The sentencing guidelines directing judges to set penalties for OSH regulatory breaches and corporate manslaughter offences may have a bigger impact on compliance with safety and health law than any single piece of regulation in the past 20 years. In their first six months, the guidelines have resulted in as many penalties of £1m or more as there were in the previous two decades.
The new guidelines
The 2015 definitive guidelines for health and safety offences, corporate manslaughter and food safety and hygiene offences (bit.ly/1PiSeLD) came into effect in February 2016. They detail a framework for penalties in England and Wales for organisations and individuals convicted of breaching the Health and Safety at Work Act and other OSH regulations and the Corporate Manslaughter and Corporate Homicide Act.
They apply to individuals prosecuted for failing to safeguard themselves and others under s 7 of the HSW Act (for employees) and s 37 (for managers and directors) or for gross negligence manslaughter. Though they do not formally apply to Scottish and Northern Irish courts but lawyers expect them to provide a template for judges in these jurisdictions until they are superseded by local guidelines. In at least one case sentenced in the Scottish courts since February, the judge followed the guidelines step by step.
The Sentencing Council's aim was to provide judges with a framework to help them levy more consistent penalties. It was also keen to bring the sentencing approach for safety and health offences in line with the regime for environmental crime.
Senior figures in the judiciary were reported to be concerned that fines for large organisations did not reflect their income adequately. Dismissing appeals by Network Rail and Sellafield in 2013 against fines of £500,000 and £700,000, the Court of Appeal said there was no ceiling on penalties and that fines of £1m or more should not be saved for the most serious cases triggered by major disasters.
Launching the guidelines, the Sentencing Council said it did not anticipate that fines would rise substantially for smaller organisations.
Using the new guidelines, a judge applies a formula to set the penalty, first deciding whether the defendant's culpability was very high, high, medium or low. The next factor is a matrix cross-referring the likelihood the safety failing would lead to harm and how bad that harm could have been -- from minor injuries to lifelong disability or death. The judge must also consider how many people were exposed to the risk of harm and whether the safety failing was a significant cause of actual harm before setting a final harm rating of 1 to 4.
The harm rating and culpability assessment is applied to a series of tables with fine ranges for organisations with different levels of annual turnover.
The fine ranges are as follows:
micro-organisations (turnover less than £2m): £50 to £450,000
small organisations (turnover between £2m and £10m): £100 to £1.6m
medium organisations (turnover between £10m and £50m) £1,000 to £4m
large organisations (£50m and above turnover): £3,000 to £10m.
For each harm category at each culpability there is a suggested "starting point" fine, ranging from £200 for low culpability, harm level 4 for a micro-organisation to £4m for a large organisation with very high culpability and harm level 1. Judges can move below these starting points for mitigating circumstances, such as a good safety record and early guilty pleas. Aggravating factors, such as obstructing an investigation or cost-cutting at the expense of safety, will push the penalty up the scale from the starting point.
There are separate schedules for individuals convicted of OSH failings (see Gaol warning box below) and for corporate manslaughter offences, with fines for the latter offence ranging from £180,000 to £20m.
To explore the implications of the new sentencing regime for UK organisations, IOSH Magazine brought together senior safety lawyers Dr Simon Joyston-Bechal, director of Turnstone Law, and Michael Appleby of Bivonas Law, for a discussion broadcast online at www.ioshmagazine.com
The lawyers started by examining how the new guidelines have elevated penalties for larger employers. The major factors behind the increase are the guidelines' instruction to courts to weigh the potential for harm in a regulatory breach rather than just the actual harm caused, and the explicit link between fine level and annual turnover.
Joyston-Bechal noted that prosecutions under the Health and Safety at Work (HSW) Act and OSH regulations are brought for failure to protect employees and others. Dutyholders can be prosecuted for these failings when no accident has taken place and the injury is merely evidence of the breach. (The Corporate Manslaughter and Corporate Homicide Act differs, in that only a fatality can trigger a prosecution.)
