Construction project owners: New sources of legal risk under Ontario's OHSA

A recent decision of the Ontario Court of Appeal may significantly increase the risk of legal exposure facing an "owner"^[1] of a construction project.

Because of this recent case, engaging a General Contractor ("GC") as the "constructor"^[2] at a construction project, and allowing the GC to assume full operational "control" over the project, may no longer insulate the project's owner from liability under Ontario's Occupational Health and Safety Act ("OHSA").

The Court of Appeal has suggested that if an owner is found to be an "employer"^[3] pursuant to the OHSA, and the owner (or its staff) are regularly present at the project, the owner may be held liable for health and safety matters for the entire project. This means that an owner may now be liable for health and safety matters over which it exercise no day-to-day oversight, or control.

In this Insight, we will provide a detailed breakdown of the Court of Appeal's decision in Ontario (Labour) v Sudbury (City), and indicate why an "owner" may wish to take immediate steps to avoid being characterized as an "employer" in these circumstances.

We will also comment on the City's recent decision to appeal the Court of Appeal's decision to the Supreme Court of Canada.

A very common construction contractual arrangement between an Owner and GC

The contractual arrangement in Sudbury will be familiar to most "owners" and "constructors" across the province.

The Corporation of the City of Greater Sudbury ("City") put to tender a construction project for road and water main repairs.  Thereafter, the City contracted with a GC for the completion of the repairs ("Project"). The GC contractually agreed to serve as the "constructor" for the Project. The "constructor" would have control over day-to-day management of the Project. The contract also stipulated that the "constructor" would be responsible for ensuring full compliance with the OHSA for the entire Project.

The contract called for minimal involvement on the part of the City.  While the GC / constructor was responsible for managing the project, the City would only monitor the Project. It did so by occasionally sending City-employed quality control inspectors to check for defects in workmanship. The quality control inspectors were not authorized to direct or control any of the work being performed by the GC, or the GC's workers. No other City employees were present at the Project.

A tragic accident

In September, 2015, a pedestrian was tragically struck and killed by a road grading machine operated by an employee of the GC.  The pedestrian was attempting to cross a street at a traffic light that was adjacent to the Project. 

The Ministry of Labour ("Ministry") attended at the workplace and conducted an investigation into the accident.  The Ministry charged both the GC and the City with numerous violations of the OHSA.  For the purposes of this Insight, we will focus on the charges laid against the City only.

City charged as a "constructor" and as an "employer" 

The charges laid by the Ministry against the City alleged that the City failed, as a "constructor" and as an "employer" to:

1. Ensure there was a "signaller" (i.e. a helper) present to assist the driver of the road grading machine with safe navigation.
2. Install a sturdy fence to separate members of the public from dangerous construction equipment.
3. Retain the services of a paid duty police officer to assist in directing traffic and vehicles through the construction zone.
4. Establish and implement a traffic protection plan for workers and others at the Project.

Trial decision

At trial, the City was acquitted of all charges.  The Trial Judge agreed with the Crown prosecutor that there were numerous, clear violations of the OHSA at the Project, which contributed to the accident occurring. However, the Trial Judge found it was "crystal clear" that the GC was the "constructor" and had "control" over the Project.

The Trial Judge next considered whether the City was an "employer". The Court agreed with the Crown prosecutor that the City was an "employer" insofar as it was responsible for the quality control inspectors who attended on-site at the Project. The City was responsible for training and ensuring that the quality control inspectors were aware of risks and exposure points at the Project.  In this way, the Court agreed, the City had limited overlapping duties as both "owner" of the Project, and "employer" of the quality control inspectors.

The Crown attempted to take this argument further. The Crown argued that the mere presence of City-employed quality control inspectors at the Project made the Project a "workplace" for the purposes of the OHSA. Therefore, according to the Crown, the City was responsible as an "employer" for all health and safety matters at its "workplace" – i.e. the entire Project.

The Trial Judge disagreed:

"[the] City did not have control of the conduct of the workplace to bring it within the obligations intended or created by the OHSA for employers". 

Crown's First Appeal

The Crown appealed the Trial Judge's ruling to the Ontario Superior Court of Justice.  Again, the Crown claimed that the City was liable for the accident, both as a "constructor" and as an "employer". 

The Superior Court endorsed the Trial Judge's ruling and dismissed the appeal.  The Superior Court accepted that the City did not exercise sufficient "control" over the Project to be classified as a "constructor".  The Superior Court also accepted that the City was not an "employer" for purposes of the Project. 

The Court commented on the current state of affairs in the construction sector.  It commented that accepting the Crown's position would "…change substantially what has been the practice in Ontario on construction projects".

