Unique Opportunity for Professionals & CAMA Sponsors!

Each year a number of Canadian CAO’s are transitioned out of their CAO positions. Most often they are simply a casualty of a new political environment.

CAMA recognized the growing need to support their CAO members in transition and engaged a consultant to develop a Members in Transition Toolkit. The Members in Transition Toolkit will be launched at the 2019 Annual Conference in Quebec City.

It became evident that those transitioned members who had immediate and continual access to good resources, appeared to get through transition easier. So part of the project included having them identify the specific resources that would have been helpful to them as they navigated their way through transition.

We now need to locate the professionals from each province who provide these identified resources, for inclusion in the toolkit. The toolkit will list the services required and will link to the professionals who provide the service, so our members in transition can quickly and easily find the professional resources they need, when they need them.

Specifically, here are the professionals we need for the toolkit:

 Employment Lawyers (who represent employees)
 Financial Planners/Accounting Planning/Taxation Advisors
 HR Advisors/Career/Transition Counsellors/Life Coaches
 Recruiters/Executive Recruitment Firms/Head Hunters
 Pension Advisors
 Messaging/Communication Experts
 Psychiatrists/Counsellors/Therapists
 Business Coaches

CAMA partners with muniSERV.ca to provide the professional resources Canadian municipalities need, through its Find Municipal Experts & Services database.

If you provide any of the above professional services, please consider becoming a muniSERV professional member and then select the special Transition/Career Services category after the toolkit is launched in May. Doing so provides you with the unique opportunity to be automatically be linked directly to the CAMA Members in Transition Toolkit so CAMA’s CAO members in transition can easily find you. *muniSERV is pleased to share the revenue from this special category with CAMA to support future projects.

How to Participate

If you already have a muniSERV professional profile, you’re all set until the launch of the new toolkit in May. We’ll notify you when you need to go back into your dashboard and add the new, special Transition/Career Services in “Build Membership Package”. 

If you’re not a muniSERV member yet;
 1. Become a muniSERV member today and create your profile in your dashboard
 2. Start appearing in searches in the Find Municipal Experts & Services database right away and get a free Members’            Only Rotating ad (value of $120) for your first month of membership.
 3. We’ll notify you when you need to go back into your dashboard in the “Build Membership Package”, and add the                  special “Transition/Career Services” category to your cart.
 4. Then you will be able to select as many subcategories as you like, in “Manage my Profile”

Click Here to join muniSERV, or Contact us: [email protected] or  [email protected] , for more information.

 

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New Partnership for muniSERV!

You already know muniSERV.ca offers a full suite of tools for municipalities – most of which are free.

But, we’re always on the hunt for even more new and innovative tools and resources to help Canadian municipalities – and we’ve found another perfect partner!

We’re pleased to announce that muniSERV.ca has entered into a partnership with GoByDesign, for their innovative new platform – BoxOfDocs, The Ultimate Sharing Platform For Canadian Municipalities.

Whether you are updating your existing bylaws or policies, or looking to develop new standards, and want to see what similar municipalities have in place, BoxOfDocs is here to help.

*Bonus Partnership Offer

Now, when you register for free on muniSERV, you can also activate your Free Trial of the BoxOfDocs, Municipal Premium Membership, which lets you effortlessly share documents with other Canadian municipalities and gives you with access to thousands of documents your municipality uses daily!

If you have not committed to being an active member for either muniSERV or BoxOfDocs yet, now is a great time to join both and network with other Canadian municipalities to take advantage of valuable tools and services offered under this new partnership.

Welcome BoxOfDocs!

Susan Shannon

Founder & Principal,

muniSERV & muniJOBS

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Blunders managers often encounter when attempting to resolve workplace disputes

In today’s workplace employee conflicts may and do happen. Sometimes they begin as simple matters which escalate into significant issues in the workplace causing lower performance and productivity resulting in lack of communication, misunderstanding of the intent, personality clashes or different perceptions and values.  

 

It is vital to deal with employee conflict, whether minor or significant, in a timely fashion to preserve a positive, healthy work environment and to evade any increase or collateral damage among work teams and others departments. 

 

We are finding that managers often do not respond accordingly to the issues of conflict in the workplace. In many cases, it is for lack of experience, fear of retaliation against them, insufficient training and lack of confidence. Sometimes they find it easier to avoid and ignore then tackle the sensitive issues.   