In practice, said Joyston-Bechal, courts had usually focused on the severity of the accident. "In the old world, prosecutions and punishments tended to be linked to outcomes ... it tended to be that if you have a more serious accident you were more likely to be prosecuted and to get a bigger punishment."
He gave the example of a workplace with an unprotected ledge at height and offered different scenarios of an inspector visiting the site and noting that employees had access to the ledge, or of someone falling off the ledge and breaking an ankle or being left paralysed.
"You could still be prosecuted for exposing people to risk if the inspector noticed the ledge before anyone was injured, but you might get a £10,000 to £20,000 fine," he said. "If someone had broken an ankle it might be £20,000 to £30,000. If they had been paralysed, maybe a £300,000 fine.
"In the new world under these guidelines, we don't treat those cases differently depending on outcome; we look at the risk. We are going to be asking ourselves what is the likelihood of someone falling off the ledge: high, medium or low? And if they did fall off, what harm was risked? And if they have risked fatality or paralysis then they are in the highest category, even though no one was harmed."
These factors could boost the penalty to £300,000 based on the potential for and likelihood of harm. If the organisation was a large one with more than a £50m annual turnover, it would be elevated to an even higher tariff.
"So a case that would have been a £20,000 fine where no one was injured could now bring a £3m fine," he warned.
He added that another inflationary factor for new penalties was the instruction to courts to consider whether more than one person had been exposed to harm, regardless of the number involved in an incident. "I have struggled to find a scenario where only one person is exposed to risk," he observed.
The guidelines provide fine tariffs for micro-organisations up to large enterprises, which are defined as turning over more than £50m, but they say the courts may decide to exceed the maxima in the tariffs for "very large organisations" whose income "very greatly exceeds £50m". Asked what turnover made an organisation very large, Joyston-Bechal admitted: "We don't know," adding: "In my way of thinking, once you are at £100m it's very hard to say you don't greatly exceed £50m."
Appleby surveyed some of the significant cases involving fatalities that had come to court in the guidelines' first six months. He highlighted building materials retailer Travis Perkins' prosecution for a fatality in the car park of one of its stores when a customer loading his roof rack was struck by a heavy goods vehicle.
The £2m fine was "far in advance of what we would have expected not that long ago," Appleby said. The case was an example of the court looking at the risk to customers of unmanaged vehicle movements, rather than just the accident, however serious.
But in support of his argument that the courts are still bedding in the regime, Appleby noted the case of Monavon Construction. The firm was sentenced in July for corporate manslaughter after two men died when they fell through a hoarding at the edge of its site in Euston, London into a 4 m lightwell excavation. The £250,000 fine for each offence suggested the judge had approached the sentence as he might have done before the guidelines came into force.
"The courts are still trying to come to terms with this approach," said Appleby. "You have to bear in mind that in the criminal courts, health and safety cases are a very small part of what they do. Dealing with risk is something they are not used to."
Joyston-Bechal said the courts' need for contextual guidance on the potential harm and likelihood elements heightened the importance of expert witnesses and increased the need for the defence to research and present accident statistics for the particular hazards involved in each case. But even with the best data and advice, "the judge still has to decide whether that is low, medium or high, and three judges might make three different decisions," he said.
Appleby said defendant companies would be encouraged to plead not guilty by the fact they might be able to influence their culpability rating by presenting detailed evidence to a judge on their risk management procedures.
"Even if we lose at trial, if we can convince the judge that we are not very high culpability [but]medium culpability, we can save them £2m," added Joyston-Bechal. "So why would you go in straight away pleading guilty?"
Turning to cases involving non-fatal accidents, Appleby noted several cases:
"HAVS fines in the past would have been £10,000 or maybe £20,000 if it was a large company," said Appleby of the Asset International case.
