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Episode 51 Buy Episode

Safety Starts at the Top – Officers’ Personal Liability for WHS Breaches

Law as stated: 28 January 2022 What is this? This episode was published and is accurate as at this date.
In this episode, Judge Peter Rozen KC reflects on his work assisting the Royal Commission into Aged Care Quality and Safety, applying case studies and stories to WHS law. Peter also discusses the differences in Work Health and Safety laws between states and the adoption of the model law. Peter also discusses officers’ duties under WHS law and the need to actively implement safe management plans.
Substantive Law Substantive Law
28 January 2022
Judge Peter Rozen KC
Victorian Bar
1 hour = 1 CPD point
How does it work?
What area(s) of law does this episode consider?The importance of proactive involvement with workplace safety, and personal liability under work health and safety (WHS) laws.
Why is this topic relevant?The model WHS laws aim to harmonise health and safety standards for workers across Australian jurisdictions. Although most states (excluding Western Australia and Victoria) have adopted the model WHS laws, differences remain both in practice and enforcement.

Section 27 of the Work Health and Safety Act 2011 (Cth) provides that an officer of a person conducting a business or undertaking (PCBU) must exercise due diligence in ensuring their business or undertaking complies with relevant WHS laws.

Modern due diligence under section 27 can mean proactive involvement in work safety compliance.

What legislation is considered in this episode?Work Health and Safety Act 2011 (Cth) (WHS Act)

Work Health and Safety Act 2011 (NSW) (WHS Act (NSW))

Corporations Act 2001 (Cth) (CA 2001)

Occupational Health and Safety Act 2004 (Vic) (OHS Act)

What cases are considered in this episode?R v Commercial Industrial Construction Group Pty Ltd [2006] VSCA 181

  • A construction worker fell through a hole which was not barricaded. In the County Court, CICC Group pleaded guilty to a breach of the 1985 predecessor of the OHS Act. In issue in the VSCA was whether the sentence imposed was manifestly excessive. The court found that although CICC Group had formally adopted a safety management system, its duty was not discharged as it was not actively implemented. The VSCA dismissed the appeal.

Construction, Forestry, Maritime, Mining and Energy Union, Mr Matthew Howard v Mt Arthur Coal Pty Ltd T/A Mt Arthur Coal [2021] FWCFB 6059

  • Mt Arthur Coal, a member of BHP Group, implemented a COVID-19 vaccination site access requirement. In issue in the FWCFB was whether the access requirement was a lawful and reasonable direction. The FWCFB noted that a vaccination mandate can be a lawful and reasonable direction, however, Mt Arthur had not complied with its work health and safety consultation obligations under the WHS Act (NSW) (based on the model WHS laws).
What are the main points?
  • There are minor differences in legislation between states that have adopted the model WHS law. Victoria and Western Australia are yet to adopt the model law and differ quite significantly in some key areas. This includes the use of the term employer instead of PCBU.
  • For the purposes of WHS law, the definition of “officer” piggybacks on the definition contained in the CA 2001.
  • An officer must exercise due diligence in ensuring compliance with WHS regulations, otherwise they may be held personally liable.
What are the practical takeaways?
  • The most effective way to reduce workplace incidents and injuries is to encourage a participatory approach to safety. If you are an officer of a company, go to the actual workplace that you are in charge of to ensure that WHS regulations and the safety management plan are being complied with.
  • Utilise effective management tools that convey WHS information as simply as possible. This can be achieved through employee education programs or one-page pictorial summaries of WHS issues.
Show notesThe Royal Commission into Aged Care Quality and Safety

Report by Robin Stewart-Crompton, Barry Sherriff and Stephanie Mayman called ‘National Review into Model Occupational Health and Safety laws’

SafeWork NSW website summarising prosecutions under WHS law from 2012-2021

SafeWork NSW page on workplace inspections with comment from Dimitri Hari

Australian Transport Safety Bureau’s report titled ‘A systematic review of the effectiveness of safety management systems’

WorkSafe Victoria case against the Victorian Department of Health for breaches of hotel quarantine

David Turner:

 

 

 

 

1:00

Hello and welcome to Hearsay, a podcast about Australian laws and lawyers for the Australian legal profession, my name is David Turner. As always, this podcast is proudly supported by Assured Legal Solutions, a boutique commercial law firm making complex simple.

The corporate veil or separate legal personality, it’s one of those concepts that everyone remembers from their undergraduate business organisations unit at law school, that the owners and managers of a company are not personally liable for the debts of that company. Of course, there are many exceptions in law and in practise, contractual guarantees liability for insolvent trading, which we’ve spoken about on this show before but one personal exposure that certainly keeps company directors up at night is the potential for personal liability for breaches of work health and safety legislation. Here to tell us about directors’ responsibilities under work health and safety legislation is Peter Rozen QC. Peter, thanks so much for joining me today on Hearsay.

Peter Rozen:It’s a pleasure.
DT:Now, Peter, before we start, tell us a bit about your practise. You’ve recently been acting as senior counsel assisting the Royal Commission into aged care, quality and safety. Tell us a bit about your role with the Royal Commission and your other work in the health and safety space.
PR:

 

 

