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Introduction

The future viability of Victoria’s Workers Compensation scheme has come into focus in recent years, with the scheme needing financial assistance from the state government to stay afloat, and employers saddled with a 42% premium increase in 2023. Despite this increase, the rising cost of Victorian claims continues to outstrip the impact of the premium increase, amid data showing that claimants continue to remain in the scheme for longer than ever before.

Many observers point to a significant increase in mental injury claims as a key contributor to the scheme’s financial woes, as illustrated by the fact that such claims now make up 16% of all Victorian claims, compared to only 2% of claims in 1985. That number is projected to rise even further, with WorkSafe Victoria forecasting a 5.5% increase year on year for new mental injury claims up to 2030.

These trends appear to be tied to an increased level of complexity in returning injured claimants to work. In recent years this led to the idea that the Victorian scheme no longer catered adequately for the current claim landscape, having been originally designed with physical injuries in mind. Amid strong calls for reform, the Victorian government announced a number of changes which came into effect on 31 March 2024, aimed at ‘modernising’ the state’s WorkCover laws.

The main changes, made under the Workplace Injury Rehabilitation and Compensation Amendment (WorkCover Scheme Modernisation) Act 2024, are as follows:

1. New eligibility requirements for primary mental injury claims; and
2. An additional Whole Person Impairment (WPI) requirement for claims beyond 130 weeks.

The Changes Explained

1. Additional Eligibility Requirements for New Mental Injury Claims

There are three key changes to the eligibility requirements for new mental injury claims, as set out below.

i. The claimed mental injury must have:

• caused significant behavioural, cognitive or psychological dysfunction; and
• been diagnosed by a medical practitioner in accordance with the Diagnostic Statistical Manual of Mental Disorders.

- There is a new definition of mental injury, namely one which causes ‘significant behavioural, cognitive or psychological dysfunction’.

- This must be diagnosed by either a General Practitioner or a Psychiatrist.

ii. The claimed mental injury must predominantly arise out of or in the course of any employment.

-The previous test was that employment need only be a cause. The test now requires that employment is the predominant cause (the strongest or largest contributing factor). This will need to be determined by an Independent Medical Examiner.

-The predominant cause test also applies to new claims for a recurrence, aggravation, acceleration, exacerbation or deterioration of a pre-existing mental injury. Employment needs to be the predominant cause of that recurrence, aggravation, acceleration, exacerbation or deterioration.

iii. The claimed mental injury must not have been predominantly caused by stress or burnout, as a result of events that may be considered usual or typical and reasonably expected to occur in the course of a worker’s duties.

-There is a new exclusion for claims due to stress or burnout. This provides that there is no entitlement for stress or burnout arising mainly from events considered usual or typical and expected to occur in the relevant employment.

-‘Usual or typical’ duties may depend on the relevant industry, as well as the usual demands, pressures, and interpersonal interactions required in a specific role.

-There are however some carve-outs to this exclusion. It does not apply:-

a. If the claimed stress or burnout arose as a result of behavior constituting bullying, harassment, or discrimination. Such behaviour would not be considered typical, nor reasonably expected to occur.

b. Where the mental injury arises mainly from traumatic events that may be considered usual and reasonably expected in the course of a specific role. This protects first responders, who are often routinely exposed to traumatic and life-threatening scenarios in the course of their work.

2. Further Requirement for Payments After 130 Weeks.

In order to continue to receive weekly payments after 130 weeks, workers must now meet both:

a. The existing capacity test, requiring them to be assessed as having no current work capacity, and that this is likely to continue indefinitely; and

b. The new WPI threshold, requiring them to be assessed with a WPI of at least 21%.

Workers in receipt of weekly payments approaching 130 weeks will have their entitlement reviewed prior to that point by the relevant insurer. Previously this only required an assessment of their work capacity, and a resulting finding that they have no current work capacity, and that this is likely to continue indefinitely. However it now also requires an assessment of the WPI resulting from their work injuries (conducted by an Independent Impairment Assessor), and a finding of at least a 21% WPI.

Potential impacts of the changes on the scheme

On their face, the scheme modernisation changes aim to limit access to compensation for new mental injury claims, and to restrict the ability of existing compensation recipients to remain within the scheme indefinitely. In doing so, it is no doubt hoped this will reduce the number of long-term claimants within the WorkCover system, and that such claimants will instead be encouraged to return to work.

With the changes only in their infancy, it remains to be seen whether they ultimately reach their desired aims, particularly with regard to aiding the scheme’s long-term financial viability.

There are however some understandable concerns as to how the changes may play out. For instance, cutting off payments for claimants at 130 weeks, without making prior provision for robust return-to-work assistance, may direct those claimants to make other types of claims, including Serious Injury Applications. This could simply move the relevant financial exposure to another area of the scheme. From a practical standpoint there is also a danger that 130 week assessments become difficult to arrange due to the new need for qualified Independent Impairment Assessors to take part, thereby creating bottle-necks in the process, and potentially leading to greater expense and more time for claimants within the system.

Where to from here

It remains to be seen whether the changes will cure the scheme’s ills. However this uncertainty only reinforces the notion that employers and insurers will be best placed to mitigate their financial and claims exposure by investing in two key areas:

1. safety and prevention in the workplace, to ensure that workers avoid the need to make claims in the first place; and
2. robust return-to-work and rehabilitation processes, to minimize the amount of time that workers remain within the compensation scheme before resuming work.