Improving health and safety at work: An effective regulatory framework

In ConfidenceOffice of the Minister of LabourThe ChairCabinet Economic Growth and Innovation CommitteeIMPROVING HEALTH AND SAFETY AT WORK: AN EFFECTIVE REGULATORYFRAMEWORKProposal1 This paper is one of a suite of four Cabinet papers that seek agreement to changes toNew Zealand’s health and safety system. This paper seeks agreement to proposals forchanges to primary and secondary legislation, including agreement to the content ofthe Health and Safety at Work Bill.Executive Summary2 There are problems with our existing workplace health and safety regulatory frameworkand its implementation, including: it is too complicated, not comprehensive, suffers from inconsistentimplementation, is insufficiently underpinned by guidance, and its complianceand enforcement tools are not flexible enoughsome provisions are perceived to be relatively weak compared to overseasjurisdictions, such as in respect to worker participationthere is a lack of tailored regulation of major hazard facilities – facilities that storeand process large quantities of dangerous substances and that have the potentialto cause a major accident.3 I propose, consistent with the Taskforce’s recommendation, new workplace health andsafety legislation based on the Australian Model Work Health and Safety Act, withmodifications to take account of differences in the New Zealand context. The ModelLaw was based on a thorough modernisation process drawing on both Australian andinternational experience and extensive consultation.4 These changes to the regulatory framework are an important step towards improvingour health and safety system to meet the Government’s target of a 25 % reduction inworkplace fatalities and serious injuries by 2020. The Model Law is a sound basis for anew approach as it is both familiar (it is based on the same regulatory approach) andnew (it is more modern and reflects changes in working arrangements).5 The likely effects on business of the package of changes are discussed in the overviewpaper and the regulatory impact statement. Overall, understanding the changes willmean some initial costs to businesses – as with any regulatory change businessesneed to understand the changes and if necessary adapt their systems. This canparticularly affect small businesses. Over time, however the regulatory and systemchanges should create greater certainty and reduce on-going compliance costs forsmall and large low-risk businesses, and even make it easier to comply for high riskbusinesses.6 A key Taskforce recommendation was to strengthen the legal framework for workerparticipation. Consistent with the Taskforce’s recommendations, I recommend that we:adopt from the Model Law rules that require duty-holders to consult and involveworkers, that give more clarity about what effective worker participation systemslook like in different workplaces, and that give worker representatives andcommittees (where they are present) greater powers and responsibilitiesMBIE-MAKO-146085571

In Confidenceexpand and strengthen protections from discrimination for workers (includingnon-employees) who raise health and safety issuesnot adopt requirements in the Model Law that are neither necessary norappropriate in the New Zealand context, for example the Model Law’s provisionson workplace health and safety entry permits7 Another key Taskforce recommendation was to improve the regulation of major hazardfacilities. Consistent with the Taskforce’s recommendations, I propose makingregulations to prevent and mitigate the effects of major accidents at large chemicalproduction and storage facilities; downstream petroleum facilities (e.g. oil refineries);and other facilities (e.g. fertiliser plants) that store or process very large quantities ofdangerous substances.8 In order to address uncertainty and regulatory gaps, regulations, guidance and ACOPswill need to be developed to provide duty-holders and workers with certainty about howthe law and regulations will apply to them, without being unnecessarily prescriptive.This will not only promote better health and safety outcomes, but will make complianceeasier for businesses.Background9 New Zealand’s primary workplace health and safety legislation, the Health and Safetyin Employment Act 1992 (HSE Act), follows a model commonly known as the Robensapproach 1 .10 The Robens approach seeks to increase awareness, knowledge and competence inmanaging workplace health and safety, rather than rely on prescriptive requirementsfocusing on a narrow range of workplace hazards. Performance-based general dutiesensure broad coverage of work and workplaces. Advantages of the all-encompassingnature of these general duties are that they do not quickly date, they support innovationand they provide flexibility. The duties are underpinned by industry- or hazard-specificregulations, approved codes of practice and guidance where further clarity is required.11 The Robens approach remains the preferred method for legislating for workplacehealth and safety across many Commonwealth jurisdictions. Australia and the UnitedKingdom have both confirmed their Robens-based models as the best approach afterrecent reviews of their legislative systems.Duties FrameworkProblem definition12 The HSE Act is now 20 years old. The Royal Commission on the Pike River Coal MineTragedy concluded that our implementation of the Robens approach has beenincomplete – particularly in relation to the relative lack of regulations, Approved Codesof Practice (ACoPs) or guidance to make the HSE Act as effective as intended.13 Other problems identified in submissions to the Independent Taskforce on WorkplaceHealth and Safety and that have been raised by business and stakeholders include:a. duty holders have difficulty knowing what to do in order to meet the generalduties – or knowing whether they have done enough to be considered compliant.This can result in duty holders not doing enough, or being over-cautious in theirinterpretation - effectively increasing the compliance burden on themselves1 So named after its ‘father’, Lord Alfred Robens. His 1972 report to the British government, Safety and Health at Work,transformed the attitudes towards and organisation of occupational health and safety.MBIE-MAKO-146085572

In Confidenceb. the concept of taking ‘all practicable steps’ to meet the general duties is not wellunderstood by the wider regulated community, being considered too vague anddifficult to applyc. the duties do not effectively accommodate the changes in working arrangementssince the HSE Act was passed 20 years ago, such as an increase in contractingarrangementsd. the HSE Act does not explicitly require positive action by directors and seniormanagers of duty holders in relation to the health and safety, and effectivelyrewards directors who avoid involvement in matters affecting health and safetye. there are gaps of coverage in relation to some upstream duty holders (designers,manufacturers, installers etc.), who have a profound influence on the health andsafety risks present in the workplacef. some of the language used in the HSE Act is perceived as being relatively weakcompared to overseas jurisdictions,. For example, the HSE Act seeks to‘promote’ the prevention of harm to people, whereas the object of the AustralianModel Work Health and Safety Act is to ‘secure’ the health and safety of workersg. the compliance and enforcement tools for the regulator are in some places notsufficiently flexible to enable the regulator to promote compliance, and may leadto an overemphasis on prosecutionh. the penalties in the HSE Act, and as applied by the Courts, are not providingsufficient incentive for some to comply with the HSE Act.Taskforce Recommendation 2: that the Government enact a new workplace health and safety Actbased on the Australian Model Law 2a. the scope of the new Act should include acute, chronic and catastrophic harmb. the Object in the Model Law should be adoptedc. duties should extend to all relationships between those in control of workplaces and those whoare affected through adopting the Australian approach of persons conducting a business orundertaking (PCBUs)d. duties should extend to all those in governance roles through adopting the Australian approachof giving a due diligence obligation to officers of PCBUse. the current ‘all practicable steps’ test should be replaced with the Australian ‘reasonablypracticable’ test.Analysis14 I have considered the problems outlined above and the manner in which they couldbest be addressed. In the majority of situations, the preferred solution is to adopt anintegral feature of the Australian Model Work Health and Safety Act. Legislativeoptions present in other jurisdictions (such as the United Kingdom and Canada) werealso considered, as well as modifying the HSE Act, but the advantages of the moremodern Australian legislation were apparent.15 The Model Law was finalised in 2011 following a long period of national consultation. Itis the most recent articulation of the Robens approach available to us. In developingthe Model Law Australia has been through an extensive modernisation process,drawing on both Australian and international experience.2 The Australian Model Work Health and Safety Law was developed following an extensive national review in 2008-9 todetermine the optimal content of a workplace health and safety Act. In a bid to achieve national harmonisation of legislativeprovisions, each of the nine Australian jurisdictions were to use the Model Law as a template for new State legislation, makingadaptations as necessary for their context. To date, seven have done so. It comprises a model Work Health and Safety Actregulations and codes of practice.MBIE-MAKO-146085573

