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Friday Workplace Briefing

Directors Going to Jail – Your Risk Around Psychological Hazards and What To Do

In this week’s Friday Workplace Briefing Andrew Douglas and Nina Hoang focus on why you need good governance and how to protect your organisation and yourself.

To view the full episode and catch up with the week’s latest news and developments please visit this link.


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About the Hosts

Managing Principal - Victoria

Senior Associate - Workplace Relations

Episode Transcript

Andrew Douglas: Okay, let’s go to our big topic today, ’cause it is, I think, the most emergent and serious issue which is untested in our environment, which is psychological safety. We’ve heard, we’ve read lots of rubbish about it. So what, today, we thought we’d do, is strip that away, and we just tell you the truth. And what we’re dealing with is Director Liability. So the first part is what…

Nina Hoang: And officer liability.

Andrew Douglas: Yeah, what is an officer, really? An officer is a person who has a substantial control or financial management position within an organisation.

Nina Hoang: Yep.

Andrew Douglas: So it’s not somebody who looks after one site, if there’s 10 sites, it’s the person…

Nina Hoang: It’s not safety managers, not HR managers.

Andrew Douglas: Yeah, it’s really quite different. There’s an argument under industrial manslaughter that they could be a different type of officer, particularly in Queensland and Victoria. I think that’s unlikely, by the way. I’m just putting it out there, there is some argument about that. So, the next question, really, is, then, what are psychological hazards? And they’ve fall into two categories, which are serious wrongs.

Nina Hoang: Yeah, sexual harassment…

Andrew Douglas: Harassment, or sexual harassment.

Nina Hoang: Violence, bullying.

Andrew Douglas: Yep. So, those categories, when you look at them in Victoria, are notifiable events. When you look at them in ACT, sexual harassment will be a notifiable, actually, notifiable on the day it happens, event. So, we’re seeing changes around that, and the Victorian legislation is still dragging its heels. It’s not here yet, but soon to come. But, overwhelmingly, the nature of serious injuries that are suffered in psychological injuries, over 90% of the ones that cause people to leave work are about work design.

Nina Hoang: Yeah.

Andrew Douglas: So, they’re things about the demands of a job, they’re about…

Nina Hoang: Lack of support.

Andrew Douglas: Skills, lack of skills, under-utilisation of skills.

Nina Hoang: Lack of recognition. All the small things…

Andrew Douglas: Remote working…

Nina Hoang: That build over time.

Andrew Douglas: And remote working, I think, is one of the ones they talk about. The other thing is poor physical environment, and how often did we deal, during COVID, where people failed to do physical risk-assessments of people working from home?

Nina Hoang: Yeah.

Andrew Douglas: And are still doing it, and not providing the right structures for people to work at home, ’cause they go “It’s at home.” For those people, by the way, goodbye, and off to jail.

Nina Hoang: And change-management, Andrew, that’s a big one.

Andrew Douglas: And conflict.

Nina Hoang: That people just forget about.

Andrew Douglas: Yeah, and conflict, and the way people behave towards each other.

Nina Hoang: Yeah.

Andrew Douglas: Now, there I’m turning sideways, and my stomach’s starting to show. We won’t do that again. Stay front-on. So, where we want to spend a bit of our time, is to say work-design is everything, and that’s a leadership issue.

Nina Hoang: Yep.

Andrew Douglas: So what happens when you do that? You go, okay, when is an officer, and, particularly, a director, liable? So, in Victoria, it’s really important to understand each WHS and OHSX have what’s called an attribution element, which means the action of any individual in the business is the action of the business.

Nina Hoang: Yep.

Andrew Douglas: Okay? Unless you can show that you have a system in place, that that person was acting outside of it. And that has to be a system that has real integrity. So, when you do… That’s 143, in Victoria, and similar provisions in others. Once you come to 144, which is director’s liability for primary duty breach, in Victoria, you’ve got to show that they have a knowledge of the hazard. Now, when it comes to psychological hazards, they do, because they’ve been published, all around Australia. So, at that stage, it’s not that they have a knowledge of it happening right in there, they’re aware this is a hazard, and they’re triggered.

