Welcome to the Fall 2014 BLG Charities and Not-for-Profit Newsletter. In this edition we discuss a variety of topics of interest to the sector, including updates on CASL, CRA initiatives and employment law. As always, let us know if there is a topic of interest to you.

We also wanted to mention our annual Charities and Not-for-Profit symposium which will be held at our offices on Monday, November 17th, 2014.

Past Actions Of Directors And Officers May Impact A Registered Charity’s Future

On August 27, 2014, the Canada Revenue Agency (“CRA”) published guidelines to the “ineligible individual” rules under the Income Tax Act. These rules provide the CRA with  the discretion to refuse or revoke the registration of a “registered organization” (defined to include registered charities and registered Canadian amateur athletic associations), or to suspend its receipting privileges, based on the past actions of a director, officer, trustee, or person who controls or manages the registered organization or who made the application to obtain the organization’s registered status. The CRA’s authority in respect of the ineligible individual provisions of the Income Tax Act is limited to making determinations regarding the registration status of a registered organization, and does not extend to the sanctioning of the ineligible individuals themselves.

Who Is An “Ineligible Individual”?

Generally, an individual is an “ineligible individual” if he or she:

  1. has been convicted of an offence (criminal or non-criminal) that is related to fi dishonesty or is relevant to the operation of the organization, such as fraud, forgery or the misappropriation of funds; or
  2. was connected to an organization whose registration was revoked for a serious breach of the registration requirements, such as the issuance of fraudulent receipts or participating in abusive gift tax shelters, and the connection is through holding a position:
    1. as a director, trustee, officer, or like official with the revoked organization;
    2. of control or management of the revoked organization (directly or indirectly); or
    3. as a promoter of the tax shelter that caused the revocation of registration.

The “ineligible individual” designation lasts for five years from the date of conviction, except in the case of a criminal offence whereby the designation remains in place until a valid pardon has been granted or a record of suspension  ordered.

How Does This Affect The Charity?

There is nothing in the Income Tax Act that prevents an “ineligible individual” from serving a position with a registered organization (i.e. director, officer, controller or manager). For this reason, there is no process in place to allow a registered organization to obtain a pre-approval or clearance authorization from the CRA. Similarly, there is no requirement for a registered organization to disclose the involvement of an “ineligible individual” to the CRA.

If the CRA believes that an “ineligible individual” poses a risk to a registered organization’s beneficiaries and/or assets, it will notify the registered organization. The registered organization will have an opportunity to respond with evidence addressing (i) whether the person is actually an “ineligible individual”; (ii) the measures the organization has in place to minimize any risk; and/or (iii) the benefits arising from the individual’s contribution to the organization. In some cases, it may be difficult satisfy the CRA that risks have been mitigated without removing the individual from his or her current position within the registered organization.

The CRA will then use its discretion to refuse or revoke the registration of the registered organization, suspend its receipting privileges for one year, or take no action.

What Steps Should A Charity Take?

Unless the CRA notifies a registered organization that it is considering taking action regarding an “ineligible individual”, there are no steps that are required to be taken. Nonetheless, there are procedures that can be taken by the registered organizations in order to protect themselves from becoming affiliated with ineligible individuals. For example, the Income Tax Act does not require an individual to advise a registered organization of his or her status as an ineligible individual. Therefore, it may be prudent to include a provision in the registered organization’s by-laws requiring all officers and directors (and the like) to disclose their status as an ineligible individual, therefore, allowing the registered organization the ability to proactively mitigate any risks that may result from becoming associated with such an individual.

The CRA’s guidelines can be found at: www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/  cg-024-eng.html?utm_source=charities&utm_ medium=eml

Authors: Marco Deiana, Katherine Spassov and John McIntyre

CASL’s Next Wave: Installation Of Computer Programs

On July 1, 2014, most provisions of Canada’s new anti-spam law (commonly known as “CASL”) came into force. These provisions create new rules for email marketing and other e-communications by requiring that recipients consent to receiving commercial electronic messages (or “CEMs”), and by requiring the messages to contain certain content, including a mechanism to unsubscribe. In the months leading up to July 1, Canadian and foreign organizations alike have been updating their e-communication practices to comply with CASL. Please see our website blg.com/antispam for more details.

