Across Canada, the issue of contracting and potential liability for the activities of contractors has received increased attention over the past few years.
What if, for example, your company hires a contractor to perform services which involve complex health and safety standards and the contractor or its employees fail to comply with the health and safety laws?
Or, what if your firm hires a specialized cleaning or maintenance contractor, which accesses a hazardous part of your facility, and a serious accident involving violation of a health and safety standard occurs?
In these situations, both the direct employer of the employees involved (the contractor) and your company, which contracted for the services, could be charged and convicted of any health and safety contravention by the contractor. You could be fined substantially for each contravention.
The issue of liability for the activities of contractors continues to raise controversial and complex issues for employers in most Canadian provinces. Too many companies find out the hard way that contracting out work does not equate to contracting away legislated responsibility and potential liability. Consider the following recent cases.
Dofasco
In February, 1999, in Ontario, Dofasco Inc. received a total fine of $675,000 for three separate workplace accidents. Of this fine, $400,000 was allocated for an incident in which two workers of a contractor, retained by Dofasco to remove debris from a confined space, were fatally injured during the confined space entry. A gas check had failed to detect the presence of argon gas in the tank. In addition to the penalty levied against Dofasco Inc., the direct employer of the two workers, Steelcat Task Force Inc., received a fine of $100,000 for failing to inform workers of confined space entry hazards.
Conveyor death
In November 1998, Georgia Pacific Canada Inc. received a fine of $100,000 for a lockout contravention, for another incident arising in Ontario. A worker for Ancaster Tool Company, under contract to Georgia Pacific, entered the workplace to perform routine maintenance on a screw conveyor. The Ancaster Tool Company worker tagged out only his end of the conveyor before commencing maintenance duties. An operator for Georgia Pacific, not having been informed that work was underway, turned on the conveyor, causing fatal injuries to the worker. The direct employer of the worker, Ancaster Tool Company Inc., received a fine of $65,000.
Fatal burning
Potash Corporation of Saskatchewan received a penalty of $300,000 in August 1998, after contracting for the services of a company to repair a cover on a vat containing a potash/water mixture heated to approximately 90 degrees. Three employees of the contractor fell through a section of the cover. Two were fatally injured and one was severely burned.
The corporation had warned its own workers about the potential danger, but apparently had not informed the contractor or contract employees performing the work. The contractor employing the workers, Bedry & Sons, was also convicted and fined $10,000.
Fatality at Cargill Ltd.
In July 1991, Cargill Ltd., an Alberta corporation in the business of slaughtering and processing beef, was fined $40,000, after a subcontractor’s employee was fatally injured in the workplace. This was at the time the highest penalty levied against any Alberta corporation under health and safety legislation.
Cargill had lockout procedures for its own personnel and required them to remain away from the area of the accident, involving an unprotected drive shaft, yet directed a worker of the contractor to perform work in the area of the unprotected drive shaft, resulting in the fatality. The subcontractor employing the worker, Chemidyne Corp., received a fine of $8,000.
Legislation varies
The issue of potential liability for contracting is complicated by two factors: first, the provisions of health and safety legislation vary by province, and second, in many provinces separate and opposite approaches are permitted for construction work versus non-construction work performed within premises.
In general terms, the risk for employers is greatest where the statutory definition of “employer” or “owner” in health and safety legislation allows firms to be found liable for the acts of non-compliance of a contractor or a subcontractor (this is expressly provided in such provinces as Ontario, Manitoba, New Brunswick and the Yukon), or where provisions state that the employer is responsible for the work activities of all workers at a work site under its control (this is the case in such provinces as Alberta, British Columbia, Nova Scotia, Saskatchewan).
This results in any company that retains contractors being responsible for ensuring compliance with health and safety statutes and regulations, as though it were the direct employer of the workers, and results in a corresponding obligation to ensure that the corporation is regarded as duly diligent when contracting for outside workers.
