By Jesse Gardner and Nicholas Reynolds

Much has been written about the Supreme Court of Canada’s decision in R. v. Greater Sudbury (City), and its implications for project owners with respect to their occupational health and safety obligations. Below, we consider the practical implications of what the Greater Sudbury decision may mean for owners under different project models.

Factual background

The City of Sudbury contracted with Interpaving Limited to repair a watermain and act as constructor under Ontario’s Occupational Health and Safety Act (OHSA) in performing its work. Contrary to OHSA, Interpaving failed to place a fence between the project site and the intersection, and failed to ensure that a signaller was in place.

An Interpaving employee struck and killed a pedestrian when driving a grader through an intersection. The Ministry of Labour charged Sudbury under s. 25(1)(c) of the OHSA as both a constructor and an employer for failing to ensure Interpaving’s compliance with OHSA.

Sudbury conceded it was the owner and acknowledged that its quality control inspectors were sent to site to ensure Interpaving’s compliance with their contract. However, Sudbury denied that it was either a constructor or an employer under the OHSA, on the basis that it had delegated control to Interpaving.

The Supreme Court’s decision

In its decision, the SCC observed that the OHSA is a public welfare statute that is remedial in nature, and one which is meant to ensure a minimum level of worker protection, as a result of which it must be interpreted liberally to promote health and safety. The OHSA promotes health and safety by allocating duties amongst multiple parties, such that these duties overlap (rather than one entity being responsible). The failure of one health and safety system is not necessarily fatal, to the extent that another system or entity may pick up the slack. As a result, multiple entities may be accountable for OHSA breaches, and they cannot use others’ failures as an excuse.

The Ministry was not required to demonstrate that Sudbury had exercised control over the workers or workplace to establish a breach, given that a breach of s. 25(1)(c) is a strict liability offence. The Court observed that a review of OHSA demonstrated legislative intent to focus on the employer’s connection to the workplace, rather than control over the workplace or workers. The Court found that the definition of “employer” under the OHSA did not include any reference to a “control” requirement, which absence the Court concluded was indicative of the legislature’s intent not to make the definition of “employer” contingent on such a factor. By referring to a contract for services in the definition of “employer”, the OHSA contemplated an employer-independent contractor relationship as falling within the definition.

Turning to the issue of due diligence, the Court noted that the presence of a due diligence defense was significant insofar as it allows “employers” who breach section 25(1)(c) of the OHSA to avoid penalties if they can demonstrate that they took “all reasonable steps” to prevent the breach. Here, an employer could argue that its lack of control over the workplace or workers (i.e. through delegation to another entity) could constitute evidence that it took “all reasonable steps” to satisfy its due diligence obligations.

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Analysis of the due diligence issue would require consideration of (1) the accused’s degree of control, (2) whether they delegated control to the constructor in an effort to overcome their own lack of skill, knowledge or expertise, (3) whether the accused took steps to evaluate the constructor’s ability to ensure compliance with OHSA before deciding to delegate, and (4) whether the accused effectively monitored/supervised the constructor’s work.

In this case, Sudbury was an employer of both (1) the quality control inspectors it dispatched to the project site, and (2) Interpaving. Therefore, Sudbury was obligated to ensure OHSA-prescribed procedures were implemented at the worksite, such that the failure to implement safety measures meant that Sudbury committed an offence under section 25(1)(c). As noted above, Sudbury’s control (or lack thereof) would go to the issue of due diligence (which was referred back down to the Superior Court). This decision may cause concern and uncertainty for owners. Owners, particularly on public projects, often seek experienced contractors to provide expertise in compliance with occupational health and safety requirements. Owners also satisfy these obligations by selecting a project delivery model which contractually allocates this risk to the contractor.

Project owners previously relied on the proposition that they were not an employer under the OHSA. Under this paradigm, the due diligence analysis was not at the forefront, as the liability inquiry would rarely advance to that stage. However, given the Court’s decision in Greater Sudbury, this paradigm no longer applies, and the due diligence analysis will instead assume greater prominence as the critical component of the liability inquiry. Owners will need to adjust accordingly in order to bolster their due diligence defence.

Importantly, the degree of potential exposure for owners may depend in part upon the nature of the contractual relationship with the contractor and the project delivery model. We consider below the implications for certain project delivery models—including the traditional general contractor model, the construction manager model, and variations of the P3 model.

General contractor model

arguably, a traditional owner-contractor relationship (e.g. a design-bid-build model, such as a CCDC-2 contract, or a design-build, such as a CCDC-14) may be more prudent than a construction management relationship from an occupational health and safety perspective, given the greater degree of contractual separation created between owners and workers on site compared to the construction management model. Under the owner-contractor model, the owner can more credibly argue that it has delegated control of the site to the general contractor (who is typically identified in the prime contract as constructor).

Ironically, the existence of an owner-contractor relationship of the nature described above is arguably less suitable where the owner requires additional expertise. In contrast, a construction management relationship may be more suitable, in that it may require the construction manager to prioritize the owner’s interest to some extent.

