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By Tiffany Yeo, Trainee Solicitor at Kingston Lawyers

Relevant legislation: Occupational Health and Safety Act 2004 (Vic) (the OH&S Act), Occupational Health and Safety and Other Legislation Amendment Act 2021 (Vic) (Act)

Did you know that you may be breaking the law if you have contracted or arranged to be insured or indemnified for penalties incurred for breaches of Occupational Health and Safety laws?

Voiding of contractual terms and offence provisions

The Occupational Health and Safety Act 2004 (Vic) (the OH&S Act) was amended by the Occupational Health and Safety and Other Legislation Amendment Act 2021 (Vic) (Act) on 21 September 2021.

Section 148A of the Act immediately voids any term in a contract, which insures or indemnifies a person or entity, for a pecuniary penalty imposed for a breach of the OH&S Act or regulation. This prohibition also applies retrospectively to penalties incurred before the commencement of the Act.

Section 148B makes it an indictable offence to enter into, offer to enter into, or be a party to a contract which purports to insure or indemnify their own or another person’s pecuniary penalties incurred due to a breach of the OH&S Act, without reasonable excuse. This provision is effective from 22 September 2022. The maximum penalty for breaching this section is 300 penalty units for an individual, equating to $54,522.00 as of 1 July 2021 and 1500 penalty units for a body corporate, equating to $272,610.00 as of 1 July 2021.

Additionally, under Section 148B, it is prohibited to provide or receive a benefit under a contract or other arrangement which purports to insure or indemnify a person for the person’s liability to pay a pecuniary penalty under the OH&S Act or its regulations.

Similar provisions also apply under the Dangerous Goods Act 1985 (Vic) and the Equipment (Public Safety) Act 1994 (Vic).

Defences

A person however will not commit an offence under Section 148B if they have a ‘reasonable excuse’. This exception provides some flexibility where there is an acceptable reason for the conduct. However, it is unclear how this will apply as it has not been defined or tested. 

Other costs permitted to be indemnified

Whilst the prohibition applies to indemnities for penalties under the OH&S Act and Regulations, it does not apply to indemnification for other costs such as costs to defend against investigations and prosecution and court-ordered damages. Therefore, these costs can be indemnified or insured against.

Effect of amendments

The Act seeks to prevent those responsible for health and safety from avoiding the consequences of breaching OH&S laws and therefore ensuring they remain accountable. This also further emphasises the duty employers and OH&S duty holders are under to promote and maintain safe working environments.

In summary:

• From 21 September 2021, any terms in contracts or arrangements which purport to indemnify or insure a party for penalties incurred from breaches of the OH&S Act are void. This includes breaches of the OH&S Act or Regulations which occurred prior to 21 September 2020.
• From 21 September 2022, persons or entities who enter into, offer to enter into or are a party to a contract or other arrangement which seeks to insure or indemnify themselves or another party’s liability to pay a pecuniary penalty under the OH&S Act or Regulations will have committed an indictable offence and be liable to pay a pecuniary penalty.

Given the changes to the OH&S legislation, it is important that persons or entities with obligations under the OH&S Act and Regulations, review and amend all contracts before 21 September 2022.