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Comcare and Seacare Legislation Amendment (Pension Age and Catastrophic Injury) Bill 2017



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ISSN 1328-8091

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BILLS DIGEST NO. 102, 2016-17 29 MAY 2017

Comcare and Seacare Legislation Amendment (Pension Age and Catastrophic Injury) Bill 2017 Paula Pyburne Law and Bills Digest Section

Contents

Purpose of the Bill ............................................................... 3

History of the measures ....................................................... 3

Structure of the Bill ............................................................. 3

Background ......................................................................... 3

Comcare and Seacare Schemes ............................................... 3

Comcare scheme ................................................................... 3

Seacare scheme ..................................................................... 4

Aligning pension age ................................................................ 4

Hanks report recommendation ............................................. 4

Catastrophic injury .................................................................. 5

Productivity Commission inquiry .......................................... 5

Nature of catastrophic injury ................................................ 5

Rationale for the measure ..................................................... 5

Productivity Commission recommendation .......................... 5

Heads of Treasuries ............................................................... 6

Committee consideration .................................................... 6

Selection of Bills Committee.................................................... 6

Senate Standing Committee for the Scrutiny of Bills .............. 6

Policy position of non-government parties/independents ..... 6

Position of major interest groups ......................................... 6

Financial implications .......................................................... 6

Statement of Compatibility with Human Rights .................... 7

Parliamentary Joint Committee on Human Rights .................. 7

Pension age ......................................................................... 7

Commencement ...................................................................... 7

Date introduced: 11 May 2017

House: House of Representatives

Portfolio: Employment

Commencement: Various dates as stated in the body of this Bills Digest

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

May 2017.

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Key provisions .......................................................................... 7

Application and transitional provisions ................................. 7

Catastrophic injury .............................................................. 7

Commencement ...................................................................... 7

Key provisions .......................................................................... 7

Providing for non-catastrophic injury ................................... 8

Providing for catastrophic injuries ........................................ 8

Whether services are reasonably required ........................... 9

Application and transitional provisions ................................. 9

Redemption payments ........................................................ 9

Commencement ...................................................................... 9

Key provisions ........................................................................ 10

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Purpose of the Bill The purpose of the Comcare and Seacare Legislation Amendment (Pension Age and Catastrophic Injury) Bill 2017 (the Bill) is to amend the Safety, Rehabilitation and Compensation Act 1988 (SRC Act) and the Seafarers Rehabilitation and Compensation Act 1992 (Seafarers Act) to implement two measures being:

• to ensure that injured employees in receipt of weekly compensation payments for incapacity under the SRC Act or the Seafarers Act can continue to receive those payments until they reach pension age as defined in the Social Security Act 1991 and

• to allow for legislative rules to be made to align both statutes with minimum benchmarks for catastrophic workplace injuries developed for the National Injury Insurance Scheme (NIIS).

History of the measures These measures have previously been introduced as part of larger amending Bills as follows:

• on 25 March 2015, the Safety Rehabilitation and Compensation Amendment (Improving the Comcare Scheme) Bill 2015 (Improving the Comcare Scheme Bill) was introduced into the House of Representatives. The amendments contained in the Improving the Comcare Scheme Bill were more extensive than those in the current Bill. The Bill lapsed when the Parliament was prorogued on 17 April 2016

• on 13 October 2016, the Seafarers and Other Legislation Amendment Bill 2016 was introduced into the House of Representatives. The Bill has not been the subject of any debate. It contains amendments to both the Seafarers Act and the SRC Act in equivalent terms to those in the current Bill1

• on 9 November 2016 the Safety, Rehabilitation and Compensation Legislation Amendment (Defence Force) Bill 2016 was introduced into the House of Representatives. The Bill has not been the subject of any debate. If enacted, it will create the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988. That Act will apply only to members of the ADF who have been injured prior to 1 July 2004 and will have provisions in equivalent terms to those in the current Bill.

Structure of the Bill The Bill comprises two Schedules:

• Schedule 1 contains the relevant amendments to the SRC Act and the Seafarers Act to ensure that certain provisions are aligned with the pension age as defined in the Social Security Act and insert references to catastrophic injuries and

• Schedule 2 contains application and transitional provisions.

