If you bring a contractor onto your premises, whether it’s a plumber fixing a geyser, a cleaning company or a builder doing an extension, the Occupational Health and Safety Act holds you responsible for how they work. A Section 37(2) agreement is the document that changes that. It is one of the first things a Department of Employment and Labour inspector, a client’s safety officer or a principal contractor will ask to see.
This guide explains what the agreement is, when you need one, what it must say and the mistakes we see most often.
What does Section 37 of the OHS Act say?
Section 37(1) says that if an employee does something (or fails to do something) that would be an offence under the Act, the employer is treated as having done it, unless the employer can prove it did not allow it, it was outside the employee’s authority, and the employer took all reasonable steps to prevent it.
Section 37(2) applies the same rule to a mandatary: anyone you engage to do work for you, such as a contractor, subcontractor or agent. In other words, by default you can be held liable for your contractor’s safety offences as if they were your own employees. The exception is when you and the mandatary have agreed in writing on the arrangements and procedures that will make sure the mandatary complies with the Act.
That written agreement is what people call a Section 37(2) agreement, a mandatary agreement or a “mandatory agreement”.
When do you need a Section 37(2) agreement?
Any time another business does work for you, on your premises or on your behalf. Common examples:
- Maintenance contractors: plumbers, electricians, air-conditioning technicians, painters, handymen
- Service providers on site regularly: cleaning, garden services, pest control, pool services, security
- Construction work: a principal contractor appointing subcontractors, or a client appointing a principal contractor
- Specialists doing once-off jobs: tree felling, roof repairs, solar installations, lift servicing
The size of the job doesn’t matter. A one-day repair can still result in a serious injury, and the question “did you have a written agreement?” will still be asked.
If you are the contractor, expect your clients to ask you to sign one. Having your own version ready, along with your safety file, makes you look professional and helps you get onto site faster. See our guide to what goes in a contractor safety file.
What should the agreement include?
The Act doesn’t prescribe a format, but a good agreement clearly sets out the “arrangements and procedures” for compliance. At minimum it should cover:
- The parties: full company names, registration numbers and the people signing, who must have authority to sign.
- Scope, site and duration: what work is being done, where and for how long.
- The contractor’s undertaking to comply with the OHS Act and all relevant regulations for its own employees and any subcontractors.
- Appointments: the contractor’s Section 16(2) appointee and the competent people responsible for supervising the work. Read more about 16(2) appointments.
- COID: proof that the contractor is registered with the Compensation Fund and holds a valid letter of good standing.
- Risk assessments and method statements for the work, provided and approved before work starts.
- Induction, training and PPE: who provides what, and proof of competence for specialised tasks.
- Permits and site rules: hot work, working at heights, confined spaces, lock-out, and the host’s site rules.
- Incident reporting: how incidents are reported, including Section 24 reporting to the Department.
- Inspections and the right to stop work: the host may inspect and stop unsafe work.
- Subcontracting: no subcontracting without approval, and subcontractors must sign their own agreements.
- Consequences of non-compliance, including termination, and signatures with dates.
Does it mean you have no responsibility at all?
No. The agreement shifts liability for the contractor’s compliance, but it doesn’t cancel your own duties as an employer or client. You still need to:
- choose contractors who are competent and properly resourced for the work;
- tell them about the hazards on your premises;
- check that they actually follow the agreed arrangements, and act if they don’t.
On construction projects, the Construction Regulations 2014 add specific duties. For example, a principal contractor must appoint each contractor in writing, be reasonably satisfied that they are competent and resourced, and make sure every contractor is registered and in good standing with the Compensation Fund before work starts.
Common mistakes
- Signed after the work started, or never signed at all because “it’s just a small job”.
- A generic template with no details: no site, scope or dates filled in.
- Signed by someone without authority, such as a site worker instead of a director or the 16(2) appointee.
- Subcontractors not covered: your contractor brings in someone else who never signed anything.
- Not filed: the agreement exists, but nobody can find it when the inspector asks.
Need a Section 37(2) agreement template? An editable mandatary agreement is included in our Office & Small Business Safety File, every Contractor Safety File and the Construction H&S System, together with the appointment letters, risk assessments and registers that go with it.
Frequently asked questions
Is a mandatary agreement the same as a Section 37(2) agreement?
Yes. “Mandatary” is the word the OHS Act uses for a contractor or agent, so a mandatary agreement, a 37(2) agreement and a “mandatory agreement” all refer to the same document.
Who should sign the Section 37(2) agreement?
Someone with authority on each side, usually the CEO (Section 16(1)) or a person appointed under Section 16(2). Both parties should keep a signed copy in their health and safety files.
Do I need a new agreement for every job?
For once-off jobs, yes. For a contractor who works for you regularly, one agreement can cover an ongoing service contract, as long as the scope, sites and dates are clear and it is reviewed when the work changes.
Does the agreement replace the service contract?
No. It deals only with health and safety compliance. It is usually signed alongside the commercial contract or attached to it as an annexure.
Does a contractor also need its own safety file?
Yes. The agreement says the contractor will comply, and the contractor’s safety file is the proof: appointments, risk assessments, training records, COID letter and inspection registers.
