The Insider’s Second Annual Due Diligence Scorecard:How Does Your Safety Program Measure Up?

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Justice Potter Stewart of the U.S. Supreme Court once famously said that although he couldn’t define “hard-core pornography,” he knows it when he sees it. The same might be said for due diligence. The OHS laws and regulations don’t even mention due diligence much less explain what it is. And if you ask a room full of judges to define “due diligence,” you’re likely to get a wide variety of answers. In essence, when it was all said and done, you’d be back to the I-know-it-when-I-see-it test.

If you’re a safety coordinator trying to keep your company in compliance with OHS laws, this lack of a precise definition of due diligence is very frustrating. The good news: There is a way to come to grips with due diligence. As the Insider has said many times, to understand what due diligence really means you must look at actual cases where companies raised a due diligence defence and see how the courts ruled in those cases. What did the successful defendants do that caused them to prevail? And what didn’t the unsuccessful defendants do that caused their due diligence defences to fall short? When you see due diligence “in action,” you’re in a better position to decide if your own company’s safety program can withstand a due diligence analysis.

But that’s easier said than done. Going out and finding all of the cases where due diligence was decided—let alone reading each one—is a tedious and time-consuming process and few safety coordinators have the time, training or inclination to do it. So the Insider has done it for you. This year’s Annual Due Diligence Scorecard picks up where last year’s left off—in August 2005. We found nine cases from around Canada in which a company raised a due diligence defence—some successfully and others not so much. Here’s a look at the results.

Due Diligence Basics

First, let’s briefly explain how due diligence works: To convict a company of a safety offence, the prosecutor must prove “beyond a reasonable doubt” that the company violated an OHS law. If the prosecutor meets this burden, the company can still avoid liability by proving that it exercised “due diligence”—that is, that it made all reasonable efforts to protect its workers’ health and safety and to ensure compliance with OHS laws and the company’s safety program.

A company can raise a due diligence defence when it’s charged with any safety offence, not just ones based on accidents or injuries. And a due diligence defence isn’t just available to companies; it can also be raised by officers, supervisors and even workers accused of safety offences.

How Courts Analyze the Due Diligence Defence

To decide if a company exercised due diligence, courts consider the specific facts of the case at hand and weigh a number of factors. The primary factors a court typically considers are the following:

Foreseeability: Could a reasonable person have foreseen (or did the defendant actually foresee) that something could go wrong? A due diligence defence may be successful if the incident or accident was so unlikely that the company could never have expected it to occur. However, companies are expected to know about and protect their workers against the hazards associated with their particular industry.

Preventability: Was there an opportunity to prevent something from going wrong and, if so, was an effort made to do so? If a company has a chance to prevent an incident or event from happening, it should take all reasonable steps to do so, such as identifying hazards, preparing and enforcing safe work procedures, and training workers and supervisors. But if a company can show that it took such steps and the incident or event happened anyway, it may be able to make out a due diligence defence.

Control: Who was the person present who could have prevented what went wrong? For example, workers sometimes violate a company’s safety rules and procedures and get hurt as a result. In such cases, it may be easier to prove due diligence because you can argue the worker had control of situation and could’ve prevented the injury if he’d only followed your safety rules and procedures. But note that worker fault isn’t always clear or decisive.

The Due Diligence Scorecard

Due diligence is often raised in safety violation cases. But courts don’t always focus on the due diligence aspect of the case when making their decisions. Our Scorecard only includes cases in which the due diligence defence was the deciding factor in the case. We found nine cases decided since August 2005 where a court had to decide if a company successfully made out a due diligence defence, eight reported and one unreported.

In last year’s Due Diligence Scorecard, we included the following quote from Norm Keith, a leading OHS lawyer who has defended literally hundreds of companies in prosecutions: “It seems like the courts are setting the standard for due diligence ever higher.” Last year’s Scorecard was 4 “wins” and 8 “losses.” This year’s numbers are even more decisively in favour of prosecutors and against companies (and other defendants). Of the nine cases:

Wins: Companies “won” only twice, both in Ontario.

Losses: Companies “lost” the other seven cases, which came out of Alberta, British  Columbia, Ontario and Saskatchewan.

Insider Says: There were also two cases—from Ontario and British Columbia—where the company and another person–an owner, supervisor and worker–was also charged and raised  a due diligence defence. See the sidebar on p. x to find out how those cases turned out.

Conclusion

The Scorecard below gives you the key details of the nine cases mentioned above. It tells you whether the company won or lost, what happened and how the court analyzed the company’s due diligence defence. Next month, we’ll analyze the cases in detail and show you the lessons to be learned and how those lessons apply to your own company’s safety program.

Insider Source

Norm Keith: Gowling Lafleur Henderson, LLP, Ste. 4900, Commerce Ct. West, Toronto, ON M5L 1S3.

