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Regulatory Impact Statement - Health and Safety in Employment Amendment Bill (No 3)

Explanatory Note

The Health and Safety in Employment (HSE) Bill (No 3) contains five provisions, three of which were previously contained in the Health and Safety in Employment Amendment Bill (No 2), now discharged. Therefore this Regulatory Impact Statement (RIS) consists of two parts:

  1. the RIS previously published as part of the Health and Safety in Employment Amendment Bill (No 2) for the following three provisions:
    1. clarity regarding collaboration in multi-business workplaces
    2. consistency with the Evidence Act 2006
    3. funding mechanisms for workplace Hazardous Substances and New Organisms (HSNO) Act 1996 enforcement in workplaces

[POL Min (08) 9/7 on 28 May 2008; CAB Min (08) 21/5 on 3 June 2008; LEG Min (08) 13/5 on 3 July 2008; CAB Min (08) 26/1 on 7 July 2008 refer]

  1. the RIS for the provision to replace the current definition of "serious harm" in schedule 1 of the HSE Act

[CBC Min (08) 27/13 on 6 October 2008; EGI Min (09) 26/10 on 25 November 2009; CAB Min (09) 42/7 on 30 November 2009 refer]

A Regulatory Impact Statement was not required for the Prosecution of infringement offences provision on the grounds that it:

  1. involves a technical revision that substantially re-enacts the current law by clarifying the existing legislative intent, and
  2. has no or only minor impacts on businesses, individuals or not-for-profit entities.

Part 1 - RIS Health and Safety in Employment Amendment Bill (No 2)

Executive summary

The Health and Safety in Employment Amendment Bill (the Bill) addresses three particular policy problems; funding mechanisms for workplace Hazardous Substances and New Organisms (HSNO) Act 1996 enforcement, clarity regarding collaboration in multi-business workplaces and consistency with the Evidence Act 2006.

The Bill proposes an amendment to the Health and Safety in Employment (HSE) Act 1992 to enable a fuller range of options for addressing the funding of HSNO Act enforcement activities in workplaces. This proposal responds to the Department of Labour's (the department) HSNO Act baseline funding being very low, and the cessation of the interim funding in 2009 reducing the department's HSNO Act enforcement services by 50 percent.

The Bill also proposes creating an explicit duty for duty holders in multi-business workplaces to collaborate. In the process of ratifying the International Labour Organisation (ILO) Convention 155 (concerning workplace health and safety), the issue of how New Zealand law and policy addresses collaboration in multi-business workplaces arose. In addition, this amendment will strengthen New Zealand's conformity with ILO Convention 155.

Finally, the Bill proposes the removal of the privilege against self-incrimination under section 31(6) of the HSE Act as it applies to bodies corporate. This will better align the HSE Act's enforcement processes with the Evidence Act 2006.

Adequacy Statement

This statement has been reviewed by the department and is adequate according to the adequacy criteria.

Status Quo and Problem

The proposed amendments will address three particular policy problems:

  1. funding mechanisms for workplace HSNO enforcement (HSE Act levy amendment)
  2. clarity regarding collaboration in multi-business workplaces
  3. consistency with the Evidence Act 2006

Through this statement we address each policy problem individually.

A. HSE Act levy amendment

The department has responsibility under s97 of the HSNO Act for enforcement of hazardous substances in workplaces. This comprises 80 to 85 percent of HSNO Act enforcement activity.

The department's HSNO Act baseline funding is very low, and HSNO Act enforcement services will be compromised unless funding continuity is addressed, and potentially increased. The absence of a funding mechanism has affected the level of funding provided for the department's HSNO Act enforcement.

The main source of funding under previous legislation for hazardous substance enforcement - the licensing of dangerous goods by territorial authorities - was not continued under the HSNO Act, when the department took over the enforcement role from territorial authorities.

The department is funded for both HSE and HSNO Act enforcement. HSE Act baseline funding is approximately $40m per annum. HSNO Act enforcement baseline funding is approximately $1.8m per annum on-going, and a further $2.2m interim funding per annum, which ceases on 30 June 2009.

