Stringer Brisbin Humphrey - OH&S Due Diligence Update - July 23, 2003

On June 12, 2003, the prospect of both regulatory and Criminal Code prosecutions emanating from a serious workplace accident became much more real. The federal government introduced anticipated amendments to the Criminal Code in Bill C-45, which, if passed, will create positive occupational health and safety-related duties for corporations, individuals, and other parties defined as "organizations". Bill C-45 will make it easier to convict those same corporations and "organizations" of the offence of criminal negligence for workplace safety violations.

The breadth of the application of the proposed amendments may surprise some. New duties would exist for individuals and corporations, but also for a broadly defined series of "organizations" including voluntary associations and even trade unions.

The amendments do not supersede current regulatory provisions in the OHSA. Rather, new "criminal" offences are created for corporations, defined "organizations" and individuals who fail to protect workers and the public. The following are key details of the legislative changes proposed in Bill C-45.

1. POSITIVE OH&S DUTY ADDED TO CRIMINAL NEGLIGENCE SECTION OF THE CRIMINAL CODE

The Bill proposes an explicit new duty within the criminal negligence sections of the

Criminal Code. The duty provides that those who undertake or have the authority to direct how another person does work or performs a task are required to take reasonable steps to prevent bodily harm to any person arising from the work.

The framers of the legislation clearly intend to impose this duty on a wide range of personnel in the workplace. All managerial personnel (regardless of whether they are front-line supervisors, or officers or directors) who have the power to direct work would be responsible for ensuring that all reasonable steps are taken to prevent bodily harm.

The duty would not be confined to managers, supervisors, and officers or directors. Any individual employee who "undertakes" to direct another how to perform any "task" in the workplace could also be subject to the duty. Imposing this obligation on employees has the potential to create a chilling effect on working forepersons or lead hands, who may well become reluctant to assume such roles if they attract the potential risk of criminal liability for even minor direction or supervision of others.

The proposals require that those subject to the duty take reasonable steps to prevent bodily harm to any person. Therefore, there would exist an obligation to workers and to the public at large. This part of the duty will be of critical importance in settings where the public is in physical attendance where the work is performed, or where the public could be affected by adverse consequences arising from work activities.

2. DIFFERENCE BETWEEN PROPOSED CRIMINAL CODE AND OHSA DUTIES AND VIOLATIONS

The proposed duty closely parallels obligations already imposed on employers, supervisors, constructors, directors, officers and owners under the OHSA to take "all reasonable precautions" to protect the health and safety of workers.

It would certainly appear that proposed Criminal Code duties would apply to each of those parties who have regulatory OH&S obligations. Determining what "reasonable steps" an employer or manager was required to take in the circumstances will be a fact- sensitive determination. The mere failure to exercise steps required under a regulatory statute, or failure to exercise "due diligence" as defined in caselaw from the OHSA context will not equate to criminal negligence. However, we fully expect that the Courts would seek guidance from well-developed "due diligence" jurisprudence from OHSA prosecutions which have generally imposed an extremely high standard of diligence on regulated parties such as employers, constructors, supervisors, officers and directors.

What, if anything, does the addition of Criminal Code duties mean for already-regulated corporations and individuals in Canada?

Aside from the obvious addition of obligations for "organizations" (defined below), one of the most important differences between criminal and OHSA prosecutions is that a criminal standard must be breached by the individual, corporation, or organization.

Criminal negligence standards are well developed and will remain unchanged. Criminal negligence occurs when an act or omission of an accused party shows wanton or reckless disregard for the lives or safety of others in a situation where the accused party is under a legal duty to act. The Crown must prove that the conduct of the accused party represented a marked and significant departure from the standard which could be expected of a reasonably prudent person in the circumstances. Needless to say, this standard is distinct from the regulatory standard of failure to exercise all reasonable care or "due diligence". Just how distinct it will be from regulatory "due diligence" concepts will be dependent on case law which develops.

Another important difference between Criminal Code prosecutions and those under the OHSA relates to the burden of proof. In criminal cases the Crown is required to prove the guilt of an accused "beyond a reasonable doubt". In OHSA prosecutions, once the Crown has proven on a balance of probabilities that the alleged action violating the regulatory standard occurred, the onus is on the accused party to establish "due diligence". There will clearly be some cases where the burden of proof and the apparently significantly higher standard for criminal negligence conviction will make the difference between acquittal and conviction for an accused party.

