Staying Current: Bill 168 Occupational Health and Safety Amendment Act. New Accessibility Standards for Customer Service

Transcription

1 CANADIAN FRANCHISE ASSOCIATION ONTARIO REGION LEGAL DAY MARCH 2, 2010 Staying Current: Bill 168 Occupational Health and Safety Amendment Act New Accessibility Standards for Customer Service Amendments under the Competition Act dealing with Pricing Introduction of the HST by DARRELL JARVIS MARK MAGRO FASKEN MARTINEAU DUMOULIN LLP

2 TABLE OF CONTENTS Page INTRODUCTION... 1 PART I BILL 168 OCCUPATIONAL HEALTH AND SAFETY AMENDMENT ACT, 2009: WORKPLACE VIOLENCE AND HARASSMENT... 1 Overview... 1 Background...2 Occupational Health and Safety Act... 3 Components of Legislation... 4 Enforcement and Penalties... 5 Other Jurisdictions... 6 Implications... 8 PART II ACCESSIBILITY FOR ONTARIANS WITH DISABILITIES ACT, Overview... 9 Background Requirements for Franchisors and Franchisees Additional Requirements for Franchisors and Franchisees with 20 or More Employees Training Interpreting the Requirements Enforcement PART III THE IMPACT OF THE NEW HARMONIZED SALES TAX ON THE FRANCHISE INDUSTRY Overview Impact on Franchises PST Exempt Goods Point of Sale Rebates Temporary Restrictions of ITCs PART IV DEVELOPMENTS IN CANADIAN COMPETITION LAW AFFECTING PRICING Overview Background Price Maintenance Decriminalization of Price Discrimination, Predatory Pricing and Discriminatory Promotional Allowances New Dual-Track Regime for Agreements between Competitors i-

3 INTRODUCTION There is a considerable amount of recent legislation that affects franchise systems. Two changes in the law, Bill 168 amending the Occupational Health and Safety Act and the Accessibility Standards for Customer Service under the Accessibility for Ontarians with Disabilities Act, impose obligations on franchise systems with respect to drafting policies, creating procedures and training employees. In March 2009, Parliament enacted changes to the Competition Act, which have implications for franchise systems, particularly with respect to pricing. In July 2010, the HST will come into effect. This paper will assist franchisors and franchisees understand these changes in the law and prepare to meet their new obligations. 1 PART I BILL 168 OCCUPATIONAL HEALTH AND SAFETY AMENDMENT ACT, 2009: WORKPLACE VIOLENCE AND HARASSMENT Overview Bill 168, Occupational Health and Safety Amendment Act (Violence and Harassment in the Workplace) received Royal Assent on December 15, 2009 and will go into effect June 15, The legislative amendments to the Occupational Health and Safety Act (OHSA) will enhance the province's existing Safe at Work Ontario strategy and attempt to further protect workers from violence and harassment in the workplace. The amendments under Bill 168 create positive duties on employers to prevent and manage violence and harassment in the workplace. The new protections will require employers to: develop and communicate workplace violence and harassment prevention policies; adopt violence and harassment implementation programs; assess the risks of workplace violence, and take reasonable precautions to protect workers from possible domestic violence in the workplace; disclose information where there is a risk of violence, including personal information; allow workers to refuse work upon threat of workplace violence. The amendments also add the definitions workplace violence and workplace harassment to the OHSA. Workplace violence is broadly defined and includes the exercise of, attempt or threat of exercising, physical force by a person against a worker that causes or could cause physical injury to the worker. Workplace harassment is defined as engaging in a course of vexatious comment or conduct against a worker in a workplace that is known or ought reasonably to be known to be unwelcome. This definition is much broader than the definition of harassment under 1 The authors gratefully acknowledge the contributions of Kate Sangster-Poole, Nicole Melanson and Sebastien Kwidzinski to the preparation of this paper.

