27 February 2008

Nine years after the Court of Appeal concluded that fines for health and safety offences were too low, little has changed from the abject situation that we reported two years ago. True, average fines continue to rise, and the level at which fines were once deemed "extraordinary" - £100,000 and above - is looking less unusual every month. But underlying this, most fines - particularly those imposed on larger companies - are unlikely to make much of a dent in their directors' annual bonuses, let alone the company's profits.

In this article, we look at how the courts have been sentencing employers convicted of health and safety crimes and at the effect of the Court of Appeal's guidelines and ministerial and HSC/E exhortations to magistrates and judges to sentence appropriately. We also consider the potential impact of two major developments that are currently in draft form but that will come into force this year: new sentencing guidelines for manslaughter and HSW Act offences that involve a death; and a Bill that would allow regulators to make use of alternative sanctions to fines.

Prosecution record

The first observation to make about enforcement in 2006/07 is that all the important indicators - enforcement notices served, cases and offences prosecuted, and fines imposed - represent an improvement on 2005/06. The second observation, however, is that 2005/06 - coincidentally the first year after the HSE ceased publishing its enforcement report - was by some way the worst in the HSE's history, and that 2006/07 is only marginally better. "The trend is reversing," says Sandra Caldwell, director of the HSE's Field Operations Division (FOD), "but I would like the pace of that to increase."

The HSE's statistics for 2006/07¹ show that the number of cases taken by the HSE rose to 613 in 2006/07, from 573 in 2005/06 (see column 2 in table 1). A total of 613 is still, however, the second lowest on record and less than half of what the HSE was taking in almost every year of the Conservative governments in the 1980s and 1990s - administrations that were generally perceived as, at best, indifferent to the enforcement of health and safety, and that at worst saw it as little more than a burden on business.

 

While the HSE highlights on its statistics page that the number of offences ("informations") it prosecuted rose to 1,141 in 2006/07 from 1,056 in 2005/06 (column 3 in table 1), it fails to mention that the two totals are, as with the number of cases, the lowest on record and less than half the annual totals prosecuted in the late 1980s and early 1990s. And although the number of informations laid rose by 85, the number of convictions increased by just eight, to 848 (column 4 in table 1). This means that the conviction rate fell to 74% in 2006/07 from 80% in 2004/05 (most of this decade has seen annual rates between 75% and 79%). Table 2, below, shows that the picture for the number of enforcement notices served by the HSE, while less dramatic than the decline in prosecutions, follows a similar pattern.

In an interview conducted for this article, the  HSE's Sandra Caldwell said that she could not say whether the numbers of prosecutions and enforcement notices in 2006/07 were satisfactorybecause the HSE does not set targets for these. All incidents, she explained, must be considered against strict criteria governing enforcement and not against whether the HSE was falling short of a total in any particular year. She prefers to look at trends and admits that she was "not happy" with these. "Last year [2006/07] we halted that downward trend and this year's figures to date are "in the same ballpark". It is important, however, to maintain this level, she emphasises. Nor is Caldwell worried at the drop in the conviction rate, regarding the 74% in 2006/07 as a "blip". The figure "always oscillates", she points out, and can depend on how many informations the HSE lays in each case. A better indication, insists Caldwell, is that the HSE is securing convictions of 90% of dutyholders that it prosecutes.

Another fine mess

Column 5 in table 1 shows that the average fine for a conviction in 2006/07 was £15,370 per offence, which is almost half the previous year's average, but greater than any other year. The average fine, however, is distorted in most years by a small number of high fines. In order to obtain a more realistic picture of everyday sentencing, the HSE excludes "extraordinary" fines - those of £100,000 or more - to calculate "adjusted" averages (column 6 in table 1). This shows that the average rose by 36% to £8,723 in 2006/07, which is £2,311 higher than the 2005/06 average and the highest average on record.

One limitation with looking at fines per offence is that cases will often involve more than one offence; a more accurate picture of the total penalties imposed on dutyholders can be gleaned from the average fine per case or dutyholder. Unfortunately, this is one of the sets of statistics that the HSE no longer provides (see box 1).

 

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Box 1: HSE information and credibility gap

In previous years when HSB has reviewed the enforcement of health and safety, the HSE, and its statistics department in particular, have been very helpful. The decision to stop publishing an annual enforcement report after 2004/05 has, however, resulted in a paucity of information that had been readily available until then. Although at the time the decision was taken, the HSE's director of communications, Colin Douglas, assured HSB that all information that had been included in the annual enforcement report would continue to be available (HSB 352 p.3), this has proved not to be the case. In particular, we requested information on average fines:

• for prosecutions involving a death; and 
• per case or dutyholder prosecuted (the HSE now supplies the information only on offences, which can be of limited use because cases can comprise more than one offence and so give a truer picture of sentencing patterns).

The HSE told HSB: "[We are] afraid that we do not hold this information in the form requested. We continue to record detailed information in our operational databases which would underpin these statistics, but since 2005/06 we have not collated this information for annual publication. We know from past experience that compiling and validating all of this additional information would take a significant amount of HSE resource. Therefore, it is likely that, if you were to submit such a request under the Freedom of Information Act, the cost of this work would prohibit us being able to satisfy this application. [We] apologise for not being able to provide more help with your statistics request, but [we are] sure that you'd agree that we should only make available information which has been collated and validated to the same degree of rigour as our currently available set of enforcement statistics."

