Carole Aippersbach, Author at LawNow Magazine
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About Carole Aippersbach

Carole Aippersbach is a lawyer with the Centre for Public Legal Education in Edmonton, Alberta.

The Intersection of Law, Language and Culture

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Picture of scrabble tiles spelling law, language, culture. Title: the intersection of law, language and cultureIntroduction

When we think of the intersection of law and language, most of us reflect on the linguistic sides of the issue, such as: questions about why law-makers use certain words as opposed to others, queries about ‘legalese’, and problems of misunderstanding, interpretation and translation. Rarely do we spend much time considering the possibility that the language we speak might itself form the basis for the granting – or denial – of certain legal rights and responsibilities.

However, in Canada, this question of ‘language rights’ is a very important part of the legal landscape. Whether we are born in Canada or move here later in life, we learn that this is a bilingual country. We also learn that minority official language speakers (the French language minority outside of Québec, and the English language minority inside Québec [1]) have language “rights” and that these rights are sometimes protected by Canada’s constitutional framework (including the Canadian Charter of Rights and Freedoms). But what exactly are these rights? Why do we have them, and when can we use them? And are these rights always constitutionally protected?

The Larger Framework

The structure of our bilingualism, and more specifically of our constitutionally-protected minority language rights, stems from our history. Canadian law recognizes that both the English and the French communities, and therefore, languages, played an important role in the founding of the federation now known as Canada. It recognizes that language is a fundamental aspect of individual identity and an expression of community and culture. Canada’s bilingual character is also a fundamental aspect of Canadian national identity. It is a reference for national pride and patriotism. Like the flag and the national anthem, our bilingual composition portrays the national personality. Minority language protections ensure that all of these aspects of Canadian identity will be preserved.

It is these governmental commitments to the importance and equality of the English and French languages that have led to the bilingualism we know and enjoy today. Unlike some other countries, Canadian bilingualism is not one wherein most people in the country speak both languages fluently. Like the flag and the national anthem, our bilingual composition portrays the national personality Instead, Canadian bilingualism reflects the reality that there are a large number of people who speak one language, and a large number of people who speak another (in Québec alone, there are almost 8 million French-speakers). This bilingualism is then echoed in the language-related rules and programs that are in place. The result: Canada has two official languages and numerous legal protections for minority official language rights (the French language minority outside of Québec, and the English language minority inside Québec).

The rules around our constitutionally-protected minority language rights, including who gets to decide what, are complicated, and equally steeped in history. To understand the greater picture, we must step back for a moment.

The basic rules that dictate which level of government can make laws in a particular sector are set out in sections 91 (federal) and 92 (provincial) of the Constitution Act, 1867 (“CA 1867”, formerly known as the British North America Act or “BNA Act”). Under the CA 1867, the word “language” itself does not appear in any of the lists in either s.91 or s.92. Instead, the authority to make laws about language is tied to each particular non-language subject matter. As a result, there is no single and complete power to make laws that are only about language, and powers over language are divided between federal and the provincial/territorial governments. Alongside the Charter and other constitutional protections, the federal government has passed additional laws about language rights. One example is the Official Languages Act. Again, however, this kind of legislation applies only to the federal government. Furthermore, the federal government has transferred some of its powers to the territorial governments in Nunavut, the Northwest Territories and Yukon.

The result is a set of federal language laws, and a set of language laws (or no language law) for each province/ territory.

It is important to understand what kind of language rights there are. In a nutshell, language rights appear in various kinds of law, and the kind of rights or protections that they give depends on the nature of the law.

Overarching Legislation / the Constitutional Framework

The most permanent commitment to bilingualism comes from the language rights that are enshrined in the Canadian Charter of Rights and Freedoms (the Charter), section 133 of CA 1867 and section 23 of the Manitoba Act, 1870. These rights guarantee, under certain conditions, the use, protection and development of minority languages in certain sectors: education, governmental communications and services, legislation and publications, and judicial rights. These rights are essentially permanent; as they are difficult to alter (there is high standard for changes to the Charter and to other constitutional documents). However, although they affect people across Canada, and except in matters of minority language education rights, these rights are limited to the federal government, and the governments of Québec, Manitoba, and New Brunswick (the only officially bilingual province).

Federal Laws

Alongside the Charter and other constitutional protections, the federal government has passed additional laws about language rights. One example is the Official Languages Act. Again, however, this kind of legislation applies only to the federal government. Another example is section 530 of the Criminal Code of Canada, which outlines the minority official language rights of an accused in criminal proceedings before a court. These laws can be seen as one way the federal parliament puts constitutional minority language rights into action.

Provincial Laws

Due to its bilingual status, the government of New Brunswick has also passed additional language laws that work alongside the Charter. The laws of other provinces/territories contain some language rights, but they are generally less extensive. The exact nature of these “rights” varies. Some provinces/territories have created laws that grant rights and protections. For example, in Manitoba and Ontario, a person can complain to a court if those laws are not respected. Other provinces, however, have not created such language laws. Instead, they have merely directed some government departments and service providers to communicate and offer services in the minority official language. In such instances, official minority language communication and services provided by provincial or private organizations are a matter of policy, not of right.

 

The Constitutionally-Protected Rights

As noted, the clearest and most permanent language rights are those enshrined in the documents of Canada’s constitutional framework. These rights can be divided into the following four general categories.