Establishing a cost-recovery mechanism can only be done through a law change.

B. Collaboration in multi-business workplaces

New Zealand law addresses the issue of collaboration in multi-business workplaces through a combination of the duties of employers in relation to employees (s6), the duties of the person in control of a place of work (s16) and the duties in relation to the principal-contractor relationship (s18).

However, the department's understanding is that because the legislation is not explicit in requiring collaboration, some employers interpret it as the absence of a requirement to establish or participate in collaboration. Where businesses are attempting to take "all practicable steps" to meet their obligations through collaboration, this may not be supported, as other businesses may not see collaboration as necessary to meet their own legal obligations. This suggests there is scope for improved compliance with the HSE Act's intent.

There have been several health and safety failures in workplaces such as airport baggage handling areas, port facilities, and shopping centres where a failure of businesses to collaborate to manage hazards has been a significant factor.

Requiring employers and others in multi-business workplaces to collaborate to meet their duties as an employer, principal, or person in control of a place of work, would codify the duty to collaborate in a manner that is consistent with the intention of the HSE Act and would strengthen conformity Article 17 of International Labour Organisation's (ILO) Convention 155 (relating to occupational safety and health), which New Zealand ratified in June 2007.

Article 17 of ILO Convention 155 requires businesses that share a workplace at the same time to collaborate to meet the requirements of the convention, namely:

C. Consistency with the Evidence Act 2006

The HSE Act is inconsistent with the Evidence Act 2006 because the HSE Act has been interpreted by the courts as giving bodies corporate the privilege against self-incrimination.

It is desirable that the rules of evidence that apply to investigations into alleged HSE offending are the same as those that apply to investigations into other alleged offending. The Evidence Act provides that the enactment inconsistent with the Evidence Act prevails. This means that currently the rules of evidence that apply to alleged HSE offending are different to the rules of evidence that apply to other alleged offending.


The overall objectives of the proposed changes in the Bill are to:

Alternative options

A. HSE Act levy amendment

In addition to maintaining the status quo, one alternative option was considered to address the absence of a mechanism to fund the department's HSNO Act enforcement activities, namely to establish a separate levy on businesses through the HSNO Act.

Establishing a new levy under the HSNO Act would have allowed greater flexibility in HSNO Act enforcement cost recovery, enabling it to apply to a wider range of hazardous substances activities. Nevertheless, a new levy on businesses under the HSNO Act would have necessitated additional administration costs for government and businesses.

B. Collaboration in multi-business workplaces

Supplementing the status quo with guidance and creating a regulation to make the duty more explicit were the two alternative options considered.

Status quo with supplementary guidance

This option could include an approved code of practice or other guidance document for collaboration in multi-business workplaces.

This option was not supported, as a code only outlines how to meet a duty as stated in the HSE Act. If the duty is not explicit, the code is of doubtful value. In addition, guidance, in itself, is unlikely to provide a clear enough standard for prosecution or other enforcement action to bring about the practice that is more consistent with ILO Convention 155. It would also mean an absence of case law to reinforce the legal expectation.

Regulation to make it more explicit

A regulation could be developed under the Health and Safety in Employment Regulations, rather than in the primary legislation. This option was not chosen, as the department's experience is that general duties contained in secondary legislation are not observed as readily as those in the principal Act.

C. Consistency with the Evidence Act 2006

No alternative options were considered.

Preferred Option

A. HSE Act levy amendment

Using the HSE levy is the best option to address a mechanism to fund the department's HSNO Act enforcement activities, as it is the most cost-effective to implement and it reinforces synergy between the department's HSE and HSNO Act roles.

Furthermore, it would allow HSNO enforcement costs in workplaces to be recovered from businesses, without additional administrative costs on those businesses. The HSE levy collection is efficient as it is collected by the Accident Compensation Corporation (ACC) alongside a far larger ACC levy (the Residual Claims levy).

B. Collaboration in multi-business workplaces

The preferred option to improve collaboration in multi-business workplaces is to amend the HSE Act to include a new duty in Part 2 (Part 2 contains the core of the HSE Act's duties for employers and others to manage health and safety in the workplace).

