Brought into force in 2002, the Nova Scotia Volunteer Protection Act (the "VPA") remains the only stand-alone statute in Canada dedicated to shielding volunteers of non-profit organizations from personal liability.
1. Basic Direct and Indirect Liability Shields
Notwithstanding any enactment of Nova Scotia, no volunteer of a non-profit organization is, subject to various conditions and exclusions, liable for damages caused by an act or omission of the volunteer on behalf of the organization. In addition, if damages are awarded against, or any amount is paid by, a non-profit organization, the organization has no right of recovery against the volunteer. The first rule shields the volunteer from direct liability to the third party while the second rule shields the volunteer from indirect liability (that is, the corporation is directly liable and then seeks to recover from the volunteer).
The liability shield does not protect the non-profit organization itself from liability for damage caused to any person, including damage caused by an act or omission of a volunteer in respect of which the volunteer is immune from liability.
A volunteer (which may include a director, officer or employee of an organization) is an individual performing services for a non-profit organization who does not receive in respect of those services compensation (other than reasonable reimbursement or allowance for expenses actually incurred) or money or any other thing of value in lieu of compensation in excess of $500 a year. Therefore, the VPA does not protect paid staff or others who are paid more than $500 per year - presumably on the basis that the employee or paid director is compensated in part for the risk assumed.
A non-profit organization is defined in the VPA as:
● meaning any non-profit corporation or society incorporated under the Nova Scotia Societies Act organized and conducted for public benefit and operated primarily for charitable, civic, educational, religious, welfare, health, sport, recreation, tourism, heritable or culture purposes; and
● including various municipalities, school boards, regional library boards and hospital boards in Nova Scotia and bodies designated in regulations made under the VPA, which includes various provincial political parties.
The non-profit corporation may be incorporated or unincorporated.
Damages includes both physical and non-physical losses and both economic (that is, pecuniary loss resulting from damages, including loss of earnings or other benefits related to employment) and non-economic (that is, losses for physical and emotional pain and suffering, including injury to reputation). Essentially, the VPA is directed at uninsured tort damages such as might be suffered by the beneficiary of a service at the hands of a negligent volunteer.
2. Conditions and Exclusions
To qualify for liability protection, the volunteer must have been:
● acting within the scope of his responsibilities in the non-profit organization at the time of the act or omission (which excludes protection if the volunteer committed the wrongful act or omission beyond the ambit of his work for the organization); and
● properly licensed, certified or authorized, if required by law, by the appropriate authorities for the activities or practice undertaken by the volunteer at the time the damage occurred. For example, the liability shield will not protect an uncertified swimming instructor or lifeguard.
The liability protection does not apply if:
● the damage was caused by willful, reckless or criminal misconduct or gross negligence by the volunteer;
● the damage was caused by the volunteer while operating a motor vehicle, vessel, aircraft or other vehicle for which the owner is legally required to maintain insurance - a carve-out that is justified to prevent insurers from taking advantage of the liability shield;
● the act or omission which caused the damage constitutes an offence; or
● the volunteer was unlawfully using or impaired by alcohol or drugs at the time of the act or omission which caused the damage.
While useful, the VPA legislation has limited scope. It does not protect directors from personal liability for unpaid payroll remittances (for employee income tax deductions, Canada pension plan contributions and employment insurance premiums) or harmonized sales tax remittances. Nor does it apply if the director, officer or employee receives more than $500 in compensation in a year. It only applies to a limited subset of Nova Scotia non-profit organizations - primarily those that are operated for charitable, governmental or other public benefit purposes. It would not apply to most member-benefit organizations.
Nevertheless, from the standpoint of a director or officer of an applicable non-profit organization, an outright immunity from liability under the VPA is superior to rights of indemnification or to receive insurance coverage. The availability of indemnification depends in part on whether the corporation is solvent and whether those in control of the corporation will honour the obligation to indemnify without litigation to enforce the obligation. Insurers can be expected to resist payment if there are any plausible grounds for doing so. Far better for the director or officer not to be immune from liability at the outset than to be liable but have a right to recover the loss from the corporation under an indemnity or from a carrier of insurance coverage.
Arguably, the Nova Scotia liability regime helps to remove a significant barrier that would otherwise discourage volunteers (including volunteer directors) from contributing their efforts to the activities of Nova Scotia non-profit organizations.