Majority Report
1.1
On 1 March 2006
the Senate referred to this committee the provisions of the OHS & SRC Bill
Legislation Amendment Bill 2005 (Occupational Health and Safety, Rehabilitation
and Compensation). The committee received nine submissions to this inquiry. A
list of these is to be found at Appendix 1. At its public hearing in Melbourne
on 21 April, the committee heard from six of the organisations which had made
submissions. The witnesses are recorded in Appendix 2.
Background to the bill
1.2
The OHS and SRC Bill 2005 was introduced in the House
of Representatives by the Minister for Workplace Relations, the Hon Kevin Andrews
MP, on 7 December 2005. As
the Minister stated, the bill implements in part recommendations of the Productivity
Commission in its Report No.27, National
Workers' Compensation and Occupational Health and Safety Frameworks which
was released in March 2004. The Productivity Commission recommended extending
coverage under the Occupational Health
and Safety (Commonwealth Employment) Act 1991 to eligible corporations
licensed to be self-insured under the Safety,
Rehabilitation and Compensation Act 1988.[1]
1.3
The bill before the committee opens the way for an
extension of this regime to employees other than those employed by a
Commonwealth authority or Government Business Enterprise. There are
considerable benefits to employers, especially in administrative savings for
firms operating in a number of states. There are significant benefits to both
employers and employees to being covered by a single set of workers'
compensation and OHS laws as currently applies in the case of Commonwealth
employees.
1.4
The main beneficiaries of this amendment will be, in
the first instance, former Commonwealth bodies, recently privatised or due to
be privatised. Under amendments contained in this bill they will be eligible
for coverage under the SRC Act. Other beneficiaries will be corporations who
self insure under the Commonwealth's workers compensation scheme.
1.5
The Productivity Commission suggested in its report
(No. 27, National Workers' Compensation
and Occupational Health and Safety Frameworks) that coverage under a
Commonwealth OHS regime should be introduced progressively, and initially
confined to firms in competition with Commonwealth organisations, followed by firms
of sufficient size and stability which would be eligible to self-insure.[2] The Government did not accept this
recommendation. However, the Government
did accept the Commission’s recommendation that the Australian Government amend
the Occupational Health and Safety (Commonwealth Employment) Act 1991, to
enable those employers who are licensed to self insure under the Australian
Government’s workers’ compensation scheme to elect to be covered by the
Australian Government’s occupational health and safety legislation. This legislation would be extended to cover
those insuring any future alternative national premium – paying insurance
scheme.
1.6
As the Minister for Employment and Workplace Relations
has observed when speaking about the difficulties faced by multi-state
employers:
They find it almost impossible to develop a national approach to
occupational health and safety and the increased cost of complying with
multiple jurisdictions does not lead to improved health and safety outcomes for
their employees.[3]
1.7
In summary, the committee majority sees this
legislation as consistent with the recommendations of an impartial body which
has thoroughly investigated the problem of limiting the human and financial
costs of work-related injury. It notes the Commonwealth's approach to injury
prevention and management is through continuous improvement nation-wide, and
with these improvements being able to be recorded and assessed on the basis of
uniformity of standards. While the committee notes that this legislation will have
gradual effect because state and territory systems will remain in operation,
the long-term benefits will be considerable. Not least of these will be to serve
as a catalyst for further reform in state jurisdictions.
1.8
The committee majority now turns its attention to
specific matters of argument and concern raised during its consideration of the
bill.
The need for national uniformity
1.9
In this section the committee majority expresses some
general views on the need for Commonwealth legislative initiatives in areas of
policy previously regarded as 'off-limits' to the Commonwealth. In doing so,
however, it notes that the amendments contained in this bill cannot be regarded
as leading to a 'takeover' of state functions by the Commonwealth. The bill
does not interfere with the operation of state and territory legislation. To
the extent that Commonwealth laws apply, they will cover only corporations, and
only those which successfully apply for a licence to operate under the
Commonwealth workers' compensation scheme.
1.10
Comment is sometimes made about the 'centralising
tendencies' of the Government in regard to broad areas of business and
industrial relations regulation. It is claimed that some of this legislation is
contrary to the spirit of the Constitution, the consequence being a weakening of
the federal 'balance'. There would be more substance to this argument if the
states gave priority to harmonising their laws and regulations to ensure that
state boundaries were not impediments to the efficient conduct of business
across the country. Such an approach is, in theory, well within the scope of
joint state initiative, with or without Commonwealth encouragement. In truth,
there is no prevailing culture of state collaboration independent of
Commonwealth initiative or direction. The committee majority acknowledges that
the decision of Optus to use Comcare and take its $1.5 million premium out of
the Victorian system did prompt some renewed energy on the part of HWCA to find
a federal solution. It remains true that there is no political imperative to
drive such collaboration, nor any other influences at work encouraging
initiatives for reform at state level.
