Fewer Protections and More Prosecutions for Businesses and Officers?
On 21 March 2024, the Queensland Parliament passed the Work Health and Safety and Other Legislation Amendment Bill 2023 (the Bill), which includes amendments to the Work Health and Safety Act 2011 (Qld) (the WHS Act) that will significantly decrease the ability of businesses and company officers to protect against the potential financial consequences of breaches of the WHS Act.
It is unlikely the changes will stop there, as the original form of the Bill, and the Parliament’s approach in passing the amended version of it, suggests there will be further amendments in the near future that will increase the risk of businesses and officers being prosecuted for serious, indictable offences under the WHS Act.
Prohibiting Insurance and Indemnities for WHS Penalties
The Bill introduces a new offence, punishable by a fine of up to $50,000, of entering into, providing, or receiving a payment under, a contract of insurance, or any other similar arrangement that insures or indemnifies a person against all or part of a monetary penalty that might be imposed under the WHS Act.
Significantly, the Bill also contains a new provision that voids any term of a contract of insurance, indemnity, or other similar arrangement to the extent that it is designed to insure or indemnify a person against a monetary penalty that might be imposed under the WHS Act.
A monetary penalty includes a fine that might be imposed on a person convicted of an offence against the WHS Act.
These amendments will mean that businesses can no longer use insurance or like arrangements to protect against possible financial liability for an offence against the WHS Act (or a contravention of a civil penalty provision). They will become liable to pay the full amount of any monetary penalty imposed for a breach of the WHS Act.
The Bill includes a defence to this offence if the person has a reasonable excuse for their conduct, for example, entering into an insurance contract believing, based on negligent legal advice, that it did not cover monetary penalties under the WHS Act. Importantly, simply attempting to protect against the potential financial impacts of monetary penalties under the WHS Act will not constitute a reasonable excuse.
It is not only persons conducting a business or undertaking (PCBUs) that are at risk from these amendments. Officers and workers will be exposed to a similar risk:
1 . If a body corporate commits the offence, each officer of that body corporate is taken to have committed the same offence if they authorised or permitted the conduct (entering into, providing, or receiving payment under a contract of insurance or indemnity) or were directly or indirectly knowingly concerned in the conduct. This means that, for example:
(b) If a CEO causes a company to indemnify a worker of the company against a fine imposed on them for an offence against the Act, both the company and the CEO will have committed the offence and will be liable to a fine of up to $50,000.
2 . The prohibition on indemnifying a person for their liability for a monetary penalty under the WHS Act means that companies and employers cannot pay monetary penalties imposed on an officer or worker on their behalf. Any officer or worker who has a fine or civil penalty imposed on them under the WHS Act will be personally required to pay the monetary penalty, with no payment or reimbursement from their company or employer.
Category 1 Offences and Industrial Manslaughter – Lowering the Threshold and Widening the Net
If it is the banning of insurance against WHS Act fines that is the low-pressure system coming from one direction, it is the likelihood of amendments to the industrial manslaughter and Category 1 offences in the WHS Act that is the high-pressure system coming from the opposite direction, to create the metaphorical Perfect Storm of WHS Legal Risk brewing on the horizon.
In its current form, a Category 1 offence involves reckless conduct – the person engages in conduct that exposes an individual to a risk of death or serious injury or illness, and is reckless as to that risk. For a person to be reckless about a risk, they need to have an actual awareness that the risk exists, and act with indifference to, or in conscious disregard of, that risk.
When it was originally introduced, the Bill proposed to amend the WHS Act to add an alternative fault element for a Category 1 offence, so that a person could also be prosecuted for the offence if they engage in the relevant conduct “with negligence”. Negligence is an objective fault element, and generally easier for prosecutors to prove than recklessness.
The Bill did not include any proposed definition of “negligence”. Under the common law in Queensland, criminal negligence does not require proof of any awareness or other state of mind by the person said to have committed the offence. It involves “such disregard for the life and safety of others as to amount to a crime against the State and conduct deserving punishment”[1] or “such a great falling short of the standard of care which a reasonable [person] would have exercised, and which involved such a high risk that [harm] would follow, that the act or omission merits punishment under the criminal law”.[2]
The proposed new negligence offence was intended to fill an obvious gap in culpability between the current Category 1 (reckless conduct) offence and the Category 2 offence, which is one of strict liability. It would also have addressed, in part, the disparity (accordingly to some) in fault elements between Category 1 with recklessness on the one hand, and Industrial Manslaughter with negligence – and significantly greater penalties – on the other.
The proposed amendment to the Category 1 offence was removed from the Bill before it was passed, but all indications are that this will only be temporary.
