Litigation
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Buying or Selling: How to Avoid Litigation Related to Hidden Defects

Buying or Selling: How to Avoid Litigation Related to Hidden Defects

By Emily R. Erhardt

 1. Obligations of Parties/ Factors Considered by the Courts

Saskatchewan courts have noted that the long-applied principle of caveat emptor, the doctrine holding that purchasers buy at their own risk[1], is the starting point in the law regarding the sale of land.[2] This places an onus on the purchaser of a property to conduct reasonable inspections in order to identify defects.

However, there are exceptions to this doctrine, including if the seller either misrepresented the existence or extent of a defect or acted to conceal a patent defect, meaning a defect which can be discovered by conducting a reasonable inspection and making reasonable inquiries about the property.[3]

The seller’s act of concealment must be such as to turn the defect from a patent one to a latent one,[4] i.e. a defect which a routine home inspection wouldn’t readily reveal.

There is typically a high onus on the buyer to inspect and discover patent defects, which involves conducting a “reasonable inspection by a qualified person.[5] Although a seller does not have a duty to show the buyer any patent defects, the seller may be liable for concealing latent defects or making negligent misrepresentations about latent defects.

2. Ensuring Compliance with Obligations

 i. Sellers/ Vendors

 As mentioned, sellers must not misrepresent or conceal defects in a property. Concealment has been found to include wilful blindness of defects.[6] An example of this may be if you had knowledge of cracking in the basement walls but refused to remove drywall for fear of being proven correct.

A seller may also be held liable in the following situations:

  • Where they know of a latent defect rendering a house unfit for habitation;
  • Where they are reckless as to the truth or falsity of statements relating to the fitness of the house for habitation;
  • Where they breach their duty to disclose a latent defect that renders the premises dangerous.[7]

To avoid liability, sellers should be honest in their dealings and take appropriate measures to ensure that the property is safe and that any potentially dangerous defects have been disclosed.

 ii. Purchasers

In order to take reasonable steps to identify defects in a property, it is recommended that a potential purchaser obtain a home inspection by a qualified individual. It would also be prudent to obtain a disclosure statement from the seller, which would identify issues including defects known to the seller.

It is also important to note that where a buyer relies on his or her own inspections (or those of people he has hired for such purpose) to decide whether to complete a land purchase, he cannot later claim to have relied on the seller.[8]

Before assuming that a seller has concealed or negligently misrepresented certain aspects of a property, a purchaser should consider whether or not they can establish that the latent defect was known to the seller, or whether it can be proven that the seller was guilty of concealment or a reckless disregard of the truth or falsity of any representations made.

3. The Court’s Assessment of Damages (rectifying the undisclosed issues)

 Many claims for remedying defects are dismissed because purchasers are unable to lead evidence or establish that the seller was aware of defects associated with a property. Cases wherein purchasers are able to establish knowledge and concealment of defects often give rise to awards for damages. In determining an appropriate amount of damages, courts consider the amount required to remedy the defect. For example, in Paton v. Little [2003 SKQB 43], the purchasers of a home were awarded damages after it was determined that the seller knew and concealed that the foundation of the home had to be largely replaced. After obtaining a report from a contractor, it was determined that it would cost $60,000.00 to repair the foundation. The purchasers were permitted to enter judgment for $60,000.00.

Similarly, in Reeves v. Taylor [2013 MBQB 125], the purchaser of a home was awarded $18,758.72 in damages for costs to repair his home after the seller was found to have made several misrepresentations on a condition statement. The purchaser led an abundance of evidence establishing that the seller had made representations in relation to the stability of the foundation and status of the heating system which he knew were false. The purchaser was also found to have been induced to make the offer to purchase on the basis of the seller’s representations.

It is important to note that the court’s objective in this context is to make the purchaser whole, or put them in the position that they would have been in but for the misrepresentations of the seller. To receive damages, a purchaser must have suffered a detriment or incurred actual costs flowing from the misrepresentations of the seller. The writer is unaware of cases wherein the courts have ordered damages above and beyond costs for repairs associated with a seller’s misrepresentations.

