Stagesafe

News for 2008

November

Imprisonment now an option for breaching health & safety rules

Senior managers and directors who breach health and safety rules could effectively be treated as common criminals once the new Health and Safety Offences Act is brought into force on 16 January 2009. By making imprisonment an option for many offences, what was once considered a breach of regulations will become a criminal matter, says Steffan Groch, head of regulatory at DWF. The Act, which received the Royal Assent last month, amends the existing Health and Safety at Work Act 1974.

It raises the maximum penalties which can be imposed by lower court from £5,000 to £20,000, increases the range of offences for which an individual may be imprisoned and makes certain offences, which are currently only triable in the lower courts, triable in both lower and higher courts.

However, Steffan Groch believes the new rules could face a legal challenge in the courts: “The way the health and safety law works is that in many circumstances people are presumed guilty unless they can prove their innocence. In the case of Regina v. Janway Davies in 2003, the Court of Appeal decided that this reverse burden of proof could be justified, in part because health and safety offences were not ‘truly criminal’ in nature.

“Given that one of the justifications for this decision has arguably disappeared, I believe that a challenge is inevitable.

“The combination of this new law and the Corporate Manslaughter Act 2007 is also interesting. The Corporate Manslaughter Act is focused on proving that senior managers have been guilty of a collective ‘gross breach’. Thus, the more breaches found on their part, the more potential charges can be laid against them for a breach of section 37 of the Health and Safety at Work Act 1974. The new law will make section 37 offences carry imprisonment.

“Whilst the legal burden of proof will be upon the prosecution to prove that the senior manager or director was guilty of ‘neglect’, we need to remember that under the manslaughter rules, senior managers can be guilty of neglect even for things they did not know about, if the court considered that they ought to have been aware of them.”

Groch believes that, whilst it is right that the worst cases of health and safety offences should be punished accordingly, the stiffer penalties will lead to more defendants having “little option but to seriously consider defending themselves, either to protect their liberty or avoid a heavy fine or disqualification.”

Before being approved this time, the Health and Safety Offences Bill had been presented – and rejected – four times in the House of Commons.

Royal Assent for Offences Act

After a relatively speedy passage, the Offences Act received Royal Assent last month and Explanatory Notes to the Act were published last week.

Following all the fanfare surrounding the introduction of the new Corporate Manslaughter Act in April, which introduces no new offences against individuals and does not include imprisonment as a sentencing option, it is surprising that so little attention has been given to the Offences Act which gives rise to the possibility of individuals being sent to prison for breaches of the Health and Safety at Work Act.

The purpose of the Offences Act is to raise the maximum penalties available to the courts for certain health and safety offences. The Notes to the Offences Act states that the objective of the changes it introduces is to ensure that sentences for health and safety offences are: “sufficient to deter those tempted to break the law, and sufficient to deal appropriately with those who do commit offences.”

The Offences Act makes the following key changes to the existing legislation:

Inspections make Bradford a safer place

Inspectors from the HSE and Bradford Council visited over 175 businesses recently as part of an intensive, two-week long, joint inspection initiative aimed at making the city a safer and healthier place in which to work.

Between 20 and 31 October 2008, Bradford Council and the HSE focused their attention on construction sites and a wide range of inner city premises including retail outlets, garages, engineers and others. As a result, inspectors issued 75 improvement notices - where action was required to be taken as a matter of urgency to prevent an accident occurring - and 16 prohibition notices - where inspectors found it necessary to stop activities immediately until steps had been taken to put things right.

At one visit, it was evident that machinery safeguards were so poor employees were at risk of serious injury or worse. In this case, in addition to notices being issued, a prosecution is also being considered.  A number of companies will receive follow up visits from HSE and Bradford Council inspectors over the coming months to ensure they have made the necessary improvements.

The initiative focused on key areas for concern where there was significant risk of injury or ill health. In addition to safety violations, there were a number of breaches of important welfare requirements, including, for example, a lack of heating, dirty toilets and eating areas, and poor lighting. HSE principal inspector Chris Flint, who led the HSE inspection team, says: “This has been the first time the HSE and Bradford Council have undertaken a joint initiative of this kind and it has proved very effective.

“Inspectors found a range of unacceptable practices ranging from employees being expected to access upper storage areas without precautions to prevent them from falling, to dangerous machinery being operated without adequate guarding. All simple matters to deal with, yet as our inspectors found them, all accidents or an ill health occurrence waiting to happen.”