Background Comcare and Seacare Schemes

Comcare scheme The SRC Act underpins the Comcare scheme which provides for the rehabilitation and compensation of injured employees employed by:

• Commonwealth Government agencies and statutory authorities that pay premiums to Comcare under the SRC Act

• Australian Capital Territory Government agencies and authorities that pay premiums to Comcare under the SRC Act and

• Commonwealth authorities and eligible corporations that have been granted self-insurance licences by the Safety Rehabilitation and Compensation Commission (the Commission) under the SRC Act.2

1. According to the Minister for Environment and Energy, Mr Frydenberg, the measures in this Bill are being ‘progressed separately due to their time critical nature’. Source: J Frydenberg, ‘Second reading speech: Comcare and Seacare Legislation Amendment (Pension Age and Catastrophic Injury) Bill 2017’, House of Representatives, Debates, (proof), 11 May 2017, p. 4.

2. P Hanks, Safety, Rehabilitation and Compensation Act review: report, (Hanks report), Department of Education, Employment and Workplace Relations, Canberra, February 2013, p. 5.

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The SRC Act also applies to members of the Australian Defence Force who were injured before 1 July 2004 during non-operational service.3

Seacare scheme ‘Seacare is a national scheme of occupational health and safety (OHS), rehabilitation and workers' compensation arrangements which applies to defined seafaring employees and—in relation to OHS—defined third parties.’4 Claims for workers’ compensation are managed by the employee’s employer. This management responsibility is often outsourced to an employer’s insurer or third party with claims management expertise. Premium income from these insurance policies does not contribute to the cost of scheme services, unlike arrangements in centrally-managed schemes.

Aligning pension age In February 2013 Peter Hanks QC delivered his report of the Safety, Rehabilitation and Compensation Act Review (Hanks report) to the Government.5 The Hanks report noted, amongst other things, that under the SRC Act, compensation is not payable to an employee who has reached 65 years of age. The exception to this is an employee who has reached 63 years of age and then suffers an injury: that employee is entitled to a maximum of 104 weeks of incapacity payments. The rationale for those provisions was that ‘the Government does not consider it appropriate that employees should continue to receive workers’ compensation benefits after the normal retirement age’.6

However, in 2009, the Government enacted the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Act 2009 to amend the Social Security Act to increase the eligibility age for the age pension progressively from 65 years to 67 years, to be phased in between 2017 and 2023. Outlining the measure, the Minister for Families, Housing, Community Services and Indigenous Affairs stated:

As part of these reforms, and to improve the longer-term sustainability of the pension system, the qualifying age for age pension will increase for both men and women from 65 to 67 years. This will be done on a gradual basis, with the qualifying age for age pension increasing by six months every two years, commencing on 1 July 2017 and will be fully implemented on 1 July 2023. Phasing the change in over this period will allow affected individuals time to plan for their retirement.

The change will ensure age pension age is adjusted to reflect the significant improvements in life expectancy that have occurred since age pension was first introduced in 1909. It will allow the government to respond to the long-term cost of our demographic challenges. This change will not impact on current age pensioners, and will only affect people born on or after 1 July 1952.

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Hanks report recommendation To avoid inconsistency between the operation of the Social Security Act and the SRC Act, the Hanks report recommended that the SRC Act be amended so:

• the cut-off age is tied to the qualifying age for the Age Pension and

• employees who are injured at any time after five years prior to the Age Pension qualifying age can receive incapacity payments for a period of 260 weeks.8

As both the SRC Act and the Seafarers Act provide that compensation is not payable to a person who has reached 65 years of age, the Bill amends both of the statutes to ensure that compensation is payable until a person reaches pension age.

3. Ibid.

4. Seafarers Safety Rehabilitation and Compensation Authority (Seacare Authority), ‘About us’, Seacare website, 1 February 2017. 5. Hanks report, op. cit. 6. B Howe, ‘Second reading speech: Commonwealth Employees Rehabilitation and Compensation Bill 1988’, House of Representatives, Debates, 27 April 1988, p. 2191.

