In this month's Addendum...
- Competition law: Why silence is golden
- Labour and employment : Toxic bosses
- Corporate counsel: The tectonic shift
- Business immigration: Compliance challenges
- Mergers: Hollowing out
Michael P. Fitzgibbon
Addendum is published by National magazine, the official magazine of the Canadian Bar Association. The views expressed in the articles contained herein are solely the views of the authors, and do not necessarily represent the views of the Canadian Bar Association.
Loose talk and hot docs: why silence is golden in competition law
By Mark Katz, Davies Ward Phillips & Vineberg LLP
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Allegations of anti-competitive behaviour are often based on a company's own documents and other statements. Accordingly, it is an axiom of competition law compliance that parties must be extremely careful in what they say and write about the competitive implications of their conduct.
Any skeptics still remaining to be persuaded about the validity of this point would be well-advised to consider the proceedings that were initiated in the United States by the Federal Trade Commission against the Whole Foods/Wild Oats merger. This case is a timely reminder of the adverse consequences that can ensue when parties fail to pay adequate attention to what they are saying and writing.
Whole Foods and Wild Oats both operate high-end supermarkets that carry organic and other natural-type products. In February 2007, the two companies entered into an agreement pursuant to which Whole Foods was to acquire Wild Oats. The parties filed their pre-merger notifications with the Federal Trade Commission, which, after completing its review, decided to seek a court order to enjoin the transaction from proceeding.
The FTC argued that the Whole Foods/Wild Oats merger should be prohibited because it would harm consumers by lessening competition in the market for "premium natural and organic groceries." In advancing this argument, the FTC relied heavily on internal documents of the parties, particularly those from Whole Foods.
Foremost among the choice quotations cited by the FTC were selections from a presentation made by John Mackey, Whole Foods' CEO, to the company's board of directors. In this presentation, Mackey observed, among other things, that the acquisition of Wild Oats would help avoid "nasty price wars" in certain overlap markets and prevent more traditional supermarket chains from using Wild Oats as a "springboard" to launch a "competing national natural/organic food chain to rival [Whole Foods]." As a testament to Mackey's techno-skills, the FTC also quoted similar statements from Mackey's blog and from anonymous postings that he had made on certain Internet message boards.
Although perhaps less dramatic in nature, the FTC was also able to point to a broad range of other internal documents from both companies in support of its case. For example, before the merger proposal, Wild Oats had prepared a series of documents detailing its strategy to deal with Whole Foods; there were apparently no plans of an equivalent nature with respect to conventional supermarkets. Similarly, various Whole Foods' documents seemed to indicate that it was principally concerned with Wild Oats as a competitor. Even more tellingly, Whole Foods had prepared a deal valuation for the proposed transaction – which it called "Project Goldmine" – showing the healthy profits that it anticipated earning following the merger.
Notwithstanding these various documents and other statements, the U.S. District Court ultimately denied the FTC's request for an injunction and the merger was allowed to proceed (although the decision is now under appeal again). The court found the parties' economic evidence in defence of the merger more compelling than the documents (and other evidence) cited by the FTC.
The U.S. District Court's decision demonstrates that inflammatory statements alone will not necessarily make out the case against an allegedly anti-competitive merger. But this result should not obscure the principal compliance lesson to be learned from the Whole Foods experience – careless language in a party's documents is like catnip to competition authorities and heightens the risk of enforcement action. Even if the proceedings are ultimately unsuccessful – as has been the case (so far) with the FTC's pursuit of the Whole Foods/Wild Oats merger – the threshold question for companies and their advisors is: why take the risk and voluntarily hand authorities the evidentiary rope with which they will try to hang you?
“The Whole Foods case underscores the importance of educating companies and their personnel about how competition authorities (not to mention private plaintiffs) will make use of internal documents against them.”
The Whole Foods case underscores the importance of educating companies and their personnel about how competition authorities (not to mention private plaintiffs) will make use of internal documents against them. In Canada, for example, the Competition Bureau has a variety of means to acquire a company's internal documents as evidence, including compulsory production orders, search and seizures and pre-merger notifications.
