Top Legal Issues on the Docket for CFA Franchise Law Day
Labour legislation and disclosure law hot topics at full-day event
As the legal landscape for Canadian franchisors continues to change, the Canadian Franchise Association’s Franchise Law Day on September 26 is a must-attend event for anyone who works in franchising.
“The issues franchisors face are growing in complexity, cost, and consequence,” says Michael Sherrard, Managing Partner at Sherrard Kuzz LLP and Co-Chair of the 2017 Franchise Law Day Committee, along with Christine Jackson of Osler, Hoskin & Harcourt LLP.
To address these issues, Franchise Law Day will bring together some of Canada’s leading franchise lawyers for a full day of plenary sessions, workshops, and roundtable discussions offering best practices franchisors can adopt to protect their businesses.
The Changing Labour Law Landscape
One of the major issues up for discussion at Franchise Law Day is employment law. After a two-year review of the Employment Standards Act and Labour Relations Act, the Ontario government released its proposed amendments to provincial labour legislation in May 2017.
Although franchisors were not specifically targeted in The Fair Workplaces, Better Jobs Act, 2017, the proposed amendments – which include raising the minimum wage to $15 per hour by January 2019 – will have a significant impact on franchisees operating in Ontario, as well as increase the risk of unionization for franchise systems. Alberta has also introduced proposed amendments to its labour legislation, and British Columbia has just announced plans to do the same, making employment law a key area of concern for franchisors across Canada.
To address these changes, Franchise Law Day will kick off with a Breakfast Plenary led by employment law expert Matthew Badrov of Sherrard Kuzz LLP, and Stephen McDonald, Director of Employment Standards at the Ministry of Labour. “The session will explore new strategies and business-focused solutions to mitigate the risks arising out of these far-reaching changes,” says Sherrard.
The session will also look at the ongoing risk of joint-employer status for franchisors. Although franchisors were not explicitly deemed joint employers of their franchisees’ employees in the Ontario labour law amendments, the risk of a joint-employer designation for franchisors still exists due to the control they have over certain aspects of their franchisees’ businesses. To learn more about this complicated area of franchise law, be sure to attend the Breakfast Plenary.
Another major issue on the agenda is franchise disclosure. In September 2016, the Ontario Superior Court released its decision in Raibex Canada Ltd. v. ASWR Franchising Corp (AllStar Wings), a ruling that further complicates Ontario’s already complex disclosure requirements.
In AllStar Wings, the court granted a two-year rescission remedy to the franchisee primarily because the franchise disclosure document did not contain a copy of the head lease and associated cost information, despite the fact that no site had been identified, and therefore no head lease existed, at the time of disclosure or when the franchise agreement was executed.
The decision, which is currently under appeal, is troubling for two reasons. First, the practice of selecting a site after the franchise agreement has been signed is common in the franchise industry, especially where a franchisor is granting territory or area rights to a franchisee.
Second, the decision says a franchisor must delay disclosure until all material facts (not just the head lease) are known. Given the broad definition of “material fact,” the decision makes it difficult for franchisors to determine when they are ready to provide disclosure and enter into a franchise agreement.
“AllStar Wings is one of the most important decisions on disclosure in the past decade,” says Christine Jackson, noting that it could give non-franchised tenants an unfair advantage over franchisors and franchisees in Ontario’s already competitive real estate market. It could also make franchisors less willing to assist franchisees with site selection and leasing arrangements.
Given these developments, several concurrent sessions will focus on disclosure (click here for a full program agenda).
Something for Everyone
For new and experienced franchisors alike, there will be important topics on the agenda at Franchise Law Day. The 30-minute Legal and Legislative Panel will offer attendees a quick update on the most recent legislative developments and case law updates. Furthermore, the session will provide best practices that franchisors can immediately take back to their systems. “Our program focuses not just on the most recent legal developments this past year, but on some of the most practical business solutions implemented by our experts in franchising,” says Jackson.
For new franchisors, sessions on topics like how to negotiate a franchise agreement will cover some of the basic legal considerations for new and emerging systems. All sessions will be followed by roundtable discussions, where attendees can ask questions and share their own experiences with their peers and franchise law experts.