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Friday Workplace Briefing

Recovery Actions – Third Parties and Public Liability Insurance

This week Andrew Douglas and Mathew Reiman discuss the impact of the High Court ruling that delivered a huge blow to Host indemnities for recovery actions; as well as giving you a wrap up of some important news and developments.

To view the full episode and catch up with the week’s latest news and developments please visit this link.

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About the Hosts

Managing Principal - Victoria

Episode Transcript

Andrew Douglas: Matt, third party public liability insurance. We’re onto the major thing.

Mathew Reiman: The major thing.

Andrew Douglas: The major thing. And I better do this, hadn’t I?

Mathew Reiman: Oh, it’s a bonus, yeah. No, I had my comments.

Andrew Douglas: So we talked about, what was that case before?

Mathew Reiman: Dylan.

Andrew Douglas: Dylan. We’re talking about Dylan.

Mathew Reiman: Dylan! I think Matt might be talking aboutMathew Reiman: I talked about Dylan earlier. So let me tell you what happens when you hire a labour hire. You get sent in your offer from the labour hire. And what the labour hire will do, is seek a series of indemnities. In three states of Australia, those indemnities as they relate to safety, are illegal. So not only illegal.

Mathew Reiman: Illegal, illegal

Andrew Douglas: Illegal.

Mathew Reiman: That’s what I heard. I like it.

Andrew Douglas: They’re also unlawful and you can be fined. Okay? So be wary of those ones.

Mathew Reiman: Yep.

Andrew Douglas: But they do seek indemnity around workers’ compensation. So let’s just map this out. You’ve got labour hire providing labour to a host.

Mathew Reiman: Yep.

Andrew Douglas: Labour hire employee gets injured at host.

Mathew Reiman: And you’re the host?

Andrew Douglas: And you’re the host. You’re the host, okay? Except for our guys who act for labour hire,

Mathew Reiman: The other labour, yeah.

Andrew Douglas: You get the workers’ comp claim here in labour hire land, and you go, “well they’re actually at another site and they got hurt.” It’s likely the other site hurt them. Then you got the basis of negligence. Can’t tell what’s happened to my language today. For which your workers’ comp insurer can seek recovery against the host. The host will then go up to their public liability insurer. And as we’ve said with Dylan, the public liability insurer may say no. And that all sounds pretty normal except for one thing. And that is the indemnity policy that you seek. You, sorry, by changing your indemnity provisions in that contract, you’re actually got to have insurance which permits you to seek that indemnity on both sides. And the host will not allow it.

Mathew Reiman: Yeah.

Andrew Douglas: There is a policy that does give that total indemnity. So where the host goes back and says to labour, “you indemnify me fully.” It’s worth about a million dollar premium for average size business. Very, very hard to get. And the policy now there’s only one left that you can get that works in Australia.

Mathew Reiman: Yeah, wow!

Andrew Douglas: And it’s almost impossible to get. But both sides have these exchanging indemnities, trying to get out of liability. Can I just tell you, it’s rubbish.

Mathew Reiman: Yeah.

Andrew Douglas: We’ve now litigated several of these. They are unquestionably difficult to prove one way or the other. And the issue is no matter what happens, you are enjoined in a litigation battle about the words of the policy, and the liability process.

Mathew Reiman: Oh, not a battle you want to get into.

Andrew Douglas: So you’re 4 or $500,000 in before you’ve cleared up what the words mean. The best way of doing this as a labour hire provider, and as a host is to own your responsibilities. So if the labour hire person to come in and go, “okay we’ll manage the introduction, safety and the admission into site. We’ll be clear about that and we’ll provide continuing support.” The host says, “look, we recognise that we have responsibility in Victoria, we got section 23 responsibility. In any event, we recognise that’s the same threat in Australia with a different number. We recognise we’ve got this liability. So we will accept that responsibility. And most importantly, we will not create areas of risk for labour hire. We will treat them like our employees.”

Mathew Reiman: Yes.

Andrew Douglas: Now that doesn’t sound like much, but when you’re looking, some of the industries like agriculture, the meat industry, those industries, whole sections, the provision of service is done by labour hire.

