Publications

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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  • COVID-19: Support for Agriculture and Agri-Food Businesses in Quebec and Canada

    It goes without saying that the economic upheavals caused by the COVID-19 pandemic are posing countless challenges for all companies, whether or not they are pursuing their activities within the limits imposed by the governments of Canada and Quebec. Food producers such as agricultural and food processing businesses, considered by the Quebec government to be essential services, are not exempt from this harsh reality. In this context, different levels of government and certain key economic actors have taken critical measures to support and protect businesses in the agriculture and agri-food industry, which are vital to both the health of individuals and that of the Canadian and Quebec economies. This bulletin presents the various support measures specific to agri-food industry businesses, which may also be eligible for general tax and economic support measures announced in response to COVID-19, including the Canada Emergency Wage Subsidy (CEWS). Canadian measures Recruitment support Many food producers depend on the additional input of foreign labour during the summer months. To offset the impact of the mandatory 14-day isolation period for anyone arriving from abroad, the Canadian government is providing financial assistance of $1,500 to such producers for each temporary foreign agricultural worker arriving in Canada to work. This financial assistance is conditional on compliance with the mandatory isolation period or other public health guidelines. Financial support The Government of Canada has also increased Farm Credit Canada’s (FCC) capital base by $5 billion in order to increase its lending capacity for agribusinesses and food producers and processors. For existing borrowers, FCC offers: Deferral of principal and interest payments for up to 6 months or deferral of principal payments for up to 12 months; and Access to an additional secured line of credit up to a maximum of $500,000 (for Quebec borrowers only). FCC offers term loans of up to $2.5 million,with no fees, to any Canadian agriculture and agri-food business whose working capital or production is impacted by COVID-19. Borrowers have the option of paying interest only for 18 months and benefit from a 10-year amortization period. The Government of Canada additionally announced support measures for farm producers, agri-food businesses and the food supply chain, which consist of the following: A sum of $77.5 million to help food processors purchase protective equipment and adapt work areas; A $125 million injection into the AgriRecovery program to cover additional costs to meat producers; A budget of $50 million to buy back certain surpluses, including potatoes and poultry; An increase of $200 million in the Canadian Dairy Commission’s borrowing limit to support temporary storage costs for butter and cheese; Financial assistance of $62.5 million for the fish and seafood processing industry; and Income support for fishers who are not eligible for the Canada Emergency Wage Subsidy, in the form of benefits and subsidies. The Canada Emergency Wage Subsidy On May 15, 2020, the Government of Canada announced its intention to amend the legislation on the CEWS to include measures to increase support for employers that hire seasonal employees. These new provisions, once they are passed, will give employers that are eligible for the CEWS two options for the calculation of their eligible employees’ average “baseline remuneration”: (1) the period from January 1 to March 15, 2020, or (2) the period from March 1 to May 31, 2019. In both cases, any period lasting seven days or more without remuneration will be excluded from the calculation. To be eligible, the employees must not be residents of Canada. Quebec measures The reality of COVID-19 is demonstrating that the success of the agriculture and agri-food industry is one of the Government of Quebec’s top priorities, as it is for the population in general. Recruitment support On April 17, 2020, the Government of Quebec announced that it will pay a premium of $100 per week to anyone taking on work for farmers between April 15 and October 31, 2020. As of April 22, 2020, close to 2,300 Quebecers had applied for such positions, the government’s goal being to encourage 8,500 people to get involved. Financial support La Financière agricole du Québec (FAQ), a government organization serving the agricultural and agri-food industry, has also implemented exceptional measures: Loans of up to $50,000 to support farm producers experiencing liquidity problems related to COVID-19; A six-month moratorium on loan repayments; Interim payments increased to 75% under the AgriStability program to ensure that program benefits are quickly available; Notices of assessment for the Farm Income Stabilization Insurance Program deferred to July 1, 2020; Deadline to enrol in the Crop Insurance Program extended from April 30 to May 21, 2020. Deadline to apply for the Agristability Program extended from April 30 to July 3, 2020. Notices of assessment for the Crop Insurance Program deferred from June 1 to July 1, 2020;  Investment grant payments under many FAQ programs moved up from June1 to May 1, 2020. Finally, the investment company Fondaction, whose mission is to practice socially responsible development, has undertaken to allocate $40 million to Quebec SMEs in the agricultural and agri-food industry over the next year. In addition, Fondaction has made its financing offer more flexible in order to provide support to industry businesses that are solid and growing, provided that they were profitable before COVID-19. Such businesses can apply for assistance from Fondaction to finance any project of $500,000 or more requiring development capital.   The Lavery team is committed to supporting your agricultural and agri-food business. We are available to answer all your questions regarding the announced measures, how they affect your business and any aspect relating thereto. The information and comments contained herein do not constitute legal advice. They are intended solely to enable readers, who assume full responsibility, to use them for their own purposes. The information and comments contained in this document are limited to measures in Quebec or Canada announced or made public on or before June 4, 2020.

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  • Improving Cybersecurity with Machine Learning and Artificial Intelligence

    New challenges The appearance of COVID-19 disrupted the operations of many companies. Some had to initiate work from home. Others were forced to quickly set up online services. This accelerated transition has made cybersecurity vitally important, particularly considering the personal information and trade secrets that might be accidentally disclosed. Cybersecurity risks can stem not only from hackers, but also from software configuration errors and negligent users. One of the best strategies for managing cybersecurity risks is to try to find weak spots in the system before an attack occurs, by conducting a penetration test, for example. This type of testing has really evolved over the past few years, going from targeted trial and error to larger and more systematic approaches. What machine learning can bring to companies Machine learning, and artificial intelligence in general, is able to simulate human behaviour and can therefore function as a hypothetical negligent user or hacker for testing purposes. As a result, penetration tests involving artificial intelligence can be a good deal more effective. One example of relatively simple machine learning is Arachni: open-source software that assesses the security of web applications. It is one of the tools in the Kali Linux distribution, which is well-known for its penetration testing. Arachni uses a variety of advanced techniques, but it can also be trained to be more effective at discovering attack vectors-vulnerabilities where the applications are the most exposed.1 Many other cybersecurity software programs now have similar learning capabilities. Artificial intelligence can go even further. Possible uses for artificial intelligence in the cybersecurity field include2: A faster reaction time during malware attacks More effective detection of phishing attempts A contextualized understanding of abnormal user behaviour IBM has recently created a document explaining how its QRadar suite, which incorporates artificial intelligence, can reduce managers’ cybersecurity burden.3 What it means: Human beings remain central to cybersecurity issues. Managers must not only understand those issues, including the ones created by artificial intelligence, but they must also give users clear directives and ensure compliance. When considering which cybersecurity measures to impose on users, it is important for IT managers to be aware of the legal concerns involved: Avoid overly intrusive or constant employee surveillance. It may be wise to consult a lawyer with experience in labour law to ensure that the cybersecurity measures are compatible with applicable laws. It is important to understand the legal ramifications of a data or security breach. Some personal information (such as medical data) is more sensitive, and the consequences of a security breach involving this type of information are more severe. It may be useful for those responsible for IT security to talk to a lawyer having experience in personal information laws. Finally, a company’s trade secrets sometimes require greater protective measures than other company information. It may be wise to include IT security measures in the company’s intellectual property strategy.   https://resources.infosecinstitute.com/web-application-testing-with-arachni/#gref https://www.zdnet.com/article/ai-is-changing-everything-about-cybersecurity-for-better-and-for-worse-heres-what-you-need-to-know/; https://towardsdatascience.com/cyber-security-ai-defined-explained-and-explored-79fd25c10bfa Beyond the Hype, AI in your SOC, published by IBM; see also: https://www.ibm.com/ca-en/marketplace/cognitive-security-analytics/resources

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  • Travel and Immigration: Update on Restrictions in Canada