 4. Conclusion

As a seller, it is important to fully and honestly disclose all known defects about a property upon listing it for sale. Conversely, purchasers must take reasonable steps to identify defects, including requesting a disclosure statement and obtaining an inspection of the property. If a purchaser is considering making a claim, he or she should ensure that they have enough evidence to establish that the seller knowingly concealed defects associated with the purchased property. If you have questions associated with this evidentiary threshold, or are seeking advice regarding a potential claim, we encourage you to contact us and would be happy to refer you to one of our real estate or litigation specialists.

September 2020

Disclaimer:  This article contains general information only as of the indicated date.  It relates to Saskatchewan, Canada and may not be applicable in your jurisdiction.  It does not constitute legal advice to you and no solicitor client relationship will be established by reading this article.  Specific legal advice should be obtained by the reader on any topics discussed above from a lawyer entitled to practise law in your jurisdiction.

© Copyright 2020 Olive Waller Zinkhan & Waller LLP. All rights reserved. No part of this publication may be transmitted or reproduced without the written permission of the copyright holder.

[1] Garner, Bryan A., Black’s Law Dictionary (4th Ed) pg 102 “caveat emptor”.

[2] Britt v. Klimczak, 2010 SKQB 407 at para 41.

[3] 1348623 Alberta Ltd. v. Choubal, [2016 SKQB 129] at para 185, citing Cardwell v. Perthen [2006 BCSC 333] at para 122.

[4] Rose and Whitefly v. Overs, [2008 SKPC 63] at para 33.

[5] 44601 B.C. Ltd. v. Ashcroft (Village), [1998] B.C.J. No. 1964(S.C.); Bernstein v. James Dobney & Associates, 2003 BCSC 9856.

[6] 1348623 Alberta Ltd. v. Choubal [2016 SKQB] 129 at para 223.

[7] Ibid at para 183.

[8] Stann v. Lukan [2007 SKQB 366] at paragraph 93.

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Why Should You Have A Lawyer Assist You In Purchasing A Home?

Whether you are a seasoned homebuyer or in the process of purchasing your first home, it can be a stressful experience. Having a lawyer assist you with the home buying process can ease a great deal of that stress. On a basic level a lawyer will guide you through a real estate transaction with neat checklists and arrange for the land to be transferred to the buyer. However, there are many other important tasks the lawyer assists with in a real estate transaction. Read on to learn more.

1.  Due Diligence Searches

A lawyer will conduct a series of due diligence searches for you. These serve a variety of purposes, but generally ensure that you are aware of what exactly you are buying, that there are no unknown interests on the property and that each party pays their respective costs.

One such search is search of the Land Titles Registry. This search will reveal if there are any unexpected parties with a claim against the property. Additionally, this will reveal the amount of the mortgage that the current owner’s lender has secured against the land, which will need to be paid out in the course of the transaction.

Another search the lawyer will perform is for municipal taxes on the property. Conducting this search allows your lawyer to ensure that there are no arrears in taxes on the property accrued by the seller. Having this information also allows your lawyer to calculate the taxes due on closing. This will ensure that you, as the buyer, are not paying for taxes on the property accrued prior to closing on the sale.

2.  Review Contracts

Lawyer may not become involved until after the agreement for sale has been completed and conditions are removed. At this point financing may already be in place and the sale is ready to move ahead. Your lawyer will receive all required pieces of information, such as the address of the property, the names of the parties, purchase price and possession date. This enables the lawyer to start working on the file.

The lawyer will review the contracts and ensure that all conditions are completed and will ensure that all necessary aspects of the sale are accounted for. The lawyer will also review the offer and confirm what exactly it is you are purchasing. For example, they will ensure you understand what appliances are included in the sale of the home, whether there are any rented appliances which need to be contracted for and if there are any moveables, such as outdoor storage sheds, that are not included in the terms of the sale.

3.  Secure you against fraud

Lawyers are able to give and accept trust conditions. A trust condition is a promise undertaken by a lawyer, which, if accepted, binds the lawyer personally to ensure that this promise is followed through on. It is important to note that only a lawyer can give trust conditions to another lawyer. Having a lawyer on both sides of a transaction ensures that both parties follow through with the sale as planned. Both the buyer’s and seller’s lawyers will give and undertake trust conditions in a transaction. For example, the seller’s lawyer will be undertake to transfer the title into the name of the buyer and pay out any current mortgage on the property, upon receiving funds. The buyer’s lawyer will undertake to forward the mortgage funds as soon as they have access to them. Buying a property without a lawyer can leave you vulnerable to being defrauded. You do not want to find yourself in the position of having forwarded funds to a seller, if there is no trust condition in place binding them to transfer the land to you in return.

