Regulated legal entities

Security companies/security providers

Security guards do not carry out their duties in a vacuum, but in most cases as an independent entrepreneur or as an employee of a commercial security company (institution) or an in-house security organisation. Thus, usually the logical law writing process proceeds by first defining what aspects of these entities should be regulated. It is not an easy task because the commercial security activities include everything from self-employed security professionals to small family firms to nationwide companies to huge multinational enterprises with hundreds of thousands of personnel.

In all the regulatory regimes under study there was some kind of definition of what sort of legal entity/company was considered to be commercial security one in need of regulation. Amongst the regimes under study, probably the simplest, but nonetheless a good description of a legal entity providing manned commercial security services, was that from Queensland Government (1993:§8): “A security firm is a person who, or partnership that, engages in the business of supplying, for reward, the services of crowd controllers, security officers or private investigators to other persons.”

The control of the security companies is achieved by setting specific requirements on the company structure, its management and its administrative rules on reporting and contracting. The companies’ general behaviour in the marketplace is steered by implementing (country-) specific codes of conduct. The aspects of regulation

concerning security providers are, in general, universal. On top of the normal local requirements on registration as legal business entities, the security providers were seen, in all the regulatory regimes under study, to need a separate, special registration/

licensing in order to provide (security) services listed in the industry-specific laws. This registration was carried out by an authority dealing with these kinds of procedures especially for commercial security providers or generally to different licensed businesses.

General preconditions for licensing could be found in the regulations of all the regulatory regimes under study. These all included the prohibition to perform the regulated private security activities without a license/registration. There were also specific conditions like a ban to execute within the firm other business activities besides those under the act as in Belgium, or to be involved in certain kinds of business activities as in Estonia. In some regimes certain minimum standards were also set on the capacity to render a security service. These could include, for example, requirements on office space, strength of administrative staff, and equipment as was the case in Belgium and South Africa.

The rules on legal entities providing commercial security services often include specific requirements on the ‘institutional’ representatives of the companies, including owners, board members and executive/responsible managers. These statues are implemented to prevent organised crime or criminal elements from using commercial security companies as frames for their illegal activities. Because of the difficulty to control owners, this kind of control had been in practice skipped in the regulatory regimes under study. Some substitutive control had been achieved by the local private security regulations which required commercial security providers to be registered as local companies.

The interviewees did not have comments on the principles to control companies as businesses. Only the aspect of equality was commented; if the operational personnel should be regulated (licensed), that should concern the whole staff from guards to CEOs and board members. The designation of individuals considered to be ‘institutional’

representatives of the security companies reflects the general business law practice;

these characters are the legal and responsible face of a business entity. In the commercial security context there is a generally accepted pattern to set extended ethical and also professional requirements on top executives in all the regulatory regimes under study and on board members in Estonia, Queensland, South Africa and Sweden. In the

real world it has turned out that the use of men of straw, even in the commercial security context, makes the effectiveness of control on executives limited.

Swedish interviewee comments express the similar union and employer thinking on this matter in a country with long history of social dialogue:

“All the board members need to be approved and controlled. Everyone in a company has to be approved and controlled.” (Industry expert)

“…they should have the same requirements up and down the organisation; higher requirements cannot be imposed on a guard than can be imposed on a director or a board member” (Industry Expert)

Contracts, liability insurance coverage, subcontracting

Examples of specific contractual and liability regulations included in private security legislation in the six regulatory regimes under study are presented in Table 21. As commercial security activities grow and become vertically specialised, they are also increasingly beginning to be organised administratively in the same way to achieve effective business control. In order to control the business activities, especially the integrated and combined service solutions and because of the increasing contract values, the different aspects of contracting and liability are given more importance in the regulations. Only South Africa of the regulatory regimes under study had in its regulation an obligation of a written contract and Belgium and New York had a requirement to uphold compensation guarantees. The opinions of the interviewees basically supported a more formalised and regulated way of contracting, but it was interesting that in practice a ‘light’ and even oral agreement culture was still strongly alive. All this had been given limited importance and the business parties still relied on general business law practices and had not understood how crucial contractual matters have become today as one of risk management tools, particularly in commercial security.

Table 21 Rules on contracting and liability

BE EE NY QLD ZA SE

Obligatory written service contracts x

Rules concerning liability and protection from liability x⁹⁷ x x

Compulsory insurance (bond) requirement x x

Subcontracting rules x x

Especially in Queensland a local culture was eminent:

“A client will think that contract law is efficient. You don’t need special legislation on that.” (Expert)

“The contract signing is covered by separate legislation, by business legislation.”

