"Definitive guideline" on corporate manslaughter issued
The "definitive guideline" for courts on fixing fines for offences that cause workplace deaths is a missed opportunity, argues Howard Fidderman.
Back to top:
Towards the definitive
guideline
Jettisoning
the turnover link
The
main changes
Box 1: Corporate manslaughter and corporate
homicide
Arriving at the definitive
guideline
Seriousness
of offence
Aggravating
factors
Mitigating
factors
An offender's
means
Consequences of
fine
Setting a
fine
Four possible
additional orders
What the Sentencing Advisory Panel did
not address
Disparities in comparative levels of fines faced by smaller and
larger companies
Minimal impact on large firms.
Two weeks before the start of the UK's first corporate manslaughter trial on 23 February, the Sentencing Guidelines Council issued a "definitive guideline" (PDF format, 250K) (external website) to courts on imposing appropriate penalties on organisations convicted of the new offence. The guideline, which also applies to organisations convicted of health and safety offences that are a significant cause of death, applies to all sentences handed down from 15 February 2010.
Although the council's consultation on the guideline has resulted in few changes, and even fewer of significance compared with 2009's draft, we are reviewing the definitive guideline in detail here because it should play a significant role in increasing average fines for both types of convictions, stating, as it does, that fines should not normally fall below £500,000 for manslaughter and £100,000 for health and safety offences that are a significant cause of death. It also represents a missed opportunity to increase the fines to levels that would affect convicted organisations equitably, regardless of size, and offer a level playing field for those employers that strive to comply with the law and protect their workforces.
Towards the definitive guideline
In December 2007, the Sentencing Advisory Panel published proposals to assist courts faced with imposing a sentence for convictions under the Corporate Manslaughter and Corporate Homicide Act 2007 (PDF format, 130K) (on the Office of Public Sector Information website) and for HSW Act offences involving a death. The proposals were the first stage in a process to help the Sentencing Guidelines Council to produce a definitive guideline.
Had the council accepted the proposals, fines for many workplace fatalities would have increased beyond recognition. Crucially, the panel proposed linking the sentence to the offender's annual turnover (or gross revenue income or equivalent for public and third sector bodies). There would be a "starting point" for the fine, which could then be adjusted between an upper and lower point (the "range"), with all three points posited as percentages of turnover. The starting point fine for manslaughter - the most serious of the offences - was to be 5% of turnover (amid a range of 2.5%-10%), while HSW Act convictions involving a fatality would start at 2.5% (range 1%-7.5%).
Jettisoning the turnover link
The proposals, which would have seen many fines significantly in excess of £10 million, elicited polarised responses from representatives of employers - particularly larger ones - and of employees, and the panel consequently proposed reduced percentages for the "starting points" and ranges, and a more complicated system, but nevertheless maintained the principle of the turnover link, which would still have led to significantly higher fines than courts currently impose. The panel sent this "advice" to the council in November 2008 to assist it with producing a "definitive guideline" for courts in England and Wales.
In October 2009, the council consulted on a draft guideline that rejected a fixed link between fine and turnover, relegating the latter to just one of the factors that courts should consider. In its place, the council advised that fines should generally start at £500,000 for corporate manslaughter and at £100,000 for HSW Act offences causing death. The council also addressed an ambiguity in the panel's proposals to make it clear that the guidelines in relation to the HSW Act were restricted to where an offence causes, rather than simply involves, a death.
The council's chair, Lord Chief Justice Judge, said the fixed link to turnover "could inadvertently risk an unfair outcome, was particularly difficult to apply to public and third sector bodies, was likely to create a perverse incentive to adjust corporate structure to avoid the proper consequences of offending and so did not provide the most effective way of assessing the level of fine across such a wide range of situations". Consultation closed on 5 January 2010 and the definitive guideline followed on 9 February.