Rejecting a further appeal from HSB, the HSE claimed that to provide the average fines for prosecutions involving a fatality and per case would "be approximately two months of work". Sandra Caldwell, director of the HSE's Field Operations Division, told HSB that the HSE rejected the notion that scrapping the enforcement report was a "retrograde step" that sent out the wrong signals to stakeholders. The HSE, she explained, "wanted to bring together all the reports to 'see them in the round'".

HSB will be pursuing the information that the HSE refuses to provide via the Freedom of Information Act, and will report the outcome when we receive a decision.

 

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Table 3 shows that in the last three years for which the HSE published statistics, the average adjusted fine for a case was approximately £3,000 more than the adjusted average for an offence. The bottom part of table 3 shows the longer-term record for FOD, which accounts for most HSE prosecutions. Again, this shows the case average is around £2,000-£3,000 more than the average for offences (with the difference lower in earlier years when the averages were lower). If these differences are crudely extrapolated, we can estimate that the average adjusted fine per case in 2006/07 would be around £12,000.

 

Local authority woes

Figures for local authorities (LAs) show a record of formal enforcement activity well below their HSE colleagues². In 2006/07, Britain's 410 LAs managed to secure just 318 convictions - less than one per LA over the whole year - for individual offences (of which four were taken by county councils). The total number of convictions is just 37.5% of that secured by the HSE. The total amount of fines imposed was £2,195.544, at an average of £6,904 per conviction - 45% of that for an HSE prosecution.

The HSE's report on LAs does not contain "adjusted" averages, although they are fairly straightforward to calculate. Just seven companies (accounting for eight offences) received fines of £100,000 or more, totalling £750,000. Removing these exceptional fines from the annual returns reduces the total fines secured by LAs to £1,445,544, and the number of offences to 310, giving an average adjusted fine of £4,663 per information, which is 53% of the HSE's average.

Nor does the trend among LAs offer solace. Although the number of convictions secured in 2006/07 was 71 higher than the 2005/06 total of 247, that year continued a downward trend since 1995/96. Average unadjusted fines, like those for the HSE, are affected by a small number of exceptional fines, although it should be noted that the 2006/07 average was more than £1,000 lower than the previous year's average. The adjusted average, however, is slightly lower than each of the two previous years (£4,935 and £4,848 in 2005/06 and 2004/05 respectively).

More worrying still is the fact that of the 410 LAs in Britain, only 100 secured any convictions: 267 - more than half of LAs - told the HSE that they had not taken a prosecution for a health and safety offence and 43 did not even bother to reply.

Sandra Caldwell emphasises that LAs enforce according to the same principles and using the same enforcement policy statement as the HSE. Given this, she admits to being "surprised but not critical" that over half of LAs failed to take a single prosecution for health and safety in 2006/07. In partial mitigation, she says that, as a national regulator, it is a "challenge" for the HSE to ensure consistent enforcement among its own inspectors and regions, whereas LAs have their own local accountability, set their own enforcement priorities locally and enforce other legislation - food, for example - and so can have different priorities from LA to LA. In addition, LAs may be enforcing a greater number of low-risk premises than the HSE. Consistent enforcement of health and safety, she says, represents for LAs a "real challenge".

Exceptional fines

Table 4 looks at the number of exceptional fines (£100,000 and above) that have been imposed between 1975 and the end of 2007. This shows a marked increase in the frequency with which courts are handing down fines of £100,000 or more: 

• in the 28 years to 1 April 2003, courts imposed 83 such sentences - an average of three a year;
• in the four years from 1 April 2003 (2003/04 to 2006/07), courts imposed 107, with an annual minimum of 22 and an average of almost 27 a year; and
• in the first nine months of the 2007/08 reporting period, courts have already imposed 25 such sentences.

Equally encouragingly, table 4 shows that the five highest fines under the HSW Act have all been imposed since April 2004. Further, courts are increasingly likely to sentence companies in excess of £100,000. This tendency is tempered, however, by two findings:

• as a proportion of all fines of £100,000 or more, those of £200,000 and above accounted for 40% between 1975 and 2002/03, and 40.1% on average in each of the subsequent four years, ie there has been no change; and
• of the 207 fines of £100,000 or more imposed between 1975 and the end of 2007, 127 (61%) are below £200,000 and 180 (87%) below £300,000. 

  

Still failing the Howe test

In late 1998, the Court of Appeal's landmark judgment in R v Howe & Sons Ltd criticised the low level of fines that courts were imposing for health and safety offences (HSB 275 p.7). The court set out criteria that courts should take into account when fixing a fine, subsequently revisiting the issue on five occasions, each time confirming and elaborating its own criteria and mitigating and aggravating factors (HSB 304 p.9 and 334 p.24). The criteria were also supplemented by sentencing guidelines for magistrates and "encouragement" from the lord chancellor to magistrates to sentence more appropriately for health and safety offences.

