[ESTABLISHING A BUSINESS ENTITY IN CANADA] 83
January 1 of any year are required to have a written policy on electronic monitoring in place prior to March 1 of that same year. The policy must provide employees with information pertaining to whether the employer electronically monitors its employees, and if so, must describe how and in what circumstances employees are monitored and the purposes for which information obtained through monitoring will be used by the employer. In many jurisdictions (including the Provinces of Ontario and Québec), the purchaser of a business is deemed to be a continuing employer and inherits the employees and their current employment rights, including compensation, seniority, vacation and other benefits. There is no concept under Canadian law of “employment at will”. An employee’s tenure with a predecessor corporation will be considered for the purposes of determining termination pay required by the employment standards legislation and for determining the amount of reasonable notice which must be given on termination of employment without cause. Written employment agreements may reduce, but not entirely eliminate, the non- statutory notice and severance requirements. Under Canadian law, non-competition and non- solicitation undertakings are seen as a restraint of trade and are more restrictively interpreted and applied in an employment context than in the context of the sale of a business. Non- competition undertakings will generally be enforced if the scope of the activities covered, the geographical territory and the period of time for which the restrictions are to remain in force are all reasonable in light of the employer’s legitimate need to protect its business interests. An ambiguous restrictive covenant is prima facie unreasonable and will be unenforceable. The Supreme Court of
Canada also recently decided that non- solicitation undertakings are not subject to the same restrictions. The Canadian courts will not generally write down an invalid clause and will invalidate a non-compete undertaking where they find that a non-solicitation undertaking would have sufficed. In Québec, an employer cannot enforce a non-competition undertaking if the employer either terminated the employment without “serious reason” or gave the employee “serious reason” to resign from the employment (CCQ 2095). Employers in Ontario have limited ability to use non-compete clauses. The provincial legislation prohibits employers from binding any employee to a non-compete agreement, unless the employee in question is (a) an executive, meaning that they hold a designated executive position, or (b) a seller of part or all of a business, who becomes an employee of the buyer immediately following the sale. Also, employers with more than 25 employees are required to have a written “disconnecting from work” policy in place. Disconnecting from work means “not engaging in work -related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work.” Privacy Rights and Data Protection Privacy Canada’s federal privacy and data protection law applicable to the private sector is the Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA applies to private sector organizations that collect, use, and disclose personal data (called “personal information” (PI) in Canada) in the course of a commercial activity that takes place within a
ILN Corporate Group – Establishing a Business Entity Series
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