Safety Programs: Investments, Not Costs

By Richard P. Schweitzer, Esq.

Sometimes distributors say they cannot afford the cost of a safety compliance program, or they defer sending employees to training programs because of the expense. Some owners do not see safety as necessary to improving the company’s bottom line – saying that if it does not generate revenue or reduce costs, they are not interested. Others appreciate the value of safety programs but still view safety as a cost item to be minimized.

This is backward thinking. Safety programs are means to preserve revenue. I heard one GAWDA distributor complain that his company was disqualified from contracting with a Fortune 500 manufacturer because the distributor’s OSHA 300 record of injuries was too high (too many small injuries). The lack of attention to safety management cost the company millions of dollars in potential sales. What was the cost of safety at that company?

Costs For Noncompliance

I also hear that the infrequency of audits or enforcement actions by federal and state regulatory agencies means that some distributors might choose to overlook some compliance practices and take their chances on not receiving an audit. This is bad policy for two reasons. First, look at the actual cost of a nominal civil fine in an enforcement action. If an agency fines your company $5,000, what is the amount of increased sales necessary to recoup that fine? At a 5 percent profit margin, a company would need to generate an additional $100,000 in sales just to break even on the fine. That does not include the lost administrative time necessary to respond to the violation.

Second, and perhaps more important, failure to comply with government regulations might mean that a court will automatically find that a company was negligent if the noncompliance led to an injury and the company is sued. Conversely, compliance with regulations is strong evidence that a company acted reasonably in a situation, even if someone was injured.

According to a study by the Federal Motor Carrier Safety Administration, the average total cost of a crash involving a commercial truck over 10,000 pounds gross vehicle weight is about $91,000. If there are injuries involved, the average total cost jumps to $200,000 per crash. And the average total cost of a fatal crash involving a commercial truck is $3.6 million.

Lost Productivity, Too

Moreover, even for minor workplace injuries, the costs to a company’s productivity are staggering. According to the National Safety Council, each disabling workplace injury where medical advice is sought amounts to approximately $42,000 in wage losses, medical expenses, administrative expenses and employer costs. That figure does not include the cost to hire and train a replacement worker or the loss of productivity because a key employee is no longer able to work.

Managers need to view safety compliance as an investment in their company’s greatest asset: their employees. Keeping employees healthy and working productively is perhaps the single largest contribution that a company can make to its bottom line.

Accidents happen for a reason, and a well-conceived safety program with daily follow-through is the best method to prevent accidents from disrupting your operations. GAWDA has state-of-the-art safety materials available for all members and a team of industry consultants who may be accessed by phone or email. Use these resources to ensure that your company’s operations are safe, legal and efficient.

GAWDA’s Government Affairs and Human Resources Legal Consultant Rick Schweitzer is president of Richard P. Schweitzer PPLC in Washington DC. He is also GAWDA’s general counsel. Members can reach him at 202-223-3040 and rpschweitzer@rpslegal.com.