The main changes
Following consultation, the definitive guideline differs from the draft in that it covers a slightly wider range of workplace deaths, and thereby it applies:
- to health and safety at work offences, as opposed to those covered only by the HSW Act; and
- where it is proved that the organisation's offence was a "significant cause of death" (the draft guideline was limited to cases where the offence "caused" the death).
Other changes mean that:
- an employer's failures to heed advice or a warning from a health and safety representative, or to respond appropriately to near misses that have arisen in circumstances similar to those that resulted in the fatality, are now explicitly "aggravating" factors;
- a large organisation now has up to 28 days in which to pay a fine (the draft guideline had required the fine to be paid "immediately" or within seven days);
- the definitive guideline is explicit that the mitigating and aggravating factors apply to "health" as well as "safety" (the draft guideline frequently referred to "safety" only, although this is highly likely to have been a drafting oversight); and
- the definitive guideline is explicit (the draft guideline was not) that it applies only to corporations and not to individuals (again, this is a matter of drafting only).
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Box 1: Corporate manslaughter and corporate homicide The Corporate Manslaughter and Corporate Homicide Act 2007 (PDF format, 130K) (on the Office of Public Sector Information website) received royal assent on 26 July 2007 and came into force on 6 April 2008. The Act replaced the application of the common law offence of manslaughter to organisations with a new offence of "corporate manslaughter" in England, Wales and Northern Ireland, and "corporate homicide" in Scotland. Nomenclature aside, the two offences are identical. The Act makes an organisation guilty of corporate manslaughter if the way in which it manages or organises its activities causes a person's death and amounts to a gross breach of a duty of care. An organisation will only be guilty if the way in which its senior managers manage or organise its activities is a substantial element in the breach. Senior managers are those who play significant roles in either the making of decisions about how the whole or a substantial part of its activities are to be managed or organised, or in their actual managing or organising. The offence does not abolish the application of the individual common law offence of manslaughter to directors and workers; nor does it create any new duties. What is a gross breach? The Act defines a "gross" breach as conduct that falls far below what can reasonably be expected of the organisation in the circumstances. In determining whether the breach was gross, the jury must consider:
The jury may also:
Who owes the duty of care? With limited exemptions for certain duties of care owed by public authorities or that arise out of public functions, the Act applies to: corporations, Crown or government departments and bodies; police forces; and partnerships, unions or employers' associations that are also employers. All these bodies owe a relevant duty of care in four areas:
How will the Act be enforced? The police will continue to take the lead in possible manslaughter prosecutions, in line with the normal protocols for investigating work-related deaths in England, Wales and Northern Ireland and in Scotland. There will be no change either in the role played by the HSE and local authorities in these investigations, ie they will continue to assist the police. Conviction is punishable by a fine. In addition, courts can impose remedial and publicity orders. Failure to comply with either type of order is punishable by a fine. |
Arriving at the definitive guideline
The new offence of corporate manslaughter requires a gross breach of a duty of care that has caused a death, ie where the conduct falls far below what can be reasonably expected of the organisation and where a substantial element of the breach is the way in which the organisation's senior management manages or organises its activities (see box 1). The health and safety offences hinge on whether there has been a breach of duty to ensure health and safety and do not, in themselves, require there to have been an injury (although, self-evidently, a fatal injury is required for this guideline); indeed, even where there has been an injury, an employer can dispute that its breach caused the harm.
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The Sentencing Guidelines Council's definitive and draft guidelines set out the same 10-step process for courts to follow when sentencing organisations convicted of corporate manslaughter or health and safety offences that were a significant cause of a death. The steps are as follows:
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The council notes that there may be a significant overlap in the offences, so it should be expected that some cases will be prosecuted in the alternative. There are, however, factors that will distinguish the two: corporate manslaughter will generally involve systemic failures, whereas HSW Act offences will involve a defendant being unable to show that it was not reasonably practicable to avoid the risk of injury or lack of safety, meaning that the failure could be at an operational rather than systemic level. Further, the burden of proof remains on the prosecution in corporate manslaughter cases, whereas all it needs to prove in an HSW Act offence is that there has been a failure to ensure safety, after which the burden shifts to the defendant to prove that it had done what was reasonably practicable.
