Date amended:
External
Policy

13.1 What is a 'Former Employee'?

'Former employee' is a term with a particular, defined meaning for the SRCA. Note, that 'former employee' does not mean an ex-member of the ADF.

Division 3 of Part X of the SRCA sets out special transitional provisions for weekly incapacity payments for certain employees who were incapacitated before the commencement of the SRCA on 1 December 1988. These special provisions apply only to 'former employees', as defined in S123:

'Former employee' means a person who, immediately before the commencing day, was receiving weekly payments of compensation under the 1971 Act in respect of an injury resulting in an incapacity and had ceased to be an employee within the meaning of that Act before that day.'

13.2 Essential Requirements for 'former employee' status

The essential requirements for a person to be a 'former employee' are:

  • he/she was receiving weekly payments of compensation immediately before 1 December 1988 (the 'commencing day' of the SRCA), i.e. actually on 30 November 1988, and
  • he/she had ceased to be a Commonwealth employee before 1 December 1988.

It is important to note that the person must actually have been receiving weekly compensation, it is not sufficient that they were entitled to compensation at that day. In the case of Comcare v. Neil (1993) the Federal Court decided that the phrase 'was receiving' should be given its natural meaning, i.e. it is not sufficient that a person was simply entitled to receive the 1971 Act's incapacity payments on 30 November 1988. That person must have actually been, as a historical fact, in receipt of payments made in respect of that day, to qualify as a 'former' employee.

Consequently, a retrospective determination – i.e. one made today under the SRCA – that a person was entitled to incapacity payments on the 30 November 1988 does not mean that this person is a 'former'.

This is illustrated by the AAT decision in Re Delaney and Comcare where the Office of Commonwealth Employees Compensation accepted liability for the applicant's injury on 9 July 1987, but a rate of incapacity payment was not determined until 1991 because of delays in obtaining medical reports and in the determination process. The Tribunal, following Comcare v. Neil, held that it was necessary for the applicant to be in actual receipt of weekly compensation; being entitled to receive compensation did not bring him within the definition of "former employee".

13.3 Significance of being a 'Former Employee'

The significance of the Section 123 definition is that the current incapacity periods of 'former employees' are to be paid under Sections 131 to 137 of the SRCA. These are different transitional provisions and they specify a scheme of payment different to either that of the 1971 Act or of the SRCA.

13.4 Distinguishing 'Former Employees' from others

The vast majority of eligible former employees were identified as such in December 1988. Occasionally, however, special cases arise and must be considered by delegates.

13.5 Former employees who cease payment and later re-establish entitlement

If a former employee ceased receiving incapacity payments (e.g. because of improvement in their condition) and subsequently re-establishes an entitlement to compensation, whether for the original injury or a fresh injury, they must continue to be treated as a former employee. The rule is: 'Once a former, always a former'.

13.6 Benefits were suspended or wrongly cancelled as at 1 December 1988

If weekly compensation was suspended or cancelled as at 30 November 1988, and it was later reinstated (in respect of that day) by the Administrative Appeals Tribunal, or on a reconsideration, the person is to be treated as 'receiving compensation' for the purposes of the definition of former employee.

13.7 Compensation of 'Formers' and effects of awards of damages

Under S99 of the 1971 Act, weekly compensation for incapacity was not payable to an employee who recovered lump sum damages (i.e. from a civil action) until the amount of compensation foregone equalled the amount of damages received. Where the lump sum was large, this suspension of compensation payments could extend for 10 – 20 years.

In these cases, when compensation once again becomes payable, the person may be entitled to be treated as a former employee.

The person should be treated as a former employee if investigation clearly shows that:

  • they retired from Commonwealth employment before 1 December 1988, and
  • their entitlement to payment of weekly compensation was suspended under S99 of the 1971 Act, before 1 December 1988, because of the recovery of damages.

Note: This does NOT include situations where compensation was redeemed by payment of a lump sum.