Nina Hoang: Ah, so you’re saying it has to be a knowledge of the risk, how high the risk is, as opposed to that an employee has that specific idea?

Andrew Douglas: No, that’s right. No, the the knowledge is that there is a hazard, and that needs to be managed, because nobody can say there isn’t a psychological hazard in a workplace.

Nina Hoang: Yeah.

Andrew Douglas: ‘Cause there is. So, the answer is that puts them on the notice of inquiry, and then they go to what the WHS says, and I’ll come to that in a second, what is the objective obligations that come around that? The next question is, what is their capacity to influence, in the role they have as an officer? Bit different, because under WHS, all officers must have a working knowledge of the whole business, whereas, in Victoria, it’s slightly different, if they don’t have that influence. So they’re a company secretary, the company secretary could say: “Well, look, I run the legal part of it, but I actually don’t have a knowledge of the allocation of resource except for liquidity issues.” Okay? And the last part, is, how attributable is the fault from the person who did the wrong? So, if it’s something chaotically dangerous, done by a foreman, which they wouldn’t have known about, Victoria provides get out of jail.

Nina Hoang: Yeah.

Andrew Douglas: But when we go to WHS, it’s very clear that there is the due diligence obligation, it’s an objective one. You must know about the business, and the major hazards in the business. You must keep up to date with the relevant law…

Nina Hoang: And put enough steps so that…

Andrew Douglas: Yeah.

Nina Hoang: You’re satisfied that the company’s complying.

Andrew Douglas: Yeah, you’ve got to have a system, that you know has integrity, and, most importantly, which is the same as reasonable practicability, you must allocate and be satisfied there are the resources for the organisation to be safe. So, in Victoria, when you’re on-knowledge, all those obligations kick in. So, in psychological hazards, Victoria is, actually, no different to anywhere else.

Nina Hoang: Yeah, it’s the same.

Andrew Douglas: And the issue, for you, is this, what is the evidence that I have that tells me, internally, what are those hazards and risks? And, secondly, what are the controls I put in place, and what resources do I allocate? And each officer must identify that control, and that allocation of resource. And if they don’t, they’re liable under 144. But, of course, they’re much worse than that, because reckless endangerment comes into play, which says now you have knowledge of a risk of injury, they can’t say they don’t, with psychological hazards, okay? Because they do know that. If they don’t make these inquiries, and they don’t fully act upon it…

Nina Hoang: Then they’re indifferent.

Andrew Douglas: Then they’re indifferent, which is recklessness, and, therefore, they can go to jail. So, can you see, now, very quickly, it’s actually harder, in some ways, to prove a primary duty than a serious breach.

Nina Hoang: Yeah.

Andrew Douglas: And then you get to industrial manslaughter, where you say, “Look, is there a duty?” So the duty, the initial duty is, let’s have a look… There are two major duties, one is to employees, that exists, out of common law, okay? And there is another duty to other people, that’s the section 25 duty. So, has there been a breach of those duties?

Nina Hoang: Yes.

Andrew Douglas: Now is the breach so wanting in the standard of care? Now the standard of care applied is the reasonable behaviour of the board, taking to consideration its knowledge and its role. So, we go back to WHS, what should it do?

Nina Hoang: Yeah.

Andrew Douglas: Okay. Do you see how bad this is going, and how quickly it’s going bad?

Nina Hoang: It just escalates.

Andrew Douglas: Yeah, so once someone knows, let’s start again. We’re probably breaching, because we don’t know. Your alarm bells are going off! We do nothing about it. Someone dies, you’re off to jail for 25 years. I just want to show you that it’s, actually, easy to prove the more serious offence of industrial manslaughter and reckless endangerment, because the state of the knowledge now, in Australia, is everyone does know there are psychological hazards, and it’s what the regulator will do.

Nina Hoang: Yeah. I think what employers need to understand, is, if the focus is no longer on the fact, that, look, something has occurred, they comb back through, to see, you know, where the signs are they were suffering from psychological hazards, it’s just assumed that you should have known.

