Today's General Counsel, November 2022

NOVEMBER 2022

VOLUME 19/NUMBER 8

TODAYSGENERALCOUNSEL.COM

How Companies Handle Remote Work: A Survey

• Non-Compete Best Practices • Antitrust Implications of No-Poach Agreements • Avoiding Potential Holiday Party Liabilities • Building Your Legal “Center of Excellence” $199 SUBSCRIPTION RATE PER YEAR ISSN: 2326-5000 ISSUU.COM/TODAYSGC

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contents

NOVEMBER 2022 Volume 19/Number 8

4 Editor’s Desk COMPLIANCE

8 Developing a Non-Compete Implementation Strategy

20

Navigating the state-by-state patchwork.

FEATURES

By Robert W. Horton

16 Creating a World-Class Legal Center of Excellence

SURVEY

11 Remote Work: Fall 2022 Survey How some legal departments are handling the flexible workplace.

How can the process be improved?

By Tripp Hemphill

By Joshua I. Rothman, Ralph A. Dengler and Robert S. Pickens

18 Careful Wording Makes For Broad Fintech Patent Claims

COLUMN/THE ANTITRUST LITIGATOR

Detailed explanations, and many examples.

By Michael Young, Luke MacDonald and Chris Johns

14 No-Poach Agreements and Antitrust 11th Circuit Decision leaves critical issues unresolved.

20 Greenwashing Just Got More Expensive In Canada

By Jeffery M. Cross

Amended Competition Act significantly increased penalties.

By Nikiforos Iatrou, Michael Caldecott and Leila Far Soares

22 Easy On the Booze, No Flirting, Weed Is Still Illegal—Let’s Party! vBy Laura A. Stutz

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EDITOR’S DESK

W

hen non-compete agreements are litigated employers enter the courtroom with a distinct handicap, writes Robert W. Horton in this issue of Today’s General Counsel. By nature,

non-competes restrict an individual’s right to work and make a living, which makes judges and legislatures uncomfortable. But employers can cite situations in which they’d be at a big competitive disadvantage without such an agreement. The tug of war this creates results in widely varying state statutes. Horton suggests how legal departments might approach designing valid non-competes that work in the states where they are likely to need them. On a related issue, Today’s General Counsel columnist Jefferey Cross writes about recent litigation concerning the antitrust implications of no-poaching agreements between employers.

Also included in this issue: Joshua I. Rothman, Ralph A. Dengler and Robert S. Pickens of Venable LLP examine the way legal departments are handling remote work. The general counsel their firm surveyed discuss how their departments deal with matters like hybrid scheduling, and building personal connections between attorneys who work separately. Laura Stutz of Wilson Elser has some timely advice about holiday office parties in her article, and Tripp Hemphill of DISCO outlines a strategy for creating what is defined as a Center of Excellence in your legal department.

Bob Nienhouse, Editor-In-Chief bnienhouse@TodaysGC.com

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CONTRIBUTING EDITORS AND WRITERS Michael Caldecott Jeffery M. Cross Ralph A. Dengler Tripp Hemphill Robert W. Horton Nikiforos Iatrou Chris Johns

Luke MacDonald Robert S. Pickens Joshua I. Rothman Leila Far Soares Laura A. Stutz Michael Young

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COMPLIANCE

Developing a Non-Compete Implementation Strategy

By ROBERT W. HORTON

I

f your business does not have non-compete agreements in place but would like to develop one, what are the options and best practices you should consider?

The jumping-off point for consideration is understanding that non-compete agreements are generally disfavored as a matter of public policy because individuals are being restricted in their opportunity to find work and support themselves. The public policy issue results in different approaches toward non-competes in every

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state. Even in the states viewed as most favorable toward the enforcement of non-competes, courts will require (as a matter of common law or statute) that the employer have a protectable interest that justifies non-compete restrictions (e.g., confidential information provided to employees, goodwill created by the employees and specialized training given to employees). In those states, the scope of non-competes related to duration after the termination of employment and geographic reach must also be limited only to what

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is reasonably necessary to defend those interests.

