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Business and industry responds to the proposed new Sentencing Guidelines

Following our recent round table events, we report on the key themes which emerged from the discussions regarding the Sentencing Guidelines Council’s consultation in relation to health and safety, corporate manslaughter and food and safety hygiene offences.

DWF recently held a series of round table events to seek attendee’s views on, and to frame a response to, the Sentencing Guidelines Council’s recent consultation into sentencing for health and safety, corporate manslaughter and food safety and hygiene offences.

The guidelines are not yet in effect but the consultation concluded on 18 February 2015 and it is worth noting that similar guidelines are already in force for environmental offences. It is likely that some change to sentencing will result from the consultation.

Below we report on the key themes which emerged from the round table discussions.

Theme one: Linking fines to turnover

As discussed in DWF’s previous articles, ('Sentencing Council consultation paper published' and 'Will the proposed new sentencing guidelines mean corporate manslaughter fines of £20 million?') the guidelines represent a sea change in the penalties to be levied for breaches, with fines up to 10 times higher, or in some cases even more, than their previous levels. The guidelines promote a strong correlation between fines and turnover.

DWF’s view was that linking fines to turnover was likely to prove problematic and represented a blunt instrument for determining the appropriate penalty to be levelled against an organisation. Businesses were asked for their views to see if they agreed.

Several themes emerged from these events, which were attended by a cross spectrum of organisations from a number of industries and risk profiles. Amongst these themes the positive aspects included the fact that:

  • All attendees welcomed having a clear framework that promoted certainty.
  • All agreed that significant penalties for deliberate or flagrant offenders were entirely appropriate and justifiable.

However, it was felt linking fines to turnover was not an appropriate measure. For example:

  • Many high risk industries are also industries with low margins where profitability would be eliminated by imposing a significant fine, limited consideration is given to this in the guidance.
  • Delegates felt that the cost of ensuring employee safety should be the same on a like for like basis, regardless of the size of the employing business and that financial means were therefore not the relevant measure for fines.
  • No reflection is included in the guidance of the degree of control which a smaller organisation can exert over its employees, for example because senior management are directly supervising work activities and because businesses are more likely to operate on a single site. The sentences and culpability criteria do not reflect the additional concerns which arise from being a multi-site business with numerous employees.
  • Previous moves to significantly increase sentences have not led to change because large businesses have many times the number of employees and operations that small businesses do, it was recognised that this must be factored in when considering how to fine them. The fact that a business may have a very low accident rate and a long history of compliance is largely absent from the current guidelines, which focus primarily on the conduct relating to the offending act.
  • The proposed penalties imposed for large organisations, even for low culpability issues, remain high and focus on harm rather than culpability, for example a low culpability breach involving a large business where there is a death, the fine would still start at £180,000.

Theme two: The impact on the relationship between regulators and the industry.

The proposals could represent another blow to the traditionally positive relationship between regulators and industry that has existed in Britain. Many are already uncomfortable with the HSE’s Fee for Intervention (FFI) regime which, in the eyes of some, incentivises the regulator to identify material breaches and deters organisations from seeking advice for fear of being charged and having contravention notices on their record.

Theme three: Concerns about practicality

Numerous practical concerns were also raised, from the fact that responsible businesses which proactively record all incidents and near misses may find this used as evidence to increase their culpability, to the fact that the technical detail of the guidelines will place more power into the hands of regulators who may not always portray a business in a representative way, leading to inconsistency. Inevitably it was felt that the guidelines would lead to longer Court hearings to examine the various criteria, particularly given the scope for significant fines for minor incidents, increasing costs and putting strain on the Court system.

Theme four: Financial data

A further issue is that the guidelines expect financial data, which could be sensitive or even damaging, to be disclosed for the Court to conduct a sentencing exercise. This may lead to regulators requesting or even compelling production of this data as part of their investigation, which places further strain on their relationship with the business.

Theme five:  Public profiles and perception of businesses

Delegates also felt that large businesses usually have higher public profiles than their smaller counterparts. Many felt that adverse publicity was a major deterrent to offending behaviours and that this had a greater effect on higher profile businesses in the wake of an incident.

Many questioned whether the perception of business, as exemplified by the consultation, was a realistic portrayal of business in the UK today – that shareholders needed to be reminded of the need for businesses to operate within the law through punitive fines. For example to date there have only been nine successful Corporate Manslaughter prosecutions (requiring a gross breach of duty causing death with evidence of senior management failings), with two acquittals. None of these prosecutions related to large businesses as defined by the guidelines, yet the guidelines appear to assume that profit is being made at the expense of safety and focus on ensuring that turnover is used as a measure of penalising large businesses.

Theme six: The alternatives…

The intention underlying the sentencing appears to be to reduce food safety risks and workplace accidents by forcing businesses to do more in view of the deterrent of large fines. We would question whether this is an approach that will produce results. Accident rates (as collated by the HSE) have, during periods of economic stability (for example 2003-2007) remained relatively static despite efforts to reduce them, and as at 2013, were in fact the lowest recorded and the third lowest in the EU. Delegates would have welcomed a different approach which promoted certainty for businesses whilst incenvising safety, such as the use of civil sanctions (which have been employed for environmental offences for years). This might have, for example, promoted reinvestment of funds to combat safety issues, rather than forcing businesses to tie up capital making financial provision for fines.

Whilst the intention was no doubt to bring home the importance of safety, the Council risks businesses viewing fines as an unavoidable cost in an unfriendly regulatory environment. This would send entirely the wrong message, particularly given the fact that the evidence indicates that Britain’s businesses have succeeded in reducing accident rates to a lower rate than those in similar economies.

Theme seven: The likely effect of the guidelines

Surprisingly delegates did not consider that the guidelines would have a significant effect on their attitude to food hygiene, or health and safety. Their view was that they currently do all they can to achieve what is reasonably practicable as responsible businesses and employers. Ominously, in light of the above, they felt that the effect of the guidelines would, they said, be to impose an additional cost of doing business in the face of the often unpredictable risks which sometimes eventuate and would have a purely punitive effect.

The Council, by contrast, makes explicit that the aim is to penalise shareholders and management in the wake of a breach. As made clear by the points above, business representatives had no objection to penalties to those placing profit ahead of safety, and welcomed anything which promotes certainty. However the long term effect on safety and the broader economy of a purely punitive regime which may be to deter creditors, investors and perhaps even businesses operating in riskier industries, remains to be seen.

It is unknown whether the guidelines will be implemented in their current form and DWF have formally responded to the consultation.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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Steffan Groch

Partner and Head of Regulatory - Head of Sectors

I head up DWF's national Regulatory team as well as leading the firm’s ‘go to market’ sector expertise. I am also Chair of the UK Health and Safety Lawyers Association.