Companies and directors in the dock

“Health and safety is a priority issue for those at the top of all organisations and they must be prepared to face the consequences of ignoring the law; in future that could well mean prison” John Prescott, 7 June 2000

Background

From a comparative law perspective, health and safety is perhaps a unique area of law.  The statutory regime in Scotland and  England is virtually  identical, as the Health and Safety at Work Act 1974 (HSWA) and the subsequent myriad of regulations apply equally in each country.  Under this regime, both corporations and directors can be prosecuted in the criminal courts and are subject to a maximum penalty of an unlimited fine in the higher courts.  Most of the regulations also impose civil liability.  

However, at common law the situation of corporations and directors could not be more different. Although it may be technically competent, Scotland has never known a prosecution of a corporation or a director for culpable homicide in respect of a health and safety incident, whilst in England prosecutions for manslaughter against both corporations and directors have not only been attempted but have succeeded and sentences of imprisonment have been imposed on directors.

Although the prosecution of criminal cases is a devolution issue under the Scotland Act 1998, the main provisions of the HSWA are  reserved to Westminster.  In the wake of the public outcry over the Paddington rail crash, the Government has recently announced controversial proposals for a fundamental shake up of health and safety which could make corporations and senior management more accountable and most health and safety offences imprisonable. This may also result in the end of the common law anomaly between Scotland and England.  The relevant proposals can be found in three documents:

• Revitalising Health and Safety Strategy Statement
• Health and Safety at Work (Offences) Bill
• Consultation Paper:  Reforming the Law on

Involuntary Manslaughter

All of these developments are set against the background of a highly critical report by a Select Committee on the Environment, Transport and the Regions earlier this year which described the level of investigation carried out by the Health and Safety Executive (HSE) as “totally inadequate”.  The report  concluded that only 11% of reported major injuries are investigated and that there is “an urgent need” to increase rates of investigation and prosecution.

The current climate of change in the way health and safety offences are investigated and prosecuted can also be seen from two recent High Court decisions in England.  In one case, relatives of a person killed in an accident successfully judicially reviewed the decision of the HSE not to investigate1. In the other, a decision by the Crown Prosecution Service (CPS) not to prosecute a company and manager for manslaughter, following a fatality at work, was also judicially reviewed by relatives and the Court ordered the Director of Public Prosecutions to reconsider the decision2.  Although no equivalent proceedings have been taken in Scotland, it may only be a matter of time before such a challenge is made.

The Strategy Statement

At the launch of the Strategy Statement in June, the Government set out in uncompromising terms their ten year strategy for health and safety. The Health and Safety Commission (HSC) Chairman,  Bill Callaghan, said:

“Health and safety should be a core requirement of business activity, not an inconvenient “add-on”.  Those who cannot manage health and safety cannot manage.  We need to create a positive health and safety culture which sees business go beyond doing the statutory minimum”

Every year, health and safety failures cost the country £18 billion; 400 people are killed in work accidents; 25 million working days are lost; two million people suffer from ill health caused by work and 500,000 people suffer from work related stress. These are just some of the Government’s statistics and they have led to a growing concern for health and safety in the workplace. The courts have reflected this by imposing higher fines and awarding record damages in recent cases. In order to tackle the problem, the Strategy Statement has set the following targets:

• reduce the rate of fatal and major injury accidents by 10 per cent
• reduce the incidence of people suffering from work-related ill-health by 20 per cent
• reduce the number of working days lost from work-related injury and ill-health by 30 per cent
• achieve half of each improvement by the year 2004 and the rest by 2010

The targets will be achieved by a ten-point strategy, supported by a 44-point action plan, which will provide incentives and practical support to employers, together with a range of measures to penalise employers who do not meet their health and safety responsibilities, including:

• imprisonment for most health and safety offences and higher fines in the lower courts
• “innovative” penalties such as fines linked to turnover, prohibition of bonuses, suspension of managers without pay, suspended sentences pending remedial action, compulsory health and safety training,  penalty points system, fixed penalties, community service
• directors’ responsibility - a directors’ code of practice will ensure that a named person in every company will have statutory responsibility for health and safety matters
• amendment of the HSWA to ensure protection of workers regardless of status
• occupational health strategy to combat work-related illnesses
• new help for small businesses, including a health and safety grant; providing better targeted support through the Small Business Service; and the provision of comprehensive health and safety guidance for small firms
• insurance industry incentives to reward good health and safety performers at the expense of those companies with poor health and safety records
• integrated call centre for reporting accidents and  duties on employers to investigate accidents
• restrictions under the HSWA section 28 on the use of information obtained by the HSC to be loosened
• legislative database and other health and safety information to be available online
• offenders to be named and shamed

By far the most contentious proposals are those relating to directors’ responsibility and innovative penalties.  At present, directors, managers, secretaries and other corporate officers  can, in certain circumstances,  be criminally liable for health and safety offences under section 37 of the HSWA. The proposal to require organisations to make a named person legally responsible for health and safety matters is fraught with problems.  On a practical level, it is a position which few employees would volunteer for and employers will have difficulty filling.   From a legal perspective, unless amendments are made to existing legislation, the appointment will not absolve other directors or officers from responsibility under section 37 of the HSWA nor under the Management of Health and Safety at Work Regulations 1999, which provides that the appointment of a “competent person” shall not absolve an employer from criminal responsibility.    The financial elements of the “innovative penalties”, such as suspending managers without pay and prohibition of bonuses, raise many other issues and could  be equally difficult to implement.