4 - 2 - the Human Rights Code, which requires a complainant to establish that harassment is based on a prohibited ground of discrimination (e.g., race, sex, religion, etc.). Background Bill 168 was introduced as the Ontario government s response to several factors, including certain critical events and growing concern about the prevention of violence in the workplace. This concern is reflected in recent statistics that have focused on workplace violence. A 2004 Statistics Canada survey, Criminal Victimization in the Workplace, found that 17 per cent of violent incidents in Canada occur at the workplace. Further, from April 1, 2008 to March 31, 2009, inspectors made 417 field visits to workplaces and issued 351 orders related to violence in the workplace. 2 However, the main catalyst spurring these amendments was the tragic death of Lori Dupont in November 12, 2005, as a victim of workplace harassment and violence. Lori Dupont was employed as a nurse at Hotel-Dieu Grace Hospital, Windsor Ontario. While working, she was attacked in the OR unit and stabbed seven times by a doctor with whom she'd had a past relationship. Speaking to the Standing Committee on Social Policy, Barbara Dupont, Lori s mother, claimed that the hospital had been aware of the harassment issues since both Lori and other employees had made formal complaints to the administration. 3 A Coroner s Inquiry was initiated in 2007 in order to investigate the events surrounding Lori Dupont s death. In its report, the Coroner s Jury made recommendations to the Ontario government, the hospital and to hospital and doctor associations regarding workplace violence. The Recommendations noted that although the Hotel-Dieu Grace Hospital had a harassment policy, there appeared to be much uncertainty in how to deal with the situation or how to go about filing a complaint. 4 The Recommendations also addressed the role of the Ministry of Labour in intervening in similar situations and suggested expanding the mandate of the Ministry beyond physical violence to include emotional harm and behavioural harassment. 5 Other highly publicized incidents of workplace violence that have led to these amendments include the death of Theresa Vince in 1996, a senior human resources administrator at Sears, who was killed by her boss after a prolonged period of harassment and stalking, and the death of four employees and two others in 1999 at the Ottawa OC Transpo workplace when a longservice bus driver went on a shooting rampage Ministry of Labour website: Standing Committee on Social Policy, Tuesday November 17, 2009: proceedings/committee_transcripts_details.do?locale=en&date= &ParlCommID=8875&BillID=2181&Business=&DocumentID=24517#P70_3278. Verdict of Coroner Jury (December 11, 2007): Ibid. _ads=,

5 - 3 - In 2008, the Ministry of Labour engaged a Consultation on Workplace Violence Prevention and offered various organizations, groups and stakeholders the opportunity to respond. Some stakeholders did not think the general duties of employers contained in the OHSA went far enough in protecting employees from workplace violence. Various organizations urged the provincial government to take appropriate steps to improve measures to prevent violence in the workplace and to include protection from psychological harassment in the OHSA. 7 Bill 168 was therefore introduced as the Ontario government s attempt to reduce workplace violence, and to clarify for employers and employees their responsibilities and rights to prevent and respond to workplace violence and harassment. 8 Occupational Health and Safety Act Bill 168 amends the OHSA by adding Part III.0.1: Violence and Harassment. The OHSA was introduced in 1979 in order to protect workers by making Ontario s workplaces safe and healthy. It sets out the rights and duties of all parties in the workplace and establishes procedures for dealing with workplace hazards. It also provides for enforcement of the law where compliance has not been achieved voluntarily. The OHSA calls for the creation of joint health and safety committees in many workplaces, which are advisory groups of employee and management representatives. Under the amendments of Bill 168, the various duties and responsibilities of employers, supervisors and workers, currently contained in sections 25, 27 and 28 of the OHSA, will be extended to apply to workplace violence specifically. For example, under Section 25(2) of the OHSA, an employer already has a duty to provide information, instruction and supervision to protect the health or safety of workers, to take every precaution reasonable in the circumstances for the protection of a worker, and to prepare health and safety policies and programs. Employers also have responsibility to take reasonable care to ensure the provisions and any orders made under the OHSA are complied with. The amendments clarify that the employer s duties listed in section 25 apply with respect to workplace violence. They add to the employer s general responsibilities by specifically outlining duties to implement violence and harassment policies, to provide information to employees, including personal information about a person with a history of violent behaviour, and to conduct risk assessments. Further, the amendments extend the rights of employees to refuse work, currently contained in section 43 of the OHSA, where they have reason to believe workplace violence is likely to endanger them. In sum, Bill 168 extends and strengthens employers general duties and workers rights under the OHSA in order to better prevent and protect against workplace violence. The amendments will 7 8 Examples of responses to the Consultation Paper by the Ontario Counsel of the Canadian Federation of University Women: < %20..pdf> and the Ontario Federation of Labour: < First Reading in the House of Commons (April 20, 2009):

6 - 4 - attempt help strengthen existing provisions under the act and provide clarification to current regulations. Components of Legislation Violence and Harassment Policies: Bill 168 requires employers to develop and implement written policies with respect to both workplace violence and workplace harassment. This law is mandatory for all employers regardless of size or industry, and regardless of any previous history or risk of violence in the workplace. Further, employers must review these policies at least annually. There is also an obligation for employers with more than five employees to post the policies at a conspicuous place in the workplace. Employers also have a duty to post workplace violence and harassment policies if the number of employees regularly employed at the workplace is six or more. Workplace Programs: Bill 168 also requires employers to develop and maintain a program to implement the workplace violence and workplace harassment policies. The workplace violence program must include: measures to control the risks of workplace violence identified in the assessment; procedures for dealing with violence; procedures for employees to report incidents or threats of workplace violence to the employer; a process for investigation and addressing incidents, complaints or threats of workplace violence. The workplace harassment program must provide measures and procedures for employees to report incidents and a process for investigating and dealing with incidents or complaints. Further, the employer is obligated to provide employees with information and instruction that is appropriate for the worker, on the contents of the programs and policies. Risk Assessments: The amendments require employers to conduct an assessment of the risk of violence that may arise in the workplace. The assessment must consider the risks of violence that may arise from the nature of the workplace, and the type and conditions of the work. In conducting the risk assessment, employers are also required to take into consideration common risks at similar workplaces, risks specific to the employer s workplace, and any other factor that may later be prescribed by regulation. For example: a health care worker would likely be subject to a greater risk of workplace violence than an office worker. Employers must then report the results of the assessment to the workers through the Joint Health and Safety Committee or worker representative. If there is no Committee or representative then the results must be reported directly to the workers.