For non-competes arising out of an employment relationship, even in these favorable states, courts may enforce an agreement for up to two years in the geographic area served by the employer during the employment relationship. Such favorable courts, however, often will limit enforcement of the non-compete to a shorter time period and only the geographic area where the employee actually provided services. In less favorable states, non-competes BACK TO CONTENTS

arising out of an employment relationship may not be enforced at all (e.g., California) or may be limited to employees compensated above a certain threshold (e.g., Illinois), limited to a certain duration (e.g., 12 months in Oregon), and/or require compensation for the former employee during the term of the non-compete (e.g., Massachusetts).

States that permit enforcement of non-competes have different approaches to addressing agreements found to be overly broad by

States have different approaches regarding what constitutes adequate consideration for a non-compete. courts charged with their enforcement. In some states, again either by common law or statute, courts will rewrite an overly broad agreement to narrow the scope of the restrictions and then enforce the restrictions drafted by the court. In other states, courts will simply strike the provisions they view as too broad (“blue penciling”) and determine if there is anything left that can be reasonably understood and enforced. In other states, the court simply won’t enforce the agreement, period.

States also have different approaches regarding what constitutes adequate consideration for a non-compete. In some states, new or ongoing employment is sufficient consideration. In others, new employment is sufficient consideration, but only if the employee is given notice of the requirement to sign a non-compete before beginning employment. In other states, BACK TO CONTENTS

ongoing employment is insufficient consideration based on a view that new consideration must be given.

Therefore, consideration such as a promotion, pay increase, bonus or some sort of equity must be given for the non-compete with a current employee.

This state-by-state patchwork approach is further complicated because the parties’ agreement regarding which state law applies often will not be honored by courts in states with more restrictive views toward non-competes than that of the state agreed upon by the parties.

What does all of this mean for your desire to implement non-competes in your business?

• Be mindful of the approach to non-competes of the states in which employees are located.

• Only require non-competes for employees who really do have access to confidential information that is of a consequential nature or personal relationships with customers that could be used by the employee for a competitor.

• Consider whether you can obtain the necessary protection by requiring only a non-solicitation agreement (the employee agrees not to do business with customers of the business), rather than a non-compete in which the employee agrees not to engage at all in the provision of the same services as the employer.

• Limit the time period and geographic scope of non-compete as much as possible.

• Draft non-compete agreements so that they can withstand blue penciling if necessary. Add multiple provisions regarding length and geographic scope so

something will be left if the court strikes some of the provisions.

Finally, take heart that even in states that will not enforce a non-compete, thereby leaving the customer goodwill developed by your employees essentially unprotected, courts will still protect your confidential information. Every non-compete agreement should include a confidentiality agreement. Often unfair competition can be protected by enforcing the confidentiality obligation of the former employee.

Robert W. Horton is a member at Bass, Berry & Sims and chair of the firm’s Labor & Employment Practice. He represents management in all areas of labor and employment law. bhorton@bassberry.com

NOVEMBER 2022

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SURVEY

Remote Work: Fall 2022 Survey

By JOSHUA I. ROTHMAN, RALPH A. DENGLER AND ROBERT S. PICKENS

R

emote work is one of the most debated questions in the corporate world right now. We surveyed in-house counsel across a range of industries to see how companies are handling it in the post-pandemic world. Some are still all remote, some are in-person every day, some are in between.

For example, one company surveyed is currently requiring all employees to report to work on site. That company maintains a multiacre assembly facility in which the assembly personnel work together, and the office staff are located in the same facility in an open environment to foster interaction and BACK TO CONTENTS

communication. We received several other responses of interest.

Owen McKeon, U.S. General Counsel, Scandinavian Tobacco Group, Bethlehem, Pennsylvania office: After being fully remote from the outset of the pandemic in midMarch 2020, the company began a hybrid schedule in early 2022, encouraging its employees to come into the office in a phased approach.

Although the number of days per week may change based on local hospitalization numbers relating to Covid-19, the current policy anticipates employees being required to work from the office three days per week. In-person collaboration and

interaction are primary factors in the company’s decision to adopt a hybrid schedule. Managers within individual departments and functions have discretion to set schedules for their teams, coordinating in-office days to be most productive within their group and function. McKeon expects the hybrid work policy will evolve in the future as necessary to ensure the needs of the business are being met.

