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  • From “Safe Harbor” to “Privacy Shield”: laying the groundwork for a new agreement on transatlantic data transfer with the United States

    The United States and the European Union recently concluded a new agreement aimed at allowing U.S. companies to continue to collect, use and disclose personal information concerning European citizens, while still preserving their fundamental rights. To properly understand the importance of this new agreement, one must be aware that the Court of Justice of the European Union, in a decision rendered on October 6, 2015, had declared invalid the previous data sharing framework, known as "Safe Harbour", which governed the holding of personal information regarding European nationals by numerous American companies, including Web giants such as Facebook and Google. This transnational agreement provided for a self-certification mechanism for U.S. companies by which they undertook to abide by a certain number of guiding principles applicable in the European Economic Area (EEA), pursuant to which these companies could obtain the authorization to collect and store personal information originating from the European Union. Such an agreement was necessary to allow U.S. companies to hold personal information about European citizens because the legislative framework applicable in the United States does not offer "an adequate level of protection" for personal information as compared with that required by European authorities. However, in the wake of the revelations by Edward Snowden regarding the mass surveillance by U.S. authorities of the computer data of several large corporations, an Austrian citizen, Maximillian Schrems, sought and obtained the invalidation by the Court of Justice of the European Union of the Safe Harbour Agreement.1 The Court held that the “legislation permitting the public authorities to have access on a generalised basis to the content of electronic communications must be regarded as compromising the essence of the fundamental right to respect for private life”. While this decision was, in principle, supposed to apply immediately, the Data Protection Working Party (known as the “WP29”) — an independent European advisory board on data protection and privacy — urged the European institutions and the U.S. government to act by January 31, 2016 to agree to an alternative solution. It was in this context that the European Commission made the highly anticipated announcement, on February 2, 2016, of a new agreement in principle with the United States, dubbed the "Privacy Shield". The details of this agreement have not yet been disclosed, but we already know that this new mechanism will entail stricter obligations and tighter control of U.S. companies that deal with information of a personal nature originating from the European Union. Furthermore, access by U.S. authorities to this information is expected to be more closely regulated and more transparent. While, in theory, this agreement does not directly affect Canadian companies that collect, use or disclose personal information regarding European citizens, any such companies having an American subsidiary or a place of business in the United States and which collect personal information from Europe, as well as Canadian companies mandating third parties located in the United States with tasks that require the communication of personal information on European nationals, e.g. for hosting purposes, would be well advised to ensure they comply with the conditions of this new agreement when it takes effect. Stay tuned for more updates.   Schrems v. Data Protection Commissioner, 2000/520/CE, Court of Justice of the European Union, 6 Octobre 2015.

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  • Canada’s Anti-spam Legislation : Phase 2 comes into force and first monetary penalty imposed

    Whereas Canadian businesses have barely recovered from the first phase of Canada’s anti-spam legislation (CASL), which aims primarily to regulate the sending of unsolicited commercial electronic messages, a new series of requirements applicable to the unauthorized installation of computer programs came into force on January 15, 2015. Like the rules applicable to commercial electronic messages, the second phase of the CASL is based on an opt-in mechanism as opposed to an opt-out mechanism. In other words, if someone wishes to install computer software or programs on someone else’s device, he must first obtain the consent of the device’s owner or authorized user. Parliament has not limited the legislation to any devices in particular. This means that the installation of software or programs on a computer, smartphone, tablet or game console is likely subject to the new rules. Likewise, the installation of software or programs on any device with computerized components, such as cars, appliances, smartwatches, etc. Since the legislation does not apply to the personal installation of computer software or programs, it is important to bear in mind that the new rules only apply when a business installs or causes the installation of software on someone’s device as part of its business activities. For example, the new rules do not apply where a person downloads an application onto his or her own device. Nor does the legislation apply to employers who install software or a computer program on the company’s devices. On the other hand, if the employer wishes to install a program or software on a device belonging to its employee, it must obtain the employee’s consent first. Furthermore, the legislation establishes several cases in which a person is deemed to have consented to the installation of a computer program or software. These include, for example, cookies, HTML, JavaScript, or an operating system such as Windows, OS/IOS, Linux, Android, Unix and BlackBerry OS. For the time being, if computer software or a computer program was installed on someone else’s computer before January 15, 2015, the person is also deemed to have implicitly consented to the installation of updates until January 15, 2018. CONSENT OF THE OWNER OR AUTHORIZED USER Express consent must be obtained from the device’s owner or an authorized user. The CASL does not define the