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Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015



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ISSN 1328-8091

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BILLS DIGEST NO. 88, 2014-15 24 MARCH 2015

Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015 Leslie Nielson Economics Section

Contents

The Bills Digest at a glance ................................................... 3

Purpose of the Bill ............................................................... 3

Structure of the Bill ............................................................. 3

Background ......................................................................... 3

About the Seacare Scheme...................................................... 3

Nature of the decisions ........................................................... 4

Relevant law .......................................................................... 4

Decision by the AAT............................................................... 5

Decision by the Federal Court ............................................... 5

Effects of the decisions .......................................................... 5

Interim response to the decisions ......................................... 6

Previous reviews ................................................................. 6

Committee consideration .................................................... 7

The Senate Selection of Bills Committee ................................. 7

Parliamentary Joint Committee on Human Rights .................. 7

Statement of Compatibility with Human Rights .................... 8

Policy position of non-government parties/independents ..... 8

Position of major interest groups ......................................... 8

Opposition to the Bill ............................................................... 8

Support for the Bill .................................................................. 9

Comments ............................................................................... 9

Financial implications ........................................................ 10

Key issues and provisions................................................... 10

Schedule 1—Constitutional coverage ................................... 10

Trade and commerce power ............................................... 10

Date introduced: 26 February 2015

House: House of Representatives

Portfolio: Employment

Commencement: Sections 1-3 and Schedule 2 on Royal Assent; Part 1 of Schedule 1 on 24 June 1993; Part 2 of Schedule 1 on 18 July 1994.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

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Corporations power ............................................................ 11

Application to trainees ........................................................ 12

Retrospective amendments ................................................ 13

Occupational health and safety ........................................... 13

Schedule 2—application of the levy ...................................... 14

Concluding comments ....................................................... 14

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The Bills Digest at a glance The amendments in this Bill are a direct response to two legal decisions. Those decisions had the effect of dramatically broadening the class of persons to whom the Seacare scheme applies.

The amendments in the Bill are intended to bring about a return of the status quo that existed before the decisions and to put beyond doubt that the Seacare Scheme does not cover injuries sustained during intrastate voyages. Injuries sustained during intrastate voyages are normally covered by the relevant state workers compensation scheme.

Purpose of the Bill The Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015 (the Bill) amends the Seafarers Rehabilitation and Compensation Act 19921 (Seafarers Act) and the Occupational Health and Safety (Maritime Industry) Act 19932 (Maritime Industry Act) in response to the decision of the Full Court of the Federal Court in Samson Maritime Pty Ltd v Aucote3 on appeal from the decision of the Administrative Appeals Tribunal (the AAT) in Aucote and Samson Maritime Pty Ltd.4

Structure of the Bill The Bill contains two Schedules:

• Schedule 1 contains proposed amendments to both the Seafarers Act and Maritime Industry Act that respond to the above mentioned decisions and

• Schedule 2 contains proposed amendments to the Seafarers Act concerning the application of the seafarer’s rehabilitation and compensation levy.

Background About the Seacare Scheme To appreciate some of the potential problems arising from the decisions of the AAT and the Federal Court, an understanding of the Seacare scheme is required:

Seacare is a national scheme of occupational health and safety (OHS), rehabilitation and workers' compensation arrangements which applies to defined seafaring employees and—in relation to OHS—defined third parties.

The scheme is overseen by the Seafarers Safety, Rehabilitation and Compensation Authority—otherwise known as the Seacare Authority—which comprises an independent Chairperson and Deputy Chairperson, the Chief Executive Officer of the Australian Maritime Safety Authority, two employer representatives and two employee representatives.

5

Workers’ compensation arrangements established by the Seafarers Act are privately underwritten with employers purchasing insurance policies from approved insurers, under the terms of that Act.6 In addition to overseeing the operation of the Seafarers Act the Seacare Authority also oversees the operation of the Seafarers Rehabilitation and Compensation Levy Act 1992 (the Levy Act).7 The Levy Act provides for a levy to be collected to support the Seafarers Safety Net Fund. The Safety Net Fund stands in the place of an employer where there is no employer (usually due to that employer going out of business) against whom a seafarer can make a compensation claim.8

1. Seafarers Rehabilitation and Compensation Act 1992, accessed 18 March 2015. 2. Occupational Health and Safety (Maritime Industry) Act 1993, accessed 18 March 2015. 3. Samson Maritime Pty Ltd v Aucote, [2014] FCAFC 182, (22 December 2014), accessed 16 March 2015. 4. Re Aucote and Samson Maritime Pty Ltd, [2014] AATA 296, (14 May 2014), accessed 16 March 2015. 5. Seafarers Safety Rehabilitation and Compensation Authority, ‘About us’, Seacare website, accessed 5 March 2015. 6. Explanatory Memorandum, Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, p. vii, accessed 16 March

2015.

