Appeal court triples fine: economic impact argument dismissed

Sep 19, 2013

By Ryan Conlin

Large fineThe Ontario Court of Appeal has sent a clear message that employers convicted of criminal negligence can expect to receive a substantial penalty. This tragic case involved a group of six workers who were repairing a balcony on a Toronto apartment building on Christmas Eve in 2009. A suspended scaffold the workers were using came apart when a seventh worker attempted to step onto it, which led to four workers falling to their deaths and another becoming seriously injured.

The incident was widely covered in the mainstream media and directly resulted in the appointment of the Tony Dean panel to review the Occupational Health and Safety Act (OHSA). The Crown had sought a fine of $1,000,000, but the sentencing judge surprised many observers and imposed a fine of $200,000. A fine of $200,000 is at the lower end of what an employer could have expected to receive if convicted under the OHSA for such a serious offence involving multiple fatalities.

Ability to pay

The sentencing court placed great weight on the ability of the employer to pay the fine, and rejected a line of earlier cases which had held that ability of an inactive corporation to pay a fine was not a relevant factor. The sentencing judge held that imposing a fine in the range sought by the Crown would likely bankrupt the employer. The Crown drew the Court’s attention to some higher fines imposed under the OHSA, but the Court indicated that those fines were not relevant as they were imposed against large and profitable corporations.

The Court of Appeal determined that the sentencing judge erred when he placed great emphasis on the financial viability of the employer in these circumstances. It held that the economic viability of an employer is an issue to be considered, but it ought not to prevent the imposition of a fine or even be the most important factor in determining the amount of a fine. The Court of Appeal noted that the employer before the Court did not appear to have any ongoing economic activity and thus there was no public interest in whether the company continued to operate.

It is clear from this decision that courts will have little patience for ability to pay arguments from companies that are no longer operating. This decision also clearly implies that it will be extremely difficult for an employer to make an economic impact argument where there is no issue about the amount of a fine resulting in bankruptcy and job loss.

The Court of Appeal has left the door open for a sentencing court to consider the issue of economic impact where there is a real possibility that a high fine will cause a company to cease operations and cause employees to lose their jobs. One example of such a case is R. v. Transpavé Inc., which involved a young employee who died as a result of malfunctioning equipment and poor training. The company subsequently spent $750,000 on safety improvements and demonstrated considerable remorse. The Court imposed a fine of $100,000 to ensure that the company could continue to operate and employ 100 workers.

The Court of Appeal determined that the sentencing judge erred when he placed great emphasis on the financial viability of the employer in these circumstances.

Criminal convictions are more serious than OHSA convictions

Many safety advocates expressed concern that the amount of the fine imposed by the sentencing court set a dangerous precedent in that the consequences of a criminal negligence conviction were essentially the same as for an OHSA conviction. The Court of Appeal has responded to this concern and made it clear that OHS criminal prosecutions are not intended to duplicate prosecutions under the OHSA. Criminal prosecutions are intended to provide additional deterrence where there has been what the Court of Appeal called “…morally blameworthy conduct that amounts to a wanton and reckless disregard for the lives or safety of others.”

There is now no question that fines imposed under the Criminal Code will be considerably more severe for employers than if the charges were brought under the OHSA. In our view, this principle ought not to be legally controversial. The Criminal Code would hardly be an effective deterrent for the most serious misconduct if the penalties imposed were essentially the same as those provided for by the OHSA.

The factors considered on sentence

The Court of Appeal determined that the $200,000 sentence met the legal test for being “manifestly unfit,” denouncing the approach taken by the sentencing court in clear and unequivocal terms. It indicated that the fine imposed by the sentencing court could result in employers considering such a fine as a “…cost of doing business.” The Court of Appeal indicated that the sentencing court should have placed greater emphasis on denunciation and deterrence.

The Court of Appeal discussed the factors that were relevant to an appropriate sentence in the case. It indicated that the company was extremely negligent as three times as many employees were on the swing stage when it collapsed than was the required practice. The Court of Appeal also pointed out that three times as many employees were on the swing stage than there were lifelines available, and only one lifeline was used correctly. The few mitigating factors on sentence included a lack of a prior record and that a plea of guilty saved the costs of a trial. The Court determined the appropriate penalty was $750,000. This amount is 50% more than the $500,000 maximum fine for a single charge against a corporation under the OHSA.

What this decision means

Employers convicted of criminal negligence can expect Courts to impose significant fines that greatly exceed the fines imposed under the OHSA. From a broader perspective, it seems likely that this prosecution may open the door for a great number of criminal negligence cases. As the Court of Appeal itself noted, there have been very few OHS criminal prosecutions since the Bill C-45 amendments to the Criminal Code were enacted almost 10 years ago.

This decision gives prosecutors an incentive to pursue criminal negligence cases in OHS matters as the Court of Appeal has made it very clear that employers who are convicted will face severe penalties. It is important to remember that any defence to a criminal negligence charge will often be based on the actions taken by senior management to prevent safety violations. This decision serves as a wake-up call for corporations to ensure that they can prove that senior management are actively involved with OHS compliance and are aware of their obligations under the Criminal Code and the OHSA.

Ryan J. Conlin is a partner at Stringer LLP Management Lawyers. He is also a frequent speaker at WSPS’s Partners in Prevention conferences. Ryan can be reached at 416-862-7011 or rconlin@stringerllp.com.

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