Newsletter
Amendment Notice for "Contract Management" under the Occupational Safety and Health Act
"Contract management" is a crucial aspect of occupational safety and health that is often overlooked. A brief review of the occupational accident information published on the website of the Occupational Safety and Health Administration of the Ministry of Labor reveals that the proportion of occupational accidents due to outsourcing to contractors remains high. While companies or factories must pay attention to basic management of occupational safety and health within their operations, occupational safety and health incidents often involve "external factors." For instance, when a company's facilities require repairs and this is outsourced, the contractors may fail to implement proper fire prevention measures. Additionally, when contractors leave the site after completing the contract work, they may neglect to properly "restore" the on-site firefighting equipment or machinery they have used or fail to conduct off-site inspections and confirm the restoration of normal functionality of equipment or facilities. Consequently, when an accident occurs that causes a fire, the firefighting equipment cannot function as intended. It is precisely these seemingly "insignificant details" that conceal the potential hazards of major occupational accidents.
In light of the fact that the number of significant occupational accidents has not effectively or noticeably decreased in recent years, the Ministry of Labor announced a draft amendment to the Occupational Safety and Health Act (OSHA) on November 7, 2024. The key points of the amendment include strengthening accident prevention at the source for construction projects, enhancing safety management for construction outsourcing, appropriately increasing the maximum penalties for violations of the law, and adding provisions for information publication of non-compliant penalties. The draft amendment has introduced stricter regulations regarding "outsourcing management," including the following:
1. "When a business unit entrusts a construction project, above a certain scale, for planning, design, and construction, it shall ensure that the planners and constructors analyze potential hazards based on the characteristics of the project in advance, take preventive measures, and allocate safety and health expenses" (Article 15-1 of the draft amendment).
(1)Besides stipulating necessary safety and health equipment and reinforcing measures that construction business units must adopt during the construction phase as stipulated by the current OSHA, the draft amendment aims to increase and strengthen the responsibility of the "project owner." Project owners in this context include real estate developers for large-scale building projects, manufacturers for large-scale factory construction, and financial service providers for building financial centers.
(2)In addition to requiring construction business units to implement occupational safety and health measures in contract documents, the draft amendment provides that project owners must strictly require their designers or constructors to conduct risk assessments, analyze potential construction risks in advance, adopt necessary occupational accident prevention equipment and measures, prepare compliant safety and health drawings and specifications, and quantify and allocate safety and health expenses.
(3)When project owners entrust the design or construction of projects of a certain scale in the future, they must not only stipulate safety requirements in contract documents but also pay more attention to the adoption of occupational accident prevention equipment and measures, the preparation of compliant safety and health drawings or specifications, and the reasonableness and feasibility of safety and health expense allocation."
2. "When a business unit leases or lends its workplace or equipment to others, it must inform them of the relevant hazard factors in advance" (Article 26 of the draft amendment). The competent authority has observed that, in practice, business units often lease or lend their workplaces or equipment without adequately informing others of the potential hazards, which leads to accidents. Therefore, by strengthening the responsibility of business units to disclose hazards when leasing factories or machinery, this provision enhances the prevention of operational hazard risks to others and reduces social costs."
3. "The recognition of joint operations between business units and contractors has been expanded. When contractors and subcontractors further subcontract their portions, they are now also required to handle work coordination and adjustments, inspections, training, and other disaster prevention measures, in cooperation with the original business entity's subcontract management" (Article 27 of the draft amendment). The current regulation requires only contractors and subcontractors to provide hazard notifications in advance when further subcontracting their portions. However, in practice, there are often multiple layers of subcontracting, and it is common for contractors to immediately subcontract their work to other companies for execution. Therefore, provisions have been added that require contractors and subcontractors to also manage work coordination and adjustments, workplace inspections, guidance and assistance in training, and implementation of other necessary measures to prevent occupational hazards when further subcontracting their portions."
4. "When a business unit assigns a project to two or more contractors, it must designate one contractor to take responsibility for the overall management of safety and health integration" (Article 27-1 of the draft amendment). The competent authority has observed that, in current practice, there are often situations where projects are awarded in parallel without anyone overseeing integration. For instance, in construction projects, owners frequently award different parts of a building project separately to civil engineering, electrical and mechanical, and air conditioning contractors. While each contractor has its own safety and health management system, there is a lack of integration. To prevent occupational hazards arising from interface conflicts, a new provision has been added that requires the contracting business entity to designate a primary contractor responsible for integrating safety and health management."
The proposed amendments to the OSHA significantly increase the responsibilities of project owners in terms of contract management, which will have a substantial impact on the daily operations of companies or factories. Relevant industries should continuously monitor the progress of these legislative changes to promptly respond and adjust their internal management accordingly.