Parent and child
Webinar viewers sent in questions during the discussion, asking about the courts' treatment of different types of organisation.
Answering a query about how they would sentence a business that had high turnover but low or no profit, Joyston-Bechal noted that though there was provision for judges to take into account the health of an organisation in finalising the penalty, it would not be a major factor. "By being loss-making you can't escape your culpability," he said.
Appleby added that he expected the size of the fines would lead to judges offering more defendants the chance to pay over a longer period.
Another questioner asked what the courts would define as the legal entity whose turnover would be assessed to set the fine. The lawyers said that, where subsidiary companies are separate businesses, they would be treated as such. Joyston-Bechal said the courts would normally ask: "'What is the corporate entity that is being sentenced? What is the turnover of that corporate entity?' Unless that is exceptionally giving the wrong result, the court will just look at that. But if that gives a distorted view of the company's turnover then [they will] look elsewhere."
Appleby noted that in the case of Balfour Beatty Utility Solutions (BBUS), convicted in May for a trench collapse fatality, before settling on a £2.6m penalty the court had considered looking beyond BBUS's income to take into account the whole Balfour Beatty group's turnover of £8bn. "It shows the way the courts are starting to think about the financial side of things," said Appleby.
A case that would have been a £20,000 fine where no one was injured could now bring a £3m fine
"I'm advising clients we do have to think in a more intelligent way," said Joyston-Bechal. "Say if you are an organisation with £100m turnover and one part of your business is the bit that generates the hazard and that has a £5m turnover. I think you do now need to seriously consider taking that part of the business and putting it into a separate corporate, so you can protect your main £95m turnover business. It doesn't mean that it's appropriate in each company but for a construction company with five geographical divisions you might consider splitting into five subsidiary companies."
Appleby and Joyston-Bechal clarified how public bodies will be treated under the guidelines. For local authorities and similar bodies, the court will take their turnover as the annual revenue budget, which includes government grants, council tax receipts and other income. For health trusts, the turnover would be the annual revenue figure published by the National Health Service regulator Monitor.
These revenue figures would push councils and health bodies to the top of the turnover table, said Joyston-Bechal: "They are among the biggest organisations in the country."
The guidelines say that if there would be an impact on the "employment of staff, service users, customers and local economy", the courts can moderate the fine.
But Joyston-Bechal observed that even if a sum in the millions of pounds for a public sector body was halved or reduced by 70%, "you still have quite a high fine that you wouldn't otherwise have got".
For charities, whose revenue will be determined by reference to their annual audited accounts, fines can also be discounted if the organisation can show it would adversely affect service provision.
One webinar viewer asked how the guidelines might affect the practice of "phoenix" companies. These are enterprises which are shut down by the directors to avoid a safety penalty, then re-emerge as new firms with the same staff and assets. Appleby suggested that directors tempted to liquidate a business in these circumstances were pursuing a dangerous strategy because it would give prosecutors little incentive to launch an action against the defunct company.
"That's the time they think of going after the directors," he said, "and the directors are now more likely to go to jail."
Almost all the convictions for health and safety offences since the new guidelines came into force have involved organisations, so little attention has been paid to the new tariffs they set for custodial sentences.
Individuals can be prosecuted under s 7 of the Health and Safety at Work (HSW) Act for failing to ensure their own or their colleagues' safety. Directors can be charged under s 37 where their acts and omissions lead to breaches.
The guidelines instruct courts to follow a similar sequence for individual custodial sentences as for financial fines. This entails assessing factors including culpability, degree of actual harm, likelihood of harm and whether more than one person was exposed to risk
The table of penalties for individuals sets a benchmark gaol sentence of 18 months for anyone judged to have very high culpability in the top harm category, with a maximum of two years, but even for medium culpability the benchmark is a 26-week prison term. In the lower parts of the table the penalties are fines or community orders.
