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Exposure of Directors to Claims By Injured Workers

25-Jan-17

By Will Johnston

Directors of companies may not appreciate that an injured employee in Alberta can sue them personally for damages arising from a workplace injury, even though under the Alberta Workers’ Compensation Act that same worker is barred from suing their employer and co-workers. Recent law in Alberta confirms that corporate directors may be held personally liable for workplace injuries in certain circumstances, particularly when the directors are directly involved in the day-to-day activities of the corporation.

In 2006, a decision from the Alberta Court of Appeal upheld a trial level decision awarding damages to the estate of a deceased worker against a director of the company that employed him. The director was determined to be 50% at fault for the accident, and personally liable to the employee.

In this 2006 case, the worker had been employed for approximately 2 weeks at a company in the business of manufacturing portable structures. This company had two directors, including the defendant, Mr. Epton. The trial Court determined that Mr. Epton was significantly involved in monitoring work in the shop and was aware that a new spreader bar used to lift very heavy panels was unable to properly connect with the hoist to allow the safety clasp to close over the spreader bar. Further, Mr. Epton was aware that the workers had been unable to use the defective equipment to perform a lift and that a second attempt was going to be made the next day – when he was not going to be present at the shop.

In concluding that the director could be held personally liable, the Court reviewed provisions from various statutes to find that Mr. Epton owed a duty of care to the deceased worker. Under Alberta’s Occupational Health and Safety Act (“OHS Act”), directors are deemed to be an employer of a company’s workers. The OHS Act requires that employers take all reasonable steps to ensure the health and safety of workers. The Court also considered that the Alberta Business Corporations Act (“ABC Act”) requires directors to monitor the affairs of the business and act in the best interests of the company. In the Court’s view, the obligation under the ABC Act requires directors to take steps to implement safety measures required under the OHS Act.

The Court ultimately held that Mr. Epton failed in his duties as director. The company had no safety training programs, did not have safety meetings, and perhaps most importantly, Mr. Epton did not take any steps to prevent the company’s workers from using the unsafe spreader bar.

A more recent case in Alberta, Bower v. Evans, suggests a narrow approach to holding directors personally liable for workplace accidents. In this case, the Court of Queen’s Bench overturned a Master in Chambers’ (lower court) decision refusing an application for summary dismissal of a claim by an injured worker against the directors of the company where he worked. (A summary dismissal application seeks to have a lawsuit thrown out at an early stage on the basis that it has no reasonable prospect of success). The Master relied on Epton to conclude that it was not plain and obvious the injured worker’s claim had no chance of success, and so it should be allowed to continue to trial. In other words, the claim had not yet succeeded, but it had enough merit to be allowed to carry on to a full trial.

On appeal, the Court of Queen’s Bench overturned the Master’s decision and dismissed the claims against the directors. Justice Belzil decided that the decision in Epton was based on Mr. Epton’s personal involvement in the events that caused the worker’s death. Mr. Epton’s knowledge of the issue and failure to implement safety measures amounted to personal negligence, separate and distinct from that of the company which employed the deceased worker. This distinguished the Epton case from the facts in Bower, where the two directors had essentially no knowledge of, or involvement in, the day-to-day operations of the company. The Bower directors were the wives of the men who performed the day-to-day work of the company.

It remains to be seen how these two decisions will be reconciled in future cases. In Epton, the Court explained in detail that the failure of Mr. Epton to take any steps to implement any health and safety measures was clearly negligent. Neither the trial judge nor the Court of Appeal expressly concluded that a director must be personally involved in, or have personal knowledge of, the circumstances leading up to an injury. However, the Court in Bower relied on this distinction to arrive at a different conclusion. As Bower was not a Court of Appeal decision, it remains unclear to what extent it will influence the law in Alberta.  It does not change the principle that a corporate director may be liable for negligent conduct contributing to a workplace accident. Rather, it suggests a narrow approach to determining when that should occur, based upon such factors as the involvement of the directors in the oversight of health and safety matters and day-to-day operations.

If Bower is appealed, the Court of Appeal may provide further guidance on this subject. However, regardless of the different outcomes in Epton and Bower, directors should understand the risk that they may be liable for workplace injuries, failing to implement a health and safety program, or failing to enforce compliance with the system, in the event that a company worker is injured. In addition to diligently taking steps to ensure that a robust company health and safety program is implemented, maintained and enforced, directors should satisfy themselves that they have adequate personal insurance coverage in place. Perhaps the best means to control this risk is for directors to obtain personal coverage as a director under the WCB Act. If this coverage is obtained, then the director will also be immune from lawsuits by injured workers just as the company and other co-workers are. Alternatively, directors should ensure that they have adequate director and officer liability insurance in place which does not exclude this type of claim.

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