In Confidence16 As has been the case with each of the Australian States and Territories, we need tocarefully consider the Model Law and areas in which it needs to be modified to eitherreflect the New Zealand-specific context, or where lessons have been learntin Australia since implementation and clear improvements can be made. Having saidthis, I agree with the Taskforce that variations to the Model Law should be kept to aminimum, and only made for good reason.17 The driver for adopting and adapting the Model Law in New Zealand isnot harmonisation or alignment with Australia. It is simply that the Model Law is fit forpurpose in the main, and it will be modified where it is not fit for purpose. Simplifyingworkplace health and safety for trans-Tasman businesses is, however, an importantancillary benefit of implementing a version of the Model Law here.18 Being able to draw upon much of the significant resources and body of knowledge andjurisprudence developed in Australia, and again adapting this to our purposes, isanother strong benefit. This is especially the case when it comes to the suite ofregulations, codes of practice, and guidance material that has been developed inAustralia to support the Model Law. Our limited ability to develop these independentlyin the past was a major contributing factor to our failed implementation of the Robensmodel for workplace health and safety. There is no point reinventing the wheel if anexcellent one already exists; and our Australian colleagues have been very generous inoffering their support in getting it fitted.19 A new law would replace the HSE Act and also replace the Machinery Act 1950, whichcurrently continues only for the purposes of allowing for the regulation of amusementdevices (e.g. fairground rides). These regulations would be brought into the health andsafety system.20 The Taskforce’s recommendation identifies the core elements of the Model Law, andtheir report makes a compelling case for adopting them. The new object (or purpose) isexpressed in more positive language, provides greater clarity about who will beprotected and how, and identifies the principle that workers should receive the highestlevel of protection that is reasonably practicable.Duties of PCBUs21 The core duty is that of a person conducting a business or undertaking (PCBU):A person conducting a business or undertaking must ensure, so far as is reasonablypracticable, the health and safety of:(a) workers engaged, or caused to be engaged by the person; and(b) workers whose activities in carrying out work are influenced or directed by theperson,while the workers are at work in the business or undertaking.22 The PCBU also owes a duty to other people affected by the work being done. Specificduties extend to upstream participants in the supply chain (e.g. PCBUs that aredesigners, manufacturers, importers and suppliers of plant, substances, andstructures).23 PCBU is a broad concept that captures all types of modern working arrangements and,like the HSE Act, is not limited to for-profit businesses. Whether a person conducts abusiness or undertaking is a question of fact to be determined in the circumstances ofeach case. The SafeWork Australia interpretive guide on the meaning of PCBU and itsapplication to particular circumstances is attached as an appendix to this paper. It isimportant that guidance like this is provided on the definition in New Zealand, as it willbe a new concept.MBIE-MAKO-146085574

In Confidence24 If the Model Law is adopted, additional exclusions to being a PCBU will be able to bemade by regulations. This safety valve ensures that the concept can be drawn widelyto ensure there are no gaps, while providing a flexible method of excludingcircumstances where the costs of regulation outweigh the benefits. At this stage, theAustralian regulations exclude most residential unit title bodies corporate.25 It may also prove desirable to provide additional clarification in the Health and Safety atWork Bill to limit uncertainty and reduce concerns of legislative overreach. I will be alertto this issue as the Bill develops.Qualifier – reasonably practicable26 The key to making the duties work in the Model Law is the qualifier of ‘so far as isreasonably practicable’. Without it, duty holders would breach their duty whenever theoutcome was not achieved, regardless of the efforts they took. A qualifier limits thegeneral duty in the interests of fairness and achievability, by introducing the concept ofdoing what is reasonable in the circumstances.27 In the Model Law, reasonably practicable, in relation to a duty to ensure health andsafety, means:…that which is, or was at a particular time, reasonably able to be done in relation toensuring health and safety, taking into account and weighing up all relevant mattersincluding:a. the likelihood of the hazard or the risk concerned occurring; andb. the degree of harm that might result from the hazard or the risk; andc. what the person concerned knows, or ought reasonably to know, about:d. the hazard or the risk; ande. ways of eliminating or minimising the risk; andf. the availability and suitability of ways to eliminate or minimise the risk; andg. after assessing the extent of the risk and the available ways of eliminating orminimising the risk, the cost associated with available ways of eliminating orminimising the risk, including whether the cost is grossly disproportionate to therisk.28 The equivalent qualifier in the HSE Act is ‘all practicable steps’. I agree with theTaskforce that the Australian test is preferable. It is more accessible and gives a bettersense of what is expected of duty-holders. It does a good job of incorporating theconcept of reasonableness based on a risk assessment and cost-benefit analysis.Duties of others, including directors29 The Model Law creates a due diligence duty so that those in governance roles mustproactively manage workplace health and safety. This is in contrast to the HSE Act,which makes directors, officers and agents liable for any failure of the body corporate(as an employer or other duty holder) to comply with the legislation, if they haveparticipated in, contributed to, or acquiesced in that failure.30 The approach in the Model Law is preferable because directors are only liable wherethey fail to perform their due diligence duty. A positive duty supports the framework,because directors and senior management set the direction and provide leadership inhealth and safety for their organisation, including making resource decisions. Thelanguage of due diligence is familiar and consistent with their governance role, andtheir other duties as a director. It clarifies that health and safety of workers is part ofgovernance.MBIE-MAKO-146085575

In Confidence31 Under the Model Law only professional directors and officers are subject to the duty. Itexcludes anyone acting on a voluntary basis who receives only out-of-pocketexpenses. This would, for example, exclude members of a school board of trustees orofficers of a sports club from the due diligence duty even if the organisation itself is aPCBU.32 Workers and others in the workplace will also be required to take a reasonable degreeof responsibility for their own health and safety and for the health and safety of thosearound them.Discussion33 This duties framework seeks to improve health and safety outcomes by:a. allocating duties to those participants who are in the best position to control risksb. ensuring the duties are appropriate to the participant’s rolec. making the duties clear and achievable.34 The first question a business will need to ask itself is what it can reasonably do toensure the health and safety of workers and others affected by its business.35 While the advantages are substantial, adoption of the Model Law will require NewZealand businesses and workers to engage with some new concepts, includingPCBUs, and the concept of identifying risks and hazards and taking steps to removethese ‘so far as is reasonably practicable’, as well as a modified compliance regime.36 Adoption of the Model Law it is not a radical departure from the HSE Act. It is simply abetter, more modern version of the Robens approach. The Model Law is, however,sufficiently different that it will be clear to New Zealand duty holders and regulators thatnew behaviours are required. It is predicted that increasing the profile of health andsafety issues and creating a shared responsibility amongst participants in the system,together with the other aspects of the proposals such as leadership and incentives, willlead to better health and safety outcomes.37 The likely effects on business of the package of changes are discussed in the overviewpaper and the regulatory impact statement. Overall, understanding the changes willmean some initial costs to businesses – as with any regulatory change businessesneed to understand the changes and if necessary adapt their systems. This canparticularly affect small businesses. Over time, however, the regulatory and systemchanges should create greater certainty and reduce on-going compliance costs forsmall and large low-risk businesses, and even make it easier to comply for high riskbusinesses.38 I agree with the Taskforce that the Model Law should be used as the basis for a newHealth and Safety at Work Act.39 If Cabinet agrees to the proposal to use the Model Law as a basis for the drafting ofnew health and safety legislation, a number of other core Taskforce recommendationswill be dealt with as a matter of course. Some of the key matters that were of interest tothe Taskforce are discussed within this context below.MBIE-MAKO-146085576

In ConfidenceCoverage of the NZ Defence Force (NZDF)40 The State Services Commission undertook a review in 2012 of the HSE Act and itscoverage of the military. It recommended that legislation be clarified to make clear thatNZDF personnel are covered by the legislation and that Navy vessels are also covered.I propose that the new Health and Safety at Work Bill should explicitly cover the NZDF,including naval ships, while excluding NZDF personnel on operational service. Officialswill provide further advice to me and the Minister of Defence on the implications ofexcluding operational service.Compliance and Liability Framework41 Improved health and safety duties are necessary but not sufficient to improve thehealth and safety system. There is also a need for appropriate consequences to followfrom breach of those duties. Health and safety enforcement acts as a deterrent, bothdirectly (an individual firm’s experience) and from the knowledge of others’ experience.Deterrence theory suggests that penalties need to be certain and proportionate to thebenefits of non-compliance in order to be effective. There also needs to be a range oftools available to promote compliance without solely relying on prosecution.Taskforce recommendation 11: that the government implement measures that increase the costs ofpoor health and safety performance, including:a. extending the existing manslaughter offence to corporations and revising the corporate liabilityframework that applies to all offences (including manslaughter)b. stronger penalties and cost recoveryc. visible and effective compliance activity42 The Minister of Justice is considering the recommendation to extend the existingmanslaughter offence and will seek Cabinet decisions on any proposed changes in duecourse (likely by the end of July). The Minister of Justice has also proposed that areview of the general corporate liability framework be referred to the Law Commission.43 Beyond the high-level recommendation outlined above, the Taskforce also made anumber of recommendations about various ways to strengthen penalties and otherwiseimprove compliance in the body of their report. These are discussed below.Stronger penalties44 Adoption of the Model Law and Taskforce recommendations would result in a newtiered penalty regime and, overall, a significant increase in the maximum levels overthe current law. These increases include a maximum penalty of $600,000 or 5 yearsimprisonment for a PCBU that commits the most serious offences involving recklessconduct that exposes people to serious risks. In my view, the penalty levels in theModel Law will be appropriate in a New Zealand context.45 Under the current law, penalties issued by the Courts continue to be low. Fifty-five percent of all fines imposed are less than $30,000 (12% of the maximum) and 92% areless than $50,000 (20% of the maximum). Low fine levels undermine the generaldeterrent effect and send signals that offending of this type is less serious and thatworkplace health and safety is not important.46 The proposal will see the level of maximum fines increased to sanction and deter dutyholders from breaching their workplace health and safety duties. The use of graduatedcategories of offences and penalties provides better guidance to the Courts aboutappropriate fine levels.MBIE-MAKO-146085577

