PressRoom

The Threat of Corporate Manslaughter: REAL OR IMAGINED?

During recent years, there has been much talk about holding senior executives to account for corporate failures, which result in death or serious injury for the company’s operatives. In practice, no one has yet gone to jail, but with each succeeding year, as governments throughout the world tighten their health and safety legislation, it seems it is only a question of time before someone in the corporate corridors of power spends some time behind bars, as a result of their business’s failure to protect their employees from harm in the company’s day-to-day operations.

Given that the appetite for legislation is driven from the USA and Europe, and since the UK effectively acts as a bridge-head between the two, it is worth studying recent developments in that country, which probably reflect actual or potential plans for similar legislation around the world.

There, businesses responsible for work-place deaths now face massive fines, and some may even be forced to close down as a result. Under legislation passed earlier this year, employers who cause the deaths of workers or customers through gross negligence may be convicted of a new offence of corporate manslaughter.

There is no upper limit to the potential size of these fines, but it seems that a likely starting point for a first-time offender pleading not guilty may be a fine equivalent to 5% of the offender’s turnover, averaged across the three years prior to sentencing.
To date, the largest fine imposed on any UK operator under previous health and safety legislation is the £15 million on gas distribution company, Transco, in 2005 for an explosion in 1999 that killed four members of a Scottish family. That represents less than 1% of the business’s turnover, but under the new regime, the company could expect to be relieved of at least £75 million, if convicted of corporate homicide. And that 5% starting point can be halved OR DOUBLED, according to whether there are mitigating or aggravating circumstances.

Fines for breaches of health and safety laws but not corporate manslaughter will be half the rate, but will still represent a significant increase on current penalties, which tend to vary between £100,000 and £1 million, where responsibility for workplace deaths is established.

Imagine, then, if you are a £1.8 billion turnover company and you offend under the new legislation. Whereas previously you may have escaped with a relatively small six-figure rap on the knuckles, under the new arrangements you could be waving goodbye to £90 million or more.

One incident for a medium-sized business enjoying net profit margins of 20% could wipe out a quarter or more of its profit at a stroke, and a second incident could potentially send it out of business. Of course there are lawyers arguing that such a level of fines is contrary to current judicial thinking, because such swingeing fines could potentially restrict the availability of capital or future safety investments. That does not mean that governments throughout the world, who like to be seen to be tough on safety breaches, wherever and whenever they occur, will necessarily back away from taking the tough decisions, however strong the lobbying power of big corporates. In the event of a major incident involving a multiple loss of life, they know that in a culture of blame, fuelled by massive global media coverage, the buck stops firmly with them.

Until now, in the UK, cases involving deaths caused by a failure of management have been investigated by an organization created by parliament called the Health & Safety Executive. In the future, it is increasingly likely that this sort of investigation will be handled by the police. It has been difficult to bring manslaughter charges against either large corporations or the senior management which runs them, because it has been deemed that such organizations have no single ‘directing mind’. Even now, the courts will have to be convinced that the way in which the business activities are managed or organised by its senior management is a substantial element in the breach of its duty of care to the people for whom it is responsible. The jury will have to consider the extent to which attitudes within the company had encouraged a failure to comply with health and safety legislation, so it may be difficult still to prove cases of corporate manslaughter, but those who are convicted will find it ruinously expensive.

Why is this an issue? In the UK alone, 300 workers a year are still killed in work-place accidents, and this figure rises to around a thousand when you add in those who also die of long-term occupational diseases, such as asbestosis. Extrapolate that globally, and the International Labour Organisation (ILO) in Turin, Italy, estimates there are 270 million accidents a year and over 2 million deaths. Indeed globally, more people are killed at work each year than are killed in wars. With globalization, the increasing industrialization of developing countries and the growth of multinational companies, it is highly likely that the laws of the developed world, and in particular the law of corporate manslaughter, will be not far behind.

Perhaps more importantly, there is also evidence that, where Health and Safety best practice is taken seriously, as it now is in the UK and Europe generally, those accident and fatality rates can be cut dramatically. According to the Turin Union of Industry, in the last 50 years work-place deaths have fallen by 70% and half of that improvement is telescoped into the last five years, when health and safety legislation has been at its most stringent.

As the culture of health and safety spreads through the rest of the developing world, accompanied almost certainly by the legal enforcement of legislation similar to the UK’s corporate manslaughter bill, what can corporations – and the individuals within them – do to protect themselves from potentially ruinous legal actions, if and when serious incidents occur?

In the past, there have been difficulties in finding one senior person in the company who knew enough to incriminate him. Under the new legislation, a crime is committed where an organization owes a duty of care to take reasonable care of a person’s safety, but the way in which its activities have been managed or organized amounts to a gross breach of that duty and causes death. To convict a company, though, the prosecution must prove that the failure came substantially from ‘senior management’, which also means that the assessment of a defendant’s corporate culture can be legally relevant.

‘Corporate culture’ can be found in an ‘attitude, policy, rule, course of conduct or practice within the corporate body generally or in the part of the body corporate where the offence occurred. Evidence may be led that the company’s unwritten rules tacitly authorized non-compliance or failed to create a culture of compliance.’ This definition comes from the Australian Capital Territories, which was the first state to introduce an offence of Industrial Manslaughter, relying on this new rule of attribution.

