Corporate Guilt?

It has been a long time coming, but this month sees the introduction of the new corporate manslaughter legislation. Sally Thornley, head of compliance information services at the FTA, considers the background to the new law and what it could mean to your organization

On 6 April 2008 the Corporate Manslaughter and Corporate Homicide Act creates a new offence of corporate manslaughter in England, Wales and Northern Ireland, and corporate homicide in Scotland. The new act is the culmination of more than 10 years of campaigning to make it easier to prosecute large organizations when they have caused death by gross failings in the corporate management of their duties of care.

Over the years there have been a number of high-profile cases that have evoked public demands for manslaughter prosecutions. Tragedies such as the Herald of Free Enterprise, the Kings Cross fire and the Clapham rail crash were all followed by inquiries that found the corporate bodies at fault. Although there were usually successful health and safety prosecutions (often leading to significant fines), the fact that manslaughter charges failed to stick heightened public perception of inadequacies in the law.

Under existing gross negligence manslaughter legislation, a company cannot be convicted unless an individual within it, who can be identified as the embodiment of the company, has first been shown to be guilty of manslaughter.

The problem of identifying an individual who is the embodiment (or ‘directing mind’) of the company and is also culpable becomes more difficult the larger the company gets. In large organizations, responsibility for safety matters can be unclear, particularly when those duties of care are poorly managed and structured.

The new legislation aims to close this loophole and make it easier to prosecute organizations (including, for the first time, specified Government bodies), complementing existing law under which individuals can be prosecuted for gross negligence manslaughter and both individuals and organizations for health and safety offences.

Although this is a new offence, it is important to understand that it does not impose any new obligations or duties on organizations. Those organizations whose senior management already properly manage their duties of care should have nothing to fear from the new law.

The new law is also only intended to be used in the most serious cases. In its guidance, the Ministry of Justice confirms that ‘corporate manslaughter/homicide will continue to be an extremely serious offence reserved for the very worst cases of corporate mismanagement leading to death’.

The new offence

Under the Corporate Manslaughter and Corporate Homicide Act 2007, an organization commits an offence if the way in which its activities are managed or organized:

• causes a person’s death, and
• amounts to a gross breach of a relevant duty of care owed by the organization to the deceased.

An organization is guilty of an offence only if the way in which its activities are managed or organized by its senior management is a substantial element in the breach.

The Act lists the existing duties of care owed by an organization under the common laws of negligence that require it to take reasonable steps to protect a person’s safety. These are owed:

• to its employees or to other persons working for the organization or performing services for it
• as an occupier of premises
• in connection with:
  – the supply of goods or services (whether for consideration or not)
  – construction or maintenance operations
  – any other activity on a commercial basis; or
  – the use or keeping of any plant, vehicle or other thing
• to a person for whom the organization is responsible for their safety because they are:
  – detained at a custodial institution, removal centre, short-term holding facility or in a custody area at a court or a police station
  – being transported in a vehicle, or held in premises, in relation to prison or immigration escort arrangements
  – living in secure accommodation
  – a detained patient.

Clearly, in the case of most transport operations, the first three duties are likely to be the most relevant. Many of these duties are also subject to more specific legislation and guidance. For example, compliance with drivers’ hours rules and the Working Time Directive are designed to protect the safety of drivers and other road users from fatigue-related problems. The operator licensing system, construction and use regulations, together with the testing and plating regime, aim to protect employees and the public from unroadworthy vehicles. There is also an overlap with health and safety legislation.

Determining an offence

Two key questions will determine whether an act of corporate manslaughter has been committed. First, whether there has been a gross breach of a duty of care, and secondly, whether the way in which activities are managed or organized by senior management was a substantial element of the breach.

A breach is ‘gross’ if the alleged conduct falls far below what can reasonably be expected of the organization in the circumstances. What may be considered reasonable is likely to vary from one organization to another according to the individual circumstances at the time. Ultimately, this will be up to the jury to interpret.

When deciding if the breach was gross, the jury is directed in law to consider:

• whether the organization failed to comply with any health and safety legislation that relates to the alleged breach, and if so, how serious that failing was and how much of a risk of death it posed. The jury may refer to any relevant health and safety guidance, which may also include guidance published by specific sector regulatory bodies, such as the Vehicle and Operator Services Agency (VOSA)
• the extent to which there were attitudes, policies, systems or accepted practices within the organization that were likely to have encouraged or produced a tolerance to the failure. Having a safe system in place may not be good enough if it is allowed to be routinely ignored.

The ‘senior management’ of an organization is defined as the people who play significant roles in:

• the making of decisions about how the whole or a substantial part of its activities are to be managed or organized, or
• the actual managing or organizing of the whole or a substantial part of those activities.

This clearly includes those at board level, but also may include managers who are involved at a more hands-on level if they manage the whole or a substantial part of the business. For example, a transport manager who is responsible for managing one depot in a large retail organization is unlikely to be considered a part of senior management. However, a transport manager of a medium-sized haulage company who is responsible for all the transport operations may fall into the definition.

How low the bar will be set for someone to be considered part of an organization’s senior management will be played out on a case-by-case basis, with the final decision resting with the court.

