by admin | Jun 29, 2017 | Charity & Not-for-Profit Law, Employment Law
On May 23, 2017, the Ontario Government released the much anticipated Changing Workplaces Review Final Report and Summary (the “Report”). The Report recommended some 173 changes to Ontario’s employment and labour laws, and proposed amendments to Ontario’s Employment Standards Act, 2000 (“ESA”) and the Labour Relations Act, 1995. In response to the Report, on June 1, 2017, Bill 148, Fair Workplaces, Better Jobs Act, 2017 (“Bill 148”) was quickly introduced and referred for consideration of the Standing Committee on Finance and Economic Affairs. Public consultations on Bill 148 will be held in various Ontario cities this summer. This Bulletin will focus on the proposed changes to the ESA which may have the most significant impact on charities and not-for-profits in Ontario, including changes proposed to provisions on minimum wage, paid vacation, personal and emergency leave, and scheduling.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 405.
by admin | Jun 29, 2017 | Charity & Not-for-Profit Law
Directors and officers of federally incorporated charities and NFPs have both a statutory standard of care and common law fiduciary duty to act in good faith with a view to the best interests of the corporation. This duty at common law is illustrated in Bhadra v Chatterjee, where the Ontario Superior Court of Justice (the “Court”) considered a dispute between the board of directors (referred to as the “board of trustees”) of Toronto Kalibari, a NFP religious organization (“Kalibari”), over the amendment of by-laws upon their transition to the CNCA. This case is not the first instance that a trustee of Kalibari has filed a lawsuit against two of the Respondents. The first instance was in the case of Pal et al. v Chatterjee et al., reported in the March 2013 Charity Law Update.
In this case, Bhadra, a trustee of Kalibari (the “Applicant”), brought a motion seeking to stop three other trustees, Chatterjee, Dey and Ghosh (the “Respondents”), from calling a meeting of the board to vote on the proposed new by-laws. The Applicant further sought for the Court to redraft the by-laws or, in the alternative, to be granted leave to commence a derivative action.
At a meeting discussing the process of internal revision of Kalibari’s by-laws, a dispute arose between the Applicant and the Respondents. Subsequently, the board of trustees held a discussion about hiring a lawyer to revise Kalibari’s by-laws for the CNCA transition. Five of nine trustees voted in favour of retaining a lawyer, Mr. Box, to do the work. Two of the Respondents subsequently went by themselves to discuss the retainer with Mr. Box without first consulting with the remaining trustees on the work to be done.
The Court allowed the application, in part, “on the basis that the Respondents did not act in good faith in the manner in which they retained counsel to draft new corporate by-laws and invited corporate counsel to a meeting of the board […] without notice to the applicant”. In this regard, it stated that the “Respondents should have expected that the “minority” trustees would want an opportunity to liaise with the lawyer before the first draft was prepared.”
The Court stated that “the Respondents acted in bad faith and without the authority of the board when they retained Mr. Box and the by-laws drafted by him were drafted on behalf of the Respondents”. As such, the court prohibited the Respondents from holding a meeting to vote on the said by-laws. The Court ordered that all parties be returned to their previous positions, and that Kalibari retain new legal counsel, namely someone other than Mr. Box or two other lawyers that had been hotly debated by the trustees. This case serves as a reminder that, even where there is conflict between members of a board of directors, each director must uphold the statutory standard of care and the duty to always act in good faith with a view to the best interests of the corporation on which they serve, as they may be held personally liable for their actions.
by admin | Jun 29, 2017 | Charity & Not-for-Profit Law, Privacy Law & Anti-Spam
In May 2017, the Office of the Information and Privacy Commissioner for British Columbia updated its guidance document on Conducting Social Media Background Checks (the “Guidance”). The Guidance is intended “to help organizations and public bodies navigate social media background checks and privacy laws.” The Guidance emphasizes the fact that using social media to conduct background checks on prospective employees or volunteers or to monitor current ones can place an organization at risk of a privacy breach. Privacy risks of social media screening include collecting inaccurate, dated or irrelevant information about individuals, collecting too much information about individuals or inadvertently collecting personal information about third parties. The Guidance also cautions against over-reliance on consent, which can be revoked at any time. The Guidance advises organizations planning to use social media for background checks to conduct a privacy impact assessment of the risks associated with doing so and to have comprehensive policies, procedures and controls in place to address these risks.