In Confidence47 The Taskforce recommended that consideration be given to including a furthercategory of serious offending with higher maximum penalties that would apply wheredeath results. The Taskforce noted that care would need to be taken to ensure this didnot detract from how seriously the courts would treat other offences.48 I do not consider that the new health and safety law should include such an additionaltier. The Crimes Act already includes offences that are available in the most serious ofcases, and joint charges could potentially be laid with health and safety prosecutions.Frequently the actual harm caused by a health and safety failure is no more than amatter of luck. In this respect (and noting that reparation orders are available tocompensate for harm actually caused) there seems little distinction to be drawnbetween failures that result in death (or indeed, harm), and those that do not.49 There is a real risk that departure from the Australian model to add an additional tiercould have the perverse effect of lower tariffs for serious contraventions of the healthand safety law.50 I recommend implementing the categories of offences and penalties in the Model Law.Crown organisations paying penalties51 Currently Crown organisations can be convicted of an offence under the HSE Act butare not subject to fines. They can be required to pay the costs of the prosecution underthe Costs in Criminal Matters Act or to pay reparation.52 Under the Model Law, the Crown is subject to the same penalties as a body corporate.The Taskforce recommended adoption of this approach, so that Crown organisationsare subject to penalties for breaches the same way as other duty holders.53 As a result of the Cave Creek tragedy, the Crown Organisations (Criminal Liability) Act2002 (COCLA) removed the Crown’s exemption from prosecution for offences underthe Building Act 1991 and the HSE Act. The Crown Organisations (Criminal Liability)Bill (the Bill) as introduced made Crown organisations liable, on conviction for anoffence, to the same penalties that could be imposed on any body corporate convictedof the same offence. These penalties included the imposition of fines, an award ofreparation to a victim and remedial orders.54 After considering submissions questioning the appropriateness of fining governmentdepartments, the select committee recommended amending the penalty provisions asfar as fines are concerned. Submitters on the Bill raised two concerns. First, if a Crownorganisation is held liable under the Act, then any fine it receives is payable to theCrown. This effectively creates a merry-go-round of Crown funds. Second, a Crownorganisation may have to discontinue or curtail its activities because resourcesallocated for those activities are likely to be used to pay the fine. This may be contraryto the public interest.55 The Ministry of Justice administers the COCLA and has considered the abovearguments. It considers the current position defensible from a constitutional perspectiveand has no current plans to recommend amendments to the COCLA.56 I recommend that Crown Organisations not be subject to fines for breaches of theHealth and Safety at Work Bill.The Regulator’s compliance tools57 The Model Law provides for a range of compliance and regulatory tools, most of whichare equivalent to tools in the HSE Act, while a few (most notably enforceableundertakings) are new. The regulator’s tools under the Model Law include powers to:MBIE-MAKO-146085578

In Confidencea. issue guidance, warnings and make information availableb. enter workplaces for the purpose of informing and securing compliance andgathering information, supplemented by powers to obtain search warrantsc. issue improvement notices, prohibition notices, non-disturbance notices, and totake remedial action and seek injunctions where they are not complied withd. accept enforceable undertakings from duty holders given in connection with acontravention or alleged contraventione. issue infringement noticesf. bring prosecutions.58 These compliance tools are all appropriate in a New Zealand context, consistent withTaskforce recommendations, and I propose that they are all adopted. There will needto be some divergences from the Model Law to reflect New Zealand conditions andpractice. For example, I expect that some powers will be expressed to be held by theregulator rather than inspectors. The regulator must have sufficient oversight over howthe regime is implemented, so powers should tend to be held by the regulator anddelegated to inspectors rather than being held by individual inspectors. Care will alsoneed to be taken to ensure that the ability to obtain search warrants does not limitinspectors’ ability to enter workplaces and carry out compliance and informationgatheringfunctions efficiently and effectively.59 The Model Law does not set out the detail of the infringement notice regime, as this isleft to individual jurisdictions. The Model law does, however, provide for theinfringement fee to be prescribed in the regulations, which must not exceed 20% of thepenalty for the relevant offence. I propose that the infringement notice regime in theHSE Act is brought over into the new law with the necessary amendments, subject totwo changes recommended by the Taskforce to make the regime more effective:a. Currently infringement notices can only be issued after a formal warning hasbeen given. This has resulted in few infringement notices being issued and is anunusual limitation. I agree with the Taskforce that the requirement to give awarning should be removed, and propose this.b. The maximum infringement fee is currently $3,000 or $4,000 (depending on thetype of contravention), which is low and is unlikely to be an effective deterrent. Ipropose that the approach to setting infringement fees in regulations is adoptedfrom the Model Law.60 The Model Law also provides a comprehensive system for review of the regulator’sdecisions which I propose is adopted as part of the new law, subject to changes toreflect New Zealand conditions including the availability of judicial review. This systemof review has significant overlap with a Taskforce recommendation that a regulatorychallenge panel be established.61 I recommend that the regulator’s compliance tools from the Model Law are adoptedwith necessary amendments.Court Powers62 The Taskforce has recommended powers relating to duty holders found by the court tohave contravened their duties:a. enabling (but not compelling) judges to make adverse publicity orders – theModel Law allows the court to require the offender to publicise in general, tospecified people or specified classes of persons, the offence, its consequenceand the penalty imposed and any other related matterMBIE-MAKO-146085579

In Confidenceb. publishing information about enforcement actions – the Model Law allows theregulator to make information about its enforcement actions publicly available, toenable the regulator to raise awareness of the consequences of breaching healthand safety obligationsc. provide for compliance or restoration orders that resolve the consequences of afailure not just the cause – the Model Law enables the court to order the offenderto take such steps as are specified in the order (in a specific period) to remedyany matter caused by the commission of the offence, so that the consequencesof a failure are remedied as well as the cause.63 I support these proposals. They will provide more flexible approaches to dealing withcontraventions of the new law.Address ill-gotten financial benefits from non-compliance with H&S legislation64 The Taskforce recommended using the Criminal Proceeds (Recovery) Act 2009 toaddress ill-gotten financial benefits from non-compliance with health and safetylegislation. That Act will apply to offences against the new health and safety law. Thethreshold for recovery in that Act is, however, high, being either offending that results inproceeds of over $30,000 or offending punishable by a maximum term of imprisonmentof 5 years or more. This means that recovery is likely only in the most serious andclear-cut cases, which is appropriate.Cost recovery mechanisms65 The Taskforce recommended a mechanism be established which allows the regulatorto recover its costs that directly relate to offending that has been proven beyondreasonable doubt. There is already provision for courts to order the payment of costs incriminal cases under the Costs in Criminal Cases Act 1967. However, such awards arerarely made in health and safety cases and, even when they are, the prescribed rate of$226 per half day in court does not begin to cover the full costs of a prosecution.66 The level of cost recovery envisaged by the Taskforce would therefore require aspecific power for the court to order an additional payment reflecting the regulator’scosts of a successful prosecution. While the order would remain discretionary, I agreethat it would provide an additional method of ensuring that the system does not supportthe poor performance of the worst offenders.67 I recommend that the new law include a power for the court to order that the offenderpays the regulator’s costs in bringing a successful prosecution.Nature of liability and private prosecutions68 Contraventions of health and safety laws are entirely criminal in nature. 3 It is notpossible to bring proceedings for compensation for contravention of a health and safetyobligation, and duty-holders will not be civilly liable to third parties for failure to complywith their statutory duties. It is possible, however for the court to order the payment ofreparation under the Sentencing Act.69 Enforcement by the regulator is the norm. There are, however, circumstances wherethe regulator may decide that a breach of a health and safety obligation should notresult in a prosecution. The HSE Act recognises this by providing a limited power forprivate prosecutions. The Model Law does not allow private prosecutions, and only theregulator or an inspector (or in certain cases the director of public prosecutions) mayprosecute.3 This is true to the extent that proceedings for personal injury are barred under our Accident Compensation Act 2001. However,a number of court cases, most notably that of Gilbert v Attorney-General [2002] 2 NZLR 342 have found that an obligation onthe employer to take reasonable steps to provide a safe workplace is an implied term in an employment agreement, and abreach of this obligation may give rise to a personal grievance, and therefore potentially an award of compensation.MBIE-MAKO-1460855710

