Part One: Workers' Compensation

Coverage
Organization, Administration and Adjudication
Eligibility for Benefits
Multiple Causes of Disability
Subsequent Consequential Disabilities
Compensable Losses
Multiple Disabilities
Objections to Claims
Employer Misconduct
Medical Aid
Money Payments
Rehabilitation and Care
Obligations to Continue the Employment
Finance
Vicarious Liability
Health and Safety
Claims against Third Parties
Social Insurance and Social Security
Part Two: Other Systems

Accident Compensation
Sick Pay
Disability Insurance
Employers’ Liability
This chapter deals with compensation systems for disability (by injury or disease)
or premature death resulting from employment. Its purpose is to explain the
provisions and the diversity that are commonly found, but not to describe or
itemize the systems of each nation.
Compensation may be provided by:
a workers’ compensation system
a broad-based social insurance or social security system
an accident compensation system
sick pay
disability insurance
employers’ liability.

Most industrial nations use some combination of these regimes. Part One of this
chapter deals with Workers’ Compensation. Part Two deals with Other Systems.

PART ONE: WORKERS’ COMPENSATION

[Note on “jurisdiction”. This word is used to refer to a country or a unit within a
country (such as a state or province) that operates a workers’ compensation
system.]
Although traces of workers’ compensation can be found in earlier civilizations,
particularly in Maritime Law, the systems that we now have were created in the
latter half of the nineteenth century, or in the present century. The subject was
known as workmen’s compensation, but the trend for the last twenty years has
been to change this title to workers’ compensation, and that term is now in
common use.
Coverage
Industries covered
The coverage of a workers’ compensation system is usually compulsory in relation
to a specified list of industries, or in relation to all industries subject to some
exceptions. Mining, manufacturing, forestry, fishing, transport, construction,
distribution, health care institutions and other public services are typically
covered. Examples of industries that are excluded in some jurisdictions are
agriculture, service industries (such as travel agencies), and domestic service.
Employers’ liability (described in Part Two) may apply to industries that are
excluded. Where an industry is outside the compulsory coverage, some
jurisdictions allow for the coverage to apply upon application by an employer. In
some jurisdictions, employers with less than a minimum number of employees
(usually in the range of 3 to 20) are excluded.
People covered
Where an industry is covered, all workers in that industry are commonly included,
whether regular or casual, full-time or part-time, and whether production
workers or office staff. Migrant workers usually come within the defined category
of people who are covered, but the coverage may be excluded on another
ground. For example, they may be employed in an industry that is not covered.
There is no waiting period for the coverage to apply. Officers of corporations and
other management personnel are included in some jurisdictions and excluded in
others. Classifications used in the laws relating to corporations or labour relations
are commonly irrelevant in workers’ compensation. Some jurisdictions exclude
members of an employer’s family, and some exclude workers whose earnings are
above a certain level. It is also common to exclude people whose employment is
of a casual nature and who are employed otherwise than for the purpose of the
employer’s trade or business. Where a worker has reached the age of eligibility
for a retirement pension, that does not exclude the coverage of workers’
compensation in most jurisdictions, but it is common for the benefits to be more
limited.
The nationality of a worker is generally irrelevant. All people who are lawfully
employed in a covered industry are generally included, and some jurisdictions
also cover those who are unlawfully employed. In some others, compensation
benefits are discretionary if the worker was employed under an unlawful
contract. A child born with a disability arising out of the employment of one of the
parents is covered in a few jurisdictions, and in some others, the law is unsettled.
Territorial connection
The coverage generally applies to workers whose usual place of employment is
within the jurisdiction. In mobile industries, such as fishing, trucking and airlines,
there is usually a home port or base of the worker that is considered to be the
usual place of employment of that worker. The location of the employer’s head
office is generally irrelevant. It is also generally irrelevant where the payroll is
administered, except that in mobile occupations, this may be part of the evidence
from which to determine the home port or base of particular workers. The place
of residence of a worker or dependant is generally irrelevant, though it is relevant
in some jurisdictions for some purposes.
Opting-in
Unincorporated employers and the officers of corporations (where they are not
within the compulsory coverage) may elect in some jurisdictions to be covered as
workers. They then have the benefits and obligations of being a worker under the
legislation as well as the benefits and obligations of being an employer.
Self-employed people (independent operators)
This term is used here to refer to people who earn a living by work, and who are
neither employers nor employees.
Self-employed people are either:
included in the compulsory coverage
excluded from the compulsory coverage but may be covered upon application, or
excluded entirely.

In some jurisdictions, people considered to be self-employed for other purposes

are treated as employees for workers’ compensation. For example, in some
jurisdictions, commercial fishermen may be treated as employees and within the
compulsory coverage regardless of whether they are considered employees, for
other purposes.
The distinction between an employee and an independent operator (self-
employed person) is often controversial because of the incentive that an
employer or employee may have to treat their relationship as an arrangement
between independent contractors rather than as one of employment. Portraying
the relationship in this way may avoid obligations to contribute to various public
funds, and other obligations of an employer. Thus it is common to find that a
relationship that is obviously one of employment in substance has been
documented to appear as a relationship between independent contractors. To
recognize such documentation as valid for workers’ compensation purposes
would usually be incompatible with statutory requirements if the coverage is
compulsory. Where one person is working exclusively, or almost exclusively, for
another, that is cogent evidence that the relationship is one of employment.
Similarly, where a contract has been signed to the effect that the relationship is
not one of employment, that is usually cogent evidence that the relationship is
one of employment.
Miscellaneous extensions
Some jurisdictions use the workers’ compensation system to cover people who
are not employees, or to cover disabilities that did not result from employment.
Usually these extensions of the coverage apply to people for whom governments
have some responsibility. Examples are volunteer fire-fighters and other
categories of people doing voluntary work of a charitable nature. Less common
examples are prisoners, students and school-children. In some jurisdictions, the
coverage applies to someone who is injured while acting in the public interest by
seeking to save the life of someone in danger, or to prevent a crime. The coverage
of all these groups, where it applies, is usually financed out of public funds.
Specialized systems
Some jurisdictions have a separate system for a particular industry, such as
merchant seamen, the military or the public service. In federal countries, there is
sometimes a system created by the federal government and limited to particular
industries, while the state or provincial governments provide for the general
systems.
Organization, Administration and Adjudication
Basic structures
Most systems of workers’ compensation fall into one of three basic organizational
categories.
The obligation to provide the benefits is placed upon employers. Insurance
coverage is available, and in some jurisdictions it is compulsory. The insurance
companies are usually subject to regulation and supervision by an agency of
government. Some jurisdictions limit the number of insurance companies that
may be involved. Adjudication is on an adversarial model in the ordinary courts,
or in a specialized court or other tribunal.
The system is one of social insurance operated by a government department,
often a ministry of labour. Decisions are made within the department. Usually
there is a system of review or appeal to resolve disputes, and there may be
appeals to an outside body.
The system is one of social insurance administered by a government agency,
sometimes called a “workers’ compensation board”. Such an agency is (at least in
theory) independent of ministerial control. The agency is responsible for
adjudication and administration, as well as being the insurer. In some
jurisdictions, the agency provides medical care and rehabilitation services, and in
a few jurisdictions, it also exercises the regulatory functions of government in
relation to occupational health and safety. Procedures may be adversarial or
inquisitorial, or may have features of both. It can fairly be described as a social
insurance system because it is a system of compulsory insurance administered by
government, but it must be distinguished from the broad-based social insurance
systems described elsewhere in this article.

