Corporate Manslaughter – New Guidelines

In the 18th century, Lord Chancellor, Baron Thurlow stated:

“Corporations have no soul to damn and no body to kick, they therefore do as they like”

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This attitude remained within English law until the case of MS Herald of Free Enterprise.

MS Herald of Free Enterprise was a ferry which capsized moments after leaving the Belgian port of Zeebrugge on the night of 6th March 1987, killing 193 passengers and crew. The ferry had been designed for rapid loading and unloading, so there were no watertight compartments. When the ship left harbour with her bow door open, the sea immediately flooded the decks, and within minutes she was lying on her side.

Investigations found that many employees had failed in their responsibilities that day – one employee had failed to close the bow doors; another had failed to ensure the bow doors were closed; and a final employee had left port without knowing whether or not the bow doors were closed.

A public Court of Inquiry into the incident was held under British Lord Justice Sir Barry Sheen in 1987. The Sheen Report severely criticised the attitude to safety prevalent in P&O, stating:

“All concerned in management… were at fault in that all must be regarded as sharing responsibility for the failure of management. From top to bottom the body corporate was infected with the disease of sloppiness”

This case lead to confirmation that a company can, in principle, commit manslaughter.

Twenty years later, we saw the introduction of the Corporate Manslaughter and Corporate Homicide Act 2007, which created a means of accountability for deaths caused by very serious management failings.

Since the introduction of the Corporate Manslaughter and Corporate Homicide Act 2007, Lion Steel Ltd was charged in relation to the death of 45-year-old employee Steven Berry who fell through fragile roof panelling sustaining fatal injuries. The company pleaded guilty to the offence on 4th July 2012 and was fined £480,000.

In another case, Paul Bowers, 47, was killed on 26 January 2013 when a pile of metal “stringers”, delivered to the warehouse in Hanger 14 of Cambridge airport, toppled on to him. The prosecution said CAV Aerospace Limited was responsible for ordering stock and maintaining health and safety at the warehouse run by a subsidiary. The company, based in Consett, County Durham, denied charges of corporate manslaughter and breaching health and safety but was found guilty.

So why are we talking about it now?

As of 1st February 2016, fines are now intrinsically linked to the turnover of the defendant company. For larger companies, fines may increase from hundreds of thousands into the millions of pounds and fines measured in the millions could become the norm. The Sentencing Council’s Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences Definitive Guideline suggests that fines should range from £180,000 to £20,000,000 depending upon the size of a company, but will, essentially, be unlimited. It is clear that the guidelines say that the fine must be sufficiently substantial to have a real economic impact on the defending company and it must bring home, to management and shareholders, the need to comply with health and safety legislation.

Some examples of potential corporate manslaughter incidents that could affect your client include:

–              A pedestrian killed by falling scaffolding

–              A gas leak caused by an unregistered gas fitter

–              An employee injured by faulty machinery

So how can your clients best protect themselves?

Clients should take time to review their existing processes and procedures and consider how the importance of safety can be shared internally so as to improve performance and, ultimately, so that accidents can be avoided.

Where concerns are identified then the following could be considered:

  • An increase in compliance
  • Re-evaluation, re-investment and re-education in health and safety policies
  • Consideration of safety initiatives, procedures and training
  • Consideration of the appointment of a Health & Safety Manager where one does not exist and/or support roles to take responsibility in this area

All of the above will all be crucial to try and ensure that the worst-case scenario never happens. If it does happen, the implementation of the above will enable your client to demonstrate that they did all that they could which could mitigate the impact of an otherwise significant fine.

Your clients should consider the individuals who could be shown to have contributed to any future gross breach of duty of care. The Corporate Manslaughter and Corporate Homicide Act 2007 will put company executives in the firing lines for breaches of health and safety. Directors & Officers liability (D&O) insurance is a relatively inexpensive policy that will be absolutely priceless should a prosecution occur, as it focuses on the directors’ personal financial protection.

Clients should also check their employers’ and public and products liability policies to ensure that the defence and appeal costs are included following any manslaughter. All of Yutree’s liability policies include a Corporate Manslaughter extension as standard.