Even in situations where employers have contracted work beyond their capabilities to expert contractors, or in situations where there is clear contract language contracting away liability, courts have burdened the industrial employer with responsibilities of health and safety legislation where an accident involving a contractor’s employees has occurred.
The only situation in which contracting away is potentially available is where a province expressly provides that a contractor, sometimes called a “prime contractor” or “constructor,” may undertake and completely control the work on behalf of an industrial employer or construction project owner.
This approach is only available for construction in some provinces (such as Manitoba, Ontario, Nova Scotia, Yukon). The matter of contracting to a “prime contractor” or “constructor” involves separate, and entirely opposite, legal concepts, and this contrasting approach is shown in the box on this page.
This reality, which even courts have recognized, is seemingly unfair, mandates that employers assess their occupational health and safety system to determine whether appropriate steps have been taken before hiring a contractor (often referred to as a pre-qualification process), and whether appropriate steps are being undertaken after the hire of a contractor.
Contractor safety program
Any contractor safety program should include:
•Detailed checklists or forms for advance pre-qualification specific to the work being performed by the contractor. The focus of advance pre-qualification should be on ensuring that the potential contractor has a health and safety program sufficient to ensure full compliance with relevant requirements.
•Assessment of whether the potential contractor will have adequate levels of supervision for the hazards of the activity, so that workers are regularly monitored by them.
•Assessment of whether the risks are such and your knowledge of the workplace is such that the contractor’s employees should be governed by your corporation’s policies, programs and supervision.
•A system for familiarizing the contractor with all workplace hazards or potential hazards of your workplace, and systems for communication and co-ordination of work with the contractor.
•Monitoring and removal practices for any contractor not following safe workplaces.
•Appropriate contract language to confirm expectations of the contractor, your corporation’s rights upon any non-compliance, and indemnification clauses, amongst other matters. (Contract language will differ significantly for contracting of work in those situations where a “prime contractor” or “constructor” may undertake and control the work). The wrong contract language can in some cases create, rather than prevent, liability.
An appropriate contractor program can have a significant impact, both in pro-actively preventing incidents and accidents, and in protecting corporate employers engaged in contracting from successful prosecution and liability.
SIDEBAR
Contracting involves two legal concepts
Contracting to a “prime contractor” (or a “constructor”) involves separate, and completely opposite legal concepts depending on which province you’re operating in. Here is an explanation of the two approaches.
1. Contracting, where the work of contractors is defined as the employer’s or owner’s responsibility:
•If the definition of “employer” includes direct employees and the employees of contractors, the employer (or worksite owner) has responsibility for the safety of all workers on site, and cannot legally contract away responsibility and potential liability under the health and safety legislation, no matter what contract language is used.
•Government officials have the discretion to charge the direct or indirect “employer” of the worker, or both, with violations of the health and safety legislation
•Employer must take a “hands-on” approach and exercise due diligence for all direct employees and employees of contractors.
•All contract language should confirm pre-qualification processes and the system for properly handling the presence of the contractor.
2. Contracting, where the work, and the responsibility, of contractors is undertaken by the “prime contractor” or the “constructor” — as opposed to the employer or owner:
•If a workplace or project may either choose to control the work of contractors, in other words, to perform the work as their own contractor or constructor and retain responsibility and potential OHSA liability, or may legally contract away responsibility and potential liability to a constructor or “prime contractor.”
•In such situations, there is a unique opportunity to contract away responsibility and liability to the “prime contractor” or “constructor.”
Work must, however, be fully and completely controlled within the provisions of governing provincial legislation, or responsibility may still be regarded as the owner’s.
•The owner must decide between a “hands-on” approach taking control as constructor or prime contractor, or a “hands-off” approach upon retaining a constructor or prime contractor to perform work or undertake a construction project.
•All contract language should confirm which approach — “hands-on” or “hands-off” — has been chosen.
Cheryl Edwards is a partner in the law firm of Stringer Brisbin, Humphrey. She develops seminars for employers facing the problems and pitfalls of contracting. She can be reached at (416) 862-1616.
