The decision in Inspector James v Paul (No 2) NSWIRComm 117 (5 September 2011) (James) has confirmed that company directors cannot rely upon their apparent remoteness from the day to day operations of their business to avoid liability for an occupational health and safety (OHS) incident.
On 3 July 2006 an employee of Deckorform Pty Ltd (Deckorform) died of serious injuries sustained after a machine he had been operating malfunctioned.
WorkCover NSW found that, at the time of the incident, the machine had been operated without a number of safeguards which, had they been in place, would have prevented the incident.
Deckorform and its director, Mr Robert Paul, were charged and pleaded guilty to breaching sections 8(1) and 26 of the Occupational Health and Safety Act 2000 (NSW) respectively.
Original decision – NSWIRC
In the first instance, Justice Marks of the NSW Industrial Relations Commission acknowledged that the incident involved a ‘most serious breach of the Act’ and occurred in a workplace that was ‘defective and manifestly unsafe’. His Honour also found that plant and equipment at the worksite was being operated by workers who were not competent to operate them safely or to undertake necessary safety audits of the machinery.
Notwithstanding these considerations, and despite recognising that Mr Paul had ultimate responsibility for implementing and ensuring compliance with OHS standards, his Honour dismissed the charges against Mr Paul on the basis that he was too ‘remote’ from the day to day operations of the business.
Appeal before the NSW Industrial Court
The decision of the Commission was appealed by WorkCover NSW to the NSW Industrial Court (Court) on the basis that Justice Marks had underrated Mr Paul’s role in the management of Deckorform.
The Court stated that it was commonplace for directors to be remote from the day to day operations of businesses and that Justice Marks had erred in giving this factor weight.
The Court confirmed that while a director cannot necessarily be expected to have a detailed awareness of the day to day activities of the businesses they manage, Mr Paul, as director, was ultimately responsible for the OHS standards of the business, including ensuring that risk assessments of machinery were undertaken by appropriately trained staff.
Importantly, Mr Paul’s OHS responsibilities were not reduced even though he:
- relied upon local management to attend to the day to day operations of the business; and
- did not have a detailed awareness of Deckorform’s day to day operations.
Accordingly, the Court upheld the appeal and fined Mr Paul $15,000.
The decision in James confirms that company directors cannot avoid their OHS responsibilities by arguing that they are too removed from day to day operations to ensure safe systems of work. Ultimate responsibility and liability for safe systems of work will vest with company directors and officers. Therefore, directors and officers should ensure that safe systems of work are implemented and maintained by competent staff in accordance with relevant standards.
New statutory obligations to exercise due diligence in relation to OHS
On 1 January 2012, the Work Health and Safety Act 2011 (Qld) (Act) commenced in Queensland. The Act now imposes a positive obligation on directors and officers to exercise due diligence in relation to OHS matters. Due diligence requires that directors and officers:
- acquire knowledge and keep up to date on OHS matters;
- understand the nature and operations of the trade, business or undertaking of their company and associated risks;
- ensure that appropriate resources are available and utilised by the company to eliminate or minimise hazards from such operations;
- ensure that the company has processes for receiving and considering information about incidents and hazards, and responding to them in a timely manner; and
- ensure that the company has, and implements, appropriate processes for complying with its relevant duties and obligations.
Failure to exercise due diligence can result in heavy financial penalties against directors and officers and in some cases can result in imprisonment.
It is important that all company directors and officers are aware of their new obligations under the Act.
Please contact Belinda Winter or Luke Keane of Cooper Grace Ward Lawyers should you wish to know more about directors’ and officers’ OHS responsibilities.
We will discuss this issue in more detail at our Employment basics for small to medium enterprises on 13 March 2012. Click here to register to attend.