What kinds of duties do employees owe their employer after leaving?

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to drafting non-compete agreement, questions about their validity and enforceability, or resolving disputes about confidentiality, non-solicitation, or non-compete clauses, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Ontario lawyers registered on the website who can assess your business needs and help you draft, understand, negotiate, and resolve disputes involving these types of agreements.   I should know, I’m one of them!  If you want to speak with me directly, you can contact me directly.

In this blog, I’m going to discuss what, if any, types of duties an employee owed towards a former employer with respect to CONFIDENTIAL INFORMATION, NON-COMPETES, and NON-SOLICITATION.  Now, I’m going to be discussing these things OUTSIDE OF A WRITTEN CONTRACT.  In other words, I’m going to be talking about common law (i.e. judge made law).  You see, if these things are dealt with in a written agreement (e.g. employment agreement or employee termination agreement), then a breach of this agreement could result in a breach of contract – which is enforceable in court.  But what if NO written or oral agreement existed to deal with things like confidential information, non-competes and non-s0liciations?  Well, that’s where the common law comes into play.  So lets delve into it, shall we?

Employee’s Duty of Confidentiality
In Hub Financial Inc. v. Molinaro, [2002] O.J. No. 2846, the Ontario Superior Court of Justice had to deal with a claim against registered insurance brokers for breaching their fiduciary obligations and duties of confidentiality towards their former employer.  There was no specific agreement with their former client; the insurance brokers had been able to carry out their activities with a large degree of independent.  When the client unilaterally increased its shares of the commissions, the relationship with the brokers was terminated.  But there was no agreement or discussion about the respective rights of the brokers at any point.

Overall, Cullity J. found that the brokers were entitled to compete with the client and that they could solicit business from the clients they had recruited.  There was also no common intention that certain information which the brokers acquired (e.g. client lists, policies of the client) should belong to the client.  So no duty of confidentiality existed either.  Indeed, the court found that the brokers were not prevented from using that information after their association with the client had ended.

Duty of Confidentiality
Now what’s important here is some of the things which Cullity J. wrote in getting to these conclusions.  First, with respect to the duty of confidentiality, Cullity J. found that a combination of factors which existed in that particular case warranted NO DUTY on the part of the brokers to hold information in confidence.  Those factors included:

• the brokers were NOT employees of the client (they were independent contractors);
• the information was obtained by the brokers and largely at their expense;
• the information related only to clients recruited by the brokers; and
• the information was acquired for the mutual benefit of all parties through an equal sharing of commissions.

Based on these and other factors, the court concluded that there was no COMMON INTENTION that the information should belong to the plaintiff and no rational basis for IMPUTING such an intention.  Co-ownership, rather than exclusive ownership, of the information was the more appropriate analogy.

Cullity J. also mentioned that, because the client unilaterally changed the relationship with the brokers (leading to a fundamental breach of that relationship, which entitled the brokers to treat the contract as coming to an end), the brokers were no longer bound by any duties of confidentiality which may have previously existed.

So at the end of the day, the Court concluded that the facts (e.g. agreements, understandings, expectations, industry standards, etc.) warranted an obligation on the brokers to keep the information confidential after their relationship with the client had terminated.

Non-Compete and Non-Solicitation
With respect to whether the brokers could compete with the former client and solicit the same customers, the Court concluded that they COULD DO SO.  Why?  Well, it has to do with the specific facts of that case.  The relationship between the brokers and the client was one of independent contractor and client, not of employee and employer.  The brokers were free to carry on their own business for their own benefit and were expected to do so.  They earned based on their own efforts.  Their clients were as much their own as the clients’.  Once the association with the client terminated, the brokers were free to compete and solicit the same clients in the same market place.  There was also no contracts, agreements, or understandings to the contrary that would impose such restrictive covenants after the association was terminated.

