What can happen to organisations who fail to take out compulsory insurances?

Employers who do not meet their workers’ compensation obligations for their workers should be aware that there can be very serious consequences.

One recent prosecution highlights just how seriously failing to hold insurance is taken in Queensland.

Recent workers’ compensation prosecution

On 15 July 2021, an employer (a Brisbane-based auto wreckers) was found guilty on one charge of failing to insure regarding their failure to hold workers’ compensation insurance for their workers.

The employer was fined $94,500 and a conviction was recorded.

What does the law say?

The Workers’ Compensation and Rehabilitation Act 2003 (the Act) contains provisions around employers failing to hold adequate insurance.

These relate to all employers who employ workers. It an offence for an employer not to hold workers’ compensation insurance for each of their workers.  

An employer has five days of employing workers to obtain a policy and must maintain the insurance by making periodic returns and paying a premium at the time and in the way required for the policy.

Failing to hold workers’ compensation insurance carries a maximum penalty of 275 penalty units (which currently equals $37,908.75) for individuals.

If the employer is a corporation the penalty is five times the prescribes maximum penalty for an individual, making the maximum penalty for a corporation $189,543.75.

Identifying a failure to insure

WorkCover can identify an employer failing to insure through a variety of methods.

While this may occur on the lodgement of a claim (without a corresponding policy), WorkCover also uses detailed data matching processes to check employer compliance and conducts a state-wide site visit program, where we visit employers to check their insurance coverage.

Using data from a variety of sources enables WorkCover to focus on educating Queensland businesses (especially new businesses) about their WorkCover obligations, before they are uninsured.

WorkCover may recover from the employer the amount of the unpaid premium together with a penalty equal to 100% of the unpaid premium.

If WorkCover has paid compensation or damages for an injury sustained by a worker when the employer did not hold insurance, we may recover the amount of the compensation paid, together with a penalty equal to 50% of this amount.

In 2020/21, WorkCover raised $5.5 million in premium and penalties against uninsured employers across the scheme.

Actions taken by Worker’s Compensation Regulatory Services

If further investigations from Worker’s Compensation Regulatory Services (WCRS) find there is sufficient evidence of failing to insure, it may also support a recommendation to the Workers’ Compensation Regulator for a prosecution.

In 2020-21, WCRS received four referrals for investigation against employers, two prosecutions were commenced and one of these was successfully prosecuted.

It’s important to note that in addition to a referral to WCRS, WorkCover may also take action to apply a penalty to the employer's account for failing to hold the adequate insurance.

Further information

Visit the workers' compensation prosecutions page for more information.

According to section 40 of the Ordinance, no employer shall employ any employee in any employment unless there is in force a policy of insurance to cover his liabilities under the laws (including the common law) for injuries at work in respect of all his employees, irrespective of the length of employment contract or working hours, full-time or part-time employment. Should there be any queries on legal liability, employers should seek professional legal advice.

The minimum insurance cover should be for an amount:

An employer who fails to comply with the Ordinance to secure an insurance cover is liable to prosecution and, upon conviction, to a maximum fine of $100,000 and imprisonment for two years .

Moreover, under the Employees' Compensation Assistance Ordinance, Chapter 365 of the Laws of Hong Kong, an employer who fails to comply with the compulsory insurance requirement is liable to pay a surcharge to the Employees Compensation Assistance Fund Board.

For any information concerning the list of insurers underwriting employees' compensation insurance, please click here to access to the relevant website of the Hong Kong Federation of Insurers.

For information concerning the extended insurance coverage to the Shenzhen Bay Port Hong Kong Port Area, please click here to access to the relevant website of the Insurance Authority.

According to section 40 of the Employees’ Compensation Ordinance, no employer shall employ any employee in any employment unless there is in force a policy of insurance to cover his liabilities under the laws (including the common law) for injuries at work in respect of all his employees, irrespective of the length of employment contract or working hours, full-time or part-time, permanent job or temporary employment. Hence, an employer must take out an employees' compensation insurance policy for his part-time local domestic helper as required by the law.

When taking out an employees' compensation insurance policy, an employer should take note of the following statutory minimum insurance cover :

IMPORTANT NOTE

The minimum amount of insurance cover specified in the Ordinance is not the maximum liability that the party concerned is required to bear under the laws (including the common law). The party concerned should therefore carefully assess the possible risk and consult insurers for professional advice on whether an insurance policy for an amount more than the minimum under the Ordinance should be taken out.

When taking out an employees’ compensation insurance policy, employers should take note of the followings:

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