    If you have any questions about this publication, please contact Nicolas Joubert. Thanks to David Nachfolger for his contribution to this article. Since the start of the COVID-19 pandemic, Canada has imposed a series of travel and immigration restrictions for all travelers who are not Canadian citizens or permanent residents. These regulations govern both commercial airline carriers transporting foreign nationals to Canada and immigration processes and procedures for those seeking to visit, study, or work in Canada. For ease of reference, we have summarized these restrictions as follows: Visitors For foreign nationals seeking to visit Canada from outside the United States, travel will not be permitted save for individuals who, among other criteria, are: Immediate family members (spouse or common-law partner, dependent child or dependent child of a dependent child, parent or step-parent, guardian or tutor) of a Canadian citizen or permanent resident. Travelling for a non-discretionary purpose. It is important to note that officers of the Canada Border Service Agency make the final determination on admission into Canada at a Canadian port of entry. Recently, officers have been interpreting the entry into Canada of immediate family members of Canadian citizens or permanent residents narrowly and refusing admission to some family members. Foreign nationals seeking to visit Canada from the United States must demonstrate that their reason for entering Canada is essential and non-discretionary (reasons include critical infrastructure support, certain types of work, and economic services and supply chains). Students International students who have a valid study permit or who were approved for a study permit on or before March 18, 2020, can travel to Canada. Temporary Foreign Workers Workers who hold valid Canadian work permits and normally live in Canada (even if they have been laid off) can enter Canada. This also applies to workers who have applied for work permits from outside of Canada and have a work permit approval letter from Canadian authorities. Foreign workers who have received work permit approval letters for jobs at Canadian businesses that have closed because of Covid-19 will not be admitted, along with individuals who have received work permit approval letters for open work permits (with no contract of employment). For foreign nationals who do not hold Canadian work authorizations, only those with offers of employment in critical industries such as agriculture, food processing, health, transportation and emergency services will be processed. For foreign nationals whose objective in travelling to Canada is to perform work normally exempt from the requirements of a work permit (such as urgent aftersales service or emergency repair work), they can self-identify to commercial air carriers with a letter of support from the their Canadian employer and documentation outlining the urgency of their entry, which will also be needed to persuade a CBSA officer of the non-discretionary and non-optional purpose of their entry. General Information Airline officials will conduct a health check, and anyone showing symptoms of COVID-19 will not be allowed to board their flight to Canada. All travelers must have a plan to quarantine for 14 days when they arrive in Canada. This is mandatory, even if they have no symptoms. Travelers without a plan should not travel to Canada. All travelers should wear a non-medical mask during travel. Restrictions apply to individuals travelling to Canada by private and commercial operators. Canadian authorities have announced that Canadian visa application centres that collect biometrics are temporarily closed further to the COVID-19 outbreak. In addition, any applicants who are required to undergo a medical exam with an approved panel physician will be unable to do so given that most, if not all, panel physicians are not currently performing medical examinations because of the COVID-19 outbreak. The inability to give biometrics or undergo a medical examination effectively prevents many foreign nationals from applying to enter Canada at this time, even if they are exempt from the travel restrictions. Canadian authorities have also confirmed that work permit applicants who are currently outside Canada must confirm that their employer is not subject to the mandatory closure of non-essential businesses and that they will be able to start their employment after the 14-day self-isolation period before making any travel arrangements. Workers should not travel to Canada if their employer is no longer offering them a job. CBSA officers may ask if the offer of employment still stands or if the employer is still operating. If not, CBSA may refuse the work permit as the foreign national no longer meets the applicable eligibility requirements. The members of our Business Immigration team are available to answer any questions you may have about measures you are considering or the solutions you are seeking given the realities of your organization and its activities.-->

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  • Natural Products and Pharmaceutical Innovations: What are the Patent Options?

    Natural products play an important role in pharmaceutical innovation. They are active components in many medicines. For example, nearly half of the small molecules used to treat cancer are natural products or directly derived from natural products.1 They are also components of vaccines. The pharmaceutical industry is constantly seeking access to natural products and the traditional knowledge associated with them. These include plants (roots, bark, leaves), micro-organisms (terrestrial and marine), toxins, venoms and other natural biological agents.  In the current race to develop a drug and/or vaccine against COVID-19, natural products or derivatives are surely worth considering as a starting point. The harvesting of natural resources for use by the pharmaceutical industry is usually carried out by partners such as traditional healers, farmers, academics or businesses. Thus, the process usually involves several stakeholders, including providers and users of natural resources and associated traditional knowledge, which are often located in different parts of the world. Fair and equitable collaboration in such a context requires well-developed collaboration agreements and access and benefit-sharing agreements. Various instruments of international law encourage the signing of such agreements, including: The Convention on Biological Diversity (CBD), which recognizes the sovereignty of states over their natural resources. The CBD sets out fundamental principles to regulate access and benefit-sharing, including that access to natural resources, their use and the sharing of benefits arising from them should be based on “mutually agreed terms.”2 The Nagoya Protocol covers the sharing of the results of research and development, the payment of royalties and joint ownership of intellectual property (IP) rights.3 The World Intellectual Property Organization (WIPO) has developed a guide to assist providers and users of natural resources and associated traditional knowledge in the negotiation and establishment of IP clauses in access and benefit-sharing agreements. The guide describes how IP rights can be exploited and managed to achieve the desired objectives, and how the benefits arising from the use can be created and shared in a fair and equitable manner, thereby promoting the conservation and use of biodiversity.4 Furthermore, research and development activities in the pharmaceutical industry are known to be associated with high risk and high investment costs. Indeed, it is widely recognized that the process to develop a drug can take up to 15 years, only about 16% of molecules entering the clinical phase will be approved, and only 1 in 5 marketed drugs generates revenues equal to or greater than the research and development costs involved.5  In the pharmaceutical industry, intellectual property, especially patents and data protection, is thus considered an essential instrument for securing the economic benefits of an innovation. Efforts in this intense period of development of a drug/vaccine against COVID-19 are of course focused on the technical aspects directly related to research and development. Nevertheless, those involved should not lose sight of the importance of collaboration agreements and access and benefit-sharing agreements.  When it comes to natural products in particular, concluding agreements with solid clauses on possible innovations and patents is key for providers of natural resources and traditional knowledge. The same applies to users of these resources and knowledge. We explore some of these clauses below. Initial consideration – deciding whether or not to patent Factors to be considered include the nature and purpose of the project, the expected value of the project results, business objectives, and the ability to manage acquired patents. The decision to apply for a patent, or not to do so, depends largely on whether the benefits of patent protection will outweigh the cost of obtaining it. Confidentiality What information must be kept confidential to ensure that its disclosure does not jeopardize the chances of obtaining patent protection? Agreements should include clear clauses on information management (publication of scientific articles, presentations at conferences, press releases, etc.). The parties may agree to make public disclosures only after mutual approval and the filing of a patent application. Some jurisdictions (Canada, United States, Japan) offer a grace period after a disclosure of the innovation, but for other jurisdictions (Europe, China) there is virtually no such grace period. Where patent protection is desired, the US Provisional Patent Application is a key tool for managing the confidentiality of an innovation under development. Patentability of research and development results While a natural substance as such generally cannot be patented, some results derived from the use of natural resource and associated traditional knowledge can be protected by patent, provided that the innovation is new, useful and not obvious. Parties obtaining the patents Should a general principle applicable to all innovations resulting from the use of natural resources obtained from providers be adopted? Should users have the obligation of reporting all developed innovations? Should they have the obligation of agreeing on the terms for obtaining a patent? Countries where patent protection can be obtained Countries where patents can be obtained are determined by taking into account key markets, strategic locations for drug manufacturing and other considerations, such as the country of origin of natural resources and the traditional knowledge associated to them. Depending on the number of countries ultimately chosen, a strategy involving a Patent Cooperation Treaty (PCT) international application could be considered.  Inventors It is important to name the “real” inventors in a patent application—the validity of the future patent could depend on this. Those who participated only in collecting natural resources or verifying use results may not qualify as inventors. The extent of scientific contribution is one of the main factors to consider. Ownership of future patents The Nagoya Protocol mentions joint (provider-user) ownership of patents as a possible benefit-sharing mechanism. However, companies in the pharmaceutical industry are not keen on this practice. They try to avoid the complications and legal uncertainties associated with joint ownership. Although most countries, including Canada, require the co-owner of a patent to obtain the consent of the other co-owner in order to grant a license, this is not the case in the United States, where a co-owner can grant a license without the consent of the other party and without having to give any justification with respect to royalties or other payments. One commonly adopted solution allows the user to retain ownership of the patent while the provider is granted a royalty-free license. However, some providers consider this option unfair because the patent is not co-owned. In cases of joint ownership, it will of course be necessary to determine how responsibilities will be divided between the provider and user. The parties must decide who will be responsible for filing the patent application and for maintaining the continuing effect of the patent, and who will provide the resources necessary for performing these actions. Patent exploitation What is the most appropriate model for exploiting a patent and disseminating innovation? Which among a license, assignment or joint venture is preferable? Who will negotiate and approve the terms of any subsequent patent exploitation agreement? Should licenses be granted free of charge, or should preferential conditions be granted to entities in the provider’s country or to other partners? Benefit-sharing How, when and between whom will the monetary or non-monetary benefits arising from the commercial exploitation of a patent be distributed? What benefit-sharing mechanisms can be applied in this case? Management of conflicts between provider and user It is important to determine what jurisdiction will apply and how possible conflicts will be resolved (mediation, binding or non-binding arbitration, civil action, etc.). Disputes Only a patent owner can sue for infringement. If the patent is owned only by either the provider or the user, the other party’s cooperation can be negotiated. End of collaboration A collaboration can end for a number of reasons, for example, as a result of problems with the flow of natural resources (volume, quality). What happens to acquired patents then? Conclusion Providers and users of natural resources and associated traditional knowledge should carefully consider their relationship ahead of time. It is very likely that research and development using natural resources will lead to patentable innovations. If there are no plans for patent co-ownership, it is important to include relevant clauses in agreements that ensure a fair and equitable distribution of monetary or non-monetary benefits resulting from the commercial exploitation of patents.   Newman D. et Cragg G., “Natural products as sources of new drugs over 30 years from 1981 to 2014”, Journal of Natural Products (2016), 79.3, 629-661. Convention on Biological Diversity. Nagoya Protocol. World Intellectual Property Organization (WIPO) (2018), A Guide to Intellectual Property Issues in Access and Benefit-sharing Agreements. Report of the Meeting of the Group of Legal and Technical Experts on Concepts, Terms, Working Definitions and Sectoral Approaches (UNEP/CBD/WG-ABS/7/2).