7. J Macklin, ‘Second reading speech: Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009’, House of Representatives, Debates, 15 June 2009, p. 5851. 8. Hanks report, op. cit., recommendation 7.16, p. 112.

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From 1 July 2017, Age Pension age will be 65 years and six months.9 That being the case, enactment of this measure before 1 July 2017 is imperative if the Government wishes to ensure that injured workers remain eligible for workers’ compensation up to the extended Age Pension age.

Catastrophic injury

Productivity Commission inquiry In August 2011, the Productivity Commission released its report on disability care and support (DCS report) in Australia.10 The DCS report considered, amongst other things, the arrangements that are in place in each of the states and territories to fund, manage and coordinate the lifetime care and support needs of all people acquiring a catastrophic injury at some point in their lives.

The Productivity Commission considered that, in order to improve outcomes for people with catastrophic injuries, governments should create a no-fault system of nationally consistent care and support arrangements for such people, to be called the National Injury Insurance Scheme (NIIS).11

Nature of catastrophic injury According to the Productivity Commission, a catastrophic injury would need to be defined according to the type and severity of injury:

Severe brain injury and spinal cord injury are the most common types of serious or catastrophic injury, but multiple amputations, severe burns and permanent blindness can also be “catastrophic” and give rise to a similar need for treatment, rehabilitation and lifetime care and support … The severity of the injury would be based on a range of relevant clinically verified measures.

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Rationale for the measure The rationale for the introduction of the NIIS is that ‘most catastrophic injuries involve lifelong disability, and hence, the need for lifelong care and support’.13 In some cases, the courts can deliver adequate payouts that cover all of these costs if an injured person is able to prove that their injury was caused by negligence—but this is not available in every case.

Under the common law, compensation for the losses associated with catastrophic injury only applies where an at-fault (provably negligent) first party (defendant) can be identified. The adequacy of any payout will then be dependent on whether damages are assessed accurately and whether there is contributory negligence on the part of the plaintiff that reduces the amount of compensation the defendant is liable to pay.

A person acquiring a catastrophic injury who is unable to establish another party’s fault for the injury will not generally be able to gain access to compensation under a fault-based common law system. This includes cases where the accident was purely a matter of chance without any other party’s involvement—for example, a swimmer may acquire a brain injury when submerged by a freak wave. Alternatively, an accident may take place in a person’s own home or private property, such as from falling off a ladder:

Consequently, the scope of cases that are non-compensable under the common law is very wide. Australia-wide, only about half of catastrophic injuries are compensated through insurance, with the supports required for the remainder covered through (generally inadequate) taxpayer-funded health and disability services. The proportion varies significantly across jurisdictions and depends crucially on whether a fault or no-fault insurance system is in place.

14

Productivity Commission recommendation The Productivity Commission proposed that lifetime care and support under the NIIS would meet all of a person’s injury-related needs (excluding income payments, which would sit outside of the scheme). It would

9. Department of Human Services (DHS), ‘Age pension: eligibility basics’, DHS website, 12 April 2017. 10. Productivity Commission (PC), Disability care and support, Inquiry report, 54, vol. 1, PC, Canberra, 31 July 2011. 11. PC, Disability care and support, Inquiry report, 54, vol. 2, PC, Canberra, 31 July 2011, p. 852. 12. Ibid., p. 794. 13. Ibid., p. 798. 14. Ibid., p. 820.

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fund all reasonable and necessary clinical health services, medical and social rehabilitation, early interventions, therapies, care, and home and vehicle modifications.15

Under the proposed model:

… scheme management, operation and financing would be jurisdictionally-based. A coordinated federated approach would be critical, however, to ensure that the level of benefits and the standard of care provided by individual schemes were subject to minimum reasonable benchmarks. 16

[emphasis added]

Heads of Treasuries In response to the Productivity Commission recommendations, the Commonwealth and the states and territories started to develop the NIIS to provide lifetime care and support to people who suffer a catastrophic injury from a motor vehicle accident, workplace accident, medical treatment injury or general accident (occurring in the home or community).