In Confidence70 I propose that the current rules in the HSE Act relating to private prosecutions arebrought into the new law. This maintains the status quo, which appears to be working.Move H&S prosecutions to the Employment Court71 Currently workplace health and safety matters are heard in the District Court. DistrictCourt judges do not deal with health and safety cases regularly enough to developspecialist knowledge in the area. Data from the last 20 years indicates that a judge willhear an average of 15 HSE Act cases over that period of time. Thirty judges have onlyever heard one HSE case, and 100 judges have heard fewer than 10. The two judgeswith the most HSE experience have presided over 72 cases each.72 The Taskforce recommended developing specific health and safety capacity in thejudiciary. It identified that one approach was to provide for a smaller group of judges tohear workplace health and safety cases in the Employment Court, and for theEmployment Court to have an expanded jurisdiction so that it covers workplace healthand safety.73 I agree in principle that there would be a benefit in developing specific health andsafety capacity in the judiciary. The Ministry of Justice is currently working on theCourts Reform Bill (working title – subject to change) which might amend where theEmployment Court sits in the New Zealand Court structure. At this stage it is prematureto decide if health and safety cases should be heard in the Employment Court or byspecialist Withheld District Court.74 I recommend that the Minister of Labour and Minster of Justice report back on howgreater specialist health and safety capacity in the judiciary can be best achieved oncethe Courts Reform Bill has been fully developed and bef Withheldend of 2013.Time frame for initiating court action75 Time limits for commencing prosecutions ensure the regulator has incentives toexpedite investigations and enable justice to be served and all parties to move on withtheir lives within a reasonable period. The Model Law (and the HSE Act) prescribeperiods based on the time when the offence came (or should have come) to the noticeof the regulator. Basing the time on discoverability rather than the date of contraventionis important in relation to occupational health in particular, because contraventions canremain undetected for long periods.76 Under the HSE Act, a prosecution must be initiated within six months of the date onwhich the circumstances relating to the offence first becomes known, or oughtreasonably to have become known, to an inspector. In practice this timeframe hascreated problems for investigators who are sometimes unable to complete aninvestigation and initiate court action in otherwise meritorious proceedings. A recentreview by the State Services Commission suggested that the timeframe be extended atleast to twelve months.77 The Model Law requires court action to be initiated within the latest of: two years of anoffence first coming to the notice of the regulator, one year of a coronial report orinquest if it appears from the report that a health and safety offence has beencommitted, and six months of the contravention of an enforceable undertaking.78 While the timeframes in the Model Law are longer than the HSE Act, they are, inalmost every case, significantly shorter than would apply under the general rules in theCriminal Procedure Act 2011. Under the Criminal Procedure Act, the highest tier ofoffence proposed for breach of a duty would have no time limit, and the lowest tierwould need to be commenced within five years of the commission of the offence (orlater with consent).MBIE-MAKO-1460855711

In Confidence79 I recommend that the proposed Health and Safety at Work Bill include an extendedperiod for initiating court action based on the Model Law.Worker ParticipationProblem Definition80 Worker participation in health and safety matters in the workplace has been associatedwith better health and safety performance.81 Our legislative framework for worker participation is less rigorous than overseasjurisdictions (particularly Australia). The HSE Act excludes businesses with fewer than30 employees from the requirement to have a worker participation system (unless oneis requested by a worker or union), and there are gaps in protections for workers whoraise health and safety issues. The legislation focuses on “employee” rather than“worker” participation which disincentivises people in multi-employer environments fromestablishing sensible worker participation systems that involve all the workers presentin the workplace. There is a smaller role for health and safety representatives thanthere is in Australia.82 In addition, enforcement of the existing provisions on employee participation has beenlacking.Taskforce recommendation 3: that the government strengthen the legal framework for workerparticipation, including through providing (based on the Model Law):a) specific obligations for employers to support worker participationb) expanded powers and responsibilities for worker health and safety representativesc) stronger protections for workers who raise workplace health and safety matters.Taskforce Recommendation 4: that the government ensure that the following actions occur tosupport effective worker participation:abthe new agency should include in regulations, approved codes of practice (ACoPs) andguidance material more specific requirements for how worker participation is expected to occurthe new agency should provide increased support for worker participation, including increasedsupport for:i. worker health and safety representativesii.iii.workers who raise workplace health and safety matters, including either confidentiallyor anonymouslyunions’ existing rights of entry.Comment83 I agree with the Taskforce that we can and should lift the current worker participationrequirements to help drive better outcomes in the workplace. I also agree that there areaspects of detail in the Model Law that are neither necessary nor appropriate in theNew Zealand context. For this reason, worker participation would be one of the mainareas in which the new Health and Safety at Work Bill diverges from the Model Law.However, most of the divergence will be in relation to the level of prescription andwhere particular requirements sit (i.e. legislation, regulation and ACOPs). In the main,similar outcomes are still being sought.MBIE-MAKO-1460855712

In Confidence84 As with the Model Law framework, the worker participation system should include ageneral duty to involve and consult workers on health and safety matters. All PCBUswill be required to have worker participation practices that are appropriate to theworkplace. This is a change from the current requirements where only workplaces withmore than 30 employees, or where a worker or union has requested it, have to haveworker participation systems.85 This will mean that for all workplaces:a. If the workers want to have health and safety representative/s, the duty-holdermust consult the representative/s, allow them time off for training within threemonths of being requested, pay for that training, provide time and resources toperform their role, and give them information.b. The legislation will specify powers and functions for representatives andcommittees, including the powers for trained health and safety representatives todirect unsafe work to cease (balanced by safeguards against improper use) andissue a Provisional Improvement Notice to a person they believe is contraveningthe Act.c. If the workers and/or PCBU want to have a health and safety committee, workersmust make up at least half of the committee, the PCBU must consult thecommittee, the PCBU must allow the committee time to perform its role and thePCBU must give the committee information.86 Approved Codes of Practice and regulations will be developed to provide guidance forrepresentatives, committees and PCBUs about how the worker participation provisionsapply to them. These will include materials targeted at smaller workplaces. I recognisethat small firms are less likely to have representatives or committees for workplacehealth and safety and will need to consult and involve their workers in other moreinformal ways; this will be acceptable under the law. In consultation with the relevantsectors, WorkSafe will be able to work on regulations, ACoPs and guidance on workerparticipation in specific industries (such as high-hazard industries), if these are seen tobe necessary and appropriate.87 These proposals will result in increased expectations on PCBUs to consult and involveworkers, along with more clarity about how effective worker participation systems canbe developed and maintained within different workplaces. For workplaces with workerrepresentatives and committees, those representatives and committees will havegreater powers and responsibilities.Proposed divergences from the Model Law88 I agree with the Taskforce that we should not adopt some of the detail in the ModelLaw, such as provisions on establishing designated work groups. I consider theseprocedural details are unnecessarily prescriptive for our legislation and could imposeunnecessary compliance costs on businesses. Procedural details (for example electionprocesses) could sit in regulations or guidance rather than in the Act. Officials arereviewing whether other details such as health and safety representatives’ term ofoffice should be omitted, or if doing so would have implications for other provisionsbeing adopted from the Model Act.89 The Taskforce recommended adopting the Model Law’s powers and functions forhealth and safety representatives, with a small change: the right of health and safetyrepresentatives to be present at interviews of workers or groups of workers should besubject to agreement from not only the worker, but also the inspector. I agree with thischange, and also recommend one more. I favour maintaining the useful provision in ourexisting legislation that gives health and safety representatives a role in promoting theinterests of workers who have been harmed at work, including in relation toarrangements for rehabilitation and return to work.MBIE-MAKO-1460855713

