The Health and Safety at Work Act Bares its Teeth

Sentencing under the New Health and Safety Legislation

The Health and Safety at Work Act 2015 ("the HSWA") attracted much attention when it was enacted in April 2016, largely due to its imposition of widespread workplace health and safety duties and significantly increased penalties for breaches.

Under the legislation, corporate duty-holders face a maximum penalty of $3 million for a reckless breach of health and safety, a sum six times higher than the equivalent offence under the HSWA's predecessor. The HSWA also contemplates two lesser tiers of offences, which likewise attract substantial fines. Yet, many businesses have been unsure about how these thresholds would translate to actual sentences. This uncertainty has been somewhat addressed by the District Court's first two sentencing decisions, which provide initial guidance as to how the sentencing principles outlined in the HSWA ought to be applied and the quantum of fines which are likely to be imposed.

 A Brief Look at Sentencing under the HSWA

The HSWA requires the Court to apply the Sentencing Act 2002, taking particular account of a number of prescribed criteria, before setting the quantum of a penalty. These criteria include the safety record of the offender; the degree of departure from prevailing standards; and the offender's financial capacity or ability to pay any fine to the extent that it has the effect of increasing the amount of the fine. 

In a novel approach, the Court is also entitled to make a variety of sentencing orders against the offender, including an order to contribute to WorkSafe's costs towards the prosecution, a work health and safety training order, an injunction targeting particular conduct or actions, or an adverse publicity order. The Court might alternatively adjourn a proceeding for up to two years and make an order for the release of a person if that person gives a court-ordered enforceable undertaking.

WorkSafe New Zealand v Budget Plastics (New Zealand) Ltd [2017] NZDC 17395

The sentencing principles under the HSWA were recently applied for the first time in WorkSafe New Zealand v Budget Plastics (New Zealand). This case involved an incident in which a worker's hand was amputated from his forefingers down to his wrist after it was caught on a machine he was operating in the workplace.

The employer pleaded guilty to a failure to ensure, so far as is reasonably practicable, the health and safety of the worker. The maximum penalty for such an offence, where the failure exposed the worker to a risk of death or serious injury, is a fine not exceeding $1.5 million.

In sentencing the employer, the Court first noted that the principles set out under the previous legislation and which were recorded in Department of Labour v Hanham & Philip Contractors Limited remained applicable. This involved assessing the amount of reparation, fixing the amount of the fine, and making an overall assessment of the proportionality and appropriateness of the total imposition of such amounts.

Reparation was first fixed at $37,500, in light of comparable cases under the previous legislation. The Court then turned its mind to the quantum of the fine, noting that it was not authorised to make sentencing guidelines and instead could only adapt available authorities. As such, it was not willing to apply the increased culpability bands provided by WorkSafe in reflection of the heightened liability under the new legislation, nor was it willing to draw upon Australian authorities, as counsel for the employer had submitted.

Turning to assess culpability, the Court considered that there was an obvious risk of amputation to those using the machine and that the incident was foreseeable. On this basis, the Court categorised the culpability as moderate. Rather than fixing a starting point, the Court opted to suggest a range between $400,000 and $600,000. The Court then applied aggravating and mitigating factors and decided that the end sentence ought to be between $210,000 and $315,000.

The final consideration, and arguably one of the more influential factors in relation to the setting of the fine, was financial capacity. The employer had provided evidence which outlined that it could not pay any more than $100,000. Whilst WorkSafe did not challenge this evidence, it stressed that penalties under health and safety must "bite" and not be at a "licence fee" level. The Court referred to case law which recognised "while, generally, a court should impose a fine within the offender's ability to pay, there is authority for the proposition that, in appropriate cases, fines may be imposed at a level beyond the company's apparent means ...[However] ...there may be cases where the offences are so serious that the defendant ought not to be in business." Satisfied that a fine of above $100,000 was outside of the employer's means, and not of the opinion that the case was serious enough to stop from employer from operating, the Court reduced the fine to the maximum that was realistically able to be paid, being the sum of $100,000.

WorkSafe New Zealand v Rangiora Carpets Limited [2017] NZDC 22587

Budget Plastics has since been supplemented by WorkSafe New Zealand v Rangiora Carpets Limited. In this case, the employer was prosecuted for health and safety breaches, after a worker slipped from a mezzanine and fell through a false ceiling primarily constructed of plasterboard. As a result of the accident, the worker broke her arm, shoulder and collarbone, fractured her pelvis and suffered a laceration to her head. The employer pleaded guilty to a failure to comply with duty that exposes individual to risk of death or serious injury or serious illness.

