In this edition, we feature articles from several of our offices and several of our practice areas. Tamara Wong of our Vancouver office writes about a new type of entity – the Community Contribution Company. Tracey Mosley discusses social media tips. We have two articles on employment matters and an article contrasting donations and sponsorships by Melanie McDonald of our Calgary office. Renai Williams continues our mini-series on competition law issues.

We are pleased to be able to offer services to clients in the not-for-profit sector from all of our offices.

 

Community Contribution Companies: A New Corporate Structure for Social Enterprise

On May 14, 2012, Bill 23, Finance Statutes Amendment Act, 2012, was passed into law in British Columbia and is expected to come into force on July 29, 2013 (the “Act”).  Bill 23 amends the Business Corporations Act (British Columbia) (the “BCBCA”) to allow for a new hybrid legal structure for social enterprise, called Community Contribution Companies (“CCCs” or “C3s”).

Many of the details surrounding C3s were expected to be set out in the regulations.  On February 28, 2013, the much anticipated regulations were released and will come into force on the same day as Bill 23
(the “Regulations”).

C3s emerged to respond to the demand for socially focused investment options. C3s are a hybrid because they combine aspects of a traditional for-profit corporation and a not- for-profit entity. C3s will be able to carry on business for the dual purpose of both earning profits for shareholders and pursuing a social purpose for the community.

British Columbia is the first province in Canada to create a legal structure for social enterprise. The United Kingdom first introduced this hybrid business structure in 2005 with the establishment of Community Interest Corporations. The United States followed by introducing a similar type of company called Low-Profit Limited Liability Companies.

The major characteristics and implications of incorporating as a C3 are as follows:

  1. Community Purpose. A C3 must have one or more community purposes which are beneficial to society at large or a segment of society that is broader than the group of persons who are related to the C3. Community purposes may include providing health, social, environmental, cultural, educational or other services.
  2. Name. A C3 must have the words “Community Contribution Company” or the abbreviation “CCC” as part of its name. The use of the word “Community Contribution Company” or the abbreviation “CCC” by an entity that is not a C3 is restricted unless specifically authorized by the Act or the Regulations.
  3. Directors. A C3 must have at least 3 directors.
  4. Restrictions on Transfer of Assets. There are restrictions on the transfer of assets or money by a C3. A C3 may only transfer its assets:
    1. for fair market value;
    2. to a “qualified entity”, such as a registered charity or “qualified donee” as defined in the Income Tax Act (Canada);
    3. in furtherance of the C3’s community purposes;
    4. for transfers specifically contemplated by Act or the Regulations, such as dividends, redemptions or distributions on dissolution; or
    5. for transfers authorized by the Regulations.

In addition, except as specifically permitted by the Act or by the Regulations, no part of the money or other assets of the C3 can be transferred during the C3’s existence or on its dissolution to a person related to the C3.

  1. Restrictions on providing Financial Assistance. There are also restrictions on when a C3 may provide financial assistance. A C3 may not transfer any of its money or other assets by way of financial assistance:
    1. to persons who are related to the C3, except in certain limited circumstances; or
    2. to any other person unless the C3 is acting in furtherance of its purposes.
  2. Restrictions on Ability to Distribute Profits. A C3 cannot declare a dividend that is greater than 40% of the profits of the C3 in a financial year and any unused dividend amounts for previous financial years. This restriction, however, does not apply to shares held by “qualified entities”, which include “qualified donees” and registered charities as defined in the Income Tax Act (Canada), and community service cooperatives as defined in the Cooperative Association Act.

Upon dissolution 60% of the distributable assets of the C3 must be transferred to a “qualified entity”, such as “qualified donees” or registered charities as defined under the Income Tax Act (Canada).

  1. Public Accountability. A C3 will be subject to a greater degree of public accountability. Each C3 must produce financial statements and an annual community contribution report must be prepared and posted on a publicly accessible website of the C3.

