6 August 2009 | Andrew Stokes

The first prosecution under the Corporate Manslaughter Act has sounded a warning for businesses. Andrew Stokes explains the points buyers must take on board

The death of employee Alexander Wright has resulted in the first prosecution under the Corporate Manslaughter Act 2007 since it came into force last year (Law Update, 27 March 2008). Cotswold Geotechnical Holdings, a small family-run geological survey company, was prosecuted after Wright, a geologist, was crushed to death when the sides of an excavated pit collapsed while he was collecting soil samples. One of the company's directors is also being prosecuted for gross negligence manslaughter.

The case is a stark warning to employers and stresses the importance of organisations taking the opportunity to review management systems as well as their health and safety procedures. When the corporate manslaughter offence was introduced last April, its primary target was organisations which were responsible for major disasters. But, as this case demonstrates, it applies to almost all organisations regardless of size, where they are employers, or occupiers, or undertaking any commercial activity. It also suggests we should expect more than the dozen or so cases that the Government predicted would be brought annually.

Under the Act, an organisation is guilty of corporate manslaughter if the way in which it manages or organises its activities causes a person's death and amounts to a gross breach of a relevant duty of care to the person who has died. A substantial part of the failure must have been at a senior level, and penalties on being convicted of corporate manslaughter include an unlimited fine, which could be linked to the organisation's annual turnover, and range from 2.5 per cent to 10 per cent of this depending on the circumstances.

Although it is surprising the CPS targeted a small business, and not a larger organisation for the first prosecution, it is likely that this was because the directors in such a small company would have been closely associated with the day-to-day running of the business and the chain of decision was therefore more easily identifiable, making a prosecution more likely to succeed. It was hoped that the first cases brought under the new Act would provide useful guidance on how it will be applied to larger UK businesses - in particular, illuminating the application of phrases such as "senior management" and "management failure", which this case is unlikely to do.

In the highly charged atmosphere which follows a major disaster, employers and directors need to know they have the appropriate insurance in place for defence costs should they become embroiled in manslaughter or other regulatory investigations. Procurement and supply chain managers in particular should be aware that any gross failures at a senior level in the supply chain that are found to have contributed to someone's death could lead to a prosecution under the new Act.

The Health & Safety Executive has recorded 228 fatal accidents at work since April 2008, so it is likely that other corporate manslaughter investigations are currently under way which may result in prosecution, and that this case is just the first warning, of many.

* Andrew Stokes is a partner and head of the safety, health and environment group at Beachcroft