The issue of document creation is particularly sensitive in the context of mergers and acquisitions, where the need to "sell" the benefits of the transaction may lead companies to use overly aggressive language that can be read to imply anti-competitive effects. For example, care should be taken not to state that the acquisition will raise barriers to entry; allow the merged entity to "dominate" the market; or lead to increased pricing power post-merger. Instead, the pro-competitive aspects of the transaction (assuming there to be any) should be emphasized.
Although the FTC injunction against Whole Foods failed this time, one can expect that Mr. Mackey will be more circumspect in his language if and when the next merger comes around. He, and all corporate personnel in the same situation, would be well advised to abide by the golden rule of document creation in this context: don’t write, say or e-mail anything that you wouldn’t want to see appear prominently in litigation documents filed against you by a competition authority. Words count in competition law – and none more so than one's own self-authored, and self-incriminating, statements.
Mark Katz is a partner in the Toronto office of Davies Ward Phillips & Vineberg LLP, where he is a member of the firm's competition law and foreign investment review groups. He has appeared at every level of court in relation to competition matters, up to and including the Supreme Court of Canada, and has acted as counsel on several leading cases before the Competition Tribunal, including the first abuse-of-dominance and merger cases heard by that body. Mark can be reached at 416-863-5578 or email@example.com.
Workplace bullying and harassment
By Michael P. Fitzgibbon, Borden Ladner Gervais LLP, Toronto
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Courts in Canada have lately taken on a more active role in policing workplace behaviour. Courts will show their concern with employer behaviour in a variety of ways, including through an award of Wallace or punitive damages. Irrespective of how the court intervenes, what is clear is that, over the past 10 years, judges are scrutinizing employer “conduct” in deciding on the appropriate remedy and awarding damages to the employee where the employer’s conduct towards the employee is objectively unfair, unreasonable, or offensive.
The starting point for this approach is a recognition that an employment contract is different from, for example, a commercial contract or any other contract for that matter. In Alberta Reference (Reference re Public Service Employee Relations Act (Alta.)),  1 S.C.R. 313), Chief Justice Dickson observed that:
Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being. Accordingly, the conditions in which a person works are highly significant in shaping the whole compendium of psychological, emotional and physical elements of a person’s dignity and self-respect.
In Wallace, the Supreme Court of Canada took up this theme and extended it by importing the existence of a “power imbalance” into every facet of the employment relationship.
This “power imbalance” has been relied upon in subsequent decisions in support of the awarding of non-contractual types of damages (in the recent unreported case of Szabo v. Poley (Oct. 30, 2007, OHRT)), the Human Rights Tribunal of Ontario found that the “power imbalance is particularly pronounced in the type of employment in this case, where workers earn low wages doing relatively unskilled work.” The tribunal awarded $8,000 in general damages to the employee in the circumstances. This imbalance is important because harassment and bullying often have, as their genesis, power and control.
The problem and implications
Is workplace bullying as pervasive and widespread as many experts claim? The answer, according to a number of recent surveys, is a resounding “yes.” A recent U.S. study discovered that:
- 37 per cent of American workers, an estimated 54 million people, have been bullied at work;
- 49 per cent of working Americans said they suffered or witnessed workplace bullying, including verbal abuse, job sabotage, or destruction of workplace relationships;
- bullying is four times more prevalent than illegal forms of "harassment”;
- 72 per cent of bullies are bosses;
- women are targeted by bullies more frequently (in 57 per cent of cases), especially by other women (in 71 per cent of cases);
- Only three per cent of bullied targets file lawsuits, and 40 per cent never complain;
- Verbal abuse and behaviour/action are the most common forms of bullying (tied at 53 per cent)
The problem has become so omnipresent that, in the United Kingdom, a campaign has been launched to declare Nov. 7 “Ban Bullying at Work Day.” A number of books have also recently been written on the subject, including Prof. Bob Sutton’s eye-catching The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn't.
Some workplaces may have a culture that encourages a certain style of behaviour. A Wall Street Journal article starts off as follows:
Are you sometimes a conniving weasel at work? Do you notice yourself stepping on other people's fingers as you scamper up the corporate ladder? Have you rudely ignored colleagues who can't help you advance?
