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Packed with valuable information, our publications help you stay in touch with the latest developments in the fields of law affecting you, whatever your sector of activity. Our professionals are committed to keeping you informed of breaking legal news through their analysis of recent judgments, amendments, laws, and regulations.

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  • Heffel Gallery Limited : The National Importance of Foreign Art in Canada

    On April 16, 2019, the Federal Court of Appeal issued a judgment resolving a deadlock that had been plaguing the Canadian art community since June 12, 2018. Since June 2018, the Canadian Cultural Property Export Review Board (the “Board”) has had to take into consideration the Federal Court’s findings in Heffel Gallery Limited v. Canada (Attorney General).1 As a result of this judgment, the eligibility of foreign artwork was facilitated with respect to the issuance of permits to export cultural property2 but compromised with respect to the issuance of income tax certificates.3 It was thus easier to obtain a permit to export artwork abroad and more difficult for donors to Canadian museums to benefit from income tax deductions In contrast to the way the Board had been operating, this trial judgment interpreted the “national importance” criterion very restrictively. As a result, the applicability of the Cultural Property Export and Import Act4 (the “Act”) was limited to works with a direct connection to Canada. Outstanding objects that were not produced in Canada or by a Canadian artist could no longer benefit from the protections afforded by the Act when exported5 or qualify for income tax certificates. In a unanimous decision, the Federal Court of Appeal6 overturned the trial judgment by finding that a work by an international artist can meet the level of national importance required under the Act. In this regard, the Federal Court of Appeal found that the “national importance” criterion allows for a determination of the effect that exporting the object would have on the country.7 As a result, a work or its creator does not need to have a direct link to Canada to be eligible for tax deductions and the application of the export control mechanism. The Trial Judgment The piece “Iris bleus, jardin du Petit Gennevilliers”8 (“Iris bleus”) by impressionist painter Gustave Caillebotte is at the heart of this dispute. In November 2016, the Heffel Gallery held an auction in which a London-based commercial gallery acquired the painting. In order to deliver Iris bleus to its buyer, the Heffel Gallery had to apply to the Board9 for an export permit. The expert examiner in the case refused the application, and, subsequently, the Board’s review panel did the same.10 Following these refusals, an application was made to the Federal Court for judicial review, in which it had to rule on the meaning of the national importance criterion as it appears in the Canadian Cultural Property Export Control List11 (the “Control List”). Following to their analysis, the Court deemed the Board’s interpretation of the national importance criterion to be too broad.12 Although it recognized the plurality of Canadian culture, the Federal Court found that the objects covered by the “national importance” criterion must have a direct connection to Canada.13 Pursuant to this interpretation, the Court adopted a position expressly favouring the property rights of owners of cultural property as well as economic liberalism in the art market.14 The trial judgment had unfortunate consequences, most notably, the fact that numerous institutions had to suspend or even cancel new acquisitions15 because certain generous donors could no longer receive tax certificates.16 The Federal Court of Appeal Judgment In its reasons for judgment, the Federal Court of Appeal first reiterates the broad outlines of the applicable legislative framework and its primary objective. In 1977, Parliament enacted the Cultural Property Import and Export Act17 in order to protect Canada’s national heritage. In adopting said law, Parliament was complying with its international commitments to UNESCO to combat the trafficking of cultural objects.18 The control list system established by Parliament (the “Control List”) sets out a number of conditions that must be met in order for an object’s export to be controlled under the Act.19 If the object is not included in the Control List, an export permit may be issued. If it is, an expert examiner determines whether the object "(a) is of outstanding significance by reason of its close association with Canadian history or national life, its aesthetic qualities or its value in the study of the arts or sciences; and (b) is of such a degree of national importance that its loss to Canada would significantly diminish the national heritage”.20 According to the Federal Court of Appeal, the trial judge erred in refusing to defer to the Board’s decision. In other words, when interpreting its own incorporating legislation, the Board is “better situated to understand the policy concerns and context needed to resolve any ambiguities in the statute.”21 » This error is significant because Parliament had granted broad powers to the Board when assessing an object according to the “national importance” criterion. More specifically, these powers recognize the expertise of the members appointed to the Board based on their specialization in the fields of cultural property, cultural heritage and cultural institutions.22 Conclusion Canada’s cultural institutions were undoubtedly relieved by this jurisprudential outcome. By recognizing that a work can be of national importance without necessarily being Canadian, this decision crystallizes the experts’ interpretation of the Act and the resulting practices that were predominant in the cultural community prior to the trial judgment. Donors who own exceptional works by foreign artists can once again donate them to Canadian institutions’ collections and benefit from tax incentives in return. The Federal Court of Appeal concludes by reiterating the purpose of the existing legislative framework, namely to “prevent many Canadian institutions from being ‘culturally ghettoised’ in allowing them to acquire works of art with a view of preserving cultural heritage for future generations.”23   2018 CF 605. Cultural Property Export and Import Act, R.S.C. 1985, c. C-51, ss. 7-16 Id., ss. 32 and 33. The income tax certificate is the mechanism of the Cultural Property Export and Import Act (the “Loi”) that allows those who donate works to Canadian institutions to benefit from the tax deductions provided for in the Income Tax Act. Supra note 2. Under the terms of the Cultural Property Export and Import Act, institutions may exercise a priority right of purchase that delays the export of any work considered exceptional and of national importance for up to six months. Canada (Attorney General) v. Heffel Gallery Limited, 2019 FCA 82 Id., para. 37. 1982, oil on canvas, 21 ¾ x 18 ¼ inches. Cultural Property Export and Import Act, supra note 2, ss. 8(3) and 40. Heffel Gallery Limited v. Canada (Attorney General), supra note 1, para. 8. C.R.C., c. 448. Heffel Gallery Limited v. Canada (Attorney General), supra note 1, para. 12. Id., para. 20-21. Id., para. 26-27. On this subject, see Catherine LALONDE, “Des dons qui échappent aux musées,” Le Devoir, December 19, 2018. Cultural Property Export and Import Act, supra note 2, ss. 32 and 33. Supra note 2. In order to comply with their commitment under the Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, 14 November 1970, 823 UNTS 231 (entered into force April 24, 1972), signatory countries were required to adopt legislation ensuring cross-border control of cultural property. The object must be included in one of the well-defined categories of the Control List, be at least 50 years old and, in the case of a natural person’s work, its creator must be deceased. In addition, where the object is not of Canadian origin, it must have been in Canada for at least 35 years. Cultural Property Export and Import Act, supra note 2, s. 11(1), emphasis added. Canada (Canadian Human Rights Commission) v. Canada (Attorney General), 2018 SCC 31, cited in Attorney General of Canada v. Heffel Gallery Limited, supra note 6, para. 52. Canada (Attorney General) v. Heffel Gallery Limited, supra note 6, para. 33. Id., para. 57

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  • The countdown is on to protect your trademarks in Canada

    A few weeks before the coming into force of the amendments to the Trade-marks Act, the following is a reminder of the actions you should consider taking before June 17, 2019 to protect your rights and save costs. Actions To Take Benefits Renew your registrations and classify your products & services Cost savings before June 17, 2019: $50 per renewal. $125 for each class of products and services (beyond the 1st class), since products and services must henceforth be classified according to a system of 45 classes. Protect the trademarks associated with your main products & services Review your trademark portfolio and ensure that your currently marketed products and services are protected. If not, file an application before June 17 to save costs: before June 17: a single $250 filing fee, regardless of the number of classes of products and services covered by your application. on or after June 17: a $330 fee for the 1st class + $125 per additional class. Protect your trademarks for your future plans Do you intend to launch new lines of products and services in the next few years? Take advantage of lower fees until June 17 and the elimination of the declaration of use by filing a trademark application to extend your protection. Beware of trolls! Monitor your marks The elimination of the declaration of use has encouraged the spread of trademark trolls to Canada. Use a monitoring service to react quickly to third parties who attempt to misappropriate your mark. The trademark registration process will be greatly simplified as of June 17, 2019, particularly because of the elimination of the declaration of use. The new registration process will indeed allow trademark registration, without any use requirement in Canada by the applicant. To avoid disputes involving your trademarks, remember that it is important to conduct searches before launching a new mark and to quickly file applications for registration.

