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“Occupational Health and Safety” Corporate Liability and the Regulation of Officers: New Zealand Reform

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“Occupational Health and Safety” Corporate Liability and the Regulation of Officers: New Zealand Reform Victoria University of Wellington, Faculty of Law, LAWS 582, Stella Kasoulides Paulson Stella Kasoulides Paulson “Occupational Health and Safety” Corporate Liability and the Regulation of Officers: New Zealand Reform LLM RESEARCH PAPER LAWS 582: MASTERS LEGAL WRITING FACULTY OF LAW 2014 1 2 Occupational Health and Safety, Corporate Liability and the Regulation of Officers Table of Contents LLM RESEARCH PAPER lAWS 582: Masters Legal Writing 1 FACULTY OF LAW 2014 1 Abstract 4 Word length 4 I Introduction 5 II Regulatory Breakdown 9 A Workplace Health and Safety Regulation – Setting the Scene 9 B Regulatory Breakdown – A History 10 1 “New” governance 10 2 Old governance in New Zealand – pre Robens 11 3 Robens in New Zealand 12 C Current State of Affairs – Regulatory Failure 15 D The Move to Reform 16 1 Features of the proposed reform 17 III OHS and Corporate Liability – the Fundamentals 19 A The Business Case 19 B Company Law and Occupational Health and Safety Regulation 20 1 Company law and directors duties 20 2 Personal drivers within the corporate set-up 21 C Companies and Occupational Health and Safety – in light of corporate drivers 22 1 The cost benefit equation 22 2 Analysing the cost benefit equation 23 3 The new governance argument 24 D The Fundamental Issue – and How to Counter It 25 IV The New World of Work 26 A Regulating the New World of Work 26 B New Elements of a New World of Work – and the Officer Duty 28 1 New harm 28 2 New work arrangements 29 3 Modern pace 30 4 Decline in union density 31 V The Need for Effective Inducement 31 A A Personal Duty with Personal Incentives 34 B Fines and Penalties 34 VI The Importance of Leadership and Culture Setting 36 A Culture Setting – The Role of Officers’ 36 B Creating a Health and Safety Leader 37 1 High-ranking officers in particular 38 VII The Officer Duty 39 A The Traditional Approach to Regulating Officers 40 B The Officer Duty 40 1 Due Diligence 41 2 A Negligence Based Standard 43 3 The duty to monitor – a new (private-sector funded) safeguard 45 2 Victoria University of Wellington, Faculty of Law, LAWS 582, Stella Kasoulides Paulson C Limits of the Duty as Drafted 46 1 Definitions 47 VIII Conclusion 51 Bibliography 53 3 4 Occupational Health and Safety, Corporate Liability and the Regulation of Officers Abstract This paper examines the concept of corporate liability in the context of occupational health and safety in New Zealand. In particular it looks at the new duty of officers proposed in the Health and Safety Reform Bill 2014. New Zealand’s occupational health and safety framework has experienced a regulatory breakdown, stemming from its incomplete implementation of the Robens Model for health and safety regulation. That breakdown involves many flaws and gaps, especially as far as corporate liability is concerned, while the modern world of work has created new challenges to health and safety regulation. This setting demands a new regulatory tool to create effective corporate liability and increase the compliance of companies’. This article examines the new world of work and the inherent clash between OHS regulation and the corporate world to reveal two main conclusions; the major barrier to company compliance is a lack of effective inducement; and there is a desperate need to create health and safety leaders within companies, in order to create a positive health and safety culture. These two conclusions promote the main proposition of this paper, that the proposed duty of officers will be instrumental in improving the state of workplace health and safety. This paper examines the duty, as drafted, to emphasise its potential and to highlight certain flaws which may limit that potential. Word length The text of this paper (excluding cover pages, table of contents, footnotes and bibliography) comprises approximately 12, 083 words. Subjects and Topics Occupational Health and Safety – Corporate Liability – Officer Duty - 4 Victoria University of Wellington, Faculty of Law, LAWS 582, Stella Kasoulides Paulson I Introduction At 3:45 pm on 19 November 19 2010 a disastrous methane explosion ripped through the Pike River underground mine in the West Coast region of New Zealand. The tragedy resulted in the death of 29 workers and is the country’s most devastating workplace accident in almost a century. 1 The Pike River disaster received extensive media coverage, 2 which served to increase public attention, spurring widespread public outcry. The disaster awakened the people of New Zealand to the shameful state of their nation’s workplace health and safety regulation. In this way, it acted as a catalyst to the reform of New Zealand’s workplace health and safety framework. 