2015 Legislative Session: Fourth Session, 40th Parliament
HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

official report of

Debates of the Legislative Assembly

(hansard)

Wednesday, October 7, 2015

Afternoon Sitting

Volume 29, Number 5

ISSN 0709-1281 (Print)
ISSN 1499-2175 (Online)

WEDNESDAY, OCTOBER 7, 2015

The House met at 1:33 p.m.

[Madame Speaker in the chair.]

Routine Business

Prayers.

Introductions by Members

Hon. N. Letnick: It gives me great pleasure to introduce Jim and Clara Daley. I was in the hallway upstairs a few minutes ago, and they said: “You’re Norm Letnick.” I said, “Yes,” and they said: “We’re constituents of yours.” So would the House please make them welcome.

Joining us in the members’ gallery this afternoon is the Ambassador of Sweden to Canada, His Excellency Sjögren. He is accompanied by the honorary consul of Sweden at Vancouver, Mr. Gradin, and by Mr. Forslund, trade and business promotion, from the Embassy of Sweden in Ottawa. I’ll be meeting with the ambassador this afternoon to discuss bilateral relations between British Columbia and Sweden.

Would the House please extend a warm welcome to the ambassador, the honorary consul and Mr. Forslund.

J. Horgan: It is appropriate that I follow the Minister of Agriculture, seeing that Sweden’s greatest exports to British Columbia are named Henrik and Daniel. I want to thank them very much for that.

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It leads nicely into my introduction. Not joining us here in the gallery today is Adam Cracknell. Adam Cracknell was born in Prince Albert, Saskatchewan. He moved to Juan de Fuca as a teenager. He attended Belmont High School. He played minor hockey in Juan de Fuca, he played Junior B in Saanich, and he was a superstar in Cranbrook with the Kootenay Ice.

Adam was drafted by the Calgary Flames. He played briefly for the St. Louis Blues, the L.A. Kings and, most recently, the Columbus Blue Jackets.

Members will remember the enthusiasm we all had for Kraft Hockeyville here in British Columbia when the member for Saanich North was able to secure funding through all of the good efforts of all members of the House in a bipartisan way to bring Kraft Hockeyville to southern Vancouver Island. The game was played in Colwood. Who scored the winning goal in overtime? Well, it was Adam Cracknell, who was in Victoria and in Vancouver on a tryout contract.

His story is about perseverance and living hard to realize a dream. Tonight — not in the Legislature today, but tonight — Adam Cracknell will be in the dressing room with Daniel and Henrik as the starting fourth line centre for the Vancouver Canucks.

Hard work, perseverance, living the dream. Will we all give great thanks and congratulations to Adam Cracknell for a life well lived.

G. Kyllo: Joining us in the House today we have the Canadian Manufacturers and Exporters Association. We have Marcus Ewart-Johns, who is the vice-president of CME. Also joining him we have Jayson Myers, the president of CME, who’s visiting us today from Toronto.

We also have joining us Marilynn Knoch — she’s executive director of the B.C. PIA — and Betty Lou Pacey, the president of BL Innovative Lighting. We also have Dan Reader, who’s the president of Murray Latta Progressive; Stephan Peel, the vice-president of operations for Ironside Design Manufacturing; and Darryl Anderson, a regional representative for CME.

M. Farnworth: I’d like to take this opportunity to acknowledge that it is the birthday of one of the members of our House, and that is the Government House Leader. House, join me in wishing him happy birthday.

Hon. S. Bond: I’m very pleased to welcome a group of visitors to the gallery today. We have members of the Coalition of B.C. Businesses that are here this afternoon, all of them job creators across the province. We’re very much looking forward to our discussions this afternoon.

We have representatives from the Building Supply Industry Association, the New Car Dealers, the Canadian Home Builders, the Hotel Association — a very long list.

I do want to single out one of them, though, and just welcome in a special way the brand-new president of the B.C. Chamber of Commerce, Jon Garson.

I know the House will want to make all of our special guests welcome this afternoon.

B. Routley: Today, we will have a total of three groups visiting us from the Shawnigan Lake School. Their teacher, Paul Klassen, will be here, along with some help from the parents of these students. They’ll be here at different times during this afternoon.

Please join me in welcoming all of these students to this legislative precinct.

Hon. B. Bennett: I’d like to just recognize three individuals who are with the business coalition. Neil Moody is the CEO of the Home Builders Association of B.C. The president of the Home Builders Association of B.C. is one Simon Howse, who happens to be from Fernie. He emigrated from Australia, he came to Fernie to ski, and he never left. That was about ten years ago.

Welcome, Simon.

I’d also like to welcome an old friend of mine and of many other people in this House — at least on this side of the House — Muneesh Sharma, who worked here for
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many years and was an outstanding executive assistant to me when I first started in cabinet and to many other ministers as well.

Please help me welcome these three gentlemen.

J. Horgan: It’s rare that you get an addendum to an introduction. But joining us in the gallery, because he works here with security, is Adam’s father. I was unaware of this. Peter Cracknell is here today, and I know he’s the proudest father in the place, among a bunch of proud fathers.

Would the House thank Peter for having a great son named Adam and make him very, very welcome.

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S. Hammell: I’d like to welcome to the House Deborah Conner. Deborah is the executive director of the B.C. Schizophrenia Society. I’m sure she’s here to meet both sides of the House. Would the House make her welcome this afternoon.

Ministerial Statements

SOFTWOOD LUMBER AGREEMENT

Hon. C. Clark: I rise to make a statement because this Monday the Canada-U.S. softwood lumber agreement will expire. The agreement that we have at the moment ended five years of litigation between Canada and the U.S. The result of that was returning $2.4 billion in duties to B.C. softwood lumber producers. It provided certainty for the industry. It provided certainty for the 80 communities that rely on that industry and to the thousands of families who depend on that industry to put food on the table for their families.

I want to inform the House that as soon as this federal election is over, whatever the outcome, I will be speaking to the Prime Minister. In my discussion with him, I’m going to ensure that the federal government understands the importance of free and fair access to the U.S. market and what that means for British Columbia but also, in a country where so much of the national economy depends on what happens here in British Columbia, the importance of this agreement for every single Canadian.

I’m going to make sure that our Prime Minister makes the softwood lumber agreement and its renegotiation a priority.

We, in this province, are one of the world’s largest softwood lumber exporters. We have worked very hard to diversify our markets over the years, as well as our economy. Since 2006, softwood lumber exports to China have grown from just 1 percent to 25 percent today. That’s a remarkable change and something that’s been good for communities across the province. We’re going continue our work to expand Asian markets, but the United States will always remain a crucial market for us — our closest neighbours, our closest friends, anywhere in the world.

None of us in this province can forget that forestry built our province. We also know that we cannot take its continued success for granted. We have to work hard to ensure that forestry will endure as a key pillar of jobs and growth in B.C., to ensure that the 80 communities that depend on it continue to thrive.

In order to do this, we all need to very determinedly and purposefully work together — members of this House and, of course, members of the Houses of Parliament in our nation’s capital in Ottawa.

J. Horgan: I welcome the Premier’s commitment to ensuring that her full attention and the full attention of her government will be focused after the federal election — in fact, since the expiration of the softwood lumber agreement this week — on ensuring that we do renew that agreement in the interest of workers here and in the interest of our industry.

It’s critical to know that everyone in this House benefits, whether it’s the communities that the minister articulated…. I made my way through university working in the forest sector. Sadly, since 2002 there are 206 fewer mills in British Columbia and about 25,000 fewer employees. That doesn’t diminish the importance of us all working together to protect what remains and, in fact, grow the industry now and into the future.

My colleague from Surrey-Whalley has been tasked with monitoring the file on behalf of the official opposition. I know he has a very cooperative and working relationship with the Minister of International Trade.

I’m looking very much forward to sharing information and ideas about how we can work together in unison for all British Columbians to make sure we protect this critical and vital industry — not only to our past, I would argue, and I think the Premier agrees, but to our future.

But there is, of course, lots to do here at home that doesn’t involve international negotiations and that we can work on together as well to assist the industry today — trying to reduce the amount of raw log exports, for example, and a range of other issues that are in the hands of the government. I look forward to working with them on those as well.

It’s critical that we stick together on these trade agreements. It’s also critical that we work together to make sure we have a vibrant forest sector now and into the future.

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Statements
(Standing Order 25B)

BEADIFFERENT OPERATIONS IN HOPE

L. Throness: In honour of Small Business Month, I want to highlight a particularly interesting business in my riding. There are many enterprises, both large and small,
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that are like hidden gems in my communities. None could be more like that than a store in Hope called Beadifferent, which is a business name with a pun. Randy Swope began his business creating unique beadwork in 2004. His store offers pretty well anything that a creative person would ever want to make their own affordable jewelry.

But Randy does more than that. He creates his own jewelry out of molten glass in a workshop that he operates on site. I watched him demonstrate his craft, and the results are really beautiful. But Randy does more than that. He is also a woodcarver, already something of a tradition in Hope. You’ll find half a dozen of his carvings around town, two of the sasquatch in Harrison Hot Springs, as well as carvings in 18 other countries. I would invite members to go to his website and look, for example, at his carving of bear cubs, attached high up on a real tree. You would swear that the cubs are real too.

It’s not easy to make your living through art, but over a decade of hard work, ingenuity and natural talent, Randy has literally carved out a living for himself and his family. He’s a great example of an entrepreneur who, like the other 383,000 small business owners in our province, go about doing what they love to do, asking nothing from government but to get out of their way.

People like Randy Swope create a million jobs and make our province an even more unique and interesting place to visit. So next time you’re driving through Hope, why not stop at the bright purple storefront on 3rd Avenue, across from the municipal hall, and visit Beadifferent? You might come out with a new hobby and a whole new look.

FISH STOCKS AND TOURISM
AT KOOTENAY LAKE

M. Mungall: Well, Kootenay Lake is truly spectacular, and I can’t imagine a better place to be in the summertime — or the spring or the fall or the winter, for that matter. I’m not alone in this. Every year people flock to the lake to enjoy all that it has to offer on the shores, on the water, as well as what’s in the lake — fish.

Kootenay Lake is world-renowned for its amazing fish — the beautiful, red kokanee salmon, the ancient sturgeons and the incredible Gerrard rainbow trout. As Kerry Reed puts it on his website for Reel Adventures: “If you’re interested in catching a big fish, take a trip with Kerry and Reel Adventures in British Columbia for a chance to catch the biggest trout in the world.”

That’s exactly what superstars Justin Timberlake and Jessica Biel did in 2010. They were among the many who brought a total of 4 million angler dollars to Kootenay Lake that year. However, five years later, things aren’t looking so good for fishing in Kootenay Lake. Fish populations are plummeting, down to less than 10,000 kokanee spawners from one million, ten years ago. The bigger fish, which need the kokanee for food, are also declining.

As the B.C. Wildlife Federation put it, the Gerrard trout are eating themselves out of house and home. With fewer fish and smaller fish, derbies are being cancelled and businesses are losing customers. For Kerry Reed, he has lost 50 percent of his business.

People around the world want to know what’s going on and what’s going to be done to rebuild the Kootenay Lake fishery. Government has taken some action, but the B.C. Wildlife Federation says that more needs to be done and more can be done.

In moving forward, there is much to learn about how this collapse occurred and much to do to rebuild. In true Kootenay spirit, locals know that by working together, we can save Kootenay Lake fish and the international tourism it brings.

PORT MOODY PUBLIC LIBRARY

L. Reimer: October is Library Month in British Columbia. It is an opportunity to recognize the value of public libraries and the vital role they play in promoting literacy in every community across the province. I had the pleasure, during my years as a city councillor in Coquitlam, to sit on the library board while the new Coquitlam town centre branch was being built. No one would have guessed how incredibly well used it is and has been ever since it opened.

While some libraries are fixtures in the community, some are mobile, such as the mobile book bus in Coquitlam, now called Library Link. Libraries are partners in lifelong learning and help British Columbians of all ages access the information they need to live, learn, work and connect with people.

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In my own constituency of Port Moody–Coquitlam, the 15th annual Links to Literacy Golf Tournament was held in August at Westwood Plateau Golf and Country Club in support of the Port Moody Library. This year’s tournament raised over $35,000 to support our library’s literacy initiatives. The proceeds from this year’s tournament will be directed towards a new learning lounge in the library, which will benefit people of all ages.

Like all libraries across British Columbia, the Port Moody Library supports and encourages student learning through diverse collections, services and on-line resources. Libraries help people develop the skills required to find and evaluate information in order to adapt and succeed in what is becoming an increasingly knowledge-based economy.

My congratulations, therefore, go to all of the 2015 Links to Literacy sponsors and all the volunteers who made this year’s tournament a huge success.

TED PICKELL AND STEWART WORLD PORT

D. Donaldson: How do you get a couple of hundred people to stand on a long dock jutting out into the
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Portland Canal on a cool and wet northern September day and enjoy it? Well, it wasn’t a fishing tournament, and it wasn’t Crab Fest. How you do it is by offering a glimmer of a brighter future. More than a glimmer, actually, because on September 16, I joined a couple of hundred others in Stewart for the official opening of the Stewart World Port.

Ted Pickell, from northeastern B.C., invested $70 million to complete phase 1 of the port, with no provincial or federal dollars directly contributed. The Stewart World Port fills a gap: the break-bulk, roll-on, roll-off imported cargo side, where the northwest is only currently serviced by a port in Washington state.

I first toured the site with Ted Pickell and Stewart mayor Galina Durant about three years ago. At that time, my thoughts were about how important the project was on a north-south basis within Stikine for mining and other industrial projects in the northwest. That’s because there was, and still is, a concern about potential leakage of this business through the Alaskan port of Wrangell, through a potential road called the Bradfield connector west of Iskut and a possible B.C. Hydro inter-tie with the Alaska system.

The Stewart World Port will go a long way to prevent that leakage, but what is really interesting are the west-east possibilities. Already, ships will be coming, starting in January, carrying global giant Air Liquide cargo bound for Alberta. One heavy-haul operator at the official opening told me how he hoped to import 180-foot blades for a wind energy project in northeast B.C. through the port and along Highway 16.

The reality is concrete, and the potential is great. I thanked Ted Pickell that day for his belief and vision. It’s the type of local investment we need in northwest B.C. It is also a testimony to the determination and resilience of the people of Stewart, who remain rooted to place through the ups and downs of the global resource economy. Their future, indeed, looks brighter.

MANUFACTURING INDUSTRY

G. Kyllo: For the second consecutive year, the government is supporting manufacturing by proclaiming October 11 to 17 as Manufacturing Week in B.C. Manufacturing has enormous economic and social impacts in British Columbia. In fact, most jobs, directly or indirectly, depend on manufacturing.

Through the B.C. jobs plan, our government encourages young people to enter the field and access the training required to pursue rewarding careers in the industry. Manufacturing Week draws attention to these innovative, family-supporting jobs and showcases how manufacturing contributes to our province’s diverse, strong and growing economy.

To give you a measure of the impact of manufacturing in B.C., $14.3 billion is the dollar amount that manufacturing contributes to the B.C. economy every year. There are also 12,000 manufacturing companies in British Columbia, and in 2014, we had 161,000 people employed in the manufacturing sector. It’s also worth noting that the average manufacturing wage is 12 percent higher than the provincial average.

The goal of Manufacturing Week is to raise the profile of the sector and to find ways to reduce barriers to job growth in the manufacturing sector. Our government is building stronger partnerships with industry and labour in key sectors, such as the aerospace manufacturing industry, to deliver training and apprenticeships to keep up with the demand for skilled workers.

In B.C., we make just about everything, thanks to our vast forests, rich mineral deposits, a highly educated workforce and a provincewide focus on research and innovation. By proclaiming Manufacturing Week, we demonstrate our commitment to work with manufacturing companies to help build success and create new opportunities for growth.

B. Ralston: October is Manufacturing Month in British Columbia. It’s not just a week; it’s a month. Manufacturing is a significant part of the British Columbia economy, yet it’s sometimes overlooked and underappreciated by the public and by policy-makers. Non-resource manufacturing, particularly, is a bigger part of our industrial base than many may realize.

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British Columbia’s highly visible resource-based manufacturing sector — wood products, pulp and paper, petroleum and coal products, and primary metal products — are important and contribute significantly to British Columbia’s international exports. Yet according to the Business Council of B.C., non-resource manufacturing is even larger than resource-based manufacturing, both in terms of GDP output and number of jobs here in British Columbia.

Non-resource manufacturing in British Columbia is very diverse, comprising 14 different industries. Among the industries: food, machinery, fabricated metal, computer and electronic products, transportation equipment, beverages, chemicals, non-metallic mineral products, plastics and rubber manufacturing, printing and other related products.

The entire manufacturing sector pays wages that are, on average, 15 percent higher than the overall wage for all industries. Manufacturers are much more likely to invest significantly in private sector research and development.

Manufacturing firms in British Columbia tend to be bigger than firms in other sectors and are, therefore, better able to sell into other markets within Canada and abroad. Naturally, there are challenges. However, this month is the occasion to celebrate the achievements of the sector. I invite members to visit firms in their ridings and engage with the workers and the business leaders of this vibrant part of the B.C. economy.
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Oral Questions

YOUTH DEATH CASE AND
GOVERNMENT SUPPORT FOR YOUTH
IN CARE AND AGING OUT OF CARE

J. Horgan: Last week we in the opposition laid out and underscored the scope of the failures of the Ministry of Children and Families when it comes to protecting and caring for children in care: children dying of unexpected and unexplained circumstances, children being placed in care with abusers and children being taken from group homes, inappropriately housed and left abandoned.

The Premier has said that she wants to learn from these examples, and I’m encouraged by that. But would she agree with me that the best way to learn these lessons is to bring in new eyes and a new vision for protecting children in British Columbia?

Hon. C. Clark: As I’ve said in the House over these last several weeks a number of times, the issue of a review is something that is underway in the ministry. Having Bob Plecas — a former, respected deputy minister, who served governments of all stripes in our province — come in and look at some of the specific issues will be a big help to that. Making sure that we understand very specifically what happened in the case of Alex Gervais will be another important piece of the puzzle.

I want to make sure that this work is done as quickly as possible. Children who depend on us, depend on us today. We need to make sure that we get the information, get to the bottom of what happened, to try and ensure that we can address the issues that any review will raise as quickly as we possibly can so that we can ensure that those children who are in government care are looked after as well as possible today.

Madame Speaker: The Leader of the Official Opposition on a supplemental.

J. Horgan: I agree that reviews of the deaths of children in care are critical if we’re going to learn anything. Again, I disagree with the Premier on who best to have a new and reviewed and invigorated look at how the ministry cares for people. Therefore, I want to raise the case of Carly Fraser.

Carly Fraser was in the care of the ministry, a deeply troubled teenager with a history of drug abuse, mental illness and attempted suicide. She was put in a group home for one year, and at the end of that year, she was then removed, at age 16, to a basement apartment, left with minimal supervision and without any supports whatsoever. She was sexually abused on that first weekend, and life spiralled down further for that 16-year-old.

My question to the Premier is: is that what we can expect from the Ministry of Children and Families — that 16-year-old girls are going to be left to their own devices in basement apartments?

Hon. C. Clark: Well, of course, the member knows I cannot, will not — because the law prevents me — and should not comment on specific cases of individuals. But I will say this.

You know, the Ministry of Children and Families has worked very, very hard, all of the staff on the front lines doing some of the hardest jobs in the world. The minister has worked incredibly hard, as well, to make sure that the ministry is as modern and as up to date as possible and continuing to strive to always improve — increasing front-line staff by 21 percent, decreasing the number of children in care.

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We do believe and we know, based on the science that we see, that children are better off in almost every case when we can find ways to support them in staying in their families, making sure that those families have what they need to do their job as parents as well as they can and allowing those children to maintain those relationships, which are so vitally important.

The number of children who are in the care of the government is now down to about the lowest level it has been in 15 years. That has been the result of a lot of hard work, and it has been a purposeful goal that the government has set so that we can ensure that we are always doing better to support children who are vulnerable across the province.

Madame Speaker: The Leader of the Official Opposition on a further supplemental.

J. Horgan: The Premier’s response is incongruous to Lisa Fraser, the mother of Carly, who was here today and who was seeking answers and seeking help, just as the Premier alleged the ministry would be directing their staff to do.

This went on for some time. At 16, she was moved out of the basement apartment and into another group home. She fled from that group home, and that led to harder drugs and a harder life. Twenty hours after she turned 19, Carly Fraser leapt from the Lions Gate Bridge and took her own life. Her mother had appealed to the ministry for help, but she had aged out — 20 hours and had aged out. So no review will be done by the ministry as a result of that.

How can we possibly learn from the loss of Carly’s life if the ministry won’t even open the file?

Hon. C. Clark: We and the ministry certainly seek to learn from the experiences, both positive and negative, of all of the children who have found their way through government care.

For most of them, that experience is one that can set them on the path to a new life — 273 youth placed for
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adoption this year. That’s up by 21 percent since 2014. For those children, the story is a better one, where they get an opportunity to start a new life in a new family and where they know that they will have permanency. They know who will be there when they celebrate their birthday the following year.

There are stories, as the member points out, and real events in people’s lives that are not so positive. The ministry strives to make sure that they learn from all of these events, that we support our front-line workers by increasing the number of front-line workers — for example, another 110 child care workers added this year, an increase of 11 percent — that we’re supporting them through training and that, through regular reviews, some of which are underway now, we’re constantly improving the practice of the ministry.

These children and their families depend on us to make sure…. Because they are vulnerable, we do the best we can to protect them. We are going to continue to do that, and this minister is working incredibly hard every day to make sure that everything we do is constantly improving.

K. Corrigan: The Premier talks about some children doing better after they are in care, and Carly Fraser was doing better. She was in a group home that she was doing well in. But when she hit the age of 16, she was removed from that group home where she was progressing. She was going to school. She was working. She was taken out of that group home, and her mom was told that happened because they were “out of time.” That was the quote from the social workers.

For her, within a couple of months in that basement suite, living by herself, she was raped twice. She quit school, she quit her job, and she started on a downward spiral that resulted, eventually, in her death when she jumped from the Lions Gate Bridge.

When we asked the Premier questions about Alex Gervais’s death, she blamed the delegated agency and said there would be consequences. Then she said that government needed to review the matter in order to understand who was at fault.

When it came to Carly Fraser, the government had a very different approach. When Carly’s mother, just a few months ago, asked the ministry to review her death, the ministry refused and closed her file. The reason they gave was that Carly Fraser jumped from the Lions Gate Bridge on her 19th birthday.

Does the Premier really believe that because Carly took her own life 20 hours and 35 minutes after turning 19, the ministry has no obligation to review her case and learn from the tragedy of her death?

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Hon. S. Cadieux: The member and the members opposite all know all too well that we cannot speak about the specifics of any circumstance, happy or tragic, in this House.

What I can tell you is that we have been making continuous improvements in the Ministry of Children and Families. We’re measuring and analyzing the work we do with more scrutiny than ever. Our annual performance management report is on line and available, and it’s unique among provinces. In fact, other provinces are looking to us for advice on how we do that work. I’ve insisted on expansion of the ministry’s quality assurance to include work around adoptions, because permanency is one of the most important things that we can do for children in care, and it hasn’t been good enough.