In the IOSH Magazine webinar, Simon Joyston-Bechal said the new regime was likely to lead to more custodial sentences because the guidelines no longer reserved them for the most serious cases. "The judge is being told 'you have to give this person a prison sentence'," he said.
The factors such as potential for harm and exposing more than one person to risk which also apply to corporate OSH offences could push courts towards the higher sentences in the table, Joyston-Bechal warned. "If I'm right about these inflationary factors then more and more people will get sucked into those higher categories because of the way this regime has been created.
"More people will find themselves in jail," he added. "So, for directors and senior executives, it becomes very important because they are the ones who have exposed people to risk because of the decisions they have taken."
The lawyers flagged up two more sets of instructions to courts in the pipeline which could further boost penalties. The Sentencing Council has released a draft on discounts to penalties for early guilty pleas by defendants.
This reduction has previously been set at one-third for an organisation entering a guilty plea within a reasonable period. But the consultation draft, for a guideline to be issued in November, suggested the one-third discount would be available only for organisations which plead guilty at their first appearance in court.
This would not allow many organisations the chance to form a picture of whether they were likely to be assessed as high culpability or to have created a high likelihood of harm.
"I think we will find far from most cases pleading early enough to get the one-third discount," Joyston-Bechal advised. "Most defendants will not plead on time."
Appleby added: "The courts want to see people plead early if they are going to plead [guilty]. The problem for health and safety is that it's so much about the interpretation of the facts and how you assess them."
Another guideline in preparation covers jail terms for crimes including gross negligence manslaughter. "Jail terms have been hovering between two and four years but I think the intention will be that more of those cases will be up at the higher end," Joyston-Bechal said.
Appleby added that with the new guideline for HSW Act offences pushing custodial sentences up towards the maximum two years, those for manslaughter would almost certainly have to be higher.
Joyston-Bechal said organisations' response to the new sentencing landscape should include briefings or training for directors to set the tone at the top for OSH management and to teach them how their decisions could affect the likelihood of a prosecution in the event of a serious accident.
He also suggested businesses undertake a review of policy statements and documents setting out OSH roles and responsibilities.
"Health and safety professionals and consultants create very good documents that reduce the likelihood of an accident happening, but they haven't had a lawyer look at them to say 'hold on, there are hostages to fortune in the way you have created that'. If you don't moderate some of the language people can go to jail," he warned.
Appleby said the prospect of higher fines should spur into action companies faced with a prosecution before the case comes to court. "You've got to start looking at the case earlier on and you've got to start looking at experts earlier on," he said. "Because once the case starts, the sausage machine starts, you are going to be asked to make a lot of decisions earlier on than before."
He said it was important to put in time, not just gathering evidence but thinking about how it would be presented in submissions to the HSE and in court: "It doesn't increase costs but puts you in a much more informed position should you be prosecuted."
The lawyers emphasised the value of organisations ensuring their internal accident investigation reports were protected by legal privilege so they could not be used against the defendant unnecessarily by the prosecutors.
Joyston-Bechal said preparing documents under privilege gave defendants a breathing space to have a private dialogue to identify the failings.
"Understandably, clients have structures for dealing with accidents," Appleby said. "But you see 20- to 30-page reports for something quite simple. If that report ends up in front of the jury, which it may do, you in the company may understand what you are talking about, but people will just glaze over. It has to be user-friendly. It may be for the needs of the company but the people who have to view that report now may not be the same people who have to review it in five years' time. The way you communicate in that report is very important."
Appleby said that there was often a rush to judgment after an accident, prompted by the sense that there should be multiple recommendations for improvements to safety systems. "One thing I say to companies is the more recommendations I see in a report, the less confidence I have that you actually understand what went wrong and how to improve things," he said. "Supposing you have a work process that's been in place for ten years and this is the first time you have had an incident. Why are you looking to change it? Sometimes the most obvious 'do-nothing' option is not considered."
Watch the IOSH Magazine sentencing guidelines webinar below