notion of “authorized user.” According to the CRTC, anyone who has permission to use the device is an authorized user. For example, an employee who uses a device supplied by his or her business, a spouse or children who use the family computer, the renter of a device, and a person who is repairing a computer (but only to the extent that the person is making agreed-upon repairs) are authorized users. When a person must obtain consent, the person must convey the following information to the owner or authorized user in clear and simple language: The reason consent is being requested The identity of the person who is seeking consent If consent is sought on behalf of another person, a statement indicating which person is seeking consent and which person on whose behalf consent is being sought The mailing address and one other type of contact information of the person A statement indicating that the person whose consent is sought can withdraw their consent A description in general terms of the functions and purpose of the computer program to be installed In addition, if the software or computer program collects personal information, interferes with the user’s control of the device, changes the device’s settings or the data stored on the device, causes the device to communicate with another device or allows a third party to connect to the device remotely without the owner or authorized user’s knowledge, the request for consent must also disclose the following information: A description of these functions and the reason for them A description of the impact of these functions on the operation of the device All the consent-related requirements must be met before the software or computer program is installed. As for the consent itself, it is not presumed and the burden of proof is always on the person who does or causes the installation. A $1.1 MILLION PENALTY FOR CONTRAVENING CANADA’S ANTI-SPAM LEGISLATION The CRTC recently reprimanded a Quebec business for sending commercial electronic messages without the consent of the addressees and for sending messages with unsubscribe mechanisms that did not function properly. The monetary penalty for the four violations is $1.1 million. The company has 30 days to submit written representations to the CRTC or pay the penalty. It also has the option to request an undertaking with the CRTC to address this issue. We remind you that the CASL imposes serious penalties on people who do not comply with its provisions, including those concerning the unauthorized installation of computer programs. Offenders who are individuals face administrative monetary penalties of up to $1 million, whereas the maximum is $10 million for all other offenders. Effective July 1, 2017, any person who suffers a loss or damage due to a contravention of the CASL may apply to a competent court for an order requiring the person to pay the amount of the damage in question, plus up to $1 million in liquidated damages. CONCLUSIONS Although this second phase of the CASL mainly seeks to protect Canadian consumers and businesses against the installation of malware or spyware that is often particularly harmful to users, it should be kept in mind that the new requirements can apply to many other situations. It is therefore important for businesses to review their practices in this regard, to ensure they comply with the law’s provisions.

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  • New Anti-Spam Law: Better Act Quickly

    In December 2010, the federal Parliament passed the Act to Promote the Efficiency and Adaptability of the Canadian Economy by Regulating Certain Activities1 that Discourage Reliance on Electronic Means of Carrying out Commercial Activities, better known as the “Canada’s Anti Spam Legislation” (CASL or the “Act”). The purpose of the Act is mainly to protect Canadian consumers and businesses against unsolicited spam messages, false or misleading commercial representations, malicious software and other electronic threats. It is scheduled to come into force on July 1, 2014. The new regime is based on a opt-in mechanism rather than through exclusion. As such, after July 1st, sending a commercial electronic message will be prohibited unless the recipient has consented to receiving it. Canadian businesses using electronic mail or social networks to inform and solicit customers will therefore have to review their practices in order to comply with the law, failing which they will be liable to administrative penalties and civil suits. However, transition measures are provided to give businesses time to adjust their practices.The definition of “commercial electronic message” within the meaning of the Act is wide and covers all electronic messages, including text messages (commonly called SMS), sound, vocal or visual messages in respect of which it is reasonable to conclude that their purpose is to encourage participation in a commercial activity. For instance, an electronic message which promotes an offer to purchase, sell or rent a product or a service constitutes a commercial electronic message covered under the Act. Such is also the case for an electronic message promoting a person as a purchaser, seller or renter of a product or service or involved in the areas of business, investment or gaming.Since non commercial activities are not covered under the Act, it must be noted that political parties, charitable organizations and corporations conducting market studies or surveys are generally not covered under the Act, unless their electronic messages are related to the sale or promotion of a product.Furthermore, the Act provides for many exceptions, such as messages sent between persons having a personal or family relationship or commercial electronic messages responding to a recipient who requested information on prices or estimates for the provision or delivery of goods, products or services.For the time being, the prohibition does not cover verbal communications by phone, which are currently governed by the Telecommunications Act2, particularly through the National Do Not Call List. However, this exception may be revoked by order-in-council if the government deems it appropriate.EXPRESS OR IMPLIED CONSENT OF THE RECIPIENTThe required consent for sending a