As of 1 February 2016 courts must now follow the step-by-step approach laid out in the new sentencing guidelines when calculating what fine to hand down for food safety and hygiene offences under the Food Safety and Hygiene (England) Regulations 2013. Previously, judges had little guidance and relied upon precedent. There is now a particular focus on an organisation's turnover which will result in substantially higher fines, especially for larger organisations.
In previous years we have seen few fines reaching the million pound mark for food safety offences, certainly not as many as for health and safety and environmental offences. However, the implementation of these guidelines is only likely to increase the prospect of such substantial fines being handed out. Later on I take a look at the case which sent shock waves through the food industry last year when Mitchells and Butler were fined £1.5million. I also explore the impact these guidelines will have on such cases and the action companies can take to prevent such offences.
Smaller organisations will not escape the sting of these changes either. Although the fining range will not reach the heights of that affecting the larger organisations, they will be proportionately hit because the fine is based on turnover. They can still expect fines in the tens/hundreds of thousands for the more serious offences. Even less serious offences, where there is a low risk of an adverse effect, may well be targeted with high fines if the companies in question have fallen far short of the appropriate standard. It is hoped this will tackle the problem of repeated low-level offences.
Determining the appropriate fine - 'step by step'
Step one - the court is to determine the seriousness of the offence and, as such, which category it falls into. This will depend upon: 1. 'culpability'; and 2. 'harm'. Where an offence does not fit squarely into a particular category, then individual factors will be considered to provide weighting to make the overall assessment.
In terms of an organisation's culpability, this may be: 'very high', 'high', 'medium', or 'low' and will range from deliberate breach/ flagrant disregard for the law, to offender falling short of the appropriate standard, down to isolated minor failings.
Next the court will ascertain the seriousness of the harm (this ranges from category 1 - 3). It is important here to note that the court will take into consideration not only actual harm, but also the 'risk of harm'. This shows a further shift towards sentencing which reflects the seriousness of the failure and the potential outcome, rather than just the actual outcome. For example, if company A serves food in a buffet which contains campylobacter and their customers eat it and become seriously ill, then this will fall into the highest category of harm (category 1). Similarly, if company B serves food in a buffet which contains campylobacter, but the customers happen to not eat it, a high risk of an adverse effect on the individuals would still exist (especially if that group was vulnerable e.g. children). As such, this second offence would also fall within category 1.
As for examples of cases falling within categories 2 and 3, the former would probably cover cases where a consumer has been misled in relation to food's compliance with religious and personal beliefs, whilst the latter would probably cover cases where the public has been misled about specific food consumed where there is little or no risk of an adverse effect on individual(s).
Step two - it is at this stage that the court is required to focus on the organisation's annual turnover. This will provide the starting point for the fine - this development has caused greatest comment. For the most serious offences for large organisations (turnover of £50 million and over) the starting point is £1.2million. This is between a sliding scale of £500k up to £3million. Where the fine will lie within that range will depend heavily on the aggravating and mitigating factors. This top range provides very high fining power indeed. However, where an organisation's turnover very greatly exceeds £50million, then the courts will have the ability to move outside this suggested range, going even higher, to achieve what they think is a proportionate sentence.
Step three- the court may be required to refer to other financial factors to ensure, again, that the fine is proportionate. This may include, for example, directors' remunerations, loan accounts and pension provisions.
Step four, five & six- the court is to consider other factors that may warrant adjustment of the proposed fine. This includes: wider implications to innocent third parties, for example employees; a possible reduction in the fine following assistance to the prosecution; and lastly, the court can also take into consideration an early guilty plea. This can reduce the fine by up to a third depending on the stage the plea is submitted. The full third is applied where the defendant pleads guilty at the first reasonable opportunity.
Step seven - the court is to consider whether to impose a hygiene prohibition order. History of convictions will play an important role here. If an organisation has repeatedly failed to heed the warnings of authorities, a court may consider the organisation too big a risk to the public.
Step eight - where sentencing an offender for more than one offence, the court need to assess whether the total sentence is just and proportionate to the offending behaviour. The total fine after all is inevitably cumulative.
