Opinion Number. 1456


Unemployment Insurance power of Commonwealth Parliament to make laws with respect to unemployment insurance: insurance power: ‘INSURANCE’

Key Legislation

Unemployed Workers Insurance Act 1922 (Qld) (13 Geo. 5 No. 28) ss 3, 4, 5, 6, 7, 9, 13, 14, 15, 16, Schedule: constitution s 51(xiv): Commonwealth Workmen’s Compensation Act 1912: Unemployment Insurance Act 1920 (U.K.) (10 & 11 Geo. V c. 30)


The Prime Minister asked to be advised as to the power of the Commonwealth Parliament to make laws with respect to unemployment insurance.

As a type of the legislation under this head I am referred to the Unemployment Workers Insurance Acts 1922–1927 of Queensland.

These Acts constitute an Unemployment Council representing the Government, employees and employers with the Minister as Chairman (section 3). It is the duty of the Council to obtain all available information as to the condition of the labor market, and it may also inquire as to the causes and extent of and means of reducing unemployment, and such other matters as the industrial efficiency of the community, the organisation of the labor market, opportunities for employment, and State Labor Exchanges. Section 4.

An unemployment insurance fund for the payment of sustenance allowance and the administration of the Act is created. Workers, employers and the Government each contribute one-third of the fund. Every worker over 18 years employed under an Award or Agreement under the Industrial Arbitration Act of 1916, and every employer of such worker must contribute to the fund. Except as prescribed, the employer in the first instance pays on behalf of himself and the worker, the worker’s contribution being afterwards deducted from his wage. Section 5.

In other cases the employer of persons over 18 years of age pays contributions in respect of each such worker. One half of such contributions are payable and a debt due by the worker to the employer. Section 5A.

Provision is made for remission of contributions in case of hardship. Section 6.

Every unemployed worker has the right to be registered at a State Labor Exchange, and if work has not been provided for him within 14 days after registration, has the right to receive–subject to several restrictions and exceptions–prescribed sustenance allowance. Section 14.

The rates of sustenance vary from 15/- to 20/- per week, in the case of individual workers (male and female) and from 25/- to 35/- per week in the case of married workers; an allowance of 4/- to 5/- per week to each dependent child to the number of 4. Schedule.

In addition to these provisions there are others which appear to be rather in the nature of preventing the existence of unemployment than of insuring against unemployment.

For instance, the Governor, upon the report of the Council that employers without just excuse are not beginning or proceeding with works, may direct employers to do such things or take such measures as will remedy unemployment; and if the employer fails to obey such an order the Council may levy a penalty contribution from him in addition to other contributions payable by him. Section 7.

Again, to reduce unemployment, relief work may be provided by the Government, or local authorities may be ordered to commence and carry out works and may for this purpose obtain loans from the Treasurer. Section 9.

Lands may be set aside for labor farms to which those normally employable and unable otherwise to support themselves may be admitted. Section 13.

The Council may direct that a worker who has repeatedly lost his employment by reason of imperfect technical knowledge or skill shall receive technical training at the cost wholly, or in part, of the Council. Section 15.

Lastly, the Governor may in general give orders calculated to safeguard the requirements and well-being of the people and to give full effect to the Act. Section 16.

The Commonwealth has power under section 51(xiv) to make laws with respect to ‘Insurance other than State Insurance; also State insurance extending beyond the limits of the State concerned’.

Insurance may be defined shortly as the act or system of insuring or securing against loss or damage by a contingent event. The words of the Constitution above quoted do not limit the insurance power to any particular kind of insurance. I see no reason why the power should not cover insurance against the contingency or event of unemployment.

The Oxford Dictionary after defining ‘insurance’ very much in the words above quoted gives the following extended definition–

A contract by which the one party (usually a company or corporation) undertakes in consideration of a payment (called a premium) proportioned to the nature of the risk contemplated to secure the other against pecuniary loss by payment of a sum of money in the event of destruction of or damage to property (as by disaster at sea, fire, or other accident) or of the death or disablement of a person.

I do not think, however, that a contract is an essential element of insurance as used in the Constitution. It is true that until recently insurance has mostly been voluntary and contractual, but I do not think that insurance is any the less insurance because it is compulsory. The High Court has distinctly held that industrial arbitration is none the less arbitration for being compulsory. I am confirmed in this opinion by the reference in the Constitution to State insurance which means insurance conducted by a State. State insurance almost invariably contains an element of compulsion.

I think, therefore, that a scheme similar to that of the Queensland Act, and excepting those parts to which I have alluded as not coming within the scope of insurance, would be legislation of a kind which the Commonwealth Parliament has power to enact.

The exception, however, of State insurance would make it impossible for the Commonwealth Parliament in its legislation to supersede or in any way affect any system of State insurance conducted by a State, as for instance the Queensland system. There would, therefore, be a difficulty in introducing a federal system of unemployed insurance unless arrangements could be made with the State of Queensland, and any other State which may have a system of unemployment insurance to clear the way by repealing their legislation on the subject.

In the case of the Australian Steamships Limited v. Malcolm, 19 C.L.R. at page 326, there is a dictum by Mr. Justice Isaacs that compensation under the Commonwealth Workmen’s Compensation Act is ‘not what is ordinarily understood as insurance, though in a sense employees are insured because the injury entitling them to compensation is independent of negligence or other wrongful conduct on the part of employers’.

Workers’ compensation, however, stands on a different basis. It is not a system for indemnifying against loss in consideration of a premium. It is a system imposing a liability on employers in connection with accidents to their workmen. I do not think that the dictum affects the question now under consideration.

I may add that though I have advised that the Queensland Act is essentially an insurance Act, it has of course not been drawn in such a way as to come within the scope of a power to legislate upon insurance, and it would be practicable to draw an Act of substantially identical effect which would be much more clearly based upon the insurance power, and in this connection I would refer to the Unemployment Insurance Acts 1920–1927 of the United Kingdom which are much more explicitly based on the principle of insurance.

I think that provisions for registration of unemployed workers and for cancelling benefits if an insured worker refuses work that is available would be justified as incidental to insurance.

[Vol. 24, p. 468]