Legal Department, National Resilience, Inc.: Resilience was founded during the pandemic, and its legal department has permitted its members to work remotely since inception, subject to manager discretion. In order to foster collaboration

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and inclusion, Resilience Legal holds biweekly online meetings to which all legal department staff are invited and encouraged to participate. In addition, Resilience Legal holds in-person offsite meetings, typically on a quarterly basis, as well as other in-person meetings and social events. Individual practice groups and working teams also hold in-person meetings. Finally, Resilience Legal accommodates staff that prefer in-person work by providing workspace in one of several offices across North America.

Resilience Legal will continue to assess its remote work policy, making any adjustments needed to balance the needs of the business with the needs of legal department members.

Jay Cahill, Intellectual Property Counsel, Markforged Inc. (Provider of 3D printers, printing materials and software, NYSE: MKFG): From the outset of the pandemic, Markforged safely maintained a

Staff that are co-located in the same city can find time together at WeWork. sizable on-site workforce of critical engineering and manufacturing personnel to continue operations and ensure its products would be available to support industry, supply chain resilience and assist with COVID relief. Markforged employees from other functions were remote from March 2020 until mid-2021.

Markforged encouraged, but did not mandate, its employees to return to the office. The primary considerations evaluated in the shift to the current hybrid and more traditional

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models were employee safety and the positive opportunity provided by in-person collaboration. The leadership team continues to monitor an array of COVID statistics and weighs employee opinion to ensure that hybrid and on-site models provide a comfortable, safe working environment for its people.

Ruth Atherton, Chief Legal Officer, The Commons Project Foundation: As a global non-profit organization focusing on data interoperability and creating global public goods such as open data standards, The Commons Project has always been a fully remote workplace which increases our global reach and creates access to top staff. As a non-profit, it also allows us to avoid expensive infrastructure costs. This model requires intentionality to stay connected across the organization and to create an environment in which employees experience an “open door policy,” especially with their managers. Using tools that increase quick communication (such as instant messaging and interactive project management tools) allows us to decrease video fatigue and the hassle of setting up additional meetings. Staff that are co-located in the same city can find time together at WeWork, and we make use of offsites to help build personal connections. Postpandemic, we remain fully remote and continue to recognize the power of strategically designed and timed in-person meetings, which are particularly useful for co-creation and strategy sessions.

Brandon Ziegler, Chief Legal & Administrative Officer, Workiva Inc. (NYSE: WK): It is currently voluntary for employees to return to the office, attend in-person meetings and

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travel for business. We encourage our employees to work from where they work best, whether in the office or at home. We want them to work where they feel the most comfortable and where they can be the most productive, so we have remote-work options available for most employees, while permitting in-person collaboration at our various offices.

Joshua I. Rothman is a partner in Venable LLP’s IP Litigation – Life Sciences Group. jrothman@venable. com Ralph A. Dengler is a partner in Venable LLP’s IP Litigation – Technology Group. radengler@venable. com Robert S. Pickens is a counsel in Venable LLP’s IP Litigation – Technology Group. rpickens@venable. com

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COLUMN / THE ANTITRUST LITIGATOR

No-Poach Agreements and Antitrust

By JEFFERY M. CROSS

N

o-poach agreements are very much in the antitrust news recently. The Department of Justice and the Federal Trade Commission have challenged several such agreements, and there have been multiple antitrust class actions attacking such agreements.

A “no-poach” agreement is an arrangement between entities that they will not hire each other’s employees. The argument frequently made is that such agreements restrain the market for labor, reducing wages and restricting employees from moving from one job to another.

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No-poach provisions are frequently found in franchising. The franchiser wants to incentivize its franchisees to invest in training.

Such training, of course, costs money for the franchisee. A rival franchisee of the same brand may try to take a free ride on its rival’s investment by hiring an employee after the rival has trained the employee. Because no-poach provisions can often be found in franchise agreements, many of the recent cases challenging such arrangements have involved franchises.

