New Zealand: Across the ditch – Resignations from director/officer roles in response to new WHS laws

New Zealand has adopted Australia's model work health and safety (WHS) laws (with minor changes). The Health and Safety at Work Act 2015 (NZ) (HSWA) commences on 4 April 2016.1 The response of business to the HSWA provides us with some important reminders about key aspects of the Australian model WHS legislation.

Early reaction suggests that corporate New Zealand (NZ), and in particular its directors and officers, are taking the new laws very seriously, particularly in relation to personal liability. For example, Sir Peter Jackson has resigned as a director of Weta Workshop, the Wellington design company in which he owns a major stake and has worked with on many of his best known films, including The Lord of the Rings trilogy. The resignation was reportedly in direct response to the new WHS laws.2

By contrast, some of Australia's directors and officers found it hard to believe they could be personally liable under WHS laws for some time. Early disbelief by Australian Boards and very senior executives that they had personal WHS liability has been replaced, three years into the new laws, with an acceptance that they must be 'safety literate'. This means they need to be able to sign off, on an informed basis, on safety initiatives and robustly interrogate their executives about safety – in much the same way that they must be financially literate in order to sign off on financial matters.

As in Australia, NZ directors and other officers are required to ensure that the 'person conducting the business or undertaking' (PCBU) for which they are a director or other officer, complies with its WHS duty. So for example, if John Smith is a director of ABC Pty Ltd, then John Smith must exercise due diligence to ensure that ABC Pty Ltd fulfills its WHS duty. Due diligence is defined to include taking reasonable steps in six specific areas including:

  1. Acquire - to acquire and keep up-to-date knowledge of work health and safety matters; and
  2. Understand - to 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; and
  3. Provide Resources and Processes - to ensure that the PCBU has available for use, and uses, appropriate resources and processes to eliminate or minimise risks to health and safety from work carried out as part of the conduct of the business or undertaking; and
  4. Monitor - to ensure that the PCBU has appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely way to that information; and
  5. Comply - to ensure that the PCBU has, and implements, processes for complying with any duty or obligation of the person conducting the business or undertaking under the HSWA; and
  6. Verify - to verify the provision and use of the resources and processes referred to in paragraphs 3-5 above.

Breach of the officer's duty attracts a maximum penalty of NZ$600,000 and/or imprisonment of up to five years.

Interestingly, the NZ Institute of Directors chief executive Simon Arcus is reported as saying that Peter Jackson has made an "excellent, considered choice" and "the sleeping director had obviously looked into what the legislative changes were going to be...the age of the sleeping director is absolutely dead and this reinforces the need for directors to be across all aspects of their role, with health and safety being a key consideration".3

It would seem that in NZ, as in Australia, it has been difficult to convey the fact that although directors/officers do indeed have personal WHS duties, those duties are WHS corporate governance duties and they are not 'hands on' WHS duties. The WHS officer's duty is very much about:

  • receiving reliable and accurate information about the adequacy of WHS systems and resources;
  • acting on reliable advice about what needs to be done in relation to those systems;
  • then verifying that action has been taken.

In the same way that directors/officers need to be financially literate and make financial decisions, they are also required to be safety literate and make decisions (informed by experts) about safety investment and related issues. However, just as officers with financial accountability are not required to "do the accounts", officers are not required to perform hands-on safety roles – although they may be required to ensure that such roles are adequately resourced.

Recognising these features of the director/officer's duty, Michael Woodhouse, the NZ Minister for Workplace Relations and Safety has said: "any suggestion that directors need to resign because of new requirements under the new Health and Safety at Work Act is an unnecessary overreaction".4

The relatively low rate of officer prosecution in Australia during the first three years of operation of the model WHS laws suggests that Minister Woodhouse is correct, and certainly, those Australian officers who actively engage in compliance with their WHS duty appear relatively comfortable with the duty.

There is little doubt that in Australia the model WHS laws have had a significant impact on investment in safety, with Boards and senior executives engaged in training about their personal WHS duties and liabilities as well as those of their PCBU's – most medium to large organisations developed and implemented 'due diligence' frameworks to help facilitate their officers' compliance with the officer's duty under the WHS Act.

Those due diligence frameworks vary from the very prescriptive (that is, defining the actions required by officers against compliance schedules), to the more laissez-faire (that is, providing guidance about how to fulfil the officer's duty and relying on a high degree of individual officer input and responsibility for their compliance). This new-found safety literacy has in turn led to an increased interest in the concept of 'safety culture' by officers who are seeking ways to measure safety culture, and identify deficiencies in it so that rectification action can be undertaken. There is an emerging recognition that 'safety culture' can operate as a safety hazard or a safety enabler and, therefore, has to be proactively managed.

NZ has tightened up the definition of "officer" under its legislation having learnt from Australia's difficulty in identifying who is included within that term. In Australia, this difficulty has meant that from a practical perspective, those that sit on the cusp of the officer definition tend to be asked by their organisations to comply with the officer's duty. There are some concerns that the question of 'who is an officer' will be relevant if the WHS regulator is considering a prosecution. In order to deal with this issue, some commentators have suggested the Australian legislation be amended to provide that a person, who would not otherwise be an officer under the WHS laws, does not make themselves an officer simply by complying with the officer's duty.

Generally, our experience suggests a growing acceptance of officer liability and a belief that the due diligence provisions have created an increased focus on health and safety with the potential to achieve improved outcomes in the workplace. It will be interesting to test the position of corporate NZ and its directors/officers after the new HSWA has been in operation for three years.

Footnotes

1 See: http://www.business.govt.nz/worksafe/hswa
2 3NewsNZ, 'Sir Peter Jackson Resigns as Weta Director', 18 January 2016, at: http://www.3news.co.nz/business/sir-peter-jackson-resigns-as-weta-director-2016011816#axzz3xpGACqmc
3 See: http://www.stuff.co.nz/business/75986534/health-and-safety-legislation-sees-peter-jackson-resign-as-weta-workshop-director
4Ibid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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