Where serious breaches of the Occupational Health and Safety Act 2004 (Vic) (Act) arise from systemic safety failures, WorkSafe Victoria (WorkSafe) is no longer confining its enforcement powers to companies. Recent cases indicate that the prosecutorial focus by WorkSafe following workplace incidents has shifted and this shift is finding support in the courts.
While companies have been steadily exposed to significantly higher penalties for breaches of the Act since it came into force in July 2005, it is the concurrent rising trend to prosecute officers (and individuals more generally) that is causing even more concern.
It appears that, where serious incidents have resulted from systemic safety failures, WorkSafe wants to show the community that it will hold, not only the company, but its directors and officers (and, in some cases, employees with supervisory or management responsibilities) accountable.
Offences under the Act are indictable in nature. Directors and managers need to be aware that prosecutions under these provisions have the potential to result in prolonged court proceedings, significant fines and criminal convictions. Officers are likely to be required to pay any fine from their personal funds and the recording of a criminal conviction can affect an individual’s ability to perform other corporate governance or management roles in the future.
What are your obligations as an officer and individual?
Officer duty
Under section 144 of the Act, an ‘officer’1 is guilty of an offence where the company contravenes the Act and the contravention is attributable to that officer failing to take ‘reasonable care’.2 In considering whether an officer has taken reasonable care the court must have regard to:
- what the officer knew about the matter
- the extent of the officer’s ability to make or influence decisions about the matter
- whether the contravention is attributable to other persons, and
- any other relevant matter.
In some other Australian jurisdictions3 the standard imposed on officers is ‘due diligence’ rather than ‘reasonable care’. However the burden is expressed, there is a general obligation on all officers of a company to exercise care in the management of risks to its employees and other persons affected by the conduct of the company’s business.
Employee duty
Under section 25 of the Act, employees also owe a duty to take reasonable care with respect to the health and safety of themselves and others. This provision can be applied to supervisors or managers who allow the employees working under them to engage in unsafe conduct. What is ‘reasonable care’ will be determined by reference to the role, ability to control and activities of the individual.
Recent prosecutions of officers
Historically, sections 144 and 25 were only used for very serious breaches or tended to be withdrawn during the plea negotiation process. Some practitioners even suggested that they were purely a negotiating starting point for WorkSafe. Whether this is correct, it is clearly no longer the case. We discuss below three recent cases where significant penalties have been imposed on directors for breaching section 144 of the Act. These cases, along with other cases in the last six months4 demonstrate an increasing trend in taking enforcement action against officers following a serious workplace incident.
Jelfor Treated Timbers Pty Ltd
A director of Jelfor Treated Timbers Pty Ltd (Jelfor) was recently fined $80,000 after a Jelfor employee had his arm amputated and suffered a fractured skull as a result of becoming entangled on a timber post that was being drawn into an unguarded machine.
Both Jelfor and the director were considered to be ‘on notice’ by WorkSafe and the court regarding the risk of such injury due to earlier incidents at the site. This knowledge was treated as an aggravating factor during sentencing for the offence.
Jelfor is a small family run business and, given the director’s ‘hands-on’ role in the daily running of the business, when the injury occurred in August 2008 WorkSafe was quick to look at the director as well as the company as being liable.
Both the company and the director pleaded guilty. Jelfor was fined a total $460,000 and entered into an adjourned undertaking while the director was fined a total $80,000. Interestingly, the magistrate directed that three of the four fines ($310,000) be paid to charity.
Orbit Drilling Pty Ltd
The managing director of Orbit Drilling Pty Ltd (Orbit) was fined over $100,000 after an employee was fatally injured when the 22-tonne truck he was driving ran out of control on a steep slope and overturned, crushing him.
The employee was directed to drive the truck in difficult off-road conditions. He had just recently started with Orbit and had only held his heavy vehicle licence for two weeks. It was found that Orbit failed to:
- provide Mr Alford with any information, instruction or training for a complex task requiring significant experience and expertise
- provide adequate supervision of a new and inexperienced employee, and
- provide safe plant (the truck was poorly maintained and known to have defective brakes).
