Last week the High Court reviewed several cases involving WorksafeNZ v.s. Stumpmaster Ltd, Tasman Tanning Company and Niagara Sawmilling Company Ltd. Now, we finally have some sentencing guidelines and clarity around fines under the Health and Safety at Work Act 2015.
What’s Are the New Sentencing Guidelines?
When working out how much to fine an organisation the Courts will:
- Assess the amount of reparation to be given to the victims (or their estate)
- Fix the amount of the fine by reference guideline bands:
- Low culpability: Up to $250,000
- Medium culpability: $250,000 to $600,000
- High culpability: $600,000 to $1,000,000
- Very high culpability: $1,000,000 plus
- Consider if there were any aggravating or mitigating factors (did the company plead guilty and work to remedy the problem).
- Make an overall assessment of the proportionality and appropriateness of the combined sanctions (fine and reparations) imposed. In short, will an organisation be able to pay an otherwise appropriate fine?
Where do you sit on the field?
Under the legislation, multiple parties can be charged at once (think landownerr, principle contractor, sub-contractors and workers). However, there is a hierarchy of culpability since the HASAW Act has officially ‘classifide’ duty holders:
1st Primary Duty Holder = Person in Charge of the Business or Undertaking PCBU
2nd Officers = Company Directors or Partners that exercise significant influence.
3rd Workers = carrying out work for the PCBU’s, including following instructions and using equipment safely.
If you are the General Manager, the ‘buck stops with you’. However, from now on, the argument that you are removed from the chain of causation because you only play at being ‘Director” on a bi-monthly basis won’t fly. Also, workers also need to take ownership of their actions or inactions while on the job.
What happened?
All of the companies were being fined under s 48 HASAW 2015 ‘Offence of failing to comply with a duty that exposes individual to risk of death or serious injury or serious illness.’
Stumpmaster Ltd:
- The team were cutting trees and the public were not excluded from the worksite. A woman was struck by a falling tree and suffered injuries requiring 6 days in hospital
- A Hazard ID had been completed; however, there was no signage or barriers (which were either in the van and at the company office).
- The company made a real effort to notify the industry and improve its HSE processes post incident
- Stumpmaster had an unblemished record and was a small one-person company that employed contractors.
District Court:
The Judge adopted a starting point of $450,000 to $500,000
– 30% pleading guilty
– 25 % other factors (culpability etc.)
= Fine $250,000 + Reparation $18,500
The fine was reduced to $90,000 and the payments were to be monthly over 5 years in consideration of the size of the company.
High Court
The court believed the starting point needed to be around $550,000; however, maintained the reduction for
- 30% pleading guilty
- 25 % other factors (culpability etc.)
- reduction due to size and scope of the business and ability to pay
= Fine $90,000 stands, the funds are available and the appeal was dismissed.
Tasman Tanning Company Ltd:
- A forklift operator was exposed to hydrogen sulphide fumes, he lost consciousness and struck his forehead while trying to get of the forklift.
- Hydrogen sulphide is poisonous, corrosive and flammable. The smell of ‘rotten eggs’ is a known warning sign, but the gas deadens your sense of smell and quickly affects your nervous system causing loss of consciousness.
- Three years earlier, at a different facility owned by the same company, two workers lost consciousness due to exposure to the gas. Two more workers lost consciousness when they tried to help their workmates. Two of these four victims had to be placed into medically induced comas so they could recover
Sentencing Considerations:
- There is ample material about the risks associated with hydrogen sulphide. March 2018 Workplace Exposure Standard (WES) review HYDROGEN SULPHIDE (CAS NO: 7783-06-4)
- Employees did not have personal gas monitors.
- The company was a repeat offender, there were inadequate workplace procedures, multiple examples of poor communication and a lack of supervision
Outcome in the High Court:
Reparation: Set at $18,000, then reduced to $13,000 as the defendant had already made a payment of $5,000.
Fine:
$550,000 starting point was;
+ 10% for repeat offence – $605,000;
– total discounts 40 per cent
= $363,000 fine
The appeal was allowed. The existing fine of $380,000 was decreased to $363,000.
Niagara Sawmilling Company Ltd:
- The victim worked on a grader/trimmer machine. He had two of his fingers partially amputated when he tried to dislodge a piece of wood that had got snagged.
- The machine’s fixed guard did not provide adequate protection.
- An external health and safety consultant had recommended that the guard be changed; however, the company’s in house Safety Advisor disagreed.
- The company had three previous convictions in 2003, 2011 and 2015.
Outcome in the High Court:
Ignoring a fundamental and long recognised duty to adequately guard machinery is a poor business decision.
The High Courts upheld the District Court’s decision. The District Court Judge assessed the offending as medium range
$500,000 Starting point
+ 15% uplift appropriate due to previous offending
– 25% for mitigating factors
– 25% for a guilty plea
Fine: $323,437
Reparation: $27,000
Points to Ponder: Getting a Bit Freaky about Fines
This week’s Freakonomics Podcast ‘Who Decides How Much a Life Is Worth?’ focused on how do Americans put a dollar value on a person’s life? According to Steve Dubner, the host, the hard part ‘isn’t attaching a dollar figure to each victim; …..it’s acknowledging that dollars can’t heal the pain.’
Dubner talks to Kenneth Feinberg who has decided what reparation payments would be for: Soldiers who went to Vietnam and were exposed to agent orange, 911vcitims, mass shooting victims such as Sandy Hook Elementary School and Pulse nightclub.
He also spoke to W. Kip Viscusi (Vanderbilt University’s Distinguished Professor of Law, Economics, and Management) about how to manage the problem. Both interviewees discussed the key questions asked when deciding any given sum were:
- How much money do you have to distribute?
- Who is eligible to get the money (the victim or the victim’s estate)
- How do you put a value on someone’s life?
- The value of statistical life refers to how much it’s worth to prevent one expected death.
- Value based on future lost earnings
- Something else?
- How do you apply the same methodology to multiple cases?
Writing about fines and reparation payments always raises huge ethical and moral issues around what is ‘reasonable’. Do I think the new High Court guidelines are on the right track? My answer is yes, because I think they are based on a sound methodology and are transparent. If business owners are prepared to cut corners and not meet minimum standards there will be consequences.
Would I like the challenge of trying to work out how much a company will be fined after they have had a catastrophic injury in their workplace? Absolutely no! For the moment, I’m quite happy trying to help my clients proactively manage their people and workplace so they never have to ask ‘should we just plead guilty and accept the fines?’
Have a safe and productive week.