1.11
The committee majority has already noted the judgement
of the Productivity Commission on the incapacity of the states to implement
uniform and consistent regulation of occupational health and safety. It may be
the case that states have conceded their inability to act in this policy area.
No submissions on this bill were received from state governments.
The costs and disadvantages of current arrangements
1.12
The National Council of Self Insurers agued forcefully
before the committee that an effective national OHS strategy would only achieve
its objectives with speedier progress toward national consistency in
regulations. This was not simply a case of saving administrative costs, but to
achieve better safety outcomes. The Council gave the committee an instance of
where this was jeopardised by different regulations:
If you look at the security-sensitive ammonium nitrate regulations
which have come in state by state, PACIA, the Plastics and Chemical Industries
Association, are really concerned about the different degree of regulations
across the states. We have a situation where the ammonium nitrate can be
classified differently, the amount you can store is different from state to
state, the transport of it is such that you can transport a certain amount in Victoria
but you cannot take it into South Australia
et cetera. Some national guidelines there, some national regulations, would
streamline it and make it a lot safer. That is what it is about. The confusion
is really dangerous.[4]
1.13
The National Council of Self Insurers predicted that
the effect of the legislation would be that companies operating across state
borders would seek to (subject to satisfying relevant criteria) move into the
Commonwealth jurisdiction, and that this movement would drive a speedier move
toward national consistency. This would make it easier for small contractors to
comply with regulations because they would be governed by far fewer of them.[5]
1.14
Another consequence of the lack of uniformity across
jurisdictions, according to the Productivity Commission, is its effects on the
operation of Commonwealth welfare programs. The design of state schemes results
in Commonwealth benefits becoming de
facto workers' compensation payments. Ignorance or confusion about
eligibility of coverage – the result of differences among states in the
definition of employee – can mean that an injured worker can become the
responsibility of Medicare or a welfare agency. The varying statutory benefits across
jurisdictions have different effects on Commonwealth programs. For instance, in
Victoria,
payments for some statutory benefits cease after two years, whereas in Queensland
they may operate for five years.[6]
Compliance with OHS regulations
1.15
At its Melbourne
hearings on 21 April, the committee heard a great deal from the ACTU and its
affiliated unions about the issue of compliance by companies with OHS
regulations, and claims from unions that the Commonwealth lacked the human
resources necessary to enforce its law. Much was made of the fact that Comcare
had not yet recommended the prosecution of any employer with breaches of the
OHS Act, and that it refused to act upon recommendations from state inspectors working
on its behalf that it launch prosecutions.
1.16
In response to these claims, Comcare advised the
committee that until legislative changes were made in September 2004 it was
unable to initiate civil or criminal prosecutions. Six or seven prosecutions
were currently under active consideration, all of them against businesses which
were unable to be prosecuted previously.
1.17
Under current arrangements, Comcare has access to the
services of approximately 200 state inspectors. Comcare advised the committee
that its current recruitment of investigators would see levels rise to the
point where it would have the same ratio of inspectors and investigators to
employees as do comparable jurisdictions.[7]
As to the allegation that Comcare had failed to use the services of state and
territory inspectors, Comcare advised that it had not always found the quality
of their reports of investigations satisfactory. The committee majority
understands that state inspectors adopt a different approach to their work, as
required under state regulations. As Comcare explained to the committee:
Part of the problem that we experience relates to the fact that
we approach investigations quite differently. You even see it with the
terminology. The states refer to ‘inspectors’ and we refer to ‘investigations’
and ‘investigation reports’. A lot of the inspectors that do work for us from
the states are used to walking into a workplace, spotting hazards—things like
cabling, as was mentioned before—writing a notice and leaving, whereas, when we
require an investigation report to be done, it is quite a comprehensive
forensic examination in response to an incident: what went wrong; who was
responsible; what are the elements of the legislation; what are the elements of
an offence; what should have been done; what was reasonably practicable; was it
done; and, if not, why not?[8]
1.18
Comcare has found that state inspectors do not always
have the background and experience in providing reports to employers that are
appropriate for the case. They often lack knowledge of the legislation, in
circumstances where Comcare finds it difficult to keep them up to date. There
is also difficulty in dealing with state officials who need the writing skills
to articulate and prove elements of offences rather than just asserting that
and writing notices.[9]
1.19
The committee majority notes the progress made by
Comcare to increase the strength of its investigatory arm. It understands the
problem of collaborating effectively with state bodies whose employees have
their particular administrative culture which is grounded in the requirements
of state regulations. This is no reflection on state OHS bodies. However, the Commonwealth
has the more immediate task of dealing with large corporate enterprises,
committed in all cases to effective OHS management, and having the resources to
implement them. Under the amendments proposed in this bill, the SRC Commission
must satisfy itself that an applicant for a self-insurance licence can meet the
OHS standards set by the Commission. This is a process involving rigorous
audits of the safety operations of the licence applicant. The Comcare approach
to compliance will necessarily be different from that exercised by state
authorities.[10]
Effect of national self-insurance on state OHS schemes
1.20
Submissions to the committee from unions have claimed
that the financial pool in state systems will be reduced in the case of firms
opting to self insure. This would increase the premiums for remaining
businesses in the state schemes and increase pressure on workers' entitlements.[11] This assertion was also made by the
ACTU at the committee's hearing.