As promised, as part of our response to the representative’s report on Paige in the Downtown Eastside, for the first time ever, all 19-year-olds who tragically die but have received services from the ministry in the last year will also have their full case file reviewed by the office of the provincial director.

Madame Speaker: Burnaby–Deer Lake on a supplemental.

K. Corrigan: Well, the minister may say that she can’t talk about this case. Carly is not around to protect anymore, and her mother is in the gallery. She’d certainly like some answers, because she’s been getting nothing but the wrong answers so far.

The minister certainly has the ability to order a review. Carly’s mother, Lisa, wants a review of her daughter’s death. She thinks that a review will help the public understand what went wrong, why the ministry abandoned Carly and what government can do to prevent more such tragedies. As I said earlier, on August 6, just two months ago, she wrote to the minister and asked her to initiate a director’s review.

Here’s what the response said: “Because she was 19 years old at the time of her death, she was no longer considered a child or youth, and therefore, according to ministry policy, her apparent suicide was not reported to the director, nor can this incident be considered for a case review.”

The Premier said we should learn from tragedies. Again, does she really believe that we shouldn’t learn from Carly’s case because she took her life 20 hours and 35 minutes after she turned 19?

Hon. S. Cadieux: Again, I cannot speak to the specifics of any circumstances in the House. The members are always welcome to bring concerns that are raised to them to my office, and within the limits of what we are allowed to disclose, we will do that.

Certainly, we are always looking for ways to improve the work that we do and the services that we provide to children and families in this province. I’ve outlined much of that over the last couple of weeks, and I expect that I will have opportunity to outline more for the members.
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C. James: The ministry’s indifference to Carly’s plight started well before her death. Her care agreement expired when she was 17. Her mother, Lisa, pleaded with the ministry to renew the agreement and help Carly. The ministry did not renew this agreement. Carly ended up on the streets and deteriorated further and further.

The Premier says that they’ve decreased the number of children in care. Well, let’s all remember in this House that Carly was one of those children. She was pushed out the door without supports and without government care.

Does the Premier recognize that children like Carly deserve better than they are getting from her government? And will she support a case review for Carly and her mother, Lisa?

Hon. S. Cadieux: As the members know, we’re not going to talk about the specifics of any case in this House, and we are always looking at the services that we provide to youth.

Our front-line social workers every day do the hardest work in the province. They do that work because they care about kids and they care about the outcomes for those kids. For anybody to suggest otherwise is absolutely incredulous.

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Madame Speaker: Victoria–Beacon Hill on a supplemental.

C. James: What is incredulous is that this government has removed the supports that social workers need on the ground to give the supports to children like Carly. That’s what has happened from this government.

The ministry knew about Carly at the time her care agreement expired at 17. They knew she was using drugs. They knew she’d been institutionalized with mental health issues. They knew she’d been sexually assaulted twice. They knew she had attempted suicide at least once and talked openly about doing it again.

So does the Premier think or believe — not talking about a specific case — that cutting a 17-year-old off without any ministry supports is the right decision ever to make?

Hon. S. Cadieux: The services available through the Ministry of Children and Families are extensive. We have a system of supports through our foster families, through group homes, through individualized resources for youth. For older youth, we have agreements with young adults, if that suits the individual.

The work that the social workers do on a daily basis is tailored to the individual child and their needs. That work continues with the supports provided through our child and youth with special needs budgets, programs and services to help youth with disabilities, to support youth with mental health challenges.

We know that the children and youth and families that interact with the Ministry of Children and Families on a daily basis are some of the most vulnerable in our province, some of the most complex and difficult and challenging circumstances for us to work with but, most importantly, for those families and individuals to deal with. And our intent and our work every day is to try and provide the absolute best system of supports that we can.

REVIEW OF YOUTH IN CARE DEATH CASE

D. Donaldson: The family of Alex Gervais is calling for an independent investigation into his death, but the minister insists on an internal review. Yet in the J.P. case, the minister decided to appoint an independent review conducted by Bob Plecas.

Stó:lō Tribal Council vice-president, Tyrone McNeil, points out that that is a double standard of accountability. To the minister, why the double standard?

Hon. S. Cadieux: The member well knows that any time there is a death of a child in care, there are a number of processes that are triggered, the first of which is a coroner’s look and a police investigation. Then the director takes their opportunity, and in this case, the provincial director of child welfare has launched a case review.

It is not appropriate for the minister or any member of the House to instruct or advise the provincial director on how to conduct that review or what it entails. It is also not appropriate….

The director must do that work unfettered. The whole point is to keep politics out of reviews. The process for a review is the same by the director, regardless of whether or not a delegated agency or a ministry office was in charge of the file.

The director has developed additional policy, as I mentioned just earlier, that every death involving a child in care will be reviewed — and expanding powers to review the death of a child that has been in care of the ministry past their 18th birthday.

I will let the review unfold. Following that, the Representative for Children and Youth retains authority to also do a review, should she feel that’s necessary.

Madame Speaker: Member for Stikine on a supplemental.

[1415]

D. Donaldson: In one case, the minister appoints an independent review when a young girl is sexually abused in the ministry’s care. In Alex Gervais’s death, the Premier and the minister point fingers at the delegated agency before an internal review is even conducted. That demonstrates chaotic leadership at the top of this ministry.

Will the minister do what the family is asking? Will she do what the Stó:lō chiefs are asking? Will she agree to an independent investigation into the death of Alex Gervais?
[ Page 9486 ]

Hon. S. Cadieux: As I said, the director of child welfare has launched a review, and we will wait to see what the result of that review provides us in terms of information on what happened in this particular instance and what case practice, policy or other implications flow from that.

REVIEW OF CHILD PLACEMENT CASE

R. Austin: The children’s minister committed that the Plecas review into the J.P. case would be completed by October 13 and will be made public by October 21. My question is: will the minister honour that commitment?

Hon. S. Cadieux: The appointment of Mr. Plecas was, I believe, a responsible and coherent approach to a very difficult situation. What motivated that appointment was the desire to address a very difficult situation and respect the needs of the family in the case. We also must be respectful of legal requirements. As such, I have been informed by Mr. Plecas that he may request an extension in time. If that is indeed the case, then we will report that as well.

Madame Speaker: The member for Skeena on a supplemental.

YOUTH DEATH CASE AND
GOVERNMENT SUPPORT FOR YOUTH
IN CARE AND AGING OUT OF CARE

R. Austin: Almost six months ago, the Representative for Children and Youth issued a heartbreaking report into the tragic life of an aboriginal girl named Paige. Paige died alone on the streets of Vancouver, shortly after aging out of care. The children’s minister refused to accept the recommendations made in that report. All she offered was the promise of a rapid response team to help youth on the Downtown Eastside.

Nearly half a year later, we’ve seen no real action and no real response on the ground, let alone a rapid response. Does the minister think that that’s acceptable?

Hon. S. Cadieux: I am pleased to report to the member that in fact the team is fully operational and working. They’ve met. They’re to look at the needs of the most high-needs individuals in the Downtown Eastside. We’ll have more to say about the model and the response to the rest of the recommendations in that report, once we’ve had an opportunity to brief the representative.

CHILDREN AND YOUTH COMMITTEE
MEETING CANCELLATIONS

M. Farnworth: Yesterday, in response to questions on why the Select Standing Committee on Children and Youth cancelled its previously scheduled hearings, the Premier said: “It is not the Premier’s or any member of the government’s role to be directing the work of a select standing committee of the Legislature” and that these decisions are made by the committee.

Given those comments, hon. Speaker, I will direct my question under Standing Order 47A, MacMinn’s fourth edition, the rules under which this House operates, to the only member who can answer my question, the Chair of the Select Standing Committee on Children and Youth, the member for North Vancouver–Seymour.

I’m sorry that the Premier thinks it’s a humorous issue, but it was a very serious question. My question to the Chair of the Select Standing Committee on Children and Youth, the member for North Vancouver–Seymour: can the Chair tell this House what obligations were so important that they required the sudden cancellation of already-scheduled meetings with the children’s representative?

Madame Speaker: If I might, the purpose of question period is to seek information from members of executive council.

[1420]

M. Farnworth: Thank you, hon. Speaker. I would draw your attention to the standing orders, MacMinn’s fourth edition, 40(1)(a), page 141, Erskine May’s edition 23, page 345, Beauchesne’s sixth edition, page 119, that deal with questions to private members. The authority states that the only time you can ask to a private member is a Chair of a committee.

The Premier, in her comments, made it clear that it is not the role of the executive council to direct the work of a committee. Therefore, hon. Speaker, the only opportunity that I have to ask about this business is by directing a question to the Chair of the standing committee.

Again my question is to the Chair of the Select Standing Committee on Children and Youth. What were the obligations? Why were they so important that they required the cancellation of already scheduled meetings with the children’s representative, the very individual that the executive council set up the committee that she chairs to hear from?

Hon. M. de Jong: I have not, I’m afraid, committed Standing Order 47A to memory. I realize this, generally, isn’t the place where we have procedural discussions, so I will make my comments brief and point out that in the reference that the hon. Opposition House Leader has made, it speaks to the fact that questions could not suggest a particular subject for inquiry, nor could the question deal with evidence before a committee.

In Parliamentary Practice, it indicates a very, very narrow scope, and, Madame Speaker, I would suggest that this particular question falls outside of that scope.
[ Page 9487 ]

Madame Speaker: If I might comment, it has not been the practice of this House. It has not been the practice.

M. Farnworth: Thank you, hon. Chair. That’s why I respond to my colleague the Government House Leader. These are the standing orders, MacMinn’s fourth edition, that govern this House. It’s very clear on the narrow scope that a question to the Chair of the committee can be permitted.

I am not asking about votes on the committee. I am not asking for a referral or for the committee to do something, which my colleague the hon. House Leader would be absolutely correct on. I am asking for an explanation for a decision that the committee Chair made. That is perfectly legitimate under the standing orders of this House and backed up by both Beauchesne’s and Erskine May, which also guide this House.

Hon. M. de Jong: I’m always interested, of course, in the hon. member’s views on the interpretation. I’m going to suggest that in this case, this is a little bit of uncharted territory for the House and, in those circumstances, seek guidance from the Chair.

The hon. Opposition House Leader may, like me, wish you to have some time to consider what that guidance would be. That may be the best way to resolve the issue, given the fact that the passage quoted a few moments ago doesn’t refer to any precedent within this chamber for the procedure that the member has referred to.

DEATHS OF MOTHER AND SON IN PRINCE
RUPERT AND INQUEST RECOMMENDATIONS
ON TRANSIT SERVICES

M. Karagianis: During the recent inquest into the deaths of Angie and Robbie Robinson, we learned that lack of access to affordable transportation between communities is a real barrier to families needing to access services for children with autism.

[1425]

The inquest sent a recommendation to the Minister of Children and Families. It asked her to “ensure transportation costs and availability are part of respite planning.”

Will the Minister of Children and Families be acting on this recommendation?

Hon. S. Cadieux: As I said, I thank the Coroners Service and the jurors for their work. It was certainly difficult work, I’m sure, to hear about and to consider the very tragic circumstances surrounding this tragic murder-suicide.

The coroner’s recommendations will be taken and reviewed and thought about very seriously before we respond. We’ll do that in addition to considering the practice considerations that were highlighted during the recent testimony and that information that was examined through the director’s case review of this circumstance as well.

We anticipate formally receiving the recommendations in the near future, and after consideration, we’ll be in a better position to respond specifically to the recommendations.

M. Karagianis: For many years now in the House, we have been calling on the B.C. Liberal government to bring in an enhanced public transportation system to link northern communities. The coroner’s inquest is calling on the minister, again — a second recommendation — to “ensure transportation issues are addressed separately from autism and other special needs funding for families in rural and remote communities.”

Again, a question to the minister: will the Minister of Children and Families be demanding better transportation services between northern, rural and remote communities so that families can access services they need along this route?

Hon. S. Cadieux: I think there are a number of interesting and serious recommendations to be considered. We know that service provision in rural and remote communities is a challenge, not just for autism services or supports for people with autism, but also, similar challenges are faced by individuals needing medical treatment and otherwise.

We will consider the recommendations thoroughly and provide a response.

[End of question period.]

S. Fraser: I seek leave to present a petition.

Madame Speaker: Proceed.

Petitions

S. Fraser: Just a heads-up to our esteemed chamber staff that in the interests of hernia prevention, I will be delivering those cards and petitions. There are about 100 pounds of them.

I have petitions from over 6,000 individuals very concerned about the loss of our remaining old-growth forest. The petition is calling on the Premier to deny permits for old-growth logging in the Walbran Valley.

Madame Speaker: Hon. Member and all those who would wish to table petitions in the future, the tabling can only occur if the petition is actually in the chamber.

Orders of the Day

Hon. M. de Jong: Continued committee stage debate on Bill 36.

[1430]

Committee of the Whole House

BILL 36 — AUDITOR GENERAL FOR
LOCAL GOVERNMENT
AMENDMENT ACT, 2015

(continued)

The House in Committee of the Whole (Section B) on Bill 36; R. Chouhan in the chair.

The committee met at 2:31 p.m.

On section 10 (continued).

S. Robinson: Glad that we’re back at it here again today. I have a number of questions on this section, section 10.

The second amendment adds a new subsection that says: “For certainty, at a meeting convened in accordance with subsection (3) (a), the audit council may consider recommending to the minister the suspension or removal of the auditor general.”

I would like to hear from the minister, if he could share with the House, how he understands that amendment.

Hon. P. Fassbender: I think I answered this, in part, yesterday. The audit council’s role is to provide oversight and review of the performance of the office. They can on their own volition, based on that review or any concerns that they have, make recommendations to the minister.

S. Robinson: Does all of the audit council have to agree to this? How does that play out in practical terms?

Hon. P. Fassbender: Clearly, the audit council is a group that works together. They deliberate. They ask for reports or reviews, and then, by resolution, they would make a decision that would go forward to the minister as a result of that.

S. Robinson: Well, it might be clear to the minister, but it’s not as clear to me because the way that I read it, in the original legislation, section 21(3)(a), it says a meeting of the audit council “may be convened by the chair or by 2 members of the council with prior notice to the chair.”

Does that mean that the entire audit council needs to be there in order to have the discussion, or can just two members constitute enough of a meeting in order to make a decision?

Hon. P. Fassbender: The general practice of any committee, and why this is there, is if the chair was to be absent and two members of that council would want to convene a meeting — that is to call a meeting — of all of the members of the council, they can do that.

S. Robinson: If that’s the case — and my understanding is that the act already provides the audit council the ability to make recommendations around suspensions and terminations — why is an amendment that provides for the audit council to meet to discuss suspension or termination being introduced? Why is this particular amendment necessary?

[1435]

Hon. P. Fassbender: The purpose of this is to bring absolute clarity to the audit council — that this is one of their responsibilities and that they can, on their own volition, make a recommendation to the minister.

S. Robinson: That suggests that in the original act, it wasn’t clear what the role of the audit council was. Now this is to define very specifically what they can and can’t do, so that the audit council can recommend to the minister that the auditor general is not performing and ought to be fired.

Hon. P. Fassbender: Indeed, it is to bring absolute clarity. Where there may have been an inferred responsibility previously, now it is absolutely clear to the audit council what their responsibilities are and what they are able to do, on their own volition, in making recommendations to the minister.

S. Robinson: Yesterday, when I was asking the minister questions, he certainly had lots to say about not reading into the future what possibilities might be, but I do really believe that when you’re writing legislation you have to anticipate. If you don’t anticipate, like they did originally when they put this out, then you wind up with holes in the legislation.

I think it’s important that the minister entertain the idea of anticipating what could happen. I would like to ask the minister a question that entertains possibilities.

What happens if the audit council feels that there is some concern about the performance of the Auditor General for Local Government, but the minister believes that it’s just fine, that the performance is just fine? How does that play out in this future possibility?

Hon. P. Fassbender: What we have learned, because of past situations, is that the role of the minister in working with the audit council, hearing recommendations, is paramount to ensure the good order and the good process that we move forward. The minister’s responsibility is to work with the chair and with the audit council, to receive their recommendations, but ultimately, as it is in the case of the appointment of the Auditor General for Local Government, the minister has the final decision-making power.

S. Robinson: Based on the minister’s response to that question, with the minister working closely with the aud-
[ Page 9489 ]
it council chair, can he explain how the independence of the office, the independence from politicians and from political influence, is going to be maintained?

Hon. P. Fassbender: Well, very easily. The minister will want to ensure that the audit council has the opportunity to speak with the minister, to make recommendations to the minister, and the minister is bound by practice to listen to that and then make a determination if one is required.

That has no influence on the independence of the office and the operating of the office, because the Auditor General for Local Government, as I said yesterday, has the right to make any decisions in terms of the functioning of the office, the reports that are being done.

[1440]

S. Robinson: Well, I would beg to differ around what influence looks like. Certainly, the minister has his own perspective on what influence looks like.

I would like to hear from the minister, because he talked so much yesterday with such passion and commitment about a partnership and a relationship with the UBCM, how he sees this fitting into that relationship, given that the UBCM has said on their site that they see the independence of the audit council as very important. That’s a quote from the UBCM’s website. They have expressed some concerns.

How is he planning to address his relationship with the UBCM about making sure that his relationship with the audit council, a council that he’s saying he will work very closely with…? Where will the independence wall be established?

Hon. P. Fassbender: Clearly, the audit council is appointed by the minister. The audit council operates separately from the minister. They have their deliberations. They work with the Auditor General for Local Government to ensure that the principles of the office are being maintained. The minister is clearly willing to hear recommendations that come from the audit council, when the audit council deems that it wants to make those recommendations to the minister.

The minister does not sit with the audit council and direct them on what they need to do but is there to hear their recommendations once they have come to some conclusion on any issue.

S. Robinson: I’d like to know how members of this House will know that that’s in fact happening.

Hon. P. Fassbender: Because it will be happening.

S. Robinson: So this is another one of the “just trust us” models of governance. That’s really very, very helpful.

I don’t have any other questions on this.

Section 10 approved.

On section 11.

S. Robinson: I have a number of questions on this section.

In section 11, there are additional parts that are made in terms of access to records and information. I’m particularly interested to understand why this didn’t appear in the first version of the act.

Hon. P. Fassbender: Again, as a result of the practice that was under the old act, it was clear that the Auditor General for Local Government needed to have complete clarity as to the responsibilities to provide the audit council with any records or information that they needed in order to do their work and their responsibilities as they are defined.

S. Robinson: There is clarity that there was lack of clarity, is really what I’m hearing, so they had to bring in some clarity. That’s great.

What’s the difference between this section and the requirement under subsection 16(2)(c) that requires the AGLG to provide records to the audit council and staff assisting the council?

[1445]

Hon. P. Fassbender: Under the previous act, the Auditor General for Local Government had the discretion to provide the information. This modification absolutely ensures that when the audit council asks for information, it has to be provided. Again, because of experience that we had, it was very clear that that had to be very clear and that it was legislated that the Auditor General for Local Government had to provide that information.

S. Robinson: If I am to understand the minister’s explanation, the previous AGLG, who was fired by the minister, would refuse to provide documents. That was the interpretation that was understood by that previous Auditor General for Local Government, and then she subsequently decided to sue as a result. So this is a way to make sure that this doesn’t happen again. That’s helpful.

Moving along, I have another question related to this. Can the minister give an example of a record that would be exempted under subsection 21.1(1)(a), “a record or information obtained in the exercise of a power or the performance of a duty of the auditor general under this Act”?

Hon. P. Fassbender: The clarity here is that when the Auditor General for Local Government and the office does its work, it receives documents in confidence from local governments. This ensures that the audit council can’t reach through the Auditor General for Local Government to documents from local governments.
[ Page 9490 ]
Their role is to get information from the auditor general that he provides in terms of his summary reports and so on.

S. Robinson: Can the minister describe what the expectation, then, is of which documents will be provided? Which are the standard documents that one would expect would be asked of the Auditor General for Local Government to provide to the audit council?

Hon. P. Fassbender: By example, any of the working documents that the Auditor General for Local Government has on the performance and the functioning of the office, the reports that are being compiled, which ones are underway, what status they might be…. There are a number of things that actually relate to the functioning of the office and the work that they’re doing.

As I said, it does not include those things which are given in confidence by local governments to the auditor general, but all of those other things that relate to the staffing of the office and all of those issues are what the audit council can ask for and would receive.

S. Robinson: I thank the minister for that response. That was helpful.

I have another question that relates to the part, “Report to minister.” That’s 21.2: “The audit council may prepare a report respecting the performance of the auditor general in relation to any or all of the matters referred to in section 19 (1) (j) and may provide the report to the minister.”

[1450]

Can the minister please tell us what the purpose of this clause is?

Hon. P. Fassbender: I believe I’ve answered it, but I will answer it again. The role of the audit council is to review the performance of the Office of the Auditor General for Local Government and all of its aspects as it relates to its performance, whether that be reports that are underway — any of those things. This makes it absolutely clear that the audit council, based on that review, may provide a report or recommendations to the minister as a result of that review.

S. Robinson: It does say “may provide” a report, which gives them a lot of flexibility. What does the minister envision would be the conditions under which the audit council…? Or perhaps he has expectations under which the audit council would actually act on this clause.

Hon. P. Fassbender: I think it’s very clear. The audit council does its work if they feel, based on that review, they have a recommendation or communication they want to make to the minister. They have the opportunity to do that. We’re not suggesting that they have to do it a certain number of times. That is in their discretion because they are independent in the reviews that they do as well.

S. Robinson: The minister says that they are independent if they do a review. Well, what happens if, for example, in this House there are some questions during question period that we ask of the minister that suggest that maybe there are problems over there in the Auditor General for Local Government office, as happened last February, March and well into April? Will the minister be able to go to the audit council and ask for a report? Does it work both ways?

Hon. P. Fassbender: For me, it is very clear. If indeed the minister is made aware of an issue that someone brings to the minister’s attention — because the minister is absolutely finally responsible for this function — then the minister would pick up the phone, speak to the chair of the audit council and say: “A concern has been raised. Is there an issue that the audit council has reviewed and has a perspective on?”

If they did, then I would say: “I would appreciate your report, based on that.” Or the chair would determine that he would ask the audit council to look into something that had been registered as a complaint, and if there was a report that came out of it, that would come forward to the minister.

If the chair said that the audit council has no concern over that issue and has nothing to communicate to the minister, then the minister would accept that position from the audit council.

V. Huntington: I wonder if the minister could advise us whether, in the performance of their duties — they are reviewing or monitoring the preparation of a performance audit or the conduct of a performance audit — the audit council itself could not make a determination of the appropriateness of that preparation or conduct without having access to the record of local government.

[1455]

If they’re not permitted access to those records, then how, if they were in a conundrum, could they determine whether the conduct of that audit was appropriate or not?

Hon. P. Fassbender: For clarity for the member, the role of the audit council is to provide overview and oversight on the overall performance of the office, not the specific review of individual reports. If there was a concern about that, and in order to protect the confidentiality of local governments, the audit council has the opportunity, through the professional organizations, to raise that issue. That would be reviewed by a party that is bound to that same confidentiality standard that the Auditor General for Local Government office is as well.