CASL Applies To Computer Programs

Although CASL focuses on the sending of “spam”, it also has rules dealing with the installation of
computer programs and the alteration of transmission data in an electronic message. These provisions come into force on January 15, 2015. The purpose of CASL is to improve the efficiency and privacy of e-communications; hence these provisions are aimed at viruses, malware and practices like “phishing”  that are often perpetuated through or by products of spam. Like the provisions of CASL which deal with CEMs, however, the legislation takes a broad approach to the computer program provisions and it will affect any person or organization that provides software, mobile apps or other computer programs for purchase or download.

Enforcement Mechanisms

Failure to comply with CASL can result in significant fines, among other things. CASL has administrative monetary penalties of up to $1 million per violation (for individuals) and up to $10 million per violation (for organizations). If an employee commits an act that contravenes CASL (such as sending a CEM without the necessary consent or unsubscribe mechanism), the employer could be held liable, if the employee was acting within the scope of his or her employment. Board members and officers of a company could also be held personally liable for violations. In addition, there is a private right of action that takes effect on July 1, 2017.

Installation Of Computer Programs

Starting January 15, 2015, CASL will prohibit installing or causing to be installed, in the course of a commercial activity, a computer program on any person’s computer system, or causing an electronic message to be sent from the person’s computer, unless the express consent of the owner or an authorized user of the computer is obtained. This applies if the person installing the program (or the person directing the installation) is in Canada, or the computer on which it is installed is in Canada at the relevant time. This means these provisions apply to persons in Canada who provide the computer program, and to computer programs purchased or downloaded by users in Canada, even though the company who provides the program is not located in Canada or does not have any presence there.

CASL defines “computer program” as data that, when executed on a computer system, causes the system to perform a function. This is a very generic definition that includes all kinds of software as well as apps. “Commercial activity” is defined as any transaction, act or conduct of a commercial character, whether or not there is an expectation of profit. The fact that a profit motive is not required suggests that free downloads may be subject to CASL.

The consent for installation of a computer program must clearly and simply describe, in general terms, the function and purpose of the computer program to be installed. The request for consent must also include certain prescribed information about the sender. The CRTC (the agency responsible for enforcing CASL) has indicated that express consent needs to be “opt in”, meaning a user needs to actively do something to provide consent, such as checking off a box (that was un-checked to begin with) to consent to the installation of the program. Pre-checked boxes or “opt out” consent will not suffice for purposes of express consent under CASL. Requests for consent cannot be buried in the terms and conditions or combined with other requests, such as consents required under privacy laws.

There are additional requirements if the computer program performs one or more of certain functions that are particularly sensitive or invasive and that are contrary to the reasonable expectations of the user. These consist of the following:

  • collecting personal information stored on the computer system;
  • interfering with the owner’s or an authorized user’s control of the computer system;
  • changing or interfering with settings or preferences already installed on the computer system without the owner’s or authorized user’s knowledge;
  • changing or interfering with data that is stored on the computer system in a manner that obstructs, interrupts or interferes with lawful access to or use of that data by the owner or an authorized user;
  • causing the computer system to communicate with another computer system or other device, without the authorization of the owner or authorized user; and
  • installing a computer program that may be activated by a third party without the knowledge of the owner or authorized user.

In these circumstances, the consent must include more details about these functions and draw the user’s attention to them. The provider of the computer program must also provide an email address to which the user can send a request for the program to be removed or disabled, if they believe the function was not accurately described when consent was requested, and the provider must provide assistance to remove or disable the program at no cost to the user.

There is a 3-year transition period that applies to upgrades or updates to computer programs that are installed prior to January 15, 2015. There is implied consent to install upgrades or updates on such programs until January 15, 2018, subject to the user giving notice that they do not wish to receive the upgrade or update.

Altering Transmission Data

Starting January 15, 2015, CASL will prohibit altering or causing to be altered, in the course of  a commercial activity, the transmission data in an electronic message so that the message is sent to a destination other than (or in addition) to the one specified by the sender, unless the express consent of the sender or the recipient is obtained and the sender provides an email address that the recipient can send a request to unsubscribe to.

The practice of altering transmission data is most likely found in malware and viruses, so it is unlikely to apply to legitimate businesses. However, if an organization’s IT system is hacked causing it to violate this prohibition, it could be liable under CASL.

The next wave of CASL will require every business and organization that offers software, apps and other computer programs to assess whether they obtain consent from users and make changes to comply with CASL, and establish ways of recording the consent to demonstrate compliance.