1. Minority Official Language Education Rights

Under section 23 of the Charter, Canadian citizens who are in an official language minority in their province/territory have the right for their children to be educated in the minority language. However, the Charter adds some criteria. For example, in all provinces/territories except Québec, the eligibility criteria are: that the first language of the parent is French and that he or she still understands French, or that the parent had his/her primary education in Canada in French. In addition, once one child is enrolled in French school, all the other children in that family may access French-language education. However, there can still be variations from place to place, in exactly how this right is fulfilled. Sometimes, a sufficient number of minority language children may result in a French-language school being built in a particular area. Other times it may only result in French- language instruction within a larger English-language school, or in a right for the children to be transported by bus to a French-language school in another area.

2. Government Services and Communications

Section 20 of the Charter states that, under certain conditions, any member of the public in Canada has the right to communicate in either official language with an office or institution of the federal government. It also states that any member of the public in Canada has the right to communicate in either official language with an office or institution of the government of New Brunswick (there are no conditions for this right). It is important to note, however, the limitations contained within the exact wording of these rights.

  • Minority language speakers do not have a constitutional right to any and all governmental services and communications in their language: only the federal government and the government of New Brunswick. Minority official languages services and communications may still be available to them (for example, because a provincial/territorial law or policy allows for it), but it is not a matter of “right” protected by the Constitution.
  • There are conditions. For example, in English-speaking provinces/territories, French services must be made available: where there is “significant demand”, or where the “nature of the office” makes it “reasonable” to offer the service in French. If neither of these conditions is met, even federal government services may not be available in French. Both of these conditions are matters that are continually under evolution and reassessment.
3. Legislation and other Governmental Publications

All federal laws (and regulations) exist in both languages. So, too, do the laws of New Brunswick, Manitoba, Nunavut and the Northwest Territories. Furthermore, for some of these jurisdictions, even the journals, order papers, notice and minutes, and Hansard records are kept in both official languages.

Again, however, this is not necessarily true of all other provinces and territories. Some jurisdictions have chosen – either as a matter of provincial/territorial law or a matter of policy – to publish some or all of their laws in both languages (such as Newfoundland and Nova Scotia). All federal laws (and regulations) exist in both languages. So, too, do the laws of New Brunswick, Manitoba, Nunavut and the Northwest Territories. Furthermore, for some of these jurisdictions, even the journals, order papers, notice and minutes, and Hansard records are kept in both official languages.  In others, for example, British Columbia, laws are only available in English.

The publication of court decisions also follows a similar pattern. The federal courts and the Supreme Court of Canada publish all decisions in both official languages. On the other hand, not all criminal trials result in decisions being issued in both languages. In fact, most don’t. It depends on the language of the proceedings and/or the importance of, or general public interest about, the issue (sometimes, such as when the trial was in French, the decision may be published only in French). Similarly, decisions resulting from non-criminal provincial/territorial proceedings may or may not be available in both official languages, depending on the language laws of the province/territory.

4. Judicial Rights

Judicial language rights pertain to the possibility for an individual to use either French or English in the judicial system, especially court processes. Section 133 of the CA 1867 guarantees these language rights in any court established by Parliament (the federal government) and the courts of Québec. Section 23 of the Manitoba Act 1870 and section 19 of the Canadian Charter of Rights and Freedoms guarantees similar language rights in Manitoba and New Brunswick. Rarely do we spend much time considering the possibility that the language we speak might itself form the basis for the granting – or denial – of certain legal rights and responsibilities. The courts of the other provinces/territories are not bound by any such constitutional provision, except where the Criminal Code, which is federal legislation, says differently.

Criminal law is in the jurisdiction of the federal government. Therefore,  there is the possibility of having a criminal trial (including the preliminary inquiry) in French. French-speaking judges are available. You can choose to have your criminal trial in French, no matter what your mother tongue, and even if you understand English. In addition, every accused must be informed of the possibility of having his/her trial in French. If a French trial is chosen, the Crown prosecutor assigned to the case must speak French, the accused has the possibility of obtaining a translation of the information and indictment (the documents that list the charges against the accused person) upon request, and a jury, if there is one, can be formed of French-speakers. Lastly, the decision may be granted in French even if not all of the proceedings were conducted in French (however, a substantial amount must have been in French).

Conclusion

Constitutionally-protected minority official-language rights are multi-tiered and quite complex. And they are still developing: throughout the country there are cases before the courts asking for further clarification of these rights. As with all aspects of our constitutional framework, these rights are living, breathing entities. Despite their complexity, however, it is important that citizens understand these rights, especially if they are trying to assert them. More detailed information about these rights  is available at: Canadian Legal FAQs – Constitutional Language Rights

Notes:

1. This article pertains to constitutionally-protected French language minority rights outside of Québec. The issue of English language minority rights inside Québec will not be addressed in any detail.

 

How to Avoid Your Day in Court

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jugglingWhen people think of needing legal help, they often think of lawyers, court forms, and court rooms. As those who have been there already know, it isn’t nearly as glamorous as it seems on television, and quite to the contrary, it can be quite scary. The good news is that not every legal issue has to end up there. Think of the law as a long time-line, or “spectrum”, of possibility: court is at the very end of the line. The key to maximizing your chances of not ending up there is taking a proactive approach to address the issue as soon as you catch the first glimmer of a problem (or earlier!). But where do you begin? More good news! In this day and age, there is a great deal of information available at your fingertips (or at the local library). It’s just a question of knowing when you need such information and exactly how to go about getting it.