The amendment will create a duty to collaborate where businesses share a workplace. It will apply to all persons with duties under Part 2 or Part 2A of the HSE Act and require them to take reasonable steps to collaborate in meeting their duties in the shared workplace. Duties in Part 2A of the HSE Act (employee participation) will be included, for consistency with ILO Convention 155 and to encourage joint meetings and the sharing of resources in workplaces where appropriate.

This option provides a means and motivation for employers, contractors and subcontractors to "buy in" to and engage with health and safety management. Consequently, it would improve compliance with the HSE Act in the workplaces concerned. It would also strengthen New Zealand's conformity with ILO Convention 155 by:

C. Consistency with the Evidence Act 2006

The preferred option to ensure consistency with the Evidence Act 2006 is to amend the HSE Act in relation to the privilege against self-incrimination. The impact of this will be that an individual representing a body corporate will not be able to invoke the privilege against self-incrimination in respect of information that may incriminate the body corporate during an investigation into alleged HSE offending by the body corporate. An individual will still be able to invoke his or her own privilege against self-incrimination, and refuse to provide information that may incriminate the individual.

This is the preferred option because only an amendment to the HSE Act can ensure that the HSE Act is not inconsistent with the Evidence Act in relation to the privilege against self-incrimination.

Implementation and Review

A. HSE Act levy amendment

There are no direct financial implications from amending section 59. However the proposed amendment will enable consideration of a wider range of options for funding HSNO enforcement in workplaces. This subsequent work programme will canvass the following four main options:

The review of HSNO funding in workplaces will include decisions on administrative matters, for example the levy rate mechanism. The HSE levy can be applied as a single rate across all employers and self employed, or as different rates applied to different businesses.

The process of changing the levy rate is done under the Health and Safety in Employment (Rates of Funding) Regulations 1994, and involves separate consultation requirements, including a regulatory impact analysis.

B. Collaboration in multi-business workplaces

In relation to the amendment to Part 2 of the HSE Act to require collaboration, there will be an information campaign for sectors particularly affected, such as construction and civil aviation. This will be organised in conjunction with the Civil Aviation Authority (CAA) and Maritime New Zealand (MNZ).

Sector groups, CAA and MNZ will be encouraged to develop guidance appropriate to their industry in the lead up to the new requirement coming into force.

C. Evidence Act 2006

Once the amendment is in force, a person representing a body corporate who seeks to invoke the privilege against self-incrimination on behalf of that body corporate during a HSE investigation will be informed that the privilege does not apply to bodies corporate.


Consultation has been undertaken with: the Treasury, Ministry of Justice, Accident Compensation Corporation, Ministry of Economic Development, Ministry of Pacific Island Affairs, Ministry of Transport, Ministry of Women's Affairs, Maritime New Zealand, Civil Aviation Authority, Te Puni Kokiri, Environment Risk Management Authority New Zealand, Ministry for the Environment, the New Zealand Council of Trade Unions and Business NZ.

Part 2 - RIS: Revision of the definition of Serious Harm

Executive summary

Public consultation confirmed that the definition of "serious harm" in Schedule 1 of the Health and Safety in Employment (HSE) Act 1992 is difficult for businesses to interpret and apply and should be revised.

It is proposed that the existing definition of "serious harm" is replaced a new three-part definition, comprising three broad categories of harm:

trauma injury, being physical harm arising from a single accident or event and defined by the degree of physical incapacity

acute illness or injury caused by exposure to certain workplace hazards and requiring treatment by a medical practitioner

chronic or serious occupational illness or injury, being physical or mental harm requiring hospital admission, in-patient surgery, or able to be confirmed by specialist medical diagnosis.

Adequacy Statement

The proposal is not likely to have a significant impact on economic growth.

The Department of Labour has consulted government agencies on the content of this Regulatory Impact Statement while developing the proposal and considers it adequate.

Status Quo and Problem

The existing definition is an important component of the HSE Act framework. While it currently allows the operation of the Act in most respects, it is deficient in the ways listed below, and as such undermines the effective working of the legislation. This view has been confirmed by consultation with stakeholders.