The Regulations list the information that must be disclosed in the community contribution report. For example, the community contribution report must disclose:

    1. the remuneration and position held of each person whose remuneration during that year was at least $75,000;
    2. the financial statements for the C3 for that year;
    3. the aggregate amount of dividends declared to “qualified entities” in that year and the identity of all “qualified entities” that hold or beneficially own shares; and
    4. the total amount of dividends declared to shareholders that are not “qualified  entities”

Although at the moment there are no federal or provincial tax benefits given to C3s, we expect that C3s will still be an attractive vehicle for those individuals who wish to carry on business while still pursuing socially responsible purposes.

Tamara Wong
604.632.3478
TaWong@blg.com

 

Trade Associations and the Competition Act: No Such Thing as Safety in Numbers

While trade associations provide a forum for members to communicate and collaborate, there are certain topics that should never be discussed. All too frequently, however, association members discuss price, customer allocation, supply issues and bid or tendering practices under the guise of “association business”. Not only does this conduct expose an association’s members to liability under the Competition Act, it also exposes the association (including individual directors and officers) to fines (of up to $25 million for each offence) and criminal sanctions (including, for individuals – jail for up to 14 years).

Liability under the Competition Act (whether directly or for aiding or abetting) can arise for associations in a number of situations, including:

  • Where the association becomes a forum for competitors to agree on competitively sensitive matters such as prices (discounts, fee guidelines, surcharges), market allocation, and limits on supply.
  • Where restrictive membership policies, fee guidelines, by-laws and disciplinary procedures exclude competitors from the market or have the effect of raising prices.
  • Where the regulatory functions of the association create barriers to entry or restrict the ability of competitors to compete in a given market.
  • Where members agree on particular bid response strategies (i.e. group boycotts).
  • Where rules and procedures relating to advertising encourage false or misleading representations.

To help keep your association and its members on the right side of the Competition Act:

  • Educate members and staff on the provisions of the Competition Act that affect the activities of the association and its members.
  • Implement a credible and effective compliance program, with strict codes of ethics and conduct.
  • Have clear membership criteria that are based on the legitimate objectives of the association and, where possible, foster a diverse board of directors (not just a board of competitors).
  • For all association and sub-committee meetings stick to a pre-approved, legally vetted agenda and maintain accurate and detailed minutes. Consider as best practice beginning each meeting with a statement of the association’s commitment to Competition Act compliance and what that means in practical terms for member participation (e.g. no discussions as to price, market allocation, bids etc.).
  • Obtain legal advice and exercise caution in the formulation and implementation  of guidelines that relate to any important competitive aspect of members’ business activities or when issuing or suggesting rates or the treatment of surcharges (this activity is a potential powder keg and is usually best avoided).
  • When disseminating or collecting member information use historical data, keep information in a generalized, aggregated form and where possible use an independent data collection agency. In all cases, ensure that participation in any information exchange is voluntary.
  • Prohibit any discussion (formal and informal) between members that relates to current or future prices, costs, output levels, market allocations, business plans or bids.
  • Conduct regular audits to ensure Competition Act compliance.

Where compliance with the Competition Act is concerned, there is no such thing as safety in numbers. When in doubt, seek legal advice about the activities being proposed or discussed by or on behalf of your association. Remember: Should your association discover that it was involved in activities that may violate the criminal provisions of the Act it can, in certain circumstances, approach the Bureau and request immunity from prosecution  in return for co-operating with the Bureau’s investigation and any ensuing prosecutions.

Renai Williams

 

Workplace Accommodation of Employees Caring for Elderly Parents

The Ontario Human Rights Code recognizes and protects employees against discrimination on the basis of “family status”. Traditionally, employees have requested accommodation  on the basis of family status relating to obligations associated with child care; however, as the population of Ontario ages, many members of the Ontario workforce are finding that they have familial obligations arising from the need to care for elderly parents as well.

