Prepare for much larger work-safety violation fines, say top firms

The first decision shows just how much larger fines are going to be

Prepare for much larger work-safety violation fines, say top firms
New Zealand businesses should prepare for much larger fines under the Health and Safety at Work Act 2015 (HSW Act), top law firms said.

Last week, Budget Plastics became the first business to be penalized under the HSW Act. It was fined $138,500 by the Palmerston North District Court after a worker had his hand partially amputated due to an incident on 6 April 2016.

“[The first sentencing under the act] shows that the court will impose higher fines moving forward, which reflects the five-fold increase in maximum fines available under the act,” MinterEllisonRuddWatts (MERW).

WorkSafe New Zealand found a number of health and safety failings by Budget Plastics, said Grant Nicholson, a Kensington Swan partner who specialises in health and safety and in commercial and insurance litigation.

“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,” he said.

Brian Nathan, a partner at Duncan Cotterill who specialises in litigation, echoed the sentiments.

“This decision has resulted in a large increase in the level of fines for breaches of the HSW Act. As insurance cover cannot be obtained for fines, every PCBU [person conducting a business or undertaking] should be aware of the potential effect on their business of breaching their health and safety obligations,” he said.

In the decision, the district court said that the appellate courts will have to determine sentencing guidelines for the HSW Act. The court said that although New Zealand looked to the Australian Model Work Health and Safety Act to develop the HSW Act, sentencing will not be similar in this jurisdiction. The HSW Act explicitly requires the Sentencing Act 2002 be applied to sentencing, MERW said.

The firm also said that courts will continue to consider the financial situation of offenders in setting fines. MERW expects the practice to increase, as the larger fines could threaten the sustainability of companies. Nonetheless, the court did say that in instances of serious breaches, it may be preferable for defendants to be put out of business.

This practice will be particularly significant for certain types of businesses, Nicholson said.

“This will be particularly important for small- to medium-sized businesses, as big six-figure fines will really bite,” the Kensington Swan partner said.

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