Impact of the changes
The most notable case before the new sentencing guidelines came into effect, saw Mitchells and Butlers fined £1.5 million for placing unsafe food on the market. In addition to this, two of its employees were imprisoned for falsifying records. This was a tragic food poisoning case where 'left-over' Christmas dinner had been incorrectly reheated, leaving 32 ill and one person dead. The court stressed that the company had become aware of the risk of cooking, cooling and then reheating turkeys but had took manifestly inadequate steps to address that risk. The court went on to say that as the company was a substantial concern with a turnover of £1.96 billion and a pre-tax profit of around £125million, a fine of £1.5 million was appropriate.
Turnover does not always paint a true picture of a company's profitability. Accordingly, previous sentencing has also considered profit before tax. However, in light of these new guidelines- with a clear indication that the fine starting point will correlate with an organisation's turnover - we have to ask: what would the fine have been for Mitchells and Butlers if sentenced just over a year later? With a harm category at 1, and an argument between 'very high' and 'high' culpability, the fine could easily exceed £1.5 million; particularly if we bear in mind that Mitchells and Butlers' turnover very greatly exceeds the £50million threshold. In those circumstances, a court would be well within its rights to move outside the suggested ranges.
Since a similar set of guidelines were implemented for environmental offences in 2014 we have definitely seen an increase in fines in this area. Thames Water was fined £1million in January for discharges of pollution into a canal. No one was harmed by this incident, in fact the categories of culpability and harm were low. Nevertheless, the courts were quick to stress that large organisations must bring about the reforms and improvements for which they say they are striving because if they do not sentences passed "will be sufficiently severe to have a significant impact on their finances." This, therefore, may be indicative of things to come.
The court in the Mitchells and Butlers case was also trying to bring home to business management and shareholders the need to operate within the law. Equally it is clear that the intention behind these guidelines is not only to reflect the seriousness of such offences, or to remove any potential financial gain an organisation may have made due to cutting corners, but to make companies in general sit up and listen.
There are fears that higher fines may put some organisations out of business. Whilst that is not the direct intention of the guidelines, in some severe instances that may be the end result.
With this high fine potential, organisations' tactics may alter. Organisations that may have considered previously pleading guilty to a marginal case at an early stage (in an attempt to reduce the fine) may now be more keen to fight their corner - defending cases they may not have been commercially inclined to before.
One thing is for certain - even where an organisation pleads guilty, the distinct categories for culpability and harm will undoubtedly lead to disagreements between the prosecution and defence teams and as such we are expecting to see a rise in Newton Hearings. These are separate hearings to ascertain which of the conflicting facts are true.
Considerations for organisations
Most responsible organisations will have systems in place in order to comply with food safety and hygiene regulations. Nevertheless, the key is to not become complacent. It is crucial to ensure that these systems are kept up-to-date, and that they are being employed correctly and to a standard sufficient so as to minimise, or where possible, exclude risk. Directors and senior managers are increasingly being held accountable for organisations' actions/failures. There are individual provisions in the new guidelines that could lead to custodial sentences. Therefore it is imperative that these systems and checks are implemented from the top down and at every level.
Ashfords can provide training to director level or staff on health and safety/food safety compliance, if this would be of interest to you please contact us.
Ashfords Regulatory Consultancy and Primary Authority Offering
To help support businesses in preventing incidents that could lead to substantial fines, Ashfords have launched a regulatory consultancy service and Primary Authority offering.
Ashfords regulatory consultancy service can help to take the burden of compliance off your shoulders, backed up with specialist legal advice, so that you are free to develop and grow your business, confident that you are doing the right thing. Ashfords HSEQ team can provide advice on the legal compliance status of your business in any number of key trading areas such as food hygiene, food safety and food standards.
In addition to the consultancy service, you can also sign up to our Primary Authority offering. Primary Authority is a government scheme led by Regulatory Delivery ("RD") to improve regulation by local councils and can provide significant benefits for businesses.
Ashfords have established a Primary Authority relationship with a number of leading primary authority providers (local authorities) who are experts in delivering assured advice to businesses across a range of regulatory scopes. This process can include obtaining assurance on existing policies and procedures or developing new assured advice around emerging issues. Ashfords act as the co-ordinator for the primary authority partnership with the local authority.
The primary authority, co-ordinated by Ashfords, can provide advice on your legal responsibilities and how you can meet them and you can rely on this advice - other local authorities can't ask you to do something different.
For more information on the impact of the sentencing guidelines on health and safety offences please click here.