The new guidelines for health and safety offences in 2016 significantly increased fines for larger organisations through turnover-based sentencing. The rationale for this was the statutory objectives of sentencing, in particular punishment of offenders, reduction of crime and protection of the public. But is this change in approach justified?
In November 2017, the Health and Safety Executive (HSE) published statistics – the first time we would expect to see improved safety performance if the guidelines have significantly improved workplace safety. The data suggested no such impact, particularly against historic trends:
- Fatal accidents have plateaued with a modest increase followed by a modest reduction.
- Non-fatal RIDDOR (reporting of injuries, diseases and dangerous occurrences regulations) injuries have seen modest reductions in line with historic trends.
- Estimated non-fatal injuries have not significantly reduced.
- HSE found no significant change to accident rates per 100,000 workers.
- The incidence of injuries leading to absences of more than three and seven days increased in 2016-17.
- Average days lost per worker and total days lost both increased in 2015-16 and 2016-17.
If they are not securing greater public protection, the guidelines could be justified for purely punitive reasons. That would, however, contradict HSE’s risk-based approach to compliance, using annual incidence rates per 100,000 employees and comparing these to industry norms.
- Given that the scale of larger entities puts them more at risk of accidents, are the guidelines justified on the grounds that these are the worst offenders? Available evidence suggests not:
- The UK has less than half the EU average incidence rate.
- Approximately half the UK workforce is employed by small and medium enterprises (SMEs), yet SMEs received 85 per cent of all fines as at 2011.
- HSE data suggests that the fatality rate in large organisations is half that of SMEs.
- Incidence rates are higher in SMEs than in large organisations in virtually every sector.
- EU-wide, SMEs are responsible for 33 per cent more accidents per 100,000 workers than larger organisations.
- In 2006, 82 per cent of reported injuries and 90 per cent of fatal workplace accidents in the construction sector were in SMEs.
Conversely, compliance costs for small businesses are up to seven times higher than for larger organisations.
Although successive governments have sought to reduce this ‘regulatory burden’, the net effect of the guidelines has been to increase total fines from £18m in 2016-17 to nearly £70m in 2016-17. The average fine per offence increased 332 per cent from £29,197 in 2014-15 to £126,262 in 201-17. This suggests that a turnover-based approach increases the regulatory burden, penalising businesses for the scale of their economic operations with no regard to incidence rates and no benefit to SMEs.
The approach penalises larger companies, which are objectively safer and more exposed to enforcement risk because of their greater profile, number of activities, size of workforce, scale of projects and likelihood of previous convictions.
It is not clear who benefits from a turnover-based approach, as:
- organisations are deprived of resources that could be invested in safety;
- enforcement resource is drawn away from the most risky organisations as publicity focuses on the largest fines;
- a compliance rather than risk-based approach is more likely to be adopted by organisations to minimise fines, counter to the views of leading experts about how best to improve safety performance;
- there is no evidence that this approach improves accident rates;
- the burden of compliance is increased, pushing up costs for industry and ultimately for consumers for no clear benefit; and
- investment in high-risk, low-profit sectors becomes less attractive.
It will be interesting to see if any future review by the Sentencing Guidelines Council examines this evidence and, if so, the weight it gives to these issues. It is, however, clear that efforts to reduce the burden of compliance have, from a financial perspective, been largely undone by the guidelines.
Adrian Mansbridge is legal director and Jason Cropper is a partner at law firm TLT