7. Seafarers Rehabilitation and Compensation Levy Act 1992, accessed 18 March 2015. 8. Seafarers Safety Rehabilitation and Compensation Authority, ‘About us’, op. cit.

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Nature of the decisions The AAT and Federal Court cases discussed above are about whether a person who was injured while working on a vessel (the Samson Mariner), was entitled to payment of compensation under the Seafarers Act. The facts of the case were as follows:

• on 18 June 2011, Mr Aucote (the injured worker) injured his right shoulder whilst working as a deckhand or dogman on board Samson Mariner, a multi-cat dredge helper vessel

• the vessel was registered on the Australian Register of Ships

• it was being used to assist in the construction of a 1.5 kilometre two sided wharf and associated infrastructure at Port Walcott, in Cape Lambert, in the Pilbara region of Western Australia

• the wharf, when completed, would be used for loading bulk carriers with iron ore

• the builder, John Holland Pty Ltd, had chartered Samson Mariner for a minimum of 12 months from February 2011 and

• Rio Tinto Iron Ore had engaged John Holland to construct the wharf and associated port infrastructure so that it would have the capacity to load up to 50 million tonnes of iron ore annually, principally for export to the People’s Republic of China.9

The injured worker’s claim for compensation was not accepted by his employer.10 The AAT was requested to determine whether the Seafarers Act applied to the claim. The main issue to be determined was whether the Samson Mariner was engaged solely in intrastate trade, or whether by virtue of its task (constructing a facility for the export of iron ore), closely working with a foreign owned vessel engaged in that task and transporting goods that were directly imported for the express purposes of completing that task, it was engaged in trade or commerce between Australia and places outside Australia. If the latter was the case, then the Seafarers Act applied, and the injured worker was entitled to compensation under that Act. If the Samson Mariner was engaged in trade and commerce purely within the waters of a single state, then the provisions of the Seafarers Act would not apply.

The President of the AAT held that the Samson Mariner was engaged in trade or commerce between Australia and places outside Australia.

The Full Court of the Federal Court came to the same final decision—that the injured person was entitled to compensation under the Seafarers Act—but did so based on a different provision.

Relevant law The relevant law is section 19 of the Seafarers Act, which relevantly provides:

Application of Act

19(1) This Act applies to the employment of employees on a prescribed ship that is engaged in trade or commerce:

(a) between Australia and places outside Australia; or

(aa) between 2 places outside Australia; or

(b) among the States; or

(c) within a Territory, between a State and a Territory or between 2 Territories.

19 (2) This Act also has the effect it would have if:

(a) a reference to an employer were limited to a reference to a trading corporation formed within the limits of the Commonwealth; and

9. Samson Maritime Pty Ltd v Aucote, [2014] FCAFC 182 at paragraph 2, accessed 23 March 2015. 10. Re Aucote and Samson Maritime Pty Ltd, [2014] AATA 296 at paragraph 3, accessed 23 March 2015.

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(b) a reference to an employee were limited to a reference to an employee employed by a trading corporation formed within the limits of the Commonwealth.

Decision by the AAT The decision of the AAT was based on an interpretation of paragraph 19(1)(a) of the Seafarers Act. Having decided that the injured worker was employed as a seafarer, the AAT then determined that he was employed on a prescribed ship, which was engaged in trade or commerce between Australia and places outside Australia because:

All of the interrelated commercial arrangements of which the charter of the Samson Mariner was part were simply means to achieve an identified end: providing Rio Tinto with the necessary infrastructure and ancillaries to process and export up to an additional 50 million tonnes of iron ore per annum. 11

Under this decision the entitlement of the injured worker to compensation has its legislative basis in section 51(i) of the Constitution—the trade and commerce power.12

Decision by the Federal Court The Full Court of the Federal Court based its decision on subsection 19(2) of the Seafarers Act and determined that the injured person was entitled to compensation because he was a seafarer employed on a ship registered in Australia by an Australian trading corporation.

Under this decision the entitlement of the injured worker to compensation has its legislative basis in section 51(xx) of the Constitution—the corporations power.

Effects of the decisions The practical effect of these decisions was to expand the coverage of the Seafarers Act, and therefore the Seacare scheme, to seafarers who are employed on prescribed ships which are owned by a constitutional corporation.13 This includes those which are engaged in intrastate trade—provided that they satisfy the definition of prescribed ship.14 This may, for example, include those Australian owned vessels working in the offshore oil and gas industries, harbour tugs, ferries and small work boats of all kinds engaged solely in the waters of one state.

