An inspection by a regulator, not least an unannounced one, can be a stressful event. To ensure that the regulator's intervention passes smoothly, it is crucial that a business has already thought about, and put in place, an incident response plan.
Whether this plan is viewed as "crisis management" or simply “compliance planning” it is imperative that the plan exists and that all employees – directors, senior managers and frontline staff – are aware of its existence and understand their role in the response. What is of little use is such knowledge sitting in the mind of the one person designated as bearing, for example, the health and safety responsibilities for the organisation.
The importance of having a coherent plan and knowledge share cannot be understated: if an employee doesn’t understand his or her role, or is blissfully ignorant of the statutory powers that can be exercised by an inspector, that employee may well find themselves being charged with a criminal offence.
Powers and obligations
Broadly speaking, the spectrum of regulators in Scotland are able to exercise similar powers, including the power to enter premises, the power to seize or copy documents, and the power to ask questions of any employee they encounter. Equally relevant is that a failure to comply with a regulator's request, or to obstruct an inspector whilst exercising his or her statutory powers, is a criminal offence.
This is true for inspectors of the Health and Safety Executive, or the Scottish Environmental Protection Agency, or Environmental Health Officers. The most likely consequence of a successful prosecution is a monetary fine, and certainly a criminal record. Prosecution of employees, though rare, should not be cause for complacency.
Valuable lessons can be learned from the difficulties recently encountered by employees of Southern Water Services Limited (Southern) during an investigation being undertaken by the Environment Agency (EA). Although an English case, the outcome is of equal relevance in Scotland.
Court of Appeal judgment
To put that matter in context, the Court of Appeal judgment narrates that five employees of Southern were on duty at a number of Southern's sites in July 2016 when. During visits by EA officers, it was alleged the officers “met with what can, put at its lowest, be described as a lack of co-operation on the part of the employees of Southern Water and in some cases with conduct which was clearly calculated to frustrate the inspection”. The employees had been instructed not to co-operate with the EA.
What, then, does the Court of Appeal tell us about obstructive conduct?
Any individual who finds themselves on site when a regulator comes knocking on the door should be left in no doubt that refusing to hand over documents, or refusing to answer questions on the basis that someone else instructed that individual to behave in a particular manner, will find very little sympathy in the courts.
What amounts to obstruction?
The court considered obstruction to be “reasonably understood as encompassing any act which prevents an authorised person from exercising powers that he has or which makes it more difficult for him to exercise his powers”.
If an employee fails to act, that can only be a criminal offence if the employee had a duty to act in the first place. For example, a refusal to answer informal or conversational questions posed by an authorised person ought not to be an offence. That should be contrasted with questions asked of employees when the authorised person makes clear he is acting under his statutory powers (and thus there is a duty to act).
The Court of Appeal indicated that a subtle distinction might be drawn between, on the one hand, an employee communicating to the officers the position the company had chosen to adopt (i.e. non-disclosure) and, on the other hand, when the employee has crossed the line and is actually "positively implementing that position" by telling the officers what they could or could not do. Great care ought to be taken by any employee who might find that their behaviour, with hindsight, is analysed as having actually crossed the line between communicating a position and adopting a position.
Failing to assist authorised officers, or failing to hand over documents to authorised officers, is plainly conduct falling on the wrong side of the line and, potentially, into criminal liability. Where an employee goes far beyond implementing the company's position, there will likely be no doubt about their criminal liability. For example, where the employee "takes matters into their own hands" and removes documents (or, as happened in this case, even locking the documents in a cupboard beyond the reach of the officers), this will be regarded as conduct that self-evidently prevents an inspector from exercising their statutory powers. This will be so even if the employee's “explanation” is that they were told to act in such a manner by their superiors or advisers.
When an inspector visits, it is therefore imperative that “cool heads” prevail, and all staff, from Managing Director to frontline operative, is aware of what is expected of them and the company’s contingency planning for such visits.
Timely legal advice can be crucial. But equally crucial is for all employees to be aware of the powers and duties of an inspector, and carefully evaluate whether their own conduct could be viewed as being obstructive. Simply “doing what you are told” is not a recognised legal defence.
Shepherd and Wedderburn's regulatory crime team has experience dealing with investigations, and provides clients with advice on how to be prepared for, or react, to an investigation by regulatory bodies. Please contact Kevin Clancy in our regulatory investigations team for further information and advice.