Appendix 4:
Legal Liability

EXPOSURE TO LIABILITY

EXAMPLE

RISK MANAGEMENT

Director's Liability Exposure

Directors must carefully fulfill their fiduciary duties to the primary care group to receive the benefit of available limited liability protection.

This includes the exercise of due diligence (e.g. the diligence and skill that a reasonable prudent person would exercise in comparable circumstances), and the fulfillment of the following duties:

• Duty of knowledge
• Duty to exercise care, skill and diligence
• Duty to manage
• Duty to avoid conflicts of interest
• Duty to act within scope of authority

Clearly outline Directors' duties in the by-laws.

Establish policies by which the primary care group is to be managed.

Comply with relevant legislation, by-laws and policies.

Director's Checklist:

Attend all board meetings; speak your mind; insist on receiving relevant information relating to matters requiring board approval in advance; read circulated materials carefully and in advance; make independent decisions; keep personal notes of meetings; review minutes of meetings when received; keep a file to collect minutes, personal notes and other documents; insist minutes record any disclosure made by a Director or that a Director's abstinence/dissent is recorded; consider obtaining independent legal advice on any major corporate steps to be taken and on written professional opinions from specialists such as accountants, investment advisers and lawyers on whose advice the board is expected to act; insist on good audits and an effective audit committee; insist on evidence of compliance with internal control requirements; insist that the corporation protect Directors (to the extent practical and permitted by law) by insurance and indemnification; be alert and responsive to changing circumstances.

Directors face exposure to liability for any of their own actions that are inconsistent with the Directors' duties to the primary care group.

The primary care group fails to pay for a supply of medical products it has contracted for and received because a Director has diverted them to his own personal use. The Director, having ceased to act in the group's best interest, could be personally liable together with (or instead of) the group.

Conduct your activities in the best interest of the primary care group.

Statutory Liability

Corporations Act contains penalties for Directors of non-profit corporations who fail to comply with provisions of the Act.

The primary care group changes the location of its head office or the number of its Directors without following proper procedure. The group fails to keep appropriate books and records as prescribed.

Appoint someone to be responsible for corporate and regulatory compliance and ask for regular reports to the board.

Criminal Liability

Directors face exposure to criminal liability if they violate the Criminal Code of Canada or other quasi-criminal Acts.

The primary care group commits fraud directed toward the Ministry. The Director(s) who authorized or allowed the fraud to take place may be liable.

Do not engage in criminal offences.

Civil Liability

Directors face exposure to civil liability if they participate in a civil offence or if they authorize the wrongful act that is the subject of the civil offence.

A Director causes the primary care group to make a negligent misrepresentation and someone relied on that to their detriment (e.g. inducing a physician to move his family and practice to the group on the basis of misleading information).

A Director misrepresents the financial status of the group to the Ministry.

Do not engage in civil offences.

Employee and Workplace Liability

Directors can be jointly and severally liable for unpaid wages (up to 6 months) and vacation pay (up to 12 months) in the event of bankruptcy. The duty continues for 6 months after the person ceases to e a Director.

The primary care group goes bankrupt and doesn't pay its employees back pay or vacation pay.

Exercise due diligence. Establish procedures to ensure that wage liabilities and unpaid vacation pay are met. Ensure those responsible for payroll report to the Directors on a regular basis.

The primary care group as an employer must meet statutory obligations of record keeping and maintain statutory employment and labor standards.

Appoint someone to be responsible for HR compliance.

Enter into independent contractor agreements instead of employment agreements, where appropriate.

The primary care group is vicariously liable for negligent acts and omissions of employees.

A primary care group employee, in conducting his duties, causes harm to another. The group would be liable unless the employee was "acting on a frolic of his own. "

Doctors are already liable for the acts and omissions of their employees for patient care matters.

Directors can be liable for a failure to perform the duties imposed by the Occupational Health and Safety Act.

The Criminal Code also imposes criminal liability for unsafe workplaces on all organizations.

The primary care group does not ensure the safety of its workplace, which entails providing prescribed and functioning safety equipment to workers, appointing competent supervisors, carrying out safety procedures in the regulations and providing information, instruction and supervision to workers to protect their health and safety.

Establish procedures to ensure that every reasonable precaution in the circumstances was taken (e.g. provide gloves and masks; avoid needlestick injuries).

Primary care groups may be liable for negligence arising out of human resource management issues.

Establish mechanisms to address: hiring, withdrawal and termination of providers; credentialing; delegation of controlled acts (liability insurance, scope of authority, competence).

Income Tax Liability

Several statutes create obligations on employers to collect and remit taxes to the government. Directors may be liable to pay any amount of employee taxes, including penalties and interest that are not remitted. The duty continues for two years after the person ceases to be a Director.

The primary care group does not withhold or remit federal or provincial income taxes, employer health taxes, CPP contributions, EI premiums, workers' compensation premiums.

The group does not remit GST or RST when required.

Exercise due diligence. Ensure those responsible for payroll freport to the Directors on a regular basis confirming that all required remittances have been sent to the appropriate tax authority.

Enter into independent contractor agreements instead of employment agreements, where appropriate.

Environmental Liability

Directors can be liable for environmental problems that may be encountered (e.g. non-compliance with federal and provincial environmental regulations such as the Water Resources Act).

For primary care groups, this may be entirely hypothetical.

If the primary care group discharges a contaminant into the environment.

Exercise due diligence; establish a pollution prevention system; supervise and inspect it; improve business methods; ensure periodic reporting from those responsible as well as reporting of non-compliance.