The NIIS is a federated model of separate, state-based no-fault schemes. It builds on existing state and territory accident compensation schemes (for example, for motor vehicle and workplace accidents) to complement the National Disability Insurance Scheme.

The development of the NIIS is being progressed through Commonwealth and state and territory Heads of Treasuries (HoTs).17 The first area to be progressed was motor vehicle accidents.18 The minimum agreed benchmarks for motor vehicle accidents are now available.19

Consideration of benchmarks for workplace accidents is currently underway.20

Committee consideration Selection of Bills Committee At its meeting of 10 May 2017 the Selection of Bills Committee deferred consideration of the Bill to its next meeting.21

Senate Standing Committee for the Scrutiny of Bills At the time of writing this Bills Digest, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Policy position of non-government parties/independents No adverse commentary in relation to the two measures contained in the Bill by non-government parties or independents has been identified.

Position of major interest groups There has been no identified commentary from stakeholders in relation to the measures in this Bill.

Financial implications The Explanatory Memorandum states that the Bill will have no financial impact.22

15. Ibid., p. 853. 16. Ibid., p. 854. 17. HoTs will report to the Standing Council on Federal Financial Relations (Standing Council) and then an update will be provided to the Council of Australian Governments (COAG). Source: Treasury, National Injury Insurance Scheme: issues discussion paper, Treasury, Canberra, 2013,

p. 3.

18. B Shorten (Minister for Financial Services and Superannuation), Moving towards a comprehensive National Injury Insurance Scheme, media release, 5 April 2013. See also: PricewaterhouseCoopers Australia (PwC), National Injury Insurance Scheme: motor vehicle accidents, consultation regulation impact statement (RIS), Treasury, Canberra, 16 April 2014.

19. Treasury, ‘Agreed minimum benchmarks for motor vehicle accidents’, Treasury website. 20. Standing Council on Federal Financial Relations, National Injury Insurance Scheme: workplace accidents, consultation RIS, Department of Prime Minister and Cabinet (PM&C), Canberra, 5 March 2015. 21. Selection of Bills Committee, Report, 5, 2017, The Senate, 11 May 2017. 22. Explanatory Memorandum, Comcare and Seacare Legislation Amendment (Pension Age and Catastrophic Injury) Bill 2017.

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Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.23

Parliamentary Joint Committee on Human Rights At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not considered the Bill.

Pension age Commencement The provisions of the Bill which amend the SRC Act and the Seafarers Act to ensure that compensation is payable after a person turns 65 commence on 1 July 2017.

Key provisions Under existing section 23 of the SRC Act, weekly compensation is not payable to an employee who has reached 65 years of age. In addition, where an employee who has reached 63 suffers an injury, weekly compensation is payable in respect of the injury for a maximum of 104 weeks during which the employee is incapacitated.

The provisions of section 38 of the Seafarers Act are not in equivalent terms. Under that Act, if an employee who has not reached 64 suffers an injury, compensation is not payable for the injury after the person reaches 65. If an employee who has reached 64 suffers an injury, compensation is not payable for the injury after the end of the period of 12 months starting on the day on which the injury happened.

The Bill amends section 23 of the SRC Act and section 38 of the Seafarers Act so that references to a person’s age in years are removed and references to pension age as defined in the Social Security Act are inserted.24

Application and transitional provisions The amendments to the SRC Act and the Seafarers Act apply in relation to a payment of compensation in respect of a week that begins after 1 July 2017.25

Catastrophic injury Commencement The provisions of the Bill which amend the SRC Act and the Seafarers Act to provide for household services and attendant care services for persons who have suffered a catastrophic injury commence on the day after Royal Assent.

Key provisions At present under the SRC Act if as a result of an injury to an employee, the employee obtains household services or attendant care services that he, or she, reasonably requires, Comcare is liable to pay compensation in respect of those services up to a specified amount.26 There are different considerations for determining whether compensation is payable for either household services or attendant care services. However, the amount of compensation payable for both household and attendant care services is the same and, other than determining whether services are reasonably required there is no management or regulation of the provision of those services and no distinction between services required by severely or catastrophically injured employees.

