Navigating the complex and highly regulated maze of state-run occupational health and safety jurisdictions in Australia can be onerous. In addition, most schemes are moving to tougher penalties for health and safety breaches, especially towards company directors and senior officers. While serious accidents occur more frequently in blue-collar industries, directors’ liability should be a concern to all directors and senior officers.
Current occupational health and safety responsibilities mean that directors and persons concerned in the management of a company can be found personally liable if their company breaches OHS legislation – this is also known as directors’ liability.
Contravening OHS regulations comes with a hefty price if charged. In NSW, directors can be personally prosecuted and fined up to $55,000 in relation to a contravention of the OHS Act that takes place in their company. Subsequent offences mean directors can be fined up to $82,500 or face two years imprisonment. Penalties to corporations can be up to ten times these amounts. Therefore, it is essential that company directors understand the laws and how they relate to their company. These penalties are not just targeted toward directors. They can be applied to anyone in an organisation with decision-making authority who did not exercise due-diligence. Penalties for offences in Victoria are similar, however, there is a current groundswell for the doubling of all OHS penalties that may become law in the not-too-distant future.
To decrease the risk of directors’ liability, directors need to first recognise the importance of OHS regulations, to protect not only themselves but also their employees. From there they can take simple remedial steps to eliminate the risk and avoid unnecessary accidents. A precedent that resulted in a significant fine to a company director could have been avoided with the simple step of installing an audible alarm to warn people that heavy machinery was currently moving or was about to move. Given that all OHS legislation in Australia has moved towards a risk management model, having a system in place to identify hazards and assess and control risks is now a fundamental aspect of running a business operation.
Defences for the Occupational Health & Safety Act 2000 (NSW) (Act)
It is becoming common for directors to be held liable for matters they have little control over and there are many cases in which no defence is available. Due diligence is a legitimate defence, which defines that “he or she, being in such a position, used all due diligence to prevent the contravention by the corporation.” Directors need to be continuously aware that they are required to carry out due diligence in the workplace everyday, to avoid prosecution should any accidents occur.
The second defence available is: “He or she was not in a position to influence the conduct of the corporation in relation to its contravention of the provision.” This means all directors in the position of power to influence OHS issues should be aware of how these issues can affect them in the long run. It is no longer a defence for directors to relegate their OHS responsibilities to lower level managers – the very position of company director or senior officer implies that person is in a position to influence the conduct of the corporation.
How to mitigate directors’ liability
The most positive method of mitigating your OHS liabilities as a director is to achieve due diligence through a risk management framework. As long as you are doing everything you possibly can in regards to identifying, assessing and controlling OHS issues, you will reduce the likelihood of workplace injury and disease.
When developing an OHS Management System, ensure you have key OHS objectives and targets that, through the operation of the system and the collection of data, will tell you that you are succeeding or not meeting those targets and objectives. Develop effective methods of capturing critical data and measuring and evaluating your safety system. Good corporate governance requires you to be thoroughly informed through the operation of transparent systems of work
Ensure that OHS risk management systems are established, including proper risk assessment, control mechanisms and training. Ensure that at all times specific duties have been delegated to ensure all OHS laws are complied to. Make sure the system is reinforced and regularly reviewed and tested. Ensure OHS subject matters and the review of incidents are a standing agenda item for all senior management and board meetings. Always have in place a system of internal and external audits for your OHS Management System to ensure it meets Australian standards and to ensure the system has been effectively implemented.
Proactive risk management
Always be proactive in identifying OHS hazards and issues. Make sure workplace inspections are continuously carried out by experienced staff, and that you regularly receive and respond to reports on OHS issues from all business units and operating regions of the company. Maintain systems for the reporting of hazards from all employees and contractors. It is vital that ongoing enquiries are carried out to ensure that management is capable of ensuring the corporation’s statutory obligations in regards to safety are met. Take action if you become aware of any system failure. When a hazard is identified, assess the risk and respond by controlling the risk, always seeking to eliminate the risk as the first measure of control.
Instil a culture of safety
As a director, you have the ability to instil a culture of safety from the top down. You are able to influence this into the company and also actively promote safety amongst managers and employees by championing OHS issues. Ensure that all senior managers and employees are committed to conformance with your OHS system, and ensure that achieving OHS objectives is an important part of their job role and KPIs. Consultation with your workforce is not only a legal requirement, it is crucial in engaging employees and their supervisors in health and safety issues that affect them. Harness the collective knowledge of the people who are most affected by OHS issues through formalised consultation arrangements such as designated workgroups, health and safety representatives and OHS Committees. Ensure that OHS information is clearly and positively communicated at all times.
Training and knowledge
First and foremost, ensure that as a director you have either the required experience or training in dealing with OHS issues. Ensure you have a thorough understanding of the legal framework, or employ a consultancy to do so. Make sure that adequate procedures have been put in place for the induction, supervision and training of employees in regards to OHS matters. The way you induct, supervise and train all employees and contractors is an essential part of your OHS Management System. Regularly conduct gap analyses to determine if training requirement are met, both from a licensing and site-based perspective.
Always be aware of changes in OHS legislation. Stay continually informed on OHS issues in the operations which you are involved in or have a degree of control over. Regulations, Codes of Practice, Australian Standards, WorkCover alerts and industry bodies are all important knowledge bases.
Nicole Albert is National Manager of Konekt Containment, Australia’s largest private sector provider of workplace health solutions that minimise workplace risk and the impact of workplace injury, resulting in reduced workers’ compensation premiums.