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3:00

Sure, David. So the last two years of my working life and my life in general actually has been taken up by that role, that’s senior counsel assisting the Aged Care Royal Commission, and it was very challenging, not the least because I didn’t know terribly much about aged care or aged care law before I took up that roll. One of the things that really struck me coming from a workplace health and safety legal background was the lack of any enforceable duty on providers of aged care to look after the health and safety of the residents that they are responsible for and it was particularly striking because the majority of aged care providers are private organisations, many of which operate for profit whilst being subsidised by the Federal Government, and so the absence of a clearly enforceable duty along the lines of what we know well from workplace health and safety law was really striking and probably closer to the topic today, the lack of a duty on the directors and others in charge of aged care providers also seems to be quite a gap in the law. So, the final report of the Commission addresses both of those things. Just in relation to that, one of the big challenges that was faced by the Commissioners and the Royal Commission into aged care was how to craft a duty for providers to look after residents whilst at the same time maintaining some scope for residents to take risks in their lives. So, it’s not entirely analogous – the workplace safety situation – where you want risk in the workplace to be as low as reasonably practicable. Residents in aged care are not children and they should be allowed to go for a walk, for example or take some level of risk without necessarily putting the proprietor at legal risk themselves. So, getting that balance right is quite challenging, and I suppose that’s one of the differences between aged care and workplace safety.
DT:

 

 

 

4:00

I do remember that from the report and I think from your address to the Commission that there is that tension between an aged care facility being a place where people live. It’s a home. Most people in their homes are free to take the risks that they want to take but at the same time it is also a workplace and it is a place where people are living precisely because they require the care of the stuff there, so it is an interesting issue and one that, I suppose, distinguishes it from the work health and safety issues that we’ll be speaking about today. I want to start with the legislative landscape for work, health and safety around the Commonwealth. One of my earliest roles in the law was as a paralegal in a work health and safety team at one of the large law firms and, at the time, the Work Health and Safety Act was new legislation. That Act, it’s a Commonwealth Act, and a casual observer might see that act and say ‘well, great, we’ve got Commonwealth legislation, nationally harmonised system. I need to look at that act and I’ll know what my responsibilities are as a PCBU, a person conducting a business or undertaking, wherever I am in the country,’ but that’s not actually the case. Where does it apply and where doesn’t it?
PR:

 

 

5:00

 

 

 

 

 

6:00

How long have you got, David, it’s a very good question. Funnily enough, I’ve been teaching health and safety law for the best part of 15 years in the law school at the University of Melbourne and I remember, year after year, telling the students that perhaps next year will have harmonised law and we won’t be looking at different laws in the various states. There have been significant developments in that regard but it’s still pretty complicated, so the Commonwealth law that you refer to, the Work Health and Safety Act 2011, has a fairly limited application. So, it applies to the Commonwealth in its capacity as an employer, so, if you’re working for the Department of Social Security and you’re a Commonwealth public servant, then you’re owed duties under that act by your Commonwealth employer and then there’s another range of entities called licensees, Commonwealth licensees to use a simple term, and they’re national companies like Optus, for example, which are private companies but are licenced to operate under the Commonwealth scheme and they’re also covered by that Commonwealth Act. So, that’s the scope of the Commonwealth Act. Then we’ve got a series of state Acts which do the real heavy lifting in relation to workplace safety. Every state or territory, with the exception of Victoria and Western Australia, so we put those two to one side immediately, but all the rest operate under a harmonised scheme which is state based law that adopts a template model and, therefore, the content of the law is essentially identical, with some minor changes in all of those jurisdictions but the substantive law is a state or territory enactment that is effectively in the same terms as that Commonwealth statute that we started talking about. So, the majority of Australian workers fall under those provisions. Victoria and Western Australia, however, resisted the temptation to enact the template law. Victoria’s held fast to that. We’re different down here. We want to have our own Act which differs in some very significant ways, especially in relation to directors’ duties which I’m sure will come to, from the template model. Western Australia has finally succumbed and is due to implement the template legislation, I think this year, but everything is delayed because of COVID, of course, so it’ll perhaps be next year and it’ll look a lot like the template law, but it won’t be identical to the law that applies, in New South Wales but for present purposes it will be very close. So, Victoria will be the only holdout when that happens.
DT: 7:00Resisting the temptation. I think that language is really interesting that Western Australia ‘succumbed’ to the temptation and Victoria’s ‘resisted’ it. What are the policy reasons why one might not adopt the harmonised system? What has been the reason for that holding out?
PR:

 

 

 

 

 

8:00

 

 

 

 

 

 

 

 

 

 

9:00

 

 

 

 

 

 

 

10:00

The stated reasons were twofold. The first was the Victorian law exceeds the standards in the template model. As you can imagine, the development of the template model which came through a report headed up by a former public servant called Robin Stewart-Crompton.

TIP: The aptly-named Stewart-Crompton report was the result of a 2008 review into model occupational health and safety laws.

The panel reported to the Workplace Relations Minister’s Council, headed by then Minister Julia Gillard, on the optimal structure and content of a model occupational health and safety act that would be capable of being adopted in all Australian jurisdictions. The first report pertained to the current duties of care, including the identification of duty holders and the scope and limits of their duties. It also had regard to the nature and structure of offences and defences to those offences. The second report covered a much wider range of areas from the review, including:

  • workplace-based consultation with workers and participation and representation provisions
  • enforcement compliance of OHS laws
  • regulation-making powers and administrative processes
  • permits and licensing arrangements for those engaged in high-risk work and the use of certain plant and hazardous substances
  • and the role of OHS regulatory agencies in providing education, advice and assistance to duty holders

The two reports ultimately made 232 recommendations and, following these recommendations, the Council agreed to a framework for a uniform law to address the inconsistent laws between different Australian states and territories. The aim of that was to enhance safety for Australian employees and increase certainty for their employers. In 2011, the WHS Act was enacted, following the framework provided by the Council.

The Stewart-Crompton report was, necessarily, a compromise of the existing state laws and Victoria’s argument was, in some respects, the compromises went too far, the standards are too low, we want to stick with our own law, which we think is better essentially. Then there was another argument which was that because the template model law was, essentially, based on the Victorian law, and, if you’ve got the time and you read the Stewart Crompton report, you’ll see time and again they said ‘we’ll do what’s in place in Victoria.’ Victoria said ‘well, we don’t need to adopt the model law because the model law is essentially the Victorian law, anyway’ and if you think there’s a bit of a contradiction in those two arguments then you’re probably right, there is but that was the position and there’s been a degree of stubbornness, really, in Victoria, despite changes of government in the interim, to stick with the Victorian law. Although, there are some signs of some patchwork implementation, for example, in the area of labour hire, the Victorian law has recently been amended to look a bit more like the person conducting a business or undertaking model that you mentioned a moment ago.