Mathew Reiman: Yeah.

Andrew Douglas: Almost no employee.

Mathew Reiman: No, not at all actually.

Andrew Douglas: And they are treated at arm’s length.

Mathew Reiman: That’s, yeah, yeah.

Andrew Douglas: Almost like contractors.

Mathew Reiman: Yeah that’s right.

Andrew Douglas: So Matt, I think that’s why Matt and I really wanted to chat about it.

Mathew Reiman: Yeah.

Andrew Douglas: One, this case means you must do what I just said.

Mathew Reiman: Yeah.

Andrew Douglas: You must treat them like your own. You must have a strong safety system. You must manage them. If you don’t, forget about this case, forget about insurance. You are going to be thrown into this well of litigation, where you’ll have no clarity and certainty. And good legal advice is about creating certainty.

Mathew Reiman: Yeah. Yeah. And I think Andrew as well is that, you know this trend that we are seeing of this enforcement, this expectation that you’ve got to have that responsibility for people on your side. Making sure that you take that individual responsibility, and not trying to outsource it to someone else, actually means you can also protect people as well. It’s base safety. Yeah.

Andrew Douglas: And productivity.

Mathew Reiman: Oh yeah well absolutely.

Andrew Douglas: So the irony of all this is, if I have labour hire that come in, I build their skill. Perhaps in the labour hire agreement, I have a conversion clause and a good labour hire does. Which means that comes in as labour hire, I agree to pay a premium 15 percent of his total year on wage, if I convert him to one of my employees. Actually pretty good, when you look at the provisions of the Fair Work Act. It’s a good way of testing…

Mathew Reiman: Yeah.

Andrew Douglas: The cattle before they come to eat the grass.

Mathew Reiman: Yeah, yeah.

Andrew Douglas: It’s not a bad idea.

Mathew Reiman: No, no it’s, yeah yeah.

Andrew Douglas: So good clauses have that. So why wouldn’t I bring in the best labour hire I can get? Have conversion clauses, it is a way that I can tunnel this skill and talent into my organisation. Treat them really well so I build their talent skill. They’re not going anywhere else.

Mathew Reiman: Yeah, yeah. That’s right Andrew. It’s the, you can’t have your cake and eat it too, right? You can’t get the positive benefits that you’ve just described there, without taking some responsibility for the safety of those people. And as soon as you want one without the other, that’s where you end up in a situation where those people hurt and don’t want to stay. And you end up in litigation.

Andrew Douglas: And as Nina, if Nina was here, would tell you, the litigation that’s coming from regulators about the protection of labour hire, is prolific at the moment. Because the contracting method of engaging employees or labour has changed so dramatically over the last 10 years. It is now a focus of the regulators to protect labour hire.

Mathew Reiman: Yes. Yeah.

Andrew Douglas: So it’s now a high risk area.


Andrew Douglas: Man. We’re on time,

Mathew Reiman: Excellent.

Andrew Douglas: Going well.

Mathew Reiman: We are!

Andrew Douglas: Let’s go over the problem. This’ll blow us out ’cause it’s a lot of pages.

Mathew Reiman: This is a lot pages.

Andrew Douglas: And Matt, you’re reading.

Mathew Reiman: And they’re very tall, Sally tells me. So we might be hidden behind the wall.

Andrew Douglas: The tall pages, let’s see what we’re doing.

Mathew Reiman: Oh that one’s not too bad.

Mathew Reiman: Let’s see if I can come over it like that. Off you go Matt. I thought it’d be up like this so we could–

Andrew Douglas: I thought so too. I think that’s the next couple, next couple of slides. So we will get to it.

Dwayne was the Operations Manager of Magic Moulders, a plastic extrusion and moulding business for the food industry. Kate was a plant operator. She had raised issues with the owner about the way women were treated in the business. Nothing direct but constant commentary, mocking women, and sexualising them, but never directed at her.

When the owner undertook a climate survey, there was a very strong response from women in the business, raising the same issue and saying they didn’t feel safe or comfortable with the culture. The owner spoke to Dwayne explaining it needed to stop.

