Cost Benefit Analysis – The Financial Side of Workplace Health & Safety

Many business owners and managers are familiar with the concept of a cost benefit analyses. For those who are not, in its most basic form, it is a review of an investment to ensure return (or benefit) outweighs its cost. While this may seem like an elementary rule for business, when the investment is in safety the workplace health and safety guidelines can become blurred.

An example which comes to mind is the now infamous ‘Ford Pinto Memo’ in the US. During the 1970s the Ford Pinto had a problem with its fuel tank which caused it to occasionally burst into flames during a rear collision. It is claimed that Ford knew of this engineering fault, however calculated that the cost of the resultant claims of the fault, would be less than the cost of ordering a recall of the cars to fix the fuel tank. It is claimed that 24 people died as a result of fires in the Pinto.

You may also be surprised to learn that the aviation industry uses a similar formula when determining whether to issue mandatory safety improvements (known as airworthiness directives) to airlines, following a plane crash. The civil aviation safety authority (CASA) website, spells out a procedure on conducting a cost benefit analysis for “economic evaluations of airspace change proposals (ACPs)”, of which airworthiness directives are included. The unsettling thought being that aircraft are flying today with known defects, which have not been corrected as the cost of a mandatory fix would cost the industry more than the resultant compensation.

So the obvious question for business owners and managers … if addressing a hazard will cost me more than paying increased workers compensation premiums as a result of injuries incurred, do I have to fix it ?
According to the Occupational Health and Safety Regulation (NSW) 2001, Sec 11 states an employer must eliminate any foreseeable risk to health and safety. If it is not reasonably practical for the risk to be eliminated, it must then be controlled. From interpreting this clause, a cost benefit analysis could potentially be part of determining whether it is reasonably practical to eliminate the risk. For example, a small business identifies a minor risk to work health and safety [i.e. not likely to occur and if it does occur not likely to cause significant harm], and determines it will cost 15% of annual profits to eliminate. It could be argued that the associated cost of elimination is not reasonable. On the other hand if the risk was assessed as being major [likely to cause significant harm or death], the expenditure of 15% of annual profits could be seen as reasonable.

Looking at more than financials, any owner or manager who merely relies on a cost benefit analysis to determine workplace health and safety obligations runs the risk of failing to show the required level of due diligence under existing legislation and adopted in the harmonised laws from 1 January 2012. From 1 January 2012, individuals can attract penalties of up to $300 000 and 5 years imprisonment for such a breach.

The concept of reasonably practical is a complicated area and one not to be taken lightly. However one question to ask yourself is…could you sleep at night knowing you could have done more to removed workplace health and safety dangers to prevent a death or serious injury at your workplace?

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Discrimination, Harassment and Bullying At Work

Recently there have been a number of significant decisions regarding discrimination in the workplace, highlighting the fact that preventing discrimination at work is a responsibility of every employer. Employers can be held directly responsible for discrmination, or vicariously liable for the actions of their employees, if they have failed to take all reasonable steps to prevent discrimination from occurring in their workplaces under the Australian workplace law.

From State to State under there are a differences in what actions are considered unlawful discrimination, however, employers should ensure they do not discriminate (or allow their employees to discriminate) on the basis of the following:

• race, nationality, national extraction or social original;

• sex, sexuality, transgender and transexuality;

• marital status;

• pregnancy;

• age;

• physical or mental disability;

• family responsibility, and

• ethno-religious background.

Case Summary: Vicarious Liability

An employer can be held responsible for the action of their employees (vicariously liable) if they have not taken all reasonable steps to prevent discrimination and harassment in their workplace, and do not deal effectively with a complaint of harassment or discrimination when it is made.

Recently a major rail network was held vicariously liable for the actions of its employees in sexually harassing a female manager. The manager was subjected to having graffiti of a “particularly graphic and highly offensive nature” written about her in the men’s toilets at the workplace. In a further incident, another employee pushed a pornographic magazine under the door of her office.

The female manager filed an internal complaint, and then a further complaint with the Administrative Decisions Tribunal, citing sexual harassment and discrimination at work.

The female manager was subsequently awarded $20,000 by the Administrative Decisions Tribunal due to the finding of sexual harassment and discrimination against her at work.

