The Health and Safety at Work Act: Just how exposed are the officers?

WorkSafe NZ has been busy prosecuting businesses. But how exposed will officers be in the new health and safety environment?

As I’m sure you know by now, the Health and Safety at Work Act is the legacy of the Pike River mining disaster. The Royal Commission of Inquiry into the tragedy identified a number of failings on the part of the company’s directors and chief executive, yet no-one seemed to be held to account for those failings.

The new Act clarifies the role of “officers” in ensuring the Person Conducting a Business or Undertaking (PCBU) is fulfilling its duty to keep people safe from its activities.

Remember, the PCBU is any entity that creates a workplace. It can do that by directly employing someone, or contracting people to do the work on their behalf. The PCBU can be not-for-profit – such as a council or charity – or a commercial entity.

The PCBU must ensure, amongst other things, that the people it retains to do the required work are competent to perform that work safely.

You will appreciate that it is people that breathe life into a legal entity, whether the entity is a sole trader or a large business. Some people have particular responsibilities to ensure the PCBU is doing what it is supposed to. The Act calls those people “officers”, and defines them as anyone in a governance role or exercising significant influence over the business, such as a chief executive.

So how can officers check – and be confident – that the PCBU is doing what it is supposed to?

The Act says they must do their “due diligence”. In other words, the officers need to know enough about the business they are in charge of to understand the hazards and risks. With that understanding, they need to allocate an appropriate budget to manage the risks, and make sure that the controls are being applied. They need to foster a culture that actively encourages prompt reporting of hazards and near misses, as well as accidents. They also need to verify the systems and processes are working to keep people safe.

Peter Jackson, the celebrated director of The Lord of the Rings, recently resigned his position as a director of Weta Workshop, saying he didn’t feel he was involved enough to be able to discharge his duties under the new Act.

But New Zealand, as a nation of small businesses, has many silent directors. Remember Gloria Davis, director of the company that operated the Easy Rider? When it sank in 2012, claiming eight lives including her partner’s, she was held partly responsible for not stopping the boat from operating without a qualified skipper. Her takeout from the ordeal was a plea to people to think carefully about taking on the responsibilities of a director, because there are very real consequences for failing to take it seriously.

S151 (2g) of the Act instructs the court to look at a person’s ability and capacity to pay a fine, for the purpose of increasing the fine. Putting assets in trust is unlikely to protect them. A far better way of protecting yourself from big fines is to be an active officer. The Institute of Directors also recommends independent audits to confirm your systems are working as they should.

Good governance demands due diligence to understand and manage the risks. The Pike River inquiry showed how important it is for directors to get out of the board room, to not take the chief executive’s word for everything. The age of figurehead directors is coming to an end.

Accidents do happen. The PCBU can be prosecuted for failing to do all that is reasonably practicable to keep workers (and others) safe. But if the officers can show that they have been conducting ongoing due diligence, they can escape the big penalties.

Shelley Major is a chartered director of the Institute of Directors and Fellow of the HR Institute of NZ. She is the managing director of Major Consulting Group which specialises in helping businesses to understand and meet their obligations under the Health and Safety at Work Act 2015.

This article was first published as an editorial in the Waikato Business News in March 2016.

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