How to avoid a finding of systemic failure and achieve proportionate fines for health and safety offences

15 May 2017

Over 600 cases against defendant organisations have now been sentenced since the Sentencing Guidelines for Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences (the Guidelines) came into force on 1 February 2016.

A finding of 'high' culpability for any organisation significantly increases the level of fine. The highest fine to date under the Guidelines of £5 million followed a finding of high culpability against Merlin Attractions Operations Limited (which subsequently moved further up the offence range due to aggravating factors), after the court held that there was a "catastrophic failure to assess risk and have a structured system of work".

There are a number of factors that the court will take into account in determining whether an offence is one where 'high' culpability can be attributed to an offending organisation, namely:

  1. The offender fell far short of the appropriate standard; for example, by:
    • failing to put in place measures that are recognised standards in the industry
    • ignoring concerns raised by employees or others
    • failing to make appropriate changes following prior incident(s) exposing risks to health and safety
    • allowing breaches to subsist over a long period of time
  2. There is serious and/or systemic failure within the organisation to address risks to health and safety.

The impact of a finding of high culpability has meant that these factors have been the subject of increasing scrutiny, and we have seen a number of arguments and counter-arguments posed before the courts on the correct interpretation of the different factors outlined above. We focus in particular, on the final factor.

When is a failure 'systemic'?

Is it when there is a failure of a specific system? Or does it refer more broadly to a failure by a defendant organisation to establish good health and safety systems generally?

Prosecuting authorities argue that a systemic failure should be found in relation to a single failure to carry out a risk assessment. The proposition is as follows:

  1. The law requires a systemic approach to the management of health and safety in the workplace, as set out particularly within the requirement to conduct risk assessments under the Management of Health and Safety at Work Regulations 1999.
  2. The starting point therefore is that a suitable and sufficient risk assessment of all the risks to which employees and non-employees may be exposed must be carried out. An employer must then identify and implement appropriate steps to control the risks identified.
  3. The employer should then ensure that a safe system of work is established through providing appropriate training, instruction, information, supervision and monitoring.
  4. A failure to carry out a risk assessment is therefore a failure of a system, therefore, a 'systemic' failure.

The premise is that in considering whether a failure is systemic, the court must focus on the specific breach, and should not look more widely at other issues and matters associated with a defendant organisation's operations.

Taking the above example of a failure to carry out a specific risk assessment, it has been contended before the court that the fact that other parts of a defendant's operations may have all been risk assessed, and in relation to which there were safe systems of work, is irrelevant to an assessment of systemic failure in respect of the offence in question. The submission has been supported by the contention that the prosecuting authority, if they are investigating a specific incident, will largely have not investigated, and therefore not criticised, any other part of a defendant's operation.

However, taking this example to its logical conclusion, if that were correct then the outcome that would surely follow would be that all failures to carry out any risk assessment would always be a systemic failure, and therefore always land an offending organisation in high culpability territory. This restrictive approach cannot have been intended by the Guidelines and must surely be incorrect.

"Risks within the organisation"

Culpability will be high if there was "a serious or systemic failure to address risks within the organisation": the use of the word "risks" (rather than "risk") makes it plain that the court is entitled to consider the offender's health and safety systems generally - and not just the specific failure or breach.

Prosecuting authorities have sought to undermine this interpretation by arguing that if the court always has to consider "risks", plural, then no case could ever fall within the high culpability bracket where there was no other risk when looking at an offender's health and safety systems generally in any given situation.

To our knowledge, this has not been accepted by the courts. A finding of "systemic" failure has only been made where the court has concluded that the breach was attributable to a widespread failure in the systems that had been put in place to manage the risks that arise from an organisation's activities; not merely a failure in relation to risks which arose from a singular breach.

The clear wording "within the organisation", also evidently directs the court to consider the quality of systems more widely.

The court's assessment of culpability must therefore be informed by the nature and quality of the organisation's general approach to health and safety, and in our experience, a court will find that, for a company to fall into the 'high' definition of systemic failure there would need to be a more widespread failure within the organisation.

A consistent approach

Prosecutors have also argued that to take into account anything other than the breach in assessing culpability necessarily amounts to an element of double-counting, given that consideration of effective health and safety procedures in place is a mitigating factor to reduce the seriousness of an offence, which is considered at a later stage in the Guidelines.

However, this approach would be inconsistent with the way in which the categories at all other levels set out in the Guidelines are outlined in terms of assessing culpability. For example, culpability is likely to be "very high" if there has been a "deliberate breach of or flagrant disregard for the law". The court is therefore entitled to look at the nature and extent of health and safety compliance generally - and not just at the breach in question - in order to form a view as to whether or not the organisation has disregarded the law - and, if so, whether it has done so flagrantly.

This approach is wholly consistent with the Court of Appeal's remarks in R -v- Balfour Beatty Rail Infrastructure Services Ltd in which there was a finding of systemic failure within the organisation.

"A breach of the duty imposed by s.3 of the 1974 Act may result from a systemic failure, which is attributable to the fault of management. It may, however, be the result of negligence or inadvertence on the part of an individual, which reflects no fault on the part of the management or the system that they have put in place or the training that they have provided. In such circumstances a deterrent sentence on the company is neither appropriate nor possible. Where the consequences of an individual's shortcoming have been serious, the fine should reflect this, but it should be smaller by an order of magnitude than the fine for a breach of duty that consists of a systemic failure."

A proportionate sentence

The Guidelines provide a series of starting points and ranges for fines that are based on the size of the company: micro, small, medium and large. Large companies are those with a turnover of £50 million or more.

For very large organisations (VLOs) the Guidelines provide: "Where an offending organisation's turnover or equivalent very greatly exceeds the threshold for large organisations, it may be necessary to move outside the suggested range to achieve a proportionate sentence."

The key word here is "necessary".

The onus is on the defendant organisation to persuade a court that it is not necessary to move outside of the range.

There are a number of practical steps that a defendant organisation can take to help the court reach this conclusion:

  • A move outside the range is only appropriate if the court concludes that an increased fine is "necessary" in order to bring home to the organisation the need to comply with health and safety obligations. Evidence of an organisation's commitment to health and safety and its remorse in relation to an incident should be submitted. Consider statements expressing these sentiments directed to the court from directors and senior managers, who should also attend the sentencing hearing to underline that the message from the court will hit home, without the need to escalate the level of fine.
  • Whilst turnover for VLOs may greatly exceed £50 million, the profit margin, cash flow and challenges facing the particular industry for the organisation will always require putting into context so that the court can accurately consider what is truly necessary to achieve a proportionate sentence - statements from forensic accountants and finance directors should be prepared to ensure that company accounts are fully explained and understood by the court.
  • A defendant organisation's reaction to an incident, as well as evidence of other strong mitigating factors, will also impress upon the court that a large fine is not necessary to ensure that appropriate actions will be taken by the organisation. Evidence that a review of any relevant practices has taken place promptly and voluntarily post-incident, that any steps required to be taken have been implemented and kept under review and that any victims have been sufficiently supported, will all go towards reassuring the court that going outside of the ranges of fines suggested by the Guidelines, is neither necessary nor proportionate.

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