Liability and Risk: Implications of the Harmonized Safety Legislation

An engineering view

The implications of the new model Work Health and Safety Act will forcefully change the way Australian businesses and governments operate. The act is aimed at corporate governance. It requires the most senior decision makers (excepting government ministers) to positively demonstrate due diligence for the safety hazards created by their business or undertaking. The penalties for reckless failure to achieve this duty are criminal in nature (up to five years jail and $600,000 fine)

Philosophically, the act adopts the legal view of causation, which necessarily is hindsight-biased. By their nature, the courts only examine the minority of things that went wrong, not the majority of things that went right. That is, after the event, the fact is certain. This means that, from the court’s viewpoint, prior to the event estimates of rarity for serious loss events were presumably flawed and those who made such estimates are, prima facie, guilty of negligence. Historically, due diligence is the primary defense against common law negligence claims.

The obligation under the act is for officers to positively demonstrate due diligence. This would appear to create potential opportunities and difficulties for engineers.

As an opportunity, it should increase the need for technically competent directors and executives for technologically based businesses and undertakings. The notion of a mining company board comprised exclusively of legal and finance directors who have never been underground, and whose knowledge of science and engineering is insufficient to comprehend the hazards associated with such an undertaking will be eliminated. This should provide greater opportunities for engineers at the most senior levels, as the duty cannot be delegated.

That is, under the act, boards can no longer decide on the best commercial course of action and then delegate the responsibility of safely achieving these outcomes to managers, and health and safety advisers. One of the lawyers who helped draft the act has been reported as saying that, if board members cannot positively demonstrate that safety due diligence has been achieved in their company’s operations, then the intention of the act is the company should not be in business. How such an idea might be applied to government departments is perplexing.

Liability: Risk and Liability Balance

The due diligence approach focuses on events that maim, kill or cause serious damage and tests to see if all sensible, practicable precautions are in place, based on the balance of the significance of the risks versus the effort required to reduce them.

This need for due to diligence requires a paradigm shift in the way risk management has typically been conducted in Australia. As shown in the table, the traditional approach described in the risk management standard AS/NZS ISO 31000 has been to identify hazards, analyze them and then evaluate them by comparison to risk criteria. If the criteria are not satisfied, then risk treatments are applied until the criteria are achieved.

The due diligence approach specifically rejects this method. It does not care about small issues that never get to court. It focuses on events that maim or kill or cause serious damage and test to see if all sensible practicable precautions are in place, based on the balance of the significance of the risk versus the effort required to reduce them.

Such an approach means that post event legal review of formally documented, qualified risk assessments that rely on target levels of risk or safety will almost certainly provide beyond- reasonable- doubt proof of failure of the risk decision-making process. This will thereby create criminal liabilities for the relevant officers. The impact of this on many current risk assessment processes cannot be overstated.

From the perspective of the new act, technical engineering organizations must engineer due diligence. That is, they must ensure the laws of man and the laws of nature are congruent. In terms of achieving safety outcomes (lack of harm), managing the laws of nature is logically prior to dealing with the laws of man. This is obvious to engineers but not, it seems, to many lawyers.

New Legislation Considerations: Travel Risk Management

An alternate Y model approach was developed for the Gladestone Area Water Board in 2011 to specifically address the requirements of the act.

Most legal advice regarding demonstrating due diligence process as required by the act is focused on a compliance audit to the relevant section and clauses. But this should be the outcome of the due diligence process, not the cause.  The process has been applied to several companies and authorities since, all to the satisfaction of relevant legal counsel.

The essential point is that if the due diligence review is arguable at a common law duty-of-care standard (the balance of probabilities) then the likelihood of being successfully prosecuted on a beyond reasonable-doubt basis (the required proof for statutory mischief) is minimal.

Overall, engineers should step up, take a leadership role and use this act as an opportunity to be heard at board level. Action in your businesses is required if;

  • Your current OH&S system was established to comply with the risk management standard, especially an earlier version such as AS/NZS 4360-2004 using the 5 x 5 risk characterization/evaluation system.
  • Internal risk managers have not briefed the management team on the new legislation changes and how they will affect your organization.
  • No one in your organization is the “go to” person for the new legislation.
  • No action has been taken to ascertain if your current system complies with the new act.
  • There is a general consensus that “we will be compliant”.
  • Your risk register has integrated business and safety risks.
  • Precautionary decision-making is based on a target level of risk or safety and not the common law balance.
Travel Risk Management Evolution

The traditional approach described in the risk management standard AS/NZS ISO 31000 has been to identify hazards, analyse them and then evaluate them by comparison to risk criteria. The due diligence approach specifically rejects this method.

Source: Civil Engineers Australia| January 2012-Page 40-41

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