V. Huntington: But with respect to the minister’s answer, section 8 specifically says that the audit council
[ Page 9491 ]
can review and monitor the performance of the auditor general in respect of the exercise of his powers and performance of his duties, in the planning and conduct of performance audits and the preparation of performance audit reports, annual reports and other reports, if any.

Again, with respect, I would say that if they can monitor and review whether or not those reports and the conduct of those reports are being prepared appropriately, how could they do that without access to the information that is bound and the central purpose of the preparation of those reports? How could they do that? It’s quite specific here in section 8 that they have that authority.

Hon. P. Fassbender: Again, to provide clarity, the audit council’s job is to look at the overall performance of the office, the scope of the audits and the reports that are being done — the timeliness of those — and the management of the overall operation.

[1500]

There is a quality assurance council, as part of the Auditor General for Local Government, that gets into the detail of each of the individual audits. That is not the role of the audit council. It is ensuring, under standards that are common practice within the industry, that the Auditor General for Local Government respects the confidentiality. The audit council’s role is not to get into the detail of those audits but to look at the bigger picture of the overall performance of the office.

V. Huntington: I thank the minister for that answer. I’m just looking at the specific wording of the sections and trying to reach clarity. I appreciate it.

The minister just mentioned a quality assurance council. Did I misunderstand him, or is there some other body here that we’re not aware of?

Hon. P. Fassbender: Standard practice for auditor general offices is to bring in a quality assurance council that comes in. They’re contracted to come in to make sure that the appropriate procedures are followed, that the diligence is done under the professional standards. That is not a separate council set up by the audit council or the Office of the Auditor General. They bring in people, which is a bit of a check and balance for them as well. They are brought in as needed by the Office of the Auditor General.

S. Robinson: This is interesting, and I appreciate the member for Delta South asking the question. It’s the first time I’ve heard about this quality assurance council, and I’m puzzled by these layers of bureaucracy that we keep seeing and how much this is costing taxpayers. Certainly, it invites questions about value for money, given the cost of this office.

I do have a question about what the minister said earlier, in response to one of my earlier questions. The minister stated that he can, in fact, ask for a report from the audit council. I have a question about how this is different from perhaps asking for a report from a deputy minister, given that the minister does handpick the audit council. In some ways, one could perhaps perceive that the audit council reflects the desires of the minister, but they’re somewhat independent, sort of, because they’re in a different body, and the minister can then ask them to report back to the minister.

I’m still trying to reconcile…. I know that the minister has been, perhaps, frustrated, because he keeps saying “for clarity.” But I’m still struggling with, and I think others in this House are struggling with…. I think that British Columbians need to have some assurance that there really is independence in this office, given how strongly this government was committed to independence in the office and that it would be disrespectful of that if we didn’t ensure that there was real, clear independence in the office.

If this is troublesome to the minister in terms of my continuing to ask about it, that means that the assurances — I don’t think they’re really clear to members in this House.

Hon. P. Fassbender: What’s very clear is the fact that the audit council is appointed by the minister. The criteria for the kinds of individuals that we would be appointing to that council are contained within the act. I indicated yesterday, in response to UBCM and local governments and the issue of sensitivity to local governments, that my intent is to appoint two previously elected individuals to that council.

There’s no question in my mind that members opposite might say the people that are appointed have a particular bias. I do not believe that for a second. The quality of the individuals that are in the audit council have been selected for their background, their experience, their sensitivity.

[1505]

As I said, the minister does not direct the audit council on what to do. That is up to them, given the context of their responsibilities. They operate independently, but ultimately, they are charged with reporting to the minister. If there are issues that the audit council believes require action by the minister, they will communicate that to the minister. But the audit council is a body that meets on its own. If they have an issue they wish to discuss with the minister, they’re free to do that, and from that, the minister may or may not take any action, as required.

S. Robinson: Thank you for that response.

I’m sure the minister is well aware, and I’m certainly well aware, as some of my other colleagues are well aware, of appointments that have been made where there perhaps hasn’t been the kind of expertise one would expect. There is one that just came out of my community that has people shaking their heads about an appointment that this government made and saying: “We don’t even
[ Page 9492 ]
understand how it was that she got appointed.” But that, we know, happens quite often in different communities — that we wind up shaking our heads.

The minister said yesterday as well as today about his commitment to appoint two additional people to the audit council. I’m assuming that grows the number to seven, because I can do math and I do understand math concepts. The minister has said that several times. Perhaps he could share with the House what the timeline is on those appointments.

Hon. P. Fassbender: Imminent.

S. Robinson: I have a couple more questions on this. Actually, no, I don’t. I got distracted, so I will let this one pass.

Section 11 approved.

On section 12.

S. Robinson: Okay. On this one, we have some stuff being repealed, and then there is a change in some of the language around: “fiscal year addressed by the estimate referred to in paragraph (a)” and substituting “upcoming fiscal year.”

I just want to make sure I understand what the meaning is of that. If the minister could just clarify the purpose of that change and make sure that I understand it, I would appreciate it.

Hon. P. Fassbender: Those changes are consequential to section 9, and it just brings clarity in terms of the fiscal year and the estimate process that is clarified there as well.

S. Robinson: I thank the minister for his response to that.

Further down in this section, we see that there is a subsection that is expanded, (3.1), where it says: “Before preparing a proposed annual service plan under subsection (1), the auditor general must, in the manner and to the extent the auditor general considers advisable, consult with the Union of British Columbia Municipalities respecting themes on which some or all performance audits may be based.”

Has the minister had a chance to chat with the UBCM in terms of this particular change in the legislation?

Hon. P. Fassbender: When I met with the executive of UBCM, at least the outgoing and the incoming presidents, I made it very clear that, again, as a result of feedback from UBCM, it is the expectation of the minister to the Auditor General for Local Government to sit down with UBCM and to talk about the various themes that would be used in the functioning of the office.

[1510]

That relationship is one that needs to be built and that was not existent previously. It is an important function in terms of assuring local governments that the role of the office is to be one of supporting change and opportunities for local government in identifying best practices. That relationship is an important function of the office. That is why it is clarified in here that that is one of the things the Auditor General for Local Government is expected to do.

S. Robinson: The operative word in this clause is “consult,” and consult can take on many different meanings. Sometimes consultation is one-way. “Consulting” means informing, for some. I’ve certainly seen examples where that’s happened — where people were consulted, but really they were informed — and other times where consultation has happened, but it’s after a decision is made. So the consultation is after the fact.

I’d like to hear from the minister how he understands “consult” in this specific context.

Hon. P. Fassbender: Clearly, in discussions with UBCM, my interpretation of that…. It is again up to the Auditor General for Local Government, because the functioning and the scope of work to be done are decisions of the Auditor General for Local Government.

But clearly, I have said to UBCM — and have said to the successful candidate who will be filling that office — that the expectation is that the Auditor General for Local Government will meet not only with UBCM as a body but with individual local governments to talk about the themes, the scope, the kinds of things that will be reviewed. That will be prior to terms of reference being developed for any given review, not afterwards.

S. Robinson: I’m hearing a little bit of a mixed message. I don’t know if the minister will appreciate the subtleties of this.

On the one hand, it’s up to the auditor general, and then on the other hand, there are expectations of the minister. I’m just trying to get clarity, because that’s not the same. They’re not equivalent. They’re different concepts. “Up to the auditor general” means it’s up to the auditor general. And if there are expectations of the minister, then it needs to be really clear that these are expectations of the minister.

The minister can’t leave it up to the auditor general and do this arm’s-length thing, but then have expectations. If the minister can, at least for the benefit of this House, tell us how he understands those two sides…. I’m not sure how you can leave something up to somebody, but then have these expectations that are laid out somewhere else.

Hon. P. Fassbender: I’ve said a number of times in this discussion that the lessons we learned that brought us to where we are today — but more importantly, where we’re going tomorrow — is that this office’s function is to
[ Page 9493 ]
support local governments. It is not to provide a negative view of what local governments do but to help them move forward in a positive way.

Clearly, the minister’s expectation — I’ve said it publicly, and I stand by the comments that we have made as government — is that we want to see the Office of the Auditor General for Local Government be sensitive to local government’s needs, be sensitive to the issues that they face and to work with them. That is the direction.

[1515]

Beyond that, the minister does not direct and will not direct the Auditor General for Local Government any further than to say — as I clearly said when I met the successful candidate: “My sincere desire is that two years from now, local governments will be able to stand up, as will UBCM as their representative body, and say, ‘We have a good working relationship with the office of the auditor general but also recognize that they have an independent function, even though we have a relationship with it to do the work that needs to be done, and we appreciate the value of the work of the office of the auditor general.’”

S. Robinson: I think at this point I’d like to reiterate that when this office was first proposed, it was always to support local government. This isn’t a new idea. It was always about supporting local government. We know that that was an experiment that went completely sideways. If it’s frustrating to the minister that we’re taking our time making sure that we get it right, given the colossal failure and waste of taxpayer dollars, I’m sorry if I’m doing too thorough a job for the minister.

I think it’s important to recognize that the UBCM does not support this office. Fifty-four percent voted to endorse to eliminate, or ask the government to eliminate, this office. The UBCM is quite concerned. That’s how I read that.

I think it’s worthwhile to make sure that this challenge around whether it’s independent or not is explained thoroughly and understood. The suspicion among local governments is that the independence of this office, which everyone believes is crucial, is being eroded by some of these changes.

I’m going to continue to ask the minister questions along those lines, because I think saying that something is independent when it’s not is problematic. Saying that I, as minister, have expectations of this office suggests that the minister actually does have influence about what happens out of that office. Then to say, “Well, no, it’s independent….” It’s like being a little bit pregnant. Either you have independence or you don’t have independence. Either you’re pregnant or you’re not pregnant. So I’m going continue asking those questions.

Moving on, in this section, by repealing subsection 5(a)…. That’s part of what’s happening in this amendment. I have questions, again, around what this removal means in terms of the actual practice and what we can expect to see from the audit council.

Hon. P. Fassbender: It has nothing to do with the operations of the office. It has everything to do…. It is consequential to the section on the budget for the office.

S. Robinson: Does the removal of this subsection mean that the audit council can recommend changes that may affect the estimates process?

Hon. P. Fassbender: Again, it’s clear that subsection 9 has been repealed. That is why this change has been made.

V. Huntington: Earlier my colleague asked…. Given the use of the word “consider,” I think yesterday my colleague asked: what evidentiary requirements were there to ensure that an issue had been considered? I note on page 4, the page that section 12 is found, and in sections 12, 13, 14 and 16, we see the word “consider.” All the way through these amendments we see the word consider.

The minister suggested that there were no evidentiary rules for that word. I wonder if he has considered at all whether there ought to be a definition for consider in this act.

Hon. P. Fassbender: I have considered it, and I consider the comment being a considered comment. The bottom line is that the language is being put there specifically in legislative language to ensure that the auditor general can consider, may consider — doesn’t have to — the information.

[1520]

S. Robinson: I see the member for Delta South and I were thinking along the same lines, because I have a whole number of questions about that language, around the difference between “may consider” and “must consider.” In some of the original act, there was “may consider.” Now there is “must consider.”

I’d like to know how…. The minister is now, I think, ultimately responsible for this office, which is how I’m understanding this. The minister is taking responsibility for the operations of the Auditor General for Local Government. How will he know that the AGLG…?

Where it says “must consider,” how will he know that it has been considered, versus the old language, which was “may consider”? That’s clearly different. There is an intention there that it be different, and I’d like to know how he would know the difference.

Hon. P. Fassbender: In that particular section, it says that “the auditor general must, in the manner and to the extent that the auditor general considers advisable, consult with the Union of British Columbia Municipalities.” So this section clearly states: “…must, in the manner and
[ Page 9494 ]
to the extent that the auditor general considers advisable…” That is just to, again, bring clarity and to ensure that the auditor general knows that one of the intents of this office is to work with the Union of B.C. Municipalities in a collaborative and a cooperative fashion.

Section 12 approved.

On section 13.

S. Robinson: We were getting ahead of ourselves a little earlier. Again here, we see this “must consider.” There’s a subsection in it: “(4.1) The auditor general must consider any comments provided by the audit council under subsection (4).”

Again, we have this process that is…. I think I understand the intent. I think the intent is to go from “may consider” to “must consider,” which implies a directive. But if there’s no requirement to demonstrate, if there’s no evidence to suggest that that has been considered, how would the minister — who’s now declaring, with this legislation, that he’s ultimately responsible — know that the Auditor General for Local
[ Page 9495 ]
Government had, in fact, considered comments provided by the audit council?

Hon. P. Fassbender: Well, very easily. In the previous sections that we talked at length about, the audit council is the one who determines the functioning of the office, including comments that they make back to the auditor general. And clearly, if the Auditor General for Local Government did not consider the comments of the audit council, I suspect that that would have them question the performance of the office and may lead to a recommendation coming to the minister.

S. Robinson: If I’m to understand this…. I’m trying to overlay this in terms of how I imagine conversations had gone on previously with the audit council and the previous Auditor General for Local Government, where the legislation said “may.” The previous Auditor General for Local Government, who subsequently sued the government, read the legislation to say “may consider.” She chose, I imagine, to hear what was said but didn’t choose to act on the audit council’s request.

This is about making sure that the Auditor General for Local Government in fact acts in the way that is expected by the audit council, and all members of the audit council are appointed by the minister. I’m just trying to make sure that I understand the relationships, all the way down, in terms of understanding what the minister’s expectation is of the behaviour, the choices and the actions of the Auditor General for Local Government.

[1525]

Hon. P. Fassbender: Clearly, the audit council considers the performance of the office. If they see a gap or they have a concern, they would communicate that to the Auditor General for Local Government. The Auditor General for Local Government must consider their input but is not bound to do anything about that input if indeed the auditor general feels, because of their independence, that that has no relevance to the performance of their duties.

If that was to be the case and the audit council disagreed, again, the audit council then would have the opportunity and the right to communicate through a report and a motion of the audit council to the minister.

Sections 13 to 17 inclusive approved.

On section 18.

S. Robinson: In section 18, we have a substitution and review of the act, and I have a number of questions about this piece. It says: “Subject to subsection (2), the minister may, at any time, review one or both of (a) this Act, and (b) the functioning of the office of the auditor general.” It then goes on.

I’ll just speak to that. I want to ask about the specific purposes of these changes.

Hon. P. Fassbender: As the member, I am sure, is aware, the previous act had a time frame of five years. This now provides that the minister may at any time review the act or the functioning of the office, based, again, as I’ve said, on any recommendations and reports that come from the audit council.

S. Robinson: Perhaps the minister can explain specifically what it was that inspired the changes that we’re seeing here before us today?

Hon. P. Fassbender: It again goes back to the learning that we did in the functioning of the office. Again I reiterate what I said at the very beginning of committee stage that this was a new venture on the part of our government to achieve some very clear goals.

What was also obvious…. The members opposite were the ones that were standing in this House in question period many times asking where the minister’s leadership was in dealing with the issues they had raised about the functioning of the office.

Because of that learning, we are very clear that if issues do come up at any time that significantly impact the functioning of the office or, indeed, even the act, the minister may make changes at that time.

[1530]

S. Robinson: As I’m listening to the minister, I do recall how in this chamber we certainly had lots of questions about what was happening in that office. We all know the story about how the Auditor General for Local Government was fired and subsequently sued government. I understand that a settlement was made. We also know that there was a lot of waste of taxpayer dollars.

The minister likes to talk about the one taxpayer. I agree. There is one taxpayer. And we know that at this point, by my calculations, it’s over $7 million for half a dozen reports, of which two were found useful. For the sake of just having full knowledge, perhaps the minister can report to this House how much the settlement was for the previous Auditor General for Local Government.

Hon. P. Fassbender: No, I will not comment on that as part of this committee stage.

S. Robinson: I appreciate the response. Given the changes in terms of review…. And we know that this review, the idea of reviewing as needed, is really the change that we’re seeing, because the five years seem to provide some anxiety for the government around this office.

I’d like to know how this idea that the minister can review at a whim or at a desire, his desire, might impact on the independence of this office.

Hon. P. Fassbender: Not at all. Clearly, the review would be done if issues came to light either through the audit council or by other situations. But ultimately, the office and the functioning fall under the minister’s responsibilities. The minister is ultimately accountable, and as such, the minister would have the ability to move in a timely and effective manner if problems did arise again, which, I believe, with the changes we’ve made, will not be the case.

S. Robinson: Well, given the cost of this office to the taxpayers so far, I would hope that there wouldn’t be any more waste of tax dollars. But the minister, in answering the question, said that if issues came to light that would prompt a review of the act, but it doesn’t say that here. It says: “Subject to subsection (2), the minister may, at any time, review one or both….” It doesn’t say that the minister may, if issues come to light, review one or both.

I’m wondering if the minister can take a look at this and point out…. It does say “at any time.” It doesn’t specify that there have to be particular concerns that are brought by the audit council or brought by the Auditor General for Local Government. It just says “at any time,” which I read as “when the minister wants to, because the minister wants to,” not because there’s a particular issue.

Hon. P. Fassbender: If the minister was to review the act, it would come into this House, and the minister would have to give an explanation of why changes were being proposed to the act. That’s the process that we’re in right now in the changes that we are making to the act.

Again, the minister is not looking to review things for the sake of doing a review. The review is something that is a responsibility to ensure that the office fulfils the mandate that it’s been established to do.

S. Robinson: While the minister’s response about reviewing the act — it comes into this chamber — is quite accurate, it doesn’t speak to the functioning of the Office of the Auditor General. What that means, the way I read it, is that there doesn’t have to be a particular issue. The minister can also just say: “Well, gee, hmm. I heard from some community somewhere that they’re not happy with the auditor for local government. I’m going to go and take a look at the office and the operations of the office.”

I’m sure the minister can appreciate that this is some of the angst, certainly, that I am hearing from folks at the UBCM and how I’m understanding their concern that they put on their website around the independence.

[1535]

This is an issue related to the independence of this office, and I think it would be great to hear from the minister about how he is prepared to ensure that that’s, in fact, going to be the case.

Hon. P. Fassbender: I think, clearly, all of the changes that we are proposing in this act, all of the relationship issues that we’ve addressed that have come forward from UBCM and local governments, are to ensure absolute accountability for the purpose of the office and the functioning of the office. That’s the intent, and I can assure the member opposite that the minister is not going to, based on one community saying they didn’t like something, do a review of the functioning of the office.

I would suggest to that community very clearly that they work with the Office of the Auditor General for Local Government and raise their concerns. This further emphasizes the importance of the office being sensitive to local governments’ needs while still maintaining that independence but understanding, perhaps, some of the nuances that may apply to a local government in the province. It’s all about relationship-building on one hand but clear accountability on the other hand.

Sections 18 to 20 inclusive approved.

Title approved.

Hon. P. Fassbender: I move that the committee rise and report the bill complete without amendment.

Motion approved.

The committee rose at 3:37 p.m.

The House resumed; Madame Speaker in the chair.
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Report and
Third Reading of Bills

BILL 36 — AUDITOR GENERAL FOR
LOCAL GOVERNMENT
AMENDMENT ACT, 2015

Bill 36, Auditor General for Local Government Amendment Act, 2015, reported complete without amendment, read a third time and passed.

Hon. A. Wilkinson: I call second reading of the Franchises Act, Bill 38.

Second Reading of Bills

BILL 38 — FRANCHISES ACT

Hon. C. Oakes: I move that Bill 38, the Franchises Act, be read a second time.

I’m delighted today to be introducing this important piece of legislation that will support the franchising sector in British Columbia. I’m delighted because I want investors and businesses in British Columbia to be set up for success.

[R. Chouhan in the chair.]

This legislation directly supports small businesses across British Columbia, opening the door for investment and employment opportunities by providing certainty for both investors and businesses.

Successful franchise owners tend to reinvest and open multiple franchise businesses, which leads to more jobs and career opportunities in both our urban and rural communities. We met some of those the other day. Franchise businesses play a significant role in British Columbia’s economy, and we want to ensure that private sector investments are encouraged.

This bill has been the subject of consultation for some time now. In the fall of 2014, the Ministry of Justice undertook a public consultation based upon a report published by the British Columbia Law Institute in March of that year.

[1540]

In July of this year, the Minister of State for Emergency Preparedness undertook consultations with franchisors whose head offices are located here in British Columbia. We’ve also consulted with the business community — groups like the Small Business Roundtable, the Retail Council of Canada and the Canadian Franchise Association. As MLAs, we have heard from our constituents as well. All agree that we must strike the right balance between protecting franchisees while upholding franchisors’ rights to freely contract. The proposed act does this.

Bill 38 is based largely on work that was done by the Uniform Law Conference of Canada and, most recently, by the British Columbia Law Institute. I want to offer my personal thanks to both these organizations for the significant work that they contributed to this bill.

I want to acknowledge the great number of individuals outside of government who worked with both my ministry and the Ministry of Justice and Attorney General in the development of this bill. We had the invaluable contributions of an advisory group of experts in franchise law. This group provided a great deal of advice and feedback over the course of developing this legislation. Many in the franchising community provided their input during our consultations process and contributed to the bill that we have before us today.

This legislation represents a balanced approach to ensure that franchisees and franchisors have the business certainty that they need to succeed. It protects vulnerable franchisees so that they can succeed in their franchised businesses, while at the same time providing a standardized regulatory framework for franchisors.

Without legislation regulating franchising in British Columbia, there are few legal options open to franchisees. This bill will provide important legal protection in British Columbia. For franchisees, it will provide the level playing field between them and the franchisors.

Franchise information resides solely within the franchisor’s knowledge and control. As a result, there have been situations where franchisees did not receive the full disclosure about critical information — information like revenues and costs, other franchisees, legal issues, and the like. If vital information is being withheld or the franchisee is misled, the franchisee stands to lose greatly.

For franchisors, it also provides protections. For example, it imposes a duty of fair dealing. This applies to all parties in the performance and enforcement of the franchise agreement. It provides a section of substantial compliance that benefits the franchisor. If, for example, they had a technical irregularity or an error in their disclosure document, they would still be deemed in substantial compliance. As a result, they would not be subject to the remedies for disclosure set out in this act.

Most importantly, Bill 38 provides a standardized legislative framework that minimizes the regulatory burden, particularly for those franchisors who operate in more than one province in Canada. By harmonizing our legislation with the five other provinces which have a franchise act, we are greatly reducing the costs of doing business. Disclosure obligations will be the same whether a franchisor is operating here in British Columbia, in Alberta, in Manitoba, in Ontario, in Prince Edward Island or in New Brunswick.

The legislation contains two key components. First, the act requires franchisors to provide franchisees with all the relevant disclosure information — information that franchisees need to make informed decisions about
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whether to invest in the business prior to entering the franchise agreement.

Second, the act provides franchisees with legal remedies where the franchisor does not comply with the disclosure obligations, such as not disclosing the information or providing misleading information.

Alberta, Manitoba, Ontario, New Brunswick and Prince Edward Island have already enacted franchise legislation closely conforming to the Uniform Franchises Act, an act developed by the Uniform Law Conference of Canada.

[1545]

Bill 38 is consistent with the legislation in the five other provinces, as I mentioned, and it is consistent with the Uniform Franchises Act. This is important in providing standardization and certainty for franchisors and franchisees alike.

Franchisors support the fact that we’ve developed a bill that closely follows their existing obligations and best practices. One of the greatest values of this legislation is in its uniformity, which streamlines the way that franchisors operate within Canada. With uniformity, a franchisor operating in multiple provinces can prepare the same disclosure package for all of their franchisees.

