The new price of safety
On 1 October 2012 the Health and Safety Executive’s ‘Fee for Intervention’ (FFI) charging scheme came into force in the UK. The result of the scheme is that businesses will be liable to pay the costs of the HSE’s formal enforcement charges if they are in breach of health and safety laws. The basis of FFI is founded upon the principle that those who do not comply with the law should pay for the work that the regulator must carry out as a result of that non-compliance. The burden of responsibility is therefore shifted from the public purse to the offending organisation.
FFI was introduced earlier this year via the Health and Safety (Fees) Regulations 2012, and was initially due to come into force on 6 April 2012. It was postponed in enforcement until 1 October to enable the HSE to publish guidance on the matter, and to allow businesses to improve their understanding of the scheme. The guidance was published in June, with a ‘corrected version’ published in September. It is available for download from the HSE website.
Despite the additional time-capacity and the intentions of the regulator there are a number of questions about the scheme that remain to be answered. Organisations continue to be uncertain about the impact the scheme may have upon their particular business and about the true cost of the new regime.
What is FFI?
FFI provides that businesses in contravention of health and safety laws will be charged at a rate of £124 an hour in the circumstances where the HSE has to make a formal intervention to rectify a ‘material breach’. The charges will begin from the point of time that the material breach is identifi ed, up until the point of rectifi cation. FFI will apply to all dutyholders regulated under the Health and Safety at Work etc Act 1974 (‘the 1974 Act’) and related Regulations, where the HSE is the enforcing authority, subject to a number of exceptions.
Exempt activities and sectors
Primarily, the FFI scheme will not apply where another fee is payable under separate arrangements with the HSE for that work or sector (such as where there is already a charging scheme in place), or to those who choose to work with certain biological agents.
Exemptions from FFI are as follows:
- Self employed people who only put themselves at risk.
- Individuals who have committed an offence under sections 36-37 of the 1974 Act.
- Those licensed under the Control of Asbestos Regulations 2012 (the licence fee contains an element to cover the costs of inspection).
- Work activities involving biological agents at containment levels 1 to 4 (it is intended that a separate cost recovery scheme will be introduced for this work within two years).
- Sites subject to the top-tier requirements of the Control of Major Accident Hazards Regulations 1999 (COMAH) and HSE’s work at lower-tier COMAH sites connected with the control of major accident hazards.
- Offshore oil and gas production facilities.
- Sites licensed under the Nuclear Installations Act 1965.
- Onshore boreholes (a separate cost recovery scheme is being brought in for this work by the Health and Safety (Fees) Regulations 2012).
- Other work activities such as fi rst-aid approvals services where HSE already recovers a fee.
- HSE work in connection with an appeal against an improvement or prohibition notice at an employment tribunal.
- HSE work in relation to a prosecution in England and Wales after information is laid at court (any subsequent prosecution costs may be recovered under English civil law).
- HSE work in relation to a prosecution in Scotland after the HSE submits a report to the Procurator Fiscal (any subsequent prosecution costs cannot be recovered under Scottish civil law).
- HSE work in relation to Crown bodies after the HSE formally notifi es the Crown body that it would have begun a criminal prosecution against them, had it not been a Crown body.
- Any material breach which relates only to any of the laws listed in Appendix 1 of the FFI Guidance (on the basis that these laws are not made under the Health and Safety at Work etc Act 1974).
Charges will also not apply in relation to the HSE carrying out its functions under the following regulations:
- Control of Major Accident Hazards Regulations 1999
- Gas Safety (Management) Regulations 1996
- Genetically Modifi ed Organisms (Contained Use) Regulations 2000
- Biocidal Products Regulations 2001
- Chemicals (Hazard Information and Packaging for Supply) Regulations 2009.
What is a material breach?
Charges will be imposed only in the circumstances that a dutyholder is in ‘material breach’ of health and safety law. A material breach arises where an HSE inspector is of the opinion that there has been a contravention of health and safety law that requires a written notice of that opinion to be issued to the dutyholder.
Written notice from the HSE may take the form of notifi cation of a contravention, an improvement or prohibition notice, or a prosecution. It must include details of the law that the opinion relates to, the reasons for their opinion, the contravention which constitutes a material breach, and notifi cation that a fee is payable. HSE inspectors are to follow the FFI Guidance Note and the HSE’s general enforcement framework policies in making decisions. In general, the principle is that enforcement action should be ‘proportionate’ to the health and safety risks and the extent of the breach.
If a material breach is identified during a visit – as is likely to commonly occur – then costs for the whole of the visit from the point of time of the inspector’s entry onto the site (prior to identifi cation of the breach) will be recoverable from the organisation under the scheme.
Charges will apply to all the work that the HSE undertakes in ensuring the material breach is remedied. It includes any investigation or enforcement action up to the point of rectifi cation or commencement of a prosecution. The fee will apply to each intervention where a material breach is identified.
Costs for associated work in connection with the material breach are also chargeable. These include time spent writing notifi cations of contravention and reports; preparing and serving improvement or prohibition notices; follow-up work to ensure compliance including site visits, telephone calls, email correspondence and reviews of any documentation; taking statements; specialist assistance; information-gathering; assessing any documentation in respect of inspection, investigation or enforcement; and any research related to the material breach required to carry about any of the aforementioned tasks.
