Contracting with carriers in NZ? Health and safety tips for freight agreements

Jayne Kirton, Partner and Naomi Cervin, Senior Associate | Friday 4 April 2008

Health and safety issues need to be considered when entering into agreements with carriers. Bell Gully partner Jayne Kirton and senior associate Naomi Cervin outline some practical steps that can be taken when engaging carriers in order to ensure compliance with obligations imposed by the Health and Safety in Employment Act 1992.

The potential for health and safety liability was highlighted in a recent prosecution for the injuries sustained by a South Port forklift operator while unloading goods from a rail wagon. Each group: South Port, as employer of the forklift operator and owner of the site of the incident; the carrier; and the manufacturer of the goods being unloaded, were fined and also ordered to pay emotional harm reparations to the injured forklift operator.

The (HSE Act) requires employers, principals and persons in control of a place of work to take all practicable steps to ensure that contractors and their employees are not harmed while working. This includes taking all practical steps in respect of carriers you engage.

This practice note sets out:

• Health and safety issues to consider before entering into a freight agreement.
• Some practical steps that can be taken once a freight agreement is entered into to ensure compliance with obligations imposed by the HSE Act.

Duties of those in control of the workplace

Section 16 of the HSE Act provides that a person who controls a place of work (in this practice note referred to as a Business Owner) must take all practicable steps to ensure that no workplace hazard harms people in the vicinity or harms people who are lawfully at work as employees, contractors or subcontractors, or employees of a contractor or subcontractor.

A Business Owner also has specific duties in situations where they know of any significant hazard that is, or is likely to arise, in the workplace.

When a Business Owner engages a carrier and any of the carrier's employees or contractors who may be present on a worksite controlled by the Business Owner, the Business Owner is under a statutory obligation to take all practicable steps to ensure that no workplace hazard harms any person in the vicinity of the workplace or any person lawfully at work.

Duties of principals

A "principal" is a person who engages any other person (other than as an employee) - such as a contractor or subcontractor - to do any work for gain or reward.

Section 18 of the HSE Act provides that every principal must take all practicable steps to ensure that no employee of a contractor or subcontractor is harmed while doing any work that the contractor was engaged to do.

A Business Owner is a principal in relation to any carrier they engage and therefore must take all practicable steps to ensure that no employee of the carrier is harmed while doing any work that the carrier is engaged to do.

Principals have the same level of duties as employers to protect against accidents. In the case Department of Labour v Central Cranes Limited (1996) the High Court rejected an argument that the duty of principals was lower:

"The Act does not provide for a strict demarcation of the responsibilities of employers and contractors. Indeed, it emphasises that two or more persons may carry the same duties. It envisages interlocking responsibilities and there is no set of rules which, if observed will shift responsibility from principal to employer. Broad duties are imposed on principals, employers, and others, including employees. This requires a close analysis of risks and consultation and communication among all those responsible for the work place and with the workers themselves. Whether the principal and the employer have each discharged their responsibilities will always be a question of fact and degree in the absence of a precise code of practice."

Duty to take "all practicable steps"

What constitutes "all practicable steps" will depend on the particular circumstances and is impossible to describe precisely. However, guidelines are available from case law:

• A practical precaution must be taken unless, considering all circumstances, taking that precaution would be unreasonable.
• The standard required to meet "all practicable steps" does not require a complete protection against all potential hazards.
• The standard requires measuring the degree of potential risk on the one hand, and the difficulty in averting the harm on the other. If it can be shown that there is a gross disproportion between them (the risk is insignificant in relation to the sacrifice), the standard will be met.
• A breach by a contractor of its obligations to protect its own health and safety does not automatically provide a defence to a principal.
• It is not necessary in a prosecution under section 18 to prove that the principal deliberately failed to take all practical steps. Even if the principal genuinely believed it was acting in accordance with its legal obligations, this will not provide a defence to a charge. The issue is whether the principal took the steps it shouldhave to meet the required standard of "all practicable steps".
• Generally, foreseeability of harm will be assessed at the time of the accident and not with the benefit of hindsight.