A few jurisdictions use a mixture of insurance companies and a state fund. Large
employers in some jurisdictions are allowed to carry their own risks, so that the
insurance company plays the role only of claims administrator, or the government
agency plays the roles of administrator and adjudicator, but has only a back-up
role as insurer.
Under all three models, a worker is required to notify an injury or disease to the
employer where this is possible. There are usually detailed requirements relating
to such notices and to subsequent reporting. The insurer usually receives reports
from the employer, the claimant and attending physicians. In some social
insurance systems, an employer who fails to file a report on time is subject to a
penalty or surcharge. Otherwise, such an employer is subject to prosecution. The
reporting requirements of claimants are usually enforceable by the denial or
suspension of benefits, but non-compliance by a claimant can often be waived, so
that disqualification from benefits is not automatic. The reporting requirements
of attending physicians may be enforced by suspending the payment of fees.
Traditionally, reports have been received as paper documents and the files of
administering agencies have been paper files, but recently, electronic methods of
communication and of information storage have been introduced.
Most jurisdictions require a claim to be filed within a specified time, though a few
allow payments to commence without a claim form having been received. There
is commonly a power to extend the time for filing a claim, but even so, statutory
time limits can be a cause of serious injustice in some disease cases.
Primary decisions
The initial decisions made in response to a claim are sometimes made by
employers, but more commonly by insurers. Where a
system is administered by insurance companies, the initial decision may be
the acceptance or rejection of a claim or offer made by the claimant, or it may be
an offer by the insurer that can be accepted or rejected by the claimant.
Commonly, a settlement is reached by negotiation. In some jurisdictions, there
are provisions to prevent an insurance company from coercing a low settlement
by the withholding of periodic payments. Where there is no agreement, the case
may go to a court or other adjudicating body for primary adjudication.
Where the system is one of social insurance, the adjudicating body is usually also
the insurer, so that the primary decision is adjudicative. It is part of the rationale
for a social insurance system that disabled workers should not have to bargain
from a position of weakness. They should be entitled to a prompt adjudication of
their statutory rights. If a claim is allowed but the benefits are determined to be
less than the claimant feels they should be, the benefits as determined are
payable while the claimant pursues any appeal.
Primary decisions are commonly based on the documents on file. Administration
and adjudication are heavily centralized in insurance company systems and in
some social insurance systems. Local administration and adjudication enable an
adjudicator to receive evidence and argument firsthand, and to test the credibility
of the evidence. For these and other reasons, some social insurance systems have
decentralized.
In social insurance systems, hearings are not generally held in primary
adjudication, even when expressly provided for by law, though they are held in
some cases in some jurisdictions. Where a system is administered by insurance
companies and is officially operating on an adversary model, a hearing in primary
adjudication by a court or tribunal is normal unless the employer, or the
employer’s insurer, concurs in the worker’s claim, or any dispute is settled. A few
jurisdictions provide for mediation. However, to require or permit mediation
when one of the parties has impaired bargaining power and needs income
diminishes the right to adjudication. If a system is intended to provide for
continuity of income without the need for professional advocacy, the need is for
prompt adjudication. This is even more important where a delay in adjudication
may delay rehabilitation.
A widespread problem in primary decision-making is the use of referral systems.
Under these systems, the person who receives communications from the claimant
has only limited decision-making authority, so that decisions of any complexity
have to be referred to someone else who has not received the evidence and
arguments first hand. Commonly, different decisions on the same claim have to
be referred to different people, with consequential risks of misunderstanding,
mistake, and inconsistency. Such referral systems are a major cause of delay,
waste, therapeutic harm, error, injustice and damage to rehabilitation prospects.
Investigation, evidence and proof
In jurisdictions using an adversarial model, the responsibility for providing
evidence about the facts, and for providing medical opinions, generally lies with
the parties. In some social insurance systems, the parties are expected to produce
the evidence that they have and that which it lies within their power to obtain,
but the adjudicating agency commonly has a responsibility for making the
inquiries necessary to produce any further evidence. Similarly, investigation to
test the credibility of the evidence, or for other purposes, may be a function of
the parties, the insurer or the adjudicating body. In social insurance systems,
investigation may be a normal function of an adjudicator, or there may be a
separate investigation unit (though that is a less efficient structure for normal
investigations).
In adversarial systems, and in some social insurance systems that are not
adversarial, there is a burden of proof on the worker to establish a claim, though
there is sometimes a burden of proof on the employer with regard to particular
issues. In other social insurance systems, there is no burden of proof on anyone
except the adjudicating body. Sometimes there are legislated presumptions.
There is usually no general presumption in favour of or against the worker, but
there are commonly presumptions that apply in particular situations. The
broadest example is that where an injury resulted from an accident that occurred
in the course of employment, it is presumed to have arisen out of the
employment, and conversely, where it arose out of the employment it is
presumed to have arisen in the course of employment, unless the contrary is
shown. Some jurisdictions provide that where a worker is found dead at a place of
employment, the death is presumed to have resulted from the employment
unless the contrary is shown.
The standard of proof is generally the balance of probabilities. This might also be
described as the best available hypothesis. With regard to the etiology of disease
and some other medical issues, however, the input of the medical profession is
not always controlled by the relevant legal criteria, with the result that a higher
and unlawful standard of proof is often required for a claim to be allowed. One
aspect of this is that when physicians are asked for advice on etiology, there is
commonly a reluctance to write a report concluding that “I do not know” even
when that is clearly stated earlier in the report. Thus a negative conclusion in a
medical report may reflect nothing more than an assumption of the negative
applied by the advising physician in the absence of positive data. It is, therefore, a
conclusion of law (sometimes erroneous), not a conclusion of medicine. Some
jurisdictions include a provision that where the disputed possibilities are evenly
balanced, an issue must be decided in favour of the worker or dependants. Where
those provisions apply, the issue must be decided in favour of the worker or
dependants unless there is contrary evidence to tip the balance against that
conclusion.
In some jurisdictions, the prescribed standard of proof is not the balance of
probabilities on an issue of employment causation. A claim must be denied unless
the affirmative is proved to a higher degree of probability than the negative. Such
provisions sometimes apply only to disease cases. Even in these jurisdictions, the
balance of probabilities may still be a standard of proof for other issues, such as
the existence of a disability.
Some systems include a unit to investigate abuse. This may be confined to abuse
by claimants, or it may include abuse by system administrators, claimants,
employers, insurance companies and the providers of health care and
rehabilitation services.
Advocacy
The preparation and filing of claims is usually a simple matter that does not
require legal talent, and some jurisdictions prohibit the charging of legal fees for
these functions. Advocacy is common in disputed claims, the more so as cases
reach the higher levels of decision-making. Where experience rating applies or an
employer is self-insured, there may be an advocate for the worker and another
for the employer. Otherwise advocacy is normal only for the worker.
In systems administered by insurance companies, the advocates in adjudicative
processes are normally lawyers. In social insurance systems, an advocate may be
a lawyer, a trade union official or some other lay advocate specializing in workers’
compensation cases. In some jurisdictions, the government or the compensation
authority provides a group of advocates to assist workers, and in some
jurisdictions, a similar group is provided to assist employers. Sometimes, a worker
may also be eligible for legal assistance under a government plan of Legal Aid.
Access to files
Where a system is administered by insurance companies, the file of the insurer is
not usually accessible to the claimant, though if the case is litigated, certain
documents may be obtainable from the insurer’s file, and the file of the court is
usually accessible to both parties. Where a system is one of social insurance, the
same body is commonly the insurer and the adjudicating tribunal, and in many
jurisdictions, the file of that body is accessible to the claimant. In some
jurisdictions, access to the file is allowed as a matter of procedural fairness, and it
is then sometimes accessible also to the employer, at least to some extent in
some circumstances, and this may result in a loss of confidentiality of medical
information. Alternatively, access to the file by the claimant may be available
under human rights legislation, or freedom of information legislation. An
employer is generally not allowed access to a claim file on those grounds, but may
be entitled on those grounds to access to the employer’s file relating to
classification and assessments.
Employers sometimes need medical information for health and safety purposes,
or for rehabilitation, but there are usually more efficient ways of meeting those
needs than by access to a claim file.
Finality
Workers’ compensation differs from ordinary litigation in the courts with regard
to finality. When a personal injury claim is made in the courts under the general
law, the decision of the court is normally final. In workers’ compensation, there
are usually provisions for decisions to be reopened in the event of some change in
circumstances. The most common example is where a pension has been awarded
for a permanent partial disability, and some years later, the disability has
worsened (or rarely, the disability has been cured).
Where workers’ compensation is a system of social insurance, it is also normal to
permit the reopening of decisions, even when there has been no change in
circumstances. These provisions for reopening (or reconsideration) serve a useful
purpose, but they are also vulnerable to misuse by system administrators. A
common practice is to divert every complaint or appeal into a process of
reconsideration. This has several negative consequences. One is delay in appellate
adjudication, sometimes with consequential delay in rehabilitation. Another is
that when, in primary adjudication, a claim seems doubtful or the evidence is
incomplete, the claim can be denied, and then the decision can be reconsidered if
the claimant complains or appeals. An inquiry to complete the evidence can then
be made in the reconsideration process which ought to have been made in the
first instance. The use of “reconsideration” in this way is a negative influence on
the quality of primary adjudication and a cause of injustice to those who
acquiesce in initial negative decisions.
Medical issues
Some jurisdictions require a claimant or attending physician to file a medical
“certificate”. Others require the attending physician to file a “report”. A
“certificate” is sometimes considered to be decisive on certain points, whereas a
medical “report” is usually considered to be evidence that may be weighed in the
balance with any other evidence.
Medical questions are commonly decided in the same way as other questions of
fact, but some jurisdictions include special provisions for the decision of medical
questions. Adjudicating agencies often have staff doctors who advise on or decide
medical questions. In many jurisdictions, a claimant must submit to any medical
examination arranged by the compensation authority or other insurer. In some
jurisdictions, the claimant must submit to a medical examination by a physician
appointed by the employer, but such provisions are controversial because of the
risk of therapeutic damage and the loss of confidentiality of medical information.
In fatal cases, autopsy reports are commonly used as part of the evidence relating
to the causes of death. Death certificates are sometimes referred to, but they are
often unreliable on the causes of death.
Medico-legal interaction involves some of the most widespread and intractable
problems in the adjudication of workers’ compensation claims. Probably the most
common example is the provision of medical reports by physicians who have not
been informed of the legally relevant questions on which medical evidence is
needed. When this happens, a “medical report” often includes, explicitly or
implicitly, assumptions of background facts (which are sometimes erroneous), an
opinion on law (which is commonly erroneous), as well as any medical opinion.
Unravelling these components of a “medical report” requires a level of legal
talent which is commonly not available in primary decisionmaking. To avoid this
problem, some jurisdictions have a process whereby the legally relevant medical
question is formulated before a medical opinion is sought.
In systems administered by insurance companies, it is normal for the insurer or
the employer to participate in the decision of medical issues, and to have access
to medical information for that purpose. Where a system is one of social
insurance, one rationale for that choice is to preserve the confidentiality of
medical information. Employers may be prohibited from participation in the
decision of medical issues, or they may be left with no incentive to participate
because the rate of assessment is one that does not vary by reference to claims
cost experience. Where experience rating is used, a system becomes adversarial
and medical information about a worker is commonly disclosed to the employer.
Sometimes there is also provision for an external medical referee or a medical
panel to be used in some cases. In some jurisdictions, the conclusions of a medical
panel or referee are final and binding. In others, the conclusions may be subject
to challenge by further medical evidence or argument in the ordinary appellate
process.
Where a separate structure or procedure is available for the resolution of a
medical question, this requires a process to decide which questions are “medical”.
The responsibility for deciding this would normally lie with those responsible for
deciding the general issue. There is a broad consensus about what is a “medical”
question, but there is also some diversity. For example, in cases of permanent
disability in jurisdictions where the physical impairment method is used to arrive
at a pension, establishing the degree (percentage) of impairment is classified as a
medical question in some jurisdictions. In others, it is classified as a general
question that requires an input of medical opinion.
Appeals
It is normal to have a structure for appeals. Where the system is one of social
insurance, the appellate structure may be completely internal, or there may be an
external tribunal. Usually this is at the final level of appeal, though in some
jurisdictions, it is at an intermediate level. In some other jurisdictions, appeals lie
to an ordinary court, and in others to a specialized court or tribunal. In some
jurisdictions, hearings are automatic in appellate adjudication. In others, hearings
are held if one is requested, or if the appellate body perceives a need for a
hearing. In social insurance systems, it is normal for the appellate body, and in
some jurisdictions also the parties, to have access to the file that was used in
primary adjudication. This avoids wasteful duplication of effort and it may also
enable the appellate tribunal to see what, if anything, went wrong in primary
adjudication. The information on that file may be supplemented or contradicted
by fresh evidence or argument on the appeal.
Rights of appeal are commonly unrestricted in relation to monetary benefits, but
may be more limited in relation to rehabilitation assistance. Appeals on questions
of medical aid are usually permitted, though in many jurisdictions they are rare.
Where an appeal lies to an ordinary court, the grounds upon which an appeal may
be brought are commonly narrower than when an appeal lies to a specialized
court or tribunal. Also an ordinary appellate court is less likely to review the
evidence, or to receive new evidence, than a specialized court or tribunal.
Complaints to an ombudsman are available in some jurisdictions, sometimes with
regard to the substance of conclusions that have been reached, but sometimes
limited to matters of procedure.
Adjudicative manuals
Where a system is one of social insurance, it is normal to have an adjudicative
manual comprising the law of the system, which is used as the guidance material
for adjudicators. It is commonly a synthesis of the statute law, regulations, case
law, and decisions made by the adjudicating or administering body in the exercise
of delegated powers. Commonly it has the title of “Policy Manual”, but that is
misleading. Only portions of the manual relating to the exercise of discretionary
powers can fairly be called policy. For the most part, the manual is a rule book,
and a part of public law.
For decades, these manuals were treated as secret documents. Use of the word
“policy” in the overall title of a manual tended to disguise the fact that it was, in
substance, a body of secret law. In recent years, this has commonly been
recognized, and publication of the manuals has been required by statute, or by
the decisions of adjudicating or administering bodies.
Eligibility for Benefits
Causation in injury cases
The general principle is that compensation is payable for injuries and deaths that
result from some event or circumstance of the employment. In many jurisdictions,
the legislation refers to an injury “arising out of and in the course of the
employment”. There is usually no requirement that an injury or accident must
have occurred in the course of the employment. The essential test is employment
causation. For example, suppose that during an afternoon, A places a rat in the
lunch box of B (a fellow worker), perhaps maliciously, or perhaps as a practical
joke. When B opens the lunch box later at home, the rat bites B, causing a
significant disability. The injury did not occur in the course of employment, but
there is no requirement that it should. It arose in the course of the employment
(though there may still be scope for debate about whether it arose out of the
employment). Some jurisdictions, however, require that an “accident” must
have occurred in the course of employment.
Some other jurisdictions refer to an injury “arising out of or in the course of
employment”, but there appear to be few cases in which this difference in
language would make any difference to the result. Some jurisdictions do not
define a compensable disability in any general words. Instead, they have a list of
circumstances that will constitute a sufficient employment connection for a
disability to be compensable.
In most cases in most jurisdictions, the place of occurrence of an injury is not
determinative. It is merely part of the evidence on the question of employment
causation. Similarly, there is usually no requirement that an injury must have
occurred during stipulated working hours. Whether it did so occur is, again, part
of the evidence for deciding whether it resulted from the employment. Some
other jurisdictions place greater emphasis on geographical or chronological
connections with the employment, and in some jurisdictions, the injury must have
occurred at a place of employment, though that may include any place where the
worker was supposed to be for carrying out the work.
Some jurisdictions have a requirement that the disability must have occurred
within the jurisdiction, but such requirements are incompatible with the general
principle that disabilities resulting from employment should be covered.
Generally, it is sufficient that the usual place of employment of the worker was
within the jurisdiction in which the claim is made. Thus where the employment
involves international travel, a workers’ compensation claim for a disability
sustained when abroad would normally be paid by the system in the home base
of the worker’s employment.
The term “work-related” is commonly found in compensation literature, but it is
generally inappropriate and misleading. In most jurisdictions, there is no
requirement that for an injury to be compensable, it must have resulted from
work (productive activity). A few jurisdictions require that for an injury to be
compensable, it must have resulted from work, but in most jurisdictions, it is
sufficient that it resulted from employment. For example, an injury sustained in
the course of entering or leaving the employer’s premises, or during a break
period, or when receiving pay, would be compensable in most jurisdictions.
Some jurisdictions specify that an injury sustained while retraining or preparing
equipment for work is covered. In many others, such an injury is covered as one
arising out of and in the course of the employment.
Accident
One of the eligibility requirements for compensation used to be that an injury
should have been caused by an “accident”. In some jurisdictions, that word has
been repealed. In others, it is generally superfluous and misleading. Regardless of
whether the word “accident” is used, compensation is not generally confined to
injuries that occur on a particular occasion, or by a “specific incident”. The
coverage applies also to disabilities that result from strain over time, or other
causes that have a gradual or cumulative impact, and the coverage includes
disabilities that result from the normal routine of work. Where the word
“accident” appears in the legislation, its only significance may be to cause
confusion and wasteful adjudicative costs in marginal cases. Sometimes, however,
an unusual event may be crucial evidence on etiology. For example, in heart
attack cases, some jurisdictions look for some unusual strain or stress to
determine whether the employment was a contributing cause of the heart attack,
or whether it resulted solely from natural degeneration so that its occurrence in
the course of employment was purely coincidental.
Commuting
Many jurisdictions cover injuries that result from commuting to and from work, at
least when the worker is travelling by the most direct route, and without any
significant interruption for personal business that is unrelated to the needs of the
journey. These jurisdictions usually have detailed rules about whether the
coverage still applies in all the circumstances, such as where a worker travels by a
longer route for reasons of personal pleasure, or where the worker stops for
personal shopping in the course of the journey. Some of these jurisdictions also
specifically include an injury that results from travel between work and a place of
medical treatment if the treatment was required during working hours.
In other jurisdictions, injuries that result from commuting are not covered when a
worker is travelling between home and a fixed place of employment. The theory
is that since the worker has selected where to live and where to work, the worker
has selected the journey to be undertaken and the risks of that journey are not,
therefore, considered to be risks of the employment. If the worker does not have
a fixed place of employment, but travels between home and different places
designated by the employer, such journeys are in the course of the employment
and injuries resulting from them are compensable. This is common in the
transport and construction industries. Similarly, where a worker normally works
at a fixed place of employment but is temporarily assigned to work at a different
place, an injury resulting from a journey between home and the temporarily
assigned place of work is compensable. Even journeys between home and a fixed
place of employment are covered in some circumstances; for example, where a
worker who is not on shift is called out by the employer to deal with an
emergency, or where the worker is using transport provided by the employer.
Commencement and termination of the coverage
The coverage of any particular worker may apply for slightly longer than the
contract of employment. For example, if a worker is injured upon entering an
employer’s premises for the intended first day of work, that injury would be
compensable in many jurisdictions notwithstanding that the formalities of a
contract of employment have not yet been completed. Similarly, if a worker who
has been dismissed from the employment is injured before leaving the employer’s
premises, or sometimes before arriving home, that injury would be compensable
in many jurisdictions notwithstanding that the contract of employment had
terminated.
Fault
Workers’ compensation systems were designed to provide automatic
compensation for industrial disabilities, and to avoid the cost and therapeutic
damage of evidentiary inquiries about who, if anyone, was to blame. Hence it is
usually irrelevant whether there was any fault on the part of the employer, the
worker, or anyone else. Some exceptions to that principle are mentioned below.
Natural phenomena
Different views are taken about eligibility for compensation when a disability or
death has resulted from a natural phenomenon. For example, if a worker is killed
by a lightning strike, the death would be compensable in some jurisdictions but
not in others. The test applied in some jurisdictions is whether the employment
exposed the worker to a risk of that type of occurrence greater than the risk to
which the public are normally exposed. The natural phenomena covered by this
test include injuries caused by plants and animals.
Disease cases
There is more diversity among the jurisdictions in eligibility criteria for disease
cases. The terms “industrial disease” or “occupational disease” are commonly
used, but they are misleading and a cause of great confusion. They tend to imply
that compensation is payable for and is limited to a certain category of diseases
known as “industrial” or “occupational”. That is commonly not so.
In some jurisdictions, the coverage is narrowly confined. It may apply only to
diseases that are specified on a closed list; but that list will not include all of the
diseases commonly known as “industrial” or “occupational”. In other jurisdictions,
the coverage is broadly defined so that diseases are covered to the same extent
as injuries, including diseases that affect the general population and that are not
known as “industrial” or “occupational”. As in injury cases, the test in these
jurisdictions is whether the disease resulted from employment in the particular
case, not whether the disease is of a type that usually results from employment.
For example, a claim by a health care worker for tuberculosis may succeed if it is
shown to have resulted from employment in the particular case, notwithstanding
that the disease is prevalent in the general community.
Other jurisdictions adopt an intermediate position. The coverage is not confined
to a closed list of diseases, but it falls short of the coverage in injury cases. For
example, some jurisdictions require that a disease must be “peculiar to or
characteristic of the employment”, or that it must be “due to the nature of” the
employment. Some jurisdictions provide that no compensation (other than
medical aid) is payable in a disease case unless there is both a physical
impairment and a loss of earnings, even though the jurisdiction is one in which a
pension would be paid for a permanent physical impairment in an injury case
regardless of any loss of earnings. Some jurisdictions also have notice
requirements or time limits that apply only to disease cases. Some of these time
limits are unrealistic having regard to the latency periods that are common for
some of the most serious diseases.
Where a disease is alleged to have resulted from exposure to contamination,
evidence that the exposure of the worker to the contaminant has exceeded the
maximum levels established for regulatory purposes is evidence of causation, but
it is not conclusive. Evidence that the exposure of the worker was always below
the prescribed limit is usually much weaker. The general principle that it is more
difficult to prove a negative applies here. Exposure records of earlier years may be
of unknown credibility, and they may relate to the work environment rather than
to the exposure of the claimant, which could have been higher than the
environmental average. Also because of variations in individual susceptibility and
the scientific uncertainty behind most of the exposure limits, the disease may
have resulted from the exposure of the claimant even if it always was below the
prescribed limit. For these reasons, any evidence that the exposure of the worker
was always below the prescribed limit is not very persuasive, and it is not a bar to
a claim.
Traditionally, the lung diseases among miners and other workers in heavy
industry have been prominent among the serious and fatal claims for disease. In
recent years, there has been greater recognition of diseases among workers in
light industry, and in office occupations, many of which are more subtle in their
effects on body function. For example, it is now recognized in some jurisdictions
that a claim may succeed for sealed building syndrome.
The legislation of many jurisdictions includes a schedule of diseases. It is in two
columns. The first is a list of diagnoses. Opposite to each diagnosis in the second
column is a type of industry, work or process that is known to cause that disease.
The significance of the schedule varies in different jurisdictions. It may be:
Exclusive and Conclusive. Only the diseases listed in the schedule are
compensable. If the conditions indicated in the second column apply in a
particular case, the claim is allowed. Otherwise it is denied. Evidence of etiology
in the particular case is irrelevant and inadmissible.
Exclusive and Presumptive. Only the diseases listed in the schedule are
compensable. When the conditions indicated in the second column apply, the
disease is presumed to have resulted from the employment. However, evidence
that the disease did not result from the employment in the particular case is
admissible, and so is evidence to support the presumption that it did result from
the employment. Where the evidence, on balance, is sufficient to outweigh the
presumption, the claim is denied. Otherwise the presumption holds and the claim
is allowed.
Presumptive, but Not Exclusive. For scheduled diseases, the position is the same
as under (2) above. For an unscheduled disease, there is no presumption, but it
may still be compensable. In many jurisdictions, unscheduled diseases are
compensable if the evidence indicates employment causation in the particular
case and the eligibility requirements relating to disease claims have been met. In
some other jurisdictions, an unscheduled disease must be recognized by the
adjudicating or administrating body as an industrial disease, or an occupational
disease, before it is compensable, though there is no restriction on the range of
diseases that may be so recognized. Recognition may be general or for the
particular case. It is not a recognition that the disease fits within a preconceived
category of industrial or occupational diseases. It is simply a recognition that
there is no overriding policy reason why the disease should not be compensable.
In some jurisdictions, unscheduled diseases are only compensable if the disability
reaches a prescribed degree of impairment.
Conclusive, but Not Exclusive. Where a disease is scheduled and the conditions in
the second column apply, the claim must be allowed. Evidence of etiology in the
particular cases is irrelevant and inadmissible. For unscheduled diseases, the
position is the same as under (3).