Primarily, concerns have arisen amongst businesses as to the defi nition of ‘material breach’ and the subjective nature of the application of the FFI scheme. The broad nature of the defi nition given in the FFI Guidance Note and the extent of the potentially recoverable costs has resulted in apprehension from employers, who fear that the assessment of ‘material breach’ may differ depending on the subjective viewpoint of the particular inspector involved. There has been a call for greater clarity from the HSE as to when a breach would be ‘material’ in order that businesses can be better prepared for the impact of the scheme. At present, the general assessment is left to an individual inspector and therefore knowledge as to the intricacies of what will practically constitute a ‘material breach’ can only be built up on a retrospective basis after the event.
Questions have also been raised in recent months regarding the nature of the approach taken by the HSE in enforcement actions. In September, a company in Norfolk accused the HSE of taking ‘unjust’ action in their belief that there had been a breach of health and safety law. The company contends that the decision had a damaging commercial impact, with a freeze upon trading for a period of ten weeks. The HSE imposed an enforcement ban on the company on 10 July which prevented all movement of its UK stock. The ban was lifted on 29 August; the same week that the case was due to call in court under an action for judicial review. The company intends to claim for damages as a result of a loss of commercial contracts during the enforcement period.
The main criticism raised in this case relates to the attitude of the HSE in their enforcement and their refusal to engage with the company throughout the process. It is feared that lack of engagement could be a feature of FFI enforcement and that inspectors will not be aware of or engaged in the commercial realities of their decisions upon the organisation in question. As a result, there are also concerns regarding the strain that this scheme may have upon the relationship between organisations and the regulator in terms of communication. With inspectors taking strict or ‘unjust’ approaches in their enforcement the prospect of businesses openly communicating with the regulator diminishes. Organisations are less likely to contact the HSE with concerns about implementation of safety practices if they fear the strict application of an enforcement regime that will result in high costs.
Commercially, issues are also raised by companies that operate in conjunction with other organisations in terms of ‘multi-party’ breaches. According to FFI Guidance the inspector will apportion the time spent investigating and enforcing the breach between each of the responsible dutyholders for the breach so far as responsibility for the material breach is reasonably attributable. If only one dutyholder is in material breach and the others involved are not, then only the costs reasonably attributable to the dutyholder in breach will be recovered. The extent of how straightforward this approach will prove to be in practice remains to be seen.
Additional charges - third party involvement
In addition to the hourly rate charged for the HSE inspector’s time, the FFI scheme also allows for the recovery of additional expenses for third party involvement where this has been necessary. The HSE may contract elements of work to the Health and Safety Laboratory (HSL) – an internal agency of the HSE – or to external third parties, such as technical experts. In these circumstances the FFI scheme allows for the actual cost to the HSE for the service to be recovered from the dutyholder. This may be higher than the FFI hourly rate.
The FFI Guidance states that normally the HSE will check with the relevant dutyholder that there are no commercial sensitivities in using a particular third party company and external contractors must provide a statement that no confl ict of interest exists before work begins. The principal is that the HSE will seek to fi nd a replacement if sensitivities do exist, but reserve the right to engage the contractor if there are overriding health and safety reasons or if the position cannot be checked due to urgency.
Administration, Disputes and Repayments
Invoices for FFI charges will be sent to dutyholders in January, March, May, July, September and November of each year. Payment is due to the HSE within 30 days of the date of the invoice and any failure to pay within that period will be pursued in accordance with the HSE debt recovery procedure.
Disputed invoices will be subject to HSE dispute procedures on two levels. A dutyholder must formally dispute an invoice through written notifi cation to the HSE. It will then be referred to an independent HSE senior manager in the fi rst instance, followed by a panel of HSE staff and an independent representative. Dutyholders will not be required to pay the disputed invoice until the dispute is resolved. If any dispute is not upheld, then the HSE will be entitled to recover the costs of resolving the dispute at the FFI hourly rate of £124 multiplied by the time taken to resolve the dispute.
Appeals against prohibition and improvement notices will remain governed by existing procedure, which allows for the appeal to be heard at an employment tribunal. The enforcement notices issued by HSE inspectors include details of the relevant documentation to be used to submit the appeal.
In the circumstances that a prosecution is brought by the HSE and there is no resulting conviction, the HSE will repay any fees relating to this offence to the dutyholder. If any fee paid may be attributable to both an offence which does result in a conviction and an offence that does not, then no repayment will be made on the basis that the work would have been carried out any in event in respect of the conviction that did result.
It has been stated that a review of the FFI scheme will be undertaken by the HSE after the fi rst twelve months of operation, and within three years of the regime coming into effect. The level of the charging rate will be reviewed annually.
The rate-setting model used to determine the hourly charge will also be subject to annual review. At present, the model is based on an estimation of how many inspection, investigation and enforcement days the HSE anticipates it will spend regulating dutyholders for 2012/13 in the areas where costs were not previously recoverable.
Whilst any incentives to eliminate breaches of health and safety legislation in general are largely welcomed, it is fair to conclude that there may be ongoing concern regarding this particular scheme until clearer details of the practical implementation emerge. Organisations will be keen to see that FFI is implemented in a proportionate manner with consistency across a spectrum of inspections. There are currently doubts expressed about the likelihood of this given the broad and somewhat ambiguous nature of elements of the scheme found in the offi cial HSE Guidance.
At present, organisations are best advised to fully prepare for the enforcement of the scheme by ensuring that their standards of safety and regulatory compliance are kept at consistently high levels. An ongoing awareness of common safety issues and the engagement of workforces will help to contribute towards this aim. A clear understanding of regulatory obligations will also be a key factor in going forward. It is only through the implementation of sound safety regimes that the cost of the charging scheme will not impact upon business.