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Since the Kirk decision was handed down in February this year it has

so far failed to deliver on the hope it would bring an end to some of the unreasonable tactics used by WorkCover and permitted by the Court in prosecuting employers, directors and managers.

In this article we take a close look at the recent decision in Morrison v Chevalley where the NSW Industrial court has ‘read down’ the High Court judgement in Kirk v WorkCover. It’s an outcome that has left legal analysts asking what effect, if any, the Kirk decision can have on the work health and safety landscape.

A quarry (the company), the operations manager and two other non-executive directors were charged with safety breaches after an employee was killed when the truck he was driving down a haulage road went over the embankment.

Based on legal advice, and before Kirk, the company and the operations manager entered guilty pleas. However,

IN THIS ISSUE

Directors guilty until proven innocent according to NSW IR court

AdviserEmployers

September 2010 Published by AFEI - Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000

the two non-executive directors pleaded not guilty.

Days before the case against the two non-executive directors was heard, the Kirk decision was handed down and the directors asked the court to dismiss the charges against them based on the findings in that case. In Kirk the High Court held that for charges under the NSW OHS Act to be valid they must clearly identify what measures the company could have taken, but didn’t, to prevent the relevant risk.

For a review of the Kirk decision please see

the highlighted box at the end of this article

titled ‘What did the High Court decide in

Kirk?’

� Modern award changes lost in transition

� Modern awards-overtime rates apply now

� NSW work health and safety Bill expected soon

� High income employees and unfair dismissal

� What should I do when a WorkCover inspector visits

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2

Features

1 Directors guilty until proven innocent according to NSW IR court

5 NSW work health and safetyBill expected soon

5 Modern Award developement

6 Modern Award development

7 High income employees and unfair dismissal

8 What should I do when aWorkCover inspector visits myworkplace?

9 Tell us about your experiences

Training & events

10 October and November training dates

11 Future issues

September 2010

continued from page 1

What did the directors argue in Morrison v Chevalley?

Following the trend of the High Court’s view in Kirk, the directors argued that the charges against them were so lacking in identification of the essential elements of the alleged offence that the court didn’t have the power to hear the case, that orders should never have been made requiring them to appear before the court to answer the charges and that the charges were therefore invalid and should be dismissed. One director also questioned the constitutional validity of the section of the law used to bring the charges.

The reason that the directors were made to appear before the Court was because the company was charged with an offence against the OHS Act and under a controversial section of the Act, where a corporation breaches the law, each director of the corporation and each person concerned in the management of the corporation is taken to have breached the same provision. That is, they are ‘deemed guilty until proven innocent’. This carries with it a ‘reverse onus of proof’.

What did the prosecutor say?

WorkCover said a statement of offence was made up of three elements, with the charge the first, followed by the particulars of the offence and a description of the consequences of the offence. The use of the words of the Act to describe the offence is enough, it said. And even if there was a problem with the charges, it still didn’t affect the jurisdiction of the Industrial Court and it was too late for the directors to challenge the proceedings under criminal procedure law.

WorkCover also said that any question about the correctness of the orders for the company and directors to appear before the Industrial Court was irrelevant because the company and directors did attend and orders were made by consent in all four matters. WorkCover also referred to the Hamilton v John Holland Pty Ltd decision, also made post-Kirk, where the Industrial Court distinguished between the ‘factual’ and ‘legal’ elements of a charge to allow the prosecution to proceed. It said that identifying the act or omission that caused the health and safety risk was a matter of fact and not a necessary matter of law that had to be established for a charge to be valid.

CONTENTS

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September 2010 Published by AFEI - Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000

FEATURES

What did the High Court decide in Kirk? The High Court decision in Kirk exonerated a hobby farmer who had been convicted by the Industrial Court and ordered to pay large fines when his farm manager was tragically killed

What did the NSW Industrial Court decide?

The two directors will be prosecuted for breaches of occupational health and safety law.