In earlier years, positions 1 and 2 were commonly found, but position 3 has
become more common over the last forty years. Position 4 is rare. In many
jurisdictions the schedules are too limited and out of date to be of broad-scale
use in relation to contemporary disabilities.
A danger of schedules that are not intended to be exclusive is that there may be a
tendency, in practice, for them to become exclusive. The theory is that when a
claim is made for an unscheduled disease, the evidence will be investigated to
determine whether the disease resulted from employment. The danger is that
this will not be done, so that in practice, the coverage tends to become confined
to the scheduled diseases. Some jurisdictions seek to avoid this danger by not
using a schedule at all.
It is sometimes assumed that a diagnosis is required for a disease claim, but that
is usually true only in jurisdictions where compensation is confined to the
diseases shown on an exclusive schedule or other closed list. In most other
jurisdictions, a diagnosis is necessary for the application of any presumptive
schedule, but otherwise a diagnosis is not necessary if employment etiology can
be shown without one. The eligibility requirements usually relate to etiology, and
if that can be shown, usually to the balance of probabilities, without a diagnosis, a
disease may be compensable.
Distinction between injury and disease
Because many jurisdictions have different eligibility criteria for disease from those
applicable in injury cases, it is sometimes necessary to determine whether a
disability should be classified as one resulting from injury or disease. The
distinction has been made pragmatically, not by reference to any principle. Hence
there is no fixed rule for distinguishing between the two, but the following are
common practices.
Disabilities resulting from trauma are generally classified as injuries, and any
disease resulting from an injury (such as by the infection of a wound) is classified
as part of the injury. Where a disease is listed, scheduled or otherwise specifically
mentioned in the legislation, any such case is classified as a disease. Otherwise,
disabilities that result from a specific incident are more commonly classified as
injuries, while those that result from exposure over time are more commonly
classified as diseases, but that is not consistently so, and there is no fixed rule to
that effect. For example, sprains and strains are generally classified as injuries,
whether they result from a specific incident or from exposure over time. Similarly,
dermatitis is commonly classified as a disease, whether it results from a specific
incident or from exposure over time, though burns caused by a single incident of
chemical exposure may be classified as an injury. Hearing loss due to noise
exposure is classified as an injury if it resulted from an explosion, but as a disease
if it resulted from exposure over time. Disabilities caused by the gradual
absorption of chemical or biological agents are classified as diseases. Allergic
reactions are generally classified as diseases, whether they result from a single
incident or from exposure over time.
Mental disorders—stress
Compensation for a physical disability generally includes all mental dimensions
and consequences of the disability. Similarly, where a mental disorder that
resulted from employment causes a physical disability, that disability is generally
recognized as compensable. The language of the statutes is not generally
confined to physical disabilities, so that there is no reason in principle why
compensation should not also be payable where a mental disorder has resulted
from employment with no physical disability being involved. In many jurisdictions,
such cases are covered by the legislation, but there is often a reluctance to
recognize the coverage in subsequent adjudication. In recent years, there has
been an increase in claims for occupational stress, and in many jurisdictions, it
falls within the meaning of injury or disease. Of stress claims that have been
allowed, the stress has been caused sometimes by environmental conditions,
such as temperature, sometimes by the behaviour of fellow workers or
supervisors, such as sexual harassment, and sometimes by the systems of work,
including claims for karoshi (death from overwork). In jurisdictions in which
disabilities that result from commuting are compensable, the combined effects of
commuting and what happened in the course of work are relevant in deciding
whether the worker was disabled or killed by occupational stress.
Contemporary political developments, which emphasize “competitiveness” and
“deregulation”, including the deregulation of overtime, have led to apprehensions
about the rising incidence of occupational stress. The response in some
jurisdictions has been to create a statutory bar against claims for mental stress.
Bad backs
In many jurisdictions, the largest volume of controversial claims in workers’
compensation are bad-back cases. Typically, the worker suffers a severe acute
pain following lifting or twisting at work. Sometimes this is followed by chronic
pain.
Bad-back claims are generally treated in one of three ways:
The claim is accepted and paid in the ordinary way for the duration of the
disability. This is very common because most bad backs resolve within a month.
The claim is denied.
The claim is accepted for an initial period, and then benefits are terminated on
the ground that any continuing disability beyond that point is a result of an
underlying disease condition rather than the employment. Typically, the medical
reports indicate a degenerative disease in the spine, which is common in the
general population.

The overriding dilemma in bad-back cases is that typically, there is no scientific