Seriousness of offence
The guideline sets out 10 steps for a court to follow when deciding a sentence for manslaughter or for health and safety offences causing death (see box 2), starting with a determination of the seriousness of the offence. Given that a death has occurred, the level of harm, the council points out, is "very serious". Just how serious, however, is determined by the judge considering:
- how foreseeable was serious injury (gravity will usually increase with foreseeability);
- how far short of the applicable standard did the defendant fall;
- how common was the kind of breach in the organisation - whether it was isolated or "indicative of a systemic departure from good practice across the defendant's operations" (the draft stated only that an isolated breach was likely to be significantly less serious than one that is endemic); and
- how far up the organisation did the breach go - usually the higher the responsibility, the more serious the offence?
Aggravating factors
The court must then consider any aggravating and mitigating factors. In a non-exhaustive list, the council's guideline states that the offence will be aggravated where there has been:
- more than one death, or an additional very grave personal injury;
- a failure to heed warnings or advice, whether from officials such as inspectors, employees (especially health and safety representatives) or other persons, or to respond appropriately to "near misses arising in similar circumstances". The explicit references to safety representatives and near misses were not in the draft guideline;
- cost-cutting at the expense of safety;
- "deliberate failure to obtain or comply with relevant licences, at least where the process of licensing involves some degree of control, assessment or observation by independent authorities with a health and safety responsibility"; and
- injury to vulnerable persons. As we noted in our review of the draft guideline, the council gave no clue as to what it meant by "vulnerable". The final guideline addresses this - albeit vaguely - by explaining that "vulnerable persons would include those whose personal circumstances make them susceptible to exploitation." The panel had given a somewhat clearer example, when it stated that "vulnerable" persons would include those with "language difficulties, financial hardship, and/or uncertain or illegal immigrant status, and [where the offender] has exposed them to unsafe working practices".
Mitigating factors
A second non-exhaustive list states that the offence will be mitigated where the offender has:
- accepted responsibility promptly;
- shown "a high level of cooperation with the investigation, beyond that which will always be expected";
- made genuine efforts to remedy the defect;
- a good health and safety record; and
- a responsible attitude to health and safety, such as the commissioning of expert advice or the consultation of employees or others affected by the organisation's activities.
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The definitive guideline, like its draft predecessor, is clear that the same standard of behaviour is expected of all sizes of organisation. Size, however, might affect an organisation's approach to safety, which could be relevant when assessing the seriousness of the offence, and aggravating and mitigating factors. It also states that large firms do not necessarily have more generous budgets or fewer constraints, and that some may have high turnovers but small profits. The council does accept, however, that "in some instances, a large organisation may have less excuse for not dealing properly with matters affecting health and safety, since it may have greater access to expertise, advice and training resources, whether in-house or otherwise." |
In practice, it is difficult to see how an organisation convicted of corporate manslaughter could demonstrate the last two of these mitigating factors: the "systemic failures" and gross breach of duty that are the core ingredients of the offence must surely be incompatible with a "responsible attitude" to health and safety; and the only way that an organisation could have a good health and safety "record" amid such failings would be if that record were restricted to its overall number of reportable injuries, which will often be just a matter of chance. The panel aired similar misgivings when it stated that a good safety record should be of "minimal relevance" to manslaughter. It is more likely that these two mitigating factors could be applied to health and safety offences. And quite why "genuine efforts to remedy the defect" - which would be expected by the law in any case - should be a mitigating factor is unclear. The panel had noted that these should be expected as a matter of course and that recognition should be made only where these efforts had been prompt and "exceeded" what was necessary to remedy the failures; the definitive guideline excludes this refinement.