Author: Adrian Liu

Status Of The Not-For-Profit Corporations Act, 2010 (Ontario)

It is now old news that the Not-for-Profit Corporations Act, 2010 (“ONCA”) received Royal Assent on October 25, 2010. Although more than 3 years have passed since then, the ONCA is still not in force. Prior to the calling of the June 12, 2014 election, the ONCA was expected to come into force sometime in late 2014 or early 2015. The government website now states that the ONCA is not expected to be proclaimed in force prior to 2016.

Bill 85, which was introduced in June 2013, would have amended over 80 Ontario statutes, including the ONCA. According to the Ontario Government, the ONCA was anticipated to come into force no earlier than six months after the passage of Bill 85. When the election was called, Bill 85 was being debated at second reading. As a result, Bill 85 died on the order paper. In order for the ONCA to be proclaimed into force, the technical amendments provided for in Bill 85 still need to be enacted. That means the Bill will need to be reintroduced (and given a new number) and the legislative process (beginning with first reading) started anew. If the time taken to lead Bill 85 through first and second reading of the legislative process is any indication, the reintroduction of the Bill and ensuing process, will likely take us well into 2016. Whether or not the ONCA will be a priority of the new government also remains to be seen. In addition, it appears that some groups in the not-for-profit sector have been advocating for further amendments to what was Bill 85.

It is possible that the new amending legislation will be different than Bill 85, or that it will be further amended in committee through the legislative process.

Author: Sylvie Lalonde

The Law Relating To Contract Disputes Has Changed: Plan Ahead

To a certain degree, contract disputes are inevitable during the life of an organization. What effect does a particular clause have? Who is responsible if something goes wrong? How much money is owed? The answers to these questions may seem obvious to both parties when the contract is drafted, but that can change over time and with certain events. This is where commercial arbitration comes in.

Commercial arbitration is meant to provide disputing parties with a relatively quick and inexpensive way to resolve a disagreement. This is why most contracts will include a clause sending any dispute to binding arbitration. However, a problem arises when the unsuccessful party disagrees with the arbitrator’s decision and tries to appeal it to the courts.

This is where the law has now changed. On August 1, 2014, the Supreme Court of Canada dealt with the appeal of a commercial arbitration decision involving the interpretation of a “finder’s fee” clause. In this case, Sattva Capital Corp v Creston Moly Corp, the Supreme Court made two significant changes to the law.1

Appeals Are Now Limited

The Supreme Court found that appeals of commercial arbitration decisions should rarely be heard. The Court explained that appeals should generally be reserved for legal issues with a broad impact. Though contract interpretation was traditionally seen as more of a legal question, the Court moved away from this approach.

Instead, the Court emphasized that contract interpretation should be seen as largely fact-based, focusing on the specific circumstances of the parties and their intentions. This is especially the case in the commercial context, where the parties are usually more sophisticated. This makes appeals rarer because factual determinations by an arbitrator are given a high level of deference by appellate courts.

The effects of this decision will vary between provinces. For example, in British Columbia, a commercial arbitration decision can only be appealed on a legal question.2 In Ontario, however, it depends on the contract itself – parties can decide to restrict appeals to legal questions or open it up more broadly.3

When Heard, Appeals Are Now Harder To Win

In cases where a court hears an appeal of a commercial arbitration decision, it is now less likely to be overturned. Before the Sattva decision, courts would put themselves into the shoes of the arbitrator and determine what decision should have been made. Now, courts will review the decision to see whether it falls within a range of reasonable and acceptable outcomes. This means that even if the appellate court would have decided differently in the arbitrator’s shoes, it can only overturn the decision if it was an unreasonable one.

Recommendations For Organizations

With a greater focus on the factual circumstances surrounding contracts and the limited right to appeal an arbitrator’s decision, there are two prudent steps that can be taken to plan ahead:

1. Seek Legal Advice When Drafting Contracts

Though this may seem counterintuitive when we just explained that contracts are less of a legal issue and more of a factual one, it is now even more important to seek legal advice when drafting contracts. Lawyers can assist in ensuring that contracts are clear and unambiguous. This will make it more likely that a dispute will be either prevented, or resolved in your favour if the issue proceeds to arbitration.

2. Pick Your Arbitrator Carefully

When bringing a dispute to arbitration, it is now very important to recognize that the arbitration is likely the only chance to be heard. Arbitrations are unique in that the parties get to select who hears the case, so take extra care when picking the arbitrator, as he or she will likely have the last word on the dispute.

