Exclusion Raised Belatedly Without a Problem!

December 1, 2004

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Bernard Larocque
Partner, Lawyer

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January 19, 2023

The Canada Emergency Wage Subsidy: The Canada Revenue Agency takes action

In response to the pandemic, the Canadian government launched in the spring of 2020 the Canada Emergency Wage Subsidy (the “CEWS”), a program that provides employers with a subsidy based on the remuneration paid to their employees and income they lost during the pandemic. Section 125.7 of the Income Tax Act (the “ITA”) sets out how the subsidy is to be calculated, and likely caused problems for those who had to interpret this ambiguous provision without supporting doctrine or jurisprudence. For instance, calculating the “qualifying revenue,” which is central to the CEWS calculation, involves many nuances. As an example, it requires that an entity’s revenue during qualifying periods be estimated and that certain items be excluded, such as “extraordinary items,” a term new to the ITA. The calculation of “eligible remuneration,” another important component of the CEWS calculation, also has a number of peculiarities, such as the inclusion of remuneration for related and managerial employees. The Canada Revenue Agency (“CRA”) now has taxpayer’s CEWS calculation in its sights. The CRA began auditing CEWS claims and issuing notices of assessment to taxpayers in an effort to reduce the amount of CEWS originally granted. With reductions in pre-pandemic period qualifying income or the inclusion of items that taxpayers had initially excluded in their qualifying period income, such assessments are likely to have a significant impact on the CEWS amounts to which taxpayers were entitled, especially for companies with a large number of employees. In specific cases, the CRA may also impose penalties which can be as high as 50% of the excess subsidy claimed. Although the time limit for amending CEWS claims has expired, submitting a fairness request to amend a previously filed claim may be possible in some circumstances. Moreover, when notices of assessment are issued, a notice of objection may be filed to contest the adjustments made by the CRA. It is important to keep all documentation related to the calculation of the “qualifying revenue,” your employees’ remuneration and any other accounting documents to support the CEWS amounts claimed. A proactive approach and early intervention in a CEWS audit will not only result in a more favourable outcome in a given case, but will also prevent many back-and-forths with the CRA. Lavery’s tax law team is familiar with the CEWS program and its intricacies, and can assist you should you be audited or should you receive a notice of assessment from the CRA.

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January 19, 2023

Clarifications regarding insurance products offered on the Internet

In early 2022, the Autorité des marchés financiers (the “AMF”) conducted specific consultations on financial products offered on the Internet. Further to these consultations, the AMF published explanations on the Regulation respecting Alternative Distribution Methods (the “RADM”) in late December 2022.1 Here are some key points that the AMF has clarified: Definitions The AMF has elaborated on the meaning of certain terms and expressions included in the RADM, thereby clarifying the obligations incumbent on firms as concerns insurance products offered on the Internet: “Providing” or “presenting” information: This implies delivering, giving or handing over information to a client without them having to take any action. A client should not have to search for the information to find it. As such, making the information accessible or referring to a policy is not enough.2 “Making visible at all times”: The information should be visible to the client at all times, regardless of the page the client is on. A representative’s contact information is the only information that must be visible on the digital transactional space at all times. Websites that are accessible to people who are blind or use a voice assistant must also have means to present this information.3 “Making a representative available”: The AMF only requires that representatives be available during regular business hours.4 “Making information readily accessible”: A client must have the option of taking cognizance of the information and be able to easily find it. The information must be accessible in one or two clicks. Including a hyperlink or an icon, for example, are ways of making information accessible.5 Under this obligation, a hyperlink may be used to redirect a client to a website or document external to the digital space.6 External documents that are accessible through hyperlinks, such as sample insurance policies, must be up to date. Summary of the complaint processing policy The AMF specifies that the summary of the complaint processing policy referred to in the RADM must be that of the firm running the transactional website, not of a third party. Thus, a property and casualty insurance brokerage cannot refer to an insurer’s policy summary.7 Identification of the firm A firm may display partner logos on its digital space only if doing so does not cause confusion. A client must know which firm runs the space and must be able to distinguish it from partners that do not offer the products or services.8 Product coverage, exclusions and limitations Further to its supervisory activities, the AMF has confirmed that product coverage appears to be well presented in digital spaces. However, exclusions and sometimes limitations are not as well presented. Given that exclusions and limitations constitute information that is necessary for a client to make an informed decision, the AMF urges firms to pay attention to these and to select them based on a proper analysis.9 Suspension of transactions The AMF has clarified how to apply the criteria under section 14 of the RADM, more specifically paragraph 3 of this section, which provides that a firm must suspend a transaction initiated through a digital space when no representative can immediately intervene with a client who asks to deal with a representative and there is a risk that the client will not be able to make an informed decision. The AMF specifies that it is up to the firm to assess and manage its risk. In order to determine whether such a risk exists, the AMF has proposed the following solutions: The firm may caution the client as follows: “Do you wish to continue the process even though no representative is available at this time?” The firm could post its representatives’ availability. If a client decides to enter into a contract through a digital space, the firm could ensure that a representative contacts them within 24 hours. A transaction does not have to be suspended immediately; it can be done at the end of the transaction, before the contract is concluded. Moreover, stopping or temporarily suspending a transaction may also be necessary if a contradiction or irregularity in the information the client provides could lead to an error.10 The digital space must be set up to detect such a contradiction automatically. The AMF considers it preferable to discontinue a transaction if contradictions are detected. It can also be temporarily suspended while the client is informed of the consequences of making false statements and the importance of knowing their entire situation, for example, and to allow them to make corrections, if necessary.11 To better understand the obligations of the RADM, we invite you to consult our bulletin Bill 141: Checklist on insurance products offered via the internet and distribution without a representative. These are only available in French at this time; Regulation respecting Alternative Distribution Methods, CQLR, c. D-9.2, r. 16.1. Autorité des marchés financiers, Explications à l’égard du règlement – Le RMAD expliqué article par article (hereinafter the “Explanations”), ss. 7, 9, 11, 12 and 12.2. The terms “explaining information” or “providing information” under section 12.1 of the RADM should be interpreted in the same manner. Explanations, s. 8. Explanations, s. 8. Explanations, ss. 8 and 10. Explanations, ss. 8 and 10. A representative’s contact information does not have to appear on external documents and websites at all times. It is important to note that under section 9 of the RADM, a document that is to be “provided” or “presented” to a client cannot be located on an external website. Explanations, s. 8. Explanations, s. 8, para. 1. Explanations, s. 9. For example, a client declaring they have no children yet selecting insurance for their children constitutes a contradiction. Explanations, s. 14.

