Following the final report of the Royal Commission on the Pike River Coal Mine Tragedy, the Institute of Directors (IoD) and the Ministry of Business, Innovation and Employment (MBIE) have issued a guideline entitled Good Governance Practices Guideline for Managing Health and Safety Risks (the Guideline).
What is the status of the Guideline and who does it apply to?
One of the recommendations of the Royal Commission was for the health and safety sector to issue an approved code of practice to guide directors on how good governance practices can be used to manage health and safety. While the Guideline was intended to address that recommendation, MBIE has stopped short of amending the Health and Safety in Employment Act 1992 (HSE Act) or issuing a document with statutory force.
If the Guideline had been issued as a "code of practice" under the HSE Act, failure to comply with the Guideline would be considered by a Court to be evidence of a breach of the HSE Act. In its current form, however, a Court may (but is not compelled to) take the Guideline into account when considering the liability of directors for health and safety breaches.
While the Guideline is voluntary, directors should be familiar with it as it provides useful best practice advice and practical tools for directors to better influence an organisation's health and safety systems through their leadership, strategic decision-making and allocation of resources. Compliance with the Guideline will increase the likelihood that an organisation and its directors will be seen to have complied with the HSE Act.
The Guideline is targeted at, but not limited to, directors, trustees and councillors of organisations with 20 or more employees.
Does the Guideline change the current liability of directors?
As stated above, the Guideline does not affect the current statutory framework under the HSE Act.
In a previous update (see link later in this article regarding the Pike River Coal Mine Tragedy) we set out the current position of directors under the HSE Act. In summary, directors have secondary liability for breaches of the HSE Act, meaning that directors can only be liable where the company (which has primary liability) is in breach of the HSE Act and is liable for an offence. The HSE Act does not impose an express duty on the board of directors, or on individual directors.
A director will face potential criminal liability where it is clear the director directed, authorised, assented to, acquiesced or participated in the company's failure to comply with a provision of the HSE Act. In practical terms, a director may face liability where he or she had clear knowledge that the situation was unsafe or otherwise contrary to the HSE Act.
The recommendations outlined in the Guideline reflect the position that directors should have a positive and ongoing duty to ensure health and safety compliance. The Guideline borrows the concept of "due diligence", which was introduced by Australia's Model Work Health and Safety Act (WHS Act).
To meet their duty of due diligence under the WHS Act, directors should take reasonable steps to:
have a personal knowledge and understanding of:
- health and safety matters in the workplace; and
- the operations of the company and hazards and risks associated with those operations.
ensure and verify their company has:
- resources and processes to eliminate or minimise risks to health and safety;
- appropriate processes for receiving and considering health and safety information and responding to it in a timely way; and
- appropriate processes for complying with all the duties and obligations contained in the WHS Act.
Role of directors in the governance of health and safety
The Guideline's recommendations are set out in terms of four "key elements". For each element, the Guideline divides actions into "baseline actions" (minimum requirements) and "recommended practice" for directors. We set out some of the recommended actions below.
Policy and Planning
- Develop, approve, and publish a safety vision and beliefs statement that will express the organisation's commitment to heath and safety.
- Establish targets for tracking the organisation's effectiveness in implementing the board's health and safety strategy and goals. Directors may wish to include both lead and lag indicators in targets and ensure that they do not create perverse incentives.
- Determine a board charter that will describe the board's own role and that of individual directors in leading health and safety in the organisation. The board charter may include detailed structures and processes to be used to plan, deliver, monitor and review leadership of health and safety.
- Apply a performance review process to the CEO role, which includes health and safety responsibilities and accountabilities, and ensure that a similar process applies to other management.
- Ensure that management develops, implements, audits and regularly reviews and updates an effective management system consistent with accepted standards.
- Review management reports on reviews and audits of systems and control plans.
- Become personally aware of the organisation's hazards and control systems. Review risk registers.
- Ensure that management have staffed the organisation with sufficient personnel with the right skill mix, supported by specialists as required, to operate the business safely.
- Ensure that plant and equipment is provided by management that is fit for purpose, well maintained and supported by training and safe operating procedures.
- Provide sufficient funds for effective implementation and maintenance of the health and safety management system and for improvement programmes.
- Specify clear requirements regarding reporting and timeframes for significant events in the board's charter.
- Review serious incidents, including serious non-compliance and near misses, and be personally satisfied with the adequacy of management actions in response.
- Ensure that improvement goals are developed annually by management and that regular progress reports are received by the board.
- Specify arrangements for the formal review of health and safety in the board's charter including frequency, who is involved, and how and what input is required.
- Ensure that input into the formal review includes audits (internal and external), system reviews, performance results, significant incidents, organisational changes and benchmark data.
- Determine an action plan and track progress as an outcome for the review.
The recommendations listed above are only some of what is outlined in the Guideline. A series of diagnostic questions in the Guideline provide directors with an additional tool to determine whether the organisation's practices are consistent with the board's values, goals and approved systems.
For more information on the key findings and recommendations of the final report of the Royal Commission on the Pike River Coal Mine Tragedy, see our earlier update of 23 November 2012 entitled Pike River Commission proposes health and safety reform to improve corporate governance.
See also our earlier update of 21 May 2013 entitled Independent Taskforce recommends urgent and sweeping changes of current workplace health and safety system.
MBIE's inspector's powers: Utumapu v Bull overturned by Court of Appeal
On appeal the Court of Appeal has overturned the High Court decision in Utumapu v Bull (2011). The earlier High Court decision had interpreted the HSE Act in a way that limited MBIE's inspector's powers to compel a company to provide an employee to attend an interview, narrowed the scope of questions that could be asked of the interviewee and required an inspector to provide advance warning of the intended topics for questioning. The Court of Appeal confirmed the coercive nature of an inspector's powers (subject to the privilege against self-incrimination) and that a corporate employer can be required to answer questions and make a statement. Also, the Court recorded its disagreement with the High Court's conclusion that an inspector is bound to provide an indication of the purpose of the interview and the type of allegations which might be made.