A Record Year for EHS Non-Compliance fines in the UK
The sentencing landscape for Environmental, Health and Safety offences in the UK (England & Wales specifically) has undergone significant change over the last 18 months. In England and Wales, companies have been handed record fines in these fields. So what does this mean for businesses?
Health and Safety
The shift towards higher fines in England and Wales all started in February 2016, with the publishing of the Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences: Definitive Guideline. The Guideline is binding and places requirements on the Courts to assess offences by taking into account the size of the business, the seriousness of the offence and any other ‘aggravating factors’ such as previous offences and cost-cutting at the expense of safety. Counter to this, the Courts must also consider mitigating circumstances such as evidence taken to voluntarily remedy the problem and reductions for guilty pleas.
This has led to a much larger amount of convictions resulting in 7-figure fines. At least 18 cases exceeded the £1 million mark in 2016. In 2015, there were only 2. Amongst these cases, 2016 saw two particularly significant fines for breaches under the Health and Safety at Work Act 1974. The first of these was handed to Network Rail following an incident that led to the death of a pedestrian on a level crossing, with the rail operator having to pay a hefty £4 million. Soon after, Merlin Attractions were fined an even higher £5 million for the high-profile accident that took place on the ‘Smiler’ ride at Alton Towers Theme Park, which resulted in 16 people being injured and 2 of those having legs amputated. This was a record for a non-fatal accident. It is worth noting that these fines would have been set at £6 million and £7.5 million respectively, if the two companies had not pleaded guilty to the offences. In total, 2016 saw a 148% increase in the overall amount of fines compared with 2015.
But what can businesses learn from these high-profile cases? Perhaps the most important lesson to take away is the importance of recognising when a health and safety failing exists and issuing a guilty plea. In both cases mentioned, this reduced the amount of the fine by a substantial amount. The full significance of this will become clearer when the Sentencing Council publishes updated guidelines for reductions in sentencing for cases where there is a guilty plea. The cases also show that, for the moment, the Courts are willing to stick within the sentencing ranges in the guidelines in relation to the size of the company. However, they acknowledged that how ‘size of the company’ is assessed could be open to interpretation. Of course, if a company is placed in the higher size bracket, a larger fine will follow.
The general consensus is that this trend of higher fines is set to continue. Because of this, certain businesses are already anticipating potential large fines. The UK’s biggest construction company, Balfour Beatty, have even set aside, what they describe as a ‘prudent’, £25 million reserve to ensure that it can meet future fines. This move, although controversial, could be followed by others further down the line.
Not wanting to be left behind, environmental fines have also experienced a sharp increase recently. However, where fines for health and safety offences have been steadily high over the last 18 months and progressively built towards the Alton Towers fine, all previous environmental fines were blown out of the water in March this year.
Similarly to health and safety fines, Courts follow the Environmental Offences: Definitive Guideline, when issuing environmental fines. These have applied since 2014 and have resulted in a number of sentences which hit the £1 million barrier. By December 2016, the record fine for an environmental offence stood at £2 million.
Following the case in March involving Thames Water and the Environment Agency, where the company was found guilty of dumping 1.4 billion litres of raw sewage into the Thames, this record was catapulted to a stratospheric £20 million (a 10-fold increase for all you Maths fans out there). Although it was described as the ‘biggest freshwater pollution case in the Environment Agency’s 20-year history’, it would be fair to say that the level of the fine was perhaps not expected.
The amount is an attempt to make water companies get the message and realise the environmental impact that such actions cause. However, this judgement sets a precedent not only for water companies but for any company disposing of waste inappropriately and causing pollution.
Businesses should view this as a timely warning and ensure that effective systems are in place to comply with environmental requirements and avoid pollution from the top down. A fine that is even a fraction of that received by Thames Water could be extremely damaging for smaller businesses.
It remains to be seen if the decision taken in the Thames Water case is an anomaly or if it will set the wheels in motion on more regular eye-watering sentences. Despite this, it does appear that when it comes to offences concerning either environmental or health and safety in England and Wales, these large fines are here to stay. Now more than ever, companies must pay careful attention to environmental and health and safety issues, as any damage done through non-compliance will not only harm their reputation, they will also feel the effects on their balance sheet. Without an effective EHS management system in place, deep pockets will be needed.