DIRECTORS AND MANAGERS LIABLE FOR COMPANY OH&S BREACHES

Author: Valentina Misevska

Publish Date: March 7, 2007

A recent decision of the NSW Industrial Court serves as a serious reminder to directors and managers of the extent of their liability for Company breaches of Occupational Health and Safety laws.

The case in question[1]resulted from an incident that took place in 2003 when an employee of Owens Container Services was killed while attempting to clean a tank with a flammable and highly volatile cleaning agent. The tank exploded and threw the employee several metres through the air.

The Company was charged for failing to ensure the health and safety of its employees, under s8 of the Occupational Health and Safety Act 2000 (NSW). Mr Ritchie, a director and CEO of the Company was also charged under s26 which states that directors and managers may be personally liable for breaches of their Company. Ritchie pleaded not guilty.

In 2003, the Company had 80 offices around the globe and employed 1600 workers. Although Ritchie was based in New Zealand, he traveled to all divisions and spent an average of one day per month at the Australian operations.

Ritchie tried to invoke either of two defences available under s26, they being:

1. that he was not in a position to influence a Company’s conduct in relation to the breach. In this respect, he argued that in reality he was too remote from the daily operations of the Company to be influential in the OH&S of each division, and as a result relied on his divisional and site managers (who, it was subsequently revealed, did not have the requisite training and knowledge);
2. that even if he were in a position to influence the Company’s conduct in this manner, he had demonstrated all due diligence in attempting to prevent the breach. In this respect, he argued that he had done so by reviewing OH&S specialists’ reports on the Company’s safety concerns.

Ritchie’s arguments were rejected. He was found guilty and ordered to pay $22,500. It was found that by virtue of his position within the Company, Ritchie did have the power to influence the Company’s policies and practices in relation to OH&S and it was within his power to have proper and effective reporting and safety policies in place.  

This did not mean that he needed to have hands on involvement in the daily operations but he did need to be “active and diligent” in requiring information, reports and recommendations on such issues, in acting on recommendations and in understanding the Company’s business operations.

This decision is an important reminder that directors and managers can be made personally liable for a Company’s breach of the OH&S laws with serious legal consequences.

If you are a director or manager who has the power to influence the Company’s policies and practices in relation to OH&S, then you are exposed.   This legal risk needs to be managed on various levels. Failure to manage such risks could result in a penalty for an individual of up to $55,000 and 2 years imprisonment.

For assistance in undertaking an overview of your Company’s OH&S risk profile and developing an effective legal risk management strategy, please contact  Valentina Misevska or Matthew Smith on 49076300

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