Workplace Safety Due Diligence in Mergers & Business Acguisitions
Across Canada in both Federal and provincial jurisdictions, health and safety requirements are regulated through acts and regulations. Compliance is monitored by the Ministry of Labour and a range of specialized agencies, police forces, boards and commissions assist the ministry in its work.
Compliance with the Occupational Health and Safety Act, and the applicable regulations, is a minimum standard. Fines can be up to $25,000 for an individual and up to $500,000 for the company if charges are laid under the Act.
The importance of compliance with applicable Occupational Health and Safety legislation has been heightened by Bill C-45 which adds additional liability under the Criminal Code of Canada. This amendment holds directors and officers criminally liable for workplace health and safety. Significant fines and jail time can result if serious injuries or fatalities occur, and all reasonable measures have not been taken to prevent those injuries. If one business is aquired by another then these obligations are also aquired along with everything else.
When considering the purchase of another business, the aquiring company will spend time and money examining the financial condition of the target. But a considerable hidden liability may also exist in how well the target complies with its health & safety obligations. Does the target company have a system to maintain compliance in matters like employee training and workplace inspections? Do they have a trained and functioning Joint Health & Safety Committee? Are there any pending investigations from safety inspectors that could result in fines or worse? Is everything documented in a comprehensive and professional manner?
If employee training has not taken place, or machinery and equipment is not up to standard in maintenance or certifications then training costs, engineer’s pre-start reviews, electrical code inspections will mount rapidly for the unwary buyer.
Would-be acquirers should remember to review health and safety information and determine if an appropriate management system is in place. A review or audit of the physical condition of the workplace may also be beneficial to determine compliance in machinery, equipment and processes.
Know where you stand before you acquire – don’t purchase someone else’s liability!