4.  Advise on title insurance

Your lawyer can answer any questions and advise you on the benefits of title insurance and real property reports, or if they are required in a transaction. Title insurance is an alternative to ordering a real property report. A real property report will tell you where your property lines are and if there are any easements or encroachments on the property. Ordering a real property report allows a buyer to know exactly what they are purchasing and if there are any contractual issues to be dealt with prior to furthering the transaction. Ordering a real property report can be quite costly and in some circumstances arranging for title insurance can be an appropriate, and less expensive, alternative to doing so. Title insurance covers specific loss on damage that results from certain defects to the title or ownership of the property.

Sometimes a lender will require that you obtain title insurance, and your lawyer can advise you if this is the case. Title insurance, depending on your policy, can protect you from financial losses that may occur as a result of dealing with unexpected easements or encroachments. It can also protect you if you discover that a structure on the property is in violation of a municipal bylaw, after the closing of the sale.

5.  Ensure you have title after transaction closes

After the closing of the transaction, your lawyer will provide you with a copy of the title to your new property. Any interests against the land registered against the land on behalf of the seller will usually have been dealt with by this point, yet may still appear on title for a short period of time. Your lawyer will advise you as to what these interests are, why they are still there, and provide you with an updated title once those interests have been discharged. This title should be free and clear of any registered interests against the land at the time of the transfer. After the sale, your lender, if one was involved, will have its mortgage registered on the title.

If you have any questions about the role of a lawyer in a real estate transaction or require assistance in an upcoming property purchase, contact us today.

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Vicarious Liability

My employee caused damage, can my business be held liable?

Did you know that an as employer you can be liable for the actions of your employees? The principle that an employer can be held liable for actions of its employees is called vicarious liability. Vicarious liability is an implied term in all employment contracts. Essentially, it means if an employee causes harm to a person or property during the course of his or her job duties, the employer can be found to be liable for the actions of that employee. Vicarious liability applies whether or not such actions were directly authorized by the employer where there is a close connection between the authorized acts of an employee and the harm suffered. It can apply even where an employee has adopted an unauthorized or incorrect method of completing an authorized task. Employers, including non-profit corporations, have been found to be vicariously liable for:

  • discriminatory actions of employees;
  • vehicular and other accidents caused while an employee is on the job (even where an employee has been found to have made a detour while driving);
  • assault and battery committed by employees;
  • theft and fraud committed by employees; and
  • sexual abuse and other types of workplace harassment perpetrated by employees (particularly where the employer is found to have known about the abuse or harassment and done nothing to curb the behaviour).

Typically employer liability is confined to actions conducted by employees during the course of employment. However, the courts have interpreted the phrase “during the course of employment” quite broadly to include activities that fairly and reasonably may be said to be incidental to the employment or logically connected to it. In some circumstances, liability has extended to off-duty conduct of employees including business trips authorized by the employer.

The reasoning behind the principle of vicarious liability is two-fold:

  •  it increases the likelihood of providing a harmed party an adequate remedy because businesses generally have a greater ability to pay than individual employees; and
  • it operates to deter businesses and their employees from acting negligently and ensure that the businesses standing to profit from the activities of their employees bear the risk.

Contact Us

If you would like information on how to help your business mitigate the risk of vicarious liability, please do not hesitate to Contact us to discuss your options.

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Saskatchewan’s New “Revenge Porn” Law

The ever-evolving nature of social media and smartphones has challenged governments to keep up to date with current technology and the social harms that may result. In response to the advent of cyberbullying and revenge porn, the Saskatchewan provincial government has made changes to The Privacy Act. On September 15, 2018, amendments to The Privacy Act came into effect in Saskatchewan, providing new legal avenues for those whose intimate images have been shared without their consent.

The Privacy Act (the “Act”) now contains a definition for “intimate image”. An “intimate image” is defined as a visual recording (photograph, film, or video) in which a person is nude or exposing themselves or is engaged in explicit sexual activity. Under the Act, it is wrongful to distribute intimate images of another person without that person’s consent. Further, a person does not have to prove any loss or damages in order to sue.