What if, for example, your company hires a contractor to perform services which involve complex health and safety standards and the contractor or its employees fail to comply with the health and safety laws?
Or, what if your firm hires a specialized cleaning or maintenance contractor, which accesses a hazardous part of your facility, and a serious accident involving violation of a health and safety standard occurs?
In these situations, both the direct employer of the employees involved (the contractor) and your company, which contracted for the services, could be charged and convicted of any health and safety contravention by the contractor. You could be fined substantially for each contravention.
The issue of liability for the activities of contractors continues to raise controversial and complex issues for employers in most Canadian provinces. Too many companies find out the hard way that contracting out work does not equate to contracting away legislated responsibility and potential liability. Consider the following recent cases.
Dofasco
In February, 1999, in Ontario, Dofasco Inc. received a total fine of $675,000 for three separate workplace accidents. Of this fine, $400,000 was allocated for an incident in which two workers of a contractor, retained by Dofasco to remove debris from a confined space, were fatally injured during the confined space entry. A gas check had failed to detect the presence of argon gas in the tank. In addition to the penalty levied against Dofasco Inc., the direct employer of the two workers, Steelcat Task Force Inc., received a fine of $100,000 for failing to inform workers of confined space entry hazards.
Conveyor death
In November 1998, Georgia Pacific Canada Inc. received a fine of $100,000 for a lockout contravention, for another incident arising in Ontario. A worker for Ancaster Tool Company, under contract to Georgia Pacific, entered the workplace to perform routine maintenance on a screw conveyor. The Ancaster Tool Company worker tagged out only his end of the conveyor before commencing maintenance duties. An operator for Georgia Pacific, not having been informed that work was underway, turned on the conveyor, causing fatal injuries to the worker. The direct employer of the worker, Ancaster Tool Company Inc., received a fine of $65,000.
Fatal burning
Potash Corporation of Saskatchewan received a penalty of $300,000 in August 1998, after contracting for the services of a company to repair a cover on a vat containing a potash/water mixture heated to approximately 90 degrees. Three employees of the contractor fell through a section of the cover. Two were fatally injured and one was severely burned.
The corporation had warned its own workers about the potential danger, but apparently had not informed the contractor or contract employees performing the work. The contractor employing the workers, Bedry & Sons, was also convicted and fined $10,000.
Fatality at Cargill Ltd.
In July 1991, Cargill Ltd., an Alberta corporation in the business of slaughtering and processing beef, was fined $40,000, after a subcontractor’s employee was fatally injured in the workplace. This was at the time the highest penalty levied against any Alberta corporation under health and safety legislation.
Cargill had lockout procedures for its own personnel and required them to remain away from the area of the accident, involving an unprotected drive shaft, yet directed a worker of the contractor to perform work in the area of the unprotected drive shaft, resulting in the fatality. The subcontractor employing the worker, Chemidyne Corp., received a fine of $8,000.
Legislation varies
The issue of potential liability for contracting is complicated by two factors: first, the provisions of health and safety legislation vary by province, and second, in many provinces separate and opposite approaches are permitted for construction work versus non-construction work performed within premises.
In general terms, the risk for employers is greatest where the statutory definition of “employer” or “owner” in health and safety legislation allows firms to be found liable for the acts of non-compliance of a contractor or a subcontractor (this is expressly provided in such provinces as Ontario, Manitoba, New Brunswick and the Yukon), or where provisions state that the employer is responsible for the work activities of all workers at a work site under its control (this is the case in such provinces as Alberta, British Columbia, Nova Scotia, Saskatchewan).
This results in any company that retains contractors being responsible for ensuring compliance with health and safety statutes and regulations, as though it were the direct employer of the workers, and results in a corresponding obligation to ensure that the corporation is regarded as duly diligent when contracting for outside workers.
