Towards principled OH&S laws
AICD strongly supports the application of “principled laws” when applied generally to legislation and specifically, when it comes to director liability.
Principled laws refer to legislation based on principles or concepts such as the rule of law, fundamental tenets of a democracy and fairness. Principled laws also mean that a particular law is proportionate to the issue at hand or the particular problem which is sought to be regulated in some manner, and no more. Also, when the legislature is considering any business laws, it should adhere to Government guidelines already in place. These guidelines include the objective of reducing red tape and looking at the cost/benefit of any law before its introduction.
One law that offends this principled law approach is the NSWOccupational Health and Safety Act 2000 (OH&S Act), in particular as it applies to directors’ liability.
That state’s OH&S laws provide a regime of ‘absolute liability’ for offences under the Act subject to only very limited defences. That means that, if there is a workplace incident (an actual or even a threatened injury), an employer is liable unless they can prove their innocence under one of the narrow statutory defences. This approach is adopted in only a few other states, but enforced with unmatched rigour in NSW. Typically in NSW, employers plead guilty to a prosecution brought about by a workplace incident because of the difficulty in defending any such prosecution. The issue then turns to a “plea in mitigation” to reduce the penalty.
Once the employer has pleaded guilty, however, the OH&S Act provides that each relevant company director and “person concerned in the management” is automatically also guilty of the same offence without the necessity for the prosecution to actually prove any guilt. The presumption of innocence, which is a fundamental right in a civilised democracy is taken away and the director must in essence prove his or her innocence by attempting to establish one of the very narrow statutory defences. One of the greatest safeguards of our democracy enshrined in documents like the Universal Declaration of Human Rights, that every citizen should have a fair trial, is set aside in this legislation.
In most civilised societies strict rules are applied as to who can bring prosecutions of this type. For example, in general criminal cases this body might be the Director of Public Prosecutions or in the case of workplace accidents in NSW, WorkCover. Despite the potential for obvious conflicts of interest, however, a trade union may also commence such criminal actions under the OH&S Act. The trade union that brings the action may also keep the spoils resulting from a successful prosecution, a practice that is a direct and immediate conflict of interest. Where else would this situation be tolerated?
The prosecution in NSW is brought before the Industrial Commission, which has its origins in the protection of employee rights. The old maxim that “justice must be done and seen to be done” might bear some scrutiny in the selection of this court or tribunal. Once convicted, a director’s right of appeal is curtailed by statute because the prosecution is heard in the Industrial Commission. This is another extraordinary (and unnecessary) trampling of normal civil rights.
When looked at objectively, the liability of directors under the OH&S Act fails the “principled law test” in several ways:
- Deeming directors to be guilty of an offence and destroying the presumption of innocence. There is no fair trial.
- It allows a trade union to prosecute, without the usual safeguards of prosecutors and with potential and actual conflicts of interests.
- The court or tribunal where these prosecutions are heard severely limits any rights of appeal.
Apart from these fundamental structural flaws from a civil liberties perspective, there are other practical problems with this law. Firstly, it appears these draconian laws do not give any real positive safety outcomes. Secondly, it makes it more difficult to attract directors to sit on boards, particularly start-ups, small to medium companies, charities, or inherently dangerous industries such as mining, construction and certain types of manufacturing. That means the very people who might be knowledgeable in OH&S will be reluctant to take up such positions because of their very knowledge. Everyone loses – employees, safety, the future training of new directors, investors, the economy and so on.
AICD, in its recent submission to the Federal Government’s National Review Into Model Occupational Health and Safety Laws, has put these and other views strongly. The review is a very worthwhile attempt to work co-operatively with the states for uniform OH&S laws in Australia. I refer you to Gabrielle Upton’s article on p68 and the link to the AICD’s submission on our website. AICD supports strong and principled laws in the critical area of safety. All Australians deserve better treatment and there are far better models to follow when it comes to directors’ and managers’ liabilities.
John H C Colvin FAICD
CEO, Australian Institute of Company Directors