What is an enforceable undertaking and how does it work?

by External26 Apr 2016
By Luke Holland, Partner, Sparke Helmore Lawyers

Courtrooms and big fines look to be a thing of the past as businesses in the WHS harmonised states rush to sign up for enforceable undertakings (EUs) when faced with a safety prosecution.
Governments have sought to motivate safety behaviours with the “big stick” for years but with the introduction of model Work Health and Safety Legislation (the WHS Act) in most Australian states, businesses now have an alternative to a court imposed sanction for a contravention of the WHS legislation. The WHS Act allows the regulator to accept an enforceable undertaking in lieu of a prosecution so rather than waste time and money on legal proceedings a business can focus on improvements in safety, develop safety initiatives and ‘do good’ for the benefit of the community.

What is an EU?
An enforceable undertaking is a legally binding agreement submitted by the alleged offender that commits to achieving significant WHS outcomes. The alleged offender will propose a number of projects within the EU, which must deliver benefits to three key stakeholders:
  1. employees;
  2. the industry; and
  3. the wider community.
Examples of projects that deliver such benefits include:
  • implementation of special training programs to address the needs of workers, supervisors and management
  • purchasing or developing new equipment, systems of work etc. for the benefit of the workplace
  • publicity regarding the alleged breach
  • industry-wide awareness programs regarding safety, and
  • partnering and donations to not-for-profit organisations.
What to consider?
EUs have been available under Commonwealth safety law for a number of years. However, this is the first time they have been available to the broader workforce. EUs are an important instrument in avoiding prosecution but there are a number of factors that must be considered before proposing and implementing an EU.

Legal advice
If charged with a contravention of the WHS legislation, it is important that proper legal advice is sought regarding the contravention. Safety contraventions are serious in nature and a failure to adequately protect the business’ legal interests could result in serious consequences for the business as a whole. In particular, the process of proposing an EU is one that requires legal assistance.

Strength of case
Of primary importance is the strength of the prosecution, if there are reasonable prospects of successfully defending a prosecution then the business should assess what benefit an EU will achieve that they cannot undertake voluntarily.  As they say, knowledge is power so understanding the strength of your case can also help you negotiate the fairest outcome.

Reputation
The effect of a WHS prosecution on the reputation of a business is something to be considered. Whilst an EU is published online, it does not constitute an admission of guilt, is not adversarial in its process and leads to a resolution that is less disreputable in its effect. Consideration should also be given as to the benefit of a “no conviction” status as a result of an EU given many modern business tenders now require disclosure of prior offences.

Cost
Whilst lawyers and fines are expensive, the costs of an EU can be significant so much so that they can often exceed the financial penalty of a successful prosecution. Understanding the likely financial and time costs to be spent will be critical to working out whether an EU is right for your business.

Benefit
EUs provide a unique tool to create change and invest in areas that otherwise might be missed by a business. Weighing up the true difference that can be made to workers, the industry and the community is a perhaps the most exciting consideration when contemplating an EU.

EUs present a number of benefits for a business. They provide the opportunity to invest in organisational reform within the organisation, which can minimise exposure to WHS issues. They also promote safe practices throughout the industry and promote collaboration between businesses in addressing major WHS concerns. When such a culture is created within industries, employees will benefit significantly. Rather than businesses paying hefty fines and court fees they are able to re-invest this capital into their own organisation and often address the issues that created a problem in the first instance.

Ultimately, an EU should be considered when there is a strong prosecution case, the costs of implementing the EU are reasonable and if there could be an adverse effect on business as a result of a successful prosecution.

What can be put in an EU?
There are no strict guidelines on the length or total cost of an EU. The factual circumstances of each case will influence the content of the agreed terms of an EU.

The regulator assesses the proposal for an EU based on:
  • the proposed EU’s merits and benefits
  • the business’ financial ability to meet the terms of the proposed EU
  • the significance of the commitment compared to the culpability of the business
  • the business’ compliance history
  • the support the business has provided to the injured person
  • the input from the injured person, and
  • the likely outcome of a prosecution.
Where to find guidance
The best guidance comes from analysing EUs that have been accepted across the country to date. These can assist to provide an understanding of what is deemed acceptable by different regulators in particular cases. The variable nature of an EU is such that no template can be used that would be adequate for every differing circumstance.

You cannot force the regulator to accept your terms so knowing what other regulators have agreed in similar circumstances will help with your negotiation.

What happens once terms are agreed?
Once an EU has been entered into, the business is monitored by the regulator to ensure that all terms are being implemented or complied with as set out in the EU. If a business contravenes an EU, the regulator can apply to the court to impose a financial penalty and give orders either compelling the business to comply with the EU or discharging the EU altogether. The original prosecution can also be revived.

Whilst EUs cannot be described as “carrots” there is no doubt that in the right circumstances EUs can achieve “good” out of a potentially bad situation. The key to achieving the right outcome for your business is understanding and knowledge. Good luck.
 

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