Due Diligence Scorecard

Here’s a synopsis of the one unreported and eight reported due diligence cases decided since August 2005.  In each case, a Canadian court had to decide if a company successfully made out a due diligence defence.

Employers Win

Ontario: Starcan Corp.

What Happened: An automotive parts manufacturer was ordered to conduct a vibration audit and an acoustic audit, and to submit reports on each audit by certain deadlines. The company conducted a vibration audit and submitted the required report by the deadline. But issues raised by the vibration audit delayed the acoustic audit and caused the company to submit the acoustic audit report late. The company was charged with two violations of the Environmental Protection Act for failing to submit the acoustical audit report by the deadline.

Ruling: The company exercised due diligence.

Analysis: The court acknowledged that the company had missed the acoustic audit report deadline. But it ruled that based on the surrounding circumstances, the company had exercised “absolute diligence.” The company continually kept the government informed of its efforts to comply with the order. The government never objected to how the company was proceeding. The difficulties that prevented the company from complying sooner were unforeseen and not caused by the company’s trying to cut costs. In fact, in order to comply, it spent over $1 million on sound and vibration controls in what amounted to a “retrofit on a grand scale.” And, ultimately, the company did comply with the order—and actually surpassed the government’s acoustic requirements.

[R. v. Starcan Corp., [2005] O.J. No. 4725, Aug. 18, 2005]

Ontario: Vipe Construction Ltd.

What Happened: Two OHS inspectors came upon a sewer repair and noticed that there was no shoring in place to prevent the excavation trench from collapsing. The workers then put a support system in place in the trench. The inspectors left. There was no accident and no one was hurt at the excavation. But the next day, the inspectors charged the company with failing to ensure the trench had a support system.

Ruling: The company exercised due diligence.

Analysis: Based on the lack of firm evidence as to the trench’s depth, the court said it wasn’t clear that it actually required shoring. But shoring material was available at the excavation if needed. And any mistake the supervisor might have made when estimating its depth was reasonable and honest. Also, the company was a small one that had never been charged with an OHS violation. It had a safety manual, and all workers got training and instructions. The company had independent safety audits done, held an annual seminar where workers got refresher training and did random audits of worksites. And there hadn’t been an accident or injury at the excavation.

[R. v. Vipe Construction Ltd., [2006] O.J. No. 2034, May 23, 2006]

Employers Lose

Ontario: National Wrecking Co.

What Happened: A U.S. company was involved in the demolition of a large steel and metal building in Ontario. It hired a Canadian subcontractor to supply workers, along with supervision and equipment. But the U.S. company kept primary control over the project. A supervisor who worked for the U.S. company directed two workers to burn or cut all incidental steel. In doing so, the workers cut a 2500-pound door from its supports. When another worker removed some steel that was piled in front of the door, it fell on yet another worker and crushed him to death. The U.S. company was charged with several violations.

Ruling: The company didn’t exercise due diligence.

Analysis: The court rejected the company’s argument that the subcontractor was solely responsible for safety at the worksite. The court found that the steel door should’ve been properly braced once it was cut from its supports. And the piles of steel in front of the door weren’t a proper brace. Even if the door had been properly braced, the company should’ve put up a caution sign or tape so workers would clearly understand that the door was a potential hazard. The court added that it was foreseeable that a worker might remove some of the steel piled in front of the door because it wasn’t obviously a brace.

[R. v. National Wrecking Co., [2005] O.J. No. 3538, Aug. 9, 2005]

Alberta: Trican Well Service Ltd.

What Happened: A non-producing oil well was blocked. So the owner of the oil well hired a company to purge it by inserting a small coil tube into it. A worker was standing on the pressure side of the coil tubing unit, a violation of company policy. There was an explosion and the worker was killed. The company was charged with several violations, including not having an MSDS for crude oil on site.

Ruling: The company didn’t exercise due diligence.

Analysis: The court found that mixing air and hydrocarbons could potentially create an explosive environment and that the company failed to provide instructions to workers about this unreasonable safety hazard. There was evidence that the company was aware of this risk, which was mentioned in the MSDS for crude oil. But the company didn’t make any effort to get the crude oil MSDS—despite the fact the company’s own safety manuals stressed the importance of MSDSs. And the company didn’t give its workers any information or instructions on this hazard. So although the company had a safety program, the evidence showed that the company didn’t exercise any diligence at all with regard to protecting workers from this particular hazard.

[R. v. Trican Well Service Ltd., [2005] A.J. No. 1720, Dec. 5, 2005]

Saskatchewan: Rosin

What Happened: An 18-year-old worker was leaning over the back of his company’s loader when a cross member on the bucket’s lever arms came down on him. He was fatally crushed between the arms and body of the loader. The company was charged with three OHS violations.