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  • Amendments to the Pay Equity Act: What are the changes to expect?

    On April 10, 2019, came into force several long-awaited amendments to the Pay Equity Act, which are mainly intended to improve the pay equity audit process. These amendments follow last year’s Supreme Court of Canada ("SCC") judgment1. We discussed these judgments in a previous bulletin. It should be recalled that the SCC, in its decision of May 10, 2018, essentially declared certain provisions of the Pay Equity Act unconstitutional, stating that: Compensation adjustment, in the context of a pay equity audit conducted every five years, must be retroactive; The information to be included in the posting of the audit results was insufficient to allow employees to properly understand the process followed by the employer during the audit and did not include the date on which inequity manifested itself. In fact, the amendments to the Pay Equity Act go much further than most of the adjustments required by the Supreme Court of Canada, despite public consultations and numerous comments from employer groups in this regard. The following is a brief summary of the most significant amendments to the Pay Equity Act that your organization should review in order to quickly ascertain their repercussions: 1. Pay equity audit: Events leading to adjustments Compensation adjustments, following the pay equity audit process, will now have to be paid retroactively, back to the date of the event leading to the adjustment. The Pay Equity Act does not provide any clarification as to the notion of the event leading to the adjustment. In practice, the employer will therefore have to examine the events that have affected pay equity on a case-by-case basis. One can imagine that this amendment will not be easy to apply and that in the case of several events and adjustments, retroactivity will have to be applied on different dates. The retroactive payment required as a result of the pay equity audit will be payable in a lump sum. However, in some cases, for persons still employed by the employer, this lump sum may be spread over several payments, after consultation with the pay equity audit committee or the certified union representing employees, as the case may be. In addition, the employer must indicate the date of the event on the posting of the audit results. With respect to the date on which an employer must perform the pay equity audit, the Pay Equity Act now provides that the five (5) year time limit is established from the first posting and not the second posting, whether for an initial pay equity exercise (through a program or not) or a previous audit. 2. Pay equity audit: Participation of employees and certified associations Another major change is the introduction of an employee participation process in cases where the initial exercise was conducted by a committee or where there is at least one certified union representing employees. One of the consequences of this participation process is that the employer is obliged to provide information about the audit work, including written documents. The Pay Equity Act provides that persons with access to this information are required to maintain its confidentiality. The employer must also institute consultation measures so that the certified union or employees can ask questions and submit comments. The employer also has an obligation to allow employees to meet at the workplace to determine who will be designated in the participation process. In any event, employees are deemed to be at work for the purposes of this process. Finally, the employer will have to include questions or comments submitted as part of the participation process in the posting and show how they were considered in the audit. 3. Retention of documents Documents used to achieve pay equity or to perform the pay equity audit must now be kept for a period of six (6) years instead of five (5). In the case of a complaint or investigation, the employer is required to keep these documents until a final decision is made or until the investigation is closed. 4. End of posting notices Good news: In order to somewhat streamline the posting process, it will no longer be necessary for employers to issue a notice stating that a pay equity posting is in progress. 5. Creation of a complaint form The Commission des normes, de l'équité, de la santé et de la sécurité du travail ("CNESST") has created a complaint form that employees will have to use to file a complaint. This complaint must briefly state the reasons for which it is being filed. 6. Grouping complaints and conciliation The Pay Equity Act now provides the possibility for the CNESST to group complaints if they have the same juridical basis, are based on the same facts or raise the same points of law, or if circumstances permit. In addition, when more than one certified union represents employees in the same job class and one of these unions files a complaint, the process requires the appointment of a conciliator. In the case of a group of complaints or a complaint filed by a certified union in an enterprise, an employee who has also filed a complaint must receive a copy of the agreement that has been reached, and this employee may refuse to be bound by this agreement. In the event that no agreement has been reached, the Commission des normes, de l'équité, de la santé et de la sécurité du travail ("CNESST") must then determine the measures that must be taken to ensure that pay equity is achieved or maintained. Transitional measures Second postings related to a pay equity audit made prior to April 10, 2019, continue to be governed by the previous provisions of the Pay Equity Act. However, in the case of a first posting made before April 10, 2019, the second posting must include the date of each event leading to an adjustment, in accordance with the changes made: A period of 90 days (until July 9, 2019) is allowed to make this second posting. Note: Adjustments resulting from this second posting will be due as of the date of the event that generated these adjustments and will therefore be retroactive according to the ministère du Travail, de l’Emploi et de la Solidarité sociale. An employer that must issue a posting related to the pay equity audit by July 9, 2019, is not required to implement a participation process under the new provisions of the Pay Equity Act, even if a pay equity committee had been formed when pay equity was achieved or if a certified union represents all or some of the employees concerned. If an employer was authorized by the CNESST before February 12, 2019, to conduct its pay equity audit after April 10, 2019, and, if not for that authorization, the posting of the audit would have been done before April 10, 2019, then the previous provisions of the Pay Equity Act will apply. For pay equity audits to be completed by April 10, 2020, the new reference dates for calculating audit periods will only apply as of the next pay equity audit. What employers should do Right now? The Quebec government had to amend the Pay Equity Act to reflect the SCC's decision. These amendments will give rise to a number of practical difficulties that employers will have to anticipate. Pay equity audit Although the maintenance of pay equity must be audited every five years, we believe that employers will have to institute a mechanism to periodically identify major changes within the company that could lead to pay inequities for predominantly female job classes. It will be necessary to keep a history of these events in order to be able to determine which ones have led to adjustments, if any, when posting the audit results. In any case, a history of the work should be kept, whether or not it was done by a committee, in order to ensure a certain continuity within the enterprise in the event of a change of manager. Since it requires continuous monitoring of the payline to comply with legal requirements, the audit process itself will become less onerous. Employee participation With respect to employers now required to institute an employee participation process, it will also be prudent to have employees who participate in the audit process sign a confidentiality agreement and make them aware of the sensitive nature of the information to which they have access. Posting Employers will have to ensure adequate disclosure of information in the postings, which will enable better understanding of the audit results and potentially minimize the risk of complaints. Training and communication It will be essential to train managers on pay equity in order to ensure a good understanding of the legislation and avoid inconsistencies in the implementation of the audit process. In short, although pay equity is a value that has reached a point of consensus in our society, the fact remains that the law imposes a restrictive and formal framework that will have to be put in place. Our Labour and Employment team can provide you with valuable support in this exercise and we invite you to contact us.   Quebec (Attorney General) v. Alliance du personnel professionnel et technique de la santé et des services sociaux, 2018 SCC 17

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  • Bill 141 and divided Co-ownerships: What changes in insurance for co-owners?

