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Due Diligence and Safety

In this article, I’m looking at Due Diligence and Safety in the USA, UK, and Australia. Why? Because Due Diligence is the root of so much that we should be doing in Safety.

Let’s start with the definitions of due diligence in the way that it applies to safety (because due diligence is a concept that has many different applications in business.)

Due Diligence in the United States of America

Definition of Due Diligence

1law the care that a reasonable person exercises to avoid harm to other persons or their property …
Doing your due diligence: “… in this sense, it is synonymous with another legal term, ordinary care.”

Merriam-Webster Dictionary

That’s the definition from a popular US dictionary.

Workplace Safety in the USA

In the USA, the Federal Occupational Safety and Health Agency, (OSHA), governs health and safety in the workplace.  As the USA is a federal state, what the OSH Act or Agency covers is complex, as follows:

  • The Agency covers most private sector employers in all 50 US states, either directly through the federal agency or through an OSHA-approved state plan – 22 states have such a plan;
  • Workers at state and local government agencies are not covered by the Agency, but have OSH Act protections if they work in those states that have an OSHA-approved state program;
  • The Agency protects workers of all federal agencies;
  • The Act does not cover the self-employed, immediate family members of farm employers; and
  • The Act does not cover workplace hazards regulated by another federal agency (for example, the Mine Safety and Health Administration, the Department of Energy, or Coast Guard).[2]  

Are you confused?  I am!

Product Safety in the USA

To add to my confusion the US Consumer Product Safety Commission (CPSA) regulates the safety of some consumer products. It does so under thirteen different federal laws.  These acts regulate, for example, child safety, flammable fabrics, art supplies, poisons, and refrigerators[3].  I can’t see any coherent pattern to what the CPSA regulates.

However, the US Federal Government tends not to manage product safety.  It is more often addressed via state legislation, which varies from state to state.  

Product safety is also dealt with through civil liability: victims sue you if your product hurts someone.  In other words “Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.”[4]

There are different theories of liability, one of them being ‘strict liability.  “In criminal and civil law, strict liability is a standard of liability under which a person is legally responsible for the consequences flowing from an activity even in the absence of fault or criminal intent on the part of the defendant.”[5] 

Back to Due Diligence

Now we circle back to due diligence: “due diligence is the only available defense to a crime that is one of strict liability … Once the criminal offence is proven, the defendant must prove on balance that they did everything possible to prevent the act from happening.”[6]

(I also note from that Wikipedia article that “It is not enough that they took the normal standard of care in their industry – they must show that they took every reasonable precaution.”  We now seem to be heading towards our old friend ‘reasonably practicable’ – but that’s another article!)

There is a big difference in the way that the USA manages workplace and product health and safety.  Due Diligence may be a useful concept in all these settings. However, I’m finding it very difficult to say what it means when applied to safety.

Due Diligence Around the World

It was also challenging to pin down due diligence and safety in the United Kingdom (and still is).

In 2007, the UK’s Health and Safety Executive (the national regulator, much like OSHA in the USA) published a useful study into Due Diligence[7].  This report looked at “whether the law in nine different countries imposes health and safety duties upon boardroom directors (and other senior managers)”.

Due Diligence in Nine Different Countries

It concluded that “seven out of nine countries contain safety legislation that imposes positive safety obligations upon either directors or senior managers of companies. These are: Germany, France, Italy, Sweden, Japan, Canada (four out of fourteen jurisdictions) and Australia (two out of nine jurisdictions).

Thus, the criminal law in these countries imposes safety obligations on directors or senior managers.  

Interestingly, the Report found that exercising “due diligence to prevent the commission of the offence” was often found to be a viable defense for company directors and senior managers in many jurisdictions.

Due Diligence in the United Kingdom

The report observed that, in 2007, “It is fair to say that the legislative framework for regulating occupational health and safety (OHS) in Great Britain appears unusual in not imposing positive duties on directors. The majority of the nine countries studied do have this kind of legislation.” 

The UK brought the Corporate Manslaughter and Corporate Homicide Act into force in 2007 – the same year as this Report.  The UK introduced this because of several failures to prosecute company directors after high-profile fatal accidents.  Before 2007, courts had to find individuals guilty of gross negligence manslaughter to hold them accountable. Such prosecutions often failed.