 

When issues are not dealt with quickly and efficiently in the workplace, they tend to fester and develop in magnitude. When an employer has contacted me, the situation usually has been growing underground, so to speak, for some months before it explodes in either the HR office or before the managers. Typically, at this point, the problem is more complicated, involves more staff and takes more effort and time to resolve. At times it may even undermine the staff’s confidence in the manager’s ability to manage. 

 

Some common behaviours of supervisors and managers which may have a negative impact on the managing of workplace disputes effectively would be ignoring the situation until it is about to “burst”.  

 

When managers disregard challenging situations, when they do come to the surface, they require immediate and urgent action usually at a very inconvenient time to resolve. Some managers tend to overlook an awkward situation altogether until the case is ready to blow up. Then they need to take immediate action to try to deal with it, and this almost always occurs at an inconvenient time, like on a Friday afternoon before a long weekend. Putting your management head in the sand will not make the problem go away, it will only make it worst. Taking action early in the workplace dispute development is usually the best solution, with the most excellent chance of success. 

 

Not dealing with a conflict that is escalating quickly, many managers found themselves frustrated and overwhelmed which could add fuel to the case, potentially affecting the decision-making process and the capability to contain and resolve the situation comprehensively.

 

Another mistake a manager may make is letting the office politics interfere with resolving the conflict. When office politics interfere with the steps of the solution, staff in the workplace goes camping. Taking sides of either the complainant or the respondent. The team that tries to remain neutral (sitting on the fence) only suffer the ongoing bickering of the two parties.

 

The way that employees perceive situations in the workplace are essential to resolving the conflicts in the actions to be taken. A biased move (recognized or not) on the managers part may result in more battles and create permanent barriers in the workplace.  

 

The objective of workplace dispute resolution in the first place is to come to an agreement or solution that is practical and realistic for all parties. So it may mean there is a requirement for conciliation to move forward to resolution by the manager.  

 

Taking a page out of Steven Covey’s “7 Habits of Highly Effective People” book and initially “seek to understand then be understood”.  

 

Sitting down with the employees, listening actively to what they are disturbed about, gathering all the information from both sides and only then attempting to craft a clear picture of what is going on, why and what the options might be regarding resolving or improving things for those caught up in the conflict.  

 

The bottom line is that disputes and conflict in the workplace are not stoppable. Anticipating how to approach these workplace situations beforehand, may put you in a position to be ready to take action when they occur.

 

Monika B. Jensen PhD
TEL: 905-683-9953

WEBSITE: www.aviarygroup.ca
PRINCIPAL
FAX: 905-683-9912

 

 

 

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Mental Health Problems and the Workplace

October is Mental Health Month. Recently there has been bigger mindfulness of the impact of mental health problems on individuals and the workplace. The economic impact is realized through direct treatment costs to the health care system as well as indirect costs, such as reduced or lost productivity due to absenteeism.

Mental health problems account for about half of employee absences due to illness each year in Canada for example, 3.5 days lost per employee per year are due to mental health problems. It is estimated that mental illness results in 35 million lost workdays each year in Canada.’

Employees living with mental health problems may feel and behave out of character at home and work. There may be feelings of things not quite right, yet they are unable to pinpoint the problem. Their co-workers, supervisors and family members may start to notice a change in mood and behaviour.

 

 Signs that indicate an employee or colleague may have a mental health problem are:

·      Regular late arrivals or often absent

·      Lack of teamwork or an over-all disinterest in working with co-workers

·      Lower output

·      Increased mishaps or safety problems

·      Numerous complaints of exhaustion or unexplained pains

·      Difficulty focusing, not being decisive or forgetting things

·      Making apologies for missed deadlines or poor work

·      Decreased attention or involvement in one’s work

·      Working excessive overtime over a prolonged period

·      Expressions of outlandish or grand ideas

·      Displays of irritation or pointing the finger at others

 

It is important to highlight that people behaving in these ways may be just having a bad day or week or dealing with a difficult situation in their personal life that may be temporary. A pattern that continues for a more extended period, however, may point to an underlying mental health problem.

 

Stress is a consistent part of life and work, and it can be positive or negative. Unwarranted hurtful stress through life events, including workplace issues, can contribute to mental health problems. Work itself can be expected to generate a certain level of stress associated with meeting deadlines and expectations, the need to feel valued and the loss of control over one’s time.

 

There are many causes of workplace stress. One key to effective stress management is maintaining awareness of the potential stressors and readiness to address them before they become problematic. Some of the most critical sources of work-related stress are listed below.

