Backgrounder

Criminal code Amendments Affecting the Liability of Corporations

The Government of Canada has introduced legislation to encourage improved workplace safety and to modernize the Criminal Code with respect to the criminal liability of corporations. The House of Commons Standing Committee on Justice and Human Rights held hearings into the subject of corporate criminal liability in May 2002 and recommended that the Government introduce legislation. The Government's November 2002 response to the Committee set out the principles that would guide the development of legislation.

The Government of Canada is strongly committed to protecting employee and public safety, as well as ensuring employers are held fully accountable for safe work environments.

How is corporate liability defined?

Under current 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 certain senior employees, namely the "directing minds" of the corporation, commit a crime. These persons are defined as executives 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.

In the proposed legislation, the term "organization" is used rather than "corporation." "Organization" includes "a public body, a body corporate, a society, a company," taken from the existing Criminal Code definitions, but adds "a firm, a partnership, a trade union or an unincorporated association," which are new. It is important to ensure that the same rules for attributing criminal liability apply to various forms of organizations regardless of the specific way they choose to structure their affairs.

How is the law being changed?

Workplace Safety

The proposed measures build on recent reforms to Part II of the Canada Labour Code in protecting against workplace hazards. Those enhancements provided 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 Canada Labour Code.

The proposed Criminal Code amendments build on these changes by imposing a legal duty on employers and those who direct work to take reasonable measures to protect employee and public safety. If this duty is wantonly or recklessly disregarded and bodily harm or death results, an organization could be charged with criminal negligence.

Expanded Conditions for Liability

The Government's proposals also update the law on corporate criminal liability by ensuring it reflects the current structures of modern organizations. The proposed measures would make corporations criminally liable:

• as a result of the actions of those who oversee day-to-day operations but who may not be directors or executives;
• when officers with executive or operational authority intentionally commit, or direct employees to commit, crimes to benefit the organization;
• when officers with executive or operational authority become aware of offences being committed by other employees but do not take action to stop them; and
• when the actions of those with authority and other employees, taken as a whole, demonstrate a lack of care that constitutes criminal negligence.

How are corporations punished for committing a crime?

Organizations cannot be imprisoned and so the Criminal Code provides for fines. The proposed legislation increases the maximum fine on an organization for a summary conviction, a less serious offence, from $25,000 to $100,000. There is currently no set limit on fines for indictable or more serious offences, and this would remain unchanged under the proposed legislation.

The proposed legislation also identifies factors that a court must consider in setting the level of fines. For example, judges would be asked to consider aggravating factors like the degree of planning or economic advantages gained by the organization in committing the offence. Mitigating factors could include measures taken by the organization to significantly reduce the likelihood of criminal activity.

Under the proposed legislation, an organization that takes steps to ensure it does not commit further crimes could be subject to a probation order, which could result in reduced fines in certain circumstances. A judge may elect to have the organization inform the public of the offence, the sentence and the remedial measures undertaken. A court could also impose conditions in hopes of averting future criminal occurrences by the organization, including the requirement to develop related policies and procedures and to appoint a senior officer to oversee their implementation.

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June 2003