The law in this area is rapidly evolving as more and more employees seek accommodation from their employers. Generally, where a distinction, conduct or action that is based upon a person’s family status has the effect of limiting access to opportunity (i.e. more hours of work, a promotion)
that would otherwise be available to other members of the workforce, then it is considered family
status discrimination.1

A contentious issue at law is under what circumstances an employee should be accommodated for obligations associated with family status. In one case from the British Columbia Court of Appeal the Court held that discrimination is made out “when a change in a term or condition of employment…results in a serious interference with a substantial parental or other family duty or obligations of the employee” (emphasis added).2

However, the Federal Court of Appeal recently held that this standard which requires an employee to show a “serious interference” is too high a threshold for employees.3 Instead, the Federal Court held that at issue is whether or not the employment rule in question interfered with an employee’s ability to fulfill substantial parental obligations in a realistic way. Once this is established, the burden then shifts to the employer to demonstrate that the term of employment in question is a bona fide occupational requirement and that accommodating the request would be undue hardship.

In the area of family status and eldercare, a recent decision before the Human Rights Tribunal of Ontario (the “Tribunal”) applied a similar test as that recently adopted by the Federal Court of Appeal.

In Devaney v. ZRV Holdings4 the applicant was terminated in 2009 after his employer became frustrated with his continued absences relating to his efforts to take care of his ailing mother. His mother’s health had declined to the point where he was required to do much of his work from home  so that he could be available if his mother should need assistance. The employer warned Mr. Devaney several times that he would be terminated if his attendance record did not improve and when he did not comply, he was terminated.

The Tribunal found that since Mr. Devaney’s presence at home was required, as opposed to simply based on a personal preference, the employer had a duty to accommodate him.

The employer argued that Mr. Devaney had chosen to spend time with his mother at home, rather than place her in a long-term care facility. Mr. Devaney testified that he did not have the resources to hire home-care services, an alternative that the employer argued was available to him. The Tribunal held that the employer’s insistence that Mr. Devaney attend work in person constituted a prima facie case for discrimination, since he had no reasonable alternative but to stay home.

In determining whether the employer’s requirement that Mr. Devaney be present at the office was a bona fide occupational requirement, the Tribunal rejected the employer’s claims that Mr. Devaney’s absences were having a negative effect on the performance of his team. In fact, the evidence showed that the client for whom Mr. Devaney was principally working was happy with his work. Moreover, Mr. Devaney’s mother was eventually accepted into a long-term care facility, which would have significantly reduced his need to be out of the office. As such, the Tribunal found that the employer’s requirement was not a bona fide occupational requirement, and that the employer could have accommodated Mr. Devaney’s needs without undue hardship. The Tribunal awarded Mr. Devaney $15,000 in general damages and also ordered the employer to develop and implement a workplace human rights policy and training to its staff.

The aim of these protections is to accommodate an employees’ ability to meet substantial familial obligations. Although the law relating to the appropriate standard of accommodation is unclear, moving forwards, accommodation requests on the basis of family status (including eldercare) should be taken seriously. Offering flexible working hours, remote access and other creative solutions can greatly reduce employers’ exposure to these claims in addition to creating an attractive workplace.

This article originally appeared in the Hospital News.


1Andrews v Law Society of British Columbia [1989] 1 SCR 143.

2Health Sciences Association of BC v Campbell River & North Island Transit Society [2004] BCCA 260

3Johnstone v Canada (Attorney General) [2013] FC 113.

4 2012 HRTO 1590.

Lisa Cabel

 

Donations and Sponsorships

Worldwide businesses are acknowledging their corporate social responsibility in addition to profit making goals. As significant corporate resources are being allocated to these new efforts, organizations need to consider different options and the related advantages and disadvantages.

When a corporation wishes to support a registered charity, it can do so by way of a gift or sponsorship. At law, a gift requires: (i) an intention to donate property; (ii) acceptance of the gift; (iii) delivery of the gift; and (iv) no corresponding benefit given in exchange for the gift. According to the Income Tax Act (Canada) (“ITA”), there is a broader definition of a charitable gift which permits the corporate client to receive a benefit in exchange for a gift provided that the ‘advantage’ does not exceed 80% of the fair market value of the gift. In contrast, a sponsorship (which is not defined in the ITA) means a payment  by a corporate client to a charity in exchange for advertising or some other benefit.

