New Brunswick Joins other Provinces with Franchise Legislation
By: Debi M. Sutin

The grant of franchises in the Province of New Brunswick will be subject to regulation in early 2011, joining the Provinces of Ontario, Alberta and Prince Edward Island with pre-sale disclosure legislation in Canada.  More than a year after releasing its Consultation Paper on proposed Regulations to the New Brunswick Franchises Act (“Act”), final Regulations were approved by Cabinet and are to come into force on February 1, 2011.  Like the Alberta and Prince Edward Island franchise laws, the Act allows for the use of a disclosure document prepared for use in another jurisdiction provided that additional information is included, through what is generally called a wrap-around document, in order to comply with the requirements of the Act.

Two separate regulations were approved: the Disclosure Document Regulation and the Mediation Regulation. The latter prescribes the method of delivery of a notice of dispute and a notice to mediate which, under the Act either party to a franchise agreement is entitled to initiate.  The Mediation Regulation also prescribes the method for appointing a mediator, the timing and conduct of mediation and forms to be used for notices, statements of facts and issues and the certificate of completed mediation.  The Disclosure Document Regulation prescribes the items of information required to be disclosed by a franchisor in its disclosure document.

While the disclosure Regulations under New Brunswick’s Franchises Act mirror, in many respects, the regulations to the franchise legislation in Ontario, Alberta and Prince Edward Island, there are some note-worthy differences.  This article will address those provisions of the Disclosure Regulation which are unique or which differ significantly from the regulations under Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 (the “Ontario Regulations”) which do not expressly allow for the use of a wrap-around document. 

• In addition to specific information required to be disclosed pursuant to the Disclosure Document Regulation, it also requires in a number of instances for a form of “negative disclosure”.  For example, if the franchisor does not provide earnings projections, the disclosure document must provide a statement to that effect.  Similarly, if training or other assistance is not offered to the franchisee, a statement to this effect must be included in the disclosure document.  The Certificate of Franchisor, which must be in the form of Form 1 of the Disclosure Document Regulation must also include a prescribed statement if the franchisor is relying upon an exemption under the Disclosure Document Regulation from providing financial statements.
• Disclosure of information relating to criminal convictions, administrative orders and proceedings, civil proceedings and bankruptcy are limited to the 5 year period prior to the date of the disclosure document while under the Ontario Regulations, such disclosure must be provided for 10 years in the case of criminal convictions, 6 years for bankruptcy and with no period limitation for civil actions and administrative proceedings.
• Disclosure of background information of the franchisor must include the number of franchises granted during the 5-year period prior to the date of the disclosure document (like the disclosure required under the Franchises Act (PEI)).
• As part of the disclosure pertaining to the franchise, the franchisor is required to disclose its policies and practices regarding guarantees and security interests required of franchisees (similar to the requirement under PEI’s disclosure requirements).  Although it has become common practice to disclose such information in Ontario under the catch-all disclosure requirement of “all material facts”, there is no express provision requiring such disclosure in the Ontario Regulations.
• The Disclosure Document Regulation provides a definition of “earnings projection” which is the same as the definition provided in the Regulations to the Franchises Act (Prince Edward Island).  It is defined as follows:

  “earnings projection” includes any information given by or on behalf of the franchisor or franchisor’s associate, directly or indirectly, from which a specific level or range of actual or potential sales, costs, income, revenue or profits from franchises or businesses of the franchisor, franchisor’s associates or affiliates of the franchisor of the same type as the franchise being offered can easily be ascertained.

  As with the Regulations to the Franchises Act (PEI), the Disclosure Document Regulation refers to the provision by the franchisor of an earnings projection, “directly or indirectly”.  Although not yet clear, this could mean that an earnings projection could be provided to a prospective franchisee outside of the disclosure document and by someone other than the franchisor such as a third party franchise consultant or broker.

