Pension plans and their investment rules: investing in alternative investment funds in full compliance

October 31, 2016

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Numerous pension plans today are among the largest investors of capital in private equity, venture capital and hedge funds.¹

In many cases, such pension plans hold assets valued in the tens or hundreds of millions of dollars (or even more) consisting of various categories and sub-categories of investments. It is therefore not surprising that with the recent lower rates of return of the traditional forms of investments, pension plans are increasingly opting to invest a portion of their assets in alternative investment funds.

Pension plans are however subject to many particular legislative and regulatory provisions, including rules governing their investments that they must take into account when making such investments.

For example, regarding defined benefit pension plans, Quebec’s Supplemental Pension Plans Act (hereinafter the “SPPA”) stipulates that only the pension committee² (or a person to whom it has delegated this power) may “decide how the assets of the plan are to be invested.”³

In addition, the pension committee must adopt a written investment policy. This policy must, in particular, take into account the characteristics of the pension plan, its financial obligations and the other requirements prescribed by law.⁴ The SPPA also provides that the investments must be made in conformity with this investment policy, as well as the rules and limits provided by law.⁵

The federal statute governing pension plans, i.e. the Pension Benefits Standards Act, 1985 (hereinafter the “PBSA”), as well as the main regulation thereunder, the Pension Benefits Standards Regulations, 1985 (hereinafter the “PBSR”), also impose various obligations on pension plan administrators pertaining to investments.⁶ Thus, in the case of a defined benefit pension plan that is subject to the PBSA, the plan administrator is required to establish a written statement of investment policies and procedures (i.e. an investment policy)⁷ and to invest the assets of the pension fund in accordance with the regulations⁵⁸ and in a manner that a reasonable and prudent person would apply in respect of a portfolio of investments of a pension fund (i.e. the prudent method of portfolio management).⁹

This article will not describe all the investment obligations of pension plan administrators, but will highlight several significant principles that administrators of defined benefit pension plans must keep in mind before investing in an investment fund.

1. Does the pension plan’s investment policy permit the proposed investment in the investment fund?

The SPPA not only requires the pension committee to adopt a written investment policy, it also provides that this written policy must set out specific conditions, such as the permitted categories and sub-categories of investments.¹⁰ Similarly, under the PBSR, a pension plan’s written investment policy must, among other things, set out the categories of investments.¹¹

The pension plan administrator must therefore verify whether the language of the investment policy permits investments in the investment fund in which it plans to invest.

For example, does the pension plan’s investment policy permit a portion of the pension fund’s assets to be invested in units of a limited partnership whose purpose is to hold equity interests in real estate or infrastructure projects? Another example was considered in the case of Syndicat général des professeurs et professeures de l’Université de Montréal c. Gourdeau et al.¹² in which the plaintiff, the University of Montreal’s union of professors, alleged in its court proceedings that the members of the investment committee of the University of Montreal’s pension plan had made investments in a hedge fund, notwithstanding that the applicable investment policy did not specifically allow investments in this category of funds.¹³

We note also that some investment policies only provide that the plan administrator may assign a portion of the portfolio to a portfolio manager, without any reference to the notion of investment funds. However, because of the characteristics of the funds they administer, many managers of alternative investment funds are not registered managers. Private equity and venture capital funds that invest for the purpose of exercising a certain degree of control in, or to participate actively in the management of, the projects or businesses they invest in, typically do not qualify as “investment funds” within the meaning of the law, and their managers are not normally registered, whether as portfolio managers or investment fund managers.¹⁴

The language of the investment policy should therefore be considered carefully, and special attention should be paid to the terminology used and its legal meaning.

If a conclusion cannot be made that the proposed investment clearly qualifies as one of the permitted categories or sub-categories of investments under the pension plan investment policy, it would be prudent for the policy to be amended before the proposed investment is approved. The amendment in question could refer specifically to that investment or provide for the addition of a new category or subcategory of investments that clearly includes the proposed investment.

The pension plan administrator should also ensure that the amendment to the investment policy is appropriate in the circumstances, particularly in light of the characteristics of the pension plan, its financial obligations and the other provisions of the investment policy.

In addition to the foregoing, we believe it would be prudent for the plan administrator to verify whether the categories of investments described in the targeted investment fund’s investment policy are included in the permitted categories or sub-categories of investments under the pension plan’s investment policy.

It should be remembered that, in accordance with the standard structure of alternative investment funds, once the plan administrator has committed capital in the targeted investment fund by signing a subscription agreement, the fund manager generally has the right to make calls for payment at its discretion during the fund’s investment period, by requiring investors (including the plan administrator) through drawdowns to pay a part or all of the amount they committed to the fund. The fund manager may then invest the said amounts in any portfolio investment of its choosing that complies with the investment policy of the fund. Furthermore, unlike hedge funds, the majority of private equity and venture capital funds do not usually allow investors to request the redemption of their interests in the fund. Therefore, the pension plan becomes “captive” and will not be able to recover its investment until liquidation of the fund, unless it finds a purchaser in the secondary market.

In addition, the plan administrator cannot assume that the fund manager will follow or comply with the terms and conditions of the pension plan’s investment policy, even if it has been disclosed to it. Indeed, the investment fund manager is not acting as agent for the pension plan administrator investing in its fund. Since the amount invested by the pension plan administrator is pooled with the funds of other investors, the investment fund manager (unlike a portfolio manager) cannot undertake to comply with the investment policy of a specific investor.

The manager’s investment decisions are collective (for the entire fund) and are therefore only subject to the restrictions imposed on it by the investment fund’s organizational documents, i.e. primarily the restrictions set out in the fund’s investment policy. However, there are ways to circumscribe this power of the manager, as we shall see in greater detail in the sections below.

Finally, we note that the plan administrator should also satisfy itself that the other pension plan documents contain no provisions that could prohibit, restrict or otherwise limit the proposed investment.

2. Does the proposed investment comply with the other limits or requirements set out in the investment policy?

The permitted categories and sub-categories of investments are not the only conditions that must be set out in the pension plan’s written investment policy. Indeed, the SPPA stipulates that the investment policy must, for instance, also set out the proportion of the assets that can be invested in debt securities and equity securities, as well as measures for ensuring the diversification of the portfolio.¹⁵

As for the PBSR, it provides that the investment policy provisions must also deal with the asset allocation and the diversification of the portfolio.¹⁶

Investment policies usually contain one or more provisions that set out the maximum percentage of the assets in the pension fund that can be allocated to various permitted categories or sub-categories of investments. When the proposed investment is made, it must therefore comply with any applicable limit in this regard. In addition, the investment policy generally contains other specific requirements relating to certain categories or sub-categories of investments

Such requirements may, for example, deal with the quality of the securities that can be held in respect of a category or sub-category of investments (e.g.: a minimum rating of “A” by a recognized credit rating agency) or the minimum market capitalization of a security at the time of purchase. They may also prohibit the purchase of certain securities. Any specific condition, limit or prohibition that may apply in the case of the proposed investment must be respected. Furthermore, one should also review all the types of investments permitted by the investment policy of the targeted investment fund, since, as we noted above, the pension plan administrator will not be entitled to review or approve the investments made by the fund manager in accordance with that policy.