Table 1 shows that the average fine per offence convicted rose from £4,694 in 1997/98 - the most recent year that was available to the court when judging Howe - to £15,370 in 2006/07- a rise of 327%. But, as we noted earlier, average fines can be deceptive because they can be influenced by a small number of exceptionally high fines: had we taken the period to 2005/06 instead of 2006/07, for example, we would have been talking about an increase of 613% because 2005/06 included a £15 million fine imposed on Transco (without which the average actually fell).

The adjusted average per offence - with fines of £100,000 stripped out - shows a 229% increase from £3,805 in 1997/98 to £8,723 in 2006/07. We are unable to provide average rises per case because the HSE no longer produces fines on a case basis (see box 1). But analysis of figures to 2004/05 - the last time the HSE produced average fines per case - shows the percentage increases for cases and offences to be similar.

Nor does the HSE any longer break down its figures into higher and magistrates courts. The last time it did this, in 2004/05, the average fine per case in the higher courts - where more serious failings are likely to be heard - was £46,388, which was around the same level that the Court of Appeal had been critical of in Howe. Caldwell's impression is that there is an increasing amount of sentencing in crown courts, although she admits that she does not have the statistics to back it up.

The only way is up

The overarching conclusion must be that the average fine - adjusted or not - remains embarrassingly low and at a level that will not hurt offenders other than those with small turnovers and profits. All the words and cajoling of the Court of Appeal, the lord chancellor, government ministers, the HSC and HSE have, in the kindest interpretation, spawned a threefold rise in the average fine, albeit from the irrelevant to the innocuous, as well as a handful of notably high fines (although even these, as we shall note later, have barely touched the companies' profits).

One result of this has been a series of failed attempts by Labour backbenchers to raise fines via a "handout" bill through the private members' route (whereby individual MPs attempt to take bills onto the statute book). The bills attempted to raise the maximum fines available for health and safety offences, particularly in the magistrates' courts. But despite indicating support, the government has failed to find sufficient parliamentary time for any of these bills or to introduce its own legislation. Nor has any MP drawn a sufficiently high spot in the ballot to guarantee parliamentary time. Sandra Caldwell says that the HSE will continue to use the private members' ballot but acknowledges that this is an "opportunistic" and problematic route. The government, believes Caldwell, remains "sympathetic" to the need to increase fines and is still "looking for an opportunity" to introduce legislation.

Whatever Caldwell's views, though, Labour has been trotting out the same excuse for almost a decade. Things may be on the verge of changing, however, through draft sentencing guidelines for HSW Act offences that result in a death and for corporate manslaughter. In addition, a government Bill is making its way through parliament that will introduce alternative sanctions (although this will not increase the levels of penalties) and a new Private Members' Bill on raising fines has made some unexpected progress.

New sentencing guidelines

One of the major ways of persuading magistrates and judges to sentence appropriately is through guidelines. Recently, the Sentencing Advisory Panel (SAP) consulted on the level of fines that courts should impose for corporate manslaughter convictions and for HSW Act offences that have resulted in death (HSB 365 p.2)³. Consultation closed on 7 February.

Leaving aside manslaughter for the moment, the panel's consultation could prove significant for HSW Act prosecutions where there has been a death, because the draft proposes that judges base the fine on the culprit's annual turnover, averaged over the three years prior to sentencing (the Court of Appeal in Howe had explicitly precluded a firm link between fine and turnover, although it did say that a fine should reflect the ability to pay). The SAP's starting point for calculating a fine would be 2.5% of the offender's average annual turnover, with aggravating and mitigating factors (see box 2) fixing the fine normally between 1% and 7.5% of turnover.

 

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Box 2: Aggravating and mitigating factors

In cases of manslaughter, or for a breach of health and safety legislation where a death is involved, the Sentencing Advisory Panel (SAP) advises that the critical factor in determining the culpability of the offender is the extent to which it fell below the appropriate standard. Relevant factors will include a failure to keep pace with changing standards, the degree of risk, the extent of the danger, and whether the death was the result of an isolated or continuing breach of duty. To help fix the sentence in the light of the above, the SAP states that judges will have to take account of aggravating and mitigating factors (as they do for other health and safety offences).

Aggravating factors affecting the level of harm are:

• offences will be most serious where there has been more than one death and that this was reasonably foreseeable; and
• serious injury has been caused in addition to the death - "indeed, it is often a matter of chance whether or not injuries are so severe as to result in death."

Aggravating factors affecting the degree of culpability are:

• failure to act upon advice, cautions or warning from regulatory authorities (including previous incidents of a similar nature);
• failure to heed relevant concerns of employees or others;
• carrying out operations without an appropriate licence;
• action or lack of action prompted by financial or other inappropriate motives (if "a standard of care has been breached deliberately with a view to profit, this will be a seriously aggravating feature". Also, while organisations such as charities and public bodies do not make profits, they "might still deliberately compromise safety standards"); and
• corporate culture encouraging or producing tolerance of breach of duty (attitudes, policies, systems or accepted practices within the organisation that were likely to have encouraged or produced tolerance of the relevant failure).

