When a workplace injury is the fault of the employer due to their negligence or the negligence of an employee, a claim for damages may be made.
Some people call this "breach of duty of care" which is an element in a negligence claim.
There are a number of restrictions that apply to a damages claim when the employer is at fault including:
The injury must result in a permanent whole person impairment of at least 15%;
A claim for statutory lump sum compensation must be made before or at the same time as a claim for damages; and
Damages are only payable for past economic loss (loss of earnings and superannuation) and future economic loss up to the retirement age (loss of future earning capacity and superannuation).
This modified damages claim is called "work injury damages".
It is important to note these restrictions do not apply if someone other than the employer is at fault, for example, if you are employed by a labour-hire company and the host employer is at fault.
While past economic loss is easy enough to calculate, future economic loss is a bit of a mystery. Most people do a quick calculation of their gross annual salary multiplied by years to retirement and add 10% or so for future loss of superannuation.
For a 47 year old person with 20 years to retirement earning $70,000 a year that calculation will look like this:
$70,000 x 20years = $1,400,000.00 = 10% super = $1,540,000.00
The real calculation looks more like this:
$1,065.00 net per week x 666.4 = $709,716.00
Plus superannuation at 14.21%, = $100,850.64
Less 15% for vicissitudes = $688,981.64
This basic calculation will then be reduced further to take into account any residual earning capacity.
Why is the calculation so different?
The work injury damages lump sum is tax free so the starting point for the calculation is the net (after tax) weekly wage.
Damages for future economic loss are reduced by a 5% discount rate.
Superannuation is added at a grossed up rate to take into account future increases in the minimum rate and the fact it is calculated on net (after tax) earnings.
The total is then reduced for vicissitudes of life. That is, the risk that something else would have prevented you from working uninterrupted until retirement age, like another injury, illness, changes in the labour market etc.
The problem with getting the calculation wrong is it becomes hard to accept advice from your legal team about a proper settlement figure. Sometimes , your family or mates will be spurring you on to hold out for "top dollar" when there is no prospect of you getting that money. In the end it will cost you more in legal fees and your case will drag on longer than necessary.
When it comes time for settlement negotiations, you need a lawyer you can trust who will take the time to explain how the damages are calculated, give you a range of likely outcomes based on the differing medical evidence and provide advice about a proper range for settlement having regard to the strength of your case and the risks of litigation.
Contact us for more information.
DISCLAIMER: This blog is made available by Mortimer Fox Lawyers to give you general information and a general understanding of the law, not to provide specific legal advice. Unless otherwise stated, all information provided pertains to injuries sustained in or in connection with New South Wales. By using this blog you understand that there is no solicitor client relationship between you and Mortimer Fox Lawyers. This blog should not be used as a substitute for legal advice. If you require legal advice please contact us for an appointment.
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