A new report on the findings of the 2018 review into the model WHS laws has been released, and contains recommendations with significant potential implications for directors.
Safe Work Australia was asked to review the content and operation of the model WHS laws in 2018 to meet the government’s commitment to review the laws regularly to ensure they continue to operate effectively. Marie Boland was appointed as the independent expert to head up the inquiry.
Boland found that the model WHS laws are largely operating as intended, but identified a number of areas for improvement. The report made 34 recommendations in total, including, notably, that the model WHS Act be amended to prohibit access to insurance for payment of WHS fines, to create a new offence of industrial manslaughter and to provide that a duty holder commits a ‘Category 1 offence’ (being one of the main, most serious, categories of criminal offences under the model WHS laws) if they are grossly negligent in exposing an individual to a risk of serious harm or death.
Consistent feedback was received during the review that discussions about WHS have been elevated to the boardroom, and that safety issues are being considered alongside other due diligence requirements. An AICD director tool that provides further background on WHS and directors’ duties can be accessed here.
The report recommendations will be subject to a regulation impact statement process before relevant Commonwealth, State and Territory ministers respond later this year.
Overall assessment of the laws
Boland found that the model WHS laws are largely operating as intended. While harmonisation of the laws is an ambitious objective, she states, it has largely been achieved and remains strongly supported. The Governments of Victoria and WA (the only states yet to implement the model laws) have been urged to adopt the model laws as a matter of urgency and other jurisdictions to minimise variations.
On duties of care, Boland found that “the duties framework is generally understood, settling in people’s understanding and working well… and there is a general view that key definitions are sufficiently flexible to encompass changing work arrangements, emerging industries and new business models”.
In particular, Boland noted that the positive duty that is placed on officers of organisations to exercise due diligence to ensure their organisations meet their duties of care under the model WHS Act was highlighted throughout the review as one of the key successes of the model WHS laws.
The report observes that “across the diverse range of individuals and groups, it was reported that the introduction of due diligence requirements for officers has placed accountability for management of WHS at the appropriate level within organisations. I received consistent feedback that discussions about WHS have been brought into the boardroom and that safety issues are being considered alongside other corporations’ due diligence requirements”.
Prohibiting access to insurance for payment of WHS fines
Boland found that insurance policies which cover the fines of those found guilty of breaching WHS laws have the potential to reduce compliance with the laws and undermine community confidence.
The ultimate objective of a prohibition on insurance would be to ensure greater compliance by ensuring that monetary penalties act as an effective deterrent, and are not nullified by being paid through insurance coverage or an indemnity.
Boland stressed that she is not suggesting that companies and officers should be precluded from accessing insurance or indemnity for legal costs incurred in defending a prosecution and that “this is purely about insurance for the payment of the penalties where there are court findings that the model WHS laws have been breached”.
The AICD has previously expressed a strong view that D&O insurance plays a fundamental role in WHS matters, and that any proposed changes to the availability of insurance would need to be approached with an abundance of caution. In the case of WHS, there is the possibility that an individual can be held liable because of their role with a company, for example directorship, without the need for some culpability to be established – this makes the availability of insurance crucial.
We have also argued that the common law already adopts a carefully balanced approach to cases involving an insured seeking to claim under a policy with respect to their alleged criminal liability and, indeed, that there are benefits associated with insurers being involved in WHS matters because they take a proactive role with customers to assist with preventative WHS initiatives.
We will continue to engage closely on this issue and will consult with stakeholders further as the recommendations are considered.
The introduction of new offences of industrial manslaughter and gross negligence
Contraventions of the model WHS laws are generally criminal offences. As Boland notes, this reflects the broad community view that any person who has a work-related duty of care but does not observe that duty should be liable to a criminal sanction for placing another person’s health and safety at risk.
The model WHS Act provides for three categories of offence for failure to comply with a health and safety duty. Category 1 offences relate to the most serious cases of noncompliance, involving recklessness in exposing an individual, to whom a duty of care is owed, to the risk of death, serious illness or injury.
Boland noted that there have been very few successful Category 1 prosecutions, potentially due to the difficulties associated with proving ‘recklessness’ (given recklessness requires the prosecution to prove a conscious choice to take an unjustified risk).
Accordingly, Boland recommended the inclusion of 'gross negligence' for category 1 offences, noting that it will add an extra deterrent to the model WHS laws and assist prosecutors to secure convictions for the most egregious breaches.
Notably, Queensland has recently seen its first Category 1 conviction, with Multi-Run Roofing Pty Ltd being fined $1 million and a director sentenced to 12 months’ imprisonment (to be suspended after four months) after being found guilty of engaging in reckless conduct (a Category 1 offence under the Work Health and Safety Act 2011 (Qld)).
Boland also recommended amending the model law to provide for a new offence of industrial manslaughter, where the outcome of gross negligence by duty holders is the death of a person covered by the model WHS laws. Boland considered that a new offence is required to address increasing community concerns that there should be a separate industrial manslaughter offence where there is a gross deviation from a reasonable standard of care that leads to workplace death. While it is possible for individuals and corporations to be held liable for manslaughter under existing state criminal laws, Boland noted that there are limitations to the criminal law when dealing with breaches of WHS duties (for example, she points to the views of legal experts that there are significant hurdles for prosecutors to overcome to secure a manslaughter conviction against a corporation, including because they must identify a grossly negligent individual who is the embodiment of the company and whose conduct and state of mind may be attributed to it).
Notably, Queensland and the ACT have already introduced industrial manslaughter provisions, with other jurisdictions considering it (for example, the Victorian government has indicated that it intends to introduce workplace manslaughter laws into parliament this year). Boland emphasises that the proposed new offence also aims to enhance and maintain harmonisation of the WHS laws.
According to Safe Work Australia figures, as at 21 March, there have been 30 Australian workers killed at work in 2019. In 2018, the preliminary data from Safe Work Australia shows there were 157 Australian workers killed at work, compared with 190 workers in 2017 .
Increase in penalties
Boland has recommended amending the penalty levels in the model WHS Act to reflect increases in consumer price index and in the value of penalty units in participating jurisdictions since 2011, and reviewing the increased penalty levels as part of future reviews of the laws to ensure they remain effective and appropriate.
Currently, the penalties for offences under the model WHS Act are described in monetary amounts rather than penalty units (because it was considered less confusing to adopt a monetary figure given the jurisdictional differences in penalty unit levels and potential for further variations to occur over time). This has meant that penalties have remained at the same level despite inflation and increases in the value of penalty units across participating jurisdictions (notably, the Queensland Act uses penalty units instead).
Boland also noted a submission which highlighted that the penalty for a Category 1 offence of $3 million for a body corporate would now be over $5.5 million if the penalty was instead expressed as penalty units and indexed to the Commonwealth penalty unit value (although, as Boland observes, penalty unit values have not increased in all jurisdictions by the same percentage as the Commonwealth penalty unit).
The Boland review highlights the ongoing need for directors to prioritise oversight of WHS matters, and the likely increase in personal liability risk should some of the key recommendations be implemented.
The report recommendations will now be subject to a regulation impact statement process undertaken by Safe Work Australia before relevant Commonwealth, State and Territory ministers respond later this year.
This will commence in the coming months with the release of a consultation regulation impact statement and call for submissions.
The AICD will continue to engage closely on these issues and will keep members updated.
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