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January 6, 2023

Patent applications and processing times – What’s right for you

Part 1: Four reasons to slow down and four reasons to speed up the process Part 2: Slowing down the process (CA, US, EP, PCT) Part 3: Fast track (CA, US, EP, PCT) Part 1: Why slow down or speed up the process? Slowing down the process Why would anyone want to slow down the process when it already usually takes several years for a patent to be issued? Cash flow Uncertainty for competitors Possibility of changing the scope Possibility of filing a divisional application In some cases, cash flow may justify spreading expenses over a longer period of time. Keeping an application pending longer may also be beneficial from a business perspective. In fact, it could create uncertainty for competitors, who cannot easily determine the scope of the exclusive right that may be granted to you. Moreover, claims are easier to amend while the application is pending. Lastly, filing a divisional application is usually only possible when the parent patent application is still pending. Speeding up the process If slowing down the process is so advantageous, why speed it up? Proof of patentability before expanding the patent application family Monetary valuation or capital raising Proceedings before the courts Strong negotiating position After filing a priority application, the applicant has 12 months to file corresponding applications in other countries. Filing abroad can entail considerable expenses. It may therefore be advantageous to obtain results quickly so you can make the best decision about filing applications in other countries. An issued patent is a far better indication of a technology’s value. This can have a major impact on a company’s valuation and, at the same time, allow for additional capital to be raised. Moreover, filing a patent application will not prevent infringers from marketing your technology; you may only commence proceedings in front of the court with an issued patent. The possibility of instituting legal proceedings could drastically change the tone of negotiations with your competitors—and sometimes your suppliers, too. Strategies and costs Special provisions exist to speed up and slow down the process in many territories. For the purposes of this exercise, we will discuss patent applications in Canada, the United States and Europe. We will also look at international patent applications, namely PCT applications. Part 2: Slowing down the process Canada With regard to slowing down the process, the simplest strategy in Canada is to wait before requesting examination as much as possible. While the provision for this has changed over the years, applicants now have four (4) years from the date of filing a Canadian application to request an examination. For PCT national phase entry, Canada allows an extension of the standard 30-month time limit to up to 42 months under certain conditions. However, examination request dates and maintenance fees remain the same. Therefore, this is beneficial in the short term only. For each examiner’s report (also called office action), it is possible to request an extension of the time limit by two months before the original time limit expires. This request must be accompanied by the late fee and is only accepted under certain conditions. The other option is to not reply to the examiner’s report and to wait until the application is deemed abandoned. The application may then be reinstated by filing a response to the examiner’s report and paying an additional fee. It is important to note that a Canadian application is no longer eligible for accelerated processing if an extension of the time limit was obtained for it or it was reinstated. Furthermore, while an application is abandoned, and even if it is later reinstated, third parties could obtain certain rights to the technology. United States In the United States, an extension of time fee may be paid at the same time as the reply to an examiner’s report is filed. However, the maximum time limit must not exceed six (6) months. It is also possible to file a request (or petition) for the suspension of the time limit for replying to an examiner’s report (by paying the relevant fee, of course). This request is only acceptable under certain conditions and cannot exceed six (6) months. Similarly, a request may be filed to defer the examination of the application, which may delay examination by up to three (3) years after the priority date. Once again, certain conditions must be met and there is a fee to pay. Europe As is the case for Canada, for each examiner’s report, a request can be made to extend the time limit by two (2) months before the original time limit expires. However, unlike in Canada, there are no fees or conditions for this request to be accepted. The other option is to not reply to the examiner’s report and to let the application lapse. The application may then be reinstated by filing a response to the examiner’s report and paying an additional fee. As for the 10-day rule, it will continue to apply