On 1 November 2015, new Sentencing Guidelines applying to health and safety, corporate manslaughter and food safety and hygiene offences will become effective. They are expected to impact all cases in these areas sentenced on or after 1 November 2015 and by virtue of section 172 of the Criminal Justice Act 2003, every court must have regard to the guidelines where they are relevant to an offence being sentenced.
On 13 November 2014, draft guidelines were published regarding the sentencing of health and safety, corporate manslaughter and food safety and hygiene offences. These closely followed the precedent set by guidelines introduced in July 2014 for environmental offences.
Current guidance, issued in February 2010, is limited to health and safety offences which cause death and corporate manslaughter - in other words, it provides guidance only in the cases causing a high level of harm.
Those guidelines were clear that for corporates, "A fixed correlation between the fine and either turnover or profit is not appropriate". For corporate manslaughter, the appropriate level of fine has "...a £500,000 starting point ". For health and safety offences causing death, the appropriate level of fine in the 2010 guidelines was, "seldom...less than £100,000."
By contrast, the 2014 draft guidelines set out a detailed methodology for calculating culpability and harm, and then band together recommended levels of fine according to the turnover of a convicted business.
Large organisations are defined in the H&S guidelines as those with a turnover of £50 million or more.
For such organisations, the guidelines suggest fines ranging from a starting point of £10,000 up to £4,000,000 for health and safety offences with the range extending up to £10,000,000 for those with high culpability and causing a high level of harm. For corporate manslaughter, the new recommended levels of fine will be £3,000,000 to £20,000,000.
The question not fully answered by the guidelines is what will happen to a convicted business which has turnover well in excess of the "large organisation" £50 million turnover.
At present the only published issue of the guidelines says this: "Very large organisation: Where a defendant organisation's turnover or equivalent very greatly exceeds the threshold for large organisations, it may be necessary to move outside the suggested range to achieve a proportionate sentence." Exactly the same wording appears in the Environmental Sentencing Guidelines.
The court's approach to this issue was considered by the Court of Appeal earlier this year in the application of the Environmental Sentencing Guidelines. That approach is highly likely to be followed as authoritative in health and safety cases.
In R v Thames Water Utilities Limited (Thames Water), the following circumstances put Thames Water into court:
- Over the course of one week in 2012, untreated sewage in excess of permitted discharge levels was discharged into a brook which runs through a nature reserve owned by the National Trust.
- The cause of the discharge was that two pumps had tripped and failed when they became clogged with "rag" inappropriately discarded into the system by domestic and other users. There had been at least 16 instances of one or both pumps failing in the previous five months.
- Staff did not respond to pump failure alarms which were triggered on two days, and the discharge was discovered by a member of the public who reported it.
- Soon after, the pumps were replaced with a better specification, better able to cope with the ingestion of rag.
Thames Water and their prosecutors agreed in this case that culpability on the part of Thames Water should be treated as falling within the category of negligence. For the Environmental Guidelines, there are four levels of culpability graded down from deliberate (the worst), to reckless, negligent, and then low or no culpability at the bottom end of the scale.
The harm caused was very localised, and was put at Category 3 (out of 4 categories, 1 being the highest and 4 being the lowest).
As part of its mitigation, Thames Water explained that it had voluntarily funded a National Trust community warden for three years at a cost of £90,000. It pleaded guilty at the first opportunity and had acted promptly in replacing the pumps when the issue was reported. Against that was the fact the company had a record of 106 convictions in relation to 162 environmental violations since 1991. Although this was not viewed as routine disregard of environmental obligations given the scale of the business, in the court's view, it was indicative of there being room for substantial improvement.
So, on this occasion, the scenario before the Court of Appeal involved relatively low levels of harm with a relatively low level of culpability plus good mitigation although at the time of the offence, in the court's view, the defendant could have been doing more to avoid breaches. The health and safety equivalent to this degree of harm and culpability might be a failure to risk assess a task in an otherwise comprehensive set of risk management measures, contributing to an employee losing the end of his little finger.
For a business with turnover of £50 million, where there is medium culpability (ranked 3rd out of 4) and a harm category 3 (out of 4 with 1 being the highest), the proposed health and safety guidelines suggest that the starting point for determining the fine will be £300,000 - but could be as high as £750,000.
Under the Environmental Guidelines, the starting point for the fine recommended by this level of harm and culpability was rather lower than this - £60,000 up to £150,000.
You might in these circumstances be surprised that at first instance, Thames Water received a whopping £250,000 fine. The Crown Court took the £60,000 starting point from the guidelines and multiplied it by five because of Thames Water's turnover, to reach a figure of £300,000, which was then reduced to £250,000 because of the mitigation.
To put this into context in terms of the new sentencing guidelines to take effect in November, applying a proportionate uplift to the recommended starting point (as from 1 November 2015) for that level of health and safety offence and with a proportionate discount for the same sort of level of mitigation, this equates to a fine of £1,250,000.
When Thames Water appealed the fine of £250,000, the Court of Appeal not only dismissed the appeal, but said that the fine was lenient, "even taking into account the significant mitigation...We would have had no hesitation in upholding a very substantially higher fine."
However, the Court of Appeal in its judgment discouraged what it called a "mechanistic extrapolation from the levels of fine suggested" in the guidelines for large companies and said that for very large businesses, profitability as well as turnover may need to be taken into account in a way not anticipated by the guidelines for smaller businesses:
"In the worst cases, when great harm...has been caused by deliberate action or inaction, the need to impose a just and proportionate penalty will necessitate a focus on the whole of the financial circumstances of the company...In such a case, the objectives of punishment, deterrence and the removal of gain (for example by the decision of the management not to expend sufficient resources in modernisation and improvement) must be achieved by the level of penalty imposed. This may well result in a fine equal to a substantial percentage, up to 100%, of the company's pre-tax net profit for the year in question (or an average if there is more than one year involved), even if this results in fines in excess of £100 million."
A criminal fine of course cannot be insured - this will be the defendant company's liability alone to bear.
The final version of the health and safety sentencing guidelines which will come into effect on 1 November have not yet been published, but our source has indicated that they will follow the draft guidelines and that they will apply to all health and safety matters sentenced after 1 November.
The increased levels of fine will hit businesses of all sizes, but those with turnover greatly in excess of £50 million should be particularly mindful of the likely impact.
It is vital that early specialist legal support is sought following an incident that may put your entire business at risk.