Managing Health and Safety in a "compensation culture"

Public Opinion - compliance is not an option!

Ever since the ‘Herald of Free Enterprise’ sailed from Zeebrugge with her bow doors open, with disastrous consequences, there has been a public outcry demanding higher standards of performance on safety issues. The fire at Kings Cross tube station and the ‘Marchioness’ disaster on the river Thames further lowered the acceptance that organisations, both public and private can get it right. The series of railway crashes with multiple fatalities over the last ten years has simply reinforced the need for government to act and the enforcement agencies to be more effective.

This disquiet over public safety has had a tremendous knock on effect on occupational health and safety performance. There was, and remains a rising public demand to see companies with poor safety records punished, and individual directors held to account.

Government Policy Initiatives

One of the policy consequences of this demand to tighten standards and performance was that the government introduced a ten-year strategy in June 2000 called ‘Revitalising Health and Safety’. The statement set a number of national targets for improving health and safety performance including the following:

• reduce working days lost from work related injury and ill health by 30% by 2010
• reduce the incidence rate of cases of work related ill health by 20% by 2010
• reduce the incidence rate of deaths and major injuries by 10% by 2010
• achieve half of the improvements under each target by 2004

Figures published by the Health and Safety Commission (HSC) in November 2007 suggest that although the target for reducing the number of fatal and major injuries is currently on track the figures in relation to reducing working days lost and the incidence rate of cases of work related ill health remain alarmingly not on track and of concern for employers, the HSE and Government.

Throughout this strategy, a number of measures to focus attention on health and safety have been introduced. These include HSE campaigns targeting high-risk activities, such as construction, occupational health and health care. At the same time the HSE concentrated attention on the main causes of major accidents, like working at height, working in the highway, slips, trips and falls etc all of which should feature as principal hazards in the Management "Arrangements" section of any company safety policy required under section 2(3) of the Health and Safety at Work (etc) Act 1974.

As part of the launch of the strategy the Deputy Prime Minister and the chair of the Health and Safety Commission (HSC) strongly encouraged employers to adopt the national performance standards and targets as part of their overall health and safety strategy in order to demonstrate continuous improvement in health and safety performance.

Over the last few years the HSE and Local Authorities have been developing closer working relationships in order to improve effective targeting of regulatory activity. The results of this partnership, which has been forged under the direction of the HSC, has been the development of joint regional work planning based on the priority topics put forward by the Commission itself. The aims of the partnership include, the more effective utilisation of limited enforcement resources and greater impact in terms of increased levels of health and safety in the workplace.

The priority areas are:

• Injury reduction, including "Falls from Height", "Slips and Trips" and "Workplace transport"
• Disease reduction, including "Asbestos" and "Skin Disease"
• Stress, Muscular Skeletal Disorders and Return to Work, including, "stress management", "Upper Limb Disorders" (WRULD’s) and Work/Life balance

The review of local authority regulatory services, announced by the Chancellor on budget day set out six national priorities for local authority regulatory enforcement services. The review published in March 2007 made a number of recommendations to ensure that local authorities can benefit from devolution without compromising regulatory outcomes or exposing business to inconsistent enforcement.

One of the national priorities for regulatory enforcement services is "Improving Health in the Workplace".

The policy description is "to reduce the incidence of ill health and days lost from work activities in relation to musculo-skeletal disorders, stress and chemicals, promote compliance with the law, and reduce the cost and suffering to individuals and companies". The emphasis is clearly with improving the health and well being of the workforce as distinct from managing safety.

The rationale for "improving health in the workplace" as a national priority is due to the high risks posed to individuals, their families, damage to business and the costs to the economy as a whole.

• 560,000 workers per year experience an illness or ill health condition caused by or made worse by their work
• 147,000 people per year start an episode of work related illness
• £360-£610 million costs to employers of ill health in 2001/2
• Costs to the economy of several billion pounds per year

The Rogers review will without doubt place considerable pressure on larger organisations due to more focussed regulatory activity to provide preventative occupational health interventions. The following themes should be considered as part of any safety policy review in the Management "Arrangements" section legitimately grouped under an occupational health heading.