Mitigating factors are:

• employee acting outside authority or failing in duties (although this is not a defence for an employer faced with a health and safety prosecution. It will also not be particularly prominent in a corporate manslaughter conviction, which is designed to exclude actions of maverick employees); 
• ready cooperation with authorities and steps taken to remedy safety failures as soon as possible after the offence, although "a court is likely to give credit only where the offender has initiated remedial action of its own volition rather than under pressure from the enforcement authorities";
• a good safety record - "An excellent record might be considered relevant for some offences under the HSW Act involving death, but there may be few (if any) cases where an organisation in gross breach of its duty of care would have such a record or, even if it did, where it should have a significant effect on sentence."

 

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The proposals, if implemented, would dramatically increase fines under the HSW Act where a death is involved. When reporting fines, HSB, wherever possible, obtains the offender's financial details and calculates the fine as a percentage of pre-tax profits (in line with a 1992 Law Commission proposal on manslaughter). Table 5 sets out all fines of £100,000 and over that courts imposed between April 2006 and December 2007 for health and safety offences and on which we have been able to find financial details of the organisation. Columns 3 and 4 of the table set out the company's annual turnover and pre-tax profits in the year nearest to the date of sentencing: it is important to note that some of these figures are for a parent or holding company or the like, because there are no figures for the company itself. Column 5 sets out the amount of fine imposed; and columns 6 and 7 calculate the fine as a percentage of profit and turnover.

Column 6 of table 5 shows that of the 48 fines since April 2006:

• 32 involved a death at work;
• only three exceeded the company's annual profits;
• a further four exceeded 10% of profits;
• 16 fines were between 1% and 10% of profits; 
• 16 were below 1% of profits; and
• nine companies made a loss, were dormant or did not publish a profit.

Further, on the rare occasions where a fine exceeded 1%-2% of firms' annual profits, the firms were all small or medium-sized. For example, the fine imposed last October on FJ Chalcroft represented 119% of its 2006/07 pre-tax profits, although this also highlights a problem with linking sentencing to profits, which can vary significantly from year to year, depending on factors such as whether there has been significant investment, a major accident or even a fine (the fine was 38% of the previous year's profits).

The SAP will also need to ensure that courts have the power to counter the situation found in the case of Alstom T&D in March 2007, when the judge fined it £100,000 but observed that it was a dormant limited company with a balance of £2, yet was part of a large and valuable group: the company had been sold after the fatality for "many millions", but no money had been left in the company.

The value of turnover

The problems with using profit, rather than turnover, are that profits can vary significantly from year to year, whereas turnover can offer a better picture of the ability of the company to pay. An example of this is the fine of £150,000 imposed on Nightfreight in 2006: the company made a £6.2 million pre-tax loss after restructuring in 2005, but in 2004 had made profits of £5.1 million.

Perhaps the most pertinent detail in table 5 is that not a single fine among the 48 exceeded 1% of an organisation's annual turnover, with most considerably below 1%. Column 8 of the table shows our calculations of what the fines would have been in the same cases (where there had been a death and had the judge imposed the SAP's starting point of 2.5% of turnover). Subject to the important qualification that some of these turnovers are for parent companies (and would therefore in practice be less for the convicted entity), we can see that all the fines of £100,000 and over would have been higher by a factor of at least four, and that most would have been tens and even hundreds of times higher, sometimes reaching into hundreds of millions for the largest organisations. The discrepancies are even more significant when viewed against table 6, which shows the average fines for all fatalities between 1999/2000 and 2004/05 (the HSE again claims it does not have figures for the past two years).

 

Further, if judges were to implement the SAP proposals, HSW Act fines for work-related fatalities would usually exceed levels envisaged by the Court of Appeal in the post-Howe cases of Friskies Petcare and Colthrop Board Mills, where it noted that "it appears from the authorities that financial penalties of up to around half a million pounds are appropriate for cases which result in the death even of a single employee", and that fines above this amount tend to be reserved for major public disasters.

Manslaughter guidelines

The SAP advises that the "primary factor in assessing the seriousness" of the HSW Act and corporate manslaughter offences "is the extent to which the conduct of the offender fell below the appropriate standard of care". Corporate manslaughter applies to the most serious instances of management failure and, as such, a fine should be at "a level significantly higher" than that for an offence under the HSW Act involving death.
The SAP therefore proposes that the "starting point" for fixing a fine for corporate manslaughter - based on a first-time offender pleading not guilty - should be 5% of the annual turnover (three-year average). Aggravating and mitigating factors (see box 2) would mean the fine would normally lie between 2.5% and 10% of turnover, although previous convictions may take the fine out of this range. (The Office of Fair Trading and the European Commission use maximum fines of 10% of turnover for breaches of competition law.) The range assumes that a judge also imposes a publicity order on the offender.

Although the government anticipates there will only be a dozen or so convictions a year, the impact on those organisations - and a possible ripple effect on employers more generally - could be dramatic. As the SAP notes, the data on work-related convictions for the common law offence of manslaughter, which corporate manslaughter will replace from April, is not complete. This is because: the recording of sentences under the common law does not distinguish manslaughter by gross negligence from other types of manslaughter; there is no official centralised collection of work-related manslaughter convictions; and there is no agreed definition of what work-related manslaughter actually covers (our figures below, for example, exclude seven landlords and gas fitters and several dangerous driving offences, all of which could arguably be included in the totals). Nevertheless, HSB has, over the years, reported every case of work-related manslaughter that we have encountered and is thus able to comment on trends in prosecutions and sanctions.

