Icons/Ionic/Social/social-pinterest

Royal Commission into the Aged Care sector: Why individuals rather than corporations stand to lose the most

08 October 2018

#Dispute Resolution & Litigation

Howard Rapke

Published by Howard Rapke

Royal Commission into the Aged Care sector: Why individuals rather than corporations stand to lose the most

The year opened with a high-profile royal commission with far-reaching consequences and significant fall-out. And the year is set to close with another.

The recently announced Royal Commission into the Aged Care sector will tackle issues that go to the heart of our aging population – opening up the industry for a forensic grilling.

But it’s the individuals involved in operating aged care centres, not the corporations themselves, who could stand to lose the most in a legal sense.

An individual in the company gives evidence on its behalf. And while the sanctions under the Aged Care Act may mean these corporations lose a licence or the right to operate as an aged care provider, it is the individuals who stand to suffer far more financially and could endure significant damage to reputation. 

Corporations are significantly more likely to be able to absorb the damage and weather the storm - if an individual is convicted following the Royal Commission’s findings, they will not be able to hold a position as a director or manager of a corporation operating an aged care centre again.

With such reputational damage due to a job candidate having previously been before a royal commission - and with this documented online in all of its detail – their chances when looking for a new job in the aged care sector, or more broadly, will very likely be impacted. 

But the potential financial impact may be more serious than the dent in future job opportunities.

The degree of penalties applied through the Aged Care Act will have a greater impact on individuals rather than any corporate entity. 

The vast majority of the sanctions under the Act impose a financial penalty generally by restricting the potential earnings of the aged care provider. Major corporate entities will be able to absorb this financial limitation far greater than an individual provider. 

Some aged care operators run multiple centres across the country and have a significant presence in the industry. But owners and operators of smaller aged care facilities involved in the royal commission may start to struggle to fill their spaces and their ongoing viability may also become questionable.

Perception is a strong force, and in a competitive buyer’s market, if a centre’s name has been before a royal commission and been the subject of adverse findings, then it is unlikely a family, who has conducted their research and due diligence, will encourage their loved ones to move in.

The approach that has been taken by the Financial Services Royal Commission of asking institutions to identify any misconduct has set an approach which has proved to be forensically useful in getting parties to “own up” to issues which then are investigated by the royal commission. 

The Royal Commission’s terms of reference are particularly broad, meaning the commissioners have wide ranging abilities to examine quality and safety throughout the aged care sector. The terms of reference place specific emphasis on an inquiry into the quality of aged care services and how best to improve the industry for the future. 

This broad scope of inquiry means that aged care facilities will have to decide as to what misconduct they may want to own up to, when to not do so may mean that at some later stage they could be strongly criticised. 

With the coverage that the Financial Services Royal Commission has received in respect of the various entities that have appeared before it, it is very likely that there will be similar high profile coverage of what is a nationally important issue across Australia. 

The outcomes of this latest Royal Commission could have wide ranging consequences.

The important thing to remember is that corporations may be obliged to pay fines, they may be the subject of some publicity and there may be an impact upon a listed operator’s share price but it is individuals behind the operators whose careers and reputations can be seriously affected. 

Following the release of the terms of reference, right now, proper preparation is crucial for both corporations (for profit and not-for-profit) and individual providers in the aged care sector.

They should familiarise themselves with the processes of a royal commission and be prepared for what is likely to be an intense examination of the aged care industry. 

Author: Howard Rapke

Contacts:

Melbourne
Howard Rapke, Managing Partner 
T: +61 3 9321 9752 
E: howard.rapke@holdingredlich.com

Sydney
Greg Wrobel, Partner 
T: +61 2 8083 0411 
E: greg.wrobel@holdingredlich.com

Brisbane
Paul Venus, Managing Partner 
T: +61 7 3135 0613 
E: paul.venus@holdingredlich.com

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources. 

Howard Rapke

Published by Howard Rapke

Share this