Authors: John McIntyre, Katherine Spassov

1 2014 SCC 53, [2014] SCJ No 53 (QL).
2 Arbitration Act, RSBC 1996, c 55, s 31.
3 Arbitration Act, SO 1991, c 17, s 45.

Effective October 29, 2014, Ontario Employees Entitled To Three Additional Unpaid Leaves From Work

On March 5, 2013, the Government of Ontario introduced Bill 21, Employment Standards Amendment Act (Leaves to Help Families), 2013. On April 29, 2014, Bill 21 passed Third Reading in the Ontario Legislature and comes into force six months later, on October 29, 2014.

Effective October 29, 2014, the Ontario Employment Standards Act, 2000 (the “ESA”) will be amended to include three additional unpaid leaves of absence:

    1. Family Caregiver Leave
    2. Critically Ill Child Care Leave
    3. Crime-Related Child Death/Disappearance Leave

The new leaves provide employees with certain rights for leaves of absence under the ESA, such as reinstatement, vacation accrual and protection from reprisal. The new leaves of absence are in addition to existing leaves of absence in the ESA, including Family Medical Leave and Personal Emergency Leave.

Family Caregiver Leave

Employees will be entitled to up to eight (8) weeks of unpaid Family Caregiver Leave in each calendar year to care for each ill relative specified in Bill 21. The weeks of leave must be taken in full weeks, but do not have to be taken consecutively or  in a single block. There is no minimum service requirement for eligibility to take Family Caregiver Leave, or pro-rating for part years.

An employee may take Family Caregiver Leave if caring for or supporting the following specified  relatives:

  1. The employee’s spouse.
  2. A parent of the employee or the employee’s spouse.
  3. A child of the employee or the employee’s spouse.
  4. A grandparent or grandchild of the employee or the employee’s spouse.
  5. The spouse of a child of the employee.
  6. The employee’s brother or sister.
  7. A relative of the employee who is dependent on the employee for care or assistance.

The scope of this leave also includes step-children, step-parents and foster children.

Employees are eligible for Family Caregiver Leave if they have a certificate from a “qualified health practitioner” stating that the specified relative has a “serious medical condition”. The term “serious medical condition” is not defined in Bill 21, except that it can be chronic or episodic.

A “qualified health practitioner” means:

“a person who is qualified to practise as a physician, a registered nurse or a psychologist under the laws of the jurisdiction in which care or treatment is provided”

This means an employee could provide a certificate obtained outside Ontario, which could be difficult for employers to verify.

Employees who wish to take leave must advise the employer in writing that they wish to take Family Caregiver Leave. An employee may take the leave before providing notice, and then advise the employer “as soon as possible”. Employees must provide a copy of the certificate “as soon as possible”, upon request from the employer.

Critically Ill Child Care Leave

Employees with at least six consecutive months’ of service may qualify for up to 37 weeks of unpaid Critically Ill Child Care Leave. Upon request from  the employer, an employee must provide a copy of  a certificate from a “qualified health practitioner” (defined in the same way as under Family Caregiver Leave) that states:

  1. The child is critically ill and requires care or support of one or more parents and
  2. The period during which the child requires care or support.

The child must be under 18 years of age, and “critically ill”, meaning “…a child whose baseline state of health has significantly changed and whose life is at risk as a result of an illness or injury.” The terms “baseline state of health” and “significantly changed” are not defined, and it remains to be seen how they will be applied in Ontario.

The employee notice requirements are similar to those for Family Caregiver Leave, i.e. providing the employer with notice and a copy of the certificate upon request “as soon as possible.” Additionally, the employee must provide a “written plan” that indicates the weeks in which he or she will take the leave.

Crime-Related Child Death Or Disappearance Leave

Employees with at least six consecutive months’ of service may qualify for unpaid Crime-Related Child Death or Disappearance Leave. “Crime” means an offence under the Canada Criminal Code, and “child” means under 18 years of age.

An employee can take up to 104 weeks in the event of a crime-related death of employee’s child, step-child or foster child. A “crime-related death” means the employee’s child, step-child or foster child has died and it is “probable, considering the circumstances, that the child died as a result of a crime.”

An employee can take up to 52 weeks in the event of a crime-related disappearance of employee’s child, step-child or foster child. A “crime-related disappearance” means the child has disappeared and it is “probable, considering the circumstances that  the child disappeared as a result of a crime.”

The leave ends after 104/52 weeks, or the day on which it “no longer seems probable” that the child died or disappeared as the result of a crime.

An employee is not eligible for this type of leave if s/he is charged with a crime or if it is probable, considering the circumstances, that the child was a party to the crime.

