On 19 March 2014, the Federal Parliament introduced the Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014(Cth). If the legislation is passed, it will significantly alter the landscape of workers’ compensation insurance in Australia.
The aim of the amendments is to remove the requirement for certain organisations to comply with the separate workers’ compensation schemes of each and every State or Territory, by allowing them to apply for a licence to self-insure under the Safety Rehabilitation and Compensation Act 1988 (Cth).
On 15 May 2014, the Senate referred the Bill to the Senate Education and Employment Legislation Committee (Committee) for inquiry and report. The Committee’s report was completed 8 July 2014.
Safety Rehabilitation and Compensation Act (Cth)
The Safety Rehabilitation and Compensation Act 1988 (Cth) was established to provide statutory insurance cover for Commonwealth and ACT government employees. Changes were made to the legislation in 1992 and 2006, allowing certain other organisations to self-insure under the Federal legislation.
In 2007 however, the Rudd government instituted a moratorium preventing any further self-insurance by non-government corporations. This ban was finally lifted on 2 December 2013.
Proposed changes to the scheme – national employers
If the Bill is passed, ‘national employers’ will be eligible to self-insure under the Federal Comcare scheme and will be covered by the Work Health and Safety Act 2011 (Cth). A ‘national employer’ is a corporation that has employer obligations in two or more Australian States or Territories. A national employer has employer obligations if the corporation is, or would be required to meet the obligations of an employer under a workers’ compensation law of the Australian jurisdiction to pay premiums, contributions or similar payments.
This ‘national employer test’ will replace the current definition of ‘eligible corporation’ under the Act and the associated ‘competition’ test.
The decision whether or not to award a licence will be determined by the Safety Rehabilitation and Compensation Commission (Commission) directly and the requirement that a corporation be declared ‘eligible’ by the Minister will be removed, thus providing a more streamlined application process.
Licensed employers may engage a claim management firm or insurer to manage their workers’ compensation claims. Licencees will also be required to provide a bank or insurer’s guarantee, for an amount that could be called upon by the Commission in the event a self-insurance licence is suspended or revoked, together with a reinsurance policy.
Benefits of the scheme – resources sector
There is a high prevalence of personal injury claims across the resources sector due to the physically demanding nature of the work. As such, insurance and risk control is particularly important for employers in the resources industry.
Many companies involved in mining and infrastructure development have projects in regional and remote areas throughout Australia and will operate across multiple States. These companies may therefore meet the requirements of the new legislation and be eligible for self insurance.
Self insurance may be a particularly attractive option for these larger corporations as a way to increase operating profits through the reduction in compliance costs and overheads associated with the maintenance of insurance in each state. The scheme will also provide those licensees with increased freedom and control through self-management.
The introduction of a single licence for self-insurance for a related group of companies, as opposed to the requirement of single licenses for each corporation, will also increase efficiency and reduce costs and avoid the situation where only some entities within a group are eligible to be licensed, while other members of the same group fail to meet the requirements.
There are currently some 30 employers, which are self-insured under the federal scheme. Yet, there are approximately 2000 companies operating in two or more States or Territories, which could potentially become licensees. A large number of those employers are operating in the resources sector, and the legislation therefore has particular relevance with its potential to significantly impact the way risk is managed by those employers.
Findings of the Senate Education and Employment Legislation Committee
The Committee received submissions from 18 organisations, including a number of unions, government departments, as well as the Queensland Government.
In its submission, the Queensland Government called for the Commonwealth to consult further with the States and Territories, in an effort to reach agreement about the proposed amendments, raising a number of areas of concern.
The Committee chaired by Senator Bridget McKenzie has recommended the Senate pass the Bill. We now await the Second Reading Speech of the Bill in the House of Representatives.
Companies who operate within two or more jurisdictions and are interested in reviewing their current workers’ compensation arrangements should seek advice from our Insurance and Risk Group about the process and a comparison between schemes.