehabilitation;

Third, the scheme must be deliberately organised to urge forward the physical and vocational recovery of these citizens while at the same time providing a real measure of money compensation for their losses. The Woodhouse Report had noted that the common law action for damages was actually a disincentive to rehabilitation because the more incapacitated the injured person was at trial (often 2-3 years away from the injury date) the more damages he or she would

receive.

4. Real Compensation

Fourth, real compensation demands for the whole period of incapacity the provision of income-related benefits for lost income and recognition of the plain fact that any permanent bodily impairment is a loss in itself regardless of its effect on earning capacity; The Woodhouse report recommended that weekly compensation be paid at 80% of previous earnings as long as the person was incapacitated from their injuries. The Report also recommended compensation for any permanent disability suffered. This was to be in the form of a permanent weekly pension whether or not there had been income loss through that disability.

5. Administrative efficiency

Fifth, the achievement of the system will be eroded to the extent that its benefits are delayed, or are inconsistently assessed, or the system itself is administered by methods that are economically wasteful.; The common law and worker's compensation systems for compensating accident victims had led to employers, motorists and others having to take out insurance against the possibility of being sued. In some cases (Workers Compensation insurance and Motor Vehicle insurance it was made compulsory by legislation to take out such insurance). In other cases such as possible liability for damage caused by negligent employees or products most prudent employers took out insurance against such risks.

The Bill contains a number of cuts to ACC cover and entitlements - many of which run counter to one or more of the five principles upon which the scheme was founded.  While not set out in the Bill itself, the Government also proposes, in contravention of the community responsibility principle above, significant increases in ACC levies targeted to particular activities.  ACC Minister Nick Smith claims the cuts and levy increases are necessary to address a "cost  blowout" in ACC.

The reality is that there is no cost blowout - ACC takes in far more in levies each year than it spends on claims and claims administration.  Its so-called financial difficulties stem largely from a political decision taken in 1998 to fully pre-fund ACC by 2014 - i.e. to fully fund all future entitlements, including weekly compensation, that are likely to have to be paid on existing claims.  That decision was necessary for the implementation of the policy of the National-led government of the day to privatise workplace injury insurance.

However, when ACC was re-nationalised in 2000, the Labour-led government of the day did not revert to the "Pay As You Go" funding of ACC that had existed for its first 25 years, but continued the policy of pre-funding.  That decision, together with negative impact of the global financial crisis on ACC's investments, is responsible for much of the so-called "crisis" ACC now faces.

Specific concerns

Cover for hearing loss

The Bill (clause 6) proposes to erode the comprehensive cover aspect of the scheme in an ominous way by removing the right to be covered by ACC for people who suffer a hearing loss of less than 6%.

Hearing loss has only ever been covered by ACC if it has been caused by an accident, by the work environment of an employee, or by medical treatment.  A claimant doesn't get ACC cover if it is caused by a natural process or by a disease or infection.

But even if hearing loss is caused by an accident or by the work environment, the Bill will deny ACC cover to someone who is only a "little bit" deaf due to that cause.

This is like denying you cover if you have only a small fracture, or if you have only minor ligament damage. 

Claimants with low-level hearing loss caused by industrial deafness will have to meet the cost of hearing aids and any other costs arising from it themselves - even if their overall hearing loss attributable to all causes is significant.

This proposal cuts at the heart of the no-fault, comprehensive cover nature of the ACC scheme.

Suggested action: Submit in opposition to clause 6

Cover for work-related gradual process, disease, or infection

Injuries that are caused by gradual process, disease, or infection are covered by ACC only if they are work-related - i.e. the injured person performs an employment task that has a particular property or characteristic; or is employed in an environment that has a particular property or characteristic; and the particular property or characteristic causes, or contributes to the cause of the personal injury.

Section 30 of the Act was amended in 2008 to clarify that the responsibility and cost for investigating a work-related gradual process, disease or infection claim rests with ACC; and that if a person has both work and non-work exposure to the cause of the injury, the person will receive cover if the work exposure was the more likely cause.

The 2008 amendment also provided that if a person otherwise meets the requirements for work-related gradual process, disease or infection cover, a claim can be declined only if ACC proves that the work task or work environment places the claimant at no significantly greater risk of developing that personal injury.

These amendments followed the recommendation of an expert Ministerial Advisory Panel that there was uncertainty about the operation of the former law and they were desirable to provide greater certainty of cover for claimants with a work-related gradual process, disease, or infection.

The Bill (clause 7) proposes to repeal the 2008 amendment and revert to the previous law that had been criticised by the Ministerial Advisory Panel as lacking clarity and consistency in its application.