The first step in trying to avoid the courthouse is recognizing when there is a problem that needs to be addressed. This can often be much harder than it seems. After all, legal problems don’t just walk into a room and identify themselves. The law, and its application, has an amazing ability to surprise. Let’s look at a few examples.

We’ll start with the far end of the legal spectrum: the “What do you mean the law does not cover this situation?” or “What, there’s actually a law about that?” kinds of scenarios.

  • You are a post-secondary student, and you move into a room in someone’s home. You would think that standard landlord/tenant law (which, by the way, is sometimes called “residential tenancies”) applies to your rental situation, right? Not necessarily. For example, in Alberta, it does not. Instead, the situation is governed by contract law (which is not a “law”, per se, but common law). No contract can mean lots of trouble. Surprise.
  • You move in with your best friend. Your children have grown and your husbands have passed on, so why not save on expenses? After all, you already do just about everything together. After three years, you might become adult interdependent partners (the Alberta version of common law). Yes, even without any conjugal relations. Surprise.
  • The daycare to which you send your child has asked you to sit on its board of directors. It is such a great organization; helping out is the least you could do. While this is true, if the board does not have the right documentation in place, you, as a director, could be held personally financially liable for the mistakes of the daycare centre. Surprise.

As you can see, just about anything can give rise to a legal issue. You never know when you’ll find yourself on that line. So stay aware. Start by assuming there is some kind of law involved, and look into it. This is especially true in situations in which you have some kind of responsibility to someone else, or situations in which you hear a little voice in your head saying “well, this could lead to a bunch of trouble”. So …are you letting someone else drive your car? Have a look to make sure that is covered by your insurance. Dumping things into the creek on your property? Remember, that water flows to somewhere else, and those property owners may have some rights. As an aside, it is important to remember that, not knowing about a law is irrelevant; if you break that law, you will have to face the consequences.

The next set of situations on the legal spectrum are of the ‘false assumption’ variety: the “well, that is what the law used to be 20 years ago” or “ well, I’ve heard (or seen on TV) that this is what the law says”, or “well, surely the law will say <this>, it is only logical.” A few hints in this regard.

  • Laws change. Some laws change every few years, others remain the same for decades, You should never assume that the law is the same today as it was 20 years ago, or even as it was yesterday. Even lawyers always have to double-check. For example: a few years ago, it was not a problem to talk on a hand-held cell phone while driving. Today, it is illegal and it can lead to serious penalties.
  • Laws are different in different places (sometime vastly different). They can change from city to city, province to province and country to country (this is known as “jurisdiction”). Do not assume that you know the law because a distant relative told you all about their experience. Also, American television is not a good way to do legal research. As far as the law is concerned, the U.S. is a foreign country, and the legal differences can, at times, be enormous. For example: in the U.S. there is a tax on gifts, in Canada, there is not. Another: in Alberta, one can write a will entirely in hand-writing, with no witnesses, and it can be valid Will. In B.C., however, it would not be a valid will, because in B.C., even a handwritten Will requires two witnesses.
  • Laws do not necessarily match each individual’s concept of logic. Just because you, or I, think something is logical (or just, or fair), does not make it ‘the law’. Even if 1 million people think it is fair, that does not make it ‘the law’. An Alberta example: “If I cannot make my own health decisions any more, surely everyone will just take instructions from my spouse”. Right? Wrong. That would be logical, but it is not usually how the law works. Health care workers need to know who you choose as your decision-maker, and they need the correct piece of paper to do that. Imagine for a moment a situation in which your spouse and, say, your child, are providing different instructions. Whose instructions are to be followed? No one’s. Instead, someone will have to prove that they have the legal authority to make decisions on your behalf (either because you assigned them that job before you lost capacity, or because they’ve gone to court to get someone appointed). That is the law: an individual’s perception of logic or fairness are irrelevant.

A final set of situations to consider are those of the ‘burying one’s head in the sand’ variety: the “well, I’ll just ignore this for now, as it might go away” or “it can wait, my rights won’t change” or “I’m sure the law has a back-up plan, I’ll just rely on that” kind. Let’s examine this in further detail.

  • As is usually the case in life, burying one’s head in the sand, is rarely a successful strategy. In fact, when it comes to the law, it is often the opposite: if you ignore it, it might get worse. For example: You were unemployed for two months and you missed a payment or two on your new 60-inch television, and you decide that you will just make a big lump sum payment when your income tax refund arrives. They are still getting all of their money, right? No problem, right? Wrong again. Chances are, when you signed the financing agreement, you agreed that if you miss even one payment, the creditor can come and take back the TV. The bank does not care what your plans are – it wants its money, on time. Plus, now your credit rating has just gone down (where it will stay for a while).
  • A while back, you were in a car crash. You were seriously injured, but everything has taken so long, and you are still trying to determine the exact extent of the injuries and the final cost. In every jurisdiction, there is a time limit to legal actions – if you wait too long, you might lose your right to sue.
  • You are young, estranged from your family and, should something happen to you, your friends all know what you want. So why write a Will – that will just bring the family out of the woodwork, right? And if you write a Will you have to leave something to your family members, right? Wrong and wrong. When it comes to Wills, the law does have a back-up plan, but, in this case, it is the opposite of what you want. If you write a Will, you could leave things to your friends. If you don’t, succession law will give it to family.