commercial electronic message may be express or implied. The situations where the sender of such a message may rely on the implied consent of the recipient are set out in the Act. For instance, the Act provides that there is implied consent where the sender and the recipient have or had an ongoing business relationship within the two years preceding the date the message is sent. The same applies where the recipient asked the sender about products, goods or services during a 6-month period preceding the date of the message.The consent of the recipient is also implied if he or she has conspicuously published his or her electronic address without adding a statement whereby the recipient does not wish to receive unsolicited commercial electronic messages, to the extent that the message is relevant to the recipient’s employment or business or functions in such business.The consent is also implied where the recipient communicated his or her electronic address to the sender without indicating that he or she does not wish to receive unsolicited commercial electronic messages, again to the extent that the message is relevant to the recipient’s employment or business or functions in such business.Lastly, the existence of private relationships between the sender and the recipient within the two-year period immediately before the day on which the message is sent also allows for inferring the implied consent of the recipient to a commercial electronic message being sent in the cases provided in the Act.In all other cases where the Act does allow for inferring an implied consent, the express consent of the recipient is required for sending a commercial electronic message. Such consent is not presumed and the burden of proof lies with the sender.To obtain this consent, the sender must set out clearly and simply the purposes for which the consent is being sought and also the information that identifies the person seeking consent (or if the person is seeking consent on behalf of another person, information that identifies that other person). The scope of information which is required to be provided to identify the person seeking consent is set out in the regulations.It is important to note that after July 1st, a request for consent will in itself constitute a commercial electronic message. It will therefore not be possible to request such consent using an electronic mean, subject to certain exceptions.MECHANISM FOR WITHDRAWING CONSENT AND FORM OF COMMERCIAL ELECTRONIC MESSAGESThe Act provides that any person sending a commercial electronic message to another person must implement an unsubscribe mechanism allowing the recipient to withdraw his or her consent to receive commercial electronic messages from that sender. The sender must allow the recipient to express his or her will by electronic means, either by electronic mail or through a website, without cost and at any time. The sender must give effect to any withdrawal within a 10-day period.The description of this withdrawal mechanism must appear in the commercial electronic message which must, in addition, include information that identifies the person who sends the message or, if the message is sent on behalf of another person, the information that identifies the person who sends the message and the person on whose behalf it is sent. The commercial electronic message must also indicate the postal address and either the phone number to reach a service agent or a voicemail service, or the electronic mail address or the address of the website of the person who sends the message or, if applicable, the address of the website of the person on whose behalf it is sent.If it is practically impossible to include this information and the withdrawal mechanism in the commercial electronic message, they may be posted on an easily accessible web page without charge to the recipient through a link indicated clearly and prominently in the message.ADMINISTRATIVE PENALTIES AND PRIVATE RIGHT OF ACTIONThe Act provides for severe penalties for persons who fail to comply with its provisions. Contraveners are liable to administrative monetary penalties of up to $1,000,000 in the case of an individual, and $10,000,000 in the case of any other person.Furthermore, the existence of a private right of action against the sender of an unsolicited commercial electronic message constitutes a crucial point of this new regime. The Act allows any person suffering a loss or harm as a result of non-compliance with the provisions of the Act by the sender of a commercial electronic message to apply to a court of competent jurisdiction for a judgment ordering the sender to pay him or her the amount of such damages, plus liquidated damages of up to $1,000,000. For instance, the recipients of a spam message who suffer damages after relying on misleading information found therein may institute a class action to pursue their common claims on the basis of this new Act.CONCLUSIONUnsolicited electronic messages are a nuisance which warrant action. Canada is the only G8 jurisdiction which had not yet taken specific measures to regulate or prohibit spam messages. However, the obligation to obtain the consent of the recipients of commercial electronic messages, who in most cases have nothing to do with the spam messages, will constitute a difficult and costly burden for many businesses.It is therefore important that businesses review their electronic mailing lists to ensure that they comply with the provisions of the Act, namely, that the persons whose names are included have given their express consent to receive commercial electronic messages from the businesses or that the businesses can rely on the implied consent of such persons, failing which the businesses will have to obtain adequate consents. Again, contravening businesses will be liable to substantial penalties and claims which may exponentially increase through class actions involving hundreds if not thousands of recipients who allege that they suffered damages._________________________________________1 S.C. 2010, c. 23.2 S.C. 1993, c. 38.

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  • The Supreme Court invalidates Alberta’s personal information protection act : What impact will this have elsewhere in Canada?