·    Poor communication

·    Incongruity in work demands, individual ability and amount of control over working practices

·    Work overload and work underload

·    Shift work and/or night work

·    Segregation, isolation and/or unstructured support for home workers

·    Short-term contracts

·    Role conflict, uncertainty and changing roles

·    The uneven weight assigned by management to consultation, support and control

·    Lack of training for managers in communication and people skills

·    Idleness

·    Uncomfortable physical workspace

·    Introduction of new technology, if not planned and gradual

·    The culture of presenteeism, in which an employee feels the need to be seen working at all times

·    Work-life imbalance

·    Home-based stresses that support or feed off of work-based stresses

 

Managing workplace stress can include training for employees to raise awareness about the causes and effects of stress, as well as to learn skills for coping with stress at work and in their personal lives.

 

Research has shown that some job stressors are worse than others, such as jobs that continuously involve imposed deadlines over an extended period and give individuals little control over the day-to-day organization of their work (high demand/low control). These jobs can lead to more than double the rate of heart and cardiovascular problems. As well as significantly higher rates of anxiety, depression and fell of being undermined. High demand/low control jobs also lead to substantially higher alcohol, prescription and over-the-counter drug use, and a significantly higher susceptibility to infectious diseases.’

 

Jobs that require high physical or mental effort but offer little in the way of compensation, status, financial gain or career enhancement (high effort/low reward) also affect employee stress levels. These jobs are associated with triple the rate of cardiovascular problems and significantly higher rates of depression, anxiety and conflict-related problems

 

The health of workers does not have to be compromised by stress. Changes to the workplace can make for a more mentally healthy workplace, especially when employees feel adequately rewarded and have greater control of their work.

 

Mental health problems can seriously affect someone’s ability to work. If left untreated and the mental health problem worsens, the employee may need to stop working altogether.

 

On the other hand, employees may try to continue to work knowing that they are not performing to their usual standards. If mental health problems are acknowledged early, and proper treatment is obtained, most people can quickly return to their regular performance at work, and much unhappiness and suffering can be avoided.

 

Monika B. Jensen Ph.D
TEL: 905-683-9953

WEBSITE: www.aviarygroup.ca
PRINCIPAL
FAX: 905-683-9912

 

 

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Communicating and Listening Non-Judgmentally: Tools for Dealing with Mental Health Issues in the Workplace

I am finding as I train, coach and mediate that the issues in the workplace are becoming more complex. In recent events, some high profile individuals have come to the attention of the media as a result of their actions. We are finding mental health issues are more of a concern and the means to address them is less easy. In this article, I am attempting to share some tools you may want to engage in when speaking with your colleagues or employees.

Communication is not just saying words; it is creating correct understanding. Active listening is an essential skill in the communication process. Dr Marius Pickering from the University of Maine identifies four characteristics of empathetic listening.

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Strategies to Overcoming Unconscious Bias in the Workplace

Unconscious bias is hitting the news. From Bay Street to Main Street to Starbucks the impact of unspoken bias is real and harmful to the workplace. Bias stands in the way of making correct decisions in hiring and promoting. It also has a vital impact on your staff and the workplace in general. Let’s explore how we can become aware of our own bias and stop it in the workplace?

 

First, let’s define it. “Unconscious bias refers to a bias that we are unaware of, and which happens outside of our control. It is a bias that happens automatically and is triggered by our brain making quick judgments and assessments of people and situations, influenced by our background, cultural environment and personal experiences. (ECU: 2013 Unconscious bias in higher education) 

 

We all have a bias. The question is, do we identify it and then what do we do about it? In addressing one of the most crucial training issues facing the workplace today, unconscious bias, employers can assist in creating an inclusive, civil and respectful workplace. 

 

Research indicates that unconscious biases are prejudices we have, yet are uninformed of. They are “mental shortcuts based on social norms and stereotypes.” (Guynn, 2015). Biases can be based on skin colour, gender, age, height, weight, introversion versus extroversion, marital and parental status, disability status (for example, the use of a wheelchair or a cane), foreign accents, where someone went to college, and more (Wilkie, 2014). If you can name it, there is probably an unconscious bias for it.

 

Hence if we think we are unbiased, we may have unconscious adverse thoughts about people who are outside our own group. If we spend more time with people from other groups, we are less likely to feel prejudice against them.

