5.1
This chapter examines in more detail the effectiveness of the prosecutions of, and penalties used in, workplace death legal proceedings. In particular it explores the following issues:
industrial manslaughter as an offence;
the operation of an independent statutory office for work health and safety (WHS) prosecutions;
union right to prosecute;
the personal liability of company officers;
the limitation period for prosecutions;
the adequacy of financial penalties;
directors' insurance against penalties; and
Industrial manslaughter as an offence
5.2
As set out in Chapter 3 of this report, model WHS legislation has been implemented by the Commonwealth and all states and territories, apart from Victoria and Western Australia. There are three categories of criminal offence for the breach of health and safety duties under the model WHS Act. The two most serious offences relate to the exposure of a person (either a worker or a bystander) to a risk of death or serious injury or illness:
Category 1 – a duty holder, without reasonable excuse, engages in conduct that recklessly exposes a person to a risk of death or serious injury or illness.
Category 2 – a duty holder fails to comply with a health and safety duty that exposes a person to risk of death or serious injury or illness.
5.3
As mentioned in Chapter 3, it is important to recognise that these two most serious offences seek to address the risk of exposure of a person to death or serious injury or illness, rather than the outcome (the death of a worker) which results from failure to address the risks.
5.4
Throughout the inquiry a number of industry stakeholders insisted that the current penalty framework is sufficient. However, the committee received substantial evidence indicating that these provisions are not an adequate deterrent to prevent unnecessary workplace deaths, nor are they meeting community expectations, and that as a result a new offence of industrial manslaughter was warranted.
5.5
For example, the Australian Manufacturing Workers' Union (AMWU) stated:
Although breaching work health and safety laws is a criminal offence the penalties applied by the courts are generally much lower than the available maximum. The push for industrial manslaughter legislation has its origins in the failure of the courts and regulators to use the legal system as a deterrent.
5.6
The Australian Council of Trade Unions (ACTU) acknowledged that while it was appropriate for the WHS regime to focus on risk management, there was also a need for a specific offence of industrial manslaughter:
All three offences in the Model Laws focus on the duty to manage risks, rather than the outcome of failures to meet such duties. The ACTU agrees that it is appropriate for Australia’s WHS regime to focus on risk-management, by placing a strict duty on persons conducting businesses or undertaking to manage WHS risks, regardless of the outcome of those failures. However, in circumstances where the consequence of negligent acts or omissions is the death of an individual or individuals, a specific offence focused on the outcome is also appropriate and necessary.
Existing industrial manslaughter provisions
5.7
Industrial manslaughter provisions currently exist in Queensland and the Australian Capital Territory (ACT).
5.8
Other states have given varying degrees of support for the idea. For example, the Victorian Government advised the committee that if re-elected it would seek to create a new criminal offence of workplace manslaughter in the Occupational Health and Safety Act 2004 (Vic).
5.9
In August 2018, media reports indicated that the Western Australian Government was considering the introduction of industrial manslaughter laws. The Premier, the Hon Mark McGowan MLA was quoted as saying the laws were 'worthwhile'.
5.10
The Law Council of Australia (Law Council) identified:
The Australian Capital Territory (ACT) is the only jurisdiction that has specific offences of industrial manslaughter under its Crimes Act 1900 (ACT). Queensland has also inserted an industrial manslaughter offences under the relevant Work Health and Safety Act 2011 (Qld) (as well as the Electrical Safety Act 2002 (Qld) and Safety in Recreational Water Activities Act 2011 (Qld)), discussed below.
All other jurisdictions have general manslaughter offences, with varying maximum penalties. The offence of gross negligence manslaughter exists under common law. It has been noted that it is the crime most likely to be used to prosecute employers responsible for work-related deaths.
5.11
A consolidated table of the differences between state and territory laws prepared by the Law Council of Australia is at Appendix 3.
ACT jurisdiction
5.12
The ACT introduced the criminal offence of industrial manslaughter in March 2004, the first Australian jurisdiction to do so. The ACT Government submission provided detail on the rationale and scope of the legislation:
The purpose of introducing the specific offence of industrial manslaughter was to ensure that employers can be appropriately held to account if their reckless or negligent behaviour results in the death of a worker, and to raise awareness of the duty of employers to provide a safe workplace. These provisions send a clear message to employers and the wider community that avoidable workplace deaths will be dealt with in the strongest possible way.
By amending Part 2A of the Crimes Act 1900, the ACT Government sought to ensure that employers and their senior officers can be held responsible where the death of a worker is caused by recklessness or negligence. This applies to all employers in the ACT, including the ACT Government. This provision does not, however, impose vicarious liability on employers and senior officers for the actions of others. An officer cannot be liable for prosecution just because they occupy a particular position in an organisation. Additionally, for liability under the industrial manslaughter provisions, an employer's recklessness or negligence must be proven beyond reasonable doubt.
ACT industrial manslaughter laws include substantial penalties, including financial penalties which can be applied to either individuals or corporations. For both employers and senior officers the maximum penalty is $300,000 for an individual or $1.5 million for a corporation and/or a maximum of 20 years imprisonment. Courts can also order corporations to take actions including publicising the offence, notifying specific people about the offence and carrying out projects for the public interest.
Queensland jurisdiction
5.13
In October 2017 the Queensland Parliament passed amendments which introduced a new offence of industrial manslaughter into the Work Health and Safety Act 2011 (Qld).
5.14
The amendments were in response to the Best Practice Review of Work Health and Safety Queensland (Best Practice Review) that was undertaken in response to the fatalities at the Dreamworld theme park and Eagle Farm construction site in 2016. The Best Practice Review found that a new offence of industrial manslaughter was appropriate and necessary. It concluded that such an offence would address a gap in the offence framework as it applied to corporations, finding that existing manslaughter provisions in the Queensland Criminal Code do not provide for individual conduct to be imputed to an organisation.
5.15
More specifically, the Best Practice Review stated that:
…these provisions extend corporate criminal responsibility to cases where a corporation’s unwritten rules, policies, work practices or conduct tacitly authorise non-compliance, or fail to create a culture of compliance consistent with its responsibilities and duties of care.
5.16
Under the amended WHS legislation a company can be prosecuted for the offence of industrial manslaughter. This is in contrast to if an action was taken by the Director of Public Prosecutions (DPP) under the Queensland Criminal Code, where only an individual can be prosecuted for manslaughter.
5.17
The Queensland Government submission provided further detail on the rationale for and operation of the offence:
The industrial manslaughter offence applies to both PCBUs [persons conducting a business or undertaking] and senior officers whose conduct negligently causes the death of a worker. This includes conduct that is either an act or an omission to perform an act. The penalties for industrial manslaughter are up to 20 years imprisonment for an individual or a maximum of $10 million for a corporation.
The offence of industrial manslaughter sends a clear message to duty holders about societal expectations on safety in the workplace and that companies, and the senior officers working for them, must do all that they can to ensure the safety of workers at their workplace. This in turn is likely to increase proactive WHS management and encourage work health and safety to be managed as a cultural priority within businesses.
