On November 10, 2023, the Supreme Court of Canada (“SCC”) released a decision upholding the Ontario Court of Appeal’s decision that the City of Sudbury (the “City”), which was the “Owner” of a construction project, could also be held liable as an “Employer” for violations of Ontario’s Occupational Health and Safety Act (the “OHSA”) and the Construction Projects Regulation (the “Regulation”) on the construction project.

Although the SCC was divided on various issues, the SCC held that the City had breached its duty as an “employer” under the OHSA. This was despite the City having entered into a contract in which it had assigned responsibility for compliance with the OHSA on its construction project to a party other than itself.

The SCC has remitted the question of whether the City exercised due diligence in meeting the obligations of an “Employer” to the Ontario Superior Court of Justice.

FACTS

In 2015, the City entered into a contract with a general contractor, Interpaving Limited (“Interpaving”), to repair one of the City’s water mains. While the City was the Owner of the construction project, the contract between the City and Interpaving stipulated that Interpaving would assume control over the entire project, including ensuring that all health and safety requirements under the OHSA were met, making Interpaving the “constructor” (as defined below).

A fatality occurred when a pedestrian was struck by a road grader operator while she was crossing an intersection within the construction zone. Contrary to the OHSA and the Regulation, no signallers were present to assist the grader operator and the fencing required by the Regulation had not been installed.

Notwithstanding that Interpaving was responsible for all health and safety obligations on the project under the contract, the City was charged with violations of the Regulation (lack of fencing, lack of signallers) contrary to the “Employer’s” obligations under section 25(1)(c) of the OHSA, which requires an Employer to “ensure that … the measures and procedures prescribed are carried out in the workplace.”

The basis of the charges was that the City was both a “constructor” and an “employer” within the meaning of the OHSA.

The City pled not guilty to charges laid under both the OHSA and the Regulation.

PROCEDURAL HISTORY

Earlier, the Ontario Court of Justice held that the City was neither an “employer” nor a “constructor,” and so owed no duties under the OHSA. The definitions of “employer” and “constructor” under the OHSA are:

“employer” means 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 (OHSA, s 1(1)) (“Employer”)

“constructor” means 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 (OHSA, s 1(1)) (“Constructor”)

This decision was appealed by the Crown (the “First Appeal”). The Ontario Superior Court of Justice dismissed the appeal, finding that the Ontario Court of Justice had correctly identified and decided the issues.

All court levels referred to section 1(3) of the OHSA, which states:

An owner does not become a constructor by virtue only of the fact that the owner has engaged an architect, engineer or other person solely to oversee quality control at a project.

The Court of Appeal and the SCC found that section 1(3) of the OHSA effectively gives an “Owner” the right to contract out of the responsibilities of a “Constructor” by hiring another party to take on that role.

The City had reserved the right to conduct inspections of Interpaving’s work for quality assurance purposes. Both Ontario lower Courts held that in fulfilling this role, the City had not become a Constructor or an Employer.

On the First Appeal, the Crown argued that due to the amount of control the City exercised over the project, including having ultimate control over traffic and being able to suspend work on the project if necessary, the City had acted as a “constructor.”

The Crown also took the position that the Ontario Court of Justice had erred in failing to find the City to be an Employer, as the City had employees on the site overseeing quality control (the “Inspectors”).  In short, the Crown’s argument was that section 1(3) of the OHSA does not limit the responsibilities of Owners by preventing them from potentially also being “Employers,” as opposed to also being “Constructors” (which section 1(3) indicates cannot be an automatic outcome merely because the Owner has hired someone to oversee quality control).

The Ontario Superior Court of Justice found that this logic “in turn would make an owner which undertakes quality control on a project responsible for not only the safety of its own workers, but also for the safety of all workers on a project.”

The second issue was this: while the City was clearly an Employer vis-à-vis its own workers on the project (the employees overseeing quality control), was the City also responsible for all the workers employed on the project and for all obligations that are assigned to an Employer under the OSHA that related to those workers? Was the City therefore responsible for ensuring that the required signallers and fencing were in place?

The Crown appealed to the Ontario Court of Appeal (the “Second Appeal”), and was granted leave on the narrow issue of whether the Ontario Superior Court of Justice erred in deciding that the City was not an Employer under the OHSA. The Court of Appeal ruled unanimously in favour of overturning the Superior Court’s decision. The Court of Appeal held that as the City met the definition of an Employer, the City was therefore responsible for the duties of that position and was liable for the violations of the Regulation that occurred. The failure to have a signaller and required fencing in place thus rendered the City liable under section 25(1)(c) of the OHSA, unless the City was able to establish a due diligence defence. The decision was remitted to the Ontario Superior Court of Justice to hear the Crown’s appeal of the trial judge’s due diligence finding.

The Court of Appeal’s reasoning was that the definition of Employer applied to the City, due to the City employing Inspectors on the site to monitor progress and for quality control purposes. The Court adopted the Crown’s argument outlined above: that section 1(3) does not preclude Owners from also meeting the definition of an Employer and being subject to the duties of an Employer under section 25 of the OHSA.

THE SUPREME COURT OF CANADA’S DECISION

The City appealed to the SCC. The case was heard by the SCC on October 12, 2022 and the Court’s decision was released on November 10, 2023.

The key question on appeal at the SCC was framed by the parties as follows:

Is the owner of a construction project, that it was legally required not to control when it has contracted out to a third party to act as the “constructor”, nevertheless “the employer” responsible for workplace safety pursuant to section 1(1) of the Ontario OHSA?