Employees must advise the employer in writing that they wish to take the leave and provide a “written plan” that indicates the weeks in which he or she will take the leave. However, an employee may take the leave, and then advise the employer and provide the written plan “as soon as possible”.

An Employer may require an employee to provide “evidence reasonable in the circumstances” to entitlement to leave. It is not clear what evidence could be requested in these circumstances, and what would be considered “reasonable”.

Given the possibility that circumstances (and  eligibility under the ESA) may change as police investigate the death or disappearance of the child, employers may wish to periodically obtain information to confirm an employee’s continued eligibility for the leave of absence.

Implications for Ontario Employers

Ontario employers should review existing leave of absence policies and procedures, and make any necessary amendments to handbooks, employment contracts, policies, collective agreements etc. Of particular interest to employers may be the policies and procedures relating to verifying information provided in a certificate from a “qualified health practitioner.”

Given the broad circumstances when an employee may qualify and the possibility that an employee could take multiple leaves for different relatives each calendar year, Family Caregiver Leave appears most likely to affect Ontario workplaces. We will monitor the impact of the new leaves, including any decisions that further define the eligibility criteria.

Author: Kate Dearden

The Non-Profit Risk Identification Project Report And Budget 2014 Consultation Measures: A Changing Landscape For Non-Profit Organizations

On February 17, 2014, the Canada Revenue Agency (the “CRA”) released its report (the “Report”) on the Non-Profit Risk Identification Project (the “Project”) and an accompanying Q&A.

Perhaps the only thing that was truly surprising about the Report, given that it covered three years of information-gathering, was how short it was. In light of the federal government’s announcement of the federal government’s consultation measures announced in Budget 2014 (the “Consultation”) shortly before the release of the Report, however, and the fact that the CRA has been targeting the same issues in the sector for the past few years,
it may be fair to say that the length – and content – of the Report shouldn’t have been unexpected. The highlights of the Report are as follows:

1. An Overview Of The Project

  • The CRA started the Project in 2009 and reviewed 1,337 files over three years.
  • The Project was designed to provide the CRA with insight into the way non-profit (“NPOs”) organizations claiming the non-profit exemption in paragraph 149(1)(l) operate and, in particular, to:
    • understand the compliance issues facing NPOs; and
    • evaluate NPOs’ level of compliance with the requirements in the Income Tax Act (Canada) (the “ITA”).
  • The organizations audited by the CRA pursuant to the Project were drawn from a random sample of 30,000 organizations identified through Statistics Canada. Due to the nature of the sample, only NPOs that had filed a T2 (corporation tax return), T3 (trust tax return) or T1044 (non-profit organization information return) were audited.
  • Though NPOs have been audited in the past through the regular T2 or T3 screening process, the Project is the first specialized program focused on auditing NPOs from an income tax perspective.

2. The Exempting Provision And The Groups Claiming The Benefit Of It

  • Paragraph 149(1)(l) was introduced in the Income War Tax Act, 1917. The CRA and the Department of Finance have both noted that this provision has changed little since it was introduced.
  • The nature of the groups eligible for the exemption has evolved through the years and a wide variety of entities of all sizes now claim an exemption from tax under it.
  • The number of NPOs in Canada is currently unknown (though the CRA’s estimate is 80,000), as there are no registration requirements to qualify for the exemption and the filing obligations of NPOs vary according to the type of entity. Many unincorporated entities that are not trusts, for instance, do not have any filing requirements under the current regime.

3. Requirements To Be A Tax-Exempt NPO

  • The Project evaluated the NPOs sampled in accordance with the following four factors in paragraph 149(1)(l) identified by the CRA as being necessary for an NPO to qualify for tax-exempt status:

    (a) Not a charity
  • The CRA reiterated the position that an organization that is a charity at common law cannot be a tax-exempt NPO.
  • The Project revealed a small number of charitable organizations that appeared to be claiming paragraph 149(1)(l) status, including registered charities erroneously filing Form T1044 and organizations that were actually charities under common law (i.e., having charitable purposes for the relief of poverty, advancement of education, advancement of religion or other purposes beneficial to the community).

    (b) Organized for a non-profit purpose
  • The CRA restated its view that making profits will not disqualify an organization from the NPO tax exemption as long as the profits are incidental and arise from activities undertaken to meet the organization’s non-profit objectives.
  • The Report noted that there were a small number of cases where an organization’s governing documents indicated that it was not organized exclusively for a purpose other than profit.

