The legal ruling is a timely reminder of officers’ responsibilities under the Health and Safety At Work Act 2015, warn Buddle Findlay Partner Susan Rowe and Solicitor Philippa Moran.
The recent Australian case of Brett McKie v Munir Al-Hasani & Kenoss Contractors Pty Ltd (In Liq) [2015] ACTIC 1 indicates that a narrow interpretation of “officer” might be taken by the courts in New Zealand.
This case involved the prosecution of a project manager following the fatal electrocution of a contractor at a project site.
The Australian definition of officer is a person “who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business.”
The court considered the individual’s decision-making role in the company as a whole, rather than their role in respect to the particular matter in which it was alleged there was a breach of a duty.
While the project manager had “operational responsibility” over the delivery of specific contracts, he did not exercise sufficient responsibility over the whole organisation so as to qualify as an officer.
While the definition of an officer is different in New Zealand, it is possible that our courts might adopt a similar approach and find that to qualify as an officer a person has to exercise significant influence over the management of the entire company, not just part of it.
WorkSafe has already indicated it will adopt a conservative approach in relation to local authorities and treat only elected members and CEOs as officers.
Defined under the Health and Safety at Work Act (“HSW Act”) as those in governance roles, officers have a positive due diligence obligation to proactively manage health and safety in the workplace.
Who is an officer?
An officer is a director of a company, a partner in a partnership or persons in other entities occupying similar roles. It also includes a person who exercises “significant influence over the management of a business or undertaking“. A liquidator or receiver of a company can also be an officer after appointment.
Persons who merely advise or make recommendations to an officer are expressly excluded from the definition. Officers are likely to include CEOs and may include CFOs and other members of an organisation’s senior management team depending on their level of influence over the operation of the business.
What is due diligence?
Under the HSW Act, “a person conducting a business or undertaking” (“PCBU“) owes a primary duty of care to ensure, so far as is “reasonably practicable,” the health and safety of its workers and workers influenced or directed by the PCBU.
If a PCBU has a duty or obligation under the HSW Act, an officer of the PCBU must exercise due diligence to ensure that the PCBU complies with that duty or obligation. If an officer has acted with due diligence, he or she will not be held liable for the conduct of other officers or the PCBU.
Officers must exercise the care, diligence and skill that a reasonable officer would exercise in the same circumstances, taking into account (without limitation) —
- the nature of the business or undertaking; and
- the position of the officer and the nature of the responsibilities undertaken by the officer.
Due diligence will further require officers to:
- know about health and safety matters;
- understand the operation, hazards and risks of the business;
- allocate appropriate resources to address these risks/hazards;
- implement a fit-for-purpose health and safety system and ensure processes are in place to respond to incidents;
- report on hazards, risks and ensure it is a regular agenda item and well documented; and
- verify it is all happening.
The duty is not dependent on there being an incident or accident. In Australia it is not uncommon for improvement notices to be issued or for prosecutions to be taken if officers are found to be falling short of due diligence. Whether the same approach will be adopted in New Zealand is yet to be seen.
Penalties
A failure to meet due diligence obligations will expose an officer to a risk of being personally convicted of a criminal office.
There are significant penalties for three categories of offences:
| Category | Workers | Sole traders / Officers | Companies |
| 1. Without excuse, exposes individual to risk of death/serious harm and recklessness as to the risk (s47) | $300,000
5 year imprisonment |
$600,000
5 year imprisonment |
$3 million |
| 2. Duty failure exposing individual to risk of death/serious harm (does not require knowledge or actual harm) (s48) | $150,000 | $300,000 | $1.5 million |
| 3. Duty failure (does not require risk exposure) (s49) | $50,000 | $100,000 | $500,000 |
These penalties have significantly increased from those contained in the previous Health and Safety in Employment Act 1992. Under the previous legislation, it was not uncommon for workers, officers and employers all to be prosecuted, convicted and fined. This trend is unlikely to change.
Practice
In a practical sense, officers must frequently observe and attend their work sites. This is not a task that can be delegated to office managers and workers. It will not be sufficient for an officer to arrange for insurance, put policies in place and then sit on his or her hands. Nor will it be enough for a board to delegate these tasks to a CEO.
Simon Arcus, chief executive of the Institute of Directors, recently noted that “the age of sleeping directors is absolutely dead.”
Officers who do not have hands-on involvement in the operation of their business are more likely to be at risk of prosecution because they may not be familiar with theday-to-day procedures for health and safety compliance. This issue led to the resignation of Peter Jackson as director of Weta Workshop.
Any officer must be personally satisfied as to the effectiveness of their organisation’s health and safety systems and performance. As part of this, they should obtain good quality health and safety information from management, maintain a strong health and safety culture which involves worker engagement and review.
The Health and Safety Guide: Good Governance for Directors was re-released by Worksafe New Zealand and the Institute of Directors in March 2016 and is a practical tool for officers and managers.
The guide outlines a framework for directors and managers to identify whether their health and safety management systems are of a standard and quality that is effective in minimising risk.
The statutory due diligence obligations and the recommendations contained in the guide suggest an officer should adopt a cycle of planning, review, implementation and improvement for a company.
Suggested action points for this annual cycle are contained in the table below.
| Obligations | Suggested action points |
| KNOW AND
UNDERSTAND
(Plan) |
Understand and exercise due diligence obligations – ‘know’ the organisation, its risks and systems |
| Lead from the top. Encourage a positive culture towards health and safety | |
| Create a health and safety charter and health and safety policy documentation | |
| Set measurable performance targets for staff and as part of CEO/management KPIs | |
| ALLOCATE AND IMPLEMENT
(Do)
|
Implement a health and safety system that is fit-for-purpose and best practice |
| Ensure appropriate resourcing for health and safety | |
| Undertake a risk assessment for the organisation and ensure the organisation has a system in place to identify and control hazards and risks | |
| Revise employment agreements | |
| Ensure that employees have access to, and use, appropriate equipment and plant and are trained for use | |
| Ensure there is a system for worker participation and representation | |
| Identify, consult, cooperate and coordinate with other PCBUs | |
| REPORT
(Monitor) |
Determine what information will be reported and who will collate/report, circulate |
| Develop and implement internal/ external monitoring for continuous improvement | |
| Document all processes and decisions made on health and safety matters, preferably in an electronic recording system | |
| Engage external assistance to provide guidance where appropriate | |
| VERIFY
(Review and act) |
Implement internal and external reviews of health and safety systems |
| Review management/CEO health and safety performance on an annual basis | |
| Implement changes identified as result of annual review |
