20 February 2018By Shakaira John
In an earlier post, we discussed the Ontario Securities Commission’s (“OSC”) Whistleblower Program under OSC Policy 15-601 and, in particular, the OSC’s focus on promoting awareness of whistleblower protections despite criticisms of their efficacy. Recently, legislative amendments gave teeth to whistleblower protections by creating a civil cause of action for reprisals, potentially resolving one of the criticisms of the program (highlighted in our earlier post).
The OSC also recently proposed an amendment to the Whistleblower Program to clarify that in-house counsel are ineligible for a whistleblower award if they acquired the reportable information while acting in their legal capacity.
New Civil Anti-Reprisal Cause of Action: As outlined in our prior post, whistleblower protections were built into the Securities Act, prohibiting employers from taking retaliatory action against a whistleblower that adversely affects the whistleblower’s employment, including termination, demotion, suspension, and the imposition of penalties or threats. However, without an independent cause of action, the enforcement of the anti-reprisal provisions fell entirely to the OSC.
Recently, the Ontario legislature bolstered these protections by amending the Securities Act and the Commodity Futures Act (which governs trading and advising in futures) to create a civil cause of action for reprisals against whistleblowers. Under both acts, an employee whistleblower may now bring a claim against his or her employee for improper reprisals, either in the Superior Court of Justice or by arbitration under a collective agreement (for unionized employees).
The Court (or arbitrator, as the case may be) has the power to order either or both of:
Notably, the new civil cause of action imposes a reverse onus: the anti-reprisal cause of action places the burden of proof on the employer to establish that it did not take an unlawful reprisal against the claimant employee.
The amendments bring Ontario’s whistleblower regime in line with the statutory causes of action for retaliation against whistleblowers under the Dodd-Frank and Sarbanes-Oxley Acts in the U.S., where the whistleblower program has been successful.
Another Proposed Amendment: On January 18, 2018, the OSC published a Notice and Request for Comments on a proposed further change to Ontario’s whistleblower regime “[f]ollowing further consideration as well as feedback received from the Law Society of Ontario subsequent to the publication of the final Policy”. The proposed change would clarify that in-house counsel who report information under the policy, in breach of applicable law society rules will not be eligible for a whistleblower award.
Under the current policy, in-house counsel are ineligible for a whistleblower award except where: (1) there is a reasonable basis to believe that whistleblowing is necessary to prevent “substantial injury to the financial interest or property of the entity or investors”; (2) the in-house counsel has a reasonable basis to believe that the subject of the whistleblowing submission is engaging in conduct that will impede the OSC’s investigation into the misconduct; or (3) at least 120 days have passed since the whistleblower reported the information internally, or 120 days since the whistleblower became aware that the information was known to certain internal individuals, as specified in the policy, including the audit committee and the chief compliance officer.
Under the proposed amendments, these exceptions would no longer apply to in-house counsel acting in a legal capacity.
Comments on this proposed change are to be submitted by March 20, 2018.
The Takeaway: The legislative amendments creating a civil cause of action respond to earlier criticisms about the lack of an independent cause of action for reprisals. The enforcement of the anti-reprisals protections of the Whistleblower Program no longer falls solely on the OSC, which may quell concerns about the OSC’s ability to effectively prosecute violations of the anti-reprisals provisions. We have yet to see any cases brought pursuant to the new provisions; it will be an interesting emerging body of case law.
The further proposed amendment to clarify the ineligibility of in-house counsel for whistleblower awards demonstrates the OSC’s continued efforts to improve the Whistleblower Program. Although it remains to be seen whether any further changes will be made in response to other criticisms of the program, the OSC appears receptive to receiving and addressing critical feedback on the program.