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Impacts of the No-Poach & Wage-Fixing Guidelines, Child-Focused Food Advertising, and more - Timely Topics June 2023

Timely Topics with McCarthy Tétrault curates the latest market trends on a monthly basis to help you stay informed of developments that can affect your business. This content is current as of May 2nd, but please connect with us if you have any questions on any of the topics below.

Here are this month’s trending topics:

1) Finally Finalized: Competition Bureau Publishes No-Poach and Wage-Fixing Guidelines

On June 23rd 2023, new amendments to the Competition Act come into effect that will have significant impacts for Canadian employers.

As outlined in detail in our recent article, the amendments to section 45 of the Act will make it a criminal offence for unaffiliated employers to enter into agreements to fix salaries, wages or terms and conditions of employment, or to refrain from soliciting or hiring another firm’s employees.

The new section 45(1.1) offences represent, in our view, the most stringent wage-fixing and no-poach antitrust enforcement regime in the world. The potential liabilities under these offences are substantial — prison sentences of up to 14 years for involved individuals, significant corporate fines with no statutory limit (but instead “in the discretion of the court”), civil damages claims (including by way of class actions), reputational harm, and potential debarment of companies with public contracts.

In light of these serious consequences, all Canadian employers would be well-advised to consider the impact of the new provisions on their business, including: evaluating employment-related clauses in their standard commercial arrangements, reviewing their human resources policies (including salary benchmarking exercises), and updating their anti-trust compliance programs.

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Our team continues to carefully monitor updates to how the amendments will be enforced and will provide updates as they become available. If you have any questions regarding the impact of these amendments on your workplace, please do not hesitate to contact any member of our Competition/Antitrust & Foreign Investment or Labour & Employment teams.

2) Significant New Regulatory and Policy Frameworks for Advertising Food and Beverage Products to Children

In response to growing concerns regarding childrens’ vulnerability to advertising, and the potential adverse impacts of advertising foods and beverages to children that are high in sugar, sodium or fats, both regulators and industry have taken steps to place parameters around these practices that have significant implications for brands, retailers and advertisers.

First, starting on June 28th, Ad Standards, will begin to administer the Code for the Responsible Advertising of Food and Beverage Products to Children (“Code”). This Code, together with its companion document, the Guide for the Responsible Advertising of Good and Beverage Products to Children establish a national industry standard for the advertisement of food and beverage products to children. It generally provides that only food and beverage products which meet specified nutritional criteria may be advertised in a manner that is primarily directed to children under the age of 13.

Second, on April 25th, Health Canada published a policy update announcing its proposal to amend the Food and Drug Regulations to restrict advertising to children under the age of 13 for foods that contribute to excess intakes of sodium, sugars and saturated fat. This follows the introduction of Bill C-252 into the House of Commons, which would prohibit advertising “foods and beverages that contribute to excess sugar, saturated fats or sodium in children’s diets in a manner that is directed primarily at persons who are under 13 years of age”.

Both developments employ a similar model: prohibiting targeted advertising to children of food products which do not satisfy prescribed nutritional criteria. However, as outlined in our recent article, Canadian advertisers must be aware of the distinctions with each approach.

As a next step for advertisers and in anticipation for the Code to come into effect on June 28th, Ad Standards has announced it will host a two-part webinar series. The first was held on May 10 and the second will be held on May 31. The webinars will provide attendees with an overview of the Code, explain the nutrient content thresholds required to allow for advertising primarily directed to children, and give practical examples to provide guidance on the application of the nutritional criteria and factors used to determine if an ad is “primarily directed to children”.

Unlike the Code, Health Canada’s proposal to amend the Food and Drug Regulations would carry the force of law once effected, however any implementation of Health Canada’s proposals is likely to unfold on a much longer timeline. Health Canada has announced that the policy update will form the basis for draft regulations that will be published in or around winter 2024 for public consultation.

We recommend that advertisers carefully monitor developments in this space and consider if, and how, they wish to engage with Health Canada on the nature and scope of these proposals over the course of the next year.

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McCarthy Tétrault LLP’s product regulatory team is here to help your business navigate this rapidly evolving regulatory area, ensure that your advertising practices are compliant with all applicable laws, regulations, and industry requirements, and advise on engagement with regulators.