DT:Where do you tend to fall on that spectrum? Do you say the Victorian Act exceeds the model law or more or less implements it? What argument do you prefer?
PR:

 

 

 

 

11:00

I think there are some areas where the model law is clearly superior and the most obvious one is the use of the concept; person conducting a business or undertaking rather than the employer, so, getting away from that employer-employee paradigm with its limitations that we’ll come to in a moment, in relation, for example, to the gig economy, the model law exceeds the Victorian law  and also in relation to directors’ duties which we’ll also come to, obviously. So, I’ve always been an advocate of model law, I think Victoria should follow it. It’s a matter of principle, we really should have one set of rules throughout Australia. Even if that does involve some minor compromises, I think the benefits of having uniform legislation far exceed any disadvantages. So, I’d be an advocate of Victoria getting on board even at this late stage.
DT:It’s never too late.
PR:That’s right.
DT:I’m glad you raised the idea of the person conducting a business or undertaking, as opposed to an employer and this false dichotomy in the modern age between an employee, on the one hand, and an independent contractor. You mentioned the gig economy and we’re seeing a blurred line between those two roles. Almost a sui generis third category of person who’s highly dependent on the gig platform but not in an employment relationship with it. To what extent is that existence of a formal relationship of employment relevant to work health and safety law?
PR:

 

12:00

 

 

 

 

 

 

 

 

 

 

 

 

13:00

 

 

 

 

 

 

14:00

Under the traditional style of law, which Victoria is an example of, the employer-employee relationship, as it’s understood at common law, is central to the operation of the Act. The party that has the benefit of the law are principally people who fall under the common law definition of employee and those that have the responsibility to provide the safe working environment are employers at common law.

TIP: There’s a multi-factor test at common law to determine whether a person is an employee or a contractor. The court will look at the whole relationship between the employer and the employee, and they’ll look at it in substance, not just form. Any written agreement stating the nature of a relationship as either employment or contractor is relevant but not conclusive. Some of the factors that indicate a person is an employee, at least at common law, include that:

  • They don’t have control over the way that they perform their tasks
  • They work standard working hours that they don’t control
  • They receive wages based on the time that they’ve worked, rather than the tasks they’ve completed
  • They’re not generally free to work for others at the same time. They’re obliged not to compete with their principal, for example.
  • They aren’t able to delegate any aspect of the work to another person or to sub-contract it
  • Whether Pay As You Go tax is deducted from their pay; or
  • Whether they don’t render tax invoices for payments and file GST returns with the tax office

However, it’s becoming increasingly difficult to use these criteria to delineate between an employee and a contractor in the advent of the gig economy. It’s possible that a lot of these factors can apply to a person but they’ll still be found to be an employee. This distinction between employees and contractors is important because in Victoria this construction of the employer-employee relationship is used for work health and safety law rather than adopting the slightly different approach under the model law.

In the Victorian Act there is some extension of those terms to cover independent contractors and others but it’s done in that traditional deeming style that we see in legislation which invariably leads to arguments and lots of work for lawyers, of course, in arguing about the precise operation. One of the great benefits of the model law is that it sweeps away all of that argument and it starts from the proposition that if person A is providing some benefit to person B, whether they do that work as an employee or as a contractor or as an apprentice or even on a voluntary basis, they’re entitled to a working environment that is safe as reasonably practicable, and the person that is getting the benefit of the work, regardless of their status, ought to have the duty. So, that Stewart-Crompton report that I mentioned earlier came up with this. It’s a bit clunky, but it’s as good as anything which is this person conducting a business or undertaking or PCBU, as they’re known in the trade and they are the party that has the duty and the duty that they owe is to a person who fits under the description of ‘a worker’, which is a very broadly defined term that goes well beyond the common law ‘employee’.

DT: 15:00I suppose another of those related concepts to this idea is, and perhaps it’s a similarly attenuated concept when we talk about remote working and the gig economy and hybrid work environments, is the idea of a workplace. What is a working environment and where does the person conducting a business or undertaking’s responsibility to provide a safe working environment end?
PR:

 

 

 

16:00

It’s a very good question, especially in the context of pandemic, of course, where people’s working environment, all of our working environments, look a bit different to the way they looked before COVID. The expression working environment is deliberately chosen in health and safety law to avoid arguments about whether or not something is a workplace. So, that’s a deliberate decision that is included in all the Australian laws, so, not just the model law, but also the law that applies in Victoria and Western Australia. They all have this concept of a working environment which the courts have considered means anywhere where someone working. So, if your work involves working from home, that’s your working environment. If your work involves being in a truck, that’s your working environment and so on. The challenge though is how does one accommodate the degree of control over that working environment that the person conducting the business or undertaking might have and fit it into the notion of what’s reasonably practicable? So, we’ll probably come to this, but a reasonably practicable test is applied in health and safety law and a significant part of that is the extent to which the duty holder controls the environment in which the work is done. So, the lower the level of control, the lower the duty, all else being equal.
DT:

 

17:00

Makes sense. Now, we’re here today to talk about the personal liability of directors and officers for breaches of WHS law and, from what I understand, that’s a common feature in both the model law and the law that applies in Western Australia and Victoria. Although I’ve said directors personal liability throughout the introduction to this episode, it’s really broader than that, isn’t it? What is an officer for these purposes and what kind of individuals might find themselves exposed to personal liability for WHS breaches?
PR:

 

 

 

 

 

18:00

 

 

 

 

 

 

19:00

 

 

 

 

 

 

20:00

 

 

 

 

 

21:00

Throughout the country, both in the jurisdictions that have implemented the model law and those that haven’t, the definition of officer piggybacks on the definition in the corporations law. So, the definition in the model law and the state laws is that a person is an officer if they are a director or secretary of a corporation or “a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation, or has the capacity to affect, significantly, the corporation’s financial standing.”