    (c) Operated for a purpose other than profit
  • The Report indicated that there were a  significant number of cases of organizations that were not operated exclusively for a purpose other than profit.
  • The Project revealed a wide range of organizations carrying out a variety of activities with an apparent profit motive. The red flags identified in the Report indicating an apparent profit motive were disproportionately large capital or operating reserves resulting from surpluses generated by non-incidental profits.
  • With respect to this third requirement, the Report observed that there are common views in the sector that:
    • an NPO must produce a profit for programs to thrive and capital assets to be maintained; and
    • as long as profits are used to further an NPO’s purpose, the source of funding shouldn’t matter.

    (d) Income payable to or made available for the personal benefit of a proprietor, member or shareholder
  • The red flags identified by the Report with respect to this requirement include shareholder loans, the ability of an organization to pay dividends and the guaranteeing of personal loans. Other problematic activities that have been identified over the years, as discussed above, include income being made available for the benefit of members in situations where it is used to reduce the amount of members’ fees that would otherwise have been payable by the organization’s members, particularly where the income comes from non-member sources.
  • The Report indicated that there were a small number of cases where this requirement was a problem for an organization audited under the Project.

4. Concluding Notes On The Report

  • The Report stated that the current legislative framework governing NPOs allows many different organizations with a wide variety of purposes and activities to claim the NPO tax exemption. In fact, almost any type of organization can qualify without restriction as to its activities or objectives (other than that they be non-profit).
  • The Project revealed that many organizations have a different interpretation of the requirements imposed by paragraph 149(1)(l) than does the CRA.
  • Many NPOs are administered by non-specialist volunteers who want to comply, but do not understand the requirements imposed by the legislation (or perhaps, more accurately, the requirements imposed by the CRA, which do not, in our view, necessarily align perfectly with the legislation).
  • The Project has given the CRA a better understanding of the issues facing the NPO sector and has highlighted areas where the sector’s understanding differs from that of the CRA.
  • A significant number of the organizations sampled during the Project would fail to meet at least one of the four requirements needed to qualify for the NPO tax exemption.
  • Regarding those organizations with compliance issues, the Report divided them into the following higher risk and lower risk categories (the risk being the loss of tax-exempt status):
    • Higher risk
      • A significant number of the organizations sampled by the CRA are in this category.
      • Red flags here include the following (and the Report indicates that organizations with these “high risk” indicators do not qualify for tax-exempt status as an NPO and would need to be reassessed if audited outside the Project):
        • Non-incidental profits
        • Profits unrelated to non-profit objects
        • Disproportionately large reserves, surpluses or retained earnings
        • Income payable or made available for the personal benefit of a shareholder, proprietor or member
    • Lower risk
      • Non-compliant organizations in the lower risk category include those with “readily correctable” issues, such as making filing errors and not providing enough information to substantiate their non- profit purpose.

5. Action Items

  • The Report identifies education and outreach to the NPO sector as “critical”.
  • The CRA will work with representatives in the NPO sector and engage in “targeted outreach, client service and education”.
  • The CRA will review, revise and improve education materials and support.
  • The CRA will provide the Department of Finance with a copy of the Report for the purposes of examining the legislative framework.
  • As part of Budget 2014 tabled on February 11, 2014, the federal government indicated that it intends to review:
      • whether the NPO tax exemption remains properly targeted; and
      • whether sufficient transparency and accountability provisions are in place.
  • The federal government will release a Consultation report for comment and the government will undertake further consultation with stakeholders “as appropriate”.

Based on the Report and the Department of Finance’s announcement of the Consultation, it seems clear that, at a minimum, two things will happen:

  1. The CRA will implement an NPO education initiative. What precisely this initiative will consist of remains to be seen, but we can likely expect some new webpages, publications and outreach by CRA staff on this front.
  2. The Department of Finance will consider amending the NPO tax exemption in paragraph 149(1)(l). As mentioned above, it seems likely that the Department of Finance’s concerns regarding NPOs are similar to those of the CRA’s at this  time – we expect that the Consultation paper will provide more clarity on this. However, whether or not a legislative amendment is made, the CRA’s administrative position on the ability of NPOs to earn profits and maintain reserves could continue to affect NPOs in one of two ways:
    • If a legislative amendment to paragraph 149(1)(l) is not made, NPOs will likely be stuck with the CRA’s administrative position, as described in the “Background” section above.
    • If a legislative amendment to paragraph 149(1)(l) is made, it is possible that the Department of Finance will choose to make the CRA’s administrative position law unless the sector makes a convincing case for something different.

