Friday News Finds – January 22, 2021

By Zach Lechner-Sung

Welcome back to Friday Finds! This week we will be discussing the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., the regulation of cryptocurrency in the U.S. and Canada, as well as disclosure requirements for climate-change-related financial risks.

Last week, the Supreme Court of Canada (SCC) refused to hear an appeal from the Ontario Court of Appeal’s (ONCA) decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391. The case concerned an employee who was terminated without cause and paid severance as per the “termination without cause” provision in his employment agreement. The employee then sued the company for wrongful dismissal, alleging that the “termination without cause” provision was unenforceable because a separate “termination with cause” provision violated the Employment Standards Act (ESA). The Court found that the “with cause” provision was in fact unenforceable; however, they did not clarify why it was unenforceable. Generally, Ontario legislation requires some form of notice depending on the length of employment and the reason for termination. One can assume that the “with cause” provision in Waksdale lacked certain requirements under the ESA. The Court explained that employment agreements “must be interpreted as a whole” in determining whether they violate the ESA. Thus, since the “with cause” provision was void, the “without cause” provision was also unenforceable. The decision has several implications for employers in Ontario. In particular, employers need to clarify termination for just cause in their employment agreements, specifically outlining in what situations notice and severance will be provided. Under Ontario common law, an employer with “just case” for termination can fire an employee without providing reasonable notice. Under the ESA however, employers must provide notice and severance unless the employee “has been guilty of wilful misconduct, disobedience or wilful negligent of duty that is not trivial and has not been condoned by the employer”. The Waksdale decision demonstrates the need for this distinction to be clear in employment contracts and suggests that employers should review their employment agreement for potential ESA violations.

The dramatic rise in the price of Bitcoin and other cryptocurrencies has once again raised the stakes around the regulation of cryptocurrencies. On January 16, 2020, the Canadian Securities Administrators (CSA) released additional guidance regarding the trading of crypto assets in its Staff Notice 21-327. The notice describes the situations where securities legislation will apply to crypto transactions, as well as where regulation is heading regarding the industry as a whole. The innovative nature of crypto assets and blockchain technology has challenged security regulators and legislatures, particularly in their decision whether to define certain technologies as a security or a currency. Recently, the U.S. Securities and Exchange Commission filed a lawsuit against Ripple Labs Inc. The lawsuit concerns the selling of more than $1.3 billion USD of XRP, a virtual token meant to be used as a digital asset for banks to transfer money, without registering with the Commission. The previous Chairman of the SEC, Jay Clayton, has stated that the Commission has the authority to regulate every digital asset imaginable, regardless of its design, intention, or use. This statement, as expected, has been met with controversy. While securities regulators must be nimble and dynamic in order to respond to increasingly innovative capital markets, legislation around crypto assets has been slow moving. Regulators and legislators need to protect investors while still allowing economic actors to pursue opportunities these technologies provide. Proponents of crypto technology argue that the government is focusing too heavily on the former, and not enough on the latter.

On January 11, 2021, the Office of the Superintendent of Financial Institutions (OSFI) released a discussion paper titled Navigating Uncertainty in Climate Change. The paper outlines key aspects of climate-related risks, including how they should be categorized, mitigated, and disclosed. The paper summarizes various climate-change-related financial risk disclosure requirements of several regulatory bodies, including the CSA’s guidance released in August 2019 through the CSA Staff Notice 51-358. The OSFI is currently seeking comments from stakeholders in relation to these topics. These discussions will be used to prepare recommendations for how disclosure should be governed. Not surprisingly, many of Canada’s largest corporations have strong opinions on the amount of disclosure that should be required by various regulators. In particular, they are concerned with a “one size fits all” approach to climate-related disclosures as well as the onerous requirements they would have to face if climate-risk disclosure was required by multiple regulatory bodies to varying degrees. For instance, it is argued that standards need to be flexible, especially considering the context of industries like oil and gas which represents a large part of the Canadian economy. Many organizations and companies that have joined the discussion are calling for further research and planning before any new legal requirements are enacted.

Thank you for joining us for this week’s Friday Finds! We hope to see you back next week for more business law news stories.