(Manger)

“I don’t know the percentage but I would guess that great portions of the people do it with a handshake.” (Industry expert)

This kind of statements describe not just the actual situation but probably also the immature business culture within the local private security industry. On the contrary to this reality, the usefulness of a written contract for all parties was understood by others in the same environment, as can be noticed from comments like:

“Do I need to contract for that? I think I would like something in writing … and it helps the clients to understand where they stand. …I think it is a benefit for all parties, it is a safeguard.” (Expert)

“I think it would be a positive thing. …it would give more protection, because the contracting parties would know from the very beginning in the relationship where they stood and equally by itself would know what the obligations were.”

(Manager)

There was one more aspect from the authorities’ point of view which was taken up by a Swedish interviewee; even if contracts in private security were a totally unregulated sector in Sweden, the inspectors visiting security companies went through contracts, if they existed, in order to control that no illegal tasks had been approved to be performed by the guards:

“…what we are looking at, is that there are no unlawful assignments taken. That means in the first place that there is not given to the guard tasks of personal checks, that is, to inspect peoples’ bags or equivalent, or to enter facilities or equivalent, to make a house search. Those kinds of contracts have appeared.”

(Industry Expert)

Business-related liabilities have gained increased importance and attention, even in the commercial security, since the terrorist attacks in the United States and other parts of the world. Commercial security providers and their insurers have been faced with new cases of previously unheard proportions. For example, the airport security screening of the passengers, on the planes targeted in the 9/11 terrorist attack created liability lawsuits against the commercial security companies. In the societies with a British legal heritage included in this study; New York, Queensland and South Africa, this matter had been taken into consideration in the industry specific legislation.

The CNI protection contracts, a result of the privatisation of former nationally run infrastructure industries and services, have changed the responsibilities on security of these objects to the new (non-governmental) owners. Examples of these high-risk objects are, for example, water supply, energy production, public transport, parts of

defence industries and so on. At the same time, the astronomical liabilities connected to these objects have made new kinds of contracting and insurance arrangements unavoidable. This had been taken increasingly into consideration when deciding what to regulate in the industry-specific legislation in Estonia and Sweden. Sweden is a world-class trailblazer in this sort of regulation with its special laws (Swedish Government 1990) concerning the use and powers of commercial security providers in guarding state objects of CNI. In South Africa there is separate legislation concerning this subject, which also defines the role of private (security) actors in this context (South African government 1980; 2007).

The interviewees had a unanimous opinion on the need for a regulated insurance coverage, expressed well by the following Australian comment:

“There should be that kind of policy as part of the licensing process, those things should be there. The issues of insurance and cover, those types of insurance, should be administered at licensing, there should be a requirement.” (QLD Manager)

Subcontracting is a general problem strongly affecting the rights of security firms’

employees, but also the transparency of contracts from the customers’ point of view.

For business profitability the smooth planning and organisation of the work is crucial.

This tempts the security providers to use all means, legal and occasionally even illegal, to optimise their utilisation of manpower. This sometimes happens by using subcontracting in an unsound way. The basic drawbacks of this model of action can be found in several ways throughout the industry. The unsound consequences on the credibility of the commercial security were well described by one interviewee:

“One thing that is probably the most complicated is the subcontracting of guard services. This is an area that we are trying to work through with state governments. You can get what you call multi-contracts, five or six levels and the problem is that everyone is taking a cut and in the end of the day the poor little guard at the end is probably getting cash in hand - a very low wage. The client is not aware that the contract is passed in hands. It’s good to know that a contract has gone through six seven hands, because they [customers] may not like it. If there are five levels of people taking the margin, the service delivered at the end is probably going to be sub-standard.” (QLD Manager)

In order to create and maintain the credibility of the commercial security activities, these kinds of arrangements should be controlled by industry-specific regulations, as was the case in Sweden and South Africa. It is also important in order to clarify the responsibilities in case of misconduct, loss or crime which the security provider or an individual guard may be called to account for.

One separate area that should be regulated in connection to the commercial security companies is their obligation to document certain parts of their activities, store them for a fixed period and to submit immediate or annual reports to the authorities and customers. There were different procedures mentioned in the legislations of the regulatory regimes under study but no uniformity could be found. Furthermore, the interviewees seemed to have given little thought to this matter and had no actual comments on its implementation into their local private security statues. Most of them agreed upon the importance of careful documentation but they did not see it to be a core question in the writing of regulations. Many interviewees thought that these were matters belonging to general business legislation. This was interesting because the development of the industry will beyond controversy require improvements in this part of commercial security regulation.

On top of the basic regulations imposed on security companies by industry specific legislation, there was in all regulatory regimes a variety of supporting but binding rules included which can be called the codes of conduct⁹⁸. They covered very different matters in the different regulatory regimes. These rules are primarily directives affecting the commercial security business and companies, even if in many cases they also cover individual persons working within the industry.