    On June 13, 2018, Bill 141, An Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions (hereinafter referred to as the “Act”), received assent. This reform has a significant impact on certain laws governing the financial sector, amending the Civil Code of Québec (“C.C.Q.”) regarding the divided co-ownership of an immovable. While many of the legislative amendments will have to wait for the regulations to come into force, others took effect on December 13. Here is an overview of them. Insurance obligations of the syndicate of co-owners The provisions of section 6411 of the Act amend the manner in which the insurance obligations of the syndicate of co-owners under article 1073 of the C.C.Q. are regulated. Here is a brief description of these amendments: Deductible Insurance taken out by syndicates must have a reasonable deductible. It will be up to the legislator to define this concept in a future regulation. Risks covered The risks covered by operation of law will be prescribed by regulation. These will be deemed to be covered, unless the policy or a rider sets out, expressly and in clearly legible characters, which of those risks are excluded. Amount of coverage The amount of insurance must cover the reconstruction of the immovable in accordance with the standards, usage and good practice applicable at that time; the amount must be evaluated at least every five (5) years by a member of a professional order designated by government regulation. Insured persons The members of the syndicate’s board of directors and the manager as well as the chair and the secretary of the general meeting of the co-owners and the other persons responsible for seeing to its proper conduct must take out third person liability insurance. It should be noted that the manager may be a co-owner or a third party, in accordance with article 1085 C.C.Q. The insured status of a management company for the purposes of a syndicate's policy could have a significant impact on insurers' potential recoveries. Identification of improvements to private portions The Act provides that the syndicate must keep at the disposal of the co-owners a description of the private portions that is sufficiently precise to allow any improvements made by co-owners to be identified2. The identification of these improvements will in principle have the advantage of clearly defining what is covered by the co-ownership’s insurance and what is covered by the co-owner’s insurance. If not identifiable, the improvements would remain the responsibility of the syndicate. Creation of a self-insurance fund In addition to having to set up a contingency fund and an operating fund, the syndicate will have to set up a self-insurance fund that is liquid and available on short notice3. This fund will be used to pay the deductibles provided for in the insurance policies taken out by the syndicates and to compensate for damage to property in which the syndicates have an insurable interest, when the contingency fund or an insurance indemnity cannot provide for it. The amount of the self-insurance fund must be based on the amount of the deductible and must provide for an additional reasonable amount to cover the other expenses for which it is established. Insurance obligation Each co-owner must take out third party liability insurance, the amount of which will be determined by regulation4. Damage to property - Repair or claim Section 642 of the Act provides for the insertion of articles 1074.1 to 1074.3 after article 1074 C.C.Q.5. These articles have the following provisions: When a loss occurs which falls under the coverage provided for by a property insurance contract entered into by the syndicate and the syndicate decides not to avail itself of the insurance, it shall with dispatch see that the damage caused to the insured property is repaired. A syndicate that does not avail itself of insurance may not sue a co-owner, a person who is a member of a co-owner’s household, or a person in respect of whom the syndicate is required to enter into an insurance contract to cover the person’s liability for expenses incurred. On the other hand, it seems that the syndicate could benefit from a right of recourse in the event of a claim not involving insurance coverage. However, the sums incurred by the syndicate to pay the deductibles and make reparation for the injury caused to property in which the syndicate has an insurable interest may not be recovered from the co-owners otherwise than by their contribution for common expenses, subject to damages it can obtain from the co-owner bound to make reparation for the injury caused by the co-owner’s fault. This reservation making it possible to claim damages is open to interpretation. It would be possible to read these new articles and conclude that the syndicate retains rights of recourse against a co-owner for damage to property in which it has an insurable interest in the event that no insurance coverage is at stake and the co-owner's fault can be demonstrated. Or, perhaps the legislator intended to preserve the syndicate’s rights to claim damages other than the cost of repairing the damage caused to the property, as permitted by article 1728 C.C.Q. in respect of latent defects. These amendments and this notion of damages will undoubtedly need to be clarified by the courts. Finally, syndicate insurance will take precedence in the event that the same risks and property are covered by more than one insurance policy. Insurers’ subrogatory action The limitations on insurers' subrogatory rights in matters of divided co-ownership are now codified. The insurer of the syndicate, co-owner, person who is a member of a co-owner’s household, or person in respect of whom the syndicate is required to enter into an insurance contract to cover the person’s liability will be denied the right to bring a subrogatory action against one of these persons. The only possible exception to this rule applies in the case of bodily or moral injury or if the injury is due to an intentional or gross fault5. Conclusion Although many of the above-mentioned amendments remain dependent on the adoption of regulations, it remains important for the representatives of co-ownership syndicates to carry out the necessary checks to validate their insurance needs and obtain the appropriate advice from professionals in this sector. Insurers will also have to adjust their practices as a result, both when insurance is taken out and when managing claims.   These amendments will come into force 12 months after the publication of a regulation made under the 3rd paragraph of article 1073 C.C.Q. A first regulation must be published by June 13, 2020, at the latest. The provisions of section 638 come into force on different dates depending on the date of establishment of the co-ownerships concerned. See sections 653 and 814 para. 2 of the Bill 141. The provisions regarding the self-insurance fund will come into force 24 months after the publication of a regulation made under the 3rd paragraph of article 1072 C.C.Q. A first regulation must be published by June 13, 2020, at the latest. The entry into force of these provisions is conditional on the adoption of a regulation to be published no later than June 13, 2020. These provisions have been in effect since December 13, 2018.

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  • The 5 key factors to consider before becoming a franchisor

    Our team is frequently consulted by entrepreneurs asking the following question: we want to franchise our business concept, so where do we start? One of the most common scenarios involves a very enthusiastic customer approaching the owner of a new business concept with some local success (such as a restaurant) and offering to buy a franchise. It is quite common for the business owner to quickly accept this offer in hopes of becoming the next Subway. Unfortunately, many entrepreneurs do not realize that successfully running one or two locations requires very different skills and abilities than those required to develop a franchise network. So, rather than becoming the next Fred Deluca, they are soon faced with challenges resulting from the poor choice of franchisees, inefficient locations, an ineffective supply system and the inability to maintain a uniform concept with the few franchisees they have managed to recruit. As a result, one or more franchisees will most likely stop paying their royalties, close their doors and, guess what – blame the franchisor for the losses incurred. Having represented several franchisors over the past 15 years, we recommend that entrepreneurs pursue the franchise business model only if they are able to meet the following criteria: 1. The concept is viable and the business model is profitable The fact that one location is generating a profit does not guarantee that the concept is viable or that the business model is profitable. In order to be able to draw such conclusions, we strongly recommend that entrepreneurs run at least two, or ideally three, corporate branches (regardless of concept type) in different markets for a period of at least 18 months. Like any entrepreneur, a franchisee normally assumes some business risks related to the choice of location of the franchise and the quality of its operations. However, the franchisee should not share, or suffer from, business risks related to assessments that the franchisor should carry out before granting the franchise.Like any entrepreneur, a franchisee normally assumes some business risks related to the choice of location of the franchise and the quality of its operations. However, the franchisee should not share, or suffer from, business risks related to assessments that the franchisor should carry out before granting the franchise. 2. The concept and business model can be replicated Ideal demographics and geographic locations, supply costs (or sources), elements that may be difficult to replicate and even the unique expertise or charisma of the founder are all factors that influence the success of a business concept and should be taken into consideration before developing a franchise network. The franchisor must have a business concept that a qualified franchisee can operate without being in the same shoes as the franchisor. New franchisees, who will have different business experience than the founder in most cases and whose franchises will be located in different markets than the original, must still be able to easily replicate the franchisor’s concept with the same success by following the system that the franchisor carefully laid out in advance. 3. Recruiting franchisees is actually possible Wanting to sell franchises is an admirable goal, but there must also be a sufficient pool of candidates who meet the franchisor’s selection criteria. For example, franchising a shoe repair shop might seem like a good idea, in order to standardize customer service and modernize the environment in which this type of service is offered. Nevertheless, using the same example, it is important to determine whether there are enough candidates in the trade to consider developing a franchise network in the industry and to ensure that some shoemakers are ready and willing to convert their current businesses to franchises and continue operating under the branding of a third party. 4. The franchisor’s team has sufficient resources to properly train and support the franchisees Our team was recently called upon to resolve a franchisor-franchisee dispute that perfectly illustrates the issues that can arise from a lack of experience or resources on the part of the franchisor. The franchisor fell victim to the enthusiasm of many prospective franchisees for its seemingly viable concept and profitable business model and collapsed shortly after starting its franchising operations. After franchising some 20 businesses in a short period of time, the lack of support from the franchisor in choosing locations and layout, a poor understanding of key industry performance indicators, a flawed supply system and incomplete initial training of franchisees led to the collapse of the network. Even if it means slowing down the pace of development, franchisors must ensure that they have sufficient infrastructure in place to support the growth of the network. Poor choices made while developing a franchise network can have negative effects for several years, not to mention the impact these choices can have on the future success of the franchisor. 5. The franchisor has sufficient financial resources Developing a franchise network in accordance with the above recommendations requires excellent capitalization. The initial franchise fees and royalty payments from the first franchisees are not enough for the franchisor to cover the development of sufficient infrastructure to ensure the viability of the network. The vast majority of franchisors who have challenged this basic rule are now facing serious difficulties.

