Backgrounder

Highlights of the Government Response to the 15th Report of the Standing Committee on Justice and Human Rights
Corporate Liability and Workplace Safety

Defining Corporate Liability

Under Canadian law, a corporation may be found liable for a Criminal Code offence, but it has largely been left to the common law, as developed through the courts, to determine the nature and scope of this liability. Corporations can only act through the people they employ, and the law must look to the actions of individuals - particularly those in charge of the company - in order to determine the criminal liability of the corporation itself.

Canada currently employs an "identification" theory as its basis for corporate liability, which assigns liability to a company when a crime is committed by certain senior employees, namely the "directing minds" of the corporation. This group is empowered to exercise decision-making authority over matters of corporate policy.

There are also regulatory regimes to help address criminal acts by corporations. Other federal laws, such as the Canada Labour Code, Part II, and the Canada Business Corporations Act, create offences in relation to specific areas of corporate conduct.

Responding to the Standing Committee

On November 7, 2002, the government tabled its response to the 15th Report of the Standing Committee on Justice and Human Rights dealing with workplace safety and corporate liability. The Committee's lone recommendation was that the Government table in the House of Commons legislation to deal with the criminal liability of corporations, directors and officers.

The government will draft new legislation that modernizes corporate criminal liability in a way that is consistent with our current criminal law and its traditions. The Committee heard some testimony in support of a corporate culture model, which identified very broad criteria to hold a corporation criminally liable. However, this model is untested and could be subject to challenges under the Canadian Charter of Rights and Freedoms. The government has concluded that clear and simple changes can be made that will ensure corporations are held fully accountable for their actions.

Committing to Workplace Safety

The Government of Canada believes that the first line of defence against death and injury in the workplace is workplace safety and health regulation. For that reason, the government has already taken significant measures to ensure that workers in federally-regulated industries are protected, most recently through extensive amendments to Part II of the Canada Labour Code.

These include significant new rights for workers: the right to be informed about hazards in the workplace, the right to participate in correcting those hazards, and the right to refuse dangerous work. Fines of up to $1,000,000 are provided for breach of the Code.

The government proposes legislation that would clearly impose on every person who employs or directs another person to perform work a legal duty to take reasonable care to avoid foreseeable harm to the person or the public. Wanton or reckless disregard of this duty leading to death or bodily harm could result in a charge of criminal negligence.

In addition, the government proposes to expand the standard of fault for corporate liability, which would apply to all offences - including workplace safety. With respect to offences committed for the benefit of the corporation and done intentionally, corporations could be held liable if employees with executive or operational authority commit the offence personally or become aware of offences being committed by other employees and do not take action to stop them. Corporations could also be found criminally responsible when the acts of persons with authority and other employees, taken as a whole, demonstrate a lack of care that constitutes criminal negligence.

Strengthening Corporate Governance

While the proposed Criminal Code amendments would also apply to all intentionally committed offences, including corporate fraud, they are not intended to address broader issues of corporate governance reform in light of recent corporate scandals in the United States. The response reflects concerns with respect to the criminal liability of corporations that have been under review for many years. The proposals for change in the criminal law deal with the issues that were considered by the Standing Committee and the submissions made by witnesses. The existing Criminal Code fraud provisions are sufficient to address high-level corporate wrongdoing.

The Government is also engaged in separate activities to evaluate how to strengthen corporate governance. There is currently a cross-departmental review underway involving, among others, the Departments of Finance and Industry, as well as Parliamentary committees, including the Senate Committee on Banking, Trade and Commerce.

Obtaining the Response and Sharing Your Views

Electronic copies of the response paper are available at www.canada.justice.gc.ca/en/dept/pub/ccl_rpm.
The Department of Justice welcomes feedback on the response paper, which can be submitted through ccl-rpm@justice.gc.ca (e-mail no longer operational) and will be taken into account as legislation is drafted. The government intends to introduce new legislation in Parliament during the spring of 2003.

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Department of Justice
November 2002