When a corporation makes a charitable gift it is entitled to deduct from its taxable income the amount listed on the donation receipt, provided that the deduction does not exceed 75% of the corporation’s taxable income and any excess amount can be carried forward for five years. If the sponsorship is a reasonable outlay or expense for the purpose of generating profit, then for Canadian income tax purposes it would qualify as a business expense that can be deducted from a corporation’s taxable income. A business expense differs from charitable gifts as a business expense: (i) is not subject to the 75% limit; and (ii) cannot be carried forward for five years. Therefore from a tax perspective, charitable gifts and sponsorships have very similar tax benefits to corporations.

Gifts by corporations to charities can include gifts of gift certificates, inventory, real estate, and leasehold interests but excludes services because there must be a transfer of property for there to be a gift. The ITA has special rules regarding certain types of property that is donated to a charity: medicine, inventory, life insurance, capital property, cultural property, and ecological property.

Corporations may want to create a parallel charitable foundation for their charitable giving.  A charitable foundation may assist with public perception since there will be a separate entity to collect and manage money collected from staff, customers and others and also it allows (within certain parameters) for an asset base to be built up to support ongoing charitable activities if at some point the corporate profits are down. These benefits need to be weighed against the initial and ongoing creation and maintenance costs of a separate governance structure, including bookkeeping and preparation of financial statements.

There are a number of other legal and related issues to be considered by a corporation looking at making a charitable donation:

  • Do the Articles of Incorporation or other originating documents authorize the activities being considered, in addition to the corporation’s view to profit?
  • What level of approval is required to approve a donation/sponsorship – board approval, executive, other?
  • Should a board committee or other internal group created to develop policies related to gifts/sponsorships?
  • For sponsorships, is there a sponsorship agreement outlining clearly what benefits and information the corporate client is entitled to receive?
  • A corporate client should also consider whether there are any risks associated with working with a particular charity or project, being mindful of: anti-terrorism laws; tax shelters rules; appropriate levels of fundraising expenses; and the activities and other policies of the charity.

Being aware of the issues may assist charities in discussions with organizations when seeking donations and/or sponsorships.

Melanie McDonald
403.232.9567
MeMcDonald@blg.com

 

Social Media Tips for Charities and Non-Profits

Most of us aren’t experts on social media. We think we understand it – more or less – because we are on the receiving end of so much content. What do you need to think about, however, if your organization wants to start generating content, whether you intend to send it to your known supporters, or out to the world in general.

First things first. What does social media do? What is its purpose?

Social media amplifies information you generate, to those who opt to follow your means of dispersing that content. Your followers may have their own followers. Additionally, most content can be viewed and redirected by any person anywhere in the world. The number of social media vehicles seems to grow by month but the best known include Twitter, Tumblr, Facebook, Pinterest, LinkedIn, Vimeo, and YouTube. Don’t forget the comment sections that attach to everything from blogs to online newspaper articles.

You can post words, statements, text, graphics, music, cartoons, video and audio clips, alone or in any combination.

Social media can cement, augment, or torment the reputation of a not-for-profit.

In choosing to generate social media content, let all of the meanings of “social” be your guide. You are being social by “sharing”, social by “hosting”, and social by “seeking out others” when generating social media content. Do it well and your list of supporters and donors may grow.

A few tips:

  • Limit the individuals who can “speak” on behalf of your organization through social media. Employees and volunteers must be cautioned against ill-considered use of social media. Encourage them to report to you any concerns they have about content they spot or receive as opposed to responding themselves.
  • Determine if you want to post at regular intervals, or only when launching or highlighting fundraising campaigns. Too much content will lead people to ignore you. Poorly timed postings may get lost in the normal rush of the day.
  • Keep track of who is commenting or reposting your content. Review comments left on websites.
  • Develop a consistent style, including any colours and graphics. Use your own trademarks and brands correctly. There should be no misspellings or truncations of trademarks.
  • What seems humorous to one person can be hurtful to another. Photos, videos, cartoons or statements that tease people or organizations, or mock or lampoon events might be funny if the subject is “in on the joke” and the circulation of the item is limited. If not, your organization can find itself lambasted for causing the humiliation of others. Make certain that unflattering content does not originate in your postings or by way of you reposting content received from others.
  • Correct any misimpressions or mistakes originating in your content immediately.
  • If minor conflicts arise, it may be possible to be supportive of the other party, as opposed to responding with hostility, which will only highlight the problem and cost you the opportunity to show your organization’s maturity. For example, you may discover that road traffic problems are preventing guests from getting to  a fundraising event on time with the result that fed-up supporters are blaming you, on Twitter. Respond immediately with thanks for advising  as to what they are experiencing and that you are trying to mitigate the problem by finding alternate routes or delaying the start of the event. Barking back that people should use GPS or otherwise deal with their “own” problems is a way to turn a problem of the moment into something for which you may never be forgiven.
  • A supporter’s problem with your organization is your problem – own it.