    On November 15, 2013, the Supreme Court of Canada declared Alberta’s Personal Information Protection Act (PIPA)1 constitutionally invalid on the ground that it disproportionately infringed a union’s right to freedom of expression, in this case, the United Food and Commercial Workers, Local 401 (the “Union”).2 This case is of particular importance because it raises the issue of Canadian legislatures’ ability to establish a constitutionally acceptable balance between the protection of personal information and a union’s freedom of expression.THE BACKGROUNDThe events giving rise to the case occurred in 2006, during a lawful strike by the employees of the Palace Casino at the West Edmonton Mall (the “Employer”) that lasted 305 days. During the course of this lengthy labour dispute, both the Union and a security company hired by the Employer videotaped and photographed the picket line. Signs placed in the picketing area stated the Union’s intention to publish images on the Internet of individuals crossing the picket line. While no images were posted on the Internet, the Union nevertheless used certain photographs to prepare pamphlets, newsletters and posters.Several individuals who had been videotaped or photographed crossing the picket line filed complaints to the Alberta Information and Privacy Commissioner under PIPA. The adjudicator, who was appointed by the Commissioner to decide on the complaints ruled that no provision of PIPA authorized the Union to collect, use or disclose personal information for the purpose of advancing its interests. Consequently, she ordered the Union to stop collecting the personal information without the consent of the individuals in question and to destroy any material in its possession that contravened PIPA. It should be noted that, under Alberta law, the adjudicator did not have jurisdiction to rule on the constitutionality of PIPA.Following the judicial review of the adjudicator’s decision, the judge of the Alberta Court of Queen’s Bench accepted the Union’s arguments and ruled that PIPA unreasonably infringed the Union’s freedom of expression as guaranteed under s. 2(b) of the Canadian Charter.3 On appeal from this judgment, the Court of Appeal agreed with the Court of Queen’s Bench and ruled that the infringement of a union’s freedom of expression is not justifiable in a free and democratic society.4 It therefore granted the Union a constitutional exemption from the application of PIPA.THE DECISION OF THE SUPREME COURT OF CANADAIn a unanimous judgment written by Justices Abella and Cromwell, the Supreme Court agreed with the Court of Appeal. It stated that videotaping and photographing persons crossing a picket line – as well as possibly using or distributing these images – were expressive activities carried out for legitimate purposes, in this case, to deter people from crossing the picket line and to inform the public about the strike.5 It also noted that those crossing the picket line could reasonably expect to be videotaped or photographed and have their image disseminated. The Supreme Court emphasized that, in the case at bar, the personal information collected, used or disclosed by the Union did not contain any intimate details about the lifestyle or personal choices of the individuals in question.6Canada’s final court of appeal then performed a detailed review of PIPA in order to understand how it limited the Union’s expressive activities. It concluded that PIPA has a much broader scope than the federal statute that inspired it. Unlike the federal Personal Information Protection and Electronic Documents Act (“PIPEDA”),7 PIPA does not apply solely to activities undertaken for commercial purposes. In fact, except to the extent provided by PIPA, it “applies to every organization in respect of personal information”.8Despite the numerous exemptions restricting the scope of PIPA, none of them applied so as to allow the Union to collect, use and disclose personal information for the purpose of advancing its interests and expressing its views on “matters of significant public interest and importance”.9 Consequently, the Supreme Court concluded that PIPA infringed the Union’s freedom of expression.The Court then analysed s. 1 of the Charter, pointing out the important role of unions in Canada’s economy and emphasizing that a union’s freedom of expression is an essential component of labour relations. The Court further stated that picketing represents “a particularly crucial form of expression with strong historical roots”.10 Given the Court’s opinion that PIPA does not include any mechanisms by which a union’s constitutional right to freedom of expression may be balanced with the interests protected by the legislation, and given the breadth of the restrictions imposed on the Union’s freedom of expression, the Court ultimately concluded that the adverse effects of PIPA were disproportionate to its benefits.At the request of the Alberta Attorney General and the Privacy Commissioner and “given the comprehensive and integrated structure of the statute”,11 the Supreme Court declared the entire statute invalid, but suspended the effect of the declaration of invalidity for a period of 12 months in order to give the Alberta legislature the opportunity to determine how to bring the legislation in compliance with the Charter.THE FORESEEABLE CONSEQUENCESWe must now consider the following question: What impact will this decision have on PIPEDA and on the Quebec and British Columbia statutes governing the protection of personal information in the private sector?It should be noted that, like Alberta’s PIPA, the