Despite these findings there were also positive signs suggesting that many dutyholders in Bradford are responding positively to the advice and information available to them and managing health and safety effectively in the key areas required of them.

John Blanchfield, Environmental Health Manager for Bradford Council, who led the council’s team of inspectors says: “The majority of employers welcomed our help and were keen to comply with the advice given. Overall, it was pleasing to see that in many premises health and safety was clearly being taken seriously and was well-managed. Encouragingly, this also extended to some of the very small businesses visited (including those with one or two employees) and the self-employed.”

Limited liability comes under scrutiny

As if company directors didn't have enough to worry about as the economy slides into recession, the protection of limited liability is also under attack. In the recent case of Contex Drouzhba Ltd v. Wiseman (2008), the court has ruled that a director who had signed an agreement containing a promise to pay for goods on behalf of a company, gave an implied representation that the company had the capacity to meet its obligations under the agreement. Since at the time of signing the agreement the director knew that the representation was untrue, he was held to be personally liable for a claim in deceit.

The director of the company knew at the time of signing the agreement that the company was insolvent and that there was no chance of obtaining capital from elsewhere. He was found to have represented that the company had the capacity to meet the payment terms and since he was effectively "the controlling mind" of the company, he was personally liable for his own fraud.

The case has indicated that creditors seeking recovery from directors of insolvent companies may have an alternative route to the existing insolvency laws relating to wrongful trading. Hurdles to recovery (such as it being the liquidators' decision whether or not to pursue claims against directors and that any reimbursed monies would still be subject to the usual priorities in any liquidation) may be avoided. The defrauded creditor may now have a direct cause of action by claiming against the director personally in deceit.

By no means will every contract signed by a director contain implied representations that the company will be able to fulfil its obligations. Arguably few do and each case will depend on its own facts. Proving deceit is notoriously difficult to do.

Nevertheless, the case illustrates an increasing trend moving away from previously robust views of what limited liability meant. Directors of companies in trading difficulties need to consider carefully their personal position when committing companies to long term commitments; do they genuinely believe that the company will be financially able to meet them?

Employment Bill becomes law

The Employment Bill has received Royal Assent and became the Employment Act 2008. In summary, the Act contains provisions dealing with workplace dispute resolution, the national minimum wage, employment agencies and trade union membership law.

Workplace dispute resolution

The Act repeals the statutory dispute resolution procedures and related provisions. As a result:

National minimum wage

The Act provides for some changes to the enforcement of the national minimum wage by:

The Act also clarifies provisions in the National Minimum Wage Act 1998 relating to voluntary workers.

Employment agency standards enforcement regime

The Act strengthens the employment agency standards enforcement regime by providing for more severe penalties for defaulters and greater powers for the inspectorate.

Trade union membership law

The Act amends trade union membership law in light of the European Court of Human Rights (ECHR) judgment in Aslef v. UK, a case which concerns the freedom of trade unions to expel or exclude individuals on the basis of their membership of a political party. The ECHR held that the relevant provisions of the UK legislation violated Article 11 of the European Convention on Human Rights (the Convention), the right to freedom of assembly and association. Rather than appealing the judgment, the Government has amended the UK legislation to ensure compatibility with the Convention and to enable trade unions to exclude current or former members of particular political parties from membership.

When does it come into force?

The Act's provisions will not come into force immediately, and most will come into force at a date to be appointed by the Secretary of State. Under current proposals, the Government intends this to be 6 April 2009, although some of the national minimum wage provisions come into force earlier in the New Year.

No Christmas light for Bedford

Christmas lights will not be put up along Bedford High Street this year because of fears about health and safety.

Town Hall bosses have decided not to string illuminations across the main road as they are concerned the ageing buildings will not be able to support the decorations, which could fall down and injure someone.

Concerns arose after a woman suffered serious head injuries last November when she was hit by falling Christmas lights in St Neots, Cambridgeshire, after the brickwork of a shop crumbled.

A spokesman for Bedford Borough Council said: "The location for this year's Christmas light displays follow stringent safety checks of the fixtures, fittings and the integrity of the walls that will be supporting them.

"This comes after a failure to our own display last year and other high-profile incidents across the country, some of which resulted in serious injury."

Shoppers in Colchester also had a narrow escape two years ago when the town's High Street Christmas decorations fell into the road, but did not injure anyone.

