Lawlink NSW: 10. Community service orders

10.1 Community service orders involve a corporate offender undertaking or contributing to work or projects that benefit the community or a part of the community in some way. In Chapter 5 the Commission recommended the adoption of community service orders as one of the options for sentencing corporate offenders. This chapter discusses the nature of community service orders, their application to corporate offenders and precedents for their imposition on corporate offenders in Australia and overseas. Finally the chapter considers diverse issues that relate specifically to community service orders as corporate punishments and makes recommendations to deal with some of them.

10.2 Community service orders, which direct an offender to perform community service work,¹ have been used in the case of individual offenders as an alternative to imprisonment for quite some time because of a number of benefits both to the offender and to society. For offenders, community service orders obviate the oppressive and brutalising effects that the prison environment can have on inmates.² This sentencing option, while providing a means to punish offenders, also assists their rehabilitation. Some community-based correction programs involve education and training aimed at rehabilitation. Offenders learn new skills that help their re-integration into society and reduce the likelihood of recidivism.

10.3 Community service orders allow society to reduce prison costs. Moreover, the recipients of the service to be rendered by the offender, such as non-profit organisations, charities, nursing homes, children’s homes and community centres, benefit in numerous ways from the penalty. Further, this mode of punishment addresses society’s need to attain a sense of justice, especially in cases where the resulting harm transcends an individual victim and affects an entire community. Requiring the offender to perform some service to the community as a penal sanction not only underlines the community’s disapproval of the offence, but may also help towards repairing the harm done to society.

10.4 Some of the advantages of community service orders are equally applicable in cases involving corporate offenders. First, the community stands to benefit from a project that a corporate offender may be required to do. Secondly, by requiring the expenditure of time and effort, community service orders emphasise the social unacceptability of corporate offences.³ Thirdly, community service orders are a useful means of achieving reparation when the harm that resulted from an offence affects the wider community rather than individual victims. In cases involving breaches of environmental laws, courts are increasingly using community service orders instead of fines to punish corporate offenders as they are more likely than fines to repair the harm caused to the environment.⁴

10.5 In addition, community service orders avoid the “deterrence trap” that limits the use of fines on corporations that are in financial difficulties.⁵ Corporate offenders may have insufficient cash resources to pay the appropriate amount of fine required for effective deterrence. Community service orders that require corporations to render a service or use non-cash resources, provide a means of punishment without forcing the company into liquidation (which courts must generally avoid because of the spillover effects on innocent parties such as the corporation’s employees, creditors and consumers).⁶

10.6 Community service orders may also enhance rehabilitation and specific deterrence against future commission of offences. When the officers and employees of a convicted corporation are involved in a community service project, they are made aware of the seriousness of the offence and this may increase accountability and discipline in the organisation and prompt revision in company systems to avoid future violations.⁷

10.7 Some commentators have noted the possible danger of a corporation gaining favourable publicity from undertaking community projects.⁸ However, given that a corporation would undertake such projects by order of a court as a result of a conviction, it is unlikely that the corporation will generally use it to bolster its reputation as a good corporate citizen.

10.8 There was general support for the adoption of community service orders for corporate offenders both during the consultation meetings conducted by the Commission⁹ and in written submissions.¹⁰

10.9 Courts in the United States have used community service orders as a sentencing option for corporate offenders for some time. Such orders are usually imposed as conditions of organisational probation orders.¹¹ In one of the leading cases on the matter, United States v Danilow Pastry Corporation, six bakeries convicted of price fixing were excused from paying substantial portions of the fines imposed on condition that they provided baked goods to various organisations assisting the needy for one year. The court gave a number of reasons for imposing such an order. First, the imposition of monetary fines commensurate with the gravity of the offences would have bankrupted the bakeries. This outcome would have caused widespread unemployment among the bakeries’ employees and in the economies of the communities in which the plants were located; and (somewhat ironically) diminished competition in the bakery industry. Secondly, the substituted payment required the bakeries to make symbolic restitution for their offences by doing something more organisationally onerous and thought provoking than merely paying the potential fines. The community service orders in this case also brought the offences to the attention of the public, thereby increasing the punishment without harming the needs of employees, consumers or communities that would otherwise be affected by a fine.¹²

10.10 In another case, a corporation was ordered to contribute US$8 million towards the establishment of the Virginia Environment Endowment.¹³ In yet another example, a highway construction company convicted of fraudulent bidding on highway contracts was required to donate $1.5 million to endow a professorship in ethics at a local university.¹⁴ The community service orders made in these cases were not any different to a fine to the extent that all that was required was for the corporations to write a cheque.