This is also problematic where the due diligence analysis considers whether the accused has effectively monitored or supervised the constructor’s work. Where the owner requires occupational health and safety expertise, it is unclear how they can effectively monitor or supervise a contractor who owes a lesser obligation to pursue the owner’s interests (compared to the construction management model), and who may have greater expertise than the owner.

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Unfortunately, the Court did not articulate the distinction between control and supervision. The Oxford English Dictionary defines “supervise” as meaning “​to be in charge of somebody/something and make sure that everything is done correctly, safely, etc.,” suggesting that final decision-making authority—or in other words, control—resides with the supervisor rather than the supervisee. Similarly, “control” is defined as “the power to influence or direct people’s behavior or the course of events.” As a result, it is unclear how an owner could supervise work without retaining control, insofar as the term implies being able to direct the constructor. A heavy hand by the owner can lead to claims of interference such that owners may be better served by robust monitoring rather than supervision.

It may be prudent for owners to consider appropriate measures to demonstrate due diligence. For example, an owner may want to retain their own OHSA consultant to monitor the constructor, while taking steps to ensure that monitoring does not amount to supervision. This might include incorporating comprehensive reporting obligations for the contractor and robust investigative rights for the owner or its consultant, while remaining clear that the contractor retains ultimate decision-making authority with respect to health and safety issues.

The construction management model

By contrast, the construction management model may pose a risk to owners insofar as subcontracts would be between the owner and the subtrades, such that the owner directly employs those organizations with personnel on the project site.

There would arguably be an enhanced risk under the due diligence analysis of the owner being deemed to have retained control over the project. Using a construction manager might undermine a due diligence defence; insofar as the construction manager does not have a direct contractual relationship with subtrades and therefore has no contractual control over them—although the construction manager may have delegated authority from the owner to manage the subtrades. This tension creates a catch-22 for owners requiring assistance in managing projects (i.e. a more beneficial form of delivery model creates a greater risk to the owner).

It is possible that the industry will see an increase in Construction-Manager-at-Risk (“CMAR”) contracts (e.g. under a CCDC-5B contract), where the construction manager acts as agent during pre-construction, before then assuming the role of general contractor once the construction phase begins. This may resolve some of the issues faced by an owner early on in the project, before allowing them to delegate control of the activities that actually run the risk of OHSA liability (i.e. construction activities).

However, the devil will be in the details of such contracts and of the parties’ conduct. It can be difficult to know where the construction manager role begins and the general contractor role ends—particularly where the construction phase begins while the pre-construction phase (e.g. design, land acquisition, permitting, etc.) is still in progress—such that a CMAR contract will have to be carefully drafted in order to limit the owner’s OHSA exposure.

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As it pertains to satisfying a due diligence defence, any construction management contract should be explicit about the extent to which the owner is delegating its authority to the construction manager. As is the case with the owner-general contractor relationship, the owner under a construction management model would also be well-served by precisely articulating the scope of monitoring rights, and clearly stipulating that such monitoring does not imply an act of control by the owner.

P3 model

P3s share some similarities with the design-build approach sometimes used under the general contractor model, such that the observations above apply to some extent to P3s as well. However, the unique features of P3 models create additional risks in light of Greater Sudbury.

Project agreements on P3s are intended to be a complete code of the owner and project contractor’s relationship, including with respect to the allocation of rights, obligations, and risk, as well as available remedies. Owners enter into project agreements on the assumption that they have shifted all risk to the project co except for a limited number of specifically articulated exceptions. Greater Sudbury arguably undermines this structure by shifting responsibility and risk back to the owner.

This is problematic in circumstances where the P3 model engages the criteria of the due diligence defence in a different manner from other project delivery models. First, it is more likely on a large P3 that a public owner will have enhanced expertise, given that large public owners typically are involved in many P3 projects and have significant institutional knowledge. As a result, the second criterion of the due diligence analysis—delegation of control in order to overcome a lack of skill, knowledge, or expertise—would be more difficult to satisfy.

Given the size and complexity of P3 projects, it is arguably impractical to suggest that an owner could effectively monitor an entire project without deploying significant resources to oversee both the project site and the project contractor’s relevant off-site activities. This might increase the efforts the owner must undertake to satisfy those obligations, at the same time as it is trying to avoid exerting control over the project’s overall health and safety scheme.

An effective approach for P3 owners to bolster a due diligence defence may entail (1) explicitly articulating in the project agreement the extent to which the owner is ceding control over the project site; (2) expressly identifying the limits of the owner’s supervisory rights in respect of occupational health and safety; and (3) including comprehensive monitoring rights over the project co’s work, including in relation to occupational health and safety.

Jesse Gardner is a Partner in the Construction and Infrastructure Practice Group at Singleton Urquhart Reynolds Vogel LLP.

Nicholas Reynolds is an Associate in the Construction and Infrastructure Law Group at Singleton Urquhart Reynolds Vogel LLP.

[This article originally appeared in the May/June 2024 edition of ReNew Canada]

Featured image: The Supreme Court of Canada, Ottawa, Ont. (Getty Images)

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