ACC is being forced to close a legal loophole in contracts covering more than 300,000 workers after discovering it allowed big employers to illegally challenge entitlements.
The ombudsman has ruled that a clause in ACC's accredited employer contracts allowing them to dispute a lump sum payment is in direct conflict with the ACC act, which forbids such action.
ACC's accredited employer scheme is designed for large employers and provides a significant reduction in levies in exchange for the employer taking responsibility for any workplace claims.
The ruling is a result of the case of Porirua woman Fuatino Faumuina, who injured her back in 2006 after she slipped and fell while working at the police college.
Three years later, still suffering severe pain and depression, Mrs Faumuina applied for a lump sum settlement and was awarded $21,000.
But police triggered a clause in its contract with ACC allowing it to request a technical review of the lump sum assessment and Mrs Faumuina was found to not be entitled to the payment.
After her advocate, Mike Dixon-McIver, filed papers in the district court, ACC agreed to have Mrs Faumuina assessed by another reviewer and she was subsequently awarded a higher payment of $29,000.
This money was finally paid in February this year, but last month Mr Dixon-McIver received the result of a complaint he made to the ombudsman claiming his client should never have been made to have the technical review.
Mr Dixon-McIver said he had been working with ACC claimants for 20 years and had never encountered anything like it.
"Why should the employer be allowed to act contrary to the act, what is it that's driving ACC?
"Why are these employers who are being given an opportunity to make money from self-management, being given the opportunity that other employers don't have?"
One of the country's top lawyers specialising in ACC legislation, John Miller, said he was surprised ACC had allowed such a clause that went against the legislation governing it.
While an employer could object to a claim that happened at work when it first occurred, it was clearly a breach of the ACC act for them to challenge a lump sum or entitlement ruling once it was made.
"You don't want any employer coming in and saying, I don't think he should have a wheelchair or this treatment or that.
"You can't do that to the detriment of an employee or a claimant, it's going against the will of Parliament."
Mr Miller said it was possible former claimants who had lost entitlements or lump sum payments because of the clause could challenge the decision in court, possibly arguing any assessment they were forced to undergo was an unnecessary intrusion.
An ACC spokesman said an "administrative error" in Mrs Faumuina's case had allowed her employer to follow the illegal course of action.
While it was possible for a preferred employer to challenge what portion of a lump sum it was required to pay, it should never be allowed to influence the outcome as in this case, he said.
Without a detailed examination of records it was hard to say if similar situations had occurred, but it was believed that Mrs Faumuina's case was the only one that had taken so long to resolve.
Following the ombudsman's decision, ACC would rewrite all 150 accredited employer contracts covering 325,000 employees in April when they were renewed to ensure the mistake could not happen again.
A spokeswoman for ACC Minister Judith Collins declined to comment.
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