OHS & Workers’ Compensation Advisor

Ontario OHSA Fine Signals Future Significant Director & Officer Prosecution Risk

The case involving a workplace explosion and Ontario Occupational Health and Safety Act (OHSA) prosecution against Eastway Tank, Pump and Meter Limited of Ottawa, Ontario and its owner and Director Neil Greene, wrapped on Friday, April 5, 2024, with guilty pleas and penalties for both the company and its Director. The terrible incident, which occurred in January 2022, resulted in fatal injuries to 6 workers, and catastrophic ones to a 7th worker, one of the worst losses of life and injury in a workplace accident in Canadian history. In addition to imposing a high OHSA corporate fine, the case has sent a chilling message about future OHS prosecution risk to Canadian corporate directors and officers.

The Eastway Tank Tragedy

The incident occurred in the fabrication shop of a facility that builds and services tank trucks capable of carrying a variety of fuels. Numerous regulatory agencies regulate this type of business and multiple investigations into the cause of the incident were commenced. The Ministry of Labour (now Ministry of Labour, Immigration, Training and Skills Development – referred to here as the Ministry) and Office of the Fire Marshal’s investigations, according to detailed agreed facts presented in court on April 5, concluded that flammable vapours near a newly built tank truck in the shop ignited and exploded while a “wet test“or ‘leak test” was underway. Such tests on new tank trucks are standard practice, done in the end stages of fabrication and had been done multiple times per year for decades at Eastway.  The “wet test” or “leak test” is performed using diesel fuel. Diesel fuel is added and flushed through the tank truck compartments to ensure the integrity of the tank prior to its operation and use. The defence and prosecution agreed that the use of diesel fuel to conduct “wet testing” is not a fire or explosion hazard.

Investigators concluded that the diesel fuel used in the “wet test” was contaminated with gasoline, creating a fire and explosion risk that would not be present had only diesel fuel been used.  This is because gasoline has a much lower flashpoint than diesel fuel. Gasoline vapours came into contact with an ignition source, resulting in several explosions, a fire engulfing the facility, the collapse of the fabrication shop roof, and the worker injuries. The ignition source remains undetermined. Eastway had a standard operating procedure prohibiting gasoline from entering the fabrication shop. However, diesel fuel, contaminated with gasoline, was found in several storage tanks – including the tank containing the diesel to be used for “wet tests”. A prosecution under the Ontario Occupational Health and Safety Act (OHSA) was commenced, with six separate charges, each, against Eastway and its Director.

 The Eastway Penalty

On April 5, 2024, the corporation pled guilty to failing to take the reasonable precaution of ensuring that diesel fuel used for “wet testing” was not contaminated with gasoline or any other flammable liquid or substance.  Eastway also pled guilty for failing to properly train and supervise workers on safe fuel storage and handling procedures to protect workers from the hazard of diesel fuel used for “wet testing” of trucks becoming contaminated.  A fine of $300,000 on each for the two charges was imposed on Eastway, plus an automatic 25% surcharge, for a total penalty of $750,000.

Traditional sentencing factors were considered by the court when imposing sentences. The court considered and accepted a joint sentencing recommendation from the Crown and the defence. As always, in sentencing a corporate entity the court took into account the maximum fine available under the OHSA – at the time of the accident $1.5 million per charge.[1] The court also considered the circumstances, including the terrible consequences of the explosion, the guilty plea indicating remorse, the need for deterrence, Eastway’s modest size, and its prior unblemished OHSA record. The court heard Eastway had from 20 to 30 workers at the time of the tragedy and had been operated successfully for decades by Mr. Greene, from the time he graduated from university, and, prior to that, by his father. There had been no prior charges against the business, and any prior OHSA orders had been complied with. The business is still operational and may commence operations again in future.

Before imposing a sentence, the court heard understandably emotional Victim Impact Statements from the families of the deceased and from the injured worker. The fine, all were reminded, takes into account OHSA regulatory sentencing factors and does reflect an attempt to place a value on the injuries and lives lost. Penalties are often decried as too low by the media and other stakeholders. This penalty, from an OHSA sentencing perspective, represents an extraordinarily high amount for a small corporation.  It is the highest penalty against such a corporation for a first offence to date. Only large mining, steel, forestry and commercial operations have ever previously received a fine of $300,000 or more for a first offence.  The total fine of $600,000 is the eighth-highest amount ever imposed under the OHSA.  The seven cases with higher total fines, again, involve significantly larger corporations – most of which had multiple prior convictions.  Unquestionably, the accident was terrible, but as noted by the judge, this sentence should serve as a warning to all Ontario businesses, regardless of size, about increased OHSA penalties.

