When the defendant is an ice cream store

Law360 Canada (July 10, 2024, 10:16 AM EDT) --

John L. Hill

The concept of a corporation as a legal entity is far from simplistic. The principle of deterrence, which has a limited impact on individuals, can be a powerful tool for ensuring compliance in the complex world of businesses and government agencies.

Unlike a human being, a corporation can vary in size and operate in multiple locations simultaneously. These nuances were underscored in the Ontario Court of Appeal judgment in R. v. 1222149 Ontario Ltd. (Dairy Queen and/or Embrun DQ Grill & Chill), 2024 ONCA 543.

This case, which involved a prosecution against the holding company operating as the Embrun DQ Grill & Chill, holds significant implications for the field of corporate liability. It was brought to light after a 16-year-old summer student suffered a spinal injury when her hair was caught in a rotating spindle of the restaurant’s Blizzard machine. The machine was equipped with a guard to prevent such injuries, but it had become standard practice for some employees and shift leaders to remove the guard to save time, especially in “rush” periods. 

The injury led to charges under the Occupational Health and Safety Act, R.S.O 1990, c. O.1, (OSHA) for not ensuring the employee’s long hair was suitably confined and failing to provide the guard was in place to prevent this injury. After a two-day trial before a justice of the peace, the corporation was found guilty of condoning the missing guard but acquitted of not dealing with the employee’s hair. A fine of $7,500 was imposed. An appeal to the Ontario Court of Justice was dismissed. A further appeal to the Ontario Court of Appeal, cited above, dealt with two main issues.

The Crown maintained that the lower courts erred in restricting the corporation’s size to its local operation. The appeal court agreed that it was a mistake to limit an assessment of the corporation’s size and economic scope to the store where the offence occurred. The court reaffirmed its decision in R. v. Cotton Felts Ltd., (1982), 2 C.C. (3d) 287, that a fine imposed on a corporation must consider the corporation’s economic means to achieve both general and specific deterrence. General deterrence, which aims to prevent others from committing similar offences, is achieved when the fine is hefty enough to be “felt” by the corporation. Only when the fine becomes significant and considered beyond “a cost of doing business” is it likely to motivate a change in procedure.

For individuals, specific deterrence, which aims to prevent a particular offender from committing further crimes, seldom works as a crime prevention method. Studies have shown that offenders may be deterred only when there is a certainty of conviction. However, for corporations and government agencies, the threat of a financial penalty can act as a deterrent since protecting “the bottom line” financially is the primary motive for their existence. Specific deterrence can be achieved in the context of corporations when the financial penalty is sufficiently large to motivate change.

The second Crown argument emphasized treating individual and corporate defendants differently. The legislature intended a clear distinction when the defendant is a corporation rather than an individual. Fines under s. 66 of the OHSA (amended after this incident) now range from $500,000 for an individual to $2,000,000 for a corporation. The Court of Appeal has given clear direction that “Where a sentencing judge or justice of the peace relies on a precedent involving an individual in sentencing a corporate defendant, the reasons must show that the judge or justice of the peace turned their mind to the difference between individuals and corporations in terms of a range of sentence and considered the quantum of fine necessary to achieve specific deterrence for the corporate defendant (Ontario (Labour) v. New Mex Canada Inc., 2019 ONCA 30).

In this case, the court understood it was not dealing with a “mom and pop” operation. The corporation being assessed a fine here ran seven stores. It employed 84 full-time equivalents even though the operation where the teenager was injured employed only 12 full-time equivalents. Treating the corporation as only a local operation understated the size and scope of its economic activity; such understatement artificially reduces the impact of the fine necessary to achieve the deterrence required.

The court held that a fine of $40,000 was required to impress the corporation about the necessity of providing a safe working environment.

Although the idea that a corporation is the equivalent of an individual in the eyes of the law is a common generalization, behaviour modification requires that corporations and government agencies can and should be treated differently.

John L. Hill practised and taught prison law until his retirement. He holds a J.D. from Queen’s and an LL.M. in constitutional law from Osgoode Hall. He is also the author of Pine Box Parole: Terry Fitzsimmons and the Quest to End Solitary Confinement (Durvile & UpRoute Books). Contact him at johnlornehill@hotmail.com.

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