The introduction of the offence also provides an alternative avenue for recourse where the police decide not to pursue charges under Queensland’s Criminal Code. It also allows sentencing judges to have appropriate scope to deal with the worst examples of corporate or individual behaviour.
To ensure appropriate governance in decision making, prosecution decisions involving the offence of industrial manslaughter are subject to Director of Public Prosecutions approval in the same manner as Category 1 offences under section 31 of the WHS Act and that the Director of Public Prosecutions may take over any prosecutions for industrial manslaughter.
5.18
Regarding the decision to insert the industrial manslaughter offence into the WHS legislation and not the criminal code, the Queensland Government emphasised that it was a conscious choice with a specific logic behind it. Mr Paul Goldsbrough, Executive Director of WHS Engagement and Policy Services for the Queensland Office of Industrial Relations explained:
…a decision was made to include it [industrial manslaughter offence] in the Work Health and Safety Act in the national model laws. That has been an important point in raising front and centre, quite rightly so for persons with duties, their obligations in relation to the Act. The government was of the view that it makes it very clear that this offence exists and that it is a tool that can be used in the case of particular conduct in the workplace.
The need for the introduction of industrial manslaughter provisions
5.19
The committee received evidence both for and against the introduction of industrial manslaughter provisions.
5.20
The Department of Jobs and Small Business (the department) stated that the introduction of the offence of industrial manslaughter is 'unwarranted' and inconsistent with the 'philosophy' of WHS legislation, where culpability is established by unlawful exposure to risk of death, injury or illness, rather than by the final consequences of the exposure.
5.21
The department explained its position in the following terms:
Introducing industrial manslaughter laws will have negative effects on the relationship between employers and employees on worksites and will diminish the capacity of businesses to implement an improved safety culture. Industrial manslaughter laws could punish employers who are linked to a death — but not necessarily those who have the power to control the circumstances leading to that death. Additionally, a punitive approach is counterproductive and less effective than encouraging employers and workers to work together – it will be less of a deterrent and more of a punishment.
5.22
The department further stated that introducing industrial manslaughter laws 'may be a disincentive for people to own and operate a business'.
5.23
The Law Council stated that it did not support the introduction of specific industrial manslaughter offences in the form set out in the Queensland legislation or the ACT legislation. It opined that the Queensland legislation was inconsistent with traditional criminal law principles, and that the ACT legislation was 'in many ways' inconsistent with the model WHS laws.
5.24
The Law Council further stated that it:
…is not convinced that a specific industrial manslaughter offence needs to be introduced into the Model WHS Laws, given existing criminal law and WHS offences (which already include offences that can give rise to jail sentences for those who recklessly cause death at a workplace).
5.25
However, the Law Council went on to say that if industrial manslaughter provisions were to be introduced they should be legislated in a 'consistent manner across the jurisdictions':
The Law Council is of the strong view that no such provisions be introduced other than in a consistent manner across the jurisdictions that have adopted the WHS Model Laws, which would necessarily require a consultation process and agreement from those jurisdictions. Different tests for liability and different penalties have a tendency to produce an inconsistency with a key component of the rule of law: that the law should be applied to all people equally. There is a need for the harmonisation of both WHS and the general criminal law to ensure that like cases are treated alike irrespective of jurisdictional boundaries.
5.26
The Australian Institute of Company Directors made clear it had several concerns regarding industrial manslaughter offences, including that it led to a misdirected focus on punishing wrongdoing (away from the core objective of WHS laws); that it undermines the efficacy of harmonised WHS laws; and that it would overlap with general law manslaughter offences.
5.27
The Minerals Council of Australia argued that as data indicates that workplace injuries and fatalities are decreasing in Australia, there is nothing to warrant the imposition of higher penalties, such as industrial manslaughter, in respect of offences under the model WHS legislation. It also asserted that there was a lack of evidence that a punitive approach would led to improved WHS outcomes, and maintained that penalties must be part of a broader range of enforcement and compliance mechanisms.
5.28
Master Builders Australia expressed concern that the introduction of industrial manslaughter offences, such as in Queensland and the ACT, detracted from the harmonised model WHS laws. The Australian Industry Group also put forward similar concerns, stating that the amendments to the Queensland legislation in regard to industrial manslaughter have 'created a fissure which puts at risk the collaborative approach' of a harmonised system.
5.29
Master Electricians Australia (MEA) stated that industrial manslaughter 'outside of the criminal code is not appropriate'. Specifically, it raised concerns that the model used in Queensland does not contain the controls and protections required to afford natural justice to those facing the industrial manslaughter charge. Mr Jason O'Dwyer, Manager of Advisory Services for MEA elaborated on this position:
…we do oppose industrial manslaughter existing outside of the Criminal Code when it comes to individuals. Our position is consistent with those of eminent professional law associations. However MEA, after reading the submissions, concede that prosecution of corporate entities may need to be facilitated in the Criminal Code but via a separate piece of legislation… The reason that we've had the position about industrial manslaughter being only in the Criminal Code is that we have concerns about the difference between the Criminal Code and the other pieces of legislation—not only the Criminal Code but a number of other pieces of legislation—that protect all parties in the process of investigating a situation where the maximum penalty is 20 years' imprisonment. It's a very serious situation. People do have the right to natural justice, and people do obviously need to be prosecuted when they do fall short of the law. We believe that the investigation processes and the best people to actually make those decisions is the DPP and the police, and that's why we've got that situation. We are not against industrial manslaughter per se and holding people accountable, but we do see and we do agree with organisations like the Law Council of Australia, the Queensland Law Society and the Bar Association of Queensland in saying that really should be located in the Criminal Code.
5.30
Conversely, a number of stakeholders expressed support for the introduction of industrial manslaughter provisions.
5.31
The ACTU argued that a new offence of industrial manslaughter should be included in the model WHS laws, rather than in criminal law. It recommended the adoption of provisions based on the existing Queensland provisions, with the amendment that the offence should include any person killed by the negligence of the PCBU (person conducting a business or undertaking). The Australian Workers' Union indicated that it supported the ACTU position on this matter.
5.32
The Victorian Trades Hall Council (VTHC) made clear that it supported the introduction of industrial manslaughter on a national scale. Its submission outlined the specific points it recommended on this matter:
VTHC and the Victorian union movement are advocating for legislation which will:
insert a crime of corporate and industrial manslaughter into the Occupational Health and Safety system;
adequately punish corporate negligence where the negligence results in the death of a person;
adequately punish negligent decisions by senior managers in control of a substantial part of the business where that negligence results in the death of a person;
bind the Crown in its role as an employer;
provides two exceptions for:
emergency services employees operating in good faith; and
family run small business where the deceased is a family member of the business owner/operator.
5.33
The VTHC argued that it was imperative that the industrial manslaughter provision be included in WHS legislation, rather than in the criminal code.
