Yes, you read that headline right. As far-fetched as it sounds, the Supreme Court of Canada just heard a case that raises the question of whether the protection against cruel and unusual punishment set out in the Canadian Charter of Rights and Freedoms extends to corporations.

The constitutional challenge could establish a new frontier in sentencing.

The story behind the case is simple.

The accused numbered company, 9147-0732 Québec Inc., is a building contractor convicted of doing construction work without a proper licence, contrary to the Québec Building Code.

At trial, the judge rejected the company’s defence that it had simply made a mistake by billing the work through the “wrong” company. In the construction industry, sub-contracting among different companies run by the same people, often family members, is common.

Prior to sentencing, the company challenged the $30,000 minimum penalty applicable to corporations — about three times the minimum applicable to individuals — as cruel and unusual punishment under Sec. 12 of the Charter, which mandates that no one should be subjected to such punishment.

The trial judge decided that the company’s Charter rights weren’t violated.

The judge then separately ruled that corporations cannot claim protection from cruel and unusual punishment because in Canada and elsewhere, it’s intended to protect people, not companies, from unconscionable, degrading or inhumane treatment. That includes torture or indefinite solitary confinement.

Went to appeal

That second portion of the ruling was appealed to the Superior Court of Québec, which upheld the decision, and then to the Québec Court of Appeal, where the judges split 2-1 in favour of the company.

The two judges ruled that nothing in the Charter section precludes companies from arguing that a mandatory minimum penalty is cruel and unusual punishment.

A key part of their reasoning was that mandatory minimum monetary penalties could lead to fines that cause serious economic harm and even push companies into bankruptcy.

Since that could potentially hurt employees who are at risk of losing their jobs and benefits, it could constitute cruel and unusual punishment, they held.

The two justices pointed to a specific sentencing factor in the Criminal Code that requires a judge to take into account the effect of the sentence on the economic viability of a business entity and the continued employment of its employees. They also cited the new remediation agreement regime, which clearly states that one of the purposes of the regime is to:

“… reduce the negative consequences of the wrongdoing for persons — employees, customers, pensioners and others — who did not engage in the wrongdoing, while holding responsible those individuals who did engage in that wrongdoing.”

Read more: What's ahead for remediation agreements in the SNC-Lavalin aftermath

In his dissent, the third judge analyzed the history of the protection from cruel and unusual punishment in Canadian and English law (going back to the 1688 Bill of Rights), as well American, European and international human rights conventions.

He concluded that it was inconsistent with the essence of Sec. 12 of the Charter to allow corporations to assert that monetary penalties could constitute cruel and unusual punishment.

He also rejected corporations pointing to potential bankruptcy, and its impact on their employees, as a basis for saying a punishment is cruel and unusual. In his view, this was tantamount to giving corporations the ability to have their cake and eat it too — behave badly in ways that could harm their employees, then use those employees as a shield when penalized.

Corporations have some Charter rights

The question, therefore, of whether the Charter should be interpreted to extend to corporations is complex. And it’s not new; it came up almost immediately after the Charter was enacted.

Courts have found that corporations do have the benefit of some Charter rights, like those protecting against unreasonable search and seizure, the right to trial within a reasonable time and the presumption of innocence.

Corporations are also able to challenge unconstitutional laws that violate their rights.

Over time, provincial and federal lawmakers have tended to create separate regulatory offences for individuals and corporations to deal with these kinds of challenge. By and large that approach has worked — until now.

The Supreme Court is now being asked to address three issues.

THE CANADIAN PRESS/Sean Kilpatrick

The first is a general question about whether we need to adjust how we interpret the rights set out in the Charter. The Charter is supposed to evolve with Canadian society, and so it’s important to reassess and adapt in response to societal changes.

The second question is an examination of what’s at the heart of the protection against cruel and unusual punishment. Is it intertwined with and inseparable from protecting human dignity? The appellants, the Attorney General of Québec and the Director of Penal and Criminal Prosecutions made the argument to the Supreme Court that Sec. 12 does not apply to corporations.

Four of the six interveners in the Supreme Court case support this interpretation: the Director of Public Prosecutions of Canada, the Attorney General of Ontario , the Canadian Civil Liberties Association and the B.C. Civil Liberties Association. The Ontario argument stated:

“Section 12 should remain, as it always has been, limited to protecting the dignity and worth of human beings, not the profits of corporations.”

On the other side, the respondent company argued that Sec. 12 is better interpreted as a broader protection against any punishment that is “grossly disproportionate” without the need for a connection to human dignity.

It insists that allowing corporations to make an argument under the section doesn’t trivialize cruel and unusual punishment nor make it easier to prove. Two interveners support this position: the Association of Criminal Defence Lawyers of Montréal and the Canadian Constitution Foundation.

Citing the harm to employees

The most significant issue is the last: whether a corporation can rely on how a punishment affects the people who have a stake in its economic fortunes as evidence of the cruel and unusual nature of the sanction.

The Attorney General of Ontario and the Canadian Civil Liberties Association argue forcefully that this is hard to square with the basic principle of corporate law — that corporations are distinct legal entities separate from the people who create them.

Beyond this lies a deeper, more troubling concern.

Regulatory offences are, for the most part, meant to motivate businesses to spend money on measures that protect the public and vulnerable groups who lack the power to demand these protections directly.

That means we must be very careful that Sec. 12 is not used to do an end run around the purpose of public welfare regulation.

Imagine the outrage if a corporation subject to a heavy fine for a serious safety violation that put workers’ lives at risk could turn around and challenge the fine as cruel and unusual punishment because those same employees might lose their jobs.

Should the Supreme Court side with the Québec contractor, that’s a distinct possibility.