What does a committee and the board of directors of BHP have in common?
By Frank Higginson12 Mar 2012
Certainly it is not the pay packets, or share bonuses based on performance. It is also unlikely to be the first class plane junkets to London, or a heavy reliance on China.
Could it be that both might have someone on them named Marius? Yes, but probably only in very limited circumstances.
Enough of the alleged humour (if you can call it that); perhaps we should return to what we do best.
The answer actually is that each has identical obligations under the new Work Health and Safety Act 2011 (‘the WHSA’) which commenced on 1 January 2012. There is no grace period for compliance, and the obligations are operating now.
Please forgive the length of this update. Normally we like to keep them short and sweet, however due to the nature of the issues we are discussing, this is much longer.
New work health and safety laws
It has been agreed that each state will introduce an identical regime of workplace laws. This has happened in Queensland, NSW, the ACT and the Northern Territory. For the bush lawyers out there, you can get some more background here.
Bodies corporate have always been subject to the WHSA obligations, but the new laws change the obligations of committee members and impose incredibly serious penalties of a criminal nature against officeholders of entities that breach them.Is your body corporate a PCBU?
If your body corporate is, what is now called, a Person Conducting a Business or Undertaking (a ‘PCBU’), then the statutory obligations of committee members are identical to those of the directors of BHP.
There has been an attempt to exclude a body corporate as we know it from the WHSA. The definition is very tight. A body corporate is exempt from complying with the WHSA if its only responsibility is for common areas used only for residential purposes.
Our view is that this exemption will only apply to a very limited number of smaller bodies corporate. A body corporate will be a PBCU (and therefore not exempt from the WHSA compliance) if:
- it employs anyone (as opposed to contracting them like in a management rights arrangement); or
- any of the lots or common property are used for what could be considered non-residential purposes. This includes:
- lots being used for short term rentals or student accommodation;
- a commercial use of any of the lots (ie home offices or a letting business under a management rights business);
- leases over common property for things like telephone towers and the like;
- the common property is used for any commercial purpose whatsoever (ie boot camps, aqua aerobics etc); and
- the body corporate allows owners to perform work like gardening or maintenance on common property.
The threshold issue that all bodies corporate immediately need to understand is whether or not they are a PCBU.
If your body corporate is a PCBU then…
It needs to immediately put in place appropriate plans to deal with the obligations in the WHSA. These plans need to be site specific.
This is where it gets a little more intimidating for committee members.
The WHSA imposes obligations on officers to exercise what is called ‘due diligence.’ This means that they need to proactively understand the obligations in the WHSA and ensure they have in place appropriate plans and strategies to deal with the WHSA obligations.
If you are a paid officer these due diligence obligations will apply to you and there are hefty penalties for failing to meet them. Volunteers are also required to perform due diligence, and while they cannot be prosecuted for failing to do so, they can be prosecuted for not taking reasonable care to ensure that their acts or omissions do not adversely affect the health or safety of others. In our view, failing to act with due diligence is an act or omission which could lead to health and safety risks for others.
These penalties can be horrific. A body corporate who acts recklessly causing death or serious injury can be liable for a penalty of up to $3 million. An officer involved with the same incident can be liable for up to $600,000 and jail time of up to 5 years. There is a cascading scale for less serious breaches.
The first defence to any allegation of a breach of the obligations under the new WHSA regime will show what plans were in place to prevent an incident, and how were those plans monitored and enforced (all of which is ‘due diligence’). If you have no plans, or no monitoring and reporting procedures, then we think it is going to be very difficult to prove you acted with due diligence.
The interplay of body corporate and management rights
In larger buildings that have management rights, the issue is even more complicated. In those buildings, a body corporate will almost certainly be a PCBU and the resident manager will also be a PCBU. There are obligations created on both parties by virtue of the WHSA.
Our view is that a body corporate cannot just point the finger at a resident manager if something goes wrong. The fact that management rights might be in place, does not absolve a committee from their WHSA obligations. Those obligations are imposed by the WHSA regardless.
It must also be remembered that every management rights arrangement is one of contract. We cannot recall ever seeing a management rights agreement that directly deals with making the resident manager responsible for managing the imposition of these types of new WHSA obligations.
What we recommend to all of our body corporate and management rights’ clients is that this new regime means that there needs to be a collaborative approach taken in relation to the creation of a site specific plan for each and every body corporate which is a PCBU. Each strata manager will also have to be involved in the on-going management of that plan. There will be additional costs involved for everyone with their new obligations.
Our crystal ball
If you want the crystal ball polished up, what we can see coming is:
- Resignations from committee members who do not want the perceived personal liability.
- Confusion between bodies corporate and resident managers over who is responsible for what, with strata managers trying to manage that and probably being caught in the crossfire.
- Being paid to serve on the committee becoming a far more common occurrence.
- Many bodies corporate deliberately ignoring their WHSA obligations – and it will be one of these that will be made an example of in coming years, when something goes wrong.
It is very important to take immediate proactive steps to deal with what we believe are the obligations under the WHSA. Ignorance of the law is definitely not an excuse for not complying with the WHSA obligations.
As much as the imposition of these obligations on committee members is perhaps distasteful, the reality is that they exist and they must be dealt with.
What we think everyone needs to consider is:
- Whether your body corporate is a PCBU.
- Getting compliant WHSA plans in place.
- What policies will be put in place for new and existing committee members about the WHSA.
- How you draw the WHSA obligations to the attention of owners.
- What insurance you have in place and what it extends to.
- Agreements between the various parties in a scheme about who will do what, with the new WHSA obligations (which extends to the interplay between bodies corporate, resident managers and strata managers).
- New by-laws that deal with the WHSA obligations.
We can help with all of these
We have a partner at our firm who has advised hundreds of companies over the last decade on their WHS obligations under the previous legislative regime and has well and truly started advising them on the new regime. That experience has been invaluable in bringing the understanding that our firm now has of the WHSA so far as it relates to bodies corporate and management rights. We are uniquely placed to be able to assist bodies corporate and resident managers to deal with their new obligations.