Hard line HSE prosecution strategy may push firms into bankruptcy

The Health & Safety Executive risks pushing companies into bankruptcy by accusing firms of the committing the most serious offences when they have in reality committed lesser breaches, a leading lawyer has warned.

Speaking on the eve of Safety and Health Expo at ExCel, London, Vikki Woodfine, Partner at law firm DWF LLP and Lead Commentator for Wolters Kluwer professional Health and Safety information service Croner-i, said some companies could be forced to the wall by fines that could see medium sized firms fined up to £4m for health and safety offences.

As well as potentially ruinous fines, companies were also having to bear the cost of contested cases because the Health & Safety Executive was adopting a policy of bringing cases at the highest level of culpability (and hence penalty) in “the vast majority of cases” forcing firms to go to court to argue for a lesser offence.

Woodfine urged the HSE to take a “fairer” approach and a more realistic view of culpability and harm when bringing cases to court if it wanted to reduce the number of contested cases which placed a heavy burden on public funds as well as the companies being prosecuted.

She also warned that, in order to secure the new higher fines, the HSE would look to charge the parent company in a larger group as well as the firm alleged to have committed the offence. “As the sentencing guidelines for health and safety offences have now bedded in and high fines are increasingly the norm, the next phase that will be interesting to watch from the courts is how they deal with group companies. It is unlikely to be long before we see a case where an attempt is made by the courts to sentence an organisation based on the turnover/financials of a “linked organisation” i.e., the Group or Parent Company.”

She said: “In practice, companies are now faced with the most impossible of dilemmas when it comes to deciding whether to defend a prosecution. There has always been a fine reduction when pleading guilty and this remains the case. However, given the new fine levels, there has been an increase in the number of defended cases as companies simply cannot just accept their fate anymore given that the guidelines expose them to potentially business ending fines.

“The guidelines have introduced a very real fear for small and medium-sized organisations that even if they plead guilty… they may still have to pay a fine where the starting point is £250,000 or more, which is often a prospect that could put them out of business.

“Consequently, the advice to duty holders is changing, with many companies now seeking to test the prosecution evidence before a jury. While the company runs the risk of being found guilty, the judge may place the offence into a lower bracket in the guidelines, thereby reducing the overall penalty.

“We are often seeing the HSE start the vast majority of cases saying that they are High Culpability, Category 1 Harm. The defence then seeks to say Low Culpability, Category 3 Harm and the hope then is that the judge will decide Medium Culpability, Category 2 Harm. But there is no certainty in this approach, and with the HSE stating cases at their highest point, companies cannot take the risk and are contesting cases

“If the HSE wishes to see a reduction in contested trials (which take up significant manpower for them and a cost risk) a fairer approach from the HSE has to be adopted whereby it takes a more realistic view of culpability and harm at the outset.”

Wolters Kluwer will be showcasing the Croner-i suite of products at Safety and Health Expo which runs at ExCel, London from 20-22 June. For more information go to www.wolterskluwer.co.uk



Health and safety offences

From 1 February 2016, the entire sentencing landscape for health and safety offences changed resulting in a cataclysmic shift upwards in fine levels. These changes came in through the Health and Safety and Corporate Manslaughter Sentencing Guidelines which represented the biggest shake up to the regulatory landscape in recent years, with fines up to 10 times higher (or more in some cases), than their previous levels.

Not only are companies now being targeted by increased fines but individuals are being prosecuted more and we are seeing cases of imprisonment of directors and managers in cases where that would have order phentermine online pharmacy been unheard of previously.

In such cases, when considering fine levels, the company’s turnover is the relevant figure for the court to look at. The guidelines classify corporate entities by reference to turnover: micro up to £2 million; small £2–10 million, medium, £10–50 million and large more than £50 million. Very large (where judges are given discretion to move beyond these parameters) does not have its own bracket, but the guidelines suggest this would include a company with a turnover of over £900 million. This is a worrying prospect for many hauliers, given that transport is often a high turnover business, albeit with a relatively modest profit margin.

Once the company size has been determined from its turnover, the guidelines then calculate a fine level (with a range of potential sentences and an indicated starting point) based on a calculation taking into account turnover, risk of harm and culpability.

Importantly the guidelines do not require actual harm to have occurred (although it will be an aggravating feature), only the risk of harm. Therefore previously innocuous risks could now lead to prosecutions where a risk of serious injury or even death is proven. This is the area that often causes surprise to dutyholders now and there have been a number of cases, including cases attracting fines in excess of £1 million, where there has been no harm at all, only a risk of harm. For example, the case of ConocoPhillips where there was a risk from a gas leak, but no harm caused. This case saw a fine of £3 million imposed, (which would have been £5 million without a guilty plea). That fine, under this new regime, is higher than the fines for Network Rail, Hatfield and Ladbroke Grove disasters — all of which caused mass fatalities and where there were purportedly clear warnings ignored.

Pre and post guidelines benchmarks

Pre-guidelines Post-guidelines
Health and Safety Offences (fatalities) A health and safety offence which resulted in death recommended a starting point for a fine at £100,000. A medium-sized organisation (turnover between £20–50 million) could see the starting point as high as £4 million depending on the level of culpability.

For large companies (£50 million+) the guidelines indicate a top level fine of £10 million.

Corporate Manslaughter Fine starting point of £500,000; highest fine to date £700,000. Medium-size organisation would see a starting point of £3 million with a possibility of fines up to £7.5 million.

A large organisation faces potential fines of up to £20 million.

Health and Safety Offences (non-fatal) For companies small and large alike, fines in the tens of thousands. Potential fines in the hundreds of thousands even for smaller companies and above. £500,000 for larger corporates.


The reality under the new guidelines

Since the new sentencing guidelines were imposed in February 2016, we have seen 25 fines exceeding £1 million.

Company Size Fatal? Fine (million)
Merlin Attractions Very large No 5
Network Rail Very large Yes 4
ConocoPhillips Very large No 3
Balfour Beatty Very large Yes 2.6
Cristal Pigment (2 breaches) Large No 2.4
Decco Large Yes 2.2
Wilko Very large No 2.2
Tata Steel Very large No 2
Travis Perkins Very large Yes 2
Warburtons Very large No 2
Bakkavor Foods Limited Very large Yes 2
G4S Very large No 1.8
C.RO Ports London Medium No 1.8
Scottish Power Very large No 1.75
Foodles Production UK Large No 1.6
Maria Mallaband Care Group Large Yes 1.6
Embrace All Medium Yes 1.5
Kier MG Very large No 1.5
Tarmac Very large Yes 1.3
Parker Hannifin Large Yes 1
National Grid Gas Very large No 1
Balfour Beatty CE Large (group — very) Yes 1
UK Power Networks Very large Yes 1
Watling Tyres Medium Yes 1
Nottinghamshire CC Unknown No 1

To put the above penalties into context, there were only 28 fines of over £1 million before the guidelines were introduced in early 2016 (1974 to 2016). Also, the recent decision against a county council (April 2017) demonstrates that £1 million fines are no longer reserved for the private companies.

© 2017 Wolters Kluwer (UK) Limited


About Wolters Kluwer

Wolters Kluwer in the UK publishes Croner-i online content and tools for health and safety professionals.

Wolters Kluwer N.V. (AEX: WKL) is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services.

Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide.

Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

For more information about our solutions and organization, visit www.wolterskluwer.com, follow us on Twitter, Facebook, LinkedIn, and YouTube.