At the hearing on October 12, the City argued that the result of the Crown’s position and the “purely textual approach” taken by the Court of Appeal is that every project Owner would always be an Employer, because at minimum, the Owner will have contracted for the services of the constructor’s workers.Therefore, every Owner would be required to exert “a measure of control” over the safe performance of work, and would therefore always, by default, be a Constructor – rendering section 1(3) of the OHSA superfluous and section 1(1) redundant (as Constructor is defined in section 1(1) as the project Owner or the party it contracts to be the constructor).

The Crown argued that an Owner that meets the definition of an Employer can be liable for contraventions of the OHSA if they fail to fulfill their duties as an Employer. While the OHSA expressly permits Owners to contract out of the role of Constructor, an Owner cannot contract out of the duties of an Employer, if it fits within the definition of Employer.

The SCC held that while control over workers and the workplace may be a factor in the due diligence defence, the OHSA does not require that the City have control over the workers or the workplace to become subject to the obligations under section 25(1)(c).

The SCC confirmed that the OHSA is protective legislation that requires generous interpretation, and that different parties may have overlapping duties under such legislation.The SCC held that the City met the definition of an Employer in two ways: the City employed the Inspectors directly and it was an Employer of Interpaving. That the City was an Employer of Interpaving was not a finding made by any of the lower courts, and is based on the Honorable Justice Martin’s reasoning that “[b]y referring to a “contract for services” in the definition of “employer,” the legislature signaled its intent to capture employer-independent contractor relationships under the “employer” definition.”

Two other Justices (Rowe and O’Bonsawin JJ.) did not agree with this finding, and, in their dissenting reasons, they concluded that the City was an Employer of its Inspectors only, and that the City and Interpaving were in an “owner-constructor relationship,” not an “employer-worker relationship.”

The SCC found that the City’s control (or lack thereof) over Interpaving’s workers or the workplace was not part of the actus reus of the offence itself.

A significant area where the SCC Justices split in their reasons was whether there should be a “nexus” between the Employer and the activity in question. In analyzing the context and purpose of section 25(1)(c) and the OHSA, Martin J. contrasted the duty in section 25(1)(c) with other duties of Employers that are drafted more narrowly, such as sections 25(1)(b) and (d), as evidence of the Legislature’s intention that this section be construed broadly, resulting in the potential for concurrent liability of multiple parties. This overlap of duties is, however, a key purpose of occupational health and safety legislation, and why there can be an Employer and a Constructor, or more than one Employer, responsible for workplace and worker safety.

Martin J. also found that the defence of due diligence – the only stage of the analysis at which the concept of control should factor in – functions as a “safety valve,” by which Employers will not be subject to penalties under section 25(1)(c)if they can prove that they took all reasonable steps to avoid the breach of the legislation.

Rowe and O’Bonsawin JJ. disagreed with this characterization, citing the fact that rather than operating as a safety valve, small businesses, sole proprietors, contractors and homeowners (who could all potentially be captured within the definition of an Employer) may resign themselves to pleading guilty as opposed to paying the legal fees to put forward a successful due diligence defence.

Martin J. also raised the idea that shifting the burden to the Employer to establish due diligence “incentivizes” Employers to take all the steps they can to avoid breaching the legislation, and affirmed that in analyzing the defence of due diligence, the degree of care which a person must exercise is principally governed by, among other things, the “[e]xtent [to which] underlying causes of the offence are beyond the control of the accused.”

Martin J. stated that when considering an accused’s due diligence, relevant factors include the following

  1. the accused’s degree of control over the workplace or the workers there;
  2. whether the accused delegated control to the constructor in an effort to overcome its own lack of skill, knowledge or expertise to complete the project in compliance with the Regulation;
  3. whether the accused took steps to evaluate the constructor’s ability to ensure compliance with the Regulation before deciding to contract for its services; and
  4. whether the accused effectively monitored and supervised the constructor’s work on the project to ensure that the prescriptions in the Regulation were carried out in the workplace.

IMPLICATIONS FOR OWNERS

As this decision arose from a specific provision in Ontario’s OHSA, it remains to be seen what effect the SCC’s reasoning will have on the interpretation of occupational health and safety legislation in other parts of Canada.

In Ontario, Owners must now be aware that even if they contract out the duties of a Constructor, or employ people on site only for quality assurance/inspection purposes, as long as they fit within the definition of an Employer (which can include the relationship between an Owner and an independent contractor), they will be responsible for obligations as both an Owner and an Employer.

Martin J. noted that “[i]n the construction context, it may be open to a judge to find that the owner took every reasonable precaution because the owner decided to delegate control of the project and responsibility for workplace safety to a more experienced constructor.” In other words, while hiring a Constructor does not prevent an Owner from being potentially liable as an Employer, the decision to contract out work in a construction context may potentially assist an Owner in establishing a due diligence defence.

This decision sets a strong precedent that Owners cannot avoid liability for the obligations of an Employer regarding all employees on a project, even if they directly employ only certain employees to oversee the work. Due to the fact that an Owner can fit within multiple roles, one of which may be an Employer, Owners are responsible for those duties and liable for breaches of those duties, unless they can establish a due diligence defence.

The SCC’s decision did not address whether indemnification provisions in construction contracts may be drafted so as to allow for a third party to indemnify the Owner against any fines and costs they might incur, if the Owner is found to be acting in the role of, for example, an Employer, when they sought to expressly contract out of that role and the associated obligations.

It will be important to draft construction agreements carefully and to pay particular attention to provisions such as these, which may become relevant if one party is charged.