Andrew Douglas: Yeah, and Kozarov…

Nina Hoang: Because it’s so high-risk.

Andrew Douglas: Yeah, and Kozarov, which is the recent case that we talked about.

Nina Hoang: Exactly the High Court.

Andrew Douglas: Yeah, at the Victoria Supreme Court.

Nina Hoang: Yeah.

Andrew Douglas: But it comes from…

Nina Hoang: Yeah…

Andrew Douglas:It does come from the High Court decision, sorry.

Nina Hoang: Yeah.

Andrew Douglas: Basically, it says when you know of an inherently dangerous risk, so, this is when officers are actually on notice that there is a very risky thing, and this, in Kozarov, was a woman who was working in Coroner’s Court, and saw terrible photos, and…

Nina Hoang: Yeah, yeah.

Andrew Douglas: So they knew that was inherently dangerous, and they did nothing to put a control in place.

Nina Hoang: Or did not enough, like, there were barely any controls.

Andrew Douglas: Now, she showed no signs. Well, the court says you don’t have to wait for someone to be wounded, to know that they’re at risk. That’s a common law issue, but, in safety law, that’s where we are. So, the last part, and I’ll just do this very quickly, ’cause we’re running out of time. If we could have the next slide up. This is the intervention. Okay, the intervention is really very straightforward, which is, you must have a plan that’s based on evidence. You must build an evidential process of how you execute that plan, you must have competency-based training, the supervisors must know what the plan is, be satisfied everyone’s competent, who is working there.

Nina Hoang: Employees need to be trained, too.

Andrew Douglas: Yeah, they do. And then, well, that’s right, the supervisor must be satisfied they are trained and competent, in what they’re doing. There must be a method of monitoring, to see that it’s working, and there must be a scaled-up reporting system through the hierarchy, so everybody can see that it is working. So, it’s just, very quickly, that’s how it works. That is the governance structure that you need.

Nina Hoang: And keep reviewing as necessary, as well. It’s not just tick-and-flick.

Andrew Douglas: But it is evidence, and so you got to keep coming back to where the evidence is and the only way to create that evidence, and enrich the evidence, is to have relationships and good leadership.

Nina Hoang: Yeah. It all comes down to that, ’cause if the people aren’t telling you what’s going on, you’re failing in your duties, anyway.

Andrew Douglas: That’s exactly right. Okay, let’s go onto our case study, ’cause we are, now, one minute, 37, behind.

Nina Hoang: Okay.

Andrew Douglas: Okay, so we’re bringing up our case study, today.

Nina Hoang: COVID had been a difficult time for Century Super, a private super and wealth fund. It employed 350 people, and during the acute stages of the epidemic, had to rapidly transition to work-from-home. The return to back to the office had been anything but smooth sailing.

Many who had worked from home had settled into a different lifestyle, sometimes assuming greater care or parental roles, which worked well for them, and their family. Sometimes their partners also put pressure upon them to stay working from home, for good or bad reasons, as it worked for their family.

Yvonne was a technical advisor at Century Super. She received a regular assortment of client queries around their bespoke accounts, and had to answer those concerns, and logged them within the day of receipt.

It was a critical job, focusing on the wealth-accumulating clients, a unique digital offering that was online, rather than using face-to-face financial planners.

Century Super was a startup business seven years ago, the brainchild of banker, Cindy Morrison, it went live six years ago, and was underwritten, initially, by Cindy, and the bank she used to work at.

Yvonne was one of the first employees who worked directly with Cindy. She moved from the bank with Cindy, and had worked next to Cindy in the bank on underwriting financial products that Cindy designed.

Yvonne was a detail-oriented person, highly structured in the way she undertook her work, but inflexible on technical data and authorisations. Cindy loved having her on board, because if it passed Yvonne, it would pass a regulator, but she was not easy to work with. Others found her drive for detail frustrating and endless. She was Cindy’s security blanket. For others, she was an interminable maze of questions and blocks for getting the job done.

