September 2010

Occupational Safety and Health

Increased fines for breaches of health and safety in the workplace

Employers have a duty to report all workplace accidents resulting in serious harm to the Department of Labour (“the Department”). The Department decides whether or not to investigate the accident. If an investigation is undertaken, the Department will then decide whether or not to prosecute.

All employers need to be aware that the fines for successful prosecutions have increased dramatically since the High Court’s decision in Department of Labour v Hanham and Philp Contractors Limited, Cookie Time Ltd, and Black Reef Mine Ltd.

In these three appeals the Department submitted that the time had come to revisit the sentencing principles set out in the 2004 guideline judgment of the High Court in Department of Labour v De Spa & Co Ltd.

In De Spa, the High Court dealt with three appeals by the Department in the year following the commencement of the Health and Safety in Employment Act (“the Act”) in 1993. The Act had consolidated some thirty previous statutes and substantially increased the maximum fines available. Under the then new legislation, the maximum penalty under section 50 (essentially, where employers have not ensured the safety of employees) was $50,000 where serious harm was caused to a victim and $25,000. in any other cases. This amounted to an increase in fines of ten-fold and five-fold respectively.

There was then an amendment to the Act, which came into force on 5 May 2003 and brought about a five-fold increase in the maximum penalty from $50,000 to $250,000. However, that increase was not being reflected in the level of fines being imposed by the courts as District Court Judges have resisted calls to substantially increase the level of fines until they received structured guidance from the High Court.

The Department put statistics before the Court in Hanham and Philp that showed the level of fines imposed since the five-fold increase in the maximum penalty had increased only slightly and that 88% of all fines imposed had been less than $20,000 (8% of the maximum fine). The highest fine ever imposed under section 50 was $110,000 (32% of the maximum fine).

The Court held in Hanham and Philp that their review of sentencing levels for offending under section 50 had shown that higher levels of fines were needed to meet the objects of the Act and the Sentencing Act.

The Court also considered that the increase in maximum penalties was a signal by Parliament to the Courts that sentences overall should be increased, while noting that sentencing is not a mathematical exercise.

  • The Court held that the broad categories of starting points for fines are as follows:

  • Low culpability: a fine of up to $50,000.

  • Medium culpability: a fine of between $50,000 and $100,000.

  • High culpability: a fine of between $100,000 and $175,000.

  • Extreme culpability: a fine of between $175,000 and $250,000.

The outcome of Hanham and Philp was that the fine of $10,000 imposed on Black Reef Mine Ltd was increased to $20,000, the fine of $15,000 imposed on Cookie Time Ltd was increased to $40,000 and the fine of $5,000 imposed on Hanham was increased to $50,000.

The Court’s direction flowing from Hanham and Philp is therefore a clear indication to employers that they should now expect greater consistency from the courts for starting points for fines, and the level of fines will certainly increase as District Court Judges get to grips with the High Court’s decision.

(Note that whilst an employer can insure against reparations and legal costs, they are not allowed to insure against any fines incurred.)