Case Summary: Personal Persistance as Harassment &Employee Liability

A recent decision of the Federal Court has found a female university student harassed their university tutor when she persisted in making advances to him after he had refuted her. The university tutor filed the complaint of harassment about the student in 2002 after she had described him as having “nice eyes” and asking him out to coffee and the movies.

The tutor emailed the student stating that he did not believe that going to the movies together was a good idea, and requesting that she desist from making advance to him.

The student responded to the email, including a threat to “make life difficult” for the tutor. Her email response was considered to be aggressive by the Court.

On appeal from the Federal Magistrates Court, the Federal Court found that “conduct in the nature of persistent personal invitations has, in some cases, and in conjunction with other acts, been held to constitute sexual harassment”. Where the tutor had clearly rejected the advances of the student, but she persisted, it consistuted unwelcome and unsolicited conduct of a sexual nature.

Are you Taking All Reasonable Steps to Prevent Discrimination in Your Workplace?

Employers have a responsibility to take all reasonable steps to prevent discrimination and harassment in their workplace, and to address complaints of discrimination and harassment quickly and confidentially.

Some of the steps that employers should take to prevent harassment and discrimination are:

• Having a comprehensive anti-discrimination policy that is committed to by all workplace participants (including managers, directors and contractors)

• Having a grievance resolution procedure that is clear and concise

• Providing information to your employees of where they can go to get assistance outside of your workplace if they want to (for example, the Human Rights and Equal Opportunity Commission or the Anti-Discrimination Board)

• Training all employees on what is unlawful discrimination and harassment, and what behaviours are expected of them at work

• Ensuring all managers are trained on how to appropriately investigate and handle complaints

• Making discrimination and harassment a feature of discussion at staff meetings

• Displaying posters and other materials in staff rooms that clearly state that harassment and discrimination will not be tolerated in your workplace

Workplace flexibility - Working from Home

Employers considering providing employees with the opportunity to experience workplace flexibility and work from home may wonder what risks they may face. This is particularly so after the decision in Hargreaves v Telstra.

In that case the Administrative Appeals Tribunal (“AAT”) found that injuries suffered by Ms Hargreaves while she was working from home were sustained in the course of employment and so compensable under the relevant Commonwealth legislation.

Ms Hargreaves was injured on a break from working when she fell down the stairs at her home. She later developed a psychological injury as a result of what she described as Telstra’s unhelpful response to her compensation claim. The AAT found in her favour in that the psychological injury arose from issues regarding her return to work plans, which included Telstra’s insistence that she return to work in the city office, contrary to advice from her doctors. This case demonstrates the extent of potential workers compensation liability faced by employers in relation to working from home.

It also highlights the difficult balancing act employers face. On the one hand they may have to consider a request for workplace flexibility options under the Fair Work Act 2009 (such as working from home) and balance this against OHS and worker’s compensation risks.

Employers may only refuse such a request for workplace flexibility options on reasonable business grounds.

What are reasonable business grounds?

 The factors relevant in defining ‘reasonable business grounds’ are listed below? These are taken from the Explanatory Memorandum to the Fair Work Bill.

• the effect on the workplace and the employer‘s business of approving the request, including the financial impact of doing so and the impact on efficiency, productivity and customer service;
• the inability to organise work among existing staff;
• the inability to recruit a replacement employee;
• the practicality or otherwise of the arrangements that may need to be put in place to accommodate the employee‘s request.
•  

Employers may argue, as a result of the Hargreaves decision, that the impact of claims on the employer’s claims history for workers’ compensation premiums, will allow then to refuse the request. Whether this argument would succeed is yet to be tested.

What about OHS risks?

The Model Work Health and Safety Act (“Act”) due to commence on 1 January 2012 defines workplace very broadly as “a place where work is carried out for a business and includes any place where a worker goes, or is likely to go, while at work.” This would include an employee’s house. What should an employer do about these risks? The new Act requires that they take all “reasonably practicable steps” to reduce risk of injury. In addition, Part 3 of the Model Work Health and Safety Regulations imposes specific obligations for ensuring the safety of the “general working environment.”

If you have a Working from Home Policy, it should be reviewed to ensure that it covers risk assessment for working from home that addresses each of the risks identified in the proposed new Regulations to the Act(for example, lighting, ventilation, heating and ergonomics).

Tips for employers?
 

