New OH&S obligations of Directors and Officers

On 1 January 2012 the new Work Health and Safety Act 2011 (Cth) will come into effect along with similar legislation which is expected to come into effect next year in all States and Territories, except Victoria and Western Australia, as part of the system of nationally harmonised occupational health and safety laws. Under this legislation, directors and officers will have significantly expanded obligations and liability regarding occupational health and safety.

What are the changes?

Directors and management are no longer only deemed to be liable for the breaches of a corporation or other entity in certain circumstances. Instead, now all "officers" (as defined in the Corporations Act 2001 Cth) have a positive duty to exercise due diligence to ensure that the entity complies with the health and safety obligations under the legislation. Importantly, even in the absence of a breach by the entity, an officer may still be convicted for a breach of the officer's obligation to exercise due diligence to ensure that the entity complies with its obligations.

Who is affected?

Anyone who falls under the definition of "officer" as defined in section 9 of the Corporations Act 2001 Cth, including:

• Directors and Company Secretaries;
• Corporate decision-makers who make (or participate in making) decisions which affect the whole or a substantial part of the business of the entity; who have the capacity to "significantly affect the entity's standing" or whose instructions or wishes are usually followed by the directors (excluding professional advisors); and
• Liquidators, receivers and administrators.

The definition of "officer" is likely to include non-executive directors, chief executive officers, chief financial officers and in some cases, general counsel, human resources directors and others involved in decisions relating significant investments or projects.

What does "due diligence" mean?

The concept includes (but is not limited to) taking reasonable steps:

• to acquire and keep up-to-date knowledge of OH&S;
• to understand the business and the hazards and risks associated with it;
• to ensure the business has available for use, and uses, appropriate resources and processes for complying with OH&S duties;
• to ensure the business has processes for receiving and considering information regarding incidents, hazards and risks and responses in a timely way; and
• to ensure the business has and implements processes for complying with OH&S duties.

Each officer described above should be prepared to demonstrate that they have personally made enquiries about the above matters in their area of responsibility and taken steps to address any gaps arising from their enquiries. These duties are non-delegable duties. A failure to comply with these duties can result in significant penalties of up to $600,000 per officer or 5 years imprisonment. Organisations that fail to comply with their health and safety obligations face penalties of up to $3,000,000.

What needs to be done now?

Organisations should identify who is an "officer" under the legislation in their business. There should then be an examination of the organisational structure, company constitution, each senior manager's role, scope of duties and degree of influence over decisions. Once those officers have been identified, steps should be taken to:

• train them about their new obligations under the legislation;
• ensure that they have ascertained and that they understand the hazards and risks associated with their area of the business or undertaking and have procedures or systems to address them or plans to do so which are being implemented;
• review what information they receive about health and safety issues in their area of responsibility, whether they receive that information in a meaningful format, what they do with the information in it and how they update their information;
• check there are adequate procedures for appointing the experts who report to them on safety matters and verifying their expertise on an ongoing basis;
• examine the formal structures in their area of responsibility (including the existence of safety committees and structured incident and hazard/risk reporting systems);
• ensure there is a process (which is followed) so that incidents, hazards and risks are responded to appropriately;
• ensure there is a system for verification and that the processes and systems that are in place are working, such as regular health and safety audits of the relevant areas; and
• document the steps taken by the individual referred to above.