Employers beware! Environmental fines have become increasingly heavy since the new Environmental Sentencing Guidelines were introduced. What’s more, the fact that the offence was committed by a contractor will not let the employer ‘off the hook’.
Take, for example, the recent fine of £100,000 imposed on Miller Homes by Leeds Crown Court. Miller had engaged Flannery Civil Engineering to build storage lagoons to hold and filter run-off water from one of Miller’s construction sites. However, Flannery allowed silt water to run directly into an adjacent watercourse. Discharge of run-off from construction sites requires either consent from the local sewerage undertaker, or a permit from the Environment Agency. Flannery had not obtained either.
It was, however, Miller that shouldered responsibility for the offence. As the Environment Agency said: “Miller Homes should have had more effective water management systems on the construction site to prevent the silty run-off from affecting local watercourses”. It did not matter that Miller had specifically engaged Flannery to manage the run-off.
These increasingly heavy fines are not just confined to environmental offences, either. From 1 February 2016 fines for Health and Safety offences were also increased, under the new Health and Safety Sentencing Guidelines. Under both sets of guidelines, Courts must take into account the size of a business’ turnover when setting fines. This means that prosecutions are more likely to be against the party with the deepest pockets- and this is usually the employer. Add to this the fact that fines range from £50 up to £10million, then it is apparent how serious this issue is for employers.
So what can you, as an employer, do to protect yourself against such prosecutions and fines? There are a number of practical steps you should take, including:
- Before employing a contractor or sub-contractor, check that they have a good reputation for statutory compliance, and also ensure that they have the appropriate policies and procedures in place.
- Ensure that your own policies and procedures are fully up-to-date and compliant.
- Identify and actively manage risk.
- Keep policies and procedures updated and site specific, and document evidence.
- Train employees where appropriate.
- Be aware of your legal obligations.
Review your contracts
In addition, you should consider trying to include the following provisions in your contacts:
- An indemnity from the contractor, whereby it agrees to indemnify you against any claims, losses, costs etc that you incur due to breach of legislation/statutory duty/statutory obligations on the part of the contractor (or any sub-contractors). Standard form construction contracts (including JCT contracts) do not include such an indemnity. Although you could still claim your losses in the absence of an indemnity, you would have to rely on breach of an implied term, and this is far less straightforward than claiming under an indemnity; and
- An express right to terminate the contract if the contractor commits serious and/or persistent breaches of legislation/statutory duties or statutory obligations. Most standard form contracts (including JCT contracts) do not specifically provide for this, and so you would have to argue that the breaches fall within one of the standard grounds for termination (e.g. failure to proceed regularly and diligently with the works), and this can be problematic, as these breaches do not fall squarely within any of the standard grounds. Also, to avoid any arguments as to whether a breach is serious or persistent, you should establish a scoring system that ‘rates’ the seriousness of the breach and, if the score falls below a certain level, the entitlement to terminate will be triggered.
For more information, email firstname.lastname@example.org.