Restraint of trade

This week's SCC hearings, banning noncompetes, and BC's decision to backtrack.

I’m sure Tim Hortons has been basking in the glory of its recent nationwide pizza launch. But you can only ride a high for so long.

The company is now facing a proposed class action for accidentally telling half a million people they won a boat. And another lawsuit over an allegedly faulty drink tray that led to severe burns.

— Dylan Gibbs, with Alexandra Son


6-min read

  • Scrutinizing regulations

  • Crown honour vs. contract

  • Banning noncompetes


This week at the Supreme Court

This was the Supreme Court’s only sitting week of the month. But it’s been action-packed. Here’s a look at what’s happening.

Hand with red pen marking up paper

Judicial review of regulations

Today’s hearing is a big one for admin law. The Court is deciding how much deference to give when reviewing regulations.

  • In Katz, the Supreme Court said courts should only interfere with regulations in “egregious” cases — when regulations are completely unrelated to their enabling statute’s purpose. It’s a hyper-deferential approach that would almost always protect a decision to enact regulations.

  • But the Court arguably overturned Katz in Vavilov. With just a few exceptions for correctness review, Vavilov tells courts to assess administrative decisions using a universal standard of reasonableness.

  • And it’s tough to square a universal approach with the one-off subscription to Reasonableness+ that Katz gave to regulations.

Appellate courts are split. The Federal Court of Appeal said Katz is out — courts should review regulations for reasonableness just like any other administrative decision. But the Supreme Court hearing covers two Alberta cases, where the Court of Appeal (forcefully) said that regulations still deserve special treatment:

[The appellant’s arguments challenging the federal Child Support Guidelines] are clouded by considerations that are simply irrelevant: the policy choices adopted by the Governor in Council, the effectiveness of the Guidelines, and how the Guidelines impact him personally.

[His] tortured approach illustrates the impracticality of applying a Vavilov standard of reasonableness review [and] the corresponding simplicity and clarity of applying Katz.

Auer v. Auer, 2022 ABCA 375 at paras 100-104

Ornate Crown resting on a contract

How far does the Crown’s honour go?

In a two-day hearing earlier this week, Quebec argued that the honour of the Crown can’t override a clear contract.

What happened? Canadian police services have underperformed in Indigenous communities. That’s why Canada and Quebec agreed to fund an Indigenous police service self-managed by the Pekuakamiulnuatsh Innu First Nation. But the funding agreement was limited.

  • Canada and Quebec capped the amount of funding for each budget year, leaving deficits on the First Nation’s shoulders.

  • And there’s an entire agreement clause, restricting the parties’ rights to the terms of the contract.

The First Nation ended up with an underfunded police service lacking basic resources. So they sued, arguing it was dishonourable for the governments to leave the police service in that position.

On appeal: The Supreme Court is looking at whether Canada and Quebec had to go above and beyond the contract’s terms. The Superior Court said no. According to the trial judge, the Crown only has to act honourably when constitutionally-protected Indigenous rights are at stake — not when the government simply contracts with Indigenous peoples. But the Court of Appeal disagreed:

[Relying solely on the agreements would] allow [Canada and Quebec] to contract out of their obligation to act honourably towards the [First Nation], an obligation [that] applies independently of the expressed or implied intention of the parties – thus, independently of the wording of the agreements.

Takuhikan c. Québec, 2022 QCCA 1699 at para 117

There was also a criminal appeal as of right this week. I don’t spend much time thinking or writing about those — because the Court tends to deal with them from the bench (like it did in this case). But it doesn’t feel right not to mention that both counsel who acted for the Crown are brilliant former colleagues of mine. They successfully overturned an Ontario Court of Appeal decision, restoring convictions for sexual offences committed against a child.

Kudos to Veenu and Étienne.



🗑️ BC shelved the legislation that would have let it sue social media companies (and any other company with a risky product). Premier David Eby said Meta, TikTok, X, and Snap agreed to work collaboratively on the issue of online harm, avoiding litigation (at least for now).

🪧 McGill law professors are on strike.

🙌 People have donated more than $280,000 to help Umar Zameer move on with his life after his acquittal earlier this week for the death of Detective-Constable Jeffrey Northrup.

🤖 The Law Society of Ontario’s Futures Committee tabled guidance on generative AI. If you’re looking for a nationwide roundup of how Law Societies are approaching this issue, check out Professor Amy Salyzyn’s LinkedIn post (and the additions in the comments).

🤓 If you have a strong grasp on Ontario employment law, CanLII and Andrew Monkhouse are looking for volunteers to contribute to an annotated Employment Standards Act.

Beyond the border

🤳 President Biden gave final approval to the law forcing TikTok’s parent company to sell the business. ByteDance needs to sell by January or face a ban on TikTok in the US. TikTok CEO Shou Chew isn’t flinching, saying the company has defeated TikTok bans in the courts before and expects to do the same this time around.

🔓 The US Federal Trade Commission banned noncompete agreements for workers nationwide. The ban is similar to the one Ontario introduced in 2021, with a few key differences.

  • Ontario’s ban doesn’t apply retroactively. The US ban covers existing agreements, except agreements between employers and senior executives.

  • Ontario carves out all noncompete agreements made with senior executives. In the US, existing executive agreements are safe — but not new ones.

  • Both jurisdictions have exceptions for business sales. Business owners who sell their business and start working for the purchaser can generally be held to a noncompete.

TRU professor Matt Malone says it’s high time for Canada to adopt a nationwide ban itself (Globe and Mail).

Dylan Gibbs

That’s all for today. Govern yourself accordingly.

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