Crown's Second Appeal

The Crown commenced a second appeal, this time to the Ontario Court of Appeal.  The Court of Appeal refused to hear the Crown's argument regarding the question of whether the City was a "constructor".  The Crown was only permitted to argue that the City was an "employer" for purposes of the Project.

On April 23, 2021, the Court of Appeal issued a preliminary judgment in favour of the Crown.  The Court ruled that a party is an "employer" for OHSA purposes if the party employs workers that are "directly employed or engaged by contract". 

The Court further stated that once an "owner" is found to be an "employer" on a construction project, it may be implicated in and prosecuted for any Ontario OHSA violation that occurs on a project.  According to the Court, an employer's position virtually is equivalent to that of an "insurer who must make certain that the prescribed regulations for safety in the work place have been complied with before work is undertaken". 

In this case, the City employed its quality control inspectors, and the quality control inspectors were present at the Project on occasion. Therefore, according to the Court of Appeal, the Project was a "workplace" and the City was responsible for ensuring compliance with the OHSA in respect of all facets of the Project / "workplace". 

Notably, the Court of Appeal did not consider evidence regarding whether the City (including its quality control inspectors) exercised any "control" or had any involvement in the day-to-day management and operations at the Project. The Court suggested that the issue of "control" could become relevant in future cases dealing with the "owner" vs. "employer" issue, however it was "not sufficiently canvassed" by the parties in the case before the Court.

Consequences of the Court of Appeal decision on the Owners

Because the Court of Appeal found:

1. the City was an "employer" for purposes of the entire Project, and
2. the entire Project was a "workplace" for purposes of the OHSA, the City was not able to rely on its contract with the "constructor" (i.e. the GC) to insulate against the legal exposure it is now facing as an "employer" under the OHSA.

The City's only remaining option will be to prove that it took "every precaution reasonable in the circumstances" (i.e. it exercised due diligence) to ensure that the GC assigned a signaller to the road grading machine; installed an appropriate fence around the project, etc.  Satisfying this burden may prove to be daunting, given that the City was relying on an experienced and well-established "constructor" to manage health and safety matters at the Project, and City employees were not regularly present at the Project.

City granted leave to appeal to Supreme Court of Canada

Leave to appeal is required before a case can be heard by Canada's highest Court.  The Supreme Court receives numerous request for leave to appeal each year.  Only a handful of the most serious and significant cases are granted leave to appeal by the Supreme Court each year.

In response to the Court of Appeal's decision, the City sought leave to appeal from the Supreme Court of Canada, which was granted on December 9, 2021.^[4]  Evidently, the implications of the Sudbury decision are serious enough to warrant further assessment and consideration from our highest Court. 

The City's appeal is expected to be heard by the Supreme Court of Canada at some point in 2022.  At this early stage, it is unclear whether the Supreme Court of Canada will agree with the Ontario Court of Appeal's interpretation of the duties of owners, constructors and employers on construction projects.

Gowling WLG Focus

The Sudbury decision was a preliminary ruling – before the City was granted leave to appeal to the Supreme Court, the matter was remitted to the Superior Court so that the Parties could lead evidence on whether the City exercised due diligence to keep the entire Project safe.

The Court of Appeal left open the question of whether, in a different case and considering different facts, a reviewing Court may re-introduce the concept of how much "control" an "owner" / "employer" exercised over a given project. It is possible that the Supreme Court, when considering the City's Appeal, will re-introduce or otherwise comment on this concept.

Subject to the Supreme Court's eagerly anticipated decision in this matter, it is possible that future cases may develop along the lines of the established "owner" / "constructor" case law, such that an "owner" will be exempted from liability under the OHSA where its obligations as an "employer" are so limited that it exercises no "control" at a project.

However, if the Supreme Court agrees with the Court of Appeal, the decision in Sudbury will be a sign of things to come for the immediate future, owners and constructors may wish to revisit their long-standing practices for construction project monitoring, quality control, safety and management.  

It may no longer be prudent for an owner to send its own employees to conduct quality control, maintenance, etc., at a project, even though those functions may have nothing whatsoever to do with construction work being performed. Failure to account for these exposure points may trigger substantially more liability under the OHSA than the owner initially anticipated, or contracted for.

It is imperative to stay abreast of the evolving recommendations of our Courts and regulators. At Gowling WLG, we are committed to monitoring legislative developments by industry sector. For any questions you may have about the Court of Appeal's decision, or any other issues related to Construction and Occupational Health & Safety law, our Litigation & Dispute Resolution, and Employment Labour & Equalities Groups would be pleased to assist.