way of establishing the long-term causative significance of any particular event at
work, or of the ordinary pattern of work, compared with natural degeneration or
other causative factors. The bad-back cases illustrate very graphically the
difficulties of compensating or not by reference to the cause of a disability.
Death
In fatal cases, there is generally no requirement that the death must occur within
any particular time of the accident, injury or disease, and a death may be
compensable notwithstanding that it occurs many years after termination of the
employment in which it was caused. A death resulting from a self-inflicted injury
is not generally compensable, but a suicide is compensable in some
circumstances; for example, if a compensable injury that was not self-inflicted
caused a serious depression that led to the suicide. A few claims have also been
allowed for suicide resulting from the process of dealing with the compensation
authority.
Multiple Causes of Disability
Controversies commonly arise when a disability has resulted from the combined
effects of an event or circumstance of the employment and another event or
circumstance that is unrelated to the employment. An example would be lung
cancer that appears to have resulted from the combined effects of industrial
contamination and smoking. In many jurisdictions, a claimant is entitled to
compensation if the employment was a significant contributing cause of the
disability, notwithstanding that non-employment factors were also causative.
Some jurisdictions require the adjudicator to select the predominant or primary
cause, but that makes the result a matter of arbitrary choice if the reality is that
the disability would not have occurred in the absence of either cause, or if it is
unknown whether the disability would have occurred in the absence of either
cause.
In some jurisdictions, there are provisions for apportionment, so that a claimant is
entitled to compensation, but only at a reduced level of benefits. Such provisions
are difficult in adjudication, mainly because there is commonly no scientific way
of deciding in what proportion the disability should be attributed to the different
causes. Another difficulty with such provisions is that the resulting benefits may
be below the level of social security (welfare) to which the claimant would be
entitled if there were no workers’ compensation claim. To avoid the hassle of a
disputed compensation claim, therefore, the claimant may apply for and receive
social security (welfare) benefits. To the extent that this happens, the cost of
occupational disability is shifted from the workers’ compensation system onto
general revenue.
Where a contributing cause of a disability was a susceptibility or a pre-existing
condition of the claimant, that is usually just as irrelevant to the level of
compensation as it is to eligibility. This would seem fair if the wage rate on the
claim is the rate that the claimant was able to earn with the pre-existing
condition. However, susceptibility or a pre-existing condition may be relevant to
the duration of benefits. Where a pre-existing condition is aggravated by an event
or exposure of the employment, the aggravation may produce a compensable
disability, but if the aggravation is temporary, eligibility for compensation will
terminate on the expiry of the aggravation.
Where some circumstance of an employment had causative significance in
producing a disability, it is generally compensable notwithstanding that the
claimant was already allergic to that type of disability. Where some circumstance
of an employment caused an allergy that the worker did not previously have, any
subsequent periods of disability caused by subsequent allergic reactions are
usually compensable regardless of whether a subsequent allergic reaction was
triggered by anything relating to employment. Thus in allergy cases in jurisdictions
in which the critical etiological requirement is that the employment should have
been a significant contributing cause, it is sufficient for compensation if the
employment either caused the allergy or triggered the reaction.
Subsequent Consequential Disabilities
Where a disability is compensable, any other disability that is subsequent and
consequential is also compensable. For example, where a compensable injury
becomes infected, any consequential disease is compensable. Where a worker
sustains a compensable disability for which medical treatment is undertaken, and
that treatment causes another disability, that is also compensable. For example, if
a claimant falls down the stairs at a clinical rehabilitation facility when attending
for treatment, any injury resulting from that fall would generally be considered
compensable. However, where the connection between the original and
subsequent disabilities is indirect, diverse views are taken. For example, if the
second injury resulted from a motor vehicle accident when driving to a
rehabilitation facility, that would be compensable in some jurisdictions, but not in
others.
Where a subsequent disability is more distant in time, place, or causal connection,
it may be considered too remote to be compensable. Suppose, for example, that
a claimant sustained a compensable leg amputation. Ten years later, the claimant
is run down by a motor vehicle when on a vacation. An argument might be made
that the claimant could have avoided the second accident if it were not for the
prosthesis, so that the second disability is a consequence of the first. Even if the
causal connection is established as a matter of fact, it would probably be
concluded that any disability resulting from the motor vehicle accident is “too
remote” to be considered a compensable consequence of the amputation. Also if
the leg amputation resulted in a pension measured by the degree of physical
impairment, one of the factors taken into account in establishing a percentage
rate is the limitation on body movement. Where that is so, if that same limitation
of body movement were to produce further compensation when it has resulted in
a known monetary loss, it would be arguable that the claimant is receiving
compensation for the same factor twice over.
Compensable Losses
The most common types of compensable loss are economic. Thus the most
common benefits are medical care and compensation for loss of income or
earning capacity, but many jurisdictions also pay benefits for physical or mental
impairment, and for disfigurement, regardless of the economic consequences.
Property damage is generally excluded, though compensation is commonly
payable for damage to eyeglasses, dentures or a prosthesis. A few jurisdictions
also provide compensation for damage to clothing.
Multiple Disabilities
Where a claimant has two or more compensable disabilities with the same date of
commencement, they are generally aggregated for the calculation of
compensation, but the total payable cannot exceed what would be paid for a total
disability. Where two or more compensable disabilities occurred on different
occasions, they are usually treated as separate claims. Benefits are calculated
separately in respect of each, and different wage rates may apply. A worker may,
therefore, be eligible for benefits concurrently under two or more claims. This is
normal, for example, when a worker is receiving a pension calculated by
reference to the degree of physical impairment in respect of a permanent partial
disability, has returned to work, and then sustains a further injury causing a
temporary total disability. In some jurisdictions, there is a maximum applicable to
the combined total of benefits that may be received at any one time under all
claims, but not in others.
Where a claimant has two or more disabilities, not all of which are compensable,
problems can arise in deciding which losses are attributable to each. This is not
usually a problem where the compensable disability is the most recent. General
principles normally require that compensation must be paid for loss of earnings if,
prior to the compensable disability, the claimant was working with the non-
compensable disability. Where compensation is supposed to be payable by
reference to actual loss of earnings and the non-compensable disability is the
most recent, there may be adjudicative difficulties in deciding whether the
compensable disability is currently causative in relation to any absence from
work.
Objections to Claims
The objections most commonly raised are that a claimant has not met one or
more of the eligibility requirements. Even when those requirements have been
met, there may still be a few grounds on which an objection can be raised.
Because workers’ compensation systems were generally established to avoid
evidentiary inquiries on questions of fault, any allegation that a disability resulted
from the negligence of the claimant is generally irrelevant, and so is any allegation
that the cause of the disability was outside the control of the employer.
A self-inflicted injury is not compensable. It is usually excluded in the definition of
a compensable injury or accident, but sometimes there is an express bar. To be
excluded, the injury must have been deliberately inflicted by the claimant. It is no
bar to a claim that the claimant deliberately undertook the risk of injury.
Some jurisdictions provide that misconduct of a claimant is or can be a bar to a
claim, but in most jurisdictions this bar can only be raised in exceptional cases. To
avoid having evidentiary inquiries on questions of fault as a normal routine, this
bar is confined in various ways. In some jurisdictions the bar only applies if the
misconduct is criminal or gross, and in others, if it is serious and wilful. Some
jurisdictions provide that the bar does not apply in fatal cases, or where a
disability is serious or permanent. In some jurisdictions, it is a requirement for the
bar to apply that the misconduct must have been the “sole cause” of the
disability, and very few injuries are caused solely by anything.
Where misconduct bars a claim, it is usually a bar to all benefits, though some
jurisdictions permit a reduction of benefits for misconduct.
One explanation for the reluctance to allow allegations of misconduct is that in
serious and fatal cases, innocent dependants could suffer. In minor injury cases,
allowing issues of misconduct to be raised would defeat the goal of economy in
adjudicative costs. Related to this, most systems are not organized to conduct an
evidentiary inquiry in primary decisions, and it would be unfortunate to allow
allegations of misconduct to be raised if the system is not designed to make a fair
judgement upon them.
It has sometimes happened that a claim has been barred on the ground that
misconduct took the worker outside the course of the employment, but that is a
very difficult ground on which to bar a claim. Unless great care is taken, it can
have the effect of barring a claim for misconduct in circumstances in which the
statutory limitations on that bar do not apply. The point can be illustrated by
cases of injuries resulting from horseplay. A worker injured by horseplay is not
outside the course of employment if the worker was an unwilling participant, or
had not made any substantial deviation from productive activity, or if the
horseplay was an ordinary part of human nature in the ordinary course of
employment, or if it was simply a more entertaining way of doing the work.
However, if the worker was completely removed from any productive activity and
was an initiator or a willing participant in the horseplay, it may be legitimate to
decide that the injury did not arise in the course of the employment. In other
circumstances, a claim may only be barred for horseplay if the statutory criteria
relating to misconduct have been met.
In some jurisdictions, a claim is barred if the disability was caused by the
intoxication of the worker from alcohol or drugs. This bar may not apply to all
claims. For example, it may not apply to fatal cases. In other jurisdictions,
intoxication is generally irrelevant except that it may be a species of misconduct,
in which case, the objection is subject to the limitations that apply to an allegation
of misconduct.
In some jurisdictions, a claim may be barred if the disability resulted from non-
compliance by the worker with occupational health and safety regulations, or
with safety rules issued by the employer. However, this bar can tend to
undermine the incentive for employers to engage in proper health and safety
planning. If an employer can issue rules, or seek the issuance of regulations,
requiring workers to protect themselves from hazardous conditions by
appropriate behaviour, this could reduce the incentive to avoid or minimize the
creation of hazardous conditions by proper planning. A related problem is that
the behaviour of workers is to some extent self-initiated and to some extent
conditioned by the decisions of employers. Thus it would be difficult to legislate
this bar without getting into evidentiary inquiries on fault. It may be for these
reasons that this bar is not widespread.
In some jurisdictions, a claim for disease may be barred because of fraudulent
misstatements previously made by the worker. There are practical problems with
these provisions. In particular, it would be hard to prove that a statement was
made fraudulently if the worker merely signed a printed form on an occasion that
was not conducive to reading and contemplation.
It is sometimes alleged that a worker was susceptible to the disability that
occurred, but that is generally irrelevant.
In some jurisdictions, the parents of a child who was killed are not eligible for
compensation if the child was employed contrary to the laws relating to child
labour.
The availability of benefits from another source is usually irrelevant. Workers’
compensation systems are generally in the position of first payer, so that
eligibility for benefits from another source is not a bar to a workers’
compensation claim. In some jurisdictions, however, there are some provisions
for a reduction in workers’ compensation benefits if there is eligibility for benefits
from another source.
The non-payment of assessments by an employer is not usually a bar to a claim in
social insurance systems. In systems administered by insurance companies, non-
payment of the premium by an employer may extinguish the liability of the
insurer, leaving the claimant only with a claim against the employer.
Where an objection to a claim is valid, it is usually a total bar. However, some
jurisdictions provide that certain objections may have the effect of reducing
benefits. For example, a few jurisdictions provide that misconduct by a worker
may have the effect of disentitling the worker from monetary benefits for an
initial period of a week or two weeks.
Employer Misconduct
In most jurisdictions, misconduct by the employer is irrelevant to the validity of a
claim, except that it may be part of the evidence on the general question of
whether a disability resulted from employment. In some jurisdictions, however,
additional benefits, or higher levels of benefits, are payable where a disability
resulted from misconduct of the employer. Some of these provisions are narrow,
referring only to criminal misconduct, to “gross” negligence, or to serious and
wilful misconduct. Others are broader, referring to negligence or a breach of
occupational health and safety regulations. These provisions are part of the
workers’ compensation system, and are unrelated to “employers’ liability”
(discussed in Part Two). These provisions are open to the same objection as
provisions relating to misconduct by workers; that is, they may require an
evidentiary inquiry in the context of a system that was designed to operate, as far
as possible, without evidentiary inquiries. For this reason, some jurisdictions
confine the provision to cases in which the employer has been convicted in a
criminal court.
In jurisdictions in which a claim may be barred because of intoxication by the
worker, or a wilful failure of the worker to comply with safety rules, it is
sometimes provided that the bar will not apply if fault can be shown on the part
of the employer.
Medical Aid
In some jurisdictions, disabilities resulting from employment are treated in the
same way as other disabilities under a government system of medical care. In
other jurisdictions, the workers’ compensation system provides the medical aid
for compensable disabilities. This may be extensive, including the attendances of
medical practitioners and other health care professionals, hospital care, surgery,
prostheses, appliances, drugs, dental care, orthopaedic footwear and therapies
required for rehabilitation. Where a claimant is entitled to a prosthesis or other
appliance for a permanent disability, subsequent servicing and replacements are
also provided. Medical aid is commonly provided on a full indemnity basis for all
necessary services, even though monetary compensation benefits for economic
losses are less than a full indemnity. Thus in some jurisdictions, the medical aid
coverage in workers’ compensation is more extensive than the coverage under
the general government system. In countries that have no government system of
medical care, the medical aid provided in workers’ compensation cases can be a
striking contrast to the medical care that is otherwise available, and to the
medical insurance coverage that is otherwise available to workers. However, in
some jurisdictions, there are restrictions on the medical aid that may be provided.
For example, treatments that may be considered “experimental” are sometimes
excluded.
Travel costs and other expenses incurred by a claimant to receive medical aid are
usually covered, but many systems restrict the level of reimbursement to the cost
of using public transport unless that is unavailable or inappropriate.
Some jurisdictions have separate workers’ compensation hospitals, rehabilitation
clinics, or other health care facilities. Otherwise, workers’ compensation cases are
treated at the same hospitals and other places of medical treatment, and by the
same personnel, as other cases. The only difference between the workers’
compensation cases and the others may relate to the sources of payment.
Sometimes, however, there are also other differences. For example, a workers’
compensation authority may contract with a general hospital for additional
services in workers’ compensation cases.
It is not usually a condition of eligibility for medical aid that the claimant should
be impeded from work, or otherwise entitled to money payments. Thus a large
proportion of workers’ compensation claims are for medical aid only. In
jurisdictions that use experience rating, the pressures not to report employment
injuries to the workers’ compensation authority or insurer sometimes result in
medical care being provided under the general health care system rather than
under the medical aid provisions of workers’ compensation.
Usually the obligation to provide medical aid is placed upon the insurer (whether
a government agency or an insurance company), but there is commonly an
obligation upon the employer to provide medical aid for the initial phase of an
injury, such as first aid and ambulance transportation to a hospital. Usually
payments for medical aid are made directly by the insurer to the provider of the
treatment or service. In most jurisdictions, it is considered inappropriate to
require the claimant to pay and then claim reimbursement. That could create a
cash-flow problem for people whose incomes have been reduced by their
disabilities. It could also facilitate overcharging by service providers, leaving
claimants caught in the middle and having to bear the excess cost.
In systems administered by insurance companies and where medical care is
otherwise a matter for the market, and where there are no other controls on
overservicing, workers’ compensation claimants may be required to receive their
care at a limited range of hospitals and other health care facilities, and their
choice of attending physicians may be limited.
Some jurisdictions provide that compensation benefits may or must be suspended
or terminated if a claimant unreasonably declines to accept medical treatment
that is offered; but these provisions are usually relevant only in very exceptional
cases where the refusal is equivalent to a self-inflicted injury. Workers’
compensation legislation was not usually intended to stifle patient choice in
medical care, or to negate the basic human right to be selective in the acceptance
of treatment. Also in at least some jurisdictions, compensation authorities are
more concerned to prevent the overuse of drugs and surgery than to prevent
their underuse.
In some jurisdictions, there are temporal or territorial limits on the provision of
medical aid. In others, medical aid for a compensable disability is provided as it is
needed for the lifetime of the worker and regardless of any change in the
worker’s country of residence. In these jurisdictions, this feature distinguishes
medical aid under workers’ compensation from the coverage under general
government systems of medical care.
Money Payments
Wage rate
The calculation of monetary compensation usually begins by establishing an
earnings level or wage rate for the claim. This is usually the gross level of earnings
of the worker (including overtime pay) at the time of disability, or the average
earnings during some preceding period, usually in the range of four weeks to
three years. The rate of compensation is then set by reference to this wage rate.
There are sometimes provisions for a wage rate to be established by reference to
the average wage in an industry, or a national average, but such provisions only
apply in exceptional situations.
Unlike the process of assessing of damages on employers’ liability claims,
establishing the wage rate does not usually include any speculation about what
changes to the earnings of the worker would have occurred in the future but for
the disability. In relation to cases of long-term and permanent disability, however,
there are commonly provisions to the effect that where a worker became
disabled when a learner, apprentice or student at the early stages of a career, the
wage rate will be subject to upward adjustment to the basic earnings level of that
career.
Each jurisdiction usually has detailed rules relating to the calculation of previous
earnings; for example, whether notional earnings should be attributed to free
board and lodging provided by the employer, whether concurrent earnings from
other employment or self-employment should be excluded or modified, or
whether earnings from seasonal employment should be adjusted to an annual
average.
Some diseases sometimes result in a gradual erosion of earning capacity as the
worker moves to lighter and less rewarding employment. If a claim is not filed
until a total cessation of work, it would not compensate for the loss if the
immediately preceding level of earnings was used as the wage rate on the claim.
To meet this problem, some jurisdictions provide for the wage rate to be set by
reference to the contemporary earnings of other workers in the occupation in
which the disease was contracted.
Where the coverage applies to a self-employed worker, the wage rate is usually
set at the time when the coverage is arranged. In jurisdictions in which the self-
employed are covered only upon application, an applicant may be allowed to
nominate the wage rate, subject to a minimum and maximum, and subject to
rejection of the application if the nominated rate appears to be out of line with
potential earnings. The rate established at the time of coverage is then used for
calculating the assessment (premium) as well as for the subsequent calculation of
benefits in the event of a compensable disability.
In some jurisdictions, the wage rate remains fixed for the duration of the claim. In
others, it is subject to change after a specified period. Usually the rationale for the
change is that the wage rate for long-term and permanent disabilities should be
changed to reflect a longer period of average earnings prior to the disability.
Switching to a longer period of average earnings makes it easier to include
earnings from all sources, to take account of variations in overtime, and to take
account of seasonal or other variations in the continuity of employment.
Usually, the rate reflects the average gross earnings of the worker (excluding the
employer’s contributions to employee benefits), but in some jurisdictions where
compensation benefits are not taxable income, the wage rate is adjusted to a
notional “net” earnings before the compensation rate is derived. The notional
“net” is the gross amount less amounts for income tax and other payments to
government funds that are deductible from earnings.
The compensation rate
Usually there is a formula for moving from the wage rate to a rate of
compensation that is payable for total disability. This rate is usually a percentage
of the wage rate, or of the notional “net” earnings that have been derived from
the wage rate. It is usually less than a full indemnity for lost earnings. One
rationale for this is the theory that the difference between the wage rate and the
compensation rate represents the worker’s contribution to the cost of
occupational disability. This rationale is dubious, bearing in mind that the
assessment (premium) is, to some extent, an opportunity cost of labour. A more
realistic rationale is that the difference between the wage rate and the
compensation rate provides an incentive for an injured worker to return to work.
A difference of 10% is usually considered sufficient for this purpose. This rationale
has no significance in relation to disabilities that are severe and permanent.
The ceiling—maximum
Usually a ceiling (maximum) is prescribed, either for the wage rate or for the
compensation rate. A historical rationale for a ceiling was that workers with
earnings above the ceiling could, if they wished, insure those earnings by taking
out their own policies of accident and sickness insurance. However, this rationale
was never in accord with reality. There were no policies on the market that were
available to industrial workers and that would pay benefits to compensate for the
higher levels of earnings loss for the duration of a disability.
Where a ceiling applies to the wage rate, and a worker suffers a compensable
disability with a loss of earnings, but still has residual earnings above the ceiling, it
may be thought an injustice that the worker has suffered a loss of earnings from
an occupational disability and is not receiving compensation. This problem can be
avoided by applying the ceiling to the compensation rate, or by compensating by
reference to the degree of physical impairment regardless of actual earnings loss,
or by having no ceiling at all.
Another problem with a ceiling on the wage rate is that the same ceiling is then
generally used on the level of earnings on which the assessments (premiums)
must be paid. For example, if the ceiling is 50,000 monetary units per year, this
means that the maximum level of compensation will be a percentage of 50,000
units per year. The assessment paid by an employer will be a percentage of the
payroll, but subject to a ceiling of 50,000 units per year per worker. This ceiling on
the assessment can be one of the factors making it cheaper for an employer to
require regular overtime rather than increasing the size of the workforce. It may,
therefore, be considered counter-productive in terms of social policy,
occupational stress and the rehabilitation of disabled workers.
Classification of disabilities
Some jurisdictions classify compensable disabilities as temporary total, temporary
partial, permanent total or permanent partial. The same disability will often move
from one of these classifications to another. Some jurisdictions do not use all of
these categories. Some use a variation of them, or may apply similar principles
without classifying disabilities in these terms. In recent years, some jurisdictions
