In March 2017 Whirlpool UK Appliances Limited was fined £700,000 following the death of one of its contractors. The Company pled guilty to a breach of Section 3(1) of the Health and Safety at Work etc. Act 1974, which places an obligation on employers to ensure that, so far as is reasonably practicable, those that are not in their employment are not exposed to risks to their health or safety.
The fine was appealed and ultimately reduced to £300,000. This alert will look at the factors considered during the appeal and whether this will have an impact on future cases particularly for large and very large organisations where low profitability may be a factor.
On 21 March 2015 a contractor was working at a height of approximately 5 metres installing revised fire detection equipment. He was working in a MEWP. Whilst he was doing this, Whirlpool maintenance workers started up an overhead conveyor, unaware that he was working nearby. This caused the MEWP to tip over and he fell to the floor sustaining injuries from which he later died.
The HSE investigation found that there was no effective control or supervision in place to prevent both tasks being undertaken at the same time. The specific breaches of section 3 HSWA were:
- Whirlpool had not required the contractor to prepare a job-specific risk assessment and method statement for the work to be carried out on 21 March 2015;
- Whirlpool could have prepared a more detailed Permit to Work which specifically identified the potential risk posed by a working platform being used in the vicinity of the overhead conveyor and the control measures required.
Whirlpool entered a guilty plea to one count of breaching Section 3(1) of the Health and Safety at Work etc. Act 1974.
In 2014 Whirlpool had a recorded turnover of approximately £700m with profit before tax of £25m. In 2015 the recorded turnover was £710m however the company experienced a loss of £165m. The loss was as a result of two exceptional items. The first was a recall of products for corrective action remedying safety and quality issues, and the second was an impairment to an investment in a related company.
Whirlpool's turnover initially places it in the 'large' organisation bracket (turnover of £50 million and over) however as will become apparent below the company was actually sentenced as a 'very large' organisation.
The sentencing judge assessed culpability as low and found that there was a low likelihood of harm (harm category 3) given the incident occurred on a Saturday and very few people were in the factory although the seriousness of harm risked was level A (risk of death, lifelong dependency or significantly reduced life expectancy).
The sentencing judge was made aware of the loss suffered by Whirlpool in the most recent financial year but declined to draw distinction between companies with high costs and those with low.
A starting point of £1.2 million was used and reduced accordingly on the basis of an early guilty plea, the fact that there were no aggravating features present and on the contrary "every single mitigating feature [arose]" including:
- Whirlpool had procedures in place to minimise risk, although they had failed in this instance;
- There had been a full review of all policies and procedures and Whirlpool had done everything possible to eliminate further problems;
- Whirlpool fully co-operated in the investigation;
- There was a culture to commitment to safe systems and improvements in which all employees were engaged;
- Whirlpool had an exemplary health and safety record, with no previous convictions and profoundly regretted what had happened.
The company was fined £700,000, which was subsequently appealed on the basis that it was manifestly excessive.
Appeal Against Sentence
The Court of Appeal was asked to consider three issues:
- The impact of a death on the approach to the category ranges set out in the Definitive Guideline;
- How a 'very large' organisation is identified and then treated; and
- The impact of relatively poor profitability in the context of an organisation with a substantial turnover.
The impact of a death on the approach to the category ranges set out in the Definitive Guideline
When considering the harm category at Step 1 of the sentencing process, the Definitive Guideline states that where the offence was a significant cause of actual harm (not just the risk of harm) then the court must consider "either moving up a harm category or substantially moving up within the category range".
The Court of Appeal confirmed that in this case as the failings were a significant cause of death, it was justifiable to move up within the appropriate category range or move into the next harm category.
How a 'very large' organisation is identified and then treated
Under the Definitive Guideline the only assistance in determining whether an organisation is 'very large' is that if its turnover "very greatly exceeds" £50 million then "it may be necessary to move outside the suggested range to achieve a proportionate sentence."
It was clear when Whirlpool was sentenced that it had been considered under the Definitive Guideline as a 'very large' organisation although this was not explicitly referred to. This was on the basis that the starting point for the initial fine, £1.2 million, is almost 35 times greater than the starting point for a 'large' organisation with the same findings of low culpability and low likelihood of harm resulting in harm category 3 (starting point of £35,000 with a range of £10,000 - £140,000).
Indeed the Court of Appeal in its judgment stated that it is clear to them that Whirlpool must be a 'very large' organisation and that this must have also been the view of the sentencing judge.
Whilst the Court of Appeal fell short of providing guidance as to how a 'very large' organisation would be determined and did not wish to "create an artificial boundary" it did state that the language of the Definitive Guideline suggested that a 'very large' organisation is likely to have a turnover in multiples of £50 million.
The impact of relatively poor profitability in the context of an organisation with a substantial turnover
The Definitive Guideline states that a "fine must be sufficiently substantial to have a real economic impact" upon the organisation, however it further states that an organisations profitability will be relevant and that if an organisation has a small profit margin relative to its turnover, a downward adjustment may be needed. Conversely if an organisation has a large profit margin then upward adjustment may be necessary.
The Court of Appeal, whilst agreeing with the sentencing judge's assessment of culpability and harm category, considered that Step 3 of the Definitive Guideline had been incorrectly applied and stated the following:
"There is a significant difference between an organisation trading on wafer-thin margins and another…an organisation with a consistent recent history of losses is likely to be treated differently from one with consistent profitability"
However the Court of Appeal did not give weight to Whirlpool's argument that its low profit margin should be taken into account on the basis that they were unprecedented losses and did not affect the directors' remuneration.
Court of Appeal Decision
The Court of Appeal determined that the correct starting point should be £250,000 on the basis that there had been a fatality. This was then increased to £500,000 based on the company's substantial turnover.
The Court of Appeal then took a "step back" to review the four factors and determined that a reduction to £450,000, to take into account mitigation, would still be sufficient to have a real economic impact but was proportionate to the overall means of the organisation. No reduction was made to reflect the loss shown in the 2015 accounts.
The final step was for the Court of Appeal to reduce the fine to reflect the early guilty plea and it was determined that the appropriate fine in this case should be £300,000.
The Court of Appeal did however make it clear that this judgment was not intended to alter the policy of ensuring that organisations are made to pay fines that are properly proportionate to their means. The Court suggested that the circumstances of this case were unusual in that the offence was one of low culpability and low likelihood of harm and therefore had the case involved a higher level of culpability or likelihood of harm then the appropriate fine would have been much larger.
The Definitive Guideline has been in place for almost two years; the objective behind the introduction of it was to bring more consistency and certainty to the sentencing of health and safety matters. However the reality is that the sentencing ranges provided for are so wide and the circumstances of offending and those offending vary so extensively, that it is difficult to predict the likely outcome of sentencing. Each case is very much dealt with on its own merits and as Lord Chief Justice Burnett stated in the Whirlpool judgment "no two health and safety cases are the same". It certainly makes it difficult for an organisation which is prudently making provision for potentially significant financial penalty.
Although the Court was at pains to point out that this was a case very much decided on its own facts and that the low culpability of the organisation was a significant factor in the level of fine, this judgment is however important. The guidelines are largely silent as to how very large organisations should be treated and the judgment gives some assistance with this. There has been a great deal of discussion about the fact that the Definitive Guideline is focussed on an organisations turnover, which can be misleading in terms of an organisation's capability to pay, particularly where the organisation is one which is experiencing losses or low profitability. In the context of very large organisations the Court made it clear that there would need to be clear evidence of losses or poor profitability over an extended period for this to be taken into account on sentencing.