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Friday, September 7, 2012

Ability to Pay in OHS Sentencing - Australian and Canadian Analogies

The Work Health and Safety Act, 2011 (the “WHSA”) in New South Wales (NSW) provides that a breach of the WHSA is a criminal offence attracting a maximum penalty of $600,000 and up to five years imprisonment for serious offences by corporate officers. There are a variety of considerations that a Court will make in determining the appropriate penalties where a breach of the WHSA has been found. Among these is the ability to pay of the Defendant pursuant to section 6 of the Fines Act – a sentencing provision which was recently applied in the case of Inspector Hall v Raydaz Design Pty Ltd to reduce the amount of a fine under the WHSA. Recent Canadian case law involving the imposition of fines for workplace health and safety violations may offer some useful analogies for application of section 6 of the Fines Act to sentencing under the WHSA.

In December 2009, four workers of Metron Construction Corporation (Metron) in Toronto Ontario Canada were killed when a swing stage they were working on collapsed. Two other workers, also on the swing stage, survived – one was properly attached to a safety line and suffered no injuries, the other was not properly equipped and fell but miraculously survived, suffering serious injuries. Metron and its President, owner and sole director, Joel Swartz, faced charges under the provincial OHS regulatory laws of the Province of Ontario, as well as charges under the Criminal Code of Canada (Criminal Code). Mr. Swartz pleaded guilty as an officer and director of Metron and was ordered to personally pay a fine totalling $112,500 under Ontario OHS legislation. Metron as a corporation pleaded guilty under the Criminal Code and was ordered to pay a fine of $200,000 plus a victim’s surcharge of $30,000.

The sentencing of Metron was only the second time a Court in Canada imposed a fine applying these provisions of the Criminal Code. The Criminal Code was amended in 2004 to expand corporate liability for OHS offences and to create an express duty on those directing the work of others to take reasonable steps to prevent bodily harm to that person or others arising from the work. If convicted under the Criminal Code, individuals or corporations could face unlimited fines and the possibility of imprisonment.

In assessing the Criminal Code fine against Metron, the Court took note (as required by the Criminal Code) of the ability of Metron to pay any fine and the impact that a fine would have on the economic viability of the company and the continued employment of its employees. In light of these considerations, the Court concluded that the $1 million fine proposed by the Crown Prosecutor would be too severe as it would likely lead the company to go insolvent if imposed.

However, the principles of deterrence and denunciation lead the Court to conclude that a serious penalty was warranted that would express to other business owners the seriousness of OHS matters. Balancing these considerations, the Court imposed the $230,000 fine, an amount which far exceeded Metron’s last profitable financial year prior to the fatalities. The Court accepted that the financial future of Metron was impossible to predict. However, the intention of the fine was to send a “clear message to all businesses of the overwhelming importance of ensuring the safety of workers whom they employ.”

Drawing an analogy to the WHSA in NSW, the Metron example shows how ability to pay considerations may be balanced with a Court’s desire to denounce violations of OHS law and deter others from committing similar offences. While ability to pay is a relevant consideration that will have bearing on fine assessments, a Court will also seek to send a message to other employers, particularly where injury or death results from criminal negligence. A Court’s assessment of ability to pay will be based on the best evidence available to it, and will only be an estimate of the financial strength of the organization. As such, OHS fines may nevertheless bring companies to the brink (over even over the brink) of financial insolvency even where ability to pay is considered.

That being so, the best practice (in Canada or Australia) is for employers to avoid liability and prosecution in the first place by acting in compliance with OHS expectations at all times.

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