The Court decided that although it was an essential legal element of the offence by the company to clearly identify what measures it could have taken, but didn’t, to prevent risk—they weren’t essential elements for the offence by the directors. The directors were charged under a section of the law relating to offences by corporations that also deems directors and certain persons in management guilty and reverses the onus of proof, thus requiring them to prove one or both of two defences in the Act if they seek to avoid the final guilty verdict.

The Industrial Court said the directors of a company know from the charges against the corporation what measures it should have taken to avoid risk. It’s then up to them to prove a defence.

What does this mean for the future?

Making directors and managers liable for the offences of a corporation, even when the corporation hasn’t been prosecuted or convicted, makes living persons vicariously liable for alleged contraventions by the corporation, even when they may be remote from day to day management. The assumption is that they are the ‘controlling mind’ of the corporation. There is no provision for a separate offence by an individual requiring proof of a guilty mind and a guilty act in respect of the individual.

AFEI chief executive Garry Brack said in The Australian

Other examples of employers using Kirk-like arguments

In another decision in the growing line of failed Kirkesque arguments the Industrial Court has refused to allow the director of a hydraulics company to withdraw his guilty plea. He entered the plea after he was deemed guilty because of charges brought against the company.

on 27 August 2010 that it was ‘repugnant’ that the onus of proof could be reversed so someone was deemed guilty before they went to court. He hoped the decision would go before the High Court.

The reasoning and logic in Kirk hit home like a bolt for many employers. Particularly, when a Justice of the High Court described the ‘sport’ that WorkCover NSW had played with Mr Kirk by trying to make him liable for the unforeseen and tragic death of a long time employee and friend.

During the Chevalley case one of the directors said that the New South Wales government, which intervened:

…has not explained why it is, or how it is, that a non-executive director should be responsible for the truck in question to be low on fuel and without adequate brakes. This was a company where a full time and experienced operations manager, … was given adequate resources regarding safety. The manager has pleaded guilty. What should the non-executive director have done?

However, the Industrial Court said it couldn’t ‘read down’ or give a narrow or technical meaning to the words ‘each director of the corporation’ (Morrison v Chevalley [2010] NSWIRComm 116).

in an accident at work. The High Court found the Industrial Court didn’t understand what an offence was against the NSW occupational health and safety law or how a defence applied in proceedings for such an offence. The High Court said it was wrong to propose that employers have an absolute duty to ensure the health, safety and welfare of employees, which was based on the proposition that an employer could ‘guarantee’ safety by removing risk from the workplace. The High Court found that the absolute nature of this duty went against a fundamental part of the rule of law because it put an obligation on a person that’s impossible to comply with and creates a burden that’s impossible to bear. Therefore when a director or person concerned in a corporation’s management is charged, the actual risk and the things that could have, and should have, been done to remove that risk has to be particularised so that the defendant knows what they need to prove to establish a defence.

A charge must include what measures should have been taken to reduce risk, but didn’t.

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September 2010 Published by AFEI - Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000

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FEATURES

Who’s a director?

One of the arguments made by the directors in this case was that holding a non-executive director responsible for the workplace accident, when both the company and the manager of the mine had entered a guilty plea, was wrong. This was a company where a full time and experienced operations manager was given adequate resources regarding safety.

What, the non-executive director asked, should he have done?

The full bench of the NSW Industrial Court dismissed the question by saying that ‘the words “each director of the corporation” should not be read down or given a narrow or technical meaning’.

The court said ‘director’ has been held to include:

� a person who knowingly assumes the office of director without having been properly appointed

� ‘de facto’ and ‘shadow directors’.

The Court said it wasn’t its role to ‘determine whether a distinction should have been made between managers and non-executive directors’.

The term ‘director’ isn’t limited in any way by corporations law and therefore shouldn’t be limited when considering the liability of directors and managers for offences by corporations under occupational health and safety law, the Court said.