until November 2023. This rule, which was established at a time when communications were still sent by mail, provides that a dated communication is deemed to have been delivered ten (10) days after the date of the document—the time limit is therefore automatically extended by ten (10) days. All things considered, the elimination of this rule is a plus in helping prevent various communication problems. PCT When it comes to slowing things down, the PCT application itself may be used to slow down the process. In fact, the international patent application system provides allows a decision on international applications to be made as late as 30 months from the priority date. The PCT system is based more on the reservation of rights than on slowing down the process. Nevertheless, both from cash flow and filing strategy standpoints, the longer time limit for making decisions may be beneficial. Summary–slowing down the process CA: Postpone filing the Canadian application or entering the national phase. Push back the examination request. Apply for an extension of the time limit. Do not respond, then apply for reinstatement. US: Pay time limit extension fees. Submit a request to suspend processing. Submit a request to defer the examination. EP: Apply for an extension of the time limit. Apply the 10-day rule. Do not respond, then pay the fees to have the application reinstated. PCT: Take advantage of the 30-to-42-month extension for each country. Part 3: Fast track Canada Of course, the best way to speed up the process is to request an examination as soon as possible and, above all, not put off replying to the examiner’s reports received. After requesting an examination and before receiving the first examiner’s report, it is possible to request that the application be processed expeditiously. The request requires that the Canadian application be published and it may be subject to a number of conditions. An applicant whose rights may be prejudiced by the examination time limit can pay an additional fee to expedite the process. When a patent application relates to so-called green technology or the COVID-19 pandemic, the notion of prejudice does not apply and no fee is due. Speeding up the process is also possible by taking advantage of the outcome of a corresponding application in another jurisdiction deemed credible by the Canadian Patent Office (e.g., Europe, United States, Japan, etc.). This is referred to as a PPH (patent prosecution highway) request (the French translation by “autoroute de traitement des demandes de brevet”, while quite accurate, is rarely used). United States Those who have the means to do so may pay an acceleration fee when filing the application in the US. The intent is then to complete the entire process within 12 months. The ability of the US Patent Office to meet the expectation is also taken into consideration before accepting the request. Special treatment may also be requested for a patent application where the health or age of one of the inventors warrants this. Such a request may also be made when the technology in the patent application is “green” or relates to “counterterrorism.” The US also takes part in the PPH system, and the decision made regarding a corresponding application in another jurisdiction can also help speed up the process. Evidently, it is important not to delay replying to the examiner’s reports received, no matter how else you may choose to accelerate the process. Europe The European Patent Office accepts PPH requests and also offers the “PACE” programme, which helps speed up processing times (search and/or examination) without any fees or specific conditions other than responding to examiner’s reports in a timely manner. The European Patent Office’s ability to handle the requests is also taken into account. PCT Quickly completing national phase entries (i.e., well before the 30-month time limit) makes it possible to proceed faster with the substantive examination in each jurisdiction. During the international phase of the PCT, attempts can be made to move the process along before entering the national phase. This procedure often dubbed as a “Chapter II request” does not guarantee that time will be saved, but certain questions may be anticipated thus avoid multiple delays in front of different examiners. Summary – speeding up the process CA: File the Canadian application or enter the national phase as soon as possible. Make the examination request as soon as possible. Respond quickly to examiner’s reports. Request accelerated processing based on PPH, green technology, COVID-19 technology or possible prejudice. US: Pay acceleration fees when filing. Request accelerated processing through the PPH system. Respond quickly to examiner’s reports. Submit a petition to make the application special (on the basis of age or health, green technology or counterterrorism technology). EP: Request access to PACE programme. Request accelerated processing through the PPH system. Quickly respond to examiner’s reports. PCT: Enter national phase as soon as possible. Apply for examination under “Chapter II.”