7 - 5 - Reassessments of the risk of workplace violence are required as often as is necessary to ensure that workers are protected from violence and that the workplace violence policy and program remain effective. Disclosure Requirements: Bill 168 requires employers and supervisors to inform workers of the risks of workplace violence. In certain circumstances, this may include providing a worker with information, including personal information, about a person with a history of violent behaviour. This duty will be triggered if the worker can be expected to encounter that person in the course of his or her work, and if the risk of workplace violence is likely to expose the worker to physical injury. However, the employer is limited to disclosing only that information that is reasonably necessary to protect the worker. Although there is no guidance on how such persons are to be identified, the provision appears to include anyone who enters the workplace, including fellow employees, customers, or patients. Work Refusals: The amendments also extend section 43 of the OHSA, which provides an employee with the right to refuse work in certain circumstances, such as physical hazards. Bill 168 allows workers to remove themselves from harmful situations where they have reason to believe that workplace violence is likely to endanger them. As is the case with respect to work refusals generally, the worker s refusal to work would be investigated by the employer and, potentially, a Ministry of Labour inspector. Further, the employee will no longer be required to remain near the work station until the resulting investigation is complete. Instead, they will be required to remain in a safe place that is as near as reasonably possible to his or her work station and available for the purposes of the investigation. Domestic Violence: Under Bill 168, violence policies and programs must also include measures to deal with domestic violence that may erupt in the workplace. Employers are required to take every precaution reasonable in the circumstances to protect the worker where they are aware, or ought reasonably to be aware that an act of domestic violence is likely to endanger a worker at the workplace. Ontario is the only province to address domestic violence in its occupational health and safety legislation thus far. There is no definition of domestic violence and it is unclear what employers will need to do in order to discharge this duty. Enforcement and Penalties In order to enforce the provisions and regulations of the OHSA, workplace inspections are carried out. Inspections involve a thorough examination of the condition of the workplace by an inspector. The frequency of inspections depends of the type and size of the workplace and on its past record of health and safety. Inspections may also be conducted in response to specific complaints.

8 - 6 - After an inspection, the inspector prepares a report and may make recommendations to improve the health and safety of the workplace. If the inspector discovers any contraventions of the OHSA, he or she will issue written orders to the employer to comply with the law within a certain time period. The inspector may also order that work be stopped or a workplace be cleared until the contravention has been corrected or the hazard removed. A copy of the order must be posted in the workplace where it is most likely to be seen by employees. Section 66 of the OHSA provides that every person, including every corporation, who contravenes or fails to comply with a provision of the Act or an order of an inspector is guilty of an offence. On conviction, an individual is liable to a fine of up to $25,000 or to imprisonment for a term of up to twelve (12) months, or both, and a corporation is liable for up to $500,000. Other Jurisdictions The protection of workers against violence and harassment in the workplace is an issue that has been debated across Canada. Bill 168 will bring Ontario in line with other Canadian jurisdictions that have specific legislative or regulatory requirements regarding workplace violence. Currently, there are five provinces, British Columbia, Alberta, Saskatchewan, Manitoba and Prince Edward Island, which have adopted specific occupational health and safety regulatory requirements covering workplace violence. 9 Although Quebec does not have a regulation dealing with violence in the workplace, it has a regulation banning all forms of psychological harassment in the workplace. Similar to the requirements of Bill 168, the legislation in these five provinces requires an employer to implement policies and procedures to reduce or eliminate the risk of violence at the workplace. Employers must also inform employees of the risks, including disclosing information about persons with a history of violent behaviour whom employees are likely to encounter. Additionally, all of the regulatory requirements provide for training of employees in how to recognize and minimize violence at work, how to respond to incidents, and the procedures for reporting incidents of violence. However, unlike the Ontario amendments the regulations in these other jurisdictions do not apply to employers across the board. In Alberta, British Columbia, PEI and Manitoba, the requirement to develop and implement violence policies only applies to workplaces that have been evaluated as being at risk of workplace violence. In Saskatchewan, only prescribed workplaces where violent situations have occurred or are expected to occur are covered by the regulation. These include, to name a few, places of employment providing healthcare services, educational services, police and correctional services, financial services, transit services, and stores open between 11 p.m. and 6 a.m. 9 British Columbia Occupational Health and Safety Regulation; Alberta Occupational Health and Safety Code under the Occupational Health and Safety Act; Saskatchewan Occupational Health and Safety Regulations, 1996; Manitoba Workplace Safety & Health Regulation; Prince Edward Island Occupational Health and Safety Act.

