'Directors who sit in offices far from the job sites… may also be the targets of questions or prosecution'
A recent decision out of Ontario involving sizeable safety fines is part of a larger trend that sends “a chilling message overall,” according to one employment lawyer.
“And then we've got the prosecutors saying, ‘We are going to go after directors and officers more frequently’ — it's not going to be acceptable for directors and officers to sit back on their heels and not take any responsibility for health and safety compliance. So there's a lot going on in that area,” says Cheryl Edwards, partner at MathewsDinsdale in Toronto.
Anecdotally, many Canadian businesses are not addressing these safety issues as they should, she says.
“They tend to sadly turn their mind to this when an incident has happened and questions are being asked about whether senior management took steps — and that's too late.”
The case – concerning the death of six workers after an explosion at a fabrication shop in 2022 – is not a seminal one, but it is a “departure in the law,” says Ben Ratelband, partner in labour and employment at McCarthy Tetrault in Toronto.
“It is definitely noteworthy because it's demonstrative of a trend in the law that we've been seeing for quite a long time.”
While this recent decision may not exactly be a wakeup call, it’s definitely “a stark reminder,” he says.
“A lot of corporations are already aware of these obligations, because they've existed for a long time, but I do think this is a stark reminder that... directors do have significant duties, and that the consequences of not fulfilling those duties can be quite severe given the increases in maximum fines, and also, although it's not common, there is the possibility of incarceration.”
6 lives lost in workplace accident
On Jan. 13, 2022, an explosion at the fabrication shop of Eastway Tank, Pump and Meter resulted in seven workers being injured — six fatally and one critically.
An investigation by the Ontario Fire Marshall revealed that the explosions were due to contaminated diesel test fuel being used in a “wet test” of a newly built tank truck. A routine procedure, the test involved running diesel test fuel through various components of the tank truck to check for leakage.
However, the diesel test fuel used was contaminated with gasoline, which led to the explosions. The contamination occurred because a worker had left diesel test fuel in a truck the day before for calibration purposes, and more fuel was subsequently added. This contaminated fuel was then transferred from the outdoor tank to the truck in the fabrication shop, where the explosions occurred, according to the Ministry of Labour, Immigration, Training and Skills Development (MLITSD).
The investigation found that the company and its director “failed to take every precaution reasonable in the circumstances for the protection of workers” and “failed to provide adequate information, instruction and supervision to workers to protect their health and safety,” said the government, while the director “failed to take all reasonable care to ensure that the corporation complied” with OHS legislation.
Sizeable OHS fines after workplace accident
One of the big reasons the case is notable is because of the size of the corporate fines — particularly for such a small organization.
Following a guilty plea in the Ontario Court of Justice in Ottawa, Eastway Tank, Pump and Meter was fined $600,000 and its director, Neil Greene, was fined $80,000. The court also imposed a 25 per cent victim fine surcharge as required by the Provincial Offences Act, for a total penalty of $750,000.
It’s notable that these fines came under the old sentencing provisions, before new ones took effect in June 2022 when the maximum fines for directors or officers of a corporation rose from $100,000 to $1.5 million and to $500,000 for other individuals, says Edwards.
Maximum fines against individuals were quadrupled from $25,000 to $100,000. And as of October 2023, the increase moved the maximum from $1,500,000 to $2,000,000 per charge.
In addition, as of July 2022, the MLITSD now has two years to investigate and prosecute companies, directors, officers, supervisors and employees for alleged contraventions of the Occupational Health and Safety Act (OHSA) — compared to a previous timeline of 12 months.
“We’re kind of all holding our breath,” she says.
“We will probably see some cases that have been sitting for two years in the system — where the corporate maximum has now gone up and the director and officer maximum has now gone up — and we now have a prosecutor saying we are going to strictly enforce this. And so we expect to see a change fairly shortly.”
Factors considered for safety fines
When it comes to sentencing for safety violations in Ontario, one of the leading decisions cited is R v Cotton Felts Ltd from 1982, which said that the penalty amounts would be determined by a variety of considerations, including:
- the size of the company involved
- the scope of the economic activity at issue
- the extent of actual and potential harm to the public
- the maximum penalty prescribed by statute.
Other factors considered by the courts include the employer’s past health and safety record, showing remorse and actions taken after an accident.
In this recent case, the corporate fines were significant for a corporation of this size, with roughly 20 to 30 workers, and with this being the company’s first offence, says Ratelband.
“Ordinarily, with those two factors alone — unless there's a lot of other egregious sort of conduct — you would expect that the sentence would not be as high as it was.”
