If the latest proposals by the Sentencing Advisory Panel are adopted as currently seems likely, organisations convicted of corporate manslaughter after 6 April 2008 could face a potential PR disaster. They will have to publicise the sentence in newspapers (national and local), trade journals as well as on television and radio. Organisations could also be obliged to advertise the conviction in letters to shareholders, customers and suppliers as well as on their own website. That is only the starting point. They could also face the prospect of crippling fines, potentially up to 10% of average annual turnover.
For breaches of health and safety law that result in death, the financial consequences are likely to be equally severe. Although the court has no power to make a publicity order (the Health and Safety Executive website does have a 'name and shame' list however), it has been proposed that sentencing for an offence under the Health and Safety at Work etc Act 1974 may be as much as 7.5% of average annual turnover.
The Sentencing Advisory Panel has finished consulting on penalties for the revised offence of corporate manslaughter, as well as breaches of health and safety law that result in death.
The panel's provisional view is that annual turnover is the most appropriate measure of an organisation's ability to pay a fine.
Where the offender is a very large organisation, the panel's approach would result in larger fines than have been imposed previously by the courts. To put this in perspective, the largest fine imposed to date for a health and safety offence in the UK was £15 million. This was in the Scottish case of Transco, for breaches of regulations which led to the deaths of four members of the same family in a gas explosion. The fine represented 5% of the company's after-tax profits and just under 1% of annual turnover.
Where the offender has a very low annual turnover, it is possible that the panel's approach may result in smaller fines than those currently imposed in some cases, at least for offences under the Health and Safety at Work etc Act (HSWA) 1974 resulting in death.
Corporate Manslaughter and Corporate Homicide Act 2007
There are three sanctions available to the court when sentencing for the new offence of corporate manslaughter:
- Unlimited fine;
- Publicity order; and
- Remedial order.
The panel's provisional starting point for an offence of corporate manslaughter committed by a first time offender convicted after pleading not guilty is a fine amounting to 5% of the offender's average annual turnover during the three years prior to sentencing.
The court will then take into account any aggravating and/or mitigating factors (set out below), arriving at a fine which will normally fall within a range of 2.5% to 10% of average annual turnover. Significant aggravating factors or previous convictions may take the fine beyond that range. The court will then consider any mitigation related to the offender (rather than the offence), which may take the fine below the range.
Concerns remain over the sufficiency of fines and their impact on large companies. The Act provides for a publicity order through which a court will be able to require an organisation convicted of corporate manslaughter to advertise the fact of its conviction, specify particulars of the offence, the amount of any fine imposed, and the terms of any remedial order that has been made. Publicity orders will not come into effect until the Sentencing Guidelines Council has issued guidance (expected in Autumn 2008) on how courts should use this new sanction.
The panel's provisional view is that, in principle, a publicity order should be imposed on every offender convicted of corporate manslaughter.
The extent of publicity
A court may order that the details of an offence are published in any 'specified manner', giving the court scope to ensure that the publicity reaches its intended audience. Options for the form of the order include:
- Publication on television/radio and/or in a local/national/trade newspaper, including relevant broadcaster/newspaper websites;
- Publication on the organisation's website and in its annual report, informing (potential) customers and those who might be interested in investing in the organisation;
- Notice to shareholders; and
- Letters to customers and/or suppliers of the organisation.
In light of the potential range of offenders, the panel has not provided detailed guidance on the extent of publicity, but suggests that it may be possible to set some minimum standards. For example, if the offender is a local organisation, it might be appropriate to require publication in the local media; in the case of a large national organisation, publication in the national media would be more effective. In both cases, a notice in all relevant trade journals should be required. Any shareholders should be notified in order that they may press for enhanced health and safety standards and publication should always be required in an annual report.
The third sanction available under the new Act is a remedial order which sets out the steps to be taken to ensure that the failures that led to the death are addressed. This sanction is also available, although not used very often, for offences under the HSWA.
The panel's provisional view is that the costs involved in complying with the remedial order should not lead to a corresponding decrease in any fine imposed for the same offence. The order is rehabilitative rather than punitive, and merely requires the offender to take steps to comply with the health and safety standards already required by law. Any reduction in the fine would reward unfairly the few organisations that have resisted compliance with those standards, and would lead to inequitable treatment of the majority of organisations that have taken remedial action before the point of sentence.
