US Health & Safety – Comparing the Cost of Compliance vs. A ViolationCategory: Health & Safety | Bryan Richards | Published on: May 18, 2018 | Updated: May 24, 2018 Read more: Health & Safety
Despite the growing awareness of the importance of health and safety compliance, many businesses still struggle to safeguard themselves against penalties. Fines for safety and health offences increased by 80% since the new HSE sentencing guidelines came into force in 2016, reaching a total of £69.9 million compared to £38.8 million the previous year.
The US is also building more robust health and safety legislation to decrease the number of workplace accidents, by implementing stricter regulations and higher fees.
How have these attempts shaped the overall health and safety situation in the last years?
Penalties on The Rise in the US
Although the official government agency, OSHA, develops new regulations and enforcement strategies, states can opt to have their own programme. Thus, actual regulations can differ, provided they are at least equivalent to federal requirements.
In total, 25 states have started their own programmes, with some, like California and Michigan, having much stricter federal requirements.
Despite regulations differing from state to state, official data from the United States Department of Labour shows that large penalties for OSHA breaches are on the rise. 2017 recording 866 cases where the offender was charged $40,000 or more for critical violations. The volume of issued penalties in 2018 is projected to be over 600.
The Causes of Fatal Injuries at Work
Most frequently cited OSHA violations in 2017 were due to lack of fall protection in the construction industry. This was followed by the hazard communication standard and then general requirements in scaffolding.
When it comes to fatal injuries, a total of 5,190 fatal accidents were recorded in 2016 – a 7 percent increase from 2015. Numbers have been increasing consecutively for the last three years, with violence and other injuries by persons or animals seeing the largest rise in workplace fatalities of 23%. Mining, quarrying and oil and gas extraction decreased the most (26%).
The most extreme case in 2017 saw the Atlantic Drain Service in Boston pay $1.5 million after two workers died in a trench. Apparently, employees never received safety training and didn’t have access to ladders to exit the trench.
The Cost of Health And Safety Violations
To counter the increase in workplace accidents, OSHA raised penalties.
Now under new regulations, one violation will cost up to $129,336 if wilful neglect is found or the incident is repeated. If the company fails to abate, each day beyond the abatement date can cost another $12,934, depending on the magnitude of the breach.
The famous case of BP Texas City Refinery can help illustrate the reality of such extreme instances. In 2005, the company was fined $21m after an explosion that killed 15 and injured 170 employees revealed more than 200 safety violations. Expecting the company to have learned its lesson, the findings of a follow-up inspection in 2009 are even more unbelievable. OSHA discovered that not only had the previous citations not been fixed, BP had also convicted another 439 violations, resulting in a total of more than 700 violations – and a record-breaking $87 million fee!
Whilst this may be an extreme case, the averages speak volumes. The Centre for Disease Control and Prevention estimates the average cost of a fatal injury in the US to be about $990,000, including the victim’s hospital costs, worker’s compensation, general medical expenses, civil liability or litigation costs and property loss.
With the additional expenses associated with workplace disruptions, loss of productivity, worker replacement, training, and attorney fees, liability companies may be looking at an overall actual cost of between $1.4m and $3m on average per death.
Average US Health and Safety Violation Double the Cost of Compliance
Small to medium sized firms typically spend about $53,000 on health and safety compliance a year. A violation, which could simply be not having a fire extinguisher, can end up costing the business on average around $129,336. That makes compliance costs on average less than half cost of compliance. A larger case, with more violations, more victims, and perhaps a fatality, could easily cost the employer multiple times that annual compliance cost.
Looking at the high cost and fatal consequences of insufficient safety management in comparison to the returns of a healthy working environment, one would expect companies to value health and safety highly when implementing their business strategy. However, according to a survey from Employers, 25% of micro-business employees and 17% of small business employees have never received workplace safety training.
Towards a Safer Future
With health and safety regulations becoming stricter, violations are now more expensive and breaches less economic than ever before. Putting aside the ethical reasons for establishing a safe work environment, economically, this strategy doesn’t make sense.
Both the UK and US government initiatives are trying to make compliance a priority for the private sector by issuing higher penalties and carrying out more inspections. It is time for business owners to catch up with these efforts and build a sustainable safety plan.
Arinite clients appreciate we provide practical, no-nonsense advice about what you need to do to establish and maintain a safe and healthy working environment.
If you need to call upon our expert assistance, or just for an informal chat, please call our office on 0207 947 9581, or drop Brendan Tuite an email email@example.com.