5.34
Noting that Victoria has not implemented the model WHS legislation, the VTHC asserted that given WorkSafe Victoria is the expert in proving negligence in the occupational health and safety context, the offence should be inserted into the Occupational Health and Safety Act 2004 (Vic) (OHS Act). The VTHC provided the following table to illustrate why this should be the case in the Victorian context:
Table 5.1: —Why the OHS Act?
|
|
|
|
|
VicPol [Victoria Police] & DPP
|
Prosecute manslaughter under the Crimes Act.
|
No experience in proving negligence in a workplace OHS context.
Likely to require assistance from WorkSafe to determine what is and is not negligent in a workplace OHS context.
|
|
WorkSafe [Victoria]
|
Understand OHS context.
Experienced in proving negligence in OHS context in a court of law.
Already investigate and prosecute all workplace fatalities.
Prosecute some workplace fatalities under s21 of the OHS Act.
|
|
Source: Victorian Trades Hall Council, Industrial Manslaughter Policy Brief, 2018, p. 8 (tabled 28 August 2018).
5.35
The Queensland Council of Unions (QCU) advised that it supports the introduction of the offence into the national model WHS laws, and that the offence is best placed in the WHS framework and not in the criminal code.
5.36
The Young Workers Centre also recommended that industrial manslaughter provisions be incorporated into the model WHS laws.
5.37
The Construction Forestry Maritime Mining and Energy Union (CFMMEU) argued that financial penalties on their own are not an effective deterrent strategy in ensuring better WHS outcomes in workplaces. Specifically it noted that financial penalties alone:
do not ensure that offenders restructure their workplace to comply with WHS standards;
only have an impact upon the financial returns of a corporation and do not impact the motivation and/or behaviour of the responsible managers;
do not ensure any disciplinary action is ever taken against those who should have been held responsible and accountable;
do not require management to review their systems of operation so that the offence will not reoccur; and
can be easily avoided by restructuring the corporate structure or identities, or by moving the organisation's assets to other corporate entities.
5.38
In light of these limitations, the CFMMEU argued that industrial manslaughter laws are needed as an effective deterrent that must 'pierce the corporate veil' and hold corporate businesses accountable both morally and legally.
5.39
Maurice Blackburn Lawyers (Maurice Blackburn) stated support for the introduction of industrial manslaughter provisions into workplace health and safety legislation across states and territories, based on national agreed benchmarks. In justifying this position they supplied the committee with eleven case studies which demonstrated the lack of appropriate punishment meted to employers following a workplace death due to 'inadequacies in current criminal law pertaining to senior management'.
5.40
For example, in the following case study a worker was crushed to death and the company pleaded guilty to breaching its obligations under the Work Health and Safety Act 2011 for failing to ensure its workers were not exposed to risk. The company was ultimately fined $120 000:
The deceased worked for an organisation which manufactures and services large water tanks.
Three employees were working on a repair job for a customer on a large polyethylene cylindrical tank which was leaking. The employees were tasked with moving the tank, which they had previously moved on a number of occasions on the subject morning.
The tank was lifted and moved using two forklifts, known as the “dual lift method”. This is a high risk task under the Work Health and Safety Regulation 2011.
The method involved placing a square plastic outrigger pad (dunnage) under the tank to enable the other forklift’s tines to fit under the end of the tank.
The tank was being moved from the yard into the workshop. Entry to the workshop was by a ramp with an incline. When the tank was on the ramp, the deceased’s supervisor had to briefly attend to other duties. At this time, the deceased was operating the forklift positioned on the ground and facing the lower end of the ramp. The other forklift was positioned at the higher end of the ramp.
The deceased asked another worker to assist him and that worker commenced operating the forklift at the higher end of the ramp. The deceased asked the other worker to lift the tank slightly. At this time, the deceased was out of the sight of the other worker, as he was adjusting the dunnage by crouching in an area between the forklift mast and the load.
The tank moved towards the deceased and trapped his head between it and the mast. He died at the scene from fatal crush injuries. The system was unsafe. It should have been identified as unsafe, but the employer risked the deceased’s life.
The company pleaded guilty to breaching its obligations under the Work Health and Safety Act 2011, for failing to ensure its workers were not exposed to risk. They were fined $120,000.00.
5.41
In another case study, the worker was killed due to fatal injuries received during an explosion. The company was fined $125 000, a conviction was not recorded and no person is a senior position was held criminally accountable:
The deceased was employed by a not for profit body established to provide employment and training for people with disabilities and disadvantaged job seekers.
On only his second day on the job, the deceased was directed to build a funnel for the top of a large waste oil tank, however the tank was not empty at the time of the incident and still contained the remains of liquid, fuel waste and other flammable substances. When the deceased was welding the drum, the materials (high grade mono diesel oil) ignited and exploded. As a result of the explosion, the deceased received fatal injuries and passed away.
The deceased was survived by a young son.
The company was fined $125,000 for not identifying the risks in a workplace at which an employee was killed, entered a guilty plea for failing to comply with a health and safety duty – Category 2. A conviction wasn’t recorded against the company but they were placed on a good behaviour bond and a training order. These are a mere slap on the wrist and entirely inadequate for the gross breach of safety which directly caused the death.
Again:
This death was preventable,
The penalties are financial only – no person is a senior position has been held criminally accountable for the preventable loss of life
The deceased’s family, including a young son, will never see the deceased again, and will live in the knowledge that the deceased died a horrible, violent death.
5.42
Maurice Blackburn also stated that they would favour a coordinated state and territory based approach, rather than a Commonwealth scheme, and that the existing industrial manslaughter legislation in Queensland should be used as a template.
5.43
Additionally, Maurice Blackburn made the following recommendations as to the drafting of industrial manslaughter provisions:
Maurice Blackburn suggests that the Committee might consider the development of two separate categories of offence under which appropriate sanctions, including incarceration, can be imposed on an individual:
I. Recklessness; and
II. Industrial Manslaughter.
The key difference for present purposes, putting aside the fact that the elements of each offence are substantially different, is that the recklessness offence is predicated on exposing an individual to “risk of death or serious injury or illness” whereas the Industrial Manslaughter provision requires that the conduct result in the actual death of a person
In other words the recklessness offence merely requires the creation of risk (without actual harm being caused) whereas the Industrial Manslaughter offence requires that the conduct complained of has actually resulted in a death.
Maurice Blackburn submits that appropriate penalties for both might be:
I. Recklessness attracting a maximum jail term of 5 years; and
II. Industrial Manslaughter attracting a maximum jail term of 20 years.
Whilst community expectations demand serious criminal sanction for both types of conduct referred to above, in our view, the objective gravity of reckless conduct is arguably something greater than the objective gravity of negligent conduct.
5.44
One of the issues explored during the inquiry was which model of industrial manslaughter offence may be best suited for broader adoption. It was submitted that the Queensland model is superior to the ACT model due to its more contemporary approach.