The "all practicable steps" which principals must take fall into four main categories:

• contractor selection and negotiation of terms;
• information sharing;
• monitoring contractors; and
• recording and reporting.

Before entering into agreement

Contractor Selection

When negotiating any contract, it is important to consider and be satisfied that the contractor is competent to safely and capably perform the work being contracted for.

A Business Owner could do this by checking that the contractor is a well-established and competent business, and checking whether the contractor has any required certificates of competence. Evaluations for earlier contracts/references provided by the contractor from previous clients will be helpful.

Terms of the Agreement

There are generally a number of clauses in a freight agreement which deal with issues relating to health and safety.

Freight agreements with carriers generally provide that the carrier must have in place a health and safety policy. We recommend that, before entering into a freight agreement, Business Owners request the carrier provide the Business Owner with a copy of this policy. This policy should, as a minimum, contain the following details:

• hazards identified and control measures to be taken;
• emergency procedures; and
• procedures for the reporting and recording of accidents/incidents.

The health and safety policy should be adequate and appropriate to the hazards and circumstances of the particular contract. This means that a standard policy which is intended to apply to all contracts is unlikely to be appropriate.

The policy should describe the lines of accountability and responsibilities for supervision.

It would be prudent to ensure that the terms of the agreement with the carrier allow action to be taken if the carrier or the carrier's employees do not meet the obligations imposed in relation to health and safety, for example, through the suspension of the agreement. It would also be prudent for the agreement to specifically deal with:

• who will negotiate directly with the employees and any sub-contractors to ensure safe working methods and conditions in the delivery of the services;
• who is to supply and maintain safety equipment; and
• who will bear any losses if that equipment fails or is unavailable.

Once the agreement is entered into

Information Sharing

It is important that information in relation to health and safety issues is shared between the parties.

A Business Owner should make the carrier aware of any potential hazards involved in the work or in the workplace, as well as any health and safety management requirements. Likewise, the carrier should in turn notify the Business Owner of any significant hazard arising from its work.

It is worthwhile meeting with the carrier on a regular basis to discuss health and safety matters in a forum which allows free exchange of information. The type of information shared may include:

• procedures for reporting hazards that exist in the workplace, or that result from the work being done;
• methods for reporting accidents and incidents;
• responsibilities for notifying the Department of Labour of any serious harm; and
• information about the workplace or procedure - such as known hazards, emergency procedures, and provision of first aid facilities.

Each party should nominate contact persons for health and safety matters. These people should be resourced and able to carry out their role effectively.

Records should be kept of this information sharing.

Monitoring

Business Owners will be expected to monitor the carrier's compliance with health and safety requirements while the carrier is working. In order to do this, and in order to identify problems before accidents or incidents occur, we recommend Business Owners take the following steps:

• make regular inspections;
• raise issues that require attention by the carrier in relation to any unsafe work practices that are observed;
• investigate accidents and incidents;
• conduct regular meetings to review health and safety performance; and
• effectively manage the principal/contractor relationship, with all parties being aware of their roles and responsibilities.

Records should be kept of the monitoring undertaken.

Recording and reporting

It is important to ensure the carrier advises of all accidents and incidents and keeps a proper record of these in the form prescribed by the HSE Act.

Where there is a serious harm or other accident ("accident" is defined by the HSE Act), the employer or principal must:

• as soon as possible after the incident becomes known to them, notify the Secretary of the Department of Labour of the occurrence; and
• within seven days of the incident, or if the incident is not known to the employer or principal then as soon as possible after it becomes known, give the Secretary of the Department of Labour written notice, in the prescribed manner, setting out circumstances of the occurrence.

As in the case of the South Port forklift operator, parties who engage carriers can be exposed to liability even when they are not physically present and their goods are otherwise no longer within their immediate control. We hope these guidelines help you to take "all practicable steps" to meet your obligations in such situations.

For further information contact your usual Bell Gully adviser or:

Jayne Kirton
Partner