Before compensation is paid, evidence must be obtained which demonstrates that the compensation which would have been paid during the intervening period equals or exceeds the common law award. The following points should be noted:

  • contemporaneous medical evidence must support the proposition that the person was incapacitated and identify the period or periods of incapacity
  • medical expenses should be supported by receipts or accounts
  • rates of compensation should be calculated at the applicable rate under the legislation applying at the time for each period of proven incapacity
  • periods of incapacity before 1/12/1988 should be calculated under the 1971 Act (usually Ss45 or 46). Under the 1971 Act, generally the first 26 weeks of incapacity were paid at 100% of NWE and thereafter statutory rates applied.

13.8 'Current Employee' or 'Non-former Employee'

For policy and administrative purposes, a person is often described as a 'current employee' or 'non-former employee'. These terms have no statutory basis, but they are a convenient way of describing any person covered by the SRCA who is not a former employee.

A 'current employee' may have been injured, and have retired, before 1 December 1988, the critical issue of distinction is whether they were receiving weekly compensation at the commencing day.

This distinction means that it is both possible and correct for two people, who received similar injuries in the same training accident before 1 December 1988 and who retired at about the same time, to have quite different compensation entitlements.

13.9 Implications of being a former employee

Division 3 of Part X of the SRC Act (ss 131 - 137), which sets out transitional and savings provisions, provides incapacity compensation benefits for former employees which are generally more favourable than the incapacity benefits available to current employees. In particular, former employees continue to receive weekly incapacity compensation after age pension age, a benefit which is not available to current employees because of the age bar in s 23(1) in Part II of the Act.

Note, however, that s 134 reduces the amount of compensation payable to former employees, when the former employee reaches age pension age, by 5% for each year since the commencement of the Act. This reduction ensures that, after 2008, former employees born before 1 January 1954 (and who have a pension age of 65 years old) will not receive compensation once they turn 65, and will be in the same position as those who were injured after 1 December 1988. Former employees born after 1 January 1954 (and who have a pension age of 66-67 years old) will not receive compensation once they reach age pension age (which is dependent on their birthdate). Former employees who turn 65 before 2008 will continue to receive the appropriate reduced rate of compensation until their incapacity ceases or until their death.

A new s 134(2), which was inserted into the SRC Act by the Industrial Relations and other Legislation Amendment Act 1995 with effect from 15 January 1996, makes it clear that the reduced rate of weekly compensation paid under s 134 remains frozen. Neither s 8 (which provides for calculation and indexation of normal weekly earnings) nor s 13 (which provides for calculation and indexation of certain compensation benefits in accordance with the consumer price index) apply to the reduced amount of compensation calculated in accordance with s 134(1).

13.10 Compensation Entitlement immediately before 1/12/1988

The person’s compensation entitlement immediately before 1/12/1988 is relevant to calculation of the amount of weekly incapacity compensation paid to former employees under the transitional provisions in Division 3, Part X of the SRC Act. Specifically, this amount is the "1971 amount" as defined in s 123 of the Act:

"1971 amount", in relation to a former employee, means the amount of compensation that was, immediately before the commencing day, payable per week to the former employee under the 1971 Act.

The "commencing day" of the SRC Act was 1 December 1988.

The "1971 amount" is used in a number of sections in Part X:

  • s 131(3): compensation for former employees under 65 who are in receipt of superannuation benefits, are unable to engage in suitable employment, and whose "total benefit" (superannuation + compensation) was between 70% and 94% (inclusive) of NWE at 1/12/1988;
  • s 132: compensation for former employees under 65 who are not in receipt of superannuation benefits and are unable to engage in suitable employment;
  • s 135: compensation for former employees aged 65 and over on the commencing day who were in receipt of superannuation;
  • s 136: compensation for former employees aged 65 and over on the commencing day who were not in receipt of superannuation;

13.11 NWE at 1/12/88

The person's normal weekly earnings (NWE) as at 1/12/1988 (the commencing day of the SRC Act) is relevant to calculation of the amount of weekly incapacity compensation paid to former employees under the transitional provisions in Division 3, Part X of the Act.