5.45
For example, the committee was informed that the ACT has not had any prosecutions under its industrial manslaughter legislation. ACT Work Safety Commissioner Mr Greg Jones provided context around this matter and drew attention to one particular case where the industrial manslaughter provision had not been used due to limitations around the employer-employee nexus:
Our legislation was first introduced—the first in Australia—in 2004. I think that, as a deterrent, it's been quite effective. The fact that there have been no prosecutions under that—I don't know the details of some of the very early cases about why that's not the case. In this particular case, we have charged one party with manslaughter, but that was under our local Crimes Act and not the industrial manslaughter provisions. That's because the very strong advice that we got from our prosecutor and our own solicitor's office was that the nexus that our current legislation has between employer and employee didn't work or wasn't appropriate in the case that we had. The person that died as a result of that crane toppling over was not an employee of the main PCBU, the principal contractor. We don't believe, in that case, that the death resulted from the principal contractor's actions, although we believe there are a number of liabilities, if you like, or breaches, which we have laid charges about. But the immediate cause of death was not the employee's immediate employer, and that nexus is strong in our industrial manslaughter provisions. My suggestion—and I guess that's come out in our submission to the committee—is that that should be made easier to administer or to apply. My view is that the Queensland legislation is better drafted in terms of how it can apply.
5.46
The ACT Government acknowledged that the current ACT provisions for industrial manslaughter are no longer the most contemporary model in existence. As such, it formally suggested that any inclusion of an industrial manslaughter offence into the national harmonised WHS laws be based on the Queensland legislation.
5.47
Mr Michael Young, Executive Director of Workplace Safety and Industrial Relations for the ACT Government clarified why this recommendation had been made:
One of the primary advantages of the Queensland approach is that it is framed inside the WHS regime. WHS nationally harmonised laws were developed over an extensive period of time and it's been a great deal of effort and resources on understanding and coming to grips with the increasingly complex employment relationships that exist at the moment. They introduced that concept of the PCBU—'persons conducting a business or undertaking'—as a way to overcome some of those definitional limitations that were tied to the concept of 'employer'. The ACT legislated industrial manslaughter legislation that pre-dates that work and is still sort of caught up with those employer-specific relationships. By framing an offence inside the WHS regime you get the advantage of potentially being able to apply the offence to a wider range of duty holders who owe a safety duty and that potentially would overcome the issue that I think Greg's just been describing [see paragraph 5.45 of this report].
Committee view
5.48
The committee is of the strong view that there needs to be a nationally consistent industrial manslaughter provision introduced into the model WHS legislation.
5.49
While acknowledging the opposing views, the committee is persuaded by the evidence received during the inquiry illustrating that the current legislative and regulatory framework is inadequate. It is absolutely necessary for corporate entities to be held accountable for their actions, including facing prosecution for industrial manslaughter for the worst examples of corporate or individual behaviour. For those few organisations that wilfully flaunt the existing WHS arrangements and whose negligent actions result in a catastrophic outcome (the death of a worker or a bystander) the committee believes it is entirely warranted that serious consequences flow. This is particularly the case in organisations which are considered to be repeat offenders. These arrangements would also provide a strong and appropriate deterrent across the entire WHS regime.
5.50
The committee notes that the majority of impacted families that participated in the inquiry strongly support the introduction of industrial manslaughter as an offence.
5.51
The committee is of the opinion that the Queensland model of industrial manslaughter is worthy of consideration when drafting amendments for the model WHS legislation.
5.52
The committee is also of the opinion that the provision is best placed in the model WHS legislation, and not in the criminal code.
5.53
The committee is encouraged to see that several state governments have indicated they see the value in industrial manslaughter provisions and are moving in that direction.
5.54
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
introduce a nationally consistent industrial manslaughter offence into the model WHS laws, using the Queensland laws as a starting point; and
pursue adoption of this amendment in other jurisdictions through the formal harmonisation of WHS laws process.
Independent statutory office for WHS prosecutions
5.55
Another issue explored during the inquiry related to the merits of establishing an independent statutory office for WHS prosecutions.
5.56
In October 2017, at the same time as introducing the offence of industrial manslaughter, Queensland established via legislation an independent statutory office for WHS prosecutions. This followed a recommendation in the report of the Best Practice Review of Workplace Health and Safety Queensland (Best Practice Review). The statutory office will be headed by a WHS prosecutor appointed by the Governor-in-Council for a five year renewable term. The WHS Prosecutor will sit outside the DPP and inside the Office of Industrial Relations, and the position is currently under recruitment.
5.57
Mr Paul Goldsbrough, Executive Director of WHS Engagement and Policy Services for the Office of Industrial Relations explained the rationale behind the creation of the office:
Under the national model laws, the prosecutions are generally taken by regulators, with the exception of category 1, where there has to be an engagement with the DPP in each jurisdiction, because it can have a jail time associated with it. The Lyons review [Best Practice Review] recommended that there be that separation so that at arm's length of the investigation and the regulator was a decision on prosecution. The government committed to that, and it was put into the work health and safety laws at the same time as industrial manslaughter was introduced.
5.58
The QCU submitted that the creation of the statutory office was a 'cogent, legislative response' to the problem acknowledged in the report of the Best Practice Review that the regulator had been subject to external pressure in respect of the prosecution function. The QCU commented that the creation of the independent office will go some way to restoring public confidence in the enforcement of WHS matters.
5.59
On a broader level, the ACTU argued that there must be consistency, clarity and certainty regarding the prosecution policies of WHS regulators. It noted that this could include setting out exactly where responsibility resides for the decision to commence or not commence a prosecution:
At present there is some uncertainty, at least in relation to criminal prosecutions for workplace fatalities, as to whether the decision ultimately rests with the relevant regulator (acting on advice from the DPP) or whether the views of the DPP are determinative, particularly given that under the Model WHS Act, both the regulator and the Director have standing to commence proceedings (s 230), and in practice in the Commonwealth jurisdiction at least, proceedings are regularly brought in the name of the Director. Families of deceased workers need to know with absolute certainty who is making the prosecution decisions and on what basis.
5.60
Section 231 of the model WHS Act currently sets out the procedure to be followed if a prosecution is not brought. It allows for a person to make a written request to the regulator that a prosecution be brought if they consider Category 1 or Category 2 offence has occurred and no prosecution has been brought within a specified time frame. Section 231 also sets out the steps the regulator must take in response, including advising the person in writing about the outcome of the request and any subsequent processes arising from the outcome. Section 231 also allows for a review by the DPP of a regulator's decision not to prosecute a Category 1 or Category 2 offence.
Committee view
5.61
The committee considers that there is merit in having an independent statutory office to act as a dedicated WHS prosecutor, as was established in Queensland in 2017.
5.62
The committee is of the view that it would be helpful for families if the WHS regulator had to provide a published, written justification when it decides not to proceed with a prosecution, without a person having to write to the regulator within the specified time frame as set out in Section 231 of the model WHS Act.