If a sponsor or donor does not come through as expected, deal with that “behind closed doors”. Taking to social media to set out your version of the “facts” and, worse, using and abusing the name of the donor or the name, trademark or brand name of the sponsor is not acceptable and may be actionable at law.

You may need to create content which relies on the trademarks/brand names of others. Take care to ensure all trademarks and brand names are correctly spelled and depicted.

Historic trademarks and brand names may be too lengthy or complex for the social media universe. If so, create new and additional versions, instead of misusing your existing marks and brands.

Attaching offensive or questionable content such as profanity or slang to a trademark/brand name is an absolute no-no.

Sites such as Twitter and Tumblr can only carry so much content and so use that content to drive viewers to your website where you can provide greater detail. You get a doubling effect – viewers see your brand not only on the social media site but on your website.

Ensure adequate publication releases are in place for any material that may be private or subject to copyright, such as music and still or video images.

In summary, the good manners you show when meeting people directly will stand in you in good stead when “socializing” on social media.

Tracey L. Mosley
613.787.3548
TMosley@blg.com

 

New Mental Health Safety Standard May Impact Employers’ Duties Related to Employee Mental Health

Recent studies have shown that one in five Canadians will experience a mental illness in their lifetime, and that mental health is the number one cause of disability in Canada, accounting for nearly 30% of disability claims.1

The reality suggested by these statistics undoubtedly impacts Canadian workplaces, affecting employee-employer dynamics, organizational structure, and overall productivity. Employers are increasingly grappling with the effects and accommodation of mental illness in the workplace, and a recently released mental health safety standard suggests that providing a psychologically safe workplace may soon become a legal requirement.

In January 2013, as part of a Health Canada mandate, the Mental Health Commission of Canada released the National Standard of Canada:Psychological health and safety in the workplace(the “Standard”). The Standard represents a new, first-of-its-kind, voluntary national standard on psychological health and safety in the workplace, and sets out a number of initiatives employers are encouraged to implement in order to promote employees’ mental health.

The Standard has already received much attention for the notably broad definition of mental health2 it has adopted, and because, although voluntary, it sets out policy and process guidelines with a potentially far-reaching impact on employers’ operations. Perhaps most significantly, Ontario courts and tribunals are likely to take the Standard into consideration when determining the standard of care employers are expected to meet in the context of safeguarding employee mental health in the workplace.

The Standard: An Overview

The Standard provides that its guidelines are intended to assist employers in cultivating a psychologically healthy and safe workplace, which the Standard defines as a workplace that “actively works to prevent harm to worker psychological health, including in negligent, reckless or intentional ways, and promotes psychological well-being.”

In many ways, the Standard affirms Ontario employers’ existing legal obligations under the Ontario Occupational Health and Safety Act (the “OHSA”) the Ontario Human Rights Code (the “Code”), and the Accessibility for Ontarians with Disabilities Act (the “AODA”). For instance, the Standard calls for employers to identify, assess, and control hazards to worker health, including psychological health, in the workplace – a duty which employers already have under the OHSA. Similarly, the Standard’s emphasis on  an individualized and interactive approach to determining employees’ mental health needs is an extension of employers’ existing duty, under the Code, as well as the Employment Standards under the AODA, to provide accommodation to employees with mental health conditions. A notable difference, however, is that while employers’ duty to accommodate pertains to existing, diagnosed mental health conditions for individual employees, the Standard implies a wider duty to ensure psychological health and safety is promoted in the workplace as a whole.

