The number of company directors prosecuted for health and safety offences has more than trebled in a year, according to research from global law firm Clyde & Co.
Data obtained directly from the Health and Safety Executive (HSE) shows that 46 company directors and senior managers were prosecuted by the HSE in the year to 31 March 2016, compared to 15 in the previous year.
Meanwhile, Clyde & Co points out that the number of employees prosecuted has fallen, with just one individual employee prosecuted by the HSE in 2015/16, compared to 10 in the previous year.
Chris Morrison, Partner and UK Head of Safety, Health & Environment at Clyde & Co comments: "The data confirms what we've been seeing in practice with the HSE displaying an increased zeal to prosecute the most senior individuals within a business yet virtually ignoring employees who are frequently more culpable."
"By making senior management responsible for the health and safety failings of their business and their staff, the increased enforcement is a serious boardroom issue."
According to the research, of the 46 prosecutions, 34 found were found guilty, resulting in 12 prison sentences. The longest prison sentence imposed was two years.
Chris Morrison continues: "While the majority of director prosecutions relate to SME businesses due to there typically being some form of proximity or nexus with the director, the new game changing sentencing guideline for health and safety breaches with turnover related fines has created a new set of worries for directors of all sized businesses."
Value of HSE fines on the rise
According to separate research by Clyde & Co, the total value of fines imposed following HSE prosecutions in the first six months since the new guideline was introduced (1 February 2016) has risen by 43 per cent compared to the same period in the previous year.
The data received by Clyde & Co directly from the HSE showed that fines totalled £20.6 million from February 2016 to August 2016, compared to £14.4 million in February 2015 to August 2015 – a 43 per cent increase. However, this figure does not include sentences imposed in cases prosecuted by local authorities and, anecdotally, the firm believes the true figure is likely to be much higher than the official statistics suggest.
Clyde & Co points out that in the past few weeks there has been a spate of high value, high profile fines. Network Rail was fined £4 million, Foodles Production (for an incident involving Harrison Ford) was fined £1.6 million and Merlin Entertainments received the highest fine to date (under the Guideline), £5 million.
Chris Morrison comments: "After decades of relatively stable and predictable fines, the tide is now rising rapidly as the new guideline is applied by the criminal courts. The worrying thing for company directors is that fines are now routinely hitting the £1 million mark for non-fatal offences and even those where nobody has been injured meaning that any breach of the Health and Safety Act is now potentially a serious threat to a company's bottom line."
Clyde & Co explains that under the new guidelines the value of fines against companies vary depending on the size of the organisation (determined by reference to turnover or equivalent) but can exceed £20 million for the very worst cases involving corporate manslaughter – and potentially even more for the largest companies.
However, the firm's analysis of the sentencing trends suggests that the biggest impact is presently being felt by those organisations in the "medium" sized category (turnover between £10-50m). These businesses are seeing fines removing a higher proportion of their turnover than any other business group.
Chris Morrison continues: "The definitive guideline on sentencing health and safety matters is biting hard, but there is unquestionably more pain to come. We already know the Court of Appeal has paved the way for fines equal to 100 per cent of a business' pre-tax net profit with what appears to be a desire to bring regulatory criminal fines in line with financial services fines."
The Court of Appeal delivered a judgement in June last year in an environmental prosecution, which sent a warning that convicted companies should expect fines to be in the millions of pounds where repeated operational failures occur. It also warned that companies with a large turnover could face fines measured in the tens of millions of pounds, even reaching in excess of £100 million, explains Clyde & Co.
"Whilst health and safety has for many years featured prominently on many Board Meeting agendas, time spent on the point has not necessarily been significant. However, with the risk of turnover related health and safety fines now being so large, they are now material from an accounting and governance perspective which demands that all Directors, Executive and Non-Executive alike, sit up and take note."
"The new sentencing guideline means the commission and conviction of a health and safety offence has now become a potentially business critical issue, which senior management can no longer disregard as immaterial", adds Chris Morrison.