I’ve laid out the key features of this legislation. I’ve argued that we found the right balance between protecting franchisees while upholding franchisors’ rights to freely contract — a balance that supports good business relationships.

Hon. members don’t need just to take my word for it. We’ve had both franchisors and franchisees talk about their support for Bill 38. For example, John DeHart is a franchisor with Nurse Next Door. John has said this about Bill 38:

“This legislation is great news for our industry and a great move for British Columbia, as it will ensure good business practices are in place for all franchisors. It will make it easier for franchise companies to expand and invest in our province, save us time and money and help create jobs. This legislation will also bring British Columbia’s requirements in line with the other provinces, making us a more competitive place for franchises to invest and strengthen our economy.”

This is what Jackie Johnson, a franchisee with CEFA educational systems, had to say:

“We were very lucky to have bought in to a franchise that shared all the information we needed to feel good about our decision to open a franchise, but we’ve heard that not everyone is so lucky. By giving people buying into a franchise all the information they need to make informed decisions before they sign on the dotted line, you really are setting them up for success. We love our school in Langley and are excited about opening our new locations in Morgan Crossing in South Surrey.”

And I heard they’re opening one in Richmond as well.

“CEFA is a great franchise, and it’s good to know that those who aren’t as lucky as us have more support for their business.”

I’m grateful for the support of these businesses for Bill 38. Businesses are attracted to straightforward regulatory regimes that are encouraged to invest in British Columbia. That is why franchise legislation is good for business in British Columbia. Franchising plays a significant role in our economy, generating significant investment and employment opportunities as well as direct and indirect economic benefits to the community in which it operates. Successful franchisees tend to reinvest and open multiple franchise businesses which generate more jobs and career opportunities for businesses.

I hope that everyone here today joins me in support of Bill 38, which will make a positive, balanced improvement in franchisor and franchisee relations.

Deputy Speaker: The member for Burnaby-Lougheed. I understand, Member, that you’re the designated speaker.

J. Shin: Yes, I am.

Deputy Speaker: Proceed.

J. Shin: I am very happy to rise today on behalf of Burnaby-Lougheed to take my place in the debate for second reading of Bill 38, the Franchises Act.

Small businesses are the backbone of our economy, creating hundreds of thousands of jobs in this province. Legislative protection by their provincial government, such as that proposed in Bill 38, is exactly what our entrepreneurs need, and I welcome the news wholeheartedly.

Now, according to Merriam-Webster’s Dictionary of Law, franchising developed over time as an efficient way to do business, and the origin of the word “franchise” goes back to Anglo-French, meaning freedom and liberty.

I’ll be going on for a long time, by the way.

Indeed, a modern franchise model offers, or is at least assumed to offer, significant advantages, like an existing brand with name recognition and established clientele, as well as a tried and tested operation and structure with help and resources for equipment, suppliers, training, and so on and so forth — all adding to, of course, a significantly lowered barrier for any entry-level entrepreneur and, hence, more freedom and liberty, in its intended spirit, like root of its name suggests.

Of course, a quick reference to Wikipedia has, “For the franchisor, the franchise is an alternative to building chain stores to distribute goods and services that avoids the investment and liability,” that would come, typically, with a chain store model, shifting much of the risk and evening it out to the franchisee.

[1550]

The franchisee is said to have a much greater incentive than a direct employee because he or she has a direct stake in the business.

Essentially, and in terms of distribution, the franchisor is a supplier who allows the operator or the franchisee to use the supplier’s trademark and distribute the suppliers’ goods, and of course, in return, the operator would pay the supplier a fee.

There are three main fees, typically. To be more precise, the first one would be a royalty for the trademark,
[ Page 9498 ]
the second one being the reimbursement for the training and the advisory services that are provided to the franchisee, and the third one being a percentage of the individual business unit sales. That will be an ongoing fee.

These three fees may be combined in a single management fee, and a fee for disclosure is actually separate and is always a front-end fee, which tends to be a much larger sum. These franchise fees are on average 6.7 percent, with an additional average marketing fee of 2 percent. These are obviously no small costs, of course.

Thirty-three countries, but not including Canada, have laws that explicitly regulate franchising on a federal level, with the majority of all other countries having some laws which have a direct — or indirect, at least — impact on franchising.

Before I further comment on this bill before us…. I understand that I have ample time to speak on this bill, as the designated speaker. I think it would be worthwhile for us to consider the history of franchises here for a little bit, if the members would please entertain me.

The FranChoice group narrates this the best, so I’ll share that with the House. Franchises, in their earlier forms during the Middle Ages, were local titled landowners who would grant the rights to the peasants or serfs for consideration to hunt, hold markets or fairs or otherwise do business in their domain. With the rights, of course, eventually came the need for rules, and those rules went on to become part what’s now known as the European common law.

It turns out that in North America, Isaac M. Singer, the famous American investor and founder behind the Singer sewing machine company, is commonly credited for starting the modern use of franchising. The things that you learn on this job. During the 1850s, Singer, who had improved on the existing sewing machine model, wanted to find a wider distribution for his products, but he lacked the money to increase manufacturing.

Another problem for him was that people wouldn’t buy his machines without having the training for it, which the service retailers weren’t necessarily able to provide. Singer’s solution was to charge licensing fees to people who would own the rights to sell his machines in certain geographical areas, which would then be the funds that he needed as the venture capital for his manufacturing. These licensees became responsible for teaching people how to use his machines, which eventually created opportunities to bring the first commercially-successful sewing machine to the world.

Franchising, starting from that, was employed on a limited basis after the success of the Singer sewing machine distribution method. Ultimately, this really is the franchising model. The licensing of a brand name, trademarks and, of course, the entire business concept is the dominant mode of franchising, as we know it today.

There was an overwhelming need for all types of services and products after World War II and the subsequent baby boom, so franchising was the main and the popular method to provide a way for businesses to quickly grow and expand. So the widespread success of giants like Coca-Cola, Western Union…. By agreements between the automobile manufacturers and the dealers, the dealership concept soon followed.

I believe that many members in this House might have heard the story of Ray Kroc, who was the milkshake mixer salesman who discovered the McDonald brothers’ small hamburger stand in San Bernardino in California in 1954 and who is considered to have unleashed the wave of franchising that we know today.

He found that the McDonald brothers were buying so many of his milkshake mixers because they had developed a high-volume production system which enabled them to provide fast service with consistent results and, of course, at lowered costs. Kroc became their licensing agent for the fast-food concept and recruited many more franchisees, starting right from the Chicago area.

[1555]

Merely seven years later, by 1961, Kroc had bought out the McDonald brothers’ interests and took the title as the senior chairman. In two more decades after that, by 1988, McDonald’s had opened its 10,000th restaurant. Today there are over 30,000 McDonald’s restaurants worldwide as a globally recognized brand that are actually run by small business owners.

It goes without saying that the economic impact of franchise business run by small business owners and their parent companies is gigantic. In the U.S. — they’re the leader in franchising — this business model apparently accounts for almost half of all American retail sales.

Since the 1930s, the U.S. used this approach for fast-food restaurants and, slightly later, for motels at the time — after the great depression. As of 2005, there were 909,253 established franchise businesses generating $880.9 billion — and that’s not a million — of output, accounting for 8.1 percent of all private, non-farm jobs. This amounts, south of our border, to 11 million jobs for them and 4.4 percent of all private sector output.

The impact is not any less significant for us here in Canada. There are 78,000 franchised outlets with $100 billion in gross sales, or 5.5 percent of all of our GDP. This sector employs roughly 1.5 million Canadians.

Estimates by the Canadian Franchise Association suggest that B.C. has more than our fair share: roughly 10,000 franchise outlets with $14 billion in sales and 180,000 employees, crossing more than 40 different sectors of our economy — including retail, hospitality, automotive, health care — accounting for one out of every five consumer dollars spent in Canada on goods and services.

At the beginning of 2013, the Canadian Franchise Association identified six sectors of franchises that have grown significantly over the past five years.

Over that period, business consultants, services and training saw an increase for the demands for their ser-
[ Page 9499 ]
vices, in franchise listings, by 211 percent — followed by the hair and nail salons and spas at 188 percent; seniors and homecare and services at 121 percent; food, restaurant and dining rooms at 88 percent increase; home-based business at 83 percent increase; and health and fitness at 82 percent increase.

With the diversified local economy that we have in B.C., a sophisticated consumer culture and close proximity to the United States, Canada is the natural first destination for a lot of the U.S. franchise companies seeking to expand internationally and a preferred entry point, of course, for foreign franchisers, investors and immigrants seeking to enter the North American market.

Some of the biggest and the most well-known franchises among us now include Subway, 7-Eleven, Hampton Inn and Suites, Great Clips, H&R Block and, of course, the oh-so-famous Tim Hortons. But as the number of franchise businesses grew, so did the need for the legislation and the consumer protection which inevitably followed.

The International Franchise Association, IFA, was founded in 1960 as a membership organization of franchisors, franchisees and suppliers with the purpose of providing help and guidance to the entire industry. As significant as were the advantages of a franchise business for the franchisees, just as crippling were the disadvantages that often came with them, especially in the absence of legislative measures. And of course, much vulnerability continued to exist, from scams and frauds, without regulatory reinforcements.

[R. Lee in the chair.]

I would like to go over some key areas of concern for the franchisees entering into a franchise contract with their parent company. Firstly: “Franchising is one of the only means available to access venture capital” without having to give up the control of the operation of a chain and build a distribution system for servicing it.

[1600]

After the brand and formula are carefully designed and properly executed, franchisors are able to sell franchises and expand rapidly across countries and continents using the capital and resources of franchisees, while reducing their own financial risk. Of course, the more successful the franchise is, generally the more expensive it is to buy in, requiring hundreds of thousands of dollars for the start-up fee — with or without the revenue guarantee, of course.

Additionally, “although franchisor revenues and profit may be listed in a FDD,” which stands for franchise disclosure document, “no laws require an estimate of franchisee profitability,” which depends on how intensively the franchisee must have worked. Therefore, franchisor fees are typically based on “gross revenue from sales” and not necessarily on the actual profit that’s realized, taking in the franchisee’s labour that has been invested.

The sellers of franchise businesses, the franchisors, themselves, in view of our province’s apparent regulatory void that was for a while, appear to have had little or no obligation to disclose negative system unit performance statistics to the new buyers of the franchise business, who would then unknowingly purchase franchises that have demonstrated low or no profitability and even high failure rates of the founding franchisees.

These are binding and generally non-negotiated franchise agreements that we are talking about here against many unassuming and usually first-time business owners, or those from immigrant communities with language barriers, who enter and get locked into unfair dealings. All this means, really, is that the greatest risk of the business in the franchise concept is significantly shifted to the franchisees, who are also at the mercy of their parent company for stipulations that surround ongoing rates for sales commissions and advertising.

Of course, there is a second point. I will quote this as well: “A franchise usually lasts for a fixed time period — broken down into shorter periods, which require renewal — and serves a specific territory or geographical area surrounding its location.” They say that the agreements typically last five years — some very rarely maybe up to a period of 30 years — and they’re renewable at the sole option of the franchisor. Premature cancellations or terminations of contracts, as you would imagine, were not uncommon and would, without a doubt, bear serious consequences for the franchisees. The location and the number of franchises in the vicinity are also in the hands of the franchisor, which may also work against the existing businesses.

As such, in reality, a franchise is merely a temporary business investment involving renting or leasing an opportunity. It’s not a purchase of the business for the purpose of ownership. It’s actually even classified by some as a wasting asset because of the finite term of its licence.

The third part. Because the franchises are all run the same way by the parent company, the individual franchisees would not have the same kind of flexibility as to how they would like to run their business, responding to their local clientele. These are typically the freedoms that you can exercise as an independent business owner.

What that would mean is that, with all good intentions sometimes, the franchisees are often held to very severe penalties or even have their licences revoked if they intentionally or unintentionally fall short of the established protocols and expectations of the operation. It is noted that, actually, across the country the franchisor rules imposed by the franchising authority on the franchisees are increasingly strict. Some franchisors are using even the most minor rule violations to terminate contracts and cease a franchise without any reimbursement. Those are the heartbreaking stories that we’ve heard over and over.

The fourth part. The industry also ranges greatly and without adequate accountability for the promise and the
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actual delivery of franchisee support for training and setup. Often the training period, the cost of which is actually in great part covered in the initial fee, is too short in cases where it’s necessary to operate, say, complicated equipment. The franchisee has to learn on their own from the instruction manuals.

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The fifth point. The statistics, in fact, do show that the failure rates are actually higher for franchise businesses than independent business start-ups. I was very surprised to see that. It makes it that much more important for today’s franchise seekers to be aware of that fact, because not all franchise businesses are turnkey operations with promised clientele and revenue.

All in all, franchise agreements are huge, cumbersome files in complex legal language, written unilaterally in favour of the franchisor by the franchisor. Naturally, it would bear minimal legal protection and rights, if any at all, for the franchisee. The franchise agreements carry no guarantees, no warranties, and the franchisee has little or no recourse for legal intervention in the event of a dispute.

The franchisor would be almost always protected from lawsuits from their franchisees because of the non-negotiable contracts that the franchisees are required to acknowledge — in effect, that they’re buying the franchise knowing that there is risk and that they have not been promised success or profits by the franchisor. Most franchisors require franchisees to sign agreements that mandate where and under what law any disputes would be litigated. It’s sometimes not so much about the new buyers of franchises doing their due diligence, but it’s about actually being considerably business- and legal-savvy.

Also, communication with the current and ex-franchisees for getting references is greatly hindered. It should be noted that the current and ex-franchisees of systems have no duty under any law to disclose information about their businesses or their experience to the prospective franchisees either. In fact, many are muzzled by their contract with the franchisor to speak out, even if they wanted to.

On top of that, franchisors that practise franchise fraud have and can attempt to pressure franchisees leaving the franchise system to sign a non-disclosure agreement, a confidentiality agreement or, in a sense, a gag order. The gag order allows franchise misrepresentation by preventing prospective new franchisees from learning the important, and especially the negative, details about the enterprise.

In 2007, the Franchise Rule in the U.S…. In the Federal Register, comments from the former franchisees were listed concerning the confidentiality agreements, or the gag order. I believe they’re well worthwhile for us to have it read into the record here in the Legislature, as much of that also echoes the sentiments that our local franchisees have shared with my colleagues and I over the years, in confidence.

“Commenters complained that the use of confidentiality clauses is widespread, and several commenters urged the commission to ban the use of confidentiality clauses as a deceptive or unfair trade practice. Other opponents of confidentiality clauses, including state regulators and some franchisors, asserted that such provisions inhibit prospective franchisees from learning the truth” as they try to conduct their due diligence investigation of a franchise offer.”

Here’s another one. “One franchise representative contended that the harm flowing from the confidentiality provision goes beyond individual franchise sales, noting that such provisions intimidate franchisees into not testifying before legislative committees and public agencies such as the Federal Trade Commission.”

Here is another one. “The gag order…prohibits me from being able to answer questions and give cautionary remarks to other people who may be considering the franchise that I was with…. The use of gag orders is almost 100 percent in some franchise systems.”

Yet another one.

“Three franchisees…believed that they were kept in the dark about the failure of their franchisor’s system due to confidentiality clauses imposed on the current and the former franchisees. Confidentiality clauses typically release the franchisor from legal liability and bar the franchisee…from making any oral or written statements about the franchise system or their experience with the franchise business. The purpose of such clauses is to shut down any negative public comment about the franchise system.”

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Here’s one last one, franchise-related:

“I had spoken to some of the franchisees that had left the system. I now feel certain that they painted a picture that was not even close to being the truth, based on the gag order that the franchisor imposed. Had I gotten the truth from these people, my decision certainly would have been different. Every franchisee leaving the system has had a gag order placed on them, making it impossible for the current and the future franchisees to get the facts they need.”

All this boils down to the fact that beyond the standards of ethical business practice and negotiations in good faith that one would expect, when there is such an obvious long-standing regulatory void, we’ve failed to protect the small businesses in our province, for the longest time, from a series of fraud and unfair dealings that happened and devastated many franchisees and their families financially and emotionally. It wasn’t too long ago. I think that it was back in spring.

For example, how can we ever undo the stories like a particular franchisee who actually came into my office? I met with them not once — at least three times. He was forced to remain anonymous, but he was compelled to share his story. Because of the fraud that he had faced with this franchise business, his marriage fell apart. From the incredible financial distress of having lost all his savings in the franchise business, he was left without any income. He was driven to feeling absolutely hopeless, and he attempted suicide on a number of occasions.

These are the stories. I really urge the House…. I’m sure all the members feel the same way. It’s that we, as legislators, try our level best to promptly be responsive so
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that such stories that could have been prevented — or at least minimized by a regulatory introduction or improvement; we could have perhaps had it in B.C. even as far back as 2010, when Manitoba did it, for example — will happen no more.

It’s certainly eight months too late for this particular case of the gentleman that I just described. I was able to provide very little relief for his ordeal other than to just reassure him that I’ll be advocating as hard as I can for legislation like Bill 38 that we have today. A regulatory void would have continued to have claimed many more victims, had it not been the case that the government decided to act on this, this session. It’s been long decades overdue.

I do want to highlight the fact that we have been long overdue on this side of the border compared to our U.S. counterpart. The International Franchise Association adopted a code of ethics to establish a framework for the implementation of best practices in the franchise relationship of IFA members.

The code represents the ideals to which all IFA members agree to subscribe in their franchise relationships. Of course, IFA works closely with government and commissions on improving how their industry relates to the franchisees, and they have been an integral part to the expansion of franchising around the world actually.

All this was shaping up in the ’60s and the ’70s. It was in 1978, almost four decades ago, that the U.S. Federal Trade Commission enacted a law requiring all franchisors to submit to all potential franchisees a document called a franchise disclosure document, FDD, prior to receiving the money. The FDD provides detailed information on the franchise company, including the history, the officers involved, any litigation history, estimated investments to date, an overview of the business concept and, of course, a copy of the franchise agreement.

In addition to the federal requirements, a number of registration states also established their own set of requirements for the franchisors to meet before being allowed to sell franchises in these states. Of course, since the requirements may differ from each of these jurisdictions in the U.S., it’s currently 50 states in the U.S. right now that franchisors would end up actually needing to move into these areas and hinder their growth, actually, because of the differences in the regulations from one state to another, which means that, actually, we’re doing a lot better in Canada on that fact.

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Constitutionally, the franchise registration in Canada is a provincial jurisdiction. We don’t have a federal jurisdiction overseeing this. In Canada, there are five other provincial jurisdictions that put in the regulatory measures. The minister mentioned this also: Alberta, as far back as 1971, modelling after California’s legislation at that time; Prince Edward Island came in 1988; Ontario followed in 2000; New Brunswick in 2007; and Manitoba in 2010. That left British Columbia and a few other provinces without a legislative regime to impose the specific presale disclosure obligations on the franchisors.

Not having the national uniformity that would come from a single piece of federal legislation has had cause for concern that Canada might repeat the pattern in the U.S., with its wide variety of state approaches to this increasingly crucial area of our economy. But fortunately, through the combination of the U.S. example that we learned and the efforts of the Canadian Franchise Association and, of course, the thoughtful actions by provincial lawmakers, the Canadian franchise legislative landscape is quite amazingly uniform. The minister confirmed that fact today.

Of course, this Bill 38, too, appears aligned with the other jurisdictions. There are some very minor differences that do exist, and I’m sure that will be a headache for those that are charged with the compliance. But I would like to think that they can be considered to be few and fairly minor.

Tony Wilson is a franchising, licensing and intellectual property lawyer at Boughton Law Corp. in Vancouver, and he’s also a professor at Simon Fraser University. He wrote in his commentary, back in 2013: “One purpose of this type of legislation is, arguably, to level the playing field between the franchisor and the franchisee. Under these statutes, franchisees have certain rights to rescind their contracts and to get some or all of their money back if they have been misled in the sales process or they have not received the required franchise disclosure documents.”

Two years later since his commentary — I saw this just before I came in today — Tony Wilson wrote, just today, a special for the Globe and Mail.

“Unlike in the United States, where franchise laws have been a part of the business landscape since the 1970s, where the industry is highly regulated, particularly at the state level, there’s no securities commission or analogous government agency that regulates franchising in the five Canadian provinces which have franchise-specific laws.”

He goes on to further say:

“Bill 38, the Franchises Act, was introduced in the B.C. Legislature on October 5 and is arguably one of the more business-friendly franchise statutes in Canada in terms of franchisor compliance. More importantly, it goes a long way to protect B.C.’s large and growing number of small business operators, many of whom are new Canadians, who choose to assume the risks in hopes of reaping the rewards of owning and operating a franchise business but who are not entitled to any of the legal benefits and remedies available to franchisees in the other five provinces which regulate franchising.”

He also goes on to further add:

“Over my career, I’ve seen far too many shirts lost, homes forfeited and, indeed, marriages ruined because a small business operator in B.C. did not have the legal information and the legal remedies that they would have had if they had bought their franchise in Ontario or in Alberta” — where the legislation existed.”

He also goes on to say:

“If anything, this legislation in B.C. will go a long way to protect an important segment of B.C.’s economy, B.C.’s small business persons, who choose to own and operate their small businesses through franchising.”
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This long-awaited bill will finally fill the regulatory void in B.C. that had the franchisees of our province under strict obligation to the parent company with few rights and with the big franchisors exerting significant control over their small businesses.

It’s five years after Manitoba and nearly half a century later than the other jurisdictions and countries. It has been really past time for British Columbia to act in this Legislature.

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In fact, actually, I do want to express the sentiment that it didn’t have to be this fall session; it could have been this spring, when my New Democrat colleagues called on the government to take more action to ensure that B.C. franchisees are operating on a level playing field with the corporations that they’re partnering with.

Much advocacy work had been done, at great lengths, by the member for Vancouver-Kingsway. I’m so glad that he’s actually right here when I’m talking about this. It is very sweet. He had met with multiple franchisees who confided in him their distress. The member for Vancouver-Kingsway had conducted in-depth research of the industry here in B.C. and consulted numerous local stakeholders at length. He thoroughly considered the examples in other jurisdictions for several years.

It was with great support from the franchisees and the stakeholders in our communities that the member for Victoria–Beacon Hill introduced a private member’s bill, M219, earlier this year, in May, on behalf of the official opposition, calling for legislation. It is without question the responsibility of the government to provide important legal rights and remedies to B.C.-based small business owners who operate or are looking to operate a franchise business here in this province.

I would like to quote the first reading of our private member’s bill, M219, which was read by the member for Victoria–Beacon Hill on May 13 in the House. I would like to give it the recognition which it never received, since it went on to be denied its second reading by the government, resulting in what I believe is a further delay. It could have been something that we had a little earlier this year.

“I’m pleased to table in this House the Franchise Act for British Columbia to ensure that franchisees in our province are able to operate on a level playing field with the corporations they are partnering with. Small businesses are the backbone of our economy, creating hundreds of thousands of jobs in British Columbia.

“Many of those small businesses are franchise operators. Many franchisees are first-time business owners looking for an opportunity to provide for their family, launch into business, use their entrepreneurial skills and contribute to our economy. It’s estimated that there are roughly 10,000 franchise outlets in British Columbia, with $14 billion in sales and 180,000 employees.