We hope that you found this article useful. If you would like to discuss liability insurance for any of your clients then please do get in touch with us on 01638 660651 or e-mail us at laura.high@yutree.com

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Employers Liability for volunteers, students, sub-contractors, one-man bands – When is it required?

As liability specialists we are often asked to explain when Employers Liability Cover is required under the Employers Liability (Compulsory Insurance) Act 1969 (‘the Act’). It is the nuances of the rules which clients can misunderstand. Here we provide some clarity around those grey areas to assist you in your discussions with your clients.

Employers Liability Insurance covers a company for liability for damages in respect of bodily injury, death or disease caused to employees arising out of and in the course of their employment by the insured. All Employers Liability policies are required by law to carry a minimum limit of indemnity of £5m for any one claim. It is industry standard for cover to be issued with a £10m limit – work carried out offshore &/or with asbestos is an exception to this and is normally limited to £5m. Your client is responsible for the health and safety of their employees while they are at work. The Health and Safety Executive is the enforcement authority for Employers Liability insurance compliance. Your client’s business may be fined up to £2,500 for any day they trade without suitable insurance.

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What is the definition of an employee?

Whether or not your client needs Employers Liability insurance depends on the terms of their employment contract. This can be spoken, written or implied. It is the nature of the relationship with the people who work for them and the degree of control that they have over the work that they do which defines how they should be treated for insurance purposes.

One area which is commonly misunderstood by clients is around insuring sub-contractors. Your client will employ sub-contractors on one of two bases:

Labour only Sub-Contractors (LOSC) – LOSCs work under your clients’ supervision and direction. Your client will supply materials and tools. The LOSC is paid wages by the main contractor and is classed as an employee for whom your client should buy Employers Liability insurance

Bona Fide Sub-Contractors (BFSC) – BFSC work under their own supervision and direction. They will provide their own materials and tools. They are generally employed to carry out a specialist/particular type of work within a job (i.e. scaffolding/plumbing etc). The BFSC should have their own liability insurance in place and it is important that your client always checks this for their own protection. If the BFSC’s insurance fails, your client is required to provide contingent cover. If there is an accident and a BFSC is injured and their own employers liability cover fails, your client could be responsible for a claim under their public liability section. Your client does not need to buy Employer’s Liability insurance for BFSC.

So does my client really need the cover?

Your client must have Employers Liability insurance if they have employees unless they are exempt. The following employers are exempt:

  • Most public organisations including government departments and agencies, local authorities, policy authorities and nationalised industries;
  • Health service bodies, including National Health Service trusts, health authorities, primary care trusts and Scottish health boards;
  • Some other organisations which are financed through public funds, such as passenger transport executives and magistrates’ courts committees.

Your client is obliged to insure Employers Liability where:

  • They deduct NI and income tax from the money they pay employees;
  • They have the right to control where and when their employees work and how they do it;
  • They supply their employees work materials and equipment;
  • They have a right to the profit their workers make;
  • They require that person only to deliver the service and they cannot employ a substitute if they are unable to do the work;
  • Their employees are treated in the same way as other employees, for example, they do the same work under the same conditions as someone else they employ;
  • Their employees work for them on an unpaid basis whether they are students, volunteers, interns or other helpers;
  • Their employees are students, on a work experience programme, or taking part in a training programme

Your client may not need employers’ liability insurance where:

  • Their employees do not work exclusively for them (for example, if they operate as an independent contractor);
  • Their employees supply most of the equipment and materials they need to do the job;
  • Their employees are clearly in business for their own personal benefit;
  • Their employees can employ a substitute when they are unable to do the work themselves;
  • Their employees are all close family members (this exemption only applies if the company is not incorporated as Ltd company)
  • They do not deduct income tax or national insurance. However, even if someone is self-employed for tax purposes they may be classed as an employee for other reasons and your client may still need employers’ liability insurance to cover them
  • The company employs only their owner where that employee also owns 50% or more of the issued share capital in the company

If you have any questions, please contact me on 01638 675992 or laura.high@yutree.com or speak to one of our team here at Yutree.

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