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  • Disciplinary measures: What should employers do to reduce the risk of litigation?

    As an employer, you may occasionally be required to impose disciplinary measures on problem employees. Handling such difficult situations requires an objective, planned approach so as to put an end to the misconduct and minimize the risk of litigation. To assist you in implementing your intervention and imposing disciplinary measures, here is a brief review of the three essential steps: (1) conducting an investigation, (2) selecting an appropriate disciplinary measure, and (3) imposing the disciplinary measure. It is important to note that a disciplinary measure should be both a penalty and corrective action. Non-disciplinary (administrative) action is used when an employee commits an unintentional violation that cannot be rectified because of the person’s inability to perform the required work (e.g., due to lack of knowledge or skills). On the contrary, disciplinary action is warranted when an employee deliberately engages in misconduct. In this case, the measure is aimed at penalizing the employee and correcting the behaviour. Step one: conducting a thorough, objective disciplinary investigation Steps required for a disciplinary investigation When you find out that an employee may have committed a violation that warrants a disciplinary investigation, it is essential that you promptly gather the facts, rather than acting impulsively. Steps to follow: Determine whether it is necessary to suspend the employee with or without pay during the investigation; Determine who may have witnessed the violation; Set up meetings with the witnesses: Prepare a list of open-ended questions that do not suggest a version of the facts or a judgment of the situation (this list may be improved during investigation meetings by adding sub-questions aimed at obtaining more detail, while ensuring that the same questions are asked and the same aspects confirmed with all those interviewed); Meet with witnesses individually in a private area to ensure the confidentiality of the process; Set aside sufficient time to cover all aspects of the situation being investigated; Plan for replacements for employees called to meetings, if necessary; and Ensure that a second person is present to act as a witness (to take notes during meetings and to attest to what was discussed). Meet with potential witnesses: Take notes that are as complete as possible during meetings; Ensure that you fully understand the answers and information provided by the witnesses; Ask questions to obtain clarification when in doubt to avoid misunderstanding the version of the facts being reported; Do not be afraid of moments of silence, since they sometimes have the effect of making witnesses speak more, giving them the opportunity to elaborate on their answers; and Ideally, obtain a written statement, dated and signed by the witness, that summarizes the information provided during the meeting, or confirm the contents of the oral statement with the witness by having the witness read the notes taken during the meeting. Meet with the employee suspected of having committed the violation last, to obtain his or her version of the facts. Apply the same rules to that meeting as those listed above for setting up meetings and meeting with other witnesses. Act quickly and carefully It is important to act diligently when initiating and conducting the investigation, as doing so will allow you to: Collect evidence while it is still fresh in the minds of those concerned; Rectify the problematic situation quickly; and Avoid creating unnecessary stress for employees, particularly if the investigation reveals that no violation can be proven. Notwithstanding the above, take the time to gather all necessary information or carry out further investigation before deciding whether to impose a disciplinary measure. Respect the collective agreement or the organization’s working conditions If a collective agreement applies to your employees, you must ensure that you comply with the disciplinary investigation requirements set out in the agreement, including the obligation to inform the union or allow a union representative to be present at meetings, time limits for imposing a disciplinary measure, conditions for disclosing the reasons why a measure is being imposed, etc. If there is no collective agreement, it is prudent to follow the rules the employer has set for itself in internal policies or other working condition documents. Step two: selecting the disciplinary measure  If the investigation reveals that the employee has indeed committed a violation that warrants disciplinary action, you must now select a disciplinary measure. Penalty proportional to the misconduct When selecting a measure, the first principle is to ensure the penalty is proportional to the misconduct. The more serious the misconduct, the more severe the penalty should be. Penalty scale (subject to exceptions) Barring exceptional circumstances and subject to your organization’s collective agreement and policies, you should use a penalty scale, which normally includes the following: Verbal notice; Note: Although this is a verbal notice, a detailed description of the notice must be kept in the employee’s file to ensure that the situation is monitored. Written notice; Suspension; Depending on the circumstances, it is generally preferable to impose a short suspension, followed by a longer one, before dismissing an employee. Dismissal. There are exceptions to implementing such a penalty scale, including, in particular, the following: Serious misconduct having the effect of permanently breaking the relationship of trust which must exist between employee and employer; and Management employees (although such a scale is difficult to apply to management employees who have committed violations, nevertheless, with few exceptions, they should have been previously notified of the allegation and been given the opportunity to make amends). Things to consider when selecting a penalty In addition to using a penalty scale, you must ensure that you comply with the collective agreement and your business’s policies, which may include provisions for disciplinary action in the event of violations of the requirements specified in such policies. You must also verify whether the proposed measure is consistent with disciplinary measures applied in previous similar cases, so as to demonstrate that discipline is carried out consistently and fairly throughout the business, while respecting the specific facts of each case. Finally, you must consider the aggravating and mitigating factors that are relevant to your employee’s situation. Here is a non-exhaustive list of examples: Aggravating factors Mitigating factors Seniority (depending on violation) Seniority (depending on violation) Disciplinary record riddled with violations Clean disciplinary record Significant consequences of the violation for the business, customers, colleagues, etc. Violation with no significant consequences for the business, customers, colleagues, etc. Status or importance of the employee’s duties to the business Employee’s tasks are generally supervised or not critical to corporate affairs Premeditated violation Violation that was not premeditated Absence of remorse or apology Admission of guilt, show of remorse and apology Lack of collaboration or transparency during the investigation Collaboration and transparency during the investigation Employee autonomous when carrying out duties, generally without supervision Lax supervision or requirements on the part of the employer in the past in relation to the violation Step three: imposing the disciplinary measure  Once you have determined the disciplinary measure that best fits the circumstances, you must call a meeting to inform the employee of the measure. As with investigation-related meetings, you must meet with the employee in private and ensure that a witness is present with you to take notes during the meeting. Notes and disciplinary measures must be entered in the employee’s file. During the meeting, a disciplinary letter must be given to the employee, and the contents of the letter must be repeated to confirm the measure being imposed and to clearly and succinctly explain the violation(s) the employee is accused of. If the measure is not dismissal, you should take the opportunity to remind the employee of your expectations, which should also be explicitly stated in the disciplinary measure letter. In addition, the letter should state that any subsequent misconduct may result in a more severe disciplinary measure, which could even include dismissal. We remind you that you must document and carry out the measure in accordance with the requirements of the collective agreement and business policies, if applicable. Conclusion This quick reference guide should help you plan the imposition of a disciplinary measure to ensure that you: Carry out a proper investigation; Carefully select the measure to be imposed; and Impose a disciplinary measure in an appropriate manner, ensuring that you monitor your employee’s disciplinary file. However, measures must be imposed on a case-by-case basis. Our Labour and Employment Law team is available to advise and assist you for each of the three steps.

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  • Personnel placement and recruitment agencies : what are the constraints of the new regulation?