In Confidence90 The Model Law includes strong protections against discrimination for workers whoraise health and safety issues with PCBUs. I agree with the Taskforce about theimportance of protecting workers in this manner to support a more robust workplacehealth and safety system. Workers need to feel safe to raise their concerns aboutworkplace safety so that they can be addressed to prevent harm occurring. I proposethat the new law include an offence, based on the Model Law, that applies to a personwho discriminates against a worker in relation to a health and safety matter.91 Under the Model Law, discrimination in relation to health and safety matters can alsogive rise to civil proceedings, such as injunctions, compensation and reinstatement.92 In the case of employer/employee relationships, the Employment Relations Act 2000(ERA) already provides a mechanism for resolving disputes. The ERA allows anemployee to take a personal grievance under s103(1)(a) of the Employment RelationsAct 2000 if he or she is disadvantaged or dismissed due to taking part in industrialaction on the grounds of safety and health, raising a health and safety concern,refusing unsafe work (under s28A of the HSE Act) or representing other workers onhealth and safety issues.93 The ERA remains the best vehicle for resolving disputes between employees andemployers. However, workers who are not employees cannot access the ERAmechanisms and employees will have difficulty accessing them where the allegeddiscrimination is not by their employer.94 I propose that this gap is filled by introducing anti-discrimination provisions in relation tothe raising of health and safety issues that apply in the case of a dispute betweenworkers and PCBUs based on the rules in the ERA. Officials will work with theParliamentary Counsel Office to determine the best mechanism to achieve the policyintent. Consequential amendments to the Employment Relations Act will be necessaryregardless, to refer to the new health and safety regime and to make the existingprotections more explicit and visible.95 I agree with the Taskforce’s view that our existing rights of access for unions under theERA are adequate as long as these rights are not unreasonably withheld. I thereforerecommend that we do not adopt the Model Act’s provisions on workplace health andsafety entry permits.Major Hazard FacilitiesProblem definition96 The current lack of explicit regulation of facilities that store and process large quantitiesof dangerous substances — having the potential to cause a major accident — does notprovide the public with confidence or assurance that the risks associated with these‘major hazard facilities’ are being adequately controlled by operators, monitored andregulated.97 Major hazard facilities typically include chemical manufacturing sites, oil refineries, gasprocessing plants, liquid petroleum gas facilities, and other manufacturing and storagedepots. Major accidents at such facilities are broadly described as being highconsequence and low frequency events having the potential to cause multiple injuriesand fatalities to members of the workforce on-site and members of the public insurrounding areas, as well as substantial economic, property, and environmentaldamage.MBIE-MAKO-1460855714

In Confidence98 Controls that are stricter than those generally found in general workplace health andsafety legislation are often used by governments to regulate major hazard facilities.The United Kingdom first introduced regulations for the control of risks associated withmajor accident hazards at these facilities in 1984 (based on the European ‘Seveso’Directive), and subsequently replaced them with upgraded regulations in 1999.Australia introduced similar regulations in 1996, and upgraded those requirements in2011 through new regulations.99 There have been several major accidents at facilities in Europe, the United Kingdom,and Australia in recent years that have reinforced the ongoing need for effectiveregulatory oversight of major hazard facilities. For example:a. In 2001 a fertiliser factory in Toulouse, France, exploded killing 30 people,critically wounding 50 people, seriously injuring 2,500 people, and lightly injuringmany thousands. The explosion destroyed the factory and left a crater 200metres wide and 30 metres deep. The explosion reportedly generated a shockwave which blew out two-thirds of the windows in Toulouse (a city larger than thegreater Wellington region) and left over 4,000 citizens homeless. The explosionoccurred when 500kg of sodium dichloroisocyanurate (a chemical commonlyused as a disinfectant) was mistakenly added to 300 tonnes of ammonium nitrate(i.e. agricultural fertilizer). In warm, damp conditions these chemicals mixed andproduced a highly-unstable by-product, nitrogen dichloride. The decomposition ofthe nitrogen dichloride had the requisite concussive and heat energy to ignite theremaining ammonium nitrate causing the massive explosion.b. In 1998 an explosion at the Esso Longford gas plant in Victoria, Australia resultedin the loss of two lives and eight serious injuries, a fire that lasted for two days,and the gas supply to south-eastern Australia being cut off for almost threeweeks. The cost to the Victorian economy was estimated to be more than $1billion.Taskforce recommendation 8: strengthening the regulatory regime for managing the risks of majorhazard facilities by:a) mapping the risk landscape around potential catastrophic failure;b) developing criteria and prioritising types of major hazard facility for inclusion in the majorhazard facilities’ regulatory framework;c) ensuring that robust regulatory requirements, based on international best practice, apply to allpriority facilities; andd) building the new agency’s capacity to provide rigorous regulatory oversight and ensurecompliance with the new regulatory framework.Comment100 I support all four recommendations made by the Taskforce in relation to major hazardfacilities. Under the Model Law, legal requirements for the safe operation of thesefacilities are imposed at regulation level, rather than by the primary Act. I thereforepropose making regulations, before January 2015, based on international best practiceto prevent and mitigate the effects of major accidents at large chemical production andstorage facilities; downstream petroleum facilities (e.g. oil refineries, tank farms, andgas processing plants); and other facilities (e.g. fertiliser plants, pulp and paper mills)that store or process very large quantities of dangerous substances.101 The key high-level design features of the regulation include:MBIE-MAKO-1460855715

In Confidencea. A facility or proposed facility would automatically be classified as a major hazardfacility and subject to the regulations, where very large quantities of particulardangerous substances are (or will be) processed, handled, or stored on site.Early estimates are that there may be up to 60 of these facilities in New Zealand(e.g. the oil refinery at Marsden Point, the methanol production plant at Motunui).The types of dangerous substances captured by the regime and thecorresponding threshold quantities applied would be based on thresholds set byexisting major hazard facility regulation in Europe (the ‘Seveso’ Directive), theUnited Kingdom, and Australia.b. A facility or proposed facility that holds (or will hold) more than 10 per cent of thethreshold quantity may be subject to an inquiry by WorkSafe to determinewhether the facility should be classified as a major hazard facility and subject tothe regulations.c. WorkSafe would:i. consider whether there is potential for a major accident to occur at thefacility or proposed facility having regard to the following matters;The quantity or combination of dangerous substances present orlikely to be present at the facility. The likelihood that an inquiry will beheld would be greater for those facilities where the quantity ofdangerous substances is close to the threshold, or if inherentlyunstable or mutually incompatible substances are present insignificant quantities.The type of activities within the facility involving dangeroussubstances. Where the activities conducted at the facility are in someway intrinsically of higher hazard, then the likelihood of the facilitybeing determined to be a major hazard facility will be greater. Forexample: if substances are stored in relatively large closely groupedtanks; if the process has the potential to generate by-products ofextreme toxicity; if the process involves extremes of temperatureand/or pressure; and if the process is complex, requiring advancedengineering controls to ensure safety.The land use and other activities in the area surrounding the facility.The potential consequences of an incident at a facility in a highdensityresidential area would be higher than if the facility were in aremote non-residential area. Similar concerns exist where there is thepotential for escalation of any major incident to neighbouring facilities.ii.iii.consider any submission made by the facility operator and consult withinterested parties, for example health and safety representatives at thefacility, local emergency services, and territorial authorities; andfollowing the inquiry, possibly designate the facility as a major hazardfacility.d. Once a facility or proposed facility is designated as a major hazard facility, theoperator of the facility would be required to:i. prepare a safety case (containing details of the dangerous substances, thefacility, the management system, the potential for major accidents, and themeasures to be taken to prevent, control and mitigate the effects of majoraccidents) and submit it to the regulator for assessment;ii.iii.prepare and implement an emergency response plan, in consultation withemergency services and the relevant territorial authority;investigate any dangerous occurrence (an incident that could be regardedas a ‘near miss’ for a major accident) and report to the regulator on theoutcome of the investigation; andMBIE-MAKO-1460855716

iv.In Confidenceinvolve members of the workforce in the preparation and review of thesafety case, safety management system, and emergency response plan.e. WorkSafe would have powers to prohibit the operation or bringing into operationof a major hazard facility (or any part of a major hazard facility) where themeasures taken by the operator for the prevention and mitigation of majoraccidents are seriously deficient.102 I consider that it is likely to be more efficient and effective if WorkSafe (rather thanMinisters) make the individual designation decisions. WorkSafe will conduct the inquiryand so have access to the relevant information and have the expertise. It also ensuresthe process is consistent with Australia.103 This proposed regime is very similar to that set out in the Australian Model Regulations.The major difference is that the above proposal stops short of the Australianrequirement that major hazard facilities are licensed by the regulator. The Taskforcedid not propose licensing. Licensing would be a significant step that I do notrecommend adopting at this time.104 The high thresholds will mean that the regime affects a small number of facilities. Forexample, if the Australian thresholds are used, a fertiliser facility would be a majorhazard facility if it held more than 5,000 tonnes of ammonium nitrate. It would becomesubject to potential designation if it held more than 500 tonnes – in itself a large amountof fertiliser.105 It is equally important, however, that WorkSafe’s designation decisions are subject toappropriate checks and balances. I believe that these checks and balances are bestimplemented by:a. providing for a list of exclusions from designation to be set out in the regulations,enabling Cabinet to limit WorkSafe’s ability to make designations. This list couldbe changed over time, and have prospective effect even where WorkSafe hadmade a designation.b. making WorkSafe’s designations deemed regulations, and so subject to oversightby the Regulations Review Committee. The Regulations Review Committee islikely to take a close look at WorkSafe’s designations if it receives a complaintfrom an operator, particularly about an unusual or unexpected use of powers, orWorkSafe’s compliance with consultation procedures prescribed in theregulations.c. ensuring the process WorkSafe must follow is robust, the criteria clear, and that itis not able to take designation decisions lightly. WorkSafe will be subject tojudicial review, so will need to ensure its decision-making is procedurally fair andmeets legal rules.106 I also propose that the Health and Safety at Work Bill allows for the costs associatedwith regulating major hazard facilities to be separated out and (more) directly recoveredfrom the facility operators. Use of differentiated levies and/or direct charging forservices, i.e. safety case assessment, are considered appropriate to recover thedisproportionate cost of providing regulatory oversight of major hazard facilities.107 Concurrent to the process to develop the proposed regulations MBIE’s Health andSafety Group will map the risk landscape and define the jurisdictional responsibilities ofdifferent regulators (e.g. the interface of the health and safety regulator with territorialauthorities responsible for land use planning processes) in relation to New Zealand’sexisting stock of major hazard facilities by December 2013.108 I propose that WorkSafe would then:MBIE-MAKO-1460855717