9 - 7 - Further, Bill 168 also has a much broader application of the term violence than either the BC or PEI regulations. In the BC and PEI regulations, the definition of violence only includes acts, attempts, or threats of injury from a person who is not a worker. Bill 168 has no such limitation; it deals with workplace violence from both other workers and anyone who enters the workplace. Quebec: Under the Act Respecting Labour Standards in Quebec, there is a broad prohibition against psychological harassment in the workplace. Harassment is defined as any vexatious behaviour in the form of repeated and hostile or unwanted conduct, verbal comments, actions or gestures, that affects an employee s dignity or psychological or physical integrity and that results in a harmful work environment for the employee. Employers have a duty to take reasonable action to prevent psychological harassment and, whenever they become aware of such behaviour, to put a stop to it. Further, a single serious incidence of such behaviour may constitute psychological harassment if it produces a lasting harmful effect on the employee. In an attempt to clarify the definition of psychological harassment, the Quebec Labour Standards Branch has published an online bulletin with a list of a broad range of activities that could constitute psychological harassment, including: making rude, degrading or offensive remarks; making gestures to intimidate; discrediting, ridiculing, or spreading rumours; preventing someone from expressing his or her thoughts, such as yelling and constant interruption; isolating or shunning; or destabilizing by making fun of a person s beliefs, tastes or political choices. 10 According to the government s website, harassment can occur between colleagues, between employees and persons of authority, and between a group and an individual. Harassment may also stem from a person outside the workplace such as a client, customer or supplier. 11 In order to apply this definition to real-life situations a body of case law has been developed in Quebec. This case law has been helpful in determining the true scope of the prohibition and could prove to be useful in Ontario as employers attempt to implement the requirements of Bill 168 to prevent harassment. According to arbitral decisions in Quebec, psychological harassment includes sexual harassment and harassment based on any one of the grounds listed in section 10 of the Charter of Human Rights and Freedoms. One arbitrator found that the deduction and postponement of cheques owed to an employee until additional tasks, such as washing the floors and windows (which were not part of the employee s job), were completed amounted to psychological harassment. Threats and regular deductions constituted a repeated and vexatious behaviour, which affected the employee s dignity since he practically had to beg for his due. 12 In another case, the manager of a Subway restaurant was found to be the victim of psychological harassment by the restaurant Quebec Labour Standards Branch < Quebec Labour Standards Branch < Cohen c. Placements 3330 Ridgewood inc., 2009 QCCRT 519, November 25, 2009.

10 - 8 - owner, who shouted at her several times in front of customers, criticized her sexual orientation and refused to speak to her. 13 Examples of situations that do not constitute harassment include: the legitimate exercise of management rights, including the assignment of tasks, their evaluation and the decision to impose a sanction on an employee; personal work conflicts or difficult social relations; everyday work-related stress or conflict situations; difficult work conditions (or changes to work conditions) that may demand extra effort and concentration. 14 The government bulletins and arbitral decisions illustrate the broad scope of the Quebec legislation and the changing legislative and judicial attitude to abuse in the workplace. Canada: The federal government has also developed workplace violence prevention legislation for federally regulated employers. The Violence Prevention in the Workplace Regulation, being Part XX of the Canada Occupational Health and Safety Regulations, was adopted pursuant to the Canada Labour Code, which required employers to take the prescribed steps to prevent and protect against violence in the work place. The Regulation contains a broad definition of workplace violence that is not limited to physical injury. Similar to Bill 168, the Federal Regulation requires employers to adopt violence prevention policies, to assess the risk of workplace violence, and to implement preventive controls where risks are identified. Unlike the Ontario amendments, the Federal Regulation also requires employers to provide training for employees on the factors that contribute to workplace violence, the prevention programs in place, and the procedures for reporting incidents of violence at work. Bill 168 only requires employers to provide workers with information and instruction on the contents of the policies and programs. Another difference between the Ontario and Federal legislation is the lack of reference to harassment in the federal Regulation. However, it is arguable that harassment may be included as a form of non-physical harm under the definition of violence, even though the Federal Regulation does not specifically list it. Implications Under Bill 168, all employers, regardless of size, industry or actual risks, now have positive duties to develop and implement policies to prevent and minimize workplace violence and harassment. These duties also extend to directors and officers of corporate employers. Section 32 of the OHSA provides that every director and every officer of a corporation shall take all reasonable care to ensure that the corporation complies with the Act, the regulations, and orders of inspectors Ganley c Québec Inc. (Subway Sandwiches & Salades), 2006 QCCRT Quebec Labour Standards Branch <