A number of potential problems arise from the above interpretation of subsections 19(1) and (2) of the Seafarers Act, namely:

• it potentially disrupts existing insurance arrangements, and creates a source of confusion over which set of workers compensation arrangements apply in which circumstances

• it could dramatically increase the insurance costs of shipowners, as the workers compensation premiums under the Seacare scheme are, on average, significantly more expensive than those of state and territory workers compensation schemes15

• it potentially dramatically expands the coverage of the Seacare scheme to all vessels working in the intra-state trade. The Department of Employment has estimated that the Aucote decisions’ broad view of coverage could mean that the Seacare scheme applies to 11,000 vessels and approximately 20,000 employees.16 This is far more vessels and people than the current coverage (see below for further details of current coverage)

11. Re Aucote and Samson Maritime Pty Ltd, [2014] AATA 296 at paragraph 51. 12. Commonwealth of Australia Constitution Act, accessed 19 March 2015. 13. That is, a corporation covered by section 51(xx) of the Constitution - a trading corporation or financial corporation formed within the limits of the Commonwealth, or a foreign corporation.

14. For the purposes of the Seafarers Act, the term prescribed ship means a ship prescribed for the purposes of the Navigation Act 1912, which are generally Australian ships or foreign ships with Australian crews. Importantly, the Navigation Act 1912 has been repealed. 15. Explanatory Memorandum, Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, p. viii. 16. Department of Employment, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Seafarers

Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, undated, paragraph 20, accessed 19 March 2015.

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• state and territory regulators that administer workers’ compensation and work health and safety laws no longer have any statutory power to do so for seafarers. State government staff that conduct work health and safety inspections and investigations on ships are in effect redundant17

• an unintended consequence of the decision by the Full Court of the Federal Court is that maritime employers in the intrastate seaborn trade who were unaware that they were in fact covered by the Seacare scheme, are now potentially guilty of not making the required levy contributions to that scheme, and not having the required policy of insurance under the Seafarers Act18

• the viability of the Seacare scheme could be in doubt as employers may be exposed to claims for which they have no insurance, because they did not know they were liable for them under the Seafarers Act19 and

• the Safety Net Fund’s viability would also be in jeopardy, as it has not received the contributions in respect of past intrastate voyages, in respect of which claims may be made.20

Interim response to the decisions Under section 20A of the Seafarers Act, the Seacare Authority has the power to grant exemptions from the application of the Seafarers Act:

This provision was introduced in 1997, due partly to the significant costs associated with obtaining insurance cover under the Seafarers Act for one-off voyages.

The Seacare Authority has developed exemption guidelines which establish the conditions of exemptions from the Seafarers Act. These guidelines also reflect the 2006 Ministerial Direction which prescribes that exemptions from the scheme are permitted where workers’ compensation insurance is available under a State or Territory scheme at a cost lower than that available under the Seacare scheme.

21

The Seacare Authority is intending to grant an exemption from the provisions of the Seafarers Act under section 20A of that Act to all employees on ships to the extent that such employees are brought under the scheme by virtue of the decision of the Full Court of the Federal Court which is discussed above:

These employees will be covered by state workers' compensation legislation. The exemption will not impact ships that were covered under the Seafarers Act prior to the decision.

This exemption is a transitional measure that aims to provide certainty to maritime industry stakeholders on their workers' compensation arrangements while the Government considers long-term arrangements following the decision. 22

At the date of writing this Bills Digest the Seacare Authority had received submissions on this matter, but had not yet formally granted this exemption. The author understands that this will shortly occur.23

It is not clear that after the granting of this exemption the workers on the affected ships will revert to being covered by their previous workers compensation arrangements.

Previous reviews The Seacare scheme has been subject to three separate reviews which should be noted in the context of the proposed amendments in this Bill.

In 2005, Ernst & Young ABC Pty Limited (Ernst & Young) undertook a review evaluating the Seacare scheme for the then Department of Employment and Workplace Relations. This report was not made public.24

17. Ibid., paragraph 60. 18. Ibid., p. 11. 19. Ibid., p. 9. 20. Ibid.

21. Seafarers Safety, Rehabilitation and Compensation Authority, Seacare jurisdictional coverage—discussion paper, Australian Government, February 2012, p. 9, accessed 19 March 2015. 22. Seacare Authority, ‘Seacare Authority to grant a section 20A exemption’, Seacare website, accessed 18 March 2015. 23. Based on personal contact with Seacare Authority.