The guideline, like the draft text, also states that it is unlikely that the unauthorised act of an employee will significantly reduce culpability in corporate manslaughter because the offence, in the first place, requires a gross breach of duty and the substantial involvement of management. Commission of a health and safety offence may, however, in some cases be established solely by the unauthorised act of an employee, but will require an assessment of the responsibility of the organisation - in areas such as supervision or training. There may, advises the guidance, be some health and safety cases "where there is very little culpability in the organisation itself".
An offender's means
The third stage requires a court to look at an offender's resources and financial performance. In doing so, the definitive guideline, like the draft version, rejects "a fixed correlation" between a fine and an offender's turnover or profit as "not appropriate". The circumstances of convicted organisations will, it argues, vary too much, and it wants to avoid situations whereby different structures result in "vastly different" fines - "a fixed correlation might prove a perverse incentive to manipulation of corporate structure."
Nevertheless, the guideline states that a court should "look carefully" at turnover, profit and assets "in order to gauge the resources of the defendant" (see box 3). It is, the guideline states, "just that a wealthy defendant should pay a larger fine than a poor one". And while a fine should "inflict painful punishment", it should be one that the defendant can pay, even if it takes several years.
The primary obligation to provide the information rests on the defendant: if it fails to "provide relevant information, the court is justified in making adverse assumptions as to its means, and may be obliged to do so" (see box 4).
Consequences of fine
The council's definitive guideline is unchanged in the factors that a court should consider when assessing the financial consequence of the fine. These are:
- the effect on the employment of the innocent (this "may be relevant");
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the effect upon the provision of services to the public - "although a public organisation such as a local authority, hospital trust or police force must be treated the same as a commercial company where the standards of behaviour to be expected are concerned, and must suffer a punitive fine for breach of them, a different approach to determining the level of fine may well be justified" (this is in line with R v Milford Haven Port Authority [2000] 2 Cr App R(S) 423, where the Court of Appeal held that the fact that a "very substantial financial penalty … [would] inhibit the proper performance by a statutory body of the public function … is not something to be disregarded"); andThe definitive guideline states that, when considering the appropriate level of a fine, a court should request three years of financial information, including the year of the offence.
For companies and partnerships, the information should comprise published audited accounts, with particular attention to: turnover; profit before tax; directors' remuneration (or partners' drawings), loan accounts and pension provision; and assets as disclosed by the balance sheet.
The Sentencing Guidelines Council also sets out the financial information that should be sought from local authorities, police and fire authorities, similar public bodies, health trusts and third sector organisations.
If a defendant fails to provide the information, the council advises that the court "is justified in making adverse assumptions as to its means".
- whether the fine would put the defendant out of business, although "in some bad cases this may be an acceptable consequence."
Factors that are not "normally" relevant in assessing the financial consequences of a fine are:
- effects on shareholders - those who invest in, and finance, a company, states the council, "take the risk that its management will result in financial loss";
- effects on directors;
- the possibility that the defendant might, in consequence of the fine, increase the prices that it would normally charge (unless it is a monopoly supplier of public services);
- liability for civil compensation, because this will normally be met by insurance or, where the offender is particularly large, through its own resources; and
- the cost of complying with a remedial order, because such an order only requires an offender to do what it should have done in the first place (although it may be relevant to the offender's overall financial position).
The definitive guideline has lengthened the period in which a large organisation must pay a fine to within 28 days, from the consultation's "immediately or within seven days". There is no change, however, for smaller or "financially stretched" organisations, for which payment can be "spread over a much longer period" - beyond 12 months if necessary - although the first payment "should be required within a short time of sentencing". Further, an extended period for further instalments may be "particularly appropriate for an organisation of limited means which has committed a serious offence, and where it is undesirable that the fine should cause it to be put out of business".
There is no change either to a situation in which a defendant has made a "broadly quantifiable saving … by committing the offence". In such cases, the proper approach will normally be "to ensure that the fine removes the profit and imposes an appropriate additional penalty".
Setting a fine
While noting that gravity of the offence and the circumstances of the offender mean that the range of fines imposed will be "broad", the council nonetheless states that a fine must be "punitive and sufficient to have an impact on the defendant". The final text omits the consultation proviso that a fine also must "be capable of being paid", although similar qualifications remain elsewhere in the guideline.