The sizeable fines are likely a reflection of the fact that there were multiple fatalities in a “horrific” accident, he says.
“It's sending, I think, a very clear message that the courts appear to be increasing the amount of the fines,” says Ratelband, adding that the overall objective of Occupational Health and Safety Act penalties “is to deter behaviour like this in the future.”
And these cases don’t just involve a few “bad apples,” according to Edwards.
“It does tend to be the most horrific cases that result in the most publicity and the biggest fines, of course, because they've been very serious cases, but… any director and officer could find themselves in this position if they're investigated after a serious incident, and we all know that there are many incidents every day and every week in Ontario alone.”
On-site or off-site, directors responsible for safety
Another interesting element to this case is that there was nothing to connect the director to any poor or bad behaviour, she says, “just simply that he had not taken steps to ensure corporate compliance.”
Generally speaking, charges and penalties meted out in Ontario against directors and officers have been against someone who was on-site when a safety issue occurred, says Edwards.
“What we think may start to happen is that directors who sit in offices far from the job sites, who are on the board of directors — who've never been to the mining site or the construction site or the industrial facility — may also be the targets of either questions or prosecution,” she says.
“That's what this gradual bumping up of fines to an extraordinary level, $1.5 million per charge, and this proclamation from this prosecutor seems to suggest — that it's going to be a complete change: ‘We're not just going to look to the small owner of a construction project, who happens to be on site… we might look to boards of directors and say, ‘What have you done? What steps have you taken?’”
Whie it’s not common for directors to be charged, they do have a duty to take reasonable care or to ensure that the Occupational Health and Safety Act is complied with, says Ratelband.
“This case appears to signal a trend that the directors are more likely to be charged, one; and, two, that this fine could be, quite significant,” he says.
“Where you're dealing with someone who's at arm's length from an incident… the way in which they demonstrate due diligence will obviously be different from somebody who's a direct supervisor of employees.”
Due diligence defence in OHS
There is a due diligence defense to any OHS charge, says Ratelband, “so if you can demonstrate that you took all reasonable care in an instance to avoid something happening, then you will be acquitted of a charge under the Occupational Health and Safety Act, including directors or whoever it is who's charged.”
Directors and officers also want to ensure that there's some kind of corporate review or auditing of OHS compliance, he says.
“The director doesn't have to do it themselves, necessarily, but they need to ensure that someone qualified is doing that, and reporting back in a reasonably regular way to the directors about what's happening, about whether things are being complied with.”
And then it’s about establishing a system to follow up when any noncompliance is identified, says Ratelband.
“You want to have some kind of system where the essential duties are understood, they're reviewed periodically and updated, and there is a way in which health and safety issues can be reported up on a regular basis. And, that there can be direction given down to address issues as appropriate.”
One of the biggest challenges is having a system where a health and safety manager at a plant or construction site pulls together the necessary information to inform directors and officers of the state of compliance, so that then they can respond accordingly, says Edwards.
“Many directors can take a course; they can have a lawyer come in or a safety professional come in to talk to them — that's a pretty easy first step. And having an audit done or a site review done is pretty easy.
“But it's actually getting those regular ongoing reports of the state of compliance… [or] indicators of potential problems, or complete non-compliance — for example, ‘The ministry has been to our site five times and they've issued five orders for compliance.’ Getting that information to the senior people who might be off site, and then giving direction on that, I think is the hardest part.”
HR’s role in OHS compliance
HR plays an “extremely important role” in the whole process, according to Edwards.
“In some businesses, the HR manager is either closely aligned with the health and safety manager or director, or is the health and safety manager because some organizations still combine those roles. And I certainly think that in terms of formulating overall strategy for compliance with legislative obligations, HR could perform an extremely important role in making sure that it's clear that systematic steps have to be taken.”
As part of that, HR, together with health and safety, should emphasize to senior management the importance of staying informed of any safety issues, taking action and having regular reporting, she says.
“HR has a lot of credibility within the organization… So I think a partnership could be very important between HR and safety in emphasizing the need for a systematic approach to senior management and to the board of directors.”
HR should also be aware that the potential consequences of breaches of the Occupational Health and Safety Act are increasing, says Ratelband, and that the consequences of not paying attention are going to be more significant.
And with the increased focus on directors and officers, “perhaps this an impetus for HR folks to look at exactly what kind of occupational health and safety due diligence system they have in place for people who are senior members of the management structure,” he says.
“Is there a process in place or system in place for them to be able to be duly diligent and to be able to demonstrate that they were duly diligent if... it's ever questioned or challenged?”