A recent Eleventh Circuit Court of Appeals decision regarding a no-poach agreement addressed

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one of the fundamental antitrust questions that must be asked in any challenge: Is there an agreement between two or more independent, economic entities? An agreement between such entities is a fundamental requirement for a violation of Section 1 of the Sherman Act. The Eleventh Circuit decision involved a no-poach provision in Burger King franchise agreements.

The district court had held that Burger King and its franchisees were a single entity and therefore Section 1 was not implicated. A group of companies in a joint collaborative arrangement can be considered a single entity for purposes of certain BACK TO CONTENTS

restraints. Indeed, a joint venture imposing a restraint involving a core activity of the joint venture has been held to be a single entity not implicating Section 1. An example of a core activity of the joint venture would be the pricing of cars made by a joint venture to produce a new type of car.

A joint venture does not have to be a formal entity incorporated under state corporate law, or organized as a limited liability company

A rival franchisee of the same brand may try to take a free ride on its rival’s investment. or partnership. It can be a loose collaboration. But the issue addressed by the Eleventh Circuit was whether Burger King and its franchisees were acting as a single entity in establishing the no-poach provisions, or acting as separate, independent economic entities?

A Burger King franchisee was required to enter into a franchise agreement which contained a no-poach provision. The provision, called a “No-Hire Agreement,” prohibited the franchiser and its franchisees from hiring any current employee of Burger King or another Burger King franchisee. It also prohibited a franchisee from hiring any employee of the franchiser or another franchisee for six months after the employee left the first Burger King restaurant, unless the first restaurant gave the hiring restaurant written permission to do so. Under the franchise agreement, Burger King had the unilateral right to terminate a franchisee for breach of the no-hire provision.

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The Eleventh Circuit reviewed the district court’s grant of defendants’ motion to dismiss. Therefore, the question before the appellate court was whether the complaint contained sufficient facts to plausibly establish concerted action between independent economic entities. The court emphasized that consideration of whether there was concerted action implicating Section 1 depended on substance, not form.

The Eleventh Circuit applied a test that it gleaned from Supreme Court precedent: “whether there is [an arrangement] amongst separate economic actors pursuing separate economic interests, such that the agreement deprives the marketplace of independent centers of decision-making, and therefore of diversity of entrepreneurial interests.”

In applying this test, the Eleventh Circuit concluded that the complaint plausibly established an antitrust agreement. The court noted that, under the franchise agreement, a Burger King franchisee is an “independent contractor and is not an agent, partner, joint venturer, joint employer, or employee of [the Burger King Corporation].” The agreement made clear that in all public records, in dealing with third parties, and on all stationary and business forms the “franchise shall indicate independent ownership of the Restaurant.”

Notwithstanding these requirements, the court emphasized that the question of whether entities are independent centers of decision making must focus on the decision in question, in this instance the no-hire provision. The court concluded that focusing on this question did in fact establish that the parties were independent centers of decision making.

The franchise agreement expressly stated that each franchisee was “solely responsible for all aspects of the employment relationship with its employees” and that each franchisee had “the sole right to hire, discipline, promote, demote, transfer, discharge and establish wages, hours, benefits, employment policies, and other terms and conditions of employment … without consultation with or approval by [the Burger King Corporation].” Furthermore, the Burger King corporate website emphasized this independence in terms of employees.

The Eleventh Circuit’s decision regarding the Burger King no-poach provision addressed only one aspect of the antitrust analysis of such agreements, albeit a fundamental one. It left open critical issues, including whether the Rule of Reason should apply.

But it laid out a valuable framework for reviewing this key question in antitrust analysis, whether there was an agreement between independent economic entities.

Jeffery Cross is a columnist for Today’s General Counsel and a member of the Editorial Advisory Board. He is a partner in the Litigation Practice Group of Freeborn and Peters LLP and a member of the firm’s Antitrust and Trade Regulation Group. jcross@freeborn.com

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FEATURE

Creating a World-Class Legal Center of Excellence

By TRIPP HEMPHILL “could X process be better and, if so, how?”

WHY DO COES MATTER?

