Construcciones Yamaro: Robust safety systems and training vital for formwork sector

In light of the amendments to New South Wales’ work health and safety laws, recently passed by parliament, the Formwork Industry Association is emphasising the importance of providing appropriate safe systems of work and training.

By Michael Sugg, chief executive officer, Formwork Industry Association.

On 12 October 2023, the Parliament of New South Wales passed amendments to the state’s work health and safety (WHS) laws. Some of these changes commenced immediately, while others will come into progressive effect until mid-2024. These changes mean that Formwork Industry Association (FIA) members, and other industry participants, will need to carefully consider whether their safety systems and processes are robust enough and whether their workforces are trained, instructed and informed sufficiently to meet the legislation requirements.

The key changes of interest to FIA members include:

Significant increases in the maximum penalties for breaches of the WHS Act, including those whose conduct in contravening the primary duties is based on gross negligence or recklessness.
Introduction of new provisions enabling the imputation of corporate leaders’ conduct to corporations.
Introduction of a new provision providing that a corporation’s state of mind can be evidenced by reference to the:
(a) Conduct of the corporation’s board of directors;
(b) Conduct of an “authorised person”; or
(c) Existence of a “corporate culture” that directed, encouraged, tolerated or led to the carrying out of the conduct constituting the relevant offence(s) by the corporation.
Limitation of the availability of the “mistake of fact” defence.

Increase in maximum penalties

There has already been a shift in the last couple of years with the courts imposing more significant penalties for safety breaches, particularly in areas of regulatory focus. Recent prosecutions have seen penalties for businesses in excess of $2 million for serious cases.

The maximum penalties in NSW will significantly increase on 1 July 2024. The maximum penalty that can be imposed under the WHS Act for grossly negligent or recklessness offences are the most material increases and will rise from $3.99 million to $10.4 million for a convicted corporation, and from $798,000 and/or five years’ imprisonment to $2.17 million and/or ten years’ imprisonment for individual people conducting a business or undertaking (PCBUs), such as sole traders, or PCBU officers. Individual worker maximum fines will also increase.

It should be remembered that under court sentencing principles, the courts are required to consider maximum penalties when sentencing, and this means that penalties will significantly increase moving forward, particularly for serious offences.

Imputation, state of mind and culture

Aside from the increase in fines, these proposed changes will be of great interest because they expand how a business can be held liable. The new imputation and state of mind provisions came into effect on 24 October 2023. They are extremely important because they make it easier for SafeWork to prosecute corporate PCBUs based on the conduct of their board, authorised persons and “corporate culture”.

SafeWork previously had to comply with specific requirements for imputing an individual’s conduct to a corporation in order to prove that the corporate body had the state of mind required to have committed a particularly serious WHS offence. The WHS Act now includes a regime by which the conduct of the following is imputed to be the conduct engaged in by the corporation itself:

A corporation’s board of directors.
One or more authorised persons (an authorised person of a corporation is an officer, employee or agent of the relevant body corporate acting within the actual or apparent scope of their employment or authority).
One or more persons acting at the direction of or with the express or implied agreement or consent of:
(a) A body corporate’s board of directors;
(b) An authorised person.

The amendments also provide for SafeWork to prove a corporate body’s state of mind by showing that:

The relevant body corporate’s board of directors intentionally, knowingly or recklessly engaged in the relevant conduct or expressly, tacitly or impliedly authorised or permitted it to be carried out;
An authorised person intentionally, knowingly or recklessly engaged in the relevant conduct or expressly, tacitly or impliedly authorised or permitted it; or
A “corporate culture” existed within the body corporate that directed, encouraged, tolerated or led to the conduct being carried out.

Those amendments don’t apply, however, if the relevant body corporate can prove that it took reasonable precautions to prevent the conduct or its authorisation or permission. However, a failure to take reasonable precautions can be shown if the relevant conduct was substantially attributable to:

The inadequate management, control or supervision of the conduct of one or more of the body corporate’s employees, agents or officers; or
A failure to provide adequate systems for conveying relevant information to relevant persons in the relevant body corporate.

There is no definitive legal position on when something is “substantially attributable”, and the court will need to look closely at the facts of each particular case in order to decide whether something is “substantial” and “attributable”.

The inclusion of a “corporate culture” concept in the NSW WHS Act is quite novel. A “corporate culture” is defined as “one or more attitudes, policies, rules, courses of conduct or practices existing within the body corporate generally or in the part of the body corporate in which the relevant activity takes place”.

Corporate culture-related attribution clauses are not new to mainstream criminal laws in some other jurisdictions. However, the definitions of a corporate culture used in those other laws are different to the definition contained in the new sections of the NSW WHS Act. Rather than referring to “one or more” attitudes, etc …, the other jurisdictions refer to “an” attitude, policy, rule, course of conduct or practice existing within a corporation or the part of it that is involved in the relevant conduct.

It now remains to be seen how SafeWork and the courts will implement the new imputation clauses, but it is entirely possible (and probable) that courts will impose higher penalties on corporate offenders whose culture derives from the existence of multiple attitudes, policies, rules, practices or courses of conduct than those whose culture is based on only one such factor. It will, for example, be important that leadership and management teams are clearly aligned on their approach and commitment to safety, evidenced by robust systems and processes.

Mistake of fact

As to the new mistake of fact provision, there is a defence that can be relied upon by a defendant who can prove that their conduct was informed by:

An honest, but mistaken, belief in a relevant fact;
That it was reasonable to hold the relevant belief in the circumstances; and
That the mistake related to a material fact, rather than a mistaken understanding of the applicable law.

However, the new WHS mistake of fact provision limits a body corporate’s ability to rely on a mistake of fact defence to circumstances in which the relevant:

Employee, agent or officer of the body corporate who carried out the relevant conduct was under a mistaken, but reasonable, belief about facts that, had they existed, would have meant the conduct would not have constituted the offence; and
Body corporate proves it took reasonable precautions to prevent the conduct.

SafeWork has not often had to contend with accused entities relying on mistake of fact defences in the past. It will need to adapt its approach to evidence-gathering and investigation to meet any circumstances in which these new provisions apply.

What does this mean for FIA members?

Consistent with the current regulatory focus on compliance, the amendments mean that businesses will face significant penalties and other (and arguably easier) ways they can be held responsible for breaches of the WHS laws.

What this means is that businesses now, more than ever, need to make sure they have appropriate safety systems and procedures aligned to the requirements of the legislation. A significant requirement is the provision of appropriate safe systems of work, along with training, information and instruction of their workforce in those systems and processes.

The FIA has worked worked vigorously and diligently to develop and implement a Safe Formworker Program, which has been severely lacking across the industry. Strong support has been obtained from government and the industry to improve competence and safety across the formwork sector. The program offers a practical solution for formwork organisations and the industry to fulfill their obligations and avoid the significant implications of non-compliance with the WHS laws.

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Construcciones Yamaro, by Armando Iachini