All States and Territories of Australia will soon have a new
Work Health and Safety Act (the model Act), which will
place on those governing businesses a duty to take positive steps
to ensure compliance by the business with its health and safety
Barry Sherriff, an Occupational Health & Safety partner
explains due diligence in the context of Occupational Health and
Safety (OHS) risk management and corporate governance in a recent
address to Safety professionals at the Safety in Action conference
in Melbourne. As a member of the government panel that recommended
this area be clarified to assist officers, Barry lends his
experience and insights on this topic and addresses components
necessary for compliance and effective governance:
The model Act adopts the definition of officers found in s9 of
the Corporations Act. This will represent a change in a number of
jurisdictions, which currently have different tests.
This definition will ensure that the focus is on corporate
governance, rather than micro level operational issues. It can,
however, capture directors or managers of a company (e.g. a holding
company or franchisor), on whose directions the directors of
another company (subsidiary or franchisee) are accustomed to
The emphasis is on active involvement in safety by
Officers may currently be liable for offences committed by the
corporation that are attributable to a failure of the officer to
meet a relevant standard (due diligence or reasonable care).
Under the model Act, officers may be liable even in the absence
of a breach by the company, the offence of the officer flowing
directly from the failure of the officer to exercise due diligence
to ensure compliance by the corporation.
The intention of the positive duty is to ensure engagement and
leadership by officers in OHS management, better providing for
sustainability and improvement in OHS performance.
What will officers need to do for due diligence in OHS?
The model Act will, for the first time, define what due
diligence is for OHS. In summary, officers will be required to take
'reasonable steps' to:
inform themselves about OHS hazards, risks and compliance
ensure proper allocation and use of resources and the
availability of policies and procedures to provide for compliance
and hazard management, and
verify that the resources and policies are providing for
effective OHS risk management and compliance.
What should business now be doing to meet the due diligence
Existing corporate governance structures and processes, as they
apply to OHS, may not meet the new due diligence requirements.
Businesses should now review the following essential elements of a
legally compliant governance system:
an appropriate structure, with clear charters and KPIs etc, to
provide for proper communication and accountabilities
effective reporting processes for timely, credible information
ensuring officers are given the right information to meet their
means for ongoing advice and decision making
auditing and other processes for verification of
documentation demonstrating due diligence activities.
Increased penalties for non-compliance by Officers
As part of the review of the OHS regulatory system, penalty
requirements around corporate governance structures and due
diligence have been reviewed, resulting in significantly higher
penalties for officer offences. The maximum penalty for an officer
for a breach of the duty to exercise due diligence will be $600,000
and/or up to five years gaol, where there has been recklessness on
the part of the officer. The maximum penalty for a breach by an
officer without recklessness will be $300,000.
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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