04 September 2009
Howard Fidderman

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Next spring, the HSE Board will decide whether or not to recommend to ministers that they introduce statutory health and safety duties for directors. Advocates insist that the voluntary approach has clearly failed and that individual duties in law are the only viable option; sceptics argue that such duties are already implicit in the Health and Safety at Work Act 1974 (HSW Act) and would add nothing to an already-crowded legislative regime.

Twenty years after the deaths of 187 people in the Zeebrugge disaster crystallised the debate, a temporary truce was reached in 2007, with jointly-badged guidance from the Institute of Directors (IoD) and the then Health and Safety Commission, setting out what directors should be doing to help plan, deliver, monitor and review health and safety arrangements in their organisations.

But the guidance was only ever going to buy a limited amount of time - 18 months, in fact - for the HSE and the government and, once again, the pressure for duties is intensifying. Health and Safety at Work and Health and Safety Bulletin believe that the case for duties has now become compelling and, two years on from the launch of the IoD/HSE guidance, we are launching our own campaign for a statutory approach.

 

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Inspectors and the IoD/HSE guidance
How far the HSE is using the IoD/HSE voluntary guidance on directors' safety responsibilities is unclear. The executive revised its own guidance for inspectors, reinforcing existing advice on their ability to enforce against directors and to remind courts of their power to disqualify convicted directors.
IOSH's Richard Jones reports that his organisation has "been informed via representation on the IoD oversight group that HSE inspectors have been encouraged to promote the guidance with organisations whenever they visit them." But Hugh Robertson says he is "not personally aware" of any evidence that HSE inspectors have been using the IoD-HSE guidance as a tool", although he "would hope" they have. Similarly, Jon Cooper says he has seen no evidence that inspectors are referring to the guidance, but believes that it will play a more significant role once the police are better trained.
But, as David Bergman points out: "It has certainly been shown that even if the HSE puts more effort into holding directors to account - which is what they said they would do - this does not result in increased prosecution. This in part therefore indicates that it is a problem with the law, not just a lack of commitment to enforcement."

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Focusing minds

Legislation has a persuasive and educative effect that can go unnoticed amidst a preoccupation with sanctions; it makes it clear to employers and their workforces that a government expects certain things to happen and that the matter is too important to be left to good will, gentle encouragement and even self-interest.

Richard Jones, policy and technical director at the Institution of Safety and Health (IOSH), says that new duties, providing there is a perception of a realistic chance of enforcement, would result in directors and their equivalents seeking training, which would increase competence. "In time," Jones believes, "this will help to raise health and safety standards, reduce work-related injuries and ill health and also improve overall organisational performance."
Hugh Robertson, the TUC's senior policy officer for health and safety and a member of the HSE Board, similarly believes a "positive" duty "would help transform the way health and safety is dealt with at boardroom level and will hopefully help make the workplace a much safer environment."

David Bergman, the former director of the Centre for Corporate Accountability and one of the longest-standing advocates of directors' duties, agrees that duties "will focus the minds of directors on their own pecific responsibilities to ensure that the company complies with health and safety law. This will have an important effect as it is widely accepted that director action has a considerable impact upon the safety performance of a company."

Bergman adds that he has always thought the introduction of duties "would have a considerably greater impact" than the new corporate manslaughter offence, which is limited to high levels of negligence that result in death: "Directors' duties," he believes, "will impact health and safety much more widely, and ensure that [those at] the top of organisations take a much keener interest in the health and safety of their organisations."

Call to account

Duties will also make it easier to hold directors to account because, Bergman explains, "both Section 37 and manslaughter are negligence-based offences for which you need to show there was a positive duty to do something ... Making it easier to prosecute will also mean that imposing duties will have a deterrent effect as directors will want to make sure that they don't face the courts."

Sanctions are important too, and while fines are likely to hurt directors far more than those imposed on corporations, alternative penalties should be available to the judiciary: IOSH, for example, sees a role for "remedial orders", which could comprise compulsory training, third-party audit and long-term improvement plans to develop leadership. Nor should we forget the threat of disqualification under the Company Directors Disqualification Act 1986: available for several different types of directorial failing, it is used rarely for health and safety.

