Importance of a Legal Due Diligence Framework

Holly Howison writes:

Occupational health and safety (OHS) legislation in all states and territories of Australia imposes strict obligations on entities and their directors/managers to ensure that people are not exposed to risks of harm arising from their work activities. The Board of Directors of each entity needs to ensure compliance by their relevant entity with these legal obligations. Consequently, the Board of Directors needs to be actively involved in the development and implementation of OHS management systems and to establish processes and procedures that allow them to satisfy their function of overseeing compliance with OHS legal obligations via a Due Diligence Framework.

A proposed Due Diligence Framework seeks to achieve compliance with the OHS legislation by:

  • Setting standards for the occupational health and safety management system(s) of the entity as a whole, or for each of the entity’s divisions;
  • Setting standards in relation to resourcing (including allocation of designated OHS personnel) and training requirements (including training in the OHS management system at least annually, induction training on OHS risks and obligations and refresher training on OHS risks and obligations on an annual basis), to ensure the adequate implementation of those systems;
  • Providing a mechanism for ongoing auditing and review;
  • Setting minimum reporting requirements by relevant departments/divisions to the Board of Directors on the performance of the relevant management system and OHS performance via monthly board reports, OHS statistics reports, audit summary reports; and
  • Developing incident response procedures for critical incidents which allows the Board of Directors’ members to monitor the response and the preparation of significant OHS incident notification reports to the Board of Directors.

A Due Diligence Framework seeks to ensure that an organisation’s occupational health and safety management system(s) is effectively implemented and continually monitored and improved to achieve the highest level of OHS performance and ongoing legal compliance. The Due Diligence Framework will also ensure that information in relation to OHS performance and compliance is provided to and considered by the directors/managers of the relevant organisation. Essentially the purpose of a Due Diligence Framework is to enhance the ability of members of a Board and senior management teams to establish that they exercised all due diligence to systematically ensure compliance by an organisation of its OHS legal obligations.

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