So what to do? Assume for the moment that you find yourself at any one of the above points on the line. In the following article by Adriana Bugyiova, who describes Alberta’s LawCentral websites, there are organizations to help with this sort of thing: and the information and resources they provide are often free. In Alberta, there is the Centre for Public Legal Education. Similar organizations exist in almost every province and territory. For example:

Plain-language legal information is also available on all government websites. They may have a separate public legal education department, as does the Northwest Territories. Alternatively, each department may choose to offer some information in the format that it sees fit. Even law firms and courthouses are beginning to provide such information.

To find public legal information, you need only search. If you can Google, you are well on your way. Even you don’t know how to Google, go to your local library and ask a librarian for help. Courthouse and law school libraries are also helpful, however, be aware that the resources there are generally not in plain language.

If you are going to go down this route, here are a few things to keep in mind:

  • Make sure the information that you are examining is current, from the right jurisdiction, and published by a reliable source. You can find more information about that here.
  • Sometimes, public legal information is available in numerous languages.
  • Look for information that can also help you navigate process. This could be general information such as: 7 steps to Solving a Legal Problem. Or it could be information about a more specialized process: for example, how to file a complaint about a guardian or trustee in Ontario.
  • Keep in mind that this is general information only, you may still need to see a lawyer to help deal with the issue.
  • Look into dispute resolution alternatives. There is much information on this topic in Margo Till-Rogers’ online law column in this issue.

The last thing to remember? If, after all of this, you do find yourself on the court end of the legal spectrum, at least you know that you did all that you could to solve the problem in other ways first. There is much good legal information out there and, when accessed, especially in a timely manner, it can help avoid that ominous end of the line: the courthouse. Hopefully it will help you, too.

Food Safety in Canada – A Balancing Act?

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Many of the food-related policies and the information that we rely upon as consumers have come about through the work of the Food Directorate and the CFIA.

In 1967, Pierre Trudeau famously stated that the Canadian government has no place in the bedrooms of the nation. What he didn’t comment upon was whether the government had a place in our kitchens. It did – and it still does. Although most of us rarely think of the federal government when we sit down to eat a meal, the reality is that every food we consume has been touched by government regulation. And now, more than ever, the reach of that regulatory power is under debate.

The general process of food regulation begins with the Canadian Food and Drugs Act (FDA). The FDA is an Act of the Parliament of Canada that, amongst other things, governs the production, import, export, transport, and sale of food. It was first passed in 1920 and was most recently revised in 1985. It attempts to ensure that foods sold in Canada are safe, and that their ingredients are disclosed.

The FDA gives the federal Minister of Health the power to make additional regulations and polices pertaining to standards for the safety and nutritional quality of food sold in Canada (whether imported or domestic). Naturally, however, the Minister cannot complete all of this work herself/himself, so, as is the case with most governmental powers, the bulk of the work has fallen to the public service. In this case, the part of the public service in question is the Food Directorate (FD). The Food Directorate is the federal health authority responsible for establishing policies, setting standards and providing advice and information on the safety and nutritional value of food. It carries out its responsibilities under the authority of the FDA, the Food and Drug Regulations, and the Department of Health Act.

 The FDA also gives the Minister of Health the power to administer the provisions of the FDA that relate to public health, safety and nutrition. Again, however, this work has fallen to the public service. This time, to the Canadian Food Inspection Agency (CFIA), a science-based regulatory agency, tasked with assessing risk and enforcing all health and safety standards under the Food and Drug Regulations. The result: Canada’s food safety standards are established by Health Canada (largely through the Food Directorate), but the CFIA responsible for their enforcement.

The CFIA was created in April 1997 by the Canadian Food Inspection Agency Act, for the purpose of combining and integrating the related inspection services of three separate federal government departments: Agriculture and Agri-Food Canada, Fisheries and Oceans Canada, and Health Canada. In other words, its formation consolidated the delivery of all federal food safety, animal health, and plant health regulatory programs. The CFIA is also responsible for the administration of non-health and safety regulations concerning food packaging, labeling and advertising. The responsibility for the CFIA now lies with the Minister of Agriculture and Agri-Food; however, the Minister of Health (or, more specifically, the Food Directorate) remains responsible for assessing the effectiveness of the CFIA’s activities related to food safety. Many of the food-related policies and the information that we rely upon as consumers have come about through the work of the Food Directorate and the CFIA. An example that many of us see on a daily basis is the standardized “Nutrition Facts” label (specifically governed by the Consumer Packaging and Labelling Act and its regulations). This label was first introduced in 2003, and it became mandatory for most pre-packaged food products on December 12, 2005 (and it became mandatory for all on December 12, 2007). This label gives pertinent information not only about the calories per serving, but about 13 core nutrients (including the percentage of these nutrients’ daily recommended values). Another example involves the recalls we sometimes hear about, like the one that resulted from the listeriosis outbreak in August of 2008 (when 22 people died after consuming deli meats from a federally-regulated meat plant). Then there are the examples that most of us don’t see, ever, let alone on a daily basis. We may not directly know about these safeguards, but they are there trying to protect us. They can be seen in all of the legislation administered by the CFIA, including: the Plant Protection Act, the Meat Inspection Act, the Seeds Act, the Plant Breeders’ Rights Act, the Health of Animals Act, the Feeds Act, the Fish Inspection Act, and the Fertilizers Act.