The current definition is inconsistent with the Act's purpose in that it:


The public policy objective is to ensure that the policy intent of the HSE Act is implemented and administered in a manner that:

Alternative option

The only alternative option considered was the provision to businesses of more guidance on interpretation of the existing definition.

This option was not pursued because guidance cannot exceed the law, and any interpretation can be challenged in court. This is only likely in circumstances where a person is being prosecuted, and before convicting the courts will always take a narrow interpretation and have reference only to the words of the statute.

The department has previously published additional guidance - particularly on the interpretation of "temporary severe loss of bodily function" - but with limited effect. The standing of any additional guidance was therefore questionable and was unlikely to remove uncertainty for those using the definition to determine compliance.

Preferred option

Public consultation indicated nearly unanimous support of the need for a revision. The revised Schedule 1 will address each of the problems with the current definition:

It will also better align the definition with the requirements of the Hazardous Substances and New Organisms Act 1996, Electricity Act 1992, Gas Act 1992, and provide more consistency with the Injury Prevention, Rehabilitation, and Compensation Act 2001.

The preferred option will provide the following benefits for businesses:

The proposal will involve the following costs for businesses:

The incidence of serious harm occurrences is spread relatively evenly across NZ's 346,000 enterprises and 1.7 million employees, also the self-employed and principals. This means that if the reporting rate were to double, 1.7 percent of workplaces will be additionally affected in any given year.

For individual workplaces affected by the serious harm injuries or illnesses concerned, the reporting requirement is likely to be of small concern compared with other issues they will be dealing with.

Costs of retraining and changing procedures to meet the new requirements. These will be relatively minor for businesses, as the bulk of the knowledge required by businesses to comply is the same as currently. Where clarification is required, reference will need to be made to the new definition instead of the old. The Department of Labour will update published information, and provide advice to businesses through its call centre.

Costs in amending hazard management and accident and incident recording and reporting systems by private providers or firms who maintain their own systems.

Proprietary systems are usually packaged and sold as "regularly updated" to reflect ongoing changes in regulations, approved codes and standards. The changes required are minor and not expected to be a significant issue. The proportionate cost may be higher for some smaller businesses who maintain their own hazard management systems, but there will be corresponding benefits from the review process.

The net benefits from the preferred option are:

  1. Reduced compliance costs through clarity of standards and requirements across workplaces and industries
  2. Clarification of legislative requirements for the management and resolution of stress and fatigue in workplaces
  3. Potential to better align employer hazard management processes across different legislative regimes
  4. Improved employee equity through fully coverage of injuries and illness
  5. Consistent application of health and safety legislation improves economic efficiency.

Implementation and Review

There will be changes to related regulations that prescribe the forms and means of reporting occurrences of serious harm. These will support the introduction of on-line reporting as an option for businesses.

After promulgation, information on the revised Schedule 1 will be published on the Department of Labour's website. Specific information will be sent to professional and sector groups, unions and other agencies on the department's consultation list.

New information products will be developed to assist employers integrate the change into their health and safety management and accident reporting and recording systems.


An initial draft proposal was developed after consultation with key stakeholder groups, selected individual employers, and affected government agencies.

Public consultation was held from April until mid-June 2007. It was based on a discussion document containing a draft revised definition and questions to encourage a structured response.

The department received 116 submissions on the discussion document and draft. Many were extensive. The majority were from employers and employer groups, who are most affected, but there was also a good level of interest from unions and professional groups. Support of the need for a revision was almost unanimous. A report on submissions will be released with Cabinet's approval.

In developing the proposal for revised definition the Department has consulted with the Department of Prime Minister and Cabinet; the Ministries of Social Development, Economic Development, Health, Pacific Island Affairs, Womens' Affairs, and Transport; the Ministry for the Environment; the New Zealand Police; Te Puni Kokiri; the Office for Disability Issues; the Environmental Risk Management Authority New Zealand; Civil Aviation Authority; Maritime New Zealand, Accident Compensation Corporation, and the Treasury.