The first sentencing decision under the HSW Act was released on 22 August 2017. The decision gives some initial guidance to businesses and other duty holders about just how much bigger the penalties will be for breaching the HSW Act compared to the former Health and Safety in Employment Act 1992 (‘HSE Act’).
On 6 April 2016, an employee of Budget Plastics (New Zealand) Limited (‘Budget’) was seriously injured when his hand became caught in the auger of a plastic extrusion machine while he was loading plastic material for recycling. The machine amputated nearly all of the victim’s left hand from his forefingers to his wrist, leaving only his thumb and half of one other finger remaining.
WorkSafe New Zealand (‘WorkSafe’) investigated the accident and identified a number of health and safety failings by Budget. These included the plastic extrusion machine not being fitted with appropriate guarding or with appropriately located emergency stop controls, there being no adequate safe operating procedure for using the plastic extrusion machine, and Budget not having adequate systems to identify hazards and risks in the workplace.
Budget was charged with an offence against section 36(1)(a) of the HSW Act by failing to ensure the health and safety of a worker who worked for Budget while the worker was at work. Unsurprisingly, Budget pleaded guilty to the charge.
Approach to sentencing under the HSW Act
For those hoping to get some solid guidance as to how the Courts will approach sentencing under the HSW Act, the judgment in this case is disappointing. Judge Large explicitly stated that ‘it is not for the District Court to make sentencing guidelines’.
WorkSafe and Budget each made submissions about the approach the Court should take at sentencing. WorkSafe suggested that the culpability bands used previously under the HSE Act to determine starting points for fines (low, medium, and high), should be modified to reflect the increase in maximum fines under the HSW Act and to ensure the full range of available fines is used. In particular WorkSafe suggested:
|Low culpability||Fine up to $500,000|
|Medium culpability||Fine between $500,000 to $1 million|
|High culpability||Fine between $1 million and $1.5 million|
WorkSafe argued that Budget’s culpability lay at the high end of the medium culpability band, and sought a starting point for the fine of $900,000.
By contrast, Budget argued that sentencing decisions under the HSW Act should be guided by outcomes achieved in sentencings in Australia (under the comparable workplace health and safety legislation there). Budget sought a starting point of $200,000.
Judge Large noted there were problems with the approaches suggested by both WorkSafe and Budget, and ultimately declined to express a view on what the appropriate approach should be. This was disappointing, but not surprising, and we expect other District Court Judges to adopt a similar conservative approach.
Meaningful guidance on the correct approach to sentencing under the HSW Act will have to wait for an appeal of a District Court sentencing decision to the High Court.
As a first step, the Court ordered Budget to pay $37,500 in reparations to the victim. The was consistent with awards in previous cases, which indicated reparations in the range of $35,000-$40,000 were appropriate. Interestingly, and unlike most sentencing decisions under the former HSE Act, there is no discussion in the judgment about the emotional harm suffered by the victim so it is hard to know whether the reparations award is fair or not.
In determining the fine to be paid, Judge Large decided that Budget had medium culpability, and observed that in these circumstances the HSW Act called for a starting point for a fine of between $400,000 – $600,000. Judge Large did not say why a starting point in this range was appropriate, but it seems he roughly took the band applied under the HSE Act and multiplied it by six to match the six-fold increase in maximum penalties now available under the HSW Act.
Credit was given for mitigating factors, but the biggest issue was Budget’s ability to pay a significant penalty. Budget provided an affidavit from the company’s accountant confirming that a fine of more than $100,000 would cause Budget financial difficulty. Judge Large accepted this, and reduced the fine to $100,000. If Budget had been in better financial shape, the fine would have been $210,000 to $315,000.
One of the new penalties allowed under the HSW Act is recovery of the costs incurred by WorkSafe. WorkSafe asked for half of its internal legal costs, but did not ask for any investigation costs. Judge Large ordered costs of $1,000, seemingly because of his concern about Budget’s financial position.
What can businesses and other duty holders learn from this case?
The decision confirms that significantly higher fines will be imposed for health and safety offending in the future.
As a result of the increased penalty levels, the Court will need to consider whether, and to what extent, defendant businesses can meet the level of fines required by the HSW Act. This will be particularly important for small to medium sized businesses, as big six figure fines will really bite.
It will be important for all duty holders to try and avoid prosecution when they can, including by offering enforceable undertakings in appropriate cases. If you have to go to Court, getting good legal advice will make a real difference and help keep fines as low as possible.