If a claim is made that intimate images were distributed without a person’s consent, it is presumed that the intimate images were distributed without the consent of the person depicted in the image. The defendant must establish that he or she had reasonable grounds to believe that he or she had consent to distribute the intimate image.

An action claiming the non-consensual distribution of intimate images can be commenced through the Court of Queen’s Bench or through Provincial Court. If proceeding through Provincial Court, the cap for damages is $30,000. There is no cap for damages in Court of Queen’s Bench.

A court can make a number of orders if a claim for the non-consensual distribution of intimate images is successful. A court may make a monetary award, which is an award damages. Types of damages that could be awarded are general, special, aggravated, and punitive. The purpose of damages is to compensate for a loss. General damages are awarded for non-monetary losses, such as pain and suffering. Special damages are quantifiable, meaning the exact amount of the damage can be measured. Punitive damages are awarded as a deterrent and to penalize a defendant in cases where he or her conduct has been malicious or particularly egregious. Aggravated damages compensate for intangible injuries resulting from a defendant’s actions, i.e. injuries aggravated by the defendant’s behaviour.

A court may also order that any profits received as a result of non-consensual distribution of an intimate image be recovered by the plaintiff. An injunction could be issued prohibiting further distribution of the intimate image.

A person could also be charged under the Criminal Code for distributing intimate images without a person’s consent. Under section 162.1 of the Criminal Code, a person who “knowingly” distributes an intimate image without the consent of the person depicted in the image can be charged with an indictable offence that could result in up to five years in prison.

Our Litigation team can answer any questions you may have about Saskatchewan’s new “revenge porn” law. Contact us if you need more information.

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Unanimous Shareholders Agreements

What is a Unanimous Shareholder Agreement?

A Unanimous Shareholders Agreement, or “USA” as it is commonly referred to, is a formal written agreement between all of the shareholders of a corporation. All of the shareholders must unanimously agree to restrict the authority of the directors of the corporation and create a different set of rules from the baseline rules established by The Business Corporations Act (Saskatchewan) or the Business Corporations Act (Canada).

Is it advantageous to have a USA?

Whether that corporation is a closely held Saskatchewan corporation or federally registered corporation a USA restricts the rights of the directors to manage the corporation and may move those rights to the shareholders of the corporation. In corporations whereby there are two or more shareholders with equal or similar shareholdings a USA can provide a mechanism for decision making where there is a deadlock between the parties, when important or material decisions need to be made, how the corporation will be funded and any shareholder rights of first refusal or any other buy/sell considerations. A USA may also provide for formulas to set out the method of valuing the corporation in situations where a shareholder needs to exit the corporation or new shareholders wish to join the corporation.

Are there any reasons not to have a USA?

In instances where the shareholders are the same people as the directors in a corporation there are not many drawbacks to having a USA. However, in situations where the directors and the shareholder differ, shareholders may become subject to some of the liabilities normally assigned to directors to the extent that a USA moves those responsibilities from the directors to the shareholders.

To USA or not to USA – is that still the question?

Clarifying the expectations between shareholders at the initial stages of organizing the corporation or before a dispute arises can be the best way for the corporation to avoid drawn out and expensive disputes or litigation down the road.

If your still not sure a USA is right for your corporation, please contact Matthew Park of our business law team to discuss the ins and outs of Unanimous Shareholders Agreements and the various terms and conditions which can be found therein.

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Understanding Interspousal Contracts for Family Property Planning

If you and your partner enter into a spousal relationship with valuable property that you would like to retain as your own, or ensure your children from a previous relationship inherit, you should consider signing an Interspousal Contract either prior to entering the spousal relationship or during the relationship. In Saskatchewan, The Family Property Act governs how property will be distributed between spouses in the event of a breakdown of the relationship. The general principle of the Act is that all family property, or its value, should be divided equally between the parties, subject to exceptions, exemptions, and equitable considerations contained in the Act. An Interspousal Contract can exempt certain family property from being equally divided by setting out who will continue to possess and own certain property upon a breakdown of the spousal relationship or the passing of either spouse.

Who is considered a spouse?

