New guidelines calling for “punitive and significant” fines for corporate manslaughter have highlighted the need for robust health and safety risk management, insurers have warned.
Insurance broker and risk adviser Marsh has told organisations in England and Wales that they must embed robust health and safety risk management practices or face severe financial and reputational penalties in the event of a successful corporate manslaughter prosecution.
Marsh’s warning follows the introduction in England and Wales of new sentencing guidelines for the Corporate Manslaughter and Homicide Act 2007. These measures impact all organisations found guilty of corporate manslaughter as a result of a gross breach of the duty of care which results in the death of an individual. Such a breach will involve failures by senior management in the discharge of their health and safety responsibilities.
In its final definitive guideline published this month, the Sentencing Guidelines Council said its advice was clear: “punitive and significant fines should be imposed both to deter and to reflect public concern at avoidable loss of life”.
The council sets out principles to guide courts in sentencing organisations and individuals convicted of offences.
For firms found guilty of corporate manslaughter the council said fines may be millions of pounds and should seldom be below £500,000. For other health and safety offences that cause death, fines from £100,000 up to hundreds of thousands of pounds should be imposed.
In addition to financial penalties, publicity orders are likely to be appropriate in most cases as part of the punishment. The order will specify the place where the public announcement will be made and consider the size and prominence of the notice or advertisement. The organisation may also be compelled to make a statement on relevant websites, ensuring that the information is brought to the attention of shareholders and members of the public.
Marc Spurling, claims defensibility consultant at Marsh Risk Consulting, explained: “The government expects that cases of corporate manslaughter or homicide following a death at work will be rare, as the offence is intended to cover only the worst instances of failure across an organisation. However, if a successful prosecution does occur, the penalties could be severe.
“As well as the financial penalties, the publicity order penalties, by which the organisation can be compelled to advertise its prosecution, could potentially damage its reputation further and harm the success of the organisation in the longer-term.
“Ensuring the safety of its employees and any other third party while on its premises should be paramount to any organisation. We recommend that organisations review the adequacy of both their health and safety management systems and overall incident management process. Organisations can reduce the potential for corporate manslaughter prosecutions by demonstrating a robust health and safety culture which is embedded at all levels of the business and is actively encouraged by the senior management team.”
The new guidelines include the following advice to the courts:
Organisations may be fined many millions of pounds. The court may increase/decrease the fine based on the financial circumstances of the organisation but any fine will seldom be less than £500,000.
In deciding on the level of fine, the court will not be influenced by the impact on shareholders or directors, but may take into account the effect on ‘innocent’ workers and on public services.
Factors increasing the seriousness of the offence identified by the Council include the foreseeability of serious injury, whether non-compliance was common and widespread within the organisation, and how far up the organisation responsibility for the breach went.
Other factors that would aggravate the offence and raise the fine above the relevant minimum level include the number of deaths and serious injury caused, injury to vulnerable persons, failure to heed warnings or respond to near misses of a similar nature, cost-cutting, and deliberate failure to obtain or comply with relevant licences.
Fines in respect of workplace accidents causing death but falling short of corporate manslaughter should be in the order of hundreds of thousands of pounds but seldom be less than £100,000.
Fines for large organisations should be payable within 28 days.
Council member and vice president of the Court of Appeal (Criminal Division) Lord Justice Anthony Hughes said: “Fines cannot and do not attempt to value a human life – compensation will be assessed separately in these cases. These are serious offences and the fines must be punitive and substantial and have an impact on the company or organisation.”
NCE is carrying out a survey of the construction industry’s attitude to managing risk in the light of new legislation including the Corporate Manslaugher Act and the new Bribery Act. Click here to take part.