Penalty units are on the up and insurance for WHS penalties is out
Following the release of Ms Marie Boland’s 2018 Review of the model WHS Laws: Final Report (Report), the NSW Government has sought to pursue some of the recommendations made by way of introducing amendments to the current Work Health and Safety Act 2011 (NSW) (WHS Act). The legislative change is expected to come into effect early in 2020.
Key amendment – Insurability
The changes are primarily focused at prohibiting the insurance of WHS penalties and creating new offences where such insurance is sought and provided.
In accordance with recommendation 26 of the Report, section 272A of the Work Health and Safety Amendment (Review) Bill 2019 (the Bill), if enacted, will prohibit a person from entering into certain insurance or indemnity arrangements (without reasonable excuse) where that person or another person, is covered for liability for a monetary penalty imposed under the WHS Act.
Interestingly, neither the Bill nor supporting Explanatory Notes provides a definition as to what amounts to a “reasonable excuse”.
A person is also prohibited from taking the benefit of a contract of insurance or a grant of indemnity for liability for a monetary penalty under the WHS Act.
Further, the NSW Government has sought to alert and emphasise the liability of officers of corporations with respect to s 272A of the Bill by spelling out the different circumstances in which an officer of a corporation will have committed an offence under s 272A.
Fortunately, for businesses who have purchased such insurance, the transitional provisions will mean that an insured defendant will not have committed an offence under s 272A if the insurance or indemnity existed prior to the commencement of the amendment and any payment made under such insurance or indemnity was not in relation to a penalty for an incident that occurred after the commencement.
Key amendment - Penalties
There has been a noticeable trend in the WHS space towards increased penalties for WHS offences. The Bill takes this a step further, seeking to increase penalty levels in line with recommendation 22 of the Report by shifting away from penalties expressed as a fixed monetary amount and instead providing for penalty units so that the penalty will more appropriately reflect increases in the consumer price index.
Other critical amendments include the following:
- Clarifying that a person may be both a worker for a person conducting a business or undertaking and a person conducting a business or undertaking who owes duties to workers (PCBU);
- Expanding the definition of “reckless” conduct with respect to Category 1 offences to “gross negligence or reckless”;
- After an inspector has entered a workplace, the inspector or another inspector can exercise the investigative powers in s 171 of the WHS Act for up to 30 days without having to re-enter the workplace;
- In addition to the offences and penalties relating to health and safety duties currently imposed by Part 2 of the WHS Act, in certain circumstances the death of a person at work may constitute manslaughter and may be prosecuted under the Crimes Act 1900 (NSW); and
- Extending the time within which a person can ask the regulator to commence a prosecution in relation to a workplace incident from 12 months to 18 months.
If the amendments in the Bill are enacted into the WHS Act, insurers and businesses purchasing insurance will need to be vigilant to ensure compliance. In particular, Insurers will need to carefully review the scope of cover provided in their policies to ensure compliance with the new regime. Similarly, those taking out insurance policies (and their agents) will need to ensure that the cover they take out does not fall foul of the proposed regime.
Despite the proposed changes, The Bill still allows for the provision of (and purchase of) insurance policies which cover the legal defence and investigation costs incurred with respect to WHS matters.
While the proposed amendments are limited to New South Wales, insurers would be advised must remain attentive as such amendments may roll out in other jurisdictions across Australia.
This article was authored by Simon Black, Laura Sowden and Lucinda Touma, a Law Clerk in our Insurance & Health Team.