Fines of seldom less than £500,000 and £100,000 respectively will be handed out to organisations guilty of corporate manslaughter under the Corporate Manslaughter and Corporate Homicide Act 2007 and health and safety offences causing death typically under sections 2 and 3 of the Health and Safety at Work etc Act 1974.
These are the figures confirmed in the Sentencing Guidelines Council's guidelines published on 10 February and as trailed in our recent survival guide to health, safety and other prosecution risks. They will apply to organisations sentenced on or after 15 February 2010. These figures are just the starting point - the fines imposed could be much, much higher. They are meant to be punitive and sufficient to have an impact on the organisation.
Why the discrepancy in the starting levels of fines?
This is because corporate manslaughter involves both a gross breach of duty of care and senior management failings as a substantial element of the breach. There will often have been systemic failures in the organisation which have gone unaddressed and the breach must have been a significant (but not necessarily the only) cause of the death. By contrast, health and safety offences are committed whenever the organisation cannot show that it was not reasonably practicable to avoid a risk of injury or lack of safety. There may only have been a very limited falling below the standard required for an offence to be committed. However, these guidelines apply only to cases where it is proved that the offence was a significant cause of death, not simply that death occurred.
How will the fine be assessed?
A number of factors are likely to affect the seriousness of the offence and so the level of fine. Aggravating or mitigating factors, the size and nature of the organisation and the consequences of a fine will all be considered.
Factors likely to affect the seriousness of the offence include:
- How foreseeable was the injury? The more foreseeable, the graver the offence will be
- How far short of the applicable standard did the organisation fall?
- How common is this kind of breach in the organisation? Was it an isolated event or indicative of systemic failures?
- How far up the organisation does responsibility for the breach go?The higher up, the more serious the offence.
Aggravating factors justifying a higher fine will include - was there more than one death or other serious injury also involved? Had prior warnings from inspectors or employees been heeded? Had there been previous near misses? Had there been cost cutting at the expense of safety? Was there a deliberate failure to obtain or comply with relevant licences? Was there injury to vulnerable persons?
Mitigating factors will include - was there a prompt acceptance of responsibility? Was there a high level of co-operation with the investigation beyond what is ordinarily to be expected? Was there a genuine attempt to remedy the defect? Was there previously a good safety record and responsible attitude to safety?
A plea of guilty should be recognised by the appropriate reduction.
Financial information - the guidelines confirm that the law expects the same standard of behaviour from large and small organisations: smallness is not a mitigating factor and neither is largeness an aggravating factor. Size may affect the approach to safety which in turn may affect the seriousness of the offence as referred to above. Size is also relevant in determining the means to pay any fine imposed. Accounting information for a three-year period including the year of the offence should be provided by the organisation. Turnover, profit and assets will all be considered in gauging the organisation's resources. While the fine is intended to inflict painful punishment, it is intended to be one that the organisation can pay, albeit possibly over a number of years.
The financial consequences of the fine will also be considered. The following (as well as other) factors may be relevant:
- The effect on the employment of innocent people
- The effect on the provision of services to the public. Although this will be relevant in determining the level of fine, public organisations such as local authorities, hospital trusts, etc. will be treated the same as a commercial company where the standards of behaviour to be expected are concerned, and must also suffer a punitive fine for breach of them, albeit a different approach to determining the level of fine may well be justified
- Whether the fine will put the organisation out of business - although this may be an acceptable consequence in some cases.
The following factors are not generally relevant:
- Any impact upon the shareholders
- The effect upon directors
- That the organisation's prices may have to be raised as a result of the fine
- The liability to pay civil compensation
- The cost of meeting any remedial order.
When should payment be made?
For large organisations the fine should be payable within 28 days. For smaller or financially stretched organisations, payment can be made over a longer period (especially if immediate payment would otherwise put the organisation out of business) although the first payment should be required shortly after sentencing.
Name and shame - publicity and remedial orders
The guidelines also provide that a publicity order (introduced by the Corporate Manslaughter and Corporate Homicide Act 2007 and in force from 15 February 2010) should ordinarily be imposed in corporate manslaughter cases. The order will publicise the fact of conviction, give specific particulars of the offence, the amount of the fine and the terms of any remedial order. It should be designed to ensure that the conviction becomes known to shareholders and customers of companies and to local people in the case of public bodies.
A remedial order is also available for both corporate manslaughter and health and safety offences causing death if the organisation has not remedied any specific failings involved in the offence by the time of sentencing. The prosecution should give notice of the form of the order which should be endorsed by the judge.
The guidelines make it clear that these fines are not an attempt to value human life in monetary terms. Civil compensation will be payable separately. The fine is designed to be punitive and have an impact upon the organisation and will therefore be tailored not only to what it has done, but also to its individual circumstances. The figures of £500,000 and £100,000 should only be seen as starting points as the guidelines expressly state that the fines will seldom be less than those figures. The figure of £500,000 for corporate manslaughter will no longer be reserved for major public disasters. Fines in such situations could be measured in millions of pounds in future.
Although the final guidelines have moved away from an earlier proposal that there be a fixed correlation between the fine and either turnover or profit, it is still likely that a wealthy organisation will receive a larger fine than a poorer one. In addition, the serious reputational and financial impact upon an organisation that a publicity order is likely to have should not be underestimated.