11 - 9 - Although the OHSA already requires employers and supervisors to take every precaution reasonable under the circumstances for the protection of workers, Bill 168 clarifies that this duty applies to workplace violence and harassment. Employers will now need to develop specific policies and programs to deal with workplace violence. This will be particularly important in workplaces where the risk of violence is greater, such as in the health care, social services, retail, hospitality, education, transportation, and police, security, and corrections industries. Many employers already have workplace harassment policies in place as a result of their obligations under the Human Rights Code. However, employers will have to expand those policies and procedures, especially given the broader definition of harassment. Further, it is not clear what type of conduct will be caught by this definition. Employers can look to other jurisdictions, such as Quebec, where case law has been developed in applying a similar definition of harassment, in order to get a sense of the possible scope of the new provisions. Employers now have a duty to disclose information, including personal information, about persons with a history of violent behaviour in certain circumstances. However, privacy issues may arise with respect to disclosing employees personal history and therefore the application of these rules will no doubt be contentious. Since the Bill does not provide guidance on how to implement many of its requirements, such as conducting risk assessments or identifying persons with a history of violent behaviour, it is unclear what the full scope of employers duties will be. In order to aid in this regard, the Ministry of Labour will be releasing a Guide to Violence and Harassment in the Workplace, which will help employers answer important questions about the amendments to the OHSA. 15 In addition, it is expected that a body of case law will develop which will help employers better understand the full scope of Bill 168. PART II ACCESSIBILITY STANDARDS FOR CUSTOMER SERVICE ACCESSIBILITY FOR ONTARIANS WITH DISABILITIES ACT, 2005 Overview Ontario s new Accessibility Standards for Customer Service, Ontario Regulation 429/07, came into force on January 1, 2008 and is the first accessibility standard created under the authority of the Accessibility for Ontarians with Disabilities Act, 2005, S.O. 2006, Ch. 11 ( AODA ). The Customer Service Standards apply to all businesses and organizations that have one or more employees in Ontario and that provide goods or services, either directly to the public or to other businesses or organizations. The standards apply not only to the businesses that provide goods or services to consumers, such as retail stores, restaurants and hotels, but also to businesses that sell or provide service to other businesses, such as manufacturers and professional partnerships. This 15 Renu Kulendran, Ontario protects workers from violence and harassment Safe at Work Ontario Today, Issue #3 (January 2010): < <

12 would also include the provision of goods and services by franchisors to franchisees. The standards even apply to non profit organizations such as charities and churches. The Customer Service Standards do not apply, however, to services provided internally within an organization. Businesses and organizations in Ontario must be in full compliance with the Customer Service Standards by January 1, Ontario s public service and designated public service organizations were required to comply as of January 1, The Customer Service Standards set out 11 requirements, including establishing policies, practices and procedures with respect to providing goods or services to people with disabilities and training employees, volunteers and contractors. Affected businesses and organizations with 20 or more employees are also required to document the policies, practices and procedures in writing and make them available on request. In addition, providers with 20 or more employees must file annual accessibility reports with the Ontario government. If an affected business or organization contracts with a third party to provide services on its behalf, the third party must also comply, regardless of whether they have any employees working in Ontario. 16 Background The AODA was enacted in order to achieve a fully accessible and barrier free province by 2025 through the development, implementation and enforcement of accessibility standards. Accessibility standards set out measures, policies, practices or other requirements for the identification and removal of barriers and to prevent the erection of barriers. 17 The accessibility standards are being developed by standards development committees comprised of persons with disabilities, representatives of industry, government and other organizations. The proposed accessibility standards are made available to the public for comment. The five accessibility standards being developed under the AODA relate to: 1. Customer service; 2. Information and communications; 3. Employment; 4. Built environment (buildings and other structures); and 5. Transportation Nothing in the AODA reduces a franchisor s or franchisee s current obligations under the law with respect to persons with disabilities. 18 Where there is a conflict between any obligation 16 Ministry of Community and Social Services, Guide: Accessibility Standards for Customer Service, Ontario Regulation 429/07 [Guide] at A barrier is defined in Section 2 of the AODA as anything that prevents a person with a disability from fully participating in all aspects of society because of his or her disability, including a physical barrier, an architectural barrier, an information or communications barrier, an attitudinal barrier, a technological barrier, a policy or practice. 18 AODA, s.3.