3) Is your business ready? The Fight Against Forced Labour and Child Labour in Supply Chains Act

On May 3, 2023, Federal Bill S-211 passed its final reading in the Senate to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”). The Act will come into force on January 1, 2024, and will implement reporting requirements related to forced and child labour for entities that produce, sell, or distribute goods anywhere or import goods into Canada. The Act will also expand the prohibition against the importation and distribution in Canada of goods made from forced labour to those made in whole or in part from child labour.

This new law will require Canadian companies and government departments to scrutinize their supply chains and file public reports on their efforts to improve labour practices. Given the broad range of entities that are covered under the obligations of the Act, and explained in detail in our recent article, all businesses should carefully review these new measures to determine if these obligations apply to them and, if so, take action to prepare for the initial reports that are due in May 2024.

By May 31 each year, starting in 2024, captured entities must submit to the Minister of Public Safety and Emergency Preparedness a report on diligence processes implemented by the entity that are aimed at preventing and reducing the risk that forced or child labour is used in the production or importation of goods by the entity. In regards to child and forced labour, these reports must include information about the steps the entity has taken to reduce the risk that child or forced labour is used in its supply chains, the entity’s structure, activities, and supply chains, the entity’s policies and due diligence processes, the entity’s risk areas, remediation efforts, and training programs, and how the entity assesses its effectiveness in ensuring forced and child labour are not being used in its business and supply chains. Such reports must be approved by the entity’s governing body. Canadian Business Corporation Act companies must provide the report to each shareholder along with its annual financial statements.

Reporting entities that fail to comply with the Act and persons who knowingly make false or misleading statements or knowingly provide false or misleading information to the Minister or their delegates are guilty of a summary offence and liable to a maximum fine of $250,000. Directors, officers, and agents of entities who directed, authorized, assented to, or acquiesced in the commission of an offence under the Act can also face the same penalties.

Finally, the federal government appears motivated to build on the obligations in Bill S-211, and will likely introduce additional requirements for businesses to address possible forced labour or child labour in their supply chains. McCarthy Tetrault’s head of International Trade & Investment Law Group, John Boscariol, advises that “Clients need to be monitoring these developments very carefully now as we are in the midst of a sea change regarding the due diligence expectations when it comes to the risk of either forced labor or child labor anywhere in your organization’s supply chain.”

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McCarthy Tétrault’s International Trade and Investment Group has advised numerous clients in a variety of industries on how to respond to Bill S-211 and will continue to monitor developments in this space.

4) Supreme Court of Canada Decision and the Impact on Arbitration Agreements

Canada’s highest court continues to adjust Canada’s commercial insolvency regime.

In Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, the Supreme Court of Canada confirmed that arbitration agreements may be inoperative in a receivership. Peace River and Petrowest had arbitration clauses in their contracts. Petrowest entered receivership. The receiver sued Peace River, which applied for a stay in favour of arbitration under British Columbia’s arbitration legislation. A majority of the Supreme Court held that a court may find an arbitration agreement to be “inoperative” within the meaning of the British Columbia arbitration legislation where arbitration would compromise the orderly and efficient resolution of a receivership. However, there is a “heavy onus” to avoid arbitration. In Peace River, the receiver succeeded in showing that arbitration would result in a chaotic process and should be avoided. Other cases may turn on the specific phrasing of the provincial legislation and arbitration clauses.

Adam Goldenberg, a partner in McCarthy Tétrault’s litigation group explains “Arbitration clauses can be an important part of the bargain in commercial contracts. Peace River provides an important warning: parties may not be able to rely on these contractual provisions when their counterparty enters receivership.”

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McCarthy Tetrault’s leading National Appellate Litigation Group is committed to keeping client’s apprised of developments from Canada’s highest courts. For a broader summary of key recent appellate cases shaping Canada’s legal and business landscape, please review McCarthy Tetrault’s Appellate Quarterly. The next Appellate Quarterly session will take place on July 26, 2023. To receive an invitation, please e-mail [email protected].

This newsletter is designed to provide general information only. This newsletter does not provide legal advice on specific issues. You are encouraged to consult with legal counsel should you require assistance in addressing a particular issue or concern.

Tell us what you think! Do you have feedback for the Timely Topics newsletter or topics you’d like for us to explore? Let us know at [email protected].

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