An Australian company has been fined $1.1 million for negligence leading to a workplace death.
The prosecution was one of the first under Australia’s new health and safety laws, which are the model for the Health and Safety Reform Bill now winding its way through Parliament.
We look at the case, and at the Bill’s progress.
Kenoss Contractors Ltd was a family road contracting firm, now in liquidation (which means that the fine will probably not be paid). It was prosecuted after a subcontractor was electrocuted when his tip-truck connected with, or got too close to, low hanging live wires while dumping a load on site.
The maximum penalty available to the Court was $1.5 million. The Court decided the offending was at the high end of the scale because the accident could have been averted had a number of relatively simple safety measures been implemented and because Kenoss had tried to obfuscate WorkSafe Australia’s investigation.
The proceedings were one of two taken. WorkSafe also took action against Mr Munir Al-Hasani, a Project Manager for Kenoss, for failing to exercise due diligence as an “officer”. This decision, delivered in June, is of interest in the New Zealand context because it is the first to apply the new increased penalty regime and it provides the first judicial interpretation of who is an officer – a key concept under our proposed structure.
A new standard for fines
The Government has made it clear that the penalties for health and safety offences will increase, and this sentencing by the Industrial Court in Canberra gives a good indication of how the approach in New Zealand is likely to change.
The fine of $1.1 million is 75% of the maximum available penalty of $1.5 million. That is a marked contrast to the current New Zealand practice where courts ordinarily adopt a starting point for any fine of less than 50% of the current maximum of $250,000 (from which discounts are then made for any early guilty pleas, cooperation and remorse).
The fine is one of the largest ever made in Australia and ACT WorkSafe commented that the decision would send "shock waves” through the industry.
Definition of an officer
It is important to note the two countries define (or propose to define) “officer” differently.
In Australia, the test is whether the person “makes or participates in making decisions that affect the whole, or a substantial part, of the business”.
New Zealand started with that definition (in the Exposure Draft of the Bill) but has progressively narrowed it:
removing the reference to “participates in making decisions” in the Bill as introduced
amending it again in the Select Committee process to someone who is in a position that allows them to “exercise significant influence over the management of the business or undertaking” – wording that the Committee said was intended to capture only people “in very senior governance roles, such as directors and chief executives”, and
now proposing by way of Supplementary Order Paper
108 to limit the obligation of due diligence owed by officers to what “a reasonable officer would exercise in the same circumstances, taking into account the nature of the business or undertaking, the position of the officer, and the nature of the responsibilities undertaken by the officer”.
The Court found that Mr Al-Hasani was not an officer because he did not have control or responsibility over the company. He could identify potential employees but was not responsible for hiring or firing them; he could not commit corporate funds; he could not direct the type, or the specific contracts, which were to be pursued, and he prepared tenders but he did not sign off on them.
“What is established is that Mr Al-Hasani’s participation in the business process was operational; whether it went beyond that to being organisational is speculative. It is not clear that he made decisions, or participated in decisions, that affected either the whole or a substantial part of the Kenoss’ business”, the Court said.
Accordingly, the offence had been proved against Kenoss but not against Mr Al-Hasani as an “officer”. Had he been charged as an employee, the result might have been different but he was not charged in that capacity.
It is likely that a New Zealand court would have reached the same conclusion under our proposed law.
Progress on the Bill
The Government has now provided more detail on the regulations which will support its proposed exemption for small, lower risk businesses (20 employees or fewer) from the obligation to appoint a health and safety representative, even where requested by the workforce.
It has identified 57 industries which will not qualify because they are judged too high risk. The thresholds applied were:
sectors which have sustained 25 fatalities per 100,000 workers since 2008, and
industries with 25 serious injuries per 1000 workers or where there is a risk of a catastrophic event causing multiple deaths.
Sheep, beef and grain farming do not qualify as high risk under these criteria.
It was this issue which dominated debate yesterday. The Bill is now in its final committal stages, after which it will go to third reading.
For a broader description of the Bill, please refer to our earlier commentary.
For further information, please contact the lawyers featured.