• Access to Occupational Health
• Bullying at work
• Drug misuse
• Alcohol abuse
• Health surveillance
• Health promotion and campaigns
• Legionnaires disease
• New and expectant mothers
• Smoking
• Stress, and other mental health issues
• Skin diseases
• Violence at work and dealing with conflict
• Well being
• Work / Life balance

Individuals' Responsibility

Another way of driving home the message has been the Health and Safety Commission's 2002 Enforcement Policy statement, which issued the following reminder, "Enforcement authorities should consider prosecuting company directors for health and safety offences and seek the maximum disqualification period of 15 years under the Company Director's Disqualification Act 1986 as revised.

By 1996 the Law Commission had already proposed a reform of the law on involuntary manslaughter to introduce new offences which would affect the health and safety regulatory environment.

These were 'reckless killing', 'killing by gross carelessness' and 'corporate killing'. The offences of reckless killing and killing by gross carelessness would be applied to individual directors of companies where employees died as a result of an accident at work or through work related ill health. If convicted, those directors would face up to ten years in prison. In May 2000 the government published proposals to create a new offence of corporate killing, plus three new offences to deal with individuals who cause death by recklessness or gross carelessness.

Corporate Liability

The new Corporate Manslaughter and Homicide Bill after a tortuous and slow progression through Parliament and lengthy debate finally received Royal Assent on 26 July 2007 and will come into force on 6 April 2008.

The new Act creates the new statutory offence in England, Wales and Northern Ireland of "corporate manslaughter"" and in Scotland of "corporate homicide"

A company will be guilty of the new offence if the way in which its activities are managed or organised, by its senior management, amount to a gross breach of the duty of care it owes to its employees, the public or other individuals and those failings caused the persons death Guidance has recently been issued by the HSE to Directors outlining their new responsibilities.

It is worthy of note that the new offence is in relation to corporate responsibility and liability, and is not concerned with increasing the liability of individuals, who can already be held to account through existing health and safety legislation and the common law offence of gross negligence manslaughter.

It has already been made clear that Senior Management will be held accountable for significant safety failings where a poor working culture was an attributable factor.

The Compensation Culture

Running in parallel to the tightening of criminal legislation and its enforcement is the effect of an emerging cultural change. Whereas previously it might have been accepted that people generally support each other and acted for their common good, this has gradually eroded to the primacy of the individual.

It is now increasingly socially acceptable to put 'number one' first, before neighbours, colleagues and in extreme cases even one's own family. This has manifest in the huge rise in compensation claims for accidents at work and accidents in public places. The compensation costs are passed on through insurance premium rises for companies and public organisations. This trend has been further encouraged by new legislation allowing lawyers to offer 'no win, no fee' services to those seeking compensation and by streamlined rules on civil court cases.

Rising Insurance Costs

Over the past five years, employers’ liability insurance premiums have increased by between 50% and 2000% and, for some employers; particularly smaller businesses insurance has become unobtainable at any price. The increase in premiums has been particularly hard on small businesses with reports of some companies operating without employers’ liability insurance and some companies going out of business, with a consequent loss of jobs.

The increase in premiums has come about essentially because insurance companies have experienced:

• increasing numbers of successful compensation claims
• a need to set aside reserves for latent disease claims
• lost investment income from declining stock markets

Taking Positive Steps

While the compensation culture problem is based primarily on cultural and economic change, company leaders can take steps within their own organisations’ to improve their position in relation to the threat it poses.

There are two positive actions, which can be taken.

Firstly, ensuring that there is compliance with health and safety legislation to reduce the incidence of accidents and ill health, and therefore fewer successful claims. The HSE recently published research entitled 'Analysis of compensation claims related to health and safety issues'. This indicated that failure of compliance was associated with half the compensation claims.