The Explanatory Note to the Bill contains no real justification for repealing this 2008 amendment other than that the current legislation "adds to ACC's costs and potentially to the number of people receiving cover". It can be viewed only as a cynical cost-cutting measure designed to reintroduce uncertainty over cover into the legislation and make it easier for ACC to deny cover for this type of injury.

Suggested action: Submit in opposition to clause 7.

Vocational Independence changes

Vocational independence assessments are used by ACC to decide if an ACC claimant receiving weekly compensation for loss of earnings is fit to return to suitable work.  If a claimant is found to be fit to return to suitable work, his or her weekly compensation stops three months later if the claimant has not already gone back to his or her pre-injury job or found another one.

The assessment consists of two parts.  Currently, these are:

• A vocational assessment to determine what types of work are suitable for the claimant on the basis of the claimant's skills, experience and earnings before his or her incapacity.

• A medical assessment to determine whether the claimant is fit to work at least 35 hours in any of those types of work.

The Bill (clause 4, clause 9, amendment to clause 25, Schedule 1) proposes to remove the requirement that the vocational assessment of suitable work takes into account a claimant's earnings before his or her incapacity, and to reduce to 30 the minimum number of hours a claimant must assessed under the medical assessment as being able to work to be considered vocationally independent.

That runs counter to the complete rehabilitation and real compensation principles and to the purpose clause in the Act, which requires that "...during their rehabilitation, claimants receive fair compensation for loss from injury..."

Example

If the Bill is passed, claimant who was earning, say, $1500 a week before his or her injury will have his or her weekly compensation stopped if he or she is found to be able to do some  job for 30 hours a week that pays only the minimum wage.  That's just $375 a week.

Suggested action: Submit in opposition to the vocational independence amendments.

Weekly Compensation changes

The Bill (Schedule 1) proposes to change the calculation of weekly compensation entitlement for seasonal or casual workers so it will be calculated based on their annual earnings, and not on their income during the immediate period before they were injured.

The logic being used by the Government ignores the vulnerability of the workers and families involved. More and more of the workforce is being employed in casual and part time work, usually at the bottom end of the income ladder. To reduce the compensation for such people is to penalise those most in need of state support through a period of injury and rehabilitation - especially since they are the least likely to have savings to make up the shortfall.

For example, if a young mother who has been financially dependent on her partner for most of the year, joins the workforce in a casual, seasonal or temporary job and gets severely injured on the fourth week on the job, her $450 per week earnings for the four weeks is divided by 4 weeks initially (under clause 36, Schedule 1), and she can receive $360 for the first 4 weeks of injury only. Then for the rest of her incapacity the calculation under the Bill's proposals will be base on the total amount of her income over her brief employment - $1800 - divided into 52 weeks at 80%. This means her weekly compensation amount is $27.70 per week. This weekly amount is a long way from real compensation for her serve injury that was caused at work, and is an unacceptable erosion of the social contract that underpins the scheme. In this case, the $27 per week does not compensate her for future loss of earnings as her children were getting older and, had it not been for the accident, she could have undertaken more permanent work in future.

Under the current rules the young mother would continue to receive $360 per week for the entire duration of her incapacity.

The Government's proposals will mean this young mother is $333 per week less compensated for a severe injury that was caused at work.

This cut potentially affects almost a quarter of the workforce if they have the misfortune to have to take time off work because of injury.

Suggested action: Submit in opposition to the amendments in Schedule 1 relating to calculation of weekly compensation.

Treatment of holiday pay

The Bill proposes (Schedule 1, clause 49) to treat holiday pay paid on the termination of employment as earnings for the purpose of abating weekly compensation.  This proposal is unfair and an erosion of worker rights.

Holiday pay accrues in respect of time when a worker subsequently injured has not yet sustained the injury. To then charge this holiday pay against weekly compensation means that leave the worker has accrued for holidays goes towards the costs of the worker having been injured at work.  In practical terms this essentially means an injured worker is funding their own compensation for that period.

It also runs counter to the intent of the Holidays Act,  which provides for a worker being able to take annual leave for the purposes of rest and recreation. Clearly if a worker is still medically unfit to work, he or she is also not in a position to fully gain the benefits of the minimum entitlements intended by the Holidays Act.

Suggested action: Submit in opposition to the amendment to clause 49 of Schedule 1 of the Act.

Disentitlement for suicide and self-inflicted injury

Before an amendment in 2008, ACC was permitted to pay death entitlements to the family of a suicide victim only if the death was "the result of a mental injury". That reflected the fact that many suicides are by people who are sufficiently mentally ill that they are incapable of forming a rational intent.  It also reflected the fact that many others who commit suicide would meet the ACC criteria for cover for treatment injury because their suicide is caused by the failure of the mental health system to provide them with adequate and appropriate treatment and care.

