Reputation, reputation, reputation

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.

Annual turnover

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

Read our analysis of the new Act which comes into force on 6 April 2008.

There are three sanctions available to the court when sentencing for the new offence of corporate manslaughter:

• Unlimited fine;
• Publicity order; and
• Remedial order.

Unlimited fine

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.

Publicity order

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.

Remedial order

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).

Mitigating factor:

• Breach due to employee acting outside authority or failing in duties.

Offender mitigation:

• Ready cooperation with authorities.
• Good previous safety record.

Next steps

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. Take note of any action points that will help you and your organisation.