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Canada – Directors beware: you may be personally liable for workplace injuries

Written by
Mathews Dinsdale, Canada’s only national labour and employment law firm.
A recent judgement from the Alberta Court of Appeal has held that directors can be personally liable for workplace injuries unless they purchase additional, specific, WCB insurance protecting them. 

In Canada, compensation for injuries arising out of or in the course of employment generally falls under the umbrella of the workers’ compensation system. The workers’ compensation system represents a ‘historic trade-off’ where injured workers are compensated for workplace injuries, regardless of fault or an employer’s ability to pay, in exchange for losing the ability to bring a legal action against a covered employer or a co-worker. However, the workers’ compensation system does not always protect against liability, nor does hiding behind the ‘corporate veil’.

Recently the Alberta Court of Appeal explored the intersection between the workers’ compensation regime and corporate liability in Hall v Stewart, 2019 ABCA 98. The central issue in this case was whether a director of a corporation could be held personally liable for damages caused by his own wrongful (tortious) conduct, while acting as a representative of the corporation in the context of a workplace accident.

The respondent was a director of a construction company that had been hired as a sub-contractor to perform work on the construction of a new home. Part of that work included the installation of a staircase into the basement, which collapsed and injured workers employed by another sub-contractor. The director was involved in not only the supervision of the work, but also the installation of the staircase. The injured workers were compensated under the workers’ compensation system, as their employer and the construction company had coverage under the Alberta Workers’ Compensation Act.

The Workers Compensation Board (‘WCB’) brought a legal action (i.e. a ‘subrogated action’, as the insurer against a third party that caused the loss) against the director to recover the amounts it paid to the injured workers. He then brought an application to have the action against him summarily dismissed, arguing that any negligent act he committed was done as part of his duties as an employee, not as a director of the construction company. The Master in Chambers granted the application and dismissed the action against the respondent because the corporation was immune from being sued due to its coverage under the workers’ compensation system. WCB appealed the decision and a chambers judge confirmed the decision. WCB appealed that decision to the Alberta Court of Appeal arguing that the action should not have been summarily dismissed.

The Alberta Court of Appeal reviewed the workers’ compensation regime, noting that while immunity applied to the construction company, it does not apply to directors unless additional coverage is purchased from WCB. The respondent in this case did not have that coverage and the Court determined that he therefore was not covered by the workers’ compensation system.

The Court of Appeal then turned its attention to the idea of immunity from being sued based on the corporation as a separate legal entity. Generally, representatives of corporations, such as the respondent, have limited personal liability when acting within the scope of their duties as representatives. However, the Court of Appeal found that there are exceptions to the limitation of personal liability. One such exception is where the corporation itself is immune from being sued but the individual is not, which was the situation in this case.

The Court of Appeal found that both the construction company and the respondent director owed a duty of care to the other workers on site during the installation of the stairs, and without immunity under the workers’ compensation system, the construction company would have been liable. However, the respondent director did not have the benefit of the immunity that the construction company did.

Lastly, the Court of Appeal considered the policy arguments for and against attaching personal liability to tortious (wrongful) acts of corporate representatives that were not ‘independent’ of the business of the corporation, and determined that the deciding factor was the nature of the damages. The nature of the damages in this case was personal injury. The Court determined that there were strong public policy reasons to ensure that injured plaintiffs are compensated and that the recognition of a corporation as a separate legal entity was not designed to provide immunity to a director in these situations.

Ultimately, the Court of Appeal allowed the appeal, and set aside the summary dismissal of the action. This means that the dispute regarding whether the staircase was negligently installed, and whether that was the cause of the failure and the resulting injuries of the workers, would be allowed to be decided at trial. That step has not happened yet.

Although the decision did not address the specific amount of damages or liability of the director, it serves as an important warning to corporate representatives that they may not always be immune from liability in workplace accidents. As such, they need to evaluate their risk based on their own circumstances and consider purchasing additional WCB insurance where they believe it is in their best interests to do so.

Loretta Bouwmeester
Partner - Canada
Mathews Dinsdale