 

This universal tendency toward unconscious bias exists because bias is rooted in our brain. Research shows that our brain has evolved to mentally put things together to make sense to us. The brain sorts all the information it is blasted with and labels that information with universal descriptions that it may rapidly access. When we categorize these labels as either good or bad, we tend to apply the rationale to the whole group. Many of the conclusions are taken from previous experiences and learnings.  

In an article, “The Real Effects of Unconscious Bias in the Workplace”, a few of the known unconscious biases that directly impact the workplace include:

  • Affinity bias is the tendency to warm up to people like ourselves.
  • Halo effect is the tendency to think everything about a person is good because you like that person.
  • Perception bias which is the inclination to form stereotypes and assumptions about specific groups that make it awkward to make an objective judgement about members of those groups. 
  • Confirmation bias is the openness for us to pursue evidence that sanctions our pre-existing beliefs or experiences. 
  • Group think is a bias which occurs when people attempt to fit into a specific crowd by mirroring others or holding back opinions and views. This results in individuals losing part of their characteristics and causes workplaces to miss out on originality and creativity.

Horace McCormick’s research found more than 150 identified unconscious biases, making the task of rooting them out and addressing them daunting. For many organizations, however, identifying as many as possible and eliminating them has become a high priority.  

 

You can address discrimination issues by increasing your awareness of your unconscious biases, and by developing strategies that make the most of the talents and abilities of your team members. 

Unconscious behaviour is not just individual; it influences organizational culture as well. This explains why so often our best attempts at creating corporate culture change with diversity efforts seem to fall frustratingly short; to not deliver on the promise they intended.

 

What you can do: 

  • Be aware consciously of your bias 
  • Focus more on the people, on their strengths
  • Increase Exposure to Biases
  • Make small changes 
  • Be pragmatic 
  • Challenge stereotypes and counter-stereotypical information 
  • Use context to explain a situation 
  • Change your perception and relationship with out-group members 
  • Be an active bystander 
  • Improve processes, policies & procedures  

Also, managers can play a crucial role in unearthing these hidden biases by declaring their intentions to be non-biased. They can also provide transparent performance appraisals that emphasis on the employee’s exceptional abilities and skills, and grow a stronger mindfulness of their own unconscious principles.

 

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Dealing with Escalated Situations in Your Workplace

Resolving workplace conflict is an expected part of the job managers and Human Resource Practitioners. Whether you work in education, healthcare, human services, business, or any field, you might deal with angry, hostile, or noncompliant behaviour every day. Your response to the defensive reaction is often the key to avoiding a physical confrontation with someone who has lost control of their behaviour.

These ten De-Escalation Tips will help you respond to challenging behaviour in the safest, most efficient way possible.

  1. Be empathetic and non-judgmental
  2. Respect personal space
  3. Use non-threatening nonverbal communication
  4. Avoid overacting
  5. Focus on feelings
  6. Ignore challenging questions
  7. Set limits
  8. Choose wisely what you insist upon
  9. Allow silence for reflection
  10. Allow time for decisions

 

 To help you towards more efficient conflict de-escalation and resolution, the following basic steps can be followed:

  • Obtain the name of the person with whom you are speaking: People respond favourably to their own name. It also makes the conversation more personal. Ask for the person’s name early in the piece and use it throughout the discussion.
  • Use Active Listening: Clarifying, paraphrasing and using open-ended questions ensure that the individual you are speaking with knows you are aware of their situation and frustrations. Resaying a person’s own words back to them demonstrates that you have understood entirely what they were trying to say.       
  • Show support and suspend judgement: Empathy needs to be shown during conflict situations. Respecting the other person’s point of view even if you do not agree entirely will be the first step to resolving the conflict. 
  • Get them to agree and say yes: Having the person agree with you on general factual points leads the conversation towards a more favourable outcome. If you can show that you have understood their point of view by making clarifying statements you generate a state where the other person must reply with an affirmative response. The sooner you can get the person to say yes then sooner the conflict will de-escalate. It always works.
  • Avoid clichés: The worst of these being “Calm Down”. Did you ever notice how people who tell you to calm down are the ones who got you mad in the first place? Saying those words during a verbal conflict usually gets the classic retort “I AM CALM” very loudly usually with an animated hand gestures as well.       
  • Show empathy: You need to show compassion and understanding and give the conflict your full attention. Do not make impulsive decisions. Take the time to work through the problem.
  • Consistency in Courtesy: The person you are dealing with first thing in the morning deserves the same level of respect, civility and patience as the individual you are dealing with at 2 in the afternoon. They warrant the same high level of service and professionalism as the first person you spoke to. You need to maintain that position of positive brand ambassador and an excellent professional service.

