Companies not only face lawsuits from damaged employees and damaged customers; new rules on corporate manslaughter could see killer companies in the dock. Jessica McCallin reports.
The litigation culture has crossed the Atlantic and is here to stay. Workers no longer accept damage to their bodies and minds as a part of their working lives. Stress, Repetitive Strain Injury and elecromagnetic hazards have joined asbestosis, burns and crush injuries as the bases for claims against employers. You need only turn on your television set to see companies such as Claims Direct advertising their services between Brookside and Ally McBeal. Some of these `compensation companies' have gone a step further. They put up stalls in the high street, ask passing shoppers if they have had an injury in the past three years and offer to sign them on if they think they've got a 50% chance of winning.
Companies of all shapes and sizes are having to wake up to the fact that the risk/blame culture could turn to haunt them. Hence the rise of the risk manager: an employee tasked with identifying and containing all possible threats to the company's productivity, reputation, brand and balance sheet - a tough job for anyone who thinks otherwise.
And a job made all the more difficult by the pace of change in the sector. As soon as one risk is identified and contained, another one appears.
Health and safety issues show how the world is changing. Complying with health and safety provisions has long been a legal requirement. Until recently, safety issues were promoted to the detriment of health issues. But now, according to research by the Trades Union Congress, it's health issues which top the health and safety officers' list of concerns.
To an extent, this is understandable. Rather than 3,000-strong workforces operating heavy machinery in a factory, or dealing with dangerous chemicals in a processing plant, we now have a 300-strong workforce manning the phones in a call centre. The physical environment in which call centre people work seems safer than the factory floor. Employees are not at risk from molten iron or fork-lift trucks. But hidden health problems such as stress, back pain, RSI, bullying and deep vein thrombosis skyrocket in call centres and need to be taken every bit as seriously as collisions with factory equipment or trips and falls on the factory floor. There's also the rapidly emerging risk of acoustic shock: damage to hearing from loud noises - often unexpected - coming through the head-set.
As we continue to move towards a service economy, the risks companies face are, like stress, likely to remain multifaceted ones which they find hard to identify let alone manage.
Health and Safety risk problems often hit small to medium sized businesses more than larger firms. Alison Hoyes, director of the risk management arm of broker Hart Owens says: "In small and medium sized companies, one person usually does several jobs. These companies might not have the resources to appoint a dedicated risk manager. Some end up buying-in advice, but risk management, like any other sector, is subject to cowboy advisers. So buying advice is a risk in and of itself."
The environmental and health affects of products are coming under more scrutiny. Legislative moves at a national and European level could make companies guilty until proven innocent if something goes wrong with their products. Phil Bell of Royal and Sunalliance comments: "if the burden of proof in product liability cases changes, companies will have to prove that their product did not cause the problem. Can you prove your product is safe? Controversy surrounding electro-magnetic fields (EMFs) provides a case in point. To date, there is no conclusive evidence to say EMFs are dangerous. But if the burden of proof changes, companies using and selling products with EMFs will have to prove that they are not dangerous."
Bell continues: "Implicit in these proposed legislative changes is the need for companies to do more research into the products they make. They will have to do more safety testing and keep better records. They will also have to pay more attention to speculative press articles, such as the ones surrounding the dangers or EMFs and mobiles phones, because they could ultimately be liable, at some point in the future, for problems which they didn't know their product could cause."
The same burden of proof will apply if workers are injured by substances or practices at work. Will you, for example, be able to prove that that chemicals used to manufacture a product did not cause your employees condition? If not, your company might face a big compensation bill and bad publicity, all bad for the balance sheet and company morale. In a worst case scenario you might find the company is uninsurable. If a company cannot prove its products and practices are safe, insurers may be unwilling to take the risk of extending employer's liability insurance. This type of insurance is a legal requirement and without it you can't trade.
Some insurers are already thinking along these lines. One Lloyd's syndicate, which prefers to remain anonymous, has decided not to insure companies against health risks from EMFs.
The only good news for the risk manager, who may legitimately feel that the world is closing in on him, is that the amount of help available is increasing all the time. Insurance brokers are increasingly offering health and safety advice and risk management consulting as part of their service. Specialised risk management consultancies are also popping up. The sorts of insurance cover available is also diversifying. Reputational insurance, directors and officers liability, legal expenses insurance and crisis management cover are all becoming more popular.
Taking out these types of insurance, if your company can afford it, is to be recommended, but it's important to realise that insurance can't cocoon you from risk. Even insured losses take up management time and can damage a company's reputation and staff morale.
Similarly, insurers have their own risk management issues to deal with and are unlikely to extend cover to companies which are just buying it to hide sloppy risk management procedures. They will either refuse these companies or up the premium to reflect the greater risks.
Companies will need to convince insurers that they have proper procedures for identifying and mitigating risks. This will include proper health and safety measures, quality control systems, and contingency plans for when things go wrong.
This issue has had a lot of media air time in recent months as a result of public anger over incidents such as the Hatfield and Paddington rail crashes. But the government has been moving towards changing the law to make corporate manslaughter charges easier for the past two years. A Home Office consultation paper on the issue closed last year and the Health and Safety Commission's (HSC) response to the paper should be a wake up call to everyone. Companies found guilty won't just face fines. The courts will seek to apportion individual responsibility for the damages at a management or board level and the guilty party could face a jail term.
