Directors Personal Liability Protection Under the Psychosocial Hazard Code of Practice

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Directors Personal Liability Protection Under the Psychosocial Hazard Code of Practice

In today’s business landscape, it’s crucial for directors and business owners to be aware of their personal liability when it comes to injuries and fatalities resulting from psychosocial hazards. These hazards, encompassing workplace bullying, conflict escalation, discrimination, and poor job design, are now subject to the new Safe Work Psychosocial Hazard Code of Conduct. This code can be used in legal proceedings under the Work Health and Safety Act 2011 to establish assumed knowledge of the risks associated with psychosocial hazards.

While there are certain defences and exemptions in place for fair work bullying orders,especially for small businesses, management actions, and isolated incidents ofharassment, these safeguards do not extend to the broader work health and safety dutyof care. It’s important to note that the cost of compliance is not a valid defence underthis duty of care. Work health and safety liability is not covered under the standard
directors professional indemnity insurance. The benefits of proactively addressing psychosocial hazards, such as increased productivity and reduced compliance and recruitment costs, far outweigh any short-term gains that might be derived from tolerating workplace harassment. The Psychosocial Hazard Code of Conduct now requires organisations to identify and assess the risks of conflict escalation, discrimination, and poor job design. Responsibility for controlling these risks lies squarely with organizations, and they are expected to develop and implement strategies accordingly.

Under this code, the concept of the “chain of responsibility” is akin to the liability that arises from a job design that doesn’t provide drivers with sufficient time or a secure load for safe deliveries. Just as high-profile incidents in the past have expanded the personal liability of directors and business owners, a tragic event involving workplace violence or suicide could further underscore the accountability of management and all those involved in the chain of responsibility for psychosocial hazards. Thankfully, the work health and safety duty of care obligates everyone within the chain of responsibility to proactively eliminate psychosocial hazards before they lead to injury or workplace bullying. This duty of care can be incorporated into employment contracts to ensure compliance with work health and safety obligations.

For business owners and directors, the specifics of identifying, assessing, controlling, and monitoring psychosocial hazard risks are outlined in the Safe Work Australia Managing Psychosocial Hazards at Work Code of Practice 2022, which has been adopted nationally. To effectively navigate this landscape, strategic human resource management and authentic leadership skills are paramount. Strategic human resource management aligns job design with the organisation’s strategic objectives, as defined by senior management. It considers psychosocial hazards related to goal setting, resource allocation, and training to establish performance management criteria that line managers can implement under human resource management supervision. Authentic leadership, a transformational leadership style rooted in positive values, fosters strong relationships and inspires success. Its application throughout an organisation sends a powerful message of management’s commitment to employee well-being by actively addressing psychosocial hazards. Furthermore, strategic performance management can significantly reduce the risk of unfair dismissal through thorough documentation and validation of performance management decisions.

In conclusion, directors and business owners now face increased personal liability in the realm of work health and safety psychosocial hazards, without the protections afforded by workplace bullying exemptions. By combining early conflict resolution techniques, positive organisational behaviour skills, strategic performance management, and authentic leadership, they can effectively reduce liability under the work health and safety duty of care. Collaboration with human resource managers to identify evidence- based psychosocial hazard controls is crucial in preventing workplace bullying and promoting a culture of psychological safety.

Kevin Gilmore-Burrell LLB MBA, is a business lawyer with over two decades of experience and is currently conducting research on workplace bullying. His aim is to continually improve off-the-shelf Empathyse ® web-based solutions suitable for organisations of all sizes while pursuing a PhD at the University of Newcastle in this field.

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