The cost of non-compliance – D is for due diligence.

We hear from our Strategic Advisor Sterling Crew on the escalating cost of non-compliance and a practical approach to the legal defence of due diligence.

Food Safety issues are never far from media headlines along with consumer and regulatory scrutiny. Last year saw no respite in the number of food business operators being prosecuted. Following the introduction of the new Court Sentencing Guidelines in 2016, for food hygiene and Health and Safety offences, the cost of failure has never been higher. With extraordinary eye watering six figure fines being regularly handed out, Health and Safety failings can have a business critical impact on a company. It has never been more important to ensure your food business is safe and legal. If you think the cost of compliance is high try the cost of comfortable non-compliance. Even the best of businesses can get it wrong

Compliance covered

The key requirements of the legislation, The Food Safety Act 1990, are to ensure you do not include anything in food, remove anything from food or treat food in any way which means it would be damaging to the health of the people eating it. In addition, you must ensure that all food meets consumer’s expectations in terms of nature, substance and quality and are not misleadingly presented. It must be produced in premises with safe food hygienic standards. The Act covers activities throughout the food distribution chain, from primary production through to distribution, retail and catering. Given the lift and shift policy the government is adopting to transposing EU law into U.K. legislation little is likely to change post Brexit regardless of any deal.

A defence which is available to the strict liability in the Act is the one of due diligence. The Act states “… It shall be a defence for the person in charge to prove that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence by himself or by a person under his control.” Food businesses do not have to establish their case beyond all reasonable doubt. They need only persuade the court that they exercised due diligence on the balance of probabilities.

We may well see the number of prosecutions rise in the coming year, as budget cuts to local authorities could lead to less resource being allocated to supporting food businesses in helping them improve standards. As an alternative, authorities may take the decision to prosecute and enforce closure to protect consumers. It makes sense to have a strong due diligence system in place before a potential prosecution. Don’t wait until you’re in a crisis to come up with a crisis plan. There is a need to be aware that even the most proactive risk management and mitigation processes will not guarantee avoiding a breach of the Act. An effective due diligence approach will however minimise the risk of prosecution, as well as playing a part in helping to deliver safe, legally compliant food. Good compliance control systems can help avoid problems. Regulators may well decide that legal action is inappropriate if they are convinced that all reasonable precautions were taken and all due diligence was exercised.

The cost of non-compliance

The new Sentencing Guidelines dictate that fines reflect the business turnover. The final penalty can also go up or down depending on mitigating or aggravating factors. So, it is important to have a robust due diligence defence demonstrating strong extenuating factors to avoid any increase in fines. For instance, fines can be very high for a deliberate breach or flagrant disregard for the law but lower if significant efforts were made to secure food safety, although they were inadequate. The Food Safety Act 1990 provides for an unlimited fine with up to two years imprisonment for the most serious offences. Recent prosecutions have seen restaurant owners jailed for offences relating to allergenic deaths and retailers fined over £1million as the result of rat infestations in their shops. But the greater cost can be reputational damage to a food business. Being found guilty in the court of public opinion can be expensive. No matter how big or how small a business, if your customers lose confidence, the commercial ramifications can be catastrophic.

In my 35 years of experience successfully prosecuted business owners either lacked the knowledge to identify the risks or they simply did not give any consideration to the dangers to which they might be subjecting their customers. Rarely did they commit the offences with criminal intent. They were simply not prepared and had an unsafe food safety culture. They believed they were doing the right thing or had something more pressing to attend to at the time, prosecutions were something that happened to other people. Please bear in mind if you are ever tempted to think the cost of compliance is high, remember the business critical cost of comfortable non-compliance.

Guide to due diligence

The due diligence defence in UK food legislation has now been in force for over quarter of a century. Emerging case law and good practice indicates that an effective defence needs to contain a number of key elements:

Proactive action needs to be taken by the food business.
Monitoring and action on customer complaints.
Controls have to be appropriate for the level of risk and reflect the size and sources of the business.
Effective food safety management systems based on HACCP principles which continually assess the risk to food safety and allocates resources to minimise it.
Statistically significant and representative inspection and sampling of materials.
Competent trained staff.
Appropriate standards of recognised good manufacturing / retail / catering practices.
Effective controls on labelling and advertising.
Written records of the reviews and audits of control systems.
Effective traceability systems. To assist in any potential withdrawal or recall.
The senior management of the company is consulted in reviews of the effectiveness of control systems and the development of corrective action. And that this is resourced adequately.
An effective crisis management system.
Appropriate third-party checks, accreditation and testing to give a credible independent challenge and assurance.
An effective food safety culture.