12 January 2010
David Bergman

A rift has emerged over the method courts should use to penalise organisations convicted of either corporate manslaughter or health and safety offences resulting in a death. This is reflected in the reactions of different organisations to the recent consultation document published by the Sentencing Guidelines Council (SGC) which has abandoned previous proposals that would have linked fines to the turnover of the convicted organisations.

In 2008, the Sentencing and Advisory Panel (SAP), the independent board which gives the SGC guidance, proposed that the courts, when fining organisations for either of these offences, should peg the level of fines to a percentage of the average turnover of the convicted organisation.

For organisations convicted of corporate manslaughter, the SAP proposed fines in the range of 1% to 10% of the organisation’s turnover. The exact percentage range would depend on the level of organisational culpability as reflected in the “forseeability of risk of death” caused (see box).

Once they had decided on the range, the SAP suggested the court should look at another set of aggravating and mitigating factors.

In deciding where to pitch the fine in those ranges, the court should consider a separate list of factors, such as the organisation’s previous safety record, whether they had ignored employees’ safety concerns and how cooperative they had been with the investigation. 

The SGC wanted to steer judges not just on fines for corporate manslaughter but also on fines for workplace fatality convictions under the Health and Safety at Work (HSW) Act.

(There’s been no guidance for judges in this area before with the result that fines have varied enormously.) The panel suggested the range of fines for death convictions under the HSW Act should be between 0.25 and 4% of an organisation’s turnover.

The SAP’s approach of linking fines to turnover reflected previous advice it had given the Court of Appeal in 2000 on sentencing environmental crimes. The panel had argued that fines should have an equal economic impact on different organisations — though in that case, it hadn’t prescribed the turnover ranges.

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Proposed sentencing process

In the latest draft guidance, the Sentencing Guidance Council (SGC) proposes the following staged process in sentencing organisations for corporate manslaughter or deaths at work.

First the court should consider the seriousness of the offence. In doing so, the court should ordinarily consider four factors: the “extent to which the serious injury was foreseeable” (the more foreseeable, the more serious); “how far short of the standard did the defendant fall”; whether the relevant breach is a common one in the organisation (an isolated breach is less serious than one that is endemic); and how far up the organisation the breach goes (the further up the more serious).

Secondly, it should consider aggravating and mitigating factors. The council mentioned five aggravating factors in particular: if more than one death occurred or there was serious injury in addition to the death; evidence of a failure to heed warnings whether from its own employees, an inspectorate or from others; evidence of cost cutting at the expenses of safety; deliberate failure to obtain or comply with relevant licenses; and injury to vulnerable persons.

The court should also consider mitigating factors including: a prompt acceptance of responsibility; a high level of cooperation with the investigation beyond that which would be expected; genuine efforts to remedy the defect; a good safety record; a responsible attitude to safety.

In the next stage the court should consider the “nature, financial organisation and resources of the defendant” — and should look at financial information for a three year period, including the year of the offence (see table below). The guidance says that “the court should look carefully at both turnover and profit, and also at assets in order to gauge the resources of the defendant.” It makes the point that “whilst a fine is intended to inflict painful punishment, it should be one which the defendant is capable of paying.”

Fourthly, the court should consider the consequences of the fine. In assessing consequences, the SGC states that “the effect on the employment of the innocent” or upon “the provision of services” may be a relevant. The court should also consider whether the fine “will have the effect of putting the defendant out of business” though “in some bad cases” the council states that this “may be an acceptable consequence”.

Whatever the effect any fine may have upon the shareholders and directors, any effect it may have on prices charged by the company should not normally be relevant. Nor would the cost of meeting any remedial order be considered relevant.

Though it has taken away the link to corporate turnover, the council has given some kind of indicator on normative fines in cash terms. For the offence of corporate manslaughter, “the appropriate fine will seldom be less than £500,000 pounds and may be measured in millions of pounds.” For Health and Safety at Work Act offences linked to a death, the fine “will seldom be less than £100,000 and may be measured in hundreds of thousands of pounds or more.”

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New order

This turnover link has now been rejected by the SGC in a new set of proposals published in October. In its new draft guideline for judges on corporate manslaughter and other workplace fatality fines, the council says a “fixed correction between the fines and either turnover or profit is not appropriate”.

In its note to consultees, the SGC explained that this was because “the formula approach could inadvertently risk an unfair outcome, was particularly difficult to apply to public and third sector bodies, was likely to create an inverse incentive to adjust corporate structure to avoid the proper consequences of offending and so did not provide the most effective way of assessing the levels of fines across such a wide range of situations.” The council does not give any further reasons for rejecting the SAP’s proposals.