    In June 2018, amendments made to the Labour Standards Act ("LSA") included additional obligations and responsibilities for personnel placement agencies and temporary foreign worker recruitment agencies (the "Agencies"). However, these amendments were only supposed to come into effect on the date the government adopted a regulation setting out the standards and procedures for giving effect to the amendments to the Labour Standards Act. On April 10, 2019, the Quebec Minister of Labour, Employment and Social Solidarity published a Draft "Regulation respecting personnel placement agencies and recruitment agencies for temporary foreign workers" (the "Draft Regulation"). Although the introductory text to the Draft Regulation states that "the impact study shows that the proposed measures will have an insignificant impact on enterprises", on the contrary, our analysis of the Draft leads us to conclude that it will impose significant constraints on the Agencies. The beneficiaries of this reform appear, rather, to be the Agency workers and client enterprises. Agency Licence The Draft Regulation establishes a mandatory licensing scheme for Agencies: To obtain an operating licence issued by the Commission des normes, de l'équité, de la santé et de la sécurité du travail ("CNESST"), the Agencies and their officers must meet a series of criteria relating to integrity, transparency and solvency. These Agencies and their officers must be in good standing with various governmental departments and bodies, both in terms of compliance with the laws and the payment of fees or contributions. For example, an Agency may be disqualified if "in the 5 years preceding the application, the person, partnership or other entity has been condemned by an irrevocable decision of a court relating to discrimination, psychological harassment or reprisals, as part of employment" or because of criminal or penal convictions connected with the carrying on of the activities covered by the license application. All licences must be renewed every two years and, in the absence of new facts, a period of two years must elapse before a new licence application can be filed following a denial. Applications for a placement agency licence must be supported by the payment of security in the amount of $15,000 (to guarantee the protection of employees' rights under the LSA). Protection Of The Rights Of Agency Employees The Draft Regulation requires Agencies to take various measures to promote the exercise by employees of the rights protected by the Labour Standards Act ("LSA"). For example: The Agency must provide the employee it assigns to a client enterprise with a document describing his or her working conditions and identifying the enterprise in question. It must also provide the employee with the information documents made available by the CNESST concerning employees' rights and employers' obligations in respect of labour. The Agency must remind the client enterprise of its obligations regarding employee health and safety. The Agency may not charge fees to an employee for his or her assignment or training. Finally, restrictions on the hiring of Agency employees by a client enterprise may not exceed six months following the beginning of the assignment. Administrative Measures And Appeals The CNESST may suspend an Agency's licence at any time in the event of a breach of the requirements and, once the Draft Regulation has come into force, the Agency will be able to appeal the CNESST's decision to the Administrative Labour Tribunal (the “ALT”). Procedures For The Forthcoming Adoption Of The Draft Regulation Anyone wishing to make comments on the Draft Regulation is invited to submit them in writing to the Minister during the 45-day period beginning on April 10, 2019. We expect that various associations will be up in arms to get the Minister to relax what amounts to a very restrictive regulatory framework. At the end of this 45-day consultation period, the Minister may proceed with the formal publication of the Regulation, which will come into effect 15 days after publication. Agencies that are already operating on the date the Draft Regulation comes into effect may continue to operate, provided they apply to the CNESST for a licence within 45 days of that date. Note: All the provisions of the Labour Standards Act ("LSA") relating to Agencies will become law at the same time as the Regulation, including section 41.2 of the LSA, which prohibits a placement agency from remunerating an employee at a lower rate of wage than that granted to the employees of the client enterprise who perform the same tasks in the same establishment solely because of the employee's employment status. For the complete version (only available in French) of the draft regulation, click here.

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  • “ Don't work here! ”: Employers' denigration may prove very costly

    The Québec Superior Court has ordered a former employee to pay her employer $11,000 in moral and punitive damages because she posted defamatory comments about the company on Ratemyemployer.ca 1. In doing so, the employee contravened her loyalty obligations and the confidentiality and non-disparagement undertakings that she had subscribed to when her employment was terminated. Expressing dissatisfaction on social media has become commonplace. People can now publicly decry situations that upset them, and, in some cases, doing so can attract unexpected media attention. Hence, employers feel vulnerable to comments that their employees or former employees may publish on social media. It is therefore prudent for them to include clear and precise non-disparagement clauses in employment contracts and termination agreements, and to remind employees of these obligations in internal company policies. Background The employee's position was abolished in January 2012, and, as part of her termination conditions, the employer, Digital Shape Technologies Inc. (hereinafter “DST”), offered her severance pay in consideration for signing a termination and release agreement that included a confidentiality clause and a non-disparagement clause with respect to DST. However, between April 15 and 17, 2012, the employee posted three comments on RateMyEmployer.ca. In these comments, she, among other things, described a toxic work environment with a turnover rate of about 80% where social interaction was discouraged, as well as an employer that did not provide the necessary tools to do the work, repeatedly dismissed employees without just cause, hired private investigators to uncover what was said in meetings between employees and former employees, and accessed employees' personal social media accounts. After reviewing these posts and discovering the identity of the author, Digital Shape Technologies Inc. (“DST”) and its CEO filed a lawsuit against the employee claiming $150,000. Loyalty and contractual undertakings In its analysis, the Court reiterated the obligations of loyalty and discretion provided for in the Civil Code of Québec in matters of employment contracts. An employee’s obligation of loyalty to his or her employer persists after the employment relationship ends and includes a prohibition on injuring an employer's reputation, which inevitably leads to a certain limitation of the right to freedom of expression. In this case, this limitation on freedom of expression had to be taken into account to an even greater extent as the employee had contractually undertaken not to make comments that could harm DST’s reputation or to disparage its management, services or products. Although the employee claimed that the non disparagement clause violated her freedom of expression - a fundamental right protected under the Charter of Human Rights and Freedoms – the Court determined that she had validly waived her freedom of expression with respect to her former employer. In this case, the non disparagement clause was unambiguous, using clear and precise terms to define the scope of the undertaking. Considering the legal and contractual obligations that bound the employee to Digital Shape Technologies Inc. (“DST”), the Court found her contractually at fault and liable. Defamation The Court also reviewed the employer's recourse under the defamation 2 rules and concluded, after a thorough analysis of the evidence, that even if the employee had not signed a non disparagement undertaking, she had made factual statements that were false, unfounded, distorted or exaggerated. She thus wrongfully injured the employer's reputation. Damages The Court pointed to the difficulty in quantifying damages in a defamation situation, Digital Shape Technologies Inc. (“DST”) being unable to directly prove financial losses, missed business opportunities or missed candidates that may have been put off by the reading the employee's comments. Based on jurisprudential parameters, which establish a range between $10,000 and $30,000 in the case of a legal person, the Superior Court believed that a sum of $10,000 in moral damages was appropriate given the gravity of the acts and their intentional nature, as well as the amount of time the posts could be read, the fact that they were only minimally viewed and the employee's cooperation after being served with a formal demand. The Court was also of the view that awarding punitive damages was justified as the evidence revealed that the employee had intentionally harmed DST’s reputation. In light of the employee's financial situation, she was ordered to pay $1,000 in punitive damages. What employers should do The publication of defamatory content against an employer or former employer may constitute a civil fault giving rise to the right to compensation for the damages suffered. The decision in Digital Shape Technologies, however, shows that it would be prudent for employers to require that employees agree to be bound by non disparagement covenants, particularly in employment contracts, termination employment/release agreements upon termination of employment, as well as internal policies regarding the use of technology and the internet, and so forth. Doing so may not only discourage the publication of defamatory remarks, but also make it easier for employers to seek compensation in the event of breaches. A few clicks can be expensive and cause all kind of inconvenience. A good reason to think twice before hitting “send”.   Digital Shape Technologies inc. c. Walker, 2018 QCCS 4374 Defamation consists in the communication of spoken or written remarks that cause someone to lose in estimation or consideration, or that prompt unfavourable or unpleasant feelings towards him or her. For a court to conclude that defamatory statements constitute a fault for which the person who disseminated them is legally liable, it must find that the person: 1) knew that the unpleasant or unfavourable statements about the other were false, or 2) communicated unpleasant or unfavourable information about the other that he or she ought to have known to be false, or 3) made unfavourable but true comments about the other without any valid reason for doing so.

