1. Introduction – The duty outlined

1.1 The application of the law to contracts in workplaces

Most work activities are covered by the Health and Safety in Employment (HSE) Act 1992. If people working for you are described as self-employed for tax or other purposes, you will almost certainly have duties under the Act.

In this guide, "contractor" refers to a person who works for a company as a sole trader or on some basis other than as an employee. The emphasis is on contracts awarded by tender, but much of the process recommended is equally applicable to other contracting situations.

Where you have engaged a person or another business as a contractor, you will still have the duties of a "principal" to a contract in a workplace. If that is not the case, you may still have the duties of a person in control of a place of work. If a person is still legally considered an employee in terms of the Act, notwithstanding a different contractual label, then wider obligations will ensue.

The legal nature of the relationship between you and any person working for you should be clarified and included in the terms of the contract. Remember, though, that you cannot pass on a legal duty that falls on you as an employer, a person in control of a place of work, or a principal in terms of the Act. If you are considering any attempt to limit your responsibility for their health and safety, you should first read this guide carefully and, if necessary, seek legal advice.

It's important to remember that putting work out to contract does not absolve a company or individual from their health and safety obligations and is not necessarily the "easy option".

Refer also to the Guide to the Health and Safety in Employment Act 1992, available from the Department of Labour website, for further information on the duties mentioned above in relation to employers and persons in control of places of work.

1.2 Duty outlined

The object of the Health and Safety in Employment Act 1992 is the prevention of harm to people at work, or affected by work. To do this, the Act places on employers a range of duties and responsibilities for health and safety management.

Section 18 of the Act creates a duty requiring principals to a contract to take "all practicable steps" to ensure contractors, subcontractors and their employees are not harmed while undertaking work under the contract.

Broadly, a "principal" is any person who engages another (other than as an employee) to do any work for gain or reward. The exception is engaging someone to do work on your own home. The legal definition of a "principal" is discussed in section 2, below.

A principal's duty under the Act depends on what practicable steps they should take to ensure safety, such as planning, or site visits. There are situations where such duties might be shared by the principal and contractors. For example, a principal may have a limited duty in respect of intrinsic risks arising from everyday electrical work being done on a building project by an electrician as a subcontractor. However, the principal's duty would be much more extensive with respect to scaffolding provided by them for the electrician to gain access to the work.

Again, it is important to note the principal cannot contract out of obligations owed under section 18 by purporting to pass the duties on to contractors or subcontractors. Contractual clauses that attempt to do this will not be accepted by the courts.

The courts have recognised that where the principal is a corporate employer, it can only discharge its obligations through employees or agents, and a failure by an employee or agent may then be attributed to the principal. Being "let down" by an employee or agent will be no defence.

Example

1.3 The extent of the duty

A principal has a duty to a contractor, a sub-contractor or their employees. The duty is to take "all practicable steps" to ensure none of these people is harmed while doing work they were engaged to do. As the legal requirement is that all practicable steps be taken, a failure to take only one practicable step may result in a conviction.

"All practicable steps"

This duty to take all practicable steps to prevent harm is defined in terms of taking all steps that are reasonably practicable. It involves consideration of:

• the nature and severity of any injury or harm that may occur
• the current state of knowledge about the likelihood of such injury or harm occurring
• the current state of knowledge about harm of that nature
• how much is known about the risk of potential harm and the ways of eliminating, isolating or
• minimising that risk
• the availability and cost of safeguards.

When dealing with any case, the question asked by the courts is: What would a reasonable principal do in the relevant circumstances?

The concept of "reasonableness" is based on the legal concept of a hypothetical "reasonable principal", and the way they might behave in a particular situation.

There is a balancing exercise. For example, the degree of risk and the severity of potential injury or harm must be balanced against the cost and feasibility of the safeguard. The cost of providing safeguards has to be measured against the consequences of failing to do so. It is not simply a measure of whether the person can afford to provide the necessary safeguards. Where there is a high risk of serious, or frequent injury or harm, greater expenditure on safeguards may be seen to be reasonable than where the risk is lower and the foreseeable injury less serious.

Any judgement of whether a safeguard was "reasonably practicable" should take into account the current state of knowledge within the industry. The "current state of knowledge" should not be confused with industry common practice. When asking what a reasonable principal would do, the courts look at best, not actual, practice.

Example

Nor should current knowledge be confused with a particular individual's knowledge. A claim by an individual person that they did not know what to do about a hazard would not be successful if the hazard was foreseeable to others in the industry, or if they chose not to use the current body of knowledge about the hazard. The courts have referred to the current, "up-to-date" body of knowledge available to people. Failure to be familiar with this knowledge, or to apply it, is failing to take all practicable steps.

The overall test is: What would a reasonable and prudent person do in all the circumstances? There is no single prescription, but one obvious source of knowledge is the various codes of practice approved under the HSE Act. Others include guidance produced by the Department of Labour, Standards and industry-developed guidance.

The question of what is reasonably practicable is always a matter of fact and degree in each situation. What this means in terms of any given contract depends on factors such as the:

• scale and nature of the contract
• type of work the contractor was engaged to do
• contractor's and principal's respective expertise in the work being undertaken
• current state of knowledge and "best practice" in the industry
• nature of hazards in the place of work.

Obviously, the steps expected of a principal to a photocopier service contract would be different to those expected of the principal to a contract for a major building alteration. The photocopier owner may only require a brief verbal exchange of relevant health and safety information. However, the "practicable steps" expected of the principal to a major building contract would be extensive.

The duties of employers and principals will often be interrelated

Frequently a contractor's duties as an employer towards employees will require more practicable steps to be taken than may be expected of the principal to the contract.

The case law has shown, however, that when a step would be practicable for a principal to take, that step is required to be taken irrespective of what steps might be required of the contractor as an employer. For example, principals in the construction industry have been held liable under section 18 where employees of a sub-contractor were seen working in a dangerous way on a roof, rigging a crane without wearing safety gear, and using unsafe scaffolding. This was so even though the employer (and the employees) owed duties themselves.

Example

A principal to a contract cannot distance themselves from what is occurring in a place of work simply because the employer is more directly related to, and responsible for, employees carrying out the work. Nor can the principal always satisfy their obligations under section 18 merely by retaining a competent contractor if, for example, it is reasonably practicable for the principal to stipulate safety standards in advance, or to take steps if unsafe practices are observed on site visits.

Again, there is no absolute standard. The steps required of a principal which, for example, has its head office in another city, may not be the same as the steps required of a principal which is a head contractor working on site.

A process for meeting the "all practicable steps" requirement for principals is described in this guide under the following sequence:

• contractor selection and negotiation of terms
• monitoring contractor performance
• post-contractual evaluation.

The diagram below shows the main stages for managing health and safety during the negotiation, performance and post-performance of a contract for services. It is further expanded in the chart in section 3, Contractor selection and negotiation of terms.

1.4 Overview of process

The chart below outlines the usual features of a process for principals to manage and assist with the safety performance of contractors. It summarises the "best practice" process outlined in this guide.