Commercial security personnel

After defining the segments of the manned commercial security activities to be regulated, and what requirements to set for legal entities running them, the next step in the governments’ logic in writing the laws (regulations) seems to be to define what personnel and what personal qualities of the personnel to regulate. The main objects in this context are the security guards who create the bulk of the personnel and who are the most visible part of the commercial security industry. Even if it sounds peculiar, there is a basic obstacle when trying to research and compare the different aspects of the regulation on the security guards – there is no existing transnationally accepted model of how to do this, and accordingly little uniformity could be found in the regulatory regimes under study.

To regulate the individuals working within the private security industry, the profiles of them and the jobs performed need to be delineated. To demonstrate the diversity in the

‘legal’ definitions, even of the core players in the industry, the security guard can be taken as an example by comparing the law text definitions on this personnel group in the regulatory regimes under study.

 Belgium had not made a legal definition for a security guard at all.

 Estonia had made the definition by listing individual requirements of a security guard.

 New York had made the definition by listing functions and detailed tasks performed by security guards and by describing their employment status.

 Queensland had made the definition by pointing out a single function performed by guards.

 South Africa had made the definition through the description of a guard’s employment status.

 Sweden had made the definition by mentioning one employment status element of a guard.

These examples emphasise the diversity in the ways the laws are written in general, but also the fragmentation in defining some of the basic things in commercial security regulation. A comparative summary table of the security guard/security officer definitions, as well as the original law texts, accompanied by the CEN and ASIS standard descriptions, is presented in Appendix 6. This comparison emphasises the general challenges in making regulation comparisons.

What commercial security personnel to regulate?

The security personnel working within manned security are not only comprised of traditional security guards. There are a lot of different (special) duties where the individuals have a specific working title which describes their actual tasks. In practice the licensing and licensing requirements of these persons are also in many cases differentiated in the regulations. Even if the traditional security guards were licensed in all the regulatory regimes under study, it was not the case of personnel performing the specialised guard services. Table 22 presents the general scope of regulation of the personnel within manned services and the auxiliary staff of the companies.

Table 22 Licensing of main commercial security personnel (guards)

BE EE NY QLD ZA SE 'Guarding' personnel

Security guard/security officer x x x x x x

Bodyguard x x x x x x

Event attendant (crowd controller) x x x x

Door supervisor (crowd controller) x x x

Alarm receiving and monitoring station operator x x x x

‘Non-operational’ personnel / Auxiliary staff x

The table shows that in this study there are only two categories of manned security service personnel that were regulated in all the six regulatory regimes: security guards and bodyguards. Private investigators, different kinds of crowd controllers and alarm receiving and monitoring station operators were considered in some regimes as less important and/or less threatening from the society’s point of view. This was not logical because private investigators commonly interfere with citizens’ privacy, different kinds of crowd controllers are probably those who most often use force in their work, and the alarm centre operators have access to more confidential documentary and operational daily customer information than any other specific personnel group.

The employees who are not involved in the day-to-day operational activity; salesmen, white collar financial staff, secretaries, car mechanics, cleaners, janitors and so on, have similar and sometimes even better access to company’s crucial internal or customer information. However, only Swedish regulation, out of the six in this study, included compulsory directives on a (total) screening of the auxiliary personnel.

Most of the interviewees had the opinion that more or less all personnel within security companies should be regulated. The following comments, describe well the general opinions amongst the interviewees on this subject:

“I would like to say that everyone who has something to do with the activities, both directly and indirectly, should be controlled.” (SE Industry expert)

“…I think security officers, guards, bouncers, bodyguards, they need a high degree of control. I think there should be regulation, some degree of regulation for all the occupations.” (QLD Expert)

“I think definitely security contractors like crowd controllers, static guards, mobile patrols. They really need to be regulated; operational security personnel - yes.” (QLD, Expert)

To regulate auxiliary staff was not considered quite as important. The various aspects of this matter were well represented in the comments of Queensland interviewees. The control considering non-operational personnel was seen to be important.

“I think it should be regulated that any person who is actively involved in the security of property or personal safety should be regulated. That includes sales people, it includes installers and it includes monitoring staff. ...the industry has reached a strong consensus that all those people should be included.” (QLD Manager)

“… it is very feasible that anybody and everybody who work in the industry are regulated in some form and must have a license.” (QLD Industry expert)

Alternatively, there were some comments in which the interviewees saw the need to control all staff, but thought that it should be left to the companies’ discretion and responsibility.

“The auxiliary personnel, I think it should be the responsibility of the company hiring them in order for them to have a license, that all of their personnel go through certain screening processes, I think that should be mandatory. So I do not think it should be regulated.” (QLD Expert)

“Licensing [white collar] might be a step over because there will be a number of issues rising the question what else goes with the licensing.” (QLD Manager) 9.5 Detailed aspects on what to regulate on an individual level

A core part of the contents of all regulation is the list of requirements set for individual

A core part of the contents of all regulation is the list of requirements set for individual