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- 10 May 2006
Workers Compensation Legislation Amendment Bill
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Page: 22899
Second Reading
Debate resumed from an earlier hour.
Reverend the Hon. FRED NILE [8.38 p.m.]: The Christian Democratic Party supports the Workers Compensation Legislation Amendment Bill, which amends the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998. It has two main aspects, which, although not major changes to the law, are important. The first introduces a revised proposal for the grouping of related employers when assessing their workers compensation premiums. This amendment is to ensure that employers cannot structure their companies in such a way that they avoid paying their fair share of premiums. Currently related companies are treated separately when calculating their premiums, as smaller companies do not have their premiums adjusted for claims experience.
Companies with a poor claims record can gain a benefit by splitting their businesses into smaller companies. That is obviously contrary to the principles of the scheme, which seeks to encourage poor performers to improve their safety record. An increase in the cost of premiums as a result of injuries and deaths in the workplace acts as an incentive to companies to implement safety procedures to reduce the number of accidents and thus their premiums. This proposal will see the combined basic tariff premium of the entire group used to determine the extent to which the companies' claims records are utilised in premium calculations.
I have an obvious concern about this arrangement. If one company in the group is involved in construction or mining—industries that have a high rate of serious injuries or even deaths—all the companies in that group will pay higher workers compensation premiums. That may seem fair from the Government's point of view. The bill is designed to stop companies deliberately splitting their businesses into smaller entities in order to avoid paying premiums. However, it could be a double-edged sword. If a group company that is involved in a high-risk industry is performing poorly and paying higher workers compensation premiums, the combined basic tariff of the entire group will be more expensive. The bill does not make it clear whether it will target those companies that are manipulating the system in an attempt to reduce their premiums. Will it make some provision for companies that have operated in good faith for many years and never tried to avoid paying workers compensation premiums?
WorkCover has agreed that it will cap any individual increase in premiums resulting from this change as part of a transition period to 25 per cent each year for three years. That will assist some of the companies that I would define as "genuine". Overall, these grouping changes are intended to be revenue neutral, with some employers having increased premiums and some enjoying a cut in premiums—I will be surprised if that happens to too many companies. The bill also repeals earlier uncommenced provisions introduced for grouping in 2002. In line with payroll tax provisions, the grouping provisions will not apply to employers when the wages paid by group members do not exceed $600,000. In addition, charities may apply to WorkCover to obtain an exemption from grouping for a group member whose business is not in direct competition with commercial enterprises.
The bill also deals with companies—some of which may be genuine and some of which may be seeking to avoid their responsibilities in this area—that transfer to the Commonwealth's Comcare scheme. WorkCover obviously cannot charge premiums for companies that are members of the Commonwealth scheme. However, those companies must continue to comply with the New South Wales occupational health and safety laws administered by WorkCover. That means that the Commonwealth gets the premiums and WorkCover receives no reimbursement for the expenses it incurs in fulfilling its obligations required under the law.
The bill will ensure that WorkCover is funded by a levy on the workers compensation premiums of employers that have joined Comcare. They will be required to contribute to WorkCover's occupational health and safety functions. Comcare employers will be levied for a fair share of WorkCover's regulatory occupational health and safety role while those employers remain subject to those laws. This will result in a small increase in revenue. The bill contains several other minor changes. The Christian Democratic Party is pleased to support the legislation and ensure that WorkCover continues to play an important role in this State.
Ms SYLVIA HALE [8.44 p.m.]: The Greens support the Workers Compensation Legislation Amendment Bill, which amends workers compensation legislation in three main ways. First, for the purposes of calculating workers compensation premiums it groups together companies that have common ownership and control and a combined payroll exceeding $600,000 per year. Second, it makes associated entities jointly liable for the payment of premiums. Third, it makes employers who insure with the Federal Comcare scheme liable to pay proportionate contributions to the New South Wales scheme.
Proposed division 2A, "Grouping of employers for insurance purposes", will have the effect of treating companies that are related to other companies as one group for the purpose of calculating premiums. This will have the positive effect of discouraging companies from breaking themselves into smaller corporate entities to avoid paying true premiums. For example, a company might place all its construction workers in one company and pay one rate and put its office staff in another and pay a lesser rate. The Greens take a very dim view of companies that try to use complex legal structures to avoid their responsibilities. Of course, many companies will always try to pay as little as possible when it comes to their tax and WorkCover obligations. This legislation will assist the WorkCover Authority by ensuring that all employers pay their fair share and that injured workers are looked after.
Some companies unscrupulously conjure up different legal entities in order to avoid their statutory obligations. The most extreme example we have seen in this country of a corporate entity endeavouring to shield itself from a possible payout was the attempt by James Hardie Australia to bury itself in its Dutch parent company to avoid being forced to pay compensation to people who had been harmed by its asbestos products. James Hardie tried to avoid its obligations but it did not succeed. Other companies may seek to use structures in an effort to minimise their payments to WorkCover.
As I said, proposed division 2A will have the effect of treating related employers as a group. The group will be registered with the WorkCover Authority. The group will be required to take out all relevant insurance policies with the one agent and to have a common renewal date. Proposed section 175E gives the WorkCover Authority discretion to exclude from a group some employers, such as charities, whose operations are not in direct competition with those of a commercial entity.
Proposed section 175F spells out the grounds for the exercise of that discretion to exclude employers from a group. The authority is empowered to inspect records to determine whether an employer is part of a group. An employer who attempts to wilfully obstruct or delay authorised WorkCover Authority personnel will be subject to a fine. If an employer member of a group fails to pay the insurance premium, every member of that group will be jointly and severally liable for that amount. WorkCover is thereby enabled to recover the outstanding premium from other entities or individuals within the employer group.
Proposed section 39A provides that Comcare employers must contribute to the WorkCover Authority Fund. This proposal is made on equity grounds. Comcare employers will be required to meet their proportionate obligations to fund WorkCover's responsibilities under New South Wales occupational health and safety laws. The Greens support the WorkCover system and this bill.
The Hon. HENRY TSANG (Parliamentary Secretary) [8.48 p.m.], in reply: I thank honourable members for their contributions to this debate. The proposal for grouping larger, related-entity employers for workers compensation purposes is the result of a great deal of consultation with unions and employer groups. As a result of this consultation the existing legislative provisions are repealed by the bill and replaced with a more workable system that is linked closely with grouping for payroll tax purposes. In addition to the grouping proposals, I urge honourable members to support the other measures in the bill.
The Comcare levy provisions in the bill are a sensible measure that will ensure that New South Wales employers that are members of that scheme bear a fair share of the costs of the regulator. A bill is currently before the Commonwealth Parliament that would make all Comcare licensees subject to the Federal Occupational Health and Safety (Commonwealth Employment) Act 1991. Where Comcare licenses an employer for both occupational health and safety and workers compensation, the rationale for requiring the contribution no longer applies. Therefore, the bill contains a provision that clarifies that if a Comcare licensee becomes subject to Commonwealth occupational health and safety legislation then that Comcare licensee will no longer be liable to pay the contribution to WorkCover.
The proposal in the bill to enable the excess payable by employers to be set in the insurance premiums rather than in the regulations is also a practical measure for which I urge support. In relation to the point raised by Reverend the Hon. Fred Nile, I advise the House that the grouping provisions of the bill will not affect the individual claims cost of separate employers in the group. The change is the extent to which claims experience is factored into their premium calculations. I commend the bill to the House.
Motion agreed to.
Bill read a second time and passed through remaining stages.
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