Friday News Finds – November 13, 2020

By Zach Lechner-Sung

In this week’s Friday Finds we will be discussing a recent SCC decision regarding corporation Charter rights, Uber’s California ballot initiative, new CSA guidance on continuous disclosure, and the acquisition of Clearwater Seafoods by a Mi’Kmaq First Nations coalition.

Last Thursday, the Supreme Court of Canada (SCC) released its decision in Quebec (Attorney General) v. 9147-0732 Quebec Inc, 2020 SCC 32, which held that section 12 of the Canadian Charter of Rights and Freedoms does not apply to corporations. Back in May of 2016, the Court of Quebec found the defendant construction company guilty of carrying out construction work without a proper license. In accordance with Quebec’s Building Act, the Court imposed the mandatory minimum fine of $30,843. The construction company disputed the penalty, claiming that it had mistakenly billed the work to the wrong corporate entity, and challenged the constitutionality of the mandatory fine on the grounds that it infringes section 12 of the Charter which prohibits “cruel and unusual treatment or punishment.” In its unanimous decision, the SCC explained that the use of the words “cruel and unusual” suggests protection for human beings only. The Supreme Court distinguished R v. Boudreault, which held that mandatory victim surcharges under the Criminal Code were unconstitutional, on the basis that s.12 jurisprudence is marked by the concept of human dignity. Furthermore, the SCC held that the existence of humans behind the corporate veil is insufficient to ground a s.12 claim. The SCC clarified the purpose of section 12, stating that its objective is to prevent the state from inflicting dehumanizing or degrading physical or mental pain and suffering, with the intended beneficiaries being people, not corporations. While corporations do benefit from certain Charter rights such as the right to be secure against unreasonable search and seizure (s.8) and the right to be presumed innocent until proven guilty (s.11), the Charter will continue to be of limited use in defending companies from regulatory prosecution.

On November 4, California passed a ballot measure exempting ride-share companies from Assembly Bill 5, a law that would force companies like Uber and Lyft to classify their drivers as employees rather than independent contractors. Uber has consistently fought against similar legislation, as classifying its drivers as employees would require the company to provide health insurance, minimum wage, overtime, and other employment benefits. Proposition 22, or the Contractors and Labour Policies Initiative, was authorized by Uber, Lyft, Doordash, and Instacart, and represents the most expensive ballot measure in California history at a cost of around $200 million. Although drivers will not be classified as employees in California, Prop 22 provides a floor on driver earnings, guaranteeing income of at least 120% of minimum wage, as well as health care subsidies, occupational accident insurance, compensation for vehicle expenses, and protection against discrimination and sexual harassment. This comes after the Supreme Court of Canada’s decision in Heller v. Uber Technologies Inc., where the Supreme Court held that Uber’s arbitration clause in its contracts with drivers was unconscionable, opening the door for a $400 million class-action initiated by an Uber Eats driver who claims drivers should be classified as employees. Prop 22 may serve as guidance for future legislation in Canada, where drivers may be provided certain minimum protections even if they are deemed independent contractors.

The Canadian Securities Administrators recently published a Staff Notice (Notice) to report on the results of its Continuous Disclosure Review Program. The program was established to help issuers comply with disclosure obligations and aims to improve “the completeness, quality, and timeliness of continuous disclosure provided by reporting issuers”. The Notice pays special attention to disclosure obligations in light of the COVID-19 pandemic and reminds reporting issues to be clear in segregating the impact of COVID-19 from other factors that affect their operating performance, financial position, and liquidity. In general, management should be wary of incorrectly attributing the pandemic as the sole factor for negative results. Reporting issuers should be clear about their reliance on assumptions and estimates in dealing with uncertainty caused by the pandemic. Issuers should also disclose changes in governmental and regulatory policies and how they might impact their financial prospects. With the constant stream of new information about the pandemic, issuers should consider publishing interim financial statements to reflect changes in their environment. For more specific recommendations, please see the Special Notice published by the CSA on October 29, 2020.

On November 9, Nova Scotia-based Clearwater Seafoods announced its acquisition by Premium Brands Holdings Corporation and a Mi’Kmaq First Nations coalition. Clearwater Seafoods is one of the largest seafood companies in North America, and the deal represents the “single largest investment in the seafood industry by an Indigenous group in Canada.” Clearwater has a monopoly on offshore fishing licences which allows for year-round lobster harvest, and the $250 million dollar investment by Mi’kmaq communities will provide Indigenous peoples with more opportunity to participate in big industry. The acquisition comes at a time of heightened tensions over treatied fishing rights, which at times has been aggressive and violent. In 1999, the Supreme Court of Canada confirmed the treaty right of Indigenous peoples to catch and sell fish in ancestral waters. R v. Marshall confirmed the right to earn a “moderate livelihood” from these natural resources, however, the SCC later clarified that the federal government has the authority to regulate fisheries in the public interest and for conservation purposes. Additionally, the Supreme Court attempted to clarify “moderate livelihood” as not meaning an open-ended accumulation of wealth, however their failure to clearly define the scope of this allowance has resulted in continuous tension between moderate livelihood fisheries and other commercial fishermen. It remains to be seen how this new commercial venture will affect tensions between these groups and whether further clarification will be required regarding the treaty rights of Indigenous peoples.

That wraps up this week’s Friday Finds! Come back next week for more news highlights!