By Zach Lechner-Sung
Welcome back to the Canadian Business Law Blog! It has almost been a year since our last post, and a lot has changed since then. As the world adjusts to the “new normal”, the Canadian legal landscape continues to evolve and address disruptions caused by the COVID-19 pandemic. Today we will be taking a look at some of the recent headlines covering the legal response to COVID-19, as well as some recent changes to U.S. securities law and Ontario franchise law.
On August 14, 2020, British Columbia’s Workers Compensation Amendment Act, 2020 (“Bill 23”) was put into force in order to address concerns related to COVID-19, worker benefits, regulatory compliance, and the collection of unpaid assessments. Its amendments to the Workers Compensation Act provide a presumption of workplace causation in the event a worker contracts an infection from certain communicable pathogens, including COVID-19. This presumption is subject to the condition that the worker is part of a process or industry in the geographic area and time where there is a heightened risk of exposure. The basis of this change was a study commissioned by WorkSafeBC, however, findings did not indicate there was a relationship between specific occupations and a greater risk of COVID-19 infection. As of now, no definition of “a source of infection significantly greater than that to the public at large” has been provided. The Act also provides WorkSafeBC with new powers to enforce payments of debts owed by employers. The amendments expand liability for corporate directors with respect to debts owed to WorkSafeBC, and permit the board to demand payment from third parties who are themselves indebted to an employer. Other notable changes include the authorization of WorkSafeBC to provide preventative medical treatment where there is a significant health risk, and obtain search and seizure warrants where there are reasonable grounds to believe the Act or its regulations have been violated. Bill 23 also increases the maximum annual salary amount from which workers’ compensation benefits are calculated, impacting employers of workers who earn above the previous limit.
Across the border, the U.S. Securities and Exchange Commission (SEC) recently amended Regulation D of the U.S. Securities Act to facilitate greater access to U.S. private placements. Where U.S. securities law dictates that any offer or sale of a security must be registered with the SEC, Regulation D sets out exemptions for individuals and entities that the SEC considers to be sophisticated, and in no need of the protection provided through the registration process. The August 26 amendments broaden the definitions of these groups, referred to in the Act as “accredited investors” and “qualified institutional buyers”. Family offices with at least $5 million in assets under management, and knowledgeable employees of private funds offering a private placement will now be permitted to participate as “accredited investors”, among others. Similarly, larger institutions that previously were not considered “qualified institutional buyers” will now qualify for the resale exemption under Rule 144A if they meet the definition of an accredited investor and satisfy the existing $100 million securities ownership threshold. Moving forward, Canadian corporations raising capital in the United States through private placement exemptions will now have access to a larger pool of investors. Additionally, Canadian investors who were previously excluded from U.S. private placements may be able to participate under the new definitions.
Within Ontario, amendments to the Arthur Wishart Act (Franchise Disclosure) came into effect on September 1, providing franchisors with options for pre-disclosure contracting. Previously, the Act required that franchisors provide prospective franchisees with a disclosure document prior to signing a franchise agreement, or any related agreement. This prevented franchisors from seeking a confidentiality or site-selection agreement prior to sharing confidential information about their business. The recent amendments make it possible for a franchisee to ask for a confidentiality agreement before or during the disclosure period, subject to certain criteria concerning the source of confidential information. Additionally, franchisors can now receive consideration before the end of the disclosure waiting period in the form of deposit payments that do not exceed 20% of the franchise fee. These payments, however, must be refundable without any deductions, and must be provided under an agreement that does not bind the franchisee to later enter a franchise agreement.
Thank you for joining us this week as we relaunch our weekly Friday Finds series! Please check back next Friday for another overview of the week’s top business law stories.