The Determination of Common Law Awards to Injured Workers

G. A. Wooe, D. L. Morrison, J. Harrison and S. Macdonald

Australian Economic Review, 1995, vol. 28, issue 4, 59-70

Abstract: Prior to changes in the Western Australian legislation in 1993 an injured worker could sue his or her employer for damages at common law irrespective of the seriousness of injury or size of damages. A common law action is conditional on the personal injury being sustained during the course of employment, and caused by the negligence or breach of statutory duty of the employer. In recent years there has been concern expressed about the efficacy of the common law process in providing injured workers with awards that match their pecuniary and non‐pecuniary losses. We address this issue by developing a model of the determination of common law awards in which we assume pre‐trial settlement. We find that the economic mechanisms which bring plaintiff and defendant to a pre‐trial settlement will not necessarily produce an award settlement consistent with the size of pecuniary and non‐pecuniary losses. The model is subjected to an empirical examination using a sample of 384 plaintiffs whose cases were closed in Western Australia in 1990. Our results indicate that in practice the common law process fails to determine an individual assessment of injured workers' losses. In particular, awards represent an inadequate compensation for the losses suffered by severely incapacitated plaintiffs.

Date: 1995
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