Notwithstanding the above, the definitive guideline, as did the draft text, states that an "appropriate fine" for corporate manslaughter "will seldom be less than £500,000 and may be measured in millions of pounds" - since it requires a gross breach at a senior level, it "will ordinarily involve a level of seriousness significantly greater than a health and safety offence".
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Where a court makes a publicity order, it should state where the public announcement is to be made and ordinarily contain a provision to ensure that shareholders (and local people in the case of public bodies) are aware of the conviction. The council's guideline states: "Consideration should be given to requiring a statement on the defendant's website." A newspaper announcement "may be unnecessary if the proceedings are certain to receive news coverage in any event", but if it is required, the order should specify the publication, the form of announcement to be made and the number of insertions required. In an addition to the draft - and a partial reinstatement of the advice that the panel had given - the guideline also states that a court should consider indicating the size of any notice or advertisement. (The panel had been far more prescriptive, stating that there should be a notice - and specifying the size - in a local or regional paper, a trade publication and in the offender's annual report.) The prosecution should supply the court with a draft of the order before sentencing, with the judge "personally" endorsing the final form. The court should also consider separating any comment made by the convicted organisation from the order. |
Where a health and safety offence has been a significant cause of death, the guideline states, "the appropriate fine will seldom be less than £100,000 and may be measured in hundreds of thousands of pounds or more." The council also restates its view expressed in its draft text guideline that fines of £500,000 are no longer reserved for major public disasters (this had been advanced in 2000 in a Court of Appeal judgment involving Friskies Petcare (UK) Ltd).
A plea of guilty should be recognised by the appropriate reduction.
Four possible additional orders
Convicted organisations face four possible additional orders, covering publicity, remedial actions, compensation and costs. The council advises that courts should:
- "ordinarily" impose a "publicity order" for a corporate manslaughter conviction (such orders are not available for health and safety offences). The objective of an order "is deterrence and punishment" and it should therefore specify the fact of conviction, particulars of the offence, the fine and the terms of the remedial order (see box 5);
- consider making a remedial order if the offender has not rectified its failures (see box 6);
- ordinarily order the convicted organisation to pay the "properly incurred costs of the prosecution"; and
- not make an order for compensation in the "great majority of cases" because this issue will normally be considered in civil courts. The council accepts, however, that there may be "occasional cases" - for example, where a defendant is uninsured - when a court should consider a compensation order in respect of bereavement and/or funeral expenses.
What the Sentencing Advisory Panel did not address
The fines imposed on companies convicted under the different common law offence of manslaughter do not offer a valid basis for comparison of any potential effect of the guideline: such fines have invariably been low - ranging from £2,000 to £90,000, at an average of less than £50,000 - because the firms have been small and often of limited financial means. The more important sanction here has been the imprisonment of the guilty directors and owners on parallel manslaughter convictions, which is only possible because the small size of the firms allows direct culpability to be traced. That option of pursuing manslaughter charges against individuals under the common law will remain, but questions of parity and fairness and the availability of the corporate charge make it questionable how frequently the Crown Prosecution Service will prosecute individual directors and owners in the future.
There have been just 22 fines for health and safety crimes that have exceeded £500,000 - the new manslaughter threshold - and the use of the guideline to sentence the anticipated number of manslaughter cases of around a dozen a year can only boost that total.
The last time the HSE calculated fines for HSW Act offences involving a fatality - 2004/05 - the average fine per case was just £42,795. A de facto minimum of £100,000 will increase that average, as it will increase the number of fines of at least £100,000 for health and safety offences well beyond the current total of 300 since the HSW Act came into force in 1975, although it should be noted that the rate has increased from just 83 fines in the first 28 years of the HSW Act to between 22 and 40 in each of the past six years. There is, however, a possibility that judges may interpret the manslaughter minimum as a maximum for health and safety fines and, in some circumstances, impose lower fines for the latter than they might otherwise have done. This was something the Sentencing Advisory Panel had explicitly countered through overlapping turnover percentage bands for the two types of offence; it is a matter of regret that the council has failed to address this issue in its definitive guideline.