Quebec and British Columbia statutes relating to the protection of personal information in the private sector apply to unions and are not limited to commercial activities. As for PIPEDA, it is worth noting that it also applies to labour relations involving firms under federal jurisdiction.Moreover, none of these statutes provides for an exception to the general rule requiring that the collection, use and disclosure of personal information be authorized by the person in question, so as to take into account freedom of expression. In Quebec, section 1 of the Act respecting the protection of personal information in the private sector12 contains a specific rule of interpretation that concerns freedom of the press, but it does not apply to freedom of expression in its broadest sense. Moreover, the narrow interpretation attributed over the years by the Commission d’accès à l’information and the courts to the concept of “personal information”, without regard to the notion of privacy13, does not leave much room to consider freedom of expression.In this context, we believe there is a very good chance these statutes will be successfully challenged, unless the legislature takes prompt action to make the necessary adjustments.We will closely monitor any legislative amendments and jurisprudential developments likely to result from this recent Supreme Court decision._________________________________________ 1 S.A. 2003, c. P-6.5.3 Alberta (Information and Privacy Commissioner) v. United Food and Commercial Workers, Local 401, 2013 SCC 62 (hereinafter “Alberta v. UFCW”).3 United Food and Commercial Workers, Local 401 v. Alberta (Information and Privacy Commissioner), 2011 ABQB 415.4 United Food and Commercial Workers, Local 401 v. Alberta (Attorney General), 2012 ABCA 130.5 Alberta v. UFCW, supra, note 2, at par. 11.6 Id., at par. 26.7 S.C. 2000, c. 5.8 Alberta v. UFCW, supra, note 2, at par. 15, citing s. 4(1) PIPA.9 Id., at par. 27.10 Id., at par. 35.11 Id., at par. 40.12 CQLR, c. P-39.1.13 On this point, see Raymond Doray and François Charette, Accès à l’information: loi annotée, jurisprudence, analyse et commentaires, Cowansville, Éditions Yvon Blais, loose-leaf edition, updated to September 1, 2013, vol 1, p. III/54-5 and III/54-6.

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  • Legal newsletter for business entrepreneurs and executives, Number 16

    CONTENTS  Some practical advice on the recording of customer phone calls in Quebec Employment placement agencies : who is responsible for the source deductions? What are your recourses if you believe a contract is about to be, or has been, awarded to another bidder?  SOME PRACTICAL ADVICE ON THE RECORDING OF CUSTOMER PHONE CALLS IN QUEBECGuillaume LabergeMany businesses engage in the practice of recording customer calls. They do so for various reasons, including to verify quality of service, to handle complaints or to train employees.Because these recordings contain customers’ personal information, certain precautions must be taken in the collection and retention of such information, especially since the subsequent use thereof, without a customer’s consent, may infringe on his privacy rights.1The Québec Act Respecting the Protection of Personal Information in the Private Sector2 (“APPIPS”) does not govern this process and, to the best of our knowledge, the Commission d’accès à l’information du Québec has not yet ruled on the issue.The Office of the Privacy Commissioner of Canada has published Guidelines for Recording of Customer Telephone Calls3 for private sector companies operating in Canada. Given that the obligations imposed by the Personal Information Protection and Electronic Documents Act4 (“PIPEDA”) are substantially the same as those imposed by APPIPS, it is our opinion that the federal guidelines should be followed by Québec companies.The Office of the Privacy Commissioner is of the view that the recording of customer calls is permitted under PIPEDA subject to compliance with certain requirements, applicable both to incoming and outgoing calls.First, the collection of information must be motivated by a specific purpose. In Québec, the APPIPS expressly provides that, “[a]ny person collecting personal information to establish a file on another person or to record personal information in such a file may collect only the information necessary for the object of the file”5. This suggests that the use of such recordings for purely administrative purposes would be difficult to justify in view of this requirement. Customer service representatives must exercise caution when recording phone calls and must refrain from asking questions or making comments that could result in the collection of information that is unrelated to the reasons for recording the call.Federal guidelines also stipulate that in order to comply with PIPEDA, it is necessary to inform the person, at the outset, that his or her call may be recorded. A customer’s consent may be obtained in several ways. He or she can be verbally advised either by an automatic recording or by a customer service representative. According to federal guidelines of the Commissioner, a clear statement by the company printed on customers’ monthly statements could also suffice.Furthermore, a reasonable effort must be made to inform the customer of the reasons for the recording. It is important to note that the company must communicate clearly the real reason. It cannot claim, for example, that the recording is for the purpose of quality control when in fact it will be used to fulfill other objectives, as legitimate as those may be.However, a