13 under the AODA, any standard, or any other law, the provision that provides the highest level of accessibility for persons with disabilities prevails. 19 In addition to the AODA, accessibility is regulated by the Ontarians with Disabilities Act, 2001, S.O. 2001, Ch. 32, which remains in force until it is repealed pursuant to section 42 of the AODA. The Human Rights Code prohibits discrimination on the basis of disability. Requirements for Franchisors and Franchisees All franchisors and franchisees will be required to: 1. Establish policies, practices and procedures on providing goods or services to people with disabilities. 2. Use reasonable efforts to ensure that policies, practices and procedures are consistent with the core principles of independence, dignity, integration and equality of opportunity. 3. Set a policy on allowing people to use their own personal assistive devices to access the goods and use the services and about any other measures that the franchise offers (such as assistive devices, services, or methods) to enable them to access the goods and use the services. 4. Communicate with a person with a disability in a manner that takes into account his or her disability. 5. Allow people with disabilities to be accompanied by their guide dog or service animal in those areas of the premises that the franchisor or franchisee owns or operates that are open to the public, unless the animal is excluded by another law. If a service animal is excluded by law, they must use other measures to provide services to the person with a disability. 6. Permit people with disabilities who use a support person to bring that person with them while accessing goods or services in premises open to the public or third parties. 7. Where admission fees are charged, provide notice ahead of time on what admission, if any, would be charged for a support person of a person with a disability. 8. Provide notice when facilities or services that people with disabilities rely on to access or use the franchisor s or franchisee s goods or services are temporarily disrupted. 9. Train staff, volunteers, contractors and any other people who interact with the public or other third parties on the franchisor s or franchisee s behalf on a number of topics as outlined in the Customer Service Standards. 10. Train staff, volunteers, contractors and any other people who are involved in developing the franchisor s and the franchisee s policies, practices and procedures on the provision of goods or services on a number of topics as outlined in the Customer Service Standards. 11. Establish a process for people to provide feedback on how the franchisor or franchisee provides goods or services to people with disabilities and how they will respond to any feedback and take action on any complaints. Make the information about the feedback process readily available to the public. 19 Ibid. s. 38.

14 Additional Requirements for Franchisors and Franchisees with 20 or More Employees If you have 20 or more employees, you must also: 1. Document in writing all your policies, practices and procedures for providing accessible customer service and meet other document requirements set out in the Customer Service Standards (including filing accessibility reports). This includes: policies, practices and procedures for providing customer service to people with disabilities; a policy on the use of personal assistive devices and availability of other assistive measures; policies, practices and procedures regarding service animals and support persons. Include what amount, if any, will be charged for admission of a support person; steps to take with a temporary disruption to services or facilities used by customers with disabilities to access your goods or services; a description of the training policy, including a summary of training content and details about when training will be provided; a description of the process for receiving and responding to feedback, including what action will be taken on any complaints. 2. Notify customers that documents required under the Customer Service Standards are available upon request. 3. When giving documents required under the Customer Service Standards to a person with a disability, provide the information in a format that takes into account the person s disability. 4. File accessibility reports with the Government of Ontario regarding compliance with the standard. An accessibility report can be found at Training Training must be provided to employees, volunteers, agents, contractors and others who may interact with the public on the franchisor s or franchisee s behalf, as well as those who participate in the development of customer service policies, practices and procedures. Businesses with more than 20 employees must prepare a document describing the training policy, and also maintain records of the content of the training, the dates on which training was conducted and how many people were trained. The content and format of the training is generally left to the organization but must include a number of components including: a review of the purposes and requirements of the AODA and its associated regulations; how to interact and communicate with people with disabilities; how to interact with persons with disabilities who use assistive devices or require the assistance of a service animal or support person;

15 how to use equipment or devices provided by the organization to help with the provision of goods and services; and what to do if a person with a disability is having difficulty accessing the organization s goods and services. Providing information on policies, practices and procedures the organization is putting into effect and the preparation of a training guide that can be provided to employees can also be useful. Training must be done on an ongoing basis to new employees and when employees are assigned applicable duties, as well as whenever changes are made to policies, practices and procedures on serving customers with disabilities. With respect to training, a number of aids have been created. These include the Training Resource - Accessibility for Ontarians with Disabilities Act, 2005 (AODA), and the Training Resource for Small Businesses and Organizations. These materials can be found at Interpreting the Requirements Policies, Procedures and Practices In developing the policies, practices and procedures, you have to use reasonable efforts to ensure that they are consistent with the principles of dignity, independence, integration and equal opportunity. The term reasonable efforts is not defined in the Customer Service Standards. The principle of dignity refers to treating people with disabilities as valued customers who are as deserving of full service as any other customer. Independence refers to freedom to do things on your own, free from the control of others. Integration means that people with disabilities can benefit from services in the same place and in the same or similar way as other customers. Having equal opportunity means not having to make significantly more effort to access service or having to accept lesser quality or more inconvenience. 20 The policies, practices and procedures can be incorporated into existing policies, practices and procedures, such as may be found in a franchise operating manual, or they can be set out separately. 21 The standards of accessibility do not actually apply to the goods being provided, but to the way in which goods are provided. 22 The Customer Service Standards do not tell you how to make your services accessible. It is left up to the franchisor or franchisee to determine how it will make its services accessible. This will depend on the type of services, the type of business resources and other options available. 23 In determining how to make services accessible, a franchisor or franchisee must use reasonable Supra note 15 at Ibid. at 23. Ibid. at 17. Ibid. at 26.

