A welcome new era
A new era in occupational health and safety (OH&S) regulation may be dawning with the culmination of three recent initiatives.
Firstly, on 4 April 2008 Minister for Employment and Workplace Relations, Julia Gillard, announced a national review of existing OH&S laws by an expert panel. Secondly, through the Council of Australian Governments (COAG), all governments agreed in July 2008 to work cooperatively to establish national uniform OH&S legislation by 2011 (COAG Agreement). In addition, the Minister for Superannuation and Corporate Law, Senator Nick Sherry, has said that the Treasury review of corporate sanctions will examine the trend in legislation other than the Corporations Act to impose personal liability on officers for corporate fault. This is a common feature of OH&S law.
These initiatives are overdue and are a genuinely welcome development for directors. AICD will work to ensure that they result in fairer and more consistent OH&S law. Jurisdictional differences in such an important area as OH&S have no place in a modern economy.
OH&S Law for Directors
The form and substance of OH&S law for duties, defences and penalties for directors differ between states, territory & Commonwealth jurisdictions creating uncertainty for directors. They fail the principled laws test, referred to by our CEO, John Colvin, in his column on p8. Principled laws honour the rule of law, are fair, are proportionate to the wrong being addressed and satisfy a cost/benefit analysis.
These failings are serious matters which undermine the important role of directors in overseeing workplace safety. AICD made these points in its July submission to the panel review, which is summarised in this article. For AICD’s full submission please refer to the Policy and Advocacy section of our website at: www.companydirectors.com.au
The Panel Review
The panel review is guided by the worthy aims of promoting safe workplaces, increasing certainty for duty holders, reducing compliance costs for business and providing greater clarity for regulators without compromising safety outcomes. This is a good start because these aims are consistent with AICD’s requirement for principled laws.
The panel will review OH&S legislation in each state, territory and Commonwealth jurisdiction and make recommendations on the optimal structure and content of a model OH&S Act capable of being adopted in all jurisdictions. The model law will consist of a model principal OH&S Act, supported by model regulations and model codes of practice that can be adopted in each jurisdiction. AICD supports this approach and calls for the model law to be complemented by a nationally consistent approach to compliance and enforcement policy. National uniformity in this regard will benefit employers, employees and serve the national interest.
However, AICD has two concerns about this potential approach in practice. Firstly, the COAG Agreement requires each jurisdiction to enact their own laws that mirror the model laws “as far as possible” having regard to their drafting protocols. Also, new provisions can be added provided they do not materially affect the operation of the model law. In practice, either of these approaches could undermine the objective of national uniformity. AICD strongly believes there is no room in OH&S law for fundamental jurisdictional differences.
AICD’s Views
AICD’s submission is based on a few but important principles.
Laws governing the workplace need to be stringent with appropriate penalties. They must be principled laws – fair, balanced and consistent. They must recognise the mutuality of obligation between employers and employees in creating safe workplaces. The focus must be on prevention, not punishment which will help to remove the element of industrial conflict in workplace safety. Small and medium sized businesses, which comprise the majority of Australian businesses, must not be disproportionately impacted by the law.
Directors should not be personally liable for a company’s misconduct simply because they are directors. That is because they are not guarantors of company performance. To do so imputes to directors a capacity to control the acts of individuals in companies that does not reflect the way that modern companies work and the practical realities of business. It creates a serious anomaly in the treatment of directors relative to other members of the community.
Most importantly, the law must not abrogate fundamental legal principles by reversing the burden of proof and requiring directors to prove their innocence, which is often a feature of OH&S law. Appeals must be available and there should not be criminal liability (beyond a reasonable doubt) based on civil standard of proof (on the balance of probabilities).
Some of these principles are discussed in further detail below.
Mutuality of Obligations
OH&S must be a shared responsibility between employers and employees based on consultation and cooperation, not an adversarial relationship. The union right of prosecution is inconsistent with these approaches, along with the payment of a moiety to unions for successful prosecution as is the case under the NSW Occupational Health & Safety Act 2000.
OH&S should not be an industrial relations issue but it is an industrial relations portfolio responsibility in some jurisdictions. Perceptionally, this can work against the notion of the shared obligation between employees and employers. It is also inappropriate that industrial relations tribunals have jurisdiction in this area, especially where criminal penalties apply.
Burden of Proof
A reversed burden of proof is at odds with the fundamental, time honoured and internationally recognised principles of natural justice and the availability of a fair trial for every citizen. It is at odds with the principles enshrined in the Universal Declaration of Human Rights, Charter of Human Rights and Responsibilities Act 2006 (Vic) and the Human Rights Act 2004 (ACT).
A reversed burden of proof unfairly discriminates against directors relative to the way in which other citizens are treated under the criminal law. It makes directorship a less attractive pursuit for talented individuals by tipping the personal risk/reward paradigm inequitably toward risk. It can also lead to a focus on compliance in boardroom deliberations to the detriment of more value-adding activities. Both of these outcomes can have a negative impact on shareholder value without necessarily contributing to improved safety outcomes in the workplace.
Personal Liability
Personal liability for directors should not be part of the model law. AICD estimates there are more than 500+ laws that hold directors personally liable for corporate breaches in circumstances where the director may have had no personal involvement in the breach.
The Corporations and Markets Advisory Committee (CAMAC) said that this approach is objectionable in principle and unfairly discriminates against corporate personnel compared with the way in which other citizens are treated under the criminal law. It also ignores the benefits of limited liability model which enables people to take calculated risks through company structures in return for limited personal liability.
An illustration of the unfairness of the automatic liability provision is the Ritchie case where the NSW Industrial Commission found an overseas CEO/director liable for the breaches of the NSW Act. The lesson to be drawn from the case is that the starting point is whether the defendant is a director at all rather than how much practical involvement he or she has in an OH&S matter. With the law so heavily weighted in favour of the prosecution and against the individual, directors simply tend to plead guilty to the charges.
Next Steps?
The review panel will present two reports to the Workplace Relations Ministers Council (October 2008 and January 2009) making recommendations on the optimal structure and content of model OH&S law to be adopted in all jurisdictions.
The debate is already polarised with strong rhetoric from unions and business as to what the model law should look like. As the debate ramps up, AICD will squarely focus on achieving fairer and more balanced and consistent OH&S law for directors. AICD welcomes the new era, which brings with it an opportunity to do so.
Gabrielle Upton is AICD’s legal counsel. She is also a member of the Corporations and Markets Advisory Committee, the Federal Government’s advisory committee on corporations and securities law