Australia: Employment law risk: three part series: Part 2 - What obligations and risks do directors have, and how can they be managed?

Last Updated: 18 August 2016
Article by Tiffany Campbell
Most Read Contributor in Australia, September 2017

Last week in our Employment Law Risk Three Part Series, we wrote about the obligations directors have pursuant to the Fair Work Act 2009 (Cth) (FW Act) and provided suggestions for practical steps that directors can take to manage the risks under the FW Act.

Given other employment laws can impose personal liability on directors, we will spend this week concentrating on the obligations directors have under Work Health and Safety legislation. Next week, we will tie our Employment Law Risk Series off with directors' obligations under taxation legislation.

Work Health and Safety legislation

Under the harmonised work health and safety legislation in force in all States (except WA) and Territories (the Harmonised WHS Acts) and the similar occupational health and safety legislation in force in Victoria (the OHS Act), additional obligations are placed on 'Officers', which as we will see, can include directors.

An 'Officer' under both the Harmonised WHS Acts and the OHS Act has the same definition as in section 9 of the Corporations Act 2001 (Cth) and this definition includes a person who has the capacity to significantly affect the financial standing of the relevant business, such as a director or secretary of a corporation.

Under the Harmonised WHS Acts, an Officer of a business must exercise due diligence to ensure that the business complies with its duties and/or obligations under the WHS Acts.

Due diligence is defined to include taking reasonable steps to:

  1. acquire and keep up-to-date knowledge of work health and safety matters;
  2. gain an understanding of the nature of the business' operations, and generally of the hazards and risks associated with those operations;
  3. ensure that the business 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 business;
  4. ensure that the business has appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely way to that information;
  5. ensure that the business has, and implements, processes for complying with any duty or obligation of the business under the Harmonised WHS Acts (for example, consulting with workers and ensuring provision of training and instruction to workers); and
  6. verify that the above-required resources and processes are being provided and used in the business.

In Victoria, Officers are potentially liable if the business they work for contravenes a provision of the OHS Act and the contravention is attributable to the Officer failing to take reasonable care. In determining whether an Officer has failed to take reasonable care, regard must be had to:

  1. what the Officer knew about the matter/contravention concerned; and
  2. the extent of the Officer's ability to make, or participate in the making of, decisions that affect the business in relation to the matter/contravention concerned.

So what can directors do to avoid liability in this space?

What might constitute due diligence in one business may not be enough in another. The extent of due diligence required will depend on things such as the nature of the business and its size.

Officers may, in certain circumstances, meet the due diligence requirements by proper reliance on information from, and activities of others (such as Work Health and Safety Officers), but this may still require more direct involvement in health and safety management and governance in other respects.

Officers should seek advice on how to comply with their due diligence obligations under the relevant WHS Act or OHS Act which may be applicable to your particular business.

At a minimum, however, directors should consider implementing the following in order to take steps towards meeting their due diligence obligations:

Training and industry updates

Every director should understand how the Harmonised WHS Acts and/or OHS Act (as well as the supporting regulations and codes of practice) operate, what obligations they impose on the director and their business, and how businesses are expected to meet those obligations.

Tailored external training is often an effective start to understanding WHS/OHS obligations.

Directors and boards should also ensure that they receive up-to-date workplace health and safety industry updates. For example, Workplace Health and Safety Queensland frequently issues safety alerts regarding key risks and hazards for equipment, workplaces or work situations.

Consideration of Work Health and Safety matters at board meetings (and, if possible, implement a Work Health and Safety Board Committee that meets more frequently)

Board papers should include an agenda item relating to work health and safety, to allow directors to regularly consider health and safety matters, and any steps necessary to address these issues in their business.

Directors should also be made aware of any incidents, hazards and risks as and when they happen, to enable adequate consideration through a committee or at the next board meeting. There should be adequate reporting and escalation procedures in place in your business.

Ensuring adequate budget resources for work health and safety matters

Higher risk industries such as construction and mining, and businesses with a workforce engaged in considerable physical labour, in particular, should ensure that adequate budget resources are allocated to address work health and safety matters, including:

  • thorough hazard and risk assessments of business/work processes (for example, through Job Safety and Environment Analyses);
  • development and implementation of safe methods of work and a safety management system (such as written policies and procedures or Take-Fives);
  • provision of any necessary external or on-the-job training to workers regarding aspects of their particular job, and their work health and safety obligations;
  • regular toolbox meetings to discuss any WHS/OHS issues on site and adequate training of staff; and
  • maintaining and, where necessary, upgrading infrastructure, PPE and/or equipment.

Implement at least annual audits of policies, procedures and practices.

This ensures that work health and safety documents provided to employees are up-to-date, accurate, and continue to meet the needs of your business.

If you would like the benefit of Holding Redlich's experience in order to:

  • understand further your Work Health and Safety obligations as a director;
  • ensure key Work Health and Safety policies and procedures are in place in the business; and
  • ensure your business has robust audit and review systems in place,

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Tiffany Campbell
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