16 efforts to ensure that the method is consistent with the principles of dignity, independence, integration and equal opportunity. For example, a large restaurant chain may provide menus in Braille, whereas an independent coffee shop might offer to read a menu to a blind person. Both approaches might be acceptable, although clearly the former is more consistent with the principles of independence and integration. Employees In determining whether a franchisee has 20 or more employees, you count all full-time, parttime, seasonal and contract employees. You do not count volunteers or independent contractors (although they will likely have to be trained and comply with the Customer Service Standards). If the number of employees fluctuates during the year, so too can your obligations. 24 If you have a seasonal business and during a part of the year you have fewer than 20 employees, you will not need to make written policies available, for instance, during that time of the year. Resource Materials The Ministry has released a number of guides and manuals, which contain draft policies and other documents to assist in compliance. These include the Guide to the Accessibility Standards for Customer Service, Ontario Regulation 429/07, the Compliance Manual: Accessibility Standards for Customer Service, and the Compliance Manual for Small Businesses and Organizations. These materials are available at Enforcement The AODA provides for enforcement of the Customer Service Standards through inspections, compliance orders and administrative penalties. Enforcement provisions are set out in sections of the AODA. The AODA establishes broad inspection powers that provide appointed inspectors with the power to enter premises without a warrant to conduct inspections, obtain production of documents relevant to the inspection, and question any person present on matters relevant to the inspection. In some circumstances, warrants may be issued to assist with inspections. In cases where an organization contravenes specified sections under the AODA, compliance orders can be made to require the organizations to comply with the AODA or to pay administrative penalties. There are a number of possible offences under the AODA, including furnishing false or misleading information in an accessibility report, failing to comply with an order, or obstructing an inspector carrying out an inspection. Fines for individual persons can be as much as $50,000 for each day on which an offence occurs, and in the case of a corporation, as much as $100,000 for each day on which an offence occurs. In addition, directors and officers have a duty to take all reasonable care to prevent the corporation from committing an offence under section 37, and can be held liable to pay up to $50,000 for each day for breaching this duty. 24 Ibid. at 15.

17 PART III THE IMPACT OF THE NEW HARMONIZED SALES TAX ON THE FRANCHISE INDUSTRY Overview On July 1, 2010, Ontario will eliminate its existing provincial retail sales tax (PST) and adopt a harmonized sales tax (HST). The new HST will consist of a 5% federal component and an 8% provincial component for a total tax rate of 13%. It will apply as a flow through tax on the provision of goods and services in much the same manner as the current goods and services tax (GST). As a general rule, HST will apply to any goods and services that are currently subject to the 5% GST. Businesses will be responsible for collecting and remitting HST to the government. Like GST, those that provide taxable goods and services will be entitled to claim input tax credits (ITCs) on their own business inputs. Impact on Franchises The impact of the new HST on franchise systems will be felt in a number of areas, to varying degrees. Despite the negative publicity the change has received, the HST regime will actually be positive or neutral to many businesses. In fact, a good number of businesses, including many in the franchise industry, will save money under the new harmonized tax. A simple example illustrates how: Example: A restaurant franchisee purchases a point of sale system. Currently, the franchisee will pay 8% PST (because the item is tangible personal property) and 5% GST (because the item is not one of the specifically enumerated exemptions under Part IX of the Excise Tax Act (Canada)). 25 The 5% GST is recovered by way of ITCs but the 8% PST is a net cost to the franchisee. Under the new HST regime, the same 13% will be charged. The 5% GST is still recovered as before, but now the 8% provincial component of the HST will also be recovered by way of ITCs. Another notable advantage of the new harmonized tax is that, from a practical perspective, businesses will only have to comply with one transaction tax. This means they will now only have to file one return to one party the Canada Revenue Agency (which will be administering the tax) and will only be subject to one sales tax audit in Ontario. On the other hand, franchised systems that will be impacted negatively by the introduction of the HST are those that provide services that are not currently subject to PST, but will be subject to HST. 25 See the section below entitled PST Exempt Goods for a further explanation of these concepts.