NWE at 1/12/1988 is applied in two sections in Part X:

  • s 131: compensation for former employees under 65 who were in receipt of superannuation benefits and were unable to engage in suitable employment on 1/12/1988;
  • s 132: compensation for former employees under 65 who were not in receipt of superannuation benefits and were unable to engage in suitable employment on 1/12/1988.

Under the 1971 Act, Average Weekly Earnings (AWE) were a ceiling for incapacity benefits. As such, they were not required to be calculated in every case where a client was incapacitated, and the procedures for calculation were complex and time consuming.

The following policy has been adopted for establishing NWE on 1 December 1988, the commencing day of the SRC Act.

13.11.1 Where AWE was calculated

Where an Average Weekly Earnings figure (AWE) had been calculated under the 1971 Act, this amount is deemed to be the NWE under the SRC Act from 1 December 1988.

13.11.2 Where AWE was not calculated

Where the client was no longer employed by the ADF on 1 December 1988, the NWE figure is the salary according to the military pay scales (at 1/12/1988) for the rank of the client at discharge.

Note: This policy must be applied using common sense. Where it is known, or it can be established by evidence, that the client received additional special allowances or regular overtime payments, these should be taken into account in the usual manner for calculating NWE under the 1988 Act.

13.11.3 Capable of Engaging in Any Work

Whether the person is capable of engaging in any work is relevant to the amount of compensation payable to former employees under Part X of the SRC Act.

The capacity of a former employee to engage in any work arises in the following circumstances:

  • s 131 applies to former employees under 65 who are in receipt of a superannuation pension and are unable to engage in any work;
  • s 132 applies to former employees under 65 who are not in receipt of a superannuation pension and are unable to engage in any work;
  • s 132A applies to former employees under 65 who are capable of earning an amount in any work (in its form on and after 1 April 2002).

On 1 April 2002, s 132A was amended so that the section now refers to the former employee being "capable of engaging in any work", aligning this provision with the employment test in ss 131 and 132. Before the amendment, the test under this section was whether the employee was "capable of engaging in suitable employment".

Where s 132A applies, the amount that the client is able to earn in any employment (until 1 April 2002 earnings in suitable employment) is subtracted from the compensation otherwise payable. This amount is collected in a subsequent question.

Sections 131, 132 and 132A refer to "any work". The Federal Court and the AAT have suggested, in relation to ss 131 and 132, that this should be read as a reference to "any suitable employment". However, amendments to s 132A(2) and (3) which commenced on 1 April 2002 make it clear that, for the purposes of s 132A, all earnings from work (including self-employment) are to be taken into account as AE. Section 132A is not limited only to earnings from suitable employment, as defined in s 4(1).

13.12 In Receipt of a Pension on 1 December 1988

This question arises from the application of Division 3 of Part X, which sets out special transitional provisions in relation to weekly incapacity compensation for certain former employees. In particular, whether the claimant was in receipt of a pension under a superannuation scheme on the commencing day of the SRC Act (1/12/1988) is directly relevant to:

  • s 131, which applies to former employees under 65 who were in receipt of a superannuation pension on 1/12/88 and are incapable of engaging in work;
  • s 132, which applies to former employees under 65 who were NOT in receipt of a superannuation pension on 1/12/88 and are incapable of engaging in work;
  • s 132A(2), which applies to former employees under 65 who were in receipt of a superannuation pension on 1/12/88 and are capable of engaging in work;
  • s 132A(3), which applies to former employees under 65 who were NOT in receipt of a superannuation pension on 1/12/88 and are capable of engaging in work;
  • s 135, which applies to former employees who were 65 and were in receipt of a superannuation pension on 1/12/88;
  • s 136, which applies to former employees who were 65 and were NOT in receipt of a superannuation pension on 1/12/88.

