When the Health and Safety at Work Act 2015 (HSWA) came into force in April 2016, there was much discussion about the new enforcement measures introduced to ensure duty holders complied with their obligations, Graeme Tanner and Joseph Williams note
The HSWA signalled a clear legislative intent to ensure duty holders under the HSWA were held accountable where acts or omissions in a workplace caused, or created an undue risk of, harm.
Among other enforcement measures available, the HSWA significantly increased the maximum fines for breaches of health obligations over those previously available under the Health and Safety in Employment Act 1992 (HSEA).
Enforceable undertakings were also introduced to provide an alternative to prosecution in appropriate cases.
The various enforcement measures pursued by WorkSafe New Zealand (WorkSafe) over the past 12 months and sentencing trends that have emerged through the District Court in relation to health and safety prosecutions offer an indication of the likely trajectory of health and safety prosecutions going forward.
Over the last 12 months, as health and safety prosecutions under the HSWA have started to make their way through the system, the District Court has had occasion to consider the maximum fines now provided for breach of duty under the act.
In doing so the District Court has had to consider how the legislative intent of the HSWA should be reflected in sentencing determinations.
Under the HSEA, the preferred approach by the courts in addressing the quantum of fines for breach of duty was to address the culpability of the duty holder for the breach of duty by applying three bands as adopted in the High Court decision of Department of Labour v Hanham & Philp Contractors Limited:
|Low culpability||Up to $50,000|
|Medium culpability||$50,000 to $100,000|
|High culpability||$100,000 to $175,000|
The Court also noted that fines up to the previous statutory maximum of $250,000 could be imposed in cases of extremely high culpability, effectively creating a fourth band for appropriate cases.
Once culpability was assessed, the courts would then adjust any fine imposed with reference to aggravating or mitigating factors.
This approach allowed for a level of consistency and uniformity in how fines were assessed by the District Court under the HSEA.
The HSWA instituted far more punitive fines than those provided under the HSEA.
For example, under section 47 of the HSWA, which deals with reckless conduct in respect of duty, an individual who is not a person conducting a business or undertaking (PCBU) can now face a fine of up to $300,000 or 5 years imprisonment, or both.
A PCBU or one of its officers could face a fine up to $600,000 or 5 years imprisonment, or both.
Any other person (i.e. a company) could face the maximum penalty of $3 million; a sum six times higher than the maximum fines available for equivalent offences under the HSEA.
Emerging trends and inconsistencies
Unsurprisingly, the introduction of significantly higher maximum fines under the HSWA caught everyone’s attention at the time that the act was introduced, particularly given the potential of these higher fines to cripple a company’s operation.
However, while that potential remains intact, the District Court has not yet adopted a consistent and uniform approach to assessing culpability bands since the introduction of the HSWA.
In WorkSafe New Zealand v Budget Plastics (New Zealand) Limited an employee’s hand was partially amputated when caught in the auger of a plastic extrusion machine.
WorkSafe submitted the bands from Hanham should be transposed across the full spectrum of available fines under the new regime.
The Court responded with concerns that such broad bands would make it difficult to achieve consistency and result in a starting point that is “too high”.
Judge Large commented that “it was not for the District Court to make sentencing guidelines”, before finding that culpability was moderate due to a variety of factors including the risk of injury, the injury itself and the foreseeability of harm.
He adopted a starting point of between $400,000 and $600,000. After adjustments, including an assessment of the company’s financial capacity, a fine of $100,000 was handed down.
In the more recent case of WorkSafe New Zealand v Rangiora Carpets Limited an employee slipped off the side of a mezzanine floor through a false ceiling and suffered a number of broken bones and a laceration to her head.
Judge Gilbert’s approach was to assess the amount of reparation, fix the amount of the fine, consider an ancillary order and then make an overall assessment as to the proportionality of the total imposition and reparation of the fine.
In this case Judge Gilbert expressed further concern that the three and four band approaches to assessing culpability advanced by WorkSafe would compromise consistency by allowing significant movement within each band.
He therefore proposed a six-band approach with smaller incremental bands ranging from low ($0 to $150,000) to extremely high ($1,100,000+).
In adopting this approach, Judge Gilbert imposed a starting point for a fine of $300,000 which was ultimately reduced to $157,500 following consideration of mitigating factors.
However, in a further sentencing in October 2017, Worksafe New Zealand v the Tasman Tanning Company Ltd, the District Court departed from the six-band approach above, instead preferring four-bands, consistent with that adopted in Hanham under the earlier HSEA, with necessary adjustments to take into account the maximum fines imposable under the HSWA.
|Low||$0 to $400,000|
|Medium||$400,000 to $800,000|
|High||$800,000 to $1,200,000|
|Extremely High||$1,200,000 to $1,500,000|
In Tasman Training Company, the starting point for the fine was set at $700,000 with the final amount set at $385,875 once aggravating and mitigating factors were taken into account, including prior health and safety record, an early guilty plea, co-operation with WorkSafe and remorse.
