GN 1.1 Workers compensation - a brief history

Published: 12 August 2019
Last edited: 12 August 2019

Application: General information only


There are 12 main workers compensation systems in Australia. Each system has different eligibility, entitlements and arrangements.

This has resulted in numerous variations in the operation and application of workers compensation laws. Some of the differences include scheme funding, common law access, level of entitlements, return to work and coverage. These can be attributed in part to the varying industry profiles and economic environments of each jurisdiction and judicial decisions that have led to legislative amendments.

This guidance provides a brief history of workers compensation generally and describes some of the unique characteristics of the NSW system.

Workers compensation in Australia

Each of the eight Australian states and territories has their own workers’ compensation scheme. In addition, there are four Commonwealth schemes:

The origin of workers compensation in Australia

The origin of all these schemes can be traced back to 19th century British law.

Before the implementation of workers compensation arrangements as we know them today, an injured worker’s only means of receiving compensation was to sue their employer for negligence at common law. Workers rarely succeeded in these actions due to the widely used legal defences of common employment, voluntary assumption of risk and contributory negligence.

New workers compensation laws incorporating a ‘no-fault’ principle came about after federation in Australia. To be eligible for workers compensation under the no-fault principle, workers covered by the legislation had to prove that their injuries were work-related. It was no longer necessary to prove negligence on the part of an employer. Early no-fault coverage for workers’ compensation was limited. Laws provided for some benefits, however the taking out of insurance by employers was not compulsory. Further, to be eligible for workers’ compensation, an injury had to be found to have arisen out of and in the course of employment.

The first workers compensation laws in Australia were generally known as workmen’s compensation and did not expressly cover female workers. Coverage for workers compensation gradually expanded to include most workers and lump sum payments for loss of body parts was introduced.

By 1926, NSW had introduced compulsory insurance which became the model for most workers compensation schemes around Australia. Parts of the Workers Compensation Act (NSW) 1926 still apply to certain groups of workers in NSW today.

Between the 1920s and the 1970s, incremental reforms took place across the jurisdictions. Eligibility for compensation benefits continued to widen. However, economic difficulties in the mid-1980s and early 1990s shifted the focus onto reducing the cost of workplace injuries, containing insurance premiums, underwriting arrangements and administrative efficiency. There was also a shift in emphasis in the schemes to strengthen the role of work health and safety and rehabilitation of injured workers.

Challenges facing workers compensation systems generally

All jurisdictions face challenges today because of the rapidly changing nature of work including an increasingly mobile workforce, the digital economy, the gig and entrepreneurial economy, automated systems and robotics, an ageing workforce, rising screen time and sedentary behaviour, workplace stress and mental health, blurring of the boundaries between work and home, emerging industries with different types of injuries and a part-time, casual and self-employed workforce.

In order to to continue to support the modern workforce, workers compensation schemes continue to evolve including a consideration of insurance product design and coverage, finding innovative and flexible ways to achieve return to work where there are multiple employer-employee relationships, higher levels of self-employment and a greater responsiveness to the injured person’s overall life situation.

Workers compensation in NSW – some unique characteristics

While the different workers compensation schemes in Australia share common elements, each has their own unique characteristics.

Dust diseases in NSW

The definition of injury in section 4 of the Workers Compensation Act 1987 (1987 Act) explicitly excludes dust diseases as defined by the Workers Compensation (Dust Disease) Act 1942 (1942 Act). The effect of the exclusion is that claims for dust diseases, as defined, are not brought under the 1987 Act but rather under the 1942 Act.

Dust claims are made to the Workers Compensation (Dust Diseases) Authority, through Dust Diseases Care (part of Insurance and Care NSW). A worker’s entitlements are set out in the 1942 Act and are different to those entitlements under the 1987 Act. Broadly, the differing entitlements reflect the different age and profile of claimants for dust diseases.

Why are dust diseases treated differently?

Work-related dust diseases in NSW are dealt with differently in part due to the history of the construction of Sydney’s water, drainage, sewerage and communication systems. By the mid-1870s, Sydney’s lack of adequate sanitation and water supply for its growing population resulted in high rates of sickness and infant mortality. Infectious diseases were common and the real prospect of a catastrophic epidemic prompted the government of the day to create the institutional framework to build essential services. In 1880, the Public Works Department became responsible for major construction projects and started building Sydney’s sewerage system.