TIP: You might recognise that definition from the second limb of the definition of ‘officer’ in section 9 of the Corporations Act. Section 27 of the Model Work Health and Safety Act actually imports the Corporations Act definition of officer. Importantly, this definition also includes officers of a business or undertaking of the Crown and officers of a public authority.

It was actually the Stewart-Crompton second report that recommended that the definition in section 9 of the Corporations Act be adopted, given its greater familiarity and clarity amongst the profession. It’s also a definition that’s able to capture those in key positions of authority to ensure active participation in OHS matters, without being really prescriptive. Stewart-Crompton’s report recommended this, in part, to ensure that the confusion caused under previous safety legislation regarding who had personal liability as an officer was removed. Now, in determining who is an officer, it is important to distinguish between a person who participates in making decisions and a person who merely assists and implements such decisions. A person who participates in making decisions may be liable under WHS legislation as an officer, but someone who merely assists and implements will not. Accordingly, while most managers, supervisors and work health and safety advisers working in an area of a business are not likely to be considered officers for the purposes of the WHS Act, there may also be many non-directors in management positions who may, by virtue of their involvement in decision making processes in the firm, be exposed to personal liability as officers under WHS legislation.

So, you can see there that the emphasis is on the running of the business and making decisions at a very high level that affect the whole or a substantial part of a corporation. There’s an argument that the use of the corporations law definition of officer is not entirely appropriate for health and safety law. For example, a lot of decisions that impact on workplace safety are made by people who are not necessarily at the highest levels of corporations. A workplace safety officer is a very good example of someone who’s decisions may impact on the health and safety of a lot of people, but they might not necessarily meet the definition of ‘officer’ as it stands at the moment. It’s interesting, when the Victorian Act was amended in 2004, the corporations law definition of ‘officer’ was brought into the Act. Previously, the definition was different and picked up anyone who is concerned in the management of a corporation, not necessarily at such a high level. That concept of ‘concerned in the management’ was the subjects of some cases which said that a supervisor could, for example, be concerned in the management of a corporation. So, it’s interesting that there was a move away from that and the range of people who fall under the definition of ‘officer’ is narrower than it used to be. The net effect of that is, if you look at the cases where the officers duty provision has been utilised by prosecutors, it’s invariably the case that it’s only directors who are being prosecuted under the officer liability provisions. I know that’s something that will probably come to in a moment but it’s theoretically possible, but in practise very unusual for anyone other than director to be prosecuted under the officer liability provisions.

DT:Even when you were reciting the definition then, it really does read as consistent with the purposes of the Corporations Act, rather than necessarily with the model law. You talk about someone who’s in a position to affect the financial standing of the corporation, that’s very well directed to someone who might be liable for insolvent trading or engaging in voidable transactions but significantly less important, I would think, to the implementation of safe processes of work. That idea that someone who’s significantly closer to work that’s being conducted, particularly risky work in the construction industry or the mining industry, might be in a much better position to influence work health and safety than someone like a CFO, for example, who is a common example of a non-director who might, in certain circumstances, be an ‘officer’ of a company. Have you seen any cases where non-directors have been considered officers for the purposes of a WHS prosecution?
PR: 22:00

 

 

 

 

 

 

23:00

Yeah, short answer is no. You couldn’t rule it out as a possibility, but it doesn’t tend to happen in New South Wales, which is the jurisdiction where there is the most enforcement activity under workplace health and safety law.

TIP: Peter’s right. In 2021, of the 45 prosecutions under WHS Act in NSW recorded on the SafeWork website, 5 of them were against officers of the company under section 27. Of these prosecutions, all of them were directors of those companies. This means that about 11% of all WHS prosecutions in 2021 were against directors of the company for breaching their duty to provide a safe working environment.

I did a quick search of the District Court cases on AUSTLII and it’s pretty clear there’s a pattern that most of the cases where officers are prosecuted are cases where you’ve got a small company where there’s been some terrible accident at a workplace where that small company is operating and you’ve got either a sole director or husband and wife directors where the officer, that is the director, is in a hands on management position, often, usually on the work site directing the building operation or the demolition work or whatever it happens to be and they’re prosecuted under the director’s duty provision arising from that accident. That’s the typical example.

DT:I want to come back to that example because I think it raises a really interesting point about the extent to which this responsibility can be discharged through process and policy and the advice of others. Before we go there though, we’ve identified who the officers who might be exposed to this sort of liability are but what is the central duty that they have to discharge? What is the duty that, if they’re not complying with it, is productive of the liability?
PR: 24:00

 

 

 

 

 