If some of the investments that can be made by the investment fund manager may potentially contravene any requirement of the pension plan’s investment policy, the plan administrator should then negotiate a bilateral collateral agreement (commonly known as a “side letter”) with the fund manager to require that it take certain protective measures to prevent any possible contravention of the pension plan’s investment policy.

Such measures can, for instance, include the right to be excused from participating in certain investments. In such a case, the side letter may provide that the manager will be required to set up an alternative investment vehicle or parallel fund structured in parallel to the investment fund, to be used for the investments that have been excluded by the plan administrator, and in which the pension plan holds no interests (but in which the other investors have mirror interests to the interests they hold in the investment fund). The organizational documents of private equity and venture capital funds often permit this type of structure to be implemented. If this is not the case, it may be important to provide for it in a side letter, depending on the circumstances.

Moreover, even where the investment fund’s organizational documents provide for this type of mechanism, it is standard practice for an investor, such as a pension plan administrator, to require prior notification by the manager of any intention to make any investment identified in the side letter as potentially problematic for the investor.

We note that the side letter should be concluded with the fund manager at the time the plan administrator commits to the capital of the fund upon the signature of the subscription agreement, since, once it has been signed, the manager will no longer have any incentive to make any additional undertakings to the plan administrator.

3. Does the proposed investment comply with the rules and limits in the applicable legislation and regulations?

The SPPA contains certain rules and limits governing investments. For example:

the pension committee must endeavor to constitute a diversified portfolio in order to minimize the risk of major losses;¹⁷
the pension plan’s assets cannot be invested, directly or indirectly, in shares carrying more than 30% of the voting rights attached to the shares of a legal person.¹⁸

Under the SPPA, any person who makes an investment that is not in compliance with the law is, by that sole fact and without further proof of wrongdoing, liable for any resulting loss.¹⁹ In addition, the members of a pension committee who approved such an investment are, by that sole fact and without further proof of wrongdoing, solidarily liable for any resulting loss.²⁰ However, such persons incur no liability if they acted in good faith on the basis of an expert’s opinion.²¹ According to Retraite Québec, an “expert” is any person who is able to provide a specialist’s opinion on a given subject.

In addition to this liability, any person who contravenes any of the rules applicable to investments commits a penal offence and is liable to a fine of $500 to $25,000.²²

The PBSA and the PBSR also contain various rules and limits pertaining to investments. Thus, section 8(4.1) of the PBSA states that the plan administrator must comply with the regulations and invest in a manner that a reasonable and prudent person would apply in respect of a portfolio of investments of a pension fund.

We note that the administrator will not be found liable under this section if a contravention of the section occurred because the administrator relied in good faith either on the report of a person whose profession lends credibility to the report (including an accountant, lawyer or actuary), or on financial statements prepared by an accountant or a written report prepared by an auditor that have been represented to the administrator as fairly reflecting the financial condition of the plan.²³

As for the PBSR, it primarily provides that the investment of the plan assets must be done in accordance with Schedule III of the regulations, entitled “Permitted Investments”.²⁴

That Schedule sets out various rules and limits, including the rule that a plan administrator may not, directly or indirectly, invest moneys of the plan in any one person if 10% or more of the total market value of the plan’s assets has already been invested in the person, or if 10% or more of the total market value of the plan’s assets would be invested in the person as a result of the investment.²⁵

According to the definitions set out in that Schedule, the word “person” includes a corporation, trust, partnership or fund or an unincorporated association or organization.

Another rule contained in Schedule III provides that the plan administrator may not, directly or indirectly, invest the moneys of the plan in the securities of a corporation to which are attached more than 30% of the votes required to elect the directors of the corporation.²⁶

We note that, like the SPPA, the PBSA provides for certain penal offences. Thus, any person who contravenes a provision of the PBSA or its regulations commits an offence and is liable, on summary conviction, to a maximum fine of $100,000 or a maximum term of imprisonment of one year (or both), in the case of an individual.²⁷ In the case of a corporation or other body, the penalty is a maximum fine of $500,000.

In the case of R. v. Christophe et al.,²⁸ the Ontario Court of Justice held that certain investments approved by the members of an investment committee contravened one of the applicable rules under the Pension Benefits Act of Ontario and its general regulations, and convicted the members in question of a penal offence. The Court then sentenced each of the individuals to a fine of more than $22,000.

Given that there can be significant consequences where investments are made in breach of the law (or regulations, as applicable), pension plan administrators therefore have every interest in ensuring the investments are compliant.

In this regard, it is customary to provide a confirmation in a side letter from the investment fund manager that it will ensure that the pension plan administrator is not in breach of certain rules and restrictions as a result of any of the investments made by the fund. Such clauses are common, but, as previously noted, must be negotiated at the time the plan administrator commits capital to the fund.

4. Was a due diligence review done of the proposed investment and are the results of the review satisfactory to the plan administrator?

Under the SPPA, the pension committee must notably exercise the prudence, diligence and skill that a reasonable person would exercise in similar circumstances.²⁹

Similarly, under the PBSA, the plan administrator must exercise the degree of care in its administration of the pension plan that a person of ordinary prudence would exercise in dealing with the property of another person.³⁰ With respect to investments, the administrator must invest the assets of the pension fund in a manner that a reasonable and prudent person would apply in respect of a portfolio of investments of a pension fund.³¹

Accordingly, where the pension plan administrator is considering making a particular investment, including an investment in an investment fund, it should conduct a due diligence review whose scope will vary according to the proposed investment. Indeed, where certain investments are being considered, a prior due diligence review will be simpler and easier. In the case of investments in large investment funds or complex and/or innovative financial instruments, extended and detailed reviews will usually be necessary.

Some investments involve the analysis of highly technical and voluminous documentation (such as an investment in a complex master-feeder fund structure). For such investments, it is important to obtain the information and/or particulars necessary to properly identify and understand the potential benefits and risks of the proposed investment before making a decision. In this regard, it will be essential to review the offering memorandum or private placement memorandum of the fund. If the fund is not proposing to issue an offering memorandum, it may be appropriate to require that it do so to ensure that one properly understands the parameters of the investment.