The manslaughter hall of shame

HSB's records show that there have been 31 cases that have resulted in the convictions of individuals or companies for the common law offence of manslaughter. Of the 31 cases:

• 30 have involved the conviction of an individual, 29 of whom received a suspended or immediate custodial sentence (two of these convictions were subsequently quashed), with the 30th receiving community service;
• the 30 individuals comprised 25 directors, senior managers and owners, three employees, one teacher and one fairground inspector;
• of the 29 prison sentences, 21 were immediate and eight were suspended;
• all of the suspended custodial sentences were issued between 1986 and 2003, since when all prison sentences have been immediate; 
• the prison sentences ranged from nine months to 12 years, but typically were within the nine months to two years range;
• eight of the 31 convictions also involved the conviction of a company, with a ninth convicted without a parallel individual conviction; and
• the fines imposed on the companies ranged from £4,000 to £90,000 and were spread out through that range, with no obvious consistency.

The accounts of nearly all the convicted companies had "small firms exemptions", so it has often not been possible to determine their annual profits and turnover. One of the main points, however, of the new offence is to catch larger organisations, which have previously escaped prosecution or conviction for the old offence. Unlike many of the HSW Act convictions, therefore, there are no examples of larger firms where we can compare the actual fine and what it might have been under the new guidelines. But, given that the starting point of 5% of annual turnover is twice that for an HSW Act offence involving death, we can see from column 8 in table 5 that had any of those organisations been convicted of the new offence of corporate manslaughter, rather than under the HSW Act, nearly all the fines would have had a "starting point" of well over £1 million, and many would have been in the tens of millions of pounds, with a few, in theory at least, in the hundreds of millions.

There are, however, important issues that consultation needs to resolve, notably:

• how courts can obtain financial data on large organisations that would allow like-for-like sentencing - some large corporations declare profits at a group level only, while others do so for each member of the group; and
• how courts can approach sentencing public sector organisations where turnover might not be so relevant.

A parallel universe

In May 2007, the government consulted on a draft Regulatory Enforcement and Sanctions Bill⁴, which would implement proposals from Professor Macrory's review of sanctions (HSB 355 p.17) and the Hampton review of the enforcement of business-related legislation (HSB 338 p.15). The Bill, which was introduced into the House of Lords on 8 November 2007, had a successful second reading on 28 November and five committee hearings in the Lords in January and February 2008, with more to come after HSB went to press.

Alternative penalties

The Bill will allow for the introduction of alternative penalties for regulatory offences. The government received 154 responses to its consultation in 2007 on a draft Bill (HSB 360 p.1) (although the number of answers to specific questions ranged typically between 50 and 70) and published its response to the consultation in September 2007⁵. The government states that it "remains committed to the vision set out in the Macrory report of a modernised system of regulatory sanctions that are proportionate, flexible and effective. We believe it is vital that these new powers do not, however, replace ongoing advice from the regulator to business. There will be circumstances where regulators will need powers to tackle breaches of the law where a criminal prosecution may not be the most appropriate or proportionate response. With the appropriate safeguards in place, we consider that giving responsible regulators access to the new sanctions is appropriate."

The government has decided that access to the new sanctions will be determined by the minister with policy responsibility, for example the HSE's use will be decided by the secretary of state for work and pensions. Following consultation, the government has decided that the minister must be satisfied that the regulator is compliant with the Hampton Implementation Review of each regulator (HSB 365 p.8) and working to the Regulator's Compliance Code. The minister will then make an order, which will be subject to consultation. In terms of LAs, however, the government believes that they "should be judged as to whether as a whole they are ready to receive these powers for specific offences". This will be decided by the Local Better Regulation Office (which is introduced by the Bill) and the national regulator in any one specific regulatory area, for example health and safety. In the following sections, we look at the alternative penalties that the Bill will introduce and that, in theory at least, the HSE might avail itself of.

Fixed monetary penalties

The Bill will allow regulators to serve fixed monetary penalties (FMPs) to sanction low-level, minor or high-volume instances of non-compliance. More than three-quarters of the respondents to the consultation on the draft Bill were happy with the safeguards (appeal to the regulator and then an appellate body). Businesses wanted the criminal standard of proof - "beyond reasonable doubt" - to apply, and the government has responded by including this in the Bill. Where the offence is triable summarily only and punishable by a fine, the amount of the fixed penalty must not exceed the maximum fine in the court.

Discretionary requirements

The Bill also implements the government's proposal that regulators could issue three types of "discretionary requirements":

• a variable monetary penalty (VMP) that is decided by the regulator;
• a requirement on an offending business to do certain things to ensure that the offence does not continue or recur; and 
• a requirement on the business "to do certain things to restore the position, as far as possible, to the way it had been had regulatory non-compliance not occurred".

Some respondents, particularly LAs, criticised as unwieldy the process for issuing discretionary requirements, which involves first serving a "notice of intent" on the business. The process would be similar to the one used instead of enforcement notices in health and safety - albeit with little success - between 1996 and 1998. The new process differs, however, from that used by the HSE and LAs during those two years, in that it allows the business to offer a "voluntary undertaking" (see below). The government has rejected the LAs' complaints, maintaining that a two-stage process is justified because discretionary requirements will be used for more serious offences than are FMPs.