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  • Return to Work After COVID-19: What Plans Should You Make?

    As an employer, you are probably preparing for the reopening of the workplace in a pandemic setting and actively planning for your employees’ return to work. To help you in your thought process and preparations, we have prepared a list of items that you should address or consider in order to make the return to work as safe and effective as possible. While we don’t claim that ours is an exhaustive list, it does provide a general overview of things to consider before you resume your activities. Note that each business and industry is different and will need a specifically tailored plan. Our professionals are available to help you implement your return-to-work plan. Key planning steps Risk Assessment Before your employees return to work, conduct a site inspection to identify potential COVID-19 transmission or contamination risks. Implement measures to prevent and control identified risks with the collaboration of your employees, to the extent possible, and their union representatives, if any. Make sure that work methods comply with guidelines issued by the CNESST, the government and public health officials. Develop a plan to gradually reopen your workplace and share this plan with your employees. Encourage your employees to participate in identifying workplace risks and provide them with a forum or mechanism to make it easy for them to participate. Prevention Develop a procedure for checking employee and visitor health to avoid contagion in the workplace as much as possible. This may be done through a questionnaire, screening or self-reporting. Issue a directive that all workers and visitors must be vigilant and notify the employer if they experience COVID-19-like symptoms such as a fever or cough, difficulty breathing or sudden loss of smell or taste, or any other symptoms that government authorities may add, before reporting to the workplace.1 Set rules regarding hygiene, including hand washing, and respiratory etiquette at work2. Develop an environmental hygiene procedure involving daily disinfection of workplaces, objects and surfaces.3 Establish a procedure for isolating and managing employees or visitors who have symptoms in the workplace, as well as a procedure for disinfecting the premises. Encourage employees at higher risk of developing serious or severe complications from COVID-19 infection to follow appropriate prevention measures. Stay abreast of updates and guidelines issued by government, public health or occupational health and safety authorities, and follow them. Physical Distancing Issue clear guidelines regarding the physical distancing rules4 and how employees and visitors are responsible for respecting them. Inform employees and others such as customers, suppliers and business partners of these rules through the use of posters, memos, etc. Encourage telework for all employees wherever possible in order to reduce the number of employees on-site. Take steps to ensure that physical distancing is respected, and make certain that everyone can do so every day by rearranging workstations and work schedules, installing physical barriers, closing common areas, arranging or coordinating access to workplaces, installing contactless equipment, using technological means, holding virtual meetings, arranging for flexible hours, changing work methods, and so forth.  Revisit the organization of any in-person events or gatherings and consider holding these virtually or postponing them. Prohibit social practices that violate distancing rules, such as shaking hands. Develop protocols for the use of elevators or common areas. Policies Review your telework policies or procedures. Check your workplace civility or harassment prevention policies and update them to include virtual communications. Review your policies relative to attendance and leave for family or medical reasons in preparation for possible COVID-19-related absences. Create a policy or procedure for the return to work of employees who have been diagnosed with COVID-19, who think they may have COVID-19 or who have been exposed to someone who has contracted the disease5. Develop procedures to monitor for positive COVID-19 cases in order to notify persons who have been exposed and prevent further spread. Review your occupational health and safety policies in light of these COVID-19 contamination prevention measures. Communication Before employees return to work, inform them of the risks related to their work, including those related to COVID-19, and the preventive measures put in place to prevent and control these risks. Provide training on each employee’s role and responsibility in preventing the risk of COVID-19 transmission and contamination and guidelines to be followed. If you provide or recommend protective equipment, make sure that employees are trained to use such equipment in a safe and optimal manner. Inform employees of any revised or updated policies and explain the practical aspects of these policies to them, where necessary. Maintain training logs and have employees acknowledge that they have read updated policies with a signature. Train supervisors and managers to help them monitor compliance and enforcement of new occupational health and safety rules and procedures. Stay abreast of updates and guidelines issued by the CNESST and government and public health authorities. Inform your employees of any important updates. Be respectful of employee privacy. Do not tolerate any violation of your occupational health and safety guidelines, policies and procedures. Other Considerations Assess the psychosocial risks inherent to a pandemic context, such as balancing telework and family, providing support for loved ones, working in a different work climate, etc. Prepare what your response will be should some employees refuse to return to work for various reasons, whether or not they can do so legally. Be aware of tax legislation or legislation regarding unemployment insurance or emergency benefits—for example, the need to update an employee’s Record of Employment if work is available but they refuse to return to work for a reason deemed invalid. Be familiar with laws involving labour standards, discrimination, privacy, occupational health and safety and industrial accidents. Develop an emergency response plan now to deal with a possible second wave of the pandemic or a spike in infections following the reopening of workplaces or the lifting of the lockdown. Start to consider a future plan to resume pre-pandemic activities such as business travel, client visits, team meetings, events, etc. Encourage employees to raise questions or concerns and designate a contact person to dialogue with them. The professionals of our Labour and Employment team can assist you in implementing these measures, and others, as you resume your activities.   For more information on the exclusion or isolation of workers during a pandemic, consult the CNESST reference document. For more details on respiratory etiquette, consult the CNESST reference document. For more details on maintaining a hygienic environment during a pandemic, consult the CNESST reference document. For more details on physical distancing in the workplace, consult the CNESST reference document. See the INSPQ’s recommendations [French only] on the rules to follow when isolation is lifted.

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  • E-commerce: Protecting Your Work