18 Example: A cleaning business. Currently the franchisee charges its customers 5% GST but no PST, as cleaning services are not subject to PST. Following the introduction of the HST, those customers will now pay the 13% HST instead of the 5% GST. Assuming the franchisee s customers are consumers with no access to input tax credits, the customers will feel the full effect of the additional tax of 8%. This will have an inflationary effect on the system s prices, and as was the case when the GST was introduced, sales may fall. Alternatively, the franchisor or the franchisee may decide to reduce prices by some or all of the additional 8% to mitigate the effect on its customers. In both instances there will be a reduction in profitability to the franchisee and likely a reduction in royalties to the franchisor. Whether the benefits of the HST to those franchise systems will be sufficient to offset the negative impact is yet to be seen. PST Exempt Goods One of the primary differences between the new HST and the existing PST will be that many types of property and services that are currently exempt from PST will be subject to HST when the new changes are introduced in July As a value added tax, HST will apply to all goods and services except those that fall within specifically enumerated exceptions. In reality, this means that almost all goods and services purchased by franchisees and franchisors will be subject to HST. Ontario s existing PST, on the other hand, as a sales and use tax, generally applies only to tangible personal property for example store fixtures, cars and uniforms and to a limited number of services. Again there are some exceptions. 26 As a result, numerous services and intangible property that are commonly used by franchised businesses in the course of their normal business activities are not subject to PST. Some common examples include: marketing or advertising services, consulting services, trademark licenses, administrative services, accounting services and legal services. Although the prospect of having these currently exempt services and intangible property taxed at the higher 13% HST rate rather than the current 5% GST rate may seem to represent a real hardship, in reality, the actual impact on most businesses will likely be positive. As noted above, those businesses that are engaged in commercial activities those that provide taxable goods and services to consumers are eligible for ITCs. In the franchise industry this will capture the majority of businesses since GST/HST applies to all goods and services apart from a limited number of enumerated exceptions, as discussed above. These businesses will be reimbursed for all the HST they pay under the new regime, even though it will be on a broader base of property and services. 26 Prepared foods and beverages sold for under $4.00 is an example of tangible personal property that is currently exempt from PST (Retail Sales Tax Act, R.S.O. 1990, c. R.31, s. 7(1) 1) (RSTA). Insurance, although intangible personal property, is currently subject to 8% PST (RSTA s.2.1(1)). These two exceptions will continue after Ontario adopts the new HST in July 2010.

19 Outside rare circumstances, for example a start up business, most companies should not be overly affected by the slight delay that may occur between reporting and receiving any ITC owing to it. Overall, the major disadvantage in this area will be felt by those businesses that provide HST exempt goods or services, such as banks and other financial institutions, where the institutions will not be able to claim input tax credits on their expenses related to supplying those services. In the franchise context however, this is likely to have slim application as few franchised businesses provide GST/HST exempt services. Point of Sale Rebates In addition, many of the PST exemptions (some of which affect the franchise industry) have been carried forward into the HST regime through point of sale rebates. As part of its Tax Plan for Job and Growth 27, the Ontario government recently announced that its 2009 Budget includes proposed HST point of sale rebates. On these items, consumers will receive an automatic credit for the 8% provincial component of the HST. Businesses are only required to collect and remit the 5% federal HST component, ensuring that harmonization does not negatively impact consumers of such products. Perhaps most notable to the franchise industry is the point of sale rebate for prepared foods and beverages sold for under $4.00. Other examples include: newspapers, books, children s clothing and footwear. These will provide relief to consumers (who do not have the benefit of ITCs) and allow retailers to avoid the unenviable business decision of charging the extra 8% or absorbing the increase themselves. The restaurant industry in British Columbia fears the sting of such a decision, as they prepare to adopt a harmonized tax system similar to that proposed by Ontario. Currently restaurant meals are exempt from PST in British Columbia and franchise owners fear they will see a similar decline in sales to that experienced in the early 1990 s when the GST was first introduced. In Ontario, a similar situation exists with respect to hotel accommodation. Currently, transient accommodations are taxed at a rate of 5% PST, instead of the usual 8%. 28 However, when the HST comes into effect, that rate will increase to the standard 8% provincial HST component. It remains to be seen whether the governments of Ontario and BC will adopt any remedial measures to reduce the price increase facing consumers. Temporary Restrictions of ITCs The main drawback for Ontario businesses when the new HST is adopted will likely be the temporary restrictions on ITCs. In February 2010, the Ontario government announced that as part of its 2009 Budget it will implement temporary recapture provisions which will limit the ITCs available to large businesses and certain financial institutions (i.e. banks, trust companies, insurers, credit unions, investment plans etc.). Under the proposed provisions, large businesses are defined as those with annual taxable sales (technically supplies ) in excess of $10 million Ontario s Tax Plan for Job Growth: Cutting Personal and Corporate Taxes and Harmonizing Sales Taxes, online: Ontario Ministry of Finance < Retail Sales Tax, online: Ontario Ministry of Finance <