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The Seafarers Safety, Rehabilitation and Compensation Authority (Seacare Authority) released a discussion paper in February 2012, entitled Seacare Jurisdictional Coverage. It provided information on existing coverage provisions and problems associated with their operation, some guiding principles proposed to be taken into account in developing coverage provisions and draft provisions on which feedback was sought.25

In March 2013 a report of a comprehensive review of the Seacare Scheme was released. It contained extensive recommendations for amending both the operation of the scheme and its founding legislation.26 The Review is known as the ‘Stewart-Crompton’ review.

To date, the Government has not responded to the report arising from Stewart-Crompton review. The Department of Employment states that:

By restoring coverage to what was widely understood to be the status quo, the Bill will allow time for a more considered examination of the Stewart-Crompton Review of the scheme, including the long-standing issues relating to coverage. This process will include consultation will all industry participants. It is the Government’s intention to introduce further legislation containing these measures into the Parliament in the second half [of] 2015.

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These reviews demonstrate that there was considered to be a need to amend the workers’ compensation legislation for seafarers before the recent decisions of the AAT and the Full Court of the Federal Court.

Committee consideration The Senate Selection of Bills Committee This Bill has been referred to the Senate Education and Employment Legislation Committee (Education and Employment Committee) for inquiry and report by 23 March 2015.28 At the time of writing this Bills Digest the Education and Employment Committee had received seven submissions. The views of submitters are canvassed under the heading ‘Position of major interest groups’ below.

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights (Human Rights Committee) noted that the amendments would result in certain workers no longer having an entitlement to compensation under the Seafarers Act, and that they would, instead, be covered by the relevant workers' compensation and work health and safety legislation of the state in which they work. The Human Rights Committee considered that amending the Seacare scheme to remove an entitlement to compensation engages and may limit the right to social security, which is protected by Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR).29

According to the Human Rights Committee:

Under article 2(1) of the ICESCR, Australia has certain obligations in relation to economic and social rights. These include an obligation not to unjustifiably take any backwards steps (retrogressive measures) that might affect the right to social security. A reduction in compensation available to an injured worker may be a retrogressive measure for human rights purposes. A retrogressive measure is any measure that directly or indirectly leads to a backwards step being taken in the level of rights protection. A retrogressive measure is not prohibited so long as it can be demonstrated that the measure is justified.

30

As the statement of compatibility for the Bill does not, in the Human Rights Committee’s view, provide sufficient information to establish that the measure may be regarded as proportionate to its stated objective, the

24. R Stewart-Crompton, Review of the Seacare Scheme, March 2013, p. 1, accessed 19 March 2015. 25. Seafarers Safety, Rehabilitation and Compensation Authority, Seacare jurisdictional coverage—discussion paper, op. cit. 26. R Stewart-Crompton, op. cit. 27. Department of Employment, op. cit., p. 3. 28. The terms of reference, submissions to the Education and Employment Committee and the final report (when published are available on the

inquiry homepage), accessed 19 March 2015. 29. Parliamentary Joint Committee on Human Rights, Twentieth report of the 44th Parliament, 18 March 2015, accessed 19 March 2015. 30. Ibid., p. 38.

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Committee has sought advice from the Minister for Employment about the differences in levels of coverage and compensation between the Seacare scheme and state and territory workers' compensation schemes.31

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.32

Policy position of non-government parties/independents As at the date of writing non-government parties and members had not expressed a position on this Bill.

Position of major interest groups Of the seven submissions received by the Education and Employment Committee four did not support the Bill.

Opposition to the Bill The Maritime Union of Australia (MUA) opposes the passage of this Bill because:

• the Bill unnecessarily limits coverage beyond anything ever intended (see following discussion)

• the MUA fears that substantial new amendments to the coverage provision will provide fertile ground for insurers to decline liability, even in cases where the employer maintains a Seacare insurance policy. This would create uncertainty and add to costs in the scheme

• the proposed changes would lead to fewer vessels being covered and a contraction of the scheme. This will lead to greater insurance costs for the remaining participants, as the pool of employers paying insurance premiums reduces (see following discussion)

• if the coverage is tightened by passage of the Bill and additional seafarers are excluded from the Commonwealth scheme for seafarers, it cannot be automatically assumed that they will be covered under state workers’ compensation schemes. This arises due to restrictions on the application of some state workers’ compensation Acts

• the MUA contends that there is no immediate risk to the Seacare scheme and no need therefore to rush ‘poorly drafted legislation’ through the Parliament (see discussion in Key Issues and Provisions section below)

• stakeholders have not been consulted (the current Senate Committee inquiry being the only opportunity to provide detailed comments on the proposed amendments)

• there is goodwill among the key stakeholders to reach a consensus on what the coverage of the scheme should be going forward and

• the Government has wrongly stated there is a shared understanding on the pre Federal Court decision coverage as a basis for proceeding with the Bill.33

The Australian Maritime Offices Union (AMOU) has noted the extremely short time frame for providing submissions to the Employment and Education Committee which is inquiring into this Bill and drew attention to the Government’s obligations under the International Labor Organisation convention concerning occupational safety and health and the working environment (ILO Convention No. 155), to consult with workers on matters affecting their health and safety.34 It states that the Government has failed to do so on this occasion.

