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Mon October 19 2020

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Fines escalate for health & safety violations

18 Dec 19 Chris Newton, a partner in law firm Keoghs’ crime and regulatory practice, reviews the impact of the new sentencing guidelines on the construction industry

Figures from the Health & Safety Executive (HSE) show that fines for health and safety offences have increased by almost 450% since the introduction in February 2016 of new sentencing guidelines.

The construction industry has been hit hard by this tougher regime, with penalties for health and safety offences amounting to £15.7m in 2018/19 alone, at an average of £107,000 per conviction.

Under the new guidance, the scale of fines varies according to the turnover of the company. The range goes up to £20m for the very worst cases involving corporate manslaughter and large organisations but it could be even higher for very large companies.

New sentencing guidelines

So why have fines increased so dramatically? The short answer is the new sentencing guideline’s focus on culpability, harm and turnover.

The guidelines adopt a stepped approach to sentencing and how the judge assesses the defendant at each stage of sentencing can make a significant difference to the fine.

The starting point is to determine the category of offence, which defines how serious the offence is. The court does this by considering two factors:  culpability and the harm caused by the offence.

Culpability

The court considers the offender’s level of culpability. This ranges from “high”, which is reserved for deliberate breaches of or flagrant disregard for the law; to “low”, where the failings were minor and isolated.  Most offences fall in the high or medium (systems were in place but there were not sufficiently adhered to or implemented) category.  The key to persuading the judge as to the appropriate level of culpability is to have credible evidence that proves that the operation has reasonable systems in place.

Harm

Harm is split into four categories (1 - 4) and is determined by considering the risk and level of injury caused by the offence. The category is calculated by assessing how likely it is that harm occurs (high, medium, low) and how serious the harm risked is (A – C). Death, injuries reducing life expectancy and those resulting in lifelong dependency on others will be classed as level A; injuries affecting a person's ability to carry out day to day activities will be level B and all other injuries level C. 

The guidelines suggest that the courts should consider the risk created by an offence and not the actual harm suffered, but in reality the injury suffered goes a long way to determining the overall harm category. 

The court then considers the starting point fine and category range for the offence. This is based on the last 3 years’ turnover.  Fines range from £50 to £10m for health and safety offences and up to £20m for corporate manslaughter with the option to go even higher for very large organisations. 

As the table below illustrates for harm category one cases, the size of a company has a huge impact on the level of the starting point fine.

Harm category one; Starting point fine

Very High Culpability

High Culpability

Medium Culpability

Low Culpability

Large turnover (Over £50m)

£4,000,000

£2,400,000

£1,300,000

£300,000

Medium turnover (£10-50m)

£1,600,000

£950,000

£540,000

£130,000

Small turnover (£2-10m)

£450,000

£250,000

£160,000

£45,000

Micro turnover (Under £2m)

£250,000

£160,000

£100,000

£30,000

Turnover can be a crude way of measuring the size of the company, especially where profit margins are low.  Forensic accountancy evidence can assist when the court reaches the next step and “steps back” to check whether the overall fine based on turnover is proportionate to the overall means of the offender. 

Further steps in the sentencing process look at mitigation, aggravating factors, assistance to the prosecution, a guilty plea reduction (typically the fine can be reduced by 1/3 if a guilty plea is made at the first hearing), compensation and the overall fine if the court is sentencing for more than one offence. At all these stages, cogent evidence can persuade the judge to make reasonable adjustments, so it is worth ensuring that that evidence is before the court.

Implications for the construction industry

The construction industry, by the nature of the work it does, is more vulnerable than most industries when it comes to fines for health and safety offences. HSE figures show that 2.4% of workers in this sector suffered from an injury in 2018/19, against an all industry rate of 1.7%.  This translates to 4,872 non-fatal reportable construction injuries and 30 fatal injuries. The main accidents were falls from height (32%) and slips, trips or falls (30%).

There have been several notable cases with large fines in the construction industry. They include the £2.8m fine imposed on Costain and Galliford Try in September 2019 after a worker lost toes in an accident on a water project in March 2015. The worker’s foot became trapped during work upgrading a water treatment works in Cheshire. The HSE investigation found that both companies had failed to properly plan and manage the commissioning work and each was fined £1,400,000 and ordered to pay total of £101,046.20 in costs.

Other significant penalties include a £2.6m fine imposed on Balfour Beatty in May 2016 after an employee was killed when he became trapped in a trench after it collapsed on him.  The fine was given after James Sim, 32, was killed working under subcontract for Balfour Beatty Utility Solutions on 14th April 2010.

Kier MG was one of three contractors fined a total of £2m in December 2016 after Vincent Talbot suffered serious injuries when his leg was crushed when a trench collapsed on him in an incident at Fleet Street, Holbeach, Lincolnshire, on 9th March 2012.

Custodial sentences for individuals

Historically, organisations have been more vulnerable than individuals to fines relating to health and safety offences but custodial sentences for individuals are now becoming more common. 

Individuals convicted of health and safety offences face unlimited fines, community sentences or custodial sentences. Custodial sentences in these cases can range from six months to life for manslaughter. These individuals can also be penalised with director disqualification (maximum period is 15 years), costs and a victim surcharge payment. 

In the first 12 months of the new guidelines, 4% of the individuals who were prosecuted for health and safety offences received an immediate custodial sentence of up to two years in prison.

An example of one case where it was felt that an immediate custodial sentence was justified took place in 2017 involving the company director of Cherrywood Investments Limited and a site foreman. Both were given immediate custodial sentences of nine months having been found guilty of manslaughter and health and safety offences which led to the death of a carpenter who fell through a gap in the first floor of a building. The HSE alleged that there had been a blatant disregard for the wellbeing of their workers and were critical of the failure to improve standards despite the warnings given by the HSE on a previous site visit.

Proactive action

Courts should follow the principles of sentencing when determining the fine and this takes into account the objectives of punishment, deterrence and the removal of any gain through the commission of the offence.  The potential for huge fines reflects the need to ensure that they are sufficiently substantial to have a real economic impact and encourage managers and shareholders to comply with health and safety legislation. 

Organisations and individuals therefore need to take a proactive approach to health and safety.  That will include discussing health and safety at a senior level, documenting good safety practices, running, learning from and implementing the results of audits, responding to and learning from near misses and assessing immediate areas for improvement.

When a serious accident occurs, organisations and individuals should also seek prompt advice to help mitigate the impact and implement their crisis management policy.

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MPU

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