caller’s tacit consent may be inferred if, knowing the conversation is being recorded for a particular purpose, the caller does not object thereto and continues the conversation. If the caller refuses to allow the recording, he must be offered certain practical solutions, such as to not have the call recorded, to present himself at the nearest branch or point of sale, or to submit a complaint, question or comment online or by mail. In our opinion, it is not necessary that these options be presented at the outset of each call but they can be outlined in the company’s privacy policy, for example, or as a stipulation appearing on customers’ monthly statements.Notwithstanding a few exceptions, telephone conversations cannot be recorded without the express or implied consent of the person whose personal information is being collected. Included in the exceptions, under PIPEDA, consent is not required when the purpose of the recording is debt recovery or investigation of potential fraud. In such circumstances, the need to obtain consent could adversely affect the company’s ability to obtain accurate information.Lastly, the guidelines only address the protection of personal information of customers. However, the recordings may also infringe the privacy rights of employees. Therefore, employees should also be informed of the practice and the reasons for the recording._________________________________________1 Civil Code of Québec, S.Q. 1991, c. 64, arts. 35 and 36.2 R.S.Q., c. P-39.1.3 Office of the Privacy Commissioner of Canada, Guidelines for Recording of Customer Telephone Calls, June 10, 2008, available online: S.C. 2000, c. 5.5 Section 5, APPIPS.EMPLOYMENT PLACEMENT AGENCIES: WHO IS RESPONSIBLE FOR THE SOURCE DEDUCTIONS?Carolyne CorbeilQuebec employers are increasingly resorting to placement agencies to quickly meet their need for occasional workers. While this new business model is gaining in popularity and offers many advantages, it also upsets the traditional bipartite “employer-employee” relationship. Thus, since the placement agency functions as an intermediary between the client and the worker, a tripartite employment relationship is created. This raises the issue as to whether the employer-employee relationship remains intact and, if so, then who is responsible for the source deductions. The Court of Québec recently answered these questions in the case of Agence Océanica inc. v. Agence du revenu du Québec.1FACTSIn this case, the placement agency, Océanica (hereinafter “Océanica”), was in the business of providing nursing staff for the short-term needs of hospitals, residential and long-term care centres (CHSLDs) and local community service centres (CLSCs) (hereinafter the “clients”). It operated as an intermediary between the clients and nurses: clients informed Océanica of their nursing staff requirements and Océanica did the recruiting. At the clients’ workplace, the nurses received their instructions from the clients, particularly in terms of the duties to be performed by them and their work methods, acting under the clients’ supervision. Océanica billed the clients for the nurses’ compensation, plus an amount for Océanica’s profit margin. Based mainly on the testimony of the nurses working for Océanica, it was apparent that they had no written employment contract with Océanica, they bore no risk of profit or loss, and they paid for their employment expenses themselves, without reimbursement by Océanica.Océanica considered the nurses to be self-employed workers rather than employees. Thus, the compensation paid to the nurses would not be subject to the applicable source deductions in Quebec, i.e. for the QPP (Québec Pension Plan), QPIP (Québec Parental Insurance Plan), HSF (Health Services Fund) and CNT (Commission des normes du travail).On the other hand, the Agence du revenu du Québec (hereinafter the “ARQ”) submitted that the nurses were not self-employed workers, but rather employees, and therefore assessed Océanica for the amounts due, plus penalties and interest, on account of the aforementioned source deductions on the compensation paid to the nurses.Océanica appealed the assessment by the ARQ to the Court of Québec for a ruling on whether the nurses were employees or self-employed workers.THE COURT OF QUÉBEC’S DECISIONAfter conducting a general review of the definitions of the concepts of employer and employee under various tax statutes, the Court admitted that there was not much substance to these definitions and that they were not very helpful in characterizing such a complex relationship as the one that existed between Océanica and its nurses. Nevertheless, the Court found that the payment of compensation was of particular importance for a person to qualify as an “employer” for purposes of the Taxation Act2 (Quebec).As for the concept of the employment contract under the Civil Code of Québec,3 the Quebec case law has noted on many occasions that it must be analyzed on the basis of its three components, namely the performance of work, the compensation, and the relationship of subordination between employer and employee, with subordination being the main criterion for a finding of employee status. However, in the context of a tripartite relationship involving an intermediary, as opposed to the classic employment relationship between two parties, determining who is the true employer based on the subordination criteria may be difficult. Instead, a more general and broader analysis of the criterion of the employees’ legal subordination must be conducted and other criteria should also be considered, such as the