Although just under half of respondents favoured the government's proposals for enforcing discretionary requirements, there was considerable desire that the option of criminal prosecution should revive where an offender fails to pay the VMP; three in four respondents felt that all types of discretionary requirement should be enforceable by criminal prosecution. The government does not consider it appropriate, however, to make breach of a discretionary requirement a criminal offence: "Given the punitive nature of VMPs, we believe that subsequent criminal prosecution for the same offence would be likely to contravene the legal principle of freedom from double jeopardy. For the other forms of discretionary requirement, we take the view that these should be enforceable by criminal prosecution for the original offence as they are less punitive in nature and so the same concerns about double jeopardy do not arise."

Stop notices

The Bill provides for stop notices, which prohibit a person from carrying on an activity until the person has taken the steps specified in the notice. Stop notices, which are based on the original proposal for temporary cessation notices, would apply where the regulator believes there is a significant risk of serious harm to human health, the environment (including plants and animals) and the financial interests of consumers, and an offence is being committed.

The notice will be open-ended, rather than having the initially proposed six-month limit. Failure to comply with a stop notice renders the offender liable to a fine, on summary conviction, not exceeding £20,000 or a prison sentence of up to 12 months; or, on indictment, to two years in prison or an unlimited fine.

But the consultation responses have resulted in the government dropping from the Bill its proposed permanent cessation notices, which would have applied where the first two conditions above were met and where the offender had a previous conviction for the same criminal offence. Permanent notices, concluded the governent, "did not fill well" with the primary objective of bringing the offender into compliance. The Bill also requires the regulator to compensate a business for loss attributable to the notice in prescribed circumstances.

The government had also consulted on preventive notices, which would have required employers to take certain steps where an offence was highly likely to occur and that presented a significant risk of serious harm to human health or the environment. Although three in four respondents thought such notices would be a useful additional power, the government decided to merge preventive notices with cessation orders into stop notices, albeit with a "forward-looking element".

Enforcement undertakings

The Bill provides for "enforcement undertakings", whereby a regulator can accept an undertaking from a company where it has reasonable grounds to suspect that it has committed an offence. The undertaking must include action: to stop the offence continuing or recurring; to restore the position to what it would have been had the offence not been committed (subject to reasonable practicability); to benefit any person affected by the offence; or of a prescribed nature.

Although well over half of the consultation respondents supported the proposal that undertakings should be published on regulators' websites, some employers opposed the idea, claiming that it would "have a negative effect on a business's reputation". In response, the government insists that the "process should be as open and transparent as possible in order to ensure public confidence in the system".

The Bill allows regulators to recover reasonable investigative costs from businesses for a discretionary requirement or cessation notice, including the costs of obtaining expert or legal advice. Penalties, however, will be paid into the Consolidated Fund (as with fines imposed by courts), in order to ensure that the scheme does not provide a "financial incentive for regulators to pursue the administrative penalty route".

There is no change to the Bill's proposal that regulators should publish guidance on penalties and an enforcement policy, although the government agrees that they should also, as good practice, publish guidance on prosecutions, appeals and complaints handling.

HSC cool on alternative sanctions

The HSC and HSE are politely dismissive of the sanctions on offer in the Bill. The HSE advised the HSC in July 2007 that "it is anticipated that HSE will not need to take on any of the new penalties at present,"⁶ although it added that it would need to review the position against developments, including the Hampton Implementation Review and mergers with other regulators. The HSE added that an evaluation of its Enforcement Policy Statement (EPS) had concluded that "there were no significant gaps in its powers". In short: "The HSE and LAs already effectively enforce the legislation without being driven to excessive use of prosecution through lack of alternatives." The HSE emphasises that it is more concerned with courts exploiting their current potential: "Before looking at new penalties," it argues, "there is a need to ensure the level of fines imposed under current penalties act as an effective deterrent: current levels are too low (as Macrory himself found)."

The HSE advised the HSC, however, that LAs saw the situation differently: "We understand LAs now take the view that there may be cases where additional sanctions would be useful - when notices may not be appropriate but prosecution would be seen as disproportionate. HSE will enter into early discussion with the Local Authorities Coordinators of Regulatory Services (LACoRS) to explore this view." Sandra Caldwell points out, however, that although LAs may have their individual views, the HSC's comments on the use of administrative penalties for health and safety offences cover both the HSE and LAs.

Not quite the whole story

The HSE paper, which was approved by the HSC at its July 2007 meeting, did not, however, portray the entirety of the HSE's position. In an earlier paper to the board of the HSE, Jonathan Russell, the former head of HSE enforcement policy, who has since left the HSE, argued a similar position to that contained in the HSE paper to the HSC, noting that "health and safety enforcers do not need the new enforcement tools proposed"⁷.