31. Ibid.

32. The Statement of Compatibility with Human Rights can be found at page v of the Explanatory Memorandum to the Bill. 33. Maritime Union of Australia, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, 13 March 2015, paragraphs 3.1 to 3.10. 34. ILO Convention (No. 155) concerning Occupational Safety and Health and the Working Environment done at Geneva on 22 June 1981 [2005]

ATS 11 (entered into force generally on 11 August 1983), accessed 19 March 2015.

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The AMOU recommended that the Bill not be passed and that the Government should commence discussion with all stakeholders on coverage matters using the recommendations of the 2013 Review as the starting point.35

The Australian Institute of Marine and Power Engineers (AIMPE) also opposes the Bill and recommends that ‘a more comprehensive, well considered’ Bill should be introduced in the winter or spring sittings of 2015. Its grounds for so recommending are:

• the Bill would not merely restore the status quo ante regarding Seacare scheme coverage, but would instead restrict the number of seafarers covered by the legislative scheme so that it would cover only a fraction of the seafarers currently encompassed by the scheme and

• the Bill fails to address the many important issues highlighted in the report of the Review of the Seacare Scheme of March 2013.36

Support for the Bill On the other hand, the submission by the Australian Shipowners Association (ASA) to the Education and Employment Committee indicates its strong support for urgent passage of the Bill. According to the ASA there will potentially be significant consequences for those operators who are not currently within the Seacare Scheme. The ASA considers that, under the new understanding occasioned by the Aucote decisions, if the Bill were not to pass:

• there would be a dramatic increase in the number of employers included in the Seacare scheme, but the current Levy Act would not enable the Seacare Authority to collect the necessary levy from these new members. The Levy would need to increase to well above the current $15 per berth. This would lead to a dramatic and unwarranted increase in costs for the shipowners currently paying that levy37

• potentially, there would be significant consequences for the vessel operators whose employees have, as a result of the AAT and Full Federal Court decisions, become covered by the Seacare scheme. These employees may be uncovered because:

- their current insurer may not be acceptable under the Seacare scheme,

- their insurer may argue that its policy is specific to the liabilities that arise under the workers compensation regime as legislated particular to the state, as opposed to Seacare, and refuse cover38

• there may be misuse of the exemption from the Seacare scheme available under section 20A of the Seafarers Act as employers seek this exemption to access the apparently less expensive workers compensation arrangements available under various state and territory schemes39 and

• where employers are effectively uninsured due to the above problems, and do not have the capacity to pay compensation claims (and many smaller operators may not), injured employees may have no alternative but to claim against the Safety Net Fund (that is itself funded by the Levy). The Safety Net Fund may be quickly exhausted.40

Comments Given the opposition to the Bill by the majority of submitters, it is valid to consider whether the proposed amendments would have the effect of restricting the number of seafarers and vessels currently covered by the Seacare scheme.

35. Australian Maritime Offices Union, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, 13 March 2015, paragraphs 4, 5, 10-12 and 17. 36. The Australian Institute of Marine and Power Engineers, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, Seafarers Rehabilitation and Compensation

and Other Legislation Amendment Bill 2015 , March 2015, p. 1, accessed 23 March 2015. 37. Australian Shipowners Association, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, March 2015, p. 6. 38. Ibid., p. 7. 39. Ibid.

40. Ibid., p. 8.

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The AIMPE submission contains the following observation on the makeup of vessels and seafarers currently covered by the Seacare scheme:

According to the Seacare Annual Report 2013-14 the Full Time Equivalent number of employees under the Seacare scheme was 4,721 [although the raw number of persons was 7,516 employees]. These seafarers worked on 283 vessels. Of these vessels, 166 could be classified as Offshore Oil and Gas vessels. That is over half of the vessels listed in the Seacare Annual Report 2013-14 were engaged in oil and gas exploration, construction, development and operation. A further 43 could be classified as Dredging vessels—that is vessels engaged in developing new channels, turning basins and port facilities.