3 . "CORPORATE" CRIMINAL LIABILITY WILL APPLY TO A BROAD RANGE OF ORGANIZATIONS

Although the proposals have been widely known as "corporate" criminal liability provisions, Bill C-45 does not limit liability to corporations as they are known in a commercial law sense. The Bill imposes liability on "organizations" and defines that term to include public bodies, corporations, societies, companies, firms, partnerships, trade unions, municipalities, and any other organization that is created for a common purpose, has an operational structure, and holds itself out to the public as an association of persons.

This expansive definition shows an intent that the provisions apply as widely as possible. There will be few situations where a public or private sector defendant will be able to successfully argue that it does not meet the definition of an "organization".

These provisions expand the targets of potential criminal charges for workplace safety violations well beyond the OHSA which only applies to organizations that employ workers for monetary compensation. (i.e., to voluntary associations)

4. CORPORATE PROSECUTIONS UNDER CURRENT CRIMINAL NEGLIGENCE PROVISIONS

As indicated above, at present it is already possible for a corporation to be convicted of criminal negligence under the Criminal Code. This can occur as a result of the Court-developed "directing mind" doctrine: where the Crown can prove that the corporate "directing mind" possessed the necessary intent for criminal conviction or has been involved in activities or actions which demonstrate the necessary criminal intent there can be a corporate conviction. An individual responsible for developing and implementing corporate policy is a "directing mind" of the corporation. In contrast, an individual who simply carries out corporate policy on an operational day-to-day basis is not a "directing mind". The "directing mind" must occupy a senior executive position in the corporation, according to decided Canadian cases.

5. PROPOSED LIFTING OF BARRIERS TO CONVICT ORGANIZATIONS OF CRIMINAL NEGLIGENCE

Bill C-45 is specifically directed to making convictions for criminal negligence occur more readily for complex organizations, including corporations. An organization can be made a party to an offence of criminal negligence and convicted where it is shown through the means described below that it wantonly or recklessly disregarded public or worker safety.

To convict an organization such as a corporation of criminal negligence, the Crown would first be required to prove that the acts of a single "representative" of the organization (defined to include directors, partners, employees, members, and agents of the organization) acting within the scope of his or her authority breached the duty to take all reasonable steps to prevent bodily harm, or that the combined actions of two or more representatives breached the duty. In the latter situation, it would not matter whether the individual actions of a single representative were in breach of the duty, the Crown need only show that the combined actions of multiple representatives would have breached the duty had they been performed by one "representative".

Simply put, there is a two step process. The Crown has to show that the actions of a single corporate representative or group of representatives, who could be mere employees, demonstrate a lack of care that constitutes criminal negligence (i.e., reckless ignoring of safety rules or physical protective measures, when the potential result is serious harm or death). Then the Crown has to show that a senior official with operational authority or executive authority, or as the drafters have put it, "real clout", has either failed to act or has operated in a manner which insulated them from obtaining the knowledge to act (i.e., the senior officer has to have engaged in a marked departure from what would be expected of an officer with obligations to take reasonable steps to protect workers and the public).

The proposed amendments do not eliminate the "directing mind" doctrine, as it would still be necessary to prove culpability of a member of senior management. However, the doctrine would be altered to eliminate the requirement to show direct involvement, and it would be altered to allow the actions of lesser corporate representatives to make the organization party to an offence.

The proposed amendments clearly signal that Parliament expects senior management to take a proactive role in health and safety matters. The conduct of senior management could very well come under unprecedented scrutiny from investigators. After any tragic workplace accident, it is not difficult to imagine investigators bowing to public or other pressure to closely examine whether a breach of this new Criminal Code duty has occurred.

Organizations must ensure that they have a system to keep senior management informed of and actively involved in giving remedial direction on workplace health and safety issues. A system must be developed to document all actions taken by management in this regard, as documentation can become important evidence to demonstrate that the senior manager complied with the standard of care expected in the circumstances. This will become important for all senior officials in all jurisdictions should Bill C-45 pass.

6. OFFENCES OTHER THAN NEGLIGENCE

There are also new provisions in the Bill which would make organizations liable for offences deliberately or intentionally committed by representatives (i.e., offences other than negligence). An organization could be made a party to and be convicted of an offence that requires the Crown to prove fault where a "senior officer" acted within the scope of her authority and at least in part to benefit the corporation in each of the following situations:

(a) Where the "senior officer" was a party to the offence;

(b) Where the "senior officer" intentionally directed other representatives of the organization to commit the offence, or directed them not to remedy a condition which causes an offence; or

(c) Where the senior officer is aware that a representative in the organization is committing or is about to commit an offence and does not take all reasonable measures to prevent their actions.