But Russell added that while there were no "fundamental gaps" in the HSE and LA toolkit, "there may be a case for administrative fines in limited situations", although this was not a priority. He added that "there may be a need for more involvement/acknowledgement of the victim", as found by the EPS evaluation. Accordingly, the restorative justice (RJ) option was, "in principle, worthy of further investigation", although the government would need to provide resources. Russell pointed out that limited RJ might involve merely "low-key, inspector-driven mediation to facilitate agreed solutions to health or safety issues uncovered during inspections (essentially codification of existing good practice)". Despite benefits such as securing long-term compliance through involving senior company officials and allowing victims a chance to be heard, Russell also warned that there were significant potential problems with RJ, including a limited use internationally (in Australian mining, for example).

Russell also highlighted a central problem with administrative fines: "Administrative fines may be of use in limited cases, for example where serious non-compliance has occurred, but prosecution is not in the public interest. At the other end of the scale, they could be used for comparatively 'low-level' offences (eg 'welfare', paperwork). But consideration to date, including drawing on experience overseas, suggests they would be bureaucratically burdensome, costly to operate, and would risk damaging the relationship with dutyholders, impeding our ability to influence by information and advice. There are also some risks to the 'sensible risk' message if we fine for apparently trivial gaps in documentation etc."

Limited use of alternatives

Sandra Caldwell told HSB that the HSE has "not thrown out" the use of alternative sanctions in the Bill, "given that they are now there". The HSW Act, she says, is a "very established Act" that is well understood. Some other regulators do not enjoy the same suite of enforcement tools, or have only been given them recently, that are available to the HSE and LAs. Stop notices, for example, will allow other regulators access to similar powers that enforcement notices have afforded the HSE and LAs for 30 years.

Caldwell adds that the HSE will watch to see what happens with restorative justice. She can, however, see potential limited use of administrative penalties under REACH for technical breaches of process issues, although she emphasises that ultimately this is the responsibility of Defra. Caldwell is concerned, however, that administrative fines might "take you in the wrong direction", in that they will make inspectors concentrate on small details and bureaucracy, rather than the risk and the overall approach to health and safety management. She recalls a European review of penalties in which her experience of one country left her unconvinced about administrative fines. They might also end up with the HSE imposing penalties for minor offences that they currently deal with in a quick and less punitive way. The HSE, she says, already has "other ways of securing compliance".

Righting a wrong

There can be no doubt that the sentencing record of courts is inconsistent, inadequate and unfair. Courts are letting large organisations walk away with fines so negligible as to be unnoticeable. Fines imposed on small firms, in contrast, usually represent a far higher proportion of their turnovers and profits, sometimes significantly so. But, with a limited number of exceptions, fines are failing to secure the aims of sentencing: they rarely reflect public disquiet; they hardly ever punish the offender sufficiently; and they are insufficiently stringent to deter others. In themselves, they will not secure future compliance with safety standards, and while courts may be increasingly trying to eliminate the financial benefits of non-compliance, they are not enjoying much success.

The introduction of fines based on turnover will, as the SAP acknowledges, "result in larger fines than have been imposed previously by the courts" for "very large" organisations. The single largest UK safety fine was Transco's £15 million (HSB 342 p.1), which represented just 3.8% of its annual operating profits and considerably less than 1% of its annual turnover (as is the case with all of the largest fines imposed in the UK). A turnover-based fine in the 100s of millions of pounds for Transco might indeed have made employers "sit up and take notice" as the Court of Appeal once demanded. Conversely, such fines will result in lower fines for some smaller firms. This "apparent disparity in actual terms" between small and large organisations, the SAP explains, "is an inevitable result of an approach designed to have a consistently equal economic impact". Nevertheless, the SAP may consider a minimum fine "in order to ensure that the harm involved in such offences is properly reflected in the sentence".

Beyond death

The SAP proposals are, of course, limited to deaths. We have already noted that the government anticipates just a dozen or so manslaughter convictions a year; the number of HSW Act convictions will be greater, although the HSE by no means prosecutes all fatalities, of which there are around 200 a year. Nevertheless, it is not unreasonable to believe that a significant and unprecedented hike in the level of death-related penalties, combined with the opprobrium of a manslaughter conviction, will send out ripples. Sandra Caldwell, who serves as a magistrate when not running the HSE's field operations, points out that large fines do "start to flow down the system and prey on the minds of my magisterial colleagues".

And magistrates and judges certainly need significant help: almost a decade of persuasion has seen the average fine per offence rise by a paltry £5,000 since the Howe judgment. Although the Sentencing Guidelines Council has just completed consultation on draft sentencing guidelines for magistrates covering all offences in their jurisdiction (HSB 365 p.2), there is nothing in the proposals to encourage the belief that they will have a significant impact on health and safety.

"Maybe this time"

Greater joy might arise from an oft-traversed and equally oft-failed route: the Private Members' Bill. Keith Hill's Bill to increase health and safety penalties enjoyed a surprising successful second reading in the House of Commons on 1 February⁸ (most such bills do not pass this stage). The Bill would increase the fines that magistrates can impose for most offences from £5,000 to £20,000 (currently the higher maximum is restricted to breaches of the HSW Act's general duties). It will also make most offences imprisonable - usually for 12 months in the magistrates' court (currently six months for a small number of offences) and two years in the crown court (no change in the maximum, but a more widespread application). The government is again allegedly supporting the Bill (the fifth since 2000); this time, however, it is considering opening a second committee for Private Members' Bills, thereby reducing the amount of time that Hill's "handout" Bill would have to wait for its next stage and slightly increasing its chances of reaching the statute book.