“Buying a franchise requires a significant investment of capital on the part of the franchisee, yet the relationship is often characterized by unequal bargaining power. Franchisees are often at the mercy of the large franchisors.

“Other provinces have legislation to ensure these large corporations deal fairly with small business, and the act I’m introducing today would do just that. It would ensure a level playing field, require full disclosure. It would allow claims arising for a franchise agreement to be litigated in B.C. courts. It would provide for dispute resolution where needed and would allow a franchisee to recover losses arising from misrepresentation in the disclosure document.

“Extensive consultation has occurred in our province, and the B.C. Law Institute has been actively involved in this area, preparing a draft bill to address the concerns raised on which our bill is based. On behalf of small business owners, it’s time to act on their concerns. It’s time to bring protection to these hard-working British Columbians, which is why I bring this bill forward today.”

I would like to again thank the opposition MLAs, like the member for Vancouver-Kingsway, for the great deal of work done on this front for our small businesses in B.C.

Our bill proposed in the past spring session was modelled on the Uniform Franchises Act that was prepared by the Uniform Law Conference of Canada and the B.C. Law Institute. It appears that Bill 38 is as well, as the minister confirmed the fact. In fact, it’s almost identical except for three little minor accounts in language.

Of course, as I noted earlier, the government did engage in an extensive consultation with the B.C. Law Institute on the issue. That consultation ended last year, in December. While it would have been much better to have this legislation introduced then, as opposed to eight months later, I am still very, very happy to see it in this session, at least. We can finally join the other provinces in ensuring that the large corporations deal fairly with our small businesses.

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When people buy real estate, the seller is required to disclose everything pertinent about the property, yet that level of transparency did not exist for franchisees in our province until now. This had put all the risk at the feet of the franchisees, who may not have had the means to launch the kind of investigation needed to determine whether their investment was a good one or a bad one.

I do want to go over what a good disclosure document should include during the purchase. It should include the usual information as well as a credit report, start-up costs, ongoing costs, potential earnings, territories of operation, any exclusive rights that are offered, policies about volume rebates, terms and conditions of financing arrangements, requirements for participation in advertising funds, training that’s to be provided, any other costs associated with that training and beyond and, of course, the renewal and the transfer terms for the franchise agreement.

In fact, everyone I’ve spoken to…. I was on the radio just this morning, and even the host was very surprised, as well, that such standards of disclosure were not already reinforced by law in B.C. and that we were all without what we thought was very obvious all these years.

Joining us in the Legislature when the opposition introduced our bill back in the spring was a former franchisee, Wayne Taylor, who called the situation like the Wild West. “Small business owners like myself have
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little protection against large corporations,” he said. Of course, Wayne risked more than $150,000 in an arrangement with his franchise back in 2008. He goes on to say: “We are the job creators. We assume the risk. But the big companies have had all the power.”

We also had another validator of our bill. Her name is Kulvinder Sahdra. She’s a former franchise owner who believes the franchise law would have given her more protection when she was trying to sell her franchise that was at West Broadway and Maple Street in Vancouver. She claims that the company rejected three potential buyers without explaining why. When she hired a lawyer to deal with the company, a sale was finally approved. By then, she had fallen behind in her royalty payments to her parent company and ended up having to sell her house to cover the cost.

Of course, bulk purchasing agreements, where franchisees are required to buy basic supplies from the franchisors but at higher costs than what they would pay otherwise, can also tilt the playing field to the franchisor. Kulvinder goes on to add that the franchise law in our province would help our franchisees better understand all of these consequences of an agreement so that they can make a more informed decision before they enter into a contract.

There is a great article by Ben Hanuka entitled, “Franchisees closing down: problems with getting help.” This was posted in 2013 on the Law Works franchise blog. It, perhaps, illustrates the ordeal that many franchisees face and are still facing. It also has some really fantastic recommendations, so I’ll quote that.

“Well-known brands in the Canadian food and related retail industry are common these days — practically the norm. Stores are typically owned and operated by franchisees who are unsophisticated and inexperienced at operating a small business. Surprisingly, a large number of Canadian franchisors, i.e., the owners of the franchise system, are undercapitalized start-ups with no meaningful levels of management experience or ability to provide genuine training or support to their franchisees. In stark contrast with what unsuspecting would-be franchisees expect, many of these start-up franchisors are themselves relatively unsophisticated and inexperienced.

“From anecdotal evidence, it appears that start-up franchise systems have a large percentage of failing franchised units. When a franchisee closes down its doors with a partial or total loss of investment, it often represents a loss of a lifetime’s worth of savings and family assets and typically ends in the franchisee’s financial ruin.

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“The protection of franchisees does not end with the creation of…statutory remedies recently made available in some Canadian provinces, though these represent fundamental advances in franchisees’ rights and their access to justice. Despite their far-reaching effects, these can be of little practical value if franchisees are unable or unwilling to pursue them.”

The article goes on, further stating:

“Franchisees often face… interrelated legal and business problems when faced with a business failure. Much like in the broader consumer arena where a family breakdown is documented to often lead to related legal problems in a cluster, in the franchise sphere, a failed business often creates a need for various other legal and related aspects. Some of the multitude of interdisciplinary services include accounting, financial advice, real estate evaluation, brokerage services, loan financing and franchise consulting.

“When a franchisee finds himself operating a distressed business and starts to seek redress, the ‘cost of entry’ to the legal market” — to get advice and to navigate through the process — is very high. “Whereas at the outset, the average prospective franchisee would typically raise the necessary financing for the purchase and the setup of their franchise business by mortgaging his personal assets, by the time the business is in distress, the franchisee is financially strapped, having invested most if not virtually all of his personal assets in the purchase and the operation of the business.

“A recognition that an average Canadian franchisee is often a consumer is key to the removal of the barriers to access to justice in franchising. The issue here is not necessarily the cost but rather the lack of access to the complex suite of professional services that are often required at the time of distress, an integrated and coordinated service. Not being able to access this sort of coordinated approach, franchisees simply give up on all these services. Many fail to even recognize that they require these services in the first place.

“The level of information typically contained in Canadian franchise disclosure documents often provides little by way of genuine material information about all the risks associated with the business to be sold to the prospective franchisee, including what it will take for the particular…franchisee to successfully operate the business.

“And there is much more to the problem than mere information asymmetry or levelling the information playing field. No reasonable disclosure of information could in itself remove all barriers to access to justice.”

The article further goes on to elaborate.

“For example, pursuing a claim often requires a significant undertaking by the franchisee. Factors such as litigation delay, fighting against franchisors which generally have greater financial power than the franchisees and incurring the expense of lost time off work are only a few reasons why franchisees are reluctant to pursue a…claim.”

Ben Hanuka continues in his article with a list to illustrate just some of the multitude of legal practice areas in which services are typically required to address issues raised by a business in distress, even though many franchisees who operate businesses in distress refrain from seeking out these services, of course. He noted that even where a franchisee pursues a claim, one or more of the services listed in his article are nonetheless required.

For example — I’ll mention a few here — rescission claim; insolvency of start-up franchisors; franchisor’s claim to the contractual default against franchisee; separation of assets with a franchisor; the CRA deemed trust claims; landlord’s claim against the franchisee or the franchisor; bank and other secured creditors; and, of course, the trade creditors.

Even just reading that list of the main bullet points of the processes of the services that are involved for a claim…. I mean, that’s overwhelming, let alone having to actually deal with that ordeal — on your own often.

I’ll go back to quoting Hanuka’s article.

“Due to the general lack of organizational experience and financial literacy of an average…franchisee, these aspects are often mismanaged by the franchisee as well. A franchisee who otherwise has a valid rescission or other damages claim does not necessarily meet the required test to prove the damages in a court action.

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“Existing common law legal tests with respect to damages require a plaintiff to prove damages on a balance of probabilities. Yet a typical franchisee operating a business in distress and lacking adequate financial literacy will often not have his financial statements, income tax returns and other tax filings adequately in place or up to date. The law draws on an adverse inference against the franchisees, and sometimes even penalizes them, if they choose to come to court with these outstanding financial issues.

“Knowledge of legal and financial issues affecting business problems and the available strategies in dealing with them enabling franchisees of a business in distress….”

It’s no small ordeal. It’s no wonder that so many would just throw in the towel and say: “I can’t do any more, and I give up.” Those are the injustices that commonly occur. I’m glad that Bill 38 is here as a small step in the right direction for small business owners.

Now, there is an interesting recommendation that was in the article, and I do want to quote that:

“For justice to be accessible to the average Canadian franchisee — in essence, the consumer-turned-franchisee — relevant information needs to be accessible and available, and the manner in which some professional services are delivered need to be reconfigured. Issues relating to access to justice for Canadians engaged in franchising should deal with means to enable franchisees to seek remedies when their franchise businesses are in distress.”

Keeping that in mind, let’s review what this bill will accomplish as a good first step in the right direction. This bill is pro–small business, a bill that the New Democratic opposition is very proud to support and have actually long called on the government for, to ensure that the entrepreneurs are fairly treated.

It’ll legislate that:

(1) Franchisers prepare a franchise-disclosure document declaring all material facts related to a franchise opportunity.

(2) Claims arising from a franchise agreement would be litigated in B.C. courts.

(3) Deposits could be refunded up to 60 days after the disclosure document is received.

(4) A franchisee may sue the franchisor to recover losses arising from misrepresentation in the disclosure document.

(5) Duty of fair dealing is imposed on both sides.

(6) The rights under this legislation cannot be waived.

(7) The rights, in addition to any other rights, are in law.

(8) Franchisers are expressly prohibited from interfering in the right to form associations of franchisees.

(9) Franchisees could withdraw from an agreement within two years, with compensation, in the event of misrepresentation.

Now, this significant legislative improvement wouldn’t be here today if not for a group of concerned and very committed citizens like Wayne Taylor and the many other job creators who have been unfairly treated under the present regulatory void, which does not ensure proper disclosure. They stood strong and fought, through the most difficult circumstances, to see that the same injustice doesn’t continue unchecked and that such immense financial and emotional ordeals stop with them and they’ll be the last of these stories.

It was my privilege to have connected with many of these franchisees over the years, listening to their stories of struggle and to be able to voice that in the Legislature along with my colleagues.

Of course, I join the minister in recognizing and thanking the efforts made by the B.C. Law Institute that prepared a draft bill for the government to consider, published after 18 months of lengthy consultation that concluded in December last year.

The BCLI is a not-for-profit research agency. One of its roles is to improve and modernize law in B.C. and to promote the clarification and simplification of law and its adaptation to modern social needs. In March 2013, it issued a Consultation Paper on a Franchise Act for British Columbia, which recommended the adoption of the franchise legislation.

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BCLI executive director Jim Emmerton stated, on the release of the paper:

“Given the prevalence of franchise businesses in B.C. and their importance to our provincial economy, it is surprising that B.C. has no franchising legislation. The introduction of B.C. franchise legislation would further increase the degree of harmonization of regulatory standards in Canada while also giving appropriate and needed protection for B.C. franchise owners.”

In the course of its study, BCLI reviewed all the provincial franchise laws as well as the Uniform Franchises Act, adopted by the Uniform Law Conference of Canada in 2005 as a model law for all provinces to make the legislation uniform across the country, in Canada, so that we don’t suffer the same troubles that our U.S. counterparts have. BCLI believed the province should not be a more onerous legislative jurisdiction than others that regulate franchising.

Among the recommendations for B.C. they gave us, are the following, and I’ll mention some. It recommends that B.C. should become a franchise disclosure jurisdiction requiring all franchisors to deliver to prospective franchisees an FDD containing all material facts relating to the franchise opportunity. Legislation would provide for remedies in the event the franchisor misrepresents a material fact relating to the grant or fails to disclose at all.

They also recommended a fully refundable deposit that should be permitted prior to the disclosure having been made, which is a deviation from the model law — in a better way.

They also called for a prevention of franchisors from other jurisdictions having to reformat their own FDDs to comply with form requirements. Wraparound FDDs would be permitted if they are in Canada, P.E.I. and Manitoba. They would allow U.S.-based franchisors to use their FDDs if the information is required under B.C.’s act. Of course, that would be normally at the beginning as well as at the end of the FDD, as a reminder.

They also made a separate recommendation, unlike the Ontario act, that minor technical deficiencies or irregularities should not nullify a BC FDD that substan-
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tially complies with the act and regulations. The paper says: “Minor defects that do not influence the prospective franchisee’s investment decisions should not lead to the drastic consequences of non-compliance — namely, possible rescissions of the franchise agreement triggering repurchase and compensation obligations.”

All that said, the proposed bill before us delivered much of these recommendations from BCLI, consistent with other Canadian franchise statutes. I believe that Bill 38 will largely respond to the local needs here in British Columbia for our franchisees.

Of course, I don’t doubt that this bill, once it passes, will be — of course, the idea of it already is — widely supported by the franchisees and the franchisors. The Uniform Law Conference of Canada, the British Columbia Law Institute, the Canadian Bar Association and many more are very supportive of the bill.

It’s good news for small businesses that they’ll be better positioned for success, which in turn will be good news for their franchisors. Of course, that will be good news for those that are employed in this particular sector and are local consumers as well. It’s a win-win all around.

The minister quoted some of the validators to the bill, and I’ll mention a few as well. Jennifer Chow, the Canadian Bar Association of B.C. president, comments: “In our An Agenda for Justice document, the Canadian Bar Association of B.C. recommended government enact a franchises act to provide protection to small business franchisees. Last year, we were pleased to participate in the resulting public consultation. The introduction of the Franchises Act demonstrates the positive steps that result when there is collaboration among the legal stakeholders in this province.”

Of course, we’ve also heard from John DeHart, the franchisor of Nurse Next Door. We’ve also heard from Jackie Johnson, CEFA educational systems, who is a franchisee in Langley — Walnut Grove, in the South Surrey area.

Many franchisees are first-time business owners looking for the opportunity to succeed, to provide for their families and contribute to our economy.

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Many franchisees are also from new immigrant communities or those settled Canadians that are older and with language barriers — those who are considerably disadvantaged in understanding the laws and their rights for effective negotiations and fair protection.

Adding to that, buying a franchise requires a significant investment of capital on the part of the franchisee. We’ve already talked about how this particular relationship had been unbalanced, before this legislation.

The Canadian franchise market is growing and dynamic. The same can be said for the law affecting franchising. With many franchise systems operating in Canada, both foreign and domestic, the levels of sophistication of the franchisors, franchisees and those that serve them are also increasing, as they would. The importance of this area of commerce on the Canadian economy cannot be overstated and will only increase in the years to come.

Our legislation must reflect the changing business landscape to ensure fairness for all parties that are involved, especially those that are at most risk, like the franchisees and the small businesses. This bill is a big step — we’ve called for it for many years — in the right direction for the small businesses and the entrepreneurs of our province.

I do want to congratulate the new minister for the file for wasting no more time, as her government has, in taking our private member’s bill and the feedback from the communities to bring this into fruition in the House this fall, just in time for Small Business Month. This is a job well done.

Of course, there’s always more to do for our small businesses. I can’t say enough that in a province of 4.6 million people, small businesses employ one million of us — that’s almost a quarter — providing for more than half of all private sector jobs. They contribute nearly a third of our provincial GDP, with $14.4 billion worth of merchandise shipped to international destinations in 2012, accounting for almost half of the total value of goods exported from our province.

I must say again that empowering not just some but a broad spectrum of local initiatives is imperative in order for us to fully support our small businesses and the jobs they create for not just a strong but a resilient economy.

With this Franchises Act, which I don’t doubt will receive unanimous support of the House during the vote after second reading, I look forward to continuing to urge the government and the minister in the coming days and months for other regulatory improvements and better business resources.

I would like to take this opportunity to put it on the record and express a number of them. We are watching closely the government’s effort to simplify the procurement process to make it easier for small businesses to apply for government contracts.

In general, the Liberal practice has been to negotiate large and complex contracts with large out-of-province companies, a practice that we have argued for years has not only wasted billions of dollars of taxpayers’ money but also cut out and minimized the participation of many small local businesses, especially the construction contractors.

I’ll take this opportunity to continue urging the government for fair and competitive procurement practices that respect taxpayer dollars and include all B.C.’s small businesses.

My colleagues and I on this side of the House have also called on the government for more local purchasing policies that will promote B.C. food products and have more local food served in our B.C. hospitals and schools. We believe that our long support for these ideas did force the
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government to move in that direction, and we will continue press them to go further on that.

I have to mention again that the small business owner is no different than any other average British Columbians that I talk to. They are telling me how they feel underserved by this government’s current Commercial Tenancy Act, articulated in complex language with mainly the landlord’s interest. It’s really no different than the Franchises Act that we have here.

They voiced their opinions in this precinct this spring about the fine print of the long franchise contract in favour of the franchisors, and the government acted on it. It would be great if the government could take a look at the rate of the current Commercial Tenancy Act and consider the rates of the rent and the triple net for the operations on our small businesses, which quite literally force even the most successful ones to close their doors and be bullied out of their current locations.

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We also need regulation reinforcements against the diluted consumer protections for all the bank fees that are, at times, undisclosed or poorly disclosed — this works against small businesses, as well — an average of a 3 percent charge for every credit card transaction.

What that would mean is that a bustling little family-run bakery in my community whose gross revenue is $800,000 a year is paying as much as $24,000 just in credit card levy. If you can imagine what $24,000 can do in a small business…. That can hire a whole new staff person.

Of course, this particular next issue is very close to heart for me, personally, and I can’t stress enough the importance of adult basic education and English language training for a small business community.

In a province where over a quarter of our residents are immigrants and we welcome another 42,000 annually, one would think that accessible ABE and ELL programs are government’s responsibility — not just to raise a skilled workforce for our small businesses, which they desperately need, but also for our entrepreneurs, who need to have the increasingly savvy financial literacy that’s required for them to navigate through the challenging business landscape.

Especially for those entrepreneurs that are new to Canada, with language barriers — and not just the new ones that are here, but also the settled Canadians who may have received their citizenship — language competency doesn’t happen overnight the day that you get your citizenship. You need to make sure that supports continue for those people. This government knows that many of our entrepreneurs make less than the minimum wage by the hour. They are the so-called underinsured working poor, with just enough income to be disqualified from exemptions or subsidies.

What that means is that many things that cripple an average employed British Columbian would cripple small business owners likewise, like the government’s relentless increase of user fees like the MSP, which doubled; another hike for ICBC; another hike for tuition; daycare; cost of transportation. Of course, unlike those of us that are employed in a job with benefits, our entrepreneurs are struggling to keep up with these costs. Those challenges need to be a top priority for the legislators that are in this House.

Small business owners are some of the hardest-working people in the province. That’s especially true for those microbusinesses and owner-operated businesses. Many of them work many, many hours to look after all aspects of running an operation, from advertising to accounting. Whether they have proficiency or expertise in those given fields or not, they try so hard to figure it out, often with minimal resources and expertise.

I’m a daughter to a hard-working immigrant couple whose way of settling in this country when we first came to Canada was a small franchised ice cream business, in fact. The struggles that we faced as a family and overcame together are common to many other families like mine in the province. It’s a story that I well understand. This issue is very close to heart for me, personally.

Therefore, it’s all the more inspiring for me to advocate, to the best of my ability, for the better policies and resources we can provide in this place for our small businesses. I really can’t be more genuine in my commitment during my tenure for the work that we do here, which often will determine failure or success in the livelihoods for so many lives like my family’s.

There are many members across the floor that, I know, deeply care for the well-being of their constituents that they were elected to represent. I challenge the government once again to consider the points that I’ve raised in the House today on behalf of small business owners and entrepreneurs of our province.

I will certainly look forward to rising in the House to support more bills like Bill 38, the Franchises Act, which will make tangible differences for the least heard and the most struggling entrepreneurs of B.C., who are just a few empowering policy improvements and accessible resources away — whether it’s ABE training or a bill like this — from the sustainable success that they really deserve and that our community and people can also benefit from.

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J. Martin: I’m very happy to rise today to add my voice of support to Bill 38, the Franchises Act. This bill will help open the door for more small business investment in B.C. By introducing the Franchises Act, we are providing clear expectations to both franchisors and franchisees.

This act will help to bring certainty to investors looking to expand into British Columbia. This is yet another bill that helps and assists small business in British Columbia. Small business plays such a vital role in our province, employing more than one million British Columbians. I’m
[ Page 9507 ]
proud to say that small business is thriving right now in British Columbia.

Many franchise businesses have fewer than 50 employees, and they’re run by members of our communities. Franchise businesses generate significant employment and investment opportunities. Additionally, they create direct and indirect economic benefits to the community in which they operate.

Successful franchises tend to reinvest by opening multiple locations. This means they generate more jobs and more career opportunities for British Columbians, and this leads to more direct economic benefits in their communities.

Now, if this legislation supports creating jobs in B.C., then I have concerns about the opposition supporting it. I’d be very surprised if that ends up being the case, because as we know in this House, the opposition is not a fan of supporting job creation.

Let’s just remind this House — it’s been almost six days, so maybe it’s due for another a reminder — of the opposition who were against the Coquihalla Highway, who were against the Alex Fraser Bridge, who were against Expo 86, against the Trade and Convention Centre, against B.C. Place, against the 2010 Winter Games, against the new Sea to Sky Highway, against the new Port Mann Bridge, against the new South Fraser Perimeter Road and, of course, as we saw last week, against Site C. Here we have an opposition party. It’s in their DNA. They just cannot support jobs in British Columbia.

Well, we continue to open the door for investment and employment opportunities in B.C. Franchise businesses play a significant role in our economy. They are important in both urban and rural areas, opening the door for investment and for employment opportunities for all British Columbians. This act will provide important legal rights and remedies to B.C.-based business operators who are looking to operate a franchise business in our province.

What does this act do to open the door for small business investment in B.C.? Allow me to elaborate, please. This legislation will ensure franchises have all the relevant business information they need before making the decision to invest. This helps prepare these businesses for success right from the get-go.

The act will guarantee legal protections, should franchisees not be given the information they need. This helps protect people looking to invest, because they know they will have legal protection if they find out after the fact that they are in a vulnerable position. The legislation also upholds the franchisor’s rights to freely contract to allow for the success of the franchise.

This act is about certainty, and this act is about consistency, and it will encourage investment in B.C. We want to make sure we are giving franchise businesses the certainty they need to expand in B.C. Franchise businesses operate across the country, and this act provides consistency for those businesses. Similar legislation is already in place in Alberta, Manitoba, Ontario, New Brunswick and Prince Edward Island. This act provides consistency with rules that apply across these provinces.

The act also provides certainty for businesses that operate across the country and ensures a level playing field with good business practices for all. We are saving businesses time and money by allowing franchisors to use the same disclosure documents they use in other provinces with similar legislation.

This legislation supports the government’s goal to ensure that private sector investments are encouraged in B.C., while we all know the opposition’s opinion of the private sector.

There are about 78,000 franchised outlets in Canada with $100 billion in annual sales. Canadian franchises employ about 1.5 million Canadians. They exist across the spectrum of business sectors and play a significant role in the Canadian economy.

This act will provide the certainty, and it will provide the consistency that franchise businesses are looking for to invest in B.C., because encouraging more investment in B.C. is good for our economy, and it’s good for our communities.

