2013 has been an explosive year for the doctrine of corporate criminal liability in Canada. Employers need to be aware of their potential liability under criminal law for the actions and omissions of both those within their organization and third party contractors engaged by the company.
On September 4, 2013, the Ontario Court of Appeal tripled the penalty the sentencing judge imposed on a construction company that failed to ensure the safety of its workers, resulting in the death of four workers and one left permanently injured (R. v. Metron, 2013 ONCA 541). In that case, Metron had hired an independent contractor to project manage the repair of balconies of an apartment building, and the project manager in turn hired a site supervisor. Two swing stage platforms were assembled, supervised by both the project manager and the site supervisor. The swing stages had only 2 life lines, and the site supervisor, along with 5 other workers, boarded one swing stage at the end of their shift on the evening of December 24, 2009. When the swing stage fell, one worker was properly attached to a lifeline and survived, another was improperly secured, suffering permanent injury, and the other four fell to their deaths. Metron plead guilty to one count of criminal negligence causing death under the Criminal Code, and the trial judge ordered a $200,000.00 fine against the company. On appeal, the court significantly increased the fine to $750,000.00, and in doing so, put its stamp of approval on the application of criminal liability to the actions of a third party that manages an important aspect of a corporation’s business.
Agents, Third Parties and What Keeps Compliance Officers Up At Night
It is critical to remember that the project manager was a third party contractor hired by Metron, and it was the project manager who in turn hired the site supervisor. It was the site supervisor’s responsibility to take reasonable steps to prevent bodily harm and death, including to ensure that, where only 2 life lines are available on a swing stage, that only 2 individuals are on that swing stage and are properly secured to the life lines. This was in fact the normal and usual practice on the project site. This case is an important development in the law because although the site supervisor was not an employee of Metron, the court captured his role within the Company’s scope of liability.
The Criminal Code defines “senior officer” to mean a representative, which includes an agent or contractor, who plays an important role in the establishment of an organization’s policies or is responsible for managing an important aspect of the organization’s activities. If an agent or contractor plays an important role in policy making or (more likely) is responsible for managing an important aspect of the organization’s activities, the agent’s actions will bind the organization in criminal law, even though they may be a separate corporate organization. Organizations must review their contractual relationships with agents and contractors and ask the following question: does the description of obligations under the contract create a managerial role for the agent? Justice Pepall concluded that:
“The definition of “senior officer” in s. 2 of the [Criminal] Code served to broaden the scope of those whose conduct could establish the criminal liability of the organization.” (paragraph 60)
Justice Pepall rejected the old hierarchal model, and on sentencing, observed that:
“…a corporation should not be permitted to distance itself from culpability due to the corporate individual’s rank on the corporate ladder or level of management responsibility.” (paragraph 90)
In coming to their decision, the Court of Appeal put its stamp of approval on extending the net of liability to capture third party independent contractors who manage an important aspect of the organization’s activities, under the expanded definition of “senior officer” in the Bill C-45 amendments. It is no longer just the executive committee, Board of Directors, or senior policy- makers that can lead to corporate criminal liability.
The Era of New Risk Management
With this expanded reach of the definition of “senior officer,” how can businesses ensure that their activities do not cause serious criminal liability? The answer: a rigorous compliance program. Canadian organizations should be taking corporate compliance seriously in the coming decade. This involves ensuring that five essential elements of compliance are in place:
- the program is founded upon strong leadership;
- a proper risk assessment is completed;
- standards and controls are developed and implemented;
- training and communication protocols are rolled-out; and
- the program is properly monitored, audited, and updated as necessary.
Organizations must institutionalize comprehensive internal policies to reduce the chances of illegal practices taking place – otherwise, they leave themselves open to either a future criminal or regulatory prosecution.
Health & Safety Risk Management
For occupational health and safety matters, the new risk management requires a range of key considerations:
- update policies and procedures that all employees and agents must review and sign;
- ensure proper training on safety measures is taken;
- have appropriate oversight whether through a designated safety officer or otherwise;
- ensure that contracts with third party agents specify that they are to comply with the company’s occupational health and safety policies and procedures; and
- perhaps most importantly, go beyond clauses that merely limit the company’s liability for third party actions – consider providing mandatory training to third party agents as a condition of the contract, as well as the right to pro-actively audit compliance.
Organizations can no longer rely on shifting the liability onto the shoulders of the third party agent through a tightly drafted contract, if in fact the third party’s role becomes that of a “senior officer”. A more prudent approach in light of the recent caselaw is to implement a pro-active audit program of the company’s internal systems, as well as those systems of the third party agent that intersect with the company. For example, a company can conduct audits through surprise visits, to ensure that agents are complying with health and safety requirements. While this may have historically felt like micromanaging overkill, it may now be a necessary step in the new era of corporate criminal liability.
- Review your current occupational health and safety policies for completeness;
- Provide health and safety training to all employees, regardless of their level;
- Proactively engage your union and employee health and safety representatives to develop a culture of joint responsibility and liability, as well as important sets of extra eyes in the workplace;
- Ensure all employees review and sign your health and safety policies;
- Review contracts with third party agents and consider whether the contract delegates management of an important aspect of the business to the third party, which will merge the third party with the organization in criminal law;
- Provide training to third party agents where possible;
- Ensure future contracts with third party agents include terms and conditions that they will comply with the company’s health and safety policies as well as the relevant legislation; and
- Demand audit rights for third parties, including surprise audits.