that are supposed to compensate by reference to actual loss of earnings have
abandoned the use of these classifications altogether.
Temporary total disability
Most jurisdictions pay benefits for temporary total disabilities. As well as
transitory disabilities, this category includes the initial stage of most permanent
disabilities. In some jurisdictions, there is a time limit for these benefits, but
usually there is not. The benefit continues until the claimant makes a total or
partial recovery, the disability is classified as permanent, or the claimant dies. In
some exceptional cases, the benefit may be terminated by disqualification, such
as where a claimant has left the jurisdiction during the period in which medical
attention was required.
Since the vast majority of occupational disabilities are minor and temporary, this
benefit is paid for only a few days in most cases—too short a time in many
situations to make it worth the cost of considering whether the case should be
processed as temporary partial. In some jurisdictions, the level of this benefit is
reduced after a specified period, or reduced in stages after two or more specified
periods, such as three months and six months. Such reductions are not usual in
advanced industrial nations.
This benefit usually commences on the day following the incapacity for work, but
in some jurisdictions there is a waiting period of three days. In some systems, the
employer has an obligation to pay this benefit for a brief initial period, with the
obligation of the insurer commencing after that. Such provisions can cause
problems in the context of a workers’ compensation system. For example, they
may delay the collection by the insurer of evidence about the cause of the
disability.
Apart from compensation, some jurisdictions require an employer to continue the
earnings of a disabled worker for a very brief initial period, commonly for the day
of injury.
Temporary partial disability
Some jurisdictions do not use this classification at all. Others use it where a
claimant has made a sufficient recovery from the disability to engage in some
work, but is not yet able to return to the regular occupation. In most cases in
many situations, it is not worth the administrative and adjudicative cost of using
this classification because the claimant will be fit to return to the regular
occupation in any event within a few days.
In jurisdictions that use experience rating, or in which employers otherwise have a
financial incentive to invoke this classification, there are substantial
administrative and adjudicative difficulties in deciding what type of work is
suitable to the current condition of the claimant. The fear of abuse of the system
by claimants creates a reluctance to let the worker decide, and there would be
comparable difficulties in allowing the employer to decide. To have the matter
decided adjudicatively creates the problem that disputes about what is suitable
work for a particular medical condition cannot be resolved fairly and efficiently
without an evidentiary inquiry. Most systems are not designed to conduct one
promptly, and some do not provide for one at all, except on appeals. Decisions
made on such issues in more peremptory ways are a cause of therapeutic
damage, as well as injustice and waste. They can also create a strain in the
employment relationship that becomes an impediment to rehabilitation. It is
partly for these reasons that some jurisdictions prefer to avoid or minimize the
use of this category.
For cases that are classified as temporary partial, the rate of benefit is commonly
a percentage of the difference between the previous earnings of the claimant and
the current earnings, or the amount which it is thought that the claimant could be
earning (“deemed” earnings). In a few jurisdictions, the rate of benefit is required
to be calculated by reference to the degree of physical impairment, but that is
unrealistic. The period during which this classification may be applied is usually
too short, and the gravity of the disability may be changing too fast, for the rate
of benefit to be calculated in this way. Some jurisdictions exclude compensation
for a temporary partial disability if the impact on earning capacity, or on earnings,
is minor.
Some jurisdictions require the presence of a claimant within the jurisdiction as a
condition of continuing eligibility for temporary benefits. Others require presence
only during the period in which medical treatment is needed.
Permanent total disability
In many jurisdictions, severe disabilities are classified as total regardless of the
impact on earnings or earning capacity. For example, total blindness, paraplegia
or the loss of two limbs are commonly classified as permanent total disabilities.
One rationale is that compensation should be paid for the disability itself,
regardless of its economic significance. Another is that disabilities commonly
involve costs, and therefore economic losses, regardless of the impact on
earnings. Perhaps the most important rationale is that the payment of a fixed
pension without inquiry into economic loss preserves the freedom of the
individual, alleviates anxiety and maximizes the incentive to rehabilitation. A few
jurisdictions provide for a lump sum in addition to the pension.
In some other jurisdictions, benefits for permanent disability are payable by
reference to loss of earnings, so that benefits for permanent total disability are
only payable where it is estimated that the loss of earnings will be permanent and
total. In some cases, particularly among older workers, this may be the economic
significance of a disability even when the degree of physical impairment is low. In
such cases, however, there is commonly a reluctance to recognize that the loss of
earnings resulting in the disability is likely to be permanent and total.
Where a case has been classified as one of permanent total disability, a pension
may be payable for life or until a standard retirement age, but in some
jurisdictions, it is for a more limited duration. The formula for calculating the
pension may be the same as for temporary total disability benefits, but in some
jurisdictions, a different formula is used. In particular, the wage rate on the claim
may be adjusted as mentioned under Wage rate (above).
In systems administered by insurance companies, the right to periodic payments
for a permanent disability is often settled for a lump sum, but some jurisdictions
provide for annuities.
Permanent partial disability
This classification refers to permanent disabilities that are not classified as total.
The methods (described below) that are used for estimating the degree of partial
disability are also commonly used for distinguishing total from partial.
Compensation for a permanent partial disability is commonly paid in a lump sum
for minor and less serious disabilities, and in periodic payments for those that are
more serious. A pension may be payable for life or until a standard retirement
age, but in some jurisdictions, it is for a more limited duration.
Except for minor disabilities, a fixed pension has great advantages compared with
a lump sum. Where the compensation is intended primarily for any future loss of
earnings and some of the future costs of the disability, a pension has the great
advantage that it can be paid for exactly the duration of the loss. A lump sum
would require estimating an expectation of life, and in almost every case, that
estimate would be wrong. Also lump sums tend to be spent in a relatively short
time, and a claimant may then be supported out of general revenue. A fixed
pension offers the best protection for the social security (welfare) budget.
How to calculate the benefits for permanent partial disability has been the most
intractable problem in the history of workers’ compensation. Basically, three
methods are used.
Physical impairment method
This method of calculating a fixed pension has been traditional and widespread in
workers’ compensation, as well as for military pensions. Compensation is
calculated by reference to the estimated degree of physical and mental
impairment resulting from the disability. Rating schedules are commonly used
that attribute percentage rates to a list of disabilities. In some jurisdictions, the
rating schedule is rigidly followed. In others, the schedule is used as a guide.
Variations are sometimes permitted or prescribed. One example is where there is
some aggravating factor.
The content of these schedules is often criticized as too orthopaedic. For example,
amputations commonly have a percentage rate that seems high, having regard to
modern prostheses. More subtle disturbances of body function are commonly
rated low, compared with their impacts on the lives of the claimants. A more
comprehensive schedule is produced by the American Medical Association. This is
used in some jurisdictions, either exclusively, or as a reference source when the
primary scheduled used in the jurisdiction does not cover a particular disability.
Regardless of how a percentage rate is established, a pension is then calculated
by applying that percentage to what would have been paid if the claimant had
been classified as totally disabled. In jurisdictions that use this method, the
schedule is also commonly used to distinguish total from partial disability. For
disabilities that are rated below a certain percentage (commonly 10%) a lump
sum is generally paid instead of a pension. This may be calculated by using the
same calculations as for a pension, and then commuting the resulting pension to a
lump sum, or some other method may be used for arriving at the lump sum. Since
the vast majority of permanent disabilities are minor, the majority of awards for
permanent partial disability take the form of a lump sum. A few jurisdictions
provide that minor disabilities are not compensable.
Lump sums for minor disabilities, rather than pensions, have the advantage of
avoiding ongoing administrative costs, but they can create a problem in some
situations, such as where a worker suffers successive minor disabilities that
become cumulative in their impact. There is the risk that the worker will become
substantially disabled but without eligibility for a pension. A similar problem can
arise when a lump sum has been awarded for a minor disability which
deteriorates later to become more serious. If the deterioration is gradual,
successive lump sums might be awarded for the same disability, and again, the
end result may be a substantial disability without eligibility for a pension. In
anticipation of this problem, some jurisdictions insist on a pension, rather than a
lump sum, even for a minor disability, if the condition is unstable, or if it is
considered prone to deterioration.
For unscheduled disabilities, most jurisdictions adopt one of four positions.
A percentage rate is established by extrapolation from the schedule, using the
schedule figures as benchmarks.
Unscheduled permanent disabilities are compensated by using one of the other
methods of calculation (described below).
Unscheduled permanent disabilities do not receive benefits beyond those
provided for a temporary disability, though temporary benefits may continue.
Periodic payments terminate after a specified period notwithstanding that the
disability, and any consequential losses, continues.
A major advantage of the physical impairment method is that it maximizes the
incentive to rehabilitation while preserving its voluntariness and the civil liberties
of the claimant. In jurisdictions that have a ceiling on the wage rate for the claim,
this method also has the advantage that a pension is payable notwithstanding
that there may be no loss of earnings below the ceiling.
Since evidence of actual loss of earnings is irrelevant under this method, a
pension is paid notwithstanding that there may be no loss of earnings. That is
considered a price worth paying to maximize the incentive to rehabilitation and to
avoid the other disadvantages (mentioned below) of attempting to calculate
compensation by reference to actual loss of earnings. Also the cases in which
there is no apparent loss of earnings are commonly cases in which the claimant is
continuing to work for the same employer. The economic impact of the disability
may be more severe if the claimant is later in search of employment on the open
labour market. Also the pension awarded by this method is usually the only
compensation for non-monetary losses, and that rationale for the pension is
independent of any actual loss of earnings.
Pensions awarded under this method are subject to reopening upon application
by the claimant in the event of a deterioration in the condition. In some
jurisdictions, the pension can also be reopened at the initiative of the
compensation authority, insurer or employer, in the event of the disability being
cured. This is rare, because disabilities are not generally classified as permanent
until there is no realistic prospect of further cure. However, it can happen
occasionally when medical research produces a cure that was not previously
known.
The use of this method is sometimes abandoned in favour of the actual loss of
earnings method (mentioned below), but the physical impairment method is
sometimes reinstated when the difficulties and injustices of the actual loss of
earning method have been rediscovered.
The projected loss of earnings method
This is an alternative method of arriving at a fixed pension and is used in a few
jurisdictions. A pension is calculated by estimating the extent to which the
earnings of the claimant are likely to be reduced by the compensable disability in
the long run. In most cases, the claimant will have resumed employment by the
time that the calculation is made, so that current earnings can be used as a
starting point. It then has to be considered whether those earnings are more or
less than the long-term earnings potential. Where a claimant has not resumed
employment, the calculation can be more difficult; but since it only has to be
made once in those cases, it is feasible to do it by an evidentiary inquiry where
that is requested or otherwise seems appropriate. Statistical data are generally
not of much use for this purpose. They cannot be used exclusively, or as the
primary evidence, and if they are used at all, there is a danger that they will
become a diversion from the facts of the particular case.
Like the physical impairment method, this method preserves the incentive to
rehabilitation, its voluntariness and the civil liberties of the claimant. Also, like the
physical impairment method, a pension awarded under this method is subject to
re-opening in the event of a deterioration in the condition. The pension is,
however, not subject to re-opening in the event of any change in the actual loss of
earnings. This method avoids, therefore, most of the problems (mentioned
below) of the actual loss of earnings method. Since this method takes no account
of the expenses of the disability, or of non-monetary losses, it may be used in
conjunction with other benefits.
Actual loss of earnings method
This method of compensating for permanent disability, which is used in some
jurisdictions, does not provide any fixed pension. Periodic payments are supposed
to be made according to the estimated actual loss of earnings resulting from the
disability. These periodic payments are subject to variation according to changes
in the estimated actual loss of earnings. In some jurisdictions, the payments are
reconsidered from time to time when there is any change in actual earnings. In
others, the payments are reconsidered at fixed intervals, sometimes yearly.
One problem with this method is the difficulty of estimating, as time goes by, the
impact of the compensable disability on the earnings of the claimant compared
with the impact of other factors, such as subsequent disabilities, natural ageing,
technological change or political or economic changes that affect the labour
market.
Another major problem with this method is the response to the risk of a claimant
earning less than could be earned. The usual response is to “deem” each claimant
to be earning what he or she is considered to be capable of earning. The use of
such “deeming” provisions has been one of the greater causes of injustice and
resentment in the history of workers’ compensation. While the initial intention
was often that deeming should only be done by way of exception, it becomes the
normal routine when the actual loss of earnings method is used. Claimants are
“deemed” to be capable of earning in a “phantom job”; that is, a job that is
unavailable to them. “Deeming” is also applied when a claimant declines to
undertake a job because of health or moral objections. Compensation benefits
are then commonly terminated while the disability and its consequential
economic losses continue. In the jurisdictions in which this method is used, the
periodic payments are usually the only compensation that a claimant receives for
the economic losses resulting from a permanent disability. It is not part of the
legislative prescription that these periodic payments should be temporary, but
that is commonly the practical result of “deeming”.
Another injustice results from the way in which this method deals with career
progression. Under a fixed pension system, a claimant loses the benefit of career
progression in the pre-morbid occupation, but retains the benefit of any career
progression in any subsequent occupation. Under the actual loss of earnings
method, the claimant loses the benefit of any career progression in the pre-
morbid occupation and also loses the benefit of any career progression in any
subsequent occupation.
“Deeming” provisions also create a pressure to undertake any rehabilitation
measures that the compensation authority may recommend (or require)
regardless of whether they accord with the rehabilitation aspirations of the
claimant, so that the voluntariness of rehabilitation is lost, and the ordinary civil
liberties of the claimant may be impaired. For example, even the basic human
right to move to another country may be lost or impaired when this method is
used. For this reason alone, the use of this method can cause serious injustice
when a migrant worker is disabled.
Another concern is that this method creates apprehensions about rehabilitation,
as well as disincentives. If ongoing success is uncertain in relation to any
employment opportunity, claimants are sometimes fearful of trying the
employment in case it does not work out. The risk is that termination of the
employment may then be attributed to reasons other than the disability, and the
periodic payments may not be resumed.
Another serious problem with this method is the impossibility, in many cases, of
making the relevant decisions fairly and accurately without an evidentiary inquiry.
Yet such an inquiry is generally considered not to be feasible with the volume of
decisions that have to be made when periodic payments are subject to change
from time to time.
Variations and hybrids
Many variations of these methods are found, and some jurisdictions use a
combination of them. Some use a hybrid method that draws features from among
the three methods described above. One such hybrid is to award a pension by the
projected loss of earnings method, but make it subject to review on two
occasions, perhaps two years after the initial assessment and again at five years.
This has the advantage of permitting the correction of any projection that turns
out to be erroneous, but it has serious disadvantages. It prolongs insecurity, and if
a claimant has any propensity to compensation neurosis or any other form of
anxiety, this could become more entrenched. This method also prolongs any
disincentive to succeed in vocational rehabilitation. It is also open to some of the
other objections to the actual loss of earnings method, such as impairment of the
basic right to move.
Dependants
Since compensation benefits in non-fatal cases are usually earnings related, it is
not usual to have variations for dependants, but supplementary benefits for
dependants are provided in some jurisdictions.
In jurisdictions in which the benefits are taxable income, the existence of
dependants may influence the net amount received in the same way it would
influence the net amount of wages received. In jurisdictions in which the benefits
are not taxable income, but where the compensation rate is a percentage of
estimated “net” earnings, dependants are sometimes counted in estimating the
level of income tax that would have been paid on wages, and in this way the
existence of dependants can influence the compensation rate.
Disfigurement
Many jurisdictions provide compensation for disfigurement, particularly facial
disfigurement. In some jurisdictions, this is a lump sum, and it is separate from
compensation for loss of earnings. In others, disfigurement is a factor to be
considered in calculating the lump sum or pension for permanent partial
disability.
Pain and suffering
Unlike employers’ liability, workers’ compensation systems do not usually provide
compensation specifically for pain, suffering, loss of expectation of life, loss of
enjoyment of life or loss of social functioning. However, such losses are
compensated to some extent. Where the physical impairment method is used to
calculate a pension for permanent disability, the pension is normally payable
regardless of any loss of earnings. It might be seen, therefore, as compensation
for non-monetary as well as monetary losses. In jurisdictions in which
compensation for permanent disability is supposed to be paid by reference to
actual loss of earnings, there is sometimes a separate benefit for the disability
itself; that is, for the non-monetary losses. This benefit is usually a lump sum, but
in some jurisdictions, it may be a pension in very severe cases.
Indirect economic losses
Compensation is not generally payable for economic losses that are indirect
consequences of the disability or the accident. For example, if a worker had paid
in advance for a vacation and then sustained a compensable injury that prevented
the vacation from being taken, the loss of payment for the vacation would not be
compensable.
Expenses and allowances
It is normal for the system to meet the expenses resulting from a compensable
disability, or at least some of them. For example, claimants are commonly
reimbursed for the cost of attending medical examinations or the processes for
deciding claims. Irregular expenses are usually reimbursed by reference to actual
cost, and ongoing expenses are sometimes met in the same way. Otherwise, an
expense allowance may be paid for ongoing expenses. An allowance for attendant
care is probably the most common and significant. Other examples that are broad
in their application are an allowance for the extra wear on clothing that is caused
by the use of a prosthesis, a pension supplement to those who are not
ambulatory and “inconvenience allowances” for a broad range of disabilities. A
more specific example of local application is a smokeless fuel allowance.
Off-sets
Where benefits are payable to a claimant under two or more sections of a
workers’ compensation statute, whether on the same claim or different claims,
the general rule is that the entitlement is cumulative. There are no off-sets unless
the legislation so provides. Sometimes, however, the cumulative benefits may be
subject to an overall maximum. There is also sometimes an implied exception
when alternative benefits are payable in respect of the same loss. A common
example is where a claimant has been awarded a pension for a permanent partial
disability, and subsequently suffers a recurrence, causing a temporary total
disability from the same injury. If a new wage rate is not being used for the
temporary benefits, it would be normal to suspend the pension while the wage
loss benefits are being paid for temporary total disability, or to continue the
pension and reduce the temporary wage loss benefits by the amount of the
pension.
The same person may be eligible for benefits for a compensable disability and for
benefits as a surviving dependent spouse of a deceased worker. Each is a separate
claim. There is usually no provision for any off-set, and commonly no maximum
applicable to the aggregate.
With regard to benefits from other systems, usually other systems of insurance,
workers’ compensation is usually in the position of first-payer, so there is no off-
set or reduction of benefits because of money received from another system.
Sometimes the other system may deny or reduce benefits when the claimant is
receiving workers’ compensation. In some jurisdictions, however, workers’
compensation benefits are reduced by any amounts received by a claimant from
certain other systems, usually social security or social insurance systems, or
payments arranged by the employer.
Property damage
The general rule is that no compensation is payable for damage to a worker’s
property, but there are exceptions. Many jurisdictions compensate for damage to
dentures, eyeglasses, a hearing aid or a prosthesis. A few jurisdictions also
compensate for damage to a worker’s clothing. Where compensation is payable
for property damage, the eligibility criteria are generally the same as for an injury,
though some jurisdictions require an “accident” for a property damage claim
when that is not a requirement for an injury claim.
The provisions mentioned above relate to property damage that occurs in the
course of employment. There are also some provisions relating to property
damage that subsequently results from a compensable disability. The most
common example is the clothing allowance (see Expenses and allowances, above)
that is paid to compensate for the extra wear on clothing that is caused by using a
prosthesis.
Recurrences
Where a claimant who has been receiving benefits for a temporary disability
returns to regular employment, the temporary benefits are usually terminated,
though a pension and other benefits may continue in any respect of any residual
disability. In the event of a recurrence of temporary total disability, the claimant
may be entitled to a resumption of temporary benefits, but by this time the
claimant may have established a new level of earnings. Some jurisdictions provide
that this new level of earnings must or may be used for estimating the
compensation benefits following the recurrence if this would be more favourable
to the claimant. These provisions are particularly important in jurisdictions in
which the wage rate on the claim is not indexed for inflation. Commonly, these
provisions only apply after a specified number of years from the initial disability.
Non-compensable death of a disability claimant
This sub-heading refers to cases in which a person who is receiving or eligible for
a pension for a permanent disability dies, and the death is not compensable
because it did not result from the disability, or otherwise from employment. The
general rule is that benefits terminate upon the death (or at the end of the month
in which the death occurs). The following exceptions are sometimes found.
Where the deceased claimant was receiving benefits for a total or very severe
disability, some jurisdictions provide for the same death benefits to be payable as
if the disability had been the cause of death. (These benefits are mentioned under
the next sub-heading.)
Some jurisdictions provide for the disability pension to continue in favour of a
surviving dependent spouse for a short period, such as three months, or for a
lump sum to be paid to the surviving spouse equivalent to the pension benefits
for such a period.
Where a pension is being awarded for a permanent disability, some jurisdictions
provide that, in certain conditions, the entitlement may be converted into a
pension for the joint lives of the claimant and spouse, and if that is done, the level
of pension will be lower.
A few jurisdictions provide for a survivor’s benefit, in the form of a pension or
lump sum, to be paid regardless of the cause of death.