 The Director’s Penalty and Pronouncement of Ontario OHS Prosecutor

The Director, Mr. Greene, pled guilty to “failing to take all reasonable care” to ensure Eastway took the reasonable precaution of ensuring diesel fuel used for “wet testing” was not contaminated with gasoline or any other flammable liquid or substance. The Director received a fine of $80,000 on this one charge under the OHSA – again, plus an automatic 25% surcharge for a total penalty of $100,000. No particular details of the Director’s conduct were presented to explain the rationale for charging him.  It was simply stated he “failed to take all reasonable care to ensure corporate compliance” with the expected safe practice.

The penalty against Mr. Greene, significantly, represents very close to the maximum fine available in sentencing him as a director under the OHSA. At the time of the accident, the maximum penalty was a fine of up to $100,000 (plus surcharge) and/or 1 year of incarceration.[2] It represents the highest penalty for a corporate director on a single OHSA charge in Ontario, indeed Canadian, history.

In sentencing submissions respecting Mr. Green as director of the business experiencing this tragedy, the Crown Prosecutor pronounced that in Ontario corporate directors are increasingly being charged and prosecuted under the OHSA. In holding Mr. Greene accountable, the Crown Prosecutor stated it was intended to send the message that corporate directors cannot take a hands-off approach to health and safety in a business they are involved in.  These comments clearly demonstrate the intention of Crown prosecutors to, more frequently, seek OHSA fines against the most senior personnel in corporations.

Officers and Directors Take Notice

Ontario OHSA obligations and associated regulatory provisions are generally well known to our readers, yet the obligations of directors and officers and their risk of OHS prosecution continue to appear to be less well known. Every director and officer[3] of a corporation operating in Ontario has a legal obligation under section 32 of the OHSA to “take all reasonable care” to ensure that the corporation complies with the OHSA, each of its applicable regulations, and any applicable order issued by the Ministry.

A.   2022: OHSA Maximum Director and Officer Fine Increased 15 Fold

Until July 2022, corporate directors and officers were subject to a maximum fine of $100,000.  On July 1, 2022, the OHSA was amended so that these senior management representatives face a maximum fine of $1,500,000 and/or potential incarceration of up to 1 year, per charge.[4] 

The highest monetary penalty previously imposed on an individual under the OHSA has been $90,000.  That was for four separate OHSA charges – when the maximum fine was $25,000 –following a guilty plea in a case in which four workers were killed and a fifth seriously injured.

The second highest fine imposed to date on any individual has been $70,000.  That penalty was meted out in August 2023 after a supervisor pled guilty to an offence arising after a worker died after being burned by flammable vapours, that were being purged from an underground chamber, ignited.

B.   More Charges for Less Directly Culpable Behaviour?

Director and officer obligations under the OHSA are not new.  They have been in the legislation for decades.  However, they have, traditionally, not been common charges and, when a director or officer was charged, it was usually someone who was part of a small organization.  That person usually had hands on involvement in the incident resulting in charges such that they would have had an opportunity to prevent the violation or incident.  This is what we are referring to as directly culpable behaviour. 

The statements by the Crown about an increase in director and officer prosecutions for taking a hands off approach to OHSA compliance suggest a potential increase in prosecutions against directors and officers who are less directly culpable.  Those who may not have day-to-day hands on operational roles may be included more frequently as a target of a Ministry investigation and prosecution by the Crown.  If this is the direction in which enforcement moves, it would represent a departure from the usual circumstances in which director and officer charges have been laid and pursued.

We are not suggesting legal impropriety in any expansion of OHSA enforcement activities against directors and officers.  The obligations on such people are in the OHSA and do not require directly culpable behaviour or, frankly, even an accident or incident before they can be used.  They are part of the overlapping system of duties, imposed on workplace parties by the OHSA, that are intended to operate as a system of “belts and braces” to ensure compliance.  However, the spectre of increased enforcement action should cause all officers and directors, regardless of whether they have a day-to-day operational role or not, to revisit the measures in place to ensure they are taking all reasonable care to ensure compliance by their organization.

C.   Director and Officer Compliance: Documentation and Steps

The measures that may amount to all reasonable care will be specific to the circumstances of the involved officer(s) and director(s).  The steps required of a member of a board who does not have a direct operational role will, in our experience, be different from someone in a smaller organization who may have a more hands on function in the day-to-day work of the organization.  Regardless of the specific role of the officer or direction, one matter that will be important is the need to document the positive steps taken to assess and ensure corporate compliance. Without documented evidence of having taken “all reasonable care to ensure corporate OHS compliance” it may be challenging, if not impossible, for an individual to defend a charge alleging a failure to take all reasonable care or due diligence in relation to a particular set of events or OHSA obligation. Increasing individual penalties and the recent comments of a Crown prosecutor could signify a heightened focus on individual liability and a corresponding need for officers and directors to take greater action.  However, even if we do not see an immediate, dramatic shift in the approach of prosecutors, our view is the potential for tremendously high penalties adds further importance to documenting the steps taken to ensure compliance with the OHSA. 

