Canada: French language requirements impacting share plans

In the context of share plans, there are two aspects to consider:

Any documents that are related to conditions of employment must be provided in French

• Most multinational companies offering equity awards globally try to take the position that the equity awards are not part of the local employment arrangement, given they are discretionary awards and not offered directly by the local employer. However, given that such awards are offered to the employees of the local entity specifically because the individuals are employed by a related entity of the issuer company, it is likely such awards would be considered part of the conditions of employment for purposes of the new law.
• On this basis, the governing documents for a share award (e.g., the plan and award agreement) likely would need to be provided in French as of 1 June 2022. If an English version of such documents was provided before 1 June 2022, a French translation must be provided as soon as possible if an employee requests it before 1 June 2023.
• It is also possible that other documents/communications related to share awards must be provided in French, although it is still not clear on how far-reaching this requirement will be (e.g., would it extend to the plan prospectus for US public companies, FAQs, tax summaries, broker sites, etc.). If a company does not initially provide such documents to employees in French, it should – at a minimum – indicate that such documents would be provided in French upon the employee's request and then take appropriate steps to provide French versions of such documents upon request.

Any contract of adhesion must be provided in French

• A contract of adhesion is a standard form contract between two parties where the terms and conditions of the contract are set by one of the parties and the other party has little or no ability to negotiate more favorable terms and is in a "take it or leave it"position.
• Most share plan "contracts"will be considered contracts of adhesion (with possible exceptions for contracts for very high level executives).
• The documents considered part of the "contract" for share plan purposes may depend on the particular company. In general, the plan document/plan rules, notice of grant, award agreement, subscription form and/or other documents containing the governing terms and conditions of the award will be considered part of the contract that must be provided in French. If there are other documents incorporated into the governing terms of an award, then these would also be considered part of the contract that must be provided in French.
• There is an additional year to comply with the translation requirements for contracts of adhesion (until 1 June 2023). However, under portions of the law that went into effect as of 1 June 2022, certain provisions of contracts of adhesion that are provided solely in English could be voided in certain circumstances (e.g., any provision that is prejudicial to the employee will be void unless the contract was drafted in English at the employee's request or sufficient explanations were provided to the employee by the employer).
• There is a potential exception to the language requirements for contracts of adhesion "used in relations with persons outside Québec" which might cover contracts between an employee in Quebec and the issuerparent company, but this is currently unclear. And, as noted above, providing French language equity award contracts is likely required as of 1 June 2022 on the basis that such awards constitute a condition of employment.

Under either position above, the French language version of these documents will be the controlling legal documents under the new law, unless the employee chooses to make the English version the controlling version.

Key takeaways

There are a number of decisions and actions companies offering share plans in Quebec will need to take to comply with the new language requirements, including obtaining and distributing translations, managing/enrollment acceptance procedures in light of the new requirements, and ensuring that share plan documents distributed in Quebec no longer include a language "waiver" provision which many companies had included in the past to deal with prior French language requirements.

As is often the case with new legislation, there may be clarifications on the new requirements over the coming months.

For more information

If you have not already done so, please reach out to your Compensation attorney to determine the impact this development has on your company’s share plans and the best approach for your company.