In its recent 6-1 decision delivered last Thursday in Merk v. International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, Local 771, the Supreme Court of Canada has ruled in favour of a broad interpretation of the whistleblower protection provision contained in Saskatchewan’s Labour Standards Act, holding that employees internally reporting wrongdoing to persons “up the ladder” i.e. in a position of authority within the employer organization enjoyed the same protection as employees reporting wrongdoing to public authorities pursuant to Section 74 of that Act.

Section 74 of the Saskatchewan statute, at that time, made it an offence for an employer to retaliate against an employee who reported or proposed to report to a “lawful authority” any activity that is or is likely to result in an offence.  Linda Merk was terminated by her employer, a trade union, after blowing the whistle to officials within the union on the double dipping practices of one of her supervisors.  She launched a private prosecution against the union alleging that it had violated Section 74.  In a somewhat odd turn of events, and although unions have long been known to cry-out against the absence of adequate whistleblower protection in Canada, the defendant union sought to defeat the rights of employees, by arguing that a “lawful authority” only included those persons with the public authority to enforce laws, such as police or other state agents, and not union officials. 

The plaintiff lost her case at the summary conviction and appeal levels, with the lower courts accepting the union’s interpretation.  A majority of Court of Appeal judges held a "lawful authority" to be one that is "capable of exercising authority, in the sense of being able to compel obedience, with respect to the conduct reported as an offence" and determined that this excluded the union officials.  The dissenting minority judge would have allowed Merk’s appeal on the basis that this expression included any person “authoritatively empowered to act on the matter.” Ultimately preferring this broader interpretation, the Supreme Court decided that a “lawful authority” included not only public authorities but also “private” authorities within an employer organization who could exercise authority over the activities complained of.  It is to be noted that, by the time the Supreme Court decided the case, the Saskatchewan legislature had amended its whistleblower legislation to protect explicitly internal “up the ladder” whistleblowing, as in the case of Merk.

In its decision, the Supreme Court emphasized the importance of the realities of the workplace and of the general principles of labour relations, while surprisingly setting aside the ordinary rule of narrow interpretation of statutory offences.  More specifically, the Supreme Court reasoned that a broad interpretation of the expression “lawful authority” was warranted given that (a) the plain meaning of “lawful authority” is not necessarily restricted to that of “public authority”; (b) the provision’s purpose was to assist the state in the suppression of unlawful conduct and to provide protection to the employees who joined in to this important purpose; (c) the balance between an employee’s duty of loyalty to an employer and the public interest in the suppression of unlawful activity is best reconciled by protecting (and encouraging) employees who first report wrongdoing internally to their employers; and (d) protecting only those employees who report wrongdoing externally to public authorities was irrational, contrary to good labour relations and was not in line with the realities of the workplace. 

This decision will likely have important consequences on the Canadian legal landscape, as it signals a clear intent to enhance whistleblower protection legislation adopted by the legislative assemblies following the prominent scandals in the public administration and financial sectors, such as the recently enacted Section 425.1 of the Criminal Code.  This provision, which has yet to be tested by a court, constitutes the first whistleblower protection legislation to apply in a comprehensive manner in Canada’s private-sector. The provision was adopted in the wake of the American Sarbanes-Oxley Act, and protects whistleblowers who disclose any type of criminal activity by their employer by providing for criminal sanctions, including the possibility of imprisonment.

Also of importance is the fact that the Supreme Court did not address the issue of what constitutes, within an organization, sufficient “authority” over persons or activities for the whistleblower provisions to apply.  While certain union officials and managers may have significant authority, and could even “compel obedience” from their employees, which could arguably meet the narrower interpretation of the Court of Appeal’s majority, the Supreme Court does not provide any guidance for the more ambiguous situations which are bound to arise in the complex realities of the workplace, where, for example, employees may find it easier to report to their peers or outside of their immediate departments to persons who do not necessarily have clear authority over the reported activities.  

Given that the current trend in Canada is to enhance whistleblower protection and given the complexity of the situations which can arise in the workplace, employers may benefit from developing and implementing adequate internal reporting systems to ensure that employees are encouraged and have proper channels to report unlawful behaviour internally and that this behaviour is treated in an appropriate manner by persons with the requisite authority.

Please do not hesitate to call Bogdan Catanu (514-841-6571) or Guy Du Pont (514-841-6406) in the Montreal office if you would like further information on this case or to obtain a complete copy of the decision.

Davies Ward Phillips & Vineberg LLP, with over 235 lawyers, practises nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris, and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.