So when could restrictive covenants be imposed?  Well, if there is a fiduciary relationship between the parties (e.g. senior employees and an employer), then the employee may owe duties of good faith, loyalty, avoiding conflicts of interest, etc. to the employer after their relationship ends.  This means that restrictive covenants may be enforced in these circumstances.  So when will a fiduciary or special trust relationship exist?  Well, it depends on factors such as the employee’s discretion and influence and the employer’s vulnerability and trust.  For example, a fiduciary duty may be imposed on a former employee if he or she had considerable discretion or power, was high up in the employer’s organization, the employer was vulnerable to the loss of that employee, and the employee was employed for a longer period of time.  These factors would tend to make the employee a “FIDUCIARY” employee, instead of an “ORDINARY” employee (who have less onerous post-employment obligations, if any, than a “FIDUCIARY” employee).

written by admin \\ tags: confidentiality, employee duty, non solicitation, non-compete, restrictive covenant

Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about a shareholder agreement or unanimous shareholder agreement, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).  We have Ontario lawyers who can assist you in this regard (I would know, I’m one of them!).  If you want to get in touch with me directly, feel free to email me at michael@dynamiclawyers.com to discuss all your shareholder agreements needs!

This is the second blog I’ll be making about unanimous shareholder agreements.  Specifically, I’ll be discussing a basic template and things you should consider/pay attention to when thinking about unanimous shareholder agreements.  For the purpose of this blog post, I’ll be discussing unanimous shareholder agreements in the context of the Canada Business Corporations Act.

Parties
Make sure to properly identify the parties.   You should have the correct spelling of the parties’ names.  Also, identifying features such as “X is a corporation incorporated under the laws of Canada with a mailing address at” is also good.  If you have too many parties, you may want to use a Schedule, where all of the parties for example are holders of a particular class of shares, etc.

Recitals
Here, you’ll want to put some basic information about the corporation, the parties, and the reason for their entering into a unanimous shareholder agreement.   It’s pretty common to see something in this section like:

• The authorized capital of the Corporation is X;
• The issued and outstanding shares of the Corporation is X;
• The parties want to enter into this agreement to fix and determine their respective rights, duties, obligations, etc. with respect to each other and the Corporation.

Preliminary Matters
In the first real section of the unanimous shareholder agreement, you’ll probably want the parties to confirm the truth and completeness of the recitals and define terms used throughout the Agreement.

Business of the Corporation
In this section, you may want to define the business of the corporation.  This will come in handy with respect to non-compete provisions and agreements which restrict parties’ ability to compete with the Corporation in the business (however that is defined).

Operation and Control of the Corporation
Here, it’s typical to find provisions that say that the discretion and powers of the directors to manage and supervise the management of the corporation are being restricted and usurped by the Shareholders.  Essentially, the Shareholders are relieving the Directors of their powers.

The provisions in this section go on to provide details – often akin to the Corporation’s by laws – on how the Shareholders as both the Directors and the Shareholders will conduct meetings (e.g. nominees, notice, quorum, casting votes, elections and appointments, passing resolutions, etc.).

The provisions in this section may also include specific requirements for the Corporation to enter into contracts (e.g. X number of Directors required) or for the Corporation to do things with respect to issuing shares, borrowing money, selling or leasing Corporate property, amending the Corporation’s articles, continuing the Corporation in another jurisdiction, winding up or dissolving the Corporation, etc.  These things may require special majorities (i.e. majorities which are not specified anywhere in the Act).

You’ll also find provisions in this section of the unanimous shareholder agreement dealing with things like who the officers of the Corporation will be, keeping proper books of account, appointing a banker, etc.

Restrictions on the Issue and Transfer of Shares
This is a very important part of any shareholder agreement: restrictions on share transfers.  There are many ways to restrict transfers on shares, some of which include:

• General prohibition against the Corporation and the Directors for issuing new shares.
• General prohibition against existing shareholders from transferring, selling, assigning, etc. their existing shares.
• A requirement that any party that does, through one of the permissible ways of acquiring shares, acquire shares becomes bound to and a party of the unanimous shareholder agreement.

