The NSW State Government has introduced legislation in the State Parliament called the Work Health and Safety Amendment (Review) Bill 2019 (the Bill).

The NSW State Government has confirmed that unlike some other State Governments, they will not be introducing industrial manslaughter laws.  However, a note will be inserted into the WHS Act that sets out offences and penalties noting workplace deaths may be prosecuted as manslaughter under the existing provisions of the NSW Crimes Act 1900.

It has always been the case in NSW that a work-related death can be prosecuted as manslaughter by criminal negligence and under the Crimes Act, a maximum penalty of 25 years imprisonment applies.  The NSW Minister for Better Regulation and Innovation, Mr Kevin Anderson observed:

“The insertion of the note will make it clear to employers, businesses, workers and the community more broadly, that anyone who causes the death of a worker through negligence faces serious criminal sanction.”

Whilst no new offence for industrial manslaughter will be created, the new note in the WHS Act is intended to direct the minds of those that manage WHS to the risk of prosecution to manslaughter.

Members are also advised that the Bill will make prosecution of serious offences easier.  The Government believes Category 1 prosecutions have been hampered because the fault element of the offence – recklessness – is too difficult to prove.  To establish recklessness, a prosecutor must establish actual knowledge of a risk and deliberate disregard for that risk.

This situation will change with the new test for a Category 1 offence being whether there is “gross negligence or recklessness”. There is no definition of what amounts to “gross negligence”.  SafeWork NSW will be able to prosecute grossly negligent duty holders for a Category 1 offence where they expose persons to a risk of death or serious injury or illness.  The maximum penalties for a Category 1 offence are imprisonment for up to 5 years and / or a fine of $346,500 for an individual and $3,463,000 for a corporation.

The Bill also incorporates a new offence relating to insurance or indemnity arrangements which cover work health and safety penalties. It will be an offence for a person to enter into, provide, or benefit from insurance or indemnity arrangements, for liability for a monetary penalty for a work health and safety offence.  If a company commits the new offence its officers may also be liable.

This new offence will apply to entities offering the insurance and / or indemnity, and those entering into an agreement to benefit from the insurance or indemnity.  It will apply to insurers and businesses that take out insurance. It will apply to management liability and statutory fines insurance currently offered by insurers.

As the moment most policies of insurance that offer cover for WHS fines contain a provision that stipulates the cover is available to the extent permitted by law.  In those circumstances, the policies will not necessarily fall foul of the prohibition however, the cover will not be permitted by the law of NSW and an insurer will not be able to pay a fine without committing an offence so that’s the end of that insurance for WHS fines in NSW.

Many businesses see insurance cover for WHS fines as a primary driver in their decision to arrange management liability insurance or statutory fines insurance and insurers are likely to be confronted by:

•    A decline in interest in these insurance products;
•    Pressure to reduce premiums where a risk driver is removed during a policy term;
•    A need to innovate to make these products attractive.

The prohibition on insurance will not be retrospective.  It will not apply to insurance policies and indemnity agreements in place where the cover is for a liability for a monetary penalty for an incident that occurred after the commencement of a new legislation.  It will apply to insurance policies in place preventing insurance or indemnity for penalties arising from incidents after the legislation commences.

Once the Bill is passed by Parliament, the changes will commence on the Assent of the legislation. 

Businesses in NSW need to take stock of risk management strategies and insurance arrangements for WHS fines whilst insurances are called to action to manage the change that a prohibition on insurance of WHS fines brings.  Insurance brokers will also be impacted as businesses challenge the value of management liability and statutory fines insurance if WHS fines cannot be insured.

Master Builders anticipates that without WHS insurance, businesses will be further exposed if they do not have a current and effective WHS Management System in place.  To that end, Members can contact the Association’s Safety Department who offer a suite of Safety Management Systems for businesses which conform to current Australian and International Standards as well as NSW Government 5th Edition Guidelines.

More information 

If members have any further enquiries regarding this matter, please do not hesitate to contact the Association’s Safety Department on 02 8586 3555.