Putting these two groups of vessels together, 209 vessels listed in the latest Seacare Annual Report do not fit into the traditional constitutional category of “interstate trade and commerce”. That is 73.8% or almost three quarters of the vessels currently under Seacare are not engaged in what was traditionally known as interstate trading …

…The repeal of ss.19 (2) to (5) of the Seafarers Rehabilitation and Compensation Act 1992 could potentially see all of these vessels excluded from the Seacare scheme to the detriment of the Australian seafarers working in these operations.

Paring back the Seacare legislation to traditional interstate trade and commerce, as contained in s.19 (1) Seafarers Rehabilitation and Compensation Seafarers Rehabilitation Act 1992, could possible [sic] see thousands of Australian seafarers disadvantaged by the loss of the protection provided to them since 1993.

The scope of the application of the Seacare legislation has been a matter of debate within the maritime industry for many years. However it has been accepted by virtually every participant in the industry that seafarers in the Offshore Oil and Gas sector and the Dredging sector have been covered by at least the Seacare compensation legislation if not the health and safety legislation. The employers in the Offshore Oil and Gas sector and the Dredging sector have provided the coverage to their employees many of whom move around between employers as projects are completed and new projects commence.

41

This is quite different from the Department of Employment’s stated position that, at the time of the relevant court decisions, the Seafarers Act only applied to ‘employers and employees in a defined part of the broader maritime industry’ and commonly understood to be those ‘engaged in interstate or international voyages’.42

Financial implications The Explanatory Memorandum states that there are no financial implications for the Commonwealth arising from this Bill.43

Key issues and provisions Schedule 1—Constitutional coverage

Trade and commerce power Item 2 of Schedule 1 inserts the words directly and substantially into subsection 19(1) of the Seafarers Act after the words ‘ship that is’, so that after the proposed changes this subsection would read (emphasis added):

19(1) This Act applies to the employment of employees on a prescribed ship that is directly and substantially engaged in trade or commerce:

(a) between Australia and places outside Australia; or

(aa) between 2 places outside Australia; or

41. Ibid., pp. 2, 3. 42. Department of Employment, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, paragraph 13, accessed 19 March 2015. 43. Explanatory Memorandum, Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, p. iii.

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(b) among the States; or

(c) within a Territory, between a State and a Territory or between 2 Territories.

In the Aucote case, the injured worker made two arguments to the AAT. One was that paragraph 19(1)(a) applied because there was a nexus between Rio Tinto, the export of iron ore to China, John Holland and the building of the berth, which when taken into account as a whole amounted to engagement in international trade or commerce. This argument was successful.

The effect of this amendment is that vessels working to support a prescribed ship which complies with paragraphs 19(1)(a)-(c) would not be covered by the Seafarers Act. For example, tugs assisting the arrival or departure of such prescribed ships would not, themselves, be a prescribed ship for the purposes of those paragraphs.

A legal firm practicing in the maritime workers compensation area has observed that the amendment in item 2 of Schedule 1, has the potential to create confusion. This arises because this term will require additional scrutiny by either (or both) the AAT and the Federal Court.44

The Explanatory Memorandum notes that this phrase is designed, for example, to refer to ships that actually undertake voyages from one port to another in different states. By implication, these words would also refer to vessels undertaking voyages to ports outside Australia and between ports in a territory and between a territory and a state port.45

It is interesting that, in the AAT’s view, the Samson Mariner was, in fact, directly and substantially engaged in trade or commerce between Australia and places outside Australia. The AAT found that:

There was nothing insubstantial, tenuous or distant about the engagement of the Samson Mariner in that regard. Accordingly, even if the Tribunal accepted the respondent’s argument that as a matter of statutory construction 19(1)(a) required that in its activities the ship itself be directly and substantially engaged in international trade, the Tribunal would have reached the same conclusion.

46 (emphasis added)

It appears then that, based on the AAT’s conclusions, this amendment to subsection 19(1) may fail to exclude an employee from entitlement to compensation if he, or she, is employed on a vessel in similar circumstances to those of the Samson Mariner.

The matter is further complicated as the Full Court of the Federal Court did not find it necessary to decide whether existing paragraph 19(1)(a) of the Seafarers Act applied to the injured worker.

Corporations power Item 3 repeals existing subsections 19(2) to (5) of the Seafarers Act.

Both the AAT and the Full Court of the Federal Court considered the operation of existing subsections 19(2) to (5).