In February 2024, the Queensland Work Health and Safety Prosecutor completed a review into the industrial manslaughter offences in Queensland and made a number of recommendations for amendments to those offences, including:
- Removing the requirement that the worker died in the course of carrying out work for the business or undertaking, and instead requiring only that the worker died in the course of carrying out work for a business or undertaking (to account for contractual chains of businesses involved in particular work, and different corporate structures);
- Expanding the application of the offence so that it covers not only deceased workers but also workplace bystanders.
The Explanatory Notes to the removal of the proposed amendment to the Category 1 offence say that removing that amendments from the Bill will give the government the opportunity “to consider implementation of recommendations from the Industrial Manslaughter Review and amendments to Category 1 offences in a comprehensive manner at the same time”. In other words:
- The government still plans to amend the WHS Act to create the new negligence conduct offence; and
- They are further considering amendments to the industrial manslaughter offences that would broaden their application and increase the circumstances in which businesses and company officers can be found guilty of those offences.
What follows is the substantial prospect of a significant increase in Queensland of the prosecution of indictable offences resulting from work health and safety incidents. It is not difficult to foresee the prosecution of Category 1 negligence offences for many of the alleged breaches of the WHS Act that would previously be prosecuted as Category 2 breaches. It is at least arguable that many breaches of health and safety duties, leading to exposure to a risk of injury, commonly involve conduct that falls short of the standard of care expected, and a sufficiently high risk of harm, to amount to criminal negligence.
The addition of negligence as an alternative fault element for a Category 1 offence was specifically designed to “lower the threshold for conviction for Category 1 offences”, in response to the view that “the threshold of reckless conduct is contributing to a low number of successful Category 1 prosecutions”.[3] In simple terms, the point of the proposed amendment was to make it easier to prosecute businesses and officers, and to get more convictions for Category 1 offences.
The maximum penalty for the proposed negligent conduct offence would be $3,000,000, the same as for the existing reckless conduct offence. The maximum penalty for industrial manslaughter is $10,000,000.
To date, for reckless conduct offences involving fatalities, multiple companies have been fined between $800,000 and $1,000,000. For more serious examples of Category 2 offences, such as those involving fatalities, companies are commonly fined between $150,000 and $300,000. If the proposed negligent conduct offence is ultimately passed, we can therefore expect fines imposed upon PCBUs for Category 1 negligence offences will sit somewhere within the range of $300,000 to $1,000,000 in most cases.
Officers of companies would also be at greater risk of prosecution from these potential amendments and would face a maximum penalty of 5 years imprisonment, or a fine of up to $600,000, if convicted of a negligent conduct offence, or up to 20 years imprisonment for industrial manslaughter.
What Does this Mean for PCBUs and Officers?
With an increased risk of prosecution for serious, indictable offences under the WHS Act, the financial risk for a breach of the WHS Act will be greater than ever. The foreshadowed potential amendments to the Category 1 and industrial manslaughter offences have the potential to lead to significantly increased fines. Because of the amendments that have already been passed, responsibility for the payment of those fines will sit solely with businesses and their officers.
The new provisions relating to insurance and indemnities for WHS penalties commence when the Bill receives royal assent, and the provision that voids any term of contract or arrangement that insures or indemnifies against liability for a monetary penalty under the WHS Act will apply immediately from that time.
However, the prohibitions on entering into and providing contracts of insurance, indemnities, and other similar arrangements will only apply in relation to contracts and arrangements entered into, or indemnities provided, from the day 6 months after the commencement of the provisions. Similarly, the prohibition on receiving payments or benefits under one of those contracts or arrangements will only apply from 18 months after commencement.
What Next?
Now is the time to review WHS compliance measures, including WHS due diligence compliance.
Businesses and officers should take steps to ensure compliance with their duties and obligations under the WHS Act before the Bill receives royal assent and all insurance policies and indemnities for WHS penalties become void, and before any of the potential amendments are made to the most serious offences in the WHS Act.
The need for businesses in Australia to implement “best practice” work health and safety compliance is as great as ever. With an increase in the national fatality rate highlighting the ever present need to protect workers and others, the surge in compliance activity (including prosecution activity) has created unprecedented legal risk, which will only continue to increase.
At MacDonnells Law, we draw on our unique experience and understanding of WHS legislation to provide comprehensive and practical advice and training regarding WHS compliance. We can assist to protect the interests of businesses and officers through effective compliance. We have experience across the country in advising SMEs and large corporate entities and their officers on WHS compliance.
Reach out to our WHS, Regulatory and Prosecutions practice group if you would like to discuss how we can assist.
[1] R v Bateman (1925) 94 LJKB 791; [1925] All ER Rep 45.
[2] R v Shields [1981] VR 717.
[3] Work Health and Safety and Other Legislation Amendment Bill 2023 Explanatory Notes p16.