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26:00

So little bit of history might be helpful. Until the model law came into operation in 2011, there were officer liability provisions in all of the state laws, so the New South Wales example was section 26 of the 2000 Act and Victoria has a similar provision. They were classic derivative liability provisions, sort of accessorial liability. They essentially went like this; if you’re a director of a company and the company contravenes its duty in the health and safety laws, so it doesn’t provide a safe working environment for its workforce, and that failure to comply with the duty is attributable to your neglect or default in some way, then you would be also liable. That was the traditional approach in the jurisdictions that have now implemented the model law and, because Victoria hasn’t implemented the model law, that’s still the law in Victoria. So that’s a derivative liability that essentially says the corporation has to be in breach first, and then if that breach is attributable you, then you’re also liable. That approach to directors’ and officers’ liability was heavily criticised in that Stewart-Crompton report that I referred to earlier. The report said that for health and safety standards to improve, there needs to be a direct duty imposed on directors. They need to have standalone responsibilities that are not derivative of the corporations responsibility, and that recommendation was picked up in the model law and now finds its place in section 27. So at section 27 subsection 1; “if a person conducting a business or undertaking has a duty or obligation under this Act, an officer of the person conducting the business or undertaking must exercise due diligence to ensure that the person conducting the business or undertaking complies with their duty or obligation.” So, it’s a stand-alone responsibility that all officers have and it’s a duty to exercise due diligence to ensure that the person conducting the business or undertaking, which in most cases will be the corporation, complies with the duty. And then there’s a helpful guide to what due diligence means in that context in subsection 5 and it includes taking reasonable steps to keep on top of work, health and safety, generally, to keep on top of risk in the organisation that you’re the director of and then to ensure that the person conducting the business or undertaking has available for use and uses appropriate resources and processes to eliminate or minimise risk to health and safety arising from work. Then, finally, to verify the provision and use of the resources and processes referred to. So, you can see that the duty is quite different to the traditional officer liability provision in work health and safety law and is generally referred to in the courts as a proactive duty rather than one that’s reliant solely on the corporations duties itself.
DT: 27:00And that duty picks up some of the other key features or concepts in the legislation around a preference for eliminating risk, for example, and if it can’t be eliminated, mitigating or minimising it. This duty can’t be delegated, it can’t be offloaded to an employee, as you said, it’s a personal standalone responsibility of the officers of the PCBU, but I imagine that the publicly listed industrial firms of Australia are not sending their officers out to work sites to ensure that they personally as directors who might be sitting on a dozen or more boards to ensure that they personally are aware of safe systems of work in an iron mine, for example, and that they personally are responsible for ensuring that those sites are safe working environments. How do, in practice, company directors discharge these responsibilities?
PR:

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29:00

It’s a good question. There’s a lot to be said for going out and having a look for directors. The policy that underlies section 27 is clearly intended to encourage proactive involvement. If I could digress back to my recent aged care experience. One of the case studies we did in the Royal Commission that struck me was a case where a CEO of a large, for-profit aged care provider and they had, I think, 50 or so homes that they were responsible for, many of which had 100 residents in them. He would make a point of, every month, spending a night in one of those homes, sleeping in the home, eating a meal in the home, using the facilities in the home, getting in the nitty gritty, really, just to ensure that he knew how the business was operating. So, one can extrapolate that to a mine or a building company and so on. I would think that the companies that are taking their responsibilities seriously are sending their directors out from time to time, I mean obviously not everyday, but going out and familiarising themselves with the risks, talking to the workers and generally familiarising themselves with what the risks are that the company is creating and how they are eliminating or mitigating them in a practical sense. So, that’s one part of the answer to that but of course there are limits to how much that can be done in a company that’s operating nationally and so directors will necessarily be reliant on reports that they would receive as part of board papers. A brief report about injury frequency and trends in injury frequency, which was the sort of traditional health and safety report that was often included in board minutes, gone are the days where that will suffice. Any companies that are still just doing that are leaving themselves wide open in terms of responsibility under section 27.
DT:

30:00

I’m glad that you really reinforced the importance of site visits, even for large national businesses. I had a client who was the Managing Director of an industrial services business and safety was really their core value, above any other one of their corporate values and he made it a point to visit all of their project sites very frequently despite, obviously, having a lot of other responsibilities around the financial management of the business. There’s another dimension to that reliance on other parts of the business to discharge that duty in that some directors won’t have the level of expertise or technical knowledge to understand what is or isn’t safe in terms of the operations of their business. They might have a background as a CPA and maybe don’t have a sophisticated understanding of the appropriate steps to put in place at a construction site. To what extent is it permissible to rely on expert advice or counsel from an employee or an external consultant to discharge or go some way to discharging this responsibility?
PR:

31:00

 

 

 

 

 

32:00

Not only is it allowable, I think it’s vital. A lot of safety questions are necessarily highly technical issues. If you think about safety in mining, to some degree common sense has a role to play but you really need to understand precisely the risks involved and the sophisticated engineering issues involved in making a mine site safe and so the idea that every director would come in and just express their own view about these things could be, in fact, very dangerous. So you necessarily have to rely on expert advice but in a lot of ways this goes to how boards of companies are selected and the sort of conventional wisdom about corporate governance is you need an appropriate mix of skills, everyone will tell you that, but that mix of skills has to necessarily involve directors who understand the detail of the organisation that they are responsible for, so that they’re in a position to challenge managerial recommendations that are made. Good corporate governance involves not just receiving reports, but, in appropriate cases, challenging what management are saying. Going back to, again, if I may, the aged care experience, we had a number of case studies in the Royal Commission where that hadn’t happened, where there were real problems with staffing, or whatever it was, and the boards of the aged care providers, many of which were made up of volunteer directors, so very challenging situation, but they hadn’t challenged the advice that we’re getting from management in circumstances where it was appropriate for them to have done so and the failure to challenge that advice lead to very poor outcomes for the residents in those aged care homes and one can extrapolate that to the workplace safety situation.
DT:

 

 

33:00

I’m so glad you mentioned that about the composition of boards. It’s almost tried advice that a board needs to be diverse on a number of metrics. It needs to be diverse in terms of skills, diverse in terms of cognitive style but that idea that that skill diversity should extend to work health and safety and to extend to someone who has the knowledge of the details of the operation of the business. I don’t know that all boards would have someone who is actually familiar with the product or service at a details level that the company provides, so I think that’s really important practical guidance. Just to give our listeners an example, can you tell me about a case where you’ve seen an officer found liable for breach of their WHS obligations and especially where reliance on these kinds of delegations or policies or advice from others hasn’t been satisfactory?
PR:

