Member Article

Bigger fines predicted for organisations guilty of corporate manslaughter 

The long awaited definitive guidelines for sentencing organisations guilty of either corporate manslaughter or a health and safety breach which causes death have been published.

They come into effect for any sentencing hearing on or after the 15 February 2010, even if the incident occurred many years ago. The result will be a considerable increase in the level of fines imposed.

Until now, when sentencing for workplace fatalities, courts have not been assisted by the use of sentencing guidelines and the result being an inconsistency which has drawn widespread criticism from bereaved families and trade unions.

The new guidelines provide judges with guidance for two very different offences which may be committed by organisations as a result of a death.

Firstly, the new offence of corporate manslaughter which involves a gross breach of a duty of care with senior management failings being a substantial element in that breach. The second, by contrast, are health and safety offences.

These are committed whenever a defendant cannot show that it did all that was reasonably practicable to ensure the health, safety and welfare of its employees and those affected by its undertaking. Health and safety offences can be committed by a failure to avoid the risk of injury or lack of safety, there does not have to be an accident or injury.

The offences are also different in the way that they are prosecuted. Corporate manslaughter is an offence where the burden of proof remains on the prosecution throughout which means that the prosecution have to identify the acts or omission which it relies upon as constituting a breach and then prove them.

However, in a prosecution of a health and safety offence, the prosecution need only prove that there has been a failure to ensure safety or absence of risk which it may often be able to do simply by pointing to a fatality. Once it has done so, the burden of proof shifts to the defendant to prove that it did all that was reasonably practicable, while prosecution does not need to identify the precautions which it says ought to have been taken, nor need it prove how the accident happened. 

The difference is perhaps most marked by the need of the prosecution to prove in a corporate manslaughter prosecution that the breach was a significant cause of death whereas by contrast in health and safety offences, as is generally the case whether or not a death occurs, the breach can be proved without demonstrating that any injury was caused, mainly that there was a failure to ensure safety. The guidelines, however, are for cases where it is proved that the offence was a significant cause of death, and not simply that death occurred.

Seriousness of the offence

There are two main factors which will directly affect the penalty. Firstly, the seriousness of the offence and, secondly, whether there are aggravating and mitigating features. The factors affecting seriousness are matters such as whether serious injury could be foreseen, how far short of an applicable standard the organisation fell, how common was the kind of breach within the organisation, and how far up the organisation responsibility for the breach went.

Investigators will be looking to discover therefore how widespread non-compliance with safety standards was, whether it was an isolated breach or a systematic departure from good practice. The guidelines state that the higher up within the organisation responsibility for the breach, the more serious the offence. 

Aggravating and mitigating features

Having considered seriousness, a judge is then required to determine whether there are aggravating features. Whilst a list is given within the guidelines, it is not exhaustive, but, more than one death or very grave personal injury in addition to the death is perhaps not a surprising aggravating feature. 

However, of more concern to organisations may be the requirement that a failure to heed warnings or advice, whether from officials such as an inspectorate or by employees especially health and safety representatives or other persons, will be seen as aggravating as will a failure to respond appropriately to near misses arising in similar circumstances to the incident.

Organisations would therefore be well advised to ensure they have adequate near miss reporting systems and that such incidents are responded to appropriately as soon as possible. More traditional aggravating features such as cost cutting at the expense of safety, a deliberate failure to obtain or comply with licences, or injury to vulnerable persons remain aggravating features.

The mitigating features are similarly listed and include the prompt admission of responsibility, cooperation with the investigation beyond that which is normally expected, genuine efforts to remedy any defect, a good health and safety record and a responsible attitude to health and safety which can be demonstrated by such matters as the commission of expert advice or the consultation of employees or others affected by the organisation’s activities.

Ability to pay

The guidelines also deal with the provision of financial information to a court by the defendant. It is made clear that the law expects the same standard of behaviour, in relation to safety, from large and small organisations, but that size is relevant when considering the level of fine and the defendant’s ability to pay. Whilst it is not suggested there should be a fixed correlation between the fine and either turnover or profit, the court will look carefully at both and also assets in order to gauge the resources of a defendant. An annex to the guideline sets out the type of financial information which a court will require.

These include, where appropriate, three years published audited accounts with particular attention being paid to turnover, profit before tax and directors remuneration including loan accounts as well as their pension provision. For partnerships, partners’ drawings will be considered and in both cases assets at current value rather than those valued at the cost of acquisition.

For the public sector such as local authorities, police and fire authorities, judges are directed to the Annual Revenue Budget as being the best indication of the size of the defendant’s organisation. For health trusts, the quarterly reports and annual figures for financial strength issued by Monitor – the independent regulator of NHS Foundation Trusts – is the starting point.

Level of fine

Once these factors have all been taken into consideration the judge will have to settle upon a fine.  The guideline states that for the offence of corporate manslaughter, the appropriate fine will seldom be less than £500,000 and may be measured in £millions.

For a health and safety offence which is shown to have caused death, the appropriate fine will seldom be less than £100,000 and maybe measured in hundreds of thousands of pounds or more.

The guideline also indicates that in many cases, because of a significant overlap between offences, it is expected that defendants would be prosecuted in the alternative, even though this may increase complexity for a jury.

Other penalties

In addition to the fine, a remedial order can also be made and costs awarded against the defendant.  However, for corporate manslaughter only, the judge is directed in the ordinary course of events to make a publicity order.

This requires publication in a specified manner of the conviction, specified particulars of the offence and the amount of any fine. The prosecution will draft the order for approval and signature by the judge and this will specify the place where the public announcement is to be made and may go as far as indicating the size of any notice or advertisement required as well as where it should be published. 

The normal course of events will be to require the conviction to be brought to the attention of shareholders as well as local people. A direction is also likely requiring that a statement is placed on the defendant’s website. If a defendant is to make any comment alongside the publicity order, that published comment will have to be separated from the announcement and clearly identified as such.  The costs of the prosecution as well as the publicity will be borne by the defendant. 

Implications for businesses

The net effect of this guideline will be to increase substantially the current levels of fines seen for offences resulting from fatal accidents and incidents.

Many organisations may not survive such a prosecution and could well go out of business. This is recognised by the guidance, which states ‘whether the fine will have the affect of putting the defendant out of business will be relevant; in some bad cases, this may be an acceptable consequence’.

We have substantial experience of representing companies under investigation, or facing prosecution, following tragic deaths of employees and others. All have one thing largely in common – none of the organisations under investigation ever thought a death could occur involving one of their employees or someone to whom their organisation owed a duty of care.

It remains an unfortunate fact that on average almost 230 people die every year in the workplace, a figure which has remained largely static over the last 5 years.

Management and in-house legal teams must understand the implications of these new sentencing guidelines and the very real threat posed by them.

Any organisation adversely implicated following a death, either at the time or subsequently and be it during investigation or at inquest, should seek immediate expert advice.

Most importantly, however, senior management must thoroughly understand their obligations, what they need to do to comply, what questions to ask and what action to take. In our experience if high standards are set by senior management in organisations, risk can be significantly reduced. 

We are happy to provide training to senior management and in-house legal departments to ensure best practice is being followed.