The legal definition that changes everything
Watched room of experienced directors recently go very pale…
…when they realised scope of their person conducting a business or undertaking obligations.
Last month. Governance review. These weren’t inexperienced executives either.
Board members with decades of corporate leadership experience. CEOs who’d built successful enterprises from scratch. Non-executive directors with impressive portfolios spanning multiple industries. But when we started unpacking what being a person conducting a business or undertaking actually means under Australian law? Suddenly everyone was taking notes like first-year law students.
Understanding what constitutes a person conducting a business or undertaking (PCBU) is fundamental!
Not just nice-to-know information for compliance teams tucked away in back offices. Core knowledge for anyone in senior leadership position who values their personal assets and freedom.
Work Health and Safety legislation across Australian jurisdictions places specific duties on person conducting a business or undertaking. These duties can’t be delegated away, can’t be insured against entirely, carry serious personal and corporate consequences when breached.
Recent increase in workplace safety prosecutions means courts taking PCBU obligations seriously.
Penalties include significant fines, imprisonment for individuals, reputational damage that can destroy businesses overnight. Personal liability for directors and officers that extends beyond corporate protections most executives assume will shield them.
Yet many senior executives still don’t fully understand their person conducting a business or undertaking status. Don’t realise they might be PCBUs in multiple different capacities. Don’t appreciate scope of duties and potential consequences of non-compliance.
Legal definition sounds straightforward.
Until you start applying it to complex corporate structures, franchise arrangements, contracting relationships, joint ventures. Then complexity becomes apparent and compliance challenges multiply exponentially.
Legal definition and framework
Person conducting a business or undertaking is defined under Work Health and Safety legislation as someone who conducts a business or undertaking either alone or with others, whether or not for profit or gain.
Sounds simple?
Not really. Legal definition is deliberately broad to capture wide range of business relationships and arrangements that affect workplace safety. Business includes any activity carried on by person in course of which that person employs or engages others.
Undertaking includes any activity carried on by person whether for profit or gain.
Including activities carried on in partnership with others. Key elements include conducting activities, employing or engaging others, doing so in course of business or undertaking. Doesn’t require profit motive, doesn’t require formal employment relationships, doesn’t require significant scale or permanence.
Work Health and Safety legislation across Australian jurisdictions uses consistent person conducting a business or undertaking definition. Though specific obligations and penalties may vary between states and territories. Commonwealth, state, territory WHS Acts all recognise PCBU concept.
The framework evolved from previous occupier and employer-based duties.
Recognises modern workplace complexity where traditional employment relationships no longer capture full range of work arrangements requiring safety oversight.
Person conducting a business or undertaking definition acknowledges that workplace safety responsibilities should follow commercial control and influence rather than just formal employment relationships. If you control or influence workplace activities, you likely have person conducting a business or undertaking duties.
Whether you like it or not.
Legislation recognises multiple PCBUs can exist in same workplace with overlapping duties and shared responsibilities. Not zero-sum arrangement where one person conducting a business or undertaking excludes others. Courts interpret person conducting a business or undertaking definition broadly, focusing on substance of relationships rather than technical legal structures.
Can’t avoid obligations through creative corporate arrangements or contractual disclaimers.
Many have tried. Most have failed spectacularly in court.
Who qualifies as a PCBU: beyond the obvious
Seen executives shocked to discover they’re person conducting a business or undertaking in multiple different capacities.
Most obviously, companies and other incorporated entities qualify as person conducting a business or undertaking when they employ people or engage contractors. Standard employer-employee relationships clearly create PCBU status.
But person conducting a business or undertaking extends well beyond traditional employers.
Includes anyone who conducts business or undertaking that involves or affects others’ work activities. Franchisors often qualify as person conducting a business or undertaking in relation to franchise operations, particularly where they exercise control over franchisee workplace practices.
Franchise agreements that specify safety procedures, equipment requirements, operational standards can create PCBU duties. Head contractors qualify as person conducting a business or undertaking in relation to subcontractor activities when they control or coordinate work.
Construction projects typically involve multiple PCBUs with overlapping responsibilities.
Company directors and senior officers can be person conducting a business or undertaking in their personal capacity when they directly control business activities. Not just corporate liability. Potential personal PCBU status depending on involvement level.
Think about that for a moment.