What all of this means is that managers, executives and directors can all be held personally liable for workplace accidents, even if the Court can’t say what they could have done differently to prevent the accident.

When ‘hypothetically’ does a director have a defence?

When one of the directors in the case raised the idea that the existence of a defence was ‘illusory’, the Industrial Court referred to a 2006 decision that offered hypothetical examples of when a director or manager might have a defence when an offence is committed by the company.

1. A director who was in a minority on the board of directors in urging a more costly, but effective, system of safety than the other directors were prepared to adopt.

2. A director who was on leave of absence or suffering some other disability when a particular policy decision was taken and may not have been informed of that decision.

3. A director who didn’t hold a position of authority to influence the conduct of the corporation at the relevant time, although he did at another time.

When has a director proven a defence in the past?

In Chevalley, the Court also listed a handful of cases where directors have been able to mount a defence.

A fatality occurred when a circular saw was not properly maintained and no instruction was given about its proper use. The prosecution failed because it was impossible to establish whether the defendant had accepted the role of director of the parent company because of a complex corporate structure made up of numerous subsidiaries (Inspector James v Ryan [2009] NSWIRComm 215

In a 2007 decision a family business making tissue products acknowledged a contravention of the Act after an employee caught his arm in an unguarded machine.

The parties charged were all directors at the time of the breach but governing director provisions in the Articles of Association put limits on the power of directors to influence the contravening conduct (Inspector Wayne James v Sunny Ngai [2007] NSWIRComm 203

Following the handing down of the Kirk decision he asked the court to allow him to withdraw the guilty plea on the basis that the prosecutor didn’t identify the act or omission that caused the breach.

However, the Industrial Court said the case was different from Kirk because it involved the supply of plant equipment that was unsafe—which was a positive act—whereas as Kirk was about a deficiency in a system of work (Dugdale v Fluid Tech Hydraulics Pty

Ltd [2010] NSWIRComm 123).

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Published by AFEI - Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000

The Adviser www.afei.org.au 5

September 2010

FEATURES

See us at the safety show!

AFEI will be at the safety show again this year to meet with members and talk about work health and safety law. We’ll have the latest information and advice about the Model Act and the NSW Work Health and Safety Bill, which we expect to be introduced soon, to help you prepare for the changes to the law that are set to start in 2012.

AFEI Stall no. Q16

Modern Award developmentSome members have reported that union representatives are telling them to phase-in overtime rates in modern awards. However, the full bench of Fair Work Australia (FWA) made it clear in June that overtime rates in Modern Awards started in full on 1 January.

When Modern Awards started on 1 January 2010, some parts such as wages, loadings and penalties didn’t start immediately, but were to be phased in gradually over a period of up to five years. The

Australian Manufacturing Workers Union has argued that overtime should be phased-in because, in the Union’s view, it fell under the description of ‘other penalty’ in penalty rates. The union brought a case before FWA and asked the tribunal to insert wording to clarify the interpretation.

AFEI argued payments for working overtime weren’t penalty payments. FWA agreed and rejected the Union application saying there was no ambiguity.

This also applied to ‘hours of work’ provisions in Modern Awards, which FWA confirmed were deliberately excluded from the transitional provisions because ‘an employer normally has award rights to alter starting and finishing times … by giving notice to the employees concerned.’

Please contact the AFEI Workplace Hotline: 02 9264 2000 if you have questions about paying overtime or other Modern Award provisions.

NSW work health and safety Bill expected soonWe have been advised by WorkCover NSW that the NSW Bill to adopt the national model Work Health and Safety law will be introduced into the NSW Parliament by the end of October.

There is to be no public consultation on the Bill. According to WorkCover, the public

consultation on the Model Federal legislation was sufficient. This is despite the many jurisdictional notes in the Model Act, enabling each state and territory to make its own arrangements for some key provisions.

For more information see the hot topic Model Work Health and

Safety Act on the AFEI homepage www.afei.org.au. We will update this hot topic whenever there is a development, including the introduction of the Bill to the Parliament.

