Split decision of Supreme Court of Canada affirms construction project owners potentially liable as ‘employers’ under Occupational Health and Safety Act

The reasons of the four members of the Court supporting the Ontario Court of Appeal decision also went one step further, holding that an owner who employs a general contractor as a “constructor” is also an “employer” and liable under OHSA. The Supreme Court of Canada left open a “due diligence” defence for owners, which many owners will now focus on, to avoid this new potential liability as “employer.” It also remains to be seen whether the Ontario government will introduce amendments to OHSA to eliminate the potential liability this may result in for construction project owners.

The facts

The City of Greater Sudbury (City) contracted with Interpaving Limited (Interpaving), as general contractor, to perform watermain repairs at an intersection in downtown Sudbury. The contract set out that Interpaving would assume control over the entire project, including assuming the role of “constructor” and the resulting responsibilities under OHSA. For years, project owners have taken this approach, engaging a general contractor to fulfill the role of “constructor” under OHSA for a project and to take responsibility for the resulting health and safety responsibilities. After a pedestrian was tragically struck and killed by a road grader, the Ministry of Labour charged Interpaving and the City with violations of their alleged duties both as “constructor” and “employer” under OHSA. 

OHSA

OHSA is Ontario’s legislation for workplace health and safety and articulates the various duties of parties to a construction project that qualify as

1. “employer” — a person who employs one or more workers or contracts for the services of one or more workers and includes a contractor or subcontractor who performs work or supplies services and a contractor or subcontractor who undertakes with an owner, constructor, contractor, or subcontractor to perform work or supply services
2. “constructor” — a person who undertakes a project for an owner and includes an owner who undertakes all or part of a project by himself or by more than one employer.

As we discuss below, the Supreme Court of Canada split evenly with respect to whether hiring a contractor to act as the “constructor” on a project is caught within the OHSA definition of “employer” as “a person who … contracts for the services of one or more workers”.

Lower court decisions

After a review of the contract and the roles of the parties on the project, the Ontario Court of Justice held that the City was neither an “employer” nor a “constructor” and therefore owed no duties under OHSA. While the City had employed quality control inspectors for the project, the trial judge noted that section 1(3) of OHSA explicitly limits the definition of “constructor” so that an owner does not become a “constructor” simply by engaging a person as architect, engineer or another person solely to oversee quality control.

The trial judge also held that the supervisory role of the quality control inspectors was similarly insufficient to qualify the City as an “employer.” Lastly, irrespective of the prior findings, the trial judge held that the City had established a due diligence defence. The Ministry unsuccessfully appealed the Ontario Court of Justice decision to the Superior Court of Justice, which upheld the trial judge’s decision.

Ontario Court of Appeal

The Ministry then appealed the Superior Court of Justice decision to the Ontario Court of Appeal. The Ontario Court of Appeal allowed the appeal on the issue of the City’s status as an “employer” on the project. The Court of Appeal held that the City qualified as an “employer” for the purposes of OHSA and was therefore responsible for ensuring compliance with OHSA, noting that the definition of “employer” under OHSA includes two types of relationships: a person who employs workers and a person who contracts for the services of workers. In this case, the City hired inspectors who were present on the construction site to monitor the job site for quality control and the progress of the work for payment. Therefore, the City satisfied the first branch of the test — i.e., it was “a person who employs workers” and, as such, an “employer.”

The Ontario Court of Appeal particularly noted that

1. the duties of workplace parties under OHSA can, and do, overlap
2. there may be multiple “employers” in a workplace
3. it is possible for a party to meet more than one definition under OHSA and, where this occurs, the party would be required to assume all corresponding responsibilities
4. there is no specific language in OHSA suggesting that “employers” require control of the project to be liable for accidents related to health and safety or that “employers” are only responsible for their own direct employees, and not all employees hired by third parties on the project site

Although the City was not the “constructor” under OHSA on this project, it was nevertheless an “employer” under section 1(1) of OHSA and was therefore subject to the broad section 25(1)(c) duty under OHSA to ensure compliance with prescribed workplace safety measures on the project (even though the prevailing view has generally been that such duty rests with the “constructor”).