Indeed, at the time the plan administrator is making its commitment to the fund, the investment fund may hold very few or no assets (except for open-ended funds such as hedge funds). In such a case, the offering memorandum or private placement memorandum will be almost the only tool that can provide a proper understanding of the portfolio investments that will be made by the fund and the investment strategy that will be used by the manager. Obviously, the fund’s organizational documents must also be reviewed, since they constitute the main contract between the investors and the manager. The plan administrator will also wish to satisfy itself, in particular, that these organizational documents contain protective measures in the event the manager is caught in a conflict of interest, and also contain sufficient information disclosure requirements on the part of the fund manager.

As part of its review, the plan administrator should also be able to examine the side letters concluded with all the other investors. If there is no “most favoured nation” type of provision in the fund’s organizational documents, the administrator should negotiate a side letter with the manager that includes such a clause.

If the plan administrator does not have all the necessary skills to properly assess the fund’s documentation and make an informed decision on the proposed investment, it should request the assistance of qualified professionals in the field.

In the report that these professionals submit to the plan administrator on the results of their analysis, they will, for instance, be able to inform the plan administrator whether the said documentation raises specific questions or problems in relation to the pension plan, or whether some provisions of the documentation differ substantially from the standard documentation generally used in the market for this type of investment.

Finally, in all cases where the plan administrator decides to make an investment, it is important for it to properly document both the process followed and its final decision (including the reasons for it).³² Any analysis or report provided by professionals, as well as all the other relevant documents and correspondence leading up to the decision, should be conserved in the plan administrator’s records.

According to the data collected by Preqin, 23% of the capital invested worldwide in investment funds in 2012 stemmed from public or private pension funds (source: Benoît Leleux, Hans Van Swaay and Esmeralda Megally, Private Equity 4.0 – Reinventing Value Creation, John Wiley & Sons Ltd., 2015, at p. 38).
Section 168 of the SPPA.
Sections 169 and 170 of the SPPA.
Section 168 of the SPPA.
The plan administrator administers the pension plan and pension fund as a trustee (section 8(3) of the PBSA).
Sections 7.1(1) and (2) of the PBSR.
Section 8(4.1) of the PBSA and sections 6(1) and 7 of the PBSR.
Section 8(4.1) of the PBSA.
Section 170 of the SPPA.
Section 7.1(1) of the PBSR.
Superior Court of Montreal, file number 500-06-000294-054.
This case was settled out of court and the settlement was approved on May 26, 2015 by the Superior Court of Québec (2015 QCCS 2496).
Section 5 of the Securities Act (Quebec).
Section 170 of the SPPA.
Section 7.1(1) of the PBSR.
Unless it is reasonable in the circumstances to act otherwise (section 171.1 of the SPPA).
Section 175 of the SPPA. This limit does not however apply in the cases referred to in the second paragraph of that section.
Section 180 of the SPPA.
Section 180 of the SPPA.
Section 180 of the SPPA.
Section 257 of the SPPA. Where such an offence is committed by a legal person, the fine is tripled (section 259 of the SPPA).
Section 8(5.1) of the PBSA.
Section 6(1)a) of the PBSR.
Section 9(1) of Schedule III. However, the 10% limit does not apply to the investments listed in section 9(3) of Schedule III, which, among others, include investments in an investment fund that meet the requirements applicable to pension plans set out in Schedule III, investments in a fund that replicates the composition of a widely recognized index of a broad class of securities traded at a marketplace (index funds) and investments in securities issued or fully guaranteed by the Government of Canada, the government of a province, or an agency thereof.
Section 11 of Schedule III. The expression “security”, defined in Schedule III, includes, in particular, the shares of any class of shares of a corporation and any ownership interest in the case of any other entity. The 30% limit does not apply to investments made in securities of real estate corporations, resource corporations or investment corporations, as defined in Schedule III.
Sections 38(1) and (1.1) of the PBSA.
2009 ONCJ 586.
Section 151 of the SPPA. It must also act with honesty and loyalty in the best interest of the plan members and avoid conflicts of interest.
Section 8(4) of the PBSA.
Section 8(4.1) of the PBSA.
The Canadian Association of Pension Supervisory Authorities (CAPSA) stresses the importance of this practice in its Guideline no. 6 (Pension Plan Prudent Investment Practices Guideline) published in November 2011. CAPSA is a national interjurisdictional association of pension regulators whose mission is to facilitate an efficient and effective pension regulatory system in Canada. CAPSA’s Guideline no. 6 is intended to help plan administrators demonstrate the application of prudence to the investment of pension plan assets. Regarding the documenting of the plan administrator’s decisions, this guideline states the following, in particular: “Any time a key decision is made, it should be well documented, and include the reasons and circumstances that were considered.”

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December 11, 2024

Hiring Process: Can Knowledge of a Language Other Than French Be Required by an Employer?