 

 

34:00

 

 

 

 

 

35:00

 

 

 

 

 

36:00

Perhaps the best way to answer that is just to remind the listeners that the overwhelming majority of prosecutions under Workplace Health and Safety law result in pleas of guilty. It’s very rare for there to be a contested case. Now, that’s often because the prosecuting agencies pick cases that are very clear where there’s clear responsibility. I did have some involvement, a few years ago, in a case where there wasn’t an officer that was actually prosecuted but the issue of reliance on policies arose in the context of the employer being prosecuted. It was a plea of guilty but the argument went ‘it’s not such a bad breach because we had all these policies in place, it’s just that on this occasion they weren’t followed.’ Now that’s a common plea in mitigation that one hears. That case ultimately went to the Court of Appeal here in Victoria and if I could just give you a couple of brief quotes which gives you a bit of a flavour of the approach the courts took, which, in my experience, is consistent with the approach that’s often taken. This was an injury on a building site where one of the workers fell through a hole that hadn’t been properly barricaded on an upper level of a building site. He was seriously injured. The submission that was made in mitigation of penalty was what’s sometimes described as ‘what more could we have done’ submission and the Court of Appeals said this; “as part of the what more could we have done submission, the company argued that proper systems were in place before the accident. The company had purchased a safety management system from the Master Builders Association. The system included a job safety analysis procedure” according to one of the senior officers, there was a folder of many pages and so on. That’ll all sound very familiar to a lot of people involved in workplace safety. What the court said about all that was; “as this case illustrates, the formal adoption of a satisfactory safety management system will not have the beneficial effects intended unless it is accompanied by the employer’s active implementation of the system in the workplace. The employer’s duty will not be discharged simply by creating a safe system of work. The obligation requires the employer to ensure that procedures and instructions are actively and positively complied with by employees. Not only must employees be appropriately trained, but there must be ongoing supervision and compliance audits to ensure the system is being applied. In practise, employee compliance with the safe system of work must be constantly monitored by the employer.” Now, I’ve heard that too many times in other cases, and I think it really brings home the point. In terms of the current duty on directors and officers there is an obligation to verify the provision and use of system. So, that’s a really crucial part of the duty and goes to that monitoring and auditing and so on to see that the systems which are there are, in fact, being applied. And we’re all familiar with the safety management system that sits on the shelf and doesn’t get implemented. If anything, having a safety management system and not implementing it is perhaps worse than not having one at all.
DT:

 

37:00

It’s such a great distinction, isn’t it? That you can have this impenetrable tome of safe work procedures and safety policies, but unless they’re usable by the people who are most at risk and by the people who are responsible for their safety. As you say, it really is no better, perhaps worse, than even having it at all because it is so incapable of actually being applied to the purpose for which it’s been purchased, so I think that’s a really great point.
PR:

 

 

 

 

38:00

 

 

 

 

 

39:00

 

 

 

 

 

 

 

40:00

 

 

 

 

 

 

41:00

That notion of usability is a really important one. In a sense, if you’ve got a 200 page manual and you put it on a shelf and send out an email telling the workforce that it’s there and it’s available, you’re almost setting yourself up to fail really because any safety professional worth their salt will tell you that the simpler messages are the ones that are most likely to get through, and accessibility is really important. That’s where another duty that is a really important part of health and safety law kicks in here and that is the duty to consult with the workforce. So, quite separate from the duties we’ve been talking about, there’s a procedural duty which says; ‘if you’re going to implement safety changes or safety walls, you’ve got to consult with the workforce first.’ That’s probably never been more important than right now, with the implementation of vaccine mandates for COVID-19. That seems to have been sort of lost a little bit in all of the hooha. Employers saying ‘if we introduce a mandate, we’ll get sued by the workforce,’ and so on, and part of the answer to that is well, if you talk to the workforce force first and get their feedback on whatever it is that you’re planning to do, you might find that you’re on the wrong track or that, with some tweaking, the workforce will be happy. Taking the COVID example, if you tell them that those that have got legitimate medical reasons for not wanting to be vaccinated will be considered on a case by case basis, for example, you might alleviate a lot of the concern that the workforce has. That’s obviously a topical example, but one can apply that to a whole range of circumstances.

TIP: The relationship between COVID-19 vaccine mandates and the duty to consult under the WHS Act was actually considered in a case handed down after we recorded this episode. In CFMMEU v Mt Arthur Coal [2021] FWCFB 6059, the Fair Work Commission considered a site access requirement implemented by Mt Arthur Coal, a member of the BHP Group. BHP Group mandated that all workers at its Mt Arthur mine be fully vaccinated against COVID-19 by the 31st of January 2022 as a condition of entry to the site. Prior to this requirement coming into effect, Mt Arthur held an education program promoting the COVID-19 vaccine to its employees. BHP also commenced an ‘assessment phase’ where it invited questions and comments about the introduction of the Site Access Requirement via a central mailbox and some other communication avenues.

The question the Court had to answer was whether or not the COVID-19 vaccine mandate was a lawful and reasonable direction. The Full Bench noted that the vaccination mandate could have been a lawful and reasonable direction, however, it was ultimately decided that it was not for the primary reason that Mt Arthur had not complied with its work health and safety consultation obligations. Mt Arthur’s consultation process was found to fall short of what was required under WHS law as they did not consult prior to making the decision to introduce the mandate. That invitation for questions and comments about the introduction of the site access requirement came after the decision was made. In particular, employees hadn’t been provided with the reasons for the decision or the risk assessment and analysis that informed the decision, and employee Health and Safety representatives had not been involved in any meaningful way.

