Cross Border: A Guide to Doing Business in Canada – Key Topics and Developments

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On June 28, 2022, McCarthy Tétrault’s Labor and Employment Group, along with leading partners from other practice areas of the firm, hosted an insightful webinar on key cross-border topics and trends for businesses. The webinar coincided with the launch of our Cross-Border – Navigating Guide to Canadian Labor Law.. Here are some highlights from the panelists:.

Navigating Canadian Labor Law

Tim Lawsonhead of the labor and employment group, referred to the following labor law highlights:

  • Unlike in the United States, there is no “all-you-can-eat” employment in Canada. Employers can include termination clauses in employment contracts to define obligations in the event of termination. However, employers should be particularly careful when drafting such clauses as they are increasingly scrutinized by Canadian courts.
  • Non-competitions in Canada are At first glance inapplicable as trade restrictions. To be enforceable, a non-competition clause must be reasonably limited in its geographical scope, the duration of the restriction and the restricted activities. Effective October 25, 2021, the Province of Ontario declared non-competition illegal in itself as a matter of law, except in agreements for business owners and in certain limited business sale scenarios.
  • Ontario is also the first Canadian province to introduce legislation requiring any employer with more than 25 employees to have a written disconnection policy. However, this is not an absolute right for employees. The law only requires an employer to set out their expectations for disconnecting from work. The deadline to implement this policy was June 2, 2022.
  • Bill 96 increases the use of the French language by companies operating in Quebec. Among other things, Bill 96 clarifies the types of documents in French that an employer is required to provide to its employees and adds new requirements concerning the dissemination of job offers in French.

Mergers and Acquisitions

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

  • Unlike S., in Canada there is both a “fiduciary duty” and a “duty of care” that require determining whether or not the transaction is in the best interests of the company. In Canada, a transaction must consider a broader group of stakeholders, including retirees and employees.
  • The COVID-19 pandemic has accelerated the focus on equity, diversity and inclusion (EDI) and other social justice issues, resulting in a growing trend of “stakeholder capitalism” in which groups of stakeholders deploy “vote no” campaigns to block a transaction. It is important to plan and anticipate the impact that broader stakeholder groups such as unions, employees, institutions and pressure groups may have on a transaction.
  • More and more buyers involved in M&A deals are demanding increased due diligence, including incorporating disclosures into their transactions to mitigate financial and reputational damage resulting from prior sexual misconduct by executives ( sometimes referred to as the “Westein clause”).
  • “Change of control” clauses and the treatment of incentive bonuses remain at the heart of mergers and acquisitions negotiations.

Fintech activity in Canada

Financial technology or “Fintech” is constantly increasing in Canada. Ana Badoura partner in the financial services group and co-head of the fintech group, highlighted a number of fintech “unicorns” grown in Canada, such as Wealthsimple, Neo Financial, fresh books and more. Canada is also home to a robust payments industry with well-known publicly traded entities such as Shopify and Speed ​​of light.

In terms of regulation, it is important to understand that Canada has both “entity-based” regulation (ie.

With the rise of fintech companies in the cryptocurrency space, the securities regulator has paid increased attention to foreign trading platforms operating in Canada. In addition, FINTRAC, Canada’s anti-money laundering agency, has increasingly focused on enforcement warrants following the overhaul of its administrative monetary penalties regime.

Privacy and cybersecurity: Quebec’s Bill 64

Charles Morgana partner from the Technology group made a presentation on Bill C-64, the new Quebec law on the protection of personal information.

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

  • Conducting a privacy impact assessment (a “privacy impact assessment”)AIP”);
  • Determine whether the disclosed information would receive “adequate protection” in the target jurisdiction; and
  • Enter into written agreements that take into account the results of the PIAs and, where applicable, include conditions to mitigate the risks identified in the PIAs.

The new penalties in Bill 64 include administrative monetary penalties of up to $10 million or 2% of prior year worldwide revenue, whichever is greater.

For its part, the federal government tabled Bill C-27 on June 16, 2022, which will serve as a complete overhaul of the Personal Information Protection and Electronic Documents Act (PIPEDA). Bill C-27 has garnered strong support across the political spectrum and should be passed. Bill C-27 will introduce the same fines as Quebec’s Bill 64 and will introduce a number of requirements on cross-border transfers.

To ensure compliance and minimize the risk of penalties, companies must start preparing now for these regulatory changes.

Supply Chain, Customs and Trade

Martha Harrison, a partner in the International Trade, Investment and Regulatory group, explained how environmental, social and governance factors are increasingly influencing decision-making in supply chain, customs and trade. The commercial diversification of supply and suppliers has become an essential element of supply strategies.

Additionally, strong internal compliance measures are extremely important given a significant increase in regulatory scrutiny, including a spotlight on forced labor in global supply chains. Companies operating in Canada should consider implementing policies and practices that address the risk of forced labor in their supply chains, to the extent that such policies and practices are not already in place.

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

Competition and foreign investment

Kate McNeecea partner in the Competition, Antitrust and Foreign Investment group, discussed merger review under the competition law.

In recent years, Canada’s Competition Bureau has taken a more contentious stance and has flagged a potentially more contentious approach to merger review if the parties choose to close while the review is ongoing. A review of mergers and acquisitions with publicly traded Canadian targets indicates that in 2021, almost all deals with a competition law the closing condition required substantial comfort from the Bureau.

In addition, significant changes to the competition law which became law on June 23, 2022 have been reviewed. Among other things, these amendments increase fines and maximum penalties for those who break the law and prohibit wage fixing and no-poach agreements between employers.

Employment-Related Class Actions in Canada

Last but not least, Catherine Bootha partner in the Litigation Group, ended the webinar by highlighting key differences between Canadian and US approaches to class actions, and in particular in the area of ​​labor law.

Importantly, unlike the United States, there is no centralized system to manage parallel proceedings and each Canadian province is governed by different legislation. Therefore, businesses should be aware of the complex legal regime that drives class actions in each province.

More and more employment-based class actions are being brought in Canada and the trend is expected to continue. Recent trends reveal that Canadian courts may be more willing to hear cases that touch on systemic injustice and employee abuse. Common class actions in the employment context include denial of pay and benefits, worker classification issues, harassment and discrimination.

Claims that focus on common documents, practices and procedures have been certified, while claims that require an individual assessment of workers’ circumstances are less likely to be certified. Going forward, employers should pay attention to their common workplace policies and procedures to minimize the risk of employment-related class action lawsuits.

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