• If the franchisee is required to operate in accordance with the franchisor’s manuals, either the table of contents of the manuals must be included in the disclosure document or a statement specifying where in New Brunswick the manuals are available for inspection.  It is not yet clear whether this will be interpreted as giving the prospective franchisee the right to inspect the manuals or just their table of contents.
• As part of the franchisor’s disclosure regarding exclusive territory and proximity of units, the franchisor must disclose its policies and practices relating to internet sales or other “distance sales” (which term is not defined in the Act or the Disclosure Document Regulation).
• The requirement to disclose permits, licences and other authorizations required by a franchisee to operate its business is restricted under the Disclosure Document Regulation to those under federal or provincial law and does not extend to municipal laws as does the equivalent requirement under the Ontario Regulations. However, the Disclosure Document Regulation also requires a statement in the disclosure document that the franchisee should make inquiries to determine whether any other federal, provincial or municipal laws or by-laws require permits, licences or other authorizations  in order to operate the franchise.
• If the franchisor has the right to unilaterally amend any terms or conditions of the franchise agreement, this must be stated while it is only optional to provide the specific terms that may be unilaterally amended.
• If the number of franchisees in New Brunswick is less than 20, the list must include information on franchisees that operate franchises of the same type in Ontario, Quebec, Prince Edward Island, Nova Scotia or the State of Maine.  If there are still less than 20 franchisees listed, then the list must include information on franchisees operating franchises elsewhere in Canada.
• The list of former franchisees must be gathered from both the Province of New Brunswick and from those jurisdictions from which the list of current franchisees have been drawn.
• In addition to information on current franchisees, the franchisor is also required to provide information on other businesses operated in New Brunswick by the franchisor, franchisor’s associates or affiliates that are of the same type as the franchise being offered.  A franchise is deemed to be the same type as another business if it is operated under the same trademark, trade name, logo or advertising or other commercial symbol.
• Delivery of a disclosure document by courier or by electronic means is expressly permitted under the Disclosure Document Regulation
• A Statement of Material Change must be in prescribed form and must be signed and dated in the same manner as the signing of the Certificate of Franchisor.

Although substantially similar to the disclosure regulations of the other provinces in Canada with franchise legislation, there are enough differences prescribed under the Disclosure Document Regulation that franchisors must take care to ensure that their current disclosure documents are modified as necessary if they plan to franchise in the Province of New Brunswick.

Anyone in Gowlings National Franchise Practice Group can assist if you have any questions regarding New Brunswick’s Franchises Act.

New Workplace Violence Prevention Law Now in Effect
By: Norm Keith B.A., L.L.B, CRSP and Cathy Chandler

Employers in Ontario now must comply with the new Workplace Violence Prevention law.  The Occupational Health and Safety Act (the "Act") has been amended to prevent and manage workplace violence and harassment. These changes to the Act came into effect and are enforceable as of June 15, 2010. The amendments explicitly set out a duty for every Ontario employer to take specific steps to proactively prevent and manage workplace violence.  Legal compliance starts with a risk assessment. 

The Act contains definitions for workplace violence and workplace harassment. Workplace violence means the exercise of physical force by a person against a worker, in a workplace, that causes or could cause physical injury to the worker. It also includes an attempt to exercise physical force or a statement or behaviour that a worker could reasonably interpret as a threat to exercise physical force against the worker in a workplace. Workplace harassment means engaging in a course of vexatious comment or conduct against a worker in a workplace that is known or ought reasonably to be known to be unwelcome.

Risk Assessment

Employers must conduct a risk assessment of workplace violence that may arise from the nature of the workplace, type of work or conditions of work. For example, the activities workers perform, whether workers are required to travel, work alone or work late at night as well as access control and security and surveillance systems. The risk assessment must also consider circumstances common to similar workplaces – the activities or work conditions that certain sectors have in common and circumstances specific to the workplace such as layout and design and geographic location. If an employer has multiple work locations, each location should be assessed for its own unique risks of workplace violence in addition to the common risks.

Employers must prepare and review at least annually, a policy with respect to workplace violence and harassment. The policy is required regardless of the size of the workplace or the number of workers. If more than five workers are regularly employed at a workplace, the policy must be in writing and posted in the workplace. Employers may prepare separate policies on workplace violence and workplace harassment or they may combine their workplace violence policy with an existing workplace harassment policy.

