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Costs of non-compliance

WorkCover WA’s Compliance Officers regularly visit workplaces across the State to ensure each has a current workers’ compensation policy and an injury management system in place. They may also check for evidence of return to work programs should you have past or present claims. For more information on our Compliance team’s approach, principles and strategies, see the Enforcement Policy (PDF - 150kb).

The penalties for non-compliance are outlined below. Also, see examples of successful prosecutions against non-compliant employers.

Failure to have workers’ compensation insurance

If you don’t have workers’ compensation insurance, your company will be liable for the cost of the benefits paid under the Workers’ Compensation and Injury Management Act 1981 (the Act) if one of your workers has a work related injury or industrial disease.

Costs could include:

  • in excess of $600,000 in benefits if a worker is injured
  • legal costs involved in court action
  • liability for the cost of any action taken at common law
  • fines of up to $5000 per worker
  • an amount equal to any avoided premiums going back five years
  • separate and further offences for every week you remain uninsured after the date of conviction.

Engaging in avoidance arrangements

Some employers may attempt to engage in ‘Avoidance arrangements’ to try to avoid their liabilities under the Act. That is, they ask individuals to incorporate (set up their own company) as a condition of getting a contract for work. Employers commit an offence by engaging in these arrangements.

Defining an avoidance arrangement

The term ‘avoidance arrangement’ applies only in the following circumstances:

  1. The arrangement was entered into on or after 14 November 2005
  2. The work is done under an arrangement designed to enable an employer to benefit from a worker’s services without liabilities and duties as the worker’s employer under the Act; specifically if:
    a. before the arrangement was made, the worker was the employer’s worker (under the Act) and provided substantially similar services; or
    b. before the arrangement was made, the employer intimated they would not engage the worker under contractual arrangements that would make the worker the employer’s worker under the Act.
  3. While the arrangement is in effect, the worker does work principally for the employer on behalf of a company of which the worker is an employee or director.
  4. The work is directly a part or process in the trade or business of the other employer.

Examples of avoidance arrangements

Worker previously employed

AG Engineering enters into a new contract with a welder who was previously employed under a contract of service by the company to weld steel roofing frames.

Under the new arrangement, the welder provides substantially similar services as they did when working for AG Engineering, but provides those services on behalf of a separate company as a director or employee, working principally for AG Engineering. The work done is also directly part of the business of AG Engineering - that is, metal fabrication.

If an injury occurs, AG Engineering will be liable to pay the welder compensation and meet return to work obligations, if required.

Worker not previously employed

Morrissey Cleaners calls for tenders from incorporated companies to provide cleaning services to its clients. Morrissey Cleaners intimates that it is not responsible for workers’ compensation under the contractual arrangement for any company winning the tender for the contract.

An applicant, Mr Brookes, forms a company named PB Pty Ltd, registers himself as the director and PB Pty Ltd wins the contract. While the contract is in effect, Mr Brookes does work principally for Morrissey Cleaners - work that is directly a part of the business of Morrissey Cleaners - that is, industrial cleaning.

If an injury occurs, Morrissey Cleaners will be liable to pay Mr Brookes' compensation and meet return to work obligations, if required.

Fines and penalties

Costs for engaging in an avoidance arrangement could include:

  • the employer being liable to pay workers' compensation entitlements in accordance with the Act and meet return to work obligations if a worker is injured while working for an employer under an avoidance arrangement
  • a fine of $5000 for employers who allow to do work for them under an avoidance arrangement
  • a $2000 penalty may be applied to employers (or insurers) who receive money or indemnity from a worker (or the worker’s company) in respect of any compensation liability the employer has to pay.

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