June Newsletter

The Start of the testing of the new LAWS!!!!!!!Contractor Management Requirements.

Hope this all finds you safe and well and the business you undertake is humming along, especially in these somewhat “difficult” times.

We are starting to get through feedback re the effects on the work place and the Harmonisation roll out. As you probably have heard by now WA is still “talking” about coming across and we now believe it is down to the inclusion of the Mining Act, so slowly getting there. Victoria have decided they are unable to afford the implementation, which is a pity seeing the “base model” was on the Victoria Act in the first place, so in saying this we are all still right in the middle of new terminology and WHS SPEAK!!

So as we said first up in this newsletter there is the “starting” of some challenges in the Courts re the legislation so I thought we should share this with you. These are primarily re Contractor Management….a hot topic from what I hear out there!!!!!!

Clarifying contractor management:

17 April 2012

The recent decisions of the High Court of Australia in Baiada Poultry Pty v The Queen and the Supreme Court of Western Australia in Kirwin v The Pilbara Infrastructure Pty Ltd2 provide valuable guidance to persons conducting a business or undertaking (PCBUs) on what is expected to achieve compliance with work health and safety obligations, particularly when engaging expert contractors (summaries of the cases can be found at the end of this article).

Why are these decisions important?

With the harmonised work health and safety (WHS) laws now commenced in five jurisdictions (Queensland, NSW, NT, ACT, Commonwealth) many PCBUs are considering how best to achieve compliance with the new obligations imposed. One of the key changes under the legislation is that the primary duty is no longer a duty owed by an employer to its employees, but rather a duty owed by a PCBU to its ‘workers’. The term ‘worker’ has been given an expansive definition and includes contractors, sub-contractors, labour hire employees and outworkers. The breadth of the new primary duty means that it is more important than ever for businesses to understand their obligations to contractors and develop and implement sound contractor management strategies.

How can contractor management impact your exposure to risk?

Choosing the correct contractor management strategy for each situation is important and doing so is likely to result in improved safety, legal and commercial outcomes. Whilst WHS responsibilities cannot be delegated they can be allocated. By allocating responsibility to a contractor with appropriate expertise a PCBU improves safety and reduces its exposure to liability under WHS laws, reduces the risk of prosecution for its workers and officers and reduces exposure to common law claims for personal injury, commercial loss and the like.

What is required of PCBUs to comply with the primary WHS duty?

While both Baiada and Pilbara Infrastructure are prosecutions under pre-harmonisation laws, they provide important commentary on how WHS duties should be interpreted and understood. In particular, the following observations were made:

  • While the legislation imposes a duty to be proactive in the pursuit of safety, the offences are criminal in nature. The obligation is not to ensure that accidents never occur, but to ensure that everything that is reasonably practicable is done to ensure that workers are safe from hazards.
  • Demonstration that a step could have been taken does not, without more, demonstrate that failure to take that step was a breach of the obligation so far as is reasonably practicable to provide a safe working environment.
  • It is for the prosecution to prove that whatever measures it alleges the defendant should have taken would have been reasonably practicable and more practicable than whatever steps were in fact taken (eg relying on a contractor).
  • The primary duty does not require a PCBU to provide the safest working environment that is reasonably practicable, but rather to provide one among a range of reasonably practicable safe working environments. 
  • Conduct should not be assessed with the wisdom of hindsight and it should not be assumed that errors exposed later were obvious at the time.

These comments make clear that while the obligations imposed by WHS legislation are onerous PCBUs can achieve compliance by taking the reasonable steps that an employer in their position would take. Employers are not required to take every ‘possible’ step that could be taken.

What do Baiada and Pilbara Infrastructure tell us about contractor management?

Baiada and Pilbara Infrastructure both involved the prosecution of businesses which engaged specialist contractors to perform particular tasks. In each case it was alleged that the business engaging the contractor (the Principal) failed to take ‘reasonably practicable’ steps to ensure safety in connection with those tasks and that engagement of an expert contractor alone was insufficient to discharge the Principal’s duty. Importantly, the courts rejected this later proposition and indicated the following:

  • Reliance by a Principal on independent contractors alone is capable of achieving compliance with the Principal’s WHS obligations.
  • While the state of knowledge referred to in the definition of ‘reasonably practicable’ is objective, it is objective with respect to the particular person in question. A Principal is not expected to have the same expert knowledge as the specialist contractor that it engages, but is judged against the knowledge that other Principals in their position have.
  • In some circumstances the engagement of independent contractors may be the only reasonably practicable way of ensuring and maintaining a safe working environment. Very often those who engage independent contractors (i.e. Principals) know much less about safety than the independent contractors do.
  • If a Principal relies upon a specialist contractor to perform a task which falls within the contractor’s expertise and outside that of the Principal and if the task appears to have been carefully and safely performed by the contractor, then ordinarily the Principal will have met its duty.
  • The fact that a Principal has safety procedures for its own plant and employees does not mean that it must require its contractors to put those procedures in place for their employees or that it must check they were being observed.
  • It is not enough for a Principal to merely assume that someone will attend to safety requirements, but if such an assumption is based on inquiries made, assurances given, a reasonable belief as to the skills of the responsible contractor and a reasonable belief that regulatory (building) approval has been obtained then it may be well-founded.
  • If a Principal is alerted to a particular risk or issue by a specialist contractor then there may be further steps that it is reasonably practicable for them to take.