In its response, the HSC said it "strongly supports the working of the corporate killing offence whereby liability would depend on death being cased by a management failure entailing behaviour far below what could reasonably be expected. Clearly no company will want to be convicted of a such a serious offence and the Commission believes that a key value of changing the law in this way will be in its deterrent effect".
The HSC says the offence should apply to work-related deaths caused by occupational ill-health as well as accidents. This will have the effect of applying the offence of corporate manslaughter to deaths caused by exposure to health damaging agents such as pathogens, chemicals or certain fibres, but it may also have a longer-term, unforeseen impact. The HSC continues: "There are significant practical implications in applying the new offence to long latency illnesses and these will need to be considered very carefully. For example, consideration will need to be given to whether new systems will be needed for reporting instances of occupational ill-health or exposure to agents which may cause damage to health, and for investigation, and collection and retention of evidence following exposure which may lead to legal proceedings many years later."
Prosecutions for corporate manslaughter have been legally possible in the UK for 30 years. However, despite many prosecutions, only three have ever been successful. During the Paddington rail crash prosecution Great Western Trains were fined a record £1.5m. But the prosecution failed to show corporate manslaughter because there was no suitable individual whose negligence was on a par with the company's.
Current legislative backlog means the new offence is unlikely to be in place before 2003. Once it becomes law the lawyers will be ready for it. Will you?
TUC survey of health and safety representatives
Stress remains the main concern for health and safety representatives with two out of three (66%) saying stress and overwork is one of their top five concerns. The Trades Union Congress survey found stress was a main concern across all industrial sectors.
Back strain was the second major concern. 44% of respondents highlighted this risk, and the construction, distribution, hotel and restaurant sectors said it was their main concern. Repetitive strain injury came a close overall third, with 41% of health and safety reps ticking the box.
A heavy workload is, according to 74% of reps, the mains reasons for work-related stress. This is followed by cuts in staff (53%) and other workplaces changes (44%). Long hours and bullying were also identified as causes of work place stress by about one in three reps. Interestingly, the voluntary sector, banking, finance and insurance, local government and central government deem bullying to be a bigger cause of stress. Over 40% of reps from this sector cited it as a cause, saying that the bigger the organisation becomes, the more bullying becomes a problem.
Problems associated with display screen equipment and working alone are also becoming more worrying, while less than a third of health and safety reps reported slips, trips and falls, noise, chemicals and solvents, machinery hazards and dusts as being among their top five concerns.
London is the worst region for overwork, stress, hazards from display screen equipment, long hours, violence or threats and bullying. The Northern region is the worst region for musculoskeletal disorders (RSI and back strain), slips, trips and falls from a height, ionising radiation, and asthma. Scotland is worst for low temperatures and is the second worst for overwork or stress. The Midlands is the worst region for handling heavy loads, machinery hazards, work in confined spaces and vibrations. In the North West, dust, dermatitis and skin rashes pose the biggest problems.
Different industries and sector put a different emphasis on different problems. Infection, not surprisingly, is a bigger concern in the health services than in any other sector. Asthma is a bigger concern in agriculture and fishing than in any other sector. Working alone and violence pose a bigger threat to voluntary sector workers than any others, while education is second only to banking in identifying overwork or stress as a major concern.
Hatfield and other disasters
British Transport police investigating the causes of last October's derailment at Hatfield are reported to be seeking evidence to support individual charges of unlawful killing against senior executives at Railtrack. It is Railtrack that controls the rail infrastructure, and Balfour Beatty that held the maintenance contract for the line at Hatfield, where four people died in the crash. A file will be sent to the Crown Prosecution Service soon.
Hatfield is only the latest in a series of well-publicised disasters:
All these disasters have a common theme: no charges of corporate manslaughter were proved. In each case, the problem was proving that a particular individual "identified as the embodiment of the company itself" was guilty.
Response from the professions
Directors' and employers' organisations are not in favour of any corporate manslaughter legislation that would make individual directors, partners or proprietors responsible and liable to imprisonment and other penalty.
Ruth Lea, of the Institute of Directors, believes that such an action would be "scapegoating", and that the whole point of an offence of corporate manslaughter is that it can't be pinned on an individual director or executive.
The Institute of Chartered Accountants in England and Wales told the Home Office that charges of reckless killing or killing by gross carelessness should only be brought against specific liable individuals "and not associated with any general management failure within the organisation".
In the accountants' view, deaths of workers are "more likely to result from a series of omissions by a variety of people" rather than as a result of "some positive act".
They argued that any change in the law would "lead to a wholly inappropriate witch-hunt". It would also create an environment in which businesses would find it hard to recruit the highest calibre of managers when those individuals might face imprisonment or other punishment if a major accident occurred.
The institute feared that any change to the criminal law would introduce unintended economic effects without markedly increasing public safety. Their concern was that "the net effect will be an increase in the prosecution of an unfortunate few, without a significant improvement in the behaviour of the many".