Directors Exposure to Fines and Imprisonment – Work Health and Safety Matters

By 30 October 2019Workplace

Work health and safety is one, of several areas, where a director is exposed to significant fines and lengthy terms of imprisonment.

The office of director is a powerful office and carries great responsibilities, irrespective of the size of the company / corporate trustee or the scale of its business.

It is essential all directors understand their duties and responsibilities so they can appropriately comply with the law and manage their personal exposure to fines and imprisonment.

Due diligence duty

An officer (including a director) has a duty to exercise due diligence to ensure that the person conducting the business or undertaking (PCBU) complies with that duty or obligation – section 27 Work Health and Safety Act 2011 (Qld).

Due diligence requires an officer to take reasonable steps to:

  1. acquire and keep up to date knowledge of work health and safety matters
    1. obtain up-to-date knowledge of the Work Health & Safety Act 2011, its regulations and any applicable codes of practice;
    2. obtain up-to-date knowledge of work health and safety management principles and practices;
    3. identify current issues in your industry through conferences, seminars, information and awareness sessions, industry groups and newsletters;
    4. ensure work health and safety matters are discussed at the appropriate company meetings.
  2. gain an understanding of the nature of the operations of the business or undertaking of the PCBU and generally of the hazards and risks associated with those operations
    1. develop a plan to identify hazards in core activities of the company;
    2. ensure information is available to other officers and workers relating to the procedures designed to ensure the safety of specific operations that pose health and safety risks;
    3. continuously review and improve the safety management system.
  3. ensure that the PCBU has available for use, and uses, appropriate resources and processes to eliminate or minimize risks to health and safety from work carried out as part of the conduct of the business or undertaking
    1. implement a safety management system;
    2. establish and maintaining safe methods of work;
    3. recruit personnel with the appropriate skills for the tasks they will be required to perform;
    4. ensure staffing levels are adequate for safety in the company’s operations;
    5. ensure procedures are in place which allow employees to access decision makers for urgent issues;
    6. ensure all infrastructure, plant and equipment is maintained and upgraded as necessary.
  4. ensure the PCBU has appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely way to that information
    1. implement a risk management process;
    2. employ efficient, timely reporting systems;
    3. ensure procedures are in place for employees to cease unsafe work and request further resources to mitigate or eliminate the risk;
    4. ensure procedures are in place to consider and respond to information about incidents, hazards and risks in a timely manner;
    5. continuously review existing procedures against performance indicators to identify any deficiencies.
  5. ensure that the PCBU has, and implements, processes for complying with any duty or obligation of the PCBU under the Act
    1. undertake a legal compliance audit of policies, procedures and practices;
    2. test policies, procedures and practices to verify compliance with safety management planning.
  6. verify the provision and use of the resources and processes mentioned in above in paragraphs 1 to 5
    1. ensure systems are in place which record and provide evidence of the criteria listed in paragraphs 1 to 5.

Work health and safety is a legal issue. To protect its directors, a company should engage its lawyers to help its directors comply with its due diligence duties and improve safety matters for everyone concerned.

Consequence of an officer failing to comply with its due diligence duty

An officer who fails to comply with their duty, is exposed to:

  1. a fine; or
  2. a period of imprisonment.

The penalties vary depending on whether there is an element of reckless conduct, the establishment of a WH&S duty, a failure to comply that duty and the seriousness of the exposure to risk.

There are three categories of offences under the Work Health and Safety Act 2011 (Qld).

Category 1 – Reckless conduct
Type of offence Who Penalty Units ($100) Fine Term of imprisonment
WH&S duty, exposure to a risk of death or serious injury or illness and reckless conduct Individual (other than an PCBU or Officer/Director) 3,000 $300,000 5 years
Individual PCBU (ie sole trader of a business);

Officer / director

6,000 $600,000 5 years
Company 30,000 $3,000,000

 

Category 2 – Failure to comply with a duty exposing individual to risk of death or serious injury / illness
Type of offence Who Penalty Units Fine Term of imprisonment
WH&S duty, failure to comply with duty, exposure to a risk of death or serious injury or illness Individual (other than an PCBU or Officer/Director) 1,500 $150,000
Individual PCBU (ie sole trader of a business);

Officer / director

3,000 $300,000
Company 15,000 $1,500,000

 

Category 3 – Failure to comply with a duty
Type of offence Who Penalty Units Fine Term of imprisonment
WH&S duty, failure to comply with duty, exposure to a risk of death or serious injury or illness Individual (other than an PCBU or Officer/Director) 500 $50,000
Individual PCBU (ie sole trader of a business);

Officer / director

1,000 $100,000
Company 5,000 500,000

Industrial Manslaughter

Work health and safety laws are still State and Territory based laws.  While there has been an attempt to harmonize them in Australia, the harmonization is yet to fully roll out.