The AAT, despite having determined that the injured worker came within the scope of the Seafarers Act because of the operation of paragraph 19(1)(a), asked counsel for both of the parties to provide written submissions about whether it could be argued that the effect of subsections 19(2)-(5) was to give the Seafarers Act an expanded operation in reliance upon the corporations power. Having received and considered those submissions, the AAT determined that the preferred construction of the provisions is that:

… they were intended, drawing on the Parliament’s legislative power pursuant to s. 51(xx) of the Constitution, to expand the scope of the SRC Act’s compensation scheme beyond the limits of s 19(1) of the SRC Act such that any injury suffered by an employee (as defined by s 4 of the SRC Act) of a trading, financial or foreign corporation,

44. G Isolani, KCI Lawyers, Submission to Senate Education and Employment Legislation Committee, Inquiry into the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, 15 March 2015, p. 2, accessed 23 March 2015. 45. Explanatory Memorandum, Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, p. 4. 46. Re Aucote and Samson Maritime Pty Ltd, [2014] AATA 296 at paragraph 53.

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whether the ship upon which they served was in port, travelling interstate or beyond, would be covered by the scheme. 47

Similarly, the Full Court of the Federal Court found that these subsections were valid expressions of the corporations power of section 51(xx) of the Constitution as qualified by sections 51(xiii) and (xiv).48 Accordingly, if a person seeking compensation under the provisions of the Seafarers Act is employed by a constitutional corporation (and is working on a prescribed ship), subsections 19(2)-(5) are sufficient grounds for the Seafarers Act to apply to that person.

The decision of the Full Court of the Federal Court was based on an extensive review of the principals of statutory interpretation as they applied to existing subsections 19(2) to(5), as well as discussion of the application of sections 51(xx), (xiii) and (xiv) of the Constitution to these subsections. The Court was satisfied that the Work Choices case has established that the nexus created by sections 19(2), (3) and (4), as qualified by section 19(5) of the Seafarers Act, is sufficient to support that Act’s regulation per se of the employment relationship of persons within the defined class of employees whose employer is a constitutional corporation.49

The Court then went on to state:

It would be productive of unfortunate complexity if an injured seafarer had to prove the nature of his or her employer’s business dealings in order to establish whether a particular course of events or transactions attracted the operation of the [Seafarers Act] or state or territory law with respect to a claim for workers compensation. 50

The effect of item 3 is to remove the grounds for the Seafarers Act to apply simply due to the employment of a person by a trading, financial or foreign corporation on a prescribed ship.

The stated rationale of the amendment is that it restores coverage to what was widely understood to be the status quo.51 However, the complex consideration of the history of the provisions by both the AAT and the Full Court of the Federal Court, the outstanding and unresolved issues arising from the Stewart-Crompton review and the submissions of the MUA to the Education and Employment Committee would suggest confusion on what the status quo is.

Application to trainees Before the Full Court of the Federal Court, Samson argued amongst other things that because the Seafarers Act dealt with persons employed on prescribed ships who were seafarers, subsection 19(2) could not be read as applying to all employees of an Australian trading corporation who also happened to be seafarers. Rather, subsection 19(2) limited the operation of subsections 19(1) and (1A) to a person who was an employee of a trading corporation on a vessel that was engaged in, among other activities, international or inter-state trade and commerce.52

According to the Full Court of the Federal Court if Samson’s construction giving primacy to subsection 19(1) were correct, only seafarers actually employed on a prescribed ship that was then engaged in trade or commerce between Australia and places outside Australia (or another permutation of section 19(1)) could recover compensation. Acceptance of Samson’s argument would also mean that the provisions in the Seafarers Act for other persons who fell within the definition of employee (such as a trainee or a seafarer who had to attend at a Seafarers Engagement Centre for the purpose of registering availability for employment or engagement on a prescribed ship), and those relating to journeys to or from work or for medical reasons or to collect pay would not be covered. That would be because if, for example, the prescribed ship on which the person was employed

47. Ibid., paragraph 69. 48. Samson Maritime Pty Ltd v Aucote, [2014] FCAFC 182 at paragraph 49. Sections 51(xiii) and (xiv) of the Constitution provide that the Commonwealth Parliament has power to make laws relating to banking and insurance, but not state banking or insurance. These limitations are reflected in current subsection 19(5) of the Seafarers Act.

49. Ibid., at paragraph 54. New South Wales v Commonwealth (Work Choices case) [2006] HCA 52. 50. Ibid., at paragraph 58. 51. Explanatory Memorandum, op. cit., p. vi. 52. Samson Maritime Pty Ltd v Aucote, [2014] FCAFC 182 at paragraph 24.

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happened to be in port between two short intra-state voyages, the employee could not satisfy any posited requirement of subsection 19(1).53

As the Bill is intended to return the operation of subsection 19(1) of the Seafarers Act to the status quo, item 4 of the Bill inserts proposed section 19A to address the unintended consequence that was recognised by the Full Court of the Federal Court in its decision.

