Directors need to be doubly careful to meet their work health and safety (WHS) obligations as regulators toughen up their approach to prosecuting breaches. The tough stance comes as Australian governments and regulators ponder the recommendations of a review into harmonised WHS regulations, released in February this year.
Led by former executive director of SafeWork SA, Marie Boland, the WHS review gave the model laws an overall tick of approval, but also made a series of recommendations, including tougher penalties for breaches, the introduction of industrial manslaughter laws, and removing the right of duty holders to recover penalties through insurance or indemnification.
Separate to the Boland model WHS laws review, Holding Redlich law firm partner Michael Selinger says there has been a shift in the regulators’ approach to personal liability for safety breaches; and regulators are more likely to initiate prosecutions for the very serious offence of reckless conduct, as opposed to negligence, than they might have in the past.
He points to the WorkSafe ACT prosecution of Multiplex Constructions and RAR Cranes for alleged safety breaches that resulted in the death of a worker on a Canberra building site in 2016. Selinger says that along with prosecuting the crane driver for manslaughter, WorkSafe ACT is prosecuting several lower-level managers for reckless conduct.
“Reckless conduct is a very serious offence to bring against anybody, certainly for someone in a position where, ostensibly, they tend to follow the instructions of others, and it would normally, at worst, be said to have been negligent,” he says.
The shift has implications for non-executive directors because it also signals a willingness by prosecutors to include non-executive directors in their actions — not just hands-on directors, says Selinger. “The lesson that’s coming out of this recent case is that [directors] do need to pay closer attention to the steps they can personally exercise. In the past, they may have been able to say it is an area that falls into the responsibility of another director — an executive director — but the net will potentially be cast broader as the regulator focuses on what steps the board is making as a whole, so long as they can demonstrate there was a failure for each of those directors to exercise due diligence.”
Jillian Hamilton, managing director of Brisbane-based WHS consultancy Manage Damage, says now is a good time for directors to take a fresh look at their work health and safety hazards with a risk review and audit.
“They need to look at it as if it’s the very first time they’ve ever done it because what used to be acceptable risk — and what used to be easily gotten away with and not very important — that level has dropped significantly,” she says.
“Directors need to understand what is due diligence because it will be applied a lot more literally and to every level of the company, not just the big guys, which is where [the regulators] have been hunting.”
Hamilton also notes that this year, small and medium enterprises are coming into regulators’ sights, where previously the focus had mostly been on large and high-profile companies. She says the change is a response to limited success in prosecuting large companies and also because of the anticipated change in government at the recent federal election. Had Labor won the election, Hamilton says, she would have expected a tougher safety climate and more union involvement, which would have possibly instigated a lot of unrest and cost.
Among the recommendations from the Boland model WHS laws review is that governments remove the right of duty holders to indemnity from an insurer or their organisation. Selinger says the intention is to ensure directors have “skin in the game” and, if adopted, the change will prompt them to be more proactive in the steps they take. However, he notes that there is also the risk that such a provision could deter people from taking up directorships.
Additionally, Selinger says the review recommended giving greater guidance and clarity around how directors and executives can actually discharge their duty of care.
The review also recommended an increase in maximum penalties to reflect an increase in the consumer price index since 2011 and “in order to retain their real value as a deterrent”. It recommended “enhancing” the most serious type of offences (category 1) to include gross negligence in exposing an individual to a risk of serious harm or death.
Another recommendation is that the states and territories follow Queensland and the ACT by introducing industrial manslaughter laws “where there is a gross deviation from a reasonable standard of care”.
Kym Bills FAICD, chair of the Safety Institute of Australia College of Fellows and former foundation head of the Australian Transport Safety Bureau, says that while the proposal has a long way to run, “it’s definitely got a head of steam”.
“Directors should be watching pretty carefully,” he says. “Clearly, policy input is important to try to make sure that whatever is implemented is done by thinking through all the potential downsides and consequences.”
Bills says company boards and directors, government bodies and other not-for-profits already have significant duties and responsibilities under existing WHS legislation and he expected the Commonwealth ministerial consideration of the Boland review recommendations would not significantly add to these.