Overtime rates apply now

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6

FEATURES

September 2010

The transition to Modern Awards is wearing on the patience of many members because of the complex matters that need to be taken into account when calculating and paying wages, loadings and penalties.

Fair Work Australia has made a ‘better late than never’ decision to defer Modern Award loading and penalty rates to mid-2011 for the Social, Community, Home Care and Disability Services Industry Award 2010 (the Modern Award). The decision was made over two weeks after employers started paying the transitional Modern Award amounts.

Apart from the fact that this is one of only a few Modern Awards to delay the transition to Modern Award rates of pay, and now loadings and penalty rates, to the middle of next year, it’s also not the only award that covers employers in this sector.

Non-constitutional corporations are still covered by the pay rates in the equivalent of the state awards—called Division 2B State awards—that covered employees in NSW, SA, QLD and TAS before 1 January this year. The rates of pay under the Division 2B State awards are different to the rates payable under the Modern Award, and didn’t increase following the minimum wage review decision of Fair Work Australia.

For constitutional corporations which are covered by the Modern Award, minimum wage rates did increase by $26.00 per week from 1 July because of ‘pre-transition’ arrangements that make employers return to some of the terms and conditions of the pre-modern award or agreement.

The start of the transition to Modern Award rates of pay, loadings and penalties doesn’t start for this sector until July 2011. But most other Modern Awards started the move on 1 July this year.

AFEI opposed the union application to delay the start of the reduced Modern Award loadings and penalties because of the disruption it would cause, but Fair Work Australia rejected our submission and allowed the variation.

Against this background, the equal pay case is looming. It’s a major test case that could create significantly higher rates of pay for jobs in the community sector, without any guarantee of full government funding.

Modern Award developmentSocial, community, home care and disability services

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7

September 2010

FEATURES

The Fair Work Act allows employers to exclude certain high earning employees from Modern Awards by guaranteeing their salary.

A high income employee is an employee whose earnings exceed $113 800*. Earnings are defined to include wages and the agreed value of non-monetary benefits, but not for example:- superannuation; amounts not determined in advance, such as bonuses; reimbursable expenses.

The guarantee is a written undertaking that applies for 12 months and is given to an

award covered high income employee subject to:

� mutual agreement

� agreement within 14 days of employment or 14 days after an agreed variation to the employees terms and conditions.

It must also inform the employee that any Modern Award that would otherwise apply to their position will not apply.

A high income employee who is covered by a Modern Award has access to Fair Work Act unfairdismissal provision. This extends

to high income employees covered by enterprise agreements and agreement based transitional instruments (instruments).

A high income employee who isn’t covered by a Modern Award or instrument does not have access to Fair Work Act unfair dismissal law.

The capped amount of compensation for a successful unfair dismissal claim is $56 900, or the equivalent of six months of the dismissed employee’s wage, whichever is lower.

*This is the current threshold, but it increases each financial year in line with the consumer price index.

High income employees and unfair dismissal

Understanding unfair dismissal course

New Dates 22 & 26 November 2010

Learn about unfair dismissal under Fair Work law in our new half day course.

Find out how to:

� respond to unsatisfactory performance and conduct

� identify acts that destroy the employment relationship

� avoid a harsh, unjust or unreasonable dismissal

Understanding unfair dismissal—it’s an art form

Contact training today on 02 9264 2000 to enrol or visit www.afei.org.au/training for more information.

September 2010

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8

FEATURES

WorkCover NSW administers the law on work health and safety and workers compensation in New South Wales. A WorkCover inspector can visit workplaces or work sites to check you are complying with the law. Sometimes inspectors target a certain industry to check for specific hazards. Other reasons that WorkCover might send an inspector include investigating a complaint against you or an incident or accident in the workplace. This can also occur after an employee has made a workers compensation claim, or you have notified WorkCover about an incident or injury.

Here we outline what you need to do when an inspector visits your workplace.