7. PINSTRIPES TO PRISON STRIPES: WHAT WOULD HAPPEN TO THOSE CONVICTED?

(i) Factors the Courts Would Consider

The Bill proposes a number of factors Courts would be obligated to consider when imposing sentence on an organization after a Criminal Code conviction.

The sentencing provisions explicitly consider the possibility that concurrent criminal and regulatory prosecutions and convictions may occur. Courts are required to consider whether the organization has any convictions under the OHSA for similar conduct, meaning that corporations with prior convictions under OHSA will likely face higher criminal penalties. Courts would be required to consider whether there has been any regulatory penalty with respect to the offence charged, suggesting that a reduced Criminal Code penalty may be possible where the organization has already been subject to a sentence under the OHSA.

As in the context of OHSA cases, the size and profitability of an organization and the seriousness and advantages gained by the offence, will be important factors in determining the amount of any fine. Courts want to ensure that any fine acts a deterrent and does not serve as a "license" to break the law. Thus, larger and more profitable organizations can expect to receive higher fines than their smaller counterparts. The civic nature of an organization may be relevant to sentence in the case of voluntary associations with a clear public service purpose. Courts would also be required to consider other factors, including the cost of the investigation and prosecution to the public, restitution made to any victims, any penalty the organization has imposed on a corporate representative as a result of the offence, and remedial steps directed to preventing the likelihood of a subsequent offence.

The Bill specifically proposes that the Court would consider whether the organization has attempted to convert or conceal assets in order to show that it cannot pay a fine or make restitution. On the other hand, the proposals would also require the Court to consider the impact that a Criminal Code sentence would have on the economic viability of the organization and its continued employment of employees. Whether these provisions would be seen as mandating financial disclosure, an issue which has increasingly been pursued by regulatory prosecutors even where ability to pay has not been put in issue, remains to be seen.

(ii) Broad Range of Creative Sentencing Options

The majority of convictions under the OHSA result in a fine and do not generally involve any ongoing supervision by the Courts of a corporation's post-accident or post-sentence safety compliance. The logic presumably underlying this is that regulatory inspectors responsible for enforcing the OHSA provide an effective means of assuring ongoing compliance. We also note that MOL Prosecutors have fairly steadfastly maintained the position that terms of probation and other creative sentencing options are not acceptable for workplace safety violations.

Courts have been strenuously pressed to impose higher and higher monetary penalties in the name of general deterrence.

Fines would be an important means of penalizing any individual, corporation, or organization convicted under the Criminal Code, should Bill C-45 be passed. A maximum penalty of $100,000.00 for an organization, including a corporation, would be available where the Crown proceeded by summary conviction, and there would be no limit on the monetary penalty available for an organization, including a corporation, where the Crown proceeded by indictment.

Individuals would remain subject to a complete range of Criminal Code sentencing options, from absolute or conditional discharge, to a maximum of life imprisonment, depending upon the specific offence and the interests of justice.

The Bill would give the Court a broad range of creative options for sentencing organizations, including corporations, in addition to fines. This would signal an expansion of the Court's role in supervising ongoing compliance measures to protect workers and the public. Options available under the Code would include

terms of probation. Probation orders could include conditions such as:

restitution for loss or damage;
requiring the organization to establish and communicate policies and procedures to reduce the likelihood of a future recurrence of the offence;
requiring that the organization report to the Court on the implementation of remedial procedures;
requiring that the organization appoint and identify a senior officer responsible for implementation of remedial procedures.

It will be interesting to see how the Courts utilize such extensive ongoing supervisory powers in the safety context and what role (if any) MOL inspectors would play in reporting to the Court about the ongoing compliance efforts of organizations subject to such probationary sentences.

Possibly most interesting of creative sentencing options available is a new authority which would exist for a probation order requiring a convicted organization to disclose to the public their conviction, the sentence imposed, and any policies, procedures or other remedial measures established to prevent a recurrence of then offence, in a manner specified by the Court. This could result in the Court ordering an organization to disclose its conviction in a manner having a profound effect on the organization's public image (i.e., ordering conviction and sentence to be posted in a prominent place on the company website, its annual report, news media). Although for many organizations that penalty could be far worse than a substantial fine, we note that it has become commonplace for substantial OHSA fines to receive automatic posting on the MOL website and the Canada newswire service. For some time now, this practice has already been achieving the unintended effect of revealing OHSA conviction information to all who use search engines to access information about the corporation or organization.

For more information contact the writers at 416-862-1616 or rconlin@sbhlawyers.com _________________________

Disclaimer: The information contained in this article is general information only and should not be relied upon as a substitute for legal advice or opinion.