Queensland has largely adopted the proposed harmonized laws in the Work Health and Safety Act 2011 (Qld).

On 23 October 2017, Queensland introduced industrial manslaughter as an office into the Work Health and Safety Act 2011 (Qld).  Industrial manslaughter is a crime.

The offence was introduced in response to the recommendations of the Best Practice Review of Workplace Health and Safety Queensland, which was commissioned following high profile incidents in Queensland, including:

  1. Eagle Farm incident where 2 workers were crushed to death by a concrete slab; and
  2. Dreamworld incident where 4 people died when a ride overturned.

Industrial manslaughter – PCBU’s exposure

A PCBU commits the offence of industrial manslaughter if:

  1. a worker:
    1. dies in the course of carrying out work for the business or undertaking; or
    2. is injured in the course of carrying out work for the PCBU and later dies;
  2. the PCBU’s conduct causes the death of the worker; and
  3. the PCBU is negligent about casing the death of the worker by the conduct.
Person Max penalty Fine
Individual (sole trader) 20 years imprisonment
Company / corporate trustee of a trust 100,000 penalty units $10,000,000

Industrial manslaughter – Individual exposure

A senior officer of a PCBU means:

  1. where the PCBU is a company or a corporate trustee of a trust – an executive officer; or
  2. otherwise – the holder of an executive position (irrespective of how the position is described) in relation to the person who makes, or takes part in making, decisions affective all, or a substantial part, of the person’s functions.

An executive officer means a person who is concerned with, or takes part in, the corporation’s management, whether or not the person is a director or the person’s position is given the name of executive officer.

A senior officer of a PCBU commits an offence if:

  1. a worker:
    1. dies in the course of carrying out work for the business or undertaking; or
    2. is injured in the course of carrying out work for the business or undertaking and later dies; and
  2. the senior officer’s conduct causes the death of the worker; and
  3. the senior officer is negligent about cause the death of the worker by the conduct (which can be an act or an omission.

A senior officer (including a director) who commits this offence is exposed to a maximum penalty or 20 years imprisonment.

This offence is a crime.

WH&S prosecution

With a work health and safety prosecution an employer and the individuals involved can expect to be questioned by a WH&S inspector.

Workers also have duties under the Work Health and Safety Act 2011 (Qld) and can be charged if they fail to comply with their duties.  While at work, a worker must:

  1. take reasonable care for his or her own health and safety;
  2. take reasonable care that his or her acts or omissions do not adversely affect the health and safety of other persons;
  3. comply, so far as the worker is reasonably able, with any reasonable instruction that is given by the PCBU to allow the person to comply with the Work Health and Safety Act 2011 (Qld); and
  4. cooperate with any reasonable policy or procedure of the PCBU relating to health or safety at the workplace that has been notified to workers.

While there may be a tendency might to want to cooperate and speak freely with an investigator, the information volunteered can be used against the individual, unless the individual takes steps to compel the investigator to exercise its coercive powers.

If there is a safety incident, the PCBU is required to notify WH&S.  If an ambulance is called to the scene, the ambulance officer is likely to also notify WH&S.

A PCBU should immediately contact their lawyer to better understand its rights and responsibilities.

Generally speaking there are three ways, a prosecution can be responded to:

  1. defend the prosecution – if the employer has a reasonable defence;
  2. enter an early guilty plea – if the employer does not have a reasonable defence; or
  3. enter into an enforceable undertaking – this will generally require the employer to spend approximately three times the expected fine and any money spent on improving safety matters before the undertaking is entered into will not form part of the undertaking.

Workers compensation

If there is a work health and safety incident involving an employee, it is likely to also result in a workers compensation claim.

If WorkCover Queensland accepts the claim, WorkCover will appoint one of its panel lawyers. From the time WorkCover accepts the claim, the PCBU loses control of the matter.

Workers compensation insurance covers a statutory claim and a common law claim, if it proceeds to a common law claim.

It is vitally important that all employers take out and maintain suitable workers compensation insurance.

If the injured worker is an independent contractor, it is vitally important that the PCBU has adequate public liability insurance.

Where multiple parties are involved in a safety incident, there will usually be an allocation of risk. Typically, proportionate liability will be shared by those causing or contributing to the relevant claim.

Contact Information

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