10.11 Environmental protection legislation in New South Wales, Victoria and South Australia contains provisions that give courts the power to order an offender to carry out specified projects for the restoration or enhancement of the environment.¹⁵ Courts have used these provisions on a number of occasions.¹⁶ The Occupational Health and Safety Act 2000 (NSW) also gives courts the power to order an offender to carry out a specified project for the general improvement of occupational health, safety and welfare.¹⁷

10.12 One issue with respect to community service orders to be undertaken by corporate offenders is whether they should be able to take the form of a monetary contribution to charity or some community project. Prior to the adoption of the Federal Sentencing Guidelines for Organizations, United States’ courts were able to use a particular form of community service order, referred to as “community restitution”, involving community service through charitable contributions or other monetary support to social programs that benefited the community as a whole, rather than the victims of an offence.¹⁸ Community service orders crafted in this form are criticised on a number of grounds. First, they impose insufficient punishment on corporations in relationship to the seriousness of some crimes (just as a fine would in the circumstances).¹⁹ Secondly, they divert from public use funds what might otherwise have been collected as fines.²⁰ Thirdly, the introduction of community restitution orders creates an opportunity for judicial officers to channel corporate resources into pet charity programs,²¹ or at least create the perception that that has happened. If a judge is personally affiliated with an organisation that is the beneficiary of the community service order, an erosion of public confidence in judicial integrity could result.²² Fourthly, the rehabilitative value of such orders is limited because the corporation’s management and employees may not “internalise” the seriousness of the offence committed, nor its consequences.²³

10.13 The opposing view is that that community service orders aimed at achieving restitution to the general community (or a section of it), through charitable contributions or monetary support to social programs, should be permitted because they benefit both the offender and society. Unlike fines, which merely punish an offender, community restitution orders can have a more direct and positive impact on the community affected by the offence.²⁴ The corporation is forced to pay for its crime, and the community also benefits from a direct contribution to charity or a social project. Designed properly, these forms of community service will not necessarily decrease the amount or severity of the punishment, but will in fact increase its usefulness.²⁵

10.14 Advocates of this form of community service order point out that in a number of corporate crimes, such as those involving the environment or public health and safety, victims are not readily identifiable due to the widespread nature of the harm or a delay in the manifestation of the injury.²⁶ Community service orders in the form of monetary contributions to a charity or social project, so long as there is a reasonable nexus between the offence and the charity selected, may be a good way of repairing the harm in those circumstances.

10.15 In the United States, the Federal Sentencing Guidelines on Organizations have tightened the use of community service orders by providing that they may be ordered only where such community service is reasonably designed to repair the harm caused by the offence.²⁷ The United States Sentencing Commission’s commentary states that requiring a corporation to endow a chair at university or to contribute to charity would not be consistent with this provision.²⁸

10.16 In Australia, the legislative provisions that authorise the use of community service orders on corporate offenders give courts the authority to “order an offender to carry out specified projects”.²⁹ Courts have construed these provisions liberally and used them to order offenders to pay a sum of money to meet the costs of some relevant social project rather than ordering the offenders to implement the project themselves. For example, in an air pollution case, a magistrate in Victoria ordered the corporation to pay $25,000 to the Warrnambool City Council for beautification of a playground and a road reserve on the Princes Highway.³⁰ In another Victorian case, where the corporation pleaded guilty to polluting the atmosphere, the court ordered it to pay $35,000 to the City of Greater Geelong to be spent on improvements to a local park.³¹

10.17 The Commission is of the view that the practice of ordering monetary contributions to social projects pursuant to community service order provisions in specified legislation, should be permitted under the general corporate sentencing regime proposed in Recommendation 4.³² This form of community service increases the usefulness of a sentence by achieving some form of reparation to a dispersed group of victims, the general community or a section of it. The community project to be funded should, however, bear a reasonable relationship to the offence. Such a requirement would ensure the attainment of the objectives of the sentence, in particular the reparation of any harm caused by the offence. It would also avoid perceptions of arbitrariness or bias on the part of judges in their choice of community projects.