T

he legal industry is awakening to the critical need to transform the way it works. The need for cost control, increased productivity, risk mitigation and talent retention has never been higher, as legal teams strive to meet increasing demands on their time while providing valuable legal counsel and being strategic business partners.

Successful legal teams leverage the momentum of the past two years to “actively embrace transformative change” for workflow automation, contract management, artificial intelligence for contract analysis, risk assessment, or due diligence, among other things. However, according to Deloitte’s 2021 State of Legal Operations Survey, some

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of the biggest hurdles to embracing transformation are tech adoption and change management.

How can legal departments help drive change and adoption of meaningful transformation? By embracing the development of the “center of excellence” model.

WHAT IS A CENTER OF EXCELLENCE (COE)?

Centers of excellence are common in the world of business, and include teams of cross-functional managers who are empowered to look at and improve the way their business operates. The methodology by which these centers arrive at operational excellence may differ, but the process is largely the same — they ask,

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With a laser focus on making continuous operational improvement, CoEs are a way to encourage creative problem-solving in a collaborative, multidisciplinary environment — to manage change strategically.

Consequently, CoEs are an important space to consider the benefits of innovation and technology.

Departments within businesses can apply the same corporate logic to the continual development and iteration of their own processes to become recognised departments of excellence — guaranteeing efficiency and value.

In its 2021 Law Survey, Ernst & Young noted that the use of outsourced CoEs or shared service centers to support legal operations, were, despite the benefits, potentially resource-intensive and cumbersome to manage.

BUILD YOUR OWN COE There are six characteristics of a successful legal CoE that can be applied to in-house legal departments.

1

Obtain a mandate from the top A mandate to become a center of excellence is vital in order to give the legal department the authority BACK TO CONTENTS

and space to consider operational strategy and innovation. A mandate will resonate across the business and empower the relevant managers to make recommendations they know will be reviewed and acted upon at the highest level. Treat your proposal to create a CoE like a business case – set out how it will help the legal team deliver against the business’ strategic objectives by improving operations, streamlining processes, and enhancing value. Outline costs, savings, expected efficiencies, and impacts on team morale, skills development, knowledge sharing, and value creation in order to secure buy-in from the business.

2

Chart clear operational visualizations Map out your department’s functions holistically — in a way that demonstrates the operational distance between processes, touchpoints, and outcomes. This helps visualize where functions intersect, the length of time between processes, and reveal obvious breaking points. It will also identify frustrations brought on by elongated, manual processes, alongside operational fragmentations created by multiple systems and under-performing technology.

It might seem unnecessary, but CoEs use these visualizations to determine how to spend their time and budget on enhancements that will deliver strategic, rather than reactive, value and support their broader objectives —risk mitigation, predictable costs, matter transparency, and data control.

3

Define a collaborative framework Establish reciprocal rules of engagement to allow the legal department BACK TO CONTENTS

to work effectively and efficiently with internal clients and external partners in order to deliver against service-level agreements. This is particularly important when engaging in complex matters such as internal investigations or litigation preparation. Discovery and review work require a set of best practice processes communicated to relevant teams to set expectations, responsibilities, and timeframes for completion.

4

Focus on legal operations If a legal CoE is about driving efficiency, value, and best practices, it must possess a legal operations capability whose function is to analyze resource utilization, costs per matter, individual performance, and time and speed to outcome. Once benchmarked, legal operations can support a program of continuous improvement with a far clearer understanding of where and how to help.

6

Inform decision-making Having a sound information governance or data management strategy set will help CoEs to analyze data from past matters, inform future decisions and acquire a more informed view of cross-function business outcomes to help measure results, forecast costs, and inform decisions. Focus on where data is coming from and the characteristics of the vital data you rely on every day, to begin to build the dimensions of a data strategy that can help your everyday decision-making.