    As distribution channels with a global reach, websites are a powerful tool for doing business, and during the pandemic, they even play a critical role. A website consists of a set of webpages accessible from an address hosted on a server through the internet or an intranet. A website is a collection of various elements protected by intellectual property laws. We will focus on the following: Copyright It protects an original work (i.e., the author’s own creative work), insofar as it involves the exercise of skill and judgment. This exclusive right allows the owner to produce or reproduce the work in any material form, to perform, represent or publish it, and to exercise other exclusive rights. A website may include the following works: the content of screen page, graphic designs, animation, texts, still and animated images, sounds, databases (which comprise a collection of works, data or other independent elements), software, as for example the ones relating to the creation, operation and launch of the website, computer programs, photographs, cartoons, videos. Ownership of Copyright Copyright is the author’s property, unless the author (i) has assigned his or her right, or (ii) has created the work in the course of his or her employment, in which case the copyright belongs to the employer. It is important to identify the various copyright owners of the works appearing on a website. If a company mandates an external firm to develop a website (website developer), the company will not immediately own the copyright to the website. A development contract entered into with a website developer will usually include a provision regarding the ownership of copyright. It is often provided that the assignment of intellectual property rights to the client who has commissioned a website will take place after payment for said website has been made in full. This poses a problem when the website developer does not complete the website or when a dispute arises over the course of the mandate. Stock Photos Generally speaking, websites that offer photographs do not transfer the copyright of the photographs to the users. They grant a licence to use (a right to use) for a limited time and for a specific purpose. The conditions of these licences must therefore be read carefully. Assignment of Rights An assignment must be in writing in order to transfer the copyright to the company that commissioned the website. Moral Rights Moral rights allow the author or performer (even if he or she is not the copyright owner) to: Claim authorship of the work; Claim respect for the integrity of the work (to protect the work against distortion, mutilation or modification or to prevent use that prejudice the honour or reputation of the author or performer or if the work is associated with a product or service without the consent of the author or performer). Recognition of Copyright in Other Countries Given that Canada is a party to the Berne Convention, copyright owned by a Canadian national, such as a company incorporated in Canada or a Canadian citizen, is recognized in other countries members of the Convention , and said copyright need not be registered in those other countries to acquire rights. In Canada, copyright registration is not mandatory, but it does give rise to a presumption of law that it is advisable to register, at the very least, for works that are important to the business, in order to more effectively  act against  infringement. Copyright infringement is the reproduction of an entire protected work or any substantial part of it without permission. In the same manner that website contents owned by the copyright owner may not be copied without permission, one must ensure that he or she does not import or publish on his or her website any work protected by copyright without first obtaining permission. Domain Name Some domain names are protected by trademark laws, and some are not. This depends on the nature of the domain name and the use made of it. Merely registering a domain name does not create a right that could prohibit the use of a conflicting domain name or trademark. Using a distinctive domain name could confer upon its owner the right to oppose the subsequent use by third parties of a confusing domain name, trademark or trade name. Effective domain name arbitration mechanisms exist for .com and for .ca in the event of misappropriation of a conflicting domain name. Trademark A website owner using a trademark on his or her website in order to identify his or her products or services should protect said trademark by registration. Without listing all the benefits of registering a trademark, suffice it to say that registering one’s rights is significantly less costly than trying to recover said rights once they have been appropriated by a third party. The trademark owner may oppose any confusing third party’s trademark, trade name or domain name (the test of confusion takes into account various factors) if his or her rights precede those of the other. In the case of unauthorized appropriation of a third party’s logo or figurative mark, the owner may, in many cases, not only invoke trademark infringement but also copyright infringement. Right to One’s Image and Privacy The Civil Code of Québec provides that every person is the holder of personality rights, such as the right to life, the right to the inviolability and integrity of his person, and the right to the respect of his name, reputation and privacy. Similar provisions exist in other legislation, such as the Quebec Charter of Human Rights and Freedoms and the Canadian Charter of Rights and Freedoms. The law is similar in other Canadian provinces, and comparable legislation exists in various countries around the world. Thus, as a general rule, a website owner may not: (i) Publish, for example, a photograph or image of a person without that person’s consent. This rule must be weighed against the rule relating to public interest in the right to freedom of expression and the right to information; (ii) Damage a person’s reputation; (iii) Imply or suggest that a person endorses a product or service without that person’s consent. The Civil Code of Québec further provides that the use of a person’s correspondence, manuscripts or other documents without his or her consent constitutes an invasion of his or her privacy. Trade Secret Various components of a website may be protected by trade secret if a confidentiality agreement was signed and the information remains secret. This could be the case with the website coding.   Many people have preconceived ideas about intellectual property in the world of e-commerce. Often, they wrongly assume that since they commissioned their website, they own its intellectual property rights or that they can post a photo of a product copied from another website without authorization because they sell the product. Although it is easy, fast and free to access, a website is governed by a legal framework regarding intellectual property, with which website operators must comply. We did not cover the wide array of rights that are involved in a website in just a few lines. For example, for some websites, there may be patent and industrial design issues to deal with. All these legal considerations are not self-evident. Several rules must be followed to avoid engaging in illegal practices, to avoid the unpleasant surprise of discovering that you do not own the intellectual property rights to parts or all of the website, and to avoid facing threats of legal action for violating the rights of third parties. Furthermore, all the work invested in the creation and operation of the website may not provide any additional value to your company if the intellectual property rights have been neglected, even though in many cases it is a significant asset to the company. It is important to become familiar with these rules, protect your rights and resolve legal pitfalls-ideally before launching a website. If the issue of intellectual property rights is only addressed after launching the website, there may still be time to seek protection or to attempt to overcome legal problems.  Whether the website is already online or is about to be launched, an audit should be carried out to determine the situation and, if necessary, obtain protection, sign contracts and find solutions to problems that could lead to illegal or disadvantageous situations.

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  • E-commerce: Your Obligations regarding Consumer Protection and Competition Matters

    Before selling your products and services online, you will need to determine the form and content of your contract, and ensure that you comply with the provisions of the Consumer Protection Act (the “CPA”). The CPA applies to any contract between a consumer and a merchant entered into in Quebec, including online contracts of sale, which are known as “distance contracts.” Rules applicable to contracts entered into on the internet Form Contracts concluded on the internet must be in writing and must contain the name and address of the merchant, as well as the date of the transaction. In addition, certain information must be provided to consumers before a contract is concluded, in particular: information identifying your business; a detailed description of the goods or services you are selling, including their characteristics and technical specifications; the price of each item or the terms of payment; all the applicable fees, whether required by law or charged by the merchant; the delivery date or the date on which the service will be provided; and other details regarding delivery, cancellation policies and any other applicable restrictions or conditions. This mandatory information must be presented prominently and in a comprehensible manner, and be expressly brought to the consumer’s attention. This could be done through a web page containing said information, which must appear on the screen before the consumer pays for the items in the shopping cart. It is good practice to ensure that the information is easy to print or save in PDF format. Acceptance Before the contract is entered into, the merchant must provide the consumer with an express opportunity to accept or decline the offer and to correct any errors. Copy The merchant must provide the consumer with a copy of the contract within 15 days after the contract is entered into, in a manner that ensures that the consumer may easily retain it and print it. Delivery A consumer may cancel a contract if the goods are not received (or the service is not performed) within 30 days after the date specified in the contract or within 30 days after the contract is entered into in the case of a contract that does not specify a delivery date. Note that goods for which delivery was attempted on the agreed date will be considered delivered. Cancellation The CPA allows consumers to cancel the contract in a number of cases, in particular when the merchant does not comply with the provisions set out above. Each merchant is free to establish a cancellation policy and set its conditions, so long as these are in accordance with laws of public order. The consumer must be informed of said policy before entering into the contract, which must include the cancellation policy. Warranties Legal warranty The Consumer Protection Act provides for a legal warranty that automatically applies to a good, whether purchased in store or remotely. Under said legal warranty, goods must be fit for the purposes for which goods of the kind are ordinarily used, durable for a reasonable length of time, having regard to their price, the terms of the contract and the conditions of their use. Goods must also match their description under the contract. Finally, a consumer is also entitled to a recourse against the merchant should there be a latent defect in the good. Additional warranty A merchant may offer consumers an additional online warranty, provided that said warranty complies with the relevant provisions of the CPA. Application and exceptions It is noteworthy that the aforementioned rules are the consumer protection rules which generally apply to the sale of goods and services, but they may not apply in certain instances, such as in the case of contracts for the sale of goods which are likely to deteriorate rapidly, such as food. One must be mindful that the Consumer Protection Act contains exceptions or provisions that are specific to certain commercial sectors. Different laws and regulations may also apply to certain types of goods and services that are sold. Competition law issues The CPA contains competition-related obligations that are specific to Quebec. All merchants in Quebec must also comply with the provisions of the Canadian Competition Act. The purpose of the Competition Act is to (i) maintain and encourage competition between businesses in Canada, (ii) provide consumers with competitive prices and product choices, and (iii) to protect consumers from fraudulent or prohibited practices. Prohibited business practices Misleading price display Under the CPA, when you advertise the price of a product or service, you are required to advertise an “all-inclusive” price, which includes all amounts that the consumer will have to pay for the product or service. The all-inclusive price should be more prominent than the sums of which it consists. Taxes (GST/QST), among other things, may be excluded from the advertised price, but must be added at the time of payment. Price-related representations and price display are also subject to specific rules under the Competition Act. False or misleading representations Advertising that contains false or misleading representations, or fails to mention an important fact is prohibited under the CPA. The Competition Act prohibits the making of materially false or misleading representations to the public. The provisions of the Competition Act dealing with false and misleading representations apply to a number of cases, including the following: Performance representations not based on adequate and proper tests: The making of representations to the public about the performance, efficacy or longevity of a product, which is not based on an adequate and proper test, is prohibited. Untrue or unauthorized use of tests and testimonials: The unauthorized use of product performance tests and testimonials (e.g., scientific tests, consumer testimonials, etc.) is prohibited. Needless to say, these cannot be distorted. Misleading warranties: Giving a consumer a warranty containing materially misleading representations that could influence the consumer’s decision to purchase goods or services is prohibited. The overall impression conveyed by a representation and the literal meaning of said representation is used to determine whether the warranty is misleading. Misleading promotional contests: Certain information related to the holding of promotional contests must be disclosed to the public. In addition, the sending of any documentation that would mislead the recipient into believing that he or she has won a prize or other benefit is prohibited. It is noteworthy that in Quebec, there are specific rules related to promotional contests. Other prohibited practices The Competition Act aims to prevent abuse of a dominant position and therefore provides stricter standards that apply to businesses holding a dominant position in a market. Conspiracy provisions aim to prevent a business from unduly reducing competition or unreasonably increasing the price of a product. This law also prohibits the refusal to sell a product, insofar as a business has no right to harm a customer by refusing to supply it sufficiently under normal market conditions. Finally, vertical restraints, that is, practices such as exclusive dealing, tied selling and market restriction, are prohibited, as they generally impose conditions that restrict the freedom of consumers. The CPA prohibits making use of commercial advertising directed at persons under thirteen years of age. Penalties Both the Consumer Protection Act and the Competition Act provide for penalties for prohibited practices. Judges can order punitive damages for certain violations of the CPA. Under the Competition Act, certain acts are considered criminal if a person does them knowingly or recklessly, regardless of the consequences they may have on the public.