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  • How to expand your franchise network in Quebec?

    In the latest edition of the Franchise Voice magazine published by the Canadian Franchise Association (CFA), discover the article "Franchising in Quebec", illustrating some of the particularities that distinguish Quebec from other Canadian provinces in the Franchise industry. Whether you are a Canadian or foreign franchisor, this article written by our professionals reviews the legal essentials to grow your franchise Quebec project : Read and download this publication

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  • Once Upon a Time in the West: Redwater, its Trustee, and the Environmental Arm of the Law

    In a decision handed down on January 31, 2019, the Supreme Court ordered that a bankrupt oil and gas company fulfil its obligation to reclaim abandoned oil wells before paying any creditors. This decision has since sparked conflicting reactions across the country: first, because it gives clear precedence to environmental protection in the event of bankruptcy, and second, because of the influence it will likely have over business decisions in industries where environmental risks are involved. Moreover, the concrete impact this decision will have in Quebec, where environmental laws have recently undergone major reforms, remains to be seen. Background Redwater Energy Corp. is a publicly traded Alberta oil and gas company that obtained financing for part of its operations from Alberta Treasury Branches (“ATB”) in 2013. The latter held a security interest over Redwater’s assets. In 2014, Redwater experienced financial difficulties which resulted in its inability to fulfil its obligations to ATB, its primary secured creditor. In 2015, Redwater was placed under receivership. At that time, Redwater’s assets consisted of 127 oil and gas properties—wells, pipelines and facilities—and their corresponding licences obtained in 2009. Said licences were granted by the Alberta Energy Regulator (“AER”), subject to an obligation to reclaim wells and facilities as prescribed to make them environmentally safe. However, at the time Grant Thornton was appointed as its receiver, 72 of Redwater’s licensed wells and facilities were depleted and burdened with environmental liabilities in terms of abandonment and land reclamation, such that Redwater’s liabilities exceeded the value of the wells and facilities that were still producing. Upon being advised that Redwater was placed under receivership, the AER notified Grant Thornton that despite the receivership, it was under the legal obligation to fulfil abandonment and reclamation obligations for all licensed assets prior to distributing funds or finalizing any proposal to creditors. Grant Thornton replied that it was not taking possession and control of Redwater’s valueless facilities and that it therefore had no obligation to fulfil the environmental obligations associated with these renounced assets (the “Environmental Obligations”).  In the summer of 2015, in response to Grant Thornton's reply, the AER issued abandonment orders under two Alberta laws directing Redwater to suspend the operation of the renounced assets, abandon them in accordance with the AER's rules and regulations, and obtain the reclamation certificates required by law. In the fall of 2015, a bankruptcy order was issued for Redwater and Grant Thornton was appointed as trustee. The AER filed an application to order Grant Thornton to comply with its Environmental Obligations before making any distribution to Redwater’s creditors, but the application judge and the majority of the Alberta Court of Appeal agreed with Grant Thornton and refused to issue the orders sought. In their view, agreeing with the AER would be tantamount to ignoring the orderly and equitable distribution scheme set out in the Bankruptcy and Insolvency Act (“BIA”). The AER appealed the judgment to the Supreme Court. On January 31, 2019, in a 5-2 majority decision, the Supreme Court allowed the AER’s appeal. 1-  The trustee’s personal liability The first question the Court reviewed was whether section 14.06(4) of the BIA allows a trustee to escape the obligations imposed by Alberta law with respect to the reclamation of oil and gas facilities. Essentially, this question raises the fundamental issue of whether the BIA is in operational conflict with provincial laws. Section 14.06(4) of the BIA provides that the trustee is not personally liable for any failure to comply with any order to remedy any environmental condition or damage affecting a bankrupt property if the trustee abandons or renounces any right to the property in question. The majority of the Court interpreted this provision in a restrictive manner and concluded that, even if the trustee is not held personally liable, the bankrupt estate's assets remain subject to the order to remedy any environmental damage. Thus, the value of the bankrupt's assets must be used to fulfil its Environmental Obligations. 2-  The notion of “provable claim” Grant Thornton further argued that, even if the bankrupt’s assets were to be used to fulfil Environmental Obligations, these should be paid as “provable claims” of an ordinary creditor, in other words, neither a secured nor a preferred creditor. Thus, the question of whether the AER could demand that Redwater’s Environmental Obligations be fulfilled before the value of the assets could be distributed to its creditors involves the concept of “claims provable in the bankruptcy” as defined by the BIA. One of the objectives of the BIA is to ensure the equitable distribution of the bankrupt’s property among creditors who have a “provable claim.” Said distribution is done according to a very precise order, established by law. However, if a claim is not “provable” within the meaning of the BIA, it nonetheless continues to be binding on the bankrupt and must be paid regardless of the distribution scheme provided for under the BIA. According to the Supreme Court in the 2012 AbitibiBowater1decision, a “provable claim” exists if three requirements are met: There must be a debt, liability or an obligation to a “creditor”; The debt, liability or obligation must be incurred before the debtor becomes bankrupt; and It must be possible to attach a monetary value to the debt, liability or obligation. If any one of these requirements is not met, there is no “provable claim.” Applying this analytical framework to the situation at hand, the majority of the Court determined that the AER is not a “creditor” within the meaning of the first requirement. According to the Court, the people of Alberta would ultimately benefit if Redwater and other companies like it met their Environmental Obligations: the province itself would not be gaining a financial advantage. Thus, the AER, when seeking to enforce Redwater’s public duties, is not a creditor within the meaning of the law. This was sufficient to conclude that its claim was not a “provable claim” subject to the distribution scheme provided for under the BIA2. The result, according to the Supreme Court, is that compliance with Environmental Obligations prevails over the payment of any provable claims of secured, preferred and unsecured creditors in the form of a first charge3. This conclusion does not conflict with the priority scheme under the BIA, nor does it contradict the goal of maximizing the realizable value of the assets, because all of Redwater’s valuable assets were subject to Environmental Obligations in any case. Such a decision raises several questions. First, as Justice Côté points out in her dissenting reasons, it may sometimes be difficult to know when the regulator is not acting in the public interest, suggesting that such a regulator can never be a creditor within the meaning of the law. Second, the adopted interpretation is likely to have consequences, in particular on the financing industry for companies exploiting natural resources. Faced with the existence of first charges that could remain unknown for a long time, lenders that finance the activities of such companies may have to reconsider the conditions under which they agree to finance them because of the increased risk of having the value of their investment or guarantees reduced. 3-  What about the effects of this judgment in Quebec? It is particularly difficult to say with certainty what the effects of this decision will be in Quebec given the current legislative context in the areas of activity in question. Quebec legislation has undergone major reforms recently (in mid-2017 for the environment and at the end of 2018 for petroleum ressources) both in terms of environmental protection and the management of natural resources. The structure of the law, the conditions for obtaining operating licences and drilling authorizations and the powers of public authorities (in particular those of the ministers) have been changed to such an extent that we believe caution should be exercised before drawing hasty conclusions. In the case analyzed by the Supreme Court, the legislation in question, which made site remediation an obligation under the licenses issued, defined remediation to include decontamination. While this conclusion can apparently be drawn from the legislative structure applicable to mining operations, it is less obvious to do so with respect to petroleum resources development in Quebec. Moreover, although Quebec has legislative provisions to ensure that soil decontamination work is carried out in certain situations under division IV of the Environment Quality Act, the obligations to produce a characterization study, prepare a rehabilitation plan and carry out decontamination work do not apply in all cases. Although solely the production of a characterization study and a rehabilitation plan are required in some cases (cessation of activities), decontamination is only mandatory for the resumption of other activities, unless ordered by the Minister. Therefore, in cases where land decontamination is not a mandatory condition under the law, we must consider whether or not decontamination work otherwise performed may or may not qualify as “provable claims” within the meaning of the Bankruptcy and Insolvency Act. Thus, we should be careful before affirming that the Supreme Court’s decision in this case will automatically apply to Quebec in all situations. Analyzing situations on a case-by-case basis (as the Supreme Court said, incidentally) is the way forward, and understanding the Supreme Court's decision in the Redwater case properly will certainly be key. 4-  Conclusion The Redwater decision raises diametrically opposed reactions depending on the audience. Some welcome the Supreme Court's effort to support provincial authorities responsible for overseeing environmental matters by adopting an interpretation of federal and provincial legislation that is broad, flexible and imbued with cooperative federalism. The Court's message that bankruptcy is not a licence to ignore environmental rules and that trustees are bound by valid provincial laws is also appreciated. Others, however, object to the business consequences that could result from this decision for companies operating in areas of activity that involve environmental risks, because access to financing may be more difficult. Where the full value of the assets is likely to be used to ensure compliance with environmental obligations, insolvency professionals who rely on the value of the assets to cover their own professional feess may be discouraged from accepting mandates when environmental issues are involved. Some are also concerned that companies in difficulty will abandon their assets to governments rather than attempting to restructure, thereby increasing the social burden of these problematic assets - a result that the majority decision seemed to want to avoid. In Quebec, as we pointed out above, the powers exercised and orders issued will require careful review to determine their immediate or potential regulatory or monetary nature. In the first case, Redwater suggests that a trustee would be forced to comply in accordance with the value of the assets, while, in the second case, the provincial authority's claim would be considered subordinate to the rights of secured and preferred creditors in the distribution scheme provided for in the BIA.   Newfoundland and Labrador v. AbitibiBowater Inc. [2012] 3 SCR 443, 2012 SCC 67 (CanLII) However, the Court analyzed the third requirement set out in Abitibi and concluded that it is not possible to attach a monetary value to the debt in question, as it was not sufficiently certain that the organization would perform the work or claim its reimbursement. The dissenting judges concluded the contrary on this point. Which the Court equates with the one under section 14.06(7) of the BIA that the organization could not avail itself of in this case.

