• OHS Penalties and Due Diligence
  • December 10, 2012 | Authors: Michelle McCann; Mark D. Tector
  • Law Firm: Stewart McKelvey - Halifax Office
  • In September of this year, the Nova Scotia Court of Appeal released Guild Contracting Specialities (2005) Inc. v. Nova Scotia Occupational Health and Safety Appeal Panel, 2012 NSCA 94 ("Guild"). This decision is important for two reasons:

    1. It confirms that when appealing an administrative penalty a party can contest both the compliance order upon which the penalty is based and the amount of penalty; and,
    2. It confirms that a party may be able to advance a due diligence defence when appealing an administrative penalty.

    The department's interpretation of the regulations

    The Occupational Health and Safety Administrative Penalties Regulations (the "regulations") came into force in Nova Scotia in January 2010. The regulations allow the Department of Labour and Advanced Education (the "department"), through an administrator (the "administrator"), to levy penalties against those who breach the provisions of the Occupational Health and Safety Act ("OHSA") or its regulations.

    An officer of the department can conduct inspections of an employer's premises. If a violation of the OHSA or its regulations is identified, then the officer may issue a compliance order against the responsible party, which is usually the employer. If a compliance order is not appealed successfully, then the matter is sent to the administrator, who can issue a penalty. The penalty can be issued several weeks or months after the compliance order is issued.

    Before the decision in Guild, the department took the position that if a party complied with the compliance order they could not later dispute the basis for that order and on an appeal of a penalty all that could be considered was the amount of the penalty - not the underlying grounds for the compliance order. Accordingly, employers and others subject to the regulations were put in a difficult situation; they had to make a decision on whether to spend money and time appealing a compliance order before knowing (a) whether they would be faced with a penalty and, if so, (b) the amount.

    Facts in Guild

    In Guild, the employer was charged with failing to have an appropriate eyewash available on-site. A compliance order was issued and Guild complied with it, obtaining an eyewash station that could flush the eye for 15 minutes per the compliance order's requirements. Two months later, an administrative penalty was issued. The company appealed the administrative penalty to the Occupational Health and Safety Appeal Panel (the "panel").

    On appeal to the panel, Guild argued that, although it did not have an eyewash station that could clean an eye for 15 minutes, it was not needed at the time that its site was inspected because there were no dangerous substances on-site that would require that level of eye washing. Guild submitted that the eyewash station it had on site was compliant with the OHSA and its regulations when no hazardous substances were on-site.

    The panel did not address Guild's argument. Instead, it adopted the department's interpretation of the regulations and took the position that it would not consider the validity, appropriateness or necessity of the underlying compliance orders during an administrative penalty appeal. In its view, the only issue it could consider was whether the amount of penalty was appropriate.

    The company appealed the panel's decision to the Nova Scotia Court of Appeal.

    The Court of Appeal's findings

    On further appeal to the Court of Appeal, the department argued that if a party chose not to appeal a compliance order, the finding in the compliance order became final and binding and could not be reviewed by the panel.

    Justice Farrar, writing for the Court of Appeal, disagreed, concluding that:

    Quite frankly, I cannot on reviewing the record, the OHSA and the submissions of the parties, see how this conclusion could be reasonable.

    The Court of Appeal found that the panel provided no reasons for its approach to administrative penalty appeals, and that a review of the OHSA and the regulations provided no support for the panel's approach. The Court of Appeal found there was no reason that an appeal to the panel should be limited to considering the amount of the penalty.

    By limiting an appeal to the amount of the fine where a compliance order had not been appealed, the Court of Appeal found that the panel had effectively prevented employers from raising a due diligence defence, that was not "justifiable or permissible under the legislation as it presently exists".

    The Court of Appeal found that:

    • The purpose of a compliance order is to ensure compliance with the OHSA; it is different from an administrative penalty, which is intended to penalize the party.
    • A compliance order is issued well before an administrative penalty is imposed. A company cannot make an informed decision as to whether to appeal a compliance order without knowing if they are going to be issued an administrative penalty, the amount or the implications of it.
    • An appeal of a compliance order does not provide a meaningful right of appeal from issuance of an administrative penalty; by limiting an appeal of the administrative penalty to the fine amount, the panel effectively removed the employer's right to defend itself against the penalty by demonstrating due diligence, something the panel had no authority to do under the OHSA.

    What this means for you

    This is a significant and positive development for Nova Scotia employers, and others who may be subject to the regulations. It effectively requires the Labour Board (which has replaced the panel) to take into consideration both the underlying facts of a compliance order upon which a penalty is based, as well as, the amount of the penalty. The decision confirms the importance and availability of the due diligence defence to those appealing a penalty.