The insurance industry is also demanding compliance with health and safety legislation as a minimum requirement. "If you abide by health and safety regulations and can clearly show this while working with your insurers, the cost of employers liability insurance will not rise as far as if you make no attempt to comply" so said Richard Browne, Head of Liability Underwriting, Norwich Union (2006)

Secondly, improve the health and safety culture within the organisation. This approach involves a programme that influences the organisation’s key decision makers, then transmits the message through middle management to the whole staff. The key is not just to achieve legal compliance, but also to demonstrate to staff that their health and welfare is taken seriously and to involve staff in the health and safety decision making process, promoting the concept of ownership of health and safety. With that ethos in place, the local culture can be uplifted to a point where making exaggerated or fraudulent compensation claims is seen by colleagues as anti-social and threatening to their well-being.

Finding a Way Forward

The first step is to ensure that the promotion of a positive health and safety culture and added value performance on health and safety takes its lead from the board of directors. Directors should receive briefings and updates on the latest developments, which present corporate and personal criminal, civil and financial liabilities. These briefings should be timely and cover the following areas:

• current public and workforce attitudes to health and safety
• new criminal, civil and financial liabilities
• the impact of health and safety risk management on employers' liability insurance
• directors' liabilities and the new Corporate Manslaughter and Homicide Act (new guidance is now available to Directors from the HSE )
• government strategies, for example 'Revitalising Health and Safety'
• creating a positive health and safety culture and revision of the company health and safety policy
• health and safety performance monitoring
• health and safety leadership from the board

The desired outcome of the boardroom briefings is to achieve a consensus on the health and safety objectives to be achieved, and a statement of clear leadership and commitment on health and safety issues.

The second step is to ensure that managers and supervisors understand and are competent to deliver their health and safety responsibilities given to them under the "Organisation" section of the company safety policy. This can be met by a series of short management training workshops. The workshops should be aimed at middle managers with the aim of providing an insight into their health and safety roles and responsibilities and launching the ethos of a positive health and safety culture, promoting involvement and ownership of health and safety issues.

The presentation method of the workshops should encourage discussion and debate on a range of health and safety topics including:

• developments in health and safety law
• developing a positive management style
• roles and responsibilities of managers
• the company’s health and safety policy, strategy and procedures
• where to get further support or assistance

The desired outcome of the workshops should be to deliver a consistent and coherent message on the health and safety management style and approach preferred by board level management.

The third step is to continue to promote the involvement of staff through an active safety representative culture. This can be met by a series of short safety representative workshops. The workshops should be aimed at union appointed or informally appointed safety representatives or representatives of employee safety (ROES) with the aim of providing an insight into their health and safety roles and responsibilities and launching the ethos of a positive health and safety culture, promoting involvement and ownership of health and safety issues.

The presentation method of the workshops should include and encourage discussion and debate on a range of health and safety topics including:

• developments in health and safety law
• active and reactive monitoring techniques
• roles and responsibilities of safety representatives and committees
• the company's health and safety policy, strategy and procedures
• where to get further support or assistance

The desired outcome of the workshops should be to deliver a consistent and coherent message on how safety representatives can contribute to the Company’s overall health and safety performance.

The fourth step is to energetically fight claims, which are considered to be exaggerated....
From a legal point of view, any rebuttal of a claim is more likely to be successful if the employer demonstrates full compliance with health and safety, including proof of appropriate information, instruction and training. It is important to investigate any accident or incident, which may give, rise to a claim, and ensure that there is sufficient information and data to brief a solicitor and the insurance claims department.

Where a claim is regarded by the employer as exaggerated he can discuss with the solicitor acting for the company the possibility of making an offer of compensation to the court. If the claimant turns down this offer and the court subsequently awards a lower amount of compensation, the claimant would be required to pay the full legal costs for both sides. This type of strategy can be used to discourage the application of exaggerated claims. Many employers now regard it as important to challenge such claims, even if it means the cost of the case is more than the amount claimed. This helps to discourage the widespread practice of submitting exaggerated claims and is seen as being cost effective in the long run.

One limiting factor in choosing to challenge claims is the contractual relationship with the Company’s liability insurer.

In the past, insurance companies have insisted on the right to decide on the action to take on all claims. This has meant that insurance claims have sometimes been settled against the wishes of the employer. Recently however, insurance companies have been more willing to consider fighting exaggerated claims especially when employers and their brokers have worked with the insurance company to consider the issues.