Heavy fines, jail time for small corporation and directors not always necessary for effective deterrence
Back in 2017, a Summary Appeal decision in Ontario overturned a sentence of a $500,000 corporate fine and jail sentences for two directors of a company. In its place, the Summary Appeal Justice ordered a $50,000 fine on the corporation, and $15,000 fines for each of the two director defendants.
That decision was appealed by the Ontario Ministry of Labour to the Ontario Court of Appeal. The ministry hoped to have the initial sentences reinstated. In its decision dated Jan. 18, 2019, the court reviewed its concerns with the initial appeal judge’s reasoning, but ultimately declined to alter the new sentence.
By way of recap, the defendant company was New Mex, a small and closely held corporation operating a furniture warehouse. New Mex has two directors, and at the time of the conviction, 12 employees. In January 2013 an employee died after falling from a height of 12 feet off of an order picker machine. The Court of Appeal agreed that the circumstances of the fatality could aptly be described as “the highest level of negligence.” Each of the corporate and individual defendants pleaded guilty.
On initial appeal, the judge held that “deterrence is the cardinal principle,” and decided that the reduced penalties would accomplish that goal in the specific circumstances of this case. That is to say, for such a small and financially weak business, the huge fines and jail sentences were beyond what was necessary to achieve deterrence.
The Court of Appeal took issue with the lower court’s reasoning that offences under the Occupational Health and Safety Act (OHSA) — as opposed to, say, criminal offences — do not attract considerations of “moral blameworthiness” for which incarceration would be based. The Court of Appeal decided that regulatory offences do need to consider moral blameworthiness on a spectrum, which will be more strictly held when there are repeat offenders or willful misconduct. The effect is that “where the moral blameworthiness of a particular offender increases, so too can the penalty imposed.”
The Appeal Court agreed with the ministry that conduct of the defendants was blameworthy, but it also invoked the principle of restraint: “the sentence should constitute the minimum necessary intervention that is adequate in the particular circumstances” and “an offender should not be deprived of liberty ‘if less restrictive sanctions may be appropriate in the circumstances’.”
An overall contextual analysis is needed when a court imposes its sentence, even in a health and safety conviction. The previous fines of $250,000 in OHSA fatality cases were levied against large companies, typically: publicly traded companies, international companies, municipal corporations, or public utilities. The Court of Appeal criticized the sentencing judge for failing to demonstrate why, based on sentencing principles, thisefendant company deserved the same level of penalty.
It is interesting that the Court of Appeal actually decided that the original incarceration sentences were fit and preferable to the modest fines imposed on the directors in the initial appeal. However, the Appeal Court deemed that the sentencing judge erred in law through her stated reasons for ordering incarceration, namely that monetary penalties would have been too burdensome financially. For this reason, and due to certain external factors which would make incarceration unreasonable at this time, the Appeal Court chose not to disturb the more modest penalties against the directors.
This decision illustrates the sentencing principles applied in regulatory offences, but pay particular attention to what it says about jail sentences. The Court of Appeal does not oppose jail sentences for OHSA offences generally, as suggested by the lower court. In fact, this Court of Appeal specifically said that the fact that fewer than two dozen OHSA convictions have resulted in jail time is not a sufficient reason to take it off the table as an appropriate penalty. In cases where it appears that a fine will not have a deterrent effect, a jail sentence is very much in play.
With that in mind, the best defence for any employer of course is knowledge of and compliance with the law.
Michael MacLellan is a partner with CCPartners in Brampton, Ont., practicing labour and employment law. He can be reached at (905) 874-9343 ext. 251 or [email protected]