In a decision rendered on September 16, 2024,1 the Administrative Labour Tribunal (the “ALT”) found that a company (the “employer”) had violated the Charter of the French language2 (the “CFL”) by requiring knowledge of languages other than French as part of a hiring process. This is one of the first decisions ruling on the new complaint mechanisms introduced by Bill 96, An Act respecting French, the official and common language of Québec3 (“Bill 96”), aimed at amending the CFL. The Legislative Changes Made in 2022 On May 24, 2022, the Quebec government passed Bill 96, which received royal assent on June 1, 2022. This law made significant amendments to the CFL and other laws. Even before the amendments introduced by Bill 96 were adopted, the CFL prohibited employers from requiring that a person have knowledge or a specific level of knowledge of a language other than French to keep or obtain a position, unless the nature of the duties required such knowledge. Bill 96 has clarified the scope of employer obligations in this respect. In particular, employers must have taken all reasonable means to avoid imposing such a requirement,4 and, if they do impose it, they must indicate the reasons justifying this requirement in their job postings.5 Bill 96 also made it possible for job applicants and employees to challenge employers’ requirements respecting knowledge of a language other than French. The CFL now stipulates that if an employer does not meet the “necessity” conditions described below, requiring knowledge of a language other than French will be deemed a prohibited practice. The notion of a complaint for “prohibited practice” already exists in the Act respecting labour standards,6 notably in section 122. It enables employees to file a complaint if they believe they have been subjected to sanctions, discriminatory measures or reprisals for exercising a right provided under this law. The amendments introduced by Bill 96 have thus broadened the concept of prohibited practice to also include the exercise of certain language rights. The CFL was further amended to allow employees to directly file a complaint with the Commission des normes, de l’équité, de la santé et de la sécurité du travail (the “CNESST”)7 if they believe that an illegal requirement to know a language other than French is being imposed on them. These are the issues addressed by the ALT in this decision. The facts On March 3, 2023, the complainant, Byung Chan Kim, filed a complaint for prohibited practice under the CFL. He believed that he was not granted a position posted by the defendant, the employer, because it required knowledge of a language other than French as part of a hiring process. The complainant came across a job posting in the defendant’s procurement and logistics department, which it had published in January 2023. The posting appeared exclusively in Korean in an online newspaper aimed at the Korean community. The complainant submitted his application in February along with his resume, which was written in French only. A representative of the defendant requested the complainant to provide an English version of the document, which the complainant provided. The complainant then participated in an interview, during which the defendant’s representative asked the complainant to speak in English and Korean because he did not understand French. Since the complainant’s application was not selected, he filed a complaint for prohibited practice based on the provisions of the CFL. Presumption of Prohibited Practice Section 46 of the CFL prohibits an employer from requiring knowledge of a language other than French, except when such a requirement is necessary for the performance of duties. The provision reads, in part, as follows: 46. An employer is prohibited from requiring a person, in order for the person to be able to keep a position, or to obtain a position through, in particular, recruitment, hiring, transfer or promotion, to have knowledge or a specific level of knowledge of a language other than the official language, unless the nature of the duties requires such knowledge; even in the latter case, the employer shall first take all reasonable means to avoid imposing such a requirement. [...] The second paragraph of section 45 of the CFL equates the requirement for knowledge of a language other than French in the context of employment to a prohibited practice: 45. The fact that an employer requires a person to have knowledge or a specific level of knowledge of a language other than the official language to keep a position or to obtain a position, in particular through recruitment, hiring, transfer or promotion, is considered a prohibited practice under the first paragraph, unless the employer shows, in accordance with sections 46 and 46.1, that the performance of the duty requires such knowledge and that he first took all reasonable means to avoid imposing such a requirement. Based on these provisions, the ALT confirmed that a person in a hiring process, and therefore not bound to the employer by an employment agreement, bears the burden of demonstrating that the following conditions exist to benefit from a presumption of prohibited practice. They must:8 apply to a position in response to a job posting by the employer;9 demonstrate that the employer requires knowledge, or a specific level of knowledge, of a language other than French to access the position;10 and file a complaint within 45 days after the occurrence of the practice complained of.11 The ALT concluded that the complainant did indeed prove that all the conditions to apply the legal presumption of prohibited practice were met, such that it is presumed that the language requirements associated with the employer’s job posting violated the CFL. At that stage, it was a simple presumption. The presumption in favor of the complainant places the burden of proof on the employer, requiring it to demonstrate why the language requirement associated with the position was necessary, and that all reasonable means were taken to avoid imposing it. In order to prove the second criterion, the employer must show that it conducted an analysis of reasonable means before imposing the language requirement, and that it had indicated the reasons justifying this requirement in the job posting. Assessment of Language Requirements The defendant argued that the requirement for knowledge of English and Korean is necessary because the position includes tasks such as acquiring equipment on the international market, and because the defendant’s representative and employees communicate in Korean. In its analysis of these arguments, the ALT reaffirmed that the legislator has provided that any law must be interpreted in a manner that promotes the use and protection of the French language.12 Thus, the ALT emphasized that, to achieve the objectives of the law, a narrow interpretation must be made of the exceptions set out in the CFL, and that the criteria set out in sections 46 and 46.1 of the CFL are cumulative for each language requirement involving a language other than French. The ALT further noted that any decision to require knowledge of a language other than French to access a position must be based on a thorough and well-documented understanding of the actual constraints of the service in question.13 In this case, the ALT found that the defendant had failed to meet its burden of proof. First, the reasons justifying the English and Korean language requirements were not included in the job posting, an omission which in itself contravenes section 46 para. 2 of the CFL. Furthermore, the defendant failed to provide evidence regarding the nature of the positions already held within the company and the tasks associated with them, nor did it demonstrate the English language proficiency that was already required of employees. Lastly, according to the evidence, all employees in the company’s supply and logistics department spoke Korean. However, the defendant failed to prove that it had ascertained, prior to publishing its job posting, that the knowledge of English and Korean already required of other employees was insufficient. It also failed to demonstrate that it had limited the number of positions involving tasks requiring knowledge of either of these languages to the greatest extent possible. As a result, the ALT concluded that the defendant had not taken all reasonable measures to avoid imposing these requirements and, therefore, did not succeed in rebutting the presumption of prohibited practice. Limited Defence The defendant claimed that it was not because the complainant had insufficient knowledge of languages other than French that he was not hired, but rather because he lacked the skills required for the position. However, the ALT concluded that the CFL does not allow a defendant to raise an additional defence, such as having another just and sufficient cause that does not relate to the requirement for knowledge of a language other than French, to be used to avoid the application of the presumption. Since the defendant failed to prove that the performance of the task required knowledge of a language other than French, and because it failed to previously take all reasonable measures to avoid imposing such a requirement, the simple presumption became an absolute presumption, and the defendant cannot counter it with any other defence. Consequently, when a hiring process includes language requirements other than French and does not comply with the conditions of section 46.1 of the CFL, the process becomes irreparably tainted by an unlawful motive. The ALT thus confirmed that the only way to rebut the presumption of section 45, paragraph 2, and section 46 of the CFL, is to demonstrate that the performance of the duties requires knowledge of a language other than French, and that the employer has preemptively taken all reasonable means to avoid imposing such a requirement. The ALT therefore upheld the complainant’s complaint and reserved its powers to determine the appropriate remedies. Conclusion This decision marked a significant turning point in the application of the CFL. The ALT emphasized the importance of complying with the new provisions introduced by Bill 96, which aims to strengthen the language rights of Quebec workers. This decision serves as a reminder to employers of the obligation to clearly justify any language requirement and to demonstrate that they have taken all reasonable measures to avoid imposing conditions contrary to the CFL. Furthermore, this decision unequivocally rules out the possibility of defending against such a complaint with a defence based on the existence of another just and sufficient cause to justify the employer’s decision. It is crucial for businesses in Quebec to ensure compliance with these rules to prevent potential litigation, while respecting the fundamental right of workers to carry on their activities in French. Moreover, in light of this decision enforcing the prohibition on imposing language requirements under the amended CFL, it will also be pertinent to monitor how the ALT might eventually interpret the notion of “unreasonable reorganization” of a business. Indeed, the CFL stipulates that the first paragraph of section 46.1 must not be interpreted in a way that imposes on an employer an unreasonable reorganization of its business. Such an interpretation could provide employers with a way to avoid being bound by the conditions provided by the CFL. It will be important to closely follow any subsequent developments. Kim c. Ultium Cam, 2024 QCTAT 3295. CQLR, c. C-11. SQ 2022, c. 14. S. 46 para. 1 of the CFL. S. 46 para. 2 of the CFL. CQLR, c. N-1.1. S. 47 of the CFL. S. 47.2 para. 2 of the CFL, which refers to the Labour Code, CQLR, c. C-27, s. 17 with the necessary modifications. S. 46 of the CFL. S. 46 of the CFL. S. 47 of the CFL. Interpretation Act, CQLR, c. I-16, s. 40.3. Gatineau (Ville de) c. Syndicat des cols blancs de Gatineau inc., 2016 QCCA 1596.