Fatal cases
This sub-heading relates to cases in which the death itself is compensable. It may
have been an instantaneous death that was caused by the employment, or death
may have resulted later from a compensable disability. In most jurisdictions, the
death need not have occurred within any particular time from the date of
disability. However, the length of time between the disability and the death may
sometimes be part of the evidence on whether the death resulted from the
disability.
It is normal to provide a funeral benefit. In some jurisdictions, a standard amount
is payable regardless of the actual cost. In others, the actual cost is reimbursed,
subject to a maximum. Commonly the legislation does not specify to whom this
benefit should be paid, so that it can be claimed by anyone who has paid for the
funeral.
The most substantial benefits in fatal cases are the payments to surviving
dependants. These may be by lump sums, periodic payments, or both. Some
jurisdictions provide for standard amounts to be paid per dependant; for
example, so much per month for a surviving dependent spouse and so much per
month for each child. In other jurisdictions, the amounts vary by reference to the
previous earnings of the deceased worker. This is usually done by establishing
pensions for dependants at a percentage of what would have been paid to the
deceased worker for a total disability. Some jurisdictions use a blended formula
that refers to standard amounts and a variation by reference to the previous
earnings of the deceased worker.
Where the benefits are a standard amount for each dependant, there is usually
no maximum, so that the total might exceed what would have been payable to
the deceased worker for a total disability. Where the benefits are earnings
related, a maximum is sometimes established at the amount that would have
been paid to the deceased for a total disability, or a percentage of that amount,
and sometimes there is a lower maximum when there is no surviving spouse. In
jurisdictions that use a blended formula, there may or may not be an applicable
maximum.
Historically, death benefits have been payable to a surviving widow or disabled
widower, and that is still the position in many jurisdictions. In others, recent
moves to sex equality have eliminated the distinction, usually by reducing the
benefits payable to surviving widows, and sometimes by abolishing pensions.
Also, pensions for surviving widows used to be subject to termination upon a
remarriage, often with a lump sum then being payable. In some jurisdictions,
those provisions have been repealed. Even where they still apply, the children’s
allowances continue. Also in some jurisdictions in which a widow’s pension is
terminated upon a remarriage, that only applies if there are no children. When a
widow’s pension has been terminated because of a remarriage, it is subject to
revival in the event of divorce in some jurisdictions, but not in others. In some
jurisdictions, the pension of a surviving spouse is also subject to termination if
that spouse abandons the children.
Sometimes benefits are payable simply by reference to a family relationship.
Otherwise it may be necessary to show a family relationship plus dependency. It is
usually sufficient evidence of dependency that the claimant lived in a common
household with the deceased worker, or that the claimant was receiving support
payments from the deceased worker. It is not usually a disqualification from
benefits that the claimant was earning, though if there was no common
household and no significant support payments, that might be evidence that the
claimant was not a dependant of the deceased worker.
Some jurisdictions recognize partial dependency, usually for cases in which the
claimant and the deceased worker were not living in a common household. It may
be decided that the claimant was partially dependent upon the deceased worker
and benefits may be awarded based on a proportion of what would have been
awarded if the claimant had been considered totally dependent. Other
jurisdictions do not recognize partial dependency, so that a simple decision must
be made that the claimant was or was not a dependant of the deceased worker.
Benefits for dependants are payable directly to those dependants (or to the
person having care of a dependent child), not to the estate of the deceased
worker. In some jurisdictions, dependants’ (survivors’) benefits are confined to a
spouse (or widow) and children. In others, the range of eligible dependants can
include siblings, parents, grandparents, grandchildren and other family members.
In these jurisdictions, it is usual for a spouse (or widow) and children of the
deceased, if any, to have priority. Subject to that, benefits may be payable to
other family members who were, or who would in the future have probably been,
dependent on the deceased.
Pensions to a surviving spouse are commonly payable for life. In some
jurisdictions, they are payable for a fixed term of years, or until a standard
retirement age. Periodic payments for a child usually terminate when the child
reaches a specified age. There are commonly provisions extending the payments
for a few years beyond that age when a child is undertaking full-time education,
or for life if the child is disabled.
Where there are surviving children and no surviving spouse, an allowance is
commonly payable to a foster parent. The amount is often equivalent to the
amount that would have been paid to a surviving dependent spouse, but the
duration is different. A foster parent’s allowance usually terminates when the last
child reaches a certain age, or sooner if the foster care terminates.
A legal marriage is not usually required to qualify for spousal benefits. A couple
who were cohabiting at the time of death and for a specified period prior to the
death are considered spouses. The period is commonly less, or there is no
minimum period, if there is a child of the union.
A legally married spouse who was separated from the worker at the time of death
may be disqualified from benefits in some jurisdictions, or entitled only to
reduced amounts. Where the deceased worker was supporting a separated legal
spouse and there was a cohabiting spouse, some jurisdictions provide for the
spousal benefits to be divisible between them, but the total payable is not
increased. In deciding on the apportionment, it used to be normal for a legally
married spouse to have priority, but the contemporary trend in some jurisdictions
is for the cohabiting spouse to have priority.
In most jurisdictions, it is not a disqualification that a marriage took place or
cohabitation began after the disability that caused the death.
Inflation adjustments
In some jurisdictions, monetary benefits are not adjusted automatically for
inflation, so that their values deteriorate over time, subject to such episodic
adjustments as may be legislated. In other jurisdictions, benefits have a stable
value by being indexed for inflation. This may take two forms. First, indexing of
the payments that apply to new claims, including indexing of the ceiling. Second,
indexing of the ongoing periodic payments that are being made in respect of
earlier claims. The indexing factor may be applied directly to the benefits, or it
may be applied to the wage rate on the claim, with consequential adjustments
being made to the benefits.
Taxation of benefits
In some jurisdictions, the benefits, or some of them, are subject to income tax,
and the tax is then commonly deducted at source. In other jurisdictions, the
benefits are not taxable income. Where this is so, the ceiling on the wage rate, or
on the level of benefits, is usually designed to ensure that a worker will not be
better off on compensation than when earning. As an alternative to a ceiling, this
result could be achieved by establishing the compensation rate as a percentage of
the wage rate according to a scale of percentages that descends at higher levels
of income.
Protection of benefits
To ensure that the benefits are available for the maintenance of the disabled
worker and dependants, some jurisdictions prohibit any assignment of the
benefits to creditors or others, and the benefits cannot be attached to satisfy any
judgement. In recognition of this statutory principle, some compensation
authorities also decline to accept any direction from a claimant to send
compensation benefits to the address of a lawyer.
There are several common exceptions. Where an employer has continued to pay
wages or has paid other benefits to a worker who has a compensable disability,
some jurisdictions provide for the compensation authority to reimburse the
employer for the lesser of the compensation benefits to which the worker was
entitled and the amounts paid to the worker by the employer. Where a claimant
has been receiving benefits from social security (welfare) pending the outcome of
the workers’ compensation claim, some jurisdictions provide for the social
security department (welfare office) to be reimbursed by the workers’
compensation insurer. Where a claimant with a compensable disability is failing to
support dependants, some jurisdictions provide for a portion of the compensation
benefits to be paid directly to those dependants.
Suspension of benefits
There are various provisions for the suspension of periodic payments. Common
examples are the absence of a disability claimant from the jurisdiction during a
period in which medical care is required, the unreasonable refusal of medical
care, the cohabitation of a surviving dependent spouse with another person, and
imprisonment of the recipient of the benefit. The significance of the suspension is
not always clear in the legislation. Where words are used to indicate suspension,
without any words being used to indicate disqualification, it may mean simply
that the payments are postponed, with the entitlement remaining intact, so that
the arrears are payable at the end of the suspension period. Sometimes words of
disqualification are used, or it is otherwise apparent from the context that no
benefits are payable at any time in respect of the suspension period.
Overpayments
The term “overpayments” refers to payments to which the recipient was not
entitled, or payments in an amount that exceeds the entitlement. An
overpayment might result from a mistake by the insurer, the recipient or a third
party, or it may be the result of fraud by the recipient or a third party. The
obligation of the recipient to repay the overpayment may sometimes depend
upon the circumstances; in particular, on the recipient’s culpability. The recipient
may:
have induced the overpayment by fraud, negligence, or failure to comply with
obligations to report information
have been innocent of the cause of the overpayment, but aware that it was
received, and may have deliberately or negligibly failed to inform the insurer
have been innocent of any contribution to the cause of the overpayment and
unaware of any overpayment.
Some workers’ compensation statutes provide that the insurer may recover
overpayments, though not necessarily in all circumstances. Where the legislation
is silent on the question, overpayments may be recovered under general legal
principles, though not in all circumstances. For example, in some jurisdictions, an
overpayment is not recoverable if it resulted from a mistake of law by the insurer
and the recipient had not induced the mistake.
Where an overpayment is legally recoverable, the methods of recovery are
generally the methods available in the particular jurisdiction to any other creditor.
For example, the available method might be a court proceeding for debt, with the
judgement being enforced by a seizure of the goods of the recipient. There may
be no right, or only a limited right, to recover an overpayment by deductions from
future benefits. Bearing in mind that compensation payments are commonly
spent by the recipient as they are received, and that future benefits are intended
to provide for future needs, there is sometimes an obligation under
compensation legislation to make all future payments as they fall due without any
set-off for past overpayments. Where that is so, any overpayment is only
recoverable by other methods of enforcement.
The actual practice varies. If it is discovered that an overpayment was obtained by
fraud, it is normal to seek recovery by all available legal methods of enforcement,
and there may also be a criminal prosecution. Where an overpayment occurred
by mistake, it may be written off, particularly if it was received in innocence.
Otherwise the overpayment may be enforced by ordinary legal processes, and in
jurisdictions where it is legitimate to recover overpayments by deductions from
future benefits, this may be done in instalments. However, compensation
authorities sometimes strive to avoid deductions from future benefits, even
where such deductions are legally permissible.
Where an overpayment has been made to a physician or other service provider,
the legal position is generally the same as for an overpayment to a disabled
worker, except that a right of set-off is more widespread, so that recovery can be
made by deductions from future bills, and that is a common practice.
Where an overpayment has been made to a disabled worker who has
subsequently died, recovery may be sought from the estate of the deceased
worker, but deductions are not generally permitted from any benefits that are
payable to dependants.
Commutations (redemptions)
Some jurisdictions permit the commutation (redemption) of all or a part of a
pension into a lump sum. This may take the form of:
a total commutation of the whole pension
a commutation of full pension benefits for a term of years, so that the pension
resumes after that period
a partial commutation that reduces the level of pension benefits for the duration
of the pension
a partial commutation for term of years, so that pension benefits are reduced
during that period, after which the pension resumes in full.

