Last week the first fine was imposed on a business for breach of the Health and Safety at Work Act 2015 (HSWA).
WorkSafe New Zealand v Budget Plastics (New Zealand) Limited
This first case relates to an incident in which a portion of a worker’s hand was amputated after it was caught in the auger of a plastic extrusion machine he was operating in his employer’s workplace.
Budget Plastics pleaded guilty to the charge. This was essentially that as a PCBU it failed to ensure, so far as was reasonably practicable, the health and safety of a worker while he was at work in the business or undertaking, namely operating a plastic extrusion machine. That failure had exposed the employee to a risk of death or serious injury arising from exposure to the machine’s auger. This is an offence pursuant to sections 36(2)(a), 48(1) and 2(c) of the HSWA, punishable by a maximum penalty of a fine not exceeding $1.5M.
As a result of its investigation, WorkSafe identified that:
- The extrusion machine was insufficiently guarded.
- The extrusion machine was not fitted with appropriately located emergency stop controls.
- Budget Plastics did not have adequate systems in place for identifying hazards in the workplace.
- Budget Plastics did not have an adequate safe operating procedure for use of the machine.
- Budget Plastics did not have adequate policies for training workers in the safe use of the machine. Hazard identification training was carried out on a verbal and primarily supervised practical basis.
- The sole director of Budget Plastics had little awareness of, or involvement in, health and safety issues until six weeks prior to the incident. He understood that the regulatory requirements in New Zealand and China were similar – which was incorrect. He became aware that changes in health and safety in the workplace needed to be made in early 2016, and was in the process of making those changes at the time of the incident.
Of note was the fact that Budget Plastics had engaged a health and safety consultant a couple of months prior to the incident to conduct a health and safety assessment of the factory. The consultant noted that there was a good deal that needed to be done to get Budget Plastics operating to a compliance standard. At the time of the incident, Budget Plastics had implemented some of the suggested changes but not all.
Under the previous Act (the Health and Safety in Employment Act 1992), the starting point for the fine in such cases would have been $90,000-$100,000. In this case, the court said that the starting point under the HSWA in assessing the fine was in the range of $400,000 to $600,000. From there, discounts of up to 30% can be applied for payment of reparation, cooperation in the investigation, good character and the like, and lastly, a 25% deduction for an early guilty plea.
The court said that it would have imposed a fine of $275,000 on Budget Plastics, but for the inability of the business to pay that by reference to accounting evidence. The court reduced the fine to $100,000.
Key take outs from this decision are:
- As to be expected, fines will increase under the HSWA. It was interesting to note that in this case, WorkSafe’s starting position with the fine was $900,000.
- More businesses than in the past will legitimately say that they do not have the ability to pay those fines. As such, accountancy evidence will be required at sentencing to prove that, and so reduce the fine.
- Fines of this magnitude will encourage businesses to apply to WorkSafe to accept an Enforceable Undertaking instead of pursuing the criminal proceeding to conviction and fine.
- WorkSafe expects a financial commitment from the employer in lieu of conviction, but the process is not only about spending money on good causes. The quality of the proposal is important and must meet WorkSafe’s policy criteria.
- WorkSafe’s criteria prescribe that injured persons must be compensated as a condition of an Enforceable Undertaking being accepted.
We are experienced in advising clients in management of their risk and so compliance with the HSWA. We advise clients on a regular basis on their policies, procedures and systems. We routinely act for defendants in WorkSafe investigations and prosecutions, and in the Enforceable Undertaking process.