Whether the Due Diligence Report had any influence on the 2007 Act is hard to say. This Report is still the best result on the UK HSE’s website for ‘due diligence’ so not much seems to have changed.

Safety Law in Australia

Now Australia has an interesting mix of approaches derived from those in the USA and UK.

Australia is a Federation

Australia, like the USA, is a federal state.  Responsibility for health and safety generally resides with the states and territories.  The federal government only controls health and safety in federal workplaces or on federal land.  In Australia, we have a similar jurisdictional model to the USA, with all the complexity that can introduce.

US practices also influence Australian industry and commerce.  Safety requirements are often met by meeting specifications. (Whereas the UK uses a ‘safety by intent’ approach – another article I must write).  Thus, Australian safety practice often relies on certification against standards, as in the US. 

Australian Work Health and Safety Law

In Australia, we have adopted our own version of the UK Health and Safety at Work Act, 1974.  The Australian government introduced a much-refined version of UK law in 2011, some 37 years after the UK Act.

To achieve standardization across Australia, the Federal Government agreed with state and territory governments to introduce a model-based approach.

Safe Work Australia developed the Model WHS Act, Regulations, and Codes of Practice, collaboratively. Then the states and territories all agreed to adopt these centrally-developed articles of legislation.

States and territories were free to modify the Models as they saw fit. In general, the different jurisdictions have changed little, although Victoria has chosen not to implement WHS at all (thanks, Victoria, for being team players).

Unlike in the USA, Australian Work Health and Safety (WHS) legislation covers both workplaces and non-consumer goods. (Consumer goods are covered by other laws.)

This criminal law sets standards that manufacturers, designers, importers, and users must achieve when engineering, installing, commissioning equipment, and running it within a workplace.

Safety Due Diligence in Australia

In Australia, we are fortunate that the Work Health and Safety Act introduces a very specific and practical definition of what Due diligence is when applied to safety duties.

The Act says that Officers (company directors and senior managers) have additional duties.  Officers must exercise ‘due diligence. Under Division 4—Duty of officers, workers and other persons, Section 27  Duty of officers:

             (1)  If a person conducting a business or undertaking has a duty or obligation under this Act, an officer of the person conducting the business or undertaking must exercise due diligence to ensure that the person conducting the business or undertaking complies with that duty or obligation. 

Australian WHS Act, 2011

We’re now talking about what is due diligence in the context of health and safety. I need to be precise about that. The term ‘due diligence’ appears in other Australian laws and can have different meanings. In this post, the definition of due diligence applies to WHS duties only.

We’ve got to do six things, in sub-paragraphs (a) to (f), to demonstrate due diligence. 

What does Due Diligence Mean (a & b)?

(5)  In this section, due diligence includes taking reasonable steps:

                     (a)  to acquire and keep up‑to‑date knowledge of work health and safety matters; and

                     (b)  to gain an understanding of the nature of the operations of the business or undertaking of the person conducting the business or undertaking and generally of the hazards and risks associated with those operations; and

Section 27

Officers must acquire and keep up to date with knowledge of work health and safety matters obligations and so forth.

Secondly, officers must gain an understanding of the nature of their business’s operations and the risks they control.  If you’re a company director you need to know what the operation does.

You cannot hide behind “I didn’t know” because it’s a legal requirement for you to do so.  There’s no pleading ignorance because ignorance is, in fact, illegal and you’ve got to have a general understanding of the hazards and risks associated with those operations.  

We don’t necessarily have to be up on all the specifics of everything going on in your organization, but you should know what your organization does. However, we should be aware of the general costs and risks associated with that kind of business.

What does Due Diligence Mean (c, d, e & f)?

                     (c)  to ensure that the person conducting the business or undertaking has available for use, and uses, appropriate resources and processes to eliminate or minimise risks to health and safety from work carried out as part of the conduct of the business or undertaking; and

Section 27

Now, thirdly, we are moving on. Basically, sub-paragraphs C, D, E, and F refer to appropriate resources and processes.  Officers have got to ensure that PCBUs have available and use appropriate resources and processes in order to control risks.  That says you’ve got to provide those resources and processes and there is supervision.

