Northern Exposure

Workers’ Comp Throws Its ‘Employer’ Nets Wide

A British Columbia Court of Appeal decision has worrisome implications for companies that control elements of the operations of subcontractors or franchisees. Although it was about a franchise situation in B.C., it could have repercussions in other provinces and other business relationships.

What happened
In 2005, there was a robbery of a Petro-Canada service station. The robber got behind the counter and held a worker at knife point. A small swinging door was his only barrier to entry, and he kicked it down.

Petro-Canada was nailed by British Columbia Workers’ Compensation Board for failure to protect its franchisee’s service station attendants. The Board issued orders against Petro-Canada despite the fact that it had no workers on site.

Petro-Canada disputed the decision before a review officer. It lost. Ultimately, the British Columbia Court of Appeal upheld the original decision and that of the review officer, while taking issues with aspects of their analysis.

What the court said
The basic elements of the franchise relationship were found to be as follows. Petro-Canada owns the premises, owns the products sold, dictates the products supplied, and the prices of those products. Petro-Canada requires exclusivity on the part of the franchisee. The franchisee holds all proceeds in trust for Petro-Canada, which then pays the franchisee a commission.

Those facts resulted in a finding that the franchisee and its employees were carrying out Petro-Canada’s work. The appeal court therefore accepted the review officer’s decision that Petro-Canada was an employer for the purposes of the Workers’ Compensation Act. It said that the Act doesn’t restrict an employer’s obligation to protect its own employees. The Act also requires employers to protect other workers at a workplace at which “that employer’s work is being carried out.”

The appeal court found that in addition to being an employer, Petro-Canada had maintained a degree of control over the operation of the franchisee that justified the Board’s decision.

Lessons for employers in British Columbia and beyond
Those decisions signal an aggressive approach, at least by the British Columbia Board, to assessing responsibility for industrial safety. It’s clear that the Board will look to all organizations that can be shoehorned into the broad definition of “employer” in the Act. The Board’s purpose seems to be to fix responsibility to the extent possible on the largest and most significant “employer” as well as the direct employer of the injured worker. This is being done without any apparent regard for the demotivating effect that such an approach may have on such organizations. Some well-intentioned organizations may lose motivation to make a difference if their experience is that they will be held liable regardless of their reasonable efforts.

While the decision is based in what is clearly a proper interpretation of unique language in the British Columbia Workers’ Compensation Act, similar approaches could be taken in Alberta and Ontario and in other business relationships. The same logic would be applicable to other franchisers whose core business operations are being carried out by franchisees and who retain substantial control over health and safety matters.

It also potentially could be applied to businesses that are having contractors carry out work on their behalf. This may apply whether it be construction work, logging services, mining operations, or other work. The “owner” of the property in which the work is being carried out or the “owner” of the project may well be targeted by WorkSafe BC or other provinces’ workers’ compensation boards if in their view insufficient steps have been taken to ensure the safety of the workers.

The lesson for business organizations is that if they’re going to retain some control over health and safety matters being carried out by contractors (which is often done in order to retain a comfort level), then it will be important that those organizations roll up their sleeves and really ensure that due diligence is taking place on the worksite. Otherwise, you may be penalized or prosecuted for a lack of your own due diligence.

Contact the author, Norman K. Trerise

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