This case really highlights the importance of consulting with the workforce before implementing COVID-19 vaccine mandates, which is a real relevant issue that we are going to see more and more of in the cases to come.

So, as part of that duty that directors have, if the directors are on the board quizzing management, when management come and say ‘well, we’re about to introduce a system of compulsory drug testing at the mine site’, a useful question to ask might be; ‘well, have we discussed that with the workforce and the unions and what’s their feedback been? And if you haven’t, then I’m not going to consider your proposal until the next meeting, when you can come back and give me a report on consultation and what the feedback has been.’ That’s an example of a director being proactive without necessarily needing to have high level technical skills, but at least being aware of their obligations to consult.

DT:

 

 

42:00

In terms of the consultation obligation, it’s not even necessarily ‘I have to do this before I can put in place the thing that I always intended to do.’ That consultation can produce useful insights into the best way to implement that intervention. With your drug testing example ‘oh well, we spoke to the workforce and they don’t want drug testing.’ It might be that there’s a way to implement it that is going to be more effective, that is going to be less intrusive, that’s going to be better received and better complied with by the workforce. So, that consultation obligation is much more about improving interventions than preventing them from being implemented.
PR:Absolutely the cases are replete with observations that those that work on a daily basis with the risks are often best placed to make observations about how those risks can be mitigated and removed and that’s a good example.
DT:Just staying on that topic of usability, what are some examples of practical, simple, usable interventions or practises at work sites that are really effective at improving health and safety?
PR:

 

43:00

Like most things in life, it’s horses for courses. So, there might be a group of workers for whom a pictorial depiction of a safety issue is far better than a 20 page narrative. In fact, I would have thought, in most cases the laminated one page ‘here are the key messages we’re trying to get across’ will beat the carefully produced folder of material almost every time.
DT:Yeah. It’s easy to look at that idea and be snobbish and say it’s a literacy thing. It’s nothing to do with that at all. It’s that being time poor, conveying as much information in as little time is probably important to all kinds of employees and workers.
PR: Yeah, I think that’s absolutely right.

TIP: To learn more about effective safety management plans, check out the Australian Transport Safety Bureau’s report titled ‘A systematic review of the effectiveness of safety management systems’ that statistically analyses different studies on safety management plans and summarises their findings. The Bureau’s report reveals that effective plans combine a technical approach with a more people-oriented approach – an approach that empowers workers to have conversations about safety with supervisors, rather than just prescribing all of the rules in a big dusty tome somewhere.

DT: 44:00You mentioned earlier that a lot of the prosecutions of officers tend to be in smaller businesses, where, in reality, those directors are on the worksite personally involved in the supervision of that work. Is it the case then that, although systems and policies and the delegation to experts is not effective in preventing the PCBU itself from being exposed to a liability for a work health and safety breach, it does seem to be effective in dissuading regulators from pursuing prosecutions of the officers of those companies?
PR:

 

45:00

 

 

 

 

 

 

46:00

Without being inside the regulator and understanding the decision-making processes, it’s hard to be definitive about that, but one can’t help feeling that that the section 27 duty, which has now been in place under the model law for a decade, doesn’t really seem to be doing the full job that was intended for it. If you sort of, think back to the basic underlying principle of health and safety law, it’s about prevention. It’s not about responding to accidents where people are injured, it’s about being proactive and I think the hopes for section 27, when it was introduced, were that it would be used in a proactive way by the regulator. So, the regulator wouldn’t wait for an accident then come in and prosecute the director for failing to prevent the accident. The hope was that the regulator would look at the way in which the board of directors, for example, is examining risk and then enforce the law on the basis of a failure to do those things that we talked about a moment ago in section 27. So, if there’s no evidence in the minutes that directors are ensuring that they stay on top of risks that the company is exposing its workforce to, if there’s no evidence that there’s proper evaluations of resources that are being provided for dealing with safety issues, then one would have hoped that that would lead to enforcement activity in a preventative way, rather, what we seem to be seeing, and there’s a long history of this in health and safety law, is the prosecution is almost entirely reactive to accidents that are occurring at workplaces. The small company with the director that is working on site, that’s a low hanging fruit, if you like, for a prosecutor. Much harder to go after the big listed companies where the directors are not necessarily involved on a day to day basis. So, in a way, the way in which the duty is being imposed is really focusing on those smaller organisations. Whilst that might be appropriate, it’s hard to believe that there aren’t breaches of the section 27 duty that are occurring in larger organisations but just don’t seem to be the subject of enforcement.
DT:Do regulators have powers of inspection and audit that would empower them to have that preventative approach to prosecution?
PR:

47:00

They certainly do but they have very extensive powers which would enable them to audit minutes and even compulsorily examine directors if they chose to. The other thing that’s important to note is they have a broader range of enforcement powers than just taking you to court. Many of your listeners will be aware of improvement and prohibition notices that can be issued by inspectors which are administrative enforcement tools and it’s not easy to get access to information about how they’re being used in relation to particular offences but I know, from personal experience, that there are cases where inspectors have issued improvement notices to companies requiring compliance with the directors duty. Whether that’s happening as much as one would like, I’m not sure.
DT:That sounds like an example of a preventative approach but what those notices, in practise require the board to do in terms of what they were doing before the notice and what they should be implementing afterwards.
PR:

48:00

It’s not all that easy to necessarily craft a notice, in terms of what it requires. It’s one thing to identify the failures it’s another thing to say ‘here are the things you need to do’ and I think there’s a real challenge for regulators there, but you could require, at the very least, a policy or procedure that demonstrates how directors are complying with their duties, that goes through if they’re monthly board meetings, what sort of reports are they getting? You know, are they limited to the lost time injuries that we spoke about earlier or does it go beyond that and does it examine risk. For example, if notices have been issued to the company to particular work sites, is the board informed about those notices? Does that form part of the report the board get? So, what notices are we’ve been getting and what have we been required to do and how have we been implementing that? Another example is a monthly report on how we are we complying with our consultation duty? There examples of things, if they’re not being done, then you could see how a notice from a regulator could require evidence of compliance.
DT:

