Criminal Offences in the Construction Industry: The Hidden Consequences of a Guilty Plea and Good Practices

The construction industry is largely regulated and several of its sectors carry risks of criminal liability. Since the early 2010's, the consequences of pleas to criminal offences have become increasingly serious.

On the financial side, minimum fines related to offences have increased considerably. For example, the fine for acting as a contractor without holding the appropriate licence is almost 25 times higher today than it was in 2010.

However, the consequences of criminal convictions are not only financial, but can be much more serious and can even create real barriers to a company's operations, particularly with regard to construction contractor licences and public contracts. Construction contractors, professionals and owners are therefore subject to significant governance and compliance issues.

In this context, it is important to be cautious about criminal prosecutions even though, a priori, they may seem to raise only limited issues for the company. No guilty plea should be entered without a prior analysis of the consequences.

Hidden Consequences of a Guilty Plea

The case of construction contractor licences

Certain offences may lead to the suspension or cancellation of the licence issued under the Building Act. These include offences related to consumer protection, labour relations, vocational training and workforce management or occupational health and safety.

In addition, failure to report a conviction for an offence, even a minor one, when filing a declaration with the Régie du bâtiment du Québec ("RBQ") in connection with an application to obtain or renew a licence could be considered a false declaration and could lead to painful consequences.

Indeed, the law provides that a false declaration in an application for obtaining or renewing a license is punishable by fines of up to $15,000 in the case of an individual and up to $45,000 in the case of a corporation. In the case of a false declaration by a corporation, the consequences may even be doubled, since the officer of the corporation who signs the false declaration may, in addition to the corporation, be personally convicted. In addition to all these financial consequences, there is also the risk of cancellation or suspension of the building contractor's licence.

In the case of public contracts

Depending on the case, being found guilty of an offence may lead to total ineligibility for any public contract, regardless of the nature and value of the contract. A conviction for an offence, and sometimes even the mere fact of facing criminal or penal proceedings, could lead to the refusal of an application for authorization to enter into a contract with a public body, which authorization is required for certain contracts, particularly construction contracts worth $5 million or more, or to the revocation or refusal to renew such an authorization when it has already been issued. We remind you that the issuance of such an authorization is at the discretion of the Autorité des marchés publics ("AMP") and therefore, several factors may be considered.

Indeed, the Act respecting contracts of public bodies provides for a whole series of offences for which a conviction constitutes a point of no return for the company, since they automatically lead to the company's ineligibility for any public contract for a period of five years and to the company's registration in the Registre des entreprises non admissibles aux contrats publics ("RENA").

These offences leading to registration in the RENA are of different kinds and the list is relatively long.¹ For the construction industry, one can think, to name but a few, of the infractions:

• that fall under the tax laws;
• that come from municipal law relating to tendering;
• in the area of public contracts,
• that concern electoral laws; and,
• in labour relations, vocational training and workforce management.

Any prosecution, let alone one involving any of the above matters must therefore be analysed with the utmost care and no guilty plea should be entered only considering the fine to be paid.

Furthermore, companies should be aware that, in matters of public contracts, it is ultimately any criminal or penal prosecution that could jeopardize an application for authorization to contract with a public body or that could justify the revocation of such authorization or the refusal to renew it. The directors, officers and shareholders of the company must also be cautious about criminal and penal proceedings against them, since they could have consequences for the company and constitute a barrier to public contracts.

There are several other consequences in pleading guilty to an offence. For example, consider the risk of being refused a request for ministerial authorization for work involving the quality of the environment, when the person or company requesting the authorization has already been convicted of an environmental protection offence.

Construction contractors, professionals and clients must therefore implement good practices to reduce the risk of conviction and to properly document their offence records.

Due Diligence Defence

A large number of criminal offences affecting the construction industry are subject to a strict liability regime, i.e. the prosecuting party does not have to demonstrate a guilty mind on the part of the accused (mens rea), but only has to prove, beyond a reasonable doubt, the material elements of the offence charged (actus reus).

In return, however, the accused will be able to defend himself or herself from a strict liability offence by presenting a defence of due diligence. A due diligence defence will be admissible if the accused had taken all reasonable precautions to avoid the commission of the offence. In a due diligence defence, the accused's conduct will be objectively judged on the standard of a reasonable person in the same position as the accused and on the prudence, knowledge and skill that the reasonable person should have.²

Proof of due diligence will have to be made on a balance of probabilities, i.e., the accused will have to establish that it is more likely than not that he or she was reasonably diligent in his or her conduct. While due diligence does not require the accused to demonstrate perfect conduct, it is a fairly restrictive test, since it is not enough to argue that certain preventive measures were taken, but that all reasonable precautions were taken to prevent the commission of the offence.³

6 measures to be put in place

Each case is unique and due diligence can be exercised as long as there are contexts for a strict liability criminal offence in the construction industry.

The objective is to put in place measures to prevent offences and to do whatever is necessary for the proper functioning of preventive measures.⁴ In general, case law has recognized that proof of due diligence requires the following on the part of a company:

• 1. The presence of clear and appropriate instructions given to employees through an effective means of communication;
• 2. The establishment of systems for the application, control and supervision of directives and employees;
• 3. The existence of specialized training and staff development programs;
• 4. The use and maintenance of adequate equipment;
• 5. The establishment of emergency programs, where appropriate;
• 6. The possibility of graduated administrative sanctions to encourage employees to comply with the law and directives.⁵

Practical Example

A contractor is prosecuted for a violation of the Occupational Health and Safety Act. He investigates internally, but concludes that he has little defence to offer. In order not to complicate the case, he decides to plead guilty and pays the fine.