What should PCBUs do?

The changes under WHS harmonisation have brought the issue of dealing with contractors sharply into focus, with many PCBUs reviewing their approach to contractor management. While the Baiada and Pilbara Infrastructure decisions relate to duties owed under pre-harmonisation legislation in Victoria and Western Australia, the analysis of what it is reasonably practicable for a Principal to do when engaging contractors is equally applicable to the primary duty under the Model Work Health and Safety Act.

PCBUs should consider the following to ensure they are complying with their obligations to contractors:

  • Develop an appropriate contractor management strategy. Here, in broad terms, the options range from high control with high exposure at one end of the spectrum to low control with low exposure at the other end. Each situation should be assessed on its merits.
  • Ensure that contractual documentation is consistent with the strategy chosen for each situation.
  • Review the processes and procedures available on the ground to support implementation of the strategy and contractual obligations.

PCBUs will need to consider what steps are reasonably practicable for them to take during the various stages of the contracting process. Different approaches are likely to be necessary for different categories of contractors (eg expert contractors versus labour hire) and different types of work (eg construction versus services contracts). As outlined above, taking these steps has the potential to significantly reduce the risk profile of businesses.

Baiada Poultry Pty Ltd v The Queen

The facts

Baiada Poultry Pty Ltd (Baiada) runs a chicken processing plant and has in place contracts for the raising, catching, crating, loading and delivery of chickens to that plant. Baiada engaged DMP Poultech Pty Ltd (DMP) to catch and cage chickens at a farm and then load the cages onto a trailer using a forklift. Baiada also engaged Azzopardi Haulage to provide a driver and truck to take an empty trailer of chicken cages supplied by Baiada first to the farm where DMP would fill them and then to Baiada’s chicken processing plant. An unlicensed chicken catcher was loading the cages onto the trailer once they had been filled when one of the cages fell from the trailer onto Mr Azzopardi, killing him.

The legal issue

At trial Baiada argued, firstly, that it did not have control in relation to the traffic management employed by DMP at the time of the incident and so did not owe a duty with respect to that issue. Secondly, if it did have control in relation to the matter, it was entitled to rely upon the expertise of its sub-contractor (DMP), whose direct employee and forklift were involved in the incident. Baiada were found guilty at trial and the issue on appeal was whether the inadequate direction of the jury at trial had led to a substantial miscarriage of justice and so required a retrial to be held. In considering this procedural issue the High Court examined the nature of the duty owed by a Principal when engaging expert contractors.

The findings

The court found that there had been a substantial miscarriage of justice because the trial judge failed to direct the jury that the prosecution had to prove beyond reasonable doubt that the appellant’s engagement of apparently skilled sub-contractors to perform the work did not discharge its obligation, so far as was reasonably practicable, to provide and maintain a safe working environment. In reaching its finding the court commented that the fact the prosecution had pointed to additional steps Baiada could have taken did not mean these steps were reasonably practicable. Further, an interpretation of the duty that meant reliance on independent contractors alone was incapable of achieving compliance was an extreme one.

Kirwin v The Pilbara Infrastructure Pty Ltd

The facts

When tropical cyclone George hit a railway camp in the East Pilbara in March 2009 workers took shelter in pre-fabricated buildings (known as dongas). The dongas did not meet applicable standards and so, a number of workers were injured (including some fatally) when a number of the dongas lifted in the wind and collided. The Pilbara Infrastructure Pty Ltd (TPI) had engaged Spunbrood Pty Ltd trading as NT Link (NT Link) to build the railway camp. TPI had also engaged Spotless Services Australia Pty Ltd (Spotless) to act as project manager for the building of the camp during the request for tender (RFT) stage.

The legal issue

The key issue in the case was whether TPI, in its role as the Principal who contracted the construction of the dongas, had done everything reasonably practicable to ensure that the dongas were properly constructed and safe refuge in the event of a cyclone. The steps taken by TPI involved procuring the services of apparently well-qualified and experienced experts (NT Link) to design and identify the suitable specifications for the dongas. The regulator asserted that TPI should have done more, in particular that it should have engaged the services of an appropriately qualified engineer specifically to ensure that the dongas were built to relevant wind specifications (ie engage a further expert to review the work of NT Link).

The findings

The court rejected the position of the regulator and found that whilst TPI could not contract out of or delegate its duties, it could perform those duties by ensuring that an appropriately experienced and qualified person (NT Link) was retained to deal with matters beyond its knowledge and ability. In reaching its findings, the court closely examined the terms of the contractual documentation between the parties and ultimately relied on this information to determine their respective responsibilities for safety and design matters.

So as you can see there is now “proof” testing of the new laws in the Courts and the findings are wide spread responsibilities, more so than before.

We apologise for the length of this newsletter but I think you will agree the information is important to you all.

Again, let us know if there is anything further you need answers or clarification on, or maybe just feedback on concerns and issues you have faced with the implementation.

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