Director Liability and the Workers’ Compensation Act

On July 3, 2012, the Court of King's Bench released its decision in Stephens v. Shagannapi Village Shopping Centre [2012 ABQB 436] on the issue of director liability in a negligence action. In particular, the decision addressed director liability for employee negligence in Workers’ Compensation Board (“WCB”) related actions. The claim was for personal injury and as the Plaintiff received benefits from the WCB for his injuries, the claim was also partially a WCB subrogated claim.

The decision addressed the extent of director liability if a director fails to pass corporate resolutions or make employees aware of their responsibilities to clear snow and ice from public premises.

The Plaintiff, an employee of one of the tenants of the mall, was injured when he slipped and fell at Shaganappi Village Shopping Centre. As an “employee” under the Workers’ Compensation Act, the Plaintiff was barred from bringing an action against any other WCB related party for compensation for his injuries (Section 23). As a result, he could not bring an action against the Defendant, Fiell, an employee of Pipestone Management Ltd. (“Pipestone”), the operations manager of the shopping centre.

In order to get around this statutory barrier, the Plaintiff brought an action against Fiell in his capacity as a director of Pipestone. Under its contract with the shopping centre, Pipestone agreed to carry out site inspections and to hire a snow removal contractor if snow and ice were observed.

Master Prowse held that in order to establish director liability, the Plaintiff had to show that the failure of the Defendant, as the director of Pipestone, to implement a corporate policy concerning snow removal caused the Pipestone employees to be unaware of their duties to remove snow and ice from the premises. Furthermore, Master Prowse held the Plaintiff would have to show this lack of awareness directly caused the Plaintiff’s injuries.

The court found the Plaintiff’s injuries did not result from the failure of Fiell, in his capacity as director of Pipestone, to implement a corporate policy. Rather, Master Prowse found the Plaintiff’s injuries resulted from the failure of the employees to carry out their responsibilities to remove snow and ice. Master Prowse found that the Plaintiff’s injuries were caused by their negligence as employees, not by Fiell’s lack of instruction as a director.

This decision is significant to snow removal companies, business owners, property managers and insurers. Directors must ensure that company policies are safe and compliant with regulatory requirements. Moreover, directors must ensure these policies are brought to the attention of all staff and enforced at all times. Proper procedures should be reviewed regularly with employees and employee understanding of policies should be monitored on an ongoing basis. Ultimately, directors must take care to ensure that all employees are not only aware of their responsibilities, but how to carry them out in accordance with company policy.

In our experience, it is getting more common for the WCB to bring directors of companies into actions even when the corporation itself would not be brought into the action by virtue of section 23 of the Act. The WCB has taken the position that WCB coverage is available to be purchased by directors and without that coverage, directors are fair game to be brought into these types of actions. Master Prowse’s decision may result in some reconsideration of that approach. However, that remains to be seen as WCB is appealing the decision, returnable in September of this year.