Equivalent provisions are contained in the Seafarers Act.27

23. The Statement of Compatibility with Human Rights can be found at pages 1-2 of the Explanatory Memorandum to the Bill. 24. Items 7-10, 12 and 15 of Part 1 in Schedule 1 to the Bill and items 22-23 of Part 2 of Schedule 1 to the Bill respectively. 25. Subitem 2(1) of Part 1 of Schedule 2 to the Bill and subitem 4(1) of Part 2 of Schedule 2 to the Bill. 26. Safety, Rehabilitation and Compensation Act, section 29. 27. Seafarers Act, section 43.

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Providing for non-catastrophic injury The amendments in Schedule 1 to the Bill operate so as to distinguish between those persons who have suffered a catastrophic injury and those who have not in the provision of household services28 and attendant care services.29

Existing section 29 of the SRC Act is amended so that it refers to compensation for household services and attendant care services obtained as a result of a non-catastrophic injury.30 The amount payable for household services and attendant care services is capped.31

Amendments in equivalent terms are made to the Seafarers Act.32

Providing for catastrophic injuries Item 1 of Part 1 in Schedule 1 to the Bill inserts a new definition of catastrophic injury into subsection 4(1) of the SRC Act being an injury where the conditions specified in the legislative rules are satisfied. Item 6 inserts proposed section 122A into the SRC Act to empower the Minister, by legislative instrument, to make such legislative rules.33

Amendments in equivalent terms are made to the Seafarers Act.34

The Explanatory Memorandum to the Bill states that the amendments will align the workers’ compensation arrangements under both the SRC Act and the Seafarers Act with minimum benchmarks proposed for the workplace accidents stream of the NIIS by:

• inserting a new definition of ‘catastrophic injury’

• providing for the payment of uncapped weekly compensation for household services and attendant care services obtained as a result of catastrophic injury; and

• removing the current 28-day waiting period for household services compensation. 35

However, there is no direct reference in either the definition of catastrophic injury or the provision for making legislative rules that directly links to the minimum benchmarks for catastrophic injuries in the NIIS.

Item 4 of Part 1 in Schedule 1 to the Bill inserts proposed section 29A into the SRC Act to provide compensation for household services and attendant care services obtained as a result of a catastrophic injury. If an employee obtains household services and/or attendant care services as a result of a catastrophic injury and those services are reasonably required by the employee the compensation payable is such amount per week as is considered reasonable in the circumstances.36

Amendments in equivalent terms are made to the Seafarers Act.37

28. SRC Act, subsection 4(1) defines household services, in relation to an employee, as services of a domestic nature (including cooking, house cleaning, laundry and gardening services) that are required for the proper running and maintenance of the employee’s household. A definition in equivalent terms is contained in section 3 of the Seafarers Act.

29. SRC Act, subsection 4(1) defines attendant care services, in relation to an employee, as services (other than household services, medical or surgical services or nursing care) that are required for the essential and regular personal care of the employee. A definition in equivalent terms is contained in section 3 of the Seafarers Act.

30. Items 2 and 3 of Part 1 in Schedule 1 to the Bill. 31. SRC Act, subsection 29(1) for household services and subsection 29(3) for attendant care services. Seafarers Act, subsection 43(2) for household services and subsection 43(4) for attendant care services. 32. Items 17 and 18 of Part 2 in Schedule 1 to the Bill. 33. Section 42 of the Legislation Act 2003 provides that a legislative instrument can be subject to disallowance if either a Senator, or Member of

the House of Representatives, moves a motion of disallowance within 15 sitting days of the day that the legislative instrument is tabled in the relevant House of the Parliament. 34. Items 16 and 21 of Part 2 in Schedule 1 to the Bill. 35. Explanatory Memorandum, Comcare and Seacare Legislation Amendment (Pension Age and Catastrophic Injury) Bill 2017, pp. 2 and 5. 36. SRC Act, proposed subsections 29A(1) and (3). 37. Seafarers Act, proposed subsections 43A(1) and (3) inserted by item 19 of Part 2 in Schedule 1 to the Bill.