Partnerships create person conducting a business or undertaking obligations for partners, whether formal legal partnerships or informal business collaborations. Joint venture arrangements often involve multiple PCBUs with shared duties that can become legal nightmares without proper documentation.
Landlords and property owners can become person conducting a business or undertaking when they control or influence tenant workplace activities. Common areas, shared facilities, building systems all create potential PCBU obligations.
Government agencies and statutory authorities qualify as person conducting a business or undertaking when they conduct activities involving workers.
Public sector organisations aren’t exempt from PCBU duties. Even volunteer organisations can be person conducting a business or undertaking if they employ anyone or conduct activities that affect others’ safety. Doesn’t require commercial purpose or profit motive.
Supply chain relationships increasingly create person conducting a business or undertaking obligations. Companies that specify how suppliers’ workers perform tasks or access worksites may assume PCBU duties without realising it.
Classic case. Major retailer specifies exact procedures for delivery drivers accessing their distribution centres. Suddenly they become a person conducting a business or undertaking for those activities.
PCBU duties and obligations
Person conducting a business or undertaking obligations aren’t just HR issues.
They’re fundamental business governance responsibilities that affect every aspect of operations and can land directors in prison.
Primary duty under WHS legislation requires person conducting a business or undertaking to ensure, so far as reasonably practicable, health and safety of workers and others who may be affected by business activities.
“So far as reasonably practicable” sounds like weasel words but it’s not.
Means eliminating risks where possible, or minimising risks where elimination isn’t reasonably practicable. Requires consideration of likelihood and degree of harm, available knowledge about hazards and risks, availability and suitability of control measures, costs versus benefits of risk controls.
A PCBU must provide and maintain a safe work environment, safe systems of work, safe use and handling of structures and substances, adequate facilities for workers’ welfare, necessary information, appropriate training, instruction and supervision, and monitoring of workers’ health and workplace conditions.
Specific duties extend beyond direct employees.
Include contractors, subcontractors, visitors, customers, general public who might be affected by business activities. Scope of person conducting a business or undertaking obligations extends to anyone who might be harmed by what you do.
Consultation duties require person conducting a business or undertaking to consult with workers about workplace health and safety matters. Not just informing workers about risks. Actively seeking input and involving workers in decision-making processes.
The PCBU must cooperate and coordinate activities with other PCBUs when they share workplaces or influence each other’s activities.
Can’t assume someone else is handling safety obligations. That assumption has cost companies millions in fines and directors their freedom.
Incident reporting and investigation duties require person conducting a business or undertaking to notify regulators about serious incidents and preserve incident scenes. Notification timeframes are strict and non-compliance carries penalties.
Record keeping obligations require person conducting a business or undertaking to maintain records of risk assessments, training, health monitoring, incident investigations.
Records must be accessible to workers and regulators. Insurance duties require person conducting a business or undertaking to maintain workers’ compensation insurance for all workers. Can’t engage workers without appropriate insurance coverage.
Officer due diligence: personal liability for directors
Due diligence obligations keep directors awake at night once they understand personal liability.
Can’t be delegated. Can’t be insured away completely.
Company officers have personal duty to exercise due diligence to ensure their organisation complies with person conducting a business or undertaking obligations. Separate from corporate liability. Individual responsibility that follows officers personally, even after they resign.
Officer includes company directors, company secretaries, partners in partnerships, anyone else who makes or participates in making decisions affecting whole or substantial part of business.
Senior executives often qualify as officers regardless of formal titles.
Six elements of due diligence create comprehensive framework for officer responsibilities. Must acquire and keep up-to-date knowledge about work health and safety matters. Must gain understanding of nature of operations and associated hazards and risks.
Must ensure organisation has appropriate resources and processes to eliminate or minimise risks. Must ensure organisation has appropriate processes for receiving and considering information about incidents, hazards, risks.
Must ensure organisation has and implements processes for complying with legal duties and obligations.
Must verify provision and use of resources and processes mentioned above.
Personal liability for officers means individuals can face prosecution and penalties even when companies also prosecuted. Fines up to hundreds of thousands of dollars and imprisonment up to five years for serious breaches.
Due diligence isn’t about micromanaging operational activities.
About ensuring appropriate governance systems exist and function effectively. About asking right questions and ensuring satisfactory answers. About staying informed and taking action when problems identified.
Can’t delegate due diligence obligations to other officers, managers, consultants. While implementation can be delegated, ultimate responsibility for due diligence remains with individual officers.
