Recent posts on our Health & Safety blog have highlighted the sharp increase in prosecutions in Scotland for alleged breaches of health and safety legislation and incoming tougher guidelines for health and safety breaches.
With these developments, it seems a good time to look at corporate liability for health and safety in general and extensions to corporate liability that two cases from 2015 have highlighted.
Corporate liability for health and safety
Every company has a general duty to ensure that its activities do not put the health, safety and welfare of its employees, contractors, customers and anyone else at risk. Failures can, and do, lead to criminal prosecution. In addition to this general duty, there are regulations placing specific requirements on some areas of work. All companies must have in place a system for identifying and managing risks.
Organisations with more than five employees must have a written health and safety policy. While most prosecutions follow someone being injured, it is only necessary to prove a state of affairs existed that posed a real risk to the health and safety of employees or others. This was illustrated by a recent case in which a building firm was prosecuted when police officers spotted workers throwing bags from the fifth floor of a building onto a flat roof below.
Parent and subsidiary company liability
We covered the CAV Aerospace case concerning corporate manslaughter earlier this year. Crucially, the court held that a parent company was responsible for an incident that occurred at a subsidiary’s premises. The subsidiary, CAV Cambridge, was also the employer of Paul Bowers, the contractor who was killed; however it was considered that CAV Aerospace, the parent company, owed the primary duty of care.
In reaching this decision the court heard arguments from the prosecution that all operational decisions regarding the purchasing, delivery and storage of materials fell within the responsibility of the parent company and CAV Cambridge’s on-site management could not make operational decisions.
A parent company will not automatically be held liable for health and safety breaches by its subsidiaries. But likewise, as this case demonstrated, neither will the liability automatically lie with the subsidiary.
Each case will depend on its facts, and the court will carry out a “piercing the corporate veil” exercise to establish which corporate entity the duty of care lies with. In determining this, the independence of the subsidiary in terms of management and operational and financial decision making will be taken into account as will the parent company’s awareness of and involvement in the subsidiary’s health and safety practices.
Personal liability of directors
A recent English case served as a salient reminder that individual company directors are also liable to prosecution. The director of a construction company was found guilty of an offence under s37 of the Health and Safety at Work Act 1974 when an employee fell from a ladder and suffered brain damage. Under s37 if an offence committed by the company is proved to have been committed with the consent or knowledge of, or is attributable to the neglect, of the director then that person can also be prosecuted individually.
The director was fined £5,000 and ordered to pay £5,004 in costs, in addition to being given a six-month custodial sentence, and suspended for 12 months. Prosecutions under section 37 can lead to prison sentences of up to two years and unlimited fines.
To ensure good leadership on health and safety, directors should ensure the board is approaching health and safety in line with the Health and Safety Executive’s four-point agenda:
- plan the direction of the company’s health and safety policy and culture;
- deliver the policy through an effective health and safety management system;
- monitor the company’s health and safety performance;
- formally review effectiveness and compliance.
Finally, new Sentencing Guidelines on health and safety and corporate manslaughter offences come into force in England and Wales on 1 February next year.
Like their predecessor, these are likely to be persuasive in the Scottish courts pending release of the Scottish equivalent. The level of fines recommended will increase significantly, with a staged approach based on establishing culpability and harm followed by determining the level of fine based on the company turnover.
For larger companies, fines could be in the region of £10 million. Compliance with health and safety law has arguably never been more important from a risk management perspective.
On December 30, 2015