What is the role of a WorkCover inspector?

WorkCover now says that the main role of its inspectors is to educate employers on work health and safety law and workers compensation law. However you must be well prepared if an inspector does visit your workplace. In our experience they often use what they learn during this first educational visit to send another inspector to your

can talk to whoever they choose and gather information from them about the workplace.

What powers do WorkCover inspectors have?

Under the law, inspectors have a range of powers including the power to:

� enter and investigate any premises they have reason to believe is a place of work

� conduct interviews and make inquiries

� take photographs, recordings, measurements and samples

� examine and copy documents

� issue directions

� issue notices that require you to fix unsafe working conditions, stop work, provide proof of workers’ compensation insurance or issue an on-the-spot fine.

Inspectors might request the help of technical or scientific experts and can ask for help from a police officer. WorkCover and the New South Wales police share databases and work together on certain safety issues.

workplace at a later date. Often the subsequent inspector issues a penalty notice for safety breaches that were identified during the ‘educational’ visit.

Please call us if you receive a WorkCover visit, or notice of a future visit.

What could happen during a visit?

The inspector might:

� check whether you are complying with work health and safety and workers compensation laws

� give you information on work health and safety and workers compensation law

� investigate a breach

� investigate an injury or incident

� investigate reports of unsafe, unhealthy or dangerous work practices or conditions (anyone can make a report)

� begin a prosecution against you.

All WorkCover inspectors carry photo identification and must identify themselves when they enter the workplace. When they arrive union representatives might also accompany them. An inspector

What should I do when a WorkCover inspector visits my workplace?

September 2010

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Published by AFEI - Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000

FEATURES

What enforcement options are available to a WorkCover inspector?

Improvement notice

An improvement notice instructs you to fix a particular hazard or risk within a certain timeframe. It should clearly identify the unsafe work practice or hazard that you need to remove or minimise.

In most instances the inspector will return to the workplace to check that you have made the changes that were requested. Failing to make the changes could lead to WorkCover issuing you

with a penalty notice or starting a prosecution.

Workers compensation notice

A notice requiring you to fix an issue with workers compensation and the way you manage injuries within a specific timeframe.

Prohibition notice

A prohibition notice is issued if there is an immediate health or safety risk to life. You must stop work until the risk is removed. WorkCover can take court action if you don’t stop work.

Penalty notice

A penalty notice is an on-the-spot fine.

Prosecution

The most serious action WorkCover can take is to prosecute you. A prosecution is a criminal proceeding heard before the Industrial Relations Commission of NSW in court session. There is no automatic right of appeal and employers are under what’s called a ‘reverse’ onus of proof. This means you are deemed guilty until you can prove your innocence.

Tell us about your experiences

We want to hear from all members who have had experiences or concerns they think should be pursued by AFEI at the policy level to WorkCover and Safe Work Australia. We’re concerned about the practical side of how work health and safety laws affect you in your workplace.

It’s important that we have practical examples to pursue with senior WorkCover and Safe Work Australia people.

Please contact us by:

� Had a recent WorkCover inspection?

� Got a story to tell about WorkCover or an inspector?

� Concerned about the WorkCover investigation of a workers compensation claim at your business?

EMAIL admin@afei.org.auPHONE 02 9264 2000FAX 02 9261 1968POSTAL PO BOX A233, SYDNEY SOUTH NSW 1235

September 2010

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Published by AFEI - Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000

10

TRAINING AND EVENTS

OCT COURSE TITLE

1Occupational health and safety fundamentals (4 days)

7 Assertive behaviour and conflict resolution (2 days)

11 Establish effective workplace relationships (1 day)

11OHS consultation for workplace committee members and OHS representatives (4 days)

12 Manage performance management systems (2 days)

14 Recruit, select and induct staff (2 days)

18 Coaching and mentoring (1 day)

18Effective supervision and team leadership II—

planning and running the team (2 Days)

19 Workplace learning (2 days)

20 Professional presentation skills (1 day)

21 Negotiation skills (1 day)

21OHS risk management awareness for supervisors (1 Day)

25Effective supervision and team leadership I—

motivating and supervising staff (2 days)

25 Understanding unfair dismissal (1/2 day)

26 Incident investigation (2 days)

28Conduct an OHS audit and evaluate OHS performance (2 days)

AFEI runs a comprehensive range of nationally recognised qualifications and short courses.