Although not specifically aimed at charities and NFPs, and although it is drafted in the legislative context of British Columbia, this short document is a useful tool for charities and NFPs using social media background checks, and may provide helpful information, even if the charity or NFP is not located in British Columbia. Charities and NFPs not located in British Columbia can use this tool as a starting point to understanding the risks in using social media background checks, but should consult provincial privacy law and legal counsel in the province or territory in which they operate.
by admin | Jun 29, 2017 | Charity & Not-for-Profit Law
On November 21, 2016, the Ontario Superior Court of Justice (the “Court”) released its judgment in Polish Association of Toronto Limited v. The Polish Alliance of Canada (“2016 Case”). The parties to the 2016 Case had also been involved in previous litigation involving similar issues in The Polish Alliance of Canada v. Polish Association of Toronto Limited (2014 ONSC 3216) (the “2014 Case”) and on appeal (2016 ONCA 445) (the “2014 Appeal”). The Court in the 2016 Case applied the common law principle known as the “clubman’s veto” in an unusual corporate context. The clubman’s veto was explained by the Court as “a common law rule that provides that members of an unincorporated association must be unanimous to leave the association and to take the property of the association with them.”
The 2016 Case dealt with the issue of whether the members of Branch 1-7 (“Branch”) were entitled to leave The Polish Alliance of Canada (“National”), a not-for-profit corporation, and take with them the property used by the Branch. The Branch was an unincorporated branch of the National. The Branch’s property included a clubhouse on Lakeshore Blvd. in Toronto worth $50 million or more (the “Branch Property”), which was held in trust for the members of the Branch by a separate corporation, the Polish Association of Toronto Limited (“PATL”). Prior to its incorporation in 1973, the National had operated as an unincorporated association from the 1920s. However, it was the members of the Branch that raised money to purchase and maintain the Branch Property over the years and the PATL was incorporated in 1927 to hold property in trust for the benefit of the unincorporated Branch.
In the 2014 Case, the Branch’s efforts to leave the National based on the approvals obtained at a meeting attended by less than one third of the Branch members, with insufficient notice, was unsuccessful. However, the Court in the 2014 Case made determinations on several matters between and among the National, the members of the Branch and the PATL, which were upheld with some amendments in the 2014 Appeal. The Court in the 2014 Case held, among other matters, that the beneficial owners of the Branch Property are the members of the Branch, and that the Branch is an independent organization within the constitutional structure of the National. Regarding the nature of the Branch, the Court in the 2014 Case held that “While not a legal entity, as between the parties, [the Branch] is recognized as distinct, can lend and borrow, manage property interests delegated to it, and exercise the rights of a branch under the [National’s] constitution.”
After the 2014 Appeal affirming the decision in the 2014 Case was released, the Branch held a membership meeting at which the Branch members unanimously agreed to leave the National and take the Branch Property with them, giving rise to the 2016 Case. The National argued that the clubman’s veto did not apply to the National and its branches because the National was incorporated under the Corporations Act (Ontario) in 1973. The National also argued that there was no mechanism for the Branch to leave, since the National’s constitution was silent on the issue of how a branch could leave the National.
In finding against the National, the Court stated in the 2016 Case: “Given the unanimity of the branch members, the court is quite satisfied that they should be able to manage the legal title to their properties as well as the equitable title that they already own. […]At common law, the clubman’s veto allows a branch to disaffiliate and to take their property. […I]f the members are unanimous, then they can go and take their equity with them. Branch 1-7, as an identifiable, distinct, unincorporated entity within the [National] firmament, has duly engaged the clubman’s veto and obtained a unanimous vote with no vetoing vote cast.”
The Court also noted that the board of directors for the National had signed promissory notes documenting borrowing of money from the Branch, and the Branch had even sued the National on one such note. In commenting on the National’s incorporation in 1973, the Court noted that, “There was no indication that any individual member ever applied to join the corporation or knew that a change in corporate structure had occurred.”
Given the uniqueness of the background facts involved in the above decisions, it is unclear whether a court would apply the clubman’s veto in future cases involving a not-for-profit corporation where there are different facts involved. However, the decision in this case does raise the spectre that an internal division or branch of a corporation in an analogous fact situation might become so independent, distinct and separately identified that it might be entitled to leave the not-for-profit corporation and take its branch assets with them if the decision was approved unanimously by the branch members. As such, charitable and not-for-profit corporations with branches or divisions may want to take steps as necessary to ensure that the governing board of the corporation exercises a sufficient degree of control over its branches and divisions, both in practice and within the corporation’s governing documents.
by admin | Jun 29, 2017 | Charity & Not-for-Profit Law, Employment Law
On June 23, 2017, the Supreme Court of Canada (the “SCC”) reinstated the decision of a chambers judge of the Supreme Court of British Columbia, declining to enforce a forum selection clause and certifying a class action lawsuit against Facebook, Inc. (“Facebook”) for alleged violations of British Columbia’s Privacy Act (the “Act”). Douez v Facebook, Inc (the “Case”), is based on Facebook’s use of the names and pictures of its users in advertising companies and products to other users. The appellant-plaintiff, Deborah Douez, sought to bring a class action against Facebook for alleged breaches of the Act.
