WA’S PROPOSED NEW WHS LAWS

PBF cover in action

New Work Health & Safety legislation making its way through the Western Australian Parliament is expected to be law by the end of 2020. The proposed legislation introduces a range of new provisions and has serious ramifications for insurance cover.

 

Insurance for WHS penalties soon to be prohibited in Western Australia

 

The Western Australian Government introduced the Work Health and Safety (WHS) Bill into Parliament on 27 November 2019. It was passed by the Legislative Assembly on 20 February 2020 and is making its way through the Upper House. The new laws are expected to be passed later this year with the provisions coming into effect soon after.

 

Designed to better protect workers, modernise safety laws and hold those responsible for workplace deaths accountable, the new law reflects the ‘model WHS laws’ in place in most of Australia and will replace the existing Occupational Safety and Health Act 1984 (WA) and other safety legislation specific to the mining and resources sector.

 

If passed, a raft of new provisions will be introduced including:

  1. Duty of care obligations imposed on PCBUs rather than employers
    This removes the terms ‘employer’ and ‘employee’ and imposes responsibility for workers on the ‘Persons Conducting a Business or Undertaking’ (PCBU), which includes corporations, partnerships, government, charities, NFPs and businesses without employees (i.e. sole traders). It also adopts a broad definition of ‘worker’ to include employees, contractors/sub-contractors, labour hire company employees, apprentices, work experience students and volunteers. The primary duty of care for the PCBU is to ensure the health and safety of its workers and those workers who are influenced or directed by the PCBU.

 

  1. Due diligence obligations placed on WHS service providers and company officers
    An officer of a PCBU must ensure the PCBU complies with its duties or obligations under the legislation. Officers include directors, company secretaries and any person who has the capacity to affect the company’s financial standing or who participates in decisions affecting the business. An officer’s duty is a personal duty and they must exercise due diligence and be proactive in ensuring that they meet their obligations.

 

  1. Two-level industrial manslaughter offence
    ‘Industrial Manslaughter – simple offence’ is where a PCBU owes a health and safety duty but fails to comply with the duty and the failure causes the death of an individual. ‘Industrial Manslaughter – crime’ is where a PCBU has a health and safety duty and engages in conduct knowing that the conduct is likely to cause the death of an individual and acts in disregard of that likelihood. The simple offence attracts a penalty of 10 years’ imprisonment and a fine of $2.5 million for an individual or a $5 million fine for a corporation. The criminal offence attracts a penalty of 20 years’ imprisonment and a $5 million fine for an individual or a $10 million fine for a corporation.

 

  1. Definition of health to include psychological health
    ‘Health’ will cover both physical and psychological health and encompass risks like stress, fatigue and bullying. The same obligations to prevent this type of harm apply as they do to other physical risks.

 

Ramifications for insurance

 

There are currently insurance policies available, such as Statutory Liability and Management Liability , which protect the insured company and its directors, principals, partners and employees for their liability to pay fines which result from unintentional or accidental breaches of legislation which control their operations, including the relevant WHS Acts.

 

Many Western Australian businesses and organisations, from micro to multinational, rely on Statutory Liability insurance to protect their directors and officers (in both paid and honorary capacities) against personally incurring such fines and penalties.

 

An important aspect of the proposed new legislation is the prohibition of insurance to indemnify an individual for monetary penalties incurred if they breach WHS laws. This means it will be illegal for insurance companies to pay fines imposed under the WHS laws. It will also void existing insurance and indemnity arrangements for the payment of WHS fines. The maximum penalty for entering into such an arrangement would be a fine of $55,000 for an individual or $285,000 for a corporation.

 

“This is a significant change to current practice and means a duty holder cannot use products like Statutory Liability insurance to transfer the risk of monetary penalty to an insurance company,” said Ryan Cameron, EBM Director – Broking.

 

“However, the legal defence and investigation costs covered in Statutory Liability policies will still be applicable for defending WHS prosecutions. Given that defence and investigation costs for such matters typically outweigh fines and penalties by a ratio of 4:1, a solid Statutory Liability policy is still essential. In many instances, a successful defence can mean that no penalty is imposed.”

 

A robust Statutory Liability policy will provide legal costs from the time of an incident/investigation through to the closure of the investigation/inquiry, finalisation of a prosecution or an enforceable undertaking is made.

 

Your EBM Account Manager can provide risk mitigation advice in preparation for the new laws and discuss your Liability cover options.

 

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