selection of the employees, hiring, training, discipline, evaluation, etc. Thus, the Court took a more general approach to the relationship between Océanica and its nurses which was not limited to the nurses’ functions and to the degree of supervision exercised by Océanica over them.The fact that some of the classic functions of the employer (i.e. recruiting, training and supervision) were shared between Océanica and the clients did not change the nature of the nurses’ work per se. Indeed, if the clients had not been there to offer employment and Océanica had not functioned as the link between the clients and nurses, the nurses would have been unable to offer their services. The nurses were integrated into the clients’ businesses and acted under their supervision. The nurses were not administering a business. To claim that the nurses were self-employed workers because Océanica, by itself, did not fulfill all the attributes of a classic employer would have led to an absurd result. For these reasons, the Court held that it was an error to claim that Océanica’s nurses were self-employed workers.Therefore, the Court found that the nurses were employees of Océanica. Indeed, the judge stated that by inserting itself into the classic relationship between the clients and the nurses, Océanica assumed some of the employer’s functions, such as the recruiting and payment of the nurses’ compensation. In this regard, the Court found that Océanica acted as the clients’ mandatary and had entered into binding obligations on their behalf. As a result, Océanica became responsible for the clients’ tax liabilities, in accordance with the concept of mandate set out in the Civil Code of Québec.4COMMENTSThe Court essentially took a two-pronged approach to this decision. Firstly, it dismissed Océanica’s argument that the nurses were self-employed workers. Secondly, since the nurses were found to be employees, the Court had to determine who was liable for the source deductions. The Court strongly emphasized the role of the person paying the compensation in reaching the conclusion that the nurses were employees of Océanica, since Océanica paid them their wages directly.At first sight, this decision confirms the role of the employment agency as an employer of workers and its obligation to make the source deductions in Quebec from the compensation paid to them. Thus, employment agencies should remember that they must be vigilant with respect to the status of their personnel and the tax obligations for which they are responsible.However, the Court’s conclusion regarding the mandator-mandatary relationship between Océanica and the clients may lead to confusion. Indeed, it is unclear what effect this conclusion would have in a situation in which the placement agency is delinquent and fails to make the requisite source deductions.Finally, it should be noted that Océanica has appealed this decision to the Québec Court of Appeal. Hopefully, the Court of Appeal will take the opportunity to clarify the conclusion of the Court of Québec. We will be following these developments closely. Until then, caution is advised..._________________________________________1 2012 QCCQ 5370.2 R.S.Q., c. I-3 and amendments.3 S.Q. 1991, c. 64 (“C.C.Q.”).4 Article 2157 C.C.Q.WHAT ARE YOUR RECOURSES IF YOU BELIEVE A CONTRACT IS ABOUT TO BE, OR HAS BEEN, AWARDED TO ANOTHER BIDDER?Julie CousineauQuestions concerning the legality of the call for tenders process are regularly submitted to the courts. Obviously, when the contract contemplated in a call for tenders is important, each of the businesses that went through the process will have an interest in, and will want to obtain, the contract.What should you do if your business is not awarded the contract you wanted so badly? Below is a brief description of the legal remedies available in light of the recent case law. It should be noted that the remedies described below can be instituted against any business, whether public or private. However, in the case of an action against the government itself, it will not be possible to institute injunction proceedings, but it is possible to obtain a safeguard order in very exceptional circumstances. (We will not consider those circumstances in this article.)Firstly, before anything else, you must ensure that you responded to all the requests and formalities set out in the call for tenders. It goes without saying that the courts will not be able to sanction the party contracting out the work (the client) at the behest of a bidder that did not comply with the rules laid down in the call for tender documents.1GENERAL RECOURSE: DAMAGESSeveral recourses are available to aggrieved bidders. Most often, they will institute an action in damages seeking compensation for the losses they have suffered and profits they were deprived of. The bidder’s lost profits must be proven with well-documented evidence to obtain the amounts claimed, and will not be awarded unless it is clearly proven that the bidder ought to have received the contract. Note that the evidence of damages generally requires the disclosure of sensitive information belonging to the aggrieved company, such as profit margins or financial statements.Furthermore, in the event that a bidder participates in a second call for tenders launched by the client after participating in a first call for tenders (where the first call for tenders was canceled), if the bidder subsequently institutes an action in damages based on the first call for tenders, it may be dismissed on the grounds that the bidder waived this recourse when it decided to bid in the second