Section 26 of the Ontario Human Rights Code states that it is a "...condition of every contract entered into by or on behalf of the Crown or any agency thereof and of every subcontract entered into in the performance thereof that..." there be no discrimination in employment (as prohibited by section 5 of the Code) "...in the course of performing the contract."
Subsection 26(3) of the Code further sets out the powers of the Tribunal as follows:
Where an infringement of a right under section 5 is found by the Tribunal upon a complaint and constitutes a breach under this section, the breach of condition is sufficient grounds for cancellation of the contract, grant, contribution, loan or guarantee and refusal to enter into any further contract with or make any further grant, contribution, loan or guarantee to the same person.
By consequence, where a person (or company) has entered into any contract with the Crown, or an agency of the Crown, (in Ontario where the Code applies) a potential consequence of employment discrimination could actually be the nullification of the contract, and refusal by the Crown to enter into any future contract, grant, contribution, loan or guarantee to that person (or company) in the future.
Quite conceivably, such consequences could be staggeringly costly for businesses that depend on the Ontario government for financing or revenue generation.
Very few cases exist that have applied or interpreted this section, which has existed since 1990 (with amendments in 2002). However, even the possibility of such a consequence should make it evident that companies interested in preserving their ability to contract with government in Ontario must conduct effective due diligence in respect of their employment related human rights management and legal compliance, if their capacity to contract is to be preserved. Where such contracts are in place, corporate management must also recognize that employment related human rights issues are of strategic importance to the business. Potential consequences for failure to comply with section 5 of the Code could potentially extend far beyond orders for compliance or damages awards, and include the nullification of existing contractual relationships with the Ontario government, including those related to financing or the provision of goods and services.
Sound corporate social responsibility management necessitates taking a proactive approach to the issue of human rights in employment, and should include processes of human rights related due diligence when entering into business contracts as part of effective corporate governance. Indeed, in the context of these provisions of the Code such an approach may in fact be essential, and could also provide companies with a competitive advantage with respect to the establishment and maintenance of contractual relationships with the Government of Ontario.