Here are some of the ways in which share transfers are permitted/restricted:

• Consent Sale: a shareholder can transfer their shares after obtaining the consent of a pre-determined number or percentage of other shareholders.
• Right of First Refusal: a shareholder who receives an offer from a third party for the purchase of their shares must first offer the other existing shareholders the opportunity to purchase those same shares on terms, for example, that are equivalent to the third party’s offer.
• Shot Gun Buy-Sell: a shareholder can name a price at which it is willing to either buy or sell its shares.  The offer is then presented to other shareholders who have a specific amount of time to decide whether to accept the offer.
• Right to Come Along (Piggy-Back): when a shareholder who sells to a third party, the other shareholders are entitled to have their shares sold on, for example, the same terms to that third party.
• Right to Take Along (Drag Along): when a shareholder sells to a third party, the other shareholders are forced to have their shares sold on, for example, the same terms, to that third party.
• Option to Purchase (Call Option): this right gives a shareholder/Corporation the option to purchase shares in certain circumstances (these are called Triggering Events) from the Corporation/shareholder.
• Option to Sell (Put Option): this right gives a shareholder/Corporation the option to sell shares in certain circumstances from the Corporation/shareholder.
• Auction: an auction is a mechanism whereby shares are sold to the highest bidder (or on certain terms of the auction) to third parties.

In each of these circumstances, there are a few common variables: timing or an event occurring, valuing the shares, and rights/obligations affecting the other shareholders, closing provisions, identification of the buyer/seller/third parties (if any), etc.

Confidentiality
If a Shareholder receives Confidential Information (which should be a defined term) in the course of being a Shareholder, Director, Officer, employee, etc. then they should be restricted in what they can do with that information.  I’ve previously blogged about confidentiality agreements, so you can refer to that blog for more information about drafting, understanding and negotiating confidentiality agreements here.

Proprietary Rights
This section will deal with things like defining intellectual property rights (remember that there should be a definition for both proprietary rights and developed proprietary rights), who they belong to, the waiving of any moral rights under the Canada Copyright Act, and an agreement to obtain protection of intellectual property rights.

Non Competition
This section will deal with the repercussions, if any, of a Shareholder who starts competing with the corporation in the Business (which should be a defined term).  To make these provisions enforceable, they should be specific enough (e.g. by identifying parties, the Business, a time line, etc.).

Termination
Here, provisions may be put in place to initiate termination of the agreement where:

• There is only 1 shareholder left.
• A shareholder dies, becomes disabled, or goes bankrupt, etc.
• There is a breach of the shareholder agreement.
• A specific number or percentage of shareholders mutually agree to terminate the agreement.

General Terms
Here, you’ll find terms dealing with things like (but not limited to):

• Notice (how do the parties give notice under the agreement for things like termination).
• Arbitration.
• Assignment (e.g. is this to be done by the parties having to consent in writing?).
• Survival of terms (i.e. if a term is found by a court to be void, should the rest of the agreement survive?).
• Governing Law (which jurisdiction governs the interpretation and enforcement of the agreement?).
• Amendment (how is this to be done?).
• Entire Agreement (i.e. this agreement supersedes all other agreements – whether oral or written – relating to the same subject matters in the agreement)
• Waiver.
• Interpretation.
• Independent Legal Advice
• Currency.

Please keep in mind that there are many other kinds of terms and conditions you can find in the general terms section of this agreement.  You should consult with a lawyer to address these general terms.

Execution
The final section of the agreement (other than any schedules or exhibits) requires that the parties, or duly authorized representatives of the parties with the power to bind, execute the agreement.  It is sometimes a requirement that witnesses be present and sign their names alongside the parties’.

In conclusion, this blog has discussed a basic unanimous shareholder agreement template.  You should note, however, that the particular details of a unanimous shareholder agreement vary depending on the needs of the shareholders and the business.  These documents should be put together by lawyers (such as myself) who are trained, knowledgeable, and experienced professionals.

