Until recently in New Zealand, no officer of a large, complex New Zealand company had been convicted of breaching their obligations under the Health and Safety at Work Act (HSW Act).  In a recent case, however, former Ports of Auckland CEO, Tony Gibson, was found guilty of failing to carry out adequate health and safety ‘due diligence’ as an “officer” of the Port company.

This article summarises the factors which influenced the Court in convicting Mr Gibson and some key takeaways for officers from that.

Background

Tragically, Mr Kalati, a port worker, died at the port in 2020, when a container fell on him during a lifting operation.  The Port company pleaded guilty to charges against it under the HSW Act.

Mr Gibson was also charged, on the basis that he was alleged to have failed to exercise due diligence to ensure that the Port company complied with its duty to ensure, so far as was reasonably practicable, the health and safety of workers at work in its business.

This ‘due diligence duty’ is owed by all “officers” of businesses or undertakings, being company directors, as well as others who exercise significant influence over the management of the business or undertaking.

In Mr Gibson’s case, he was alleged to have failed to:

• take reasonable steps to ensure that the Port company had appropriate resources and processes in place to eliminate or minimise key health and safety risks; and
• take appropriate steps to verify the actual provision and use of these resources and processes.

Further, that his failures exposed stevedores to a risk of death or serious injury.

Why did the Court convict Mr Gibson?

Key factors were:

1. The nature and scope of Mr Gibson’s role

• Mr Gibson was tasked with leading the Port company and ensuring its systems and processes were adequate to ensure the safety of workers and compliance with the HSW and he was ultimately responsible for health and safety at the Port. This meant that Mr Gibson had the capacity and ability to influence the conduct of the Port Company, including ensuring reporting processes and policies were in place to address failures before they occurred.
• For example:
  • A third of his role expectations/performance related to health and safety. He was the key person who the Board delegated authority to, to carry out its Health and Safety policy;
  • He had direct responsibility for approving the Health and Safety manual, the Health and Safety plan, and ensuring attendance at the Health and Safety Committee meetings;
  • He was the head of the Health and Safety committee, which had the responsibility of overseeing health and safety within the Port Company;
  • While Mr Gibson assigned or delegated certain responsibilities to others to assist him (there were a number of roles at the Port Company with responsibility for health and safety), he remained responsible to monitor and review what those below him were doing.
  • He had direct involvement in a variety of health and safety initiatives undertaken by the Port.

2. Mr Gibson’s knowledge and awareness

• Mr Gibson was not a hands-off or remote CEO, operating at a significant distance from the Port Company’s day-to-day operations. He personally knew of the key risks and what controls were or were not in place.  For example:
  • Mr Gibson knew of the high risks involved in stevedoring, including the specific risk – handling suspended loads – which led to Mr Kalati’s death.
  • While there was a Health and Safety Committee, it had not carried out its responsibilities in a variety of ways, which was something Mr Gibson, as its leader, was ultimately responsible for.
  • The Port Company had not prepared its yearly health and safety strategy plans in the adjacent years (to the incident), which Mr Gibson was responsible for approving.
  • There had been an external audit two years prior which had made certain relevant health and safety improvement recommendations, which had not been implemented. Mr Gibson knew of those recommendations and that they had not yet been actioned.
  • Mr Gibson knew that the Port Company had prior convictions for breaches of health and safety and had been involved in those cases, including the decision to plead guilty. This put Mr Gibson on notice that the Port Company had not been adequately monitoring “work as done” (i.e. what was actually happening in practice, rather than what was intended or imagined) and changes were required.
  • Mr Gibson also knew, or ought to have known, that there was widespread health and safety non-compliance by workers, including in relation to a specified exclusion zone rule in relation to cranes in operation.
  • He was aware that there was likely under-reporting of incidents and near misses due to a lack of reporting.