For family property purposes, your spouse can be either the person you are legally married to or the person you have continuously cohabited with in a spousal relationship for a period of at least two years. Whether you have cohabited as spouses for two years is a factual determination, and you should contact a lawyer if you are unsure whether your relationship might constitute a spousal relationship for the purposes of property division.

Either spouse is able to make an application for the division of family property after a separation. The Act requires that an application for family property division be made within two years from the date you and your spouse cease to cohabit. In the case of married spouses, either spouse may apply for a division of family property prior to being granted a divorce.

What is an Interspousal Contract?

An Interspousal Contract is a written agreement between two spouses that deals with possession, status, ownership, disposition, or distribution of family property, including future family property. The Contract can be entered into by you and your partner prior to commencing a spousal relationship, after you are already cohabiting, or after you have already been married. However, the Contract is unenforceable until you are married or begin cohabiting. The Contract may also be entered into by spouses after the spousal relationship has broken down to determine family property and other issues that would otherwise be decided by the Court. The focus of this handout is on those contracts entered prior to the breakdown of the spousal relationship, also sometimes referred to as Prenuptial Agreements or Cohabitation Agreements.

There are both formal and substantive requirements that must be satisfied to enter a valid Interspousal Contract. Each spouse will need to see their own separate lawyer to satisfy the formal requirements of a valid Interspousal Contract and be informed of their property rights.

The substantive requirements include that the contract not be unconscionable or grossly unfair to either party at the time the Contract was entered into. There is also a duty on both spouses to make full and honest disclosure of all property information prior to entering the Contract.

Pre-nuptial agreements can also address spousal support issues though that is an separate issue that will not be addressed herein.

What is family property?

Family property is all real and personal property that is owned by one or both spouses, or that either spouse has an interest in, at the time an application for a division of property is made. Family property may consist of the family home, income properties, furniture, vehicles, bank accounts, pensions, RRSPs, business interests, shares, collectible items, insurance policies, severance packages, retirement settlements, CPP benefits, inheritances, a trust to which you are a beneficiary, and standing or harvested crops, just to name some examples. Family property can also include increases in the value of property which you owned prior to the relationship and can include the entirety of your home even if owned prior to the relationship. Speak with a lawyer if you are unsure whether certain assets may be considered family property prior to agreeing to any Interspousal Contract.

What are the rights of each spouse upon a breakdown of the spousal relationship?

The Act requires that all family property, or its value, be distributed equally between the parties upon a breakdown of the relationship. This principle of equal division can be subject to exceptions, exemptions, and equitable considerations contained in the Act. An Interspousal Contract is one way to exempt property from being equally distributed.

Many people think a short spousal relationship or misconduct on the part of one of the parties will mean that the family property does not need to be equally divided. However, there are very few circumstances which are an exception to the principle of equal division or which provide for certain property to be exempted from equal division. Furthermore, the misconduct of either you or your spouse is not relevant in dividing your property unless such misconduct amounts to dissipation of family property or a substantial detriment to the financial standing of either spouse.

What can be determined in an Interspousal Contract?

Generally, an Interspousal Contract entered into prior to or during the spousal relationship will set out what family property will be exempt from distribution pursuant to the Act in the event your spousal relationship ends.Other matters that may be included in the Contract will depend on the wishes of the parties, but can include who will bear any tax liability from the sale of any family property, a release of rights in each other’s estate, an agreement as to who will take on certain debts, and a determination of how property acquired during the spousal relationship will be distributed. Each Interspousal Contract will be different depending on the intentions of the parties entering into the Contract.

What are the benefits of executing an Interspousal Contract prior to beginning the spousal relationship?

As previously mentioned, in the event your spousal relationship ends and either you or your spouse makes an application for a division of family property, the Act provides that all family property is to be divided equally amongst both you and your spouse, subject to any exceptions, exemptions, or equitable considerations. Therefore some benefits of entering an Interspousal Contract prior to beginning your spousal relationship are:

  1. Ensuring you will continue to possess property you have acquired prior to commencing the relationship and not having to share the value of that property, the increase in value over the relationship, or relinquish possession of that property, to your spouse in the event the spousal relationship ends;
  2. Obtaining certainty in how any future acquired family property will be divided or distributed when the relationship ends;
  3. Avoiding the time and cost of an agreement or court order for a division of property after the relationship ends;
  4. Having the ability to decide for yourself how to divide the family property, rather than having a court decide;
  5. Planning for your financial future as it pertains to your savings, pensions, RRSPs, investments, and other personal property that you are relying on for financial support now or in the future; and,
    Having the ability to decide whether your spouse will have rights to share in your estate or property after you die.