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Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about a joint venture, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).  We have Toronto and Ottawa lawyers who can assist you in this regard (I would know, I’m one of them!).

So this blog will deal with the basics of a joint venture agreement or contract.  In other blogs, I’ll get down to the nitty gritty.

Definition
Plaint and simple, a joint venture is a contract between two or more parties to share resources, knowledge, skills, etc. towards a common objective.

Parties
As usual in these types of agreements, the parties are identified at the get-go (make sure this is done properly or else your contract won’t be worth the paper it’s written on!).

Recitals
This is the background story you want to tell that leads up to the formation of the joint venture.  It could go something like: Party X does Y and has Z.  Party A does B and has C.  The two would now like to join forces to make even more $$$.  So they’re agreeing to have a joint venture in accordance with the terms and conditions set out in the joint venture agreement or contract…

Definitions
It’s a good idea to set out the definitions you’re going to be relying upon near the top of the joint venture agreement (for ease of reference and good organization).  You could include definitions here about “Confidential Information” (assuming there will be confidential information passed between the parties as a result of the joint venture), what constitutes “Force Majeure” (e.g. act of God that relieves a party of liability under the agreement in certain circumstances), etc.

Business Structure
The joint venture agreement or contract will generally state how the joint venture is structured.  Is it simply two separate entities acting in concert through the joint venture agreement or contract?  Will there be a new corporation formed?  Will there be a partnership formed?  Will that partnership be a general or limited liability partnership?  For more discussion about the general forms of business one can structure in Ontario, check out this free information about business structures we’ve been accumulating.

Nature of the Relationship
So will the joint venturers be partners (capable of binding each other), corporate shareholders, or simply joint venturers (i.e. their rights and obligations are limited to the terms of the joint venture agreement or contract).

Term and Termination
How long will the joint venture last for and what events give rise to its premature termination?  Will the parties simply be able to give each other notice?  Will the joint venture dissolve by operation of law, by one party filing for bankruptcy, by one party attempting to illegally assign their interest in the joint venture to a third party, etc.?  Again, you should consult with a lawyer to find out what kinds of things typically go in this section.  Also important is what to do in the even of default.  Does one of the joint venturers become liable to pay the other if they are at fault?  Who determines fault and according to what test (e.g. sole and absolute discretion)?  There’s a lot to think about here…

Joint Venture Assets and Benefits
How will these things be deal with?  Will there be a percentage of ownership?  Will the benefits be based on revenues or profits?  Can these interests be assigned?

Operations
How will the joint venture be operated on a day-to-day basis?  Will the joint venture committee have the power to enter contracts on behalf of the joint venture?  Perhaps the joint venture committee will create a new corporation to take on a certain responsibilities and simply own equally the shares of the new corporation.  That new corporation would operate as a separate business, but its shareholders would be the joint venturers (who would elect the directors, who in turn would appoint the day-to-day officers).  This would be a good place to put reporting and record-keeping requirements too.

Joint Venture Responsibilities
Here, we get to the nitty gritty of who will be responsible for what in the joint venture. Separate paragraphs will be needed for each of the parties.

Joint Venture Management
Will there be a committee?  Will representatives from each of the parties be on the commitee?  Will there be a chairperson?  How will meetings be managed, votes and decision made?  Will there be direction from owners and delegation to the committee?  In my opinion, and as I’ve previously blogged about, businesses should be run as dictatorships with consultants, not as democracies (too many voices means things won’t get done).  

Representations and Warranties
What kinds of true, fair, and complete statements must the parties make to induce the other parties to enter the agreement?  The parties want to know that their joint venturer partners have the authorization and operational wherewithall to do what it is they are about to do.  If these representations and warranties no longer hold true, then what’s the consequence?  Notice?  Termination?  This should be spelled out here…

Liability and Indemnification
Will the joint venturers try to limit their liability from each other in connection with the joint venture?  Will they indemnify each other for their own wrongdoing – whether in contract, tort, negligence, misconduct, breach of statute or otherwise?

