Whirlpool appeal sends sentencing for health and safety offences into a spin
In March 2017 Whirlpool UK Appliances Limited ("Whirlpool") was sentenced to pay a fine of £700,000 having pleaded guilty to an offence pursuant to Section 3(1) of the Health and Safety at Work Act 1974. The prosecution followed the death of a self employed contractor who died as a result of an accident at Whirlpool's premises in March 2015.
Whilst it accepted responsibility for the incident, Whirlpool disagreed with the approach that the Court had taken in applying the sentencing guidelines for health and safety offences. The guidelines have been in force for almost two years and whilst it was intended that the guidelines would bring consistency and certainty to the sentencing of health and safety offences, there have been some instances, particularly in relation to organisations categorised as "very large" (with a turnover of more than £50 million) where sentences have still been described as "hit and miss". The applicability of the sentencing guidelines is the subject of a separate article.
Whirlpool challenged the sentence on the basis that, amongst other things, in the context of the size of the fine, the company had disproportionately low profit margins.
The judgment in Whirlpool's appeal against sentence was delivered by Lord Chief Justice Burnett on 20 December 2017 and shed some much needed light on the approach to sentencing of "very large" organisations with substantial turnover and poor profitability.
In 2014, Whirlpool had a recorded turnover of £672,842,000 and in 2015 the company's recorded turnover was £710,798,000. In 2014, the company's profit before tax was £24,738,000, but in 2015, the company experienced a loss of £165,041,000.
The sentencing court had determined that the "starting point" for the fine should be £1.2 million, then, on account of there being no aggravating factors and a wealth of mitigating factors, and on the basis that the company pleaded guilty straight away, the fine was reduced to £700,000.
On appeal, the Court took a different approach to the applicability of the sentencing guidelines. Whilst agreeing that Whirlpool is still within the category of "very large" organisations, it determined that the appropriate starting point was £250,000. This was as a result of the appeal Court considering that the sentencing Court had not applied the sentencing guidelines correctly to Whirlpool at the start of the process. The fine was then adjusted to £500,000 to take into account the company's substantial turnover. This amount was reduced to £450,000 to take into account the company's significant mitigating factors. Then the fine was finally reduced again to £300,000 (reduced by 1/3) to take account of the company's early guilty plea.
In this case the appeal court did not give weight to Whirlpool's arguments that its low profit margins should be taken into account. The reason for this was that the company's profits were unusually affected during the period concerned by the unprecedented losses suffered by the company after it was required to roll out a national programme of repairs for thousands of potentially dangerous tumble dryers.
Since the implementation of the sentencing guidelines, much publicity has resulted from the fact that a company's turnover is one of the key factors that influences determination of the fine to be imposed. This case is a good illustration of the fact that profitability of a company is relevant and should also be taken into account by the Court.
The guidelines state that "If an organisation has a small profit margin relative to its turnover, downward adjustment may be needed. If it has a large profit margin, upward adjustment may be needed."
Lord Chief Justice Burnett gave further guidance in respect of this aspect of the guidelines by confirming that "an organisation with a consistent recent history of losses is likely to be treated differently from one with consistent profitability."
The appeal judgment constitutes another step forward in determining what companies with significant turnovers can expect if they fall below the required standard of health and safety.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.