Leading from the top: coalface health, safety obligations at director level

New Zealand’s health and safety regime is about to get the largest shake-up since the controversial Health and Safety in Employment Act 1992 came into force. 

While a raft of changes are proposed, of particular relevance to those at governance level is the recommendation for new duties to be placed on directors and company officers, and the proposed extension of the current criminal offence of manslaughter to corporations.

A number of serious health and safety incidents, the most high profile of which was the Pike River tragedy, led to the appointment of an independent taskforce on Workplace Health and Safety in June last year. 

It was formed to undertake a broad review of New Zealand’s workplace health and safety systems in the first large-scale evaluation for 20 years. 

The taskforce concluded in April this year that the current system is “not fit for purpose” and made a significant number of recommended changes which are being considered by the government.

In particular, it has recommended that the current legislation be replaced with an entirely new Act based on the Australian Model Law (introduced in a number of states from January 2012). 

Specifically, and in line with the Australian Model Law, the taskforce has recommended that a new due diligence duty be created for directors and officers to ensure people conducting the business, and who participate in decision making, play a more active part in health and safety. 

If the taskforce’s recommendations are adopted company officers and directors will need to be actively, and personally, engaged in the health and safety matters of their organisation. 

The key recommended obligations include a requirement that officers and directors:

• Are aware of, and appreciate, the health and safety risks in their organisation.
• Allow adequate resources and systems to deal with health and safety matters.
• Ensure audit and monitoring processes are put in place to guarantee the systems are working and meet legal requirements.

The taskforce considers it is the boardroom that has the influence, power and resources to take initiatives and set expectations and, accordingly, it has recommended that directors’ duties in relation to workplace health and safety be as strong as other fiduciary duties. 

It also recommended that companies be required to report on health and safety practices and performance, in a similar vein to the more general reporting requirements imposed on directors, such as reporting on financial performance. 

In line with the emphasis on greater corporate responsibility for health and safety, the taskforce has also advocated for stronger penalties for breaches of health and safety obligations, including extending the existing criminal manslaughter offence to corporations and revising the corporate liability framework that applies. 

In particular, it recommends that an offence of corporate manslaughter could be found as a result of the acts (and omissions) of a greater range of officers and employees within the organisation, provided they were acting within the scope of their authority. 

It recommends also that liability be attributed to a corporation if two or more individuals engaged in conduct which together made up the components of a manslaughter offence, even if the conduct of each of them  alone would not be sufficient for legal liability. 

This would make it much easier for criminal liability to be found, with, for example, the conduct of one person and the state of mind of another person being combined for the purposes of attributing corporate liability. 

In relation to penalties, the taskforce recommends that these be lifted so they are comparable with Australian levels. 

For example, under the current legislation, offences likely to cause serious harm incur fines of up to $500,000 and/or imprisonment for up to two years. Under the Australian Model Law, reckless conduct by individuals attracts penalties of up to $600,000 and/or five years’ imprisonment, and by a body corporate a penalty of up to $3 million.

The government is giving consideration to the recommendations and it is likely we will soon see how far reaching the changes are likely to be from a corporate governance perspective. 

Regardless of whether all the recommendations are adopted, we can expect that greater participation from the most senior levels of business will be required and senior management will need to be cognisant of their own personal obligations and, therefore, liability. 

Leading from the top on health and safety issues is likely to become, not only a matter of best practice, but one of legal necessity.

Jennifer Mills is a partner at Minter Ellison Rudd Watts, specialising in employment law.