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Whether services are reasonably required A list of the matters that must be taken into account when determining whether household services are reasonably required is inserted into both the SRC Act and the Seafarers Act.38 The list includes, but is not limited to:

• the number of persons living with the employee as members of his or her household, their ages and their need for household services and

• the extent to which the persons living with the employee as members of his or her household, or any other members of the employee’s family, might reasonably be expected to provide household services for themselves and for the employee after the catastrophic injury.

This is consistent with the view of the Federal Court in Lander v Comcare in which the Court considered the extent to which members of an employee’s family might reasonably be expected to provide household services for themselves and the employee.39 In particular, the Federal Court noted:

... the household services envisaged are those provided by the household members themselves. They are not services for which those members make provision for the injured employee through the agency of third party providers. 40

Similarly there is a non-exhaustive list of the matters to be taken into account in determining the attendant care services that are reasonably required in a particular case into both the SRC Act and the Seafarers Act, including:

• the nature of the catastrophic injury and the degree to which that injury impairs the person’s ability to provide for his, or her, personal care

• the extent to which any medical service or nursing care received by the person provides for his, or her, essential and regular personal care

• the extent to which it is reasonable to meet any wish by the person to live outside an institution

• the extent to which attendant care services are necessary to enable the person to undertake or continue employment

• any assessment made in relation to the rehabilitation of the person and

• the extent to which a relative of the person might reasonably be expected to provide attendant care services.41

Application and transitional provisions The amendments to section 29 of the SRC Act and section 43 of the Seafarers Act—that is, the sections which relate to non-catastrophic injuries—apply in relation to compensation in respect of a week beginning after the commencement of the first legislative rules made for the purposes of the new definition of catastrophic injury.42

Proposed section 29A of the SRC Act and proposed section 43A of the Seafarers Act—that is, the sections which relate to catastrophic injuries—apply in relation to compensation in respect of a week beginning after the commencement of the first legislative rules made for the purposes of the new definition of catastrophic injury.43

Redemption payments Commencement The provisions of the Bill in relation to redemption payments commence on 1 July 2017.

38. SRC Act, proposed subsection 29A(2); Seafarers Act, proposed subsection 43A(2). 39. Lander v Comcare (2000) 102 FCR 11, [2000] FCA 339. 40. Ibid., paragraph 10. 41. SRC Act, proposed subsection 29A(4); Seafarers Act, proposed subsection 43A(4). 42. Subitem 1(1) of Part 1 of Schedule 2 to the Bill and subitem 3(1) of Part 2 of Schedule 2 to the Bill. 43. Subitem 1(2) of Part 1 of Schedule 2 to the Bill and subitem 3(2) of Part 2 of Schedule 2 to the Bill.

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Key provisions A redemption payment is a payment to an injured employee of a lump sum to finalise ongoing and future entitlements to income maintenance and/or medical expenses. The method of calculating redemption payments, and their scope, differs across jurisdictions.

Broadly speaking, redemption payments have three features. They comprise a lump sum payment based on an estimation of the injured employee’s future needs. They represent a compromise between the positions of the claimant and the insurer or employer, so that neither party gets exactly what they want. They are problematic because they typically involve a full release of the insurer from liability in circumstances where the future course of disability and medical treatment may deviate from that assumed in making the calculation. What might seem to be a reasonable ‘compromise’ today may turn out to be inadequate (or excessive) in just a few years.44

The Bill updates the formulae for calculating a redemption payment in both the SRC Act and the Seafarers Act by omitting references to a person’s age in years and inserting references to a person’s pension age.45

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44. H Allan Hunt and PS Barth, Compromise and release settlements in workers’ compensation: final report, W.E. Upjohn Institute for Employment Research, Kalamazoo, 2010, p. 1. 45. Items 11 and 12 of Schedule 1 to the Bill amends subsection 30(3) of the SRC Act; item 24 of Part 2 of Schedule 1 to the Bill amends subsection 44(2) of the Seafarers Act.