Dwayne blamed Kate for stirring up trouble. He started to manage her more closely, was critical of any delays in production, even when outside her control, and made a pointed dig on Slack, the online method of production communication, saying, “If anyone has any problems you can always use Kate to raise them and discuss them across the plant.”

When Kate made a complaint to him, he laughed and said, “After all you are on the continuous improvement committee.”

Andrew Douglas: Still not high as I was hoping to go-

Mathew Reiman: No, no, they adjusted the camera actually.

Andrew Douglas: I want it up here. Yeah. Oh sorry.

Mathew Reiman: No, that’s okay.

The following week, a labour hire employee, Vince was injured on Kate’s plant as he tried to lift packets of extrusion parts to a pallet rather than use the appropriate lifting device.

Andrew Douglas: I knew Matt was doing this. Sorry.

Mathew Reiman: He suffered a herniated disc, and because of the wear and tear on his spine, was unlikely to return to work.

Dwayne called Kate into a room two days later, handed her an allegations letter suggesting she was in charge of plant, and should have made Vince use the correct device. Hence, her actions caused an imminent risk to the health and safety of a labour hire employee.

She explained, she was on her break at the time, he was unsupervised, an issue she had raised several times, including her suggestion to automate the line to avoid manual handling. He found the allegations against her.

Here we go. Wow.

Andrew Douglas: Well done man.

Mathew Reiman: Excellent.

Andrew Douglas: Okay. Extrusions.

Mathew Reiman: Extrusions. And moulding.

Andrew Douglas: I’ve got more.

Mathew Reiman: I know.

Andrew Douglas: Okay. If he, if he dismissed her, that’s Dwayne, would she have a good unfair dismissal claim then?

Mathew Reiman: Yeah, absolutely. I mean when you look at the three elements here, harsh, unjust, or unreasonable. Was it harsh? Absolutely. Someone who’s made complaints, who wasn’t in control of the plant at the time, and sought to make all these changes, and then is terminated for that, harsh. You know, was it unjust again? For the same basic…

Andrew Douglas: And the truth is, when you look at unjust, you go to the lawful basis for termination.

Mathew Reiman: Yeah.

Andrew Douglas: There’s no lawful basis.

Mathew Reiman: No. What is the valid reason here?

Andrew Douglas: Yeah. What is the proceduralMathew Reiman: So I think it’s either valid or unjust. They’re almost on par here.

Mathew Reiman: Yeah. Yeah.

Andrew Douglas: But unreasonable. Wow. How unreasonable can you be?

Mathew Reiman: Oh my goodness. Yeah. And look, oftentimes people hear safety, and they assume, yes, absolutely valid reason. But you’ve got to think back to how is this person’s role a part to play in this.

Andrew Douglas: Which throws in the second question, which is general protection and saying, boy and she raised the complaint.

Mathew Reiman: Oh!

Andrew Douglas: She’s raised the issues.

Mathew Reiman: Yeah.

Andrew Douglas: She’s raised the issues of the misconduct.

Mathew Reiman: Yep.

Andrew Douglas: She’s raised issues of safety on the line. And he goes ahead and terminates her, on some of the very issues she’s raised.

Mathew Reiman: Yeah. And he found her annoying on her own, his own subjective evidence. Effectively, he was reading between the lines that he created the allegations to terminate her.

Andrew Douglas: I think there’s little doubt of that. Could Kate have brought a successful workers compensation claim? Well that’s a lay down, what’s there.

Mathew Reiman: Yeah.

Andrew Douglas: Get you and answer.

Mathew Reiman: Yeah.

Andrew Douglas: So remember the two tests? Reasonable management action here. So she’d say, “it happened at work.” Yes it did.

Mathew Reiman: Yep.

Andrew Douglas: I’ve got a mental health problem.

Mathew Reiman: Yep.

Andrew Douglas: She’d definitely argue it. And as long as it’s true, you get it up and running next thing is, only defence is reasonable management action. Was it fair for him to do? Take the actions he did? No. Did you do it in a fair way? No.

Mathew Reiman: Yeah. The double whammy.