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Now, it’s easy for the opposition to say: “Well, we support small business too.” But I’m not so sure how you square that circle. Let’s go back. When the NDP were in government, they drove the small business tax rate all the way up to 10 percent — 10 percent. Today it stands at 2.5 percent, and we have committed to incrementally lowering that to 1.5 percent. Ten percent — how can that be interpreted as anything other than a declaration of war against small business?

The NDP, similarly, brought in not hundreds but thousands of pieces of red tape and regulations to stifle small business.

Interjection.

Deputy Speaker: Member. Member.

J. Martin: This is what we’ve been getting rid of, and we have been awarded and recognized far ahead of any other jurisdiction for eliminating the red tape that they brought in.

Now, why would anyone bring in red tape? Why would anyone bring in those types of regulations that are so punitive to small business? Well, it’s pretty straightforward. More red tape and more regulations means more government regulators, more government employees to enforce those regulations, to dump more paper on small business operators. At the end of the day, what’s it all about? It’s growing the size of government.

If small business has to take a hit, if small business operators have to work longer and harder for less remunera-
[ Page 9508 ]
tion, then so be it. If small business operators have to lay off employees, if they have to close shop, then so be it. It’s a small price to pay for growing the government, which seems to be the one and only scope of this opposition.

Back in the day of Mike Harcourt and Glen Clark, they at least cared about the private sector union employees as well. The opposition today has thrown those people under the bus. They’ve denied them the right to support their families. They’ve denied them the right to earn a decent living and provide their skills and their experience on all the projects that we support and that they don’t support. It’s very easy to say: “We support small business.” I’d really like to see some evidence of that.

On behalf of my constituents of Chilliwack, I’m very happy to support this bill and look forward to the debate.

Deputy Speaker: I remind the members that you all have a chance to do your speech in second reading.

C. James: It’s a pleasure to get up and respond to Bill 38. I’m not sure I want to respond to the speaker before me. I would suggest that he take a look at the bills that were introduced in the spring session. It wasn’t that long ago. Go back and look at Bill M 219, which was the Franchise Act, introduced by the opposition before this government had moved on this issue. If he’s looking for any example of the ridiculousness of the comments that we heard, it was the speech that we just listened to.

In fact, I am pleased to see this bill coming forward because it is, as my colleague has said, a bill that is almost identical to the bill we introduced in the spring of 2015 — to actually move on a franchise act, which has been needed in British Columbia for a long period of time. So I am pleased to see this bill come forward.

I want to use my time to talk a little bit about the importance of the bill, a little bit about the importance of franchisees and why — it may be a shock to the other side — smart rules and regulations actually make sense and are called for, as the minister said at the beginning of her speech around bringing forward this act. It’s about finding a balance between the franchisee and franchisor. That’s what’s important when we take a look at this bill and when we take a look at how we can support franchisees in this province.

I want to start off with just a little bit of a look at what a franchise is. I think many British Columbians, when they take a look at some of this debate and some of this discussion, may recognize the names of franchises, but they may not understand the franchisee and franchisor relationship, which is really important to understand in order to see why this bill is critical and why the bill is needed.

A franchise arrangement is a business arrangement in which the franchisor, the owner, grants the franchisee, the person who’s buying the franchise, the right to market goods and services under the franchisor’s trademark in return for fees and royalties from the sale revenue. So the franchisor owns the name, owns the business, sells it to a franchisee, who then, using their name and using their business, is able to sell, in return for fees and services and royalties that go back then to the franchisor.

[1705]

The franchisee is part of that contract and is usually obligated to purchase inventory or supplies from the franchisor. They may also be required to contribute to various funds, such as advertising, on behalf of the franchisor, but the franchisor reserves significant control over the business. Again, that’s understandable, because the business is the name. For the franchisor, their name, their reputation, the business’s reputation, goes along with the franchise when it’s sold to the franchisor, so it’s understandable that they would maintain some of that significant control. But what that also shows is how important it is that the balance be right, that the balance be right there for the relationship to be successful for the franchisee and for the franchisor.

I’ve run through that description just to be able to remind ourselves, as we look at what’s in this bill, about how important it is to have those kinds of rules and regulations in place.

We’re not — we heard this from my colleague — talking about small numbers when we’re talking about franchises as part of the small business community in British Columbia. It’s estimated by the Canadian Franchise Association that B.C., in fact, has more than our fair share of franchises in Canada. If you take a look at Canada itself, there are about 78,000 franchisors in Canada. About 10,000 of those are right here in British Columbia, so we have a large portion of small business owners who are owners as franchisees, with $14 billion in sales and roughly 180,000 employees. Again, we’re talking about large numbers.

An interesting stat, in taking a look at it, is that 40 percent of all Canadian retail sales actually come from franchises — 40 percent. That’s a large chunk of our economy, a large chunk of our retail that actually comes from franchises. Again, they’re a significant part of the small business community in our province.

We all know the contribution that the small business community makes to British Columbia. We know the job creation. We also know the kind of work that it entails to be a small business owner — not an easy task. I’m often reminded on weekends or when we go to events on stat holidays that there is a rare small business owner who ends up getting a weekend or a statutory holiday or an evening free, because they’re continuing to look at the work they have to do in their small business, particularly the one-person owners of businesses, which is a large portion of what we see in our province.

Given the large numbers, given the importance of franchises when it comes to our economy and when it comes to small business in British Columbia, why do we need a franchise act? Why has it come forward now?
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Why did we feel it was important in the spring to bring forward a franchise act?

As I said, I think the most important piece for me is to remember that often the relationship between the franchisor and the franchisee can be an unequal relationship. Franchisors are often large companies, and large companies often come with all the resources that go along with that. If you’re a large company, you often have a human resources department. You will often have a legal department. Some companies, because they’re large, will have a real estate department. They’re large in scale, and therefore they have the resources that are needed to be able to manage as a franchisor.

The franchisee, on the other hand, is often a single entrepreneur. Oftentimes their first venture into business is through a franchise, often when they come out of business school, or they may come out of a family that has run small businesses, and they see the excitement of that. They’re individuals who really want to be able to contribute and want to be able to take part. They often see a franchise as their first entry into the business world — a little bit easier than setting up their own business.

They see that it comes with a name. It comes with a reputation. It comes with the opportunity to be able to have that recognition. They’re often, as I said, individuals that come into this for the first time as individuals meeting up with, as I said, the franchisor who has the large company, the departments, the legal behind them, the real estate people behind them and the support they need behind them.

Last winter, before Christmas, and then following through to the spring, with the member for Vancouver-Kingsway and with the member for Burnaby-Lougheed, I had the pleasure — and honour, in fact — of meeting and consulting with a number of franchisees.

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We pulled a number of people together who had expressed concern over the last year or so about the imbalance that was there with franchisees and franchisors. We got together with them to have them share with us their passion for business. That’s really the first thing that they did. It really was wonderful to be able to listen to individuals who shared with us their dream, their dream of taking on a franchise to be able to support their family and to be able to use the skills….

We talked to an individual who had came out of school, who had his business degree, who wanted to use those skills and who was keen and eager — as I said, a great entrepreneur who wanted to be able to be successful. It was very inspiring to be able to take the time, with my colleagues, and to be able to meet with those individuals.

What we also heard were their challenges. They took time to share their challenges. I have to say, in a number of those cases, heartbreaking stories — heartbreaking stories from individuals who really went into this business with good faith.

Because of a lack of information, in some cases, and because of a lack of full disclosure, what appeared to be information that wasn’t shared, they ended up losing not only their franchise and the money that they put into their franchise, but in many cases, they lost their savings. They lost their family savings. They lost their house. They certainly lost a lot of faith in taking on a small business in British Columbia. It really was, as I said, heartbreaking. I think there is not a better word to describe the challenges.

Just to give you a couple of examples. The required product purchase from the franchisor. Again, often in a contract — it may or may not be there — you are required to buy certain products directly from the franchisor, from the big company. That’s part of your contract. What many individuals don’t know or isn’t disclosed to them is that some of those products are much more expensive from the franchisor than you could buy on the market.

The individual that we talked to…. It seems like a very small issue, but if you’re running a coffee shop, for example…. To buy creamers, the cost from the franchisor, as she was required to do, it was huge compared to the cost that she could have purchased them for in the community. That added a huge cost to her business.

That increased her cost that she was faced with and made it very difficult for her to look at the success of her business. That was a piece of information that she wasn’t clear on, that wasn’t fully disclosed and that made it very difficult for her in running this business — an example of why a franchise act and the kinds of specifics that we talk about in that act are so necessary for those kinds of business owners.

Another interesting example that was shared with us was the issue of maintaining leases for businesses. Someone buys a franchise. They’re told that they have a lease. That lease expires. The example given to us was that the location is no longer suitable or, perhaps, the neighbourhood has changed and is not a successful location for that individual business.

Yet they’re told: “You’re now stuck with that lease. Sorry. Oh, right. We didn’t tell you.” You weren’t aware that you now have that lease, and you can’t actually move the franchise. Even though you still want to own it, even though you want to find a location that will work for your business, you in fact can’t do that. You’re not able to do that. Well, there’s a perfect example of an individual who really was stuck, who wanted to run a successful business, who wanted to provide that support yet wasn’t able to because of information, again, that wasn’t disclosed.

We listened to an individual who talked about the support of his family. I think this is a common story, when you talk to franchisees. Many of them come in not simply with their own support but the support of their family. I think that’s common in many small businesses as well. Families have contributed towards helping their son or daughter or wife or husband be successful. The family pooled together and provided money, provided backing
[ Page 9510 ]
and provided support for this individual to be able to start their franchise.

It was, as I said, very difficult to listen to him talk about how he felt he let his whole family down. This wasn’t just an issue for him. This was an issue for his entire family. He had let them all down by not being able to make a success of something he wanted to do his whole life — something he was sure was going to be successful and wasn’t, again, because of some basic information that just wasn’t there.

[1715]

There was a woman who shared with us that she took on the franchise after her husband became ill. Her husband wasn’t able to work any longer, and she wanted to find an opportunity to be able to contribute, to be able to have a business which she thought would give her a little bit more flexibility around some caregiving for her husband and provide support for the family.

There’s a family that, again, because of information that wasn’t disclosed and information that they weren’t clear on, lost everything, including their home. This is a family who…. Imagine a small business owner who, as I said, now has a husband who can’t work, the wife who took this business on and not able to continue.

These individuals and those stories really stuck with us through this process and really pointed out — much more clearly than a bill does, much more clearly than a piece of paper does — how important it is to bring forward these kinds of regulations and these kinds of smart rules to put in place so that we can make sure that there’s a level playing field.

I want to express my appreciation to Wayne Taylor, in particular, who really did step up to the plate, who has done a lot of work with franchisees and groups of franchisees to bring them together, to give them voice. It’s not easy to share your story, when you want to be a successful business owner. To have to come forward and share, as they described, our failures is not an easy thing to do.

That’s a tough thing for anyone, but particularly someone who went into business with all the good hope and all the good faith and wasn’t able to make a success of it. I say thank you to all the franchisees who were brave enough to come forward and who raised their voices. I really think they made the difference in pushing the government to bring this forward and put this bill forward.

I also want to say a thank-you to the British Columbia Law Institute. They really, through their report that they wrote back in March 2014…. Remember, this has been an issue that has been ongoing. They wrote a very fulsome report that was called A Franchise Act for B.C. This was a report that was worked on by a very experienced group of franchise law practitioners, by the Law Institute staff. It was compiled with the feedback from individuals and organizations and franchisees, again, who came forward and shared their stories.

I just want to read quickly, if I may, from the second paragraph of their report, which really speaks to how important it is to have the kinds of requirements to provide that balance, as I mentioned, between the franchisee and franchisor. It says:

“A characteristic of most franchises is that the franchisor is entitled to exercise significant control over the operation of the franchisee business.”

As I said, understandable. They hold the name; they hold the product.

“This allows the franchisor to implement a consistent business strategy and common policies aimed at building and retaining customer loyalty and goodwill for its product line and profitability.

“When functioning well, the franchisor-and-franchisee relationship is mutually profitable. The level of control a franchisor typically has over a franchisee’s business and the superior economic and bargaining power usually rest with the franchisor but are nevertheless capable of being exerted oppressively without regard for the franchisee’s economic interests.

“Prospective franchisees are highly dependent on the franchisor for critical information prior to making a decision to acquire a franchise at a particular location. If vital information is withheld from them” — and, again, you think of those stories of the individuals we met — “or if they’re misled, they may lose greatly.

“The franchisor, on the other hand, will profit from an initial franchise fee and royalties on gross sales produced even if a franchise fails quickly or is not profitable. In addition, franchise agreements are seldom fully negotiated. The franchisees must accept the franchisors’ standard terms.”

I think that just speaks well to the importance of having this bill. As I said, an imbalance when it comes to power, the ability for franchisors to exert power over franchisees — a good business relationship needs that balance. That’s really what I hope this legislation does that’s coming forward today.

[1720]

Other provinces certainly recognized the need for this legislation. It’s interesting to go back and look at when other provinces moved on this legislation. Alberta in 1971 actually brought in franchise legislation, P.E.I. in 1988, Ontario in the year 2000, New Brunswick in 2007 and Manitoba in 2010.

I’m glad it’s here. We’re a little behind the times, but I’m certainly pleased to see that this has finally come forward.

As I said, a big thank you, as well, to the B.C. Law Institute for their work, because we certainly relied on their good work to help draft our bill that we introduced last spring. As my colleague has said, the bill is almost identical to the bill we introduced, so I’m sure government also took a look at the Law Institute’s work. I think that’s really important.

What areas did I take a look at in the bill to make sure were there, which I certainly feel are critical to be included in franchise legislation? Those are clauses, as I said, that should be focused on levelling the playing field.

I looked to see whether the bill included protection for the franchisee if they are misled. If it happens, if the information isn’t disclosed…. There’s lots of good work around the disclosure, but if the information wasn’t disclosed and if they were misled through the process, was there protection there for them? Was there ability for the
[ Page 9511 ]
contract to be rescinded? Was there ability for them to get all or some of their money back? I think that’s a very important piece to be included in this legislation if we’re looking at levelling the playing field.

The proactive piece should be there. That’s the issue of full disclosure, the requirements, so that we can, hopefully, prevent anybody from being misled and prevent anybody from running into that difficulty. Let’s make sure we’re proactive, and let’s make sure that that is a very tight portion of this legislation to ensure that full disclosure of all information related to the franchise and to the contract obligations is there and delivered before the contract is signed.

I also looked to see whether it would allow for franchisees to come together to create an association or associations. Again, when you have an imbalance of power, often small groups or single individuals will get together to be able to put their common issues together and raise their concerns with the larger person on the other side. Again, with franchisees, the same kind of thing applies. You want the ability for franchisees to come together, to create an association, if that’s what they determine, so they have a right to be able to share their common concerns and able to speak to those.

Then the other piece I was looking for was the issue of litigation. Again, if you’ve done that proactive piece, if you provided within the legislation the ability for the contract to be null and void…. But if you end up in a lawsuit and all of that, the current status right now means that a franchisee may be required to go where the home company of the franchisor is to be able to sue them.

Many of these large franchisors have their head offices in the United States, and a franchisee can be required to actually go to the United States and provide time in court in the States for a contract that is right here, for example, in Victoria or Vancouver or Prince George.

Again, you think about the imbalance of power, think about the challenge that creates for an individual who has just taken on this business as a single person, who took it on as an owner, who now has a difficulty and has been told: “Yes, you can litigate. Go ahead. You have the right to fight us in court, but by the way, you have to come to Texas to do it.” Or you have to head to New York to be able to fight it.

That’s a huge imbalance of power — imbalance when it comes to money, imbalance when it comes to resources and imbalance when, as I said before, franchisors, as large companies, have legal staff.

They have entire legal departments to provide that kind of support, whereas a franchisee, as an individual business owner, is having to find money for legal costs, is having to find a lawyer, is having to try and navigate a system that is far away, that isn’t even here. I think that probably, for me, was one of the clearest areas that pointed out the need for this kind of legislation.

So I’m pleased. I’m pleased to see this legislation come forward. I’m pleased to see that we have the opportunity to be able to address that imbalance. I’m glad for the small business owners and for the franchisees, in particular, who have fought so hard — and those who have had not-successful experiences — that it is there. Challenges that they faced actually, I think, have pushed this legislation forward.

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I hope that this is a continued effort to support small businesses and to level the playing field in a number of areas that are here, because I think it’s so critical and so important to do that.

With that, I’ll take my seat.

J. Tegart: Thank you to the previous speaker for her comments.

Certainly, Bill 38, the Franchises Act, is a very important piece of legislation to me and the people of my riding in Fraser-Nicola. In my previous life, when I had a life, I actually helped small business — people who had a dream about being in small business, being self-employed and being successful at that dream. Franchising and franchisees were part of those clientele that I helped build their dream in my small communities.

The communities in my riding, in the heart of B.C.’s interior, are almost entirely made up of small business — those with fewer than 50 employees. Many of them are franchises. From fast-food restaurants and hardware stores to gas stations and car dealerships and real estate offices, these businesses are the heart and soul of our community — in communities such as Lillooet, Lytton, Cache Creek, Ashcroft, Clinton, Logan Lake, Princeton and Merritt, to name a few.

Each time a small business closes in my community, the effects are felt by local families immediately and deeply — by the owner, by the employees, who are now out of work, by the people who supported these merchants and by the local clubs and sports teams that relied on their sponsorship.

Franchises are extremely important to business people in small communities. They provide stability, predictability, structure and key support. We are introducing the Franchises Act to provide clear expectations for both franchisors and franchisees, because we want our businesses to be set up for success right from the start.

This bill will open the door for more investment and employment in my small communities. That means more economic stability, more jobs for local people and a stronger tax base. We want to ensure that the private sector investments are encouraged in British Columbia, and that starts with good business relationships.

The Franchises Act will govern all franchised businesses in which the franchisee is operating in B.C. There are about 78,000 franchised outlets in Canada, accounting for $100 billion in annual sales.

Canadian franchises employ about 1.5 million people. That’s one in every 22 people in Canada. Needless to say,
[ Page 9512 ]
franchised businesses play a big role in B.C.’s economy. We want to make sure we are giving them the framework and tools they need to expand.

The goal of having a Franchises Act for B.C. is to encourage small business investment in British Columbia by providing certainty for both parties. Successful franchisees tend to reinvest by opening multiple locations and generating more jobs and career opportunities for employees, leading to more direct economic benefits in their communities.

A lot of the essential features of our franchise legislation will be consistent with the approach taken in Alberta, Manitoba, Ontario, New Brunswick and P.E.I. — the five provinces that already have franchise legislation.

The act will provide important legal rights and remedies to B.C.-based business owners who operate or who are looking to operate a franchised business in the province.

To help open the door for small business investment in B.C., the legislation will ensure franchisees have all the relevant business information they need before making the decision to invest, guarantee legal protection in the event franchisees are not given the information they need and later find themselves in a very vulnerable position, and uphold the franchisor’s right to freely contract, to allow for the success of the franchise and provide certainty and consistency for franchisors, which will encourage investment in B.C.

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The proposed Franchises Act will give franchisees better protection and access to important business information, while also allowing the franchisor’s business to expand. Franchise legislation is good for business in B.C. because it provides certainty and consistency for franchised businesses and encourages more private sector investment in our province. Bill 38 is great news for rural B.C. and communities like Merritt, Princeton and Ashcroft. That is why I endorse this legislation.

[R. Chouhan in the chair.]

A. Dix: It’s very good to rise and speak to this legislation, the new Franchises Act for British Columbia, which I think is an important step, both long overdue and long awaited in our province, that will have the effect of increasing, not decreasing, economic growth, even though I note that what it represents, of course, is a new law and, following from that law, significant new regulations in the province.

These regulations, in fact, are required for an industry, the franchise industry in the broadest sense, which is both a significant job creator and a significant source of economic activity in our province. Yet, over the past number of years, as other jurisdictions across Canada — especially other jurisdictions across Canada — and, indeed, across the world have acted, the current government has failed to act. The result is that we have a jurisdiction with a growing franchise industry, which is, in many respects, the Wild West, as Wayne Taylor, who the member for Victoria–Beacon Hill talked about, of the law in Canada….

We have a jurisdiction…. We have, in British Columbia, for example, over 10,000 franchise outlets, $14 billion in sales and 180,000 employees. That means that it’s an extraordinarily successful model of business, in general. Both the franchisees and the franchisors benefit from that business having a level playing field, having the rules understood, having its reputation supported and maintained.

Of course, what we have discovered — I’ll speak about that in a moment — is that that’s not always the case. When it’s not the case, I would argue, it’s not only profoundly negative for the franchisees in question, who are the victims of a power imbalance, who are all entrepreneurs, all seeking to create jobs and support their families and put forward risk to grow the economy on the one hand — but also the franchisor, who is negatively affected by the behaviour of some, frankly, unscrupulous franchisors who negatively impact the quality of the business.

British Columbia…. When we say it’s the Wild West, we really mean it, because when you think about this…. This is not unusual or something that’s surprising to imagine here in 2015. In fact, this is an area of law and administration and business where the province of Alberta is significantly more progressive than the province of British Columbia.

Now, here in 2015, we find this generally to be true of governments. Nonetheless, it is a fact that the first franchise act in Canada was put in place in the province of Alberta in 1971, not because the government of the day was anti-business. They were putting forward a regulatory regime that existed nowhere else in the country but that they saw as needed in order to ensure a fair marketplace. Nowhere else in the country did it exist.

They went forward with, yes, more regulations in the province of Alberta — but which has meant the growth in Alberta from the 1970s. It was an evolving piece of legislation there, with a very successful franchise industry in that province, which was, for a long time, more successful than the franchise industry in British Columbia.

[1735]

The existence of fair regulation that ensured a level playing field, that made sure that everyone understood the rules and the rule of law in that province, benefited economic growth and job creation and private sector investment, not the contrary. That has, of course, been seen in other provinces such as P.E.I., which did its own franchise legislation in 1988, and Ontario in 2000 and New Brunswick in 2007 and Manitoba in 2010 — such that other jurisdictions have seen the wisdom of this way.

It’s why many people in British Columbia — many people who are franchisees in British Columbia — have campaigned so hard for this change over time. And I
[ Page 9513 ]
might note that the existence of those laws in other provinces ensures and raises the franchise industry in B.C. up to that standard, the standard in the United States, but also the standard of those other provinces, I would argue.

They challenge the franchisor community, most of which — the large franchises, of course — operate in all those provinces. It’ll involve essentially no regulatory change in the way that they operate other than adding British Columbia to the way they operate in other jurisdictions. But it would also raise up those other franchisors who don’t operate at that level here in British Columbia. So this makes a lot of sense.

Now, how did we become involved in this Franchises Act discussion as an opposition? Because we have been advocating for some time, both inside the franchise community and with the government, to see that this change happened. It’s occurred because many people in my constituency of Vancouver-Kingsway — many of them new Canadians, but many not — have seen themselves in the modern economy using franchise and small businesses essentially to create jobs for themselves and their families.

They have frequently found themselves in just the circumstances described in the outstanding speech by the member for Burnaby-Lougheed, which is that they are making this extraordinarily important business decision without full facts and disclosure. We see this in other areas, from securities law to real estate, where full disclosure is seen as essential for success. But in the franchise business with so many moving pieces, it’s very important.

