COVID-19 was declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020. Many Canadian provinces, including Ontario, declared a state of emergency under the Emergency Management and Civil Protection Act (“EMCPA”) on March 17, 2020. The federal government did not invoke its emergency management legislation. The COVID-19 pandemic has been highly disruptive of socio-economic activity in Canada, and around the world. This has given rise to governance and leadership challenges, and decisions regarding the state of the workplace, and exposure to workers, as well as clients/customers/patients in many businesses, workplaces and organizations across Canada. COVID-19 has also raised a number of questions about emergency preparedness, business continuity, and pandemic planning by governance experts and Boards of Directors (“Board(s)”) of public and private corporations and organizations.
Construction companies have a number of risks associated with COVID-19 pandemic. The pandemic has also taken a toll on the provincial and federal economies and the gross domestic product. Canada is now and for the foreseeable future resulted in an economic recession. The pandemic has been, and continues to be a difficult challenge for public health, political and policy decision makers as well as the Boards of organizations.
A central concern for many Boards and Chief Executive Officers (“CEOs”) has been the risk of potential legal liability for their organizations, individuals and them personally. This article will focus on the latter and, in particular, the legal exposure of Directors and Officers (“”D&O”) to personal legal liability arising from an employee or worker (“worker”), customer, client or patient (“3rd Parties”) from becoming infected by COVID-19 arising out of or in the course of employment and in connection with the business or the workplace.
This article will deal with three specific areas of potential legal liability of D&O; civil, regulatory, and criminal liability. The first is primarily based on the standard of care for D&Os set and enforced by Canadian courts in civil actions; the second is based on the standards set by public and occupational health and safety statutes for D&Os; third, and lastly, is the criminal law standards, set under the Westray Bill amendments to the Criminal Code (known as the “Westray Bill”). Finally, the article will provide some guidance on legal risk mitigation for D&Os.
Civil liability in Anglo-Canadian law is based on the legal theories of contract, tort and other equitable remedies. The primary risk for D&O related to COVID-19 exposure in the workplace is on the unintentional tort of negligence. A civil claim for negligence must establish a duty, breach of duty and damages. There is a general legal duty of care on organizations and their D&Os to provide a safe workplace for workers and 3rd Parties.
Organizations and D&O have these obligations under common law negligence duty of care, jurisprudence, public and occupational health & safety statutes and regulations. The latter generally focuses on worker safety, but by implication also applies to 3rd Parties who have visited or have other contact with the workplace.
In the SARS epidemic of 2003, nurses in Ontario treating patients with SARS became infected and died. 53 nurses and their families commenced a class action against the Province of Ontario, and other provincial governmental bodies and officials, alleging a breach of a legal duty of care owed to those nurses. In subsequent litigation challenging the legality of the class action, the Court of Appeal for Ontario held in Abarquez v. Ontario1 that there was no relationship of proximity between them and the residents of Ontario sufficient to give rise to a private legal duty of care that may result in a negligence civil action.
To succeed in a civil action there must be clear, convincing and compelling evidence, on a balance of probabilities, to support the claim for damages against D&O for a worker or a 3rd Party to allege that they have been infected and suffered harm and loss from a COVID-19 exposure arising out of or at the business location for which the D&O have a duty of care.
Civil liability related to workers who suffer injury, illness or death arising out of or in the course of employment from COVID-19 is governed by either workers’ compensation legislation or the civil court system. The former provides workplace health & safety insurance for the vast majority of workers in Canada Such legislation provides a bar to civil lawsuits against employers and D&Os. The latter gives a minority of workers and most 3rd Parties the right to sue in court on the basis of the tort law theory.
In Ontario, for example, the Workplace Safety and Insurance Act (“WSIA”)2, provides for a no-fault system of compensation for workers, and their dependents for an accident, injury, and illness arising out of and in the course of employment. This applies to an exposure to COVID-19 that gives rise to an occupational illness or death. The historic trade off in workers’ compensation legislation in Canada, and around the world, is that the worker and their dependents gave up their right to commencing a civil action against the employer and co-employees in exchange for prescribed compensation of “no-fault” benefits. Therefore, where workers’ compensation legislation applies there is no right to sue an employer or D&Os arising out a worker contracting COVID-19 in the workplace.3
The other legal risk for D&O exposure to COVID-19 civil liability lies with workers and workplaces not covered by workers’ compensation legislation and non-worker 3rd Parties. When a customer, client, or patient is infected by the COVID-19 virus as a result of exposure to the business/workplace, it may be argued that D&Os breached their duty of care towards such workers and 3rd Parties by failing to follow public or occupational health and safety legislation, regulations or standards related to COVID-19 risk management. Whether the workplace is a retail grocery store, a hospital, or golf course, such risk of legal exposure exists for D&Os.
When determining whether or not the D&Os have satisfied their duty of care, the Supreme Court has said that perfection is not demanded of D&Os. The Court said it will not consider that directors and officers have breached their duty of care if they acted prudently and on a reasonably informed basis. If the decisions taken are reasonable business decisions in light of what they knew or ought to have known, then the “business judgment rule” answer and defence may be invoked and the courts will not be expected to intervene.4
A risk mitigation answer for D&O legal risk in this regard relating to 3rd Party claims for COVID-19 illness is corporate and D&O insurance. Insurance will normally cover such exposure to allegations that D&Os have failed to meet a generally accepted standard of care in dealing with infectious disease during a pandemic other public health guidance has been followed, and whether an OHS contravention has taken place amounting to a potential statutory tort. All of these risk factors are very case specific. However, insurance may be obtained, and should be reviewed, to determine the coverage and protection of D&Os from third party claims arising from civil actions.