If you answered yes to any of these questions, then you probably aren't the biggest jerk in your office.
That's because the really big jerks almost never acknowledge their devious behavior. In many ways, that's the secret to their success.
It seems clear that workplace harassment and bullying is a very real problem whose reach is widespread.
Dealing with bullying and harassment
Prohibitions against discrimination and harassment in employment are found in each province’s human rights legislation and, federally, in the Canadian Human Rights Act. Certain prohibited grounds are specified in each statute and include, among others, sex, race, religion and disability. Accordingly, bullying, to the extent that it is based on a prohibited ground under human rights legislation, could found a complaint.
Some jurisdictions have addressed the problem more directly. Sweden was the first country to protect workers against bullying through legislation that was passed in 1993. Others, including Great Britain and France, followed.
In Canada, Quebec amended the Act Respecting Labour Standards (LSA) to specifically provide a statutory recourse against psychological harassment in the workplace.
The LSA defines psychological harassment as:
…. any vexatious behaviour in the form of repeated and hostile or unwanted conduct, verbal comments, actions or gestures, that affects an employee's dignity or psychological or physical integrity and that results in a harmful work environment for the employee.
The Quebec legislation further provides that “a single serious incidence of such behaviour” can also constitute psychological harassment “where it has a lasting harmful effect on an employee.”
Saskatchewan also amended its Occupational Health and Safety Act to deal with conduct that “adversely affects the worker’s psychological or physical well-being and that the person knows or ought to reasonably know would cause the worker to be humiliated or intimidated.” The conduct that can give rise to a complaint can be repeated or a “single serious occurrence of conduct, or a single serious comment, display, action or gesture, that has a lasting, harmful effect on the worker.”
Statistics compiled on psychological harassment complaints instituted over the last two years in Quebec show a surprising number of complaints, which may be indicative of employees using the psychological harassment recourse as a catch-all for a variety of workplace conduct. Nearly 5,000 complaints have been filed with the Commission des normes du travail since 2004, with only approximately 320 being referred to the Commission des relations du travail for a hearing, and no more than 15 actual decisions relating to psychological harassment being rendered to date.
The statistics demonstrate that there is considerable confusion about what conduct gives rise to a claim for psychological harassment under the LSA. The Saskatchewan legislation attempts to address this somewhat by providing that, with respect to psychological-type harassment:
…. harassment does not include any reasonable action that is taken by an employer, or a manager or supervisor employed or engaged by an employer, relating to the management and direction of the employer's workers or the place of employment.
Quebec has, similarly, attempted to clarify the types of conduct that will give rise to a claim for psychological harassment under the LSA, albeit by way of a bulletin issued by the Quebec Labour Standards Branch. For example, psychological harassment does not include:
- Normal exercise of management rights – According to the bulletin, “the day-to-day management of discipline, performance at work or absenteeism, the assignment of tasks, the application of the gradation of sanctions and even dismissal constitute the legitimate exercise of the management right. These actions do not constitute psychological harassment, provided that the employer does not exercise these rights in an abusive or discriminatory manner” (see Centre hospitalier régional de Trois-Riviéres (Pavillon St-Joseph) v. Syndicat des infirmières et infirmiers de Trois-Rivières (2006), No. 2004-9453) .
- Work conflicts – According to the bulletin, “in itself, a conflict does not constitute psychological harassment. Conflicts at work, if they are managed wisely, may lead to the clarification of responsibilities and the evolution of relations among staff. Conversely, if conflicts are managed poorly or left unresolved, they can give rise to psychological harassment, even circumstances involving risks.”
- Work-related stress – According to the bulletin, “work-related stress may have other origins than psychological harassment. However, the accumulation of stress factors may constitute a circumstance involving a risk.”
- Difficult conditions of employment and professional constraints – According to the bulletin, “difficult conditions of employment and professional constraints, organizational changes when they are justifiable from an economic or technological standpoint and when they affect the personnel in a non-arbitrary manner,” do not constitute psychological harassment.
“Aside from the practical costs associated with condoning, through inaction, a 'bullying' workplace environment, the legal risks and financial costs associated with not dealing with the 'bully' can be very significant.”