Less than 12 months after a guilty plea is entered against the company, one of the officers prepares the annual declaration to the RBQ for the construction contractor's licence. One of the questions on the form is whether the company has been convicted in the last 12 months of certain offences listed on the form. The officer is not personally aware of any convictions for the offences listed on the form, but investigates with an employee who keeps a record of the proceedings against the business. Unfortunately, the record is not up to date. The officer therefore concludes that there is nothing to declare and indicates on the RBQ form that there have been no convictions in the previous 12 months. Subsequently, the company and the officer each receive a notice of offence requesting the payment of a fine for false declaration.

In a decision dealing with similar issues, although the factual background differed, the Court of Quebec concluded that the contractor had not demonstrated due diligence in the following terms⁶: "The maintenance of the file in its state does not demonstrate a reasonable effort to avoid the commission of an offence. It was incomplete. Its maintenance was the business of one person. It was not subject to any subsequent verification. The tax preparer relied upon it without restriction.” [our translation]

8 Good Practices to Adopt in the Management of Criminal Cases

In such a case, what should be done when preparing the annual declaration to the RBQ? The company already kept a file listing the lawsuits filed against it, was this not sufficient to establish proof of due diligence and demonstrate that the company was acting to prevent misrepresentations?

Furthermore, in the context of an application to be authorized to enter into a contract with a public body or in the context of an application for renewal of such an authorization, what are the company's disclosure obligations with respect to its offence files? Are all violations against the company required to be disclosed? If so, how can a prosecution file be established, how should it be managed and what should it contain?

From the perspective of a due diligence defence to a prosecution for misrepresentation, the following practices should be considered, among others:

1. Identifying a contact person responsible for the company's offence records and communicating his or her identity to all employees;

2. Identifying an officer responsible for supervising the contact person;

3. Establishing a policy requiring all employees to report to the contact person the existence of any notice of offence or any concrete risk thereof and informing employees of the possibility of administrative sanctions in the event of non-compliance with their disclosure obligation;

4. Establishing a policy requiring the conduct of an internal investigation for any notice of offence or concrete risk thereof;

5. Creation of a register of all notices of offence issued against the company. The register should contain the following information:

• number of the notice of offence
• details of the alleged offence
• date of offence
• place of offence
• project concerned
• information about the plea entered (guilty or not guilty)
• court file number
• identity of the lawyer appointed to defend the company, if any
• information on the request for disclosure of evidence submitted to the prosecuting party
• internal investigation notes on the event
• notes on the lawyer's recommendations, if any
• court dates for the challenge, if any
• date of judgment

6. Management of the register by the contact person and by the officer responsible for his or her supervision;

7. Regular monitoring by the manager of the work on the register;

8. Training of the contact person on the general operation of a defence and the use of docket information, including the use of docket information to verify the contents of the log;

In addition, with regard to the disclosure obligation of a company in the context of an application for authorisation to enter into a contract with a public body or in the context of the renewal of such authorisation, the company must disclose to the AMP the existence of any criminal or penal proceedings against it and any conviction, where the event is less than five years prior.⁷

It is therefore good practice for any company maintaining relations with the AMP in connection with an authorisation to contract with public bodies to set up a register of infringements. The company should also make its officers, directors and shareholders aware of their own disclosure obligations towards the AMP and clearly communicate their obligations in this regard.

Finally, it is also essential that the company receiving a statement of offence to ensure that it analyzes the consequences of a guilty plea and the facts that led to the statement of offence.

For 25 years, BCF's mission has been to support Canadian businesses. We know the issues you face and our team is available to help you use the resources at your disposal. Should you have any questions, please do not hesitate to contact one of our Penal Law experts:

• Geneviève Beaudin
• Vicky Berthiaume
• Anne-Frédérique Bourret
• Michel Brisebois
• Stéphan Charles-Grenon
• Michel Décary
• Stefania Fratianni
• Julie Gaudreault-Martel
• Vanessa Gregorio
• Marc-André Groulx
• Nicolas Guimond
• Simon-Pierre Hébert
• Isabelle Landry
• Nathalie Lavoie
• Simon Pelletier
• Jean Piette
• Nicole Platanitis
• André Ryan
• Mélanie Sauriol

[1] The offences for which a conviction automatically leads to registration in the RENA are those identified in Schedule I of the Public Bodies Contracts Act.
[2] Réna ÉMONDE and Caroline MORIN, Droit pénal: infractions, moyens de défense et peine, Title 1 – Les infractions, Chapter 1 – Les infractions réglementaires fédérales et provinciales, Collection de droit 2019-2020
[3] R. v. Sault Ste. Marie, 1978 CanLII 11, page 1326
[4] R. v. Sault Ste. Marie, 1978 CanLII 11, page 1331; Groupe Récrégestion inc. v. Directeur des poursuites criminelles et pénales, 2020 QCCS 163, cited by Directeur des poursuites criminelles et pénales c. 9299-0522 Québec inc., 2020 QCCS 654
[5] Procureur général du Québec c. Dépan-Escompte Couche-Tard, 2003 CanLII 9343 (C.Q.)
[6] Directeur des poursuites criminelles et pénales c. Béton Provincial ltée, 2018 QCCQ 3204, par. 17
[7] Art. 21.28 of the Act respecting contracts of public bodies, RLRQ c C-65.1. In addition to the existence of prosecutions or convictions, the enterprise must also disclose the existence of a decision to suspend work that is enforceable under s. 7.8 of the Act respecting labour relations, vocational training and workforce management in the construction industry and convictions by final judgment to pay a claim based on s. 81 of that act, when these events occurred within the last two years.