The Corporate Manslaughter Act is being touted as one of the biggest changes in health and safety legislation in decades. Angela Davis asses how Midlands businesses are at risk.
How do you prepare yourself for a killing - and one where you may be to blame?
In one of the biggest changes in Health and Safety legislation in decades, the Corporate Manslaughter and Corporate Homicide Act 2007 comes into force on 6 April 2008. It makes companies, and not just individual company directors, liable for deaths of employees and members of the public due to negligence.
Organisations that breach the act face the prospect of unlimited fines: it is envisaged that fines will be directly linked to the annual turnover of a company, typically between 2.5 and 10 per cent.
And it is not just the financial penalties: companies may have to broadcast their convictions on TV, as well as being compelled to announce them on radio, in newspapers and trade press, on their websites, in annual reports and in communications to suppliers and shareholders. While the financial implications of prosecution could be commercially harmful for organisations that work with low profit, the surrounding publicity could be as equally crippling.
Andrew Brammer, partner at business defence firm Cartwright King, says courts are being advised to treat a fatal accident in the workplace as seriously as death by dangerous driving.
He adds: "Fines are only going to become heavier, and not just for fatal accidents. All businesses need to be carrying out a detailed review of their management systems to identify and remedy weaknesses that might impact on the health and safety of employees."
Business compliance expert, Ron Reid, a partner of law firm Shoosmiths says: "A combination of severe financial penalties and negative publicity could be a blow from which even very big companies never recover, with catastrophic damage to finances and hard won reputations.
"Brands that have taken years to develop and protect could be destroyed overnight."
In many ways the new act does not impose many new demands: rather it shifts responsibility from the individual to the corporate.
Peter Castle, managing director of insurance broker Smart & Cook, says: "The new offence will do away with the requirement to prove the guilt of a senior manager or directing mind - historically this has made prosecuting large organisations difficult. Organisations will now be guilty of corporate manslaughter if a death is caused by a breach of its duty of care. This means that the failures of several senior managers can be combined to prove a case."
Sean Elson, senior associate from Birmingham-based law firm Pinsent Masons, adds: "The new legislation does not impose any new duties on business, but it will make it easier to prosecute organisations following a death than under the current law.
"It highlights the importance of understanding existing health and safety duties and for directors and senior management to ensure that these are complied with and managed effectively."
With such draconian penalties the new Act is set to raise concerns among private and public sector organisations. Health and safety in the workplace for many companies has almost become a separate service silo, no longer tagged onto the remit of human resources.
Larger businesses, particularly in the high risk sectors, already find it a daunting minefield, where policies and processes constantly have to change to keep pace with the deluge of regulatory laws, ensuring complete compliance is fulfilled.
Although the law applies across all organisations, both public and private, certain industries will be more vulnerable due to the risky nature of work their employees perform, notably construction, manufacturing and agriculture. Logistics and transport also rank high, although reforms have already tightened things up significantly, such as with the introduction of the Working Time Directive.
Construction, as a high risk sector, is particularly at threat, as contractors and sub-contractors often work within very tight margins, so even a small fine could be damaging for the company and employees. In the East Midlands construction accounted for more than a third of the fatal accidents in the workplace in the year ending June 2007.
However, the view of many organisations that have never been exposed to the devastating implications of a fatality either in the workplace or offsite still seem brazenly insouciant as to the consequences.
Victoria Edwards, associate solicitor at Dudley law firm Hawkins Hatton, believes employers need to think carefully about how they manage risks. "Those who disregard the safety of others at work, with fatal consequences, will be exposed to very serious criminal charges," she says.
"Companies often see this area as an expense and only take action when the need arises, but by looking at their health and safety policies and obtaining advice on establishing effective policies and procedures, it will ensure that the correct safeguards are in place, saving time, money and perhaps even someone's life."
As the biggest single cause of work related fatality in the UK is road traffic accidents, insurance companies are urging organisations to consider the importance of risk assessing employees driving on company business. Minimising potential risks by assessing employees driving activities and the environment in which they are performed will both safeguard human life, corporate reputation and financial penalty.
Castle says: "It will not only minimise the risk of prosecution, but also make day-to-day operations much more efficient."
The new act may have wider business implications. With many smaller businesses already wary that the UK is developing into a compensation culture, the act may be the signal for many to throw in the towel and cease operations. It may also influence attitudes towards other exit clauses such as priming themselves for acquisition by larger organisations. Will courts take into account extenuating circumstances where a large penalty acts as a "final nail in the coffin lid"?
Probably not. Reid says: "The Court of Appeal says it will not reduce substantial fines simply because companies may go out of business, and believes those committing a gross breach of health and safety legislation do not necessarily deserve to remain in business."
Whether the act will have a more long-term and tangible impact on the region's economy other than lowering boardroom morale and perhaps shaking investor confidence is perhaps conjectural. Will an epidemic of panic prevail as the region's business leaders prepare for the new law?
Elson says: "Morale is certainly going to be an issue in any organisation facing prosecution, but it is not clear why this should be the case more widely unless industry gains a sense that the new law is being used more widely than originally intended. This region should not have greater reason to fear these changes than others in the UK."
There are those that would advocate that as the act will make companies and not individual directors liable for any deaths due to a breach of duty of care will alleviate the personal pressures faced by company directors.
Unions UK wide are disappointed that the act fails to include clauses which would allow the imprisonment of those directors. Even though the new act allows companies to be pursued through the courts in the event of a death that has not diminished the risk to individual directors and managers.
Elson says: "The new law does not alter the possibility of prosecuting individuals for manslaughter or breaches of health and safety legislation and in the that could result in imprisonment.
"The pressure on any individual involved in a corporate manslaughter investigation is likely to be immense, even where they are not being individually prosecuted, especially if that person's conduct is under fire for having contributed to the organisation's overall failure."