So wherein lies the debate that I mentioned earlier? Well, upon a careful reading of the above, or the legislation, or even just the CFIA website, you’ll note that the CFIA has a dual role: protecting the public and assessing risk within the agri-food industry. This can be also be seen in CFIA’s statement of values, which states that the CFIA is dedicated to the “safeguarding of food, animals, and plants, which enhance the health and well-being of Canada’s people, environment and economy” and that it “works to protect Canadians from preventable health risks and provide a fair and effective food, animal and plant regulatory regime that supports competitive domestic and international markets.” In other words, although the CFIA manages food safety, it also assesses risk based not only on food-related concerns, but on concerns for economic forces. These two items are at very different ends of the spectrum, and sometimes they collide head-on.

The collision of these various concerns (food safety vs. the economics of food) has been in the news in the past few years, and there is a raging debate as to how to reach the correct balance within the current model. Consider the five following examples:

  • In 2010, after many big chains began to make fat-related claims and to provide nutrition numbers for their standard menu items, the Canadian government launched a menu verification program for coffee shops and fast-food restaurants. According to monitoring tests conducted between 2007 and 2009, fat-related claims for 14 out 33 menu items offered at fast-food restaurants understated the fat content. Under the program, the federal government could, and did, test the nutritional claims and held the restaurants accountable if they were found to have provided false information. In mid-2011, this menu verification program was cancelled.
  • In January 2007, the government proposed revising food regulations to make it clear to consumers that “whole wheat” is not necessarily “whole grain”. The difference? “Whole wheat” effectively means that about 70% of the germ is typically removed, so regular whole wheat bread can be made with flour with a significant percentage of the germ missing (and in scientific studies, it is “whole grains”, not “whole wheat” that result in a lower risk of obesity, cardiovascular disease and diabetes). Now, in 2012, five years after unveiling a proposal to end this consumer confusion, Health Canada now says it has no plans to change the food-labelling rule.
  • In 2009, the federal government, after a two-year monitoring program showed that voluntary reduction targets were not working, began to plan a two-year phase-in period for regulations to limit the amounts of trans-fats in Canadian foods. Why does this matter? Trans-fats, created by pumping hydrogen into liquid oil at an elevated temperature, raise the levels of low-density lipoprotein (or “bad cholesterol”) and can lead to clogged arteries and heart disease. They are added by the food industry to give products longer shelf lives. Documents obtained by the Centre for Science in the Public Interest, showed that, by 2009, the government had gone so far as, amongst other things, to draft the regulations and associated press releases. On February 7, 2012, the government, indicating that that the proposed regulations would be a “burden” on the food industry, announced that it would not make the regulations and, instead, would continue to rely on voluntary reductions.
  • In December 2011, the federal government stopped testing grocery-store product labels for exaggerated nutrition claims and unproven health claims. This, despite the fact that, according to internal records released under access to information, test results from previous years showed widespread problems with such food labels. The CFIA is reported to have noted that the program was put on hold due to “budgetary constraints”. Inspectors will continue to follow up on consumer complaints.
  • As we all know, the CFIA announces recall orders. What many do not know, however, is that recalls are not necessarily always publicized. The CFIA does health-risk assessments and issues public recall notices based on the degree of danger that an item poses. This is the case in many other countries as well. The idea is that consumers would soon be overwhelmed by the sheer number of recalls, many of which would pose low risk (and might not yet even be in stores). For example, a 2009 study found that of 49 recalls related to bottled water, only 7 were made public.

As these examples demonstrate, food safety is quite the balancing act. There are laws, but how effective can these laws be if they are not enforced? Budgets are tight and belts must be tightened, but how much regulation is really too much? And how much is too little? Consumers may not want to be constantly alarmed, but the argument of “little risk” is arguably cold comfort to the few who are ultimately affected (especially if there is a death). For example, consumers with allergies or with Celiac Disease now, more than ever, cannot rely on labels. How much of a “burden” is too much for the companies profiting from the food business? How can Canadians make informed choices, if they are not informed?

These are all very difficult questions, and ones to which no clear answers are readily apparent. The roles of Health Canada and the CFIA are ever-evolving – they continue to revolve around globalization, societal changes and the advances of science and technology. No easy task – and not one for the faint of heart. Bedroom, shmedroom – the heat’s in the kitchen!

 

Mistake #5 in Starting a Small Business: Not Getting a Lawyer for your Business

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Continued from Mistake #4: Not Being Adequately Insured

Mistake #5. Not Getting a Lawyer for your Business

As the owner of a business, you would likely never try to do all of your own accounting, computer support, and cleaning – you would probably hire someone. After all, you are there to run the business part of your endeavour – that is what you know, that is what you do well, and that is why you started your business. When it comes to legal matters, however, many small business owners seem to think differently (at least at the outset). Despite the complexity, intricacy, and sheer volume of detail involved in legal matters, numerous business owners try to do their own legal work without a lawyer.