A number of avenues of redress are available for employees to deal with incidents of workplace bullying and harassment, depending upon the jurisdiction in which the employee is working. In addition, in view of the courts’ recent willingness to permit the litigation of human rights claims, it should be expected that, even absent specific legislation, claims arising out of workplace bullying will be brought before the courts. Various torts, such as intentional or negligent infliction of mental distress, will be relied upon to advance such claims. In addition, we will continue to see punitive and Wallace claims (Sulz v. Minister of Public Safety and Solicitor General (2006), 54 C.C.E.L. (3d) 190; see also Amaral et al. v. Canadian Musical Reproduction Rights Agency (2007) CanLII 46701 (Ont. S.C.)), as well as purely contractual claims, such as constructive dismissal, based upon harassing behaviour (Shah v. Xerox Canada Ltd.  O.J. No. 849 (C.A.)).
Case law now exists to the effect that “employers will be held liable for tolerating a corporate culture which involves abusive treatment of staff members and highlights that employer’s responsibility to be responsive to interpersonal conflicts” (Thomlinson, C.,“Bullying and Personal Harassment: Finding the Appropriate Response” (7th Annual Advanced Forum on Employment Law, Oct. 29, 2007)). The legislative approach in Quebec and Saskatchewan, as well as the evolving judicial attitude, herald the importance of prevention and the absolute necessity of a proactive and vigilant management approach when dealing with workplace complaints and conflicts. Aside from the practical costs associated with condoning, through inaction, a “bullying” workplace environment, the legal risks and financial costs associated with not dealing with the “bully” can be very significant.
Michael P. Fitzgibbon is a partner at the national law firm of Borden Ladner Gervais LLP, where he practices management-side labour and employment law. He runs the labour law blog Thoughts from a Management Lawyer.
Law 2.0 — a tectonic shift for the legal profession
In October 1988, I left my secure law firm perch and embarked as general counsel of a company called Solbourne Computer, which made UNIX workstations and servers. Entrenched as we were in the high-tech world, we used e-mail for much of our communications. Naturally, I asked our law firms to use it as well. And that’s when I first started noticing an interesting evolution.
- In 1989, when I asked our law firms to start using e-mail, they said “What’s e-mail?”
- In 1991, when I asked our law firms to start using e-mail, they said, “We would, but we can’t decide which e-mail system to use.”
- In 1992, when I asked our law firms to start using e-mail, they said, “We would, but we’re worried about the possibility of breaching privilege.”
- In 1993, when I asked our law firms to start using e-mail, they said, “We would, but we don’t know how to bill for it.”
- In 1994, when I asked our law firms to start using e-mail, they said, “We already do.”
In the brief period between 1994 and 1996, the legal world went from a low percentage of lawyers using e-mail to almost universal e-mail use; today, lawyers probably spend more time using e-mail than any other profession. This sea change occurred almost overnight, without resolving along the way any of the objections lawyers had made to the use of e-mail — and more importantly, without any major change to the way lawyers worked.
Today, we are on the verge of a technology shift in law far more profound than the widespread adoption of e-mail. The technologies sometimes collectively referred to as “Web 2.0 collaboration” will have a far bigger impact on law than either the personal computer or e-mail.
While there is no single definition of the term, “Web 2.0” is generally understood to mean those applications that exist on no one person’s or enterprise’s computer — “in the cloud,” so to speak — and which facilitate collaboration among users. Wikipedia and Facebook are among the best examples of Web 2.0 applications.
When I discuss this topic with law departments or law firms, none ever disputes that Law 2.0 will happen or will be beneficial. But many are skeptical about how soon, arguing (somewhat tautologically) that since the change hasn’t happened yet, it won’t happen at all. I’m not seeking to make the case for Web 2.0, but rather to describe the array of observable data supporting the thesis that Web 2.0 adoption is imminent.
Here's my Top Ten Reasons Law 2.0 may be closer than you think.