And the sentencing of directors would surely help bring home within an organisation the consequences of failure. With nine in 10 injuries attributable to management failures, it makes sense that health and safety law is generally premised on the body corporate. As such, sanctions - almost invariably fines - are levelled at the organisation too.

But even the highest fines are little more than an irritant to most of the organisations: of the 68 fines of £100,000 or over that were imposed for health and safety offences between 1 April 2006 and 28 February 2009, only 12 amounted to at least 10% of the offender's profits and only four exceeded 1% of annual turnover (see Deterrent, What Deterrent?, Health and Safety Bulletin 377, April 2009, or www.healthandsafetyprofessional.co.uk/deterrent-what-deterrent-part-1).

And while damage to reputation and loss of productivity are often cited as the real penalties for larger companies, there is little evidence that this is manifesting as a deterrent in a 21st century economy that has seen a post-HSW Act reduction in the injury toll hit a plateau, while health improvements remain elusive.

"Many business leaders see safety in terms of business risk and equate it to financial settlements," observes Keith Scott, chair of IIRSM and group head of safety at Royal Mail. "They miss the point that it's about prevention and anything that helps focus their minds on that is a good thing."

Fines tend to penalise smaller organisations disproportionately. Add to this the fact that, almost without exception, the only directors who are fined or go to prison - usually for manslaughter or ignoring Prohibition Notices or licensing requirements - are from small firms, and it is clear that not only do larger organisations usually escape appropriate sanction, but so do their office holders.

"Ever since the Zeebrugge trial," says Hugh Robertson, "there has been an
awareness that it would be almost impossible to prosecute the directors of a large company. [Duties] will certainly help address that imbalance."

IOSH similarly thinks legally defined duties would help create a "level playing field" and assist those who are already complying, by ensuring there is legal recourse against companies seeking competitive advantage by skimping on health and safety.

Section 37(1) of the HSW Act (see below), argues Jon Cooper, head of health and safety regulation at Bond Pearce solicitors, is "inherently unfair" to directors of SMEs. Often, he explains, a corporation is structured so the directors who have the real decision-making and financial powers are "ring-fenced" with sub-companies as legal entities.

Section 37's limits

The main argument fielded against the introduction of duties on directors is that there is already sufficient legislative provision. HSE chair Judith Hackitt, for example, told the House of Commons Work and Pensions committee earlier this year: "There are already duties on directors within the HSW Act."

The main duty she is likely to be alluding to is Section 37(1) of the HSW Act, which allows the conviction of directors where their organisation has committed an offence with their consent or connivance or that is attributable to their neglect; Section 7 also imposes general duties on employees.

But "the problem with relying on Section 37(1)," explains Jon Cooper, "is that it first requires the conviction of the corporate body and is then, at best, only an implied duty for directors. It does not set out explicitly what a director must do."

He adds that though the House of Lords recently addressed the "woolly" nature of Section 37(1) in the case of R v Chargot
(www.healthandsafetyprofessional.co.uk/lords-deliver-chargot-ruling), it's too simple to conclude that the judgment makes it a "relatively short step" to make the inference from corporate failure to a breach of Section 37(1).

"At the moment, Section 37 only applies when someone has actually acted," Hugh Robertson emphasises. "The wording is very unhelpful."

Drafting a duty

Jon Cooper argues that a duty should be placed on the company to appoint a director with responsibility for health and safety. The use of "responsibilities", Cooper believes, will result in a more compelling resonance with directors than a "duty", although he accepts that, in law, there would be little practical difference.

Hugh Robertson suggests Section 37 could be amended to place a specific duty on directors to ensure that the body corporate fulfils its general duties under Sections 2 and 3 of the HSW Act, which cover duties to protect workers and others. He cautions, however, that amending the Companies Act would be less effective as it doesn't apply to public bodies.

But Robertson admits he is "also drawn to the wording suggested by Rita Donaghy in her recent report to the secretary of state on construction deaths (www.lexisurl.com/hsw937), which recommended "positive duties on directors to ensure good health and safety management through a framework of planning, delivering, monitoring and reviewing. The duties should be explicit so that everyone knows what is expected and breaches can be more clearly identified."

