A discussion paper on the revision of the definition of serious harm

Appendix 4: Draft regulatory impact and business compliance cost statements

Problem Definition

The definition of "serious harm" contained in Schedule 1 of the Health and Safety in Employment Act 1992 (the HSE Act) is an important threshold for accident reporting, hazard management, and other duties under the Act.

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

• does not include the types of harm caused by stress and fatigue and explicitly included in the Act's coverage since the HSE Amendment Act 2002
• excludes some serious acute illnesses and injuries
• is ambiguous and hard for businesses to interpret in key areas-particularly "temporary severe loss of bodily function"
• is inconsistent with the needs of the Hazardous Substances and New Organisms Act 1996, Electricity Act 1992 and Gas Act 1992 which now refer to the HSE Act definition of serious harm
• sets thresholds based on treatment that are out of step with current medical practice.

Objective Statement

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

• eliminates unnecessary compliance costs and minimises necessary compliance costs for employers and others
• provides maximum clarity and consistency
• gives comprehensive coverage of workplaces and hazards
• maintains the interests of employees and others affected by work activities.

The Government's Workplace Health and Safety Strategy for New Zealand to 2015 and accompanying Action Plan gives the Department of Labour responsibility for revising the definition of "serious harm" under the Health and Safety in Employment Act 1992. The Government has agreed to the public release of a discussion paper which includes a proposed revision of the definition of "serious harm" under the HSE Act 1992. After consultation an Order in Council may be passed to revise the definition.

Feasible Options

There is agreement among stakeholder groups and agencies that the current definition creates a degree of uncertainty and inefficiency for workplaces covered by the HSE Act. There are three broad options for responding to the problem:

a) Status quo

The current definition contains gaps and ambiguities which make it harder for employers, principals to contracts, the self-employed and employees to meet their duties under the HSE Act. The points of failure are:

• types of harm cause by stress and fatigue are not covered
• the description of "temporary severe loss of bodily function" is ambiguous and incomplete
• certain acute illnesses and injuries are omitted, including some cases of unconsciousness, burns, injuries from falls, and electrocutions.

These have the effect of:

• creating uncertainty for those with duties to manage the workplace hazards concerned
• reducing serious harm notification and investigation rates
• leading to regular litigation on matters of interpretation which have not provided sufficient clarification
• impeding the flow of information between workplaces and the inspectorate
• undermining confidence in the completeness of coverage, and effectiveness of the legislation.

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 above and as such undermines the effective working of the legislation. This view has been confirmed by consultation with stakeholders.

b) Provide more guidance on interpretation of the existing definition

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 is therefore questionable and is unlikely to remove uncertainty for those using the definition to determine compliance.

c) Revise the definition by passing an Order in Council that replaces the existing Schedule 1 {the preferred option}

The Order-in-Council would address each of the points of failure with the latter, by:

• including, and defining, the types of harm caused by stress and fatigue
• clarifying the description of "temporary severe loss of bodily function"
• explicitly including the acute illnesses and injuries - including some cases of unconsciousness, burns, injuries from falls, and electrocutions - where there is currently uncertainty

It would 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.

Net Benefits

The preferred option will provide the following benefits:

• Employers and others are clearer on their obligations and rights under the HSE Act and related legislation, and so hazards are better managed
• Easier compliance with reporting and notification requirements for employers and others
• Less uncertainty around the management of stress and fatigue, and the role of the health and safety inspectorate in "stress cases" in particular
• Improved statistics on the nature and causes of workplace injuries and Illness
• The health and safety inspectorate will be better informed of workplace injuries and illness, meaning better surveillance, individual case/client management and more responsive inspection and enforcement.

Depending on the option chosen, the proposal will involve the following costs:

• Increased reporting from employers, the self-employed and principals, but the HSE Act already requires a record of all, i.e non-serious harm, accidents and occurrences of harm in the same format, so minimal time and costs will be involved
• Some costs in redesign of hazard management and information systems by private providers
• More processing of increased number of notifications by agencies (within existing baselines)
• Some redesign of information products and administrative processes by agencies, which will be included in ongoing revision and maintenance.

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.

Consultation

When developing the proposal and discussion document in 2002, there was initial consultation with the following key stakeholder groups, selected individual employers, and affected government agencies:

EMA (Northern)
NZCTU
SiteSafe NZ
Massey University
Business New Zealand
Federated Farmers NZ
Electricity Engineers' Association NZ
NZ Police Association
Transpower
Department of Labour (occupational physician)
Finsec
NZEPMU
NZ Chemical Industry Council
BHP NZ Steel
ACC
Air New Zealand
Injury Prevention Research Unit (Otago University)

This initial consultation has not been repeated because the discussion document is only intended as a basis for broader consultation, which can now occur.

Business Compliance Cost Statement

The proposed change will involve three potential compliance costs to business:

a) Increased reporting by employers, self-employed and principals.

These persons are already required to record all incidents in a prescribed form, which is the same as that required for reporting serious harm. Reporting may be carried out by mail, fax, or electronically. If the changes proposed in the discussion document are made, the current approx 6,000 reports annually will increase substantially, mainly through the better alignment with the ACC's definition of compensable accidents. Most of the increase will be soft tissue injuries (sprains and strains) not currently reportable. The number of trauma injuries reported is not expected to increase much.

The Department of Labour expects the number of reports to double, which would still be less than a 50 percent reporting rate, but recognises that reporting rates for minor injuries will remain low. The Department does not expect to respond to most of the new reports, but to record the occurrences for monitoring accident/injury trends in particular workplaces.

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.

b) 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.

c) 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.