1. The rise of the legal department.
The practice of law today is unique in that most professional services are bought by other professionals (i.e. law departments of big companies). This has five dramatic implications:
Purchasers of legal services
- are highly sophisticated and can assess value;
- are organized in groups (legal departments) that are often better able to achieve scale economies than are the service providers (law firms);
- are more closely aligned with the goals and operating styles of their clients, including process definition, measurement and efficiency;
- have a great deal of freedom in “build vs. buy” decisions (whether to proceed internally or to team with a law firm), such decisions often being fungible; and
- are increasingly the intellectual center of gravity of law. General counsel are much more interested in knowing what other law departments are doing than hearing abstract advice from law firms, and are more likely to talk to other law departments than to law firms.
If law firms don’t embrace Web 2.0, clients will increasingly use it to communicate client-to-client, with a resulting decrease in the role of law firms.
2. The anomalous pattern of legal spending.
Simply put, just about everything companies buy (except energy) is getting less expensive on a value basis. But legal spending has been growing twice as fast as most areas of corporate purchasing; as the Japanese saying goes, “the nail that stands out gets hammered down.” Legal spending is large and visibly out of step with the corporate reality.
The rise of private equity ownership has generated a lot of revenues for large business deals. But the more important long-term effect will be a clampdown on legal spending — just look at how private equity investors drive reductions in all spending categories. If Web 2.0 technologies have the promise of reducing spending, then CFOs, CEOs, investors and others in the enterprise will insist they be used.
3. The low cost of technology deployment.
In law firms, information technology has traditionally been viewed as a cost center. Since most law firms minimize the capital in the firm and distribute cash to partners every year, there is a strong impetus to keep spending on technology down. But Web 2.0 technologies are now cheap to deploy.
Less expensive systems not only offer reduced costs on the front end, but also allow law firms to move away from the long and extremely expensive “consensus” decision-making processes.
4. The instability of the labour market for lawyers.
The greatest internal change among law firms over the last few years has been the growing attrition rate among associates. It is fueled by associates’ recognition of the low probability of becoming a partner and by their overall frustration with their work. Law firms will have to find ways both to improve the professional lives of associates.
Law 2.0 technologies can play a role here. Firms can enable associates to be closer to clients, or leverage “lawkipedia”-type systems to accelerate their training or garner recognition as contributors. Law 2.0 can also open up the possibility of more flexible work styles (30 hours per week from home for a young parent, for example).
5. Successes outside the legal profession.
Wikipedia and Facebook are now colossal successes. Lippe’s Second Law of Legal Industry Change states that “two years after their kids are using a tool, lawyers will say they don’t get it and never will; five years after their kids are using a tool, lawyers will say they have always loved it.” This happened with the PC, the Web browser, and e-mail. There’s no reason to assume it won’t happen with Web 2.0.
6. Global growth in demand
Most economic growth is occurring outside North America, and most of the growth in worldwide legal spending will occur in Europe- and Asia-based operations of companies headquartered in North America. London-based firms are larger, more global, better organized and better at collaboration and knowledge management – these are the principles upon which Web 2.0 technologies are based. More global operations mean more people in more places, creating a greater need for multi-jurisdictional information and more collaboration.
7. Organization of information in “the cloud”
Over the past ten years, the cost of computer storage and networking has dropped, which means that digital information can be stored and retrieved from essentially anywhere (this is the much more important implication of a “flat world” than the shift of jobs to India). Gmail users know it’s easier to find a document in Gmail, thanks to its robust features and ease of use, than in their offices.
Since most legal organizations, whether law departments or law firms, have not yet fully organized the information within their bricks-and-mortar walls, they will soon find that it is easier to organize information outside their walls than within them.
8. The ascendancy of databases.
For most of human history, documents have been the best way to organize information. Over the last 30 years, however, the database has emerged as a superior organizational system. Much of the present critique of the practice of law – the hours required to work on a file, the cost of services, the repetitiveness of tasks, the complexity of the process – is rooted in the inherent difficulty of working with large, unstructured documents.
The combination of collaborative “social production” and technologies that allow fluidity between documents and databases (XML, wikis) means that teams of lawyers can better manage complexity. For example, XML allows a user to find people, paragraphs (data or documents) and processes in one environment.
