As you may be aware from our alert and blog last year, the Sentencing Council has published guidelines for health and safety, corporate manslaughter and food safety and hygiene offences for the first time.
The new guidelines replace the previous version which provided that fines should seldom be less than £500,000 for corporate manslaughter and £100,000 for health and safety offences causing death. The previous guidelines also did not cover other health and safety or food safety and hygiene offences.
The new guidelines are likely to result in significantly higher penalties for organisations convicted of such offences and will apply to organisations in England and Wales which are sentenced on or after 1 February 2016 (regardless of the date of the offence) and to all individual offenders aged 18 and over.
The guidelines do not apply to Scotland. A new Sentencing Council for Scotland came into existence on 19 October 2015 but it remains to be seen how they will approach the sentencing of health and safety offences. Until Scottish guidelines are produced, it may be that Scottish courts will refer to the new guidelines for England and Wales. Similarly in Northern Ireland, although the guidelines are not currently binding, the courts in Northern Ireland may refer to them for guidance on sentencing due to an absence of their own guidelines and the similarities in legislation.
The new guidelines were introduced for a number of reasons, including the inconsistency in sentences being imposed by courts for these types of offences and the fact that courts were often unfamiliar with these types of offences and needed guidance. There were also concerns that the sentences being imposed were too lenient, thus failing to have any significant economic impact on the organisations on which they were imposed.
The Criminal Justice Act 2003 requires that fines must reflect the seriousness of the offence and take into account the financial circumstances of the offender and under the new guidelines – “[p] articular attention should be paid to turnover; profit before tax; directors’ remuneration, loan accounts and pension provision; and assets as disclosed by the balance sheet” when determining the level of the fine to impose.
The guidelines include a number of tables setting out starting points and ranges for sentences for the various offences, for example, large organisations (those with a turnover of £50 million or more) could face fines of up to £10 million for health and safety offences, £20 million for corporate manslaughter, and £3 million for food safety and hygiene offences. It will be at the court’s discretion to go above these figures if they consider a case to be exceptional. This is significantly more than the £100,000/£500,000 figures provided in the previous guidance.
Guidance to Courts
The Sentencing Council has published a series of case studies to assist the courts in imposing sentences for the various offences. They consider the steps in the guidelines and the facts that should be taken into account at each of the key steps. They confirm which range and starting point is appropriate but don’t actually recommend what fine should be imposed.
Health and Safety
The case study for organisations convicted of health and safety offences makes it clear that:
- If there is a risk of death, harm should be category 1. If injury actually occurred, even if there was no death, as category 1 is already the highest, the court should move up within the fine category range.
- Any arguably negligent actions by an injured employee, the example in the case study being the decision to work on a dormer roof without the necessary scaffolding and protection, would not be relevant to sentencing if they would have been reasonably foreseeable to the employer.
- Culpability would be high if the company failed to put in place measures that are recognised standards in the industry.
- Steps taken to remedy the failings, acceptance of responsibility, a good health and safety record and a lack of previous convictions would all be mitigating factors.
The guidance for organisations convicted of corporate manslaughter states:
- By definition, the harm and culpability involved in corporate manslaughter will be very serious. Every case will involve death and corporate fault at a high level.
- Either an offence category A or B will be determined based upon the answers to the following questions: how foreseeable was the serious injury? How far short of the appropriate standard did the offender fall? How common is this kind of breach in this organisation? And was there more than one death, a high risk of further deaths, or serious personal injury in addition to death?
- The offender is expected to provide comprehensive accounts for the last three years, to enable the court to make an accurate assessment of its financial status.
- The fine must be sufficiently substantial to have a real economic impact which will bring home to management and shareholders the need to achieve a safe environment for workers and members of the public affected by their activities.
For food safety and hygiene offences
- Culpability will be rated low to very high – with very high being “a deliberate breach of or flagrant disregard for the law” and low being “the offender did not fall far short of the appropriate standard”.
- Consideration must then be made to whether there was a low or serious risk of an adverse effect on the individual.
- The court is required to focus on the organisation’s annual turnover or equivalent to reach a starting point for a fine.
How Will the Guidelines be Interpreted?
In September 2015, Hugo Boss was fined £1.2 million at Oxford Crown Court, having pleaded guilty to offences under the Health & Safety at Work etc. Act 1974 and the Management of Health and Safety at Work Regulations 1999 which related to a fatal incident involving a four year old boy.
In his sentencing remarks it was clear that Judge Peter Ross already had the new sentencing guidelines in mind and noted that there had been near misses reported at other Hugo Boss UK stores, including reports of a falling mirror in 2009 and an unsecured mirror in 2010.
The court was provided with the company’s financial information which showed that the turnover for Hugo Boss rose from £124.8 million to £192.8 million between 2011 and 2014 – making it a “large organisation” under the new guidelines.
As set out in our previous article, one of the key areas that still lacks clarity is how the courts should treat and define “very large organisations” (i.e. those organisations with a turnover or equivalent that very greatly exceeds the threshold for large organisations), in relation to which the new guidelines state that it may be necessary to move outside the suggested range to achieve a proportionate sentence. It is likely that the Courts will utilise the environmental case of Thames Water (R. v Thames Water Utilities Ltd  EWCA Crim 960 (CA (Crim Div)), where it was stated that very large companies who are involved in cases of serious [environmental] crime could face fines of up to 100% of the company’s pre-tax net profits – even if this results in fines of more than £100 million. We suspect that a company with a turnover of £500 million will be seen as a “very large organisation”.
It also remains to be seen whether the new guidelines will help magistrates to impose sentences for these offences and encourage them to retain the less complex cases for sentence, rather than commit them to the Crown Court. This is particularly relevant given that magistrates are now able to impose unlimited fines for serious offences committed on or after 12 March 2015 (Section 85 of The Legal Aid, Sentencing and Punishment of Offenders Act 2012).
Implications for Operators
Given the increase in fines, the consideration organisations now give to their overall approach to risk management will be essential. Prevention, rather than reaction, might be crucial for companies in their management of risk and we may see an increase in companies improving their overall compliance systems before an incident even occurs.
The cost benefit analysis in legal proceedings will ultimately change the way in which prosecutions are dealt with in future and where something does go wrong, companies might now consider defending themselves where they previously would not.