Both of these possibilities should provide NPOs with a compelling reason to be pro-active and get involved in the Consultation process. Otherwise, NPOs that fi themselves offside the CRA’s views on how NPOs can generate revenue will either have to muster the will and resources to challenge the CRA’s position in court or find another way to deal with the risk to their status, such as by becoming taxable, for-profit entities.

Author: Camille Jordaan

Ontario Human Rights Commissions Releases New Policy On Protecting Those With Psychosocial Disabilities

On June 18, 2014, The Ontario Human Rights Commission (OHRC) released its new Policy on preventing discrimination based on mental health disabilities and addictions (the “Policy”). The Policy builds on the OHRC’s Policy and guidelines on disability and the duty to accommodate, and focuses on the protection of, and the duty to accommodate the needs of, individuals with mental health disabilities and addictions (referred to in the Policy inclusively as “psychosocial disabilities”).

The Policy is the result of extensive consultations with approximately 1,000 individuals with mental health issues or addictions, as well as employers, service providers, housing providers, advocates and families. The Policy sets the standard for how individuals, employers, service providers and policy makers should act to ensure compliance with the Ontario Human Rights Code (the “Code”). Although the Policy does not have the force of law, it represents the OHRC’s interpretation of the Code as it relates  to individuals with psychosocial disabilities, and will likely be given great deference by the Human Rights Tribunal of Ontario (HRTO) and/or the courts in any decision-making on this issue.

What Constitutes A Psychosocial Disability?

The Code protects people with psychosocial disabilities from discrimination and harassment under the ground of “disability.” According to the Policy, even mental health disabilities that may be experienced or perceived as minor, with no permanent manifestation, may be entitled to protection under the Code. The Policy does not provide a singular definition or a definitive list of psychosocial disabilities, but does offer the following guidance:

  • Psychosocial disabilities encompass mental health disabilities and addictions.
  • Psychosocial disabilities differ from cognitive, intellectual and sensory disabilities, as well as learning  disorders.
  • Addictions and post-traumatic stress may constitute psychosocial disabilities.
  • A disability is psychosocial where an individual’s mental condition makes them subject to social stereotyping, stigmatization and marginalization by others.
  • Persons with psychosocial disabilities may be subject to attitudinal and environmental barriers that hinder full participation by individuals with these disabilities.

Identifying Barriers

According to the Policy, the barriers faced by individuals with psychosocial disabilities are largely due to stereotypes that marginalize these individuals on the basis of presumed group characteristics.
Examples of such marginalizing stereotypes include:

  • Defining individuals entirely by their disability (e.g., characterizing someone as a “mentally ill individual” rather than an “individual with mental illness”);
  • Assuming that individuals with psychosocial disabilities are violent or aggressive without objective evidence of such behaviour;
  • Adopting an “ableist” attitude, which generally presumes that individuals with disabilities are less worthy of respect; and/or
  • Perpetuating “self-fulfilling prophecies” through organizational cultures that marginalize individuals with psychosocial disabilities while making such marginalization seem natural.

According to the Policy, a barrier-free approach requires treating individuals with psychosocial disabilities with the same respect and accommodation as individuals experiencing a physical illness.

Areas Of Concern For Service Providers

The Policy references a number of ways in which the rights of individuals with psychosocial disabilities may be engaged in a health care environment, including the following:

  • Patient profiling – particularly where patients with psychosocial disabilities may be flagged as security concerns on the basis of their disability alone; and
  • Findings of incapacity – particularly with respect to determining whether there is sufficient objective evidence for making such findings.

Areas Of Concern For Employers

The Policy references a number of ways in which the rights of individuals with psychosocial disabilities may be engaged in a work environment, including the following:

  • Systemic discrimination or poisoned workplace environments – particularly where such environments prevent or hinder individuals with psychosocial disabilities from expressing their needs to employers; and
  • Access to employment – particularly with respect to ensuring that it is feasible for individuals with psychosocial disabilities to apply for employment, retain employment, and/or advance in employment.

