Institute of Directors’ Good Governance Guide: demystifying due diligence
The Institute of Directors and WorkSafe recently released a Good Governance for Directors guide, which updates the 2013 Good Governance Practices Guideline to ensure that its recommendations are in accordance with the Health and Safety at Work Act 2015 (HSWA). In order to challenge the notion that directors are “expected to be experts”, the guide aims to provide practical steps for director’s obligations under the HSWA by comparing it to “any other aspect of governance”, such as managing financial or reputational risk.
After briefly detailing the legislative changes, the guide divides the new obligation into four categories:
- policy and planning;
- monitoring; and
The guide stresses the importance of ensuring that health and safety policy is fit-for-purpose, and that any recommendations given are tailored to suit an organisation’s resources, culture and risk profile – particularly important in terms of establishing a strong reporting culture to ensure that directors are fully aware of whether the organisation is meeting its health and safety obligations.
In order to foster this culture, directors should ‘welcome bad news’, ensure that investigations are not about apportioning blame, and require that the board is reviewing data on the full complement of health and safety issues, including near-misses and absence rates due to sickness, not just incidents. The Institute warns against implementing ‘zero harm’ policies, which, although aspirational, may increase the likelihood of cover-ups within organisations that do not already have a strong reporting culture.
As well as developing fit-for-purpose policy, the guide drives home the idea that due diligence goes beyond merely having good policy and systems in place and directors will need to hold management to account for effective implementation of those systems, ensuring these are regularly tested through internal and external audits.
WorkSafe turns two; some teething problems remain
WorkSafe turned two at the end of last year, and recently appeared before the Transport and Industrial Relations Select Committee for its 2014/15 annual review.
It seems to have been keeping busy ahead of 4 April 2016, when the HSWA comes into effect and is working with MBIE to develop regulations, codes of practice and guidance material to assist workplaces in meeting their obligations under the new Act.
Over the past three years, workplace fatalities have decreased by 15.8 per cent, putting the Government in a good position to meet its (arguably modest) 2016 target of a 10 per cent reduction in workplace fatalities, serious injuries, and injuries that require more than one week off work.
While prosecutions, both public and private, have been effective in improving safety within the forestry sector, other sectors remain prominent in workplace fatalities statistics, particularly agriculture which continues to account for nearly half of annual workplace fatalities.
While the Council of Trade Unions last year praised WorkSafe for increasing enforcement, the number of prosecutions brought by the agency has in fact decreased. When pressed on those figures, WorkSafe explained that it does not believe a prosecution-based approach would work in the agriculture sector, which is a more diverse industry than forestry (an approach which concerned some members of the Committee).
WorkSafe is developing a best practice guide to assist inspectors in deciding which cases warrant further action, but is continuing to focus on a three-pronged attack of engagement (through initiatives such as the Safer Farms programme), education and enforcement.
An ongoing issue is a lack of warranted inspectors and, alarmingly, at least 34 of WorkSafe’s current inspectorate are unwarranted and may have been carrying out unsupervised inspections. WorkSafe explained that this generally only occurs where there is an immediate risk of harm and no warranted inspector is available to investigate. However, unwarranted inspectors are unable to write notices, take any enforcement action, and must leave a workplace if requested.
Elsewhere, WorkSafe has recently discovered that there are around 800 quarries that it has not identified or registered; twice as many as the number of quarries the agency currently has on its books. When the Committee expressed concern that WorkSafe might not have sufficient resources to deal with this influx of quarries, the agency explained that while there is currently only one person “looking for holes in the ground... on Google maps”, and that person can call in others to assist where necessary.
Home detention for director after worker dies in trench collapse
The tragic death of a construction worker in a trench collapse accident has led to the imposition of significant monetary penalties, as well as a sentence of four months’ home detention for one of the company’s directors, having discounted that sentence from a starting point of 12 months’ imprisonment.
Michael Haines died in May 2014 after a trench that had not been properly engineered collapsed burying him under 8 tonnes of soil while he was installing an effluent pipe in a four metre deep trench after a long weekend of rain. One of two directors of the company, who was also present when the trench collapsed and “valiantly” tried to save Mr Haines, pleaded guilty to failing to take all practicable steps while knowing that the action was reasonably likely to cause serious harm.
The case is noteworthy as it is just the second instance of a custodial sentence being imposed against a director under the Health and Safety in Employment Act 1992. The first instance of a custodial sentence, which was covered briefly in the September 2015 Health and Safety Update, involved a four-month sentence of home detention for a director who had been personally involved in an egregious failure to take all practicable steps to prevent harm after accidentally severing a live electrical cable.
In the latest case, Gilbert J noted that the director had no significant assets or any means with which to pay fines or reparations and considered that a community based sentence would not be a sufficient. Instead, His Honour began with a starting point of 12 months’ imprisonment, discounted to four months’ home detention due to an early guilty plea and prior good record.
The company Steelcon Construction Ltd, which entered a guilty plea to less serious charges under section 50, was fined $56,000 and ordered to pay a total of $121,320 in reparation to Mr Haines’ widow, parents and children.
The two cases, combined with recent attempts to obtain manslaughter convictions against on-site directors (also covered in our September update), are indicative of a more aggressive approach by WorkSafe toward director liability. However, that kind of liability is very different to the due diligence obligations of directors which have drawn so much attention in advance of the incoming Health and Safety at Work Act 2015.
Similarly, in the above case, the sentence was at least in part imposed due to his inability to pay a fine. As such, home detention was the “least restrictive outcome appropriate in all circumstances”. Had the director been able to pay a fine, it may well have been the case that no custodial sentence was warranted.
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