Corporate Manslaughter – The Implications for Business

For more than ten years there has been significant political commitment to reforming the law in relation to workplace deaths. Successive high-profile accidents have led to renewed calls for changes in the law following failed prosecutions against large companies and against individuals for manslaughter.

The new offence of corporate manslaughter certainly appears to address the criticism of the law as it presently stands, where a single individual, identifiable as the directing force of the company, has to be personally guilty of gross negligence/manslaughter before the organisation can be convicted.

In essence, the new law makes it easier to convict organisations whose senior managers have breached their duty of care, causing death.

Previously, prosecutions failed against all but the smallest companies, so the new act could potentially see a dramatic rise in the number of corporate manslaughter cases against businesses.

TARGETING RESPONSIBILITY

Of the major changes, the new act holds all employers accountable for the actions and decisions of their senior managers, rather than one single individual, which was perceived to be the key failure under the current legislation.

The UK Government says in its guidance that it only expects the new law to be applied to the most serious and obvious cases and organisations with good safety policies have nothing to fear. There may be only a dozen or so prosecutions under the new legislation every year.

The reality is that every workplace fatality already results in a police investigation looking at the possibility of manslaughter before passing on responsibility to the Health and Safety Executive or local authority to investigate health and safety breaches. Once the new law is in force, the police will have to look at the new corporate manslaughter offence, so will remain involved in any workplace fatality investigation for longer. There will surely be considerable pressure to test the water with the new offence.

On top of this, a convicted company may be forced to publicise its offence, which could be extremely damaging to its reputation. Also, the penalties will become far more severe with the courts encouraged to fine a guilty company based on a percentage of annual turnover, a recommendation outlined in a consultation paper from the Sentencing Advisory Panel (SAP).

The SAP consultation was designed to provide guidelines on the level of financial penalty imposed on a company convicted of manslaughter, based on a tariff system ranging from 2.5% to 10% of average annual turnover. However, the suggested approach is arguably fundamentally flawed, and goes against recent Court of Appeal recommendations.

TARGETING TURNOVER

The SAP’s proposals cover two areas – penalties for corporate manslaughter and also for offences under the Health and Safety at Work Act (HSWA) involving death. Both have slightly different recommendations in terms of the level of financial penalty, but the core principle is the same – the company should be fined a percentage of turnover. However, the approach is wholly inappropriate for a number of reasons, and it means an extra level of confusion for businesses.

Firstly, the issue of sentencing for offences under the HSWA has repeatedly been looked at by the Court of Appeal, which has clearly stated that no tariff can be applied in health and safety cases and each case should be considered individually. Secondly, the suggestion that sentencing can act as a deterrent is completely inappropriate. The mere possibility that a serious incident could occur is enough of a deterrent for most businesses.

The SAP’s proposals are designed to increase financial penalties for businesses, arguing that existing fines are not high enough. However, recent fines for offences under HSWA involving death have increased considerably, for example, the £15m fine against Transco in 2005.

The idea of linking the level of fine to turnover is also unsuitable. In high turnover but low margin businesses, such as those in the retail, food and construction sectors, turnover is not the appropriate place to start.

Also, while fines for significant health and safety breaches should be high enough to reflect the offence, the point of the legislation is not to seriously jeopardise the economic viability of many businesses, which are ostensibly very well run. It should not be the aim of sentencing to put companies out of business – arguably these proposals could well do that.

While it is correct that the offence of corporate manslaughter should be considered more serious than a breach of the HSWA involving death, each case should be considered on an individual level, as recommended by the Court of Appeal. Also, fines of the scale outlined in the proposals could restrict capital available for future safety investments – this cannot be an attractive consequence.

It is impossible to predict the full impact of the Corporate Manslaughter Act. However, the issues surrounding sentencing need to be addressed as soon as possible, to give businesses the confidence to ensure they are fully compliant with the new law.