Sentencing of health and safety offences during the pandemic: a COVID-19 deduction?

Following the introduction of the Definitive Sentencing Guideline for Health and Safety Offences in 2016 (the Guideline), there has been an increase in the size of the fines ordered by the courts following a company pleading guilty or being found guilty after a trial.

We consider in this article whether that trend has continued during the course of the pandemic or whether the courts are taking into account the effect the pandemic is having on businesses, resulting in lower fines. In addition, we comment on what financial information companies should consider producing at a sentencing hearing to demonstrate the effect the pandemic has had on its business and finances.

A COVID-19 deduction?

Under the Guideline the court is required to step back and adjust the initial fine based on a company’s turnover to ensure that it fulfils the objectives of sentencing, namely that the punishment has a ‘real economic impact’ which will ‘bring home to management and shareholders the need to comply with health and safety legislation’. As part of that consideration the court must take account of the financial realities of a company to ensure that the proposed fine is proportionate to the overall means of the offender. The overall sentence should not be designed to put a company out of business, unless the offending is considered to be of a level that this would be deemed acceptable.

During the initial stages of the pandemic, the courts were operating on a very limited basis. However, as the courts have subsequently returned to near normal operation, we have seen some companies come before the courts for sentence.

Our experience is that the courts during recent sentencing hearings have seriously taken into account submissions concerning the effect that the pandemic has had, and continues to have, on companies financially. For example, in a matter involving a prosecution of a Local Authority by the HSE (a case which Kennedys was not involved with), it was reported that the court indicated that it would reduce the initial fine by way of a ‘COVID deduction’ to take account of the effect of the pandemic. Below are two case examples that Kennedys has recently dealt with, whereby submissions in relation to the effect of the pandemic have been taken into account by the court when determining sentence.

• A Hotel - Micro Company, Medium Culpability, Harm category 4 - Fine £8,000 and order for Costs £8,000. The costs were reduced from the sum of £43,000 after consideration of recent financial information from the company showing a drop in turnover. Time to pay of one year, with no requirement to pay on a monthly basis.
• An outdoor activities company - Micro Company, High Culpability, Harm category 3 - Fine £4,000 and order for Costs £10,000. The court indicated that it would move outside the sentencing band in consideration of the lack of operating profit and money as a consequence of the pandemic. The costs were reduced from a sum of almost £16,000.

Preparation for sentencing hearing

Many businesses across the majority of industries are fighting to survive due to the pandemic, therefore a large fine could tip a business into administration. Financial information pertaining to a company’s current position at the time of sentencing is key. Below is a non-exhaustive list of financial information that should be contemplated to go before the court for consideration when determining sentence and any application for time to pay.

1. The Company Accounts – Last three years of the Company’s Statutory Accounts are required to be produced for the purpose of sentencing in health and safety prosecutions, supplemented by up to date management accounts for any period not covered until the date of sentencing.
2. Letter from the company’s accountant – To provide up to date information as to the affect the pandemic has had on the turnover and profitability of the business. This should set out on a quarterly basis the reduction in the company’s turnover during the course of the pandemic. This can be particularly impactful when compared with figures for the same periods in the previous financial years.
3. Letter from the Financial Director of the company – To set out whether any part of the company has had to be sold, whether they are thinking of selling parts of the business to survive, redundancies which have been made and the number of staff who have been put on furlough. Set out any other future financial commitments.
4. Letter from the Managing Director/Chairman – To explain the effect the pandemic has had and the future outlook of the company. Set out any personal monies put into the business or reduction in monies paid to shareholders and/or salaries to Senior Management. Reference the impact that the pandemic has had on the industry generally and describe the future issues faced by the company having to trade in a more competitive market.
5. References – From people in the local community to set out the company’s achievements and the role it plays in the local community i.e. employment of local people to holding free events. Include any involvement the company has had in supporting the community’s response to the pandemic, for example providing premises for use as a food bank or donating Personal Protective Equipment.

Comment

Up to date financial information from various sources has a key part to play in any sentencing hearing and ever more so during the pandemic. The financial realities of a company may not be apparent from the statutory accounts alone. A personal touch setting out the real impact the pandemic has had on a business is required to persuade the court during sentencing that a ‘COVID deduction’ should apply to any fine and costs, as well as to support any application for time to pay.

The organisations that we have seen fall to be sentenced to date during the pandemic have been micro companies, where the impact of a heavy fine would be much harder felt. We are yet to see how the courts would approach a large organisation where the pandemic has hit the bottom line, but where there is still enough cash in the business to withstand a substantial fine. Whether or not the courts would apply a ‘COVID deduction’ in those cases remains to be seen.

Read others items in Health, Safety and Environment Brief - December 2020