Directors' duties: Health and safety and corporate
manslaughter
This article is based on UK law as at 1st April 2007, unless
otherwise stated.
Health and safety duties
A company is responsible for ensuring the health and safety of
its employees and customers and anyone else affected by its
activities – “so far as is reasonably practicable”. No employer is
expected to provide total protection against all risks. Satisfying
a court that you did everything reasonably practicable, however,
can be difficult. Consequently, many employers choose to plead
guilty rather than fight a health and safety case against them.
Breaches of health and safety law are criminal offences, and
fines of £100,000 and more are increasingly common, with the Court
of Appeal making it clear that the worst offending companies can
expect penalties of up to £500,000. In 2007, Network Rail was fined
£4m for “systemic and unacceptable” safety failures that led to the
1999 Paddington train crash. When seven people died in Barrow in
Cumbria because of an outbreak of Legionnaires’ disease, the local
council was fined £125,000, and the judge was clear that if the
accused had been a large company, the fine would have been in
excess of a million pounds.
Although many prosecutions will result from accidents where
employees and others have been harmed, the legislation does not
require injury to have been caused before charges can be brought;
merely exposing staff and customers to a hazard can be enough.
And it is not just the company that is at risk. An individual
director, company secretary or manager can be held criminally
responsible if the company itself has been found guilty of an
offence.
The case against a director can be proved if the offence
was:
- committed with their consent – they were aware of the
circumstances and of the risks that caused the breach;
- committed with their connivance – they knew the risks but did
not do anything about them;
- attributable to their neglect – they breached a duty of care
they owed, without good reason.
A director who is found guilty is liable for fines and, in some
cases, imprisonment. They can also be disqualified from acting as a
director for up to two years and thus be deprived of some of their
earning power.
Any fines they incur will not be covered under the terms of
insurance policies.
All this makes health and safety a significant area of risk for
all companies and their directors. As such, it must be actively
managed by the board – not left to a lowly official. The Combined
Code on Corporate Governance and the Turnbull Guidance (see the
section on Corporate governance) require
listed companies to take account of health and safety when
establishing and reviewing their systems of internal control.
The resources devoted to the management of health and safety
risks should be commensurate with the seriousness of the issue and
the size of the potential fines involved.
Corporate manslaughter
At its worst, a breach of health and safety rules can result in
death. The liability of a company and its directors for fatalities
has been much in the news in the past 15 or so years, with
tragedies such as the capsizing of the Herald of Free Enterprise,
the King’s Cross fire and various rail crashes raising the issue of
corporate manslaughter and the related responsibility of both the
company and individual directors.
Before a company can be convicted of manslaughter under current
law, the prosecution must prove two things: first, that a single
individual in the company is guilty of manslaughter; second, that
this individual is the “controlling mind” of the company.
So if there is not enough evidence to convict an individual,
there can be no prosecution of the company. Even where an
individual is convicted, a large company can still find itself off
the hook. Fatal accidents are often the result of failures by a
number of people over a period of time. The larger the company, the
greater the number; and the less likely the chance of proving that
a single person was the “controlling mind”.
In the past 15 years there have been just seven successful
prosecutions of companies for work-related manslaughter. In each
case, the convicted company has been a small organisation where it
has been possible to identify one individual who had effective
overall control.
This apparent bias towards larger companies has attracted
widespread criticism, and successive promises of reform have been
made. In March 2005, the government published a draft Corporate
Manslaughter Bill, proposing a new offence of corporate
manslaughter to apply to all corporate bodies. At the time of
writing (March 2007), the Bill has still not become law.
The Bill moves the focus away from any one individual; instead,
guilt arises if it can be proved that there was a failure of
management at a senior level that:
- caused a person’s death; and
- amounted to a gross breach of a relevant duty of care owed by
the company to that person.
Other key points about the Bill are given below.
- Senior managers are defined as those who play a significant
role in making decisions about the organisation as a whole, or at
least a substantial part of it. So it is the actions or inactions
of board members – and, perhaps, of managers just below board level
– that will be examined, not the failings of relatively junior
staff on the ground.
- To be deemed to have caused a death, a management failure must
have made more than a minimal contribution to it. The required duty
of care will exist between, for example, a company and its
employees, and a company and its customers or those who use its
goods and services.
- Gross breach means conduct that falls far below what can
reasonably be expected in the circumstances.
- If a conviction is obtained, the company can be liable for an
unlimited fine, and the court can make remedial orders forcing the
company to put matters right. The parent company of a group may
also be liable where the failure in a subsidiary is in fact a
failure of the parent’s senior managers.
- The new offence will only apply to acts or failures in the UK.
There is no UK liability created for deaths caused overseas. And
prosecutions will need the consent of the Director of Public
Prosecutions – private proceedings will not be possible.
- The new offence will apply only to corporate bodies: there are
no new proposals increasing the liability of directors themselves.
This has proved controversial, with some arguing that the necessary
change in culture will only come about when directors face a real
threat of jail. One trade union has been quoted as saying:
“Directors in the dock is what we want.”
The Health and Safety Commission has published guidance on the
responsibilities of directors. This can be downloaded from the
Health and Safety Executive
(12-page PDF).
See: The Corporate Manslaughter Bill page
in our Forthcoming Legislation section