Disparities in comparative levels of fines faced by smaller and larger companies
The larger reality is that the council has baulked at a rare opportunity to do something significant about not just the woefully low levels of health and safety fines, but also about the gross disparities in the comparative levels of fines faced by smaller and larger companies. In the last issue of HSB, for example, we reported fines for two separate fatal incidents: in the first, BAE Systems Land Systems was fined £80,000, with the investigating inspector stating that its failures contributed to the death of a worker in an explosion. In the second case, Macob Administration was fined £80,000 after training and supervision failures ended in the fatal crushing of a dumper-truck driver. The BAE fine represented just 0.4% of the company's £19 million pre-tax annual profits; the Macob fine amounted to 54% of its £147,451 profits.
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Remedial orders require an offender to remedy specific failings. They are available for both corporate manslaughter and HSW Act offences, although they have rarely been used under the HSW Act. There are no changes between the council's draft and final guidelines. The council believes that a defendant "ought by the time of sentencing" to have already rectified any specific failings. A failure to do so, it warns, will deprive an offender of "significant mitigation". A remedial order, it advises, should be considered if the defendant has not put things right and the order can be made "sufficiently specific to be enforceable". The sentencing judge should personally endorse the final form of the order. The Sentencing Advisory Panel had envisaged using remedial orders in a more extensive way, going beyond specific failings to addressing deficiencies in an organisation's health and safety policies, systems and practices. Remedial orders may, believed the panel, be particularly appropriate for publicly funded bodies. |
There are undoubtedly problems with using turnover or profit as a basis for setting a fine, but they remain overall by far the fairest factors that a court can refer to. In terms of sentencing for other types of crime, turnover is the closest comparator to the income of an individual, which is typically the primary measure for assessing an individual's ability to pay a fine. It is also used by the Office of Fair Trading and the European Commission when imposing financial penalties for competition law infringements - where fines can reach 10% of turnover - and nearly all the arguments that are deployed against using turnover as a basis for a health and safety fine are equally applicable to competition law. Lord Judge argued that linking fines to an offender's annual turnover "could inadvertently risk an unfair outcome", when this is precisely what a link would have avoided.
Nor is the argument valid that a link would unfairly affect public authorities: courts could have used the panel's starting points and range, and then considered the potential impact on the provision of public services to see whether there was justification for reducing the fine.
Minimal impact on large firms
There is also a real problem with the guideline's stipulation that fines "will seldom be less" than £500,000 for manslaughter and £100,000 for health and safety offences. A fine of £500,000 would put most small firms out of business, which is contrary to the guideline's advice. The council's response would undoubtedly be that a court would recognise this and use its discretion to reduce the fine, in which case one has to question the validity of the two benchmarks in the first place: although the Government intended the new manslaughter offence to catch larger companies (all of which had avoided successful prosecution under the common law of manslaughter), the senior management test means that corporate manslaughter is still likely to apply predominantly to smaller firms; indeed the only company to be charged with the offence to date is small. Conversely, a fine of £10 million could come out of some large organisations' loose change as just another cost of doing business.
The council has let down the victims of workplace fatalities and their families, but it has also let down those employers that do their best to look after their workers, but see some of their competitors (and also suppliers and customers) disregard basic health and safety standards and then, if they are brought to court, face a fine that rarely approaches 1% of profits, let alone of annual turnover, even where death is involved. It has also let down current and future workers: fines that removed a significant part of a large company's profits and turnover would have acted as a deterrent to other employers. With a general election imminent and both major parties keen not to do anything that would upset business, it looks as if we will be saddled with this inadequate guideline for some years to come.
Howard Fidderman is a freelance journalist and editor of HSB.