The reality is the defendant has the obligation of demonstrating due diligence.  The prosecution does not have to prove an absence of due diligence.  Workplace leadership should, therefore, develop the habit of ensuring the documentation of positive steps.  Failing to do so, or failing to create detailed documentation that is useful, seriously hinders the ability to demonstrate that all reasonable care was taken.  Memories fade, and the importance of a particular step is probably not patent at the time it is taken.  It is generally after charges have been laid that individual steps take on heightened, if not critical, importance and any difficulty or inability to demonstrate the reasonable care that was exercised increases the likelihood of a conviction and a higher penalty.

What is required of individual officers and directors? What steps should Boards of Directors take? Should Board OHS committees be struck, and what should they do to ensure corporate compliance? Should businesses develop a senior management safety steering committee? What steps are most effective and protective? Should the Board of Directors request a detailed (potentially privileged) audit? We have seen and assisted in the development of compliance systems in numerous formats, each taking into account the needs of the particular organization and its directors and officers. Whatever form steps take, we suggest that senior management, officers and directors of Ontario organizations seriously consider taking the following steps and keeping this kind of documentation in an effort to incorporate a personal “due diligence” regime into their daily activities.  These need not be time-consuming steps.  A few straightforward measures and small changes in operational behaviour can be significant.  These include the following:   

i)  Knowledge of Applicable OHSA Obligations: Make sure senior officials, officers and directors have knowledge of the corporation’s most fundamental health and safety obligations – including their obligations as an officer or director.  Ensure they know the key OHSA regulatory requirements applicable to the company’s operations (e.g. machine guarding, mandatory training, WHMIS, etc.)  An appropriate training course in obligations, and documentation of the same, is a key first step.  An in-house safety official can readily prepare a summary of key regulatory obligations for senior management review; 

ii)  Ensuring Corporate Review of OHS Measures and Procedures: Ensure that, once provisions of the OHSA and regulations for work are known, there is meaningful review of corporate health and safety policies and programs and that these are reviewed and updated as required.   Place the task of reviewing the health and safety issues on officers’ and directors’ meeting agendas.  Place this issue on management or production meeting agendas with some frequency; 

iii) Keep Directors and Officers Informed of Corporate OHS Issues: Establish a system for senior officials, officers and directors to become informed of significant or critical health and safety developments or problems at the workplace to ensure the corporation addresses them and maintains compliance with the OHSA; and

iv) Follow Up and Give Compliance Directives on Known Health and Safety Issues: Officers and directors and senior officials should follow up on known health and safety problems and compliance issues.  This could include making notes about inquiries into safety issues, the response to such inquiries, and any further steps taken by the officer or board up to and including specific directions to ensure compliance, in response to health and safety issues that have not been completely or satisfactorily addressed. 

The Eastway matter is certainly notable for the tragedy involved, and the quantum of the penalties meted out, as they may signal a more aggressive approach to sentencing by Crown prosecutors.  The case may also be notable as a signal of a broadened approach to enforcement by the Ministry and Crown prosecutors. 

Employers and their senior officials would be well-advised not only to note the size of the fines imposed but to also note the comments of the Crown as a signal of what may be coming.  The prudent response of all officers and directors would be to assess and, as necessary, enhance the steps they are taking to ensure corporate OHSA compliance.  Not only would this manage individual and corporate risk, it should help ensure compliance by the organization such that a future workplace tragedy can be avoided.

[1] In October 2023, the maximum fine that could be imposed on a corporation was increased to $2,000,000 per charge.  The increased maximum could not be applied retroactively in this case.

[2] In July 2022, the maximum OHSA fine that could be imposed on a corporate director or officer was increased 15-fold to $1,500,000.  This substantially increased maximum fine could not be applied retroactively.

[3] The terms director and officer remain broad and undefined in the OHSA. It is worth noting that British Columbia is the only Canadian jurisdiction whose OHS statute imposes the same obligations for directors and officers as the Ontario OHSA (see section 27 of the Workers Compensation Act). However, senior management and directors appear in the definitions of “employer” and their duties in a variety of ways in the OHS statutes of many Canadian jurisdictions.

[4] The 2022 OHSA amendments also increased the maximum monetary penalty for all other individuals to $500,000 – a five-fold increase from the existing maximum. 

If you have any questions about this topic, or any questions relating to workplace law generally, please do not hesitate to contact a Mathews Dinsdale lawyer.

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