Beyond fines

At the other end of the spectrum, there is no evidence that any of the fines in excess of £100,000 have inconvenienced the recipients. The Centre for Corporate Accountability (CCA) has criticised the proposed range of fines for manslaughter as "too low", arguing that a company that has killed a person should face fines in excess of the 10% turnover set by competition law. But the CCA makes a further salient point, which is that there is a need for alternative sanctions beyond the "first step" of manslaughter publicity orders.
Unfortunately, if the alternative penalties provided for in the sanctions Bill have one thing in common, it is that they will not trouble employers. Fixed monetary penalties are mainly applicable to minor offences and, as such, will not replace health and safety prosecutions, which tend to be reserved for the most serious of failures. As such, the HSC/E are correct to dampen enthusiasm about their use in health and safety.

It has long been the contention of this journal that for sanctions to grab corporations where it will hurt them most, two things need to happen. First, fines need to be at a level that affects corporations' pockets (including directors' bonuses and share dividends and value): fines linked to turnover may well go some way to achieving this if implemented in the way the SAP hopes. But sanctions also need to penalise culpable individual directors: 30 years have seen barely a handful - all from small organisations - go to prison for health and safety offences (excluding manslaughter). Research reported in 2005, but only published in late 2006⁹, concluded - somewhat diplomatically, that "not less than 10 directors have been disqualified for health and safety reasons since the coming into force of the Company Director's Disqualification Act 1986." Put another way, that amounts to one disqualification every two years. Given the failings we report in these pages every month, that simply cannot be justified.

It gets worse, though. Not only could the study find "no reliable data to indicate how many unsuccessful applications for disqualification have been made since 1986", it also found a "surprisingly low level of awareness of the 1986 Act's provisions, and their utilisation in practice" among the HSE's operations directors and their LA counterparts. This low priority and awareness "stands in stark contract to its use in other areas". The HSE advises that it has now made its inspectors aware of the option of seeking disqualification; there is no evidence, however, of any significant change in the biennial disqualification average.

To an extent, the sentencing mess that engulfs health and safety has to be seen against a government approach to enforcement that might charitably be described as schizophrenic: the early years of the first Blair government saw additional funding for the HSE, the Revitalising health and safety strategy and its 44-point action plan for reducing injuries and ill health, and encouragement from ministers to "get tough" in the immediate aftermath of successive major accidents. This has given way in recent years to cuts in the HSE's budget (5% year-on-year over the next three years), knee-jerk reactions to a "compensation culture" that the government knows barely exists and, most importantly, a "better regulation" agenda striving to remove "burdens" on employers that is generally perceived as stemming from a deregulatory agenda. Amidst such messages, it is no surprise that judges and magistrates are getting it so wrong so often.

References

¹ www.hse.gov.uk/statistics/enforce/index.htm.
² HSE (2007), "Health and safety offences and penalties in local authority-enforced sectors 2006/07", ww.hse.gov.uk/lau/pdfs/lauprosecutions0607.pdf.
³ Sentencing Advisory Panel (2007), "Corporate manslaughter: consultation document", www.sentencing-guidelines.gov.uk.
⁴ "Regulatory Enforcement and Sanctions Bill" and ""Explanatory notes", http://services.parliament.uk/bills/2007-08/regulatoryenforcementandsanction.html.
⁵ Better Regulation Executive, Department for Business, Enterprise and Regulatory Reform (September 2007), "Government response to the consultation on the draft Regulatory Enforcement and Sanctions Bill", tel: 020 7215 0155, URN 07/1481, email: breresbill@berr.gsi.gov.uk, website: www.cabinetoffice.gov.uk/regulation/enforcement_sanctions_bill.
⁶ HSE (July 2007), "Cabinet Office consultation on draft Regulatory Enforcement and Sanctions Bill - HSC response", HSC/07/54, www.hse.gov.uk/aboutus/hsc/meetings/index.htm.
⁷ HSE (April 2007), "The Macrory review of regulatory penalties: application for HSE", HSE/07/48, www.hse.gov.uk/aboutus/hsc/meetings/index.htm.
⁸ "Health and Safety (Offences) Bill", Bill 29, www.publications.parliament.uk/pa/pabills/200607/health_and_safety_offences.htm.
⁹ University of Warwick (2007), "A survey of the use and effectiveness of the Company Directors Disqualification Act 1986 as a legal sanction against directors convicted of health and safety offences", HSE RR 597, www.hse.gov.uk/research/rrpdf/rr597.pdf.

 

Howard Fidderman is a freelance journalist and editor of Health and Safety Bulletin.

Health and Safety Bulletin is the leading subscription-based periodical in its field and provides independent, factual and analytical reporting allied with an emphasis on legislation, enforcement and practice. If you would like to take a twelve-month subscription to Health and Safety Bulletin (£356), please email newsales@lexisnexis.co.uk.

 

 

 

 

 

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Chemicals, Construction, Public services, Retail and distribution, Transport, Utilities, Article, Enforcement (prosecutions), Financial / general services, Manufacturing / engineering, Enforcement (prosecutions)



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