A key part of the Regulatory Enforcement and Sanctions Act 2008 is due to come into force on 6 April 2009. Businesses that operate in two different local authorities will be able to enter into a primary authority partnership with one of those local authorities and benefit from improved consistency of advice and enforcement. If a business takes the advice of that primary authority it should be confident that it won't be challenged by other authorities.
Businesses should also be aware of alternative penalties in the Act that could be made available to regulators.
What will the Act do?
The main objectives of the Act are to:
- deliver a regulatory system that is risk-based, consistent, proportionate and effective
- streamline and improve regulatory enforcement and to enable ministers to confer new sanctioning powers on regulators ensuring that they have a flexible set of sanctioning tools
- establish the Local Better Regulation Office (LBRO) as a statutory body
When did the Act come into force?
The Act came into force on 1 October 2008, apart from the provisions in part 2 which should come into force on 6 April 2009.
What's in the Act?
The Act comprises four key parts:
This establishes the LBRO which will promote greater consistency in regulatory enforcement among local authorities and between local and central government.
Businesses and other organisations that operate across more than one site can be subject to regulation and enforcement action by multiple local authorities which can lead to inconsistent regulatory enforcement.
From 6 April 2009, part 2 of the Act will give any business operating across council boundaries, regardless of its size, the statutory right to form a partnership with a single local authority in relation to regulatory compliance. The Act will apply where a business or other organisation carries on an activity in the area of two or more local authorities and each of those authorities has the same relevant function in relation to that activity. For example where a business sells a product in two different local authorities and is subject to trading standards rules in both authorities. Guidance to the Act prepared by the Department for Business Enterprise and Regulatory Reform provides that a local authority can only be a primary authority in relation to its trading standards, environmental health, health and safety, licensing or certain fire safety functions.
Eligible businesses will, for example, include manufacturers operating across local authority boundaries, multi-site retailers and internet and mail order businesses. There is also nothing in the Act to stop both a franchisor and a franchisee independently seeking a primary authority relationship. A restaurant chain, for example, could operate its own premises in more than one location. It may also grant franchises to persons who themselves operate in more than one location. Both could seek a primary authority relationship although in reality it is more likely that a franchisor will qualify for the scheme because of its likely geographical spread. Much will depend on the nature of the franchisor/franchisee relationship and the terms of the franchise agreement.
A local authority can agree in writing with a business to be its primary authority. In the absence of such agreement, the LBRO can nominate an appropriate local authority to be the primary authority. A primary authority is responsible for giving advice and guidance to the partner business in relation to the relevant functions. It is also responsible for giving advice and guidance to other local authorities about how they should exercise the relevant functions in relation to that business. Where a business or organisation has a primary authority relationship, any other local authority must contact the primary authority before taking enforcement action against that business.
Primary authorities may also make an inspection plan recommending how other local authorities should inspect the business or organisation in question. Where a primary authority has made a plan and the LBRO consents to the plan, the primary authority will be required to bring it to the notice of other local authorities. All local authorities will have to follow the inspection plan and inform the primary authority when they inspect a business or organisation in a manner that does not comply with the plan.
It will be for local authorities to decide how to resource its primary authority responsibilities. Should it wish to do so, a primary authority (after taking into account all relevant matters) will be able to charge fees to a partner business or organisation to recover costs reasonably incurred in acting as a primary authority.
The primary authority provisions will enable businesses to rely on the advice given to it by its primary authority. Where a primary authority blocks an enforcement action proposed by another local authority because it believes the action to be inconsistent with advice it has previously given (whether to the business or to other local authorities) the local authority can challenge this by referring the decision to the LBRO. The Act also makes provision for primary authorities and businesses to refer cases to the LBRO in certain circumstances. The LBRO will then determine the outcome.
Part 3 of the Act will enable ministers to confer new civil sanctioning powers on regulators in relation to specific offences. The powers will be granted by ministerial order. Regulators will not be given automatic access to them. This will allow regulators to tackle non-compliance in ways that are transparent, flexible and proportionate to the offence. The new powers are an alternative to criminal prosecution.
The new powers include:
- Fixed monetary penalties – these are fines of relatively low fixed amounts intended to be used in respect of low level, minor or high volume instances of non-compliance. It is envisaged that fixed monetary penalties will enable regulators, in suitable cases, to enforce less serious offences in a more proportionate way than a prosecution. They can also be used to avoid the stigma of a criminal record
- Discretionary requirements - include variable monetary penalties, compliance notices and restoration notices. They are a package of sanctions that may be imposed either separately or in combination. Generally, they should be used as a response to mid to high level examples of regulatory non-compliance
- Variable monetary penalties – can be set by the regulator at a level that removes any financial gain arising from an offence and takes account of factors such as the gravity of the failure and the history of compliance
- Compliance notices - requiring a non-compliant business to undertake certain actions to bring themselves back into compliance, for example by making good an unsafe piece of equipment, changing a process or providing training
- Restoration notices - can be used to ensure that a business deals with the consequences of the offence, for example by cleaning up an area contaminated as a result of the offence or reimbursing customers' money
The order giving the regulator power to impose discretionary requirements must also provide for the business to be able to give the regulator an undertaking to take action to benefit a third party affected by the offence, including the payment of a sum of money. It will be up to the regulator to decide whether to accept it, and how to take the undertaking into account when making his/her sanctioning decision. It is for the business to offer such action (perhaps after brief discussions with the regulator)
- Stop notices - require a business to cease an activity that is causing, or presents a significant risk of causing, serious harm. Such activities might, for example, include a manufacturing process, the use of certain equipment or the sale of a particular product
- Enforcement undertakings - an agreement offered by a business to a regulator to take specific actions relating to what the regulator reasonably suspects to be an offence. For example, a business may undertake to clean up an area that has been contaminated by its non-compliant actions or offer to donate money to charity supporting those who have been affected by the offence. A regulator is not obliged to accept enforcement undertakings in a particular case. Once an undertaking has been accepted and the business complies with it, the business may not be convicted at any time for the original offence or have an administrative sanction imposed on it
In practice, secondary legislation introducing the powers to various regulators is likely to be brought in on a piecemeal basis.
Part 4 provides for the introduction of a duty on regulators not to impose or maintain unnecessary burdens. The duty requires any specified regulator to review the burdens it imposes in the delivery of its objectives and to remove any unnecessary burdens.