10.18 The proponents of the use of community service orders for corporate offenders have suggested that the law should require that, as a general rule, the employees of the offender should perform the community service project.³³ Fisse suggests that the legislation should require “the personnel by whom a community project is to be performed [to] include representatives from managerial, executive and subordinate ranks of the offender’s organisation, whether or not persons in all these ranks were implicated in the offence subject to sentence”.³⁴ It is argued that by forcing the company’s officers and employees to participate in fulfilling the terms of a community service order, it is more likely that the punishment will be internalised by the corporation. In short, conditions in community service orders that require participation by the company’s personnel better achieve the rehabilitative objectives of a sentence.³⁵

10.19 The Commission is of the view that details of the design of a community project to be undertaken by a corporation, including the engagement of the corporation’s personnel, should be left to the discretion of the court. It agrees with the view that such a requirement would increase the prospect of the corporation’s personnel internalising the seriousness of the offence and perhaps prompt the corporation to take measures to prevent recidivism. In addition, where the convicted organisation possesses facilities, technical knowledge or skills that qualify it to repair damage caused by the offence, these resources should be used in the execution of the community service order. It may, however, not always be appropriate to specify these requirements. There may be instances when the restoration of the harm resulting from the offence is the paramount consideration, and using the corporation’s personnel and/or resources may not the most efficient way of achieving this. Accordingly, the determination of the conditions of community service orders is best left to the discretion of the sentencing court.

10.20 There are a number of ways in which the court may order that a corporation’s personnel be involved in the carrying out of a community service order. These include:

10.21 The naming of individuals may have consequences for these individuals if the terms of the community service order are breached. Persons named in the order who fail to carry out its terms so far as they relate to them expose themselves to contempt proceedings. This is of particular concern if staff from all levels of a corporation are to be involved in carrying out the order and some of these fail to carry out the terms of the order simply because management did not provide appropriate supervision or guidance. Unless a court deliberately wishes to put a particular person in the corporation at risk of contempt proceedings, it may, therefore, be generally desirable for the court to frame the order in such a way as to require that the corporation use a particular officer or employee or group of employees, rather than to require directly that particular named individuals participate. In this way the consequences that arise from a breach of the order with respect to the involvement of particular individuals will flow to the corporation. Officers or employees of the corporation who deliberately refuse to carry out the terms of an order will be guilty of an offence in accordance with Recommendation 21 in Chapter 13.

10.22 A community service order imposed on a corporation but naming individual officers or employees of the corporation may have the appearance of punishing those individuals. The Commission is of the view that such individuals should have a right to be heard before the order is made,³⁶ bearing in mind that they will be liable for contempt for failure to comply with the order. The Commission is not persuaded that such protection needs to be extended where the community service order identifies a group or category of officers or employees. Non-compliance with the order by members of such group is an internal matter for the company to resolve.

10.23 Community service orders, by themselves, may not always be capable of achieving the various objectives of sentencing. They do not emphasise corporate reform to prevent re-offending. Hence, it has been suggested that in cases where corporate reform is an important issue, community service might still be used in combination with a correction order that requires the corporation to reform its work practices.³⁷

10.24 The Commission also notes that a community service order requiring payment of the costs of a community project may, like a fine, be susceptible of conveying the message that the crime committed by the corporation is not serious and that corporations can buy their way out of trouble. A publicity order, under those circumstances, may also be used in order to achieve the denunciatory aim of sentencing.³⁸

10.25 The legislation generally authorising community service orders for corporate offenders should allow the court to combine the penalties that it considers necessary to achieve the objectives of sentencing appropriate to the particular circumstances of each case. The issue of combining a range of different sentencing options is discussed in greater detail in Chapter 5.

10.26 A community service order could have the effect of circumventing the upper limit of the fine set by the legislature for the offence in question.³⁹ As the statutory maximum is indicative of Parliament’s and the community’s view of the objective seriousness of the offence in question, the Commission is of the view that the cost to the offender of performing a community service order, together with the cost of any other penalty imposed, should not exceed the statutory maximum amount of the fine applicable to the offence for which the order is made.⁴⁰ This issue, while probably most relevant in relation to community service orders, also arises in respect to other sentencing options and so it is comprehensively discussed in Chapter 13.⁴¹

10.27 Another issue that arises in relation to supervising the implementation of a community service order is the risk of non-compliance. Some potential problems that can occur in the execution of a community service order include failure to assign the appropriate personnel to the community project, falsification of compliance reports, and recycling projects that have been undertaken in the normal course of business to discharge the obligations imposed by the order.⁴² A real concern is that the courts may not have the time or resources to supervise the implementation of community service orders. As this issue is also relevant to some of the other sentencing options, it is dealt with in Chapter 13.⁴³

Table of contents

2. See S O’Toole, “Prisons: the politics of punishment” (2002) 27 Alternative Law Journal 242. For an examination of a wide range of issues relating to conditions in prisons and the rights of inmates in Australia, see D Brown and M Wilkie (ed), Prisoners as citizens: humans rights in Australian prisons (Federation Press, 2002).

3. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 247.

4. Ms Kerry Palmer, Principal Legal Officer (Legal Services Branch), NSW Environment Protection Authority, Consultation.

6. See United States v Danilow Pastry Co (1983) 563 F Supp 1159 at 1167. See also para 6.8-6.11.

8. See for example M Jefferson, “Corporate criminal liability: the problem of sanctions” (2001) 65 Journal of Criminal Law 235 at 252.

9. Government Regulatory and Prosecution Agencies, Consultation; Ms Kerry Palmer, Principal Legal Officer (Legal Services Branch), NSW Environment Protection Authority, Consultation.

10. Australian Taxation Office, Submission at 8; Department of Fair Trading, Submission at 8; J Braithwaite, Submission.

11. United States Sentencing Commission, Guidelines manual (2002) �8B1.3. Prior to the adoption of the Guidelines, community service could be ordered under the corporate probation provisions of the Sentencing Reform Act 1984: 18 USC �3563(a)(2), (b)(13).

13. United States v Allied Chemical Corporation (1976) 420 F Supp 122. See also B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 244.

15. Protection of the Environment Operations Act 1997 (NSW) s 250(c); Environment Protection Act 1979 (Vic) s 67AC(2)(c); Environment Protection Act 1993 (SA) s 133(b). Under the Victorian Act the environment project that a court may order the offender to do may or may not be related to the offence.

16. See, for example, EPA v Nestle Australia Ltd (Magistrates’ Court of Victoria, Warnnambool, No P01858191, 22 January 2002, Magistrate Bolger, court order); EPA v Rosedale Leather Pty Ltd (Magistrates’ Court of Victoria, Moe, No P01251370, 4 February 2002, court order); Environment Protection Authority v Simplot Australia Pty Ltd [2001] NSWLEC 264.

18. R Gruner, “Beyond fines: innovative corporate sentences Under Federal sentencing guidelines” (1993) 71 Washington University Law Quarterly 261 at 295.

19. Gruner at 295; C Stone, “A slap on the writs for the Kepone mob” (1977) 22 Business and Society Review 4.

21. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 248.

22. M Levin, “Corporate probation conditions: judicial creativity or abuse of discretion?” (1984) 52 Fordham Law Review 637 at 656.

24. L Gattozzi, “Charitable contributions as a condition of probation for convicted corporations: using philanthropy to combat corporate crime” (1987) 37 Case Western Reserve University 569.

26. M L Howard, “Charitable contributions as a condition of federal probation for corporate defendants: a controversial sanction under new law” (1985) 60 Notre Dame Law Review 530.

28. United States Sentencing Commission, Guidelines manual (2002) �8B1.3, Commentary.

29. Protection of the Environment Operations Act 1997 (NSW) s 250(1)(c); Occupational Health and Safety Act 2000 (NSW) s 116; Environment Protection Act 1979 (Vic) s 67AC(2)(c); Environment Protection Act 1993 (SA) s 133(b).

30. EPA v Nestle Australia Ltd (Magistrates’ Court of Victoria, Warrnambool, No P01858191, 22 January 2002, Magistrate Bolger, court order).

31. EPA v Pivot Ltd (Magistrates’ Court of Victoria, Geelong, 6 September 2001).

33. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 246. See also M Levin, “Corporate probation conditions: judicial creativity or abuse of discretion?” (1984) 52 Fordham Law Review 637.

36. This right may not exist at sentencing in the case of individuals who are not offenders: See para 8.32-8.33.

37. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 248.

38. In EPA v Nestle Australia Ltd (Magistrates’ Court of Victoria, Warnnambool, No P01858191, 22 January 2002, Magistrate Bolger, court order), the court imposed a community service order (to enhance the environment) and a publicity order.

39. J Gobert, “Controlling corporate criminality: penal sanctions and beyond” [1998] 2 Web Journal of Current Issues.

40. This was suggested in B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 245.