The built environment of Sydney is shaped by the sandstone forming the foundations of the city. Open-cut quarrying of sandstone gives rise to a great deal of free silica dust. In the open-air, the dust disperses naturally. When sandstone is cut in the confined spaces of underground tunnels and narrow trenches, necessary for the water and sewerage systems, the dust has nowhere to go. The mortality rate amongst the rock miners (who tunnelled through the rock) and the rock-choppers (who chopped trenches through the rock) was high. Medical evidence at the time estimated that as many as 70 per cent of workers died of silicosis within two years of commencing work. The high wages and constant employment continued to attract workers.

The Workmen’s Compensation (Silicosis) Act 1920 established the legislative basis for compensation but the mechanism for managing claims didn’t happen until 1927. This first scheme was ad hoc and very limited both in its geographical application and the occupations covered.

The Workers Compensation (Silicosis) Act 1942 repealed the 1920 legislation and all the schemes enacted under it. The new Act broke the nexus between eligibility for compensation and the gazetting of a particular occupation – all workmen exposed to the hazards of silica dust were covered. The 1942 Act also represented a shift in government policy regarding funding. The new scheme was funded by levies on all employers using the mechanism under the general Workers Compensation Act rather than limited to employers directly involved in industries generating silica dust.

Part of the rationale for a compensation scheme specific to silicosis lay in the fact that silicosis can take a long time to manifest (excluding the very intense exposure for the rock-choppers digging trenches and, more recently, those working with manufactured products with very high silica content) making it difficult to attribute its cause to exposure to silica dust while working for a particular employer. A no-fault system funded by contributions from all employers dispensed with the need to attribute liability to a specific employer or series of employers. It also resulted in considerable savings in medical and legal costs.

The Workers Compensation (Silicosis) Committee had exclusive jurisdiction to hear and determine all claims for compensation. The Committee’s determination depended primarily on certification by the Silicosis Medical Board that the claimant was suffering from silicosis reasonably attributable to his occupational exposure to silica dust while working in NSW. As the Board and the Committee had no financial interest in the outcome, the findings were considered to be conscientious, authoritative and reliable.

In 1967, it was decided to bring compensation for all lung diseases caused by industrial dust under the scope of one Act – the 1942 Act.

The practice of setting a dust levy for all employers based on the classification of the employer’s business continued to be applied. The smooth administration and effectiveness of the silicosis compensation system appear to have influenced the decision to bring all industrial dusts under the operation of one scheme.

Dust disease claims today

Amendments to the 1942 Act since 1967 have largely been incremental to improve the equity and effectiveness of its operation and the coverage including:

  • amendments to the Schedule of diseases to reflect changing medical knowledge
  • allowing for adjustment of compensation payments bi-annually
  • to reflect shifts in administrative and anti-discrimination law, including allowing appeals to the District Court
  • to reflect changing family structures
  • to allow the Dust Diseases Authority to play a role in dust disease research, treatment and prevention.

There are currently 14 dust diseases listed in Schedule 1 to the 1942 Act - aluminosis, asbestosis, asbestos induced carcinoma, asbestos-related pleural diseases, bagassosis, berylliosis, byssinosis, coal dust pneumoconiosis, farmers' lung, hard metal pneumoconiosis, mesothelioma, silicosis, silico-tuberculosis and talcosis.

The remedial purpose and beneficial intention of the Act continues to be applied through the Workers Compensation (Dust Diseases) Authority. In 2017/18, a total of $101.35 million was paid in benefits to 4,190 people (both workers and dependants).

90 per cent of matters certified by the Medical Assessment Panel are asbestos related. The Act and the Authority enjoy almost universal recognition by treating respiratory physicians, oncologists and cardiothoracic surgeons, such that a patient with a dust disease is directed by the treating specialist to contact the Authority.

Dust diseases and common law rights

A person who contracts a respiratory disease as a consequence of occupational exposure to a dust may have two complementary rights to compensation: common law rights and statutory rights. As noted above, statutory rights are dealt with through the Workers Compensation (Dust Diseases) Authority and under the 1942 Act.

To bring a claim for common law damages a worker is required to commence proceedings in the NSW Dust Diseases Tribunal. Established in 1989, the Tribunal is a court of record with exclusive jurisdiction to hear and determine matters for damages in respect of a dust-related condition or death. In this respect, the Tribunal is unique in Australia.

The Tribunal operates under an expedited process for asbestos-related claims. The Tribunal and the Workers Compensation (Dust Diseases) Authority operate independently of one another. Appeals of decisions of the Workers Compensation (Dust Diseases) Authority do not go into the Tribunal.