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  • Recruitment: Why you need to prepare your interview questions?

    During a job interview, an employer cannot ask questions that involve grounds for discrimination prohibited under the Charter of Human Rights and Freedoms1 (the “Charter”), including the religion, marital status, or ethnic or national origin of a candidate. Simply asking such questions could result in a violation of the Charter and, for a claim for damages to be disallowed, the employer would be required to prove that the information sought was necessary to determine if the candidate had the aptitudes or qualifications required for the position to be filled.2 Learning from the judgments rendered by the Human Rights Tribunal In 2018, the Human Rights Tribunal (“HRT”) rendered three decisions that set out principles for employers to consider when hiring. The HRT ruled on complaints filed following recruitment processes in which questions were asked about a candidate’s accent or the ethnic origin of a candidate’s name. The latter was not subsequently selected as a candidate. The plaintiff claimed that he was discriminated against based on his ethnic or national origin. The HRT pointed out that section 18.1 of the Charter is aimed at eradicating discrimination in hiring by prohibiting questions about personal characteristics that do not relate to the candidate’s qualifications or abilities. The employers admitted to asking about the plaintiff’s ethnic origin, but stated that the question fell within a specific context: In order to discern if the ethnic origin of the plaintiff corresponded to one of the countries in which the business’s partners were located, so as to justify the question as relating to the employment requirements. During an informal conversation that took place before the interview. Out of curiosity, and to understand why the candidate addressed the employer's representatives in familiar French. The HRT rejected these arguments and emphasized that no matter the reason behind the question or the manner in which it was formulated, it remains that the question, asked during the job interview, was aimed at learning a personal characteristic of the candidate as it related to his origin, which is prohibited by the Charter. In its decisions, the HRT also reiterated the following points: Informal conversations that take place before or after a formal interview are part of the steps in a hiring process, and, therefore, they fall under the protections of the Charter of Human Rights and Freedoms. If a question is asked about a candidate's ethnic origin, the employer must be able to demonstrate that the answers sought relate to the qualifications or abilities required for the job. Approach to be taken by employers 1. Prepare an interview plan and follow it These decisions confirm that it is very important to be well prepared for the hiring process and to pre-establish an interview plan that clearly defines the employment requirements, so as to ensure that you only ask questions that directly relate to such requirements. 2. Avoid improvised questions   On the basis of the HRT decisions, questions asked “just out of curiosity,” off the cuff, that are more interpersonal in nature, or are meant to lighten the mood must be excluded, especially if such questions establish a direct or indirect connection to any of the grounds for discrimination prohibited by section 10 of the Charter. 3. Require the same vigilance from external consultants and in written communications  This planning must also include and regulate the content of email exchanges, text messages, and pre-interviews based on new methods of communication or pre-selection, by both the employer and its external consultants, given that the HRT emphasized that the guiding principles of the Charter can also be applied with the necessary adaptations in the digital era.   CQLR, c. C-12, ss. 10 and 18.1. Section 20 of the Charter.

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  • Open innovation: A shift to new intellectual property models?

