Introduction
A note providing a guide and explanation on the use of Memorandums of Agreement for settling workers’ compensation claims has been issued after recent confusion over the process of approval of these agreements.
The basic premise of the explanatory memorandum is to inform employers, insurers and representatives of circumstances in which the Director and Commissioner will be using their discretion under section 76 of the Workers’ Compensation and Injury Management Act 1981 (“the Act”) to refuse to register memorandums of agreement.
The powers of the Director and the Commissioner under the Act
The Director and Commissioner have discretion in the way they use their power under section 76 of the Act. The following is an outline of the powers provided to the Director and Commissioner by the Act and the way they have advised they will be using that power.
Under section 76(1), the Director is to be satisfied on the genuineness of an agreement and the adequacy of the settlement sum.
The Director will refuse to register an agreement if he/she decides that the agreement:
(a) is not genuine;
(b) has a settlement sum which is not adequate or is excessive;
(c) has been obtained by fraud;
(d) has been obtained by undue influence; or
(e) has been obtained by improper means.
If this occurs, the Director will refer the matter to the Commissioner, to make any order the Commissioner thinks just.
The Director and Commissioner consider that an agreement will have been obtained by ‘improper means’ if it is unfair. In deciding whether an agreement is ‘unfair’, the Commissioner will look at whether the worker is aware of his or her legal obligations, whether the settlement sum is adequate and whether there are any mistakes of fact that have been made by either party.
In making a decision whether to register an agreement the Director may interrogate/speak to the parties, by telephone or in writing, to decide whether the agreement falls under 2.2 (a) – (e), above.
If an agreement is referred to the Commissioner, the parties to the agreement will be immediately notified and be requested to provide written advice as to why the agreement should be registered, and provide supporting documents with that advice, within 14 days.
The Commissioner does not publish his reasons for refusing to register memorandums of agreement.
Concerns of the Commissioner and Acting Director
The explanatory memorandum outlines the following concerns:
concern - workers are not understanding the consequences of redemption and are therefore entering into unfair settlements.
notably, a claim may only be settled by redemption if a worker has been on weekly payments for 6 months under section 67(1).
concern - workers are not understanding the consequences of redemption and are therefore entering into unequitable settlements.
concern - if a worker has a permanent impairment, they are likely to require future weekly payments and are therefore possibly entering into an unequitable settlement;
- Redemptions are recording the incorrect date of injury;
concern - if the worker’s injury is incorrectly described, a worker may not be estopped from making a claim for the same injury.
if the worker’s injury is incorrectly described a worker may make not be estopped from making a claim for the same injury, or alternatively, may be estopped from making a claim in the future for an injury which they have not previously had.
- Agreements are describing impairments that are not related to the injury;
if the worker’s injury is incorrectly described a worker may make not be estopped from making claim for the same injury, or alternatively, may be estopped from making a claim in the future for an injury which they have not previously had.
- Agreements which record that a worker is accepting a Schedule 2 payment, are not accompanied by a relevant assessment evidencing the impairment for which they are to be paid;
a worker is receiving a insufficient payment for their level of impairment, or is receiving a payment for an impairment that they do not have, or is being over paid for the level of their impairment.
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Agreements which record that a worker is accepting a Schedule 2 payment, where they have already received a payment for that injury, or where an AMS has not been informed of the previous injury and the impairment assessment is therefore incorrect;
workers are dishonestly withholding information from their employers, and as such employers are paying workers twice for the same impairment;
the agreement is not reflecting the true circumstances of the worker in respect of the payments they are entitled to or the Schedule 2 payments they are entitled to and the worker may be receiving a lower settlement sum than they are entitled to.
It is safe to assume that in the future, there will be far greater scrutiny of agreements being registered.
However, there is no reason to be avoiding this useful mechanism for bringing a claim to a close. It is a tool that benefits workers and employers. There will, however, need to be greater caution in the future to ensure that the agreement reached is clearly understood by the worker and that the amounts recorded on the agreement accurately reflect the claim being redeemed and to ensure that the agreement is fair.
Care will need to be taken when deciding on the amounts nominated on the agreement that make up the settlement to ensure they stand up to possible scrutiny by the Director or the Commissioner and to ensure that, on the basis of the evidence, the compensation paid is fair in the circumstances.
The specific concerns raised by the memorandum issued by WorkCover should be clearly understood and concerns avoided by parties entering into an agreement, i.e. take care in listing the injuries and dates of injury.
For further information
Brett Ablong | Partner
T +618 9265 6001
Nathan Hepple | Senior Associate
T +618 9265 6003
Liz Seggie | Lawyer
T +618 9265 6013
