Avoiding Contractor Liability!

You can become an“employer” not only by directly employing a worker but also by hiring a subcontractor or independent contractor. Employers are responsible for ensuring: 1. their workers and supervisors are competent and properly trained; 2. all necessary health and safety policies are in place and that workers and supervisors are trained on them and compliant; 3. all workers have and use appropriate, safe methods and equipment, and that their work is done in accordance with the law; and that 4. “all precautions reasonable in the circumstances for the protection of workers” are taken.

A “constructor” undertakes the construction project for an owner (like a general contractor) and may include an owner who undertakes all or part of the project by himself or by more than one employer (remember that phrase, “all or part,” because it sets the stage for inadvertent liability).  Constructors are responsible for ensuring overall safety on the project and for making sure that all workers, supervisors and employers comply with their obligations as well.

A “project owner” includes, generally, the property owner as well as its agents and delegates (including property managers and management companies).  Project owners have very limited responsibility.  They need only prepare a list of designated substances present on site and provide that list on project tenders and to the constructor.

This makes perfect sense.  A project owner often has limited knowledge of the construction techniques, equipment and safety obligations required – which is why they hired construction professionals. Unfortunately, if the project owner is not careful, it may inadvertently find itself wearing the constructor’s hat or the employer’s hat and all the obligations and potential liability that come with them.

The worst part is that, having assumed that responsibility inadvertently, the project owner likely took insufficient steps to satisfy the onerous due diligence obligations imposed on constructors.  So, if an accident were to occur, the project owner cum constructor may have no legal defence.

How Owners Become Constructors

There is a constructor on every construction project in Ontario.  For example, if a manufacturing company hires a general contractor to renovate its facilities, the general contractor is usually considered both the employer and the constructor, even if the general contractor then subcontracts some of the work.
Remember the phrase “all or part” in the definition of constructor?  The more factors that suggest the project owner has control of the site or the workers, the more likely it will be found to have undertaken all or part of the project on its own behalf and so become the constructor.
Project owners do not become the constructor just because they were actively involved in overseeing quality control. The risk arises when they look beyond quality control and more actively control aspects of the work.

The following are a few common examples of how project owners may inadvertently take on the role of constructor:

•Hire more than one contractor directly to work on the site at times that coincide
•Assign their own employees to work alongside the contractor’s workers
•Personally supervise aspects of the work and direct workers
•Personally respond to safety issues and related incidents
Avoiding Constructor Liability

A. Engage a General Contractor or Project Manager

B. Take Care with Notices of Project

The Act requires the constructor to file a “notice of project” for any project with a value of $50,000 or more. The Ministry of Labour and courts may place significant weight on the party identified on the form as the constructor. To avoid this uncertainty, we recommend that project owners explicitly require the constructor to file a “notice of project” (if necessary) and to obtain all necessary permits, drawings, inspections and approvals.

C. Don’t Pay Subcontractors Directly

The Ontario Ministry of Labour has published a “Constructor Guideline”[1].  The guideline does not have the force of law but courts and the Ontario Labour Relations Board usually give it substantial weight.

The guideline provides an example of an owner who hires a general contractor, who then subcontracts to various subcontractors. The project owner pays the subcontractors directly. According to the guideline, this factor alone does not render the project owner the constructor.

D. “Designation of Project”

Another common way that project owners get into trouble is when they hire a contractor to provide a service that is not directly related to the main project.  For example, while a general contractor resurfaces the parking lot in an apartment building, the property manager hires a painter to repaint the hallways between the lot and the elevators.  In this example, the project owner may inadvertently become the constructor for the entire project, despite only contracting directly with the painter.
E. Leave Health and Safety in the Constructor’s Hands

Responsibility for safety is one of the most important obligations of the constructor.  If the project owner takes an active role in ensuring safety or responding to unsafe conditions, it runs a significant risk of becoming the constructor.

Project owners should communicate any safety concerns to the constructor and leave it to them to address the issue.  Where the constructor fails to remedy the situation, the project owner could consider shutting down the project and requiring the constructor to provide a safety plan for the project.  Ideally, the written contract should permit the project owner to take such drastic steps and require the constructor to bear the cost of any related delays.

General Recommendations

Aside from the specific recommendations set out above, we often help our clients develop policies and procedures for construction work.  We recommend that all project owners have such policies in place and ensure that all personnel, from those who engage contractors and general contractors to on-site personnel, be trained to avoid missteps that could saddle the company with constructor liability.