3 In the wake of the Pike River tragedy the New Zealand government established two bodies to assess the state of occupational health and safety ( OHS ). The government first established the Royal Commission on the Pike River Coal Mine Tragedy, just days after the explosion. 4 The Commission had a broad mandate to discover what happened at Pike River, why, and identify how to avoid it happening again. 5 A year and a half 1 (06 November 2012) 685 NZPD 6273. 2 See generally, “Latest on the Pike River coal mine disaster” Stuff <http://www.stuff.co.nz/national/pike-river-mine-disaster>, see also; “Mine explosion gets worldwide coverage” The New Zealand Herald (online ed, 19 November 2010, at <http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10688829 >). 3 Simon Bridges “Speech to EMA Occupational Health and Safety Conference” (Auckland, 17 April 2013); See generally, Kate Chapman and Deidre Mussen “Pike River report: Learn from tragedy – Minister” Stuff (online ed, 11 April 2013, at < http://www.stuff.co.nz/national/politics/8536948/Pike-River-report-Learn- from-tragedy-Minister>) on how the experience of the tragedy demands we learn and change, the approach of the government was to emphasise the opportunity to learn, in this way the tragedy acted as a catalyst for change. See also, Deidre Mussen “Training facility in memory of Pike River” Stuff (online ed, 03 November 2013, at <http://www.stuff.co.nz/national/9357520/Training-facility-in-memory-of- Pike-River>). 4 “Royal Commission on the Pike River Coal Mine Tragedy” (16 December 2010) 173 New Zealand Gazette 4261, (hereinafter, the Royal Commission). 5 “About the Pike River Royal Commission” (29 November 2010) Pike River Royal Commission <http://pikeriver.royalcommission.govt.nz/About-the- Commission>. And see “Royal Commission on the Pike River Coal Mine 5 6 Occupational Health and Safety, Corporate Liability and the Regulation of Officers later on 16 April 2012 the Cabinet agreed to the establishment of the Independent Taskforce on Workplace Health and Safety. 6 The Taskforce’s terms of reference were broader still, requiring that it; identify whether the health and safety system as a whole is fit for purpose, and recommend a package of measures that will result in a 25 per cent reduction in the rate of fatalities and serious injuries by 2020. 7 Each inquiry identified a multitude of flaws in New Zealand’s health and safety framework,8 and that those failings have resulted in widespread noncompliance. Each body urged for immediate and drastic action. The Government responded with a proposal for extensive reform, the biggest reform of health and safety regulation in over twenty years, in the form of the Health and Safety Reform Bill 2014.9 The proposed Health and Safety in Reform Bill (the Bill) is explicitly based on the Model Work Health and Safety Act 2011 (the Model Act) promulgated in Australia only a few years earlier, 10 allowing New Zealand to capitalise on the extensive research and planning that went in to the Australian reform. 11 Tragedy” (16 December 2010) 173 New Zealand Gazette 4261, for detailed Terms of Reference. 6 Cabinet Minutes “Terms of Reference for the Independent Taskforce undertaking the Strategic review of the Workplace Health and Safety System” (16 April 2012) CAB Min (12) 12/14, (hereinafter the Taskforce). 7 Cabinet Minutes, above note 6, at [2] and [4]. 8 The Report of the Independent Taskforce on Workplace Health and Safety: Main Report (Ministry of Business Innovation and Employment, April 2013), at [20]. 9 Health and Safety Reform Bill (2014) (192-1) (hereinafter the Bill). The Bill was introduced into Parliament at the time of writing this paper, in March 2014, and the Select Committee is not due to report until September 13 th 2014 (well after the completion of this paper). Thus, the paper cannot comment on any suggestions or alteration made during the Select Committee process or from any debates at the various readings. The Bill is not set to be passed until 2015. 10 Model Work Health and Safety Act 2011 (Aus), (hereinafter the Model Act ). 11 See Generally; Susy Frankel and John Yeabsley “Features of the Uniqueness of New Zealand and their Role in Regulation” Regulatory Reform Toolkit <http://www.regulatorytoolkit.ac.nz/resources/papers/book-3/chapter-1- features-of-the-uniqueness-of-new-zealand-and-their-role-in-regulation> 6 Victoria University of Wellington, Faculty of Law, LAWS 582, Stella Kasoulides Paulson The reform heeds the warnings of each inquiry, and proposes various tools to address them. To analyse the Bill in its entirety is far beyond the scope of this paper. Rather, this paper’s focus is the issue of corporate liability, and in particular, one aspect of the reform central to that issue, the regulation of senior managers, directors and high-ranking officers. The Bill includes a new ‘duty of officers’, 12 which for the first time, will demand that decision makers within firms actively participate in health and safety matters.
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