Assigning Liability To Directors Of A Corporation When Employees Are Injured feature image

Assigning Liability To Directors Of A Corporation When Employees Are Injured

When people are injured on the job, they have access to the workers’ compensation system, which provides them with compensation in exchange for not bringing a cause of action against the employer or fellow employees. However there are exceptions to this rule, as was recently highlighted in a decision from the Court of Appeal of Alberta.

The injuries

There were three plaintiffs (“the employees”) involved in the trial and appeal. The employees were sub-contractors who were hired to perform work on the construction of a new home. The basement of the home was to contain a staircase installed by the defendant company (“the company”), who was also hired as a sub-contractor. The defendant in the trial and the respondent at appeal is the director of the company.

The staircase was manufactured off-site by a third-party, and was installed by the company. After it was installed, the staircase collapsed, injuring the employees. Both the company and the employees’ employer were considered “employers” under the provinces Workers’ Compensation Act, which meant the employees could not sue them to collect damages. Instead, they were compensated by the Worker’s Compensation Board, who in turn brought a subrogated action against the director of the company to recover the amounts it paid to the employees.

The director’s position

The director brought an action to summarily dismiss the action against him. His position was that any negligent act that may have been committed by him was done as part of his duties as an employee of the company, not as a director. The Master in Chambers agreed, stating that the company was immune from suit, and since the director was doing the act the company was hired to do, and there as no extraordinary act or conduct beyond that scope, the director was immune from personal liability. This decision was upheld on appeal by a chambers judge.

On appeal

The Court of Appeal was tasked with determining whether a corporate director can be personally liable for damages resulting from his own tortious conduct while acting as a representative of the corporation.

In Alberta, while employers are protected against claims from injured workers, the same protection does not apply to “directors” of employers unless they purchase additional coverage from The Workers’ Compensation Board. The Act states,

5(1)   Subject to section 16, an employer, a partner in a partnership, a proprietor and a director of a corporation are not workers for the purposes of this Act unless they apply to the Board in accordance with the regulations to have the Act apply to them as workers and the Board approves the application. . . .

16(1)   Where an individual performs any work for any other person in an industry to which this Act applies, that individual is deemed to be a worker of the other person, except when the individual

(a)  is performing the work as the worker of another employer,

(b)  is an employer and is performing the work as part of the business of the employer, whether by way of manual labour or otherwise,

(c)  is a director of a corporation and is performing the work as part of the business of the corporation, whether by way of manual labour or otherwise, . . .

The court found that since the director had installed the staircase as “part of the business of the corporation,” he was not covered by the workers’ compensation system. It didn’t matter if he was acting as a director or employee when installing the staircase. The court found the legislation to be clear, and ruled against the director.

At HMC Lawyers, we act on behalf of contractors, subcontractors, lenders, and developers, both advancing and defending claims arising from negligent construction and negligent professional advice.  As a team, we have decades of experience successfully advocating for our clients in the construction industry in Calgary and across Alberta. To make an appointment to discuss a potential or emerging claim, call 1-800-480-3534 or contact us online.

 

 

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