CHANGES to the law of corporate manslaughter could see large firms fined a percentage of their turnover.
Merseyside lawyers are warning companies to get their health and safety procedures in order following the introduction of the Corporate Manslaughter and Corporate Homicide Act 2007, which came into effect last month.
Corporate manslaughter legislation was previously common law, not statutory. The law has been changed in order to stop large companies from “slipping through the net� and avoiding culpability charges.
Weightmans head of regulatory services David Lewis said the change will have a number of implications for businesses, both positive and negative.
He said: “It is going to make it much easier – it is going to make it possible in the first place – to bring big organisations before the courts. We expect to be advising clients directly on this by the end of the year.�
In the UK, more than 40,000 people have been killed in commercially-related circumstances in the last 40 years. But under the old common law of manslaughter, only 34 companies were prosecuted and only seven resulted in convictions. These include circumstances where a company has been responsible for causing the contracting of a condition, such as asbestosis, whose development takes many years to cause death.
Until now, for companies to be convicted of corporate manslaughter, a jury has to be satisfied that an individual who can be identified as “directing the mind and will� of the company is personally guilty, under what is known as the identification principle. It has been almost impossible for any large company to be convicted.
Now the law has changed, it will be unnecessary to identify a single person, and responsibility instead turns to whoever had a care of duty to the deceased – such as a senior manager or department head – and whether a jury agree that the fatal accident constituted a gross breach of the law.
The seriousness of the breach will be determined by a jury who must decided to what degree the company fell short of health and safety legislation. The Sentencing Advisory Council has put forward its recommendations for penalties, which should be finalised by the summer. On average it is expected it to agree that companies be fined somewhere in the region of 5% of their annual turnover – possibly as much as 10%.
Mr Lewis said: “Already there was the possibility of receiving an unlimited fine. The difference is that fines for this offence area going to be higher. This is not 5% of profit but of actual turnover – and that is just the starting point, if there have been no previous convictions.
“This could be massive for industry. There is an awful lot of companies whose profit margin is less than their turnover – in effect, this could wipe out their turnover.
“In the UK there could be great encouragement for people to take their work abroad – in terms of the financial risk to management, there is a real danger of this driving businesses overseas. They could see that the penalties that are being imposed are so disproportionate that it no longer makes commercial sense.�
The new act also gives judges the power to make publicity orders, with the possible outcome of forcing companies to take out newspaper or even television advertising explaining the outcome of the case.
Mr Lewis added: “This is really scaring people, as this could do a potentially enormous amount of damage to a company’s reputation. Trading business to business is not such a concern, but if your direct customers are members of the public, and they see that in the press, we have no idea how that will play out.
“The damage to reputations, and to bank balances, will be a new area of risk. So there will be an increase in pressure on organisations to take stock of their health and safety procedures. There will be an awful lot to be said for bringing in an independent auditor at this point, before something goes wrong.
“The act is there to encourage people to recognise the importance of this and try to get things right in the first place – to act as a deterrent as well as a punishment. There will be a greater incentive for the boards of large organisations to appoint non-executive directors with a particular interest in health and safety legislation.�
It is expected around a dozen cases on this scale will be heard nationally per year.