The Bill proposes (clause 10) to restrict entitlements in cases of suicide to circumstances when a person already has ACC cover for mental injury.  That means a suicide victim's family will receive entitlements only in the very narrow circumstances of the mental injury having been caused by sexual abuse, being consequent on a physical injury, or being caused by a traumatic event in their workplace.  The suicide victim will also need to have already gone through the process of having their claim for mental injury approved by ACC before their suicide for his or her family to get any entitlements.

It won't matter if a suicide victim was incapable of forming a rational intent.  It won't matter if the suicide was caused by an abject failure of mental health services to provide appropriate treatment.

Furthermore, it is often very difficult to determine whether a death is suicide. Contrary to what some people may believe, very few people leave a suicide note. So if someone drives their car into a tree and dies, is it suicide or is it an accident? If someone takes a fatal overdose of prescription drugs, is it suicide or is it an accident?  Coroners often return open verdicts, because there is insufficient evidence to make a determination on the balance of probabilities. So how is ACC meant to make such a determination? 

This amendment, which relates to wilfully self-inflicted injuries as well as suicide, reintroduces uncertainty into the scheme.  If an injury is self-inflicted, it is extremely difficult to ascertain whether the action that inflicted it was wilful.

Suggested action: Submit in opposition to clause 10

Extension of date for full pre-funding

The Bill (clauses 13 - 37) extends the date for fully pre-funding the various ACC accounts from 31 March 2014 to 31 March 2019.

While this will result in levies being struck in the immediate future at a somewhat lower level than if the 2014 target were retained, and should be supported over that target date, the whole concept of pre-funding is contrary to the Woodhouse principles and is, as suggested in the overview above, the most significant driver of the Government's manufactured crisis in ACC's finances.

If ACC were to revert to Pay As You Go, levies in the short term could be significantly reduced because ACC no longer has to add to the its investment.  It would also mitigate the inherent risk of a fully funded approach that was evidenced in last year's meltdown in the financial markets that added about $1.6 billion to ACC's liabilities.

Another approach to ACC funding would be to take the same pragmatic approach the Government has taken with the NZ Superannuation fund - forward funding it from fiscal surpluses when they occur, but not setting aside money to forward fund it in years of fiscal deficits.

Suggested action: Submit in support of abandoning fully pre-funding ACC and either it reverting to Pay As You Go or a partially forward-funded scheme.

Experience rating and risk sharing

The Bill provides for new regulatory powers to introduce experience rating and risk sharing into the ACC scheme (clause 43(7)).  This is to facilitate the introduction of no-claim bonuses, higher or lower levies, and claim thresholds for individual employers and risk rating for motor vehicles and owners of motor vehicles.

As Sir Owen Woodhouse himself has pointed out, provisions such as these run counter to the community responsibility principle and have no place in the no-fault scheme that ACC is meant to be.

The community responsibility principle recognises that the various activities we undertake in society are all inter-related, and that benefit and harm flow on to others, rather than rest solely with the people undertaking those activities.

The community responsibility principle recognises, for example, that even though a disproportionately high number of motor vehicle injuries involve motorcyclists, a significant proportion of those injuries are actually caused by someone other than the motorcyclist.

The community responsibility principle also recognises that increased use of motorcycles where practicable has environmental benefits if single occupant car usage is consequently reduced, since the greenhouse gas emissions generated by a motorcycles are significantly less than from cars and the fossil fuel used per kilometre of travel is significantly less for a motorcycle than a car.

Experience rating and risk rating run counter to that principle.  Experience rating was also found to have negative impacts when it operated in the 1990s.  In particular:

• It had a negative financial impact on the ACC scheme - i.e. more funds were paid out in levy rebates resulting from positive experience ratings than received in loadings on levies due to negative experience ratings. It seems particularly bizarre that when the government is attempting to paint a picture of financial strife in ACC, it proposes to introduce a policy that will have a negative impact on its financial performance.
• The formula for experience rating changed each year in an attempt to address the above problem - resulting in year to year uncertainty for employers.
• Experience rating placed pressure on ACC staff to remove costs by moving claims from the work account to other accounts and increased the likelihood of employers contesting that an injury was a work injury, with resultant uncertainty and delays in cover and rehabilitation for the injured person.
• ACC were required to spend significantly more time and money in defending cost allocation through the dispute resolution process rather than focusing on rehabilitation of claimants

Suggested action: Submit in opposition to clause 43(7)

In preparing your submissions you may wish to read the following analyses by Michael Littlewood and Susan St John (both PDF).