With the news that Tom Cruise has broken his ankle doing a stunt for the new Mission Impossible movie, this raises a number of issues linked to the health and safety implications that these kinds of accidents can have on film production companies.

A film set is a workplace like any other. In the UK, that means health and safety law applies in just the same way as it does to our building sites, factories, offices, shops and cinemas.

Tom Cruise's broken ankle is a "specified injury" that will need to be reported to the HSE under the Reporting of Injuries Diseases and Dangerous Occurrences Regulations ("RIDDOR"). Such a report is often the trigger for a HSE investigation into the accident circumstances and can lead to a criminal prosecution. We saw this most recently in the case of Harrison Ford, injured during the production of the latest Star Wars instalment. That incident resulted in a £1.6m fine for film production company Foodles Production (UK).

A film production company with a successful franchise (such as Star Wars or Mission Impossible) can expect to be treated as a "Large" or "Very Large" organisation by any sentencing Court by virtue of their turnover.

It's far too early to prejudge this incident but production companies need to be aware of the potential for a multi-million pound fine if found in breach of health and safety law.

Rhian Greaves, legal director at Clyde & Co

In fining Thames Water £20.3million for a catalogue of environmental offences, Judge Francis Sheridan smashed the previous record fine by more than 10 times. In doing so, he undoubtedly loosened the judicial shackles when sentencing our largest organisations, warning that "it should not be cheaper to offend than to take appropriate precautions." With sentencing in health and safety cases subject to an almost identical guideline, what happens now?

The Courts apply Definitive Guidelines for sentencing both environmental and health and safety cases (the 'Guidelines'). The Guidelines require Courts to classify organisations principally by reference to turnover. Having done so, there are identifiable starting points and financial ranges for Judges to apply when sentencing.  
A large organisation is one with a turnover exceeding £50m. But had the Judge treated Thames Water as simply 'large', the Guideline range available was a mere £100,000-£650,000.

However, the Guidelines also recognise that there will be 'very large organisations' ('VLOs'), where turnover "very greatly exceeds" £50m. In those cases, the Guidelines state that, "it may be necessary to move outside the suggested [sentencing] range in order to achieve a proportionate sentence." And move outside Judge Sheridan did.

The case was significant in many ways; the Environment Agency described it as the biggest freshwater pollution case it had ever dealt with. The sewage release was unprecedented with 1.4 billion litres of sewage entering the watercourses causing lasting damage.

The Judge described the offending as "wicked" and referenced a "history of non-compliance". Clearly influenced by Thames Water's daily profits of £2m, the Judge determined that £20.3m was the appropriate penalty, "to get the message across to shareholders that the environment is to be treasured and protected, and not poisoned".

Of course Thames Water had been involved in an earlier appeal case, which was a stark warning of what is to come.  In that case, the Court of Appeal said "…starting with turnover but having regard to all the financial circumstances, including profitability…the objectives of punishment, deterrence and the removal of gain must be achieved…this may well result in a fine equal to a substantial percentage, up to 100%, of the company's pre-tax net profit…even if this results in fines of £100m."

The Guidelines were introduced to bring proportionality to the sentencing process, particularly in the case of VLOs. This case demonstrates the Courts' willingness to use their new found muscle. There is no specific threshold upon which a business becomes a VLO. Certainly organisations with turnover exceeding £1bn will be a VLO but beyond that, there is little clarity.

Simply being "very large" does not automatically equate to a sentence being imposed beyond the ranges set out for "large" organisations. The Guidelines are clear; this is at the Courts' discretion when it is necessary to achieve a proportionate sentence.

Ofcom fined BT £42m for late line installations just a few days later showing that the Courts still have some way to go to keep pace with the penalties imposed by non-judicial regulators.

Fines have tended to be within the Guidelines' ranges so far but this case provides a clear signal that the Courts are becoming more comfortable with their new found sentencing might and are ready to exercise their discretion, where appropriate, in the case of VLOs.

Rod Hunt, partner, Clyde & Co

Notable among them are:

• There have been more £1m+ fines in the past 12 months than in the previous 20 years combined
• Average fine per offence has increased 102% according to last year's HSE report covering the year to April, with this figure set to rise once a full year's data is available
• The largest fine for a breach of health and safety imposed in the year was £5m
• The Guideline coincides with increased sentencing powers for Magistrates' Courts, which are now able to impose unlimited fines (imposing a £1m penalty in one recent case)
• 95% of health and safety cases prosecuted result in convictions while 84% of HSE initiated cases carry a financial penalty – according to last year's HSE report covering the year to end of March
• Cases against directors have tripled in the year to 31 March with 46 cases.  Just one employee was prosecuted in that period.

Commenting on the first anniversary of the introduction of the guidelines, Chris Morrison, partner and national head of safety, health and environmental regulatory at Clyde & Co commented: “One million pounds is no longer a figure beyond which the Courts will trespass only in the case of a public disaster. Since the new guideline was introduced, we have seen more penalties exceed this level than in the previous 20 years combined. Cases don’t have to lead to fatalities in order for fines to reach the multi millions. Whilst big businesses are attracting the headline grabbing penalties, those in the SME category are seeing far larger proportions of their turnover removed in the fines handed down.