Adopting A Proactive Approach

The Policy encourages employers and service providers to be proactive in anticipating and addressing the needs of people with psychosocial disabilities. Being proactive means that organizations can be responsive when needs or issues come to their attention, and minimize disruption and aggravation for everyone. Elements of a proactive approach include:

  • Developing accommodation policies and processes in advance, and with the benefit of suitable consultation/research, rather than providing hurried and “one-off accommodations” as needs arise. When organizations develop multiple accommodation options that respect the dignity of individuals with disabilities, the Code permits the adoption of the most cost effective options.
  • Inquiring appropriately into possible cases of undisclosed psychosocial disabilities. The Policy confirms that there is a “duty to inquire” in circumstances where organizations have reason to believe that an employee or service user is experiencing a psychosocial disability. Such reasonable belief may stem from observing that an individual is “clearly unwell” or has undergone a “severe change” in behaviour. Once an organization has fulfilled its duty to inquire, accommodation will only be required if the service user or employee confirms or discloses a need.
  • Gathering objective evidence. In line with the Canadian Standards Association’s national standard Psychological Health and Safety in the Workplace, the Policy recommends that organizations collect qualitative and quantitative data to support their policies and practices. An evidence-based approach helps to ensure that policy and process development are not based upon stereotypes or discriminatory assumptions. Regularly updating research further ensures that organizations are prepared to address and respond to the evolving nature of psychosocial  disabilities.

General Best Practices

The Policy sets outs best practices for ensuring that proactive approaches are effective in addressing the needs of individuals with psychosocial disabilities, including both service users and employees. These general and specific best practices include:

  • Developing a general organizational “Human Rights Strategy” that addresses barriers faced by individuals with psychosocial disabilities. Such a strategy should include:
    1. a barrier prevention, review and removal plan;
    2. anti-harassment and anti-discrimination policies;
    3. an education and training program; and
    4. an internal complaints procedure.
  • Using an “Inclusive Design” to promote the full participation of individuals with psychosocial disabilities whenever new policies are developed or when existing policies are revised.
  • Ensuring that communications within the organization adopt respectful language and avoid stereotyping when referring to individuals with psychosocial  disabilities.
  • Maintaining individuals’ confidentiality throughout the process of accommodation.
  • Providing accommodation for the competing rights of others.

Examples Of Best Practices For Service Providers

  • Flagging patients as security concerns should only be done if and when objective, person- specific evidence supports that conclusion. Otherwise, such potentially stigmatizing actions should be avoided.
  • Refraining from assuming that individuals with mental illness and other psychosocial have difficulty with decision making capacity. Objective evidence supporting the legislated criteria for findings of incapacity and involuntary hospitalization must be present, as required by existing mental health legislation.
  • Facilitating trust and open communication between service users and service providers. For service providers, this includes regular access to information and training on psychosocial disabilities. For service users, this includes an accessible complaints mechanism.
  • Accommodating people with psychosocial disabilities. Such accommodations may include:
    1. Providing multiple ways to access services including by phone, in person and via electronic  resources.
    2. Modifying rules around deadlines and strict appointment times where non-compliance and non-attendance can be shown to be linked to a disability.
    3. Providing extra time to a service user.

Examples Of Best Practices For Employers

  • Adopting  progressive  performance management and other processes that afford opportunities for employees to disclose their needs and participate in the development of appropriate accommodations while meeting employers’  expectations.
  • Engaging labour unions in the accommodation process, as unions share responsibility for this process alongside employers.
  • Avoiding intrusive employment practices whenever possible. Specifically, the Policy calls for a “genuine effort” on the part of employers  to provide accommodation without requiring employees to disclose confidential medical information or undergo an independent medical examination. More intrusive measures should only be adopted where it can be shown that they are necessary and directly relevant to providing an accommodation.
  • Accommodating people with psychosocial disabilities to the point of undue hardship. Such accommodations may include:
    1. Providing alternative ways of communicating with the employee.
    2. Allowing for more training or training delivered in a different way.
    3. Allowing a flexible work schedule.
    4. Provide job coaching.

Concluding Remarks

While the Policy does not create any new obligations for service providers and employers, it does help clarify Code-related protections and obligations in relation to individuals with psychosocial disabilities, such as mental illness and addiction. The Policy also helps service providers and employers to be proactive and avoid human rights complaints.

A copy of the policy can be found at: www.ohrc.on.ca/en/book/export/html/11238

Authors: Maciej Lipinski, Wendy Whelan, Melanie Warner, Barb Walker-Renshaw

Final Word

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    Katherine Carre 

    John McIntyre 

    Kate Dearden 

    Wendy Whelan 

    Barbara Walker-Renshaw 

    Other Author

    Sylvie Lalonde


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