Professional indemnity insurance may provide some protection.
But exclusions often apply for criminal conduct or deliberate breaches. Personal assets remain at risk for officer due diligence failures. House, superannuation, investments all potentially exposed.
Regular board reporting on safety performance, incident trends, compliance status essential for demonstrating due diligence.
Officers need reliable information to make informed decisions. Ignorance isn’t a defence when you have duty to stay informed.
Multiple PCBU relationships and overlapping duties
Complex person conducting a business or undertaking relationships create compliance nightmares.
Without proper planning and coordination, everyone ends up liable for everything.
Modern business arrangements often involve multiple PCBUs operating in same workplace or affecting same activities. Construction sites, shopping centres, shared offices, franchise operations all create overlapping person conducting a business or undertaking relationships.
Each person conducting a business or undertaking retains their individual duties.
Can’t assume other PCBUs are handling all safety obligations. Shared responsibility doesn’t mean divided responsibility. Everyone must ensure their own compliance.
Coordination duties require PCBUs to cooperate and coordinate activities to ensure compliance with WHS legislation. Must share information about risks, coordinate control measures, communicate about safety procedures.
Principal contractors often have additional coordination responsibilities when managing multiple subcontractor PCBUs.
Must ensure overall workplace safety while respecting other PCBUs’ primary duties for their own workers. Delicate balance that requires clear agreements and constant communication.
Host employers have person conducting a business or undertaking duties when contractors work at their premises. Can’t assume contractor PCBU status eliminates host obligations for workplace safety.
Classic mistake that’s cost companies dearly.
Franchise arrangements create complex person conducting a business or undertaking relationships where franchisors may have duties related to franchisee operations. Degree of control over operational procedures determines extent of franchisor PCBU obligations.
Supply chain relationships increasingly involve multiple person conducting a business or undertaking entities with overlapping duties.
Client specifications about work methods or safety requirements can create shared PCBU obligations. Joint venture arrangements often involve multiple PCBUs contributing to single project or operation. Clear agreements about respective responsibilities essential for managing overlapping duties.
Shared workplace agreements help define respective person conducting a business or undertaking responsibilities when multiple entities operate in same location.
Written agreements clarify coordination requirements and communication protocols. Regular coordination meetings between PCBUs help ensure effective communication about risks, incidents, control measures.
Formal processes work better than informal arrangements when lawyers get involved.
Practical compliance strategies for senior executives
Successful PCBU compliance starts at board level.
Flows through entire organisation structure and culture.
Governance structures must integrate PCBU training regarding obligations into standard board and executive processes. Safety can’t be treated as separate operational issue. Must be embedded in strategic planning and risk management.
Board reporting should include regular updates on person conducting a business or undertaking compliance, incident trends, risk assessments, improvement initiatives.
Directors need reliable information to exercise due diligence obligations. Can’t exercise due diligence based on hope and assumption.
Executive accountability frameworks should clearly define person conducting a business or undertaking responsibilities for senior managers. Performance measures and incentives should align with safety outcomes and compliance objectives.
Risk assessment processes must systematically identify and evaluate workplace hazards across all business activities.
Regular reviews ensure risk assessments remain current as operations change. Management systems should document person conducting a business or undertaking policies, procedures, responsibilities. Clear documentation helps ensure consistent implementation and provides evidence of systematic approach.
Training programs must ensure workers at all levels understand their safety responsibilities and have necessary competencies.
Person conducting a business or undertaking must provide adequate training and verify competency levels. Consultation mechanisms should involve workers in safety decision-making and provide channels for raising concerns.
Effective consultation improves safety outcomes and demonstrates PCBU commitment.
Incident investigation processes must ensure thorough analysis of safety failures and implementation of corrective actions. Learning from incidents essential for continuous improvement.
Regular compliance audits help identify gaps in person conducting a business or undertaking systems and verify implementation effectiveness.
External reviews provide independent perspective on compliance status. Professional advice from workplace safety lawyers and consultants helps navigate complex person conducting a business or undertaking obligations and stay current with regulatory developments.
Insurance reviews should ensure adequate coverage for PCBU liabilities while recognising limitations of insurance protection for deliberate breaches.
Remember though.
Insurance won’t protect you from criminal prosecution or imprisonment. Only proper compliance does that.