1.21
The Productivity Commission also addressed this claim
in its report. Several state and territory governments considered that there
would be adverse effects on their schemes if employers were permitted to
self-insure under Comcare. The argument was that allowing firms to exit from
state schemes would result in a smaller premium pool and increase the costs for
the remaining employers by reducing the chance to exploit economies of scale.
The Productivity Commission found that this argument was based on the false
premise that the larger states would have the lowest administrative costs. This
is not so. The largest scheme, in New South Wales,
has higher administrative costs than the scheme in Western
Australia.[12]
1.22
Actuarial research available to the Productivity
Commission concluded that the estimated reduction in premium revenue ranged
from 2.7 per cent, if one in five employers exited, to 13.5 per cent, if all
eligible employers exited. As large premium paying employers in current schemes
tend to be charged experience-rated premiums, and would not in principle be
cross-subsidising other employers, their exit would have a 'relatively neutral'
effect on the schemes.[13] The committee
majority acknowledges the caveats and reservations that are made by actuaries in
regard to these conclusions, based as they are on sometimes incomplete
information obtained from the states. Nonetheless, it points to the apparent
unwillingness of union critics to address the specifics of these estimates in
any evidence tendered to the committee.
1.23
The National
Council of Self Insurers, in a supplementary submission to the committee, saw
no reason to fear that a move by employers to the Commonwealth system would
threaten the viability of state compensation schemes. In the absence of gross
cross subsidies within the current premium pool, any such changes of insurers
would be cost neutral.[14]
1.24
The committee majority considers that the concerns
raised by unions in regard to compliance and prosecutions are grossly
overstated, and are based on a misunderstanding of the significance of the
legislation. To begin with, it is unlikely that the new provisions will be
relevant to most employers currently insured under state and territory systems.
Some large multi state corporations like Optus may see advantages in insuring
under Comcare, but others, like Qantas and the Commonwealth Bank, have stayed
under state systems, as has the Sydney Airports Corporation. Indeed, the
Commonwealth Bank moved from the Commonwealth jurisdiction to the state
jurisdiction when privatised in the early 1990s. No construction company has
yet made an application to self-insure with Comcare. Considering the rigorous
OHS licensing standards imposed by Comcare, it is unlikely that risk-prone
companies would see any advantage in insuring under a legal regime in which
premiums are generally higher and compensation packages more generous. The
majority of corporations employ within one state and are likely to see no
advantage of moving to Comcare unless the growth of their firm's interstate
operations causes them to reconsider.
Conclusion
1.25
In considering the evidence to this inquiry, the committee
majority concludes that the Government's increased involvement in the national
regulation of occupational health and safety is an important policy development,
and that it will produce better OHS outcomes over time. The consequence of its
bringing corporations within the ambit of Comcare, and providing competition
for state OHS and compensation regimes, will be to introduce more rigorous
application of OHS principles and practices and over time to reduce the
incidence of workplace accidents and illnesses. Government party senators
believe that an over-emphasis on workers compensation benefits, which has been
a characteristic of state-level debate on OHS, has distracted both employers,
and employees and their representatives, from more fundamental issues of work
safety. The result has been an unhelpful dispute over costs at the expense of
agreement over safety.
Recommendation
The committee
majority recommends that the Senate pass this bill.
Senator Judith Troeth
Chair
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