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November 27, 2024

Announcement of U.S. tariffs: repercussions and trade strategies for Quebec businesses?

Nearly four years after the Canada-United States-Mexico Agreement (the “CUSMA” or the “Agreement”) came into force, U.S. President-elect Donald Trump announced on November 25, 2024, that he would impose 25% tariffs on all products entering the U.S. from Canada and Mexico, starting on the first day of his presidency, that is, January 20, 2025. Mr. Trump added that the tariffs would remain in effect until Canada and Mexico strengthened their border policies, which he blames for the increase in illegal immigration and the trafficking of devastating drugs in the United States. As a reminder, under the current provisions of the CUSMA, most products made in Quebec and Canada can be sold on U.S. markets without tariffs applying. And so, although we can only speculate and although Mr. Trump did not give details on this subject in his announcement, his future administration could indeed invoke a number of legislative authorities to implement such a measure. In particular, it could invoke the CUSMA’s essential security exception, which allows a party to the Agreement to apply any measure deemed necessary to protect its essential security interests, the national security exception in the Trade Expansion Act of 1962, which President Trump’s first administration used in 2018 to introduce tariffs on U.S. imports of certain steel and aluminum products, or the provisions of the National Emergencies Act. Needless to say, the announcement sent shockwaves through the political and business communities in Canada and Quebec what with the close commercial ties that the U.S. has with Canada, including with Quebec. In the first quarter of 2024 alone, Quebec’s merchandise exports to the U.S. reached CAN$21.2 billion, which accounts for nearly 74.6% of the province’s international merchandise exports and makes the U.S. Quebec’s main trading partner on the world stage. The imposition of 25% tariffs would therefore significantly affect Quebec businesses. It would make them less competitive on the U.S. market, on which they rely heavily to export their products. The measure could be particularly detrimental to the Canadian forestry industry, which is already severely affected by tariffs of nearly 15% on lumber. The U.S. economy would also be considerably affected by such protectionist tariffs. While in the short term, tariffs could benefit certain domestic manufacturers and producers, in the longer term, they are likely to harm the U.S. economy as a whole. Many U.S. manufacturers would face higher costs of inputs, and established supply chains would be disrupted, in particular in the automotive and steel industries. To continue to make profits, many U.S. companies could be forced to pass on the additional costs to their end consumers by raising the prices of their products, which would undoubtedly result in another wave of inflation. Worth mentioning also are the retaliatory measures that the Canadian government may want to implement in response to such tariffs, which could affect certain parts of the U.S. economy. Although the CUSMA provides for dispute resolution mechanisms, they are unlikely to lessen the impact of the measures that the Trump administration is considering in the short term, as a final decision under these mechanisms could take a long time to be issued. The new U.S. administration could use the announcement made on November 25 as leverage in future CUSMA renewal negotiations, the preparatory discussions for which are slated to begin next year, or in negotiations for a separate trade agreement between the U.S. and Canada that would exclude Mexico. Canadian businesses would do well to encourage their various trade associations to take steps to lobby both American decision-makers and their corporate customers in the U.S. and remind them of the harmful effects that the announced tariffs may have on American businesses. While we wait for a more detailed announcement with information concerning specific tariff exemptions in particular, we suggest that businesses choose their future trading partners with great care. In an increasingly protectionist global economic context, a strategy involving the diversification of trading partners is the best way for businesses to offset the risks associated with a particular country’s tariff policies. The Comprehensive Economic and Trade Agreement signed by Canada and the European Union in 2017, which our firm helped to negotiate, may prove to be an interesting solution in this respect. Our team of commercial law and tax professionals is available to help you find solutions to the issues arising from this announcement. With our expertise, we can assist you in your commercial negotiations and help you develop strategies to mitigate the impact that the announced tariff increase may have on your business.

