Blog: Is it time to feel a few more (white) collars?

Very occasionally, my job involves a brush with the criminal law. Don’t worry – I’ve never been invited down to the station for a brief chat! Often it arises in the context of a misconduct dismissal, and I’ve spent a few interesting hours pondering whether accepting a police caution amounts to admission of an offence for disciplinary purposes, and when it might be reasonable to dismiss an employee for criminal conduct unrelated to their work. It’s not uncommon for employees to allege that the employer is guilty of criminal conduct, although the matter is rarely as clear-cut as the disgruntled employee would like it to be.

I therefore read with interest the coverage of the acquittal of the three former City Link directors who overlooked the need to send in the good old HR1 form to BIS and recently stood trial for the offence of failing to comply with that well-established statutory requirement to notify the Government about proposed redundancies.

The City Link case, which arose from the dramatic collapse of the business over Christmas 2014, appears to have been the first time that a criminal prosecution of this offence had been brought. (Surely such rarity can be the only explanation for why we never heard the killer line, “There’s been a s194 TULR(C)A failure to notify” on Taggart.) However, it seems that prosecutions for little-known regulatory offences are like buses, as it emerged in October that David Forsey, the CEO of the Sports Direct group, was to face prosecution for the same offence in relation to a warehouse closure arising out of the administration of the USC fashion chain in January. An accountant involved in the administration of the business has also been charged and the two men are due to stand trial in March 2016.

Whilst the prosecuting authorities dust off the charge book, the government also seem to be doing their bit to turn up the pressure on businesses to comply, by replacing the maximum penalty of a £5,000 fine with an unlimited fine. It remains to be seen, of course, whether any successful prosecutions will result.

The narrative which is reflected in much of the press coverage about these cases is that the directors never ‘wanted’ things to go wrong, to err is human and it is dangerous to rely on hindsight. This is reflected in the acquittal judgment in relation to City Link, which talks about the fact that directors do not come equipped with crystal balls.

This blog is not the place for a detailed, technical analysis of the operation of sections 193-194 of TULR(C)A 1992 and whether the City Link case got to the right result. But I think it is striking that both cases involved undeniably extreme experiences (in the context of employment relations) for the workers in question – laid off with 15 minutes’ notice in some cases and left hanging with no information at the worst time of the year. Further, both businesses had attracted some degree of comment in the past about their treatment of employees, including the use of ‘self-employment’ arrangements and zero-hours contracts to minimise employment liability. They are, of course, not alone in this respect their respective business sectors.

It is well worth saying at this point that the vast majority of the hundreds of business directors and HR professionals that I deal with day-in and day-out are extremely concerned to do the right thing by their employees (and the law) whilst, of course, seeking to run an efficient and profitable commercial operation. I find it hard to imagine any of them finding themselves in a situation comparable to those which gave rise to these cases.

There is a genuine debatable issue around the extent to which it is desirable for the criminal role to encroach into business life, but I do nevertheless wonder how much the exculpatory narrative referred to above is informed by the fact that legal policy-makers and decision-makers are themselves part of a professional elite. They can see themselves as company directors and may be overly influenced by a cautious, ‘there but for the grace of God’ approach to regulatory offences. (On a similar note, financial regulation certainly isn’t my field, but I’m not the first to have noted that very few bankers have ended up in prison following the 2008 banking collapse).

As a professional class, we are reticent to criminalise the boardroom-level ‘wide boys’, whereas we don’t hesitate to criminalise similarly ‘entrepreneurial’ street traders, or those who fail to promptly inform the authorities of material facts in relation to benefits they are seeking to claim; despite the fact that their actions will impact on far fewer people than this sort of corporate adventurism gone awry.

I would like to see more calling-out of corporate criminals, both for the sake of their workers, but also for the sake of the prudent, striving business leaders trying to do things in the right way. Of course, it would be worrying if it were too easy for directors to inadvertently fall foul of the criminal law. But with one (unsuccessful) prosecution since 1992, the enforcement history of the HR1 obligation is telling the opposite story (despite all the panic-mongering the trial precipitated on lawyers’ websites). So, my wish-list for 2016 includes a few more (ex-) directors adding criminal records to their CVs. What do you think?

Joanne Sefton
Barrister, Menzies Law