Can an Interspousal Contract be changed?

You and your spouse are able to amend and adjust your Interspousal Contract as you see fit. However, in order to do so, both parties will need to agree to all changes to the Contract and sign the amended Contract in front of their own lawyer. If you have an Interspousal Contract and would like to make changes to it, contact a lawyer to make the changes to ensure all requirements of the Act are satisfied.

Should you have any further questions in this regard, we encourage you to contact our Family Law team.

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Interpersonal Violence Leave Under The Saskatchewan Employment Act

The Saskatchewan Employment Act (the “SEA”) has been in effect since 2014. This legislation sets out various employment standards requirements in our province and establishes the minimum obligations that must be met by employers.

One of the subjects addressed in the SEA is that of employment leaves. An employee who has been in an employer’s service for more than 13 consecutive weeks is entitled to employment leave in accordance with the legislation. Among the various types of employment leaves addressed in the legislation is a period of job-protected “interpersonal violence leave”. For purposes of the interpersonal violence leave provisions of the SEA “interpersonal violence” means:

  • any intentional or reckless act or omission that causes bodily harm or damage to property;
  • any act or threatened act that causes a reasonable fear of bodily harm or damage to property;
  • forced confinement;
  • sexual abuse;
  • harassment; or
  • deprivation of necessities.

The interpersonal violence leave entitlement is for a period of up to 10 days in a 52 week period. The employee may take the leave intermittently or in one continuous period. Interpersonal violence leave is an unpaid leave.

The SEA outlines the specific purposes for which interpersonal violence leave may be taken. Where an employee or their child or a person for whom the employee is a caregiver is a victim of interpersonal violence, the employee can request leave from work for any of the following reasons:

  • to seek medical attention (for themselves, their child or a person under their care);
  • to obtain services from a victims services organization;
  • to obtain psychological or other professional counselling;
  • to relocate (either temporarily or permanently); or
  • to seek legal or law enforcement assistance and attend court.

An employer is entitled to ask the employee to provide evidence of the services being received in order to qualify for this leave.

Employers are also specifically required under the SEA to maintain confidentiality and limit disclosure of information respecting all matters that come to their knowledge in relation to an interpersonal violence leave taken by any of their employees.

Contact Us

Employers in Saskatchewan should familiarize themselves with the interpersonal violence leave provisions in the SEA. Ensure your workplace policies and procedures dealing with employee leaves of absence and your obligations to maintain employee privacy address all legal requirements. Need assistance? Our Employment Law team is here to answer your questions and can also help you in developing or updating your workplace policies and procedures to comply with legislated requirements in this and other areas. Contact us for more information.

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Should I Be Incorporating My Business?

Although it is often written that there are two primary reasons to incorporate; namely, limiting personal liability and utilizing tax advantages (and these are good reasons to incorporate), there may be other equally good reasons for you to incorporate. For example, a corporate structure can be the best model for a business with more than one owner, or an owner who wants to involve others – including possible creditors – as participants on some level. Additionally, ease in transferring ownership where a shareholder wishes to move on from the corporation, or passes on, are available with a corporation.

Depending upon your specific situation, incorporating your business or venture may yield important advantages for you. A corporation exists as a separate legal entity from both the directors and shareholders of a company. (The terms “corporation” and “company” can be used interchangeably in our context.) As such, a company can be liable for what it owns or undertakes, and is taxed separately from its directors and shareholders.

Among other things, we will help you:

  • Understand the roles and responsibilities of directors and shareholders.
  • Choose and confirm the availability of your corporate name.
  • Ensure that the share classes and articles of the corporation are tailored for your circumstances.
  • Incorporate the company online.
  • Assemble and maintain your corporate minute book.

Contact Us

At Olive Waller Zinkhan & Waller LLP we work with you and your accounting professional to ensure that every angle is considered in building the most appropriate and best business model for you. We have the experience and expertise to review your business needs and help determine whether incorporation – either now, or at some point in the future – makes sense for you. Contact us to discuss your options.

