Redemption of Workers Compensation Liabilities
Published: 21 May 2010
A redemption is a lump sum paid by a compensating authority to an injured worker to finalize the compensating authority’s liability to pay the injured worker either income maintenance or medical expenses or both. There is no automatic entitlement to a redemption and no obligation on the compensating authority to offer one or on the injured worker to accept one if it is offered. The amount of the redemption is arrived at by agreement between the parties and simply represents what the compensating authority is prepared to pay and the injured worker is prepared to accept to finalize the compensating authority’s liabilities existing under the Workers Rehabilitation and Compensation Act 1986 (“the Act”). It does not necessarily represent the amount that the compensating authority would have had to pay to the injured worker if he or she remained on income maintenance or continued to be reimbursed for medical expenses.
Many changes were made to the Act in the 2008 amendments. A change to Section 42 of the Act dealing with redemption of liabilities was one of the amendments. A new subsection 42(2)(e) was inserted.
This provision stipulates that an agreement for a redemption of liability for income maintenance cannot be made unless one or more of the following requirements are met:
1. The rate of weekly payments to be redeemed does not exceed $30 (indexed) (ie, at the time of the redemption, the worker’s income maintenance is no more than $30 per week, as adjusted by CPI each year),
2. The worker has attained the age of 55 years and the compensating authority has determined that the worker has no current work capacity (ie, the worker has to be both above the age of 55 and totally unfit for work).
3. The Workers Compensation Tribunal has determined on the basis of a joint application made to the Tribunal that the continuation of weekly payments is contrary to the best interests of the worker from a psychological and social perspective (ie, the Tribunal has to be satisfied that it is better for the worker’s psychological and social well being that he or she take the redemption than remain on weekly payments).
From 1 July 2009, this additional requirement for a redemption applied to all compensable disabilities occurring after 1 July 2006. From 1 July 2010, the new requirement applies to all compensable disabilities regardless of when they occurred.
WorkCoverSA has sent a letter to all claimants whose claims are being handled by Employers Mutual Limited and who are receiving income maintenance and their injury occurred prior to 1 July 2006 to alert them to the new requirement for redemptions. Claimants were encouraged to contact their case manager by no later than 1 May 2010 if they believed their claim should be finalized with a redemption now rather than after the amendment to section 42 applies to all compensable disabilities.
It is expected that from 1 July 2010 there will be fewer redemptions of liability due to the amendment to section 42. They will not disappear altogether, but the requirement of subsection 42(2)(e) does mean that the eligibility for a redemption is significantly restricted.
The intention of the amendment to section 42 is to increase the focus of injured workers and case managers on rehabilitation, return to work and recovery from the injury rather than relying on a lump sum for finalizing the claim. While it is too early to say whether the amendment will achieve its purpose, it does have merit and compensating authorities must comply with it. If the requirements of subsection 42(2) are not followed, the redemption agreement will be invalid.