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November 22, 2024

Bill C-244: unlocking the right to repair

On November 7, 2024, Bill C-244, An Act to amend the Copyright Act (diagnosis, maintenance and repair)1 received royal assent, adding a new exception to the provisions governing technological protection measures (TPM) in the Copyright Act (CA). This legislative amendment adds section 41.121 to the CA, making it legal to circumvent TPMs for product maintenance, repair and diagnosis. What it means The new section 41.121 is expected to have a limited impact on the Canadian repair market. Although repairers can now circumvent TPMs to diagnose, maintain or repair a customer’s device, it is still forbidden for repairers to use the services of a TPM circumvention specialist, and specialized circumvention equipment is still prohibited. Furthermore, the absence of a fair dealing exception in this amendment poses ongoing risks of copyright infringement for these purposes. A number of questions remain unanswered, including the scope the courts will assign to the terms “maintenance” and “repair.” Does upgrading a device with improved technology fall within the definition of maintenance, or are repairers restricted to servicing devices according to original specifications? For example, if a connected device becomes obsolete after a new security standard is adopted, would replacing its software constitute maintenance? In short, the adoption of Bill C-244 represents but a small step toward the right to repair goods, and it serves as a prime example of how reconciling property rights with intellectual property rights can be challenging. Amendments made by C-244 Section 41.121, as introduced by C-244, has three paragraphs: Diagnosis, maintenance and repair 41.121 (1) Paragraph 41.1(1)(a) does not apply to a person who circumvents a technological protection measure for the sole purpose of maintaining or repairing a product, including any related diagnosing, if the work, performer’s performance fixed in a sound recording or sound recording to which the technological protection measure controls access forms a part of the product. For greater certainty (2) For greater certainty, subsection (1) applies to a person who circumvents a technological protection measure in the circumstances referred to in that subsection for another person. Non-application (3) A person acting in the circumstances referred to in subsection (1) is not entitled to benefit from the exception under that subsection if the person does an act that constitutes an infringement of copyright. Under the new section, the protection afforded to TPMs is set aside for maintenance and repair purposes, including the related diagnosing. Subsection 41.121(2) adds that the exception also applies to a person, such as a professional repairer, who repairs a product for another person. Subsection 41.121(3) further adds that the exception applies only to situations where there is no copyright infringement; for example, copyright infringement would be a person circumventing TPMs to repair a product, but taking advantage of the situation to make an illicit copy of a computer program. Bill C-244 reintroduced certain provisions of Bill C-272,2 which had been tabled in September 2020 but abandoned after the 2021 federal election. However, unlike the original text, the amendment passed on November 7, 2024, does not allow a person to manufacture, import or distribute TPM-circumvention devices to be used to perform repairs. It is rather limited to making the act of circumvention itself legal. Origin of the problem Bill C-272 was partly introduced in response to the decision in Nintendo of America Inc. v. King,3 which had considerably dampened the TPM-containing-device repair industry. In that case, the Federal Court awarded Nintendo of America Inc. $11.7 million in statutory damages following the circumvention of its TPMs, with $20,000 awarded for each of the 585 affected games, and an additional $1 million in punitive damages. Technological Protection Measures (TPMs), also known as digital locks or digital rights management (DRM) technologies, are mechanisms used to safeguard copyrights and sensitive information in the digital domain. They regulate access to or the copying, alteration and redistribution of digital content, such as audio and video files, software and e-books. TPMs can take various forms, including access codes, passwords, encryption keys, watermarks, digital signatures, encryption methods, and integrated hardware-based protections. These measures may be embedded in the files themselves, or in the devices that read, store or distribute them. DVD encryption and video game cartridge protections are well-known examples. The World Intellectual Property Organization (WIPO) first proposed a framework for protecting TPMs in 1996, anticipating that increased internet usage might escalate copyright infringement.4 In 1999, the United States ratified the framework by passing the Digital Millennium Copyright Act (DMCA), followed by Canada’s enactment of the Copyright Modernization Act5 in 2014. This legislative amendment introduced section 41.1 and related provisions to the Copyright Act (CA), prohibiting the circumvention of TPMs. Today, TPMs are ubiquitous, appearing in cars, tractors, medical implants, printer cartridges, game consoles, and various electronic devices. The $11.7 million award to Nintendo of America Inc. pursuant to this provision had a chilling effect on the repair industry.6 In response to the Nintendo decision, Bill C-272 proposed exceptions to the prohibition on circumventing TPMs for diagnosis, maintenance, and repair activities, as specified in paragraph 41.1(1)(a) of the CA. It also included an exception for the manufacture, importation, or distribution of products designed to circumvent TPMs for these purposes, addressing the restrictions noted in paragraph 41.1(1)(c) of the CA. Harmonization with the Canada-United States-Mexico Agreement The scope of the new section 41.121 introduced by Bill C-244 was significantly narrowed to prevent conflicts with the Canada-United States-Mexico Agreement (CUSMA). Article 20.66 of CUSMA requires member countries to enforce three categories of prohibitions related to TPMs: a prohibition on offering TPM circumvention services, a prohibition on the manufacture, import, or distribution of devices intended for TPMs circumvention, and a prohibition on the act itself of circumventing TPMs. Paragraph 5 of Article 20.66 specifies certain exceptions to these prohibitions, particularly for purposes such as interoperability, encryption research (security), and government activities (most of which are addressed under sections 41.11 and following of the CA), but it does not include an exception for the repair of goods. The exception provided in section 41.121 was thus limited to the third CUSMA category which involves the prohibition on circumventing TPMs themselves, as outlined in paragraph 41.1(1)(a) of the CA. As such, the prohibitions on offering TPM circumvention services, and manufacturing, importing or distributing TPM circumvention devices, set out in paragraphs 41.1(1)(b) and 41.1(1)(c), respectively, remain unchanged, even if the purpose of circumvention is to repair a device. Introduction of ambiguous wording Legal professionals may recognize that the changes made to the definitions in section 41 present new challenges. In an attempt to clarify how the new provision’s application, the legislator has added two conflicting expressions to the definitions of “circumvent” and “technological protection measure,” which may not have been necessary. Before After Technical protection measures and information on the rights mechanism Definitions 41 The following definitions apply in this section and in sections 41.1 to 41.21. circumvent means, a) (a) in respect of a technological protection measure within the meaning of paragraph (a) of the definition technological protection measure, to descramble a scrambled work or decrypt an encrypted work or to otherwise avoid, bypass, remove, deactivate or impair the technological protection measure, unless it is done with the authority of the copyright owner; and Technical protection measures and information on the rights mechanism Definitions 41 The following definitions apply in this section and in sections 41.1 to 41.21. circumvent means, a) (a) in respect of a technological protection measure within the meaning of paragraph (a) of the definition technological protection measure, to descramble a scrambled work or computer program, or decrypt an encrypted work or computer program or to otherwise avoid, bypass, remove, deactivate or impair the technological protection measure, unless it is done with the authority of the copyright owner; and b) … b) … technological protection measure means any effective technology, device or component that, in the ordinary course of its operation, a) controls access to a work, to a performer’s performance fixed in a sound recording or to a sound recording and whose use is authorized by the copyright owner; or technological protection measure means any effective technology, device or component that, in the ordinary course of its operation, a) controls access to a work, including a computer program, to a performer’s performance fixed in a sound recording or to a sound recording and whose use is authorized by the copyright owner; b) … b) … In the first instance, the legislator specifies that definition applies to “a work or computer program,” which suggests that a computer program is not considered a work. However, the second definition uses the phrase “a work, including a computer program,” implying the opposite. These clarifications were unnecessary, since the definition of “work” already includes literary works, and section 2 of the CA expressly states that literary works include computer programs. It is unfortunate that the text was adopted in its current form despite the numerous comments on this issue during parliamentary reviews.7 Striking a balance between property rights and intellectual property rights The debates surrounding these legislative changes illustrate the inherent challenges in striking a balance between the reduction of property rights, including the right to repair goods, and the promotion of intellectual property rights. For example, the Entertainment Software Association of Canada has advocated for excluding game consoles from the new