Officer’s duties under the Work Health and Safety Act

The model Work Health and Safety Act will commence in each jurisdiction in Australia from 1 January 2012. One aspect of the legislation that is significantly different to current laws is the duty imposed on ‘officers’ of a person conducting a business or undertaking.

According to the model Work Health and Safety Act, the duty imposed on ‘officers’ is a positive duty and no longer requires the business to have contravened the legislation in order for an officer to be personally liable.

It is not yet known how this aspect of the new laws will be enforced by regulators, however, it is prudent for officers to turn their mind to this change in focus and review their current systems to ensure they have a basis upon which to assert compliance.

Regulatory context: increased focus on individuals

Director and individual liability have been more common in New South Wales and Queensland for some time. In recent years there has been an increased focus on individual liability in certain jurisdictions, particularly Victoria. Not only have there been more prosecutions against individuals, but the penalties imposed by courts have been increasing steadily.

Having said this, most prosecutions of individuals arise in circumstances where there are serious breaches (ie, fatalities), which also involve systemic safety failures. It appears that in such cases the safety regulators are keen to show the community that OHS must be taken seriously at all levels and so directors and officers (and, in some cases, employees with supervisory or management responsibilities) will be held accountable.

Who is an ‘officer’?

The starting point for achieving compliance with the obligation must be to consider who is likely to be deemed an officer and owe the duty. The model Act relies on the definition of officer in the Corporations Act 2001 and executives will generally be aware of whether they are considered to fall within this definition. The definition of officer includes directors (both executive and non-executive), company secretaries, persons who make, or participate in making, decisions that affect the whole or a substantial part of the business, persons who can significantly affect the business’ financial standing, partners (in partnerships) and, receivers, administrators and liquidators.

While this is an expansive definition, in some jurisdictions it will mean a narrowing of the application of the duty, such as NSW where the current obligation extends to directors and managers. This means that most managers (perhaps with the exception of some executive managers) will not be considered officers for the purposes of the model Act. Managers can still be held personally liable for breaching the employee duty if they fail to take reasonable care for the safety of themselves or others, particularly persons who they supervise.

What is the new duty?

The duty under the model Act is such that if a person conducting a business or undertaking (PCBU) has a duty or obligation under the Act, then each officer of the PCBU must exercise due diligence to ensure that the PCBU complies with that duty or obligation. There are a number of key differences between this duty and existing officer or director duties:

• An officer can be liable even where the PCBU has not contravened the model Act. - This will mean that officers in organisations with strong safety performance but poor governance and reporting structures will be exposed to liability. It will also mean that regulators can proactively engage with officers and require them to demonstrate the steps that they have taken to exercise due diligence even where there has not been an incident or alleged breach. This is in contrast to the current laws and regulation, whereby officers are generally only drawn into safety matters following an incident.

• The standard of ‘due diligence’ will apply in all jurisdictions and will be clearly defined. - Under existing laws some jurisdictions require an officer to exercise reasonable care rather than due diligence. While reasonable care and due diligence are generally considered to be similar standards, this situation is confusing and leads to inconsistent outcomes across jurisdictions. Further, in jurisdictions where due diligence does apply there has often been uncertainty about precisely what this standard requires. With a view to avoiding such uncertainty in the future (particularly in light of the expanded and positive nature of the new duty) the model Act provides a definition of due diligence.

• The reverse onus of proof has been removed. - In NSW, Queensland and Tasmania, the duty is currently expressed as a rebuttable presumption. That is, the breach of the company will be attributed to the officers of that company unless they can prove that they were either not in a position to influence the decisions of the company or had exercised all due diligence to prevent the contravention. Under the Model laws, the prosecution will bear the onus of proving that the officer failed to exercise due diligence, which will place a higher evidentiary burden on the prosecution in those states. A similar approach is already taken in Victoria, South Australia, Northern Territory and Western Australia.

• Reference to an officer’s ability to influence the matter has been removed. - Currently in most jurisdictions the officer’s knowledge of the offence or ability to influence the conduct of the corporation in relation to the offence is a key element in determining whether the officer’s duty has been breached. This was designed to ensure that officers with different levels of involvement in the business are each held to an appropriate standard of care given their knowledge of and influence over safety matters. Under the model Act there is no reference to either knowledge or ability to influence.

• What does due diligence mean? - The model Act provides a relatively detailed definition of due diligence, which makes clear that officers must, at a minimum, do the following: a) Have an up-to-date working knowledge of health and safety matters; and b) Understand the nature of the business’ operations, in particular the hazards and risks associated with those operations; and c) Ensure there are appropriate resources and processes available (and being used) to undertake risk management within the business; and d) Ensure there are appropriate processes for receiving, considering and responding to information regarding incidents, hazards and risks; and e) Ensure the business has (and implements) processes for complying with any duty or obligation of the business under the Act (eg, reporting notifiable incident, consulting with workers, etc); and verify that the steps in (c) to (e) have occurred.

• At this stage, limited guidance material has been developed setting out what practical steps will need to be taken to fulfil each of these requirements. Workplace Health and Safety Queensland have just released a ‘Special Harmonisation eSAFE’ publication, which provides guidance on due diligence, available at www.deir.qld.gov.au/workplace/publications/safe/may11/index.htm. Hopefully, this is a matter that will be addressed by Safe Work Australia and all state and territory regulators in the future.

• Offences under the Act are indictable in nature. Officers need to be aware that prosecutions under these provisions have the potential to result in prolonged court proceedings, significant fines and criminal convictions. Officers are likely to be required to pay any fine from their personal funds and the recording of a criminal conviction can affect an individual’s ability to perform other corporate governance or management roles in the future.

• If you are an officer within your organisation you should ensure that you have a reasonable basis for believing that OHS is adequately attended to by appropriate people, supported by appropriate systems (including training) and properly resourced. If you are not an officer, but have knowledge of or responsibility for OHS matters, you should raise this issue with the officers within your organisation and encourage them to ensure they achieve compliance both now and in the future.
• Before 1 January 2012, officers will need to ensure: they understand the changes under harmonisation; and that the OHS systems and processes within their businesses are reviewed, and updated as required, to achieve compliance with the new laws.
• Officers may need to seek advice on the new laws (either from internal or external specialists or both) and will need to anticipate what is required to provide adequate resourcing for the updating of OHS systems.
• More generally, achieving compliance with officer duties will include officers taking positive, informed and proactive steps to understand (and seek information about) the health and safety risks within their business and verify that these risks are addressed appropriately, ensure adequate risk management systems are in place and implemented, and review OHS reporting on a regular basis.

Harmonisation provides an opportunity for businesses to not only review their safety systems but to also review their corporate governance structures and OHS reporting systems to ensure that officers are able to achieve compliance with their obligations.