Despite the previous problems though, both St Neots and Colchester will have Christmas lights in their high streets this year.

The Times & Citizen asked Bedford Borough Council whether the town's Christmas lights would be affected by health and safety fears two weeks ago, but was told at the time that the decorations would be put up as normal.

The spokesman added: "The main focus for this year's Christmas light displays will be in pedestrian areas of the town centre where we hope they will provide a festive accompaniment to a host of celebrations and activities in the run-up to Christmas.

"Bedford has a good reputation for its Christmas light displays, which have entertained the public without injury for many years. We are keen to maintain this.

"We have therefore selected those locations and displays which minimise the risk to the public while supporting festive events taking place in the town centre."

Some of the heavier traditional lights have also been replaced this year with lightweight LED decorations, to lessen the strain on buildings and fixtures.

Stokes Bay Festival could ban camping

Camping could be banned and numbers cut at a popular music festival. The Stokes Bay Festival is to be debated at a full meeting of Gosport council next week, when councillors will decide on the conditions for the event to go ahead next year.

But six Lib Dem councillors will have to declare an interest and leave the chamber because they are involved with the event – giving the Tories a majority and the power to add any restrictions they want to the licence.

With four more councillors than Lib Dem and Labour combined, the Tories are set to ban camping from the festival site, which will then have to be moved elsewhere in the town.

They are also likely to push to get legislation in place which would mean the music would have to finish earlier and the capacity would be 500 less than last year.

The Lib Dem and Labour councillors have previously opposed adding restrictions to the festival.

But the Tories will not be able to impose a £25,000 increase in renting the council-owned land – which they pushed for last year – as this will be discussed at the council's budget meeting in February.

Councillors involved in the meeting are not allowed to reveal in advance how they intend to vote on the day.

But Tory leader Cllr Mark Hook said: 'Everything is up for discussion and no doubt there will be major concerns about health and safety on the site.

'It was the first year the festival went ahead last year and I support festivals in Gosport but with regard to the Stokes Bay festival, there are lessons to be learned.

'The full council can determine whatever it wishes to do and impose whatever restrictions it wants.'

The festival organiser, Lib Dem Cllr Peter Chegwyn, will declare an interest and leave the chamber at Wednesday night's meeting, along with five his party.

Cllr Chegwyn's only comment was: 'I'm just amazed that they are still playing party politics three months after the event.'

Leader of the council, Lib Dem Cllr Dave Smith, confirmed that six of his party will not be able to vote.

'They will have to declare an interest,' he said. 'The Tories have manipulated the situation so that they can damage a successful music festival, but I have no doubt it will go ahead.'

The festival, which featured The Levellers and The Saw Doctors, caused controversy last year as it was approved at a licensing hearing but never went before full council.

The Tories pushed to have the item added to the full council agenda, but failed to win a vote to lift standing orders so it could be discussed.

The Friends of Stokes Bay group was also against the festival and an estimated 40 group members and residents from the area booed and jeered when the Tories lost the vote to discuss the item at full council.

Company pleads guilty to health & safety breach

The HSE is warning employers to make sure that they have safe systems in place to clean and maintain machinery after an employee was seriously injured while working at a Kent plasterboard company.

This follows the prosecution of Knauf UK GMBH, which pleaded guilty at Sittingbourne Magistrates Court and, on Monday, were fined £4,000 with £3,204 costs for contravening the Management of Health and Safety at Work Regulations 1999 and regulation 11 of the Provision and Use of Work Equipment Regulations 1998.

HSE inspector Jan Combs says: "This conviction is a result of the company not thinking through all elements of their work activity. This led to this major injury which has significantly affected the victim's life. If a proper health and safety risk assessment had been carried out and acted upon this incident could have been avoided. They ignored basic health and safety rules".

On 18 December 2007, a group of Knauf's employees were required to clean the rollers on the plasterboard production machine. The guards were removed and the machinery turned on. The fingers of one of the employees became trapped and, as a result, he sustained serious injuries to his hand.

The HSE investigation found that no suitable health and safety risk assessment had been carried out prior to the cleaning taking place.

Section 3(1) (a) of the Management Health and Safety at Work Regulations 1999 states:

Regulation 11 (1) (a) of the Provision and Use of Work Equipment Regulations 1998 states:

Sharkey in row over music licensing

Feargal Sharkey, CEO of music industry umbrella group U.K. Music, has hit out at the Metropolitan Police's requirements for licensing of music events, during a Parliamentary hearing.