exception.8 Paul Fogolin, the association’s Vice President of Policy and Government Affairs, argued that broadly opening the right to repair goods could jeopardize the video game industry by making it almost impossible for rights holders to pursue legal action against those tampering with their protection measures.9 Charles Bernard, Lead Economist for the Canadian Automobile Dealers Association,expressed concerns about increased auto theft risks.10 Catherine Lovrics, Chair of the Copyright Policy Committee, Intellectual Property Institute of Canada, anticipated cybersecurity risks.11 Several industry stakeholders believe that making documents, software, parts, and tools available for repair could elevate the risk of cyberattacks. Industry representatives in the United States have highlighted similar risks. For instance, the Association of Equipment Manufacturerssuggests that enabling the circumvention of TPMs could compromise emission controls on equipment, potentially leading to violations of environmental laws and risks to human life.12 Others have raised concerns about product liability issues.13 According to Apple and Panasonic, today’s electronics are too complex for non-specialists to repair and, thus, broadening the right to repair could compromise consumer safety.14 Concerns about safety, security, and liability are certainly legitimate; however, it is also valid to question whether intellectual property law is the appropriate vehicle to address these issues. During review of C-244, Shannon Sereda, Director of Government Relations, Policy, and Markets for Alberta Wheat and Barley Commissions, highlighted the potential difficulties farmers face when they cannot swiftly repair their equipment. She argued that “[t]he current legislative environment in Canada supports equipment repair monopolies by allowing OEMs to prohibit the bypassing of TPMs.”15 Anthony D. Rosborough, a researcher in the Law Department of the European University Institute, corroborated this viewpoint, stating that TPMs “function principally to protect technologies, rather than works or the rights of authors.” In his view, the industry sometimes relies on copyrights for what should be more appropriately protected with patents or trade secrets.16 The relaxation of TPM rules in Canada aligns with similar measures already implemented in the United States. On October 28, the Librarian of Congress renewed a series of exceptions to section 1201 of the Digital Millennium Copyright Act (DMCA), including provisions that allow the circumvention of certain protection measures for repairs.17 These exceptions are subject to renewal every three years and have so far been renewed twice since 2018.18 Over the past few years, the United States has taken several steps to promote the right to repair goods. In May 2021, the Federal Trade Commission (FTC) filed a detailed report19 on anti-competitive practices related to the right to repair. On July 9, 2021, shortly after the report was released, the U.S. President issued an Executive Order to combat such practices and encourage the development of a third-party or owner repair market.20 Since then, multiple states have enacted laws supporting the right to repair.21 On January 8, 2023, John Deere pledged to enable independent repairers to service its equipment.22 Apple Inc., historically opposed to expanding the right to repair, shifted its stance in 2022 by launching a self-service repair program and publicly supporting California’s new right-to-repair law.23 Last year, WIPO reported that 40 states had introduced legislation in favour of the right to repair.24 Here in Canada, the adoption of Bill C-244 represents another step in establishing the right to repair goods. This measure builds on another federal bill, C-59,25 which also received assent last June and amended the Competition Act to empower courts to compel suppliers to sell diagnosis or repair tools. At the provincial level, Quebec became the first province to enact right-to-repair legislation last year. 26 In the coming months, it remains to be seen whether the new section 41.121 of the Copyright Act (CA) will unlock the repair market. For the moment, the measure strikes us as somewhat timid.27 Parliament of Canada, LEGISinfo: C-244: An Act to amend the Copyright Act (diagnosis, maintenance and repair), Parliament of Canada, online: https://www.parl.ca/legisinfo/en/bill/44-1/c-244. Parliament of Canada, LEGISinfo: C-272, An Act to amend the Copyright Act (diagnosis, maintenance and repair), Parliament of Canada, online: https://www.parl.ca/legisinfo/en/bill/43-2/c-272. Nintendo of America Inc. v. King, 2017 FC 246, [2018] 1 FCR 509. WIPO Copyright Treaty, December 20, 1996, article 11, online: https://www.wipo.int/wipolex/en/treaties/textdetails/12740. Copyright Modernization Act, S.C. 2012, c. 20, assented to on 2012-06-29, online: https://laws-lois.justice.gc.ca/eng/AnnualStatutes/2012_20/FullText.html; Canada Gazette, Vol. 146,No. 23 – November 7, 2012, SI/2012-85 Order Fixing Various Dates as the Dates on which Certain Provisions of the Act Come into Force, P.C. 2012-1392, October 25, 2012, online: https: //canadagazette.gc.ca/rp-pr/p2/2012/2012-11-07/html/si-tr85-fra.html. Graham J. Reynolds, “Of Lock-Breaking and Stock Taking - IP, Climate Change, and the Right to Repair in Canada,” in 2023 101-1 Canadian Bar Review 32, 2023 CanLIIDocs 1144, p. 54, online: https://canlii.ca/t/7n4cj. Committee on Industry and Technology, 5 December 2022, Catherine Lovrics, Open Parliament, online: https://openparliament.ca/committees/industry/44-1/49/catherine-lovrics-2/; Committee on Industry and Technology, 15 February 2023, Viviane Lapointe, Open Parliament, online: https://openparliament.ca/committees/industry/44-1/59/viviane-lapointe-5/; Committee on Industry and Technology, 15 February 2023, Andy Fillmore, Open Parliament, online: https://openparliament.ca/committees/industry/44-1/59/andy-fillmore-6/; Committee on Industry and Technology, 15 february 2023, Patrick Blanar, online: https://openparliament.ca/committees/industry/44-1/59/patrick-blanar-1/. Entertainment Software Association of Canada, Bill C-244 – An Act to amend the Copyright Act (diagnosis, maintenance and repair), online: https://www.ourcommons.ca/Content/Committee/441/INDU/Brief/BR12209146/br-external/EntertainmentSoftwareAssociationOfCanada-e.pdf. Committee on Industry and Technology, February 8, 2023, Paul Fogolin, online: https://openparliament.ca/committees/industry/44-1/57/paul-fogolin-1/. Committee on Industry and Technology, February 8, 2023, Charles Bernard, online: https://openparliament.ca/committees/industry/44-1/57/charles-bernard-1/. Industry and Technology Committee, December 5, 2022, Catherine Lovrics, online: https://openparliament.ca/committees/industry/44-1/49/catherine-lovrics-2/. Emma Fillman, “Comprehensive Right to Repair:The Fight Against Planned Obsolescence in Canada,” (2023) 32 Dalhousie J Legal Stud 123, p. 145. online https://digitalcommons.schulichlaw.dal.ca/djls/vol32/iss1/5/. Irene Calboli, “The right to repair: Recent Developments in the USA,” World Intellectual Property Organization Magazine, August 2023, online: https://www.wipo.int/wipo_magazine_digital/en/2023/article_0023.html. Emma Fillman, “Comprehensive Right to Repair:The Fight Against Planned Obsolescence in Canada,” (2023) 32 Dalhousie J Legal Stud 123, pp. 142 and following, online https://digitalcommons.schulichlaw.dal.ca/djls/vol32/iss1/5/. Committee on Industry and Technology, February 8, 2023, Shannon Sereda, online: https://openparliament.ca/committees/industry/44-1/57/shannon-sereda-1/. Committee on Industry and Technology, February 8, 2023, Anthony D. Rosborough, online: https://openparliament.ca/committees/industry/44-1/57/anthony-d-rosborough-1/. Copyright Office, Library of Congress, Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies, Federal Register, October 28, 2024, online: https://www.federalregister.gov/documents/2024/10/28/2024-24563/exemption-to-prohibition-on-circumvention-of-copyright-protection-systems-for-access-control. Copyright Office, Library of Congress, Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies, Federal Register, October 26, 2018, online: https://www.federalregister.gov/documents/2018/10/26/2018-23241/exemption-to-prohibition-on-circumvention-of-copyright-protection-systems-for-access-control. Federal Trade Commission, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, May 2021, online: https://www.ftc.gov/system/files/documents/reports/nixing-fix-ftc-report-congress-repair-restrictions/nixing_the_fix_report_final_5521_630pm-508_002.pdf. The White House, Executive Order on Promoting Competition in the American Economy, July 9, 2021, online: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/. X, Jon Campbell, December 29, 2022, online: https://twitter.com/JonCampbellNY/status/1608327624526548993; Colorado General Assembly, Consumer Right to Repair Agricultural Equipment, April 25, 2023, online: https://leg.colorado.gov/bills/hb23-1011; Minnesota Legislature, Minnesota Session Laws, 93rd Legislature, Chapter 57 – S.F. No. 2744, online: https://www.revisor.mn.gov/laws/2023/0/Session+Law/Chapter/57/; Sidley, “California Becomes Third U.S.State to Join the Right-to-Repair Movement,” October 24, 2023, online: https://www.sidley.com/en/insights/newsupdates/2023/10/california-becomes-third-us-state-to-join-the-right-to-repair-movement. John Deere, Memorandum of Undestanding, January 8, 2023, online: https://www.fb.org/files/AFBF_John_Deere_MOU.pdf. The Verge, “Surprise:Apple now supports California’s right to repair,” August 23, 2023, online: https://www.theverge.com/2023/8/23/23843506/apple-california-right-to-repair-sb-244. Irene Calboli, “The right to repair: Recent Developments in the USA,” World Intellectual Property Organization Magazine, online: https://www.wipo.int/wipo_magazine_digital/en/2023/article_0023.html. Parliament of Canada, LEGISinfo: C-59: An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023; Parliament of Canada, online:https://www.parl.ca/legisinfo/en/bill/44-1/c-59. Québec National Assembly, Bill 29, An Act to protect consumers from planned obsolescence and to promote the durability, repairability and maintenance of goods, online: https://www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-29-43-1.html. The author would like to thank Laura Trépanier-Champagne for her work in supporting the writing of this publication.