It is common for a worker to commence damages proceedings against a number of parties. These might include the last known employer where exposure is alleged, previous employers and the supplier/manufacturer of the asbestos products. Relevant employment can span decades - from apprenticeship through to retirement. The worker may choose to sue multiple defendants and concurrent tortfeasors are common.

As such, a number of insurers may respond including current workers compensation insurers (the workers compensation insurer responds in accordance with Schedule 3 to the Workers Compensation Regulation 2016); self and specialised insurers; workers compensation Old Act insurers (the privately underwritten 1926 Act insurers) and the Insurance Guarantee Fund (IGF) covering failed insurers (managed by SIRA). The Old Act insurers and the IGF continue to respond to dust claims for pre-1987 exposure each year.

A worker who recovers damages in a dust disease matter has his/her damages calculated according to common law principles. That is, the damages available are not the modified damages available to workers under the Workers Compensation Acts, where damages are limited to past and future economic loss only (see Insurer guidance GN 9.2 Work injury damages).

Dust disease claims are a specialised area of workers compensation/personal injury law. The medical and legal issues can be complex. Often, workers have a short life expectancy making their claims urgent.

Legal practitioners who specialise in this area tend to have extensive knowledge of the history of employers and manufacturers and the specialised operation of the Tribunal and can greatly assist in the expeditious management of  claims.

The State Insurance Regulatory Authority (SIRA) can assist with workers compensation insurance policy searches (see

Coal miners

Workers compensation claims by coal miners in the NSW coal industry are managed by Coal Mines Insurance (CMI). CMI is a specialised insurer under the Workers Compensation Acts. Subject to both state and federal legislation, the industry is highly regulated and has largely been shaped by historical events.

Workers in the NSW coal industry are not subject to the changes introduced by the Workers Compensation Legislation Amendment Act 2001. A number of the subsequent amendments either do not apply or apply in part. As a result, the NSW coal industry continues to be subject to some of the legislative provisions of the Workers Compensation Act 1926, as well as the 1987 Act and the 1998 Act.

Accordingly, the legislative requirements for claims in the NSW coal industry differ from general industry in a number of significant areas. One example of this is the continuing availability of ‘redemptions’ to coal miners. Redemptions provide a mechanism where the employer’s liability to make weekly payments may be ‘bought out’, or redeemed, by payment to the worker of a lump sum. Redemptions are no longer available to general workers compensation insurers (commutations are available in limited circumstances).

Queries regarding coal miners’ entitlements should be referred to CMI.

The Interim Managed Fund

What is the Interim Managed Fund?

Under the Workers Compensation Act 1926 multiple private insurers operated. Following the decision by government to move towards a managed fund in or around 1985/86, numerous private insurers chose to cease writing insurance in the area of workers compensation.

The WorkCover scheme commenced on 30 June 1987. The scheme provides workers compensation insurance for persons employed in NSW. The scheme relates to eligible work injuries and policies of insurance issued or renewed on or after 4pm on 30 June 1987. This is referred to as the managed fund.

The managed fund was originally intended to commence from 1 January 1987 however was delayed for a variety of reasons including the complex nature of the new legislation (the Workers Compensation Amendment Bill had 14 cognate bills) and the technology required to administer the managed fund.

In order to manage the risk associated with the delay, that is, the risk of the private insurers exiting before the commencement of the managed fund, the government came to a private administrative arrangement with the private insurers. The essence of the arrangement was that the former insurers continued to write business as from 4 pm on 31 December 1986 until commencement of the 1987 Act on the basis of 100 per cent reinsurance with the Government Insurance Office. This is widely referred to as the ‘Interim Managed Fund’ period.

The Interim Managed Fund only applies to policies of insurance issued or renewed by insurers licensed under section 27 of the Workers Compensation Act 1926 at or after 4 pm on 31 December 1986 up to the commencement of the 1987 Act and which were the subject of a re-insurance agreement with the Government Insurance Office.

The claims that these policies respond to are sometimes referred to as ‘straddle claims’ in that these policies straddle the privately underwritten and managed fund periods (the first six months of 1987).

Is the Interim Managed Fund still relevant?

It is over thirty years since the commencement of the managed fund. The Interim Managed Fund is now largely confined to claims involving diseases of long latency. For example, dust diseases and occupational diseases such as cancer.