Sharkey was giving evidence to the Culture, Media and Sport select committee in the House Of Commons. During the session, he revealed that at least a dozen London councils have followed police guidance on risk assessment of live music.

The Metropolitan Police Form 696 requires details of the type of music and the names, aliases, phone numbers and addresses of performers 14 days in advance as part of any license application. One London council has invoked prevention of terrorism in its licensing guidelines for live events.

Sharkey told Billboard.biz that U.K. Music was concerned about the effects of such demands, particularly on small-scale events.

"They [police and councils] need to go back and amend those licensing policy statements and review this system," he said. "Quite frankly they should probably stand up and publicly apologize to every young musician and performer in this town. Should that not happen, U.K. Music potentially does have the ability to take them to the High Court for judicial review."

While individual London councils license music events, they base their decisions on the advice of police.

Speaking after the committee hearing, Sharkey told Billboard.biz: "We learned that the Metropolitan Police, in conjunction with an organization called London Councils - a representative body for all London borough - at the end of last year jointly wrote to all 33 local London boroughs recommending that they insert some particular wording into their local licensing policy statements."

Sharkey cited one such statement from Hillingdon Council in west London, which he says "tries to make a direct connection not only between crime and disorder and live music, but most astonishingly - I'm still knocked over in disbelief - between live music and the prevention of terrorism."

The Hillingdon policy statement, adopted by the council in November 2007, states: "In the interest of public order and the prevention of terrorism, the Licensing Authority would expect that for significant events, a comprehensive risk assessment is undertaken by premises licence holders to ensure that crime and disorder and public safety matters are identified and addressed."

Sharkey says he's also concerned about the singling out of urban music genres "bashment, R&B and garage" as examples on the 'music style' section of the Metropolitan Police Form 696

"It might be a happy coincidence, but those are three musical styles that by and large would probably appeal to a large audience of young black or Asian people living in London," he said.

Of the demands for performers' personal details at least 14 days in advance of a show, Sharkey said: "This is just an extraordinary idea and I'm absolutely staggered that they thought this through at all and, more important, potentially up to 12 London boroughs have actually tried to implement this policy. I think it's acting way outside the law."

Sharkey said Westminster and Islington councils, which both license well-known music venues, had signed up to the Met's guidelines.

The former singer of punk band The Undertones was specifically addressing MPs about the impact of the 2003 Licensing Act.

He voiced concerns to Billboard.biz about police statements during the passage of the legislation linking music events with crime, and said there has been "inconsistency" with how the Act has been applied across the U.K. Sharkey cited the example of Moonfest, where in August Wiltshire Police used section 160 of the Act to prevent alt-rock act Babyshambles, featuring Pete Doherty, performing at the event.

Superintendent Paul Williams of Wiltshire Police said at the time the band's tendency to "speed up and then slow down the music" could create a "whirlpool effect" and spark disorder. It is believed to be the first time the 2003 Act has been used in such a way.

Sharkey also told the committee that the bureaucracy and cost involved for a new live music license as a result of the Act was damaging pubs, clubs and bars.

"The point I was putting across is that it is true that live music in the U.K. has blossomed in the last five or six years, but that we were still very concerned and now firmly believe that the smaller, informal gigs in those little bars and clubs, wine bars and restaurants, are being impacted upon by this legislation," he said. "The government now needs to intervene and amend that legislation."

Sharkey is suggesting an exemption in the legislation for any premises with a capacity of less than 200 people from any requirement to have a license for live music.

The Metropolitan Police was unable to comment.

Company fined for petrol leak

Companies have been warned to protect employees from dangerous substances after a 59-year-old man was engulfed in flames following a petrol leak.

Phoenix Autoparts 2000 Ltd was fined £2,000 and ordered to pay £2,375 costs at Nottingham Magistrates' Court after pleading guilty to breaching Regulation 6 (3) of the Dangerous Substances and Explosive Atmospheres Regulations 2002, for failure to apply measures to control risks from a dangerous substance, and Regulation 5 (1) of the same regulations for failing to make suitable and sufficient assessment of the risks to employees arising from the presence of a dangerous substance.

