Poorly considered language in financing and other agreements could now expose unwitting organizations and supervisory employees to criminal liability for health and safety, environmental and other accidents. Fortunately, it’s relatively easy to develop appropriate language to mitigate that risk.
Bill C-45, An Act to amend the Criminal Code (criminal liability of organizations) came into force on March 31, 2004. While it has received a lot of attention from an occupational health and safety perspective, the implications for other areas of law (i.e. environmental) and on commercial agreements remains largely unexplored.
The legislation results from a recommendation of the public inquiry into the Westray mine disaster in 1992. Bill C-45:
Establishes new rules for attributing criminal liability to organizations (including corporations);
Imposes a new legal duty on persons who direct or have the authority to direct how another person performs work;
Sets out additional sentencing factors applicable to organizations; and
Authorizes special probation conditions for offending organizations.
Broad Wording of Persons Responsible
Due to parallel provincial regulatory regimes that directly apply in many circumstances, it seems likely that Bill C-45 will only be relied on by prosecutors in egregious circumstances such as Westray. However, when such circumstances do occur, there will be close scrutiny to determine who may be responsible. While the factual circumstances will be most closely investigated, relevant commercial agreements may also be examined to determine individuals or organizations who may be a party to an offence.
The new legal duty in Section 217.1 of the Criminal Code, imposed on persons supervising the work of others, gives rise to an easily identifiable concern:
Every one who undertakes, or has the authority, to direct how another person does work or performs a task is under a legal duty to take reasonable steps to prevent bodily harm to that person, or any other person, arising from that work or task. [emphasis added]
Given the potentially broad application of the language used in Section 217.1, it is important to carefully consider the structure of, and language used, in different commercial agreements to make clear, where appropriate, who has the power and authority to direct work or tasks.
For example, in financing agreements, due to concerns about possible occupational health, safety and environmental liability, financial institutions generally require that the lending documentation make it clear that the financial institution does not have charge, management or control of the borrower’s property or operations. Given the new duty imposed by Bill C-45, financial institutions may also want to make it clear that they do not have any authority to direct how the employees, agents or contractors of the borrower do work or perform a task.
Retainer agreements with consultants and contractors provide another example. It may be important to consider the degree of control, if any, that the owner wishes to maintain over the conduct of the work by the consultant or contractor. Such a decision will involve balancing the desire to maintain sufficient control to ensure that the work is properly and safely performed against keeping a sufficient distance from the work to avoid liability to the owner if a serious incident (potentially giving rise to liability under Bill C-45) occurs. Similar issues arise in other settings, such as joint venture agreements and construction contracts, where the assignment of authority for the supervision of work is routinely addressed.
Better Language Easy to Develop
In circumstances where, on the merits, criminal liability should be imposed, it seems unlikely that an organization or an individual will be able to ‘contract out’ of criminal liability completely. However, while contractual terms or the written assignment of responsibility in a workplace setting are unlikely on their own to be determinative of ultimate liability, poorly considered language could give rise to unnecessary exposure. Given that appropriate language can be developed with reasonable ease, the time taken to proactively address this issue could pay significant dividends if a person is unfortunate enough to be involved in a situation where Bill C-45 potentially could be applied.
Dan Kirby is a partner in Osler's Environmental Law practice in Toronto.
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