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Timely Topics - October 2022 Edition

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 October 3, but please connect with us if you have any questions on any of the topics below.

Here are this month’s trending topics:

1) Labour Unrest in Canada: A Rise in Illegal Strikes?

This summer saw an increase in strike activity and an uptick in unionization organizing efforts. More recently, there have been a number of headlines regarding illegal strikes across Canada – see here and here for examples.

So the question everyone is asking is: does a union's failure to react to an illegal strike by its members give rise to a class action against it? The Quebec Court of Appeal recently confirmed that, in the event of passiveness, a union can indeed be held liable for damages resulting from its non-reactivity. This includes employers who were deprived of work performance as well as workers who wanted to execute their work but were prevented from doing so because of the illegal strike. Check out our recent blog post on A Union’s Duty to End Illegal Strikes to learn more.

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Please connect with a member of our National Labor and Employment Group if you’d like to speak about this or related issues regarding your own organization.

2) Employment-related Class Actions: What We’re Seeing

By now, you’ve likely heard of “quiet quitting”, a form of work-to-rule where an employee works only within their defined work hours and does not go above and beyond their job description. This work approach has been trending in the news and social media as employees across industries assess their priorities and strive for better work-life balance.

At the same time, in the market, we continue to see signs of labour unrest in the form of work stoppages, strikes, unionization organizing efforts and an increase in employment class actions globally.

“We are definitely seeing increased litigation and class action activity relating to unpaid overtime, the classification of independent contractors vs. employees, and return to work mandates” says Tim Lawson, Head of McCarthy Tétrault’s Labour & Employment Group. “Union organizing is also being bandied about by employees in many sectors, especially retail and hospitality and service sectors where union rates are historical low. With increased inflation and a tight labour market, it is important for employers to not only proof themselves to be class action immune, but also be able to read the signs of union organizing and be ready to counter misinformation and employee disengagement.”

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If you’d like to discuss your organization’s class action readiness plan, please connect with our National Class Actions team. 

3) An Update on ESG/Sustainability: The Impact of Activism

Climate activism is on the rise and the increase in climate-related legal action has caught the attention of many, including insurers. The insurance industry is watching closely and warn that if activists are successful, there may be an increase in the cost of directors and officers (D&O) liability insurance. All it takes is one major success or a series of smaller ones to potentially trigger a pricing review across the market.

With activism as the backdrop, we are also seeing a shift globally with respect to ESG disclosures – from a voluntary to a mandatory framework. Check out Canadian Lawyer Magazine’s recent article, “Mandatory Disclosure on ESG is Necessary, but also Provides Opportunity”, with our partner, Wendy Berman, who explores why a “voluntary regime has ‘fallen short of ensuring kind of consistency, and comparability needed to provide decision-useful information for investors.’” While market participants await mandatory disclosure requirements from regulators, we are seeing a growing resistance against ESG, particularly in the US market, where a number of states’ attorney generals are challenging asset managers’ use of ESG criteria in making investment decisions, on fiduciary and other grounds.

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If you’d like to speak about best practices in ESG/sustainability disclosures, please connect with a member of our ESG and Sustainability team.

4) Canada-Germany Hydrogen Alliance: Opportunities for the Clean Hydrogen Market

Canada and Germany have signed a deal forming the “Canada-Germany Hydrogen Alliance.” Under the agreement, the two countries agreed to take steps to facilitate investment and supply chain security with the goal of exporting clean hydrogen to Germany with the focus on energy created in Atlantic Canada. The Ukrainian war has made for an immediate energy crisis situation in Germany as Germany attempts to move away from its dependence on Russian imports and Russia reduces supply. Canada’s goal is to export Canadian-made hydrogen within three years. This deal builds on Canada’s long-term Hydrogen Strategy to become a leading global supplier of clean hydrogen.

Several clean hydrogen projects have been announced, including green hydrogen projects that will use wind power to run electrolysis facilities. Projects using wind energy to generate hydrogen will need to undergo provincial environmental assessments and will need to obtain various federal and provincial environmental permits to construct and operate the wind and hydrogen facilities. Any projects involving off-shore wind facilities of 10 or more turbines will also be subject to a federal impact assessment requirement. The cooperation of federal and provincial government agencies will be important in completing environmental assessment and permitting requirements within the three year goal for exporting hydrogen.

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If you’d like to speak about the opportunities this deal presents, please connect with our Projects Group.

5) A Looming Recession: Which Industries are Most Impacted?

Inflation, a decrease in venture capital investment, the declining stock market and rising interest rates all point to the increasing risk of the next recession. With a potential recession looming, businesses across industries are assessing their vulnerabilities. 

Industries most sensitive to the Bank of Canada’s interest rate movements – such as construction, real estate, and finance and insurance – were hit the hardest according to a recent Statistics Canada report. It’s too soon to tell whether the fallout will include a significant rise in commercial insolvency cases, as there is typically a lag time between adverse economic events and formal and informal business restructuring proceedings. However, early signs are not favourable and therefore, in addition to assessing their own vulnerabilities, businesses should be considering the vulnerabilities of others with whom they have important relationships, and considering steps they can take to better protect their positions.

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If you’d like to discuss your organization’s plan forward, whether you are considering M&A, restructuring, financing or other solutions, please connect with us. 

6) Queen Elizabeth II’s Passing Triggers an Update in Canadian Legal Terminology

The passing of Queen Elizabeth II in September has triggered a few changes in the terminology of Canada’s legal system. The legal community’s most meaningful and constant symbol of the Crown’s official role in our structures lie in our language, so while these changes are technical in practice, they give a chance to reflect for all lawyers. Among the changes are:

  • Alberta, Saskatchewan and New Brunswick have renamed their highest trial courts to refer to the King’s Bench instead of the Queen’s Bench
  • Provinces that have Queen’s Counsel (QC) designations for their prominent lawyers will switch to King’s Counsel and previously appointed designations will automatically change
  • While pleadings and legal documents already filed with courts under “Queen’s Bench” remain valid, going forward, such documents will need to reflect the term “King’s Bench” instead
  • Court cases involving the Canadian government will now need to refer to "His Majesty the King" 
  • All government contracts that previously referred to “Her Majesty the Queen” should refer to “His Majesty the King” going forward. This may relate to procurements, contracts and contract amendments

What does this mean for organizations and law firms across Canada? Likely revisions to templates and precedent documents to reflect the new language going forward. Adjustments in terminology in oral submissions also will seem strange to the tongue at first, but will become commonplace with the reign of King Charles III.

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Please connect with our Commercial & Regulatory or Litigation lawyers if you have further questions.

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.

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