Among the jurisdictions that permit commutations, many do not permit all types,
and the first is the most common.
Commutation provisions are vulnerable to abuse by system administrators,
particularly by using a formula to calculate a lump sum that is much less than the
real capital value of the pension. The availability of a commutation may also make
a claimant vulnerable to predatory practices by service providers. It may also
mean that taxpayers lose the protection that the system was intended to create
by preventing a claimant from spending a lump sum and subsequently becoming
a burden on public funds.
To avoid these problems, some jurisdictions prohibit commutations (or have no
provision to allow them). Others provide that a commutation is only available at
the discretion of the compensation authority, and this discretionary power may
be defined (by the statute or by the compensation authority) to permit
commutations only for certain purposes. Notwithstanding that a commutation is
discretionary, some jurisdictions allow the denial of a commutation to be the
subject of an appeal, and where that is so, the administrative and adjudicative
cost of such discretionary powers can be unduly high in relation to the amounts
involved.
In jurisdictions where the system is administered by insurance companies, the
insurer (or the employer) or the worker, or both, may have a right, after some
initial period, such as 12 months, to require the redemption of all future periodic
payments by a lump sum. Failing an agreement, the amount may be determined
by the court. Such provisions are open to the objections that, in practice, the
worker receives substantially less than the full capital value of the future periodic
payments, and that the future income needs of the claimant become a burden on
public funds.
Rehabilitation and Care
Clinical facilities for rehabilitation, and the services of physicians and various
types of therapists, are generally provided under the heading of medical aid. The
rehabilitation provisions of workers’ compensation statutes usually relate to
other types of rehabilitation assistance. Some items, such as prostheses, are
provided under the heading of rehabilitation in some jurisdictions and under the
heading of medical aid (or health care) in others.
Rehabilitation assistance is part of the coverage under many workers’
compensation systems, and so is chronic care. Alternatively, workers’
compensation claimants may be eligible for such assistance under a general social
security system that covers all disabled people. In some jurisdictions, the social
security system may exclude workers’ compensation cases, but in others, it does
not, so that there is a measure of overlap, and assistance may be provided by
either.
The goals to be sought in the provision of rehabilitation assistance are commonly
not prescribed. Goal definitions produced at international conferences are found
in the literature of workers’ compensation, but they are seldom treated as the
guides for daily practice. In particular, there is an ambiguity in many jurisdictions
about whether the goal of a vocational rehabilitation programme should be to
maximize or improve employment opportunities for claimants, or whether the
goal should be to coerce them back to work.
To some extent, however, the goals of vocational rehabilitation are implicit in the
way benefits are provided for permanent disability. A pension by the physical
impairment method is most consistent with the notion that rehabilitation is
voluntary, and that therefore the overall goal of any programme of rehabilitation
assistance should be to expand the opportunities of claimants, so that the goals in
any particular case are the goals of the claimant. Use of the actual loss of earnings
method implies that rehabilitation is compulsory, that it is indistinguishable from
benefit control, that the goal of the programme in each case is to restore the
claimant to employment, or alternatively, to provide the evidence that will justify
a termination of benefits.
Where rehabilitation assistance is provided under a workers’ compensation
system, the services are commonly discretionary, particularly where a broad
range of services is offered. There has been a trend in recent years to legislate an
ostensible “right” to rehabilitation, but it is hard to define an enforceable “right”
in this context. The attempt to do so has commonly been accompanied by the
reduction of monetary benefits and new limits on the rehabilitation assistance
that may be provided.
For vocational rehabilitation, the assistance offered may include counselling,
training for job interviews, a placement service, support during a period of job
search, retraining, further education and sometimes relocation expenses. As well
as vocational rehabilitation, some jurisdictions offer social rehabilitation
assistance, such as equipment for hobbies or sports, courses on makeup,
assistance with social adjustment or assistance in the resolution of marital
problems. Social rehabilitation may be provided as a goal in itself, or in aid of
vocational rehabilitation. Chronic care may consist of electronic, pneumatic or
mechanical aids, or home help. Such assistance is usually provided under the
heading of “rehabilitation”, though in many cases it is really chronic care.
In some jurisdictions, rehabilitation services reached a peak during the 1970s and
have declined in recent years. In particular, the provision of placement services
has declined, and delays have developed in the provision of other services. Where
placement services are still provided, there has been some erosion of the
traditional principle that disabled workers should be placed in productive
employment. For example, they are now sometimes coerced or required to work
in telemarketing (making unsolicited advertising calls to people’s homes)
notwithstanding objections that this is a form of public nuisance and electronic
trespass. One aspect of the deterioration is that the provision of rehabilitation
assistance is now commonly perceived as a role for unqualified office workers
rather than professionally qualified and trained field workers.
Rehabilitation is commonly perceived as something that follows the occurrence of
a disability, but some jurisdictions recognize the value of preventive
rehabilitation; that is, rehabilitation assistance for the prevention of a disability,
even in cases in which none has yet occurred. For example, bad backs and certain
diseases from industrial contamination are often predictable, and assisting a
worker to obtain another job may sometimes be appropriate as a preventive
measure. Rehabilitation assistance for this purpose is not usually provided, but it
is done in some jurisdictions in some circumstances. Rehabilitation assistance may
then be one of the remedies available in a health and safety programme. A few
jurisdictions also have rehabilitation measures for the protection of a foetus, or a
newborn baby who is being breast-fed by the worker, where exposure of the
worker to contamination, or to some other condition of the employment, would
otherwise endanger the health of the foetus or baby.
The decision-making process for rehabilitation matters is the same as for
compensation matters in some jurisdictions. In others, it is different, with a
greater emphasis on discussion and consensus, and a reduced role for
adjudication and appeals.
In some jurisdictions, the costs of rehabilitation assistance are charged in the
same way as monetary benefits. In others, the costs of rehabilitation assistance
are charged to the general fund and spread over the classes, even though
experience rating may be in effect for the cost of monetary benefits. Since the
cases in which vocational rehabilitation assistance is needed are usually those in
which the accident employer is not offering continuing employment, this method
of charging the cost enables the rehabilitation decisions to be made without the
accident employer being involved as a party. In that way, this method avoids the
therapeutic damage of adversarial processes. Where the costs of rehabilitation
assistance are charged to the general fund, the costs of compensation for injuries
sustained during rehabilitation may be charged in the same way.
Obligations to Continue the Employment
In recent years, some jurisdictions have purported to create an obligation upon an
employer in whose service a worker became disabled by a compensable injury or
disease (the accident employer) to continue the employment of that worker.
Typically, the obligation commences when the worker has made a sufficient
recovery to return to some type of work that the employer can make available,
and continues for a period of one or two years. The enactment of such provisions
is usually accompanied or followed by a reduction in compensation benefits for
permanent disabilities.
In jurisdictions with a largely unregulated market economy, and where most
employment is not covered by collective bargaining, such provisions are counter-
productive. They detract from and tend to undermine the provision of any
genuine rehabilitation service. A worker with a permanent disability is not usually
assisted by a temporary “right” to employment. Moreover, these provisions
change the image of a disabled worker from that of a person whose continuing
employment with the same employer could be expected in the ordinary course of
things to that of a burden that the employer should bear. This change of image is
not confined to the cases that would have been a rehabilitation problem in any
event, and for this reason alone, these provisions can create rehabilitation
problems.
Given that the ostensible “right” is only relevant in cases in which the employer
would like to terminate the employment relationship, the “right” is inevitably
fragile. In most jurisdictions, an employment relationship can be terminated on a
variety of grounds, and these grounds for termination are not usually
extinguished by the worker’s “right” to continuing employment. Even if
employment is unlawfully terminated, the remedies may be difficult to enforce.
The “right” is, therefore, a fragile one, and notwithstanding its fragility, its
exercise, or the refusal of the worker to exercise it, are both grounds for the
termination of compensation benefits.
Disputes about what is suitable employment, having regard to the residual
disability, are commonplace, and they can be hard to resolve without an
evidentiary inquiry. Even when such an inquiry is conducted and a well-reasoned
decision is made, it may still have limited significance, particularly if the
circumstances are changing or the period of the obligation is expiring. When a
dispute about the obligation is resolved in favour of the worker, this may still not
produce a continuation of the employment. It generally produces a cash
settlement instead. Thus even when the outcome is “successful” for the worker,
the result is the delivery of a monetary benefit through a process that is highly
inefficient, and a cause of therapeutic damage.
The enactment of such a “right” also detracts from the provision of a genuine
rehabilitation service. Since the worker has an ostensible “right” to return to the
same employer, that tends to be perceived as what ought to happen, so that
assistance for alternative forms of rehabilitation are less likely to be considered.
For all of these reasons, legislation which was intended to create an obligation on
the employer and a choice for the worker turns out, in practice, to create an
obligation on the worker and a choice for the employer.
Some jurisdictions require the continuing employment of a worker who has
sustained a disability, regardless of the cause. Such provisions are probably
workable only in the context of collective bargaining or a highly regulated labour
market.
A few other jurisdictions prohibit the dismissal of a worker who is off work by
reason of a compensable disability, but do not prohibit the dismissal of such a
worker upon recovery from the disability.
Finance
Cost distribution
The cost of workers’ compensation is generally raised by premiums or
assessments that are paid by employers. Because of this, it is commonly asserted
or assumed that employers bear the cost of the system, but that is manifestly
incorrect. The burden of any tax may move from the party with the initial
obligation to pay, and there is a wealth of economic literature explaining that a
payroll tax is commonly an opportunity cost of labour. Part of the cost of workers’
compensation assessments (premiums) may rest with employers, but part of it is
passed onto labour in the form of lower wage rates or other benefits, and part of
it may be passed onto consumers. Also workers’ compensation benefits do not
provide a complete indemnity for the economic losses of disabled workers. To the
extent that these losses exceed any compensation received, these are costs of
occupational disabilities that are not shown as costs of the workers’
compensation system. These costs are borne for the most part by disabled
workers, though to some extent they may be passed on to others, such as family
members or creditors.
Balancing of accounts
The first step in the financial design of a system is a criterion for balancing
accounts, so that aggregate revenues and aggregate expenditures will be
approximately equal over time. In systems operated by insurance companies, this
is supposed to be done by adjusting premiums, so that the revenue will reflect the
claims cost experience. In social insurance systems, the legislation usually requires
accounts to be balanced in the same way, but there are often political pressures
to reduce the level of assessments, and then bring the expenditures into line with
the assessment decisions. Unless a government maintains the integrity to block
these pressures, ongoing conflict between the legislation and the political
pressures causes ongoing friction in the administration of the system, and in
adjudication. It can also cause unfunded liabilities to accrue.
Revenue and classification
Most workers’ compensation systems use industrial classifications and establish a
rate of premium or assessment for each class or sub-class of industrial activity.
The classification may be by reference to the end product, or by reference to the
job functions of employees. Classification by end product is easier from the
standpoint of administration and adjudication. Classification by reference to the
job functions of employees can increase the complexities of auditing, particularly
where some employees perform multiple functions.
Once a rate of assessment has been established for an employer, that rate is
usually applied as a percentage of the payroll. In jurisdictions in which there is a
ceiling on the wage rate for a claim, the same ceiling is commonly applied as a
maximum on the amount of pay per worker to which the percentage rate is
applied for assessment purposes. For example, an employer might be required to
pay 2 currency units per 100 units of payroll to a maximum of 50,000 units of
payroll in respect of any one worker per year. Usually the rates are revised
annually. While assessment as a percentage of payroll is normal, alternative
methods are sometimes found, such as assessment on the estimated value of
assets, or on the price of goods sold. Some systems also have a partial subsidy
from government.
Experience rating
In many systems, the premium or assessment payable by an employer will vary
from the standard rate for the class or sub-class to which the employer belongs by
reference to the claims experience of that employer, compared with others. This
is called “experience rating”. It is sometimes called “merit rating”, but that is a
misnomer, because the rate variations have no known connection with any type
of merit. Usually the formula for calculating the variations uses predominantly
claims cost experience, but it may include a variation by reference to other
factors such as the frequency of claims. Sometimes there is also a minimum
deemed cost for fatal cases. Small employers are commonly excluded from
experience-rating plans, or where they are included, the rate variations applied to
small employers may be more limited.
Experience rating is standard in systems administered by insurance companies. It
is sometimes used also in social insurance systems of workers’ compensation, and
its use in these systems has been expanding in recent years, but to a large extent,
it is incompatible with the rationale for their creation. A major advantage of a
social insurance system is that in the adjudication of claims, it can avoid
adversarial processes. The use of experience rating deprives the system of that
advantage.
In systems administered by insurance companies, experience rating usually
applies to all expenditures made on a claim. Sometimes that is also the case in
social insurance systems, but in some such systems, experience rating is confined
to the monetary benefits. It does not apply to medical aid or rehabilitation
expenditures. This is to minimize the use of adversarial processes for decisions on
those expenditures.
The rationale most commonly heard for experience rating is that it will create an
incentive for an employer to reduce the frequency and gravity of occupational
disabilities, but there is no credible evidence that it has that effect. The only
“studies” that purport to show experience rating having any beneficial effect on
health and safety use claims data as the measure of the effect. For several
reasons, claims data cannot properly be used in that way. Experience rating
creates an economic incentive for employers to prevent or discourage the filing of
claims, to withhold positive information, to oppose claims, to appeal decisions
that are favourable to claimants, to press claimants to return to work
prematurely, to seek personal medical information relating to claimants and to
require further medical examinations of claimants. Although some of these
practices are commonly legitimate, their extensive use makes it impossible to use
claims data as a measure of the “success” of experience rating in relation to
health and safety. These practices also increase the administrative and
adjudicative costs of the system; and because of the delays and therapeutic
damage that they create, they probably increase also the compensation costs.
Experience rating can create an incentive for an employer to facilitate the
rehabilitation of a disabled worker in some circumstances, but on the whole,
experience rating is probably negative in its influence on rehabilitation. It
commonly results in all soft tissue injuries being treated with suspicion. Such
attitudes can be a cause of anxiety and an impediment to rehabilitation.
Experience rating can also discourage an employer from hiring disabled people
and from continuing the employment of workers who become disabled. This is
primarily because the compensation cost of any subsequent disability can be
greater when its impact is compounded by the previous disability. To counteract
this negative influence of experience rating, some jurisdictions use a “Second
Injury Fund”. Part of the compensation cost of the subsequent disability can be
charged to that fund, rather than to the employer’s experience account. The costs
of this fund are spread over all assessment classes and all employers. Rules for
the use of the Fund vary, but the general principle is that where some pre-existing
disability or condition has contributed to the cause of a compensable disability,
has enhanced its gravity or otherwise increased its compensation consequences,
a portion of the compensation cost of the disability should be charged to the
Second Injury Fund.
These funds do not achieve their objective. This is partly because of other reasons
(real or perceived) why many employers avoid the employment of disabled
people, and partly because the transfer of costs to a Second Injury Fund depends
upon a judgement being made in claims adjudication after the subsequent
disability has occurred. Also the cost of processing applications for a transfer of
costs to a Second Injury Fund is another reason why experience rating increases
the overall costs of the system.
Experience rating would seem, at first impression, to improve equity in cost
distribution among employers. To some extent it does, but it also creates new
inequities. For example, applications for the transfer of costs to a Second Injury
Fund, or to other general funds, are more commonly made by large employers
who have staff or outside consultants engaged for that purpose. The result of
these transfers is to elevate the standard rate for the class or sub-class, with the
end result being a subsidy from smaller to larger employers.
Funding
In terms of a time dimension, the financing of workers’ compensation is arranged
in one of two basic ways.
Funding. The total revenues required in any year are determined by estimating
the total present and future costs of all compensable disabilities that occur during
that year (or of all claims received during the year).
Current Cost Financing (sometimes called pay-as-you-go). The total revenues
required in any year are determined by estimating the total costs that will be paid
during that year in respect of all current and past claims.