In Confidencea. promote existing obligations, including the Approved Code of Practice forManaging Hazards to Prevent Major Industrial Accidents, and carry outcompliance monitoring against those obligations until the proposed regulationsare implemented;b. engage with territorial authorities on the land use planning implicationsassociated with proposed major hazard facilities, and existing or proposeddevelopments in the vicinity of existing major hazard facilities;c. develop guidance material and codes of practice, in the period June 2014 to June2016, to clarify its expectations and support duty holders to comply with theproposed regulations; andd. build capacity and capability within the High Hazards Unit to execute acomprehensive compliance strategy, informed by the risk landscape mappingand new regulatory requirements. Initial inspection and standard settingresources should be in place from June 2014, building up to full capacity by June2017.109 The proposals will result in stronger management of hazards at major hazard facilitiesthroughout New Zealand and improved regulatory oversight, with the objective ofreducing the likelihood of a major accident occurring. If successful, this will providebenefits to Government and facility operators in terms of avoided costs associated witha major accident. For example, costs associated with fatalities and serious injuries,costs incurred by emergency services, costs associated with any resulting Commissionof Inquiry, costs needed to repair or rebuild the facility and recommence operations,costs needed to repair and/or rebuild property and infrastructure surrounding thefacility, costs associated with remediating any damage to the environment, and costsassociated with lost production. This will also provide benefits from prevention ofdisruption to economic activity.110 Operators of major hazard facilities (proposed and existing) are likely to incur additionalcosts associated with the preparation of safety cases. For proposed facilities, the safetycase process will enable risks to be eliminated at source during the design stage andprevent costly retrospective or mitigating action to minimise the risks once the facility isbuilt.111 Operators of existing major hazard facilities who already have effective controls (plant,equipment, safety management systems, procedures, and people) in place to preventthe occurrence of a major accident are expected to incur marginal compliance costs asa result of this proposal. Operators of existing major hazard facilities that need to carryout significant remedial work to improve the effectiveness of their controls are expectedto incur more significant costs.Provision for data sharing among agencies112 There are constraints on the ability of Government agencies involved in workplacehealth and safety to share data and information, particularly if that information is to beused for intelligence gathering and enforcement. MBIE is considering the mechanismswhich might be available to make effective use of data sharing arrangements, includingconsideration of appropriate checks and balances in the use of any information. Toprogress this issue, further work will need to be undertaken in consultation with theoffice of the Privacy Commissioner. Experience in other areas across governmentindicates that there may need to be specific legislative mandate provided for datasharing in law enforcement activities, in particular.MBIE-MAKO-1460855718

In Confidence113 MBIE will report to me further on the issues and options for information sharingprovisions, in October 2013. Its work will be undertaken in conjunction with ACC, theMinistry of Health and the relevant transport agencies. If legislative amendments arerequired as part of the proposed Health and Safety at Work Bill, I will report to Cabinetwith proposals for consideration.Regulations, ACOPs and guidanceProblem definition114 The Taskforce identified the lack of general awareness of health and safety issues bybusiness owners, directors, managers and workers as a fundamental problem with theway that the current health and safety system operates. System participants need tobe able to recognise poor health and safety practices when they encounter them andbusiness owners, directors and managers need to know what their responsibilities areand how they can comply with them. Workers need to know how they can ensure theirown safety, health and wellbeing. The Robens model contemplates that regulationsand guidance from the regulator will provide this clarity and certainty, however thisaspect of the system was never effectively implemented in New Zealand – there are alimited number of ACoPs and guidance has been inconsistently developed.115 There are also particular problems with ACoPs and guidance relating to the HazardousSubstances and New Organisms Act – current controls are complex and not integratedinto workplace health and safety requirements and there is insufficient guidance forbusinesses about how what they need to do to comply with requirements (seecompanion paper: Improving Health and Safety at work: Occupational health andmanagement of hazardous substances).Taskforce recommendation 12 ensure the new agency implements a comprehensive set ofregulations, ACoPs and guidance material that clarifies expectations of PCBUs, workers and otherparticipants in the system.Comment116 In order to address the uncertainty and regulatory gaps that exist as a result of theincomplete implementation of the Robens model to date in New Zealand, it is criticalthat we take steps to ensure the regulation is effectively implemented. This means thatregulations, guidance and ACOPs will need to be developed to provide PCBUs andworkers with certainty about how the law and regulations will apply to them, withoutbeing unnecessarily prescriptive. This will not only promote better health and safetyoutcomes, but will make compliance easier for businesses.117 I recommend that regulation-setting should be led by MBIE, with involvement ofWorkSafe. It is anticipated that 15 sets of regulations will need to be developed, ofwhich three can be adapted from existing Regulations under the HSE Act, 10 can besubstantially adapted from the Model Law and some will need to be developed fromscratch (such as regulations for geothermal operations).MBIE-MAKO-1460855719

In Confidence118 The setting of ACOPS and development of guidance material will be a core function ofWorkSafe. Based on the Australian experience, I anticipate that up to 20 ACOPs(outlining preferred practices in core sectors or to manage hazards) and a range ofassociated guidance material will need to be developed before the new Act comes intoeffect (or very soon after). Guidance material will be particularly important in helpingduty holders to come to grips with key concepts contained within the new law, such asPCBU, and reasonable practicability. The ACOPs and guidance developed to supportthe Model Law can be used as a basis for this work, with adaptations for New Zealandconditions as necessary. In a minority of cases, New Zealand-specific publications willneed to be developed. WorkSafe will need to dedicate significant resource to thedevelopment and maintenance of ACOPs and guidance on an on-going basis. Otheragencies are likely also to need to review and maintain guidance material.119 It will be important for stakeholder buy-in and technical accuracy that WorkSafe has themechanisms and resource to contribute to stakeholder participation in the developmentof the ACOPs and guidance and regulations. Recommendations for resourcingstakeholder participation in the development of ACoPs, regulations and guidance areincluded in the companion paper Improving Health and Safety at Work: Overview.Consultation120 Consultation on the package of proposals is discussed more fully in the Cabinet paperImproving Health and Safety at Work: Overview.121 The Treasury, State Services Commission, Civil Aviation Authority, Maritime NewZealand, New Zealand Police, New Zealand Transport Agency, the Transport AccidentInvestigation Commission, the Tertiary Education Commission, New ZealandQualifications Authority, Te Puni Kōkiri, Environmental Protection Authority, and theMinistries of Health, Justice, Transport, Education, Women’s Affairs, Pacific IslandAffairs, Defence, Internal Affairs, Foreign Affairs, Primary Industries, and Environmenthave been consulted on proposals in this paper. The Department of Prime Minister andCabinet was informed.Financial implications122 Financial implications arising from the package of proposals are discussed in theCabinet paper Improving Health and Safety at Work: Overview.Human Rights123 Legislation resulting from this paper's proposals may engage the rights and freedomsof the New Zealand Bill of Rights Act 1990 ('the Bill of Rights Act') but are likely to beconsistent with the Bill of Rights Act because they are justified under section 5 of thatAct. A final view as to whether the proposals comply with the Bill of Rights Act will bemade once the Health and Safety at Work Bill is drafted.Legislative implications124 This paper proposes enactment of a Health and Safety at Work Bill and the making ofassociated regulations regulating major hazard facilities. The new law will replace theHSE Act and Machinery Act and make amendments to a number of other Acts to giveeffect to the decisions in this paper and the companion papers making up the suite ofCabinet papers.125 The Health and Safety at Work Bill has a legislative priority of Category 4 (to bereferred to select committee in the year) in the 2013 legislation programme.MBIE-MAKO-1460855720

