As an EHS coordinator, you work hard to stay up to speed on changes in environmental laws and requirements and keep the company’s EHS system in compliance with these requirements. But some situations demand knowledge and experience that the typical EHS coordinator simply doesn’t possess. For example, you may not have the technical expertise to conduct an environmental assessment of a piece of property the company is considering buying or the scientific knowledge to testify for the company in a court case.
That’s where environmental consultants come in. Using environmental consultants can be very beneficial to a company. But it also exposes the company to liability risks that you might not recognize until it’s too late. We’ll explain how environmental consultants can pose liability risks to the companies that hire them and what you can do to manage those risks. There’s also a Model Clause that your company’s lawyer can adapt for use in agreements with environmental consultants to protect your company from liability risks resulting from a consultant’s acts or omissions.
THE LIABILITY RISK
Environmental consultants can provide needed “technical expertise” to companies in a variety of situations that have environmental implications, says BC environmental lawyer Paul R. Cassidy. For example, a company may retain an environmental consultant to:
But when your company uses an environmental consultant for these and other matters, it may be exposed to liability. An environmental consultant’s assistance may pose a liability risk if the consultant:
Gives opinions outside of his area of expertise. It’s critical that environmental consultants stay within their area of expertise and only provide opinions or advice in areas on which they’re qualified to speak, says Cassidy. The biggest danger is that the consultant will give legal advice, such as telling you what you need to do to comply with environmental laws, he adds. Environmental consultants can point out things the company is doing that may not comply with the law. But they aren’t lawyers and it’s not appropriate for them to give legal opinions. And relying on their legal opinions is ill-advised and can lead to environmental violations. Admittedly, the line between noting possible non-compliance and giving legal advice is a thin one. But Cassidy says that good environmental consultants are able to give companies proper guidance without crossing this line. Examples of what consultants should and shouldn’t say:
Shares findings with regulators. As noted above, environmental consultants aren’t lawyers. For that matter, they’re also not doctors or priests. So your company’s interactions with a consultant aren’t generally covered by “privilege,” that is, the legal doctrine that protects the confidentiality of communications between people and their lawyers (or doctors or priests). And the last thing you want is for the environmental consultant you hired to rush to report your company to regulators if it finds what it believes to be an environmental violation. If the consultant’s findings of possible non-compliance are disclosed to regulators without the proper context and/or analysis, the company could be faced with a prosecution, warns Cassidy.
Chooses poor language in reports. Environmental consultants will typically generate reports for the company. The language they use in those reports to describe their findings may have an important impact on the company’s liability risks, says Cassidy. For example, say the consultant sees a stain on the floor of the loading dock area of your workplace and believes the stain is from oil. Here are two ways the consultant could describe its findings in its report:
The difference between these two sentences above may seem subtle or unimportant. But descriptions in the consultant’s report may have important legal consequences. “Spill” is a loaded word and one that has a very particular meaning in environmental law, notes Cassidy. In addition, spills trigger certain requirements under the law. So if the consultant refers to the spot as a “spill,” you’ll be expected to respond quite differently than if the consultant says the “stain appears to be from oil.”
Fails to perform competently. Obviously, the worst case scenario from a liability standpoint is if environmental consultants perform their jobs incompetently or negligently and your company then relies on their incorrect findings. For example, if your company buys a piece of property because the consultant concluded that it wasn’t contaminated and it turns out that the land requires extensive remediation, your company could be saddled with huge clean-up costs and a piece of property it can’t use as planned. In addition, the company could be hit with penalties for environmental violations if it follows an environmental consultant’s negligent advice.
Example: A city hired an environmental consulting firm to prepare a closure plan for a landfill. The consulting firm recommended a course of action. Despite the fact that outside experts raised concerns that this approach would violate environmental law, the city went along with the firm’s recommendation and hired it to implement this plan. While doing so, the firm directed leachate from the landfill site toward a vegetated area that provided an unimpeded flow to the river. In addition, it installed a pipe to collect leachate and drain it directly into an adjacent creek. Tests conducted on samples of the leachate indicated that it was “acutely lethal to aquatic life.” So the city, the environmental consulting firm and its chief engineer were charged with violating the Fisheries Act.
The city pleaded guilty, was fined $35,000 and was ordered to remediate the contaminated area. In addition, the court found that the consulting firm was either ignorant of or willfully blind to certain legal requirements. And there was no evidence that the firm ever sought an opinion from a lawyer as to the legality of its proposed plan. Thus, the court concluded that the firm and its engineer hadn’t exercised due diligence [R. v. Gemtec Ltd.].
MANAGING THE RISKS
To manage the liability risks when your company retains an environmental consultant, take the following two steps:
Step #1: Screen Consultants Carefully
Hiring the right consultant will go a long way toward minimizing your company’s liability risks. So when retaining environmental consultants, screen them carefully, says Cassidy. The amount of scrutiny you subject potential consultants to will depend on the type of work you’re hiring them to perform, he notes.
To the best of your abilities, determine the kind of technical expertise you require and look for a consultant with that expertise. For example, the expertise needed to conduct an environmental assessment of a piece of land is different from the expertise needed to audit a company’s EHS system. So if you need a consultant to help your company, say, determine how to reduce its GHG emissions, look for consultants with experience in that specific area. Cassidy also recommends that you look for a consultant with at least a masters’ degree and a registered professional designation from a recognized school or organization.