5.63
Related to this, the committee is also of the opinion that it would be beneficial for families if the WHS regulator, with input from the coroner if necessary, had to provide a published, written justification when a coronial inquest for an industrial death is not conducted.
5.64
The committee considers that these measures would assist addressing the above concerns set out by the ACTU and build the confidence of employers, employees and families of killed workers in the WHS prosecution system.
5.65
The committee is aware that the matter of Section 231 may be addressed in the Safe Work Australia review into the model WHS laws as Comcare explored issues surrounding the procedure if a prosecution is not brought in its submission to the review.
5.66
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
amend the model WHS laws to include the establishment of a dedicated WHS prosecutor in each jurisdiction, similar to the model introduced in Queensland; and
pursue adoption of this amendment in other jurisdictions through the formal harmonisation of WHS laws process.
5.67
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
amend the model WHS laws to provide that a WHS regulator must in all relevant circumstances provide a published, written justification for why it chose not to bring a prosecution following an industrial death; and
pursue adoption of this amendment in other jurisdictions through the formal harmonisation of WHS laws process.
5.68
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
amend the model WHS laws to provide that a WHS regulator must in all circumstances provide a published, written justification for why a coronial inquest following an industrial death was not conducted; and
pursue adoption of this amendment in other jurisdictions through the formal harmonisation of WHS laws process.
Union right to prosecute
5.69
The role of unions in bringing WHS prosecutions was another topic discussed during the inquiry.
5.70
Under model WHS laws, only the WHS regulator is able to bring proceedings. However, a request can be made to the regulator (or later the DPP) if a prosecution is not brought for any offences other than Category 1 offences. Individuals and unions are unable to bring prosecution proceedings directly.
5.71
The ACTU raised concerns about the 'steep decline' in prosecutions under WHS legislations over recent years. It contended that unions should have standing to bring proceedings for offences under the model WHS Act in circumstances where they have a member concerned in the breach in question:
A right for trade unions to commence prosecutions operates as an important supplement to address circumstances in which regulators are unwilling or unable to prosecute contraventions.
A qualified right of private prosecution (i.e. by a person other than a public official) for criminal matters already exists at common law. In the ACTU’s strong submission, it is reasonable, justified and necessary to confer a right of prosecution on workers affected by a breach of the Model Laws and their unions.
New South Wales is the only jurisdiction to retain access to union prosecutions. However these provisions are restricted to situations where the DPP has declined to bring proceedings. The application of the provision is problematic, not least of all because of the reluctance of the DPP to involve themselves in OHS matters (which means that the requisite referral cannot be made) and because, where penalties are ordered, they are unable to be retained by the prosecuting union (which exacerbates internal resourcing limitations within the unions who may seek to prosecute). Previously, between 1983 and 2011, union secretaries had standing to bring a prosecution under NSW laws and there is no evidence whatsoever that indicates that this ability was abused. To the contrary, all such proceedings were successful.
5.73
The CFMMEU concluded that the model WHS Act should be amended so that unions have standing to bring proceedings for offences under WHS legislation.
5.74
The QCU also noted that in Queensland unions are still unable to prosecute for breaches of workplace health and safety legislation. Research and Policy Officer Dr John Martin commented:
We find this incongruous. Unions are able to prosecute an employer for failing to pay meal money when someone works overtime yet are not able to prosecute for breaches of health and safety legislation, which seems inordinate in terms of what unions can and can't do.
Committee view
5.75
The committee considers that the enforcement of WHS laws would be strengthened by allowing injured workers, their families and their unions to commence proceedings for the imposition of civil penalties where WHS laws are contravened.
5.76
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
amend the model WHS laws to provide for unions, injured workers and their families to bring prosecutions; and
pursue adoption of this amendment in other jurisdictions through the formal harmonisation of WHS laws process.
Personal liability of company officers
5.77
Another matter drawn to the committee's attention during the inquiry was the personal liability of company officers. The ACTU argued that personal liability under the model WHS laws must be strengthened. Specifically, it contended that the definition of 'officer' should be amended so that it captures all senior managers who significantly impact on WHS outcomes:
The Model Act defines ‘officer’ by reference to the definition in s 9 of the Corporations Act 2001 (Cth). The key criterion is whether the person makes decisions affecting the whole, or a substantial part of, the business or undertaking. The Corporations Act definition is more extensive and detailed than the definition in the pre-harmonised NSW legislation, but in the ACTU’s submission, it is not necessarily more appropriate. This is because elements of the Corporations Act definition focus on management as it relates to the ‘financial affairs’ of a company. While this is clearly appropriate in the context of a legislative regime which imposes a number of financial management obligations on companies, it fails to effectively target senior decision-makers involved in health and safety governance in an organisation. It is of course completely inappropriate for managers who do not significantly influence WHS outcomes to be held personally liable for breaches of the Model Laws, and provisions need to be carefully drafted to ensure that such people are excluded and have a strong and clear defence available in the event that allegations are made.
5.78
The ACTU cited the case of Mckie v Al-Hasani and Kenoss Contractors Pty Ltd to illustrate the inadequacy of the current definition:
In that case, a worker died when his truck connected with powerlines. The court considered whether the project manager was an ‘officer’ within the meaning of the Model Act. The court held that it is the person’s influence over the PCBU as a whole, not just over the particular project, undertaking, function or event relevant to the alleged breach of duty that must be assessed. Indicators such as the following were considered relevant to the question of whether or not the project manager was an ‘officer’ or not:
Responsibility for hiring and firing employees;
Capacity to allocate corporate funds;
Capacity to direct the type of contracts to be pursued by the business;
Responsibility for signing off on tenders;
Responsibility for determining corporate structures and setting company policy;
Attendance at Board meetings;
Responsibility for compliance with legal obligations.
5.79
The ACTU submission went on to explain the circumstances of the case which it argued demonstrates that 'the current definition is excluding the very senior decision-makers whose behavior the Model Laws are seeking to change':
The project manager was a well-qualified engineer and a senior manager in the company with substantial ability to influence the safety and health of workers and others on the project he managed. He had been personally served with a prohibition notice regarding work near power lines in August 2008 on another project. The court found that the project manager was fully aware of the risks associated with the live overhead power lines above the site he managed but failed to exercise due diligence in respect to safety compliance. Despite this, the court held that there was no evidence of any involvement in the matters listed…above [see paragraph 5.78 of this report], and therefore he had an operational role only and was not an ‘officer’ within the meaning of the Model Act. This decision indicates that the current definition is excluding the very senior decision-makers whose behavior the Model Laws are seeking to change. The purpose of these provisions is to improve WHS outcomes using the incentive of personal criminal liability. However, the exclusion of key decision-makers from the definition of officer seriously undermines this goal. The definition of officer must capture people with a significant level of influence over WHS outcomes; otherwise the purpose of the provision is defeated.