Supreme Court of Canada

The City appealed the decision of the Ontario Court of Appeal to the Supreme Court of Canada. The decision of the Supreme Court was evenly split (meaning the Ontario Court of Appeal decision has been upheld).^[1] The reasons of the members of the Supreme Court supporting that result held that:

• the City was an “employer” under OHSA by virtue of having hired a general contractor, Interpaving, and because it employed quality control inspectors on the project site. A project owner may qualify as an “employer” for the purposes of OHSA, despite exerting limited or no oversight or control over the construction project

• the City had breached its obligations under section 25(1)(c) of OHSA to ensure that the appropriate health and safety measures and procedures were carried out in the workplace. There is nothing in OHSA that requires the Ministry to establish that the City had “control” over workers, the employees of third-party contractors or the workplace to prove that it had breached its obligations as an “employer.” The City was liable as an “employer” simply because it employed the contractor and the inspectors to work on the site
• liability under public welfare statutes such as OHSA is often concurrent and overlapping, and several different actors may be responsible for the same protective functions and measures

However, the Supreme Court of Canada noted that the City may avoid conviction for its failure to comply with section 25(1)(c) of OHSA if it can show that it exercised due diligence under section 66(3)(b) of OHSA. Relevant considerations may include, but are not limited to

• the accused’s degree of control over the workplace or the workers
  • where an accused can prove “lack of control”, such a finding may stand as evidence that all reasonable steps were taken in the circumstances
• whether the accused delegated control to the “constructor” to overcome its own lack of skill, knowledge or expertise to complete the project in compliance with the OHSA regulations
• whether the accused took steps to evaluate the “constructor’s” ability to ensure compliance with the OHSA regulations before deciding to contract for its services
  • relevant considerations could include whether the project owner pre-screened the “constructor” before hiring them to ascertain, for example, whether the “constructor” had superior expertise, a track record free of prior convictions for breach of OHSA and the capacity to ensure compliance with OHSA
• whether the accused effectively monitored and supervised the constructor’s work on the project to ensure that the prescriptions in the OHSA regulations were carried out in the workplace (e.g., a municipality has the ability to control those whom it hires and to supervise the activity either through the provisions of a contract or by municipal bylaws)

In the end, the members of the Supreme Court who affirmed the Ontario Court of Appeal’s decision remitted the matter back to the Ontario Superior Court of Justice for a different judge to consider the Ministry’s appeal of the City’s due diligence defence.

Takeaways

The release of the Supreme Court’s decision has the potential to significantly increase liability for workplace safety for project owners. Modern construction projects have been recognized as unique workplaces by virtue of their complexity and scale. Owners, generally not being in the business of construction, have historically delegated the management of health and safety measures on construction projects to general contractors (as “constructors” under OHSA). 

However, the Supreme Court’s decision may mean that a project owner will be an “employer” by virtue of retaining a general contractor for a project, with the related health and safety obligations and liabilities under OHSA, subject to proving a due diligence defence. Given recent increases to OHSA fines — now a maximum of $2,000,000 for corporations — and the potential for corporate directors and officers to face imprisonment for up to 12 months, project owners will want to take appropriate due diligence measures, and closely follow this case as it returns to the Superior Court of Justice to assess whether the City’s due diligence measures were sufficient.

In the future, the scope of project owner liability under OHSA in many cases is likely to center on an owner’s ability to establish a due diligence defence. Project owners should review their current procedures, both for traditional project models and emerging project models such as integrated project delivery and alliancing, and stay up to date on future cases that can be expected to provide further guidance. Project owners, who may be found to be “employers,” will want to ensure their actions are optimized to establish a sound due diligence defence in the event of any violations of OHSA.