Tripp Hemphill is Vice President of Enterprise Markets at DISCO. Over the course of his nearly two decades in the legal technology industry, he has advised leading corporate legal departments and law firms in their evaluation, implementation and optimisation of practice-focused technology at both matter and enterprise-program levels. info@csdisco.com

5

Promote automation maturity Intelligent technology is the hallmark of efficiency. Great legal tech is agile, scalable, transparent, and secure — automating the work that stymies creativity. It can help to ensure regulatory compliance, guarantee cost predictability, quickly crunch vast volumes of data to inform decision-making, and repurpose costly work product. According to The General Counsel Imperative: How do you turn barriers into building blocks?, 59% of surveyed general counsel thought technology offered a significant or very significant potential for cost savings. It is to those savings and efficiencies that a CoE would be best placed to review, assess, and advise.

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FEATURE

Careful Wording Makes for Broad Fintech Patent Claims

By MICHAEL YOUNG, MATTHEW KARAS, LUKE MACDONALD AND CHRIS JOHNS

P

atents are made of words, and the claims of a patent define its scope: the invention/activities that others are legally excluded from practicing. During an infringement suit or administrative proceeding, e.g., an inter partes review before the Patent Trials and Appeals Board (PTAB), claim words spark intense interpretive debates during a process known as “claim construction.”

The construction of a term or phrase can sink or float a patent infringement action. Moreover, even simple terms like “automatically” can generate these debates. In this article, we consider recent cases to

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provide tips for aspiring and current fintech patent owners seeking to cover infringing activities while avoiding patent invalidity.

Patent owners usually seek broad claim scope to allege infringement, while defendants typically argue for narrow constructions to avoid it. Defendants often also contend a term is indefinite and that vague or ambiguous words fail to put the public on notice of claim scope. A district court judge or PTAB panel decides the ultimate construction, which often drives downstream infringement and validity outcomes.

First, some good news: Standard terms often need no construction.

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For example, district courts and the PTAB recently declined to construe common fintech terms like “personal identification number,” “point of sale system” and “trading system.”

Patents can therefore use such terms to preserve broad claim scope with lower risk of indefiniteness.

But be careful. Many terms have no standard definition, so well-written specifications should broadly define each claim term while describing it in context using plenty of examples.

Examples help breathe life into the claims and, when explicitly presented in the specification as only examples, do not limit claim scope.

For instance, in Blue Spike LLC et al. v. Grande Communications, Inc., the Eastern District of Texas recently found “agreed upon purchase value” is not limited to a bandwidth-focused definition because it was merely one of several examples. By maintaining broader claim scope driven through a well-written specification, patent owners can force more favorable settlements or increase their odds of proving infringement at trial.

Detailed explanations are even important for seemingly innocuous words, including terms of degree like “maximizing,” “substantially” or “not fully.” Even when the specification describes these terms, courts may deem it impossible to tell whether an activity reaches the claimed BACK TO CONTENTS

degree. In CA Inc. v. Netflix, Inc., the plaintiff argued “maximizing” meant “increasing,” but the court disagreed, finding the specification failed to provide an objective standard for measuring “maximizing.” Without an objective standard, the Eastern District of Texas has held a person of ordinary skill in the art would not be able to determine the scope

Well-written specifications should broadly define each claim term while describing it in context using plenty of examples. of the invention “with reasonable certainty.” The court found “maximizing” was indefinite, rendering the claim invalid.

On the other hand, in Proven Networks, LLC v. Amazon.com et al., the Western District of Texas found “minimal equal-cost paths” to have an objective meaning that is not indefinite because an ordinary artisan “could understand that ‘minimal’ means ‘the least possible.’ ” The court noted, however, that “Defendants raise[d] some convincing points,” indicating that the high burden of clear and convincing evidence necessary to prove invalidity may have played a big role in saving the claim.

Similarly, relying on the specification’s examples, the Western District of Washington in WSOU Investments, LLC v. F5 Networks, Inc. found the phrase “not fully connected” was not an indefinite term of degree because the specification indicated that it was a binary term BACK TO CONTENTS

covering unconnected and partially connected things. Still, although the specification was helpful, the court relied on expert testimony that may have been unnecessary had it included more explicit definitions and examples.

A detailed description filled with illustrative examples, whether for complex or simple terminology, can help propel patent owners successfully through claim construction. As such, patent drafters should proactively draft claims and specifications following the above tips.

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Michael Young is a partner at Finnegan.

