Sean Elson looks at health and safety in respect to directors' and officers' liability reform

An insurer providing cover for directors and officers who are the subject of a criminal investigation or prosecution following a breach of health and safety provisions faces an increasing level of individuals involved in such proceedings if current proposals for reform proceed.

As a means of improving the rate of accidents involving serious injury and death there has been increasing pressure to introduce specific health and safety duties for directors for the first time.

The most important existing provision relating to individual criminal liability for directors is contained within s.37 of the Health and Safety At Work Etc Act 1974 (HSWA).

This allows for the conviction of an individual where a corporate body has committed an offence under any of the relevant statutory health and safety provisions and that it has been proved to have been committed with the consent, connivance or neglect on the part of a director, manager, secretary or other similar officer. This provision does not apply only to directors but also to other senior managers and office holders, although it is aimed at only those in a position of real authority.

The penalty for an offence under s.37 is the same as the substantive offences the corporation faces - usually a fine. However, in many cases the real sanction will be the stigma attached to a conviction for a criminal offence especially in a case concerning a work-related death. This ensures that many of those charged with this offence often vigorously contest a prosecution.

This illustrates that the current risk to an individual director or officer being successfully prosecuted is low.

Successful prosecution
This low rate of senior individuals being held to account for health and safety offences has been recognised and a reform process has begun with the Health & Safety Commission (HSC) having currently tasked the Health & Safety Executive (HSE) to work on proposals for change that can be recommended to the Government with a view to introducing legislation.

Initially the HSE recommended continuing only with a voluntary approach with the issuing of further guidance to directors. This was rejected by the HSC and currently the HSE have a number of options under consideration. They include:

  • That a general duty be imposed on directors either to take all reasonable steps to ensure health and safety or simply a strict liability duty subject to a due diligence defence.
  • To impose a specific duty on directors. For example, requiring the appointment of an information director to provide health and safety performance information to other directors.
  • To amend s.37 HSWA to allow for a conviction where an act or omission contributes to a breach of health and safety.
  • The last of these options would have far-reaching consequences in terms of the likely impact of these proposals. As with the current law, the reform would apply not only to directors but other senior managers. The intention behind an amendment such as this would be to lower the test applied to individuals investigated for this breach with a view to securing a greater number of convictions.

    The HSE has also expressed the view that it wishes to see an increase in the number of directors' disqualification orders imposed by the courts.

    As with the possibility of a conviction under s.37 HSWA, the Company Directors Disqualification Act 1986 (CDDA) provides almost only a theoretical risk that a director who is convicted of a health and safety offence could also be the subject of an order disqualifying them from being the director of a company. The use of this legislation following conviction has been extremely limited with approximately 10 orders having been made since 1986.

    The need to secure a conviction before a disqualification order can be made means that the main problem in achieving the HSE's aim of securing a greater use of this power against directors is the low level of convictions against individuals.

    The proposals currently under debate may not result in an amendment of s.37 due to the wider consequences, however the imposition of additional duties is possible and it almost certain that more explicit guidance will be issued setting out what is expected of directors. While the principle that before prosecuting a director they should first know exactly what the HSE requires them to do is an important one. It would also be a significant development in providing a proper benchmark against which a director's performance could be judged. In this way, the issuing of guidance could be a method for removing what is seen as one of the obstacles to securing convictions of directors and officers.

    If efforts to ensure it is easier to convict an individual are successful, it would have repercussions on the intention to increase the level of disqualification orders. This must surely reinforce the way such cases are defended and harden the intention of an individual to staunchly defend a prosecution in the knowledge that if convicted they may have their livelihood removed from them. In addition, it will considerably increase the scope of the criminal proceedings for which coverage exists. The move to disqualify a director will form a vital part of the criminal case and will substantially raise the level of preparation needed by the defence team with a view to preventing an individual from being disqualified.

    These reforms have the potential to have far-reaching consequences in the defence of senior company officers. They are due to go back before the HSC in May 2006. An intention to proceed with any subsequent reform will make for interesting times for those who insure the top level within an organisation and those who represent them. IT

    ' Sean Elson is a solicitor in the health and safety team at Kennedys