UK: Fee For Intervention: What Will It Cost?

Today sees the introduction of the HSE's Fee for Intervention Scheme (the "Scheme") extending the regulator's cost recovery powers. Whilst this change has been the subject of minimal publicity from the HSE, its potential consequences are perhaps wider than anticipated and should certainly receive due consideration from businesses likely to be affected. This article sets out the key provisions of the newly issued guidance and provides some food for thought for businesses looking to identify how they can respond to this new regime.

What does the Scheme do?

The Scheme shifts the financial burden of investigating material breaches of health and safety law from the tax payer on to the errant duty holder. Launching the FFI scheme on 28 September 2012, the HSE's Chief Executive Geoffrey Podger said:

"The most basic safety mistakes in the workplace can devastate lives and result in real costs to industry. It is right that those who fail to meet their legal obligations should pay HSE's costs rather than the public purse having to do so."

The Scheme will impose a positive duty upon the HSE to recover the costs of any intervention that leads to the identification of a contravention of health and safety law by a duty holder. For further details, please see our previous update, "Fees for intervention: guidance released 20 June 2012".

Does the Scheme apply to my business?

The Scheme applies to all HSE enforced businesses. Whilst the HSE will concentrate proactive inspection time on the construction, waste and recycling and manufacturing industries, the reality is that the Scheme will apply to any business that it inspects or investigates and finds to be in material breach of the law.

The Scheme does not apply to those in sectors enforced by other regulators (e.g. local authorities), nor does it apply to the self-employed who only put themselves at risk or to individual employees.

What is a material breach?

The Scheme will be engaged when, "in the opinion of the...inspector, there is or has been a contravention of health and safety law that requires them to issue notice in writing of that opinion to the duty holder". Inspectors will continue to use the well established principles of the Enforcement Management Model when reaching decisions, albeit the Guidance accompanying the Scheme provides some illustration of, "what a material breach might look like in practice". This loyalty to the current method of decision making promises a targeted and proportionate approach.

What will I pay for?

In principle, fees will be payable to cover the costs the HSE reasonably incurs in relation to a material breach. This will include the work needed to identify the breach initially (even if this is not immediate), together with the work required to ensure the compliance gap is closed and the breach remedied. The HSE view is that, in order to make "appropriate judgments" about required enforcement action, the Inspector needs that time to assess the duty holder's ability to effectively manage the risks and achieve compliance.

Importantly, the Scheme, "also includes any investigation or enforcement action, up to the point where HSE's intervention...has been concluded or a prosecution is started". As such, whilst it initially appeared that fixing the breach would bring an intervention to a conclusion, the reality is that the clock will continue to tick for much longer where formal enforcement action is to follow. The HSE's Guidance to Inspectors confirms that, "cost recovery stops when the regulatory activity stops, not when the material breach is rectified".

How much will it cost?

Costs will be charged at a blended hourly rate of £124, which is based upon not just the gross salaries of the Inspectors, but also the HSE's corporate services and overheads, capital charges and general administrative expenditure. Cases investigated and prosecuted before 1 October 2012 saw the HSE charge £63 per hour for Inspectors' investigation time. The impact of this new rate is therefore clear: it is almost double its predecessor.

Specialist input (such as from the Health and Safety Laboratory) will be charged at the actual cost to the HSE. Where several material breaches are identified, several experts may be required.

When will I have to pay?

Invoices will be rendered every two months and will fall due for payment within 30 days. The HSE has published an estimated invoice dispatch timetable, which confirms that charges under the Scheme will be billed en masse during specific weeks of the year.

What if I don't agree?

Disputes will initially be referred to a senior HSE manager (independent of the intervention), following which, if the issue remains contentious, a disputes panel will be convened. The panel will comprise an independent HSE Inspector, a representative of HSE Policy and Procurement and one independent person drawn from a list of industry and trade union representatives.

It is not possible to dispute the principle that the HSE should recover its costs, albeit a duty holder can make representations as to whether in fact it was in material breach and also the reasonableness of the costs incurred.

What should I do?

The Scheme is triggered by the existence of a material breach. Businesses would therefore be wise to review their health and safety policy and procedures to ensure they are sufficiently robust and to identify and remedy any potential breaches. This is of course good practice in any event but the onset of the Scheme may provide an impetus for such work.

Duty holders also need to be familiar with the Scheme and how it will operate, as any HSE inspection (whether following an accident or not) has the potential to result in substantial costs.

Companies should consider how they will deal with an intervention under the Scheme and what provisions will be required in order to minimise possible costs exposure.

What should I consider?

The HSE has not widely publicised the introduction of the Scheme. It is understood that the changes will simply be brought to the attention of a duty holder at the time an intervention occurs. The HSE's original proposals and consultation documentation suggested that the industry focussed nature of the Scheme would see it applying to just 1% of commercial enterprises.

However, there are real concerns as to the practical, legal and financial effects of the Scheme. Consider:-

  • Whether businesses will shy away from proactively seeking advice from the regulator for fear that invoices pursuant to the Scheme will follow
  • The impact upon a business that may be prosecuted following an intervention. Presently, the HSE recover their investigatory work at approximately £63 per hour. The Scheme allows almost double that figure to be billed. With invoices under the Scheme being rendered every two months and falling due for payment in 30 days, will a business under investigation be able to afford to fund the investigation before any enforcement decision is made? Whilst the Scheme envisages repaying sums to defendants ultimately acquitted, will such reimbursement come too late for some?
  • The financial effect upon a business that is investigated with prosecution being contemplated. The HSE's Guidance to Inspectors confirms that even where a prosecution is not launched, fees under the Scheme would be recoverable because, "a decision not to prosecute does not necessarily mean that a material breach has not occurred"
  • How can the potential scope for charges under the Scheme be quickly assessed during a HSE visit with a view to forming a strategy for dealing with the regulator thereafter? Although apparently "material" is the alleged breach sufficiently minor that the business can expect a letter or is the issue more likely to lead to prosecution? Analysis of this spectrum will be vital to appropriately dealing with the Inspector
  • Will paying an invoice under the Scheme amount to an admission of liability for criminal or civil purposes? In either case, does such an admission trigger insurance notification requirements and/or increase the business' risk rating for insurance purposes, pushing premiums ever skywards?
  • Equally, will an unchallenged invoice under the Scheme amount to potential bad character evidence in the case of future enforcement action?
  • How will potential liabilities under the Scheme be dealt with as a matter of contractual relations between parties to projects of any size? The fees payable under the Scheme are specifically stated to be civil debts, as such enforceable indemnities may become a feature of pre-contract negotiations. This may become a concern for a smaller outfit, in need of the work and ready to run the risk of accepting the fee liability of a larger employer to secure the contract
  • What provisions are needed to manage situations in which multiple duty holders may be in material breach?

The objects of the Scheme are twofold: first, to encourage better health and safety performance and secondly, to shift the financial burden of breaking the law from the tax payer to the duty holder. Any initiatives that promote improved health and safety performance are of course to be welcomed. However, as presently drafted, the Scheme provides no mechanism by which the means of a business can be assessed and its ability to pay the fees considered. It is to be hoped that an unintended consequence of the Scheme is not that businesses will either be forced into insolvency or have significantly less finance available to spend on health and safety improvements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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