General Terms and Conditions
This section of the Joint Venture Agreement will deal with things like (which I’ve previously touched on in teh context of an independent contractor agreement):

• Notices
• Entire Agreement
• Governing Law
• Interpretation
• Assignment
• Waiver
• Cumulative Remedies
• Counterparts
• Enurement
• Entire Agreement
• Time of Essence
• Independent Legal Advice
• Force Majeure
• Severability
• Survival
• Currency

written by admin \\ tags: agreement, assets, bankruptcies, bankruptcy, blog, breach, business, circumstances, confidentiality, contracts, corporation, indemnification, lawyer, lawyers, liabilities, negligence, negotiating, Negotiations, partnership, percentages, relationships, separation, shareholder, shareholders, shareholdings, toronto

Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only.  If you believe you require assistance in reviewing, drafting, negotiating, etc. a Confidentiality and Non-Disclosure Agreement, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).

Confidentiality and Non-Disclosure Agreements (also known as NDAs) are nothing more than ordinary contracts with specific terms related to the idea that one party (disclosing party) is going to provide information of a confidential nature to the other party (receiving party).  Breach of a Confidentiality and Non-Disclosure Agreement may result in a claim that can be enforced by going to court, through equitable remedies such as an injunction, or as otherwise set out in the agreement itself (e.g. arbitration, etc.).  In what follows, I’ll provide some general issues that are dealt with in these types of agreements.

1. Consideration
Like all commercial agreements, a Confidentiality and Non-Disclosure Agreement requires something that’s called “consideration”.  Consideration is something of value given by both parties to a contract that induces them to enter into the agreement.  Consideration is typically something like money for goods or services, etc.  One party receives something of value and the other party receives something of value.  This makes the contract valid, binding, and enforceable.  For a Confidentiality and Non-Disclosure Agreement, the consideration will likely be part of the overall agreement (e.g. I will give you confidential information to do something and then I’ll pay you in exchange for that something).

2. Definition of Confidential Information
Defining confidential information is of utmost importance.  The disclosing party will cast the net wide here to increase the receiving party’s obligations and liability with respect to the information it receives; the opposite is true of the receiving party (who wants a narrow definition of confidential information). Examples of types of confidential information include trade secrets, proprietary information, know-how, or information described in a Schedule. Use of a Schedule should still include an accurate definition of confidential information.  Sometimes, a disclosing party will also say that anything it labels confidential will be considered confidential information as well.

3. Exclusions from Confidential Information
Most confidentiality agreements will normally contain various exclusion clauses which outline the types of information which are deemed not to be confidential within the terms of the agreement.  Generally, these types of exclusions will include:

• information which is publicly available (i.e. information in the public domain);
• information which is already known to the recipient at the time of its disclosure to the recipient by the information provider;
• information which is received by the recipient from a third party who is not in breach of any confidentiality obligations to the information provider;
• professional expertise which the recipient had at the time of disclosure or which the recipient developed or enhanced as a result of reviewing the information or material provided; and
• information which the recipient is required by a court or regulatory body to disclose.

4. Limitations on Use of Confidential Information
The uses the receiving party is permitted to make of the confidential information should be clearly specified in the agreement. This will ensure that the recipient does not use the information for any other purpose.

5. Who Should be Bound by the Confidentiality Agreement
A Confidentiality and Non-Disclosure agreement may need to bind all relevant parties (e.g. parent companies, subsidiary companies, directors, officers, employees, representatives, etc.).  In many cases, it is not practical or necessary to obtain signatures from all relevant parties; in these cases, the receiving party should acknowledge and assume responsibility for making sure that these relevant parties comply with the agreement.

6. Required Protective Measures to be Taken by Recipient
The Confidentiality and Non-Disclosure agreement may include a provision requiring the receiving party to take all reasonable measures available to it to keep the confidential information in the strictest confidence.  Such reasonable steps may include:

• Electronic security (e.g. confidential information may be stored on a computer, server, network, cell phone, etc.);
• Physical security (e.g. confidential information may be in a filing cabinet, on a desk, in a box, etc.);
• Visitor control;
• Controls over photocopying confidential information; and
• Document and computer network control systems which limit access to the confidential information to those who are cleared for such access.

