20 August 2020: Permanent Impairment: When to pursue common law damages v. a lump sum payment

When can an employee pursue common law damages, per section 45 of the Safety Rehabilitation and Compensation Act?

If the employee believes that his/her injury has been the result of the negligence of their employer, the employee is able to pursue common law damages per section 45 of the Safety Rehabilitation and Compensation Act (the Act).*

The employee must satisfy the legal thresholds for a negligence claim. Firstly, the employer owed the employee a duty of care, this is generally satisfied by virtue of the employer/employee relationship. Secondly, the employer consequently breached this duty of care. The employee must prove employer’s negligence, either as a positive action that falls short of the duty of care owed, or an omission, a failure to act reasonably causing injury to the employee.

An employee must be successful in proving the employer’s negligence. There is always risk that the employee may or may not be successful in legal proceedings when arguing that the employer’s negligence caused the claimed injury. Legal advice must be sought in relation to the viability of this argument. 

The employee must also have suffered a minimum threshold of permanent impairment: 10% (most injuries) or 5% (hearing loss) or 1-0% (loss of a finger or toe). 

*An employer can also held vicariously liable for the negligence of another employee.


Does the employee need a positive, permanent impairment determination before making an election?

If your employer rejects the claim for permanent impairment, perhaps arguing that the impairment is not work related, the employee cannot then decide to make an election and pursue common law damages.1

The employee will be required to appeal this determination through the Tribunal before turning his or her mind to whether a common law claim is viable.

However, if there is no determination or if the employer’s determination accepts permanent impairment, then then the option to pursue common law damages in available to the employee.2 Without a determination however, the employee bears the burden of proving the permanent impairment thresholds.


What is an “election” (an employee must “elect” only one pathway)

The Act requires the employee to choose between the action to sue for common law damages or to pursue a lump sum permanent impairment entitlement. The employee cannot claim both. If the employee decides to pursue common law damages, he or she must sign an election form, which is essentially a waiver relinquishing the right to claim for a lump sum. Similarly if a lump sum is accepted, a common law claim cannot be pursued.


Timeframe to bring a common law damages action

The NSW Court of Appeal in Hobbins v Commonwealth of Australia3 held that the right of action only commences at the time of election.

The right of action starts at the time an injured employee elects to pursue common law proceedings.  The three year limitation period starts from the date the right of action commences (the date the written election is signed by the employee).


Maximum compensation available for common law action

The maximum amount of damages that can be awarded under a section 45 election, is $110,000.


Does a common law damages impact an employee’s existing Comcare entitlements?

A lump sum entitlement is not payable if the employee elects to pursue a common law damages claim, statutory benefits should otherwise remain unaffected.


Can the employee cancel the section 45 action once commenced?

Once the employee elects to pursue a section 45 common law action, they cannot cancel it and revert to a lump sum permanent impairment action. It is in irrevocable election.


What is the key difference between a permanent impairment claim and pursuing common law damages?

The employee must satisfy that as a result of the employer’s negligence the employee has suffered the claimed injury; Compensation awarded; Maximum compensation per section 45 (common law) is $110,000 where permanent impairment lump sums are commensurate with the degree (percentage) of impairment. Generally, a minimum 10% permanent impairment assessment results in a payment of between $23,000 and $50,000 depending on the non-economic loss component. Timeframes; Permanent impairment claim, the injury must have stabilised (although sometimes interim impairment can be claimed); common law damages claim, three years from the date of election.  


By Zoe Papageorgiou


1Walsh v Commonwealth (1998) NSWSC 223.


3(2003) NSWCA 206.

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