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  • E-commerce: Some Laws and Rules You Should Be Aware of

    Various ways of doing e-commerce E-commerce can take different forms. For the purposes of this article, we will refer to e-commerce where the contract of sale or of supply of services is concluded by electronic means, E-commerce will be said to be “direct” when the product or service is delivered electronically, such as in the online conclusion of a contract for a subscription to an online-only publication, and “indirect” when the item sold is tangible or the service is rendered otherwise than online. E-commerce can be conducted entirely online or in a hybrid manner, where the vendor operates both online and through brick-and-mortar stores. It is considered “closed” when it is between a relatively small number of participants who already have a contractual or professional relationship with each other. It can be conducted between a business and a consumer, in which case it is called “B2C,” or between a business and another business and is then known as “B2B.” E-commerce poses particular challenges for businesses and if these challenges are not properly addressed, they are likely to expose the business to additional liability. This means that e-commerce can be particularly risky for novice businesses that start to do carry out business electronically, without adequate preparation. For example, a merchant who transacts electronically will necessarily have to take direct possession of some of its customers’ personal data, such as their names, addresses and credit card numbers, or have an e-commerce service provider take indirect possession of it. The use of such personal data is subject to the provisions of privacy laws, and, given that the data is of great value to potential thieves or fraudsters, it must be protected. A merchant may also be the victim of fraudulent orders or payments made with stolen credit cards numbers. To better control its risks, a novice in e-commerce may be better off doing business with established e-commerce service providers such as Shopify, BigCommerce, Squarespace or GoDaddy, which have set up robust infrastructures for their customers. A corporation should nonetheless do its homework before choosing an e-commerce service provider. It should, for example, inquire about the terms and conditions of the service agreement to be entered into with the chosen provider, and, in particular, about the services offered (including how returns and chargebacks are handled), how the service provider protects its customers in the event of data theft or fraud, what fees are charged, and so forth. In all cases, whether or not a corporation does business with an e-commerce service provider, it should ensure that the information kept on its own servers and computers is limited to what is absolutely necessary. Likewise, once a transaction is completed, it should avoid, as far as possible, keeping personal data belonging to its customers, such as their names, addresses and credit card numbers. Moreover, a corporation that decides to engage in e-commerce must be aware of certain specific legal aspects relating first, to the particularities of e-commerce itself and second, to the fact that its customers may be located anywhere in the world. For the purposes of this article, we will focus on the rules generally applicable to all types of e-commerce. A future article will deal with the specific rules provided in the Consumer Protection Act (Quebec). Consumption tax The majority of governments impose a consumption tax on goods (and sometimes services) sold within their jurisdiction. Applicable consumption tax laws generally provide that businesses with a presence in a jurisdiction must collect applicable taxes and remit them to the competent tax authorities. For a corporation that is otherwise not present in a jurisdiction, the mere fact of selling goods in that jurisdiction is generally not sufficient to require registering with its tax authorities and collecting and remitting applicable taxes. However, the definition of what constitutes a sufficient presence to require business registration and the collection and remittance of consumption taxes varies from one jurisdiction to another. A corporation wanting to sell its goods and services electronically must therefore ensure that it is aware of the applicable consumption tax rules in the main jurisdictions where it will sell these goods or provide these services. Licences and permits Although it is generally not necessary for a manufacturer or seller to obtain a license, permit or other governmental authorization for the vast majority of goods typically sold online, they  may be required before certain products, in particular medical or pharmaceutical products, can be sold online or otherwise, domestically or internationally. It is also important to note that a licence, permit or other authorization may not be required to sell goods in a jurisdiction while the sale of the same goods in another may require such license, permit or other authorization. Thus, if a merchant wants to sell its product in a jurisdiction where a permit, licence or other authorization is required, it will be required to obtain it before proceeding with any sales. In addition, in some territories, the sale of certain goods must necessarily be done through a State monopoly. For instance, such restrictions are still the norm in Canada for the sale of alcoholic beverages. For example, a resident of Ontario may not order alcoholic beverages directly online from a producer in another province and have them delivered to Ontario, which prevents a small-scale producer of alcoholic beverages in Quebec from selling its products online to Ontario customers, for delivery in Ontario. Shipping Not all goods can be shipped in the same way. Some must be specially packaged, and some may even not be shipped by regular means, such as Canada Post and major courier companies. For example, Canada Post requires that fish, game, meat, fruit, vegetables or other perishable products be properly prepared and meet certain other applicable requirements for mailing. Other products, such as objects classified as hazardous materials, may simply not be shipped by mail. To ship these products, it will be necessary to deal with a specialized courier service. Finally, Canadian laws prohibit the export of certain goods or require special permits for their export. In addition, merchants must ensure that the laws of the destination jurisdiction allow the goods shipped to be imported into that jurisdiction. Indeed, all countries either prohibit the import of certain goods into their jurisdiction or require the importer to obtain a permit or licence issued by their government. Age restrictions Under applicable laws and regulations, certain goods may only be sold to persons who have reached a certain age or may not be sold to children. These restrictions vary from jurisdiction to jurisdiction. For instance, in Quebec, one must be 18 years old to legally buy alcohol, while elsewhere in Canada the age is 19 and in the United States, 21. Merchants wishing to sell alcoholic beverages online must take these restrictions into account. The same applies to the sale of any other goods that are subject to age restrictions. PCI DSS compliance In 2006, the main credit card issuers, American Express, Discover Financial Services, JCB International, MasterCard and Visa formed the PCI Security Standards Council to standardize the rules and standards applicable to payments made with their credit cards. The council adopted a set of rules called “Payment Card Industry Data Security Standard,” better known by its acronym, PCI DSS. All merchants wishing to accept credit card payments, including direct online payments, must adhere to these rules. Any merchant, regardless of its size, wishing to process credit card payments on its website must also be PCI DSS compliant, unless it is doing business through a compliant payment service provider. The PCI DSS include the following 12 compliance requirements, which are grouped into six categories called “control objectives.” The following table, taken from the document entitled “Payment Card Industry (PCI) — Data Security Standard — Requirements and Security Assessment Procedures”1, provides a summary of these requirements.   Control objectives PCI DSS conditions Build and Maintain a Secure Network and Systems 1. Install and maintain a firewall configuration to protect cardholder data 2. Do not use vendor-supplied defaults for system passwords and other security parameters Protect Cardholder Data 3. Protect stored cardholder data 4. Encrypt transmission of cardholder data over open, public networks Maintain a Vulnerability Management Program 5. Protect all systems against malware and regularly update anti-virus software or programs 6. Develop and maintain secure systems and applications Implement Strong Access Control Measures 7. Restrict access to cardholder data by business need to know 8. Identify and authenticate access to system components 9. Restrict physical access to cardholder data Regularly Monitor and Test Networks 10. Track and monitor all access to network resources and cardholder data 11. Regularly test security systems and processes Maintain an Information Security Policy 12. Maintain a policy that addresses information security for all personnel   Although the PCI DSS are mandatory, only Visa and MasterCard require merchants and service providers that accept their cards to comply with these standards. However, a non-compliant corporation will nevertheless be held fully liable if fraud associated with theft of cardholder data occurs. In addition, should a security breach occur, all exposed merchants that are not PCI DSS compliant will be fined. It is up to merchants and service providers to achieve, demonstrate and maintain compliance through annual validations. Merchants may use the services of specialized service providers to help them comply with PCI DSS standards. Useful tools to ensure compliance are also available online for these purposes2. Should a merchant not wish to go through the PCI DSS compliance process, it may always use the services of a PCI DSS compliant payment service provider3.   PCI Security Standards Council, Payment Card Industry (PCI) Data Security Standard Requirements and Security Assessment Procedures (Version 3.2.1, May 2018), online (PDF): Official website of the PCI Security Standards Council These can be found through a search using the keywords “PCI DSS compliance” or “PCI DSS conformity.” These can be found through a search using the keywords “PCI DSS Payment Gateway.”

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  • Why and How Should Companies Manage their Post‑Crisis Recovery?

