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Privacy Laws in Franchising

Written by: Peter Macrae Dillon

Article Overview: As a paperless society becomes increasingly likely, the volume of information available to individuals in the digital world has never been greater. However, the high risk of misuse of this information and its ability to be rapidly disseminated to vast numbers of recipients with the press of a button has prompted the Canadian government to intervene in an attempt to strike a balance between legitimate business interests and the rights of individuals to know that their personal information is secure. peter macrae dillon franchise franchisor lawyer attorney Toronto Ontario Canada

Privacy Laws in Franchising

As a paperless society becomes increasingly likely, the volume of information available to individuals in the digital world has never been greater. However, the high risk of misuse of this information and its ability to be rapidly disseminated to vast numbers of recipients with the press of a button has prompted the Canadian government to intervene in an attempt to strike a balance between legitimate business interests and the rights of individuals to know that their personal information is secure. The federal government placed the onus squarely on the shoulders of business owners and operators everywhere to ensure the appropriate collection, storage, and destruction of personal information by making the Personal Information Protection and Electronic Documents Act, 2000 S.C., c. 5 ("PIPEDA") enforceable against all private commercial enterprises in Canada as of January 1, 2004.

All personal information a company may acquire on an individual, including shareholders, customers, clients, suppliers, and members, is covered by the legislation. PIPEDA defines personal information as “information about an identifiable individual.” The broad definition includes virtually anything that could serve to identify a particular person, including name, home address and telephone number, age, height, weight, race, ethnic origin, religion, marital status, educational background and medical history.
While some perceive PIPEDA as lacking enforcement "teeth", the reality of the legislation cannot be ignored. Three of the key areas for both franchisors and franchisees to consider are detailed below.
Privacy Policy
PIPEDA requires franchisors to prepare a privacy policy that is compliant either with the federal legislation or any provincial legislation that supersedes PIPEDA. Currently, only Quebec has such legislation. From the franchisor's perspective, it is crucial that franchisees have a full understanding of what is in their system's privacy policy, to ensure that the policy is adhered to at all times in their internal dealings as well as with customers. The policy must also be made available to the customer, most commonly through a link on the franchisor’s Internet website. It is also advisable that a copy be included in the operations manual, both to educate franchisees but also in order to be able to provide a hard copy to a customer upon request.
It is not necessary for franchisees to develop their own privacy policy, but it is absolutely essential that they are educated as to what procedures must be followed to ensure that the franchisor’s policy is applied in an appropriate manner. Failure by a franchisee to do so may expose both the franchisee and the franchisor to an investigation by a privacy commissioner.
Consent
As a general rule, a franchisor must have the informed and express consent of a customer or franchisee in order to collect and/or use any of their personal information. Implicit consent is acceptable regarding the use of only the least sensitive information. This creates the requirement for a 'hierarchy' of consents to be acquired. For example, franchisees are now placed in a situation where they must have consent from its customers to share information it gathers with the franchisor, and the franchisor, in turn, should have consent from the same customer to collect the information from the franchisee. It is the responsibility of the franchisor and, to a lesser extent, the franchisee, to explicitly detail how the information is to be used and to acquire the customers' consent to do so.
Agreements
All customer contracts, sales slips, invoices, credit or membership applications, as well as any other documentation exchanged between a franchisee and customer, should be carefully reviewed to determine the level of consent that a customer is expected to provide based on the information being collected in such documents. It would also be wise for a franchisor to assess whether its existing franchise agreement and other core documentation deals with the requirements PIPEDA imposes regarding the collection of personal information both from and by its franchisees.
Final Thoughts
It is imperative that franchisors and franchisees appreciate that that there are no grandfathering provisions to PIPEDA, and therefore it is necessary to immediately acquire any and all consents needed to utilize information that has been gathered and used prior to the enactment of the legislation.
In fact, given that PIPEDA impacts all conduct between franchisors, franchisees and customers, it would be advisable to undertake a thorough review of all system-wide operations as soon as possible to ensure compliance within the three-way relationship that exists between franchisor, franchisee, and customer.



peter macrae dillon franchise franchisor franchising lawyer attorney Toronto Ontario Canada

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