Even in situations where employers have contracted work beyond their capabilities to expert contractors, or in situations where there is clear contract language contracting away liability, courts have burdened the industrial employer with responsibilities of health and safety legislation where an accident involving a contractor’s employees has occurred.
The only situation in which contracting away is potentially available is where a province expressly provides that a contractor, sometimes called a “prime contractor” or “constructor,” may undertake and completely control the work on behalf of an industrial employer or construction project owner.
This approach is only available for construction in some provinces (such as Manitoba, Ontario, Nova Scotia, Yukon). The matter of contracting to a “prime contractor” or “constructor” involves separate, and entirely opposite, legal concepts, and this contrasting approach is shown in the box on this page.
This reality, which even courts have recognized, is seemingly unfair, mandates that employers assess their occupational health and safety system to determine whether appropriate steps have been taken before hiring a contractor (often referred to as a pre-qualification process), and whether appropriate steps are being undertaken after the hire of a contractor.
Contractor safety program
Any contractor safety program should include:
•Detailed checklists or forms for advance pre-qualification specific to the work being performed by the contractor. The focus of advance pre-qualification should be on ensuring that the potential contractor has a health and safety program sufficient to ensure full compliance with relevant requirements.
•Assessment of whether the potential contractor will have adequate levels of supervision for the hazards of the activity, so that workers are regularly monitored by them.
•Assessment of whether the risks are such and your knowledge of the workplace is such that the contractor’s employees should be governed by your corporation’s policies, programs and supervision.
•A system for familiarizing the contractor with all workplace hazards or potential hazards of your workplace, and systems for communication and co-ordination of work with the contractor.
•Monitoring and removal practices for any contractor not following safe workplaces.
•Appropriate contract language to confirm expectations of the contractor, your corporation’s rights upon any non-compliance, and indemnification clauses, amongst other matters. (Contract language will differ significantly for contracting of work in those situations where a “prime contractor” or “constructor” may undertake and control the work). The wrong contract language can in some cases create, rather than prevent, liability.
An appropriate contractor program can have a significant impact, both in pro-actively preventing incidents and accidents, and in protecting corporate employers engaged in contracting from successful prosecution and liability.
SIDEBAR
Contracting involves two legal concepts
Contracting to a “prime contractor” (or a “constructor”) involves separate, and completely opposite legal concepts depending on which province you’re operating in. Here is an explanation of the two approaches.
1. Contracting, where the work of contractors is defined as the employer’s or owner’s responsibility:
•If the definition of “employer” includes direct employees and the employees of contractors, the employer (or worksite owner) has responsibility for the safety of all workers on site, and cannot legally contract away responsibility and potential liability under the health and safety legislation, no matter what contract language is used.
•Government officials have the discretion to charge the direct or indirect “employer” of the worker, or both, with violations of the health and safety legislation
•Employer must take a “hands-on” approach and exercise due diligence for all direct employees and employees of contractors.
•All contract language should confirm pre-qualification processes and the system for properly handling the presence of the contractor.
2. Contracting, where the work, and the responsibility, of contractors is undertaken by the “prime contractor” or the “constructor” — as opposed to the employer or owner:
•If a workplace or project may either choose to control the work of contractors, in other words, to perform the work as their own contractor or constructor and retain responsibility and potential OHSA liability, or may legally contract away responsibility and potential liability to a constructor or “prime contractor.”
•In such situations, there is a unique opportunity to contract away responsibility and liability to the “prime contractor” or “constructor.”
Work must, however, be fully and completely controlled within the provisions of governing provincial legislation, or responsibility may still be regarded as the owner’s.
•The owner must decide between a “hands-on” approach taking control as constructor or prime contractor, or a “hands-off” approach upon retaining a constructor or prime contractor to perform work or undertake a construction project.
•All contract language should confirm which approach — “hands-on” or “hands-off” — has been chosen.
Cheryl Edwards is a partner in the law firm of Stringer Brisbin, Humphrey. She develops seminars for employers facing the problems and pitfalls of contracting. She can be reached at (416) 862-1616.
