While de-heading fish using the manual fish de-header machine, a fish head became stuck.
"[He] reached into the machine to try and remove it. In the process, he inadvertently turned on the machine - causing the machine's blade to come down and cut his right forearm," a WorkSafe statement said.
The blade sliced through muscles, an artery and tendons. He suffered four fractures and had to have a plate put into his arm for about 10 months.
WorkSafe said AWF had not completed a site visit to identify any high risk hazards before the man - an on-hire employee - started working at the site.
No detailed job description for the role was requested and there were no adequate assessments done about the workplace or what the worker should do in certain circumstances.
Sanford was also found to have not properly managed the potential hazard in having an "inadequately guarded blade" on the fish de-heading machine - which was earlier categorised as being a 5/5 hazard risk.
"Despite Sanford being aware of this risk, the company continued to keep the machine in operation, and did not inform all people working nearby the machine of the identified hazard."
WorkSafe chief inspector Keith Stewart said: "Both parties failed in their duties to their employee. AWF should have ensured the employee was assigned to a safe work environment, while Sanford should have made sure that people in the workplace were aware of the blade hazard and were not exposed to direct contact with the blade.
"The consequences for the victim continue to hinder his day-to-day life. It's been almost a year since this incident occurred and the victim has not regained full use of his hand."