Safety Management Agreements Ensure the Safety of Enterprises

Environmental Protection Series No. 19

Safety Management Agreements Ensure the Safety of Enterprises

Introduction

In recent years, safety accidents have increased in frequency during production processes. It is urgent that people-oriented safety production is promoted. On April 28, 2020, the State Council Information Office held a press conference regarding the “Three-year Action Plan for National Work Safety Special Remediation”. The main purpose of this plan is to strengthen the supervision of work safety and eliminate safety hazards. In this context, enterprises should attach great importance to safety production management, especially the safety management of tenants and contractors in locations where the problems usually occur. As part of the management of tenants and contractors, a safety management agreement plays a vital role in the enterprise’s management. This article focuses on the necessity of a safety management agreement and the relevant key points for drafting such an agreement.

I

Why is it necessary to have a safety production management agreement?

Under the “Safety production Law”, there are two scenarios in which relevant parties must sign a safety management agreement, namely: (1) When two or more entities are engaged in  production and business activities in the same operating area, which may endanger the safety production of the other party or parties; (2) When contracting out or renting out production and operation projects or sites to another entity or entities. From the perspective of safety production management, signing a safety management agreement can clarify the responsibilities of all parties, help control safety production risks and reduce the possibility of accidents. If an enterprise is expected to sign a safety management agreement but fails to do so, it may be ordered to make corrections within a certain time limit and may be fined less than RMB 50,000, and the managers and other employees who are directly responsible may also be fined; if it fails to make corrections within the time limit, the enterprise may be ordered to suspend production and business for rectification. Such penalties may also lead to a credit crisis, which will make the enterprise disadvantaged in any bidding and lead to problems in terms of customer relationship management.

II

What is a safety management agreement?

Although there is no specific definition of a safety production management agreement under the current legal framework, it will be helpful to understand the concept of a safety management agreement in terms of its purpose. We understand that the main purpose of a safety production management agreement is to clearly define the duties and responsibilities with respect to the safety production management between the lessor and the lessee as well as between the principal and its contractor, so as to be able to reduce risks by the timely identification and rectification of any safety issues. Based on our previous experience in drafting and negotiation, in general, a safety production management agreement should at least include provisions regarding safety investments and capital guarantees, safety production management staffing, safety facilities and operating conditions, hidden danger investigation and management, safety education and training, accident emergency rescue, safety inspection and response, and responsibility sharing.

III

How to draft a safety production management agreement

Enterprises should firstly check applicable national and local laws and regulations and  normative documents. They should understand the obligations and responsibilities of safety production between the lessor and lessee as well as the principal and its contractors under the above-mentioned applicable laws and identify the scope of the statutory duty of supervision and management duty on the part of the lessors and the issuers. According to the structural sequence (such as the structure discussed under the second item above), the enterprise should reasonably divide the obligations and responsibilities of safety production considering the specific projects, the parties involved, the delivered/undelivered scope of the site and the specific scenarios (especially those involving more complicated scenarios such as cross-working) so as to clarify the responsibilities and liabilities of each party. If you need to draft and negotiate production or safety management agreements (or environmental, health and safety management agreements), you can contact your environmental and safety lawyer or counsel.

IV

Conclusion and suggestions

A safety management agreement is essential for the safety management of enterprises, their tenants and contractors. The environmental, health and safety management of enterprises’ tenants and contractors can achieve better performances only if there are a series of rules and regulations (such as a selection and assessment system for the contractors and suppliers, and a compliance system of environment, health and safety (EHS)), operating procedures, educational training, and a culture of safety. For some high-risk entities including contractors and suppliers, companies may also consider conducting an EHS compliance review before hiring. If you have any requests regarding safety production management agreements, supplier EHS compliance or EHS training, please contact us by email: [e-mail].

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The JunHe EHS Team: JunHe, with over 950 professionals, is one of China’s largest comprehensive law firms with an international reputation for providing high-quality legal services. As one of the pioneers in the legal area of environment and health and safety production (“EHS”) in China, JunHe’s EHS team provides multinational enterprises with a full range of EHS legal services that cover project development and the incorporation of joint ventures, M&A transactions, daily operations, EHS compliance, government investigations, administrative punishments, reconsiderations and litigations. 

ZHU, He

[e-mail]

Practice Area

Corporate and M&A

Infrastructure and Project Finance

Environmental, Health and Safety Compliance

NI, Tianling

Partner

[e-mail]

Practice Area

Environmental, Health and Safety Compliance

Corporate and M&A

Tingying Shen

[e-mail]

Environmental Protection

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