5.80
The ACTU recommended that the definition of 'officer' in the model WHS laws, currently based on the definition in the Corporations Act 2001, be reconsidered. It recommended that a definition be based on the definition used in New South Wales prior to the adoption of the harmonised model WHS laws, or otherwise a new definition created that focuses on the 'capacity of the person to significantly affect health and safety outcomes'.
Committee view
5.81
The committee considers there is merit in the definition of 'officer' in the model WHS laws being reconsidered to ensure that those individuals clearly engaged in and responsible for WHS decision-making are held properly accountable.
5.82
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
amend the model WHS laws to revise the definition of 'officer' to better reflect the capacity of the person to significantly affect health and safety outcomes; and
pursue adoption of this amendment in other jurisdictions through the formal harmonisation of WHS laws process.
Limitation period for prosecutions
5.83
As discussed in Chapter 4, a lengthy investigation into an industrial death has the potential to exceed the statutory limitation period, meaning that a prosecution would be unable to be brought. Even if an investigation is completed within the limitation period, subsequent coronial inquests can then be a necessarily lengthy process.
5.84
The committee received some evidence on this matter. For example, Mrs Robyn Colson, whose son David was killed in 2007 in Tasmania, advised the committee that by the time the coronial inquest into David's death was finished, she was informed that the statute of limitation had expired and it was too late for a prosecution to be brought.
5.85
Section 232 of the model WHS Act deals with the limitation period of prosecution:
232 Limitation period for prosecutions
(1) Proceedings for an offence against this Act may be brought within the latest of the following periods to occur:
(a) within 2 years after the offence first comes to the notice of the regulator;
(b) within 1 year after a coronial report was made or a coronial inquiry or inquest ended, or an official inquiry ended if it appeared from the report or the proceedings at the inquiry or inquest that an offence had been committed against this Act;
(c) if a WHS undertaking has been given in relation to the offence, within 6 months after:
(i) the WHS undertaking is contravened; or
(ii) it comes to the notice of the regulator that the WHS undertaking has been contravened; or
(iii) the regulator has agreed under section 221 to the withdrawal of the WHS undertaking.
(2) A proceeding for a Category 1 offence may be brought after the end of the applicable limitation period in subsection (1) if fresh evidence relevant to the offence is discovered and the court in which the proceedings are brought is satisfied that the evidence could not reasonably have been discovered within the relevant limitation period.
5.86
The limitation period balances the needs of a duty holder to have proceedings brought and resolved quickly, with the public interest in having a matter thoroughly investigated by the regulator to ensure a sound case is brought.
5.87
In a submission to the Safe Work Australia (SWA) review of the model WHS laws, Comcare stated that it considers that section 232 could be amended to allow for a broader extension to the limitation period such as where the DPP provides written authorisation to allow a prosecution to be brought outside of the limitation period.
Committee view
5.88
The committee is concerned by evidence it received that indicated that in some circumstances by the time an investigation and inquest into a workplace fatality have been completed, the ability of a jurisdiction to prosecute may have expired.
5.89
The committee recommends that section 232 of the model WHS Act be amended to broaden the limitation period for prosecutions of industrial manslaughter.
Adequacy of penalties and the need for sentencing guidelines
5.90
The adequacy of the current financial penalties for contraventions of WHS laws, including the need for sentencing guidelines, was another topic addressed in the inquiry.
5.91
Maurice Blackburn submitted that the penalties in WHS regimes across Australia for employers who have been found responsible for serious injury or death are 'manifestly inadequate'.
5.92
It gave the example of Queensland where fines imposed where a worker has been killed at work appear to typically range between $90 000 and $160 000. It asserted that in comparison to a breach of the Food Act 2006 (Qld), where no one is seriously harmed and the result could be a $30 000 fine, the disproportionality was obvious. To combat this the submission recommended:
We submit that there is a requirement for sentencing guidelines or at the very least ‘suggested’ penalties in the vein of that which occurs in the UK so that judicial officers are given specific guidance about the appropriate sentencing range. It must be remembered that the legislation is somewhat unfamiliar ground for many members of the Judiciary.
5.93
The Queensland Government made clear that it considers the absence of national sentencing guidelines a significant impediment to achieving national harmonisation of WHS laws. It stated that consistency in court decisions and court awarded penalties is a core tenant of the harmonisation process.
5.94
It also drew attention to the findings of the Best Practice Review of Workplace Health and Safety Queensland:
The Best Practice Review suggested that courts could better exercise their discretion to impose penalties if they could refer to national sentencing guidelines that include guidance on appropriate sentencing ranges that would apply in all jurisdictions. It was suggested that the United Kingdom’s Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences Definitive Guideline could be used as a basis for an Australian guide.
5.95
The ACTU recommended that sentencing guidelines should be developed in consultation with stakeholders in order to ensure consistent and appropriate sentencing for serious WHS breaches across jurisdictions. It provided context for this recommendation by highlighting the differences between jurisdictions in terms of sentencing:
The main objects of the sentencing process are specific and general deterrence. Although the prosecution process is similar across jurisdictions, there are substantial differences between jurisdictions in terms of the courts that hear WHS matters, the maximum penalties available and the options available under general sentencing legislation (if any). For example, in New South Wales, the Commonwealth and the ACT, a court may decide to make an order without a conviction, and can dismiss the charge, or discharge the person on condition that the person enter into a good behaviour bond for a term not exceeding two years or enter into an agreement to participate in an intervention program. On the other hand, in Queensland where a court finds the charges to be proved, there is a conviction. The court has, however, a discretion not to record the conviction, and can also impose penalties, including fines and the kinds of non-pecuniary sanctions set out in sections 236 to 241 of the Model Act. Notwithstanding the fact that the court does not record a conviction, the fact that the defendant was ‘convicted’ may be taken into account by subsequent sentencing courts, and by the prosecuting authorities in later proceedings.
5.96
Additionally, the ACTU provided an example from the United Kingdom (UK) where the Sentencing Council is consulting on proposed new sentencing guidelines for manslaughter offences:
The Sentencing Council is proposing that where an employer has had a long-standing disregard for the safety of employees and is motivated by cost cutting, they can expect a prison sentence of 10 to 18 years should a worker be killed as a result. The Sentencing Council expects that in some gross negligence cases, sentences will increase, for example where a death was caused by an employer’s long-standing and serious disregard for the safety of employees which was motivated by cost-cutting.
5.97
Voice of Industrial Death (VOID), an advocacy group for families impacted by industrial death, also indicated it was in favour of sentencing guidelines having a place in WHS legislation.
5.98
The Department of Jobs and Small Business noted that nationally consistent sentencing guidelines (similar to those in the UK) were being considered by the Boland review.
5.99
In regard to the levels of financial penalties, the ACTU argued that given such monetary penalties are the principal sanction for offences under the model WHS laws, it is essential they are set at appropriate levels. It contended that the penalties as currently set were not an effective enough deterrent for large and profitable companies and moreover did not meet community expectations. The ACTU recommended that consideration be given to increased penalties for larger sized businesses and repeat offenders.