The other four mistakes are only the tip of the iceberg when it comes to some of the legal matters faced by small business owners. Every business has its own set of issues to consider: contract law, agency law, employment law, human rights law, intellectual property, corporate & commercial law, tax law, zoning law … just to name a few.

As a business owner, you need some basic understanding of the law. There is, however, a difference between having a basic understanding of the most common issues and having a thorough knowledge of every possible legal matter that will affect your business. Lawyers have been trained to find the information for you. Let them help.

Final Words

Starting a small business is always risky. It takes significant effort and forethought. As part of this process, small businesses may make mistakes about legal matters. This happens all the time and can never be completely avoided. That said, some mistakes can be disastrous. Your business may end up incurring substantial expenses that could have been avoided with good legal planning. Dare to be prudent!

Mistake #4 in Starting a Small Business: Not Being Adequately Insured

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Continued from Mistake #3: The Contents of Leases

Mistake #4. Not Being Adequately Insured

New businesses often have insufficient insurance. In deciding what kind and how much insurance to secure, a new business owner should carefully examine the needs of the business. Here is a summary of the most common forms of insurance coverage.

Property Insurance

It is always a good idea to purchase enough property insurance to cover your business’ assets. Even if you form a corporation, which protects your personal assets from business liabilities, you still risk losing your business if disaster strikes. A good business property insurance policy should cover matters such as equipment and machinery; office furniture (including computers and accessories); inventory and supplies; company cars; and employees’ personal property kept at the business site.

You also need to understand which types of losses are covered. The kinds of things to look for include fire, explosions, storms, smoke, riots, vandalism, theft, sprinkler leaks, floods, broken windows, falling objects, water damage, and loss of business income. If you have a lease, check for leasehold insurance. This protects you if your lease is cancelled and you have to rent elsewhere at a higher rent. Many of these things are not covered under a basic policy – a fact that surprises many business owners.

Also note that some items are specifically excluded. This, too, can be surprising. For example, in some areas where earthquakes are common, damage from earthquakes is specifically excluded from basic policies. If you want to have that kind of coverage you must obtain separate coverage. While the premiums for such additional policies are more expensive, they may be worth it if your business faces multiple or unusual risks.

Be sure you understand the limits of your policy. These include maximum coverage in certain circumstances, any deductibles or co-payments required, and how the insurance company pays claims. For example, “guaranteed replacement cost” insurance will reimburse you what it costs you to replace the property. If your computer equipment is destroyed, this type of coverage will pay you as much as you’ll need to replace it. This is very different from insurance that only provides the “actual cash value” (which is often depreciated) of the damaged property.

Lastly, keep in mind that the location of your business may affect your insurance needs. If you have a business lease, your lease may require that you obtain a specific amount or type of property coverage. Be sure to check your lease before you purchase a policy. If, on the other hand, you have a home-based business, your home-owner’s policy may be voided entirely if you run a business from home. If that is the case, you will need to upgrade your insurance policy. If, on the other hand, you have a home-based business, your home-owner’s policy may be voided entirely if you run a business from home. If that is the case, you will need to upgrade your insurance policy.

Liability Insurance

Liability insurance covers your legal liability resulting from injuries to, or property damage of, a third party.

There are several types to consider, for example:

  • general liability, which covers damages that your business must pay to someone who is injured on your property;
  • product liability, which protects you from lawsuits by customers who claim to be hurt by a product you produced and/or provided; and
  • auto liability, which covers damage to vehicles in a business-related accident. This, however, may not include damage which occurs when your employee was using his or her personal vehicle for business purposes. You may need to have your employees change their personal auto insurance policies.

Not all policies cover all of these kinds of liability insurance. Be sure to consider your needs and read carefully!

Professional Liability

This kind of insurance protects you from liability arising from negligence committed while rendering professional services. This is also known as Errors & Omissions insurance. It is not available for all professional activities. As a business owner, you should ensure you know whether such insurance is available (or required) for your employees.

Workers’ Compensation Board (WCB)

Most business operations are required to have workers’ compensation coverage. If a worker is injured or contracts an occupational disease while on the job, the WCB covers the worker’s medical and wage-loss costs. Employers who are uncertain about their need to register for compensation coverage should contact their provincial WCB for information.

Directors and Officers (D&O) Insurance

This kind of insurance is for businesses that are incorporated. In general, the recovery of any damages incurred by the corporation will be limited to corporate resources, but this is not always the case. Sometimes, courts will allow plaintiffs to receive damages directly from corporate officers or directors. In general, D&O insurance provides coverage against the wrongful acts committed by directors and officers (but it can also include officers and senior management staff ). Specifically, if such an insured person is found to have committed a wrongful act and, as a result, must pay damages to an injured party, those damages will be covered by the insurance (this is known as “indemnification”).

So what is a “wrongful act”? Generally, the term “wrongful act” includes actual or alleged errors, mistakes, or omissions that occur in the discharge of duties; misleading statements; and neglect or breach of fiduciary duty. However, wrongful acts generally do not include criminal activities such as false arrest, or civil matters such as libel, slander, and infringement of a copyright or trademark.

