Health and Safety (Company Director Liability)

– in the House of Commons at 3:41 pm on 19th January 2010.

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Motion for leave to bring in a Bill (Standing Order No. 23)

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Photo of Frank Doran Frank Doran Chair, Administration Committee 3:49 pm, 19th January 2010

I beg to move,

That leave be given to bring in a Bill to amend the Health and Safety at Work etc Act 1974 in respect of the liability of company directors;
and for connected purposes.

Thank you, Mr. Speaker. I was beginning to think that someone was trying to talk the Bill out. Over the past 12 years, we have made substantial progress on health and safety at work issues. I am particularly pleased and proud that this Government passed the Corporate Manslaughter and Corporate Homicide Act 2007, but that Act did not address all outstanding issues, and there are still gaps. My Bill is intended to fill one of the more significant ones, relating to the responsibility of company directors under the current legislation.

Under the Health and Safety at Work, etc. Act 1974, primary duties are placed on an employer. Where that employer is a company, the duties are placed on the company as a separate legal entity, and not on the directors or shareholders. There are some areas in which it could be argued that there is some responsibility on directors. Section 7 of the Act, for example, places duties on all employees in respect of their own safety or that of others. However, that seems to operate only when an individual is acting as an employee, and not as an officer of the company, which is what a director is.

Section 37 of the Act imposes specific duties on directors. Subsection (1) states:

"It is a primary duty of a director of a body corporate to take all reasonable steps to ensure that the body corporate acts in accordance with the obligations imposed on it by any regulations, orders or other instruments of legislative character relating to health and safety. Any director failing to carry out this duty shall be guilty of an offence and shall be liable to be proceeded against and punished accordingly."

There have been prosecutions under this section, but only a handful each year compared with the number of industrial accidents.

The problem with section 37 is that, before there can be a successful prosecution, the prosecutors are required to prove that a company director was aware, or should have been aware, that an offence had been committed. There is no obligation on any company director to take action to inform themselves of any offences being committed by the company or to take steps to prevent offences from being committed.

The duties imposed under the 1974 Act on employers across the board, including companies, are positive. In general, those duties require the good management and common sense that a sensible employer would employ anyway-namely, the need to look at and assess risks associated with any task, and to take sensible measures to tackle them.

This general duty is in stark contrast to the position of directors of a company. The legislation imposes no positive obligations on directors. The responsibilities placed on directors by section 37 have been very narrowly interpreted by the courts. Companies that decide not to place specific safety responsibilities on directors, or that can draft requirements in such a way that they can be easily complied with, can therefore avoid prosecution without too much difficulty. The approach in section 37 in respect of company directors is totally contrary to the whole ethos and philosophy of the rest of the Health and Safety at Work, etc. Act, which encourages good practice.

The Health and Safety Executive attempted to correct this anomaly in 2001 by introducing a voluntary code of guidance. Among other provisions, the code provides that

"each member of the Board needs to accept their individual role in providing health and safety leadership for their organisation", and

"recommends that Boards appoint one of their number to be the Health and Safety Director".

Despite the enthusiastic reception of the code by business organisations, the majority of companies have not implemented its recommendations. In 2007, the Union of Construction, Allied Trades and Technicians commissioned a study of the role of directors in health and safety. The report, "Bringing Justice To the Boardroom", is an excellent and important piece of work, and the union is to be congratulated on commissioning it. I have leaned on it heavily in my own research.

One of the report's most significant findings, based on HSE data, is that only 44 per cent. of organisations have a health and safety director at board level. That is obviously disappointing because, again using HSE data, the report shows consistently positive effects from attaching direct responsibility for health and safety to a named director.

The report contains a list of organisations that complied with the guidelines. Those organisations showed reduced accident rates ranging from a 4.3 per cent. reduction in the one year at Neales Waste, through to a 100 per cent. decrease in recordable incidents-down from a seven-year average of nine to zero in 2004-at Esso's Fawley refinery. Other well-known business names showed equally impressive reductions. Debenhams reported a 20 per cent. reduction in accidents in a one-year period, and Sainsbury's showed a 28 per cent. reduction in reportable incidents over three years. British Sugar had a 43 per cent. reduction in lost-time injuries over two years, and Zurich Insurance-we always like to see the insurance industry doing well in this area-reported a 46 per cent. reduction in its accident rate over two years.

The payback on health and safety investment is not just about reduced accident rates. Such investment improves efficiency and staff morale, reduces costs and increases profitability, but, despite the best efforts of the HSE, the support of employer organisations, and these results, the UCATT report shows that only 44 per cent. of organisations have adopted the voluntary code.

The voluntary approach is not working, so more encouragement is needed to persuade employers to take health and safety much more seriously. Further research commissioned by the HSE shows how important legal regulation is in comparison with the voluntary approach. Following a critical report by the Work and Pensions Committee in 2004, the HSE commissioned a report from Professor Philip James. After a review of the evidence, he found that

"this evidence does indicate that statutory requirements are a major and perhaps the main driver of director behaviour with regard to the issue of health and safety at work. It also indicates that directors are influenced by potential personal legal liabilities, even when the likelihood of their being penalised is low-a point which further suggests that the presence of such liabilities can have a positive impact".

That is direct and to the point. Further HSE research shows that 61 per cent. of directors or managers agree or strongly agree that individuals' belief that they could possibly be imprisoned constitutes an essential or important argument for enforcement to have the deterrent effect, while 52 per cent. cite individual legal consequences as essential or important.

Despite consistent improvement in the years since the Health and Safety at Work, etc. Act 1974 was introduced, the number of deaths, serious injury and illness recorded in the workplace is still far too high. In 2008-09, 180 workers were killed at work, 131,895 suffered serious injury, a further 246,000 suffered reportable injuries and 551,000 new cases of illness caused at work were recorded. The numbers of death, injury and illness are high, but the number of prosecutions is low. The HSE prosecution database indicates that, on average, only seven directors or senior managers have been convicted of health and safety offences in each of the five years up to 2007. Over the five-year period in which around 350 construction workers died and 9,000 suffered major injuries, only 13 construction company directors were convicted for a health and safety offence.

All of the evidence points very clearly to the fact that the voluntary approach is not working. We desperately need another approach-one that will bring the responsibilities of company directors into line with all other employers under our health and safety legislation, and one that will be of benefit not just to the work force but, as the HSE's own research shows, to employers as well.

My Bill will place a positive duty on all company directors to take all reasonable steps to ensure health and safety in all aspects of the company's activities-effectively to put them in the same position as all other employers and to remove a glaring anomaly in our health and safety laws. The evidence clearly shows that this will save the lives and livelihoods of people across the UK. I commend the Bill to the House.

Question put and agreed to.

Ordered,

That Mr. Frank Doran, Tony Lloyd, Mr. Stephen Hepburn, Rob Marris, Jim Sheridan, Mr. Ian Davidson, Judy Mallaber, Natascha Engel, Miss Anne Begg and Mr. Lindsay Hoyle present the Bill.

Mr. Frank Doran accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 23 April, and to be printed (Bill 51).

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