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Legalization of Recreational Marijuana in Canada – Considerations for Employers

The impending legalization of marijuana for non-medical use in Canada should prompt all employers to consider their existing workplace policies and procedures. Do you have a drug and alcohol policy in your workplace? If so, does that policy need to be updated due to changes in the law regarding recreational marijuana use? If you do not currently have a workplace drug and alcohol policy, do you need one?

Legalization is not a “Free Pass” for Employees

Employees have never had the right to work while intoxicated or impaired due to drug or alcohol use. Nothing about that will change when the recreational use of marijuana becomes legal in Canada. The use of recreational marijuana should be treated by an employer like any other controlled substance, such as alcohol, when it affects employee performance.

Do you have a workplace drug and alcohol policy? Do you need one?

All employers can benefit from having a drug and alcohol policy. The usefulness of such a policy is not restricted to employers with larger workforces, or only to employers who have workers in safety sensitive positions. Any workplace, regardless of the size or the work performed, may experience occurrences of employee impairment while on duty due to their use of either prescription or recreational drugs or alcohol. When faced with such situations, a workplace drug and alcohol policy can provide valuable structure and certainty for all parties on the next steps to be taken by the employer.

Policy Content

A workplace drug and alcohol policy can address a number of issues, including:

  • Prohibiting employees from reporting to work under the influence of any type of alcohol or drug.
  • Defining what constitutes “impairment” or being unfit to report to or remain at work in your workplace.
  • Drug testing. This may not be available to all employers or in all situations, and must be considered in the specific circumstances of your workplace.
  • Repercussions for an employee who is found to be impaired or under the influence of alcohol or drugs (or their after-effects) while at work, including potential disciplinary actions.
  • Disclosure by employees of any medical treatment they are receiving (i.e. taking of prescribed medications), to enable the employer to confirm the employee’s ability to safely perform their duties while using prescribed medication(s) under the care and supervision of their physician.
  • Employee substance abuse/addiction problems. An employee’s drug or alcohol use may be the result of a substance abuse or addiction problem, which in turn may require a workplace accommodation rather than a disciplinary response from the employer should the employee violate the workplace drug and alcohol policy.
  • The duty to accommodate. An employer’s drug and alcohol policy (or related workplace accommodation or illness policy) should address the potential need for a workplace accommodation and/or treatment in the event an employee suffers from a medically confirmed illness, substance abuse or addiction problem. Use of alcohol or drugs, including marijuana (whether prescription or recreational), may result in a physical dependency or addiction which can constitute a disability under applicable human rights legislation. This may in turn trigger the duty to accommodate for an employer under human rights, employment standards and/or occupational health and safety legislation. You may already have a specific policy that speaks to workplace accommodations and how those will be managed – if so, that policy should also be reviewed to ensure it is consistent with any drug and alcohol policy you have or are developing.

Medical Marijuana – More Considerations for Employers

A workplace accommodation for medical reasons may require an employer to deal with employees whose treatment plans involve the taking of prescription drugs, which may include accommodating an employee’s use of prescribed cannabis and/or marijuana. The prescription of such drugs is already legal in Canada so the use of marijuana or cannabis for medical purposes is not new, though it may still be rare in the experience of many employers.

Your employment policies should reflect your obligation to accommodate the use of prescription medications in the workplace, which can include the medical use of marijuana or cannabis where that use is supported by appropriate medical evidence. While the requirement to accommodate (to the point of undue hardship) will apply regardless of the specific prescription medication an employee is taking, in the case of medical marijuana your accommodation assessment and plan should address the need for sufficient detail as to the frequency, volume and method of ingestion relating to the prescribed medical use of medical marijuana or cannabis.

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Employers are required by law to protect the health and safety of their employees in the workplace. You can have, and enforce, a zero-tolerance policy against intoxication or impairment in the workplace. You can also prohibit the use of recreational marijuana during work hours (just as you do with alcohol), and prohibit attendance at work while impaired or unfit to work.

Review your existing workplace policies. Ensure they set out your expectations for your employees and the framework in which drug and alcohol use will be addressed in your workplace. Need assistance? Our Employment Law team is ready to help you in developing or updating your policies to address the needs of your specific workplace. Contact us for more information.