Law Times

LAw times • August 8, 2011 An online resource 1.800.263.3269 Focus On CORPORATE/COMMERCIAL LAW Canada ramps up whistleblower enforcement Companies urged to get ahead as government gets more aggressive BY JULIUS MELNITZER For Law Times tion of Foreign Public Offi cials Act. In addition to a $9.5-million fi ne, the court imposed three years of onerous probation conditions on the company. All of this was because Niko provided O Bangladesh's junior energy minister with a $190,000 SUV for his personal use and trips to Calgary and New York. No cash transfer was involved, but at the time the minister was investigating the company's liability to Bangladeshi villagers aff ected by explosions at a Niko operation. Although Canada has been late to the game in international anti-corruption enforcement, observers saw the prosecu- tion and a statement from the RCMP that the force had more than 20 cases under investigation as a sign that Can- ada was fi nally taking anti-corruption enforcement seriously. But unlike the United States, where the Securities and Exchange Commission has recently implemented the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that authorize what amount to large bounty payments to whistleblowers for information about violations of securities laws, there are no similar regulations in Canada. "Canadian whistleblowing laws tend to be very specifi c and pinpointed," says Rachel Silver, who until recently worked at Norton Rose OR LLP. Most provincial occupational health and safety laws protect employees from statute-related reprisals. For example, Ontario's Occupational Health and Safe- ty Act prohibits employers from retaliat- ing against workers who have complied with the legislation's provisions. Th e Canada Labour Code contains sim- ilar provisions but provides for a maximum fi ne of only $15,000 for a contravention. 'Canadian companies need to ramp up their compliance programs very signifi- cantly,' says Riyaz Dattu. Many of the country's human rights codes contain protections that prohibit threaten- ing, intimidating or discriminating against someone because that person is enforcing rights under the legislation. Environmental protection legislation also has whistleblowing provisions. On- tario's Environmental Protection Act and Environmental Bill of Rights prohibit re- prisals against employees complying with certain legislation, including the Environ- mental Assessment Act, the Nutrient Man- agement Act, the Ontario Water Resources Act, the Pesticides Act, the Safe Drinking Water Act, and the Toxics Reduction Act. Off enders are subject to prosecution; employees have a right of complaint to the Ontario Labour Relations Board, which has wide remedial powers including rein- statement with back pay; and dismissed whistleblowers have a civil claim for lost wages and punitive damages if the termi- nation fl ows from an attempt to have an environmental law enforced. NEW EDITION CONSOLIDATED NATIVE LAW STATUTES, REGULATIONS AND TREATIES 2011 CONSULTING EDITOR: JACK WOODWARD Although the origin of Canada's aboriginal law is older than the country itself, this area of law continues to change and evolve. Stay up to date with the latest changes and impending developments with the Consolidated Native Law Statutes, Regulations and Treaties 2011. This text is a timely consolidation of the statutes and regulations that have an impact on native law. Examine the full text of bills that are before the House of Commons, but not yet passed into law. ORDER # 983593-63396 $90 Softcover July 2011 approx. 990 pages 978-0-7798-3593-3 Shipping and handling are extra. Price subject to change without notice and subject to applicable taxes. WITH THIS PRACTICAL BOOK, YOU WILL: • Save research time with a one-stop source of the key developments in native law • Access what you need quickly with a comprehensive Table of Contents • Stay current on the latest changes AVAILABLE RISK-FREE FOR 30 DAYS Order online at www.carswell.com Call Toll-Free: 1-800-387-5164 In Toronto: 416-609-3800 n June 24, Calgary-based Niko Resources Ltd. pleaded guilty to an off ence under the Corrup- At the federal level, the Canadian En- vironmental Protection Act prohibits em- ployers from retaliating against employees who report off ences, refuse to conduct il- legal activities or declare their intention to comply with the law. Th e statute also per- mits whistleblowers to request that their identities remain confi dential. Section 425.1 of the Criminal Code prohibits employers from retaliating or threatening to take action against em- ployees who provide information to a federal or provincial law enforcement offi cial. Sanctions include imprison- ment for up to fi ve years. "Th e broadest whistleblower protec- tions in Canada, however, are found in the criminal rather than the regulatory context," Silver says. "But the govern- ment doesn't appear to have been using this provision too often." Allan Cutler, the former bureaucrat who unveiled the sponsorship scandal under the former Liberal government, was demoted for speaking up, and even- tually transferred from his position for his trouble, says self-regulation doesn't work in the private sector. "Without oversight, there's no ac- countability," he says. "And no mat- ter what industry sector you're talking about, they start with good intentions, but sooner or later an embarrassing case emerges or senior management knows the wrongdoer and someone says, 'Let's go a little easier.' And that's where the straight and narrow ends." Susan Hackett, who led the charge against the Dodd-Frank whistleblower rules during her time as general counsel for the Association of Corporate Counsel, says there are serious pressures for whistle- blower legislation in Canada. "Look at the infl uence of groups like FAIR [Fed- eral Accountability Initiative for Reform] and institutional shareholder groups," she says. "Th ere's no reason why what's going on in Australia, New Zealand, and Eu- rope shouldn't come to Canada." But even if legislation isn't imminent, change on the regulatory level is. "One of the fallouts of Dodd-Frank and the SEC's response is that a whole bunch of other agencies like the Commodity Fu- tures Trading Commission are going to be very interested in passing their own version of whistleblower rules," Hackett says. "It's one of those bandwagons that leads me to believe that Canadian institutions like the TSX might not be far behind, especially because it's a way of placating people who ask what regulators are doing to stop the rampant misconduct that's perceived." However that may be, virtually every- one is in agreement that one of the best ways to ward off some aspects of whistle- blower legislation is to establish eff ective internal compliance systems. "Canadian companies need to ramp up their compliance programs very sig- nifi cantly," says Riyaz Dattu of Osler Hoskin & Harcourt LLP. But only widespread adoption of such policies will deter governmental action. "Corporate Canada must recognize that there's movement afoot that includes boun- ties and a private right of action for whistle- blowers, so it has to put itself in a position where it can demonstrate that eff ective internal whistleblowing programs are em- bedded in the ordinary course of business," says Eric Block of McCarthy Tétrault LLP. "We don't want any government to be in a position where it feels compelled to ad- vance a more draconian position." TD Bank is an institution that's done exactly that. Th e organization has a hotline for whistleblowers and a web site presence that allow information to come forward anonymously. It also gives independent di- rectors access to the web site to ensure that management can't bury complaints. "We do everything we can to encourage employees to report misconduct and to let them know that we are highly supportive of any source of information that helps us uncover wrongdoing," says Chris Mon- tague, the bank's general counsel. PAGE 9 Untitled-2 1 www.lawtimesnews.com 7/29/11 9:24:05 AM

• Cover
• Project Management
• Caledonia Settlement
• Focus On Corporate/Commercial Law