On 25 August 2006, an employee received severe burns when a leak of petrol was ignited. The leak occurred during an operation to transfer petrol from a fuel retriever tank into a vehicle's petrol tank. The employee saw what was happening and walked through the puddle of petrol that had formed under the retriever unit to stop the leak. As he did so, the petrol was ignited, probably from a stray spark from an oxyacetylene torch being used nearby, and he was engulfed in flames.

The man's trousers were set alight and he suffered severe burns to the backs of his legs and to his hands and arms as he was trying to rip his trousers off. He ran to a nearby tap to put out the flames. The man was admitted to hospital for five weeks and had to have two skin grafts. His burns covered 17% of his body and he has not returned to work since.

HSE Inspector for Nottinghamshire Maureen Kingman says: "This was a traumatic incident for the employee, and the company's management were shocked by what happened. Nevertheless, this incident highlights the need for companies dealing with hazardous substances such as petrol to ensure they control all the risks associated with that substance."

The District Judge commented that the company was negligent in that it had failed to see what was a serious and obvious risk. He also said that the fine would have been higher, but due to financial difficulties the Court had to take into account their ability to pay.

HSE publishes new health & safety stats

The Health and Safety Executive (HSE) has published the latest statistical figures relating to health and safety at work. The figures, which cover illness, injuries and deaths, days lost and enforcement action taken by HSE during 2007-2008, revealed that in London, 2.4 million working days were lost, and that 28 workers were fatally injured at work in 2007-2008, while 2725 suffered major injuries. However, rates for the capital were generally lower than the country as a whole.

Judith Hackitt, Chair of the HSE said: "Any improvement in the number of people being injured or made ill by work must be welcomed. However, there is a need for a step change. Of particular concern are the agriculture, construction and waste and recycling industries. I am also concerned that slips and trips - which can have an enormous impact on peoples' lives - are still not reducing. HSE is developing a new strategy that seeks to renew commitment from all those involved in health and safety to tackle these challenges and more.

"In the difficult and uncertain months ahead I urge employers not to take their eyes off the ball. Good business management will be vital and good health and safety management is an integral part of that. Health and safety contributes positively to competitiveness and should not be sacrificed in times of financial pressure."

The full statistics for London can be found at
http://www.hse.gov.uk/statistics/regions/index.htm

Stephen Williams, HSE's London Divisional Director said "I am pleased to see the reductions in the rate of injuries to workers in London. However, these figures show nothing to be complacent about - 28 workers lost their lives last year, and nearly 3000 suffered major injuries.

"Employers need to work much harder to reduce the unacceptable burden of harm to workers in the capital. HSE is active in advising both employers and employees on safety in the workplace, but also in prosecuting those employers who cause death or injury to their workers. While we can all work together, the responsibility for managing risks falls unambiguously on the shoulders of those who create them."

Jail time for company director

A company director who operated companies while bankrupt and forged documents has been jailed for four years and nine months. Roy Harold Goss was convicted in Croydon Crown Court of 18 charges, including offences relating to the management of companies in Swansea and Croydon.

He was also disqualified from acting as a director or in the management of a company for ten years. In passing sentence, Judge Kenneth MacRae said Goss was "intrinsically dishonest" and a "menace to the commercial and business community". Goss' companies ran up unpaid debts of £3m.

Business Minister Pat McFadden says: "We are determined to crack down on cheats like these who profit by deception. When someone acts in this way they are effectively stealing from honest businesses, who are owed money and can suffer as a result. This prosecution sends a clear message to would-be fraudsters that they won't get away with it."

Goss was convicted of the following offences:

Goss became bankrupt in 2000 prohibiting him from acting as a director of a company, or taking part in the promotion, formation or management of a company. He breached this restriction in relation to eight companies between 2000 and 2006. Six of the companies went into liquidation, leaving unpaid debts of £3m.

Working Time opt-out to continue

The Government tonight pledged to "stand firm" to maintain an opt-out to the Working Time Directive after a committee of Euro MPs, including a Labour member, voted to scrap it.

The move by the employment and social affairs committee of the European Parliament sparked a fresh row between business leaders and unions in the UK over the directive, which aims to limit the working week to 48 hours.

Union officials said it was a "significant" blow against the UK's long hours culture, but business groups said ending the opt-out would "constrain" firms, especially as they struggled to cope with the economic downturn.

Labour MEP Stephen Hughes, employment spokesman of the Parliament's Socialist Group, was among the 35 who voted in favour, with 13 against ending the opt-out, which was negotiated by the former Conservative administration in 1993.