During COVID, Yvonne asked Cindy if she could drop down from the underwriting, to client technical support. She explained besides working directly for Cindy, which she loved, it was a thankless task. She explained the level of frustration for her, as the new business had lots of salespeople developing products, but careless as to the risk, detail and systems.

It was a nightmare to manage, and they treated her badly for getting the information structure and financial integrity documentation required to go live, and win regulatory approval. She explained her husband had been retrenched as GM of Operations from Phone Company and he was depressed, drinking a bit much, and very hard work.

Andrew Douglas: That was me, depressed.

Nina Hoang: And COVID made it worse. She needed to support him. Yvonne worked from home all of 2021, returning to two days a week in the office from July, 2022. In truth, her personal leave reduced that to one day a week. The team-leaders struggled with Yvonne’s low output and constant requisitions for further client-information, clarification, and fund-data, to properly respond to client questions.

As a result, the stream of work she was sent was increasingly low-level requests, well beneath her skills, high volume, and her concerns about the work delegation and process were met with curt, resentful emails and Teams messages by her team-leader.

Other client technical support offices would use Yvonne to answer difficult questions, but found her detail-orientated, technical eye frustrating, and she was known as “hard work”, despite being relied on unofficially.

Gradually, Yvonne’s team-leader, Gorgon, elevated these concerns, and his executive manager spoke to Cindy. Cindy explained Yvonne’s difficult home-life, her unique skills and mindset, and that she had come with Cindy on the ride, and they needed to get on with her.

The executive manager pointed to her personal leave, difficult relationships and low work-output, but Cindy said just step back from her. Over the next few weeks, Gorgon did just that. Less calls, workflow dropped off, the idea was to reduce the conflict and pressure on Yvonne. Nobody told Yvonne the change, or why.

Although no risk-assessment had been undertaken, Century Super knew through Cindy and her work-colleagues that Yvonne’s husband was a violent drunk, and very controlling.

Yvonne’s mental health and fractiousness increased from the moment she worked at home with her husband, and she craved certainty and clarity in everything she did. When Gorgon took over as team-leader, he drove KPIs, but was not a listener. And, other than publicly measuring and expecting KPI delivery, he was vague.

Cindy received a late-night text message on Monday from Yvonne’s husband, accusing her of killing Yvonne. He said he was at Epworth Emergency. Yvonne was unconscious from ingesting a large number of tablets. The doctors had given him dire warnings. He said the ambulance had collected her at 3:00 PM.

Why does it get more and more morbid, with you?

Andrew Douglas: I dunno, it just does, doesn’t it?

Nina Hoang: Gosh. Alright. I’d say, what should have Century Super have undertaken as part of the work-from-home during Covid, and, again, at the return to the workplace? The answer is…

Andrew Douglas: Risk assessment.

Nina Hoang: This is normal Helen Shaw.

Andrew Douglas: Yeah, this is normal Helen Shaw, which is where a woman actually died as a result of a husband killing her at home.

Nina Hoang: Yeah.

Andrew Douglas: But it’s more than that. And, I guess, the risk assessment, here, this is a person of a particular style and structure, in the way she behaves, and psychological hazards is not about one rule for all.

Nina Hoang: Yeah.

Andrew Douglas: Okay? It is actually looking at the personalities, skills and capabilities of someone, and then looking at their workplace design.

Nina Hoang: Yeah. Which is not just what their environment is, at home, but also how everyone is communicating, and giving her instructions, while she’s working from home.

Andrew Douglas: And that’s why this is such a leadership issue, I guess, and why I’ve written such a lengthy problem, because if you go through what are the problems, here? There is working from home, no assessment of physical environment and the environment of the people who work in the same place.

Nina Hoang: Lack of clarity, lack of instruction.

Andrew Douglas: Lack of instruction.

Nina Hoang: No change management, Like they didn’t explain to her what they were doing, at all, just cut her out. That’s just crazy.

Andrew Douglas: Now d’you see, all of those things happen, from time to time, one or two of them? But, what I’m trying to say, is, one or two of them is a psychological hazard.

Nina Hoang: And that’s enough.

