Other Laws Affecting Franchising in Canada

• Author: Edward Levitt and Clark Harrop
• Pages: 67-114

Other Laws Affecting

Franchising in Canada

CHAPTER 3

Edward Levitt and Clark Harrop

Contents

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

II. Laws Affecting the Movement of People and Goods Across the Border . . 69

A. Bringing Your Executives and Employees into Canada . . . . . . . . . . . 69

1. Temporary Work Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

(a) Temporary resident visa exemptions . . . . . . . . . . . . . . . . . . . . 71

(b) Work permit exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

(c) Work permit categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

(d) Work permit conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

(e) Hiring temporary foreign workers . . . . . . . . . . . . . . . . . . . . . . 73

2. Permanent Residency Requirements . . . . . . . . . . . . . . . . . . . . . . . . 74

B. Bringing Your Existing Supply Chain into Canada . . . . . . . . . . . . . . . 75

1. Consumer Packaging and Labelling Act . . . . . . . . . . . . . . . . . . . . . 76

2. Food and Drugs Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

(a) Food labeling and advertising . . . . . . . . . . . . . . . . . . . . . . . . . 77

3. Customs Tariffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

(a) North American Free Trade Agreement . . . . . . . . . . . . . . . . . . 79

(b) Other trade agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

4. Taxes on Imports into Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

(a) Mandatory GST/HST registration . . . . . . . . . . . . . . . . . . . . . . . 83

(b) Voluntary GST/HST registration . . . . . . . . . . . . . . . . . . . . . . . 83

5. Supply Management in Canada—Marketing Boards in Canada . 8 3

(a) Milk and dairy-based products—Canadian Dairy

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

(b) Chicken—Chicken Farmers of Canada . . . . . . . . . . . . . . . . . . 85

(c) Eggs—Canadian Egg Marketing Agency . . . . . . . . . . . . . . . . 85

6. Importation and Sourcing/Sale of Alcohol . . . . . . . . . . . . . . . . . . . 86

III. Laws Affecting How Products and Services Are Advertised . . . . . . . . . . 87

A. Trademarks, Trade Names and Trade Dress . . . . . . . . . . . . . . . . . . . . . 87

B. Pricing and Advertising in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

1. Competition Act and Resale Price Maintenance in Canada . . . . . 88

2. Advertising Sale Prices in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9

(a) Bait-and-switch selling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

(b) False and misleading advertising . . . . . . . . . . . . . . . . . . . . . . . 90

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68 Chapter 3

3. Voluntary Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

(a) Canadian Code of Advertising Standards . . . . . . . . . . . . . . . . 91

(b) Broadcast Code for Advertising to Children . . . . . . . . . . . . . . 91

4. Language Laws in Québec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

C. Canada’s Anti-Spam Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

D. Contests in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

1. Competition Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

2. Criminal Code Provisions Governing Illegal Lotteries . . . . . . . . . 95

3. Contest Registration in Québec . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

E. Nutrition Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5

1. Voluntary Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

(a) Restaurants Canada—voluntary guidelines to providing

nutrition information to consumers . . . . . . . . . . . . . . . . . . . . . 96

(b) British Columbia Informed Dining Program . . . . . . . . . . . . . 98

2. Non-voluntary Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

(a) Ontario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

IV. Privacy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9

A. Collection of Customer Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

1. Federal—PIPEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

(a) Canada’s ten privacy principles . . . . . . . . . . . . . . . . . . . . . . . 101

2. Alberta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 05

3. British Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 06

4. Québec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

V. Securing Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 08

A. Taking Security in a Franchisee’s Assets . . . . . . . . . . . . . . . . . . . . . . 109

1. Provincial PPSA Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 09

(a) Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

(b) Online registry system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 10

(c) Place of registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

(d) Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1

2. Québec—the Hypothec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

B. Personal Guarantees from Franchisees . . . . . . . . . . . . . . . . . . . . . . . . 113

1. Alberta—Guarantees Acknowledgement Act . . . . . . . . . . . . . . . . 113

2. Québec—Implications of the Civil Code . . . . . . . . . . . . . . . . . . .1 13

Other Laws Affecting Franchising in Canada 69

I. Introduction

Expanding into a foreign jurisdiction, done properly, requires an attention to the

detail of many laws in the target territory, not just the franchise laws. There is no

exception to this when the system is expanding into Canada.

Given the vast array of businesses that adopt franchising as their distribution

method of choice, it would be impossible to outline all of the laws and regula-

tions that will have to be considered in this single publication, and it is incum-

bent upon each franchisor to retain the appropriate advisors to research the laws

that affect them.

However, this chapter will review some of the federal, provincial, territorial

and municipal laws that are most commonly encountered by franchisors ex-

panding their systems into Canada.

II. Laws Affecting the Movement of People

and Goods Across the Border

In Canada, immigration is the responsibility of several federal governmental

agencies, including Citizenship and Immigration Canada (CIC), Canada Border

Services Agency at ports of entry (i.e., Canadian international airports and Canada-

U.S. land border crossings), and the Department of Foreign Affairs and Interna-

tional Trade at visa offices located outside Canada. Immigration laws and policies

are contained in the Immigration and Refugee Protection Regulations Act (SC

2001, c. 27), along with related regulations, policy manuals and operations memo-

randa.

Persons who are neither Canadian citizens nor Canadian permanent resi-

dents are referred to as “foreign nationals” in Canadian immigration law and do

not have the right to work in Canada unless properly authorized. Described

below are the requirements most applicable to foreign franchisors establishing

Canadian operations.

A. Bringing Your Executives and Employees into Canada

Employees who are foreign nationals must, unless exempted, obtain work per-

mits to work in Canada. “Work” is defined as “an activity for which wages are

paid or a commission is earned, or that is in direct competition with the activities

of Canadian citizens or permanent residents in the Canadian labour market”

(Immigration and Refugee Protection Regulations, S.O.R./2002-227, s. 2). Note

that the duration of the work is not a factor, so even if an employee will be

working in Canada for a very short period of time, a work permit may be re-