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Cross-Border: A Guide To Doing Business In Canada – Key Topics And Developments – Corporate and Company Law

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On June 28, 2022 the McCarthy Tetrault’s Labour and
Employment Group, along with leading partners from other practice
areas in the Firm, hosted an insightful webinar on key cross-border
topics and trends for business. The webinar coincided with the
launch of our Cross-Border – Navigating Canadian Employment
Law Guidebook
.. The following are some highlights from the
panelists:.

Navigating Canadian Employment Law

Tim Lawson, Head of the Labour and Employment
Group, discussed the following employment law highlights:

  • Unlike in the U.S., there is no “at-will” employment
    in Canada. Employers can include termination clauses in employment
    contracts to define obligations on termination. However, employers
    must take special care when drafting such clauses as they are
    increasingly scrutinized by Canadian courts.

  • Non-competes in Canada are prima facie unenforceable
    as restraints of trade. To be enforced, a non-compete must be
    reasonably limited in geographic scope, length of restriction, and
    activities being restricted. As of October 25, 2021, the province
    of Ontario has made non-competes unlawful per se as a matter
    of law, except in agreements for chief executives and in some
    limited sale of business scenarios.

  • Ontario is also the first Canadian province to introduce
    legislation that mandates that any employer with more than 25
    employees have a written disconnection policy. However, this is not
    an absolute right for employees. The law only requires that an
    employer define expectations around disconnecting from work. The
    deadline to implement this policy was June 2, 2022.

  • Bill 96 increases the use of the French language by businesses
    operating in Quebec. Among other things, Bill 96 clarifies the
    types of French documentation that an employer is required to
    provide to its employees and adds new requirements regarding the
    dissemination of job offers in French.

Mergers & Acquisitions

Jennifer Longhurst, a Partner in the Business
Law group spoke about mergers and acquisitions and the the impact
of a transaction on various stakeholders. Of note:

  • Unlike in the S., in Canada, there is both a “fiduciary
    duty” and a “duty of care” which requires
    consideration of whether or not the transaction is in the best
    interest of the corporation. In Canada, a transaction must consider
    a broader group of stakeholders, including pensioners and
    employees.

  • The COVID-19 pandemic accelerated the focus on Equity,
    Diversity and Inclusion (EDI) and other social justice issues,
    leading to an increasing trend of “stakeholder
    capitalism” whereby stakeholder groups deploy
    “vote-no” campaigns to block a transaction. It is
    important to plan and anticipate how broader stakeholder groups
    such as unions, employees, institutions and lobby groups may impact
    a transaction.

  • More purchasers involved in M&A agreements are requiring
    enhanced due diligence, including incorporating representations
    into their deals to lessen the financial and reputational damage
    resulting from prior sexual misconduct by executives (sometimes
    known as a “Weistein Clause”).

  • “Change of control” provisions, and treatment of
    incentive awards remain core to M&A deal negotiations.

Fintech Activity in Canada

Financial Technology or “Fintech” has been steadily
increasing in Canada. Ana Badour, a Partner in the
Financial Services Group and Co-Lead of the Fintech Group,
highlighted a number of Canadian-grown fintech “unicorns”
such as Wealthsimple, Neo
Financial
, Freshbooks and more. Canada is also home to a
robust payment industry with well-known publicly listed entities
such as Shopify and Lightspeed.

In terms of regulation it is important to appreciate that Canada
has both “entity-based” regulation (i.e. for banks,
credit unions, trust companies etc.) and “activity-based”
regulation such as for payments, lending, securities and
insurance.

With the rise of fintech companies in the cryptocurrency space,
there has been increased attention from the securities regulator on
foreign trading platforms operating in Canada. As well, FINTRAC,
Canada’s anti-money laundering body has been increasingly
focused on enforcement mandates after overhauling its monetary
administrative penalty regime.

Privacy and Cybersecurity: Quebec’s Bill 64

Charles Morgan, a Partner in the Technology
Group presented on Bill C-64, Quebec’s new privacy
legislation.

Quebec was the first province to observe the European Union’s General Data Protection
Regulation (GDPR)
and legislate both higher requirements for
privacy compliance and stricter penalties for non-compliance. Over
the next three (3) years, Bill 64 will come into force, with the
majority of it taking effect on September 22, 2023. New
requirements include:

  • Conducting a prior privacy impact assessment (a
    PIA“);

  • Determining whether information communicated would receive
    “adequate protection” in the target jurisdiction;
    and

  • Entering into written agreements that take into account the
    results of the PIAs and, if applicable, include terms to mitigate
    the risks identified in the PIAs.

The new sanctions in Bill 64 include
administrative monetary penalties of up to 10 million dollars or 2%
of worldwide turnover for the preceding fiscal year, whichever is
greater.

For its part, the federal government introduced Bill C-27 on
June 16, 2022 which will serve as a complete overhaul of the
Personal Information Protection and Electronic Documents
Act
(PIPEDA). Bill C-27 has gained a lot of support across the
political spectrum and is expected to pass. Bill C-27 will
introduce the same monetary fines as contained in Quebec’s Bill
64 and will introduce a number of requirements on cross-border
transfers.

To ensure compliance and minimize risk of penalty, companies
should start preparing now for these regulatory changes.

Supply Chain, Customs and Trade

Martha Harrison, a Partner in the International
Trade, Investment and Regulatory Group discussed how environmental,
social and governance factors are increasingly driving decision
making in Supply Chain, Customs and Trade. Trade diversification in
supply and suppliers has become an essential element of procurement
strategies.

Moreover, robust internal compliance measures are extremely
important given a significant uptick in regulatory review,
including a spotlight on forced labour in global supply chains.
Businesses operating in Canada should consider implementing
policies and practices that address forced labour risk in their
supply chains, to the extent such policies and practices are not
already in place.

The impact of the COVID-19 pandemic on both simple and complex
supply chains, as well as how certain environmental crises have
impacted supply chains in Canada were also discussed.

Competition and Foreign Investment

Kate McNeece, a Partner in the Competition and
Antitrust & Foreign Investment group discussed merger review
under the Competition Act.

In recent years, the Canadian Competition Bureau has taken a
more litigious stance and has signalled a potentially more
contentious approach to merger review if the parties choose to
close while review is ongoing. A review of mergers and acquisitions
with publicly-listed Canadian targets indicates that in 2021,
almost all transactions with a Competition Act closing
condition required substantive comfort from the Bureau.

As well, important amendments to the Competition Act
which became law on June 23, 2022 were reviewed. Notably, these
amendments increase maximum fines and penalties for those who break
the law and prohibit wage-fixing and no-poach agreements between
employers.

Employment-related Class Action Lawsuits in Canada

Last but not least, Katherine Booth, a Partner
in the Litigation Group ended the webinar highlighting the key
differences between the Canadian and the U.S. approaches to class
action lawsuits, and particularly in the employment law space.

Importantly, unlike in the U.S. there is no centralized system
to manage parallel proceedings and each Canadian province operates
under different legislation. As a result, companies need to be
aware of the complex legal regime that animates each province’s
class action proceedings.

Increasingly, there are employment-based class action claims
being brought in Canada and the trend is likely to remain. Recent
trends reveals that Canadian courts may be more willing to hear
cases that touch on systemic unfairness and mistreatment of
employees. Common class actions in the employment context include
denial of pay and benefits, worker classification issues, and
harassment and discrimination.

Claims focused on common documents, practices and procedures
have been certified, while claims requiring individual assessment
of worker circumstances are less likely to be certified. Going
forward, employers should pay attention to their common workplace
policies and procedures to minimize the risk of employment-related
class actions.

To view the original article click here

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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