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Contractors should change contracts to ensure they pass HSE charges to correct company, says expert

Out-Law Analysis | 01 Feb 2012 | 2:57 pm | 2 min. read

OPINION: Building contractors should be busy revising their standard contracts to make sure that they are not about to be on the hook for costs caused by the health and safety lapses of another company.

The Health and Safety Executive (HSE) is introducing a new kind of fee that could result in one contractor paying out significant sums to cover the cost of investigating another company entirely.

The new rules come into force in April this year, and contractors should be revising their contracts to make it clear that they will not be liable for the costs of investigating subcontractors or other partner companies.

This is because where there are multiple parties involved in a potential health and safety breach, the HSE may serve the fee notice on one party when the failing was caused by another, or they may share the fees unfairly amongst several parties. A clause in a construction contract could allow for recovery of these fees from the offending party in these cases.

The HSE's plan is alarming for a number of reasons. In December the HSE approved previously announced plans for the fee, which is set at £124 per hour. The fee is designed to recover the HSE's investigation costs and will be applied when it identifies a material contravention of health and safety law. 

It might seem reasonable for the HSE to recover costs from offending companies, but this is not a penalty or a fine to be applied to those who have behaved badly, it is a charge that applies even to companies which are responsible for a relatively minor breach of the law. It applies even when an investigation does not lead to an enforcement notice or a prosecution.

If you are investigated and prosecuted but you are found not to have broken the law, you can reclaim the payments made to the HSE. But if you are investigated and the case does not lead to a prosecution you cannot reclaim the payments, meaning that companies not guilty of major breaches of the law will pay the fees.

This will disproportionately affect smaller contractors. This is both because they are likely to have less sophisticated systems for dealing with any breaches that might occur, and because they will be less able to absorb this cost which will come out of the blue and be completely outside their control.

Add to this the fact that the HSE has announced that it will take a more focused approach to finding pockets of poor practice and that smaller construction firms are "now the focus of our proactive efforts" and you quickly understand that smaller firms are in the most danger.

The fee of £124 an hour may not appear high, but investigations could take days, weeks or even months, meaning that eventual costs could spiral.

The fees begin if the HSE finds a 'material breach' of health and safety laws. The trouble with this is that the bar is set so low. There is unlikely to be a building site in the country where there is some small breach. Companies are at the mercy of individual inspectors' discretion when it comes to whether or not this will trigger the fees.

The HSE this means it will charge from when "a formal regulatory intervention through a letter, e-mail, instant visit report, notice or prosecution" up to the point that court proceedings start.

Companies can appeal the charges, but only to a panel made up of a senior HSE official and an industry representative, which hardly constitutes independent oversight.

It is likely, though, that despite this many, if not most, companies will appeal any charges levied on them. In fact the HSE could well find itself with an administrative burden relating to the charges that could threaten to cripple the system.

There is one small comfort in the proposals. The imposition of fees means that the HSE will clarify precisely which company is being investigated and when that investigation has been concluded, either by a rectification or the beginning of a prosecution.

Under the current system this information is hard to come by, so at least companies will have certainty in these areas, though that certainty could come at a very high price.

Adam Harris is a construction disputes specialist at Pinsent Masons, the law firm behind Out-Law.com