I first met a businessman who lives in my community — his franchise is not in my community — who was continuing to own and operate his franchise and was very reluctant to speak publicly but came to me and said: “I have a real concern.” In his case, he was given information about proposed revenues and average revenues based on the most successful franchise operation — he wasn’t told this — which was described as the average franchise operation in the franchisor’s group of companies, such that they dramatically overestimated the potential revenue that his franchise expected to receive. He’s saying to me: “This is of great concern to me. I was essentially not told the truth.” And in that case — because, in fact, we didn’t have this regulatory base — in terms of addressing that piece of casework, we had to address the issue directly with the franchisor.

This, of course, got us interested in the fact that British Columbia was so far behind the rest of Canada with respect to this area of law. The disclosure provisions are important because fundamentally they say something necessary and fair about everything one would purchase in life. It’s to understand when one is purchasing something, to understand what it is one is buying. That’s what these disclosure provisions of this bill intend to do, and that’s what they do in other jurisdictions. In other words, to have access to issues of conflict of interest, access to other franchisees and access to basic financial and commercial information necessary to make what’s a very difficult decision.

We often think naively when we see franchises, especially ones that we frequent often as consumers…. Generally speaking, you’ll find that franchisees love the product of the franchisors, and that’s part of the reason they got into the business. But we understand the complexities of the business. This doesn’t guarantee success to anyone. This is, in fact, government regulation that allows the free market to work, that avoids deception in the free market and avoids the consequences of that deception, which are hard-working people who do everything right being denied success because they weren’t told the truth.

[1740]

That is a marketplace that requires some government regulation, dare I say it. The government has been…. In one of the speeches here, unbelievably, the member for Chilliwack was giving a long diatribe about “red tape” as he was supporting a piece of legislation that in fact increases the regulatory burden to ensure a fair marketplace for the private sector — an unbelievable speech. That’s what he chose to do. But this is how one properly operates, it seems to me.

The rule of law is essential to private sector success. If you ever go anywhere or view an economy where there is no rule of law, you’ll understand that. That is what these disclosure provisions bring into place, bring into force.

They bring into force the idea that you know what you buy. You know what you’re getting into when you’re making what are — sometimes, for a single, small family — massive, even million-dollar investments on borrowed money, to know what it is you’re buying. You’re entering into an agreement that will take place over years. That is what the disclosure provisions do. I think it’s fair to say that that makes sense.

Secondly, the bill, as I’ve noted, stops B.C. franchisees and B.C. franchisors from being second-class citizens in Canada. From being one of the few jurisdictions in Canada, given the different system that exists in the province of Quebec…. When you take those five provinces — Alberta, Ontario, New Brunswick, Nova Scotia and Manitoba, now plus British Columbia — you begin to have a uniform regime across the country, meaning that B.C. franchisees, as they seek to make a living for themselves and for their families and for their employees, as they work together to do that, have the same level playing field as other jurisdictions.

Importantly as well — this is one of the things, as one ventures into this area of franchises, that is, I think, the most surprising — is the fact that so many people that I met with wanted to do so in secrecy, did not want their identities revealed, did not want to say anything about it or be seen even meeting on the question. They were so nervous about the potential legal consequences. In fact in many arrangements, there is an actual rejection of
[ Page 9514 ]
freedom of association or a society of franchisors. This is the circumstance.

When people are in difficult circumstances, naturally they’re talking about their own business when they have an existing investment — one understands that — but also they are denied the right of freedom of association. In fact, there has been, in Canada, intimidation of franchisees coming together to form associations of franchisees.

This piece of legislation — correctly inspired by the work that we did and the work that the B.C. Law Institute and others did — says that’s not allowed. People in our society, as suggested in the Charter of Rights, have that right to freedom of association.

This is important when you’re doing what anyone would do if they’re buying a house, which is to talk to neighbours, or what anyone was doing if they were buying a franchise — which is to talk to other existing franchisees and former franchisees to learn about and understand the business, not from the perspective of those that are selling the franchise but rather from the perspective of those who are, in similar circumstances, attempting to start a franchise business.

I think just as important…. This is another surprising thing. It is surprising to see legislation that explicitly states that franchisees have the right to freedom of association. That is the Law Institute and the government and others saying that that question is a problem, or else it wouldn’t be in the legislation.

Also interesting, I would argue, and very important, is the requirement under the act, of course, for financial disclosure but also that the governing law and form provisions come back to British Columbia.

[1745]

I met with a franchisee in dispute with a franchisor — and usually these disputes arise at a time of difficulty in the business — who had to pursue his case in Ontario, even though everybody involved lived in British Columbia. The cost and consequence of that means that to seek legal remedy under those circumstances is very difficult.

Other owners of franchises in British Columbia…. People will be surprised at this. A franchise arrangement made in British Columbia for a British Columbia business — to seek justice, people have to go to Texas and to Oklahoma and to Delaware, which is occasionally a notorious source of U.S. businesses — without saying anything negative about Delawareans in this House. But around their arrangements and their incorporation of business arrangements in Delaware, I could go on.

But the fact is that often B.C. franchisees in dispute on these questions have to go to other jurisdictions. So what this law states is that disputes under this law must take place in British Columbia, which means that at those difficult times…. And this is not the majority of the time. This is a very successful business model in our province.

At those times, frequently B.C. businesses have to go elsewhere. And what this law says is that from this point forward, B.C. franchisees will have the same rights to hear their case in their home province as franchisees in Alberta, Ontario, Manitoba, Nova Scotia, New Brunswick and Prince Edward Island, which I think everyone would agree is an important circumstance.

So what do we have? We have a piece of legislation that, I would argue, helps the free market through regulatory and legislative action. It helps the free market by ensuring that in their relationships, franchisees and franchisors have a common understanding of what the rules are, a common understanding of the business relationship and a common understanding of what needs to happen to succeed.

It is profoundly symbiotic, as you know, hon. Speaker. Franchisees represent the franchisor on main street, whether you’re in Merritt or in Vancouver. Of course, franchisees are dependent on the success of the franchisor, sometimes on their advertising and on the effectiveness of their business model to succeed themselves.

So when you have this profoundly intertwined and symbiotic business relationship, it is important to have fair rules and a level playing field. It’s important that franchisees have the right to associate with one another. It is important that British Columbia franchisees can seek justice here in British Columbia.

It’s important that the provisions of the law…. This is one we will have to follow as the law is enacted and put into force in British Columbia. It has the principle of substantial compliance in it so that potentially small matters do not become the subject of extensive litigation. That’s something that we’ll have to follow to ensure that it works in our province, but I think, on balance, it’s the right call.

Finally, it raises, I would argue, the standard and the reputation of everyone in the franchise business in British Columbia. This will no longer be the Wild West. To the contrary, it is a place where those family-run businesses in particular who get into a franchise business — whether it be in hardware or pharmacy, whether it be in food and restaurants, anywhere else — are not taken advantage of by unscrupulous franchisors, who, of course, are a tiny minority.

It also will state to those franchisors that they have to up their game. They have to up their game. They have to not use British Columbia and use the legal advantage they have over franchisees in British Columbia to their advantage. In that sense, this is equivalent, although the people involved are all entrepreneurs, be they franchisees or franchisors. This makes this equivalent to some securities legislation or consumer protection legislation, which, in fact, protects small business people, protects the job creators and protects the people in our communities across British Columbia.

[1750]

With that, I just wanted to say that it is extraordinarily difficult. The member for Victoria–Beacon Hill — who
[ Page 9515 ]
introduced bill M219, which is very similar to this piece of legislation — said it well. The people who have advocated for change have done so, I would argue, under the most difficult of circumstances. They are all, to a person, entrepreneurs of passion. They decided to take a substantial risk and start a business. All of them were employed people. All of them were passionate about their businesses. All of them wanted to succeed — every single one of them.

In general, because they had not had success in the industry, they felt a genuine sense of failure and the blame that goes with that — the sense, on their part, that it hadn’t gone as they had wished. By raising the issue of unfairness, they would in some respect be raising up something that they were not happy about. Yet they went forward with courage. I would argue that shows genuine courage.

I’d like to express appreciation for the dozens of franchisees who have spoken to us and the franchisors who have spoken to us as well, and talked about their business model, the good things in it and why so many British Columbians decide to invest in franchises across our province and the difficulties they’ve had.

I wanted to especially pay tribute to Farah Golesteneh, Kulvinder Sahdra and Wayne Taylor, who spoke out eloquently and publicly about the need for change — for legislation, remember, that will not help them. Their issues around lack of disclosure, about the failure to act…. Their issues are all in the past. They will not be affected positively by these changes in the future, yet they spoke out as citizens. They spoke out as citizens and said: “This is a system we’ve been involved in that has to improve so that people in our circumstances in future receive fair treatment.”

Nothing in this legislation guarantees business success. This is about risk, and everyone understands that. It takes real courage to go out and enter into such an arrangement. Regardless of the circumstances, there is always a possibility that a business won’t succeed. If it doesn’t succeed because of misrepresentation, if it doesn’t succeed because people can’t get access to the truth, if it doesn’t succeed because people use their strength in the marketplace — their lawyers, their size — to effectively intimidate another group of business owners, then that’s not good enough.

This is why we’ve advocated for these changes — these changes that I believe will not just assist small business but create the climate for greater small business success, something we on the opposition side believe in profoundly. They will support small businesses, not just in Metro Vancouver, where I live, but in every community across British Columbia where you see franchises. You drive down a main street of any town, and you will find a franchise business. You won’t go very far in British Columbia without meeting someone who has not worked for a franchise business.

The possibilities of this industry are, I think, very positive. The opportunities to create more business opportunities in our province are growing. That’s why I so strongly have supported this legislation.

This legislation is government doing what it should do — ensuring a level playing field, ensuring that the rule of law in British Columbia is maintained, ensuring that people have the opportunity to fulfil their dreams and their destinies. The opportunity to see those protected, to see small business people — who, many people often say, create the majority of jobs in British Columbia — receive the fairness they deserve when they enter into a franchise arrangement.

We speak in support of this legislation. We are, of course, going to have questions at committee stage as this legislation goes forward.

[1755]

I want to thank the member for Burnaby-Lougheed for her eloquence today, the member for Victoria–Beacon Hill for her legislation, but in particular, the B.C. Law Institute, who essentially drafted this bill — including people such as Tony Wilson, lawyers who advocated both publicly and in the process for years for this change because of their experience in dealing with some of the most unnecessary litigation in the province, and in other jurisdictions, facing British Columbians.

All of these people contributed to this success. It would be, perhaps, churlish to say that we’ve waited too long, but we have. But now that we’re here, I think it’s important for us as legislators to celebrate the possibilities for business in British Columbia created by this important legislative change.

L. Reimer: Thank you to the member opposite for his comments on this very important issue. There’s nothing small about the impact that small businesses have on our provincial economy. We have a tendency to think large corporations are the only big players in our provincial economy, but the fact is that small business accounts for over one-third of our total economic activity in British Columbia.

These are operations that employ no more than 50 people and are often even smaller than that. There are over one million people employed in small businesses across our province. We’re talking about entrepreneurs, people who are willing to face risks and believe in themselves. But sometimes a hard-work ethic and a willingness to succeed are not enough. For those wishing to invest in a franchise, there are often unforeseen hurdles and a lack of available information.

Bill 38, the Franchises Act, is intended to address those issues. Its purpose is to provide clear expectations for both franchisors and franchisees. We want our businesses to be set up for success from the get-go. We want to ensure that private sector investments are encouraged in British Columbia, and that starts with good business relationships.
[ Page 9516 ]

The goal of having a made-for-B.C. Franchises Act is to encourage small business investment in British Columbia by providing certainty for both parties. The legislation is designed to strike a balance between protecting the rights of franchisees while, at the same time, upholding the franchisor’s rights to enter into a contract to allow for the success of the franchise chain.

A few of us elected officials indicated that they have heard of heartbreaking stories where potential investors can end up getting burned because they were not receiving proper information or communication was lacking. I know this from personal experience, because I have been working with a constituent who is facing difficult circumstances as a result.

In this particular instance, the franchisor held money back after the franchise had been purchased and later did not disclose certain requirements. In the process, this person lost a lot of money and is having to sell their home. They have been through great emotional trauma around this.

We must not allow these types of situations to happen again. Experiences like this demonstrate the need for franchise legislation in British Columbia. In doing so, it’s also important to listen to stakeholders and consider B.C.’s specific legal and business requirements to determine what modifications were needed.

Working in conjunction with a broad spectrum of organizations, including the Canadian Bar Association of B.C., public consultations were launched in two phases. Those occurred in the fall of 2014 and the summer of 2015. We gave members of the public, the franchise community and industry organizations the chance to contribute to the discussion about potential regulations. This included the British Columbia Law Institute, which recommended that the province enact legislation based on Canada’s Uniform Franchise Act, and their final report was March of 2014.

The aim is to ensure that essential features of British Columbia’s legislation will be consistent with the approach taken in five other provinces: Alberta, Manitoba, Ontario, New Brunswick and P.E.I. Consequently, the Franchises Act will govern franchise businesses in B.C. and provide important legal protections for B.C.-based small business owners who operate a franchise.

While it was important that our act closely conform to the uniform model, we also wanted to ensure that we had a made-in-B.C. approach. This includes regulating the sale of franchises, requiring that contracts include presale disclosure requirements and providing legal rights and protections to help parties to resolve disputes.

[1800]

Because information about the franchise is solely within the franchisor’s knowledge and control, there have been situations where franchisees do not receive full disclosure about information that is critical to their decision to enter into the franchise agreement. Such was the case of my constituent. This legislation will therefore ensure that franchisees will receive all the information they need to decide whether to invest in a business before they sign a franchise agreement.

Potential investors will also have remedies if information is not disclosed. It will also protect potential investors if they are misled about potential profits or other information about the franchise.

This legislation will effectively level the playing field for franchisors and franchisees. It will provide franchisees with the same legal protections that other provinces with similar legislation do. As a result, franchisees will have greater protections and access to information to help guide their business decisions. At the same time, franchisors will benefit from uniformity in their disclosure requirements.

As I mentioned earlier, the small business sector is very much a giant contributor to our provincial economy. Bill 38 will enact significant improvements, because many of these franchise businesses have fewer than 50 employees. Just look around your own communities, and you can see many examples of restaurants and retail stores that are franchises.

We need this bill because successful franchisees tend to reinvest by opening at multiple locations. That generates more jobs and career opportunities for employees. This also leads to more direct economic benefits at the local level.

In the process of developing this legislation, we kept in mind the many legitimate concerns raised by franchisors. We had to be cognizant of the interprovincial and international aspects of the franchise business. This act has been designed to ensure that B.C. remains a competitive jurisdiction and does not place too heavy a burden on business. Standardizing the franchise legislation with other provinces will help attract new business to our province. A franchise will be more likely to come to British Columbia if they are accustomed to complying with similar rules that are elsewhere in Canada.

Currently, there are about 78,000 franchised outlets operating in Canada, with $100 billion in annual sales. Franchise operations are an important part of our national economy and right here in British Columbia. Bill 38 is going to create greater certainty and a level playing field for everyone.

For all of those reasons, I will be voting in support of this legislation.

B. Ralston: It’s a pleasure to rise in the House and speak to this bill.

I want to first, I think, give some recognition and tribute to my colleagues on this side of the House who have worked on this file — whether it’s the member for Victoria–Beacon Hill, who introduced a very similar, almost word-for-word bill in February of this year here in this House, as a private member’s bill; the member
[ Page 9517 ]
for Burnaby-Lougheed, who gave a very detailed and knowledgable and eloquent speech about franchise law and the importance of this bill to setting a regulatory environment in the franchise business that is fairer to both sides; and, of course, to the member for Vancouver-Kingsway, who in some of his constituency work gained a keen appreciation of some of the injustices worked by the absence of such legislation and came to consider the necessity and the importance of having legislation passed here in British Columbia.

Certainly, the franchise business — most of us are familiar with it as a part of the business landscape. I know that in my own riding of Surrey-Whalley, whether it’s on King George Boulevard or 104th or 108th, there are many franchise businesses. Those businesses represent the effort, the capital, the savings, the sweat equity of many British Columbians and many citizens of my riding and of others in Surrey. It’s often a point of entry, a desirable point of entry, for new Canadians or recent immigrants who want the protection and value the protection of a larger organization but are able to muster the capital to enter into it through the avenue of a franchise agreement.

[1805]

It is a significant part of the economy. Estimates by the Canadian Franchise Association suggest that B.C. has approximately 10,000 franchise outlets with $14 billion in annual sales and approximately 180,000 employees. It’s bigger than a number of sectors, if you consider that as a unique category of provincial business and of GDP. Overall in the Canadian economy, it’s estimated that franchise businesses account for 5.5 percent of the national gross domestic product, which is a huge number. So these businesses are important.

What was discovered — and this is something that’s been commented upon in business magazines and chambers of commerce and boards of trade in recent years — is the difficulties that arise when legislation of this type does not exist.

There are not many, but some, unscrupulous would-be franchisors who, given the absence of legislation, have literally preyed upon the dreams and the aspirations of would-be franchisees and taken commercial advantage of them in a very reprehensible way.

One can see from the legislation the types of barriers that were placed in the way prior to the passage of this legislation. For example, in section 13 it says: “Any purported waiver or release by a franchisee, or by a prospective franchisee, of a right conferred under this Act or of an obligation or requirement imposed on a franchisor or franchisor’s associate under this Act is void.”

One can well imagine in the limited case, in the unusual case, of an unscrupulous franchisor an attempt to “voluntarily” oblige a prospective franchisee to sign away their rights in order to get signed up with a particular franchisor. This particular provision, coming as it does from the study by the B.C. Law Institute and from the private member’s bill put forward from the member for Victoria–Beacon Hill, would prohibit that.

So if a franchisor chose to take advantage of his or her greater bargaining power in that circumstance, any attempt to do that — to oblige a prospective franchisee to sign away their rights — would be void. In other words, it would have no legal force in effect and couldn’t be done.

Given that that’s in the legislation, one can well imagine that there were circumstances that gave rise to the necessity to place such a provision in the act.

As the member for Vancouver-Kingsway has pointed out, section 4 also remedies another similar practice of unscrupulous franchisors prohibiting franchisees from associating. In other words, if you were a franchisee and you wanted to find out the common experience of other franchisees in dealing with the parent or the franchisor, the company that all those franchisees had a business relationship with, you could be prohibited, by the agreement that you’d entered into, from actually even talking to someone else about their experiences in order to gain some collective knowledge and, I suppose, the collective will to act to correct injustices or commercial inequities in the relationship between franchisees and franchisors.

The right to associate is very plain. It is, one would have thought, axiomatic, but it’s spelled out here in some considerable detail. “A franchisee may associate with other franchisees and may form or join an organization of franchisees. (2) A franchisor and a franchisor’s associate must not interfere with, prohibit or restrict, by contract or otherwise, a franchisee from associating with other franchisees, or from forming or joining an organization of franchisees.”

[1810]

The very fact that that’s in this piece of legislation speaks to a legislative effort to correct what was a previous practice among some franchisors — to prohibit that kind of commercial association, discussion. One speaks under the Charter of Rights of a freedom of association, but apparently, in some of the private contracts that some franchisors sought to impose, any opportunity to discuss common problems or common approaches was prohibited.

It goes on to talk more explicitly about some of the other prohibitions that one can well imagine were practices that have been practised, have taken place in the past and are now legislatively banned.

“(3) A franchisor and a franchisor’s associate must not, directly or indirectly, penalize, attempt to penalize or threaten to penalize a franchisee for associating with other franchisees, or for forming or joining an organization of franchisees.

“(4) If a provision in a franchise agreement or other agreement relating to a franchise purports to interfere with, prohibit or restrict a franchisee from associating with other franchisees, or from forming or joining an organization of franchisees, the prohibition is void.

“(5) If a franchisor or a franchisor’s associate contravenes subsection (2) or (3), a franchisee has a right of action for damages against the franchisor or the franchisor’s associate, as the case may be.”
[ Page 9518 ]

Again, one can see reflected in the legislative provisions here what were some of the unscrupulous, one might say unethical, practices of some franchisors — prohibiting association, threatening economic retaliation, perhaps recision of the agreement, economic penalties, fines. Who knows?

All of that, by virtue of this legislation, is now to be prohibited. If a franchisor…. One would think that one would not want to do that, given the explicit language of the section. It gives an action for damages. So this is important legislation, in that respect, in regulating the balance of commercial power between franchisors and franchisees in this significant industry, which employs over 180,000 employees, of which there are over 10,000 franchise outlets here in the province of British Columbia.

Section 5 has been spoken to — the importance of, at the point of making a decision to invest one’s savings or borrow substantially on the strength of obtaining a contract with a franchisor, a measure of disclosure that has to be fairly detailed and also has to be accurate. Otherwise, it gives right to a cause of action.

Section 5 of the bill is really the guts of the bill in the sense that it’s the most important element, which previously didn’t exist. Ethical or corporately responsible franchisors would doubtlessly disclose fully, but it was not a legal requirement here in British Columbia, although it may have been left to contract law, perhaps, to sort that out.

It requires a disclosure document, which must contain the following: “(a) prescribed financial statements; (b) copies of all proposed franchise agreements…(c) prescribed statements that have the purpose of assisting a prospective franchisee to make informed investment decisions; (d) other prescribed information; (e) copies of other prescribed documents.” A disclosure document “must include all material facts.”

There’s a provision that subsequent material changes — it uses the language of some securities legislation — would have to be disclosed to a franchisee as well. It’s an ongoing obligation, a duty of disclosure. If you enter into…. After disclosure on one set of terms, if there’s a material change that is consistent with the contractual arrangement between the two parties, that has to be disclosed as well, on a timely basis.

[1815]

That gives a right of action and a possibility of seeking damages in section 7. “If a franchisee suffers a loss because of a misrepresentation contained in a disclosure document or in a statement of material change, or as a result of the franchisor’s failure to comply in any way with section 5,” it gives rise to a right of damages.

These are powerful and fair legal remedies. They define the relationship between the franchisor and the franchisee much more clearly. Many national chains would be well familiar with these kinds of requirements, since there is an effort in this piece of legislation to strike legislative uniformity with other jurisdictions that have this law in place already, in Alberta and Manitoba — I think Prince Edward Island was one of the early ones — Ontario and New Brunswick.

Certainly, given that franchisors here, if they operate nationally, would likely have been familiar with this legislation, it will impose no new burden upon them. It will, in fact, probably assist in providing a level of legal uniformity that would make administration somewhat easier. These provisions in the legislation are important. They’re significant and a genuine legislative advance.

I suppose the other effect of this is to give the power to make regulations. In section 16 there’s a prescribed section that gives full ambit to the Lieutenant-Governor-in-Council — that’s the cabinet — to make regulations. Then there are some very specific areas which will grant regulatory power to the Lieutenant-Governor-in-Council to make regulation concerning the same things, such as delivery of documents.

One can’t but note that this is a bill coming from the Minister of Small Business and Red Tape Reduction, who apparently and logically — notwithstanding some of the rhetoric we hear — recognizes the need, in the case of this bill, for regulations to carry out the legislative intent that’s put forward and spoken to so eloquently in support of by members not only on this side of the House but members on that side of the House as well.