The company was charged with (and pleaded guilty to) breaching section 32 of the Act (‘reckless endangerment’ of a person) and in the first sentence for a breach of this section the court imposed a significant fine of $750,000, again reflective of the seriousness of this offence.
However, Judge Hampel considered these failures to be ‘serious and systemic’ and indicated that the managing director bore ultimate responsibility for ‘the combination of events’ that led to the situation where an untrained, unsupervised and inexperienced driver was directed by his supervisor to drive a poorly maintained heavy vehicle in dangerous conditions.
The managing director was fined $120,000 despite the absence of any evidence to suggest that he had actual knowledge of these facts.
Judge Hampel noted that ‘substantial fines must be imposed to mark that objective seriousness, to denounce that behaviour and to serve as a deterrent to others who think that they can ignore their responsibilities to workers’.
The site supervisor, who directed the deceased to perform the task, has also been prosecuted but has pleaded not guilty and his case is yet to be heard.
Permanent Erection Constructions Pty Ltd
Two directors of Permanent Erection Constructions Pty Ltd (PEC) were each fined $60,000 for breaching sections 21 and 144 of the Act.
This is another case where there appears to have been serious and systemic safety failures within the organisation.
An employee of PEC was fatally injured at a construction site when a partially built floor collapsed due to excessive weight being placed on it. PEC had failed to consult an engineer before commencing work and miscalculated the weight-bearing load on the floor.
PEC was found guilty of breaching section 21 of the Act in relation to the incident, and was fined $350,000.
The directors pleaded not guilty but were unsuccessful in their defence. The court found that the directors should have recognised that PEC did not have the relevant expertise and ensured that an appropriately qualified and experienced engineer was consulted.
This incident followed an earlier incident at the same construction site (for which the directors were also prosecuted and fined) in which a wall collapsed. PEC had failed to seek expert engineering advice on that occasion as well.
Will harmonisation laws affect these duties?
The Model Workplace Health and Safety Act, released by the Federal Government in late 2009 (following the national OHS review process) and expected to come into operation nationally by January 2012, contains both officer and employee provisions.
The officer provision under the Model Act is drafted in more expansive terms than existing officer provisions because it imposes a ‘positive’ duty on officers to exercise due diligence with respect to safety at their organisation. An officer can breach this duty even where there has not been a breach of the Act by the company and there is no risk to health and safety.
This new duty coupled with WorkSafe Victoria’s increased willingness to prosecute individuals means that officers should expect to be a focus of regulators in the future.
What do you need to do?
If you are an officer within your organisation you should ensure that you have a reasonable basis for believing that OHS is adequately attended to by appropriate people, supported by appropriate systems (including training) and properly resourced. If you are not an officer you should raise this issue with the officers within your organisation and encourage them to ensure they are achieving compliance.
Achieving compliance with officer duties will include officers taking positive, informed and proactive steps to:
- understand (and seek information about) the health and safety risks within their business
- ensure adequate risk management systems are in place and implemented, and
- review OHS reporting on a regular basis.
Harmonisation provides an opportunity for businesses to not only review their safety systems but to also review their corporate governance structures and OHS reporting systems to ensure that officers are able to achieve compliance with their obligations.
This article was written by Marissa Dreher, Senior Associate and Kathryn Bion, Solicitor, Melbourne.
Endnotes
- As defined under the Corporations Act 1991 (Cth). Generally speaking, officers should be considered to be directors, executive members and those with the ability to be involved in the making of decisions that affect the whole or a substantial part of the organisation.
- Similar duties of care exist under South Australian, Northern Territory and Western Australian legislation.
- New South Wales, Queensland and Tasmania.
- Sole Director, Miscitti Developments (fatality – concrete panel collapse, $70,000); Director of Hajel Pty Ltd (fatality - inadequate guarding, $65,000); Sole Director of Map Foundation Pty Ltd (t/as Café Vamp) (fatality - bullying, $30,000).
More information
For information regarding possible implications for your business, contact a member of the Occupational Health & Safety team.