3. Mr Gibson’s failures

These included:

• He had not turned his mind to the introduction of hard controls (such as signage, barriers, and adequate lighting) around operating cranes. A reasonable CEO, with Mr Gibson’s knowledge and experience would have seen the shortfalls in the Port Company’s practices and ensured additional steps were taken to address those shortfalls.
• He had not taken steps to ensure the Port Company progressed the external auditor’s health and safety recommendations or to improve the company’s systems and processes for monitoring “work as done”.
• He had not ensured the Port Company appropriately focussed on ensuring that critical risk management, associated with handling overhead loads, was progressed in a meaningful and timely way.
• He had not ensured that effective reporting lines were in place and that appropriate recommendations were received from those ‘on the ground’.
• He had not taken active steps to obtain adequate information about the nature of the work being undertaken, the risks associated with that work, what controls were in place in relation to those risks, and what additional controls were necessary to remove or minimise those risks.

Some key takeaways:

• While each health and safety prosecution is always highly fact specific, if you are an officer, even in a large organisation, we recommend that, at a minimum, you ensure that you:

• • are well familiar with the operations of your business/undertaking and the work carried out so that hazards and risks can be properly identified and addressed.

• • don’t just rely on others, including those with specific health and safety responsibilities – check that the health and safety systems you believe are in place, actually are AND are being followed.

• • check too with those ‘on the ground’, who are often best placed to know what is actually happening versus what is intended/is set out in policies or procedures.

• • ensure that there are effective reporting lines so that you get all necessary and ongoing information.

• • ensure that those with assigned health and safety obligations or roles, or specialist skills, have the appropriate skills and experience to do their roles and regularly /monitor check that they are doing what they are tasked with doing.

• • if you become aware that intended health and safety processes and systems are not actually happening, act on that and ensure changes are made (and remain in place by following up).

• • if a health and safety initiative is recommended and agreed to, make sure it is implemented and completed.  If something starts, follow up to make sure it is progressing and is then closed out.

• • look at ‘hard controls’ where relevant (in this case, this was signage, barriers and adequate lighting when lifting operations were in place), not just relying on worker compliance with other health and safety measures.

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This article is an overview of the case. It is not comprehensive or intended to provide legal advice. No person should act in reliance on any statement contained in these publications without first obtaining specific professional advice.  If you have any questions or require any advice regarding the matters outlined in this article, please do not hesitate to contact Kris Morrison at krismorrison@parryfield.com

Some employees are eligible to receive shares in the company they work for under an Employee Share Scheme (ESS). It is helpful to understand what is likely to be taxed and when.

Some companies adopt ESS to incentivise their employees to work towards the success of the company as both an employee and as a potential shareholder. Because owning shares may benefit the employee financially, income tax may be payable.

What is taxed?

There are many forms of ESS. Some employees are given shares for free or at below market rate if they meet certain conditions. Others are given the opportunity to buy shares and pay them off through salary sacrifices.

In a nutshell, if as an employee receives a financial benefit from ESS, irrespective of how the shares were acquired, the taxable amount is the difference between the market value of the shares and what was paid for the rights. Note that some ESS are exempt from taxation.

Employers may tax ESS employee benefits, however, if they don’t, the employee will need to account for it themselves by filling out an IR3 form. Note that employees can retrospectively advise Inland Revenue of benefits from previous years by making a voluntary disclosure.

When does tax get calculated?

When it comes to ESS the point the employer holds the shares for the beneficial ownership of the employee is the vesting date. In straight forward ESS, the share scheme taxing date is when the employee exercises their option for the shares (takes up their right to the shares).  This makes sense in situations where there is a risk that after the shares have vested, the employee might leave or otherwise forfeit their right to the shares. In those situations, it would not be fair to tax the employee at vesting date, because they might not ever exercise their option.

Recently however Inland Revenue released a Technical Decision Summary about a situation that was not a straight forward ESS. The employer had taxed the employee at the date the shares were exercised but the employee disputed this interpretation, arguing that the tax date should be when the shares vested.

The Tax Council Office in its adjudication found in this particular situation the share scheme taxing date was the date of vesting because that is the first date that the shares were held for the benefit of the employee and after which there was no material risk that their beneficial ownership of the shares would change, for example by the employee leaving. In this case there was no material risk that the employer would fail to exercise their option after the vesting date.

Key takeaway

If you make a financial return from an ESS you will likely need to pay tax. The date from which the tax applies will depend on the particular ESS and the employee’s circumstances. It might be at the date the employee exercises their rights or it might be at the date of vesting if there is no material risk that the employee will fail to realise their option.

