Full Federal Court Confirms That Self-Insureds Cannot Contract Out of SRC Act

Commonwealth Compensation

minutes reading time

DATE PUBLISHED: January 10, 2020

Sometimes I get asked whether or not a self-insured employer can ‘contract out’ of the Safety, Rehabilitation and Compensation Act 1988. For employers in this long tail scheme, the lack of commutation can be a major impediment to resolving old claims.

On 17 December 2019, the Full Federal Court of Australia in Seafarers Safety, Rehabilitation and Compensation Authority v Associated Steamships Pty LTD [2019] FCFC 232 (Steamships) confirmed that self-insureds cannot cash out an employee’s statutory workers’ compensation entitlements under the Safety, Rehabilitation and Compensation Act 1988 or related Acts.


Mr O’Donnell was a seafarer who contracted skin cancer. The skin cancer ultimately caused his death. Before he died, Mr O’Donnell applied for workers’ compensation under the Seafarers Rehabilitation and Compensation Act 1992 (the Seafarers Act). After he died, his widow applied under the same Act for death benefits.

Associated Steamships did not accept liability for the skin cancer but did resolve Mr and Mrs O’Donnell’s claims for compensation by way of a commercial settlement and subject to a deed of release. Associated Steamships then sought a contribution to the settlement amount from the Seafarers Safety, Rehabilitation and Compensation Authority who, in the circumstances of this matter, stood in the shoes of some of Mr O’Donnell’s former employers.

The Authority, represented by McInnes Wilson Lawyers, refused to contribute on the basis that what was paid to Mr and Mrs O’Donnell was not compensation paid under the Act but rather a commercial arrangement between the O’Donnell’s and Associated Steamships and so there was no statutory liability for it to contribute.


The Full Federal Court agreed with the Authority that the only compensation that counts under the Seafarers Act and SRC Act is compensation actually paid under those Acts. Monies paid to workers outside of those Acts is not compensation and, basically, doesn’t count.

We wait to see what the Federal Court has to say about whether or not the Authority has to contribute in equity.


The Full Federal Court did say that there may be some discretion between employer and employee in the assessment of any entitlement to compensation under the Acts. This discretion lies in how the medical and other evidence is treated in the decisions made by employers under the Acts.

So, it is still possible for an employer and employee to agree that the evidence shows that a compensable injury no longer prevents an employee from working. Then, in accordance with that agreement, the employer can make a decision under the Act giving effect to that agreement.

Of course, any decision like this does not actually stop an employee from making further compensation claims down the track. But in our experience, with good will on both sides, agreements can be made that enable both employee and employer to move on with their lives.

As Steamships shows, negotiating and giving legal effect to these agreements is not straightforward. If you would like to discuss how to make one – give us a call.


The SRC Report: Part 1 Rehabilitation Series: Decision Making Under s36 and 37
The SRC Report: Slip and Fall Not All in a Day’s Work – Telstra Protected as Full Federal Court Upholds Decision Against Employee

April 20, 2021

Administrative Law and Governance, Commonwealth Compensation

The SRC Report: How an Early Intervention Policy Can Be the Key to Employee Recovery

February 18, 2020

Commonwealth Workers' Compensation, CTP Insurance

Administrative Appeals Tribunal Confirms 600 Counselling Sessions Is Too Many