Andrew Douglas: Yeah. So off to premium we go.

Mathew Reiman: Yeah.

Andrew Douglas: Matt, could the labour hire company insurer bring a successful recovery action against Magic Muscle? And what would the public liability insurer do?

Mathew Reiman: Well, I think, well yes, the workers comp could absolutely, insurer could absolutely bring the recovery agent.

Andrew Douglas: But this is, this is Vince’s employer.

Mathew Reiman: That’s right. So the person injured on the the plant-

Andrew Douglas: Yep.

Mathew Reiman: …could absolutely, given that they’re a labour hire employee, their employers worker’s comp insurer could bring the claim.

Andrew Douglas: What do you think about the public liability insurer?

Mathew Reiman: Well, I think they would reject it. I mean did the host employee here, Magic Moulding, did they take all reasonably practical options here?

Andrew Douglas: Here, they knew. So let’s use reasonably practical.

Mathew Reiman: Yep.

Andrew Douglas: They knew what the hazard was because they’d been told.

Mathew Reiman: They had been told by, yeah.

Andrew Douglas: They knew the level of risk. Kate had elevated that and said, “you really need to use a control line automate, or at least there should have been supervision.”

Mathew Reiman: Yeah.

Andrew Douglas: It wasn’t there.

Mathew Reiman: No.

Andrew Douglas: So it wasn’t a safe plant, it wasn’t done reasonably practical and there was no safe system around managing her breaks.

Mathew Reiman: Yeah.

Andrew Douglas: I’ve got to tell you, I think the public liability insurance would decline.

Mathew Reiman: Yeah. And not an example where, you know, as opposed to Dylan, where they get almost close and they say, “oh, okay there’s something else you could have done. But this was almost perfect here.” What they did was a failure.

Andrew Douglas: The interesting part of this is, and I guess we should sort of focus on this for a second. So what happens when you go to court for this? It’s not pleasant at all.

Mathew Reiman: No.

Andrew Douglas: What happens to go to court is you are the name party. So Magic Muscle is the name party. They come along and there are two people sitting opposite them. One is the worker’s comp insurer for Vince, for Vince’s company and the second one is your own insurer.

Mathew Reiman: Yeah. Yeah, that’s right.

Andrew Douglas: So your liability for costs, ’cause you’re suing for indemnity at one level and you’re suing to say you’re not negligent on the other level, or you are defending a claim. It costs double.

Mathew Reiman: Yeah absolutely.

Andrew Douglas: And the whole time you are trying to prove your case, the insurer is trying to prove you are wrong because they need to prove you are more negligent. It’s denying liability.

Mathew Reiman: Yeah.

Andrew Douglas: So can you see how awful that sits?

Mathew Reiman: Oh and no litigation is ever easy, but this particular litigation is a nightmare.

Andrew Douglas: ‘Cause you’ve got two parties trying to prove their-

Mathew Reiman: Yeah

Andrew Douglas: And one of them is your friend.

Mathew Reiman: That’s right. Well-

Andrew Douglas: Alright. So the next question is, if the Respect at Work changes were in, would the commentary Kate complained about, be unlawful? Now remember, none of this was directed at her.

Mathew Reiman: No.

Andrew Douglas: But it was about them.

Mathew Reiman: That’s right. Well it’s the hostile work environment, isn’t it? So you’ve got to remember that’s comments of a sexual nature or about characteristics of sex made in the presence of people, not necessarily directly to, that could cause harm and effects. So here we’ve got several women, not even just one, but several women in the climate survey saying, “we feel uncomfortable because of these comments.” I mean you talk about a lady in this air, that’d be the test case of the century.

Andrew Douglas: And not only that, Dwayne’s been told to stop it and doesn’t, so you’ve got this other problem. But the important part of that is, that is a respect to work which is probably going to go through before Christmas in the Senate. So Royal has sent early in the new year, not here yet, but it is also a hazard.

Mathew Reiman: Yes.

Andrew Douglas: So that hazard kicks back in the safety level. So once you’ve got an identified wrong, it’s a recognised hazard which elevates its level of risk and the fade and introduce a control means you go back to the reasonably practical, you’ve got a real safety problem, which means the public liability insurer would be agitating that issue as well.