Employers should:

• implement a Working from Home Policy if the employer wishes to offer it as an option;
• have in place a policy to respond to all requests for workplace flexibility;
• where agreement is reached, document it;
• where a request is refused, ensure a written response to the employee within 21 days of request as provided under the Fair Work;
• ensure a risk assessment of the home working environment is completed before the arrangement commences. Consider whether a self-assessment is adequate; and
• define the “working area” in any agreement to work from home.

Statistics Overview of Australia Employees Working Condition

Study after study shows that healthy employees are happier, more productive and more profitable.

Healthy employees can be almost three times more productive in their performance review than their unhealthy colleagues and unhealthy employees take up to nine times more sick leave than their healthy colleagues.

(Source: A study by Medibank Private).

Productive employees can work for longer periods of time, concentrate more effectively on the task at hand, are better able to manage demands and priorities, meet deadlines and interact positively with others.  Productivity and a good performance review = profitability.

The statistics for Australian employees point to the need for workplace wellness:

·                 Australian employees don’t exercise enough. 10% of the Australian workers surveyed are completely inactive, 40% engage in only minimal exercise, and another 12% do less than one hour of physical activity per week.

·                 Poor dietary habits with almost half (46%) of the Australian workers surveyed living on high fat diets.

·                 62% of the Australian workers surveyed are overweight

·                 More than half of the Australian workforce is stressed with 53% of the Australian workers surveyed feel over-whelmed with stress and pressure a significant proportion of the time.

·                 56% of the Australians surveyed are in the medium to high-risk area in participating in risk behaviours including smoking, drinking and irregular use of sunblock.

·                 More than half of the Australian workers surveyed don’t get enough sleep with 56% of the employees surveyed getting less than seven hours sleep per night and 22% reporting feeling un-refreshed or exhausted during work.

·                 21% of the Australian employees surveyed experienced a medical condition in the three months preceding the survey. This includes back and neck pain (29%), hay fever (22%), heart disease (21%), migraine headaches (14%) and asthma (13%).

Stress, excess weight and chronic pain can all lead to lost productivity and a poor performance review. Implementing a health and wellness program geared to the needs of your workforce is an effective way to boost productivity and employee satisfaction. 

“The simple truth is that a healthy employee is much more profitable,” says Bailey Vaez, owner of Proactive Movement, a Toronto-based wellness at work consultancy. “A spirited and robust individual can think clearly, lead more effectively, build outstanding relationships, and produce exceptional results. Having said that, it is clear that by choice every company would want to employ and retain healthy individuals.”

To drive a good performance review, you should motivate well with wellness. A wellness program is a major decision factor when considering working for or staying with a company.

(Source: Fortune Magazine survey, The Best 100 Companies To Work For.)

“Employees are likely to be attracted to, remain, with and value a company that obviously values them” Ellen Exum, Director of Wellness and Prevention at PepsiCo. Implementing an employee wellness program in the workplace is effective. Just ask major organizations like IBM, Pitney Bowes, Motorola and Texas Instruments who have all achieved success with their wellness efforts.

There are the obvious benefits of healthy, happy employees engaged in their jobs and interacting positively with the people around them. In addition, companies can save millions of dollars each year in healthcare costs with well-structured and rewarding workplace wellness programs

When Do You Need Support with Workplace Law?

Businesses in Australia are facing one of the most complex and volatile times in workplace law and relations. From July 1 2010, 85% of Australia’s employers needed to increase minimum wages and comply with new allowances, loadings and penalties under new Modern Awards; this is just one example of many instances where a change in workplace law called for businesses to seek legal advice if they were to remain compliant.

A recent survey of 3000 businesses conducted by The EI Group, found that over 65% feel either confused or very confused about the effect of the new workplace laws on their business.

“Our workplace lawyers have been helping employers with workplace relations and employment law issues for 20 years and I cannot recall seeing people this confused before. I really feel that employers need more help than ever from workplace solicitors to understand these changes and find ways to stay compliant.” Ben Thompson, CEO, Employment Innovations.

Workplace lawyers can assist businesses in the following areas:

  National Employment Standards – Workplace lawyers can ensure your business is complaint with maximum hours, requests for flexible working conditions, parental leave and annual leave, personal and carer’s leave, community service leave, work on public holidays and notice of termination and redundancy obligations.

  Enterprise Agreement making – Workplace solicitors can draft and lodge Enterprise Agreements and appear before Fair Work Australia on related matters. Enterprise Agreements give you stability by allowing you to bed down the workplace conditions and wages for your employees for up to 4 years.

