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

On June 28, 2022 the McCarthy Tetrault’s Labour and Employment Group, along with  leading partners from other practice areas in the Firm, hosted an insightful webinar on key cross-border topics and trends for business. The webinar coincided with the launch of our Cross-Border – Navigating Canadian Employment Law Guidebook. The following are some highlights from the panelists:.

Navigating Canadian Employment Law

Tim Lawson, Head of the Labour and Employment Group, discussed the following employment law highlights:

  • Unlike in the U.S., there is no “at-will” employment in Canada. Employers can include termination clauses in employment contracts to define obligations on termination. However, employers must take special care when drafting such clauses as they are increasingly scrutinized by Canadian courts.
  • Non-competes in Canada are prima facie unenforceable as restraints of trade. To be enforced, a non-compete must be reasonably limited in geographic scope, length of restriction, and activities being restricted. As of October 25, 2021, the province of Ontario has made non-competes unlawful per se as a matter of law, except in agreements for chief executives and in some limited sale of business scenarios.
  • Ontario is also the first Canadian province to introduce legislation that mandates that any employer with more than 25 employees have a written disconnection policy. However, this is not an absolute right for employees. The law only requires that an employer define expectations around disconnecting from work. The deadline to implement this policy was June 2, 2022.
  • Bill 96 increases the use of the French language by businesses operating in Quebec. Among other things, Bill 96 clarifies the types of French documentation that an employer is required to provide to its employees and adds new requirements regarding the dissemination of job offers in French.

Mergers & Acquisitions

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

  • Unlike in the S., in Canada, there is both a “fiduciary duty” and a “duty of care” which requires consideration of whether or not the transaction is in the best interest of the corporation. In Canada, a transaction must consider a broader group of stakeholders, including pensioners and employees.
  • The COVID-19 pandemic accelerated the focus on Equity, Diversity and Inclusion (EDI) and other social justice issues, leading to an increasing trend of “stakeholder capitalism” whereby stakeholder groups deploy “vote-no” campaigns to block a transaction. It is important to plan and anticipate how broader stakeholder groups such as unions, employees, institutions and lobby groups may impact a transaction.
  • More purchasers involved in M&A agreements are requiring enhanced due diligence, including incorporating representations into their deals to lessen the financial and reputational damage resulting from prior sexual misconduct by executives (sometimes known as a “Weinstein Clause”).
  • “Change of control” provisions, and treatment of incentive awards remain core to M&A deal negotiations.

Fintech Activity in Canada

Financial Technology or “Fintech” has been steadily increasing in Canada. Ana Badour, a Partner in the Financial Services Group and Co-Lead of the Fintech Group, highlighted a number of Canadian-grown fintech “unicorns” such as Wealthsimple, Neo Financial, Freshbooks and more. Canada is also home to a robust payment industry with well-known publicly listed entities such as Shopify and Lightspeed.  

In terms of regulation it is important to appreciate  that Canada has both “entity-based” regulation (i.e. for banks, credit unions, trust companies etc.) and “activity-based” regulation such as for payments, lending, securities and insurance.

With the rise of fintech companies in the cryptocurrency space, there has been increased attention from the securities regulator on foreign trading platforms operating in Canada. As well, FINTRAC, Canada’s anti-money laundering body has been increasingly focused on enforcement mandates after overhauling its monetary administrative penalty regime.

Privacy and Cybersecurity: Quebec’s Bill 64

Charles Morgan, a Partner in the Technology Group presented on Bill C-64, Quebec’s new privacy legislation.

Quebec was the first province to observe the European Union’s General Data Protection Regulation (GDPR) and legislate both higher requirements for privacy compliance and stricter 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. New requirements include:

  • Conducting a prior privacy impact assessment (a “PIA”);
  • Determining whether information communicated would receive “adequate protection” in the target jurisdiction; and
  • Entering into written agreements that take into account the results of the PIAs and, if applicable, include terms to mitigate the risks identified in the PIAs.

The new sanctions in Bill 64 include administrative monetary penalties of up to 10 million dollars or 2% of worldwide turnover for the preceding fiscal year, whichever is greater.

For its part, the federal government introduced 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 gained a lot of support across the political spectrum and is expected to pass. Bill C-27 will introduce the same monetary fines as contained in Quebec’s Bill 64 and will introduce a number of requirements on cross-border transfers.  

To ensure compliance and minimize risk of penalty, companies should start preparing now for these regulatory changes.

Supply Chain, Customs and Trade

Martha Harrison, a Partner in the International Trade, Investment and Regulatory Group discussed how environmental, social and governance factors are increasingly driving decision making in Supply Chain, Customs and Trade.  Trade diversification in supply and suppliers has become an essential element of procurement strategies.

Moreover, robust internal compliance measures are extremely important given a significant uptick in regulatory review, including a spotlight on forced labour in global supply chains. Businesses operating in Canada should consider implementing policies and practices that address forced labour risk in their supply chains, to the extent such policies and practices are not already in place.

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

Competition and Foreign Investment

Kate McNeece, a Partner in the Competition and Antitrust & Foreign Investment group discussed merger review under the Competition Act.

In recent years, the Canadian Competition Bureau has taken a more litigious stance and has signalled a potentially more contentious approach to merger review if the parties choose to close while review is ongoing. A review of mergers and acquisitions with publicly-listed Canadian targets indicates that in 2021, almost all transactions with a Competition Act closing condition required substantive comfort from the Bureau.

As well, important amendments to the Competition Act which became law on June 23, 2022 were reviewed. Notably, these amendments increase maximum fines and penalties for those who break the law and prohibit wage-fixing and no-poach agreements between employers.

Employment-related Class Action Lawsuits in Canada

Last but not least, Katherine Booth, a Partner in the Litigation Group ended the webinar highlighting the key differences between the Canadian and the U.S. approaches to class action lawsuits, and particularly in the employment law space.

Importantly, unlike in the U.S. there is no centralized system to manage parallel proceedings and each Canadian province operates under different legislation. As a result, companies need to be aware of the complex legal regime that animates each province’s class action proceedings.

Increasingly, there are employment-based class action claims being brought in Canada and the trend is likely to remain. Recent trends reveals that Canadian courts may be more willing to hear cases that touch on systemic unfairness and mistreatment of employees. Common class actions in the employment context include denial of pay and benefits, worker classification issues, and harassment and discrimination.

Claims focused on common documents, practices and procedures have been certified, while claims requiring individual assessment of worker 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 actions.

We are here to help.

If you have any questions about these topics, please do not hesitate to contact any of the conference speakers to learn more. To order a hard copy or download a digital copy of our newly updated Cross-Border Canadian Employment Law Guidebook, visit us here.