The much talked about “Sentencing Guidelines for Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences” (the Guidelines) come into force on Monday 1 February 2016. The Guidelines will apply to organisations and individuals sentenced on or after that date, (irrespective of when the offence was committed).
The Guidelines actively encourage courts (both Magistrates’ and Crown courts) to link the level of fine directly to an organisation’s turnover. There is little doubt that for larger organisations this is set to increase the level of potential fines significantly, from the hundreds of thousands of pounds to the millions of pounds.
How will the Guidelines impact businesses?
As a result of the lack of clear guidance on how to treat “very large” companies, other than imposing an even more significant fine than “large” companies, we expect those organisations with turnovers in excess of £50 million to be hardest hit. Fines in the tens of millions are likely to make the headlines over the next 12 months.
As we discussed in our previous article, the court has already delivered a strong message in the environmental arena in the Thames Water appeal of June 2015. We anticipate this will be echoed in future health and safety cases (because of the similarity in the relevant guidelines and the regulatory subject matter). The message in that case was that in the most serious of cases larger organisations could face fines in excess of £100 million, and that even for less serious offences a fine should be measured in the millions of pounds.
There have been a number of prosecutions in the past three months which have reflected this new court attitude towards increasing the level of fines imposed on large companies:
In the final weeks before the Guidelines came into force, million pound fines were levied against a number of large organisations, including National Grid Gas plc, Balfour Beatty Civil Engineering Ltd (both for fatal incidents) and C.RO Ports London Ltd (fined £1.8 million following a non-fatal incident).
Thames Water again came under scrutiny earlier in January 2016 and this time was fined £1 million for pollution offences. In his sentencing remarks, the judge stated “The time has now come for the courts to make clear that very large organisations such as [Thames Water] really must bring about the reforms and improvements for which they say they are striving because if they do not the sentences passed upon them for environmental offences will be sufficiently severe to have a significant impact on their finances.”
In September 2015, Hugo Boss UK was fined £1.2 million for health and safety offences relating to effective planning, organisation, control and review of health and safety measures. This followed the death of a four year old boy in one of its stores. The fine represents 5% of the company’s more recent pre-tax profit and 0.6% of its £192.8 million turnover.
What should businesses be doing?
With penalties in the millions likely to be awarded against large and very large organisations, and all businesses being affected by significant increases in potential penalties, we recommend that that the changes introduced by the Guidelines are briefed at board level and that consideration is given to the risks posed to the business.
We also recommend a re-evaluation of health and safety practices to ensure legal compliance, and to reassure directors.
For more information:
If you would like to discuss this topic in more detail or arrange a bespoke briefing session for your business leaders, please get in touch with one of our experts.