History of the Federal Sentencing Guidelines for Organizations

December 8, 2021

There are few things more stressful for a business owner than finding out that your organization is being charged with criminal activity. The ramifications are vast and significant, from tarnishing your reputation in the industry to lawsuits and steep regulatory fines. In the most extreme cases, misconduct within your workplace can even lead to federal prison.

But how exactly can company non-compliance affect your organization? To understand this, it’s best to look at the Federal Sentencing Guidelines for Organizations. These guidelines can give you a clear picture of what lies in store for companies found guilty of criminality (like insider trading, embezzlement, or fraud just to name a few) – and they offer more than enough incentive to make sure your business keeps operating under the law. 

What are Federal Sentencing Guidelines?

The Federal Sentencing Guidelines for Organizations are a series of rules set by the U.S. Sentencing Commission. These rules establish a national standard for sentencing people (or in our case, organizations) who are found guilty of federal felonies or Class A misdemeanors. 

For organizations, the federal sentencing guidelines can include fines, probation, public notices of conviction, and restitution – though the severity of these depends on the charge itself. It’s also important to note that organizations can take steps to mitigate some of these repercussions; for example, organizations that prove they’ve developed an effective compliance program since their misconduct can have their sentence reduced.

Sentencing Guidelines Over Time

Why were the federal sentencing guidelines for organizations created? Sentencing guidelines started with the Sentencing Reform Act of 1984. This act coincided with the creation of the United States Sentencing Commission, which sought to eliminate sentencing disparities for similar crimes. The guidelines offer federal judges a standardized sentencing recommendation, which they can use to inform their rulings. 

Under the Sentencing Reform Act, judges were asked to consider the following in their rulings:

  • The nature and circumstances of the offense and the criminal history of the defendant
  • The need for the sentence imposed, keeping in mind the four primary purposes of sentencing: retribution, deterrence, incapacitation, and rehabilitation
  • The kinds of sentences available (for example, whether probation is prohibited)
  • The sentencing range established by the sentencing guidelines
  • Any relevant “policy statements” promulgated by the Commission
  • Avoiding unwarranted sentencing disparities
  • The need to provide restitution to any victims of the offense

For decades, federal sentencing guidelines were considered mandatory. However, this changed following the decision of United States v. Booker in 2005. This case determined that mandatory sentencing guidelines violated a defendant’s sixth amendment right to a trial by jury, so now the guidelines are only considered suggestions, rather than requirements. 

Types of Sentencing Guidelines

Sentencing guidelines fall into three categories: presumptive, statutory, and advisory or voluntary. Let’s discuss the differences between these categories and how they can affect your business.

Presumptive Sentencing

Although U.S. v. Booker eliminated the requirement to use sentencing guidelines, there are some sentences that are still mandatory. These are known as “presumptive sentences,” and they are typically considered the “normal” consequence for a “normal” criminal trial. Judges only vary from these sentences in exceptional circumstances.

Statutory Sentencing

Many business owners confuse statutory sentencing with presumptive sentencing – and we’ll admit, they are very similar. The key difference is this: presumptive sentences are established by the sentencing commission (like the United States Sentencing Commission), while statutory sentences are directly authorized by a legislative body. Additionally, while presumptive sentences are mandatory (except in very unique cases), a judge reserves the right to suspend some or all of the requirements in a statutory sentence.

Advisory or Voluntary Sentencing

Advisory or voluntary sentences are the least stringent of the Federal Sentencing types. These sentences are truly considered recommendations, and a judge has the freedom to use them as a reference or disregard them when doling out his or her ruling. 

State’s Sentencing

As the name suggests, the Federal Sentencing Guidelines are only applicable in federal court. But what about state courts? As of 2004, 23 states and the District of Columbia have adopted the presumptive, statutory, and advisory sentencing guidelines. Courts across the country take corporate misconduct very seriously – and that is why it’s more important than ever to have a robust and effective compliance program. 

If you want to ensure your employees receive the proper compliance support and training, visit ComplianceLine today. Whether you need new training curriculum, an anonymous tip line, or any other tools to assist your company’s compliance efforts, we are here to help you. Contact us today to learn how we can help your business.