However, while it is easy in principle to find a corporation liable for health and safety offences, because the employer is responsible for the actions of its employees, a different rule applies for offences such as manslaughter. A senior officer of the company, a Director for example, must be shown to have caused the deaths through their gross negligence. Proof of this can be problematic, though not impossible, but most reform proposals now seek to replace this limited individual route to liability with one reflecting the role of management as a whole in allowing negligent systems at work. In principle, it is conceivable that an entire board of directors could be put on trial for gross negligence leading to manslaughter, if an incident were severe enough.

What then is the solution? In the UK, the best way for a company now to act responsibly and legally is for it to appoint someone at senior level responsible for health and safety. If they act reasonably and responsibly, then, even if some terrible disaster occurred, neither they nor their company would be prosecutable for manslaughter. It is as simple as that. The legislation makes it plain there is no liability where the management of an activity includes reasonable safeguards, and a death nonetheless occurs. In other words, you may be accused (and convicted) of incompetence, but not gross negligence, and only gross negligence can lead to a charge of corporate manslaughter.

So what constitutes ‘reasonable safeguards’? Clearly a business has to demonstrate that it has in place all the necessary systems and processes to prevent accidents – and that those systems and processes are actively and properly adhered to by all the company’s employees.

For example, Omnisafe is a multi-faceted piece of web-enabled software from the Omniware Corporation, which covers every aspect of health and safety – from incident and unsafe act reporting and investigating, through risk assessments and management, auditing and monitoring, control of hazardous substances, staff training, records and instruction, environmental management, and statistical analysis and reporting. There are modules for every possible health and safety requirement, and the software can be customized to each customer’s individual needs, with tailored page layouts and design too. It can also work within and complementarily to EHS and SAP environments, and its flexibility (and relative inexpensiveness) is quoted by all its many current worldwide users as its core benefit(s).

It was originally designed for the oil and gas industry in the North Sea, where the offshore installations, with their massive high-risk investments, demanded high-quality support systems to mitigate the risks involved, and to do whatever they could to avoid human and capital loss.

Since the early 1990’s, the two Omniware systems (Omnisafe also has a sister product for procurement and contract management, called Omnicom) have undergone significant refinement, and the product has been adapted to business areas ‘downstream’ from oil and gas, such as refineries, chemical operations, energy and utility companies, mining, manufacturing, construction – even lately, shipping, trading and financial institutions, police forces and government. The UK’s Ministry of Defence recently installed it, in conjunction with a larger software system through Logica, for all its armed forces incident reporting. It has become apparent that it is a system with universal application.

More to the point, it is a system which, once installed and implemented, will provide you with all the records you need to prove you have taken all ‘reasonable safeguards’ and that therefore charges of gross negligence – and corporate manslaughter – could not be brought against you.

References:

Joshua Rozenberg's legal analysis in the Evening Standard of 25/3/08
Gary Slapper, Professor of Law and Director of the Centre for Law at the Open University: article in The Times on 18/7/08
Celia Wells article for the Centre for Business Relationships, Accountability, Sustainability and Society
International Training Centre article under the auspices of the International Labour
Organisation in Turin
The Omniware website

Omnisafe H&S Software Selected By UK Ministry of Defence

Working in conjunction with Logica, Omniware’s Omnisafe Health and Safety software has been selected to deliver a new Incident Reporting Information System for the MOD. Under a 10-year contract, it was rolled out in early 2008 across 1,000 key MoD users, such as incident and claims handlers, equipment managers and policy staff.

The objective of the new system is to improve health and safety across all 300,000 MoD personnel through better information collection and analysis, and improved handling of claims following any health & safety incidents.

Jeremy Martin, Logica’s Project Manager said "The client's requirements demanded three key aspects - maximum use of COTS, specific domain requirements and speed of implementation. In our comprehensive independent evaluation of potential products, Omnisafe's modular, off-the-shelf design, allied with the ability to tailor both look and functionality to the client’s specific requirements whilst retaining many of the advantages of a COTS product meant that it scored highly in all three areas."

The new system features an information capture tool, a workflow tool and a management reporting layer, to help the MoD gather information on trends and frequency of accidents, in order to develop equipment and processes that are safer for all staff, whether they are servicemen, civil servants or civilians. For the first time it will also interface with both MoD and non-MoD systems, to make it easier to exchange information on incidents and claims.

Peter Hawkins, UK Managing Director of Omniware, explains, “Although it was originally developed for the oil and gas exploration industry, Omnisafe’s simple but comprehensive modular structure means its adaptation to other sector needs has been swift and seamless; working with LogicaCMG on such a high-profile and prestigious project has demonstrated the system’s flexibility and speed of adaptation.

“In this instance, the key requirement has been for incident reporting, but the system has modules to cover every possible need, from CoSHH to the environment, and from risk assessments to staff training, records and instruction. So whether you are in the defence industry, or construction, chemicals, or anywhere else with medium- to high-risk work activities, the software has practical applications that won’t break the bank to implement.”

"Computer Weekly" article: Ministry of Defence deploys IRIS system to improve health and safety

The Ministry of Defence has launched its £5m Incident Recording Information System (IRIS) to improve the health and safety of 300,000 personnel.

IRIS has been rolled out across 1,000 users in the MoD and includes an information capture tool, a workflow tool and a management reporting tool.

IRIS will also be used to improve the processing of health and safety claims.

Richard Hatfield, the MoD's director of personnel, said the MoD project team and the prime IT services contractor Logica had delivered IRIS on time, within budget and to specification.

IRIS is based on software from Norwegian supplier Omniware, which was implemented by Logica, which will continue to support and maintain the system under a 10-year service contract worth £5m.