The employer must also develop a program to implement the workplace violence and workplace harassment policy. The program must include measures and procedures to control the risks identified in the workplace violence risk assessment as well as measures and procedures for workers to report incidents of workplace violence and harassment to the employer, for summoning immediate assistance when workplace violence or harassment occurs or is likely to occur and how the employer will investigate and deal with incidents or complaints of workplace violence and harassment. The Act also places a duty on an employer to take every reasonable precaution for the protection of a worker, if the employer knows or ought to reasonably know that domestic violence may occur in the workplace and likely expose a worker to physical injury.

The employer must also provide information and instruction to its workers on its workplace violence and harassment policy and program. In particular, the employer will be required to disclose to its workers the risk of violence from a person with a history of violent behaviour who they may encounter in the course of work and if the risk of workplace violence is likely to expose the worker to physical injury. The Ontario Ministry of Labour recently released a guidance document titled ‘Workplace Violence and Harassment: Understanding the Law’.

Enforcement

The Ontario Ministry of Labour has stated that it is committed to enforcing the new amendments to the Act. Employers who have not completed their Risk Assessment, policy, program and training by June 15, 2010 are at risk of enforcement actions including Orders and Prosecutions. Directors and Officers must ensure their organizations are in full compliance or risk personal liability. Corporations may be fined up to $500,000.00 and individuals may be fined up to $25,000.00 or jailed for 12 months or both.  Compliance with the new amendments to the Act is not only the law, it is also the right thing to prevent workplace violence.

For further information please contact Norm Keith at 416-862-5699 or norm.keith@gowlings.com or Cathy Chandler at 416-369-7351 or cathy.chandler@gowlings.com.

Who, What, Where and When

• Congratulations to Ned Levitt who was awarded by the Canadian Franchise Association the “Life Time Achievement Award” for his work in franchising.  This award was presented to Ned Levitt at the CFA Annual Convention in Mt. Tremblant in May 2010.
• Len Polsky, Ned Levitt, Debi Sutin, Jeff Hoffman, Peter Snell and Chad Finkelstein will be attending the American Bar Association Forum on Franchising October 13-15, 2010 in San Diego, California.
• Peter Snell’s article on the Pros and Cons of incorporation is scheduled for publication in the “Ask the Experts” section of the July/August issue of Franchise Canada.
• Peter Snell’s article on choosing a form of business for your franchise is scheduled for publication in the September/October 2010 edition of Franchise Entrepreneur.
• Len Polsky’s article “The Dynamics of Franchising” is scheduled for publication in the 2011 edition of Canadian Business Franchise Handbook.
• Len Polsky’s article “Understanding the Franchise Agreement – How is the Use of Social Media Incorporated Into the Franchise Agreement?” is scheduled for publication in the next issue of Franchise Entrepreneur Magazine.
• Len Polsky’s article “Location Specific Deficiencies in Disclosure Documents – Case Comment: Melnychuk v. Blitz Ltd.” is scheduled for publication in the next issue of the Franchise and Distribution Journal.
• Peter Snell spoke on July 29, 2010 on Alternative Dispute Resolution at the Franchise Forum in Vancouver.
• Peter Snell is speaking at the British Columbia Continuing Legal Education Franchising 101 Conference in the fall of 2010.
• Peter Snell is speaking at the American Bar Association Business Law Section Annual Meeting August 5-9, 2010 in San Francisco on Social Media and Brand Protection.
• Debi Sutin will co-chair the Ontario Bar Association’s 10^th Annual franchise law conference, being held in Toronto on November 4, 2010.
• Len Polsky spoke at RepCAN 2010, a US Commercial Service trade mission event in Vancouver for US Companies seeking Canadian representatives/distributors on June 10, 2010, on Protection and Distribution of Products in Canada.
• Len Polsky will be speaking at the International Bar Association Annual Conference in Vancouver on October 5, 2010, at the International Sales, Franchising and Product Law Section, on Use of Social Media in Franchise Systems.
• Ned Levitt will be speaking at the American Bar Association Forum on Franchising on the topic “The Impossible Dream: Controlling Your International Franchise System”.
• Len Polsky and Peter Snell will lead a Franchise Roundtable Supersession and Reception on September 15, 2010 in Vancouver.