All for One and One for All!

South Australian Employment Tribunal finds that all members of a group under a licence of self-insurance are equally and severally liable for suitable employment obligations imposed by section 18 of all group members.

In a recent ruling Her Honour Deputy President Judge Kelly of the South Australian Employment Tribunal in McCormack v ASC Shipbuilding Pty Ltd and Others [2020] SAET 200 has found that section 129(12) of the Return to Work Act 2014 (SA) (‘the RTW Act’) has the effect of making the nominated employer (of the group of employers holding a self-insured licence) the pre-injury employer for the purposes of section 18 of the RTW Act.

Background

Mr Rory McCormack was employed by ASC Shipbuilding Pty Ltd (‘ASC Shipbuilding’) and sustained a work injury during the course of his employment.

At the time that Mr McCormack sustained his injury, ASC Shipbuilding was a member of a group of companies that held a licence for self-insurance pursuant to section 129 of the RTW Act. The other members of the group were ASC Pty Ltd (‘ASC’) and Australian Naval Infrastructure Pty Ltd (formerly ASC Engineering Pty Ltd) (‘ANI’). ASC was the nominated employer of the group for the purpose of section 129(12) of the RTW Act.

On 17 November 2014 Mr McCormack sustained an injury to his left ankle, as a consequence of which he had claims accepted for weekly payments and medical and like expenses pursuant to the Workers Rehabilitation and Compensation Act 1986 (SA) and then the RTW Act.

On 13 November 2018 Mr McCormack’s employment was terminated due to redundancy.

On 14 December 2018, BAE Systems Australia Ltd (‘BAE’) acquired the business of ASC Shipbuilding and became the sole shareholder of ASC Shipbuilding. As a consequence of this, ASC Shipbuilding no longer operated under the licence for self-insurance with ASC and ANI.

Following the termination of his employment, but after 14 December 2018, Mr McCormack made applications, pursuant to section 18 of the RTW Act, for the provision of suitable employment to ASC Shipbuilding, ASC, and ANI.

The issue before Her Honour was whether any of ASC Shipbuilding, ASC, and/or ANI were the “pre-injury employer” pursuant to section 18 of the RTW Act.

The Worker’s submissions

Mr McCormack’s counsel placed emphasis on section 129(14) of the RTW Act, which makes all members of the self-insured group equally and severally liable for the liabilities of any member of the group under the Act.

It was submitted that, on a plain reading of section 129(12) and 192(14), the nominated employer is to be treated as the employer for all workers in the group and that each member of the group is equally and severally accountable for meeting the obligation to provide suitable employment pursuant to section 18 of the RTW Act.

The Employers’ submissions

Although no longer a member of the group, ASC Shipbuilding supported the submissions of ASC and ANI.

Counsel for ASC and ANI argued that Section 129(12) creates a statutory fiction, namely that the nominated employer is the employer of all the worker’s in the group.

ASC and ANI submitted that as section 129(12) is a “legal fiction”, this provision must be construed strictly and only for its intended purpose. It was argued that the purpose of section 129(12) was not to extend the obligation to provide suitable employment to all members of the group of companies.

In addition, ASC and ANI raised further arguments that:

  • ASC was no longer the “nominated employer” in respect of ASC Shipbuilding, pursuant to section 129(12), at the time that Mr McCormack made his application as ASC Shipbuilding was not part of the group of companies; and
  • Section 129(14) relates to “liabilities” of the group, and section 18 imposes a “duty”.

Decision

Her Honour went on to find that the words “for the purposes of the Act” in section 129(12) of the RTW Act deem the nominated employer as the employer for all purposes of the RTW Act.

By extension, Her Honour found that section 129(14) of the RTW Act creates a collective responsibility across all members of the group.

As such, an application pursuant to section 18 of the RTW Act directed at the nominated employer can relate to all members of the group.

Implications of the decision

Should Her Honour’s decision be upheld, it will fundamentally change the manner in which the nominated employer of a group of self-insured employers will need to respond to any application pursuant to section 18.

Firstly, any worker seeking the provision of suitable employment will be entitled to direct their application to the nominated employer, or any other employer that is included under the licence for self-insurance, which will not necessarily be the other party to the worker’s contract of employment.

In responding to a request for suitable employment, the relevant employer will be required to consider the availability of the requested suitable employment across the whole group.

In particular, if a decision is made to decline to provide suitable employment on the basis that it is not reasonably practicable to provide the employment, the relevant employer will need to be able to establish that it is not reasonably practicable to provide the requested suitable employment in respect of each member of the group.

In articulating a decision to decline to provide suitable employment on the basis that it is not reasonably practicable, the relevant employer will need to take a similar approach to that set out for a genuine redundancy in section 389 of the Fair Work Act 2009 (Cth) (‘the FW Act’). As section 389(2) of the FW Act requires an employer to consider whether it would be reasonable to redeploy a person within the enterprise of an associated entity of the employer, it can be expected that the Tribunal will take a similar approach as that taken by the Courts to section 389(2) in determining whether it is reasonably practicable for an associated entity to provide suitable employment.

While there is some similarity between the approach taken by Kelly DPJ in McCormack v ASC Shipbuilding Pty Ltd and Others and the obligation to consider redeployment to an associated entity under section 389(2) of the FW Act, this approach is likely to be problematic for some employer groups and local government groups in which the members of the group operate independently of one another.

For more information, please contact:
Patrick Walsh

Patrick Walsh
Director
p.  +61 8 8124 1941
e.  Email me

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.

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