    When Crisis Increases Risk Since the beginning of the crisis, we have been witnessing a spectacular collective effort marked by solidarity and the determination to ensure everyone’s health and safety. The COVID-19 pandemic has created many challenges for all levels of government, for employers and for employees. Employers have had to adapt their methods by changing the way work is organized. The state of emergency caused by the crisis has quickly engendered additional risk exposure. At the same time, employees have generally been understanding and flexible regarding the measures announced by employers. Going forward, however, employee cooperation, force majeure, and health and safety challenges may no longer be sufficient to maintain the kind of flexibility employers and employees shared during the crisis. As a result, it is important to get back on track right away, taking only calculated risks and returning to the conventional legal framework that governs the employer-employee relationship. Short-Term Crisis Recovery: Anticipating Challenges and Minimizing Risk Well organized companies focused on the challenges of recovery will likely be capable of successfully commencing their recovery while keeping any associated risks linked with new measures to a minimum.  The following are some suggestions on how to do so: It is essential to maintain, re-establish and/or preserve an effective, open channel of communication with employees. Workers will need assurance that their return to work is being properly managed and that their health and safety is a top priority for the company. Develop and implement health and safety measures for workers, or ensure that the measures already in place are adapted to the context of COVID-19. Employers have an obligation to ensure the health and safety of their workers and implement methods to identify, correct and control risks. Establish a policy for working at home (a subject recently discussed by our expert colleagues). Expect unusually high rates of absenteeism and work refusal situations and establish a plan to manage problem cases, keeping the rights and obligations of everyone involved in mind. Make sure these measures are applied in a consistent, unequivocal and uniform manner when it comes to your employees. Train managers on your organization’s key messages and positions in order to ensure that you are conveying a unified message. Coaching front-line managers will become even more important in the context of the recovery. Employers can evaluate the potential use of the Quebec government’s PACME program (which we have reviewed) as part of their recovery plan.  The most significant challenge businesses will face in the medium-term (and probably in the long-term as well) is the very unstable economic situation and potentially declining employee cooperation. Though many are current focused on short-term recovery, it is crucial to begin thinking of ways to help our organizations manage the crisis in the medium-term. The economic instability that will characterize this period will also create opportunities. In order to seize them, it is essential for companies to be flexible and agile. Every organization must set a solid action plan in motion now so that their human resources can operate with the flexibility that the unstable economic situation will require. Our Labour and Employment team is prepared to support companies facing this immense challenge. We can help you. Despite the challenging circumstances, crisis can often reveal new opportunities.

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  • What are the Duties and Responsibilities of Corporate Directors during the COVID-19 Crisis?

    This publication was written in collaboration with André Laurin. By all accounts, the coronavirus pandemic and the measures implemented by the government have created a particularly difficult and delicate situation for almost all organizations. Despite this extraordinary situation, the general duties of directors (duty to comply with the law, duty of care and duty of loyalty or fiduciary duty) as required by the relevant laws of incorporation and by the Civil Code of Québec remain the same. However, in the current context, the directors of a legal person must greatly improve and intensify their thinking process and their actions, in order to ensure that they respect these duties and, in particular, to ensure that they act in the best interests of the legal person in question. According to the incorporation laws and the Civil Code of Québec, the board of directors is responsible for the management of the legal person or, as the case may be, for the supervision of the management performed by the persons to whom they have delegated their powers, namely the legal person’s management team. Duty of care For directors of legal persons, respecting their duty of care involves, now more than ever: an understanding of the challenges and risks associated with the impact of COVID-19 on the legal person’s business, clients, employees, suppliers, etc.; identifying the best management measures available, relying upon what they reasonably consider as being the best practices under the circumstances; attentively monitoring the implementation of the decisions made and making the appropriate adjustments as things evolve. On this subject, please note that the business corporations acts specify that directors are considered to have complied with their duty of care if their decisions rely in good faith on the reports of a person whose profession lends credibility to his statements. Duty of loyalty As well as a duty of care, the law also imposes a duty of loyalty, also referred to as a fiduciary duty, on directors of legal persons, which, among other things, requires them to act in the best interests of the legal person. The Supreme Court of Canada provided interpretations of the duty of loyalty in its 2008 BCE decision1 (many of these interpretations have been explicitly integrated into recent modifications to the Canada Business Corporations Act2): characterizing the interests of the legal person as being those of a responsible corporate citizen (or “good corporate citizen”); highlighting that directors pursuant to this duty of loyalty may consider the interests of the stakeholders, such as shareholders, employees, retired persons, creditors, consumers, governments and the environment, who may be affected by their decisions; specifying, however, that if the interests of the various stakeholders cannot be reconciled with the best interests of the legal person, the long-term best interests of such legal person viewed as an ongoing concern must prevail. In practice, in order to respect this duty, directors cannot disobey the law. They must also, in particular: ensure that the legal person takes necessary measures to respect the directives of public authorities; ensure that the legal person takes appropriate measures to protect the health of its employees, clients and suppliers; not tolerate practices that are generally detrimental to the legal person or that aim to fraudulently profit from the current crisis; prioritize measures that have the best chance of enabling a substantial part of the legal person’s business to survive and restart the majority of its operations once the situation returns to normal3. We believe that in the current circumstances, it would be consistent with best practices for directors to consider the interests of stakeholders. This involves identifying those interests and evaluating them reasonably and fairly, as well as evaluating whether they can be reconciled with the legal person’s best interests. It is clear that the current situation does not easily allow for reconciling, at least in the short term, the interests of all of stakeholders with the interests the legal person, which must prevail. Maintaining the conditions and relationships that existed before the crisis will be, in most cases, difficult to reconcile with the long-term best interests of the legal person, as defined and interpreted by the law and the courts. Directors therefore must arbitrate between these interests in a reasonable way, prioritizing the interests of the legal person, even if it is difficult to do so. This crisis, the government directives and their effects require leadership and creativity on the part of directors. As has been written by several observers, the current crisis will necessitate new approaches when the pandemic is over. In this endeavour, directors must be proactive and must help management find solutions to limit the negative effects of the crisis and plan on potential new ways for the carrying out of the legal person’s operations in the coming years.   BCE Inc. v. 1976 Debentureholders, [2008] 3 S.C.R. 560, 2008 SCC 69. See subsection 122 (1.1) of the Canada Business Corporations Act, RSC 1985, c C-44. A very apropos article on the way directors can fulfill their duties of diligence and loyalty was posted on the Harvard Law School Forum on Corporate Governance on March 29, 2020: GREGORY, Holly J., GRAPSAS, Rebecca and HOLLAND, Claire, Ten Considerations for Boards of Directors, Cambridge, Harvard Law School Forum on Corporate Governance, online: https://corpgov.law.harvard.edu/2020/03/29/ten-considerations-for-boards-of-directors/.

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  • Managing Employment Injuries in the Age of COVID‑19

    The management of employment injury claims has not halted due to the current pandemic. Not only are new employment injuries taking place and claims being filed, ongoing claims are still being processed.  Managers must be vigilant in order to limit the financial impact of the pandemic with respect to employment injury claims. They can act in one of two (2) ways: Investigating the circumstances in which the worker contracted COVID-19 in order to determine whether it can be considered an employment injury; Monitoring employment injury cases to identify the impact of the pandemic on the way cases are treated to then try to obtain a reduction in financial consequences for the employer by an assignment of costs. Can COVID-19 be considered an employment injury? Although a worker infected with COVID-19 is at liberty to file an employment injury claim, they are responsible for proving that they contracted the disease or came into contact with the virus due to or in the course of their work. According to the current laws and jurisprudence, a COVID-19 diagnosis does not trigger the application of any legal presumption facilitating the acceptance of a worker’s claim under either the category of occupational disease or that of industrial accident. Helpful tip: If one of your employees has contracted COVID-19, investigate the origin of the infection. Ask the following questions and document the answers you receive: Has the worker travelled recently? Where and when? When did they return from abroad? Has one of their loved ones recently been diagnosed with COVID-19? Have one or more colleagues, clients or business partners contracted the disease? What symptoms did they experience, and when did they begin experiencing them? What was their schedule and who did they work with in the days before they began experiencing symptoms? Why do they believe they contracted the disease at work? What hygiene, preventive and protective measures and distancing did they use in the workplace? Can employers apply for an assignment of costs due to COVID-19? In terms of employment injuries, the pandemic can have many consequences, such as treatments and temporary assignments of work being temporarily interrupted and medical assessments and examinations by the Bureau d’évaluation médicale (BEM) being cancelled or postponed for an indefinite period. This situation will inevitably prolong the period during which employment injury benefits are paid, potentially significantly in some cases. Employers could apply for an assignment of costs for these claims in order to reduce the financial impact of the pandemic by demonstrating, for example, that the treatments necessary to consolidate the worker’s injury were suspended due to the pandemic, delaying consolidation or increasing the consequences o permanent impairment. A pandemic the size of COVID-19 is probably very much outside the scope of risks most employers generally have to face. When applying for an assignment of costs due to “undue burden”1, the employer will need to demonstrate that the consequences stemming from the pandemic such as delayed consolidation or more substantial permanent consequences represent a significant proportion of the costs attributable to the employment injury.  Helpful tips: If you have workers who are currently receiving income replacement benefits, find out whether their treatments or medical care have been interrupted due to the pandemic, if they have had medical or surgical appointments cancelled, etc. Document this information. The impact of these events on the cost of the claim can be documented retrospectively. Keep in mind, however, that applications for an assignment of costs due to “undue burden” must be submitted within the time limit established by law, as interpreted by jurisprudence2. The members of our Labour and Employment team are available to answer any questions you may have about occupational health and safety measures you are considering or the solutions you are seeking given the realities of your organization and its activities.   Section 326 of the Act respecting Industrial Accidents and Occupational Diseases (“AIAOD”). Section 326 of the AIAOD states that the application must be made in writing within the year following “the date of the accident”, and must include an explanation of the reasons for the application. However, the Court of Appeal has interpreted this time limit as being able to start from the day the right to the exception begins in Commission de la santé et de la sécurité du travail v. 9069-4654 Québec inc., 2018 QCCA 95 (known as the “Supervac 2000” case), as has the majority of the Tribunal administratif du travail jurisprudence that followed.

