WorkCover Industry Classifications

18 August 2021

By Sagorika Platel (Associate)

Unless you are self-insured, every employer in Victoria is subject to premiums associated with the statute based compulsory WorkCover Insurance Scheme.

Every year, WorkSafe Victoria sets the premium rates for each WorkCover Industry Classification (WIC) based on that industry’s claims experience. These rates are subsequently gazetted and used to calculate the employer’s premium in accordance with their assigned WIC.

There are currently 510 WICs, some of which are, at face value, very similar, while others are well and truly distinct.

Why then is it so important to be assigned the correct WIC?

All too often, employers are misclassified, whether this is due to their evolving business activities or a misinterpretation of their predominant business activities.

The fact is, an employer’s premium could vary drastically based on the classification they have been assigned, and by extension, this could result in overpayment or penalties of thousands of dollars.

Hentys Lawyers are committed to assisting clients to ensure that they are correctly classified for the purposes of the WorkCover Insurance Scheme.

Recently, Hentys Lawyers assisted Cut and Core Pty. Ltd. and Concut (the Companies), to successfully challenge their assigned WIC in the matter of Cut and Core Pty Ltd v Victorian WorkCover Authority (Review and Regulation) [2021] VCAT 706 (Cut and Core) which resulted in reimbursement of some four years’ worth of premium overpayments.

Cut and Core is a classic situation where minds differed in terms of how to properly characterise the employer’s predominant business activities.

The Companies were in the business of drilling concrete, asphalt, stone, brickwork and other hard materials via the use of specialist machinery and a trained and skilled employee operating the machinery.

Prior to issuing the proceedings, Cut and Core submitted to WorkSafe Victoria (the Authority) that their predominant business activity consisted of hiring out specialist machinery and a trained/licensed mechanical plant operator to perform the drilling, cutting and/or coring work. If this was correct, then the closest corresponding WIC would be E32920 ‘Hire of Construction Machinery with Operator’.

The Authority however rejected the Companies’ characterisation. Instead, the Authority determined that the Companies’ operation was the provision of specialised cutting and drilling services to customers and so, they were assigned the industry classification of E32990 ‘Other Construction Services n.e.c.’ (not elsewhere classified).

The Companies decided to challenge the Authority’s decision at the Victorian Civil and Administrative Tribunal (VCAT).

The key question to be resolved by VCAT was whether the Companies’ activities were more correctly described as ‘hiring’ or whether the activity was its ‘output’ (provision of the end result to customers).

After considering a number of factors including the following:

  • the basis for charging the rates they did;
  • the specialised machinery used; and
  • whether the Companies charged for the outcome of the work (i.e. work completed to customer specifications) or instead, for hourly hire of machinery and operators.

Senior VCAT Member J Billings found in favour of the Companies.

As Senior Member J Billings noted in the Cut and Core decision, determining the most appropriate WIC is a difficult task where minds can reasonably differ.

Contained within paragraph 59 of his decision, Senior Member J Billings mentioned that based on the material presented to him by the Authority, he was unable to conclude that it acted consistently when making WIC determinations for companies and other relevant entities.

This subtle rebuke highlights a key issue for all employers, namely, that employers should not be complacent about their WIC. Employers should proactively review their predominant business activities to ensure that they have been correctly classified or else risk a penalty or overpayment.

The silver lining in Cut and Core is that not only did VCAT’s decision result in substantial reimbursement of premium overpayments, the Companies’ reduced premium has also enabled them to become a formidable player in a competitive market.

Our team of experts at Hentys Lawyers welcomes the opportunity to assist you to review your WICs and ensure that these are the most appropriate classification for your workplace activities.