9. The rise of collaboration.
David Maister and other commentators have noted lawyers’ strong desire for autonomy. Yet as the scale and complexity of legal work has grown, lawyers find themselves in ever-larger organizations and teams. Facebook and Wikipedia have shown that Web 2.0-approaches allow users to be autonomous and collaborative, simultaneously
For example, a team of both in-house and law-firm lawyers could use a wiki to manage the range of contracts and variations across their company, or to standardize ways of sharing policies across companies. The emergence of new forms of social production is one of the most noteworthy phenomena of the last few years.
10. Non-lawyer ownership of firms.
Although not yet a factor in North America., emerging regulatory changes in Australia, the U.K., and perhaps elsewhere in the European Union presage the emergence of law firms with investment from (and even control by) non-lawyers.
“Long before there was Wikipedia, lawyers developed the common law – a linked, multi-authored, 'emergent' codification of best practice.”
Whether this change in ownership change occurs with just one firm or with dozens, it’s likely to have a catalytic effect. Firms with pure financial investors will adopt conventional business strategies, such as price competition, product definition, greater labor specialization, and substitution of technology for labour. All law firms will then have to respond.
“There’s nothing new under the sun” — that’s never been more true than when talking about lawyers adopting new technologies. The context of Web 2.0 might be new, but in many respects, the motivation and the mechanisms are quite familiar. Long before there was Wikipedia, lawyers developed the common law – a linked, multi-authored, “emergent” codification of best practice. Long before Facebook, lawyers developed Martindale-Hubbell as a way to relate across geographies and leverage existing networks.
Lawyers have always understood the need and desire to adopt new technologies to serve their clients. Web 2.0 won’t be any different. As lawyers start to see the benefits of Web 2.0 for their clients, they will quickly go from “worst to first” in their adoption of those technologies, just as they did with e-mail.
Paul Lippe is a founder and the CEO of Legal OnRamp, a Silicon Valley-based network founded in co-operation with Cisco Systems and other leading companies to improve legal quality and efficiency through collaboration, automation and process re-engineering. Paul is a former GC (Synopsys) and Harvard Law School 1984 (firstname.lastname@example.org).
Corporate governance and immigration compliance for employers
By Jacqueline Bart, Bart and Associates, Barristers and Solicitors
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Do coaches, athletes, self-employed individuals and intra-company transferees require work permits to work in Canada? Confusingly for employers and employees alike, the answer is both yes and no. In today’s global corporate labour mobility marketplace, more and more employers find themselves facing immigration compliance scenarios like these. And with Canada’s immigration laws, policies and processes taking on a complexity similar to that of the Income Tax Act, they are increasingly difficult to comply with. Ignoring immigration compliance – which touches on a dizzying array of business areas, including corporate governance, ethics, human resources management, employer liability, labour shortages, skills transfer, training, employee liability and mobility, among others – simply isn’t an option.
Understanding immigration law is a relatively new challenge for corporate counsel, employers and their counsel, and, unfortunately, recruiting foreign workers in Canada has never been more complex and fraught with potential pitfalls. Canada’s immigration compliance provisions under the Immigration and Refugee Protection Act (IRPA) are now being enforced and prosecuted through a new “line of business” at Citizenship and Immigration Canada (CIC).
From a corporate governance perspective, s. 124 (1) of the IRPA, which states “every person commits an offence who employs a foreign national in a capacity in which the foreign national is not authorized under this Act to be employed,” is the key immigration compliance provision.
This “illegal employment” provision is followed by a “deemed knowledge” provision: “A person who fails to exercise due diligence to determine whether employment is authorized under this Act is deemed to know that it is not authorized” (IRPA s. 124 (2)). Employers, their counsel, and anyone representing the foreign worker, the employer, or both, are therefore deemed to have knowledge and understanding of immigration law, notwithstanding the fact that the IRPA and its related regulations and policies are sometimes neither clear nor straightforward.
Employers and their lawyers alike are potentially at risk of incurring substantial penalties for a number of business-immigration-related offenses: contravening the IRPA under the illegal employment provisions, providing inadequate legal advice in contravention of the IRPA and its related regulations and policies, misrepresentating by omission or commission, attempting to and/or counseling misrepresentation, or attempting to and/or inducing, aiding, or abetting misrepresentation.
