9.05.2018

Health and Safety Changes – Directors Need To Act Now!

We all know about New Zealand’s appalling record in workplace health and safety, compared to the rest of the OECD.  This was, of course, brought into even sharper relief by the tragedy at Pike River.  The Royal Commission of enquiry into the Pike River tragedy, and the independent taskforce set up to review the state of workplace health and safety more generally, both identified that health and safety needs to be driven from the very top of each company.

Having already released a Guideline document for Directors on managing health and safety risks [Good Governance Practices Guideline for Managing Health and Safety Risks ] the government has now released an Exposure Draft for the proposed new legislation, expected to replace the Health and Safety in Employment Act 1992 sometime in 2014.  The Exposure Draft contains a raft of wide-ranging reforms.  However, the purpose of this article is narrow; to look at the new Directors’ obligations under the proposed legislation.

What is changing?

The new Health and Safety at Work Act will impose an active duty on those in a governance role to proactively manage workplace health and safety.  Under the present legislation, the Directors of a company can only be held liable for a breach of the Act where they have participated in, contributed to, or acquiesced in their company’s failure.  The new laws will impose a due diligence role on Directors with regard to health and safety.

Who is affected?

Duties under the new Act are imposed on Persons Conducting a Business or Undertaking (PCBU).  Essentially, this will include any legal person, company or entity which conducts a business of any sort, or size, whether it is conducted for profit or not.  Essentially, every business operation will be a PCBU.

Where a PCBU is a company, the officers will be the directors of the PCBU.  Where it is a Partnership, the officers will be the partners (including, in a limited partnership, any general partner). In a body corporate or unincorporated body, an officer will be any person who occupies a position comparable to that of a director in a corporate body.   ‘Officer’ also includes “any other person, who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the PCBU (for example, the chief executive or a chief financial officer)”  The net is cast pretty wide.  Any officer or very senior employee, who has the authority to make or be involved in making the big decisions, will have the new obligations.

What are the new obligations?

If a PCBU has a duty (and it will!) the officers must exercise due diligence to ensure that the PCBU complies with that duty.  Under the new Act, “due diligence” includes taking reasonable steps to:

  • Acquire and keep up to date knowledge of work health and safety matters; and
  • Gain an understanding of the nature of the operations of the business or undertaking of the PCBU and generally or the hazards and risk associated with those operations; and
  • Ensure that the PCBU has available for use, and uses, appropriate resources and processes to eliminate or minimise risks to health and safety from work carried out as part of the conduct of the business or undertaking; and
  • To ensure that the PCBU has appropriate processes for receiving and considering information regarding incidents, hazards, and risks and responding in a timely way to that information; and
  • To ensure that the PCBU has, and implements, processes for complying with any duty or obligation of the PCBU under the Act; and
  • To verify the provision and use of the resources and processes referred to in the above paragraphs (c) to (e).

Note that the above requirements are cumulative and concurrent – to comply, each Officer must meet each of the due diligence requirements.   Note also that the Act will continue to be one of strict liability – that is, there is no need to prove any intentional failure to meet an obligation.

What happens if an Officer doesn’t meet the obligations?

An Officer of a PCBU can be convicted of a failure to meet the due diligence requirements whether or not the PCBU has also been convicted of an offence.  However, if an Officer hasn’t met his or her specific duty, chances are pretty good that the PCBU itself has also fallen down somewhere along the line.  Consequently, a Director of a business could be facing liability in respect of his or her Officers’ duties, as well as the business facing liability as a PCBU in relation to the same event.

There are three tiers of liability under the proposed legislation:

Reckless conduct (where a duty-holder engages in conduct that exposes any individual to a risk of death or serious injury or illness, and is reckless as to that risk):Failing to comply with duties and exposing individual to risk of death or serious illness or injury:Failing to comply with any duty (including the due diligence requirements for Officers):
Individual but not a PCBU or OfficerUp to $300,000 fine and/or up to 5 years’ imprisonmentUp to $150,000 fineUp to $50,000 fine
Individual who is a PCBU or OfficerUp to $600,000 fine and/or up to 5 years’ imprisonmentUp to $300,000 fineUp to $100,000 fine
Body CorporateUp to $3m fineUp to $1.5m fineUp to $500,000 fine

What can Officers do now?

While this is an Exposure Draft only, and tinkering is possible, it is likely that legislation will be enacted in more or less this form.  Trying to meet the due diligence requirements on the night before the legislation comes into force, is doomed to failure.  Now is the time to review your current situation, and get health and safety matters in order.  If you need help to understand the changing requirements, provide training or information to your Board, or talk through whether your current arrangements are adequate, contact us to set up a discussion.

Contact: Alison Maelzer or Jim Roberts

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Contact the expert team at Hesketh Henry.
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