Health and Safety at Work etc Act 1974
Under the HSWA only an unlimited fine and a remedial order are available. The court has no power to make a publicity order. However, the Health and Safety Executive (HSE) website contains a public database of organisations convicted under the Act since 2000, which has become known as the 'name and shame' list.
The panel's provisional starting point for an offence under the HSWA involving death is a fine amounting to 2.5% of average annual turnover during the three years prior to the offence. The fine will normally fall within a range of 1 to 7.5% of average annual turnover depending on aggravating or mitigating factors.
Aggravating and mitigating factors
The panel proposes that, in relation to the actual level of fine, the court should take into account the following factors that may aggravate or mitigate the seriousness of the offence:
Aggravating factors affecting the degree of culpability:
- Failure to act upon advice, cautions or warning from regulatory authorities.
- Failure to heed relevant concerns of employees or others.
- Carrying out operations without an appropriate licence.
- Action, or lack of action, prompted by financial or other inappropriate motives. If the appropriate standard of care has been breached deliberately with a view to profit, this will be a serious aggravating feature.
- Corporate culture encouraging or producing tolerance of breach of duty.
Aggravating factors affecting the level of harm:
- More than one person killed as a result of the offence.
- Serious injury caused to one or more others, in addition to the death(s).
Breach due to employee acting outside authority or failing in duties.
Ready cooperation with authorities.
Good previous safety record.
Following the consultation, the panel will submit its recommendations to the Sentencing Guidelines Council, which will draw up the final guidelines. The guidelines will provide guidance for judges when passing sentence.
Preventing accidents (fatal or otherwise) is the best form of defence. Take note of the action points from our alert 'Corporate manslaughter – time to get cracking' to ensure your organisation is in good shape before the Corporate Manslaughter and Corporate Homicide Act 2007 comes into force on 6 April 2008.
We have added some further action points for organisations to consider in light of the proposals made by the Sentencing Advisory Panel:
- Act upon advice, cautions or warnings received from regulatory authorities. If you have been warned by regulatory authorities about failings in safety standards (for example as a result of previous incidents) and took no action before the death(s) occurred, this is likely to increase the level of punishment.
- Give proper consideration to concerns raised by employees or contractors which concern health and safety. Discussion regarding what has been raised and the reasons for a decision not to take any action should be clearly minuted. Where action is to be taken but can't be implemented immediately, ensure that interim protection proportionate to the risk, is also considered and monitored. For example, a concern about a particular tripping hazard may lead to a decision to carry out adaptations to remove the hazard. Until that can be done, an interim measure might be to increase flagging of the hazard and minimise traffic around it. Where there is an immediate and serious risk of serious injury or death from a hazard, interim measures are likely to require isolation of the area of risk pending action to rectify it.
- Carry out operations with an appropriate licence. Organisations working with hazardous substances such as asbestos or explosives, or in a hazardous industry such as construction are generally required to hold a relevant licence. Operating without or in breach of a required licence will usually constitute a separate offence, but will also increase culpability in relation to an offence of corporate manslaughter and/or an offence under the Health and Safety at Work Act etc (HSWA) 1974 involving death.
- Lack of action prompted by cost saving motives may also be a seriously aggravating feature likely to increase the level of punishment. There are no hard and fast rules here and it is not generally considered unreasonable to budget and plan for health and safety improvements. However, again, do consider interim protection where change is to be delayed. The higher the risk, the harder it is to justify delay in reducing that risk.
- Although legal advice should be sought first, ready co-operation with the authorities and taking steps to remedy safety failures as soon as possible after an accident has occurred may mitigate the punishment. Such steps are likely to be looked upon more favourably by the court if taken voluntarily rather than as a result of pressure from enforcement authorities. The reason for taking legal advice on your position here is that consideration also needs to be given to balancing the risk that taking steps after the event are not interpreted as steps which ought to have been identified and taken before the event. Not everything can be foreseen and avoided. Accidents by their very definition are unanticipated events. It is right to learn from them but also important not to open yourself up to criticism when in fact they couldn't reasonably have been prevented.
- Aim to maintain a good safety record. An excellent record might be considered as a relevant mitigating factor for some offences under the HSWA involving death.