In the automotive sector, OEMs are increasingly requesting their suppliers to designate so-called Product Safety Representatives in order to minimise risks during the development and production process. This is usually justified by the fact that OEMs are responsible for the end product and, by requiring their suppliers to designate a Product Safety Representative, they are trying to ensure that the components supplied to them, which are subsequently integrated into the end product, are accurate and safe.
While the process of deploying and educating such a person could be burdensome for suppliers, the designation of a Product Safety Representative can have positive implications on potential regulatory, civil and criminal liability both for the supplier and for the designated employee. In the following, we will provide a high-level overview of these (overall positive) implications under German law for the automotive sector.
What is a Product Safety Representative?
Product Safety Representatives are responsible for preventing or eliminating potential product safety-relevant defects during product creation, development and manufacturing. They are supposed to initiate and verify safety-relevant decisions related to the product, process and engineering. If a deviation or failure occurs, the Product Safety Representative shall react promptly and act as the key contact person for communication within the supply chain. Consequently, Product Safety Representatives usually have to meet specific knowledge requirements and be competent at performing certain tasks. They must be adequately trained and qualified in order to discharge their obligations diligently. Specifically, they must regularly obtain knowledge on the manufactured product and its relevant legal safety and liability framework, as well as risk assessment methods and their applications. In the German automotive sector, there is no explicit statutory obligation (nor any statutory prohibition) to designate a Product Safety Representative. Therefore, the need for a supplier to designate Product Safety Representatives and their requisite qualifications usually derives from a contractual request of an OEM aiming for a general liability risk reduction.
The designation of an employee as a Product Safety Representative requires a legal basis in the employee’s employment contract. If a newly recruited employee is entrusted with the Product Safety Representative function, the employment contract should stipulate this role in the “duties and responsibilities” clause. Otherwise, the existing employment contract has to be amended in order to specify the new role. In contrast to many other operations officers (e.g. data protection officers), Product Safety Representatives do not benefit from special protection against unfair dismissal (Sonderkündigungsschutz), because they do not qualify as an operations officer designated by statutory law (gesetzlich vorgesehener Betriebsbeauftragter).
Boosting regulatory compliance
As Product Safety Representatives work to ensure that quality standards are fulfilled, the designation of such persons, with the required knowledge and competencies, can help boost regulatory compliance. This applies, for example, to the quality standards IATF 16949 and the “Audit-Regelwerke VDA 6.3” by the German Association of the Automotive Industry as these, inter alia, address product safety and necessitate certain quality management system standards. Designating a Product Safety Representative may have the advantage for suppliers and OEMs to help ensure that these quality standards are met. It could also be relevant if products are covered by Directive 2007/46/EC, as an EC type-approval is only granted if a quality management system is installed in order to verify the conformity of production procedures.
Lowering product liability risks
A manufacturer will usually not be liable towards end-customers based on a breach of contractual obligations if there is no direct sale/distribution agreement with end-customers. However, a manufacturer could possibly be held liable towards end-customers according to the strict liability of the German Product Liability Act (Produkthaftungsgesetz, PLA) and due to fault-based tort law on the basis of a (at least negligent) breach of duty of care (Verkehrssicherungspflichtverletzung). In this context, designating a Product Safety Representative may increase the chances for a manufacturer to defend itself against potential liability claims for manufacturing defects, if it can prove the performance of the Product Safety Representative's duties. It is therefore crucial for manufacturers to keep a detailed record of such performance.
Designating a Product Safety Representative might also have an impact on a manufacturer's civil liability within the supply chain towards OEMs and/or intermediate suppliers. The manufacturer and the OEM are, in principle, jointly and severally liable for any damage caused by the defective product. If the OEM can prove a proper quality management system in its whole supply chain this may be helpful for excluding liability, at least for manufacturing defects. If the OEM succeeds which such a defence, there are no grounds for a recourse claim against its suppliers.
If an OEM is seen as liable for a defective component produced by the manufacturer, it may try to hold itself harmless by way of recourse against the manufacturer. In that case, designating a Product Safety Representative and documenting the performance of their duties may also be advantageous for defending such recourse claims.
For the employees acting as Product Safety Representatives, the appointment does not increase their liability towards third parties. Particularly, they are usually not liable for a breach of their duty of care towards third parties, regardless of whether or not they internally violated their obligations (e.g. instructions based on the quality assurance agreement or their specific tasks as a Product Safety Representative). However, as usual, this does not apply if the employee acts intentionally.
Criminal and administrative offence consequences
Decision-makers of all companies in the manufacturing sector are usually well advised to check whether a Product Safety Representative should be appointed to mitigate criminal law risks.
A strict system of criminal liability applies in Germany if a faulty product leads to the injury or death of consumers. In addition, there are many provisions of so-called secondary criminal law which make the production and handling of products an administrative or criminal offence if the manufacturer violates specific rules of conduct which serve to protect consumers. Criminal liability in these cases usually falls on the members of the company's decision-making body. By assigning responsibility for product safety and appointing a well-trained Product Safety Representative, manufacturers can mitigate these risks.
Effects on a company’s criminal law risk exposure
Having a Product Safety Representative appointed can have positive effects for a company if faced with a product-safety related criminal proceedings. It is a crime in Germany to place products on the market which are designed in such a way that there is a health risk to consumers when used as intended, if consumers are actually injured or killed by using the product (this is considered negligent homicide or negligent bodily injury). While German criminal law does not recognise direct criminal liability of companies, companies can be fined for management misconduct – either if a manager commits a criminal offence or if he or she fails to take the necessary measures that would have prevented an offence being committed by a lower-ranking employee. Appointing an appropriately trained Product Safety Representative can – in principle – be considered as a suitable measure to prevent product-related crimes. Thus, having a designated Product Safety Representative may serve as a defence for a company in criminal proceedings for product-related violations.
Criminal liability of the Product Safety Representative
While individual criminal liability for product-related violations usually falls on the legal representatives of a company, if responsibility for product safety is delegated to a Product Safety Representative, it is possible that a public prosecutor's office will (also) prosecute the Product Safety Representative following product-related injuries or if other criminal law violations occur within the scope of duties assumed by the Product Safety Representative. Criminal liability of the Product Safety Representative could be assumed, for example, if he or she fails to implement the necessary measures of quality control and thereby allows a dangerous product to enter the market. The responsibility of a Product Safety Representative will usually extend beyond detecting and preventing manufacturing errors and also entail accountability for detecting design flaws.
It is therefore in the interest of both the company and the Product Safety Representative to ensure that the Product Safety Representative receives appropriate training and the necessary resources to perform the tasks assigned to him or her. Provided this is the case, the designation of a Product Safety Representative is generally a suitable measure for reducing the overall criminal law risk exposure of a company.
The authors are members of our product liability team in Germany [in German].