Will new guidelines improve health and safety compliance?
Zahra Nanji and Andrew Cooper consider the sentencing guidance, including the requirement to classify organisations according to turnover when assessing the level of fines
The new sentencing guidelines for
health and safety offences, corporate manslaughter, and food safety and hygiene offences published by the Sentencing Council (SC) are now in force and will apply to organisations and individual offenders aged
18 and older who are sentenced on or after
1 February 2016, regardless of the date of the offence.
The guidelines allow for substantially higher fines to be imposed on organisations that are found to be in breach of health and safety law, with a range of factors to be taken into account when the courts are considering the appropriate level of the penalty, including the size of the organisation, the culpability of the offender,
and the risk of harm created by the breach.
The new guidance is expected to substantially increase the fines being issued for breaches of health and safety law, particularly for large organisations.
The new guidance is aimed at tackling the perceived problems under the old system, including inconsistency in how various factors were weighted and applied; that fines imposed for health and safety offences and food safety offences were too low in relation to the harm caused; and that not enough account was taken of the culpability and the means of the offender.
Examples of the inconsistency under the old rules were included in the SC's consultation, which highlighted the fact that fines issued for offences which were considered comparable in terms of the offender's culpability had been disproportionate in relation to the size of the organisation. For example, for offences which
had resulted in death, the fines issued ranged from 0.05 per cent to 7 per cent of the organisation's turnover.
The response to the SC's consultation, published in November 2015, revealed that
85 per cent of the responses (104 in total) endorsed the principles behind the new guidelines, which included that 'the fine must be sufficiently substantial to have a real economic impact which will bring home to both management and shareholders the need to comply with health and safety legislation'.
Classification of organisations
There is a nine-step process for assessing the appropriate fine, which initially includes an assessment of the culpability of the offender based on the conduct that led to the offence. This result of the early categorisation of culpability is key because it sets the starting point for the fine and the range within which the fine may be imposed.
For example, for a large company, the starting point for an offence which is found to have a
high risk of causing significant harm with a low culpability is a fine of £300,000. This is compared to an offence committed by a large company, again with a high risk of causing significant harm but with a medium culpability, for which the starting point is £1,300,000.
The next step is to assess the risk of the harm caused by the offence. The guidance states explicitly that it is not necessary to prove the actual harm was caused by the breach, although this is a relevant factor, but instead to assess the risk of harm which was caused by the offence. This includes both the seriousness of the harm risked and the likelihood of the harm being caused.
Organisations are then categorised as micro
(a turnover of less than £2m), small (a turnover of £2m to £10m), medium (a turnover of £10m to £50m), and large (a turnover of over £50m). For very large organisations, where turnover greatly exceeds the threshold for large organisations,
the guidance allows for movement outside
the suggested range in order to achieve a proportionate sentence. The classification of
the size of the organisation sets the range of fines which are applicable, within which the culpability and the risk factors further define the range of available fines.
The guidance means that fines for large companies committing the most serious health and safety offences could reach up to £10m. In the case of corporate manslaughter, the fines could be up to £20m.
The requirement to classify organisations according to turnover when assessing the level of the fine is perhaps the most controversial change. The SC previously considered whether to impose fines linked to a percentage of annual turnover as part of the consultation for the previous 2010 guidelines, but chose not to adopt the proposals on the basis that they could have unfair consequences and would be difficult to apply to certain organisations. Indeed, in its response to the consultation on the current guidelines, the Electrical Contractors' Association stated that a company's turnover was 'often a dismal measure of a company's actual resources' because it might not correlate to profitability.
The guidance addresses this criticism in step three, which asks the court to check that the fine based on turnover is proportionate to the overall means of the offender and specifically lists profitability as a factor which can adjust the penalty upward or downward.
The remaining steps require the court to consider other factors which may adjust the fine, including the impact on third parties, assistance given to the prosecution, a reduction for guilty pleas, and whether to make any compensation and ancillary orders.
Impact of higher fines
Fortunately, it seems unlikely that the new guidance and higher fines will impact on the compensation payable to victims of health and safety offences. Step four of the guidance asks the court to consider the impact of any fine on the offender's ability to make restitution for victims. Step seven asks the court to consider whether to make a compensation order but specifically states that in the great majority of cases this is best dealt with in the civil courts.
During the consultation, one response highlighted that with the vast majority of firms already doing all they can to ensure the health and safety of their staff, increasing the fines is
very unlikely to reduce the number of incidents that occur.
The experience of the financial sector, which has seen the amount of fines levied against financial institutions rocket since 2008, suggests that higher fines for large organisations may not necessarily lead to a change in behaviour. In 2013, the previous head of the Financial Conduct Authority, Martin Wheatley, warned that increasing fines for large organisations was unlikely to change behaviour unless individuals were also held to account. For the most serious offences, the new guidance allows for fines of up to 700 per cent of an individual's weekly income and up to two years in custody. It remains to be seen whether the deterrent of a combination of penalties for both individuals and organisations will result in improved health and safety compliance.
Therefore, in an age where health and safety protection is being relaxed, notably by the introduction of section 69 of the Enterprise and Regulatory Reform Act 2013, the Social Action, Responsibility and Heroism Act 2015, and the Deregulation Act 2015, it seems there is still the appetite and the scope to bring about change to ensure that health and safety breaches are properly addressed.
The Supreme Court recently delivered two judgments on the issue of vicarious liability, which has troubled the courts for many years.
Cox v Ministry of Justice  UKSC 10 considered the first requirement of vicarious liability: a close relationship between the defendant employer and the wrongdoer.
The case concerned a prisoner who was working in the prison kitchen and dropped a heavy sack onto the claimant's back, which resulted in injury.
Applying the relevant factors, the court concluded that the prisoners working in the kitchen were integrated into the operation of the prison and their work was under the direction of prison staff. Therefore, the prison was found to be vicariously liable.
A M Mohamud v WM Morrison Supermarkets plc  UKSC 11 tackled the issue of the second requirement, which is that there must be a connection between the relationship and the wrongdoer's negligence so that the employer should be held liable for their actions.
The case concerned a petrol station employee who racially abused a customer after he asked for assistance at the kiosk. The employee then physically assaulted the customer on the station forecourt. The court found the employee's job was to assist customers with their enquiries and that his conduct was within the 'field of activities' assigned to him.
The court declined to move away from the 'close connection' test formulated in Lister v Hesley Hall Ltd  UKHL 22, but it will remain to be seen whether the use of the phrase 'field of activities' results in a wider scope for vicarious liability
and an increased onus on an employer to take responsibility for the actions of their employees.