Steelmaker fined $375K in Death of Employee

Toronto Star, Wednesday, October 13, 2010 - Tony Van Alphen

In an article in the Business Section of the Toronto Star, Van Alphen reported that an Ontario court fined Essar Steel Algoma Inc. $375,000 (CAD) fine and surcharge in connection with the death of a worker in Sault Ste. Marie, Ontario, Canada.

The fine and surcharge were levied after the company pled guilty to violating the Occupational Health and Safety Act. The violations were discovered in the course of an accident that killed a worker on October 30, 2008 in Sault Ste. Marie. The worker was killed when he was struck by 125 kilograms of iron as he tested a conveyor system in the steel mill's material reprocessing operation. The violations included failure to ensure appropriate overhead guarding was in place to prevent falling material from striking a worker. The fine was $300K while the surcharge was 25% of the fine, or $75K. The Provincial Offences Act stipulates the range of surcharges available and the surcharge goes to a special provincial government fund to assist the victims of crime.

The surcharge is significant because it is typically levied against criminals convicted of drug offences or other serious crimes. By levying the surcharge the government officials (and judge) seem to indicate they view the violation of the Safety Act as a serious crime. The company not only has to bear the burden of the fine and surcharge, they must bear the cost of the adverse publicity.

The Star story went on to mention that the company was fined $25K on the same day for an unrelated safety violation. This fine was accompanied by a $6,250 victim surcharge. The safety violation was failure to maintain an emergency eye was station. A worker performing maintenance work on a truck battery was splashed in the eyes with acid when the battery exploded. The worker went to the nearest eyewash fountain only to discover that it was out of order. The incident happened just 2 months prior to the fatal accident.

Health and Safety is the area prone to risks that have the most severe impact. Workers in the Information Technology, Financial, or Pharmaceutical industries don't face these types of risks but those in the Construction, Oil and Gas discovery, mining, and manufacturing industries do. The need to avoid all the risks to health and safety is the reason that many companies have a "zero tolerance" policy for health and safety. The zero tolerance policy is the equivalent of a statement from senior management that the organization has a "zero" appetite for risks to health and safety. Companies whose Boards of Directors and CEOs craft these policies and communicate them tend to have a better track record in this area than those that don't. Those that go further and back the policy up with budgets for the implementation of the policy enjoy even better results. The policies and budgets must apply to a company's projects as well as their operational work and with such a policy in place the project manager has the direction they need to identify and assign budgets to the appropriate risk avoidance strategies.

I should mention that Essar's CEO, Armando Plastino, has taken the steps described above. The Essar web site contains a soft copy of the company's Health, Safety and Environment policy which Armando has signed. The policy covers all the points it should. In particular the policy clearly states that:

1. The company is committed to providing "excellence" in the area of Health, Safety, and the Environment.
2. That the health and safety of workers must not be compromised by any other business objectives.
3. That management is accountable for achieving HSE goals and objectives.
4. That HSE policy must be integrated with existing operations and with project planning and execution.
5. That management must continually monitor projects and operations to identify new risks and ensure that existing risks are effectively managed.
6. That management will ensure that the company learns from any HSE incidents in order that similar incidents may be avoided.

There are also provisions for training employees, ensuring that contractors, vendors, and visitors are protected by the policy, and that work that is deemed unsafe is immediately stopped. It is not possible to evaluate the effectiveness of this policy, it was only signed in June 2010, but Essar appears to have learned something from its experiences. The fines and surcharges appear substantial until you compare them with Essar's earnings - $458Bn for Q1 2010. I would tend to think that the embarrassment and negative publicity had a much greater effect.

There is a lesson to be learned from Essar's experience, even for those of us toiling in industries where there are no health and safety risks. When senior management takes the trouble to evaluate their tolerance for risk, articulate that tolerance, and communicate it to the management of their companies, risks can be very effectively managed. I hope that there are companies out there who can learn from Essar's experience, without having to sacrifice anyone's life to learn the lesson.