Get the consultant’s complete resume and background. Also, ask for references from prior clients who had needs similar to your company’s—and contact them, advises Cassidy. Specifically, ask the references if they had any complaints about the consultant’s work or concerns about its qualifications or professionalism.
Step #2: Include 7 Protections in Written Agreement
If an environmental consultant passes your screening process, sign a written agreement before hiring it. And include certain protections in that agreement. We’ve given you a Model Clause containing these protections that can be adapted and used in your company’s contracts (Caveat: Don’t just plug the Model Clause into your agreements with environmental consultants; show it to the company’s lawyer first.) Your agreement should include the following seven protections:
1. Require compliance with environmental laws. Naturally, you want the consultant to comply with the law, especially the environmental laws and regulations. So require not only the contractor but also its workers, agents and subcontractors to comply with all applicable laws, including, but not limited to, environmental laws.
2. Require the consultant to keep findings confidential. To ensure that the consultant doesn’t blab its findings to anyone who asks, state that all information provided to the consultant by your company, in any form or manner, and any documents of any kind generated by the consultant from such information is the company’s confidential property, recommends Cassidy. In addition, bar the consultant from disclosing such information and documents in any manner whatsoever to any third party without the company’s express prior written consent.
In cases where the consultant believes that disclosure to a third party is required by law—for example, if the consultant concludes that the company has committed a discharge that must to be reported—require the consultant to first notify the company of the need to obtain legal advice about a possible obligation to report such information and give the company an opportunity to determine if such a requirement exists before disclosure to such third party. Cassidy says that you should also require the consultant to ensure that any party it hires to carry out work on its behalf for the company agrees to these confidentiality terms.
3. Require the return of documents. For the consultant to do the job you hire it to do, you may have to give it documents and information about the company and its operations. Once the consultant’s work is done, you want those documents back. So require the consultant, upon the company’s request, to return any documents of any kind provided to the consultant by the company—without retaining copies of such documents, suggests Cassidy. In addition, require the consultant, again upon the company’s request, to provide all reports and findings generated by the consultant on the company’s behalf, including copies of all field notes. It’s also a good idea to limit the amount of time the consultant may retain the originals of such documents to, say, no longer than five to 10 years, adds Cassidy.
4. Ensure the consultant’s cooperation. The work the environmental consultant does for your company may ultimately be a factor in an investigation into environmental offences or other litigation. And you may need the consultant to testify on the company’s behalf about that work or provide certain information about that work to a third party, such as the seller in a land purchase deal. So include language in the agreement that requires the consultant, at all times, to fully cooperate with the company in all matters relating to the agreement including, responding to investigations and requests for information from third parties and regulators, says Cassidy.
5. Spell out the company’s ability to use the consultant’s report. Environmental consultant agreements will often state that the consultant’s work is for the client’s use and reliance only. So if you want to be able to share the consultant’s report with, say, a bank, and have it rely on that report, you should include specific language in the agreement allowing you to do so, advises Cassidy. And if you think there’s a possibility that you might want to share the consultant’s work with a third party at some point in the future, include general language giving you the right to do so with the consultant’s consent, he adds.
6. Require the consultant to indemnify and defend your company. The environmental consultant should “indemnify” your company—that is, agree to pay or reimburse the company for any and all costs related to any breach of the agreement or any damages caused by its negligent acts or omissions, suggests Cassidy. Those costs should include fines, damages, remediation expenses, lawyers’ fees and any other related expenses.
Note that the consultant may try to limit its financial risk under the indemnity to the amount of the fee the company pays it. Don’t agree to such a limit, advises Cassidy, because potential fines for environmental offences and other costs are likely to be much greater than the amount of the consultant’s fee. For example, if the company agrees to pay the consultant $10,000 and it commits an environmental offence as a result of relying on the consultant’s advice, the consultant would only have to indemnify the company for $10,000. But that paltry amount won’t do your company much good if it’s hit with millions of dollars in remediation costs or a $300,000 fine, which isn’t an outlandish amount for a serious environmental offence.
Also, don’t let the environmental consultant limit its indemnification obligation to violations caused by “gross negligence,” adds Cassidy. If the consultant’s actions cause an environmental offence or cause your company to commit an offence, it should indemnify your company—regardless of the level of its negligence and even if it wasn’t negligent at all, he says.
7. Require adequate insurance. Get proof from the environmental consultant that it’s adequately insured with professional liability insurance at a level commensurate with the likely risk of damages, says Cassidy. And require it to list your company as an “additional insured” on the policy. Then the company can go after the insurer to collect any money owed by the consultant because of its violation of the agreement or for any damages caused by its acts or omissions.
Conclusion
Ensuring that your company, its workers and its contractors comply with the environmental laws and your EHS program is hard enough. When you add environmental consultants into the mix, you must also ensure that they don’t add to the company’s environmental liability risks. So you should be involved in the process of hiring environmental consultants. Then you can ensure that the company hires consultants that are qualified to perform the work the company needs done. And you can make sure that adequate protections are included in any agreements signed with such consultants.
Insider Source
Paul R. Cassidy: Partner, Blake, Cassels & Graydon, LLP, 595 Burrard St., Ste. 2600, Three Bentall Centre, Vancouver, BC V7X 1L3; (604) 631-3300; Paul.Cassidy@blakes.com.
SHOW YOUR LAWYER
R. v. Gemtec Ltd., [2007] NBQB 199 (CanLII), June 4, 2007
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