The 2016 Health and Safety Sentencing Guidelines: How have things changed for companies?
By Kizzy Augustin, senior associate at Pinsent Masons LLP
On 1 February 2016, the new sentencing guidelines for health and safety offences came into force. They direct the courts to consider the sentencing of offending organisations by way of a step-by-step approach, primarily examining culpability, the seriousness of harm risked and the likelihood of harm, which are divided into a number of different levels to reflect the scale within each category. In light of a number of preceding Court of Appeal judgments expressing the same view, the guidelines then require an assessment of turnover in order to set a starting point for a fine that is intended “to bring the message home to the directors and shareholders of offending organisations”, as stated by the Judge in the environmental prosecution of Thames Water. The majority of the other sentencing steps relate to the consideration of increasing or decreasing the level of fine according to a range of factors. There are similar guidelines for the sentencing individuals for health and safety offences, with a stronger focus on the risk of a custodial sentence for those found guilty of serious breaches.
Ever since the Sentencing Council proposed these new guidelines, the health and safety industry has anticipated a revolutionary impact on the levels of fines compared to those that have historically been handed down for simple health and safety breaches committed by corporate entities. Although we are still in a ‘budding’ phase, we can begin to analyse the influence the guidelines have had on the courts to date and we can also consider the extent to which they may affect future sentencing trends.
The Guidelines in Practice
February 2016 heralded a new era in sentencing for health and safety offences. On the 8th of the month, ConocoPhillips (UK) Limited became the first very large organisation to be convicted and sentenced under the new regime, although the hearing actually commenced prior to the date on which the new guidelines came into force. The company, which has a turnover of £4.8 billion, pleaded guilty to three breaches of relevant health and safety regulations for a series of uncontrolled and unexpected gas releases at one of its offshore installations.
Although nobody was actually injured as a result of the breaches, due to a communication breakdown workers were sent to investigate the incident while there was still gas present. When sentencing, the Judge commented that the risk of death of serious injury would have been extremely high had there been a gas ignition. In applying the guidelines, this may have been regarded as a Harm Category 1 case due to the seriousness of the harm risked and the high likelihood of harm.
Although the company had procedures and safeguards in place, the Judge noted a failure to properly identify and control risks. The level of culpability in this case may have been classed as “Medium” as systems were in place but they were not sufficiently adhered to or implemented.
If our analysis of the guidelines reflects the sentencing Judge’s own interpretation then the starting point for the fine would be £1.3 million, with a range of £800,000 to £3.2 million to accommodate mitigating or aggravating features. In mitigation, the company pointed to its high level of cooperation with the HSE as well as significant investment in new systems designed to prevent recurrence. When considering the company’s billion pound turnover, it is also worth noting that the company in fact made a pre-tax loss of £85 million. The fine that was actually imposed by the court was £3 million – equating to £1 million for each offence.
A number of cases heard weeks before the Guideline came into effect also illustrated the prescriptive and uniform approach to be adopted by the courts (in the spirit of the 2016 Guidelines) for health and safety breaches. Four different Crown Courts imposed fines of £1m or more against large companies for health and safety breaches (all of which followed early guilty pleas):
||DATE OF SENTENCE
||LEVEL OF FINE IMPOSED
|C.RO Ports London
|Balfour Beatty Civil Engineering
|National Grid Gas
|UK Power Networks (Operations)
The ConocoPhillips case demonstrates the dramatic shift in the landscape of health and safety sentencing that the guidelines have brought about – a breach of health and safety regulations which did not result in injury may have previously attracted a fine in the tens of thousands, as opposed to millions. It is quite likely that more organisations will now fall into higher categories of offence seriousness by virtue of the guidelines’ focus on the “risk of harm” as opposed to actual harm. The extent of these seemingly hypothetical risks will undoubtedly become a contested point at trial, likely to lead to prolonged sentencing hearings involving the introduction of expert evidence.
The culpability of a defendant company remains the most decisive factor in determining the appropriate level of fine to be imposed by the Courts. The importance of achieving high standards of compliance with health and safety legislation has never been greater for organisations. Those companies found to have committed deliberate breaches of, or who have flagrantly disregarded, the law or even those that fall far short of the appropriate standard will be subject to the largest fines. It is therefore important for organisations to be able to demonstrate that they have robust safety management systems in place which are properly invested in and implemented.
In light of the guidelines’ focus on company turnover, fines for large and very large companies that are guilty of committing health and safety offences are going to increase significantly. Arguments about which corporate accounts should be considered by the court will be significant. Such battles will be especially pertinent when dealing with groups of companies and joint ventures consisting of distinct incorporated (or even unincorporated) entities.
It remains to be seen the extent to which the prosecution will petition the courts to consider the accounts of larger parent companies with higher turnovers when the sentences of smaller and less profitable subsidiaries are being assessed, particularly if the smaller subsidiary is the entity in control of the activity related to the alleged health and safety breach. The guidelines state that ordinarily “only information relating to the organisation before the court will be relevant, unless exceptionally it is demonstrated to the court that the resources of a linked organisation are available and can properly be taken into account.” It is therefore unlikely that the accounts of a parent or ultimate parent company would be a consideration for the court when sentencing a sufficiently profitable subsidiary for its own breaches of the law.
What of the Future?
Only time will tell just how high the fines for health and safety offences committed by large and very large organisations will be. There is no doubt that all eyes in the industry are now very much on the courts. The new reality may be frightening when such an organisation is found guilty of a serious offence for which it is deemed to be highly or very highly culpable, when ‘all bets are off’! Will the risk of receiving such huge fines in the event of an incident reduce the amount of injuries or fatalities? This remains to be seen. Surely the thought of a fine huge enough to potentially put a company out of business and/or the threat of imprisonment for senior managers and director that fall far short of the appropriate standard should act as an incentive to proactively address corporate health and safety concerns as soon as possible (before an incident occurs) and to ensure compliance with the law at all times.
Kizzy Augustin is a senior associate at Pinsent Masons LLP.
Download: April 2020 Legislation Update
Coronavirus has become a top priority for employers all over the world. The pandemic event is putting pressure on already stretched employers to do more to keep up to date and protect the health, safety and welfare of their employees. Download this free legislation update to understand all the latest guidelines, laws and regulations. The eBook covers:
- Coronavirus legislation;
- Changes to workplace exposure limits;
- Key cases in recent months;
- Environment and Energy;
- and much more…