The Institute of Directors recently released its new Good Practice Guide for Health and Safety Governance (Guide) in association with WorkSafe, the Business Leaders Health and Safety Forum, and the General Manager Safety Forum. The Guide replaces the 2016 edition, providing updated guidance for directors on how to comply with their due diligence obligations under section 44 of the Health and Safety at Work Act 2015 (HSWA).
As the view of the lead regulator and of professional governance bodies, the Guide is likely to be pointed to in future as indicating what is reasonable for officers to have done by way of due diligence.
Under section 44 of the HSWA, directors (and other officers) of a person conducting a business or undertaking (PCBU) must exercise due diligence to ensure that the PCBU complies with its duties. Among other things, this requires taking reasonable steps to acquire knowledge of health and safety matters, understanding the risks of the workplace, and ensuring that the PCBU has appropriate processes and resources to minimise risks.
This duty is independent – every officer is required to exercise due diligence, and the duty applies regardless of how well the PCBU is managing those risks.
This update also comes at a time where there has been increased focus on officer obligations under the HSWA, following the acquittals of the directors of Whakaari Management Ltd (see more here), and the trial of the former CEO of the Ports of Auckland, which recently wrapped up. This was the first trial of an executive of a large-scale company for alleged due diligence failures.
What is the Guide all about?
The Guide notes a lack of progress on health and safety since the HSWA came into force and says that a "new approach" is needed. This echoes the recent report on Better Governance from the Business Leaders Health and Safety Forum. That report noted that WorkSafe has indicated an intention to increase its focus on boards and officers, that an average of 77 kaimahi / workers have been killed each year while working over the past five years, and that there are an estimated 5,000 to 6,000 hospitalisations each year due to work-related ill health.
To address these issues, the Guide takes a broader approach to the responsibilities of directors within a wider health and safety "ecosystem", with an increased emphasis on not just what officers do, but how they do it. This is reflected in the "5Cs" set of questions designed to encourage self-reflection by the entire governance team.
The Guide specifically identifies mental health risks and the even wider concept of "wellbeing", requiring a "positive and supporting working environment, both in terms of culture and the provision of adequate training, resources and good work design".
The Guide provides some, albeit limited, commentary for senior managers who may also have due diligence obligations.
The Guide replaces the four key "elements" of due diligence from the 2016 edition, with three overarching areas of focus:
- What you need: ensuring that the foundations for good governance are in place, such as governance systems, induction processes, and structured assurance programmes.
- What you do: ensuring that officers undertake the right activities that support the following five principles of better health and safety governance:
- Learn and Develop: Directors should actively learn and develop contextual knowledge on health and safety, risk management, and workers' behaviours.
- Anticipate and Understand: Directors should look ahead to how potential changes could affect future work, particularly where this could lead to serious negative outcomes, even if the risk is low.
- Plan and Resource: Directors should invest in understanding what is needed for work to go well under unexpected circumstances and recognise that positive health and safety outcomes require sufficient people and resources to cope with that complexity.
- Trust and Verify: Directors should trust people to give advice and implement the decisions made, but they must also verify that those things happen and that the systems and controls work.
- Monitor and Respond: Directors should monitor their work, seeking and welcoming genuine insights (which is more than looking only at numbers), and respond in a way that encourages honesty and transparency without attempting to shift the blame.
- How you do it: adopting the right mindset to take an active and open approach to health and safety, using the "5Cs" (Courage, Capability, Curiosity, Context and Care).
The Guide notes that these principles do not map neatly onto the due diligence duties specified in the HSWA, but it provides a diagram illustrating how each principle relates to those duties.
There is also an accompanying "Quick Guide" and "Self Assessment" for directors, which can be found here.
What does it all mean for officers now?
As the Guide notes, good governance itself has not changed. The new Guide does not mean that every PCBU needs to radically revise its Board processes and governance structures, but it does provide a natural point for reflecting on what is working well and what could be done better. For example, is the Board receiving the right types of information and are the directors in a position to meaningfully test the information provided?
Good governance is not just about avoiding prosecution, and the Guide is not limited to that purpose either. However, prosecutions of officers have occurred and will continue. Directors who can demonstrate that they have done the sorts of things recommended in the Guide will be well placed to show that they have exercised due diligence, even in cases where things have gone wrong.
Please get in touch with a member of the team if you would like to discuss anything raised in this article.