Law Times

Law Times • January 9, 2017 Page 11 www.lawtimesnews.com Move comes after whistleblowing program launch Public companies must update confidentiality clauses BY MICHAEL MCKIERNAN For Law Times E mployment lawyers say public companies in Ontario will need to up- date their confidentiality clauses after the Ontario Secu- rities Commission launched its first ever whistleblowing pro- gram. Under the program, which went live last summer after years in the works, whistleblowers can claim up to $5 million for tips that lead to successful enforce- ment proceedings against com- panies or individuals for securi- ties law violations. Amendments to the prov- ince's Securities Act made as part of the program's imple- mentation also prohibit com- panies from retaliating against employees who come forward to the OSC with information or co-operate with the regulator's investigations and void agree- ments that would prevent em- ployees from doing so. Rebecca Wise, a Torys LLP civil litigator with an employ- ment and securities law prac- tice, says the amendments pose a problem for Canadian companies, since many employ blanket clauses in termina- tion agreements, employment contracts and codes of conduct that prevent the disclosure of confidential information. Even a common exemption covering disclosures "required by law" would not be sufficient, says Wise, who is based at the firm's Toronto office. "Participation in the whistle- blowing program is not required by law," Wise says, noting that a simple change to account for disclosures "required or permit- ted by law" would bring confi- dentiality clauses more in line with the spirit of the law. Discipline policies should also be reviewed to "make sure it's clear that employees won't be disciplined for exercising their rights at law," Wise adds. The changes became even more urgent after a series of en- forcement actions brought by the U.S. Securities and Exchange Commission against companies for their overly restrictive sever- ance agreements. In early August, Georgia- based building material dis- tributor BlueLinx Holdings Inc. agreed to pay a $265,000 pen- alty for forcing outgoing em- ployees to waive their rights to whistleblowing bounties under the SEC's own program, which came into effect in 2010 and was one of the inspirations for the Ontario version. Days later, California health insurance provider Health Net Inc. agreed its own $340,000 penalty for similar violations. Both companies were required to amend their severance agree- ments to explicitly acknowledge employees' rights to report sus- pected securities law violations without forfeiting any resulting whistleblower award. In a state- ment, the SEC's whistleblowing chief Jane Norberg celebrated the settlements: "Companies simply cannot undercut a key tenet of our whis- tleblower program by requiring employees to forego potential whistleblower awards in order to receive their severance pay- ments," she said. "We're continuing to stand up for whistleblowers and clear away impediments that may chill them from coming forward with information about poten- tial securities law violations," added Stephanie Avakian, the commission's deputy director of enforcement. If the OSC follows the SEC's lead by adopting an approach that punishes impediments to participation in the program, rather than simply nullifying provisions that fail to comply, employers may want to consider explicitly exempting the OSC whistleblowing program from their confidentiality clauses, ac- cording to Shana French, a law- yer with Toronto employment law boutique Sherrard Kuzz LLP. "When the OSC launched its office, it was very much inf lu- enced by what's happening in the U.S., so I don't see why they wouldn't go in the same direc- tion and sanction people im- peding the scope of an inquiry," French says. She says other than compa- nies with U.S. affiliates, few On- tario businesses have experience dealing with anti-reprisal leg- islation for whistleblowers, and that the response to the OSC's new program has been slow. "The SEC decisions were a real wake-up call. Prudent em- ployers are looking at their poli- cies and making sure that they are aligned with what the OSC requires," French says. "You don't want to be per- ceived as hampering or inter- fering with the regulator's pro- cesses." Jessica Bullock, a partner in the labour and employment law practice group at Davies Ward Phillips & Vineberg LLP in To- ronto, says that while Ontario employers can look south of the border for lessons about comply- ing with whistleblowing legisla- tion, she is less convinced that the OSC will mirror the SEC's strict approach to enforcement. "In Ontario, you couldn't have an action based on a confi- FOCUS Rebecca Wise says amendments to Ontario's Securities Act pose a problem for Canadian companies. You don't want to be perceived as hampering or interfering with the regulator's processes. Shana French See Employers, page 12 Order # 804218-65203 $4 2 volume looseleaf supplemented book Anticipated upkeep cost – $ per supplement 4-6 supplements per year Supplements invoiced separately 0-88804-218-3 Shipping and handling are extra. Price(s) subject to change without notice and subject to applicable taxes. 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