7. Return of Confidential Information
The Confidentiality and Non Disclosure Agreement may need to specify that, upon request, all of the confidential information, in whatever format, should be returned to the information provider and that all memoranda or other ancillary documents prepared by the recipient and based on the confidential information be destroyed.

8. Injunctive Relief
An injunctive relief clause may be included wherein the receiving party acknowledges that monetary damages may be an insufficient remedy and that the disclosing party should be entitled to injunctive or other equitable relief for any breach of the Confidentiality and Non-Disclosure agreement. In most cases where confidential information is being disclosed, the disclosing party cannot wait until a court determines the amount of monetary damages suffered. Here, the disclosing party will want to immediately apply for an injunction prohibiting any further disclosure of the confidential information.

9. No Liability Regarding Information
The agreement should make it clear that the disclosing party is making no warranty or other commitment regarding the accuracy or completeness of any information provided, and that there is in fact no obligation to provide any particular information to the other party.

In case you’re looking for an Ontario Mutual or One-Sided Confidentiality Agreement, then look no further:

Confidentiality and Non-Disclosure Agreement (Mutual)

This Agreement can be used to restrict both parties’ use and disclosure of confidential information that is being provided to it. If only ONE party is sharing confidential information and want to restrict the other’s use and disclosure of that information, then you can purchase a ONE-SIDED Confidentiality and Non-Disclosure Agreement:

Confidentiality and Non-Disclosure Agreement (One-Sided)

Here’s the sample Video Guide that comes with the Confidentiality and Non-Disclosure Agreement (Mutual):

Here’s the sample Video Guide that comes with the Confidentiality and Non-Disclosure Agreement (One-Sided):

All of Dynamic Lawyers‘ legal forms are lawyer-prepared, simple to read, easy to customize, and only a fraction of the price a lawyer would charge. Also, each legal form comes with a FREE VIDEO GUIDE (watch a useful example of how this legal form can be customized), a FREE DL GUIDE (read helpful information about this legal form), and another FREE DL GUIDE that sheds valuable insight into how legal forms can be challenged. What are you waiting for? Best of all, if you DO need a lawyer and need some legal advice, simply make a post and get FREE quotes from Ontario lawyers focusing on the area of law you require!

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A while back, I looked into what was required to form a multi-disciplinary partnership with non-lawyers (e.g. accountants, bankers, insurance agents, consultants, Realtors, etc.) to offer legal services.  I thought it would be great to have connections with professionals who could provide me with constant and good quality referrals.

But I quickly dropped the idea after discovering a simple truth: compliance with the Law Society of Upper Canada Rules of Professional Conduct and By Law 7 was more than I imagined I could handle!  Being a sole practitioner as it is – with trust fund accounting, insurance and law society filings, etc. – is already burdensome enough when compared with other occupations and professions.  But it’s got to be down-right scary for lawyers (in my humble opinion) in my position who are considering forming affiliations and multi-disciplinary associations/partnerships with non-lawyers.   Here’s why…

For starters, lawyers are ethically and legally not permitted to share, divide, or otherwise split any revenue, cash flows, or profits with non-lawyers generated in the context of providing legal services (LSUC, Rules of Professional Conduct, Rule 2.08(8); see also LSUC, Knowledge Tree, “Fees, Billings and Collection: Referral Fees, Fee Splitting and Division of Fees”).  Lawyers can do so through multi-disciplinary partnership, but not through affiliations or multi-disciplinary associations.