The Standard’s main compliance component involves developing a psychological health and safety management system (“PHSMS”) in the employer’s workplace. The PHSMS a meant to be a set of policies and processes to assist the employer in identifying and analyzing risks to psychological health in the workplace, controlling risks associated with organizational changes and job demands, and training supervisory staff regarding the prevention of psychological harm. The PHSMS should also include critical event preparedness, and a process relating to the reporting and investigation of work-related psychological health and safety incidents.

For instance, some of the most common workplace psychological stressors identified by employees are changes to work procedures, staffing, or products. A PHSMS would assist an employer in managing this type of stressor by having in place a change- management procedure consisting of clear dialogue between management and employees impacted by the change, information and training sessions for impacted staff, and the provision of support necessary for employees to adapt to the changes, such as temporary modified work arrangements.

To determine other types of events which are  likely to present stress and risks to psychological health, employers are encouraged to assess their organizational culture, rates of turnover, rates of absenteeism and disability benefit utilization rates. Also relevant are employees’ job demands, work/life balance, workload management, engagement, protection from violence, bullying and harassment, and leadership and expectations.

Notably, a large component of risk assessment under the Standard emphasizes consulting with employees themselves through the use of focus groups, surveys and audits in order to obtain their direct input with respect to their psychological health needs.

Another key principle put forward by the Standard is that its guidelines must be tailored to the size, nature and complexity of each workplace, and  that psychological health is the responsibility of all members of the employer’s workplace. As such, the Standard’s implementation allows for some flexibility and is intended to reflect the specific realities faced by each organization. This is reinforced by the Standard’s provision of a number of resources, such as case studies and audit tools geared towards different types of organizations.

Implications  for  Employers

Employers’ duties with respect to assessing workplace mental health risks and addressing employee mental health issues continue to be defined by the OHSA, the Code, and other relevant legislation. Unlike the OHSA and the Code, however, the Standard does not have the force of law, and as such does not create legal obligations. The Standard’s voluntary nature means that employers are not legally required to adopt  its recommendations.

However, courts and other adjudicative bodies will likely consider the Standard in their determinations of the standard of care employers must meet in  the context of providing a psychologically safe workplace. For instance, a court may well look to the Standard when assessing employee claims relating to mental stress and other psychological health issues experienced in the course of work.

While the significance and interpretation courts will give the Standard remains to be seen, employers should nevertheless familiarize themselves with the Standard and assess the degree to which its guidelines accord with its current practices.


1 Health Canada. A Report on Mental Illness in Canada, 2002; Insurance Journal 2003 as cited by the Government of Canada in The Human Face of Mental Health and Mental Illness in Canada, 2006, pg. 41, as cited by the Centre for Addiction and Mental Health: http://www.camh.ca/en/hospital/about_camh/newsroom/for_reporters/Pages/addictionmentalhealthstatistics.aspx

2 The Standard has adopted the World Health Organization’s definition of “mental health” as “a state of well-being in which the individual realizes his or her own abilities, can cope with the normal stresses of life, can work productively and fruitfully, and is able to make a contribution to his or her community.”

Maria Gergin
416.367.6449
MGergin@blg.com

 

Final Word

Matters of interest to the Not-for-Profit come from a variety of sources. For example, as part of the Ontario budget released on May 2nd, the Ontario government indicated its strong support of broader gender diversity on the boards and in senior management of major businesses, not-for-profit firms and other large organizations. In conjunction with others, including the OSC, the government  will consider the best way for firms to disclose their approaches to gender diversity, with a view to increasing the participation of women on boards and in senior management.

Other items to keep in mind:

  • the anti-spam law is coming.
  • the CNCA continuance deadline of October 17, 2014.
  • the ONCA targeted date of January, 2014.

We would love to hear from you on topics of interest.

Authors

Tamara G. Wong 
TaWong@blg.com
604.632.3478

Maria Gergin 
MGergin@blg.com
416.367.6449

Other Authors

Lisa C. Cabel
Melanie McDonald
Tracey L. Mosley

Expertise

Charities and Not-For-Profits
Competition and Foreign Investment Review
Labour and Employment
Mental Health Law