5.100
A number of families informed the committee of their great disappointment and concern with the low level of financial penalties imposed in response to the death of their loved one.
5.101
For example, Mr Jon-Paul Bradley, whose brother Gerard was killed alongside a fellow Irish national workmate in Western Australia in 2015, explained:
It's with regard to my brother Gerard Bradley and also his friend Joe McDermott. On 25 November 2015, they died at the same time as a result of concrete panel that fell from the crane. The concrete panel was being lifted over the top of them. The company have admitted fault. They have been charged. They entered an early guilty plea. We take serious issue with the small amount that they were fined. We feel that this amount doesn't actually change anything. It is a trivial amount. The maximum the amount could have been would have been $400,000. We were told that it is 25 per cent off for an early guilty plea, which is something that we also take issue with. For example, the fine could have been $300,000. Yet in this instance, it was only $160,000. We just ask what more did they need to do in order to get that maximum fine? Even if you have the laws, which we currently think are very, very weak and don't cause any accountability or change, why would you then only charge them half of what they could have actually been charged?
5.102
Mr Mark Murrie, whose son Luke was killed in 2007 in Western Australia, expressed deep concern about the paltry level of fines imposed on the company and directors convicted in his son's case:
Luke's death was not an accident; it was totally foreseeable. The packs had broken before and had been swept under the carpet. Convicted and fined in a trial, they [the company] wanted community service as their punishment. They had an appeal. You get 28 days to appeal. On the afternoon of the 27th day they lodged their appeal. The guilty conviction was upheld and the fines were cut in half—that's the law; cut the fines in half. What sort of message does that send? There was a second appeal. WorkSafe appealed against the fact the fines were cut in half.
With the legal system, they have their appeal and then you've got to sit around and wait to have that handed down. We live 600 kays [kilometres] up the road and we were told at about 2.30 in the afternoon that at nine o'clock the next day they were going to hand down the decision. So we had to pack up and go six hours down the road and get it. With the second appeal, the convictions were still upheld and the fines were put back up to the original ones—$80,000 for the company and $45,000 for each director. We were told at the start of the system that, if they plead guilty, they get a lesser fine. I'm no lawyer, but, when you looked at all the evidence, you could see that they didn't have a leg to stand on. Yet they went through the whole process, the two appeals, and still only got fines of $80,000 for the company and $45,000 for each director. They would have spent more than that on lawyers.
Committee view
5.103
The committee is of the opinion that there is merit in developing national sentencing guidelines to ensure consistent and appropriate sentencing for serious WHS breaches across jurisdictions.
5.104
The committee observes that the low level of penalties handed down in the recent past does not meet community expectations about the gravity of workplace fatalities, nor do they effectively deter other organisations from disregarding the safety of workers.
5.105
In light of this, the committee also urges the government to review the levels of monetary penalties in the model WHS legislation and consider whether there should be increased penalties for larger business or offenders who repeatedly breach the laws.
5.106
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
develop national sentencing guidelines, with direction from the UK experience, and look to undertake consultation with relevant stakeholders about the matter; and
review the levels of monetary penalties in the model WHS legislation with consideration to whether there should be increased penalties for larger businesses or repeat offenders.
Directors' insurance against penalties
5.107
Another of the key issues the committee identified, and which is linked to the efficacy of financial penalties, is the availability of insurance for directors against penalties.
5.108
Associate Professor Neil Foster, a specialist in WHS law at the University of Newcastle who provided evidence in a private capacity, informed the committee:
Research shows that the prospect of personal liability for WHS breaches is one of the key 'drivers' for improvement of corporate safety, and the continued unlawful offering by insurance companies of insurance for directors against WHS penalties seriously undermines that incentive.
5.109
Associate Professor Foster elaborated on this concept at a public hearing and illustrated the common law principles which make this insurance 'unlawful':
The policy of the common law has for a long time been to regard insurance designed to avoid the payment of a criminal penalty by a person as contrary to public policy, and so contracts of insurance or contracts of indemnity are void if they purport to provide for coverage of a criminal penalty. There are a couple of cases, some of which I mentioned in my article, where this principle has been varied—where you've got truly strict liability. If somebody could simply, by virtue of their position, be held responsible for a criminal penalty, the law in the past has sometimes allowed insurance to be taken out for that. But that principle does not apply where there's any degree of fault in the offence that's committed by the director. In that situation, insurance should not be permitted, and is not permitted according to the common law.
Under our work health and safety legislation, the offences committed by company officers are matters which involve personal fault. You cannot be convicted under section 27 of the Work Health and Safety Act unless you've failed to exercise due diligence to ensure that the company has carried out its duties. As a result, insurance against a penalty imposed under section 27 must be void at common law. It's an unenforceable contract, according to all the principles that have been in place for many years. That's a view, I'm pleased to say, that was shared after I'd written my paper to the Chief Justice of New South Wales. Chief Justice Bathurst delivered a paper at a conference where he affirmed that that's his view as well.
5.110
Associate Professor Foster went on to identify why policies are still offered and why this had such an adverse impact on the WHS of workers:
The problem we have is this: insurance policies against criminal penalties are still being issued by insurance companies, and they are still being paid for by companies on behalf of directors, despite the fact that these insurance policies are void and unenforceable. Why is that the case? It seems that we're in a situation where the self-interest of the two parties to the contract will support the availability, at least while no-one challenges it, of these contracts. So company officers would like to have insurance, insurance companies would like to provide these things and receive premiums for them, and so long as we're at a stage where there's not a significantly serious personal penalty that some insurance company decides are way too big, the insurance companies are going to keep on paying out. The people who are forgotten in that transaction are the workers; this insurance, as it were, insulates the directors of the company from the decisions they make in relation to workers.
5.111
To resolve this situation, Associate Professor Foster suggested that Parliament needed to intervene:
…one possibility is to change the legislation to spell out very clearly that such arrangements are unlawful. We have a precedent for that in New Zealand; the 2015 New Zealand legislation explicitly says that such contracts are unlawful. We have a provision in the Work Health and Safety Act 2011, section 272, which broadly says that you can't contract out of your obligations, but it really isn't specific enough to cover this area. In my view, it would be advisable for parliament and the people who are dealing with the model legislation to roll out a provision that makes it absolutely clear that such contracts are unenforceable and illegal. I think that that will improve the incentive of officers when they realise that they may be personally liable for fines and that it can't be covered by insurance arrangements.
5.112
The ACTU also advised the committee that under the model WHS laws there is no provision expressly prohibiting contracts providing liability insurance against WHS penalties:
Section 272 provides that a term of any agreement or contract that purports to exclude, limit, modify or transfer any duty owed under the [WHS] Act is void. However, it is not clear whether a contract for directors’ and officers’ liability insurance indemnifying for penalties under the Model laws would be a contravention of s 272, and this matter is yet to be considered by the courts. As a matter of practice, corporations are readily able to, and frequently do, insure against WHS penalties. As a consequence, it is predominantly insurance companies rather than duty-holders paying fines following successful prosecutions.