The SCC’s decision did not deal with the merits of the case, but rather addressed procedural matters. Facebook brought a preliminary motion to stay the proceeding on the basis of a forum selection clause in its terms and conditions of use. The forum selection clause was intended to make California the forum for all lawsuits against Facebook. The chambers judge declined to enforce the forum selection clause and certified the class action.
The British Columbia Court of Appeal reversed the decision concerning the stay, ruling that the forum selection clause was enforceable and, in the result, finding the certification point moot. The SCC was divided in a 4-3 decision, with Chief Justice McLachlin, and Justices Moldaver and Côté dissenting. The majority applied what is known as the Pompey test, from the decision Z.I. Pompey Industrie v. ECU-Line N.V., to determine if the forum selection clause was enforceable. Where there is a contract between parties, the Pompey test asks whether the party disputing a forum selection clause has strong cause to show that it would be unreasonable to require adherence to the clause. Three of the majority SCC Justices determined that in this case the forum selection clause was not enforceable, as Douez showed strong cause not to enforce the forum selection clause. In particular, these majority Justices held that privacy claims relating to the purported statutory rights of British Columbia residents should be determined in the courts of that province by the application of the laws of that Province. The fourth majority SCC Justice determined that it would be unconscionable to enforce the contractual clause due to the disparity in the bargaining powers of the parties. The effect of the decision is that the litigation will continue in the Supreme Court of British Columbia as a class action proceeding.
by admin | Jun 29, 2017 | Charity & Not-for-Profit Law, Privacy Law & Anti-Spam
On May 30, 2017, the Ontario Superior Court of Justice granted an order approving a settlement agreement (the “Settlement Agreement”) in a class action lawsuit (the “Class Action”) against Wal-Mart Canada Corp. (“Wal-Mart”). The Class Action was brought after Wal-Mart notified its customers in July 2015 that its photo processing website, which was operated by a third party, had been compromised, potentially placing customers at risk. The Statement of Claim in the Class Action alleged that customers had been required to provide their name, address, telephone number and credit or debit card information (“Personal Information”) to Wal-Mart and its co-defendant in order to use the photo finishing website and that this Personal Information had been subject to unauthorized access and stolen. As a result, customers had experienced or were exposed to various harms, including identity theft, harassment and fraudulent credit card transactions.
The plaintiff and the class members in the Class Action sought general and special damages totalling $500 million, together with punitive and aggravated damages in the amount of $50 million on the basis that, among other things, Wal-Mart’s privacy policies, handling, storage and lack of security of the Personal Information had exposed them to harm. The plaintiffs also claimed that Wal-Mart had delayed notifying law enforcement and their customers of the breach and the loss of the Personal Information, resulting in additional harm and showing negligence and reckless disregard for the sensitivity and confidentiality of the Personal Information, and that Wal-Mart had breached the terms of an implied contract it had with its customers that it would safeguard their Personal Information and notify them promptly of any compromise or theft.
The Settlement Agreement makes various benefits available to eligible class members, including recovery of valid claims for out of pocket losses, unreimbursed charges and time spent remedying issues traceable to the privacy breach of up to $5000 and $15 per hour for up to five hours per person. The maximum cumulative total available for the recovery of expenses under the Settlement Agreement is $400,000, following which this obligation will have been discharged. Eligible class members will also be able to apply for free credit monitoring services for a maximum of one year, whether or not they submit a claim for the above-noted expenses, and can apply for a reimbursement for credit monitoring services where such services were already purchased as a result of the breach. The maximum cumulative total available for credit monitoring under the Settlement Agreement is $350,000. Additionally, under the Settlement Agreement, Wal-mart will pay up to a maximum of $250,000 for the costs of administering the recovery of expenses and the credit monitoring services.
All Canadian residents who used Wal-Mart’s photo website between June 1, 2014 and July 10, 2015 and who have not opted out are eligible for compensation under the Settlement Agreement.
Even though the actual quantum of damages reflected in the settlement agreement was not large at the end of the day, this privacy Class Action demonstrates the risk faced by organizations that collect, use, store and handle personal information in the course of their activities. Any compromise of that information can lead to claims for damages for privacy breach, identify theft, out of pocket expenses, damage to credit rating and other costs incurred by the persons impacted, and can result in significant reputational damage to the organization itself. In order to mitigate these risks, organizations that deal with personal information should put in place and monitor the implementation of enterprise-wide privacy policies. They should also ensure that their contractual arrangements with third party IT providers and consultants contain robust covenants to protect the organization in the event that the actions of the third party lead or contribute to a data breach. Finally, organizations should obtain cyber risk insurance to help protect against technology risks and exposures.