Affiliations

So what if a lawyer or law firm started paying non-lawyers for certain business services that facilitated the delivering/promoting of the former’s services?  Well this business structure could lead to an “affiliation” under the LSUC’s Rules of Professional Conduct (Rule 1.02) and By Law 7.  Simply put, an affiliation exists where one entity (e.g. person, business, organization, etc.) joins a lawyer or law firm to deliver/promote the latter’s services.  If this is the case, then the lawyer or law firm would still not be able to share, divide, or otherwise split revenue, cash flow, or profit generated in the context of providing legal services to the affiliated entity (LSUC, Rule 2.08(9)).

Furthermore, the lawyer or law firm would be subject to additional onerous ethical/professional obligations and reporting requirements, such as:

• Informing clients about the nature and scope of the lawyer or law firm’s affiliation with the affiliated entity and obtain their consent to proceed (Rules 2.04(10.1 ) and (10.2));
• Establish a system to search for conflicts of interest with the affiliated entity (Rules 2.04(10.1 ) and (10.3));
• Ensure that the lawyer or law firm’s advertisements do not mislead the public about who is providing the legal services (Rules 3.04(3), Commentary);
• Ensure that the lawyer or law firm own and maintain control over the law practice and that such practice is not operated on premises used by the affiliated entity for the delivery of the affiliated entity’s non-legal services (By-Law 7, s. 32); and
• Disclose to the LSUC a report disclosing information between the lawyer or law practice and the affiliated entity with respect to financial agreements, ownership/control/management of the law practice, the lawyer’s compliance with conflict-of-interest requirements, and the lawyer’s compliance with confidentiality requirements (By Law 7, s. 33(2)).

The bottom line is that forming an affiliation with non-lawyers is too burdensome and not worth it (because fees cannot be split).

What about a multi-disciplinary association? Well, if non-lawyers teamed up with lawyers to support/supplement the latter’s provision of legal services to clients, then the Law Society of Upper Canada’s multi-discipline rules could be triggered.  Such rules impose obligations on all of the members of the association.  For example, the non-lawyers would:

• Not be able to practice their profession, trade, or occupation except to support/supplement the lawyer or law firm in providing client services (By Law 7, s. 18(2)(1)).
• Have to give effective control to the lawyer or law firm over its practice of its profession, trade, or occupation (By Law 7, s. 18(2)3);
• Not be able to practice its profession, trade, or occupation independent of its agreement with the lawyer or law practice on the premises used by the association (By Law 7, s. 18(2)5); and
• Have to agree to be bound by the Law Society of Upper Canada’s Rules, Guidelines, By-Laws, etc. (By Law 7, ss. 18(2)2).

For their part, the lawyer or law practice would have to agree to comply with various onerous obligations, such as being responsible for ensuring that the non-lawyer members of the association use appropriate skill, judgment, and competence in performing its profession, trade, or occupation and in complying with the Law Society of Upper Canada’s Rules, Guidelines, By-Laws, etc. (By Law 7, s. 19).  As aformentioned, lawyers would not be able to split or share their revenues, cash flows, or net income with the non-lawyer members of the multi-disciplinary association.  So again, the costs far outweigh the advantages of this structure.

So that leaves us with the Multi-Discipline Partnership

A multi-disciplinary partnership involves non-lawyers supporting/supplementing lawyers in providing legal services to clients.  The non-lawyer members of the partnership would, once again, have to comply with the same onerous conditions as non-lawyer members of a multi-disciplinary association.   And so too would the lawyer .  The only difference is that lawyers and non-lawyers would be able to share revenues, cash flows, and profits through the partnership.

Overall, if non-lawyers are going to get involved in promoting and delivering legal services, then the Law Society of Upper Canada is going to have to re-tool its Rules and By Laws to open up the market.  We’ve already seen the large Bay St. law firms hire business managers to help run their law practices more as businesses than as legal professions; let’s keep moving down that road so that we can make legal services more accessible to the general public.

written by admin \\ tags: accountants, advertising, affiliations, agreement, association, associations, confidentiality, insurance, law society of upper canada, lawyer, lawyers, multi-disciplinary sharing profits, partnership, practitioner, publicity, referrals