Amendments to the Work Health and Safety Act 2011 (Act) were recently passed by the NSW Parliament enacting a package of changes to NSW WHS laws.
The amendments, which came into force on 10 June 2020, give effect to a number of recommendations following Safe Work Australia’s inquiry into the effectiveness of the harmonised model WHS laws by independent expert, Marie Boland (Boland Review).
Significant changes introduced to the Act include:
- lowering the bar from ‘recklessness’ to ‘gross negligence’ for Category 1 offences, being the most serious of non-compliance offences resulting in the risk of death, serious illness or injury of an individual to whom a duty of care is owed;
- increased penalties for breaches of the Act; and
- a new offence for officers and body corporates that enter into any insurance or indemnity arrangements in relation to the payment of monetary penalties for statutory WHS offences after 10 June 2020.
Unlike other States and Territories, the amendments do not include creating an industrial manslaughter offence, with the NSW Government instead opting to include an explanatory note to the legislation to make it clear that work-related manslaughter will be prosecuted under the existing Crimes Act provisions punishable by a maximum penalty of 25 years’ imprisonment.
Lowering the bar for Category 1 offences
Under the amended Category 1 offence, a person conducting a business or undertaking (PCBU) will commit a Category 1 offence if they engage in conduct with ‘gross negligence’ that exposes a worker or other persons to whom a duty is owed to the risk of death, serious injury or illness – where previously, the prosecution had to prove that a PCBU was ‘reckless’ or in other words, had a knowing disregard that their conduct was likely to cause the death of an individual.
Although the Act does not define ‘gross negligence’, the courts have interpreted, and more recently, the Boland Review has endorsed, the threshold to require “such a great falling short of the standard of care which a reasonable man would have exercised and which involved such a risk that death or grievous bodily harm would follow that the doing of the act merited criminal punishment”.
To ensure penalties retain their deterrent value, amendments to the Act introduce a penalty unit system enabling penalties to keep pace with the Consumer Price Index each year. As a result, the maximum fine for a Category 1 offence has increased from $3 million to $3,463,000 and from $600,000 to $692,500 for an officer or an individual who is a PCBU.
These reflect the first increase in maximum penalties under the WHS legislation since the WHS Act commenced in NSW on 1 January 2012.
Prohibition on insurance and indemnity arrangements
The amendments create a new offence of entering into, providing or benefiting from insurance or indemnity arrangements in relation to the payment of penalties incurred under the Act. The offence extends to both the body corporate as well as individual officers where there is evidence of their direct or indirect involvement in the breach.
Importantly, the new offence will apply on a transitional basis. This means an individual or body corporate does not commit an offence for taking the benefit of insurance or indemnity arrangements if:
- those arrangements were in place before the commencement of the Act’s amendments; and
- any payment made under the insurance or indemnity is not in relation to a penalty for an incident that occurred after commencement of the Act’s amendments.
Further, the prohibition on entering into contracts of insurance or arrangements indemnifying defendants for payment of a penalty does not prevent companies from being able to indemnify their officers for payment of legal costs associated with potential WHS breaches or Enforceable Undertakings.
Further notable changes to the Act include:
- a welcome clarification of duties of care in the workplace – including that a contractor or subcontractor in a contractual chain can be both a worker owed a duty by a PCBU further up the supply chain, and a PCBU who owes duties to workers further down the supply chain; and
- an extension to the timeframe in which a person can ask the WHS Regulator to bring a prosecution for a Category 1 or 2 offence, from 12 to 18 months.
Questions for directors
The changes are an important reminder for boards of the important oversight obligations which boards play with respect to WHS. With multiple state jurisdictions moving to impose stricter WHS obligations, now is a good time to review the adequacy of existing arrangements.
Some questions for boards to consider include:
- When was the last time our organisation’s WHS frameworks were independently assessed?
- What evidence can management produce to illustrate a strong WHS culture?
- How often do WHS matters feature on the board agenda and does that need to increase?
- What specific safeguards are in place to ensure that contractors and subcontractors are protected by existing WHS frameworks?
- Do appropriate confidential channels exist for employees to raise WHS concerns (e.g. via whistle-blowing hotlines)?
- Do we have deeds of indemnity to cover legal costs associated with WHS investigations?
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