****************************************
Following is a question by Hon Dennis Kwok and a written reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (April 17):
Question:
Under the Employees Compensation Assistance Ordinance (Cap. 365), injured employees who are unable to recover payments of damages from their employers are required to prove their claims in court before they may claim payments from the Employees Compensation Assistance (ECA) Fund. The ECA Fund Board is, however, not liable to pay interests on those damages that have been awarded, nor is it liable for the costs incurred by the employee in proving the case in court and obtaining judgment against the employer. In a recent court case, the presiding judge has expressed his "disquiet" at the aforesaid rules in the concluding section of his judgment, and suggested that if steps are not taken to address the problem "as quickly as possible", there might be a case for judicial review of the relevant provisions. In this connection, will the Government inform this Council whether it has any plans for introducing amendments to the Ordinance to ensure that it adheres to the relevant legal principles and to alleviate the current hardship faced by injured employees applying for payments from the ECA Fund; if it has, of the details; if not, the reasons for that?
Reply:
President,
Our reply to the question raised by Hon Dennis Kwok is set out below:
The Employees Compensation Assistance Scheme (the Scheme) was set up in 1991 under the Employees Compensation Assistance Ordinance (ECAO) to provide payment from the Employees Compensation Assistance Fund (the Fund) to injured employees or family members of deceased employees who are unable to receive their entitlements of compensation and damages for work injuries from employers or insurers after exhausting legal and financially viable means of recovery. The Scheme is administered by the Employees Compensation Assistance Fund Board (the Board).
The Scheme is financed by a levy payable by employers on the premium of employees' compensation (EC) insurance policies taken out for their employees under the Employees' Compensation Ordinance (ECO). The rate of the levy for the Scheme has been revised a few times from 1% in 1991 to 3.1% as at present.
In the late 90s, the Fund was in financial difficulty owing to the rising number of large claims and escalating amount of common law damages awarded by the court. Coupled with a decline in the levy income, the Scheme incurred annual operating deficits during the period between 1996-97 and 2005-06, and the deficit accumulated was only fully offset in 2008-09.
With a view to restoring the long-term financial viability of the Scheme, the Administration commissioned a consultancy review of the Scheme in 1999. The study concluded that there was a significant imbalance between the Fund's income and expenditure so that it was necessary to increase the financial resources for the Fund and limit the scope of assistance under the Scheme. After consultation with the stakeholders, the Administration formulated a rescue package for the Scheme and the ECAO was amended in July 2002 to give effect to the agreed reform measures.
As a safety net, the revised Scheme continues to maintain the full protection of entitlements for statutory compensation under the ECO. To reduce the financial volatility brought about by the substantial amount of common law awards but, at the same time, provide reasonable protection for injured employees, a relief payment of an ex-gratia nature payable in lieu of common law damages has been introduced since then. The relief payment shall not exceed the aggregate sum of damages awarded by the court and shall not cover any costs arising from proceedings in respect of damages. Where the amount does not exceed $1.5 million, the relief payment shall be paid in full in a lump sum. If it exceeds $1.5 million, an initial payment of $1.5 million shall be paid and then followed by monthly payments calculated at the rate of the monthly earnings of the employee at the time of the accident or $10,000, whichever is the higher, until the total amount of award is paid off.
To make both ends meet, the levy rate imposed on EC insurance premium was increased by 1 percentage point, from 5.3% to 6.3% in July 2002. The Government also provided a loan totalling $280 million at no-gain-no-loss interest rate to the Board so as to enable it to tide over the financial difficulty. The Board drew down the entire loan in phases between July 2001 and March 2005. Repayment of the loan plus interest would be made in 10 years from 2006 to 2015. As at the end of March 2013, the outstanding loan principal is around $93 million.
Given the present financial situation of the Fund, the Administration considers that it is inopportune to initiate amendments to expand the scope of the Scheme to cover payment of costs and interests in damages awarded by the court. In fact, the Fund operated at deficits for years between 1996-97 and 2007-08 and has just started to gradually accumulate a surplus from 2008-09. Nonetheless, the Fund is still required to make repayment of the $280 million loan secured from the Government in early years and the loan would only be fully paid off by 2015.
In deliberating the reform measures, the view was held that the Scheme, funded by a levy imposed on the premium of EC insurance paid by law-abiding employers, should not assume unlimited liability for the negligence of uninsured employers. Besides, the exclusion of legal costs arising from the proceedings of common law claims from the coverage of the Scheme would discourage any unnecessary and prolonged proceedings, thus facilitating early settlement of the claims. It was thus decided that the Scheme should no longer be liable for the payment of common law damages or any related costs and interests.
It is noteworthy that the rescue package for the Scheme including the making of a relief payment is the consensus reached after prolonged discussions and negotiations in the community. It has aptly balanced the interests of injured employees, employers and the Board. While acknowledging the Fund as the last resort for injured employees and family members of deceased employees who fail to receive their entitlements from employers and insurers to obtain payments, the Fund has limited resources and we must ensure its long-term sustainability. The present Scheme allows for full payment in respect of statutory employees' compensation and its associated interests and legal costs, as well as a reasonable coverage of common law damages in the form of a relief payment. Such arrangement has provided an effective safety net to injured employees and family members of deceased employees.
Notwithstanding the above, the Administration will review the labour legislation from time to time, having regard to social changes, the pace of economic development and local circumstances to ensure that such legislation can cater for the latest situation. We will continue to closely monitor the stakeholders' concerns, the financial position of the Fund and the practical needs in improving the protection of the ECAO.
Ends/Wednesday, April 17, 2013
Issued at HKT 17:28
NNNN