Variations on one of these positions are found, and so is some middle ground
between them. Funding requires substantial reserves to be established, and their
adequacy is commonly re-estimated each year. With current cost financing, some
reserve is required as a cushion, but it does not require repeated actuarial
calculations.
Where a system is administered by insurance companies, the general principles of
insurance law require that it must be funded. A social insurance system is in a
different position because a government can, by law, compel future
contributions. In practice, some social insurance systems have a statutory
requirement of full funding, and some use current cost financing. Others adopt a
different position, such as partial funding, or funding for some items of future
cost and not for others.
Current cost financing is marginally cheaper in the long run, but funding is
essential in many jurisdictions, such as smaller ones, and those that are heavily
dependent upon primary producing industries.
Non-payment of assessments or premiums
In systems administered by insurance companies, an insurer may be allowed to
terminate the insurance coverage if the premium is not paid. The employer is
then responsible for the compensation payments on future claims, and future
claimants are dependent on the continuing solvency of the employer. Where
there is a legal requirement to carry workers’ compensation insurance, and an
employer has failed to pay a premium, there is commonly a provision for criminal
sanctions, usually a fine or imprisonment, and this is in addition to the employer’s
liability for claims. The continuation of the business may also be stopped in some
jurisdictions.
Where a workers’ compensation system is one of social insurance, some
jurisdictions require or permit the coverage to be terminated when assessments
have not been paid by an employer. More commonly, the payment of
compensation is not dependent upon the assessments having been paid, and
termination of the coverage is not permitted as a response to any non-payment.
Each claim is a charge on the relevant class fund, and in some jurisdictions, it is a
charge on the whole fund.
In the event of non-payment of an assessment, various enforcement mechanisms
are used. Commonly they are similar to the enforcement mechanisms that are
available in the jurisdiction in relation to other forms of taxation. These methods
may include seizure of the employer’s property (including land and goods),
attachment of the employer’s bank account, and orders for the cessation of
business. In some jurisdictions, non-payment of the assessments is also a criminal
offence. Penalties may be payable in addition to the overdue assessments, and
the employer may also be required to reimburse the administering agency for the
costs of claims arising during the period of non-payment. Where an employer is
incorporated, there may also be some personal liabilities on the directors of the
company.
Vicarious Liability
This term refers to situations in which one person may be liable for the
obligations of another. Where the employees of one person (the “contractor”) are
used to doing work for another person (the “principal”) some jurisdictions provide
that in some circumstances, the principal is, in effect, a guarantor of the
obligations of the contractor in relation to workers’ compensation. Such
provisions commonly apply to work being done on construction sites, though they
also sometimes apply to other situations.
Health and Safety
In systems operated by insurance companies, the practice varies among
jurisdictions and among companies with regard to what role, if any, the insurer
will play in relation to occupational health and safety. Sometimes the insurer
plays little or no role. Sometimes the insurer undertakes a survey of risk, but
limited to a standard range of items. Sometimes the insurer may undertake a
more professional and sophisticated survey of risk. This is more common in
particular industries where the insurer may be undertaking other types of
coverage as well as workers’ compensation. Where surveys are undertaken, they
may be repeated later, or they may be used only for initial premium setting, with
the insurer using claims cost experience for subsequent premium adjustments.
Where workers’ compensation is a system of social insurance, the most common
position is that the workers’ compensation system supports the government
agency that has the regulatory jurisdiction in relation to occupational health and
safety. This support commonly consists of statistical information, and the
distribution of health and safety messages to employers, unions and workers. The
workers’ compensation system may also provide some other health and safety
services directly to employers, such as technical advice, or it may finance the
provision of services by industry associations (though the value of this is
controversial).
In some jurisdictions, the workers’ compensation agency also has the regulatory
jurisdiction of the government in relation to occupational health and safety. In
these jurisdictions, the workers’ compensation system can be, and sometimes is,
used extensively in aid of occupational health and safety. This use may include the
provision of health and safety information from claims records to programme
inspections and for other purposes, the sharing of some technical and
professional resources, and some sharing of support services. By far the most
valuable connection is the use of compensation assessment adjustments as a
sanction for the enforcement of occupational health and safety regulations and
orders. The assessment payable by an employer may be increased by reference to
hazardous conditions observed upon an inspection (not by reference to any paper
records). This is the only suitable and available sanction for the enforcement of
health and safety requirements that can be used in the broad range of situations
for which criminal sanctions are inappropriate or inadequate (including,
continuing high levels of toxic contamination).
The compensation system can also be used in other ways to provide a sanction
for the enforcement of occupational health and safety regulations. For example,
where a disability resulted from a serious neglect of regulations or orders by the
employer, or other serious negligence, the employer may be ordered to pay the
whole or part of the cost of the claim. Thus while fault on the part of an employer
is irrelevant as a general rule in workers’ compensation, it can be invoked in a few
jurisdictions by way of exception in extreme cases as a sanction for the violation
of health and safety requirements. Assessment variations by the use of health and
safety audits has no potential on a broad scale, but it can be done in limited
circumstances.
Claims against Third Parties
This heading refers to any civil claims that a disabled worker may have against
anyone who is alleged to have caused the disability, other than the employer. In
some jurisdictions, some of these claims are barred by the workers’ compensation
legislation. Where they are not so barred, some jurisdictions provide that the
worker may pursue the claim, but the defendant is entitled to have the damages
reduced by the amount that the claimant has received, or will receive, in workers’
compensation benefits.
Other jurisdictions provide that the insurer (the compensation authority, the
insurance company, or the employer, as the case may be) may take over the right
to pursue the claim against the third party. This is called “subrogation”. In some
jurisdictions, this right of subrogation is total. The insurer takes over the whole
claim; but if any amount is recovered above the compensation that has been or
will be paid, the insurer must account to the worker for the excess. In other
jurisdictions, the subrogation is partial. For example, the legislation might provide
that the insurer can pursue the claim to the extent of the compensation paid and
payable, while the worker can pursue the claim for the excess. Or it might provide
that the insurer can pursue the claim for monetary losses while the worker can
pursue the claim for non-monetary losses.
PART TWO: OTHER SYSTEMS
Social Insurance and Social Security
The term “social insurance” usually refers to a system of insurance administered
by government with the coverage being compulsory, and with contributions being
required from employers, employees or both, though there may also be a
contribution from general revenue. Such a system usually covers employees,
though the self-employed may be included, at least to some extent. A system may
be specific; for example, a workers’ compensation system may be one of social
insurance; or it may be broad, with benefits payable in the event of
unemployment, sickness, disability, pregnancy, retirement and death. It is the
broad social insurance systems that are discussed under this heading. The
benefits may be flat-rate or earnings related. There may be exclusions from the
coverage for particular industries or particular categories of employees, but the
exclusions are commonly less extensive than the exclusions under a system of
workers’ compensation.
The term “social security” is used with several meanings. In its narrowest
meaning, it commonly refers to a system of benefits paid by government out of
general revenue to people who qualify by reason of disability, old age,
unemployment or some other qualifying cause. Commonly there is a means test.
The system usually covers all people who are usual residents of the jurisdiction.
The benefits are usually flat-rate, though there may be a variation by reference to
dependants. The term “social security” is also commonly used in a much broader
sense to include these benefits, plus social insurance, medical care and social
services. In this chapter, the term “social security” is used in the narrower sense,
so that it refers to money benefits that are distinct from social insurance benefits.
Many countries do not have a separate system of workers’ compensation.
Disabilities and deaths that result from employment are covered under a broad
social security or social insurance system that includes disabilities and deaths
from other causes. Medical aid for disabilities resulting from employment is
usually provided in these countries under the same government system of
medical care that applies to disabilities caused in other ways. In some
jurisdictions, additional types or levels of medical care are sometimes provided
when a disability has resulted from employment, or certain services or treatments
may be free which involve a cost for disabilities that did not result from
employment.
For money benefits, disabilities and deaths that result from employment may be
treated in the same way as those that result from other causes, and this is
common with regard to short-term benefits, but in many jurisdictions, there is an
additional benefit, or a higher rate of benefit, when a disability resulted from
employment. This is common for permanent disabilities and it is sometimes found
also in fatal cases. The historical explanation is often that the broad social
insurance system replaced an earlier workers’ compensation system. This
structure may also be a way of complying with ILO conventions. Some systems
also include special benefits, or special levels of benefit, for those in particular
occupations.
The coverage of broad social insurance systems is generally universal, applying to
all those who live or who work in the country, though there are commonly some
exceptions for foreign nationals.
Contributions for the cost of the system are commonly required from employees,
and from employers in respect of their employees. The contributions may be at a
standard rate (which is usual if benefits are flat-rate), or they may be earnings-
related (which is usual if benefits are earnings-related). A certain personal
contribution record may be a prerequisite for benefits, and the contribution
record of a worker or the employer of the worker may also be relevant to the
level of benefits. Where additional or higher benefits are payable for disabilities
or deaths that result from employment, the costs of these provisions is commonly
a charge on the employers’ contributions.
Where contributions and benefits are earnings-related, there is commonly a
ceiling applicable to both. Thus the insurance coverage commonly applies only to
income at lower levels, and the costs of the system are commonly borne wholly
or predominantly from income at the lower levels. The benefits under a general
social insurance system are commonly at lower levels than under workers’
compensation systems. However, various supplements are commonly found, such
as supplements for dependants.
Administration and primary adjudication are usually in a government department.
If there is any dispute, it is usually between a claimant and the department.
Experience rating is not generally used in social insurance systems. Hence an
employer is not usually seen as having an interest in the result of any particular
claim and is not considered a party to the claim, though employers may
sometimes be required to supply information. Appeals may lie within the
department or to a separate tribunal. Appeals to the ordinary courts are
sometimes possible, but the courts are not readily available to deal with social
insurance cases in any significant volume.
Under a broad social insurance system, there is often a waiting period of three
days. For temporary disabilities and during the initial phase of permanent
disabilities, periodic payments are made. They are commonly called a “sickness
benefit”, though they are paid also in injury cases. The cause of a disability is
generally irrelevant, but the benefit is usually payable only if the disability causes
an absence from work.
Pensions are normally paid for permanent total disabilities. In many jurisdictions,
pensions are also paid for permanent partial disabilities, though in some
jurisdictions, this benefit is limited to disabilities that have resulted from
employment. Partial disabilities that are classified as minor may be compensated
by a lump sum or not at all. The distinction between total and partial, and the rate
of pension for partial disability, depends in some jurisdictions on the estimated
impact of the disability on the earning capacity of the claimant. In others, it may
be measured by the degree of physical and mental impairment. Sometimes there
is a blended formula in which both factors are considered. In some jurisdictions, a
partial disability is classified as total during any period of hospitalization for the
treatment of that disability. Commonly there are additional benefits for special
needs, such as attendant care.
Death benefits commonly include a lump sum for funeral costs, a pension for any
surviving spouse, or in some jurisdictions for any surviving widow, and periodic
payments for surviving children.
Many features that are commonly found in workers’ compensation systems are
uncommon, or not found at all, in broad social insurance systems. These include
optional coverage, commutations, industrial classifications, experience rating,
funding and a role in occupational health and safety.
In some jurisdictions that have a separate workers’ compensation system, the
claimants on that system are disqualified from receiving disability benefits under
a general social insurance or social security plan. In other jurisdictions that have a
separate workers’ compensation system, the total or partial stacking of benefits is
permitted. In some of these jurisdictions, the general social insurance system is in
the position of first-payer, both with regard to medical care and monetary
benefits, with the workers’ compensation system topping up the benefits,
sometimes to the extent of a full indemnity for all losses.
Rehabilitation assistance is commonly provided under social insurance and social
security programmes. The range of assistance varies, as it does under workers’
compensation systems. There is a contemporary trend in some countries to
reduce the scope of disability pensions in favour of vocational rehabilitation
assistance. The problem with this development is that the curtailment of
monetary benefits may be real while the substitution of rehabilitation assistance
may be illusory in view of the economic and political developments that are
making vocational rehabilitation more difficult. The viability of social insurance
systems is also currently threatened in some countries by the weakening of the
State, the weakening of organized employment, the expansion of the “informal
economy”, of self-employment, and of very small businesses.
These systems are discussed more fully in works on social security and social
insurance.
Accident Compensation
A few jurisdictions have a scheme of accident compensation or accident insurance
administered by government. These schemes differ from workers’ compensation
in that they cover all injuries by accident, regardless of the cause, plus a category
of occupational diseases, or all diseases resulting from employment. These
schemes are in lieu of workers’ compensation and the personal injury component
of motor vehicle insurance, but they also cover injuries that occur at home, during
sports, or in other ways. The benefits are typical of the benefits that are
commonly found in workers’ compensation, including medical aid, monetary
compensation and rehabilitation assistance. These schemes differ from broad
social insurance systems in that they do not cover most disabilities and deaths
from diseases that are not shown to have resulted from employment. For this
reason, they do not cover the majority of disabilities and deaths.
Sick Pay
In some jurisdictions, the law of employment requires employers, or some
employers, to continue the payment of salary or wages, at least to some extent,
when an employee is unable to work because of sickness or injury. Also,
regardless of any legal obligation, it is common for many employers to continue
the payment of salary or wages for some period when an employee is unfit for
work. Although this is often called “sick pay”, these provisions usually apply to
absences from work that are caused by injury as well as sickness or disease. These
arrangements are commonly informal, particularly among small employers. Larger
employers commonly have contractual sick pay schemes, sometimes the result of
collective bargaining. Some jurisdictions have a statutory scheme of sick pay.
A workers’ compensation system, where applicable, is usually in a first-payer
position, so that sick pay is inapplicable to cases that
are covered by workers’ compensation, or it provides a supplementary
amount of income. Alternatively, the employer may continue to pay the wages
and receive a total or partial reimbursement from the workers’ compensation
agency. In a few jurisdictions, sick pay covers an initial period for all disabilities,
with workers’ compensation providing the benefits after that period for those
disabilities that qualify.
In jurisdictions that do not have a workers’ compensation system, sick pay
generally applies to disabilities that result from employment as well as those that
result from other causes. The sick pay may then provide the total income of the
worker, or it may supplement a social insurance benefit.
Disability Insurance
As an alternative to sick pay, short-term disability insurance (sometimes called
“weekly indemnity insurance”) is organized by some employers in some
jurisdictions. It is similar to sick pay except that it is administered by insurance
companies.
Long-term disability insurance is organized by many employers in many
jurisdictions by arranging a group policy with an insurance company. In the
organized sector, these policies are often the result of collective bargaining. In the
unorganized sector, such a group policy is sometimes arranged at the initiative of
the employer. The premiums are commonly paid by the employer, though
sometimes by the employees or with a contribution from the employees.
In jurisdictions that have a workers’ compensation system, these policies
generally exclude disabilities that are covered by workers’ compensation. In other
jurisdictions, the coverage of these policies may include disabilities that result
from employment. The benefits usually take the form of periodic payments,
though they may be commuted to a lump sum.
These policies are commonly limited to cases of total disability, or they include
certain cases of partial disability but only for a limited period. In other ways too,
the coverage of these policies is more restricted than workers’ compensation. For
example, the benefits may be subject to termination after two years if the
claimant is capable of any type of work, even though it may be at a much lower
rate of pay, and even though the claimant may only be able to do that work for a
few hours each week. It is also normal to terminate the benefits after an initial
period on the ground that the claimant is capable of some type of work, even
though that type of work is unavailable to the claimant.
Employers’ Liability
Most jurisdictions have, or have had, a law that makes employers liable in some
circumstances for disabilities caused to their employees. Commonly, the criteria
of liability are negligence by the employer, by management personnel, or by a
fellow worker, or some breach of statute law or of a health or safety regulation.
This liability may be the creation of the courts through case-law, the creation of
statute, or it may be part of a civil code.
The compensation takes the form of a lump sum, known as “damages”. The
amount may include an estimate of economic losses (usually loss of earnings) and
an intuitive award for non-economic losses (such as pain and suffering,
disfigurement, sexual dysfunction, impairment of social activities and loss of
expectation of life). The lump sum will cover estimates of future and past loss. In
fatal cases, the damages recoverable by dependants may include the loss of their
participation in what would have been the future earnings of the worker, and in
some jurisdictions, an award may also be made to dependants for non-economic
losses. If negligence by the worker was a contributing cause, that would bar the
claim in some jurisdictions. In others it would reduce the damages.
In jurisdictions that do not have a workers’ compensation system, the law of
employers’ liability usually remains in full effect, though eligibility for benefits
under a broad-based social insurance or social security system may reduce the
damages. In some jurisdictions, employers’ liability remains in effect, but its scope
is more confined. Where a disabled worker in some jurisdictions receives benefits
under a broad social insurance system, that system is subrogated to the claim
against the employer.
In jurisdictions that have a workers’ compensation system, but one that does not
cover all industries or all occupations, the law of employers’ liability usually
remains in full effect for those who are not covered by workers’ compensation.
Where a disability or death is covered by a workers’ compensation system, this
usually has one of the following consequences for employers’ liability.
Employers’ liability remains in effect, but a claimant must elect whether to claim
workers’ compensation benefits or pursue the liability claim against the employer.
Where the worker elects to pursue the employers’ liability claim, that
extinguishes the workers’ compensation claim in some jurisdictions. In others, the
workers’ compensation claim may be pursued if the employers’ liability claim
fails.
Employers’ liability remains in effect, but there is a set-off so that damages can
only be recovered for any losses in excess of workers’ compensation benefits.
Employers’ liability remains in effect, but it is confined to damages for non-
monetary losses.
Employers’ liability claims are excluded for workers who are covered by workers’
compensation, but with some limited exceptions, such as injuries that were
caused “intentionally” by the employer, or that occurred on a highway.
Subparagraphs 1, 2 or 3 may then apply.
Employers’ liability claims are excluded for workers who are covered by workers’
compensation. In some jurisdictions, this exclusion also covers claims for damages
for personal injury against fellow employees, against any other employer who is
covered by the workers’ compensation system, and against any worker of such
other employer, as long as the claim is based on conduct of the defendant that
occurred in the course of employment or business.

In jurisdictions in which employers’ liability remains in effect for cases that are
covered by workers’ compensation, the workers’ compensation benefits seem to
be more restricted, and that is to be expected.
Where employers’ liability claims are prohibited, the prohibition often applies
only to claims for damages for the injury or disease. Thus in some jurisdictions, a
claim may still lie on other grounds. For example, a claim for damages may still lie
against an employer for impeding the processing of a workers’ compensation
claim, such as by failing to comply with statutory obligations to maintain or supply
data relating to the exposure of a worker to contamination. Also the prohibition
of employers’ liability claims usually applies only to disabilities that are
compensable under the workers’ compensation system. Thus if a worker becomes
disabled because of negligence by an employer, but is not eligible for workers’
compensation, an action for damages against the employer would not be barred.
For example, in some jurisdictions, compensation is not payable for occupational
stress; nor is workers’ compensation payable for a disability to a child resulting
from a pre-natal exposure or injury to a parent during the course of employment.
In these situations, an action for damages against the employer would not usually
be precluded by workers’ compensation legislation.