In speaking to this bill, they’re speaking to wise and prudent regulation, which seems welcome but sometimes, perhaps, a little inconsistent with some of the more inflammatory rhetoric we hear about red-tape reduction. That’s a statute I’m sure we’ll be able to debate at some point in the near future in this legislative session, since it has come before us at second reading and will come to committee stage in due course.

I’m pleased to be able to support this legislation. It is a legislative advance, and it’s good for business, both small and large business. It’s good for franchisors. There are, for example, franchises that have been generated or started in British Columbia and have spread across the country.

One that comes to mind that’s very successful is Boston Pizza. They began in British Columbia and, judging from the information that’s provided to me, have their head office here in British Columbia but have spread across the country, I think, with 363 units in Canada and then a number outside Canada — which is, I suppose, the next development of franchise operations.

There’s a contribution by British Columbia business to the genesis and creation of new forms of franchise business, just as there are many people who open up franchises themselves and become prominent and successful small business operators within their own community.

[1820]

With those remarks, I would like to clearly set out my support for this bill and take my place.
[ Page 9519 ]

J. Thornthwaite: I’m very, very happy to be able to stand up and support Bill 38, the Franchises Act.

The North Shore has a vibrant, dynamic business community that is home to thousands of entrepreneurs who are committed to delivering high-quality products and services for the region. The district of North Vancouver reports 5,000 businesses, including home businesses, and the city of North Vancouver reports 3,500 businesses. Many of these are franchises.

Browns Socialhouse is a local franchise, and my neighbour, in Lynn Valley Village. Browns is a successful brand that is expanding quickly and has franchises opening up all across the country. The brand is attracting young, energetic entrepreneurs who are passionate about running a hospitality and service business and want to work with a company that has a proven track record.

The Lynn Valley Browns Socialhouse is co-owned by CJ Kerr and Derek Archer, and they have adopted a no-limits approach to their design and their menu, providing customers with a unique, friendly, social and, most importantly, delicious culinary experience. I recommend the cowgirl or the cowboy salad.

The franchise also takes part in many community events and co-hosted this summer, along with my office, the final night of this year’s Lynn Valley summer concert series which saw our local boy, our local entertainer Adam Woodall and his band, play to an enthusiastic crowd in the family-orientated evening.

I was pleased to join CJ and Derek at a recent event hosted by the North Vancouver Chamber of Commerce. The North Van Chamber Business Excellence Awards nominee reception was held on September 23. It was put on to announce the nominees for the chamber’s annual Business Excellence Awards, which acknowledge the outstanding achievement of deserving business people in our community.

This year Browns is a finalist for Business of the Year and is being recognized for its leadership, customer relations, community service and overall contribution to the North Shore. The award will be handed out at their annual gala, November 5 at North Vancouver’s Pinnacle Hotel. I wish CJ and Derek the best of luck, and I’ll be there joining them.

CJ and Derek are among the many young, energetic entrepreneurs who are helping to expand the economy on the North Shore. For this new generation of budding entrepreneurs, this legislation will help them immensely. It ensures that future entrepreneurs have all the relevant business information they need before they make a decision to invest, and it will guarantee legal protection should they not receive the information they need and find themselves in a vulnerable position later.

Bill 38 will prepare them for success right from the get-go, and it will encourage investment in British Columbia and the North Shore by providing certainty and consistency for franchisors.

This act harmonizes rules so they remain consistent across many jurisdictions. We’ve already heard that Alberta, Manitoba, Ontario, New Brunswick and P.E.I. also have recently instigated their franchise acts. This provides a level playing field and allows franchisors the ability to use the same disclosure documents they use in other provinces, saving them time and money. This is great news for brands like Browns that are looking to expand in many different provinces.

Small business is our biggest employer. It is the engine for job creation. It makes up more than 90 percent of all businesses in B.C. and is the reason why more than one million British Columbians have a steady paycheque. We want businesses to be set up for success right away, and this legislation does just that.

Young entrepreneurs like CJ and Derek from Browns Socialhouse in Lynn Valley are dedicated not just to growing their own business but also to mentoring, to providing professional development opportunities for other young workers and to working together with the business community to ensure the economy remains robust and growing.

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This legislation gives them the certainty and the consistency they need to do what they do best: open the door to investment and provide more employment opportunities for our communities.

I will be supporting Bill 38.

H. Bains: It is a pleasure, and I’m really happy to stand and speak in favour of Bill 38. I’m happy because I think this was the idea that was researched, worked on — worked hard, I might add — by the members of the opposition — in particular, the member for Vancouver-Kingsway working with the member for Victoria–Beacon Hill, who introduced this bill. Almost word-for-word, the bill was introduced under the name of M219 this past spring, in 2015.

I’m happy that the government has adopted those ideas. I think this just shows that working together you can achieve something because no one has a monopoly on good ideas. Sometimes some members of this House feel that they do, but good ideas could come from any place. This is an example.

The idea was researched and brought forward in this House by the member for Victoria–Beacon Hill. Like I said, you could actually compare the notes of that bill and the purpose behind that bill, M219, and the bill that we are debating today. It is almost word-for-word the same.

What this bill does is confirm the duty of fair dealing of parties to a franchise agreement and provide for a remedy in the event of a breach of that duty; confirm a franchisee’s right of association and provide for remedies in the event of the infringement of that right; require the disclosure, by a franchisor to a prospective franchisee, of financial information and other relevant information about a franchise
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or a franchise system before the prospective franchisee enters into a franchise agreement; provide conditions for rescinding a franchise agreement; provide circumstances in which there may be liability for damages; and prevent the waiver of the application of the law of British Columbia or, in the event of a claim or dispute under a franchise agreement, of the restriction of jurisdiction or venue to a forum outside British Columbia for proceedings in relation to the claim or dispute — essentially, the elements of M219.

I’m happy that we are debating this bill, and I am confident this bill will be passed here. I would say, like my colleagues have said before, the bill is before us. We could argue that this has taken longer than what it should have because other provinces — five of them, going back to 1971 — started to look at this type of bill in their provinces. Five of them today have it. That includes Manitoba, Alberta, Ontario, New Brunswick and Prince Edward Island. Now British Columbia will join those five provinces as well.

Franchises create and play an important role in our economy. In my constituency, if you go to Surrey and in particular Surrey-Newton, you’ll see many of the businesses are franchise owners. As the Canadian Franchise Association suggests, B.C. has more than 10,000 franchise outlets with $14 billion in sales and with 180,000 employees. Overall in Canada, 1.5 million Canadians are employed by these franchises.

Many new immigrants, many people in my constituency…. My constituency is one that is made up of about 70 to 75 percent of immigrant communities, and many of them come to this country to make their lives better. Many of them get engaged in one or other sort of franchise system, to create jobs for themselves but also to employ others.

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I might add that yes, they’re running businesses, yes, they employ many employees and create jobs for themselves, but they go and do more than that. I would like to use this as an example. I have an A&W franchise in the same complex where my office is in Surrey-Newton. Chris and Holly Parrish — not only are they very successful in running A&W…. I think they have two restaurants — one in my neighbourhood and another one in Strawberry Hill. They’re both in my constituency.

They do a lot of good work for the community. Every year, about two or three times during the year, they have different kinds of fundraiser activities that they engage themselves in and raise thousands of dollars for those worthy causes. Just recently, in August — I believe August 27 — there was another one. They call it Cruisin’ for a Cause. They have over 100 classic cars that come there. In summertime, every Thursday there’s a display of classic cars at that location, and many people come and donate. Either it was for MS or for cancer or for many other causes that they’re involved in.

These are the people, these are the Canadians that actually make us proud, and that’s why we proudly say that we are Canadians — because of the work that Chris and Holly do in our communities to make our communities better.

When you look at a bill like this, you are helping those new immigrants, you’re helping those entrepreneurs who have a desire to engage in businesses. When they are engaging, trying to participate in an agreement, if that agreement is based on full disclosure and full information by the seller, then you make the right decision, and the chances of success are increased when that happens. This bill will do that.

This bill also provides a remedy in the event that the franchisor or the person who’s selling fails to comply with the disclosure act that is in this bill.

I think the other more important part of this bill is that these franchisees now can form an association. They can pool their resources together, pool their knowledge together, pool their research together so that they can promote themselves and can actually have a level playing field when they’re dealing with multinational franchisors. That is also a good thing. And that remedy they can seek right here in British Columbia. That is an important part to understand.

I might add, in conclusion, that many of the franchisors, no matter how large they are, there was a day when they started out as one shop, a mom-and-pop shop in most cases. From there, they had an idea, they put it into practice, they were successful, and then they shared that with others who were willing to participate in business.

Those are the entrepreneurs and pioneers who built this country, built our province to give us the life that we enjoy today. So I think it’s about time that we started to deal with bringing in legislation like this, which is substantive in nature when you talk about what is important to British Columbians, compared to what we’ve been doing for the last week or ten days, where non-issues were being brought by the B.C. Liberals into this House.

I’m happy that finally we’re dealing with an issue that is important to British Columbians. It puts both franchisor and franchisee on a level playing field with remedies available to them in the event that there’s a dispute.

I know time is running very fast, and there are other speakers, so I’ll take my seat. I’m really happy that finally we’re debating this bill and that eventually we’ll pass it.

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D. Bing: On behalf of my constituents of Maple Ridge–Pitt Meadows, I rise today to speak in support of Bill 38, the Franchises Act, 2015. This legislation will open the door for even further investment and employment opportunities in B.C. Franchise businesses play a significant role in B.C.’s economy. We want to make sure that we’re giving them the certainty they need to expand.

The goal of this act is to encourage small business investment in B.C. by providing certainty for both the fran-
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chisor and the franchisee. Providing clear expectations for both is important because we want our businesses to be set up for success from the very beginning.

This legislation is designed to strike a balance — a balance between protecting the rights of franchisees while at the same time upholding the franchisor’s rights to enter into a contract to allow for the success of the franchise chain. This act ensures that franchisees will receive all the information they need to decide whether to invest in a business before signing franchise agreements. This ensures certainty and consistency for people wanting to enter the franchise business.

October is Small Business Month. This government values small business as an economic engine in our province. Small business provides nearly 54 percent of all private sector jobs. They represent 98 percent of all business in B.C. As well, small business employs more than one million British Columbians.

I want to take a moment to highlight a manufacturing company based in Maple Ridge. Advanced Flow Systems and Surround Technologies, a subsidiary of AdvanTec Global Innovations, have experienced tremendous growth lately due to an export contract with South Korea. This company is growing so quickly that it can be a challenge to recruit skilled tradespeople. The company has hired 100 people since January, and they expect to hire 35 more in the coming months.

This company is working with Kwantlen Polytechnic University to bring trades training to the north side of the Fraser River. This company has been highlighted as a B.C. Job Maker. It is one of countless examples of the great work that B.C. business does throughout our province.

Now, franchises exist across the spectrum of business sectors, and they play a significant role in the Canadian economy. We want to ensure that private sector investments are encouraged in B.C. This legislation will provide clear expectations to encourage small business investment in B.C. This act will provide important legal rights and remedies to B.C.-based business owners who operate, or are looking to operate, a franchise business in this province.

As well, this act provides consistency with rules that apply across many provinces. Already, Alberta, Manitoba, Ontario, New Brunswick and P.E.I. have similar legislation. By passing this act, we will provide certainty to investors looking to expand into British Columbia. This is good for business in British Columbia.

This legislation supports the government’s goal to ensure that private sector business investments are encouraged in B.C. Franchise businesses generate significant employment and investment opportunities. They also provide direct and indirect economic benefits to the communities in which they operate. As well, successful franchises tend to reinvest and open multiple locations. This generates more jobs and career opportunities in the community. This legislation supports small business in B.C., since many franchise businesses have fewer than 50 employees.

We’ve done extensive consultation on line and in person for this act. Both the Uniform Franchises Act and a recommendation from the B.C. Law Institute helped to inform this act. To ensure that we also have an act that works for our province, it is important to listen to stakeholders. B.C. has a specific legal and business landscape, so listening to stakeholders meant we could determine what, if any, modifications were needed.

Consultations were done in two phases: in fall 2014 and summer 2015. We gave members of the public, the franchise community and industry organizations a chance to contribute to the discussion. Nine stakeholders responded to the fall consultation. Of those, six expressed strong support for the legislation. Three did not express support, but they provided suggestions for improving the act. None of the stakeholders were opposed to the legislation. We’ve listened to stakeholders and the feedback we’ve received.

We’ve used the experiences and best practices from the other five provinces that currently have uniform franchise acts. As our act was being developed, we made sure to keep in mind the concerns raised by franchisors. We’ve created an act that encourages interprovincial and international franchising without the risk of it becoming a financial burden. We want to stay consistent in order to create business certainty and reduce the cost of doing business. This helps open the door for franchise investment and employment opportunities in B.C.

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Everyone in B.C. deserves an opportunity to work, should they choose. This act is being created to ensure that we are protecting businesses that want to move into our communities.

S. Robinson: It is my honour to rise as the representative of Coquitlam-Maillardville to take my place in this debate on Bill 38, the Franchises Act. I fully support this. While I represent the constituents of Coquitlam-Maillardville and I stand here representing my constituents, I also stand here as the daughter of a father who was a franchisee. I think it’s important to recognize the risks that franchisees take when they decide to make a business decision.

I can recall as a young adolescent the decision that my father took to purchase a franchise out here in British Columbia — we came from Montreal — and the angst that that created, that my father was risking everything that he and my mother had saved over the years to come to a different place to start a new life with a new business. As a franchisee, it was one of those experiences that I had as a teenager where it was all hands on deck, that this was my father’s commitment to raising his family and doing right by them, making sure that we had what we needed.

My father did sales, my mother did the bookkeep-
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ing, and the rest of us, the kids, took care of some of the equipment — we prepared it — and it really was a small family business. I’m very pleased to see this legislation come forward, because we know that small family businesses take everything that the family has in order to make something work.

When I think about the challenges that my father had in running his business and I read about the gaps that existed and I see the legislation now that’s before us, I’m so grateful that the franchisor played by the rules, was good and honest and represented a good organization.

[Madame Speaker in the chair.]

While there were certainly challenges — mostly in the ’80s — for my father, in terms of cash flow and making things work for his business, he was very, very successful in working hard and making sure that we had what we needed as children. So seeing this legislation come before us just reminds me of all the challenges that small businesses have, and anything that we can do to fill in the gaps and make sure that they are protected is a good thing. It’s a good thing for British Columbians. It’s a good thing for small business.

I’m also particularly excited to see this bill because it provides certainty to small businesses and, in particular, ensures that franchisees have all the relevant business information they need before making that very important decision to invest. It guarantees legal protection should franchisees not be given the information they need and find themselves later in a very vulnerable position. It upholds the franchisor’s right to freely contract to allow for the success of the franchise, and it provides certainty and consistency for the franchisors.

I’d also just like to say that one of the things that really excites me about seeing this here before us and really impresses me — because so often we talk about working collaboratively — is that this is the bill that was presented here in this House last spring.

Seeing it here before us, knowing full well that the member for Vancouver-Kingsway and the member for Victoria–Beacon Hill worked hard to put this together…. Essentially, what government has done is say: “This is a good piece of legislation.” They tore off the cover that was our cover, and they put on their cover. They say, I believe, that imitation is the highest form of flattery — Charles Caleb Colton said that — and I feel very honoured that government saw this worthy. I will certainly be supporting this bill.

S. Simpson: I’m pleased to just take a couple of minutes to speak to Bill 38. I know we’re tight for time, and there may be another couple of members who are interested in speaking.

Bill 38 is the Franchises Act. This is a piece of legislation that provides better balance and better protection for franchisees and franchisors, I believe, at the end of the day.

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We know that here in this province, this is a huge economic sector: over 10,000 enterprises, 180,000 people make their living out of franchise operations, over $14 billion of economic activity. It’s a very important and significant sector.

But it’s a sector that we know has faced its challenges. It’s a sector that has faced those challenges, in many ways, because of the imbalance between franchisees and franchisors, in terms of their authority and their power and their ability to work. This piece of legislation goes quite a way to deal with those matters.

It ensures franchisees have all the relevant business information they need before making the decision to invest. They have that right. It guarantees legal protections should franchisees not be given the information they need and later find themselves in a vulnerable position.

It upholds the franchisor’s rights to freely contract to allow for the success of the franchise and provides certainty and consistency for franchisors. This is important. That imbalance needs to be addressed. It’s good for the vast majority of franchisors who are highly reputable and who, in fact, don’t want the bad apples playing fast and loose. And for franchisees, it gives them rights.

It also gives them the right of association so they can come together as entities to protect and advance their own interests and ensures that if there are disputes, there is litigation. That will take place in British Columbia, where the business is located, and that’s a positive thing.

As my colleague said, this is one of those situations…. We often, here on this side, present private members’ bills, do those things, and frequently we’ll say to the government: “Look, we just think this is an effective piece of legislation. We’re happy. Tear off the cover. Put your own cover on it, and let’s move forward.” Essentially, that’s largely what has been done here.

In February 2015, the member for Victoria–Beacon Hill introduced a private member’s bill, and what that bill said is:

“This bill grants rights and imposes duties and obligations on the parties to a franchise agreement, including a duty of fair dealing is imposed on the franchisor and the franchisee. A franchisee has the right to associate with other franchisees. The franchisor cannot interfere with that right.

“A franchisor must disclose certain information, including financial statements and all material facts about the franchise, to a franchisee before the franchisee enters into the franchise agreement. If the information is not disclosed, the franchisee may cancel the agreement within a certain time period.

“A franchisee may sue the franchisor and others for any loss suffered because of a misrepresentation in the disclosed information. Those who disclose that information have certain defences. A franchisee cannot waive his or her rights under Franchise Act.”

That’s what we said. That’s largely what this piece of legislation does. It’s a good piece of legislation. It will be good for business. It will be good for all of the parties
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to a franchise arrangement and agreement. I’m glad the government has brought this forward. I look forward to voting on this, moving it forward and improving the situation for the couple of hundred thousand people and their families who make their living in this province and who live out of franchise arrangements.

Hon. S. Anton: It gives me great pleasure to speak to this bill during second reading. I’d like to thank the Minister of Small Business and Red Tape Reduction for bringing this forward.

I would like to just correct some of the record, though, which is that this work, of course, did start with the B.C. Law Institute recommendation that B.C. enact franchise legislation based generally on the Uniform Law Conference of Canada’s Uniform Franchises Act. That work was done at the request of the Ministry of Justice. We provided some funding to the B.C. Law Institute in 2012 and 2013 to do the consultation report in 2013 and a final report on the franchise legislation for British Columbia in March of 2014.

There’s quite a lot of patting on the back going on over on the other side of the House, but it is the case that this work was initiated by the Ministry of Justice with the encouragement of many of our partners in justice in British Columbia.

Ministry of Justice conducted its own consultation in the fall of 2014 and again, directly with the franchise community, in the summer of 2015. Bill 38 reflects the results of those consultations and reflects much of the work that was done by the B.C. Law Institute. Ministry of Justice staff were, of course, engaged actively in that work in bringing the act forward: Renee Mulligan, Nancy Carter and Bruce Macallum.

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I also wish to acknowledge the advisory group of lawyers with expertise in franchise law who volunteered many hours over the spring and summer of 2015, working with our justice officials to adopt the B.C. Law Institute report into British Columbia law. That advisory group consisted of Tony Wilson, Greg Blue from the B.C. Law Institute, Peter Snell, Blair Rebane, Sheena Mitchell and Stewart Rennie from the Canadian Bar Association.

I’d like to thank the B.C. Law Institute for the work they did on this act and also the Canadian Bar Association, B.C. branch for taking part in the stakeholder consultations.

All of the groups that we heard from — legal, community and business — were supportive of the legislation. We, of course, aligned the legislation with other provinces in Canada and were able to do so by closely following the Uniform Franchises Act developed by the Uniform Law Conference of Canada, and it is that document that we based all of this other work and based our legislation on.

And of course, for the reasons that many other people have said, it is a good piece of legislation. It’s an important piece in the legal structure for so many of our small businesses in British Columbia, and I am very strongly in support.

D. Barnett: It is my pleasure today, on behalf of my constituents in Cariboo-Chilcotin, to support Bill 38, the Franchises Act.

It goes without saying that small businesses are the lifeblood of communities in my riding. Without small business, some of these communities would not exist. I have a lot of personal experience in this field as a small business owner and franchisee. I know firsthand that this legislation is overdue and will help franchisees and franchisors together.

Bill 38 will open the door for investment. During the consultation process of this bill, many franchisees shared their experiences of operating a franchise in B.C. with myself. While many of them shared positive experiences, others did not.

In my riding, one franchisee of 19 years said: “If I were to do it again, I would not join a franchise.” This is indicative of the frustrations that many franchisees in B.C. have met. This legislation will create a smoother, more streamlined process for franchisees and franchisors alike.

Bill 38 is designed to strike a balance between protecting the rights of franchisees while at the same time upholding the franchisors’ rights to enter into a contract to allow for the success of the franchise chain. This includes regulating the sale of franchisees, requiring that contracts include presale disclosure requirements, and providing legal rights and protections to help parties to resolve disputes.

Because information about the franchise is solely with the franchisor’s knowledge and control, there have been situations where franchisees do not receive full disclosure about information that is critical to their decision to enter into the franchise agreement. This act ensures that franchisees will receive all the information they need to decide whether to invest in a business before signing franchise agreements.

Madame Speaker, through experience, I can tell you that this bill will certainly help those who are going into business to understand what they are getting into before they get there. I support this bill fully as a past franchisee.

Madame Speaker: Seeing no further speakers, the minister closes debate.

Hon. C. Oakes: It truly is…. I’m very proud to stand in this House representing the people from Cariboo North and to close the discussion on this bill.

I would like to thank members on both sides of the House for their comments today about the importance of the Franchises Act and the support it will have for small businesses across British Columbia. I appreciate the dialogue that has been here today.

Bill 38 will provide important protections to vulnerable franchisees while upholding franchisors’ rights to
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freely contract to allow for success of the franchise’s chain. The confidentiality agreements that the hon. member mentioned in her speech refer to ancillary agreements to provisions in the franchise agreement that limit the franchisee’s right to speak up.

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This act will ensure that the franchisees are not subject to one-sided provisions such as these. The act does this by requiring that all parties to the franchise agreement operate under a duty of fair dealing and good faith. This means that both franchisors and franchisees are required to act honestly and fairly with each other.

In addition, the provision that prohibits the franchisor from stopping the franchisees from associating with other franchisees will protect franchisees, allowing them to have this conversation with other franchisees to really learn about the franchise. This legislation will also, of course, protect an important segment of B.C.’s economy — our small businesses.

I’m extremely proud to be able to move second reading of Bill 38.

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Second reading of Bill 38 approved unanimously on a division. [See Votes and Proceedings.]

Hon. C. Oakes: I move that the bill be referred to a Committee of the Whole House to be considered at the next sitting after today.

Bill 38, Franchises Act, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

Hon. M. de Jong moved adjournment of the House.

Motion approved.

Madame Speaker: This House, at its rising, stands adjourned until 10 a.m. tomorrow morning.

The House adjourned at 7:03 p.m.

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