Health and Safety Responsibilities of Directors

Dr W. Richard Griffiths PhD, MSc (Env Man), MEd, GRSC, Cert Ed, FRSH, FRIPH, CMIOSH, MIIRSM

There are three different types of director (Executive, Non-Executive and Shadow directors). There is no definition of 'director' in the Companies Acts , but it is referred to as including any person occupying the position of director, by whatever name called. That is to say, directors can only be recognised by their function, and not title. Similarly, any liability that exists lies with the authority and responsibility that they have within the company. Many business decisions by boards of directors may have implications for health and safety. Directors in this respect must recognise their personal responsibilities and liabilities under health and safety law. Increasing such responsibilities would possibly raise the profile of the health and safety agenda in organisations, as early studies have shown that only 30% of UK firms comply fully with health and safety regulation. The HSC and HSE have no specific publications regarding directors' obligations to abide by health and safety law. Directors, however, have responsibilities outlined in the form of guidance notes and health and safety law.

Guidance

Both HSG48 (Reducing Error and Influencing Behaviour) and HSG65 (Successful Health and Safety Management) emphasise the commitment and visibility required at senior management level in order to increase the health and safety agenda and performance in organisations. The "Revitalising Health and Safety" strategy pledged to develop a code of practice on directors' responsibilities for health and safety, as well as further legislation in this area. In 2001, voluntary guidance (INDG343 Directors' Responsibilities for Health and Safety) was published describing best practice for directors while encouraging directors to take responsibility for health and safety. The guidance recommends a number of action points, including managerial boards appointing one of their number to be the health and safety champion. Appointing a health and safety director ensures there is a board champion for health and safety risk management issues. However, some boards may prefer to see such functions assigned to their Chairman and/or Chief Executive. Clarity regarding health and safety roles/ responsibilities and functions is vital. The health and safety responsibilities, etc. of all board members should be clearly laid out in the Health and Safety Policy organisation and arrangements sections. The appointment of a health and safety director should not remove the responsibilities of other directors for specific areas of health and safety risk management. In larger organisations, the appointment of a health and safety director has increased from 75% in 2001 to 85% in 2005 following the publication of the above guidance.

Health and Safety Law

Despite the guidance above, there already exist responsibilities on directors in law. Under certain sections of the Health and Safety at Work, etc. Act 1974 (HSWA), directors can, in specific circumstances, be found personally guilty of a health and safety offence in their capacity as directors, e.g. under Sections 36(1) and 37. The latter is in addition to the company being liable as a corporate body. The law in this instance places duties on directors to take action where they notice failings in health and safety. Importantly, although health and safety functions can be delegated, the employer has legal responsibility for health and safety. There is no reversal of the burden of proof (Section 40, HSWA) for either S37offences or S7 offences (employees' duties - see below), so the prosecution has to prove consent, connivance or neglect and its link to the company committing the offence in both cases.

It should also be noted that HSE's voluntary guidance on Directors' Responsibilities for Health and Safety does not state that health and safety law imposes any legal duties upon company directors. It only talks about duties upon "employers" (i.e. companies, not directors) and does not even mention Sections 7, 36 and 37. Section 37 does not require a conviction of the body corporate, but does require proof that it has committed an offence. Prosecution under Section 37 only, must show that the company committed an offence as well as evidence of consent, connivance or neglect by the director or manager. Regarding S37 the position of the individual in the management structure requires to be shown, e.g. safety policy, letter headings, etc.

Section 40, HSWA provides a defence that it was not practicable or reasonably practicable to do more than was in fact done to satisfy the duty or requirement. The defendant must prove the defence on the balance of probabilities. The provision is called a 'reverse onus' or 'reverse burden' provision, as normally the burden of proof is on the prosecution to establish facts beyond reasonable doubt.

Potential duties may also be placed on directors under Sections 7, 8 and 36 of HSWA , as if they were employees. However, there is no case law on the application of Sections 7, 8 and 36 to directors and INDG343 does not mention the application of these sections. The HSE appears to have never actually prosecuted a director for breach of Sections 7, 8 or 36 but has taken action through Section 37.

In the year 2003/04, the HSE prosecuted a total of 17 directors and managers and 11 of these were convicted. The HSC has called for more effective enforcement of S37 by the HSE and local authorities. However, difficulties relating to the prosecution of individuals, especially in large organisations, have been well debated in certain high profile cases.

The House of Commons Work and Pensions Committee suggested in 2004 that company directors should have a legal obligation in relation to health and safety.

