The Industrial Magistrates Court has provided the first guidance on who has due diligence obligations as an "officer" under the model Work Health and Safety Act.
One of the key changes of the model work health and safety legislation was the introduction of a positive obligation on "officers" to exercise due diligence.
In the first prosecution of a person charged as an officer under the WHS Act, the Industrial Magistrates Court has provided some guidance on who is caught by the officer provisions (Brett McKie v Al-Hasani & Kenoss Contractors Pty Ltd (In liq)  ACTIC 1).
Due diligence obligations of officers
Under the model WHS Act (now in force in all States and Territories other than Victoria and Western Australia), officers have a positive duty to exercise due diligence to ensure the person conducting the business or undertaking (PCBU) complies with their duties and obligations.
To exercise due diligence, officer are required to take reasonable steps to:
- acquire and keep up-to-date knowledge of WHS matters;
- understand the nature of the operations of the business and its particular hazards and risks;
- ensure there are sufficient resources and processes for risk elimination or minimisation and that the processes are being utilised;
- obtain, consider and ensure a timely response to information about incidents, hazards and risks;
- ensure there is a process for compliance with WHS duties and obligations; and
- verify the above.
Who is an officer?
Under the model WHS Act, an officer of a PCBU is:
- an officer as defined by section 9 of the Corporations Act 2001 (Cth), or
- an officer of the State, Commonwealth or another State; or
- an officer of a public authority that is a body corporate or local government, other than an elected member of a local government acting in that capacity.
The Corporations Act definition includes, among others, a director or secretary. However, since the introduction of the model WHS Act, there has been significant discussion as to whether middle or senior managers would be caught by the definition of officer.
Although there was not previously any guidance under the model WHS Act, there are Corporations Act decisions which, in addition to the section itself, make it clear that the definition includes a person who makes, or participates in making, decisions that affect thewhole, or a substantial part, of the business of a corporation.
SafeWork has provided further guidance in its "Frequently Asked Questions" guide on officer, stating that "managers (including Human Resource managers), supervisors and work health safety advisers in an area of the business or undertaking are not officers as they do not generally make, or participate in making, the key decisions on how the person conducting a business or undertaking (PCBU) operates. Instead, they:
- assist the decision maker by providing information and advice, and
- implement the decisions made by officers".
In the first prosecution of a person under the officer provisions, the Industrial Magistrates Court has now shed further light on who is caught by the WHS Act officer provisions.
The proceedings arose out of a driver contracted by Kenoss Contractors Pty Ltd being fatally electrocuted by a low-hanging power line while unloading a truck at site.
Mr Munir Al-Hasani, a Project Manager employed by Kenoss, was charged for breaching his duty as an officer. Proceedings were also commenced against Kenoss.
Position was operational or advisory, not directional
Mr Al-Hasani reported to a husband and wife (the general manager and director respectively), who ran the family business. He could not commit corporate funds, there was no evidence that he had direction over the type, or the specific contracts, which were to be pursued by Kenoss (though he was responsible for delivery of those contracts), and while he did prepare tenders, he did not have authority to sign off on them.
The Industrial Magistrate said there was no evidence of matters such as who determined the corporate structure, who established company policy as to the type of business to be pursued and which projects were to be entered into.
Rather, the Court described Mr Al-Hasani’s participation in the business process as "operational" and said it was speculative as to whether it went beyond that to being organisational.
Perhaps the most important part of the case for industry was that the Industrial Magistrate found that in determining whether Mr Al-Hasani was an officer who was required to exercise due diligence, she had to consider his influence over Kenoss as a whole, rather than the "role in respect to the particular matter in which it was alleged there was a breach of duty".
While finding that Mr Al-Hasani sat close to the top of the company structure, importantly, the Industrial Magistrate found there was no evidence that he made, or participated in making, decisions which affected the whole, or a substantial part of the business of the corporation.
As a result, Mr Al-Hasani was acquitted.
Consequences for your business
The decision is consistent with the authorities under the Corporations Act, and is an important reminder that the person must make, or participate in making, decisions that affect the whole or a substantial part of the business to be an officer.
Although no one factor is determinative, the case law suggests than an officer:
- will have substantial authority in relation to capital expenditure (though this factor must be considered in the context of the size of the corporation);
- will report directly to the Board is capable of so doing;
- is responsible for management of a large division or part of the corporation or central administration;
- has control over their budget;
- sets policies and makes decisions which are implemented by others;
- is involved in the management of the corporation and takes part in decisions which affect the company's business at a high level.
A person's ability to make decisions, exercise control and authorise the substantial use of capital expenditure is relevant to an assessment of whether the person is an officer (rather than whether the person acts in that way in practice).
Organisations should take care to review their documentation to ensure that it accurately reflects who is intended to be an officer including:
- review contracts to specify officer obligations on those intended to carry out an officer role;
- ensure that contracts, position descriptions and authority levels are consistent with officer status;
- review policies and ensure that reporting obligations , accountabilities and responsibilities are consistent;
- take proactive steps to identify officers and ensure that they have (and are comfortable that they have) sufficient tools to discharge their due diligence obligations.
Generally, employees(including but not limited to officers) take their obligations seriously and want clarity around what those obligations are. Providing that clarity is good business management and can assist to manage legal risk.