It is important to carefully read and understand exactly who is insured (and who is not), deductibles and exclusions, and any coverage limits. For example, there are often limits on general coverage (both per claim and the total allowed annually) and defence costs (a promise to indemnify may not be a promise to defend).

Continue reading: Mistake 5: Not Getting a Lawyer for your Business

Mistake #3 in Starting a Small Business: The Contents of Leases

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Continued from Mistake #2: Not Having an Operating Agreement (Partnerships and Corporations)

Mistake #3. The Contents of Leases

When you start a small business, you will need to consider where that business will be located. If your business is not a home-based one, this may be the first time you have had to deal with a commercial lease. Although such leases generally favour the landlord, there is some room for negotiation, and you should take advantage of that opportunity.

As a starting point, it is important to understand that business leases are not like residential rentals. With a residence, rent is usually restricted to a set monthly price, which may or may not include utilities. The landlord is responsible for repairs, and the terms of the Residential Tenancies Act help protect the rights of tenants. With business leases, on the other hand, there are often many other costs beyond the base monthly rent; for example, common area maintenance costs, the costs of certain repairs, and possible personal guarantees.

A second consideration: put everything in writing. Make certain that everything that you discussed and agreed upon (especially if they are changes to a previous draft) is included in the written agreement. No matter what the promise, if it is not included in the lease, it will likely be excluded by a clause that says something like “this lease is the entire agreement between the parties.”

It is imperative that you read the lease very carefully, watch for errors, and ensure that you understand the terms to which you are agreeing. A thorough understanding of the lease clauses will help you avoid surprise costs (which could sink your business). The following are a few examples of the clauses that could cause trouble if they are wrong or misunderstood.

Parties

An error in identification can have serious repercussions. For example, if you are forming a corporation and you list your personal, not corporate name, you may become personally responsible.

Premises

This includes the address, the unit number, and any additional space not included in the base units (such as access to storage rooms, conference rooms, parking, and kitchen facilities). Base charges are often calculated by the square foot – be sure to confirm all measurements.

Term

This describes the length of the lease. Some leases specify the starting and ending dates. Other leases start as of the date the landlord finishes the building adjustments that you requested, or the date the lease is signed. You may have financial responsibilities even if you have not yet taken possession. Be sure you know and agree to the date that your responsibilities will start.

Use

These provisions limit how you are allowed use the space. The limitations can be as broad as what business you will conduct or as narrow as what specific services or products you will offer. In general, the fewer such restrictions, the better for you.

Rent

In commercial leases, rent is often far more than a base monthly amount. Make sure you understand which parts of the landlord’s operating costs will be passed on to you.

Non-disturbance

This clause ensures that if the landlord sells the building, your lease will be honoured by the purchaser. Without such a clause, you might find yourself without business premises. If this clause is not in the landlord’s standard lease, you may want to consider negotiating for it.

Assignment

An assignment occurs when someone takes over a lease (one of the parties is replaced by a third party). Leases generally require the consent of the landlord for an assignment. Some even provide specific requirements in order for the landlord to consent. Take note of any such requirements so that you can determine if you can meet them and so that you know what you need to do when the time comes. Also note whether you will remain liable for the lease after you have assigned it.

Maintenance

Such a clause concerns your duty to care for the rented space. Some of the maintenance costs will be yours – be sure you know which ones and that you can live with the proposed arrangement.

Insurance

Insurance is available to cover the risks of leasing commercial space. Sometimes a lease requires certain kinds of insurance as well as certain minimum dollar limits. Be sure you know and understand these clauses before you arrange for insurance coverage and before you move into, and start using, the business premises.

Renewals

With any luck, your business will thrive. After the expiry of your lease, you may wish to stay in your current location. In anticipation of such a possibility, you may want to negotiate renewal options at the outset. Options include an automatic renewal (if you want it); a right of refusal (meaning the landlord must offer the space to you first); a fixing of the future rent for that renewal; and a formula for the determination of that rent. With any luck, your business will thrive. After the expiry of your lease, you may wish to stay in your current location. In anticipation of such a possibility, you may want to negotiate renewal options at the outset.

Continue reading: Mistake 4: Not Being Adequately Insured

 

Mistake #2 in Starting a Small Business: Not Having an Operating Agreement

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Continued from Mistake #1: Choosing the Wrong Ownership

Mistake #2. Not Having an Operating Agreement

(Partnerships and Corporations)

An “Operating Agreement” is a contract between the founders of the business. This includes people involved in the management, people who provide capital, and people who do both. This agreement sets out operative issues in advance such as who does what, when they do it, and how they do it. This ensures that everyone knows what needs to be done, and, as a result, the cost of solving problems will be kept to a minimum.

The types of issues often addressed in an operating agreement include:

  • how much time and effort each person contributes;
  • what each person’s responsibilities are;
  • how much capital each person contributes;
  • what happens if the business needs more capital;
  • what happens when a person leaves the business;
  • what happens when a person dies; and
  • any additional details imperative for, or unique to, the business.

Operating agreements are often over-looked. This is especially true in cases where the business partners are related or are friends. In such instances, the partners enter into the transaction assuming the best of one another and not anticipating the number of things that can go wrong over the life of a business. However, the consequences of not having an operating agreement usually emerge quite quickly. What happens when expected capital is not provided? What happens when a married partner gets divorced? What happens when partners disagree? These kinds of issues arise frequently and can get very messy very quickly. They can destroy both business and personal relationships.