He maintains a diverse patent practice and represents clients across a broad range of technologies including Internet of Things (IoT), fintech and crypto assets. michael.young@finnegan.com Matthew Karas is an associate at Finnegan.

His practice includes a range of intellectual property issues, with particular experience in electrical and computer technologies products. matthew.karas@finnegan.com

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Luke MacDonald is an associate at Finnegan.

He focuses on patent litigation and prosecution, representing clients in the electrical science and financial services fields. luke.macdonald@finnegan.com Chris Johns is an associate at Finnegan.

He focuses on computer and business method patent work. johnsc@finnegan.com

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FEATURE

Greenwashing Just Got More Expensive in Canada

By NIKIFOROS IATROU, MICHAEL CALDECOTT AND LEILA FAR SOARES

W

henever you highlight the environmental attributes of a product or service, the risk of “greenwashing” — making false, misleading or unsupported environmental claims — arises. In Canada, competition law has emerged as a key regulatory mechanism in the battle against greenwashing.

Canada enacted significant amendments to the Competition Act this summer, including skyrocketing penalties for engaging in deceptive marketing. These changes merit urgent consideration by companies

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selling in or into Canada. The risk of a face-off with Canada’s competition watchdog, the Competition Bureau, is more costly than ever. This is particularly important for companies making environmental claims.

Greenwashing is a Bureau priority.

The 2022 Amendments to the Competition Act became law in June. Key among them was the introduction of significantly larger administrative monetary penalties (AMPs), which previously were capped at CAD $10M for a first infringement. Now, AMPs can be up to three times the value of the benefit

NOVEMBER 2022

derived from the deception or, if this cannot be reasonably determined, up to 3 percent of a company’s annual worldwide gross revenues. This surpasses the penalties imposed by the U.S. Federal Trade Commission for similar conduct, where the highest greenwashing penalty has been $3 million over the “eco-friendliness” of bamboo textiles.

The increase in Canada was introduced to address concerns that the prior AMPs amounted to a pittance for the world’s largest firms. To provide a strong financial incentive for businesses to comply with the Competition Act, the Bureau’s view was that AMPs must be “greater than the profit that the [firm] might realize as a result of its anti-competitive conduct.”

Additionally, liability is not limited to AMPs. Businesses face another risk: class actions. In Canada, as in the United States, consumer class actions related to deceptive advertising now abound. Businesses should account for the impact class proceedings could have on their brand and reputation.

PRACTICAL ADVICE FOR MAKING ENVIRONMENTAL CLAIMS Despite the increased emphasis on enforcement, the Bureau has issued minimal guidance for making BACK TO CONTENTS

environmental claims and has yet to provide substantive direction similar to what is available in other jurisdictions — notably, the U.S. Green Guide, UK Green Claims Code and New Zealand Environmental Claims Guidelines.

Nonetheless, it is clear that greenwashing risks can be reduced by ensuring that: • Claims are accurate and specific.

Claims that make general statements about their environmental impact, and which are not reinforced by a robust methodology supporting the claim, are more likely to be misleading.

• Claims are substantiated and verifiable. Claims must be tested, and all tests must be conducted in good faith and documented before the claim is made.

• Claims are relevant. Claims must be specific to a particular product and used only in the appropriate

context. For example, it would be improper to imply that a claim covers the entire lifecycle of a product when it only covers a portion.

• Claims do not mislead consumers into believing they are endorsed by a third-party organization. A company cannot trick consumers into thinking their business practices have been affirmed by an environmental organization.

Some additional “do’s” and “don’ts” are identified in the graphic below.

Businesses should carefully scrutinize all claims before they are made to the public. This includes environmental claims made on websites, in advertising, on packaging or labels (including logos), and on all other marketing materials.

Remember, a fine line exists between green marketing and greenwashing. Vigilance is required to stay on the right side.

Nikiforos Iatrou is a partner in McCarthy Tétrault’s Antitrust/ Foreign Investment group in Toronto.