“The intensified focus on directors rather than employees makes the increased threat of prosecution a serious issue for those in the boardroom at both corporate and individual levels. Prosecutions are almost always successful.”

Looking ahead to 2017, Clyde & Co predicts:

• There will be a significant increase in the average fine per offence when the HSE issues its annual statistics in November. The figure had already risen 102% when the year to 31 March statistics were published
• The first six months of the new guideline yielded an increase of 89% in fines imposed in the construction sector. A similar pattern is likely across all sectors
• Fines for non-fatal injuries will continue to be very significant as courts focus on the harm "risked" as well as that eventually caused
• Multi-million pound fines have been running at the rate of one per fortnight in 2017 – a trend which may continue through the year.

Clyde & Co's safety, health and environmental regulatory head of compliance, Rhian Greaves, added: “2017 will undoubtedly see more significant fines and potentially a greater emphasis on suspended and custodial sentences for individuals too. However, we are already seeing the HSE and industry focusing increasingly on putting the "health" back into health and safety, which is to be welcomed.

"It will be interesting to see if this translates into enforcement action in due course. There are also interesting working arrangements for the regulator to grapple with, not least the burgeoning "gig economy", now favoured in many industry sectors. These cases may take some time to work through the system but inevitably will do so.”

www.clydeco.com

Construction is one of only three sectors still subject to proactive HSE inspection, a consequence of the ongoing battle to achieve consistent safety management across a diverse and risky profession.

The HSE's published Construction Sector priorities splits its efforts into three distinct categories:
    •    Smaller sites/projects (<=15 people on site)
    •    Larger sites/projects (>15 people on site)
    •    Asbestos

The HSE's conundrum is finding effective ways to educate and enforce across the spectrum of industry activities. On the one hand, the larger sites are well resourced and managed but have the potential for catastrophic events. On the other, a proliferation of smaller sites exists where health and safety engagement is minimal and the primary (if not sole) motivator is completion to schedule and budget.
 
Judgment day
Of course the most powerful tool in the HSE's enforcement armoury is the ability to prosecute. We again saw the number of criminal court cases rise last year and the HSE continues to enjoy huge success; the conviction rate is 95%. And with the overwhelming majority of convicted defendants subject to a financial penalty, the new Definitive Sentencing Guideline implemented in February 2016 is having a telling effect on construction companies.

The new Guideline categorises defendant organisations by financial might, with turnover the accepted "blunt instrument" by which this is done. Businesses are either micro (turnover <£2m), small (£2m - £10m), medium (£10m - £50m) or large (>£50m). The mechanistic approach now adopted by the courts sees companies slotted into "category ranges" based upon an assessment of culpability, harm and, of course, their finances.

On its introduction, the Guideline was heralded as a means of addressing the perception that fines for health and safety cases needed to rise. Indeed, at the consultation stage it was recognised that: "fines…have in the past been criticised as too low relative to the harm caused, the culpability of the offender and, on occasions, to the means of the offender."
 
With the category ranges topping out at £10m per offence and a salutary warning from environmental sentencing that up to 100% of pre-tax net profit may be a suitable sum for a fine, the Guideline's implementation was a real source of (financial) concern.

Within construction, worries abounded that fines based on turnover would have a disproportionately damaging effect on an industry with typically low profit margins. The expectation was that the new regime would deliver significantly higher headline grabbing fines, particularly for the larger organisations.
 
And in practice? We have seen more fines exceed £1m this year than we had seen in the previous 15 years combined.

Where seven figure penalties were historically reserved for the public disaster or tragic cases of multiple fatalities, we now see fines at this level almost as a matter of routine. It is therefore true to say that larger organisations are getting bigger fines and the construction sector has been no exception to this.

However, the really interesting trends are amongst SMEs. Whilst we are yet to see a "large" construction business fined more than 0.1% of turnover, those in the "small" and "medium" categories are being deprived of far larger chunks of their turnover upon sentence. With penalties to date apparently running anywhere between 1.5% and 3.75% of revenues for breaches of health and safety law, the Guideline has perhaps unexpectedly created a new type of 'squeezed middle'. This is where the financial pain of sentencing is being felt most keenly.

On any assessment, the contribution of 'small' construction businesses to the national industry wide fatality rate is disproportionate. With that in mind, when set in the context of safety performance rates in construction, it is to be hoped that the sentencing pattern evident to date will act as a deterrent, helping the HSE promote increased engagement with on-site safety management.

Vital statistics
    •    Construction is one of our largest industries, contributing around 8% to GDP
    •    The sector employs more than 2 million people
    •    Fewer than 120 contractors are responsible for approximately one fifth of output
    •    85% of construction business are small (employing less than 15 people)
    •    Small construction businesses account for two thirds of fatal accidents within the industry
    •    43 construction workers lost their lives in 2015/16
    •    Falls from height are the biggest cause of work related fatalities. 48% of all fatal falls happened in the construction industry in 2015/16
    •    Fee for intervention charges to the sector rose 26% in the past 12 months.