One issue that will need resolving should the HSE recommend duties is whether there should be a "named" director for health and safety. The arguments against this are essentially those of scapegoating and the need for the board to take a collective responsibility. The argument for a named director is that it makes it much easier to enforce the duty.

The IoD/HSE guidance noted only that the presence of a health and safety director "can be a strong signal that the issue is being taken seriously", whereas its 2001 predecessor was more emphatic, recommending boards appoint such a director.

 

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Duty doubts
There is also heavyweight opposition to the case for duties: the manufacturers' organisation, EEF, recently urged the government to "resist" legal duties, highlighting its own survey, which found directors in 80% of firms "actively involved" in managing health and safety.
And while the British Safety Council is not opposed to directors' duties per se, Neal Stone, the BSC's head of policy and public affairs says: "We do not currently have the evidence to show that there is a convincing case for new legal positive legal duties on all directors." As such, the BSC will await the final analysis of the success of the IoD-HSE guidance.
Neal Stone adds, however, that the BSC has "real concerns about the apparent lack of awareness of the guidance among boards, directors and senior managers. We know from our own surveys, from the training we provide and the conferences and events that we run that there is a worrying lack of awareness. There is still a mistaken belief among many directors that health and safety is not a boardroom issue or indeed an issue for their business. Now more than ever there is a compelling case for the IoD/HSE guidance to be more widely disseminated, understood and put into practice."

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Voluntarism has failed

There is an incongruity that there are no explicit duties on those at the top of
organisations even though there is an almost universal consensus that the key to effective management of workplace health and safety is leadership from the top. Ideally, all directors would take their health and safety responsibilities seriously. The problem is they don't and, for these individuals, guidance is never going to work.

After all, it's not as if the voluntary approach started in 2007 with the IoD/HSE guidance. The Royal Society for the Prevention of Accidents (RoSPA) has run a Director Action on Safety and Health (DASH) initiative since 1998. The HSC issued guidance in 2001, and organisations such as IOSH and the British Safety Council have all offered training and advice for some time. And while they have met with some success, they cannot by themselves bring the step change that is required among directors.

The TUC and individual unions, along with campaign groups such as the CCA, have long called for duties, while IOSH called for positive duties in May 2007 as part of its wider "Get the best" campaign for higher safety standards.

And, despite unprecedented efforts by the HSE, the IoD and other bodies, one year after the guidance was published, only a quarter of organisations with more than five workers had "board level awareness" of the guidance and, of these boards, only half had directors who had actually read the guidance (see the HSE's Evaluation of Guidance for Directors and Board Members, RR695, www.lexisurl.com/HSB585). "Unacceptably low" was the verdict of the House of Commons Work and Pensions Committee on the awareness levels.

Spring forward

The HSE board, as we noted at the start, will consider in spring 2010 a final evaluation of the effect of the IoD/HSE guidance. It has always said that it would do this once the guidance had been available for 18 months or so and the fuller effects of the Corporate Manslaughter and Corporate Homicide Act 2007 and other issues - which now include the Health and Safety (Offences) Act 2008 - were known.

It's ironic then that Rita Donaghy's report said that the impact of both these Acts will be "adversely affected" by the fact that "the precise responsibility of a director to ensure his/her company adopts an effective health and safety structure is not spelled out in a legal duty".

If we are realistic, this is not an easy moment politically for the HSE and government to introduce legislation that will be perceived in some quarters as "a burden on business". But there comes a point when the new HSE Board, with a new strategy, needs to step up to the plate and do what is right. As Rita Donaghy says of directors' duties: "As with most advances in society, for example seat belts in cars, drink driving, there comes a time when good practice has to become a legal requirement."

And, as with most health and safety legislation, "good practice" employers will have no worries. "They already have procedures in place that would protect them," points out Hugh Robertson. "It's those who never discuss safety performance at board level who will be forced to consider the implications for them personally if there's an injury or death. Directors would no longer be able to hide behind the defence of they did not know."

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Categories:
Directors' duties, Safety, Features