49:00

We’ve sort of been ramping up to this idea throughout the episode. As senior counsel assisting the aged care Royal Commission, you addressed the Commission about a systemic failure in that industry that there was inadequate staffing and inadequate training for the staff that were there that was compromising care for recipients of aged care. It sounds like the prosecutions that are taking place of officers under work health and safety legislation are the low hanging fruit and there are, perhaps, systemic failures, ones that might be identified in prosecutions of PCBUs, but not necessarily their officers, where there are breaches of the section 27 duty but those aren’t being prosecuted, perhaps because it’s difficult from an evidentiary standpoint to establish that, where there are these policies and procedures in place, even if they’re not particularly useable or well implemented. In your experience, are you seeing systemic failures in the cases that do prosecute the PCBUs and what are those systemic failures that you’re seeing?
PR: 50:00

 

 

 

 

 

51:00

 

 

 

 

 

52:00

There certainly are examples of that occurring where the regulators are examining broader questions of work organisation rather than just focusing in on an accident that occurred on a particular day and then identifying why the accident occurred, so, the wall collapsed because it wasn’t properly propped up, and leaving it at that rather than going a step back and saying ‘well, why wasn’t it properly propped up?’ It wasn’t properly propped up because, for example, the workers weren’t appropriately trained. Why weren’t they appropriately trained? Well, the budget for training had been reduced the previous year because of financial constraints and you could see how you might be able to lead that back to decisions that were made at the board. That doesn’t really tend to happen terribly often, essentially, for the reason I think you’ve identified, that it’s actually quite hard to do that. There’s a lot of work involved. If you can succeed in your prosecution by demonstrating that there should have been three props and there were only two, if that’s the reasonably practicable step that you can identify as a prosecutor and that’s going to get you the result, then you might say ‘well, why do we really need to go to all the trouble of going back and identifying why there are only two props when there should have been three?’ So, at a practical level, you can understand why it happens. There are some examples though, where regulators do seem to be prepared to do the work and identify systemic problems. There was a case just last week, as it turns out, in Victoria where there’s been prosecution brought against the Department of Health, so, against the state government, in relation to the hotel quarantine for COVID that led to the second wave in Victoria, last year, where 800 or so people died and most of those died in nursing homes, as it turned out, but we had an inquiry here last year that traced back that second wave to breaches in hotel quarantine and we’ve now seen a prosecution under the Health and Safety Act brought by WorkSafe against the department and the allegations are that there was insufficient attention given to the way in which hotel quarantine was organized, in terms of access to infection prevention and control expertise and training. So, that’s an example of a broader approach to a significant health and safety problem. Although most of the publicity that’s responded to that prosecution has focused on the failure to prosecute any individual public servants or ministers who could fall under the definition of officer under the Victorian Act but no such cases have been brought and that’s led to quite a bit of criticism of the regulator, as it turns out.
DT:

 

53:00

I suppose that aspect notwithstanding, it does sound like an interesting case where that level of abstraction in terms of identifying the real underlying problem has been taking place and it’ll be an interesting case to keep an eye on. We’ve spoken today, Peter, about a few different things that directors should be doing, not just from a legal perspective, in terms of their obligations under the model law or the Victorian Act, also from a practical perspective about the usability of the health and safety procedures that they implement, about reporting at the board level and the kind of metrics that you’d expect to see, moving past the lost time injuries that we were discussing. If you wanted to leave our listeners with one piece of practical advice for any of their clients who are considering their obligations under WHS laws, perhaps under the model law, what do you think that one piece of practical advice would be?
PR:Go to where the work is being done and talk to the workers. I think you could do a lot worse than that and how that occurs is going to vary from one organisation to another, but my story about the CEO of the aged care provider that went and slept in the residential aged care home and ate the food and everything else is an example that one can extrapolate to many workplaces. I think there’s not enough of that occurring.
DT:There’s really no substitute for seeing with your own eyes.
PR: 54:00Being there as the Peter Sellers movie told us many years ago.
DT:That’s right. Peter, thanks so much for joining us today on Hearsay.
PR:It’s my pleasure.
DT:

 

 

 

 

 

55:00

You’ve been listening to Hearsay the Legal Podcast. I’d like to thank my guest today, Peter Rosen QC, for coming on the show. Now, if you want more content, check out my interview with Michael Tooma, managing partner at Clyde & Co, about the mental health aspects of work, health and safety or, for something adjacent in the employment law space, listen to our episode with Nicola Martin from Squire Patton Boggs about the difference between an employee and a contractor and how the gig economy blurs that line. If you’re an Australian legal practitioner, you can claim one Continuing Professional Development point for listening to this episode. As you well know, whether an activity entitles you to claim a CPD unit is, of course, self assessed but we suggest this episode entitles you to claim a substantive law point. More information on claiming and tracking your points on Hearsay can be found on our website. The end of the CPD year is only a few weeks away. If you know a few people in your team who need a few extra points before the end of March, why not suggest signing up for a team subscription, if you haven’t already that is, and save on your own subscription fee. Hearsay the Legal Podcast is proudly supported by Assured Legal Solutions, a boutique commercial law firm that makes complex simple. You can find all of our episodes, as well as summary papers, transcripts, quizzes and more on our website and, if you’re a subscriber, we’ll let you know by email whenever we release a new episode and our free trial episodes are also available on Apple Podcasts and on Spotify, so, if you like us and you haven’t done it already, give us rating on those platforms and maybe tell a friend to listen to an episode too. Thanks for listening and I’ll see you next time.