Understanding corporate manslaughter and negligence

On 26 July 2007 the Corporate Manslaughter and Corporate Homicide Act 2007 received Royal Assent. It will come into effect on 6 April 2008. This new Act changes the need for a 'controlling mind' to be identified in order for there to be a prosecution for corporate manslaughter, which is a common law offence. In the past this has been a significant stumbling block when attempting to prosecute companies after major incidents, but the new law only requires a gross failure in health and safety management, which should be easier to prove.

There is no direct individual liability in the Act but this will help focus the minds of company directors on what will be a corporate offence, so company bosses should now be looking to review their policies and procedures as part of their health and safety management system.

However, do not forget that there is also Section 36 Offences of the Health and Safety at Work etc Act 1974 (HASAWA) due to 'the fault of another person' - and that will still apply. There is also Section 37 Duties of Directors, Managers and Officers of the Company to consider; this includes consent, connivance and, of course, neglect, so it could be that individuals will increasingly be prosecuted under the HASAWA due to the influence of the new Act.

Common Law and Statutory Law

Earlier it was stated that a breach of the new corporate manslaughter law will be a 'common law offence', but many people are unclear about what Common Law is. To explain this, we will first look at Statutory Law. Statute Law is law formally passed by the legislative instrument of the state, which, in the case of the UK, is Parliament. For example, the Health and Safety at Work etc Act 1974 is Statutory Law (written law) and obliges employers and employers to discharge a Duty of Care to employees or a third party. These Acts are explicit statements of what the duty is, whereas Common Law duties are closer to principles of care and are subject to interpretation or argument, as it is unwritten law and essentially judge-made law, laid down in court decisions and found in law reports.

The Duty of Care under Common Law really means one must take reasonable care to avoid acts or omissions, which can reasonably be foreseen, that are likely to injure a neighbour or anyone else. Employers owe a duty of a care to their employees, contractors, visitors, and members of the public as well as others.

As well as statute law and common law there is also civil law. The application of common law and statute law is made within the criminal court structures, but civil law and criminal law are distinct and use different court structures and procedures. Civil law regulates the rights, duties and obligations arising from transactions or disputes between individuals or the state. This may involve one party having to compensate another and an example could be an employee or member of the public suing an organisation for damage or loss.

Employers' Liability insurance

Organisations are legally required to have Employers' Liability insurance and display the certificate at work. An employer could claim under this to protect them, but it does not necessarily mean that it will be successful. The insurance company would investigate the claim, and they would advise whether settlement of the claim is justified or not. Any non-settlement means that the aggrieved person would proceed to the civil courts for a hearing. This is why these major cases are regularly reported in the press; even if the company was willing to settle out of court, the insurance company may not have been.

Criminal law is non-insurable and is only concerned with conduct that the state has decided ought to be repressed and punished by some sanction or penalty, such as a fine or imprisonment. This means in plain English that if an organisation is in breach of the Health and Safety at Work etc Act 1974, then they would be subject to a fine (which is non-insurable) under criminal law and could be subject to compensation under civil law.

Previous Employers' Liability Insurance Certificates should be kept for 40 years after the expiry date because claims for industrial diseases can be made many years after the disease is caused. For example, asbestosis can take 10 to 20 years to become life threatening, so knowing the insurance details of the employer 20 years ago is vital in compensation claims.

The Health and Safety Executive (HSE) and Local Authorities (LAs) enforce the law and if an organisation does not have a certificate that shows a minimum insurance cover of 5million then the organisation can be fined up to 2500 for each and every day they trade without suitable cover. Failure to display a certificate can result in a 1000 fine.

Directors' and managers' liability

The directors collectively represent the company and, under Section 37 of the Health and Safety at Work etc Act 1974, a director, company secretary or others in senior management positions could be personally prosecuted if they consent to the commission of an offence or if they act with neglect in respect of that offence.

In addition, the corporate body could also be prosecuted for the offence if they were also responsible. The HSE's guidance document 'Directors' responsibilities for health and safety' (reference indg343 - available to download for free as a PDF) lists five action points that directors should follow if they are to successfully discharge their responsibilities.

If no board director wants to take on health and safety responsibilities then the chief executive will assume overall responsibility; however, all directors have a 'collective responsibility'.

Understanding negligence

Many actions for damages are based on negligence, with the pursuer alleging that he or she has suffered injury as a result of the defender's negligence. In order to establish negligence the following questions must be answered:

• Did the defender owe a duty of care to the claimant?
• Was there a breach of that duty?
• Is there proof of negligence - ie were the damages or losses as a direct result of the breach of duty?

The existence of a duty situation between employer and employee has long been recognised and most cases turn on the second point - ie was the employer negligent?

If an employee wins a civil action against his or her employer, the consequences can be very serious; in extreme cases it could even be disastrous for the commercial long-term survival of the business. The employer would need to pay damages or compensation and this could run into some substantial amounts. Employers' Liability insurance will cover the cost of the claims less any excess that the employer will pay. However, bear in mind that if the company has breached any Act or Regulation under Statutory Law then the fines are not insurable. There is also the poor publicity, which could lead to the loss of reputation and earnings

The company then has to absorb into its overheads the uninsured costs that will be the main costs of an accident. These non-recoverable costs could include:

• Lost time and talent of the injured employee
• Lost time and talent of other employees (poor morale)
• Lost production (down time)
• Cost of investigation and highlighting of other deficiencies
• Cost of medical centre and first-aid facilities
• Damage to property, plant and machinery
• Cost of upgrading property, plant and machinery safety
• Court expenditure and possible fines
• Cost of industrial unrest
• Cost of advertising and replacing lost labour
• Payments to injured employee
• Poor publicity and public relations
• Increased insurance premiums

All internal risks should be within the organisation's control and represent corporate risks to the organisation. There is a major economic and costly impact for organisations to manage health and safety as an integral part of the organisation by using good risk management practices. But managing those risks in a competent manner could prove to be profitable business for any organisation.

Training and competence

Pilz offers an extensive range of training courses relating the management of health and safety. In particular, the following courses cover the Health and Safety at Work Act: IOSH Managing Safely course incorporating machinery safety; City & Guilds 4-Day Machinery Safety Course; City & Guilds Machinery Safety for Managers; and City & Guilds Machinery Safety for Supervisors.

A further service from Pilz is competence management. Depending on the customer's requirements, Pilz can assist with designing, implementing and maintaining competency management systems to cover all levels of employees, from machine operatives to design and maintenance engineers, line managers and board directors.

For more information about training courses and competence management, visit the website at www.pilz.co.uk.