May 2012

Work health and safety - are you liable? The High Court speaks

The new work health and safety laws are a hot topic for many businesses. Six months into the operation of the new laws, questions are being asked.  The courts have not yet had the chance to provide guidance on the new laws.

Two concepts central to the new Work Health and Safety Act 2011 are:  (1) the duty to ensure safety "so far as is reasonably practicable", and, (2) who is an "officer" with an obligation of due diligence. 

These two concepts, albeit under different laws, have been recently considered by the High Court.

Baiada Poultry Pty Ltd v The Queen [2012] HCA 14

Baiada operates a plant that processes chickens.  In 2005 it engaged independent contractors to raise, catch, load and deliver chickens to the plant.  In the course of loading the chickens at a farm, a contractor accidentally killed another contractor.  The first contractor was driving a forklift without a licence, when the modules it was carrying hit the other contractor.

Baiada was successfully prosecuted for not providing, so far as is reasonably practicable, a working environment that was safe.  Work Cover argued that Baiada could have ensured safety by issuing instructions to its contractors and undertaking checks to ensure safety compliance.

The High Court however held that Baiada had, so far as is reasonably practicable, ensured safety through the use of skilled independent contractors.  The High Court said:

  • the mere right to issue directions to a contractor (apparently skilled and experienced) or to check compliance with safety instructions does not mean that those matters are steps that are reasonably practicable to achieve a safe working environment;  and

  • it is not enough for the prosecution to simply show that a step could have been taken to ensure safety.  The step must be reasonably practicable to achieve a safe workplace.

As Justice Heydon said:  "In some circumstances, the employment of independent contractors may be the only reasonably practical way of ensuring and maintaining a safe working environment".

The Baiada decision does not absolve businesses from safety obligations simply by engaging skilled independent contractors.  Each case will turn on its own facts.  However, in some circumstances, engaging skilled and qualified contractors to do work not part of the core business could be a reasonably practicable step to ensure safety.

Shafron v ASIC [2012] HCA 18

Mr. Shafron was James Hardie's Company Secretary and General Counsel.  ASIC had successfully prosecuted Mr. Shafron for breaching his duties as an "officer" in respect of the release of a misleading ASX announcement.  Mr. Shafron disputed he was an "officer" involved in the making, or participation of the making, of decisions affecting the whole or a substantial part of the business (the statutory test).

Mr. Shafron argued that to be liable as an “officer” he must have had a role in actually making the decision (to release the ASX announcement).  Mr. Shafron submitted that that there is no liability if you are only concerned in or partaking in the management of the company.  Mr. Shafron argued that providing information and advice to assist the Board to make a decision does not mean he participated in decision making.

The High Court rejected these arguments, saying:

  • Mr. Shafron could not simply separate his duties as advisor from his duties as company secretary;

  • in examining whether someone is an officer, you look at the role the person plays in the corporation and not just the role they played in relation to a particular decision;

  • the concept of participating in making decisions directs attention to the role a person has in the ultimate act of making decisions, even if the final act is undertaken by some other person or persons; 

  • participation is more than an administrative arrangement, and there must be a real contribution from the participation to the making of the decisions;  and

  • the notion of participating in making decisions is ultimately a question of fact and degree in which an assessment needs to be made of the role played by the person and the contribution that person makes to the making of a decision.

In this case, Mr. Shafron was heavily involved in the formulation, presentation and implementation of the proposal and ASX announcement.  Mr. Shafron did not just give legal advice.  As a result, and given his senior position and role as company secretary, the High Court held he was an officer as he did participate in the making of decisions affecting the business.

The Shafron decision confirms that the obligation to exercise due diligence will apply beyond the Board and its directors and extends to senior and upper management.  The question of how far down the chain of command responsibility extends will ultimately depend on the structure of the organisation and the degree of a person’s involvement in decision making.  Certainly, the old tests under OHS 2000 of simply being concerned in management no longer apply and middle management are unlikely to be held to be personally liable.

Conclusion

Baiada gives some comfort for businesses in a more realistic application of what is reasonably practicable when engaging independent contractors.  Shafron makes clear that an “officer” is not limited to the actual decision maker but that there must be some real participation in decision making that affects the whole or a substantial part of the business.

In our view, a prudent practice would be for all employers and all senior managers (whether legally an “officer”) to mirror the due diligence obligations when dealing with safety.  Those obligations provide useful guidance to deal with and manage workplace safety.  

Author: James Mattson

 

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