Telstra and the asbestos problem

The James Hardie compensation model won’t work for Telstra in the current asbestos crisis, write Lee Moerman and Sandra van der Laan today for an article in The Conversation. 

The asbestos issue came to the fore during the James Hardie compensation case beginning in 2001. Since then, it has maintained prominence in the Australian industrial landscape. Only last month, the Asbestos Safety and Eradication Agency Act 2013 was passed by the Federal parliament, establishing the Asbestos Safety and Eradication Agency to administer the National Strategic Plan, aimed at preventing exposure to asbestos fibres.

The focus has recently been on Telstra, with workers having contracted mesothelioma after working on construction of asbestos-lined pits for the NBN. Telstra has taken some responsibility for the affected workers, however, controversy continues over the potential of new claims related to the NBN rollout. 

Unions have called for Telstra to establish a James Hardie-style compensation scheme - however, critics have said that this approach might not be in the best interests of future claimaints. 

"The funding arrangements are not straightforward and James Hardie is not required to fund claimants directly," the Conversation explains. "Instead the contributions are inextricably linked to James Hardie’s accounting numbers from financial reports as outlined in the Amended and Restated Final Funding Agreement."

The James Hardie scheme was established with a view to maintaining the financial viability of the James Hardie group. While the company is required to contribute to the Asbestos Injuries Compensation Fund (AICF), the funding requirements are subject to a complex formula that serves to cap James Hardie’s annual contribution to 35% of its “free cash flow.”

Other major companies with asbestos liabilities, including Telstra, are "not in the same league, in terms of exposure to claims." The AICF remains able to fund present and future claimants, and it is suggested that future claims against Telstra from James Hardie products could be encompassed under the James Hardie scheme.

Looking to the future, it is also prudent to recall that successive governments have had to provide loan facilities to the James Hardie scheme in order to fund the claims. As such, there is a need to consider carefully whether one-off corporate-based schemes of this type are the most appropriate means to fund asbestos claims. 

You can read the full article on The Conversation. 

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