Mathew Reiman: Yes, absolutely. Which might flow well into the next question.

Andrew Douglas: Yes.

Mathew Reiman: Yeah.

Andrew Douglas: Oh, how wonderful.

Mathew Reiman: Almost like it it was planned!

Andrew Douglas: And I wrote this.

Did Magic Moulders and Dwayne breach the safety legislation? And if so, how? Well we talked about how once they’ve done it, which is with the hostile work environment, what other ones?

Mathew Reiman: Well the others obviously are, we know here that there are examples given by Kate of the way to improve the way that the work is performed, about the automation. Obviously there’s also another level here about the psychological risk to herself, and to the other employees.

Andrew Douglas: And there’s Dwayne.

Mathew Reiman: And then, well that’s right. I mean he was hurt.

Andrew Douglas: He’s one of the hazards.

Mathew Reiman: Yeah.

Andrew Douglas: He’s one of the people doing this.

Mathew Reiman: Yes, that’s right. He’s the labour hire employee. He’s taking these steps.

Andrew Douglas: That’s Vince.

Mathew Reiman: Oh, I’m sorry.

Andrew Douglas: I tell you, this is complex. I warned you.

Mathew Reiman: No, you did, you did, you did.

Andrew Douglas: Dwayne was the one who was backing up the hostile working environment.

Mathew Reiman: Yes. Sorry.

Andrew Douglas: So there you go. All those things tell you really good, strong breaches of safety.

Mathew Reiman: Yeah.

Andrew Douglas:Which means public liability denies.

Mathew Reiman: Yep.

Andrew Douglas: Liability in the fair work.

Mathew Reiman: Yep.

Andrew Douglas:Mathew Reiman: Gee, it’s not nice is it?

Mathew Reiman: No it’s not.

Andrew Douglas: Every single jurisdiction you go to.

Mathew Reiman: Yeah.

Andrew Douglas: You lose on this set of factors.

Mathew Reiman: Yep. Yep.

Andrew Douglas: So guys, next week I’ve got to tell you,

Mathew Reiman: Oh, we got one more question, Andrew.

Andrew Douglas: Got one more?

Mathew Reiman: Yeah. One more question.

Andrew Douglas: Could Kate have applied successfully for a stop bullying order?

Mathew Reiman: Yes, yes, yes.

Andrew Douglas: Yes, there was repeated conduct.

Mathew Reiman: Yeah. It was unreasonable.

Andrew Douglas: Unreasonable.

Andrew Douglas: They ran the risk, health and safety. Three tests. Yes they could.

Mathew Reiman: Yep.

Andrew Douglas: So look, that’s it. Now can we go to next week then?

Mathew Reiman: We can Andrew. Sorry, I still want you to-

Andrew Douglas: That wasn’t high enough. Yeah we need to climb the fence.

Mathew Reiman: That’s it.

Andrew Douglas: Next week we should know what’s happening in the Senate, shouldn’t we?

Mathew Reiman: I think so. Fingers crossed. Yeah.

Andrew Douglas: Yeah, well it’s only a week or two of sitting left. We’ll see what happens.

Mathew Reiman: Yeah.

Andrew Douglas: But the peacock factor should be out.

Mathew Reiman: Yeah, we might print him out and put it in front of the choir.

Andrew Douglas: I think we should. We’ll put the peacock here.

Mathew Reiman: We could. Yeah, I could.

Andrew Douglas: Peacock will visit.

Mathew Reiman: There we go. Excellent.

Andrew Douglas: He’ll be our silent inquirer.

Mathew Reiman: Yeah.

Andrew Douglas: Okay. Thank you very much, everyone.

Mathew Reiman: Thanks everyone.

Andrew Douglas: See you next week. Bye Bye.

Mathew Reiman: Have a good one.

Check this next

Andrew Douglas and Nina Hoang will discuss the issue of psychological hazards and employers’ obligations to proactively prevent these hazards if they are reasonably foreseeable. To view the full episode and catch up with the week’s latest news and developments please visit this link.