  Unfair dismissal and unlawful terminations – Getting good advice from workplace lawyers about relevant workplace law before terminating or making an employee redundant can save you having to defend a costly claim for unfair dismissal or unlawful termination. Workplace lawyers can give you advice and represent you in court.

 Equal Opportunity and Anti-Discrimination – Workplace solicitors can assist with legal advice and legal representation relating to discrimination including disability discrimination, sexual harassment, age discrimination and racial discrimination. 

  Industrial Relations – Workplace solicitors can liaise with Fair Work Australia, give advice on good faith bargaining and protected industrial action.

 Drafting of Employment Contracts – Workplace lawyers can ensure that your employment contracts comply with the National Employment Standards and draft new agreements or revise existing agreements.

 Under Payment of Wages Claims – Workplace lawyers can give you advice and representation on any potential wages claim.

 Legal Representation – Workplace solicitors can represent you in court, or at a tribunal for any workplace related issue. They can provide you with information on your rights and obligations as an employer so that you remain compliant and use best practice.

During these volatile times in workplace relations and workplace law, informing yourself up front about your businesses’ legal rights, options and obligations can save you headache down the line. Employment Innovations can offer you and your business the support you need to stay compliant and have peace of mind. They also offer fully outsourced HR and payroll services, as well as other legal and migration services.

Employing Foreign Workers

So you have heard about Gina Rinehart’s deal to bring 1715 temporary foreign construction workers to her Roy Hill mine, but what do you know about your own ability to employ foreign workers?  You may be surprised to learn that you don’t need to be a mining magnate to access highly skilled foreign workers who are willing to live and work in Australia.

To be clear, Gina Rinehart’s enterprise migration deal is special. Enterprise Migration Agreements are specifically for large projects in the resource sector that require more than $2 billion capital investment and 1500 workers. They come with stringent requirements for training Australian workers and the foreign workers are protected under the Worker Protection Act 2009. Outside these mega projects businesses must go down the path of employer sponsored visas to employ non-Australians.

Until 30 June 2012 the two main types of employer sponsored visas are Long Stay Temporary Business visas (457) and Employer Nominated Scheme (EMS) visas (121 and 856). In addition there are Regional Skilled Migration schemes for regional employers. These schemes will continue after 1 July 2012 but with some changes to visa classes for permanent migration.

A 457 visa can operate for up to 4 years during which time the employee must work in the nominated occupation for the sponsor.  EMS visas allow an employer to permanently sponsor a foreign worker provided they are offering full-time work in a relevant occupation for at least 3 years. It is possible to convert a 457 visa to a permanent EMS visa with a formal skills assessment or after two years continuous work.

If you choose to sponsor a temporary foreign worker your business must meet the training eligibility benchmark. This means providing evidence that an amount equivalent to 1% of your total payroll is spent on training your employees who are Australian citizens or permanent residents. Alternatively you can pay an amount equivalent to 2% of total payroll to an industry training fund.

You must also meet strict criteria throughout the sponsorship including:

●        paying equivalent terms and conditions of employment

●        paying travel costs to enable the sponsored persons to leave Australia if requested

●        paying costs incurred by the Commonwealth to locate and remove an unlawful non-citizen

●        record keeping and provision of information to Immigration

●        not allowing the sponsored person to work in another occupation

●        not recovering costs (including migration agent fees and recruitment)

To be eligible for permanent sponsorship an employer must have a training strategy for existing Australian employees, demonstrate a legitimate need to sponsor a foreign worker and ensure that the position being filled is a highly skilled occupation on the Employer Nomination Scheme Occupation List (ENSOL).  The ongoing obligations for sponsoring a permanent worker are equivalent to employing an Australian citizen.

The application process for 457 visas follows these stages:

Step 1 the employer applies to be a sponsor
Step 2 the employer nominates a position 

Step 3 the employee applies for a visa

The application process for the employer nominated scheme is only two steps. First the employer nominates a position and second the employee applies for a visa.

Anybody concerned about Union claims that foreign workers are stealing jobs from Australian citizens should be reminded that the foreign worker visa program has built in protections for Australian jobs including training and development opportunities  to address skills gaps and making genuine attempts to fill positions locally before looking offshore.

There are significant changes to skilled migration from 1 July 2012. Now is a great time to look at your options or to review your existing arrangements.