call for tenders.2APPLICATION FOR A DECLARATORY JUDGMENT OR ACTION IN NULLITYSometimes, an aggrieved bidder may wish to apply for a declaration by the court that the client did not comply with the tender process or that the process should be annulled, particularly in cases where the client is a public entity subject to a special statute establishing a framework for the call for tenders process (e.g. Cities and Towns Act, Act Respecting Contracting by Public Bodies). In such cases, the bidder may institute an action for a declaratory judgment or an action in nullity seeking a declaration that the tendering process engaged in is null and void. The main purpose of such actions is to obtain an answer to a clear question submitted to the court.INJUNCTION OR APPLICATION FOR A SAFEGUARD ORDERAn aggrieved bidder may also apply to the court for an injunction or safeguard order to suspend a tender process that is underway (temporarily and incidentally to another action or on a permanent basis). However, it is important to know that it is difficult to succeed in an injunction action, among other things, because the criteria for a successful injunction are somewhat difficult to meet in the context of a call for tenders. Injunctions are an exceptional remedy and, since the courts have the discretion to grant or refuse them, they will frequently be reticent to intervene in a process governed by rules laid down in a statute or by the parties.To obtain an injunction order, the following criteria must be met: a prima facie case, serious or irreparable harm, and the balance of convenience.A prima facie case is met, in particular, where the applicant (the aggrieved bidder) proves to the court that the process does not comply with the applicable statutes (particularly in matters involving a public body), the client has failed to comply with the very process it put in place, or there is a major irregularity in this process. Indeed, the principle of the equality of bidders is a basic principle in tender matters that has been reaffirmed on many occasions by the courts. By itself, this criterion is generally not too difficult to meet.3Once a prima facie case has been established, the bidder must show that it would suffer irreparable or serious prejudice, i.e. which is not compensable in damages. This criterion is more difficult to meet because, in several cases submitted to the courts, they have concluded that the prejudice was ultimately compensable in damages based on the profits which the applicant bidder hoped to make. Note that the loss of expertise where the contract is awarded to the bidder’s competitor instead of the bidder, and the difficulties in assessing the amount of damages (due to mathematically complex calculations) were not found to be irreparable prejudice by the courts.4 On the other hand, where the bidder can show that his business is at risk of shutting down, the courts will be more inclined to issue the order.5Finally, if the court finds that the right on which the applicant is relying is not perfectly clear, it must decide which of the parties would suffer greater inconvenience if the order is rendered. In this regard, it should be noted that if the call for tenders involves a public body, it will benefit from a presumption that the contract contemplated in the call for tenders is made in the public interest. In such a case, it will be easier for the public body to turn the balance in its favour as compared with a private interest. On the other hand, there have been some cases involving public bodies in which the illegality committed by the public body was so great that the court concluded it was in the interest of the parties and the public to obtain a ruling on the issue of legality, while suspending the process in the meantime.6Finally, the court will also consider whether there is sufficient urgency at certain stages of the application for an injunction or safeguard order.CONCLUSIONIf you feel that you have been wronged in the context of a call for tenders, it is important to quickly assess the solutions available to you. Depending on the facts and legal issues involved, one remedy may be more appropriate than another. In any case, to benefit from all the possible remedies, you should not wait too long before evaluating which solution is best for you._________________________________________1 Simplex Grinnel inc. v. Cégep de Sainte-Foy, 2012 QCCS 4512.2 Entreprises Léopold Bouchard et Fils v. St-Tharcisius (Municipalité de ), 2012 QCCS 4071 (appeal filed).3 RJR McDonald v. Canada (P.G.), [1994] 1 S.C.R. 311, p.46.4 Entrepreneur général Uuchii inc. v. Québec (Procureur général), 2012 QCCS 4500.5 Orthofab v. Régie de l’assurance maladie du Québec, 2012 QCCS 1876.6 Ibid, note 5.

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  • Francization – Bill No 14 amending the Charter of the French language

    This publication was authored by Luc Thibaudeau, former partner of Lavery and now judge in the Civil Division of the Court of Québec, District of Longueuil. The title of this newsletter gives a good summary of the explanatory notes that serve as an introduction to Bill 14, entitled An Act to amend the Charter of the French language, the Charter of human rights and freedoms and other legislative provisions (the “Bill”). The legislator is concerned that English is being used systematically in certain workplaces. The Bill was tabled on December 5, 2012 and the proposed amendments are designed to reaffirm the primacy of French as the official and common language of Quebec.

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