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October 29, 2024

Employers’ Right to Require Medical Certificates: New Restrictions as of January 1, 2025

Quebec is currently facing a major shortage of physicians. To remedy the situation, several ministers in the CAQ government announced in early 2024 that significant changes would be implemented to reduce physicians’ administrative burden. In this context, on October 9, 2024, the National Assembly assented to Bill 68, An Act mainly to reduce the administrative burden of physicians.1 The provisions of the Act The new Act comprises 11 sections, many of which introduce amendments to the Act respecting labour standards2 (ALS) by restricting the right of employers to require documents attesting to the reasons for certain absences. Under the current legislation, an employer may be entitled to require a document from an employee who misses work owing to sickness in order to assess the reasons for the absence, its duration, or the employee’s ability to return to work. This is because, under the terms of a contract of employment,3every employer is entitled to expect their employee to fully perform the work agreed upon. Depending on the circumstances, the supporting document provided must in some instances indicate a specific medical diagnosis, an estimated duration of absence and other details relevant to handling the employee’s absence. In keeping with these principles, section 79.2 of the ALS provided that an employer informed of an absence owing to sickness, an organ or tissue donation, an accident, domestic violence, sexual violence or a criminal offence may, “[i]f it is warranted by the duration of the absence or its repetitive nature, for instance, [...] request that the employee furnish a document attesting to those reasons.” According to arbitral jurisprudence4 and that of the Administrative Labour Tribunal5, unwarranted refusal to provide such a document may constitute valid grounds for imposing an administrative or disciplinary measure, depending on the circumstances. That said, the new Act as adopted changes this balance. Indeed, a paragraph has been added to section 79.2 of the ALS specifying that “[...] no employer may request the document referred to in the first paragraph for the first three periods of absence not exceeding three consecutive days taken over a period of 12 months.” It will therefore be prohibited to require a supporting document, including a medical certificate, for the first three short-term absences (less than four days) occurring over the 12 preceding months. According to the comments of the Minister of Labour, such calculation of absences is to begin with the first absence during the year rather than as of January 1st of each year.6 The Act does not provide for an exception in cases where absences are excessive or otherwise questionable. Under which conditions will employers be entitled to require a medical certificate? Under the Act, employers retain the right to require a medical certificate where the absence is likely to last four consecutive days or more. What is more, the provision does not deny employers the right to investigate situations that appear questionable. The aforementioned prohibition will also apply to employers whose employees are governed by the Act respecting labour relations, vocational training and workforce management in the construction industry.7 Furthermore, the Act includes an amendment to the provisions relating to family or parental leave and absences. The third paragraph of section 79.7 of the ALS is amended so as to prevent employers from requiring a medical certificate to justify such absences. However, we believe this amendment in no way affects their right to require any other type of documentation, particularly as regards obligations relating to daycare services or educational institutions. Where an offence is committed, the penal provisions already included in sections 139 to 147 of the ALS apply. As these amendments are of public order and take precedence over any contract, policy or collective agreement, any measure imposed on an employee that would contravene any of these new obligations may be deemed invalid or result in a prohibited practice complaint. How will the Act affect insurers and employee benefit plan administrators? On another note, the Act mainly to reduce the administrative burden of physicians also introduces a new prohibition applicable to insurers and employee benefit plan administrators. They will no longer be entitled to require that a medical service, such as a consultation, be received in order to reimburse the cost of services or a technical aid, nor will they be entitled to require that a medical service be received at a predetermined frequency different from that considered appropriate by the attending physician for the purpose of maintaining the payment of disability benefits. Coming into force The amendments to the ALS will come into force as of January 1, 2025. The amendments concerning insurers and employee benefit plan administrators will apply subsequently at a date or dates to be set by the Government. S.Q., 2024, c. 29. CQLR, c. N-1.1. Civil Code of Québec, CQLR, c. CCQ-1991, art. 2085. See in particular the case law cited in Linda Bernier, Guy Blanchet and Éric Séguin, Les mesures disciplinaires et non disciplinaires dans les rapports collectifs du travail, 2nd ed. Cowansville, Éditions Yvon Blais, loose-leaf, updated to May 30, 2024, paras. 1.055 et seq. See in particular : Marchessault et CPE Les Petits Adultes, 2019 QCTAT 1632, paras. 37–38; Labourdette et Protecteur du citoyen, 2019 QCTAT 4831, para. 52. COMMITTEE ON LABOUR AND THE ECONOMY, Clause-by-clause consideration of Bill 68, An Act mainly to reduce the administrative burden of physicians, October 1, 2024. CQLR, c. R-20.

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