Health and Safety at Work (Offences) Bill

This Bill extends to England, Wales and Scotland and is due to receive its Second Reading this month. The main provisions are to increase the maximum fine for breaches of the Regulations in the lower courts from £5000 to £20,000 and to make imprisonment an option for the HSWA general duties and breaches of the Regulations. The maximum sentences of imprisonment will be six months on summary procedure and two years on indictment.

“Corporate Killing”

In May of this year, the Government published its much awaited Consultation Paper, “Reforming the Law on Involuntary Manslaughter” which contains a number of radical proposals, the most important being the creation of a new offence of “corporate killing”. This proposal is based on a report by the Law Commission in 1996. Although the proposals do not apply to Scotland, the Scottish Executive is working closely with the Home Office to examine the implications for Scotland. In addition, the Scottish Law Commission will no doubt be watching developments with interest. The consultation period ends on 1 September 2000, when both the Home Office and the Scottish Executive will consider the way forward. In a matter of such importance, the public interest would not be served by the laws of Scotland and England being different. Change in Scotland may be inevitable if the Consultation Paper’s proposals are implemented.

The new offence of “corporate killing” would be committed where it could be shown that a management failure was a cause or the cause of a person’s death and where such failure fell far below what could reasonably be expected of the corporation. This would be a significant departure form the present common law rule in England that corporate manslaughter can only be proved by establishing the guilt of an identified human individual for the same crime.#3 The Government is considering making the scope of the new offence much wider than the Law Commission’s proposals by applying it to “undertakings” rather than “corporations”. This would mean that up to 3.5 million organisations, ranging from partnerships to charities, could be prosecuted for the new offence.

Other proposals being considered by the Government are that:

• all enforcing authorities, such as local authorities, the HSE, Environment Agency etc, should have the power to investigate and prosecute the new offence.
• prosecuting authorities should be able to take action against both parent or other group companies if it can be shown that their own management failures were a cause of death, and against directors or other company officers.
• individuals who could be shown to have had some influence on, or responsibility for, the management failure resulting in death, should be subject to disqualification from acting in a management role in any undertaking carrying on a business in Great Britain.
• officers of undertakings should be liable to imprisonment if they contribute to the management failure resulting in death
• proceedings should be allowed to continue after the insolvency of a company
• prosecuting authorities should be given the power to freeze assets pending the institution of criminal proceedings.

Following the recent high profile collapse of the manslaughter prosecution against Great Western Trains for the Southall rail crash and the subsequent decision by the CPS not to instigate a prosecution for manslaughter against any of the companies or directors involved in the Paddington disaster, these proposals reflect a general public perception that the law is too soft on large corporations and their ‘fat cat’ directors, who have insufficient regard to health and safety issues and on occasion deliberately flout the law to cut costs.

However, such offenders can already be prosecuted under the existing statutory regime, which is the route which has always been taken in Scotland. If the HSWA is given the additional teeth of prison sentences, the new offence of corporate killing may well be considered unnecessary. No doubt prosecutors will find it easier to secure a conviction under the existing statutory framework, rather than having to prove in a corporate killing prosecution that a management failure fell far below what could reasonably have been expected.

Conclusion

Driven by a series of European Directives, the 1990s saw fundamental changes to the health and safety legislative regime in the UK, with a raft of new Regulations imposing both civil and criminal liability. The Government’s proposals, which have been described by the HSE as “the biggest Government shake up for 25 years”, will ensure that the pace of change continues. However, the proposals represent a radical shift in corporate and individual responsibility under UK law. There will, no doubt, be strong resistance from corporations, other organisations and those in management positions who feel that the changes go too far. At the same time, others will vigorously criticise the proposals for not going far enough. Not only will the Government have to weather the storm of public opinion but they will also have to consider whether any proposed new legislation is compatible with the Human Rights Act 1998. This comes into effect on 2 October 2000 and requires the responsible Minister to make a statement of compatibility or otherwise prior to the Second Reading of any new legislation. Health and safety is an area of law which will certainly be the subject of challenge under the Human Rights Act and it may be arguable that some of these proposals amount to an infringement of Convention rights. Interesting times lie ahead.

David Leckie is a partner at Mackay Simon WS specialising in health and safety and human rights. Email: david.leckie@mackay-simon.co.uk