Dear  <<First Name>>,

Statutory Liability Focus: WorkSafe New Zealand and extensive health and safety reform
 
Government has tabled draft legislation for consultation in the form of the Health and Safety Reform Bill.  It follows high public awareness of workplace safety, and an Independent Taskforce Report into New Zealand's poor workplace injury record, exemplified by the Pike River Mine disaster and on-going fatalities in high-hazard industries.  The Bill is expected to pass into legislation this year and will impose higher standards on directors and managers.

The Introduction of WorkSafe New Zealand
WorkSafe New Zealand was established in December 2013 to serve as a Crown agency to enforce health and safety legislative compliance.  The new agency replaced the functions of the Health and Safety Group within the Ministry of Business, Innovation and Employment.
 
Government considers this stand-alone agency will streamline engagement between Government, employers and workers on workplace health and safety issues, and lead to improved safety outcomes.  Reducing work-related fatalities is the primary objective & it will also be responsible for oversight of:
• Electricity Act 1992;
• Gas Act 1992; and
• Plumbers, Gasfitters and Drainlayers Act 2006.
 
New standards of care required
It is envisaged that the new Act will introduce a new concept requiring employers to ensure safety of staff where "reasonably practicable".  This is a change from the current requirement that employers take "all practicable steps" to ensure safety.  While it is uncertain that the small change in definition will have any real effect, the current bench mark to ensure ‘all’ steps are taken is onerous.
 
When accidents occur, it is easy in hindsight to conclude something has gone wrong and so “all practicable steps” have not been taken, with Courts importing a standard of what ought to be best practice as opposed to what is the industry accepted "norm".  Time will tell whether the new standard will return the inquiry to that of industry reasonableness.  In the Bill there is also a proposed introduction of a more specific risk-based assessment to help clarify for business what facts should be considered in assessing what is "reasonably practicable”.
 
Directors and Officers – duty holder standards
A new “due diligence” duty is proposed for company officers, directors and senior managers.  It will require those individuals to personally and properly understand the nature of the operations of their business and the specific hazards and risks associated with it.  A positive duty to ensure the business has a process for compliance with those duties will also be imposed.
 
The proposals also intend to allocate more prescriptive duties to those best placed to control risk (whether or not employees).  Each participant in the supply chain will be required to ensure monitoring of the safety of those under them. Duties will extend to employees, contractors and subcontractors, but also designers manufacturers, importers and suppliers who will be defined as "a person conducting a business or undertaking" (PCBU).
 
While the present 1992 Act has duties with respect of these groups (and there have been successful prosecutions of manufacturers of unsafe machinery causing harm), the legislative obligations are poorly understood due to unclear legislative drafting, and the PCBU guidance is likely to be helpful.
 
Penalties
A tiered liability regime has been introduced, featuring harsher penalties, including:
• Category 1 – reckless conduct exposing serious risk of harm or death: This category will involve egregious conduct cases and attract fines up to $3 million for a corporate entity or $600,000 for an individual.  Terms of imprisonment of up to five years will be imposed.
• Category 2 – failing to expose serious risk: This category will capture scenarios where a person fails to comply with their health and safety duties.  Penalties of up to $1.5 million for a body corporate and $300,000 for an individual will be imposed.
• Category 3 – failure of general health and safety duty: A person who fails to comply with their health and safety duty will be liable to a fine of $500,000 as a body corporate or $100,000 if an individual.
 
Under the current law, an offence broadly equivalent to category 1 carries a maximum fine of $500,000 and 2 years imprisonment, while category 2 and 3 carry a maximum fine of $250,000 (most if not all prosecutions in New Zealand have fallen under the provision involving this limit).
 
Under the Bill, the regulator’s tool belt will also include:
 
1. Issuing guidance notes, warnings and making information available;
2. The continued power to enter into workplaces to inform and ensure compliance;
3. Continued ability to issue improvement notices, prohibition notices and taking remedial action if they are not complied with;
4. The ability to accept business undertakings in connection alleged contravention;
5. The ability to issue infringement notices without warnings.
 
With legislative prohibition on insurance for fines (likely to continue under new legislation), there is a real question about whether companies (particularly SMEs) will be able to meet higher fines, and continue solvent, when breaches occur.  Insureds will remain reliant on statutory liability policy benefits to advance defence costs and meet reparation payments.
 
Therefore it is important you are aware what insurance you have in place, how it would respond in the event of a breach of OSH, & whether your policy limits are adequate.   For more information, please feel free to contact myself or Mariana here at the office on 03 548 2211.