NOV COURSE TITLE

1Develop and manage work priorities and development (1 day)

1 Introduction to Word for Windows (2 days)

2 Implement and manage operational plan (2 days)

3OHS consultation for workplace committee members and OHS reps (4 days)

4Effective supervision and team leadership III—the high performance team (2 days)

5 Effective communication skills (1 day)

8 OHS committee refresher training (1 day)

8 Train the trainer (3 days)

9 Time management (1 day)

11 Review human resource functions (2 days)

12 Understanding unfair dismissal (1/2 day)

15 Advanced Word for Windows (2 days)

15 OHS risk management (2 days)

15Telephone techniques and positive first time impressions (1 day)

17Develop and evaluate OHS management systems (3 days)

17 Show leadership in the workplace (2 days)

18 Introduction to return-to-work coordination (2 days)

22Applying principles of occupational health and occupational hygiene (2 days)

22 Understanding unfair dismissal (1/2 day)

23 Introduction to Excel (2 days)

24Effective supervision and team leadership I— motivating and supervising staff (2 days)

26 Networking skills (1 day)

26 Understanding unfair dismissal (1/2 day)

29 Your legal obligations under the Fair Work Act (1 day)

29Strategic governance and management sustainability for not for profit services in the community sector (1 day)

30 Personal influence skills (1 day)

30The board and management partnership in the

community sector—governance for a not for profit organisation (1 day)

September 2010

The Adviser www.afei.org.au 11

Published by AFEI - Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000

AdviserEmployers

Future issues...

The October issue of the Adviser will feature:

� Occupational health and safety—update on the NSW Work Health and Safety Bill � Fair Work Australia—news on the decision on Varying Division 2B State awards

The November issue will feature:

� Sexual harassment—under the spotlight � Payslips—what you need to know

Highlights from previous issues...

July 2010

� Discrimination work—employee protections to increase

� New version of Fair Work Information Statement

� Understanding the transition of modern award pay rates

August 2010

� Work Health and Safety—model Act update

� Unpaid parental leave update

� Bleak House—harder to appeal unfair dismissal under fair work

We provide an archive of past issues of the Adviser at: www.afei.org.au/adviser_archives

Members are entitled to full access once they login to the AFEI website. Call us on: 02 9264 2000 if you need more information.

www.afei.org.au

September 2010

12

© Australian Federation of Employers & Industries (AFEI) 2010

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Please address enquiries to Copyright at info@afei.org.au

The Adviser is intended as a guide to the law and shouldn’t be used as a substitute for legal advice. This information applies to employers who have premises in Australia, or are affected by industrial and workplace relations law as it applies in Australia. The

publisher and the authors, consultants and editors expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done

by any such person in reliance, whether wholly or partially on the contents of this publication. The publisher does not warrant the accuracy or otherwise of any statements made by any person or organisation in this publication.

For members that want advice about any of the subjects discussed in this publication please call Member Services at AFEI on: 02 9264 2000 and ask to speak to one of our advisers or consultants. You can also speak to a lawyer from AFEI Legal by calling: 02 8088 4999.

For further information about the Adviser or AFEI please visit: www.afei.org.auYou can also write to:

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SYDNEY SOUTH NSW 1235

Street Level 2, 97-99 Bathurst Street, SYDNEY NSW 2000Postal PO Box A233, SYDNEY SOUTH NSW 1235

Phone 02 9264 2000Fax 02 9264 5699

Email admin@afei.org.au

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