Law cracks down much harder on corporate manslaughter

Businesses responsible for workplace deaths from next month will face massive fines if current proposals are approved by the body that sets sentencing guidelines. Some firms may even be forced to close down. Under legislation passed last year, companies and other employers that cause the deaths of workers or customers through gross negligence may be convicted of the new offence of corporate manslaughter.

Parliament has set no limit on the fines these companies may be ordered to pay - although the best available pointers are to be found in draft guidelines currently under consideration by the Sentencing Advisory Panel.

Its provisional starting point for a first-time offender pleading not guilty is a fine equivalent to 5% of the offender's turnover, averaged across the three years prior to sentencing.

The panel admits that this would have led to larger fines under existing health and safety legislation. The largest such penalty was £15 million, imposed on gas distribution company Transco in 2005 for an explosion that killed four members of a Lanarkshire family in 1999.

That represented less than 1% of Transco's turnover, suggesting a fine of more than £75 million if the company had been convicted of corporate homicide - as the new offence will be called in Scotland. The 5% starting point would be halved or doubled, according to whether there are mitigating or aggravating circumstances.

Although fines for breaches of health and safety laws would under the panel's proposals be half those for corporate manslaughter, they will still be higher than they are now. According to David Young, a regulatory partner at law firm Eversheds, companies found responsible for a workplace death are typically facing penalties of between £100,000 and £1 million.

"I know of one such business that recently received a fine at the lower end of that scale," he says. "Its UK turnover was £1.8 billion last year. If the fine had been calculated according to these guidelines, it would have been £90 million."

Young says that even a company with a modest turnover of £10 million could expect to be fined £500,000. He adds: "If the net profit margin was 20%, that would be a massive dent in performance."

These draft guidelines have yet to be approved by the Sentencing Guidelines Council. But although the new law applies to fatal accidents occurring on or after 6 April, it will be at least a year or two before the first prosecutions come to court.

Meanwhile, Eversheds is arguing that the advisory panel's proposals are "entirely contrary to current judicial thinking". It believes that fines on this level could restrict capital available for future safety investments and even put firms out of business.