13.12.1 Lump sum benefits

Receipt of a superannuation lump sum benefit is NOT relevant to the application of Division 3 of Part X; any such payment is not taken into account in determining the weekly incapacity compensation entitlement of former employees. Note, however, that other lump sum payments (eg. redemptions and "Table of Maims" payments) may affect entitlements under Division 2 of Part X for periods prior to 1/12/1988. Periods of incapacity after 1/12/1988 are unaffected by "Table of Maims" payments.

13.12.2 "In receipt of" a pension

The phrasing of the relevant sections in Division 3 of Part X makes it clear that the former employee must have been "in receipt of a pension under a superannuation scheme" on 1 December 1988, the commencing day of the SRC Act. The sections do NOT apply where entitlement to superannuation arose after 1/12/88.

13.12.3 Entitled to receive a pension

The former employee should be treated as being in receipt of a pension on 1 December 1988, if they were entitled to receive a pension at that day but had not yet started to receive it (eg. they had already discharged, but their entitlement had not yet been processed by 1/12/1988).

13.12.4 Superannuation must be related to the compensable injury

If the superannuation pension received by the former employee has no causal relationship with the compensable injury (i.e. the superannuation was not paid as a result of a medical discharge for the compensable injury), the superannuation generally is to be disregarded for the purposes of Part X.

However, an exception to this should be made where a reservist has other employment contributing to NWE and receives superannuation arising from that employment. In this case, the superannuation should be taken into account.

13.12.5 Amount of Pension as at 1 December 1988,

This question is relevant to the application of Division 3 of Part X, which sets out special transitional provisions in relation to weekly incapacity compensation for certain former employees.

The amount of the client's superannuation pension on the commencing day of the SRC Act on 1 December 1988 is directly relevant to:

  • s 131, which applies to former employees under 65 who were in receipt of a superannuation pension on 1/12/88 and are incapable of engaging in suitable employment;
  • s 132A(2), which applies to former employees under 65 who were in receipt of a superannuation pension on 1/12/88 and are capable of engaging in suitable employment;
  • s 135, which applies to former employees who were 65 and were in receipt of a superannuation pension on 1/12/88;

13.13 Amount of Weekly Compensation - Age 65

The amount of weekly compensation that the client received immediately before turning 65 is relevant to the operation of s 134, which freezes the weekly compensation entitlements of former employees (at a reduced rate) when they turn 65.

The frozen weekly rate of compensation under s 134 applies only to former employees. Non-former employees (current employees) have no entitlement to weekly incapacity compensation after age pension age by operation of s 23(1).

A formula set out in s 134(1) reduces the amount of compensation payable to former employees, when the former employee turns 65, by 5% for each year since the commencement of the SRC Act on 1 December 1988. This formula ensures that, after 2008, former employees will not receive compensation once they turn 65, and will be in the same position as those who were injured after 1 December 1988. Former employees who turn 65 before 2008 continue to receive the appropriate reduced rate of compensation until their incapacity ceases or until their death.

Section 134(1) states:

134(1) When a former employee to whom section 131, 132 or 132A applies reaches 65, the amount of compensation payable per week to the former employee but for this section shall be reduced by an amount calculated under the formula:

5 x (65 - A) X C

100

where:

A is the age of the former employee, expressed in completed years, as at the commencing day; and

C is that amount of compensation payable per week to the former employee.

The definition of "C" is the source of this question in the Incapacity Calculator. Note that "C" is the amount of weekly compensation payable on the day that the former employee turns 65.

A new s 134(2), which was inserted into the SRC Act by the Industrial Relations and other Legislation Amendment Act 1995 with effect from 15 January 1996, makes it clear that the reduced rate of weekly compensation paid under s134(1) remains frozen. Neither s 8 (normal weekly earnings) nor s 13 (CPI indexation of compensation benefits) apply to the reduced amount of compensation calculated in accordance with s 134.