The Court again acknowledged that the approach under the previous legislation was broadly required under the new regime. However, as the Court was now able to make a number of ancillary orders, an additional step was required in the process at the third stage.

Turning first to assess the quantum of reparation, the Court noted that the victim suffered substantially as a result of the accident. Similar cases had attracted reparation awards between $15,000 to $20,000. The Court considered that this was appropriate, setting the final award at $20,000.

In relation to the fine, the Court recognised that the starting point was the three bands outlined in Hanham & Philip. However, in doing so, it indicated that these bands on occasion fell short, citing the Pike River tragedy as an example where a de facto fourth band was adopted.

Having considered the bands submitted by both parties, the Court opined that the approach required further stratification than three or four bands in order to take account of the significant increase in the maximum sentence and assist with meaningful placement of offending within the wide sentencing range available. Whilst it recognised that appellate guidance would be required at some stage, it set the culpability bands as follows: 

Culpability Band

Fine

Low

$0 to $150,000

Low/Medium

$150,000 to $350,000

Medium

$350,000 to $600,000

Medium/High

$600,000 to $850,000

High

$850,000 to $1,100,000

Extremely High

$1,100,000 and above

 

Having set the bands, the Court considered that the present case fell between the low/medium and medium bands, and adopted a starting point of $300,000. The Court then turned to consider aggravating and mitigating factors, including that the employer had cooperated with the investigation, had a blemish-free safety record prior to the accident, and had taken remedial steps to prevent similar accidents. The Court applied a 30% discount in reflection of these mitigating factors and a further discount of 25% given the employer's early guilty plea. This reduced the fine to $157,500, subject to adjustment in light of the employer's financial capacity.

The Court then turned to consider ancillary orders, noting that despite the wide availability of potential orders under the HSWA, WorkSafe had simply sought costs. These were awarded at $1228.  

The final step was to assess the fine, reparation and costs imposed for overall proportionality. This turned upon what level of fine would "bite" the employer and serve the relevant purposes, without going too far.

In terms of financial capacity, the Court first noted that where impecuniosity meant that a defendant was unable to meet both a fine and reparation, reparation was to be given primacy. Further, fines ought to be sufficient to deter both the offender and the wider community from breaches of health and safety obligations.

Another relevant consideration was public interest. In particular, the Court acknowledged that many families in the town relied on the business for their livelihood. In addition, whilst it had breached health and safety obligations, the employer was otherwise a responsible corporate citizen. To put it to the sword by setting a fine out of its reach, simply because of a single unfortunate accident, was therefore seen as "nonsense" by the Court. Only in exceptional cases, likely involving repeat offending and/or the most egregious of breaches, would the Court impose a sentence knowing it would force a business to close its doors.

Having viewed evidence on the employer's financial capacity, the Court set reparation at the sum of $20,000 and costs at $1228 to be paid within 28 days, and a total fine of $157,000, of which a lump sum of $50,000 was to be paid within 28 days and the balance paid at a rate of $1,000 per week over the following two years.

What can we take from these cases?

The Court's decision in Budget Plastics has been viewed as a missed opportunity for a number of reasons. For example, the Court turned down the opportunity to set sentencing guidelines in the context of the new regime. It was also unwilling to look at comparable Australian decisions or explain its reasoning in setting the mid-level culpability bands. This has made it difficult for businesses to draw upon the case in order to estimate their own potential exposure to penalties under the HSWA.

The lingering uncertainty has been somewhat remedied by the Rangiora Carpets case, which provided a greater willingness to identify and apply a culpability bands system, with increased but narrower bands, under the new regime and address the availability of ancillary orders. The weight given to financial capacity and public interest considerations has also been clarified.

From these two cases, it appears relatively clear that the approach under Hanham & Philip, with slight modification, remains the starting point. From there, the Court is willing to adopt a higher scale for assessing culpability, as well as take into account the employer's ability to pay. It will be interesting to see how this approach develops as more decisions are released.

Jennifer Mills website

Jennifer Mills

Partner

E: jennifer.mills@ah.co.nz

P: +64 9 356 2621

M: +64 21 304 604

Jess Greenheld website

Jess Greenheld

Solicitor

E: jess.greenheld@ah.co.nz

P: +64 9 920 9268

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