Penalties for violating the Act can involve fines of up to $100,000, jail terms of up to five years, or both. Offences are punishable in Canada whether they occurred in Canada or outside of the country based on s. 135 of the Act, which sets out that “any act or omission that would, by reason of this Act be punishable as an offence if committed in Canada, is, if committed outside of Canada, an offence under this Act and may be tried and punished in Canada.” Illegal employment, misrepresentation, aiding and abetting and deemed knowledge provisions apply outside Canada as well.
Because they relate to persons who “directly or indirectly misrepresent or withhold material facts relating to a relevant matter that induces or could induce an error in the administration of [the IRPA]” (s. 126), the aiding and abetting and misrepresentation and counseling misrepresentation provisions in the IRPA cast an exceedingly wide net. What constitutes a “material fact” will differ markedly, depending on the specific circumstances of the case at hand, and is therefore subject to varying interpretations. Most work permit categories are set out in policy rather than specific legislative provisions, and work permit immigration policy is subject to varying interpretations. To further complicate matters, CIC officers often cannot agree on whether an individual requires a work permit or a visitor record.
Penalties for non-compliance can be levied against employers and their counsel alike, and can also extend to employees, possibly affecting their entrance to Canada. Section 40 of the IRPA renders a foreign national inadmissible for misrepresentation or withholding material facts which relate to a relevant matter that could induce an error in the administration of the IRPA. Once declared inadmissible, a foreign worker will be barred for a period of two years. Accordingly, employers who do not advise and/or assist their staff in obtaining required work permits not only risk prosecution in their own right, but also face the prospect of having their employees rendered inadmissible to Canada for misrepresentation or withholding a material fact. If the employer’s alleged misrepresentation is linked to the employer and/or counsel, the employer and counsel may also be charged, under s. 131 of the Act, with inducing, aiding, or abetting, or attempting to induce, aid, or abet the employee in contravening the Act.
Employers and their counsel cannot afford to ignore immigration compliance legislation when recruiting foreign workers or transferring their staff to Canada as part of a business’s corporate and human resource planning. In addition to ensuring all foreign workers are legally documented and have obtained work permits, counsel is also placed in the dual role of being obliged to represent the foreign worker applicant when representing an employer on a work permit application.
Moreover, employment lawyers are required to sign a “use of representative” form, which formally appoints the lawyer as the representative of an employee. This form authorizes CIC to communicate with counsel in relation to the work permit application. Without this completed form, CIC will refuse to communicate with the lawyer.
The de facto representation of the client’s employees, now reinforced by the de jure representation, formalized by the “use of representative” form, places the employer’s lawyer in a potential conflict of interest situation which can be aggravated by any or all of the following employment law issues: contractual issues, including employment conditional on work permit approval; medical and criminal admissibility; legal issues arising from the relocation; and, most importantly, the obvious conflict of interest that could potentially result in the event of termination.
Immigration and relocation issues often exacerbate the consequences of termination by an employer.
“Corporate lawyers must be vigilant to ensure that their employer clients are obtaining immigration compliance expertise, whether or not they choose to deliver this expertise in-house.”
As a result of the increasing focus on conflicts of interest in law firms in the wake of the Neil and Strother decisions and the creation and updating of conflicts-of-interest policies among Canadian law firms, the potential for conflicts of interest caused by the simultaneous representation of the employer and employee have created consternation and disapproval by law firm management.
As a consequence, employment and corporate lawyers have shied away from immigration law, with the inadvertent but nonetheless adverse result that immigration issues are often overlooked. Larger law firms have gravitated to boutique immigration law firms as a method of avoiding the issue of conflicts which could otherwise result in the possible loss of a corporate client. In turn, this has resulted in the growth of firms practicing exclusively in immigration law, and that represent employees and employers in joint retainer situations.
Although this practical solution may make good business sense because it reduces the potential of losing a corporate client or employer as a result of a law firm conflict, it may also discourage law firms from adequately addressing important compliance issues with their clients. However, removing immigration law from the areas of practice large firms offer to a client corporation or employer runs the risk of overlooking the importance of considering all aspects of immigration compliance, and exposing employees, employers and counsel alike to risk.
