Businesses are exposed to legal risks simply by having employees. Likewise, businesses face risks by the mere fact that they have a “presence”, e.g. they use trade names, product names, logos, etc. in the course of their activities. Given that just about every business has employees and its own presence, every business would be wise to make efforts to minimize legal risks in these two areas.
On the human resources front, legal risks arise from many sources, not the least of which is statutory. Several pieces of Ontario legislation place obligations on employers to carry out assessments and to put in place policies and programs. The Occupational Health and Safety Act (“OHSA”) is one of the more onerous pieces of legislation. The OHSA requires that most employers either create a joint health and safety committee or have a health and safety representative. There are two schemes, in particular, that require employers to carry out risk assessments, draft policies and put programs in place to minimize safety hazards. One of the schemes deals with general physical hazards (e.g. caustic substances, falls, heavy machinery) while the other pertains to workplace violence and harassment. The OHSA also contains significant training obligations and requires that information be posted in many circumstances. The Ministry of Labour has a team of inspectors auditing businesses to ensure compliance with the OHSA and violations can lead to fines for businesses of up to $500,000 and fines for individuals of up to $25,000 and up to 12 months in prison.
The Accessibility for Ontarians with Disabilities Act (“AODA”) also contains onerous requirements for businesses. For example, regulations under the AODA that came into force on January 1st of this year require businesses to create policies and feedback systems, to train staff on how to interact with persons with disabilities and to report their compliance to the Ministry of Community and Social Services. Other labour and employment legislation that places positive obligations on businesses include the Employment Standards Act and the Workplace Safety and Insurance Act, both of which require businesses to post information and, in the case of the latter, has training requirements. Any failure to comply with these statutes can also lead to significant repercussions.
Aside from statutorily mandated policies, businesses should have policies in place to manage and minimize risks in other areas. For example, we encourage businesses to have workplace policies covering human rights, workplace privacy and social media usage.
Poorly drafted employment contracts (or the failure to use written contracts) is another significant HR risk. A well written employment contract should clearly establish each party’s expectations, especially with respect to duties, compensation and the employee’s entitlements on termination. They can also protect businesses by addressing issues of non-competition, non-solicitation, confidential information and the ownership of intellectual property (IP), which is discussed more fully below. Properly drafted employment contracts can go a long way in protecting employers from legal actions, e.g. wrongful or constructive dismissal claims, as well as employment standards complaints made to the Ministry of Labour.
With respect to IP, businesses now routinely turn to IP audits so that they can a) greater consolidate and protect their IP assets, and b) increase the overall value of their asset portfolio, of which IP is now forming an increasing part for most companies. In discussing IP, while most technology based businesses understand the term as it relates to patents of invention, most IP holdings of businesses consist of copyrights, trade-marks and trade-secrets.
Briefly, copyright protects original literary and artistic works, including computer programs, and comes into existence the moment that the work is created. In Canada, the term of copyright is generally 50 years, plus the life of the author. Copyright has increased in importance in the last twenty years due to the prevalence of computer software, and, of course, the Internet. Trade-marks consist of symbols, words or phrases that are used in the marketing of a business’ services or products, and act to distinguish those services and products from those of others in the marketplace. The owner of a trade-mark is the person or business that first makes use of it. Trade secrets can be any confidential information (i.e. non-public) that is important to either ongoing business operations or maintaining a competitive advantage in the marketplace (think internal financial data, customer lists and secret product formulations), but generally, the extent of any trade-secret depends on putting the proper contracts and internal protection procedures in place.
By implementing an IP audit, a business will be able to determine what trade-marks or copyright it has under its control, and will be able to put in place the correct processes to consolidate ownership claims over these IP assets, which in turn will help lessen the risks of infringement. These processes directly implicate a business’ employees and any third party contractors that they employ. To this end, an IP audit will locate and evaluate whether or not employment agreements or contracts contain the appropriate non-disclosure clauses to protect trade-secrets and patentable subject matter. Such contracts should also include an assignment to the business of any IP that is generated for the business in the course of an employee’s or contractor’s work. This is especially important for businesses that rely on third party creative consultants to develop anything from software to marketing materials, because, generally speaking, any IP created in the course of such arrangements belongs to the consultant, unless otherwise assigned back to the business.
Beyond a contractual review, an IP audit can help a business establish procedures so that it properly protects any IP that it generates. In terms of trade-marks, this will include ensuring that the proper clearance procedure has occurred so that ownership rights over the trade-mark can, in fact, be exerted as against third parties. Securing trade-mark registrations in all jurisdictions where the business sells its products and services should be undertaken, as this will further consolidate trade-mark ownership claims. In response to the increased importance of Internet marketing, an IP audit must also include a review of a business’s domain name holdings, as well as whether or not the required website privacy policy and terms of use are in place and easily visible on the business’s website.
In terms of copyrights, the circumstances of the copyright’s development must be determined, and the proper licensing or assignment arrangements made with either employees or third party creative consultants. A review of the originality of the works in question should also be conducted, so that the business does not inadvertently discover that it is infringing someone else’s copyright. As part of these protections, it should be verified that proper copyright notices are affixed to marketing materials (including websites). As well, due to its low cost, registration of these copyrights should also be undertaken.
In summary, both an employment and IP audit can be a relatively simple matter, but can have an important role in avoiding either violating the legal rights of others or protecting the rights of your business as an owner of IP and employer. If your business is exposed in any of the areas mentioned above or you are unsure about such potential exposure, you may be interested in the joint Employment and IP audit service currently being offered at BrazeauSeller.LLP. For more information, please contact Jim Anstey or James Katz.
Jim Anstey is an Associate with the law firm of BrazeauSeller.LLP. He practices employment law and can be reached at 613-237-4000 ext. 206 or janstey@brazeauseller.com. For more information about Jim, please visit www.brazeauseller.com.
James Katz is an Associate with the law firm of BrazeauSeller.LLP. He practices in the areas of litigation and intellectual property. James can be reached at 613-237-4000 ext. 267 or at jkatz@brazeauseller.com. For more information about James, please visit www.brazeauseller.com.
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