Business people need to know a lot. Of the “lots” they need to know, 7 of the key legal business musts to know about the:
- Competition and Consumer Laws (eg under the Competition and Consumer Act, 2001);
- Environmental laws (eg Contaminated Land Management Act, 1997, and the Dangerous Goods (Road and Rail Transport) Act 2008;
- Intellectual Property (eg Trade Marks Act, 1995, and the Copyright Act, 1968);
- Asset Protection (Corporations Act, 2001, Succession Act, 2006 and theTrust Act, 1925);
- Tax (Taxation Administration Act, 1953 and the Income Tax Assessment Acts of 1936 and 1997);
- Industrial Relations (Fair Work Act, 2009, Anti-Discrimination Legislation and Employment Legislation, such as, Workers’ Compensation, Long Service Leave Act, and Holiday Pay Act);
- Occupational Health & Safety Acts.
The short answer to the question “Why must you know these 7 things?“ can be summed up by the words of Justice Spender, in TPC v British Building Society & Ors (1988) ATPR 40-880 at 49,545, when considering the need for a corporation to have an effective trade practices compliance program, he said:
“… (B)usiness men, particularly at senior levels, who remain in ignorance of the Competition and Consumer Act, 2010 1974 do so at their peril.”
The peril stems from the substantial criminal, pecuniary and other penalties that apply under various statutes that require businesses to comply with.
The penalties that spur businesses to adhere to the prescribed minimum standards of behaviour are various. For instance:
Breaches of the Australian Consumer Law can be as high as $1.1m for corporations and $220,000 for individuals. The penalties for competition breaches can be $10m.
Under Environmental legislation, the penalties involve criminal sanctions such as jail terms besides pecuniary fines.
There are various levels of liability to contend with. Breaches of the competition provisions are in the nature of strict liability. There is no due diligence defence for engaging in prohibited anti-competitive conduct under the Competition and Consumer Act, 2010.
Due diligence can be a defence for the purposes of the Environmental Protection Act.
Despite the strict liability or otherwise of particular legislation, effective compliance programs play a role. Hence, knowing what to not do is critical for business survival. The Courts have consistently said that a business that has an effective compliance program may raise this in mitigation of a penalty that can be imposed by a Court, either as a means of reducing a fine where there is strict liability or raising an outright defence, where due diligence operates as a defence. In TPC v CSR Limited (1991) ATPR 40-076, Justice French pointed to the need for corporations to have a training program to achieve compliance with the Competition and Consumer Act (the then Trade Practices Act).
Since a breach of an act may, in some instances, occur regardless of whether there was any intention to engage in prohibited conduct (eg under the Competition and Consumer Act, 2010), to demonstrate compliance with the requirements of legislation, Corporations need to show that they have instituted effective and efficient procedures of managerial control “designed in recognition of human frailties of a proportion of their employees”: Eva v Preston Motors Pty Limited (1977) ATPR 40-048.
As prevention is better than cure, it is good business practice to know what you must know and implement and use a compliance program. Court cases such a Universal Telecasters (QLD) Limited v Guthrie (1978) ATPR 40-062 clearly demonstrate that the establishment of a compliance program assist in preventing: breaches of the relevant legislation and goes to the question of mitigation of damage.
Compliance programs operate at three levels:
- defence; and
- mitigation of penalty.
Businesses using a compliance program in a defensive way or in a mitigation context, must show that its program was undertaken systematically and properly carried out.
Risk management is the identification, measurement and management of risk through control. Risk management involves the establishment and maintenance of programs designed to minimise the potential exposures of businesses to loss.
Effective risk management programs depend upon the ability of responsible officers to
- identify potential risks,
- take practical steps to eliminate/minimise risks,
- implement ongoing controls,
- be fully aware of the latest techniques for eliminating/minimising risk,
- have up to date knowledge of the legal aspects of risk management.
Accordingly, the first step of any compliance program is to identify potential risks. For you to be able to do this you must know what your need to know of the 7 Key Legal Business Issues before you can even identify the potential risks that may arise in your business.
The aims of a compliance program are twofold:
1 Pre-emptive, whereby the Compliance Program is designed to create a corporate culture of best practice which promotes compliance with the relevant legislation; and
- Pro-active; where the aim of the program is to prevent breaches occurring.
Different business activities, distribution, marketing, personnel and equipment will mean that compliance needs will always be unique to each business. It is possible to outline the principals involved in the determination of legal requirements but these serve only as a guide to compliance officers. All Corporations share common aspects. The implementation of a compliance program will involve:
- If you do not already know the key aspects of the 7 key legal business issues you will need to find out what they are. [Etienne Lawyers can do this.]
- Identification of the business activities undertaken by the.
- The identification of the legal risks associated with the business activities undertaken.
- Analysing the nature of the risks ascertained.
- Identifying steps to reduce the risks controlling the impact of such risks.
- Keeping records which, for instance, may help to establish that reasonable precautions were taken and due diligence exercised to avoid a contravention.
To do this an examination of the structure and exposure to activities of your business is required This can be undertaken by looking at the key operating departments or divisions and for each division briefly listing their major functions and activities.
Having ascertained the activities assess how each activity is performed in light of the requirements of the relevant legislation.
Assess the severity of loss associated from non-compliance.
Provide a priority rating by multiplying in frequency and severity indices.
Etienne Lawyers has developed compliance programs for businesses.