In Confidence126 Based on the Australian experience, I anticipate that up to 15 sets of regulations willneed to be in place before the new Act comes into effect. Of these, it is likely that threeshould be brought over from the existing HSE framework, essentially as is. A further 10can be adopted from Australian Model Regulations and adapted for New Zealandconditions through consultation. Some regulations are likely to need to be developedfrom scratch (e.g. geothermal).Regulatory Impact Analysis127 The regulatory impact analysis undertaken for the package of proposals is discussed inthe Cabinet paper Improving Health and Safety at Work: Overview.Publicity128 Publicity is discussed in the Cabinet paper Improving Health and Safety at Work:Overview.RECOMMENDATIONSThe Minister of Labour recommends that the Committee:Content of Health and Safety at Work Bill1. Agree that the Health and Safety and Employment Act 1992 (HSE Act) and MachineryAct 1950 be replaced through the enactment of a new Health and Safety at Work Bill2. Agree that the Health and Safety at Work Bill should adopt the Australian Model WorkHealth and Safety Act, with such adaptations as are necessary or desirable to:2.1. give effect to Cabinet’s policy decisions, such as in respect of workerparticipation2.2. take account of differences in the New Zealand context, including the Bill ofRights Act, Accident Compensation Act, Employment Relations Act, search andsurveillance regimes, different criminal regimes, and other matters includingdifferences in drafting style2.3. take account of lessons learnt in Australia, including in implementing the ModelLaw in individual States and Territories in Australia3. Agree that the key features of Australian Model Work Health and Safety Law (ModelLaw) that should be adopted include:3.1. a primary health and safety duty on a person conducting a business orundertaking (PCBU), supplemented by specific duties for designers,manufacturers and suppliers etc, and a due diligence duty for officers3.2. requiring the PCBU to ensure, so far as is reasonably practicable, the health andsafety of workers while at work in the business or undertaking3.3. new categories of offences and higher penalties3.4. new compliance and enforcement tools such as enforceable undertakings andadverse publicity orders4. Agree that the Health and Safety at Work Bill explicitly cover the NZDF, including navalships, while excluding personnel on operational serviceMBIE-MAKO-1460855721

In Confidence5. Note that officials will provide further advice to the Minister of Labour and Minister ofDefence on the implications of excluding operational service6. Agree that Crown organisations should continue not to be subject to fines forcontraventions of health and safety law7. Agree that the Health and Safety at Work Bill include a power for the court to order theoffender to pay the regulator’s costs in bringing a successful prosecution8. Agree that the infringement notice regime in the current HSE Act should be included inthe Health and Safety at Work Bill, with changes to omit the requirement to first give awarning and to adopt the process for setting the infringement fee from the Model Law9. Agree that the new law should carry over rules that provide for private prosecutionfrom the HSE Act10. Invite the Minister of Labour and Minister of Justice to report back by December 2013on how greater specialist health and safety capacity in the judiciary can be bestachieved and implemented through the Health and Safety at Work Bill11. Agree that the limitation period for commencing prosecutions should follow the ModelLaw, so that proceedings must be initiated within the latest of two years of an offencefirst coming to the notice of the regulator, one year of a coronial report or inquest if itappears from the report that a health and safety offence had been committed, and sixmonths of the contravention of an undertaking12. Agree that, in relation to worker participation, the new Health and Safety at Work Billshould:12.1. place an obligation on all PCBUs to consult with workers on health and safetymatters that affect them, so far as is reasonably practicable, and require allPCBUs to have worker participation practices appropriate to their workplace12.2. require that if the workers want to have health and safety representative/s, thePCBU must consult the representative/s, allow them time off for training withinthree months of being requested, pay for that training, provide time andresources to perform their role, and give them information12.3. require that if the workers and/or PCBU want to have a health and safetycommittee, workers must make up at least half of the committee, the PCBU mustconsult the committee, the PCBU must allow the committee time to perform itsrole and the PCBU must give the committee information12.4. provide health and safety representatives and committees with the powers basedon those provided under the Model Law, including the right for trained health andsafety representatives to direct unsafe work to cease (with safeguards againstimproper use) and to issue a Provisional Improvement Notice to a person theybelieve is contravening the Act13. Agree that, in relation to worker participation, the Health and Safety at Work Bill shouldnot:13.1. provide for a system of workplace entry permit holders13.2. require PCBUs to develop an issue resolution procedure13.3. include procedural details that would be better placed in regulations or guidance,such as details about establishing designated work groupsMBIE-MAKO-1460855722

In Confidence14. Note that, under the Employment Relations Act 2000 (ERA), employees may take apersonal grievance against an employer who discriminates against them for health andsafety reasons, but non-employees cannot access these protections15. Agree that the ERA should continue to provide the basis for resolving disputesbetween employers and employees relating to discrimination in relation to health andsafety issues16. Note that consequential amendments to the ERA will be necessary to make theprotections more explicit and visible and to refer to the new health and safety regime17. Agree that new anti-discrimination provisions be implemented through the Health andSafety at Work Bill that cover disputes between workers and PCBUs outside theemployer/employee relationship in relation to discrimination relating to health andsafety mattersMajor hazard facilities18. Note that major hazard facilities store and process large quantities of dangeroussubstances that have the potential to cause a major accident19. Note that the current regime for regulating major hazard facilities under the HSE Actdoes not provide the public with a high level of assurance that the risks are adequatelycontrolled by operators, or monitored and regulated by the regulator20. Agree that regulations for major hazard facilities be made under the Health and Safetyat Work Bill with the following features:20.1. a facility or proposed facility will automatically be a major hazard facility ifquantities of particular dangerous substances are (or will be) processed, handled,or stored on site that exceed (high) thresholds prescribed in the regulations20.2. WorkSafe may designate a facility or proposed facility which holds (or will hold)more than 10 percent of the threshold quantity as a major hazard facility,following an inquiry that considers the potential for a major accident to occur atthe facility or proposed facility (having regard to quantity or combination ofdangerous substances, the type of activities at the facility and the surroundingland use) and submissions from the operator and interested persons20.3. Major hazard facilities must:20.3.1. prepare a safety case for assessment by the regulator20.3.2. prepare and implement an emergency response plan, in consultationwith emergency services and the relevant territorial authority20.3.3. investigate any dangerous occurrence and report to the regulator on theoutcome of the investigation20.3.4. involve members of the workforce in the preparation and review of thesafety case, safety management system, and emergency response plan20.4. WorkSafe will be able to prohibit the operation (or bringing into operation) of amajor hazard facility (or any part) where the measures taken by the operator forthe prevention and mitigation of major accidents are seriously deficient21. Agree that WorkSafe’s decisions to designate major hazard facilities agreed above willbe subject to the following checks and balances:MBIE-MAKO-1460855723

In Confidence21.1. the regulations will provide for a list of exclusions from designation to be set outin the regulations21.2. designations will be deemed regulations, and subject to oversight by theRegulations Review Committee21.3. WorkSafe will be required to follow a robust process and consult the affectedpersons, and will be subject to judicial review.22. Note that the MBIE is currently working on mapping the risk landscape andjurisdictional responsibilities of different regulators, in relation to New Zealand’s existingstock of major hazard facilities, and expects that work to be completed by December201323. Agree that MBIE and subsequently WorkSafe should promote compliance withobligations (including the Approved Code of Practice for Managing Hazards to PreventMajor Industrial Accidents) and carry out monitoring against those obligations until theproposed regulations are implemented24. Agree that the Health and Safety at Work Bill include provisions for the costsassociated with regulating major hazard facilities to be recovered from the facilityoperatorsData sharing among agencies25. Agree in principle that data sharing among agencies with roles in the workplace healthand safety system should be facilitated through the Health and Safety at Work Bill,subject to appropriate privacy protections26. Invite the Minister of Labour to report back to Cabinet seeking approval of specificmechanisms for information sharing that may be required to be implemented throughthe Health and Safety at Work BillDrafting of Health and Safety at Work Bill and associated regulations27. Note that the Health and Safety at Work Bill has a legislative priority of Category 4 (tobe referred to select committee in the year) in the 2013 legislation programme28. Invite the Minister of Labour to instruct the Parliamentary Counsel Office to draft aHealth and Safety at Work Bill and regulations regulating the operation of major hazardfacilities to be made under the Bill29. Authorise the Minister of Labour to make decisions on detail and to make changes,consistent with the policy framework in this suite of papers, on any issues that ariseduring the drafting process30. Authorise the Minister of Labour to release an exposure draft of the Health and Safetyat Work Bill and major hazard regulations for public comment if the timeframe permits31. Agree that MBIE will administer the Health and Safety at Work Act, and as theadministering agency, will lead advice to Ministers on statutory regulations to be madeunder the new Act32. Note that MBIE and WorkSafe will need to work closely in the development ofregulationsMBIE-MAKO-1460855724

In Confidence33. Agree that WorkSafe will lead the development of Approved Codes of Practice underthe new Act, and have responsibility for issuing guidance relating to the new ActHon Simon BridgesMinister of Labour_____/_______/______MBIE-MAKO-1460855725

