Tougher penalties for health and safety offences
New sentencing guidelines will change the way in which courts will sentence companies and individuals found guilty of corporate manslaughter and health and safety offences and are expected to lead to a significant increase in the level of fines. The guidelines come into force on 1 February 2016 and will apply to companies and individuals sentenced after that date, regardless of the date of the offence.
A range of suggested sentences are set out in the guidelines. The actual sentence which should apply depends on a number of different factors, such as the degree of culpability of the offender and the harm caused as well, in the case of companies, as their annual turnover. Having said that, there is discretion for the courts to move outside the suggested ranges to suit the facts of a particular case.
Looking at the worst case scenario, the suggested fine for the worst health and safety offences by large companies (i.e. turnover in excess of £50m) is a starting point of £4m and a range of £2.6m to £10m; the suggested fine for the worst corporate manslaughter offence by large companies is a starting point of £7.5m and a range of £4.8m - £20m.
Fines are intended to be sufficiently substantial to have real economic impact which will bring home to both management and shareholders the need to comply with health and safety legislation and to achieve a safe environment for workers and members of the public affected by the company's activities. There is scope for higher fines where the offender is a "very large organisation" whose turnover vastly exceeds £50m. In that case the sentence may move outside the suggested ranges in order to achieve a proportionate sentence.
There was a recent case involving Thames Water which suggested that, in the worst possible case, a very large organisation (i.e. with turnover far in excess of £50m) could expect a fine much higher than that suggested by the sentencing guidelines. The court said that this may well result in a fine equal to a substantial percentage, up to 100%, of the company's pre-tax net profit, even if this results in fines in excess of £100m.
The highest fine for a health and safety offence to date is £15m. This was imposed on Transco back in 2005 for a gas explosion in Scotland in 1999 which killed a family of four. Fieldfisher maintains a corporate manslaughter case-tracker here (/media/3694153/corporate-manslaughter-tracker.pdf) and insofar as we know the highest fine under the Corporate Manslaughter Act 2007 to date is £600,000, imposed on CAV Aerospace. We are anticipating significant increases in the level of fines as a result of the new guidelines.
For corporate groups, the recent conviction of CAV Aerospace following the death of a worker at its subsidiary company's warehouse is a timely reminder of the potential liability of parent companies and their directors for corporate manslaughter and health and safety offences elsewhere in the group. The courts will consider the management structure of the group to determine where responsibility for these matters lies.