Just as important as having an operating agreement is understanding it. It needs to be clearly drafted, and everyone who signs it needs to know what is in it. Failure to understand the terms of the operating agreement is one of the most common causes of in-house disputes and partnership conflicts. When a dispute arises, the operating agreement will be the decisive document in settling the dispute – its creation and comprehension are critical.

 

Continue reading: Mistake 3: The Contents of Leases

Top 5 Legal Mistakes in Starting a Small Business

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So you want to start a small business? You have your business plan at the ready, you can get a start-up loan with an interest rate that is at an all-time low, and your determination is at an all-time high. You are ready to go. Sign that says OOPS!!Ironically, now – during this flurry of energy, excitement, and enthusiasm – is the time when you should slow down and become careful and contemplative. The decisions you make could have an enormous impact on whether your business succeeds or fails. Legal mistakes are amongst the most deadly. Knowing some of the pitfalls to avoid can make all the difference. Follow our series on the Top 5 Legal Mistakes in Starting a Small Business.

 

Mistake #1. Choosing the Wrong Ownership

Choosing an ownership structure is one of the most important decisions you will make. Your decision should be based on a careful consideration of the specific needs of both your business and yourself as well as a thorough understanding of your options and how these options relate to your needs.

There are three general business structures: sole proprietorship, partnership and corporation. Each has different and important implications for matters such as liability, risk, taxation, and succession. In deciding which of these options will suit you best, you should consider the following questions.

 

What are the risks involved in your proposed small business?

Some businesses are more financially risky than others. Are you building houses or selling office supplies? In a sole proprietorship, you, the business owner, can be held personally liable for the debts and obligations of the business. This includes loans, taxes, money owed to suppliers and landlords, and any judgments against the business. This risk can even extend to liabilities resulting from acts or omissions by employees. While you can protect yourself against lawsuits by buying business liability insurance, this won’t help you with business debts. You could potentially lose everything you own if the business debts are not paid. For the case of partnershps, because partners can make commitments that bind the entire business (without even consulting you first), your liability may be even greater than in a sole proprietorship.

A corporation, on the other hand, has limited liability. This means that normally no shareholder can be held personally liable for the debts, obligations, or acts of the corporation. However, in certain limited circumstances, a judge can look behind the corporation and hold one or more shareholders liable (this is known as “piercing the corporate veil”). For example, this may happen if a shareholder personally guarantees a debt, or if the corporation is a sham company used for nefarious purposes. The limited liability advantage can also be undermined if one or more of the shareholders sign any personal guarantees.

How much start-up capital do you have?

Do you have all you need or will you need investors? Sole proprietorships and partnerships have lower start-up costs as you do not incur the costs of setting up a corporation. In addition, sole proprietorships and partnerships are easy to form; there is no long list of statutory requirements as there is for a corporation.

How do you plan on obtaining any additional capital?

Investors won’t usually invest in sole proprietorships. For partnerships, there are more potential sources of investment capital (for example, through the concept of the limited partnership), but many investors prefer shares in a corporation. Before accepting any additional capital from a new partner, you will want to ensure that this partner is suitable and that the addition of this new partner conforms to the partnership agreement. For a corporation, it is easier to raise capital because investors know that they will not be held personally liable for business debts. A corporation also has many avenues to raise money, such as selling current shares, or creating new types of shares, such as preferred shares, with different voting or profit rights.

What are your expected profits and losses in the first few years?

Will you need to deduct losses from other income? Sole proprietorships and partnerships offer numerous personal tax advantages, because, as an owner, you can deduct business losses from your other income. In addition, it is the owners that benefit from all of the profits. In a corporation the profits and losses belong to the company and have to be distributed accordingly.

Are you the kind of person who wants to be in full control of all decision-making?

In a sole proprietorship, you are in control of all decision-making. Any future sale, transfer, or dissolution of the business is entirely at your discretion. In partnerships and corporations there can be a broader management base. This can lead to divided authority and the potential development of conflict between partners or shareholders.

Can you adapt to many formal small business requirements?

In sole proprietorships and partnerships, there are few formal business requirements. However, partnerships do require an operating agreement, and this creates slightly more record-keeping than a sole proprietorship. In contrast, corporations are very closely regulated. Corporate record-keeping is extensive and can be complex.

Do you want or need statutory name protection?

If name protection is important to you, you may wish to incorporate your business. Part of the process of incorporation is ensuring that the name you choose is not the same as, or too similar to, other corporate names in the jurisdiction. The same protection will be offered to your corporation once it is set up. In general, there is no such automatic name protection for sole proprietorships and partnerships. You can find exact details about other name protection options (such as the registration of trade names) in provincial business name legislation.

What are your plans for the small business should something happen to you?

Sole proprietorships and partnerships lack continuity of business in your absence. The business has no separate existence, so you will need to make a succession plan through a Power of Attorney, a Personal Directive, and a Will. A corporation, on the other hand, as a separate legal entity, does not depend on the continued existence or membership of any of its shareholders, directors, or officers.

 

Continue reading: Mistake 2: Not Having an Operating Agreement (Partnerships and Corporations).

 

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