Why do injured workers get so much damages?
Dropped jaws, gasping, head shaking and wide eyes. This is sometimes the reaction of employers when we tell them our assessment of damages in a worker’s claim for damages. They ask, You’re kidding, right?, or How can they possibly get that much?
To be fair, this reaction is not borne out of meanness. Rather, it is because most employers do not have a working knowledge of how damages are calculated and assessed. Once it is explained, the heads stop shaking, the gasping stops and the response is, Well, alright then.
Why does it seem like injured workers get so much in damages, and how is it that damages are calculated?
While it may seem like it to some, being awarded damages is not the same as winning the lottery. The purpose of workers compensation law in Queensland is to restore the injured worker to the financial position they would have been in had the injury not occurred.
In a typical claim for damages under the Workers Compensation and Rehabilitation Act 2003 (Qld), damages are comprised of the following categories:
General damages are for the worker’s pain and suffering and are assessed according to specific injury examples listed in the Workers Compensation and Rehabilitation Regulation 2014. Assessment of these damages is heavily regulated. In negotiations, this head of damage is usually not controversial;
Past and future special damages are out of pocket medical, vocational and other expenses which are usually readily ascertainable and not in dispute;
Past economic loss is the loss of the worker’s wages since the incident. This is usually capable of a fairly accurate assessment;
Future economic loss is the assessment of how the injury will affect the worker’s capacity to earn, calculated into the future. It is by far the big ticket item in any claim for damages, and because it involves an element of crystal ball gazing, it is the most controversial.
So just how is future economic loss assessed and calculated?
Reasonable minds can differ when predicting the future. If you gave the same claim to 10 lawyers, asking them to assess future economic loss, there would likely be 10 different assessments. However, lawyers (and judges) do not just pluck a figure out of the air or go with their gut.
Many factors are considered when assessing future economic loss. Not in order of importance, they are:
Precedents – The courts publish their decisions showing how loss is calculated. Lawyers will often refer to precedent cases to determine what damages might apply in the case at hand. However, the past cases, whilst helpful, are just a guide, because no two plaintiffs or injuries are ever exactly the same;
Expert evidence – In any damages claim a number of experts will give evidence on how an injury will affect a worker’s capacity to earn in the future. The experts are usually orthopaedic surgeons, psychiatrists, occupational therapists, occupational physicians and in some cases, forensic accountants;
Past earnings – Workers are obliged to submit tax returns and other financial information when making a claim for damages. These documents show whether a worker has historically a low or high earnings history prior to the incident. This is often an important factor to assessing future loss;
Post–incident earnings – The extent to which an injured worker is earning income after the incident is also important to assessing future loss;
Medical records – Just how much a worker sees his or her GP or other medical professionals post – incident, to obtain follow up treatment and / or to manage symptoms, is sometimes important to understanding how an injury will affect one’s capacity to work;
Particular vocations – The courts recognise that in some vocations working beyond a certain age is unlikely. For instance, in Hughes v Tucaby Engineering Pty Ltd [2011] QSC 256 the court stated that manual labourers rarely work past the age of 60 years;
Vicissitudes discounting – The “vicissitudes of life” are future events which are entirely unrelated to the work injury. The court recognises that the future may bring about changes in circumstances to a plaintiff which might affect their earning capacity, such as a car accident or the development of a terminal illness. Typically future economic loss is discounted 10% to 15% depending on the age of the plaintiff, but it can be discounted further if the plaintiff has a pre-existing condition which would likely have become symptomatic in future;
The Discount Tables – In personal injury litigation, discount tables are used to calculate the present lump sum value of a future loss award. The two most common are the 5% tables and the deferred multiplier:
The 5% tables apply a particular discount to a weekly loss over a number of years. Say for instance a worker is assessed as having an ongoing loss of $200.00 per week for 20 years. Without discount, such a loss would $208,000.00 ($200.00 x 1,040 weeks). Applying the 5% table discount, the loss is $133,200.00. The idea is that if the plaintiff invests that present lump sum it would eventually materialise to an amount approaching $208,000.00 over a period of 20 years;
The deferred multiplier is applied to a particular loss which will occur at a distinct point in the future. Say a worker has a capacity to work at present, but has to have further surgery in two years, after which his / her capacity to work will decrease. In such a case the lump sum is discounted by the 2 year deferral rate, which is 9.3%. Again, the idea is that if that plaintiff invests the present lump sum (for 2 years), it will materialise in time into a non-discounted sum.
Some recent examples of future economic loss awards assessed by the courts are these:
In Schafer v Glendale RV Syndication [2022] QDC 263, the Plaintiff, a 59 year old chef, injured her shoulder from lifting a heavy oven tray. Post – incident, the Claimant could not work as a chef, but could work as a nursery assistant on reduced hours. The Court allowed her the difference between her wages as a full time chef and a part time nursery assistant ($612.00 net per week), for 8 years (ie to retirement age of 67), discounted on the 5% tables. This equated to $211,752.00. It further discounted 25% for vicissitudes taking into account her pre-existing shoulder condition and the probability that future degenerative change in her shoulder would impact upon her working capacity in years to come. This resulted in a future economic loss award of $158,814.00;
In Walker v Greenmountain Food Processing Pty Ltd [2020] QSC 329 the Plaintiff, a 37 year old maintenance manager at a meatworks, suffered multiple serious injuries, including a brain injury, when he fell through a roof. The court found that had the incident not occurred he probably would have continued to work as a maintenance manager and perhaps obtained a more senior management role based on his qualifications and experience. Whilst the Claimant continued to work post – incident as a maintenance manager, he could not perform all the requirements of the role. The court accepted evidence from an occupational therapist that he could not work in future as an electrician (his chosen vocation). The court had to consider the prospect of his obtaining full time work if he lost his current employment and his ability to retrain given his cognitive and physical limitations. It also had to consider, amongst other things, the prospect of his remaining in full time employment in the meatworks, an industry which is extremely competitive and in which changes in company ownership were likely. There were many competing factors which made a precise mathematical calculation impossible. Ultimately, as a starting point for calculations, it allowed the Plaintiff a loss of about 78% of his pre-incident earning capacity, discounted on the 5% tables, but deferred it 5 years taking into account the likelihood he would remain in his current employment for 5 years. This calculated to $870,000.00. It then applied a vicissitudes discount of 12% having regard to the Claimant’s young age, good health, qualifications and work ethic, to arrive at a total award of $765,600.00.
The above examples involve future economic loss awards which might seem like stacks of money, but the awards were designed to compensate the injured workers for long periods of time. In the case of Ms Schafer, it was 8 years of reduced work capacity. In the case of Mr Walker, it was 3 decades.
In each case the court considered the Plaintiffs unique circumstances, the medical evidence and applied a number of discounts.
About the author
Duncan Hutchings is a Consultant of Hughes & Lewis Legal
Contact
If you would like further information about how future economic loss is calculated, or how damages are calculated more generally, please do not hesitate to contact us on (07) 3218 1262.
Alternatively, you can visit the WorkCover website.