Enforcement – Easy money25 July 2012
Comparing the enforcement regime for environmental legislation with that in health and safety, Tim Hill and Paul Verrico speculate on whether a greater emphasis on civil sanctions would bring improvements in health and safety during these cash-strapped times?
There has been a lot of discussion about the HSE’s ‘fees for intervention’ (FFI) cost-recovery proposals.1
A great deal of this has focused on the finer detail of the system, its apparent inequities, and the challenge of how it will work in practice alongside formal prosecution. But one question that has not been considered as widely is whether this is part of a wider government move towards de-criminalising ‘regulatory’ breaches altogether and moving, instead, to a self-funding civil enforcement regime for the HSE?
Responding to our own recent Freedom of Information Act requests, the HSE confirmed that the FFI initiative is forecast to raise between £37 million and £39 million each year, once the scheme is fully up and running. These figures need to be set in the context of the total sum recovered from all prosecutions in 2010-2011 – £7 million. It also needs to be viewed against the HSE’s total annual budget of approximately £200 million.
In effect, this single scheme looks set to become responsible for almost 20 per cent of the HSE’s income in years to come. It doesn’t take too much cynicism to suspect that Treasury officials have identified that far greater financial recovery can be achieved by civil, rather than criminal, enforcement.
An obvious comparison lies with the recent changes to environmental enforcement, which have developed far beyond the original concept.
The Environmental Civil Sanctions (England) Order 2010 created the possibility of a variety of civil sanctions for certain types of environmental breaches. These ranged from small financial penalties through to formal written ‘enforcement undertakings’, whereby a would-be ‘offender’ avoids criminal enforcement action by agreeing in an open document to make operational changes and/or pay a certain sum of money to an environmental charity. This is a clear extension of the general ‘polluter pays’ principle, which has been around since the Environmental Protection Act first came into force in 1990.2
The downside of these civil changes, as first envisaged, is that they only impacted on very low-level offences, generally involving individuals or tiny companies, and so their use was limited. However, through expansion to include packaging waste and producer-obligation offences, the Environment Agency (EA) seems to have realised that a far more significant financial return could be achieved.
Part of the consideration for the EA agreeing to such an undertaking is that the environmental harm is remediated. Where there has been, for example, a pollution incident, or the incorrect disposal of waste, it is relatively straightforward to pay for the required clean-up, or to put a direct cost on upgrading plant or processes to avoid a repeat.
The development in respect of packaging waste is that there is little or no ‘direct’ harm to the environment beyond a wider failure to recycle a certain quota of materials. The civil sanctions do, though, allow the EA to require an offender (if the matter were to have been prosecuted) to pay a sum equivalent to the ‘benefit’ they have obtained from non-compliance; that is, the amount they might otherwise have paid to purchase Producer Responsibility Notes, or equivalent.
In many cases, this can run to tens or even hundreds of thousands of pounds, which dwarfs the relatively low fines that are typically imposed by magistrates. Coupled with the usual desire by an errant company to avoid a ‘criminal record’, the EA seems to have realised it was on to something. It could avoid expensive and contested court hearings, but still get all of its costs paid as part of the undertaking; it could get a far greater financial recovery than a court would impose; it could look to secure physical or procedural improvements above and beyond anything a court could order; and it could direct where the money went (usually to an environmental cause, or charity) rather than see it disappear into central government coffers, as happens with all fines paid in court.
A positive experience
The success of these enforcement undertakings can also be seen in the mooted (and inevitably delayed) expansion of the scheme to make such civil solutions an option for all breaches of environmental permits. In one stroke, this would include the vast majority of incidents investigated by the EA, and so would begin to have a very significant impact on whether matters are dealt with via a civil, as opposed to a criminal, route.
When representing one party in one of the largest enforcement undertakings agreed to date, we found that the process served to build bridges between our client and the regulator and focused the collective corporate mind on positive behaviours, rather than being overly concerned with minimising a fine. There was a far greater openness than is normally the case with a regulatory intervention, and all sides came away feeling that a positive result had been obtained. The experience was diametrically opposite to the usual feeling of court proceedings, where a client may feel it was fined either too much, or that it ‘got away’ with a low fine, while the regulator may continue to scrutinise the client post-incident, as it may feel that it didn’t get its pound of flesh in court.
Based on the EA’s experience, it may well be that the HSE soon comes under government pressure to consider adopting a similar approach in the future, particularly as, on the one hand, it sees its budget squeezed further, but, on the other, enjoys a steady stream of income. No doubt this will further fan the flames of those sceptics who see the costs-recovery changes as an entirely revenue-raising exercise, with no regard to actually seeking to improve safety, or the awareness of possible areas of weakness in a company’s systems.
The HSE first consulted on such a concept in 2005;3 indeed, the idea of publicity orders in corporate-manslaughter legislation originated from that consultation.
Section 42 of the HSWA 1974 does provide for the power to order the cause of the offence to be remedied. This may be done in addition to, or instead of, imposing a punishment. However, no one in our team of lawyers has ever experienced a case where that sanction has been invoked. The issue with such a remedial order is that there is no liability under health and safety law in respect of the matters covered by the order, insofar as they continue during the time fixed by the order, or any further time allowed by the court.
There are clearly some incidents, particularly where serious injury or death occurs, where a full prosecution is both inevitable and entirely justified. Equally, there are lots of low-level breaches where many companies, both large and small, would rather bite their collective corporate tongues and accept paying some cash to avoid a criminal record and protracted investigations and prosecutions, while accepting a moral duty to avoid any recurrence. Furthermore, in the current economic downturn, many health and safety charities are finding their traditional sources of funding cut – and it may serve to their benefit if a similar route were considered.
The more fundamental question is whether it will improve safety in the workplace by becoming an additional driver towards proactive compliance, rather than placing insufficient priority on health and safety and risking the equivalent of a fixed-penalty speeding ticket?
Many commentators fear that individual, or office-based key performance indicators will ‘encourage’ certain HSE officers to inspect sites with the sole motive of issuing warning letters and costs invoices, rather than taking a more pragmatic view of whether action really is required.
There is also the fear that decades of good working relationships will very quickly be lost, as organisations no longer have any trust in the HSE. From discussions that we have had with HSE inspectors up and down the country, these changes are as unpopular within the Executive as they are with businesses, particularly as a result of the lack of consultation with inspectors themselves as to how the system will operate on the ground.
On the other hand, this could present a real opportunity for businesses to learn some valuable lessons and then genuinely focus their efforts on preventing a repeat, rather than diverting time and resources into responding to a lengthy investigation and prosecution, with the threat of criminal sanctions forcing either side into increasingly entrenched positions. In many cases, organisations and the individuals involved are genuinely affected by a colleague being injured or killed, and simply criminalising them adds little other than a social stigma. Would it not be better, in some cases (albeit not the most serious), to have the option of considering some sort of enforcement undertaking for health and safety cases, too?
All of the comments above need to be taken with the significant caveat that there are no plans currently, so far as we are aware, to adopt such an approach. However, having commissioned two separate reports, from Lord Young and Professor Löfstedt – the conclusions of which did not echo what the Government wanted to hear – is it not better to have a grown-up debate around the future of health and safety involving those directly involved – not least the HSE itself – rather than revert to Daily Mail headline fodder and allegories involving the slaying of mythical monsters?
1 The costs-recovery regime is expected to come into force in October – see www.shponline.co.uk/news-content/full/launch-of-hse-s-cost-recovery-scheme-put-back-by-six-months
Tim Hill is a partner and Paul Verrico a principal associate in the Eversheds Health & Safety Team.
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