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  • What solutions for Startups Affected by COVID‑19 in Their Search for Financing?

    The impact of COVID-19 is particularly strong on start-ups in need of short-term financing and venture capitalists, whose contribution is essential to support the growth of these companies and who must make investment decisions in a context of widespread uncertainty. Like others, we have noticed the slowdown in investment activity and that many start-ups are now finding it difficult to close rounds of financing or even get time or attention from potential investors. In this context of uncertainty, we advise entrepreneurs who anticipate the need to soon close a round of financing to consider the following items: Current investors First and foremost, it is vital to consider the rights of your business’s current investors, contained in corporate documents and agreements between the investors and the corporation, as they could impact your round of financing’s feasibility. For example, if a valuation was obtained a few months ago and it is presently impossible to find a new investor to offer to purchase the corporation’s shares at an equal or higher valuation, the consequences of proceeding “down round” will have to be considered. In some circumstances, the success of a new round of financing may even depend entirely on existing investors’ support and consent. It is also possible that, under certain conditions, existing investors may be willing to take a share of the risk faced by the corporation by participating in a new round of financing, thus eliminating the need of seeking funding from new investors. Lastly, especially if one of the current investors is a venture capital fund or an active investor, it is likely that the corporation has agreed to specific milestones with that investor that could add to the difficulty of operating the business during a pandemic (for example, aggressive sales or production growth targets). But it is possible that your investor will be understanding and accept to review these milestones and associated timelines, which could lead to a positive impact on the corporation’s burn rate and give it  more leeway to weather the crisis. In all cases, we recommend transparency between the corporation and its investors, adopting a “partnership approach” and, above all, not to try to hide the corporation’s situation in its communications with its investors. Potential investors If there is no other option than seeking funding from new financial partners, it will be crucial to know the current situation of any targeted potential investor. As the current pandemic situation affects everyone, understanding the constraints faced by a potential investor is key in order to optimize the search for financing and the pitch process.  For example, if the potential investor has a specific investment thesis or policy, the investor may be even more thesis-driven and show less flexibility than before. Conversely, the investment thesis may be undergoing a re-evaluation. In addition, many potential investors will be impacted by the type of clients they serve. For example, a fund manager whose clients are government institutions may still have as much capital to deploy in the current context as before Covid-19, unlike a fund manager whose clients are high-net-worth individuals who face uncertainty and liquidity problems themselves and put pressure on the fund manager to take a more conservative stance. So, more than ever, you need to target your approach and make sure your potential investor is available to enter into a transaction in the near future. Assistance programs The various levels of government and some Crown corporations have released several assistance programs. In the context of a funding round, Export Development Canada (“EDC”) and the Business Development Bank of Canada (“BDC”) both announced co-investment assistance programs to provide access to additional financing for start-ups that already have a certain level of support from private investors. These programs are a good opportunity for entrepreneurs who need to complete or initiate a round of financing, who are not eligible for certain other government assistance programs, and who are not generating enough cashflow to finance their activities through credit facilities on conditions that are viable for their business. The program announced by EDC proposes a co-investment by EDC of an amount equivalent to that considered in an eligible round of financing, up to a maximum of $5,000,000. As for the program announced by the BDC, the BDC Capital Bridge Financing Program also provides assistance in the form of co-investment in an amount equivalent to the amount the company receives from qualified investors: BDC will offer financing as convertible notes whose default terms include a 20% discount rate on the price per share of the next round of financing and a term of three years. BDC may, however, decide to deviate from these terms and invest under the same conditions as the investors leading the round of financing. The company receiving the investment must be Canadian and have raised $500,000 in external capital in the past. It must also have a proven business model and an existing customer base prior to the impact of COVID-19. The business must have been “specifically impacted by COVID-19.” Unlike some other government assistance programs, this one does not have a fixed scale relative to this criterion. Businesses can demonstrate how the current situation affects them through qualitative and quantitative indicators (e.g. disruptions in their supply or distribution chains, difficulties in getting paid). The important thing will be to show that the lack of cashflow and the difficulty of concluding a round of financing are related to the impact of COVID-19 and not to a situation inherent to the company. The round of financing for which co-investment is being sought must have started after February 1, 2020. The round of financing must be for a minimum amount of $250,000 (prior to investment by BDC) and the overall round of financing must ensure 18 months of runway before additional funding is required by the company. For example, a business with a monthly operational burn rate of $30,000 and $300,000 in financing would meet this criterion since (1) the round, prior to BDC investment, is over $250,000, and (2) the overall round of financing, including co-investment by BDC, would be $600,000 and would ensure 20 months of runway, based on its current burn rate. There are no fixed criteria for determining who is an “eligible investor.” We understand, however, that the investor must be a private firm that has demonstrated its capacity as a lead investor for the funding round in question its ability to conduct the due diligence process. The investor does not have to be Canadian but must be sufficiently known and credible in Canada. We consider this convertible note financing offer to have three main advantages in the current environment: It increases the total “post-financing” value of the business in the form of additional cash, and the size of the funding round without increasing the principal investor’s risk, thus making the investment more attractive. It avoids immediate valuation issues for the company, allowing the lead investor to maintain control over the valuation process through the funding round. It is relatively simple, quick and inexpensive, and should not make the transaction process more complicated or burdensom for the lead investor. In short, these co-investment-based assistance programs are appealing as they can be presented to an investor by a company with financing needs whose planned or ongoing funding round is currently at a standstill due to the situation created by COVID-19. The programs may also be interesting elements to consider for an investor who wishes to have a co-investor or who would like the round of financing to reach a certain threshold to ensure that the company being invested in has sufficient runway after the investment, especially in the current context where it is difficult to predict subsequent rounds of financing. However, the parties wishing to benefit from such programs will have to ensure that their situation meets each program’s criteria and that they evaluate the financing terms offered as part of the assistance program in the context of the transaction. Conclusion Start-ups currently in need of financing should first discuss with their existing investors to try to find room for manoeuvre and assess the possibility of quickly obtaining financing, part of which could come from one of the assistance programs available. In all cases, it will be necessary to measure the impact that additional funding from new investors could have on the rights and obligations that exist between the corporation and its current investors and to ensure that it does not trigger any particular rights or recourse or create ambiguities, contradictions or even events of default. For more information in this regard or to find out about other measures that could help your business, do not hesitate to contact the Lavery team. Our team is following current developments related to COVID-19 very closely in order to best support our clients and business partners. We invite you to visit the web page that centralizes all of the tools and information produced by our professionals.

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  • How to Negotiate Temporary Agreements or Contracts in Times of Crisis?