5.113
Similar to Associate Professor Foster, the ACTU further noted that New Zealand has a legislated measure to solve this problem:
While no Australian jurisdiction currently prohibits contracts providing liability insurance against WHS penalties, s 29 of New Zealand’s Health and Safety at Work Act 2015 provides a precedent. In New Zealand, an insurance policy or a contract of insurance which indemnifies or purports to indemnify a person for the person’s liability to pay a WHS fine or infringement fee is of no effect, and persons seeking to enter into such a contract commit an offence.
5.114
The ACTU recommended that the model WHS Act be amended to include a new offence prohibiting contracts providing liability insurance against WHS penalties and fines. The Electrical Trades Union also recommended this approach.
5.115
Maurice Blackburn also explored the issue of insurance against penalties in its submission:
A further consideration in the context of the efficacy of penalties is the commercial reality that many corporations are readily able to, and do, insure against the imposition of a fine for a breach of workplace health and safety legislation. The effectiveness of a fine as a deterrent is significantly undermined where an insurer pays a penalty imposed instead of the defendant. This is contrary to good public policy.
5.116
Maurice Blackburn put forward two suggestions to combat the issue:
Maurice Blackburn submits that defendants to WHS related prosecutions should be subject to a legislative requirement to disclose to the Court if the defendant is insured against penalty, investigation costs or defence costs. Where a defendant discloses the existence of such insurance, the Court should have the option of imposing significantly higher fines, or alternative sentences.
An alternative to this approach is to simply legislate that it is unlawful to insure against a fine, investigation costs or defence costs where they apply to an alleged breach of safety legislation.
5.117
The Department of Jobs and Small Business commented that its view was that the model WHS laws should expressly prohibit insurance contracts which indemnify, or purport to indemnify, against penalties imposed for WHS breaches.
Committee view
5.118
The committee finds it utterly reprehensible that insurance policies are available to insure corporations and individual directors against financial penalties handed down for breaches of WHS legislation.
5.119
As numerous submitters identified, to have such policies available significantly undermines the deterrence value of the penalties. Companies that take out this directors and officers insurance show an inexcusable disregard for the consequences of their actions, and the committee finds this behaviour appalling.
5.120
Given that the prospect of personal liability for WHS breaches is one of the core drivers for the improvement of corporate safety, the committee is of the view there is an urgent need for reform to resolve this issue. It is of the strong opinion that the model WHS legislation must be amended to make clear that contracts which purport to offer insurance against criminal penalties are unenforceable and illegal.
5.121
The committee is aware that this matter may be canvassed in the Safe Work Australia review into the model WHS laws, and that Comcare covered the matter in its submission to the review.
5.122
The committee recommends that Safe Work Australia work with Commonwealth, State and Territory governments to:
amend the model WHS laws to make it unlawful to insure against a fine, investigation costs or defence costs where they apply to an alleged breach of WHS legislation; and
pursue adoption of this amendment in other jurisdictions through the formal harmonisation of WHS laws process.
Phoenix activity
5.123
Another matter the committee received evidence on was the prevalence of companies phoenixing to avoid paying penalty fines for WHS breaches. Phoenixing involves the stripping and transferring assets from one company to another by individuals or entities to avoid paying liabilities.
5.124
When asked by the committee whether the ACT Government had a problem with companies simply phoenxing if they have a WHS breach that may involve the possibility of fines, Mr Jones, ACT Work Safety Commissioner responded:
From a regulatory perspective, absolutely. The idea of responsibility under work, health and safety is that everyone, as we say, from the gate to the boardroom, has a responsibility. If a company is just going to wipe the slate clean and start again, clearly that's problematic. As a regulator, yes, I absolutely do have a problem with phoenixing. I think it's a major issue and not just for work, health and safety; it's the same with other parts of industry—construction, quality—as well.
5.125
Although Mr Jones conceded it was not possible for the regulator to do anything about actual phoenix activity, he advised that they did attempt to track some aspect of the behaviour from a WHS perspective:
One of the factors that feeds into our risk profile that we have for our audit program and who we visit and how often is the intel from our inspectors in the field. If a business that has a poor work health and safety compliance record has folded and they pop up again, our guys will pick it up pretty quickly. The risk profile of the old company will follow the new person, and we will pay particular attention to that. We can do that from our own operational mechanisms.
5.126
The ACTU observed to the committee that in many industries it was far too easy for companies to hide behind the 'corporate veil' and phoenix to avoid their liabilities for a WHS offence. It emphasised that there is little point in establishing offences and penalties for WHS breaches if the companies and individuals responsible for the breaches are able to easily evade accountability.
5.127
An example of such behaviour occurred in 2016 when the company AB Recycling sought to evade $800 000 in criminal penalties by phoenixing; shutting down the company and soon after resurrecting it under another name. The fines had been incurred after AB Recycling was found guilty of serious safety violations that led to the death of worker Mr Steve Bower in 2014. An article in the Sydney Morning Herald on the matter included a quote from the then WorkSafe Victoria Executive Director of Health and Safety Ms Marnie Williams:
Their [AB Recycling] attempt to wash their hands of responsibility by shutting down the company once charges were laid, refusing to take part in court proceedings, and starting up a similar company just nine months are after their employee died is utterly contemptible.
5.128
The ACTU argued that the current legal and policy responses, as well as levels of coordination between relevant regulators were not sufficient to stop companies from phoenixing to avoid their legal obligations. It recommended the government consider a number of initiatives to strengthen the ability of regulators to enforce WHS laws against companies likely to phoenix, including:
specific phoenixing offences and penalties;
bans on being a company director if liability for a serious WHS breach is established by a court;
personal liablity for directors and shareholders where a company becomes insolvent because of a failure to maintain a safe work place; and
amendments to ensure penalties administered for safety breaches are enforced through a range of measures (e.g. director identification numbers and government licensing and procurement consequences).
Committee view
5.129
The committee is concerned by evidence received that indicates the some companies attempt to evade accountability for WHS breaches through phoenixing.
5.130
The committee considers it necessary for stronger measures to be introduced to deal with such illegal activity.
5.131
The committee is aware of the work being done the Phoenix Taskforce, an initiative coordinated by the Australian Taxation Office comprising 32 federal, state and territory government agencies.
5.132
The committee is also aware that in September 2017 the Commonwealth Government announced a 'comprehensive package of reforms' to address illegal phoenix activity, including the introduction of a Director Identification Number.
5.133
The committee urges the government to implement such reforms as quickly as possible, and encourages the Phoenix Taskforce to focus part of its efforts on addressing phoenix activity specifically aimed at avoiding penalty fines for WHS breaches.
5.134
The committee recommends that the Commonwealth Government work to implement its announced reforms to combat phoenixing, such as the Director Identification Number scheme, as swiftly as possible.