Andrew Douglas: And it’s enough. Here, a combination of three or four of them, and that’s back when she was just working during COVID, are enough to, actually, crystallise a worker’s compensation claim, to crystallise a safety claim, to crystallise all sorts of types of claims that exist. And the issue here, is, forgetting that psychological hazard is about an individual assessment, not a global assessment. So yes, you’ve got to have a global assessment as a director, but you’ve also got to drill down as to what are the risk factors that impinge on a particular person’s lifestyle, and the risk-assessment must have sufficient penetration into a person’s life to actually capture that information.

Nina Hoang: Yeah. And that’s why you can’t apply blanket-controls. It has to be tailored to the specific risk of that individual.

Andrew Douglas: And it means that when you get this, it’s very clear, what you have to do, is, actually spend time with this person, be clear with them what they’re doing. You have to make sure that their skills, that they are executing, and the ones they should be executing.

Nina Hoang: Yeah.

Andrew Douglas: Let’s have a look at the second question. Well, there’s a few more.

Nina Hoang: Was this a workplace incident?

Andrew Douglas: Absolutely.

Nina Hoang: Yes!

Andrew Douglas: It happened at three o’clock, during normal work hours.

Nina Hoang: Yeah.

Andrew Douglas: Okay?

Nina Hoang: At her place of work, which is her working from home.

Andrew Douglas: So that’s it. Could Cindy be liable under her due diligence obligation?

Nina Hoang: Yes, she didn’t do enough.

Andrew Douglas: Well let’s start, in Victoria, most definitely, ’cause she had the…

Nina Hoang: She had knowledge.

Andrew Douglas: She had knowledge. Okay? Even if she didn’t have specific knowledge, she had generic knowledge. But, this time she’s definitely liable under it, and would be prosecuted. Could Cindy be liable under reckless endangerment, in that she knew of a risk of injury? Well, the injury could have been a physical abuse, from the husband, because she knew.

Nina Hoang: Yeah.

Andrew Douglas: But it’s certainly psychological risk.

Nina Hoang: Yeah, ’cause Cindy… Oh sorry, which one was it? What’s her name? I can’t remember.

Andrew Douglas: Want me to tell you? Yvonne.

Nina Hoang: Yvonne, yeah.

Andrew Douglas: I can help you.

Nina Hoang: Yvonne was, like, raised with her that she was suffering, and wanted to change roles. So that, she’s definitely put on notice of it.

Andrew Douglas: And all that Cindy did, was say…

Nina Hoang: “Leave her alone.”

Andrew Douglas: Or “Just don’t hurt her.”

Nina Hoang: Yeah.

Andrew Douglas: But actually, what…

Nina Hoang: How is that a control?

Andrew Douglas: How is that a control? Okay. And, the last part is, if she died, could there have been industrial manslaughter? And the answer is, it’s very close. I don’t think Cindy would be prosecuted…

Nina Hoang: I think she should be prosecuted.

Andrew Douglas: But she could well be prosecuted, because her reasonable care, that is doing the things she needed to do, was so wanting, because she knew this woman was at such risk. She dropped down from a very senior job to a very low job. Everyone was having trouble with her, she was having trouble, she was saying it was hurting her, and she knew the the inherent risks that were at home.

Nina Hoang: Well, she didn’t do anything to step in to protect her, at all.

Andrew Douglas: So, there you go. That’s why we wanted to spend time on directors, particularly, but on officer’s liability and psychology hazards.

Nina Hoang: See how easy it is.

Andrew Douglas: Yeah, I had to draw a long story to do it out, but the point is, you can see now, sequentially, where that liability arises. But you can also see how easy it is to intervene in pro tem.

Nina Hoang: Yeah, which is why we’re seeing more and more office charges being laid, every day, really.

Andrew Douglas: Alright, well, look, thank you very much. Great to catch up. Nina’s been crook, it’s lovely to see her getting well. See you later.

Nina Hoang: Bye.

Andrew Douglas: Thumbs up, don’t forget.

Nina Hoang: Give us a thumbs-up.

Andrew Douglas: Yeah.

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