Occupational Health and Safety Administrative Penalties and the Defence of Due Diligence

A recent case from Nova Scotia raises some interesting points around the defence of due diligence in administrative penalty cases for health and safety cases. In the past, the Nova Scotia Labour Board attested that the penalty amount charged in a case would not necessarily be considered against the issues underlying the original compliance order, if and when the case was appealed. A Nova Scotia Court of Appeal case has clarified that the Nova Scotia Labour Board can in fact apply the defence of due diligence when considering an appeal from an administrative penalty compliance order.

In the case in question, Guild Contracting Specialties Inc. was issued an Administrative Penalty for an alleged violation of the Occupational Health and Safety Act, specifically for failure to provide an eye wash unit on a construction site where controlled products were being used. This penalty was issued after a general inspection was conducted at a new building site where Guild had been subcontracted. Employees were working at the site without the fully-mandated eye wash station on that date.

The inspecting officer noticed that an eye wash was available; however, it was not equipped to provide the 15 minute flush required for the controlled products being used. In addition, this business did not have updated Material Safety Data Sheets for the controlled products on the site.

A Compliance order was issued to Guild. The business’s response was almost instant. Guild followed the order by providing a Compliance Notice, stating that the 15 minute eye wash was delivered to the site within an hour from the issuance of the Compliance Order. It also advised the Material Safety Data Sheets were previously on site, and additional copies were now available.

Both the Compliance Order and the Compliance Notice contain a section called “Important Notes.” Under this section, it says that submitting a Compliance Notice will not prevent an administrative penalty from being issued.

Guild had complied with the order, and did not make an appeal. Once Guild chose not to appeal the Compliance Order, the finding in the Compliance Order that there had been a contravention of the Act and/or Regulations became final and binding.

Much later, the Occupational Health and Safety Division issued a Notice of an Administrative Penalty to Guild alleging “that Guild had violated s. 23(1) of the General Regulations which provides that an employer shall, when required, provide an emergency eye wash fountain where there is a potential for a person’s skin or eyes to be affected by exposure to a hazardous substance. The administrative penalty was in the amount of $333.33.”

Guild this time appealed the Administrative Penalty to an Occupational Health and Safety Appeal Panel. The Panel upheld the Administrative Penalty, and in doing so it limited the issue on appeal to whether the amount of the Administrative Penalty was appropriate. Guild posed that decision to the Nova Scotia Court of Appeal.

On appeal, Guild disputed the position of the OHS Officer. The Officer had found that at the time of the visit Guild employees were applying a controlled substance. Guild said they were only setting up to do the work, and the application of the controlled substance had not yet started. As a result, there was no potential exposure to any hazardous substance and, therefore, no requirement to have the 15 minute eye wash present.

The Appeal Panel stated that they “will not consider the validity, appropriateness or necessity of the underlying compliance order(s) during a review of an administrative penalty appeal.”

By doing so, it limited the issue on appeal to whether the amount of the Administrative Penalty was appropriate, without any review of the factual or legal foundation for the penalty.

Since Guild did not appeal the initial Compliance Order and the time to appeal had expired, raising the legitimacy of the Compliance Order at the appeal of the administrative penalty was not an option. The issue had already been determined.

In support of the Appeal Panel’s decision, the Director argues that the “Important Notes” mentioned above, in the compliance order and the notice that read “submitting a Compliance Notice will not prevent an administrative penalty from being issued” effectively alerts anyone issued such a Notice on the appeal process. Specifically, failure to appeal would be equated with admitting the factual and legal basis for the Compliance Notice, and would be automatically liable for an administrative penalty.

The Court of Appeal could not agree. The Court was unable to determine by review of the record and the statutory provisions why the Appeal Panel would reach the conclusion that the failure to appeal a compliance order created an acknowledgement or a deemed contravention of the OHSA or its Regulations.

There is nothing in the regulations that would to alert a recipient of a Compliance Order that an automatic subject administrative penalty would follow if the validity of the order was not challenged. However, if an administrative penalty is imposed, there is a right of appeal under s. 11 to an appeal panel. The Appeal Panel can conduct a hearing orally, or through written submissions and it may revoke, decrease, or confirm an administrative penalty.

Nowhere in the OHSA or the Regulations is it suggested either explicitly or implicitly that the failure to appeal a Compliance Order is deemed to be a contravention of the OHSA, and renders moot the right to appeal the factual or legal basis for an administrative penalty.

The Appeal Panel’s assumptions would preclude a party from raising a due diligence defence which otherwise would be available under the OHSA, and provides the following justification,

The imposition of a penalty under the Administrative Penalties Regulations is also for a contravention of the OHSA. It seems to me, looking at the scheme of the OHSA and the regulations, that the purpose of a compliance order is to ensure compliance with the OHSA, regardless of how the failure to comply arose and regardless of whether the party to whom the compliance order is directed was duly diligent in trying to prevent the contravention of the OHSA. On the other hand, an administrative penalty is intended to be penal and punish a party for their failure to comply with the OHSA. However, by limiting an appeal to the amount of the fine only where the compliance order has not been appealed, the Appeal Panel has essentially changed what otherwise would be a strict liability offence into an absolute liability offence. While this may be justified in certain circumstances, I see nothing in the Appeal Panel’s decision nor in the submissions of the Director on this appeal, which would convince me that it is justifiable or permissible under the legislation as it presently exists.”

For these reasons, the appeal was allowed, and the case remitted to the Board for rehearing with the direction that the newly constituted Board shall not include the panel member which heard this appeal.

The decision confirms that compliance with, and the choice not to appeal, a Compliance Order issued by the Occupational Health and Safety Department is not equivalent to admitting that a breach of the Occupational Health and Safety Act has occurred. Several appeals of administrative penalties have been set aside by the Appeal Panel pending this decision. Making the reductive jump in legislative policy from following a Compliance Order being equivalent to admitting wrongdoing is perhaps too broad. There are any number of reasons why an issuant of a Compliance Order may not file an appeal. The precedent of this case will hopefully leave the space for discussion that some future appeals may need.

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