    “The value of an idea lies in the using of it.” This was said by Thomas Edison, known as one of the most outstanding inventors of the last century. Though he fervently used intellectual property protections and filed more than 1,000 patents in his lifetime, Edison understood the importance of using his external contacts to foster innovation and pave the way for his inventions to yield their full potential. In particular, he worked with a network of experts to develop the first direct current electrical circuit, without which his light bulb invention would have been virtually useless. Open innovation refers to a mode of innovation that bucks the traditional research and development process, which normally takes place in secrecy within a company. A company that innovates openly will entrust part of the R&D processes for its products or services, or its research work, to external stakeholders, such as suppliers, customers, universities, competitors, etc. A more academic definition of open innovation, developed by Professor Henry Chesbrough at UC Berkeley, reads as follows: “Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.”1 Possible approaches: collaboration vs. competition A company wishing to use open innovation will have to decide which innovation "ecosystem" to join: should it favour membership in a collaborative community or a competitive market?             Joining a collaborative community In this case, intellectual property protections are limited and the object is more focused on developing knowledge through sharing. Many IT companies or consortia of universities join together in collaborative groups to develop skills and knowledge with a view to pursuing a common research goal.             Joining a competitive market In this case, intellectual property protections are robust and there is hardly any exchange of information. The ultimate goal is profit maximization. Unlike the collaborative approach, relationships translate into exclusivity agreements, technology sales and licensing.  This competitive approach is particularly pervasive in the field of video games, for example. Ownership of intellectual property rights as a requisite condition to use open innovation The success of open innovation lies primarily in the notion that sharing knowledge can be profitable. Secondly, a company has to strike a balance between what it can reveal to those involved (suppliers, competitors, specialized third-party companies, the public, etc.) and what it can gain from its relationships with them. It also has to anticipate its partners’ actions in order to control its risks before engaging in information sharing. At first glance, resorting to open innovation may seem to be an imprudent use of intellectual property assets. Intellectual property rights generally involve a monopoly attributed to the owner, allowing it to prevent third parties from copying the protected technology. However, studies have shown that the imitation of a technology by a competitor can be beneficial.2 Other research has also shown that a market with strong intellectual property protections increases the momentum of technological advances.3 Ownership of intellectual property rights is therefore a prerequisite for any company that innovates or wants to innovate openly. Because open innovation methods bring companies to rethink their R&D strategies, they also have to manage their intellectual property portfolios differently. However, a company has to keep in mind that it must properly manage its relations with the various external stakeholders it plans to do business with in order to avoid unwanted distribution of confidential information relating to its intellectual property, and, in turn, profit from this innovation method without giving up its rights. Where does one get innovation? In an open innovation approach, intellectual property can be brought into a company from an external source, or the transfer can occur the other way around. In the first scenario, a company will reduce its control over its research and development process and go elsewhere for intellectual property or expertise that it does not have in-house. In such a case, the product innovation process can be considerably accelerated by the contributions made by external partners, and can result in: The integration of technologies from specialized third-party partners into the product under development; The forging of strategic partnerships; The granting of licences to use a technology belonging to a third-party competitor or supplier to the company; The search for external ideas (research partnerships, consortia, idea competitions, etc.). In the second scenario, a company will make its intellectual property available to stakeholders in its external environment, particularly through licensing agreements with strategic partners or secondary market players. In this case, a company can even go so far as to make one of its technologies public, for example by publishing the code of software under an open-source license, or even assign its intellectual property rights for a technology that it owns, but for which it has no use. Some examples Examples of open innovation success stories are many. For example, Google made its automated learning tool Tensorflow available to the public under an open-source license (Apache 2.0) in 2015. As a result, Google allowed third-party developers to use and modify its technology’s code under the terms of the license while controlling the risk: any interesting discovery made externally could quickly be turned into a product by Google. This strategy, common in the IT field, has made it possible for the market to benefit from interesting technology and Google to position itself as a major player in the field of artificial intelligence. The example of SoftSoap liquid soap illustrates the ingenuity of American entrepreneur Robert Taylor, who developed and marketed his product without strong intellectual property protection by relying on external suppliers. In 1978, Taylor was the first to think of bottling liquid soap. In order for his invention to be feasible, he had to purchase plastic pumps from external manufacturers because his company had no expertise in manufacturing this component. These pumps were indispensable, because they had to be screwed onto the bottles to pump the soap. At that time, the patent on liquid soap had already been filed and Mr. Taylor’s invention could not be patented. To prevent his competitors from copying his invention, Taylor placed a $12 million order with the two sole plastic pump manufacturers. This had the effect of saturating the market for nearly 18 months, giving Mr. Taylor an edge over his competitors who were then unable to compete because of the lack of availability of soap pumps from manufacturers. ARM processors are a good example of the use of open innovation in a context of maximizing intellectual property. ARM Ltd. benefited from reduced control over the development and manufacturing process of tech giants such as Samsung and Apple, which are increasingly integrating externally developed technologies into their products. The particularity of ARM processors lies in their marketing method: ARM Ltd. does not sell its processors as finished processors fused in silicon. Rather, it grants licenses to independent manufacturers for them to use the architecture it has developed. This makes ARM Ltd. different from other processor manufacturers and has allowed it to gain a foothold in the IT parts supplier market, offering a highly flexible technology that can be adapted to various needs depending on the type of product (phone, tablet, calculator, etc.) in which the processor will be integrated. Conclusion The use of open innovation can help a company significantly accelerate its research and development process while limiting costs, either by using the intellectual property of others or sharing its own intellectual property. Although there is no magic formula, it is certain that to succeed in an open innovation process, a company must have a clear understanding of the competitors and partners it plans to collaborate with and manage its relations with its partners accordingly, so as to not jeopardize its intellectual property.   Henry Chesbrough, Win Vanhaverbeke and Joel West, Open Innovation: Researching a New Paradigm, Oxford University Press, 2006, p. 1 Silvana Krasteva, "Imperfect Patent Protection and Innovation," Department of Economics, Texas A&M University, December 23, 2012. Jennifer F. Reinganum, "A Dynamic Game of R and D: Patent Protection and Competitive Behavior,” Econometrica, The Econometric Society, Vol. 50, No. 3, May, 1982; Ryo Horii and Tatsuro Iwaisako, “Economic Growth with Imperfect Protection of Intellectual Property Rights,” Discussion Papers In Economics And Business, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University, Toyonaka, Osaka 560-0043, Japan.  

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  • Is the duty of loyalty a limit to freedom of expression?

    The right to freedom of expression is not absolute. It does not permit employees to comment on political events unrelated to their workplace at all times and an employer can intervene if an employee expresses his opinions at work and on social networks. An employer has the right to request that his employees adopt a neutral position in these matters in the workplace and on the social networks. This principle remains effective even when the employee  is a union representative if the positions expressed do not concern a dispute related to working conditions within the organization or when such positions explicitly denigrate or criticize the employer. In July 2018, the Superior Court upheld an arbitration award1 in a case involving Renaud Bray2 and, in doing so, upheld the disciplinary suspension and dismissal of an employee and union representative who asserted that he had the right to wear the red square symbol at work. The employee also made defamatory statements about the employer on the internet. In the opinion of the Court, the importance of freedom of expression must be recognized, but so must the right of the employer to remain neutral in situations in which it is not involved. Context The employee wore a red square, a symbol of support for students in their dispute with the government over tuition fees at the time while he worked at a Renaud Bray bookstore. The employer also accused him of posting, while he was on paternity leave, comments on social networks that supported a boycott movement with regard to the employer, following a controversy that opposed the principal shareholder of the bookstore and an author.He was contesting two disciplinary measures (a three-day suspension and a dismissal), which had been imposed after he published comments that criticized and denigrated the employer on Facebook and on his blog. In particular, the employee encouraged citizens, customers, former employees, and artists to criticize Renaud Bray and file complaints because the company banned its employees from wearing red squares. The employer also filed two management grievances demanding compensation for the damage suffered as a result of these negative posts. Freedom of expression or neutrality?  The Court recognized that freedom of expression is an essential component of labour relations, and that it is often as a result of this freedom of expression that vulnerable workers are able to gain public support in their pursuit of better working conditions. The judge noted, however, that the red square movement did not relate to the working conditions at Renaud Bray, and the bookstore could validly maintain neutrality on this issue and require its employees to respect such neutrality. In this context, the right of freedom of expression is not absolute. Immunity that can apply to a union representative does not allow the employee to evade penalties: By posting such texts on his blog and his personal Facebook page, the employee was not acting as a union representative, but rather as an individual; He signed his articles and made requests to the readers in his own name; Moreover, some of the comments were made while he was on paternity leave and not working; His most recent posts were not about subjects that related to working conditions at Renaud Bray, but rather about a dispute between Renaud Bray and an author. Since some of the comments were false, the employee was also at fault with regard to his employer, and the employer was therefore entitled to compensation. According to the arbitrator and the Court, it was abundantly clear that the trust between employer and employee had been broken and that the dismissal was justified: how could the employer trust an employee who encouraged the readers of his Facebook page to demonstrate in front of the store and even boycott it? What employers should aim to do Given that an employer can legitimately maintain its neutrality in current debates and require that its employees respect such neutrality in the workplace, it is important to ensure that management is consistent and fair: for example, the employer could, in the workplace, prohibit the expression of political or other opinions in front of customers in general and refuse to tolerate messages on some matters. Given that the right to freedom of expression is not absolute, the employees’ duty of loyalty means that employees should not denigrate their employer, but instead should show restraint in their comments about the employer. In addition, the immunity from which union officials benefit is not unlimited; it does not protect an employee who clearly breaches said duty of loyalty. An interesting element in this case was that the employer became aware of the employee’s comments through an automated alert system used to find media articles and publications, regardless of the author. The arbitrator concluded that this was not illegal surveillance on the part of the employer, and this conclusion was not challenged before the Superior Court.   Syndicat des employées et employés professionnels-les et de bureau, section locale 574 (SEPB-CTC-FTQ) et Librairie Renaud-Bray inc. (Julien Beauregard, griefs patronaux et syndicaux), 2017 QCTA 26. Syndicat des employées et employés professionnels-les et de bureau, section locale 574 (SEPB-CTC-FTQ) c. Sylvestre, 2018 QCCS 2987 (discontinuance filed in September 2018 in regard to the application for leave to appeal).  

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