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Choosing to be covered bars future legal action

The November/December 2007 issue of COS magazine contained an article entitled, “Ensure directors and executive officers are covered. Extra coverage might be required if they aren’t considered ‘workers’.” That article focused on ensuring directors and executive officers were covered by your province’s workers’ compensation legislation in case of injury or illness.  

But what happens when a worker or a worker’s dependents bring an action against an executive officer or director following a workplace injury, illness or fatality? Can they bring such an action? Are they allowed to sue?  

One of the founding principles of workers’ compensation legislation is that workers and dependents are entitled to claim for compensation benefits, but are barred from bringing a legal action against an employer or worker covered by the jurisdictions’ workers’ compensation legislation (“statutory bar”).  

This statutory bar applies when a legal action is brought following a compensable workplace injury and generally applies regardless of how gross or reckless the alleged misconduct contributing to the injury might have been. Each jurisdiction across Canada incorporates this statutory bar into its legislation. However, each jurisdiction applies the statutory bar differently when it comes to protecting executive officers or directors of the corporation.

Although this article focuses on executive officers and directors, the same risk management benefits do apply to independent operators and industries that are exempt from workers’ compensation coverage; however, the specifics are not highlighted here.

In Ontario and Quebec, the statutory bar provisions within the workers’ compensation legislation statutes extend to executive officers or directors of the corporation. In New Brunswick and British Columbia, executive officers and directors of limited or incorporated companies are considered workers under workers’ compensation legislation. Executive officers or directors in Saskatchewan who are paid a regular predetermined salary are also considered workers. In Nova Scotia, the statutory bar extends to any agent of an employer.

In any jurisdiction where an executive officer or director of the corporation is considered a “worker” as defined by the respective statute, they are protected from a legal action resulting from a workplace injury.

In other jurisdictions, however, an action could arise against an officer or director of a corporation as they are neither considered an “employer” nor a “worker” as defined by the statute. This was the case in the 2006 Alberta Court of Queens Bench decision in Nielsen Estate v. Epton. In that case, a director of a corporation without optional coverage was successfully sued.

A claim was accepted in 1996 by Alberta’s Workers’ Compensation Board (WCB) following a workplace fatality. In the name of the deceased’s estate, Alberta’s WCB initiated a subrogated legal action against the director and 50 per cent shareholder of Fabtech Structures Ltd., Mr. Epton.

In Alberta, when a worker is entitled to workers’ compensation benefits, the WCB is automatically subrogated to the worker’s right of action, meaning that they may bring an action on behalf of the worker after paying compensation benefits. This subrogated right is separate from the worker’s right to benefits.

In Fabtech’s case, Epton had not obtained personal coverage offered by Alberta’s WCB. Therefore, under Alberta’s Workers’ Compensation legislation, Epton was considered neither an employer nor a worker. In line with corporate legal principles, the corporation was the employer, which had a separate legal identity from its directors and shareholders. In his capacity, Epton was found negligent with respect to the fatality resulting in the WCB claim.  

The trial judge accepted the overwhelming body of evidence against Epton. With respect to safety, the trial judge stated that Epton did virtually nothing and was found to be blindly delegating to people lower on the corporate ladder, without any standards, supervision, guidance, or instruction. As a director, Epton had the authority to reduce the dangers but instead allowed them to continue and magnify. Ultimately, the trial judge found that the fatality was the outcome of a corporate state of consistent negligence.

The trail judge found Epton 99 per cent liable. On appeal, Epton’s liability was reduced to 50 per cent. If Epton had the optional insurance offered by Alberta’s WCB, he would have been considered a worker, and therefore would have been protected from such legal action.  

Directors and officers need to ensure that workplace health and safety is systematically managed and responsible parties are held accountable for injury and illness prevention. However, in the event of a workers’ compensation claim, optional coverage can assist in risk management by ensuring that the statutory bar applies to a corporation’s directors and officers.  

Ensure that you know who is covered in your jurisdiction and who is protected from legal action.  For further information regarding compensation coverage for workers, directors and executive officers, contact your local compensation board and speak with your account representative.

David Marchione is an OHS consultant and paralegal with Gowling Lafleur Henderson LLP in Toronto, specializing in workers' compensation matters.  You can reach him at david.marchione@gowlings.com or www.gowlings.com/ohslaw.

Jennifer Hogan is an OHS consultant and paralegal with Gowling Lafleur Henderson LLP in Calgary, specializing in OHS legal matters.  You can reach her at jennifer.hogan@gowlings.com.

Mari-Len De Guzman

Mari-Len De Guzman is the former editor of Canadian Occupational Safety magazine and www.cos-mag.com.
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