The issue will now be debated by the European Parliament next month.

Prosecution ensues after rooftop fall

A housing management company has been prosecuted after a man fell from a rooftop whilst carrying out repairs. Berneslai Homes Ltd was fined £2,000 and ordered to pay costs £2,022 at Barnsley Magistrates Court after pleading guilty to breaching Regulation 4 (1) of the Work at Height Regulations 2005, which states that:

“Every employer shall ensure that work at height is:(a) properly planned; (b) appropriately supervised; and (c) carried out in a manner which is so far as is reasonably practicable safe, and that its planning includes the selection of work equipment in accordance with regulation 7.”

After the hearing, HSE Inspector David Stewart said: "This incident caused serious injuries but it could have easily been much worse. If the work had been planned properly, with correct supervision, it would never have happened.

"Falls from height are the most common type of fatal injury and caused 3,409 major injuries in 2006-2007. Work at height must always be properly planned, appropriately supervised and carried out in a safe manner. Berneslai Homes failed to ensure that the risks involved in this work were adequately assessed and controlled."

On the 20 January 2007 Paul Pickering, an employee of Berneslai Homes, was carrying out emergency repair work on the roof of a council property at Darfield Road, Barnsley following strong gales in the area. Inadequate planning and supervision meant that the work method adopted by Pickering was unsafe, he fell approximately five metres and suffered three broken ribs and severe bruising.

Fireworks storage license revoked

A factory has been refused permission to store fireworks on the site of a fatal explosion two years ago. Firemen Geoffrey Wicker, 49 and Brian Wembridge, 63, were killed at a blaze at Festival Fireworks, Marlie Farm, near Lewes, on December 3, 2006.

Twelve other people were injured in the inferno, including nine firefighters and a police officer. The company was renamed as Alpha Fireworks Ltd and in December 2007 its licence to store explosives was revoked by the Health and Safety Executive (HSE).

Alpha Fireworks appealed the decision and a hearing was held to consider the case but Lord McKenzie, minister for health and safety, dismissed it. He said: "I have taken the decision to dismiss the appeal by Alpha Fireworks Ltd and uphold the decision of the Licensing Authority to revoke tow licences."

The HSE had given notice to revoke two licences held by the company for the purpose of regulation 17 of the Manufacture and Storage of Explosives Regulations 2005.

TUC survey highlights workers' concerns

Stress or overwork, injuries/illnesses caused by the poor use of display screen equipment and repetitive strain injuries (RSI) top the list of workers' safety concerns, according to a TUC survey of safety reps.

Three in five safety reps reported stress or overwork as a concern in their workplace. Concerns about stress are most common in the public sector and in large workplaces, with the highest instances in central government (81%), education (74%) and health services (69%).

Stress was cited as the biggest concern in ten of the 14 sectors covered by the survey. The manufacturing, construction/distribution/hotels and voluntary organisations sectors reported noise, back strains and display screen equipment as their top hazards at work.

Injuries and illnesses resulting from the poor use of display screen equipment has risen from fourth in 2006 to become the second-most common concern, reported by two in five safety reps. Repetitive strain injuries are another commonly reported hazard.

Other concerns on the increase since the 2006 survey include slips, trips and falls (up 6%), working alone (up 3%) and violence and threats at work (up 4%). TUC General Secretary Brendan Barber says: "Stress casts a gloomy shadow over far too many UK workplaces. And as the current economic crisis creates more anxiety about job security, stress is likely to increase.

"Unions and employers must work together to combat this as it can have a huge personal cost to workers and a damaging cost to businesses. Simple office hazards, such as spending too much time fixed on a computer screen or sitting on a badly designed chair, are often overlooked by employers. But today's survey shows that they are actually a huge concern to workers and need to be addressed. Thankfully, over 150,000 safety reps across the UK are on hand to help employers prevent these hazards."

Delay in publishing sentence guidelines

The Sentencing Guidelines Secretariat has indicated that guidelines to support the new corporate manslaughter offence created by the Corporate Manslaughter and Corporate Homicide Act 2007 (the 2007 Act) will not be published until early 2009, despite earlier suggestions from the Ministry of Justice that the guidelines were due to be ready in autumn 2008.

