The core purpose of workers' compensation legislation has
been to offer injured workers easier access to benefits while
immunizing their employers from direct liability. Workers'
compensation is in fact a form of insurance for employers, which
pay premiums to the insurer (the provincial Workers'
Compensation Board) to fund the compensation system and to obtain
immunity from liability.
That principle has taken a hit in the Alberta Courts.
Normally, under section 23 of the Alberta Workers
Compensation Act, actions against employers who pay into the
WCB system are prohibited when the accident is caused by, and
injures, workers covered through the WCB system. Unfortunately, a
recent decision in Dempsey v. Bagley, 2016 ABQB
124 allows the WCB to pursue a WCB-covered employer when
there is an indemnity clause in a vehicle leasing agreement.
Two Brinks Canada Limited drivers caused single vehicle
accidents while driving during the course of their employment. The
accidents injured three other Brinks employees who were passengers
in the vehicles. Brinks met the definition of an
"employer" under the Workers Compensation Act
and paid WCB premiums on behalf of its employees.
The Brinks vehicles were leased from a third-party leasing
company, PHH Vehicle Management Services Inc. PHH was also an
"employer" under the Act and paid premiums on
behalf of its employees. The leases each contained an indemnity
clause stating that Brinks would indemnify PHH for losses arising
from the operation of the vehicles. The injured employees received
compensation and medical treatment through the WCB system. The WCB,
in the names of the injured employees, commenced lawsuits against
the employee drivers, Brinks, and PHH.
The Court was asked to consider whether the WCB could recover
against Brinks and PHH. The presumed answer is "no"
because WCB premiums are mandatory for most employers. In exchange
for paying WCB premiums, employers are granted a statutory immunity
from lawsuits under section 23 of the Workers Compensation
Act when workers covered by the WCB system are both the cause
of, and the victims of, an accident.
It follows that it would be unfair to both impose mandatory WCB
premiums on employers and then force an employer to incur costs
defending litigation and potentially paying a judgment. Such double
recovery would erase a supposed benefit of paying into the WCB
However, the Court took a different approach. It found that the
WCB could not pursue Brinks or its employee drivers pursuant to
section 23 of the Workers Compensation Act. Interestingly,
protection was not afforded to PHH because its employees did not
cause or contribute to the accident. As such, PHH could not avail
itself of the statutory immunity provided in section 23, despite
having paid WCB premiums.
Further, the Court relied on section 187(2) of the Traffic
Safety Act to hold PHH, as owner of the vehicles, vicariously
liable for the acts of the Brinks drivers. This was in spite of
acknowledging the indemnity clause in the lease agreement that
ultimately would require Brinks to indemnify PHH for any loss
arising in connection with use of its vehicles.
The Court assessed the relative vicarious liability between
Brinks and PHH as 75% and 25% respectively given that Brinks had
control of the vehicles and was responsible for providing vehicle
training to its employees, establishing operating guidelines
regarding the use of the vehicles, and supervising the use of the
vehicles. The end result was that the WCB could not pursue Brinks
or its employees for 75% of the value of the claim, but it could
pursue PHH (and Brinks) for 25% of the claim. Currently, neither
party has filed an appeal of this decision.
Although prior Courts have held vehicle leasing companies liable
for accidents involving their vehicles, those decisions did not
consider the effect of an indemnity clause on a WCB-covered
employer. The Court was not sympathetic to Brinks having to
ultimately indemnify PHH because Brinks benefited from tax and
other economic advantages by leasing its vehicles. The bottom line
is that employers must now consider the financial benefit they
receive from choosing to lease their vehicles and whether this
offsets the risk of potential liability for injured workers'
claims. For smaller claims, like in this case, the impact on
employers will not be significant. However, in catastrophic injury
cases where damage awards can often exceed $2 million, the
financial implications for employers may be momentous.
For almost a century, Canadian employers have counted on
workers' compensation legislation to address injured
employees' needs while insulating the employer itself from
direct risk. Decisions which erode that principle may, in turn,
erode employers' commitment to the insurance scheme. That is an
unnecessary risk for all concerned.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.
From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.
Staying local but going global presents its challenges. Gowling WLG lawyers offer an international roundtable on doing business in the U.K., France, Germany, China and Russia. This three-hour session will videoconference in lawyers from around the world to discuss business and intellectual property hurdles.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).