Essentially, proposed section 19A puts beyond doubt that when subsection 19(1) refers to an employee who is a seafarer, it extends to:

• trainees attending a required training course in relation to their employment on a prescribed ship and

• persons of a kind described in paragraph 4(1)(c) of the Seafarers Act being a person (other than a trainee) who, although ordinarily employed or engaged as a seafarer, is not so employed or engaged but is required under an award to attend at a Seafarers Engagement Centre for the purpose of registering availability for employment or engagement on a prescribed ship.

Retrospective amendments Item 5 applies the amendments in Part 1 of Schedule 1 of this Bill to any injury, loss or damage suffered by an employee on, or after, the commencement of Part 2 of the Seafarers Act. The Explanatory Memorandum states that Part 2 of the Seafarers Act took effect on 24 June 1993.54 The submission by the Department of Employment to the Education and Employment Committee provides the rationale for the retrospective application of these amendments:

An impact of the Aucote decisions could be that seafarers that had been injured and compensated in the sector under state and territory laws, dating back as far as 1993, may be required to pay back any compensation received and have that compensation reconsidered under the Seacare scheme. This could mean that some seafarers may be left worse off and out of pocket.

55

Occupational health and safety The expanded coverage of the Seacare scheme resulting from the AAT and Full Court of the Federal Court decisions had a flow-on impact on the regulation of safety because it moved a large number of ships and seafarers out of coverage by state work health and safety laws and into coverage by the Maritime Industry Act. However, neither Seacare nor the Australian Maritime Safety Authority are funded, or resourced, to immediately take on the role of administering a substantially larger Seacare scheme.56

Item 7 amends existing subsection 6(1) of the Maritime Industry Act by inserting the words directly and substantially, so that it would read (emphasis added):

This Act applies in relation to a prescribed ship or prescribed unit that is directly and substantially engaged in trade or commerce:

(a) between Australia and places outside Australia; or

(aa) between 2 places outside Australia; or

(b) between the States; or

(c) within a Territory, between a State and a Territory or between 2 Territories.

This will align the application of the Maritime Industry Act to that of the Seafarers Act.

53. Ibid., paragraphs 38, 43. 54. Explanatory Memorandum, op. cit., p. 5. 55. Department of Employment, op. cit., paragraph 41. 56. Ibid., paragraph 34.

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Item 8 repeals subsections 6(5) to (9) of the Maritime Industry Act. The amendments operate to limit the application of the Maritime Industry Act consistent with the repeal of the equivalent provisions of the Seafarers Act by item 3 of Part 1 of Schedule 1 of the Bill. According to the MUA, this will:

… increase significantly the number of seafarers who will now be covered by State and [Northern Territory] legislation, forcing employers to apply multiple OHS Acts to their employees, depending on the nature of the vessel operation and voyage pattern. Notwithstanding attempts to harmonise OHS laws, there is now increasing divergence in State OHS laws, while some jurisdictions such as [Western Australia] are yet to harmonise.

57

Item 9 applies the amendments in Part 2 of Schedule 1 of this Bill to anything done on or after the commencement of section 6 of the Maritime Industry Act, that is, 18 July 1994.58 These amendments are necessary to avoid the problems arising from the two decisions noted above.

Schedule 2—application of the levy As stated above, the Safety Net Fund stands in the place of an employer where there is no employer (usually due to that employer going out of business) against whom a seafarer can make compensation claim.59 The Levy Act provides for a levy to be collected to support the Safety Net Fund. Sections 5 and 6 of the Levy Act provide that the levy on seafarer berths is payable by an employer who employs or engages seafarers on a prescribed ship at the rate which is prescribed by regulations.

Item 1 of Schedule 2 of the Bill amends the definition of seafarer berth in the Seafarers Act by limiting it to those seafarers to whom the Seafarers Act applies. The effect of this amendment and that in item 3 is that where an exemption from the Seafarers Act (under section 20A) has been granted in respect of a seafarers’ employment, then their berth will not be a seafarer berth and no levy would be payable by the employer in respect of that berth.

Concluding comments In the light of the potential problems raised by the two decisions which have been discussed in this Bills Digest, the amendments in this Bill are potentially quite urgent from the Government’s perspective. However, all Parliament’s efforts will be in vain if the proposed amendments turn out to be ineffective. Further consideration may be appropriate to ensure that the proposed amendments will actually have the intended effect.

The question of whether the amendments will have the effect of leaving some members of the maritime workforce without any coverage at all remains unanswered.

57. Maritime Union of Australia, op. cit., paragraph 4.17. 58. Explanatory Memorandum, Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015, p. 8. 59. Seafarers Safety Rehabilitation and Compensation Authority, ‘About us’, op. cit.

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