Maybe you put in a Safety Management System that ensures people actually do use the stuff they should, to keep themselves safe.  And that’s very relevant because often people don’t like wearing, for example, Personal Protective Equipment (PPE) because it’s uncomfortable or slows you down, so the temptation is to take it off.

What does Due Diligence Mean (d)?

                     (d)  to ensure that the person conducting the business or undertaking has appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely way to that information; and

Section 27

Moving on to part D, we’re still on the appropriate processes. We must have appropriate processes for receiving and considering information on incidents, hazards, and risks.  Again, we’ve got to keep up to date. What’s going on in our own plants and maybe similar plants in the industry? We need a process to respond in a timely way to that information.

If we discover that there is a new incident or hazard that you didn’t previously know about. We need to respond and react to that quickly enough to make a difference to the health and safety of workers.  That works together with sub-paragraph B, doesn’t it?  In parts A and B we need to keep up to date on the risks and what’s going on in the business. Also, in part A, we need to ensure that the PCBU has processes for compliance with any duty or obligation and follows them again to provide that stuff.

In the system safety world, often the designers will need to provide the raw material that becomes those processes. Or maybe if we’re selling a product, it comes with an instruction manual of all the processes needed.

What does Due Diligence Mean (e-f)?

                     (e)  to ensure that the person conducting the business or undertaking has, and implements, processes for complying with any duty or obligation of the person conducting the business or undertaking under this Act; and

                      (f)  to verify the provision and use of the resources and processes referred to in paragraphs (c) to (e).

Examples:  For the purposes of paragraph (e), the duties or obligations under this Act of a person conducting a business or undertaking may include:

(a)    reporting notifiable incidents;

(b)    consulting with workers;

(c)    ensuring compliance with notices issued under this Act;

(d)    ensuring the provision of training and instruction to workers about work health and safety;

(e)    ensuring that health and safety representatives receive their entitlements to training.

Section 27

Finally, the officers must verify the provision and use of these resources and processes (in Parts C, D, and E).  Thus, we’ve got a simple six-point program that comprises due diligence, but it’s quite demanding. There’s no shirking this stuff or pretending you didn’t know.  I suspect it’s designed to hang Company directors who neglect and harm their workers.

WHS, Vaccinations and COVID

Now part (e) is interesting, particularly in the age of the COVID pandemic.  Not only must Officers ensure that safety resources and processes are provided, but that they are used.  Many Australian governments and businesses are mandating COVID vaccinations for workers.

Some undertakings, for example, large sporting venues, are insisting that patrons are vaccinated too.  As Officers have safety duties under the WHS Act to protect visitors and the public, you can imagine why. 

Directors could be held criminally liable for workers, visitors, or even passers-by catching COVID.  As this is criminal law, no contractual arrangement (e.g. saying ‘enter at your own risk’ on a ticket) can override WHS obligations.

What Due Diligence is All About?

Let’s face it, this is all good common-sense stuff. We should be doing this anyway.

These requirements are only the minimum required for all businesses and undertakings in Australia. In any kind of high-risk industry, we should have a Safety Management System that does all of this and more.

Conclusion

Well, we’ve looked at due diligence as it applies to safety in many different countries.  We’ve concentrated on the USA, the UK, and Australia. But Germany, France, Italy, Sweden, Japan, Canada got an honorable mention as well.

The combinations of due diligence with criminal law, civil law, and safety are very confusing in the USA. It is largely non-existent in the UK. 

Only Australia has spelled out in law what due diligence means for safety.  You may not work in Australia, but I suggest that the clarity and practicality of the WHS Act definition on ‘due diligence’ are useful for safety practitioners everywhere.  

What does Due Diligence mean for Safety Practices where You are?

[1] Merriam-Webster online dictionary.

[2] https://en.wikipedia.org/wiki/Occupational_Safety_and_Health_Administration

[3] https://www.cpsc.gov/Regulations-Laws–Standards/Statutes

[4] https://en.wikipedia.org/wiki/Product_liability#Strict_liability

[5] https://en.wikipedia.org/wiki/Strict_liability

[6] https://en.wikipedia.org/wiki/Due_diligence

[7] https://www.hse.gov.uk/research/rrpdf/rr535.pdf


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