NSW Premier Kristina Keneally has written to Gillard to demand that the state is able to retain to controversial features of its current state OHS laws – the right to prosecute employers for work safety breaches and employers carrying the onus of proof to show they exercised due care where breaches do occur.
Gillard is angry with the request and has demanded that NSW stick by the deal, which would see the new national laws come into force from January 2012.
"A deal is a deal and the federal government requires this deal to be honoured," Gillard told reporters.
"I am currently taking advice from my government about what options are available to ensure the NSW Government honours this deal."
One option is that the Government could introduce federal legislation to force NSW to comply, although Gillard has not committed to this strategy.
"I'm not going to rule any options in or out at this stage, obviously this is a problem with NSW."
While the Australian Council of Trade Unions have backed the deal, business groups have attacked the NSW position.
The Australian Chamber of Commerce and Industry's director of workplace policy, David Gregory, says the NSW stance threatens to undermine three years of work on a national OHS framework.
"The ACTU's support for the unfair workplace laws enshrined in the NSW OHS legislation raises concerns that they are not seriously committed to national workplace safety laws which are fair to both employees and employers," he said.
"It is hard to think of a decision that demonstrates greater parochial short-term self-interest."
Heather Ridout, chief executive of the Australian Industry Group, was equally scathing, labelling Keneally's decision "extremely retrograde and out of step with the community's interests".
She pointed to a High Court judgement handed down in February this year which described the NSW OHS regime as containing "obligations that were impossible to comply with and burdens which were impossible to bear."
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