…under section 316 of the Act respecting industrial accidents and occupational diseases (“Act“), Quebec employers are obligated to pay the assessment due to the CSST by a contractor in default.
Section 316 of the Act reads as follows:
316. The Commission may demand payment of the assessment due by a contractor from the employer who retains his services.
In the case of the first paragraph, the Commission may establish the amount of the assessment according to the proportion of the price agreed upon for the work corresponding to the cost of labour, rather than the wages indicated in the statement made according to section 291.
The employer who has paid the amount of the assessment is entitled to be reimbursed by the contractor concerned and the employer may retain the amount due out of the sums that he owes the contractor.
If an employer proves that he is retaining the services of a contractor, the Commission may inform the employer whether an assessment is due by that contractor.
The specific purpose of this section is to allow the Commission de la santé et de la sécurité du tavail (CSST) to collect the assessment of contractors who are in default through the employers that retain their services. Its larger purpose is to incite these employers to verify – before their services have been retained – whether these contractors are in good standing with the CSST.
Contrary to popular belief and to the terms used in its text, s. 316 of the Act is not limited to the construction industry but extends to all types of services, but not to goods. In fact, the term “contractor” refers to the carrying on by one or more persons of an organized economic activity and it has been interpreted liberally by the Courts. In addition, a general contractor can also be held responsible for the assessment unpaid by a subcontractor from which he has retained services.
Therefore, before the services of the contractor (or subcontractor) have been officially retained, the employer (or the general contractor) should protect himself by making a request to the CSST as to whether an assessment is due. Accordingly, the employer should obtain from the CSST a attestation of conformity for each contractor or demand that the contractor in default pay his assessment.
Many employers are not aware of this rule and Quebec tribunals are often called on to clarify its underlying principles.
For example, in one case, the employer had retained the services of a contractor for the expansion of a pavilion, pursuant to a construction contract. For the duration of the contract, the contractor had not paid his assessment. The CSST asked the employer to remedy the default of the contractor, as provided by s. 316 of the Act. The tribunal took this opportunity to reaffirm the principles set forth in an earlier case Fenclo ltée et Entreprise Barrette ltée , C.A.L.P. 795:
- the Commission has the right to demand the payment of the assessment due by a contractor from the employer who retains his services;
- the employer should always request an attestation of conformity from the CSST relating to the payment of the assessment by a contractor from which he retains or intends to retain services;
- the CSST realizes that this may not always be a very practical approach for employers, especially in the context of multiple short-duration contracts;
- nonetheless, it remains the only way an employer can effectively protect himself from the consequences of this rule;
- section 316 of Act is applicable to construction contracts, even if the reality of the construction industry frequently involves contracts and subcontracts.
Finally, based on the foregoing, in the context of merger or acquisition transactions, it is recommended to include in the due diligence process the request for attestations of conformity from the CSST so as not to trigger the application of s. 316 of the Act to the new employer.