It will not be necessary for the senior management failure to have been the sole cause of death. The prosecution will, however, need to show that ‘but for’ the management failure, the death would not have occurred and that a substantial element of the failure is attributable to senior management. So a one-off failure of a system that happened lower down the chain of command, such as a missed vehicle safety inspection or a single drivers’ hours breach, is unlikely to be considered a gross breach by senior management. Failure to put in place any preventative vehicle maintenance systems, or failure to have a system to effectively organize and manage drivers’ hours rules, on the other hand, may well be.

In the firing line?

This is an offence for organizations, not individuals, so it applies to:

• corporations, including:
  – companies incorporated under UK legislation or overseas
  – public bodies incorporated by statute, such as local authorities, NHS bodies and a wide range of non-departmental public bodies
  – organizations incorporated by Royal Charter
  – limited liability partnerships
• partnerships that are employers
• trade unions and employers’ associations that are employers
• police forces
• specified Crown bodies and departments.

An individual cannot be found guilty of aiding, abetting, counselling or procuring the commission of an offence of corporate manslaughter or corporate homicide. However, it is important to remember that the new offence is in addition to existing health and safety and gross negligence manslaughter legislation, under which individuals can be held to account already.

If the worst happens…

If the worst should happen and your organization is involved in a fatal incident, the police would normally be called to the scene. In addition, employers have a legal duty to report the death, under the Reporting of Injuries and Diseases and Dangerous Occurrences Regulations (RIDDOR), to the Health and Safety Executive (HSE) or appropriate enforcement agency immediately.

The police will lead an investigation if a criminal offence (other than under health and safety law) is suspected. They will work in partnership with the HSE, local authority or other regulatory authority.

The Government expects that cases of corporate manslaughter/homicide following a death at work will be rare, as the new offence is intended to cover only the worst instances of failure across an organization to manage health and safety properly.

Cases of corporate manslaughter will be prosecuted by the Crown Prosecution Service in England and Wales and the Public Prosecution Service in Northern Ireland. Corporate homicide cases will be prosecuted by the Procurator Fiscal in Scotland.

In certain circumstances a private prosecution can be brought in England, Wales and Northern Ireland, provided it has the consent of the Director of Public Prosecutions (England and Wales) or the Director of Public Prosecutions (Northern Ireland). In Scotland, prosecutions may only be initiated by the Procurator Fiscal.

Health and safety charges may also be brought at the same time as a prosecution for the new offence, as well as in cases where the new offence is not used. Individuals may also be prosecuted for gross negligence manslaughter or other offences (such as causing death by dangerous driving).

Prosecutions for corporate manslaughter/homicide can only be brought against the organization, which will usually be represented by their lawyers in court. However, individual directors, managers and other employees may be called as witnesses.

The penalties

The offence of corporate manslaughter or corporate homicide only applies to organizations, so a penalty of imprisonment is not relevant. If found guilty, an organization can face:

• an unlimited fine. Current proposals from the Sentencing Advisory Panel suggest a court would normally arrive at a figure of 2.5–10% of average annual turnover (averaged out over the three years prior to sentencing)
• a remedial order to make the organization take specified steps to remedy the breach and to change any policies, systems or practices which caused it within a specified period of time. These are expected to be rare, as existing statutory legislation (such as health and safety law or the operator licensing system) will be more likely to be used to prevent unsafe practices continuing
• a publicity order. It may be difficult to quantify the effect of this ‘name and shame’ element of punishment, but it will clearly adversely affect the reputation of the organization.

It should be noted that companies within a group structure are all separate legal entities and are, therefore, subject to the offence separately. In practice, the relevant duties of care that underpin the offence are more likely to be owed by the subsidiary than the group, so it is unlikely that a parent company would be convicted of corporate manslaughter because of failures within a subsidiary.

However, it is important to remember that duties of care apply to all those in the contracting chain. Whether a particular main contractor or sub-contractor might be liable for an offence will depend in the first instance on whether they owed a relevant duty of care to the victim. The Act applies to the existing obligations of both for the safety of worksites, employees and other workers whom they supervise, and in many cases both organizations may owe a duty of care and should work together to ensure safety. Companies may also need to work with consignors and consignees to ensure the safety of workers and the public.

What next?

First, do not panic! The new offence merely closes a loophole in existing manslaughter legislation – it does not impose any new obligations or duties. Most organizations will already be complying with their key duties of care and most of these are already separately legislated for.

However, the new law does present an opportunity to carry out a review from the top down to check that systems and processes are adequate. The four key steps to a review are:

• understand your duty of care obligations at a senior management level
• ensure you have satisfactory arrangements in place – particularly include a high-level review of strategic approach, responsibilities, reporting structures and policies
• ensure your organization is complying with these arrangements – that attitudes, policies and arrangements are actually being followed through all the way to grass-roots level
• implement any necessary changes and set a date for the next review.

As always, organizations should ensure any audits are carried out by those who can report independently without fear or favour.

Acknowledgement

This article first appeared in Freight magazine and is reprinted here by kind permission of the Freight Transport Association.