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Brief Counsel

Health and Safety Reform Bill under the microscope

18 March 2014

The Health and Safety Reform Bill will become a key piece of legislation for every workplace with significant penalties, both reputational and financial, for non-compliance  and requires the attention of senior management and board members.

We summarise the Bill’s contents and identify where it has been refined in response to the feedback received on the exposure draft released last August. Submissions are due by
11 April 2014.

Key features of new regime

The Bill is modelled on the Australian Model Work Health and Safety Act, adapted as necessary.  This will have the advantage of allowing New Zealand to draw on the Australian experience and on Australian case law.

At the centre of the new regime sits the PCBU (the person conducting a business or undertaking).  The PCBU owes duties to “workers” in a general sense when they are performing work in relation to that business, and to workers whose activities are directed by or influenced by the PCBU.  Volunteer associations not employing anyone are excluded from the definition of a PCBU.

There are also specific obligations on upstream suppliers of products or machinery to ensure that the items are supplied, installed, stored and can be operated and inspected safely.

Company officers (directors and senior management) are subject to a new positive “due diligence” duty to ensure that the PCBU eliminates risks to health and safety “so far as is reasonably practicable” and, where risks cannot be eliminated, minimises them “so far as is reasonably practicable”.

This new duty will require directors and officers, as an absolute minimum, to:

  • understand the nature of the company’s operations and any associated risks and hazards, and
  • ensure that there are appropriate resources, systems and processes to manage these risks.
In judging what constitutes an appropriate standard of care, the courts are likely to have regard to the Good Governance Guidelines drawn up by the Ministry of Business, Innovation and Employment (MBIE) and the Institute of Directors.  Our commentary is available here.
A large section of the new Bill is dedicated to worker participation, and engagement with workers.  There are significant penalties for non-compliance with these obligations.
New enforcement options available to WorkSafe as the regulator include:
  • an ability to issue infringement notices without prior warning
  • enabling judges to order wrong-doers to publicise their failures, take action to remedy those failures and pay for the regulator’s costs in bringing proceedings against them, and
  • a comparatively long period for bringing prosecutions – up to two years after the breach first comes to WorkSafe’s notice and up to one year after the coroner releases findings indicating that an offence may have occurred.
Finally, there is a significant increase in the maximum penalties for a breach of any obligation under the new Act:
  • Category 1 (reckless conduct) – up to $3 million for a corporate and $600,000 for an individual and/or five years’ imprisonment.
  • Category 2 (conduct causing, or exposing a person to serious harm) – up to $1.5 million for a corporate and $300,000 for an individual.
  • Category 3 (breach of duty) – up to $500,000 for a corporate and $100,000 for an individual.

Current maxima are $500,000 for a knowing breach of duty where there is a risk of serious harm and $250,000 for any other breach.

Corporate manslaughter has not been adopted but Labour and the Greens have made it clear that they see this as a significant gap in the Bill and we can expect further discussion on the topic during the select committee process.

Refinements from the exposure draft

As the Bill is closely modelled on the Australian Model Law, we were not expecting the basic design to change – and most of the changes which have been made are relatively minor or technical.
The most significant change is that the definition of “officer” has been narrowed.  The exposure draft defined an “officer” as someone who makes “or participates in making” decisions that affect the whole or a substantial part of the business, and expressly included the CFO.  The Bill removes the person who merely “participates” in decision-making, and removes the reference to the CFO.
This is a welcome change.  However, we consider that a further narrowing is desirable to capture only those people whose decisions either directly or indirectly affect health and safety, with liability confined to those parts of the business for which the officer is responsible.
This may be an issue for submissions to the select committee.
Other changes in the Bill include:
  • express exclusion of members of local community boards and local authorities from offences that would otherwise be imposed on an “officer” (this makes it clear that trustees of local schools will not be criminally liable for health and safety failures)
  • changing the obligation to “consult” with workers to an obligation to “engage”, although the specifics of the obligations have not changed
  • a new express exclusion from the duties of suppliers of plant, substances or structures where such products are sold second hand and “as is”
  • doubling the maximum fines for failing to institute worker participation practices to $20,000 for an individual who owes a duty under the Bill and $100,000 for a body corporate
  • new definitions of “hazard” and “risk”
  • allowing a regulator to remove a health and safety representative who is deemed to be ineffective (with the ability for that decision to be appealed)
  • a new positive obligation on a PCBU to provide information to a health and safety committee rather than just have that information “accessible”. (If this is interpreted as under the Employment Relations Act 2000 it will require a proactive approach to disclosure as opposed to simply responding to requests)
  • an obligation on a PCBU to adopt a recommendation from a health and safety committee within a reasonable timeframe or provide reasons why not, and
  • new sections regarding enforcement, prohibition notices, remedial actions, reviews and appeals.

Process from here

The Bill has been referred to the Transport and Industrial Relations Committee with submissions due by 11 April 2014.

The Select Committee is due to report back by 13 September 2014.  This timetable reflects the Government’s aim of having the Bill passed into law by the end of 2014 and in force from 1 April 2015.

Our thanks to Marie Wisker and Vonda Hodgson for writing this Brief Counsel.

For further information or help preparing a submission, please contact the lawyers featured.

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