    The rapid spread of COVID-19 and the introduction of strict government measures are limiting or changing many businesses’ operations. These measures impose unusual restrictions that make it more difficult to meet certain contractual obligations. In such a situation, many companies will want to assess the possibility of modifying certain undertakings and terms of their contracts in order to get through the pandemic and resume their business activities post-crisis. To that end, we have gathered a few thoughts on how to look into negotiating a temporary agreement, some legal principles that can be applied to begin discussions and negotiations, and some other elements to consider in a negotiation approach, which we share with you below. How to do it and where to begin: some ideas It is relevant to review all your contracts and sort them to determine which are essential for your business operations and which have the most significant financial impact.  Think about the other contracting party as well, who may also be affected by the pandemic. Has the other party defaulted of performing its correlative obligations to you, or is your inability to meet your obligations causing it prejudice in any way?  Most of the obligations included in a contract cannot be changed unilaterally. However, contracting parties must still perform their respective obligations in good faith. The occurrence of an exceptional situation such as COVID-19 is likely to force each of the parties to act more flexibly in order to comply with their duty of good faith. It is possible to validate whether some of these contracts, by their very nature, are still relevant or whether they will remain relevant once the curve flattens and economic activity recovers. For less relevant contracts, you can check whether they include provisions allowing for unilateral termination, by the mutual agreement of the parties or by a particular mechanism. Otherwise, you could then consider initiating a discussion with the other contracting party to negotiate certain terms of the agreement in order to mitigate negative impacts, if any, during the pandemic.  For each contract that must be maintained, you can list all the obligations that you are unlikely to be able to meet, in whole or in part, as well as those that your contracting party might not be able to meet, in order to open the door to an out-of-court  negotiation of certain provisions for the coming months. In your analysis, you should pay particular attention to the following clauses: Default: What constitutes a default under the terms of the contract? What are the consequences of defaulting? Does a default under this contract constitute a default under another contract? Does the contract provide for a time period to cure a default? On what conditions? Time limit: Does the contract set specific time limits for the performance of certain obligations? Which ones? Does the contract provide for the possibility of postponing the time limit for its performance? Should a notice be sent to this effect? Does it expire soon? Exclusivity: Is the contract exclusive? Can this exclusivity be overridden? Under what circumstances and on what conditions? Force majeure: Does the contract include a superior force clause (most commonly called a “force majeure”) forgiving a party’s inability to perform its obligations? What happens to each party’s obligations, especially financial obligations, in a context of superior force? Although the Civil Code of Québec defines such a notion, the contract can always provide its own definition. A case of superior force usually requires the presence of an unforeseeable, irresistible event external to the party invoking it. Continuous information: Does the contract provide for the obligation to keep the other contracting party informed when certain events occur? If so, which ones? Is COVID-19 or any other pandemic included? Negotiation: Does the contract provides for the parties the possibility to renegotiate certain terms ? Which ones? When? On what conditions? Payment: Does the contract set out time limits for payments to the other contracting party or for making any other kind of payment, depending on the nature of the contract? Does it provide for additional time limits to proceed to the payments? What is the impact of delaying or not making a payment? Financial performance: Does the contract establish financial performance criteria (e.g. compliance with certain financial ratios)? How often? What are the consequences of not meeting these financial criteria? Penalties: Does the contract contain penalties for late payment of certain amounts or for failure to meet certain contractual obligations? When is this penalty due? What amount can it reach? Liability: Is the liability of the contracting parties unlimited under the terms of the contract or does the contract instead provide for limits on the amount that may be claimed?(maximum/minimum amount)? Is there a predetermined time limit to make a claim? Does the contract provide for a notice to be sent to this effect? Dispute resolution: Does the contract provide for a dispute resolution process? Mediation or arbitration? Under which conditions can these mechanisms be applied? List all the impacts that result from a breach of obligations (e.g., penalties, notice of default, interest), and make a list of viable proposals that you can submit to the other contracting party as an alternative. What legal principles can you use to negotiate a temporary agreement with your contracting party or a postponement of your obligations?  Certain provisions or legal principles may make it possible to terminate a contract or may serve as arguments for a temporary agreement or a postponement of your obligations. Here are a few examples. (This list is non-exhaustive, of course.) Force majeure Some parties to a contract will want to invoke the concept of superior force to terminate or temporarily suspend the effects of the contract. Although this concept is interesting, it applies only to very specific situations and its application is not generalized. As previously mentioned, the Civil Code of Québec1 provides that superior force is an unforeseeable and irresistible event that must not arise from the actions of the contracting parties. Depending on the nature of the obligations covered, a contracting party may be released from its obligations or have its successive obligations suspended during the superior force period. The contract may also provide for other parameters and circumscribe the terms of what may constitute a case of superior force between the parties. The right to invoke superior force requires a case-by-case assessment of each contract and of the relationship between the parties. In any event, a party that is unable to perform its obligations, in whole or in part, must take all steps at its disposal to minimize its damage. You will find more information on the concept of superior force and its application in the bulletin The Impact of COVID-19 on Contracts.  Right to terminate Certain contractual provisions may allow for resiliation (termination) by either party, on specific terms or for specific reasons. Some contracts will provide for a termination mechanism at either party’s discretion or further to their mutual consent.  In the absence of such clauses in the contract, it remains essential to characterize the nature of the contract, since legislative provisions could allow its resiliation. That is also the case of a contract of enterprise or a contract for services, which the client may unilaterally resiliate as permitted by sections 2125 and following of the Civil Code of Québec, subject to certain limits, of course. Before deciding to unilaterally resiliate a contract, it is important to consult your legal advisor in order to properly determine the nature of the contract, validate its terms and conditions with respect to resiliation and determine the possible impacts of such resiliation (e.g., penalties, prejudice to the other party, etc.). Obligation of good faith in contractual performance The obligation of good faith imposes certain contractual duties, including those of loyalty and cooperation. The duty of loyalty entails certain prohibitions such as not increasing the burden on a contracting party, not compromising the contractual relationship, and not engaging in excessive and unreasonable2 behaviour. The duty of cooperation, on the other hand, is more positive in nature and aims for assistance and collaboration between the contracting parties to encourage contract performance. Thus, beyond the contractual relationship between the parties, the obligation of good faith allows for a genuine collaborative relationship, a partnership, even, between the parties. A party being a victim of its contracting party’s actions, which are not in accordance with its obligation of good faith under the terms of the contract or which are implicitly derived from those terms, may be in a favourable position to claim damages. Thus, if a party experiences difficulties in performing its obligations because of an event beyond its control, it is entitled to expect the other contracting party to show good faith in the performance of the contract and to act reasonably. Abuse of rights  A party’s exercise of its contractual rights may, in certain situations, constitute an abuse of rights. For example, a party that is in default of its payment obligations under the contract, due to the closure of its business as required by government authorities, may trigger the application of a contract default clause by the other party. Such other partycould proceed with the immediate resiliation of the contract upon simply providing notice. While the terms of the contract may be clear, the other party’s haste in resiliating the contract may constitute an abuse of rights. Indeed, the nature of the relationship between the parties, the duration of the business relationship and the facts that led to the default have an impact on the way a party may exercise its rights under the contract. The exercise of rights provided for in the contract in such a way as to create devastating or catastrophic effects for one of the contracting parties could constitute an abuse of rights in the performance of the contract. Mediation The contract may provide for dispute resolution processes such as mediation or arbitration. To the extent that a dispute arises between the contracting parties and that the contract provides for recourse to alternative dispute resolution mechanisms, it will be possible or even mandatory to submit the dispute to a process such as mediation before a third party, which will attempt to help the parties find an acceptable common ground. In the event of non-performance by a contractual party, this may be a very good option, insofar as the contract contains a provision providing for recourse to such mechanisms, of course. How can a temporary agreement be negotiated, and are there elements that can be put forward as part of the discussions? Given the exceptional current situation, it may also be appropriate for the contractual parties to communicate and verify the impacts of the pandemic on the contractual performance. In this way, the parties may jointly conclude that there are particular difficulties in performing certain obligations under the contract. In such a case, propose solutions or present scenarios that aim to minimize the negative impacts for your respective businesses. Rely on the mutual aid factor to meet certain obligations and/or suspend others (performance, manufacture, delivery, time limits, forbearance, etc.). It is possible to suggest performing certain obligations in consideration for the performance of your contracting partner’s correlative obligations. Where feasible, consider partial payments, deferred payments, staggered payments over time or a reimbursement based on a percentage of revenues or sales once operations resume after the pandemic. If it is possible, offer additional guarantees to the other contracting party (e.g. collateral security, personal suretyship, third party guarantee). Validate whether your insurance covers the cessation of your operations, business interruption, delays in the performance of your obligations, or financial losses arising from some of your contracts, to enable you to propose viable alternatives.  Determine which suppliers or partners are willing to conclude a temporary arrangement and those who refuse or are less open to it. You can then to try to optimize your agreements with the more conciliatory partners, allowing you to continue performing certain obligations with your more reluctant contracting parties. Innovate! Think about alternatives that might not have been possible, or that you might not have considered before the pandemic, that allow you to optimize your business practices or relationships. In short, think outside the box. A few thoughts before undertaking a negotiation  Do not restrict your thinking to the period of restriction on non-essential activities which is, at the time of writing, until May 4, 2020.  Think instead about the weeks and months that will be required to re-establish your business relationships and resume normal business operations, while performing your ongoing obligations and any deferrals negotiated during the pandemic; The inability to adapt, or the maintenance of a hard line, will bring some businesses to the brink and force them to consider various insolvency processes. You must be in a position to show your contracting parties why a position that is too firm or inflexible will not, in the long term, be satisfactory or serve the parties’ interests, in addition to being detrimental to those parties who are likely to require flexibility in the performance of their contractual obligations. You need to be able to identify the considerations specific to your business and business model, and determine the elements that may influence your decisions, such as the nature of the relationship with the other contracting party, particularly if it is a long-standing customer or supplier, whether it is a relationship that will continue into the future or if it is a one-time contract that is non-recurring, and what impacts and reputational risk your actions may entail. Beyond legal principles, the long-term business relationship must be prioritized and protected. This argument should not be underestimated. The objective of most Quebec businesses is to find satisfactory common ground for the parties involved, while trying to minimize the impacts on both sides. The watchword the parties should keep in mind is “flexibility.” During these times when solidarity is in order, it seems to us that it would be wise for each party to make the effort to reach a duly negotiated temporary agreement. We are sharing these options to provide you with ideas on how to approach the negotiation of ongoing contracts, knowing that each contract, relationship and situation are  unique. For more information, our corporate law team remains at your disposal to accompany you during the pandemic. #WeWillGetThroughThis   Section 1470 para. 2 C.C.Q. Didier Luelles, La bonne foi dans l'exécution des contrats et la problématique des sanctions, Canadian Bar Review, Vol. 83, 2004, pp. 189-190.

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