Accordingly, corporate lawyers must be vigilant to ensure that their employer clients are obtaining immigration compliance expertise, whether or not they choose to deliver this expertise in-house.
Jacqueline Bart is the founder and managing lawyer of Bart and Associates, Barristers and Solicitors. She has a Certified Immigration Specialist designation from the Law Society of Upper Canada and the editor-in-chief of a loose-leaf Canada/U.S. relocation manual: Immigration, Customs, Employment and Taxation.
Despite a loonie surging ahead of the dollar and a generally booming economy, Canada’s national identity still seems to struggle with an inferiority complex when it comes to business. For the most recent example, read the media reports nationwide about foreign multinationals snapping up Canadian companies all over the place.
Canadians have watched foreign buyouts of domestic firms take place for decades. But this latest batch represents the elite of corporate Canada across a broad spectrum of sectors:
- Hudson’s Bay Co. (retail);
- Inco Ltd. and Falconbridge Ltd. (mining);
- Fairmont Hotels & Resorts and Four Seasons Hotels and Resorts (hospitality);
- Dofasco Inc. and Stelco Inc. (steel);
- Alcan Inc. (aluminum);
- Sleeman Breweries Ltd. and Vincor International Inc. (wine and spirits);
- Terasen Inc. (energy); and
- ATI Technologies ULC (high-tech).
Is Canada at risk of becoming nothing more than a wholly-owned subsidiary of the rest of the world, especially the United States?
The list of seemingly never-ending buyouts has led everyone from journalists and politicians to Tim Horton’s regulars to suggest that Canadian industry is being “hollowed out.” Canada, they say, risks becoming nothing more than a wholly-owned subsidiary of the rest of the world, especially the United States.
But a closer look at the facts presents a more nuanced picture.
“The reaction to the loss of Canadian icons such as Inco and Alcan is understandable,” says Derek Burney, a senior strategic advisor with Ogilvy Renault LLP in Ottawa and a former ambassador to the U.S. “But what people forget is that there are Canadian companies out there that are just as active on the foreign acquisition trail.”
Consider these examples:
- Waterloo, Ont.-based Manulife Financial Corp. bought out U.S. life insurer John Hancock Financial Services Inc. for more than $10 billion in 2004.
- Toronto-based Thomson Corp. bought out Reuters Group PLC in 2007 for $17.2 billion, creating the leading provider of news and data for professional markets in the world.
- More recently, Royal Bank Financial Group became the latest in a long list of Canadian banks to move into Latin and Central America with its $2.2 billion acquisition of RBTT Financial Group.
- And in early October, TD Bank Financial Group became the seventh-largest bank in North America after its acquisition of Commerce Bancorp Inc. for $8.5 billion – this following its acquisition of Banknorth Group Inc. in 2005.
In addition, two separate reports issued in 2007 suggest that the purported “hollowing out” crisis is a myth. According to a March 2007 study from the Toronto-based Institute for Competitiveness & Prosperity (Report on Canada: Agenda for Canada’s Prosperity), Canada now has 72 companies that are considered global leaders in their areas of business – more than twice the number in 1985.
As well, Canada’s current global leaders are almost twice as large as the 1985 leaders when defined by sales revenue in constant dollars. “We simply are not being hollowed out,” the report says. “We are thickening up.”
“Canada must improve its access to international capital markets while taking the necessary measures to ensure that our own champions of industry flourish both domestically and internationally.”
And in a C.D. Howe Institute study released in August 2007 (Canada is Missing Out on Global Capital Market Integration), Canada ranks just 46th out of 73 industrialized and major developing countries in terms of net inflow of foreign direct investment (FDI) as a percentage of overall GDP from 2001-05. But we rank 13th on the list in terms of net outflow of FDI. Canadian businesses have spent $60 billion on foreign takeovers of their own during that time.
What all this activity represents is a new reality in the global economy, in which capital markets are becoming increasingly integrated. Accordingly, Canada must improve its access to international capital markets while taking the necessary measures to ensure that our own champions of industry flourish both domestically and internationally.
Merger and acquisition (M&A) activity will therefore continue to become a cross-border affair.
Read the full article in National magazine