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Who is an officer?

Date: 22/06/2017

There has been equal parts fanfare and scaremongering following the introduction of the Health and Safety at Work Act 2015, which took effect on 4 April 2016.  One of the key changes from the previous legislation is the focus on the top table of organisations, particularly the obligations and liabilities of directors and chief executives.  This has resulted in a lot of uncertainty and questions, and reportedly led to Peter Jackson resigning as a director of Weta Workshop.

The Act establishes a number of “duty holders” each of which is required to perform their statutory duties in order to ensure workplace health and safety.

The primary duty holder is the person conducting a business or undertaking (“PCBU”).  The PCBU will typically be a legal entity, such as a company or partnership.

An “officer” of a PCBU has a duty to exercise “due diligence” to ensure that the PCBU complies with its duties.  The Act sets out the reasonable steps that an officer must take in order to satisfy the due diligence duty.

Under the previous legislation, the officers, directors, or agents of a body corporate or Crown organisation only became liable if they had directed, authorised, assented to, acquiesced in, or participated in the failure of the body corporate or Crown organisation.  In essence, officers under the previous legislation had secondary liability.  Under the new Act, officers have primary liability – an officer could be found guilty of having failed to exercise his or her duty of due diligence regardless of whether the PCBU has failed to meet any of its obligations.  The implications of such a failure are also now much higher: a term of imprisonment of up to 5 years, or a fine of up to $600,000 for the most serious offence.

It is therefore important for organisations to take steps to identify who are its officers, and for senior executives to understand their obligations, including at the point they are recruited.  However, the process involved is not altogether easy.

Some people can be readily excluded from the officer classification.  Consistent with the fact that duties under the Act cannot be transferred, or contracted out of, someone who merely advises, or makes recommendations to an officer is not, themselves, an officer.  Helpfully, WorkSafe has also advised on their website that the mere inclusion of the word “officer” in a job title (e.g. a Police Officer) does not result in officer status.

Equally, some people can be readily included in the officer classification.  The first part of the officer definition in the Act defines officers by reference to the PCBU.  For example, if the PCBU is a company, any person who is a director of that company will be an officer; or if the PCBU is a partnership, any person who is a partner will be an officer.  Chief Executives will also be included by virtue of their specific inclusion in the second part of the definition.

It is the second part of the definition, however, that gives rise to difficulty in identifying a PCBU’s officers.  It states that an officer includes:

…any other person occupying a position in relation to the business or undertaking that allows the person to exercise significant influence over the management of the business or undertaking.

There is a lot of room for argument as to the meaning of the words “exercise significant influence” and they have not yet been tested in the courts. 

Some guidance can be derived from Parliament’s intentions in respect of the definition.  The Transport and Industrial Relations Committee, in its report on the Health and Safety Reform Bill, which recommended changes to the definition, stated that:

The designation ‘officer’ should be confined to people in very senior governance roles, such as directors and chief executives.  (Emphasis added).

WorkSafe says that “officers have a duty because they make policy and investment decisions that can affect workers’ health and safety.”

A recent decision of the Industrial Court of the Australian Capital Territory (McKie v Al-Hasani and Kenoss Contractors Pty Ltd (in liq) [2015] ACTIC 1) considered a different definition of officer, but is nevertheless of interest.  In concluding that a project manager was not an officer, the Court placed significant weight on the distinction between “operational” roles, which are not officers, and “organisational” roles, which are.

All of the guidance indicates that officers will be a reasonably narrow band of people at the top of an organisation.  However, care needs to be taken in conducting the classification exercise.  It is also important to remember that an internal decision as to who is an officer will not ultimately trump the statutory definition.  Accordingly, where there is doubt, it may be preferable to have everyone at your organisation’s top table acting as though they are officers because the consequences of getting it wrong could be significant.  

published in HRINZ magazine, written by David Traylor