A recently introduced Private Member's Bill (the Health and Safety (Directors' Duties) Bill 2005) by Stephen Hepburn proposed changes to the Companies Act 1989 (debated in the House of Commons for the second time in March 2005). The Bill proposed to place a general duty on all company directors with regard to health and safety, i.e. an obligation upon all company directors to take all reasonable steps to ensure that their company is complying with health and safety law. Specifically, directors would have certain responsibilities, e.g. be informed of any health and safety problems; rectify any health and safety failure by the company; and that their companies had appropriate safety procedures in place to protect their workers and the general public. The so-called health and safety information director would not be individually responsible for health and safety, only for providing the board with information. In this way, all directors could carry out their safety duties and avoid the possibility of any scapegoats being made if an incident took place. The Bill did, however, introduce the prospect of custodial sentences for directors for serious breaches of health and safety law, unlike the offence of corporate manslaughter. The Bill would have extended directors' responsibilities from the voluntary guidance above to undertake proactive involvement with health and safety. In comparison, at the moment they are only required to react to health and safety incidents. The Bill concerned proposed changes to the Companies Act 1989 but was limited in scope, e.g. it only applied to UK-based large private companies operating in the UK and not to any small or medium organisations, Governmental organisations, local authorities, public bodies, charities and NHS trusts or to UK companies operating abroad or foreign companies operating in the UK. The Bill, however, was not passed due to an insufficient number of MPs present to vote, i.e. 40.

The Centre for Corporate Accountability (CCA) has recently argued that regulation of directors' duties for health and safety is the only method that will ensure organisations take action. The law, however, might be difficult to enforce, as you would have to show that the board was prioritising in health and safety matters. It would also be unpopular, because of the high levels of publicity given to corporate manslaughter laws and recent prosecution cases. Similarly, company directors might be very cautious about appointing a named director of health and safety because of possible prosecution fears. However, only 23 directors were convicted of health and safety offences between April 2002 and March 2004 despite 620 work-related deaths during the same period, while the level of fines given to them was inconsistent.

The Company Directors Disqualification Act 1986

Under the Company Directors Disqualification Act 1986 (CDDA), company directors may be disqualified from company directorship for health and safety offences. Only eight directors have been disqualified for health and safety offences in the 19 years since the introduction of this legislation. The latter is an important point showing how little accountability they have in law compared to companies. The court may make a disqualification order against a person where he is convicted of an indictable offence (whether on indictment or summarily).

The CDDA identifies three distinct categories of conduct, which may, and in some circumstances must, lead the court to disqualify certain persons from being involved in the management of companies. These are:

• General misconduct in connection with companies, disqualification for unfitness, participation in fraudulent or wrongful trading under S213 of the Insolvency Act 1986 (S10, CDDA).
• Undischarged bankrupts acting as directors (S11, CDDA).
• Failure to pay under a county court administration order (S12, CDDA).

There exists the potential for disqualification of directors under various HSWA sections including failure to comply with an enforcement notice or potentially as an employee under Sections 7, 8 and 36. The maximum period for disqualification is five years, where a court of summary jurisdiction makes the order, and 15 years otherwise. The Court of Appeal (Re Sevenoaks Stationers (Retail) Ltd (1990), Dillon LJ) has divided the period of maximum disqualification of 15 years into three separate time periods:

• Over ten years for particularly serious cases (for example, where a director has been disqualified previously).
• Between six and ten years for serious cases not meriting the top bracket.
• Two to five years for 'relatively not very serious' cases.

Company Law Reform Bill

Potentially, this proposed law requires directors to promote the interest of their employees, e.g. health and safety. Key proposals of the Bill include a statutory statement of directors' general duties and extended power for shareholders to sue directors for negligence and other defaults. The law, which is due to be passed in 2007, may well have an impact on directors' responsibilities regarding health and safety in the future.

Leadership

Directors' motivation in respect of health and safety is driven by a number of factors. Leadership and commitment are important in promoting effective health and safety risk control to enable a continuous improvement in health and safety performance. Directors' actions and decisions in this respect must enhance and support the health and safety policy. Differences in attitudes, behaviour or decisions of directors regarding health and safety may have a detrimental effect and could compromise health and safety best practice. Managers' leadership style and commitment are thought to have an effect on health and safety management and are key aspects of an organisation's safety culture. The available literature suggests that directors may lack the specific competence (knowledge and skills) required to provide effective leadership on health and safety. In this case, training for directors may improve organisations' health and safety performance. Leadership style and its effects on health and safety management have been studied mostly in high risk industries, e.g. nuclear, chemical. The findings of three recent surveys show the advantage of having a health and safety director. Effective health and safety risk management requires the active participation of all staff in identifying potential problems, as opposed to being consulted after decisions have already been taken.

A new law could increase board members' awareness of health and safety issues and the impact that they have on their company. The impact on different organisations could be different depending upon their size and the status of their health and safety management system, safety culture and level of corporate social responsibility. Any law published in relation to directors' responsibilities will need to tackle problems in the light of risk aversion and the deregulation agenda for health and safety legislation started in the early 1980s and continuing today. However, attention to the subject of corporate manslaughter may divert attention away from the director responsibility debate.

In the context of effective corporate governance, managing corporate risk is a key issue for all directors and senior managers. The Turnbull Report (Internal Control: Guidance for Directors on the Combined Code) identifies health and safety as being an important risk area for organisations. Clearly, directors have a key role in relation to the day-to-day running of all organisations at present and more so if and when new legislation relating to their responsibilities is introduced. However, at the present moment there seems little support for amending S37 of HSWA with the debate focusing on having a stand-alone section in HSWA or expanding Regulation 5 of the Management of Health and Safety at Work Regulations 1999 supported by an ACoP. These options appear, though, to be part of a 'wait and see' policy regarding the Company Law Reform Bill and the draft Corporate Manslaughter Bill.

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