Australia: Federal Government expands access to Comcare scheme for workers compensation

On 2 December 2013, Employment Minister Senator Eric Abetz announced the lifting of a moratorium on private corporations becoming self-insurers under the Comcare scheme which had been put in place by the Rudd Labor Government in December 2007.

This was followed, on 19 March 2014, by the introduction into federal Parliament of the Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014 (Bill). The main purpose of the Bill is to enable employers who operate in two or more States or Territories to apply for a licence to self-insure under Comcare. Employers which obtain such a licence will also be covered by the Work Health and Safety Act 2011 (Cth) (WHS Act 2011). This would ensure that licence-holders operated under an integrated workers' compensation and work health and safety regime.

BACKGROUND

The Comcare scheme was established under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (SRC Act) to provide workers' compensation and rehabilitation coverage for Commonwealth and ACT Government employees. The SRC Act was amended in 1992 to enable certain categories of non-Commonwealth corporations to self-insure under the Comcare scheme, with the consequence that their workers' compensation arrangements were no longer regulated by State or Territory law.

Further legislative changes in 2006 enabled private corporations which were licensed to self-insure under the SRC Act also to be covered by the Occupational Health and Safety Act 1991 (Cth) (OHS Act 1991), rather than State and Territory occupational health and safety legislation.

The moratorium imposed by the Rudd Government in December 2007 had the effect that no further non-Commonwealth corporations could self-insure under Comcare, although existing licence-holders were permitted to remain in the Scheme. This moratorium remained in place until the Minister's announcement of 2 December 2013, despite the fact that two reports commissioned by the previous government had recommended that it be lifted.

LIFTING OF THE MORATORIUM AND CHANGES TO COMCARE ELIGIBILITY CRITERIA UNDER THE BILL

The lifting of the moratorium means that companies can once again apply under section 100 of the SRC Act to be declared eligible to be granted a self-insurance licence. To be declared eligible a corporation must either:

• be a former 'Commonwealth authority' (including a Commonwealth authority that is about to cease to be such an authority); or
• pass a 'competition test', which requires that they be carrying on business in competition with a Commonwealth authority, or with a corporation that was previously a Commonwealth authority.¹

Amongst the corporations which have obtained licences in reliance upon this provision are Commonwealth Bank of Australia Ltd, John Holland Group Pty Ltd, Linfox Australia Pty Ltd and Optus Administration Pty Ltd.

The Bill clearly contemplates that current and former Commonwealth authorities will be able to obtain licences to self-insure as at present. It also contains a number of provisions which will make it easier for non-Commonwealth corporations to self-insure under the SRC Act. They include:

• removing the requirement for a ministerial declaration of eligibility so that in future corporations would be able to apply directly to Comcare for a licence;
• removing the requirement that a corporation be in competition with a current or former Commonwealth authority;
• enabling any corporation which is required to meet workers' compensation obligations under the laws of two or more States or Territories ('national employers') to obtain a licence to self-insure under the SRC Act; and
• enabling corporations which are related bodies corporate within the meaning of the Corporations Act 2001 (Cth) to obtain a 'group licence' to self-insure under Comcare. This is in contrast with the present arrangements which require that each entity within a corporate group must obtain a separate licence (for example, in addition to John Holland Group Pty Ltd, licences have been issued to two other corporations in the John Holland Group: John Holland Pty Ltd and John Holland Rail Pty Ltd).

In addition, the Bill proposes:

• to extend the coverage of the WHS Act 2011 to all corporations that obtain a licence to self-insure under Comcare, thereby excluding the operation of State or Territory work health and safety laws, and ensuring that licence-holders operate within an integrated regulatory environment in relation to compensation, rehabilitation and prevention of work-related injury;
• to remove access to compensation under Comcare where an employee's own serious and wilful misconduct results in the employee's death or serious and permanent impairment; and
• also to remove access to compensation where an employee is injured during a recess break from their employment, and the injury occurs while the employee is temporarily absent from the workplace. If an injury occurs at the workplace during a recess break, an employee will still be entitled to obtain compensation.

KEY POINTS FOR EMPLOYERS

There are a number of factors that employers should consider in determining whether to seek a licence to self-insure under Comcare.

• operating under a single work health and safety and compensation regime could be expected to give rise to significant cost-savings for employers who operate in two or more States or Territories;
• it needs to be recognised that some State and Territory regulators possess particular expertise in certain forms of economic activity (for example, in mining and resources), and that the Commonwealth regulator may not possess similar levels of expertise. This could be a source of inconvenience in some instances;
• it is also necessary to bear in mind that workers' compensation costs under some State and Territory schemes may be lower than those under Comcare. This could be a particularly important factor where a corporation's business is heavily concentrated in a State or Territory which has lower costs than the Commonwealth scheme;
• corporations which presently meet the eligibility requirements in section 100 of the SRC Act may be inclined to press ahead with an application for a ministerial declaration and self-insurance licence. It should be borne in mind, however, that unless or until the Bill becomes law, any such corporation would continue to be subject to the work health and safety laws in each State and Territory in which it operates; and
• corporations which do not presently meet the eligibility criteria will, of course, have to wait until the Bill becomes law. However, if and when that happens, many more corporations will be able to meet the eligibility criteria, and will be able to access the benefits of access to an integrated national system of occupational health and safety and workers' compensation – assuming that the advantages of such access outweigh any potential disadvantages in terms of cost or regulatory inconvenience.

It is not clear whether or when the Bill will become law. Although the federal Opposition has not yet indicated whether it will support or oppose the legislation, it seems reasonable to suppose that the Labor Party would oppose passage of the Bill given its position on Comcare when in government. This suggests that the Abbott Government may have to wait until the composition of the Senate changes on 1 July 2014, although even then the Bill's passage cannot be assured.

Footnote

¹In addition, guidelines have been issued by the SRCC which outline criteria for whether self-insurance licenses should be granted (see Australian Government, Comcare, " Guidelines – Licence Application Evaluation", January 2006). These guidelines require employers to demonstrate that granting a licence will not be contrary to the interests of employees, and that certain prudential requirements are met so that the SRCC is satisfied appropriate funding is in place to cover workers' compensation claims. It can be expected that these guidelines will be updated if and when the Bill becomes law.

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