In ConfidenceAPPENDIXINTERPRETIVE GUIDELINE – MODEL WORK HEALTH AND SAFETY ACTTHE MEANING OF ‘PERSON CONDUCTING A BUSINESS ORUNDERTAKING’MBIE-MAKO-1460855726

INTERPRETIVE GUIDELINE—MODEL WORK HEALTH AND SAFETY ACTTHE MEANING OF ‘PERSON CONDUCTING A BUSINESS OR UNDERTAKING’This document provides guidance on the interpretation and application of the concept of a‘person conducting a business or undertaking’ used in the Work Health and Safety (WHS)Act and Regulations.The WHS Act places the primary duty of care and various other duties and obligations on a‘person conducting a business or undertaking’ (PCBU). The meaning of a PCBU is set out insection 5 of the WHS Act.This is a broad concept used to capture all types of modern working arrangements.A ‘person’ may be an organisation or an individualA ‘person’ is defined in laws dealing with interpretation of legislation to include a bodycorporate (company), unincorporated body or association and a partnership.An individual is also a ‘person’, but will only be a PCBU where that individual is conductingthe business in their own right (as a sole trader or self-employed person). Individuals who arein a partnership that is conducting a business will individually and collectively be a PCBU.Section 5 (4) of the WHS Act makes it clear that an individual is not a PCBU if they areinvolved in the business or undertaking only as a worker or officer of the business orundertaking.The Crown is also a person for the purposes of the WHS Act. The Crown may conduct abusiness or undertaking through its departments and statutory agencies.What is a ‘business’ or ‘undertaking’?The WHS Act does not define a ‘business’ or ‘undertaking’.Whether a person conducts a business or undertaking is a question of fact to be determinedin the circumstances of each case. The following table identifies the usual meaning of theseterms:BusinessesUndertakingsenterprises usually conducted with a view to making a profit and have adegree of organisation, system and continuitymay have elements of organisation, systems, and possibly continuity, butare usually not profit-making or commercial in natureThe WHS Act states that a person conducts a business or undertaking whether it isconducted alone or together with others, and whether or not it is conducted for profit or gain.The concept of ‘work’ is relevant to identifying what is a business or undertakingThe duties of a PCBU are all associated with the carrying out of work. The definition of a‘workplace’ is a place where work is carried out for a business or undertaking and includesany place where a worker goes, or is likely to be, while at work. The definition of a ‘worker’ isa person who carries out work in any capacity for a person conducting a business orundertaking.The WHS Act also places duties on PCBUs who carry out the following activities associatedwith work or workplaces:

Section 20 – management or control of a workplaceSection 21 – management or control of fixtures, fittings or plant at a workplaceSections 22-25 – design, manufacture, import or supply of plant, structures or substancesthat are, or could be used at a workplaceSection 26 – install, construct or commission plant or structures that are, or could beused at a workplaceWhat is work for the purposes of the model WHS Act?What is ‘work’ is not defined in the WHS Act and must be given its ordinary meaning. Thefollowing criteria may assist in determining if an activity is work for the purposes of the WHSAct:1. the activity involves physical or mental effort by a person or the application ofparticular skills for the benefit of another person or for themselves (if self-employed),whether or not for profit or payment;2. activities for which the person or other people will ordinarily be paid by someone islikely to be considered to be work;3. activities that are part of an ongoing process or project may all be work if some of theactivities are for remuneration;4. an activity may be more likely to be work where control is exercised over the personcarrying out the activity by another person; and5. formal, structured or complex arrangements may be more likely to be considered tobe work than ad hoc or unorganised activities.The activity may be work even though one or more of the criteria are absent or minor.Work does not include activities of a purely domestic, recreational or social nature.Organisations who also do things other than of a social, domestic or recreational naturewould be PCBUs but would only owe duties in relation to ‘work’ and only so far as isreasonably practicable.Examples of a business or undertakingA retailerA wholesale businessA manufacturing businessAn importer that is on-selling the imported goodsAn owner-driver of their own transport or courier businessA fast food franchisor and the operator of the fast food outlet (the franchisee)A self employed person operating their own businessA government department or government agencyA local councilA schoolPartnerships and unincorporated joint ventures. Where the partnership or joint venture isunincorporated, each partner is a person conducting the business or undertaking of thepartnership or joint venture.A builder (including principal contractors and sub-contractors)

A not-for-profit organisation that engages and pays administrative staffA clothing manufacturer employing outworkersThere may be multiple businesses or undertakings and therefore multiple PCBUs involved inwork at the same location. For example:The owner of a multi-tenanted shopping centre, the manager of the shopping centre,each of the businesses operating from shops in the shopping centre and those carryingout ancillary activities such as cleaning, security and shopping trolley collection.The principal contractor on a construction site, sub-contractors engaged by the principalcontractor, sub-contractors engaged by the sub-contractors (including self-employedcontractors), along with the client engaging the principal contractor.A service station owner, the service station operator (if different from the owner), themechanic (if running a separate business), the PCBU carrying out the supply of gascylinders to the public at the service station and the operator of an attached fast-foodoutlet.A single business or undertaking may also operate at multiple locations.Where work requires approval from the relevant building regulator an owner-builder may be aPCBU and owe duties to any workers or other persons at the workplace. In somecircumstances where a landlord is carrying out work on an investment property that creates arisk to health and safety to other persons at the property they could also be a PCBU.What is not a ‘business’ or ‘undertaking’The WHS Act and Regulations identify specific organisations that are not considered to be aPCBU for the purposes of the WHS Act. For example, the model Act provides that avolunteer association does not conduct a business or undertaking. (For further information inrelation to volunteer organisations, refer to the Safe Work Australia volunteer fact sheets andfrequently asked questions).Section 5(4) of the WHS Act excludes a worker (such as an employee) and an officer (suchas an executive manager) from being a PCBU in that capacity alone.Also, elected members of local authorities, who are acting in that capacity, do not conductbusinesses or undertakings.The WHS Act allows further exclusions to be made by regulation. At this stage, the WHSRegulations exclude ‘strata title bodies corporate that are responsible for common areasused only for residential purposes’, unless the strata title body corporate engages one ormore workers as an employee.Private or domestic purposesThe regulators consider that the intent of the legislation is that the following kinds of personsshould not to be taken to be PCBUs:Individuals who carry out domestic work in and around their own home (e.g. domesticchores etc).Individuals such as home-based foster carers who care for foster children.Individual householders who organise one-off events such as dinner parties, garagesales, lemonade stalls etc.Individual householders who engage persons to carry out ad hoc home maintenance andrepairs or other domestic work, e.g. casual babysitters; tradespeople to undertakerepairs. It is important to note that a tradesperson will either be a worker for a business orundertaking, or a business or undertaking in their own right if the tradesperson is selfemployed.

An individual householder may have the duties of a PCBU if they engage a worker, forexample, employing a nanny to care for children in the householder’s home. While thehouseholder is not employing the worker as part of a business, employing the worker to carryout certain duties at the home is regarded as an ‘undertaking’. Consequently, thehouseholder has a duty of care as a PCBU and the person employed by the householder hasthe worker’s duty of care under the WHS Act.A householder may also be a PCBU if ‘work’ is carried out by or for them that is not purelydomestic, but is part of a business or undertaking conducted by them (e.g. a business isoperated from home). The householder may then be a PCBU involving the management orcontrol of the workplace, and have duties as such. If the person is undertaking ‘work’ for thehouseholder, as part of the conduct of a business or undertaking by the householder, thenthe householder will have the primary duty in relation to that person.A householder who is a foster parent is not a PCBU or worker. This is because the activitiesof a home-based foster parent in caring for a foster child are not regarded as work. Theorganisation or agency that arranges and monitors the foster care, would however be doingso as a PCBU, and its activities would be regarded as work. This means that organisationswill have obligations to volunteer foster parents in so far as they can be affected by thePCBU's business or undertaking.All of the facts will determine if in the particular circumstances there is a business orundertaking being conducted (in which ‘work’ is being carried out) or if the activities are of aprivate or domestic nature.Application to the CrownThe WHS Act applies to businesses or undertakings conducted by the Crown in eachjurisdiction. The Crown operates through government departments and agencies which differin size and complexity. In some jurisdictions the Crown may have responsibility for separatebusinesses or undertakings. In determining whether a department or agency conducts abusiness or undertaking on behalf of the Crown, matters such any legislation establishing oradministered by the organisation, as well as organisational structure, governance anddecision making will be considered.Where a department operates through various agencies, the Crown will be the PCBU but thedepartment or agency may be named in any proceedings or notices as the ‘responsibleagency’.Note: this document is a general guideline only and should not be used as a substitute for seeking professionallegal advice for your specific circumstances The contents of this document are correct and based on availableinformation at the time of writing. However, there may be subsequent decisions of courts or tribunals on thematter covered by this guide which mean that the contents are no longer accurate.