Written by Montana Messina
An employer has an obligation to hold a valid policy of insurance when employing workers, except in certain circumstances.
If a worker suffers a workplace injury or illness, the worker is entitled to make a claim for compensation.
If the Workers Compensation Nominal Insurer determines that the employer did not hold a valid policy, is not considered an exempt employer and there is no dispute that the worker was an employee and was injured at work, the Nominal Insurer may issue a notice under section 145 of the Workers Compensation Act 1987 (“the Act”). The 145 Notice requires an employer to reimburse the Nominal Insurer for any payment made to a worker in respect of a claim.
Once served with a 145 Notice, if the employer seeks to appeal their liability to reimburse the Nominal Insurer, the employer must file an application to appeal the 145 Notice with the Workers Compensation Commission (“the Commission”) within the prescribed time limit.
If an employer disputes liability to reimburse the Nominal Insurer on the basis that they are were an employer exempt from having to obtain a policy of insurance, the onus is on the employer to prove exemption status, at the relevant time
Pursuant to section 155AA of the Act, an employer is considered an exempt employer and not required to obtain a policy of insurance, if during the financial year, the employer has reasonable grounds for believing that the total amount of wages that will be payable by the employer during the financial year to the workers employed by the employer will not be more than the exemption limit for that financial year.
The exemption limit for a financial year is specified as $7,5000 under the Act. An amount of wages actually payable will not be determinative when making an assessment of what will be payable. There is no requirement under the Act for retrospective consideration of evidence of wages paid.
Determining whether an employer had ‘reasonable grounds,’ as noted by this section of the Act, requires an objective test to be applied, as set out in the case of Kula.
This was affirmed by the High Court in Rockett which unanimously held that “there must be ‘reasonable grounds’ for a state of mind…it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person”.
The relevant question for determination for the Commission is whether the employer can establish, on the balance of probabilities, that at the time of injury, the employer had reasonably objective grounds for believing that the total amount of wages payable to a worker during a financial year would not exceed $7,500.
The employer can provide evidence as to various factors to demonstrate their exemption status, such as:
- Employment contract;
- Classification of worker;
- Commencement of employment;
- Expected duration of employment;
- Remuneration;
- Termination of employment;
However, it is ultimately for the Commission to determine whether an employer is considered to be an exempt employer at the date of the injury and liable to reimburse the Nominal Insurer.
Settling the matter with the Nominal Insurer prior to determination by the Commission in relation to a current 145 Notice, does not preclude the Nominal Insurer from issuing a further 145 Notice to an employer to reimburse the Nominal Insurer in the future. Further queries and payments made to or on behalf of the work for the same injury.
If the Commission determines that an employer is not an exempt employer pursuant to section 155AA of the Act, the employer is precluded from asserting that it is an exempt employer in relation to future 145 Notices issued by the Nominal Insurer that relate to the same worker and injury.
We strongly recommend that you take out workers compensation insurance even if you do not think you will pay more than $7,500 in wages.
