OPERATIONAL ADVICE NO. 153
CONTRACTING OUT OF LIABILITY
File Ref:93/2060
Contact:Wayne Miranda
Phone:(02) 334 9827
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State Managers State Claims Services Managers State Review Services Managers State Business Services Managers State Executive Officers General Managers Group Managers All claims services staff |
This Operational Advice deals with the question of whether it is possible to contract out of rights of liability, for instance, as part of a deal between a Customer and a claimant in offering a redundancy package or when paying a redemption under section 30 or 137.
The Federal Court (Lockhart J) in Behan v Australian Telecommunications Corporation (1990) 12 AAR 466 considered these questions and concluded that an employee could not, in effect, contract out of the provisions of the Safety Rehabilitation and Compensation Act 1988 (SRC Act) by accepting a lump sum settlement in redemption of liability, except as provided for under the legislation.
Sections 30 and 137 of the SRC Act provide for a determination to be made that liability to make further weekly payments can be redeemed by the payment to the employee of a lump sum. Such a payment is a redemption of liability to pay incapacity payments only; it is not an agreement that liability no longer exists in respect of the compensable injury nor is it a determination which no longer avails the employee to their other entitlements as provided by the SRC Act 1988.
Comcare Australia has been advised that some employers and employees are entering into formal agreements to the effect that if an employee accepts an offer of a voluntary retirement package whilst they have a compensable injury, or accepts the payment of a redemption under sections 30 or 137 of the SRC Act, that the employee agree not to make any further claim for compensation in respect of their compensable injury.
The Federal Court decision in Behan makes it clear that such formal agreements, or contracts, have no force in law. It is not possible to contract out of liability in such a manner. Any such agreement reached between an employee and an employer concerning rights to compensation benefits is not enforceable as neither party can contract out of a legal responsibility.
Despite the fact that an employee may have signed a contract declaring that they have no rights to future compensation, this would not preclude the employee from making a further claim in respect of an accepted condition, providing that liability still exists for that condition.
Antoinette le Marchant
General Manager
Business Development & Customer Service Division
December 1993
OA 153 - Contracting out of Liability Page 1