Contact us if you would like to know more about ESS and whether this might be a good option for your company and employees.

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This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. 

While the Employment Relations (Restraint of Trade) Amendment Bill (“the Bill”) is yet to have its first reading in Parliament, what is apparent on current information is that it could significantly limit the use of employment related restraint of trade clauses in New Zealand, particularly for lower to middle-income earners.

Currently, the starting point with restraints is that they are generally considered contrary to public law, anti-competitive and therefore unenforceable.  Nonetheless, restraints can be valid in certain instances, particularly where an employer has what is known as a legitimate ‘proprietary interest’ and can prove that the restraint is no wider than what is reasonably necessary to protect that interest(s).  For example, an employer is entitled to protect trade secrets and/or a continuing business relationship, so long as it does so in a reasonable manner.

Over the years however, restraints of trade have been used liberally by New Zealand employers and have not infrequently been included for roles which may not in fact warrant them.  In turn, employees have been left in a difficult position when their employment ends, unsure of whether a restraint is enforceable against them and/or if they can or cannot accept a new role which might breach the restraint.

In drafting the Bill, Parliament have recognised a number of issues of public interest, including the two raised above, and has effectively sought to even out the playing field.

This includes:

• seeking to prohibit the use of restraints for lower and middle-income employees (which would be achieved by providing that such clauses will have no effect if an employee earns less than 3 times the minimum wage); and
• employers of higher income employees needing to carefully consider whether a restraint clause is actually required and to compensate employees appropriately where a restraint is imposed, both during and following termination (i.e. during the restraint period).

If the Bill passes through Parliament and receives Royal Assent, employers will need to work through a number of matters set out in the Bill where they are proposing that a restraint of trade clause apply to a new employee.  Employers will also need to turn their mind to whether restraints which apply to current employees will be effective and valid on the termination and the potential implications if they are not.

Do Call Agreements and Volunteer Working Arrangements Automatically Prevent Employment Status Being Confirmed in Religious Settings?

Historically, church ministers have often been provided with call agreements, rather than employment agreements.  Similarly, many churches rely on the use of volunteers on a day-to-day basis to work in a variety of different areas and either use a formal volunteer agreement or have verbal agreements with the individuals concerned.   However, while many consider that a historic legal precedent exists that ensures persons in such roles will be automatically recognised as religious volunteers and therefore cannot legally be recognised as employees, the mere existence of a call or volunteer agreement between a church and an individual will not necessarily preclude an individual or group from arguing or even establishing that they should be legally protected by employment law.

More recently, it has become clear in New Zealand that the Courts are seriously willing to consider whether ministers and volunteers in certain situations could be recognised as employees.

For example, in the 2022 case of Courage v Attorney-General Sued (On Behalf of the Ministry of Business, Innovation and Employment, Labour Inspectorate) the Employment Court found that while the religious context of a relationship is relevant, it is not determinative, and a presumption against the existence of an employment relationship does not exist in relation to religious individuals carrying out the duties of the Church.  In another recent case from 2017, Below v The Salvation Army New Zealand Trust, the Employment Court, in the context of a religious volunteer working relationship stated there was no presumption operating in New Zealand to restrict classes of workers from employment protection.

In both cases mentioned above, the Employment Court made it clear that automatic legal protection for religious institutions does not exist when it comes to assessing the nature of a working relationships with ministers and volunteers.  Rather, the Courts will first look at the true nature of the relationship and subsequently apply a number of legal tests to determine whether the workers are actually employees.  For example, the Courts will consider:

1. the amount of control exercised an employee (the greater the control exercised over an individual, the more likely that person is an employee);
2. whether the worker is “part and parcel” or fundamental to the organisation;
3. in the event a worker was paid, how the worker was paid and the reason/intention behind payment; and
4. other relevant factors relating to assisting the court to understand the true nature of the working relationship.

Consequently, while call and volunteer working agreements can be utilised by churches, we suggest that at a minimum, organisations who use such agreements, ensure they are aware of the relevant legal risks, including the possibility of their workers being recognised as employees, and consider getting advice on how the relationship will actually operate in practice and whether that will be more consistent with an employment relationship or not.