April 2018 marks two years since the Health and Safety at Work Act 2015 (HSWA) came into force.
The sky has not fallen as doomsayers had envisaged. When HSWA was first enacted, there was a great deal of concern about officers’ liability, even leading to the resignation of some high-profile directors who were concerned about personal liability. In some quarters, the fear of personal liability eclipsed concern about the six-fold increase to the maximum fines for health and safety offending.
Two years on, we are not aware of any prosecutions of directors or other officers. We have, however, seen some substantial fines imposed for breaches of the legislation.
The first sentencing decision under HSWA, WorkSafe New Zealand v Budget Plastics (New Zealand) Limited, was delivered in August 2017 but related to offending which occurred in April 2016. While the decision was highly anticipated, the outcome was not surprising.
In Budget Plastics, a fine of $275,000 would have been imposed by the District Court, but for clear evidence that the PCBU company could not meet a higher fine without going out of business. The final fine of $100,000 was far higher though than fines imposed for similar offending under the ‘old’ Health and Safety in Employment Act 1992 (HSE). The outcome reflects Parliament’s clear signal in the HSWA that the fines imposed must increase to provide greater incentives for workplace health and safety precautions.
WorkSafe have been steadily progressing HSWA prosecutions through the District Court.
The data available on WorkSafe’s website shows that in January 2018 alone, its inspectors engaged in approximately 1000 assessments (workplace visits) across New Zealand. From the January 2018 assessments, WorkSafe undertook some 350 non-prosecution enforcement activities, and commenced some 16 investigations to determine whether prosecution was warranted.
As of today, we are aware of the sentencing outcomes of a further 14 WorkSafe prosecutions in the District Court following Budget Plastics.
By our calculation, the District Court has now imposed fines for breaches of the primary duty of care (s36, HSWA) totalling $2.175m, or an average of $145,033.60 for each s36 offence. The fines range from 0 (on 2 occasions) up to $380,000.
While a prosecution will always turn on its particulars facts, a brief comparison of fines under the HSE compared to the HSWA tends to confirm that an uplift is being applied to penalty. For example:
Avon Industries Limited was fined $61,600 for an offence against the HSE when a worker’s finger was crushed in an unguarded press (offence date, September 2014).
ITW NZ was fined $236,250 for an offence against HSWA when a worker lost 4 fingers in an improperly guarded press (offence date, July 2016).
The District Court has indicated that it is unwilling to fine PCBUs to the point of extinction, but will readily impose fines that ‘bite’ to ensure that health and safety is not seen as a mere cost of doing business.
Where a PCBU wishes to advance an argument that it cannot meet a fine at a particular level, it must be able to provide clear (usually expert) evidence to substantiate its position.
The Court’s approach to reparation awards to victims of health and safety offending has not notably changed under the HSWA. Usually, reference will be made to reparation awards that were made in previous similar cases. Anecdotal evidence indicates that reparation awards for fatal incidents have increased significantly over the last decade though, and are now routinely awarded at or above the $100,000 level. This may be a trend that continues as fines continue to rise. PCBUs should note that, unlike fines, it is lawful to have insurance for reparation orders and defence costs.
The Court also has a range of other orders it can make - including adverse publicity orders, restoration orders, work health and safety project orders - which have not been used by the Court to date. These types of remedies, however are regularly forming part of enforceable undertakings (an alternative to prosecution where there has been a breach of the HSWA) entered into with WorkSafe. These other orders may be utilised by the Court in the future to emphasis the sentencing purposes of denunciation and deterrence.
In conclusion, the recent decisions of the District Court do not make for pleasant reading. PCBUs continue to be prosecuted for incidents arising from obvious risks, which have foreseeable outcomes. Depressingly, in 2016 and 2017, there have been several prosecutions brought by WorkSafe for inadequately guarded machinery causing injury (invariably serious). These breaches will inevitably attract significant fines.
While the Court will balance the ability of a PCBU to pay a fine as part of the sentencing process, it is doubtful that the Court will be sympathetic to a PCBU that falls woefully short of the expected standards of health and safety management, like with well-known risks such as unguarded machinery.
As trite as it is, ‘a stich in time saves nine’. A PCBU that does not heed that prudent advice in the health and safety context may find that it is soon parted with its money.