25 August 2011

If you would like to discuss any aspect of this alert, please contact Nicola Whiteley or Mandy Perry.

Bribery Act 2010: Guidance for Employers

It is more than likely that you already have in place anti-bribery and corruption policies and practices within your organisation, however with the entry into force of the Bribery Act 2010 on 1 July 2011, you may need to consider reviewing and revising these to ensure that they are fit for purpose.  The Act repeals previous bribery offences and introduces a new statutory regime.  

As Business Secretary Vince Cable has explained, the Act is designed to promote anti-bribery procedures and thereby boost "the prospects of UK businesses through enhanced reputation, reduced costs and [the creation of] a level international playing field".  Accordingly, in addition to penalties which can be incurred by individuals engaging in corrupt practices, commercial organisations can now also find themselves in the stand for an offence which has been committed.

The Section 7 Offence

The Act creates offences of bribing another, receiving a bribe, bribery of a foreign public official and, most relevant for your purposes, the section 7 offence of a commercial organisation (which includes a body carrying on a business in the UK regardless of where it is incorporated and bodies incorporated in the UK but practicing business elsewhere) failing to prevent bribery by a person associated with it from taking place. 

A "person associated" with a commercial organisation is broadly defined to include people who perform services for it or on its behalf, which therefore includes its employees, agents and subsidiaries.  Given this wide reach, when reviewing your anti-bribery procedures, you should consider the scope and nature of your business, for example, if you have subsidiary companies in other jurisdictions you should think about how you might protect against the risk of such subsidiaries, their employees and agents engaging in bribery.

In order to convict a commercial organisation, an associated person must be guilty of the offence of bribing another (section 1) or of bribing a foreign public official (section 6).  Consequently, to understand the section 7 offence, you need some knowledge of the sections 1 and 6 offences.  The section 1 offence is committed where a person bribes another in order to bring about or reward the improper performance (being performance that violates an expectation that a person will act in good faith, impartially, or in accordance with a position of trust) of a relevant function or activity.  Bribery of this type can relate to functions of a public nature or to various activities including those connected to a business and those performed in the course of a person's employment.

Corporate hospitality events could bring individuals within the remit of the section 1 offence, for example where the event is lavish or where promotional expenditure is significantly beyond what is considered reasonable, in order to secure a business advantage.  To protect your organisation, you should ensure that such hospitality and/or expenditure is "reasonable, proportionate and made in good faith", establishing procedures which satisfy the section 7 defence discussed below.  The offence is committed where a foreign public official is bribed with the intention of obtaining or retaining business or a business advantage. 

The maximum penalty for the section 7 corporate offence is an unlimited fine and there is no requirement to prove that the commercial organisation was at fault, to obtain a conviction.

The Section 7 Defence and Guidance

The Act provides a commercial organisation with a full defence if it can show that it had in place "adequate procedures" designed to prevent bribery.  The Ministry of Justice has issued The Bribery Act 2010 Guidance and an accompanying Quickstart Guide to assist commercial organisations to understand and implement such procedures (the 'Guidance').

From the start, the Guidance emphasises that the Act is not designed to penalise commercial organisations that experience one-off incidences of bribery, or that wish to "get to know their clients by taking them to events like Wimbledon or the Grand Prix".  Rather, it encourages organisations to conduct serious and proportionate risk based reviews of existing practices and adopt and implement new procedures as necessary. 

The Guidance suggests commercial organisations adopt a common sense approach when formulating or amending anti-bribery procedures and sets out six principles to assist them in this process.

The Six Principles

1. Proportionality:  This is the core principle and requires that any action taken by a commercial organisation to comply with the Act is proportionate to the risks of bribery faced by the business, accounting for its nature and scale and the complexity of its activities.  You should also ensure that your procedures are clear, practical and accessible.
2. Top Level Commitment:  Given that the Act aims to promote ethical business practices and corporate responsibility, you should show that your business is committed to conducting itself without bribery.  You should ensure that all levels of management in your business have been active in the establishment of anti-bribery practices and that the adopted procedures are understood by all, implemented and enforced.  You should strive to cultivate a business-wide culture in which bribery is not acceptable in any circumstances.
3. Risk Assessment:  You should assess and quantify the potential risks of bribery, both internal and external and as are faced by you and by persons associated with you.  Considerations of overseas operations or trade and dealings in high-risk sectors or with public officials may be indicators of greater risks to be mitigated.  You should document and repeat this process on a periodic basis.
4. Due Diligence:  Engage in a due diligence exercise for all of those with whom you have a business relationship.  The Guidance encourages you to focus on all those who provide services to your business.  Your approach here should be proportionate and risk-based, designed to mitigate the risk of bribery occurring.
5. Communication:  In line with the top level commitment which you, as an organisation should exhibit, it should be ensured that your anti-bribery policy and procedure is understood throughout the organisation.  This can be achieved by, for example, running training courses or awareness campaigns as are appropriate to the size, nature and risks faced by your business.
6. Monitoring and Review:  You should regularly revisit your procedures to ensure they are adequate, effective and proportionate and to ensure that they adapt with your business over time.

Your Next Steps

The "adequate procedures" defence seeks to promote corporate responsibility and ethical conduct.  Suggested steps include that you should:

• conduct a review of the risks of bribery posed to and encountered by your business;
• check your existing procedures to see whether they are adequate in light of the risks, the Act and the six principles laid down in the Guidance;
• as necessary, redraft your policies and procedures to ensure that all forms of bribery are prohibited, including those associated with gifts, hospitality, facilitation payments, lobbying and political contributions;
• consider creating a statement of values or code of conduct (if you do not already have one) which promotes ethical and legitimate business practices and if you do have one, review it and amend as necessary;
• arrange for training and guidance to be provided to relevant employees and consider holding a campaign to raise awareness within the business; and
• ensure you have adequate whistle-blowing policies in place and strategies to protect your business reputation in the event of an allegation of bribery.

Ultimately whether your procedures are "adequate" will be a decision for the courts.  Practically speaking, watching prosecutions will be critical to get a view of how the Act is enforced and the procedures to have in place to establish the defence.

STOP PRESS

A little reported recent case could have a genuine impact on how part-time employees have to be remunerated.  In Inspector Claire Clark v Metropolitan Police Authority it was held that where a part-time worker worked more than her contractual hours, she (for it is almost always a she) should be paid overtime until she reaches the notional hours for a full-time employee.

The Metropolitan Police Authority's pay scheme did not provide any entitlement to overtime to any of its inspectors.  However, the court found that 96% of part-time inspectors were women and 86% of full-time inspectors were men, so where equal hours were worked and unpaid overtime was accrued by both the full-time and part-time workers, the part-time workers (the majority of whom were women) received less pay per hour worked than the full-time workers (the majority of whom were men).     

This case was a County Court case, but given that you often hear part-time employees say that they are paid as part-time employees but do full-time jobs it cannot be long before this issue is decided in the Employment Tribunals.  Part-time remuneration policies need to be considered against this backdrop and the question of whether overtime should be paid to part-time workers up to the notional hours of a full-time employee is one that has to be considered to avoid potential claims.