Ruling: The company didn’t exercise due diligence.

Analysis: The loader had a number of mechanical and safety problems, in particular, there were pieces missing from a linkage for setting the boom safety pins, which contributed to the accident. Given these problems, the court found that the company didn’t do all that was reasonably practical to ensure that the worker operated the loader safely.

[R. v. Rosin, [2005] S.J. No. 757, Dec. 21, 2005]

Ontario: Modern Niagara Toronto, Inc.

What Happened: Before workers from an HVAC contractor installed a cooling system in a Toronto office building, they pressurized the pipes with nitrogen gas to test the system for leaks. The workers didn’t have written procedures for depressurizing the pipes. Instead, they used a standard practice that was routinely used throughout the industry and which they had learned as part of their apprenticeship training. Before the test was done, there was a miscommunication. As a result, a welder wrongly believed the test was over and the pipes had been depressurized. As he bent over a pipe, a sudden release of gas caused a metal coupling to blow off and hit the welder in the face, causing serious injuries. The contractor was charged with several violations.

Ruling: The contractor didn’t exercise due diligence.

Analysis: The court noted that the pressurization and depressurization of pipes is common in the industry and the hazards of working on pressurized pipes are well-known. But the only training workers got on these hazards was during their apprenticeships and that training wasn’t comprehensive, the court said. The contractor didn’t have any other procedures in place to address the safety issues related to pressurization tests. And the contractor’s general safety policy, “toolbox talks” and safety audits weren’t enough. What the contractor needed was a detailed written procedure for pressurization tests and additional training for workers on the procedure and its hazards, the court explained.

[R. v. Modern Niagara Toronto Inc., Ont. Ct. of Justice (Justice Marion Lane), April 24, 2006]

British Columbia: Scott Steel Ltd.

What Happened: A railway bridge that was being rebuilt by a company collapsed when a locomotive crane entered it. Two workers were killed and several others were severely hurt. The company and its owner were charged with several OHS violations, including failing to ensure that the partially-assembled bridge could withstand the likely load to be imposed on it.

Ruling: The company didn’t exercise due diligence.

Analysis: The law required the company to have “a detailed and comprehensive set of properly ordered steps so that a worker can understand how to complete his assigned task safely.” But the company’s procedures were “far too brief, lacked sufficient detail and were ambiguous,” and didn’t give workers adequate instruction or direction in the safe performance of their jobs. Also, the workers never got any written procedures on the removal and installation of new frame bents, such as those used here. Lastly, the court remarked that the company’s supervisors “lost track of the big picture” because they were under great time pressure to get the day’s work done.

[R. v. Scott Steel Ltd., [2006] B.C.J. No. 606, Mar. 8, 2006]

Saskatchewan: Jastek Master Builder 2004 Inc.

What Happened: An OHS officer conducted a worksite inspection. He saw three workers on the roof of a building under construction without any type of fall  or head protection. He also saw another worker who had on a toque but not protective head gear. The company was charged with failing to require workers to use fall protection devices and to wear protective head gear. It was acquitted of both charges, so the government appealed.

Ruling: The acquittal was set aside and a new trial was ordered.

Analysis: The appeals court ruled that the trial court had wrongly ruled that the company had exercised due diligence. The court acknowledged that the company had a safety manual, its JHSC met regularly and it held “tool box” meetings every few weeks to discuss safety issues. But that wasn’t enough. Photographs showed that the workers weren’t wearing required fall protection or head gear. And there was evidence that on at least two occasions three of the workers didn’t wear fall protection. So the company should’ve put in place a system that ensured that workers used the proper equipment.

[R. v. Jastek Master Builder 2004 Inc., [2006] S.J. No. 299, May 10, 2006]

Ontario: Stelco Inc.

What Happened: A worker at a bar mill noticed that bars had fallen from the packager into the basement under the machine. Against his training and the company’s safety protocol, he put the machine on automatic and went to the basement to check. He went through a swing gate on which a warning was written saying that the machine had to be locked out before entering that area and spelling out the necessary procedures. The worker was crushed to death by the machine. The company was charged with several OHS violations.

Ruling: The company didn’t exercise due diligence.

Analysis: The court rejected the company’s argument that it exercised due diligence by having the swing gate and warning signage, and by training its workers on the proper procedures. The company knew the area under the machine was dangerous. But the gate didn’t prevent a worker from entering that area beyond because it wasn’t locked or bolted. And although the company’s worker training was adequate, the measures it took to protect workers from this hazardous area weren’t enough. More should have been done to make circumventing the gate and safety procedures as difficult as reasonably possible.

[R. v. Stelco Inc., [2006] O.J. No. 3332, Aug. 15, 2006]