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.

Increased Penalties

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.

“Senior Officer”

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:

  1. the program is founded upon strong leadership;
  2. a proper risk assessment is completed;
  3. standards and controls are developed and implemented;
  4. training and communication protocols are rolled-out; and
  5. 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.

Next Steps

  • 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.
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