The 2007 Act creates a new statutory offence of corporate manslaughter (to be known as corporate homicide in Scotland), where a fatality is caused by the ‘gross breach’ of a duty of care, and where the actions of the company’s senior management played a ‘substantial’ part in the breach.

Court rules on IR35 case

The High Court decision in Dragonfly Consulting Ltd v HMRC concerned the application of the 'IR35' tax legislation. The legislation means that income received for the personal services of an individual, where those services are supplied through an intermediary company, can be made subject to PAYE in some circumstances.

The key question is whether the individual in question would have been an employee of the client to which their services were supplied had they been engaged direct by the client instead of through an intermediary company. Note that this special regime applies only for tax purposes; where IR35 applies it does not follow that the individual is in fact employed by the end-user, enjoying the various rights and protections associated with a contract of employment.

In the Dragonfly case, Mr Bessell was engaged through an intermediary company (Dragonfly Consulting Ltd) to provide services to the AA. The Special Commissioners decided that Mr Bessell would have been an employee if he had contracted direct with the AA and that therefore the IR35 legislation applied to the intermediary. This decision was upheld by the High Court on appeal.

The principal factors in deciding that the relationship would have been one of employment were that:

Had the Commissioner concluded that Mr Bessell's hypothetical contract with the AA would have given him free rein to appoint a substitute, it is clear from previous case-law that the individual could not, in law, be an employee. 

However, in confirming the Commissioner's decision, the judge in the High Court noted that the express contract terms made it clear that a substitute could only be provided in place of Mr Bessell if written consent was given. In addition, the evidence demonstrated that the AA wanted, and got, the services of Mr Bessell, that they would not, in reality, have expected Mr Bessell to put forward anyone else. This led the judge to conclude that the hypothetical contract between Mr Bessell and the AA would not have included such a wide substitution clause.

Even when contractual documents do clearly provide for an unfettered right for the worker to appoint a substitute there are some instances in which a court or tribunal is allowed look behind the terms of an agreement to what happens in practice. The precise circumstances in which this is permitted are, however, less than clear and further appeal cases on this issue are pending. For the time-being this is likely to remain a difficult area and this case highlights the danger of assuming that a contractual provision which provides for the possibility of a substitute will necessarily prevent the relationship being one of employment. If, in practice, substitution is unlikely this is obviously not helpful.

This latest case may well encourage HMRC to take a critical look at similar cases where the client company relies on the services of highly skilled professional workers who are engaged to assist on particular projects, particularly if they work within the client's team structure and if in practice there is little or no possibility of the worker sending someone else along to do the work instead.

Implications of HMRC challenge — Demibourne Regulations

What then if HMRC successfully challenge the status of someone treated as self employed? The Demibourne case in 2006 indicated that HMRC could collect tax due under PAYE from the employer disregarding any tax they may have collected from the individual in relation to the same income. This was an unreasonable result and regulations have been introduced, with effect from 6 April 2008, to seek to address this. Very briefly the regulations apply, subject to conditions, where employment income is paid and it appears to HMRC that the worker has paid or self-assessed tax on that income (on a self - employment basis). In such a case HMRC 'may direct' that the employer be relieved of its PAYE liability - in effect tax paid by the employee then becomes available as a credit to set against amounts due from the employer under PAYE.

The main difficulty with the new regulations is that their operation seems to be a matter for the discretion of HMRC. They do not automatically operate when the relevant conditions are satisfied but are instead dependent on a decision of HMRC to issue the relevant direction. However, HMRC's recently published guidance indicates that HMRC will only exercise its discretion not to make a direction in 'very exceptional circumstances where there is very strong evidence to suggest that the employer has deliberately failed to operate PAYE, with no collusion on the part of the employee, in the expectation that the employer would benefit from the new legislation if discovered.' This provides real comfort that some fairly extreme circumstances would have to be present in order for HMRC not to make a direction.

Practical implications

The new regulations do not mean that employers can more easily take a view on status issues in cases where they are confident that the individual they are engaging will declare and pay tax on a self-employed basis. Quite apart from the fact that you can never really be sure that someone will pay all relevant tax liabilities, the following adverse implications can follow from getting involved with status issues:

All of this indicates that careful consideration should be given to status issues at the outset of the relationship. In borderline cases it might be worth approaching HMRC for a ruling rather than awaiting enquiries (eg following a regular PAYE audit) and then potentially being at risk for a significant amount of back-tax and suffering the disruption of an enquiry.

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