The advantage of an approach where fines were linked to turnover was that at least it would produce fines that had a consistent basis. Even if the fines would vary according to the size and wealth of the organisation, similarly serious deaths would result in a similar impact upon the organisation.

Neil Carberry, head of employment and pensions at the CBI, isn’t convinced by this argument. First, he sees turnover as a poor reflection of an organisation’s real health, making it an inappropriate measure for determining penalties. Secondly, he believes that fining companies based on turnover “would result in some fines that look too small and some fines that look too big”. He considers there would be significant perception problems if companies causing death in similar circumstances are fined very differently simply because of the size of their turnover.

Hilary Ross, a partner at lawyers Bond Pearce, also thinks it’s important for courts to take the “case in the round”. Courts should look at “all the facts and circumstances and decide on the level of fine and not have a predetermined starting point”. 

Neal Stone, head of policy and public affairs at the British Safety Council (BSC), agrees. The new proposal, says Stone, “will allow for a broad range of fines which may well better reflect the seriousness of the offence and the circumstances of the defendant than the original tariff based approach.”
Nevertheless, in its submission to the SGC’s consultation, the BSC says it doesn’t accept the premise that companies’ circumstances differ so much that a fixed correlation of fines to turnover would be inappropriate. It notes with approval the new draft guideline’s assertions that for the most serious offences, the appropriate fine will put the defendant out of business.

It’s hard to be sure which approach, the council’s or the panel’s, would lead to larger fines; but the fact that the council suggested that the panel’s link to turnover “might provide a perverse incentive to manipulation of corporate structure” suggests that it at least thought that turnover-based penalties would make organisations fear they would face bigger fines.

Neither Carberry nor Ross believe the new proposed guidance will necessarily produce lower penalties.
“The fines will still be extremely substantial,” argues Carberry. “The key issue is that they will be more tailored to the individual circumstances of a situation.”

Campaign group Families Against Corporate Killers (FACK) and the TUC are very much in favour of large fines, and very critical of the approach in the new proposed guidance. Hilda Palmer, the coordinator of FACK is suspicious of the new proposed guidance, which she considers a product of successful business lobbying. She points to the fact that anti-competition fines are linked to turnover and argues that “fines for killing someone negligently should not be lower than these.”

Hugh Robertson, senior health and safety officer at the TUC, also considers that keeping a correlation between fines and turnover is important, as it would provide “a major incentive to large multinationals to clean up their acts”.
 

Bad publicity
 

The SGC’s latest draft keeps the SAP’s earlier proposal that courts should ordinarily impose a publicity order — requiring the company to publicise details of its conviction in a manner decided by the court — in a case of conviction for corporate manslaughter. This is no different to the position taken by the panel. There’s good reason for businesses, especially the largest ones, to fear publicity orders; an equivalent power was used in Australia to force a supermarket chain to print details of a manslaughter conviction on its own carrier bags.

But while the panel stated that in all cases the convicted company should be forced to place an advertisement in a newspaper – and set out the kinds and numbers of papers in which the notice should be published – the council takes a more moderate position. It states that “a newspaper announcement may be unnecessary if the proceedings are certain to receive news coverage in any event.”

However the council does state that the order should “ordinarily contain a provision designed to ensure that the conviction becomes known to shareholders in the case of companies and to local people in the case of public bodies.

Hilary Ross thinks the SGC should have taken a stronger position. “A publicity order could be more effective than a fine,” he says. “Corporate reputation is very important. I think the current consultation waters it down to make the penalty meaningless.”

The BSC’s consultation submission says the importance of publicity orders “cannot be overstated” and welcomes the proposal to make them the norm for death at work convictions.

Neil Carberry disagrees. He thinks they are still too stringent. “I appreciate that publicity orders are a key part of the new Act but expect them to be only used by judges in the clearest cases leading to corporate manslaughter convictions.”

The SGC’s consultation exercise on its latest draft ended on 5 January. There will now probably be another hiatus while it digests the consultees’ arguments.

The views canvassed for this article suggest the unions and campaigners for higher corporate fines will have objected to the removal of the advisory panel’s gearing of fines to defendants’ turnover, while employers’ bodies and defence lawyers will have been supportive.

Whether the opponents’ arguments have carried any weight will become clear when the SGC issues its final guideline, perhaps later in the year.

Categories:
Directors' duties, Enforcement (prosecutions), Features, Corporate manslaughter, Enforcement (prosecutions)

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