However, the Court’s approach differed again in WorkSafe New Zealand v Dimac Contractors Limited from November 2017, where the Court adopted the six-band approach to culpability provided in Rangiora, rather than the four-band approach in Tasman Training Company.
Overall, while this first wave of prosecutions under the HSWA show a general shift towards higher fines, and a willingness by the District Court to adopt culpability bands consistent with the approach endorsed by the High Court under the previous health and safety legislation, we have yet to see a uniform approach to culpability bands emerge.
Instead, the District Court has repeatedly noted its preference for guidance from the appellate courts in relation to sentencing under the new regime, making this an area to watch with continued interest in the year to come.
While there remains uncertainty regarding the application of culpability bands in respect of sentencing decisions, the HSWA is clear on the role that the Sentencing Act 2002 plays in the process of calculating a final figure for a fine, from the initial starting point.
In this regard, the courts are obliged to take into account a number of other factors, including the extent of the harm (or risk of harm), the safety record of the duty holder, and the financial capacity of the duty holder to pay a fine.
A clear theme that has emerged from the early prosecutions under the HSWA is the particular relevance that the District Court is attaching to a duty holder’s ability to pay any fine imposed.
Financial capacity of the relevant duty holder was a key factor in assessing the fine in Budget Plastic, Rangiora Carpets and Dimac Contractors, with the Court in each case either reducing the final fine or allowing for payment plans to meet the fines ultimately imposed by the Court.
In considering the issue of financial capacity, the Court noted in Rangiora Carpets that, except in the most serious cases, involving egregious and/or repeat offending, the Court is unlikely to impose a fine large enough to force a business to close its doors.
The Court also noted that where the defendant’s financial ability means that it is unable to meet both the cost of a fine and reparation, reparation is to be given primacy.
While this approach is consistent with the principles of the Sentencing Act, it will be interesting to see whether the appellate courts place the same weight on financial capacity, or whether higher fines are adopted in the knowledge that they may put small or medium businesses out of business.
Enforceable undertakings are the other significant (though less publicised) change brought under the HSWA.
These are legally binding agreements between a duty holder and WorkSafe to ensure that the duty holder undertakes to fix health and safety breaches and/or prevent like breaches from occurring in the future.
They act as an alternative to prosecution that the duty holder can propose to WorkSafe, who can then accept or deny the proposal.
In reaching an agreement on an enforceable undertaking, WorkSafe will take various factors into account such as the seriousness of potential harm, the views of any victims or workers associated with the breaches and conduct of the duty holder as well as their history of health and safety compliance.
It is important to note that proposals to enter into enforceable undertakings will not be taken lightly and should not be viewed as an ‘easy way out’ for non-compliant duty holders.
Any proposed measures will ensure that the duty holder does not merely comply with minimum standards but significantly improves their systems and processes.
In addition to non-financial measures, such undertakings ordinarily involve significant financial outlay, with the costs associated with enforceable undertakings so far ranging from $70,800.63 to $249,500 (not taking into account legal expenses).
To date, WorkSafe has accepted eight enforceable undertakings and it is likely that this number will continue to grow in the next 12 months in relation to cases where offending is deemed “serious but isolated”.
That said, it appears unlikely WorkSafe will afford repeat offenders with questionable health and safety records the opportunity to adopt enforceable undertakings.
As we continue to progress under the new health and safety regime we are likely to gain a lot more clarity from the courts and WorkSafe regarding their assessment of appropriate enforcement measures.
When looking to enforceable undertakings, these can be expected to continue to serve as an effective alternative to prosecution in appropriate cases and, despite the financial outlay associated with such undertakings to date, we expect that they will remain an attractive alternative for duty holders going forward.
While it is somewhat difficult to forecast the type of situations that will lend themselves to this measure, the current climate indicates that we are likely to see more enforceable undertakings entered into in cases of isolated breaches of duty by duty holders, where the duty holder can reasonably be expected to abide by the agreed undertaking(s) and has a good health and safety record.
With regard to fines, as seen through the early health and safety prosecutions under the HSWA, while the District Court has recognised the statutory intent of the act and been willing to impose higher fines in appropriate cases, it has yet to adopt a consistent approach to culpability bands as was seen under the previous regime.
At some point in the near future we expect that the appellate courts will be called on to consider sentencing for offences under the HSWA which will likely result in some much-needed guidelines in this area.
This may well include an assessment of both appropriate culpability bands in respect of the increased fines under the HSWA as well as a consideration of the impact that the financial capacity of a duty holder ought to have on any fine imposed by the courts.
Ultimately, while the new enforcement measures appear to be trending towards fulfilling the underlying purpose of the HSWA, there remains a level of uncertainty that hangs over health and safety prosecutions.
With that said, increased fines and enforcement measures have almost certainly resulted in increased industry-awareness of the importance of health and safety, and as more clarity is established at law, duty holders are likely to gain greater clarity on how to fulfil their obligations, and the consequences if they fail to do so.
Graeme Tanner is an associate and Joseph Williams a solicitor at Duncan Cotterill, a full service law firm with locations in Auckland, Wellington, Nelson and Christchurch