Formerly litigation counsel to Canada’s Commissioner of Competition, he advises on all aspects of the Competition Act, including consumer protection matters. niatrou@mccarthy.ca Michael Caldecott is a partner in McCarthy Tétrault’s Antitrust/Foreign Investment group in Toronto where he advises on mergers, acquisitions and joint ventures, and all manner of Competition Bureau investigations. mcaldecott@mccarthy.ca Leila Far Soares is an incoming articling student at McCarthy Tétrault and is in the process of completing her J.D. at the University of Toronto where she volunteers at the David Asper Centre for Constitutional Rights.

DOs

DON’Ts

Consider the full cycle of a product or service in assessing the accuracy of a claim

Make vague claims such as “ecofriendly”, which can lead to multiple interpretations, misunderstanding and deception

Qualify general claims by specifying environmental benefits and noting any caveats or conditions

Imply that your product is endorsed by a third-party organization if it isn’t

Define important terms, unless easily and commonly understood by the public

Highlight minor or unimportant environmental aspects which can be misleading

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NOVEMBER 2022

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21

FEATURE

Easy on the Booze, No Flirting, Weed Is Still Illegal—Let’s Party!

By LAURA A. STUTZ

T

he holiday season is almost here, and many employers intend to make it merry by hosting holiday parties for the first time since the onset of the pandemic.

However, in addition to merriment, employer-sponsored holiday parties may present legal liability issues.

Bear in mind that employees have had little in-person interaction with one another over the past two and a half years.

Even before the pandemic, it was common for employees to forget

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that the office party is a work event where workplace conduct policies apply. Refreshing their knowledge of relevant policies and reminding employees that their obligation to conduct themselves in a professional manner from the work day through the office holiday party, even if the party is held off company premises, is essential to minimize legal risks.

Parties sponsored by employers, whether held on or off company premises, are considered an extension of the workplace, and laws

NOVEMBER 2022

applicable in the workplace also apply to workplace parties. Consequently, employers have a legal duty to prevent harassment and similar offenses at office holiday parties in the same way they are required to prevent them in the office. Now is the time to remind employees of the employer’s anti-harassment policy and to ensure that they understand that it applies at all employer-sponsored events.

Employers also have a duty to ensure the health and safety of BACK TO CONTENTS

their employees, not only during work hours but also during a business-related social event. While alcohol consumption is acceptable at these events, too much alcohol heightens the risk of inappropriate conduct. To avoid potential liability, employers should promote responsible drinking and arrange transportation for employees who overindulge. Consider hosting the

employees realize how their activity on social media can impact the work environment, or the brand and reputation of their employer. Employers should anticipate that employees will want to post pictures to social media and remind them of the social media policy before the party to ensure that they understand what they are not to post. Employers also should encourage employees to interact

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While alcohol consumption is acceptable at these events, too much alcohol heightens the risk of inappropriate conduct. party at a restaurant or other off-site location where alcohol is served by bartenders and wait staff who know how to recognize and respond to guests who are intoxicated.

Employers also need to be prepared to deal with new risks presented by the legalization of marijuana. Adult recreational use of marijuana is now legal in the District of Columbia and 19 states. This development may lead employees to believe it is appropriate to bring marijuana to the office holiday party. However, the use of marijuana remains illegal under federal law, and employers with drug-free workplace policies can prohibit marijuana consumption in the workplace and during employer-sponsored events. Employers who wish to prohibit use of recreational marijuana at the office holiday party, even where alcohol is being served, should ensure that their policies address legal drug use and clearly communicate the policy to employees ahead of the event.

The rise and prevalence of social media, where people “overshare” without much forethought, may also present risks for employers. Few BACK TO CONTENTS

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with each other rather than their smartphones.

Taking the opportunity to review relevant company policies with employees and remind them that they apply at employer-sponsored events can go a long way toward preventing the office holiday party from becoming a source of unintended negative consequences.

Join M+W Group and Rational Enterprise for an in-depth discussion of a live case study that illustrates practical steps an organization can take to significantly reduce legal spend and improve outcomes, backed by metrics and measurable results.

Laura A. Stutz is Of Counsel in the New Jersey office of national law firm Wilson Elser and a member of the firm’s Employment & Labor Practice. laura.stutz@wilsonelser.com

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