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December 9, 2022

The return of Christmas parties: what employers need to know

After two years of navigating COVID-19, the end of 2022 will be an opportunity for employers to organise larger activities for their employees, such as Christmas parties. The purpose of this newsletter is to make employers aware of their obligations during the holiday season festivities. Below, we will address the following three issues: industrial accidents, disciplinary measures and psychological harassment. Although Christmas parties are generally held outside of the workplace and outside normal working hours, an incident that occurs on such an occasion may qualify as an “industrial accident” within the meaning of the Act respecting industrial accidents and occupational diseases.1 Courts will consider several factors in weighing whether or not such an incident will constitute a work-related accident, including the purpose of the party, the time and place where it was held, whether or not it is organized and financed by the employer, and the presence or absence of a relationship of subordination at the time of the incident. None of these factors are decisive: they serve as a guideline for the tribunal. As many decisions have both granted2 or rejected3 claims in such circumstances. In one case where a Christmas party had been organized by the employer and was intended to encourage a sense of cohesion and belonging amongst the employees, an injury to the coccyx suffered by an employee while dancing with a co-worker was qualified as an industrial accident.4 However, in another case where an employee was injured on an escalator while escorting a drunken co-worker after a Christmas party, the tribunal ruled that the female employee had not suffered an industrial accident due to the absence of authority exercised by the employer at the time of the fall and also because the event was only intended to permit colleagues to fraternize and spend time together and not to improve the work environment.5 In the context of its management rights, an employer may, in certain circumstances, discipline an employee for behaviour which occurred during a Christmas party.6 The degree of the employer’s involvement in the organization of the party and the private nature of the party are important factors in determining whether the employer is justified in imposing disciplinary measures in such a context. For example, an arbitrator upheld the dismissal of an employee who repeatedly hit a colleague and former spouse during the employer's Christmas party held on its premises.7 The fact that the violent acts were committed during a party rather than in the direct context of work was not considered a mitigating factor. This disciplinary power is part of the employer's obligation to ensure a violence-free workplace. This obligation has gained in importance since the recent addition to the Act respecting occupational health and safety8 of the employer's obligation to “take the measures to ensure the protection of a worker exposed to physical or psychological violence, including spousal, family or sexual violence, in the workplace”.9 In another case, the arbitrator concluded that the employer could not discipline an employee for acts committed at a Christmas party organized and entirely financed by the employees and which took place outside the workplace.10 On another note, a single act of serious conduct at a Christmas party may constitute psychological harassment. A complaint for psychological harassment was upheld against an employer in a situation where the owner had touched the breast of an employee by slipping an ice cube into her sweater.11 This contact, a single gesture, was qualified by the arbitrator as serious conduct amounting to psychological harassment. The arbitrator also concluded that excessive alcohol consumption had no mitigating effect on the seriousness of the act committed. Sexual comments, forced touching and kissing by an employee during the Christmas party were also deemed to constitute psychological and sexual harassment by the courts justifying, in certain circumstances, dismissal.12 Conclusion In light of the foregoing, an employer must exercise caution and adopt measures to reduce the risks associated with the organization of Christmas parties, given that they may be held responsible for accidents or various acts or behaviour that occur during such gatherings. [1] CQLR, c. A-3.001, s. 2. [2] See in particular Fafard et Commission scolaire des Trois-Lacs, 2014 QCCLP 6156; Battram et Québec (Ministère de la Justice), 2007 QCCLP 4450. [3] See in particular Environnement Canada et Lévesque, 2001 CanLII 46818 (QCCLP), par. 35-39; Desjardins et EMD Construction inc., 2007 QCCLP 496. [4] Boivin et Centre communautaire juridique de l'Estrie, 2011 QCCLP 2645 [. [5] Roy-Bélanger et Ressources Globales Aéro inc., 2021 QCTAT 1739 [Quebec’s Tribunal administratif du travail]. [6] Teamsters Québec, section locale 1999 et Univar Canada ltée (Jean-Martin Gobeil), 2020 QCTA 344 (L. Viau). [7] Travailleurs et travailleuses unis de l'alimentation et du commerce, section locale 500 (TUAC-FTQ) et Royal Vézina inc. (St-Hubert) (Hicham Alaoui), 2017 QCTA 304 (F. Lamy). [8] CQLR, c. S-2.1. [9] Act respecting occupational health and safety, CQLR, s. 2.1, a. 51, par. 1 (16). This obligation was added pursuant to the Act to modernize the occupational health and safety regime (2021, c. 27, a. 139), [10] Syndicat de la fonction publique et parapublique du Québec et Société de l'assurance automobile du Québec (Joffrey Lemieux), 2021 QCTA 439 (C. Roy). [11] S.H. et Compagnie A, 2007 QCCRT 0348, D.T.E. 2007T-722 (T.A.) (F. Giroux). [12] Pelletier et Sécuritas Canada ltée, 2004 QCCRT 0554 (M. Marchand).

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