There are many physical aspects of being mindful of in conflict situations. It is important always to be aware of features of conflict such as your body language, your emotions, your judgement, and your initial thoughts. Keeping these in mind is essential when trying to de-escalate a problematic situation.

Monika B. Jensen is the principal of the Aviary Group, consulting company that address workplace discord.  For more information, visit www.aviarygroup.ca

 

 

 

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Private Security Trends and the Need for more Trained Private Security Resources

The Canadian Occupation Projection System (COPS) predicts that by 2018, there will be a significant shortage of Private Investigation and Private Security professionals for the projected number of job openings in Canada.

 

This is due to a large number of impending retirements and the increasing demand for trained professionals in the Private Investigation and Security field. The current security climate in Canada, the privatization of public security functions and the gaps in accessible knowledge and streamlined training in the private security field, including the gaps between private and public security, are all indications that there is an imminent and urgent need to provide professional and comprehensive private investigative and security services to Canadians. This not only increases individual safety and security within municipalities but also ensure the Canada as a whole maintains its credibility and reputation as one of the safest Countries in the World.

 

In 2002, the Law Reform Commission of Canada opened a dialogue on the trend in the growth of private security in Canada. A continued rise in law enforcement expenditures, combined with economic downturns, have contributed to pressure being placed on police services around the world to become more effective and efficient. This has resulted in a growing trend of privatizing some functions traditionally performed by public policing to the private security industry as well as the growing cooperative efforts between public and private security. Private security plays an increasingly important role in community safety and addressing issues of crime and social disorder.

 

It is often assumed that privatizing and outsourcing traditional law enforcement tasks will result in reductions in the numbers of sworn police officers. This is very far from the truth, on the contrary, public and private security collaboration may in fact result in innovative initiatives that previously did not exist, and with the growing need for security actions in communities, may in fact provide law enforcement with extra resources and partners to undertake more actions without being overworked and understaffed while utilizing various community expertise.

 

There is a growing need for more security trained private resources and more collaboration between all security facets in Canada.  In Ontario, Private Investigators as well as Security Guards are licenced and regulated by the Ministry Of Correctional Services and Community Safety.

 

Anyone that acts in these rolls must have a licence. To obtain a licence, you must meet some requirements, one of them is completion of a Ministry-approved course provided by a registered provider such as Focus Investigations. A minimum 50 hour course for Private Investigator and a 40 hour course for Security Guards is mandatory.

 

These courses can be completed online making it easy for students to complete at the curriculum at their own pace. The process is as follows:

 

1. Complete Ministry training course and receive a “Completion Number”

 

2. Book a written exam at a SERCO Canada location that provides these tests. 

 

3. Upon successful completion of the exam, a candidate may now apply to the Ministry for their license. 

* For Security Guards, Emergency level first aid training is also required.

 

More information can be found on the licensing and industry here:

https://www.mcscs.jus.gov.on.ca/english/PSIS/FAQs/FAQs-Licences/PSIS_faqs_licences.html

 

Additional training that is useful for security professionals as well as anyone working in a security related field such as:

 

Notetaking:

 

Knowing how to take notes is important for the following reasons:

 

  • Notes are referenced for several reasons and potentially by several people.
  • Supervisors might want a rundown of the events you encountered the night before, clients may want to know about incidents that affected their businesses, and law enforcement may need these notes to help with an investigation which could conclude in a court case in which the notes will be used to prove or disprove an allegation.
  • It is vital that security personnel know how to take proper notes so that the facts are covered and there is no confusion that renders the reports useless.

 

Crisis Intervention

 

A crisis occurs when someone loses control over their behaviour. These moments are often preceded by warning signs that tells you someone’s behaviour is starting to escalate.  Security officials and any employee having to interact with the public may be faced with a situation where they are called upon to defuse a situation. By following the tips in a crisis intervention course, they often prevent a situation from becoming critical and dangerous and they are prepared and confident in any crisis they may face.

 

 For more information or to enrol in one of these courses, visit us at http://www.focusinvestigation.net

 

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The Power and the Peril of the Privilege Clause

The Power and the Peril of the Privilege Clause

by Lindsay Parcells LLM, LLB, MBA

As procurement professionals know, Canadian courts have established a clear duty on the part of owners and respondents to respect the terms of ‘Contract A,’ which includes a duty by owners to reject non-compliant bids and proposals. This included duty is based on the notion that it would make little sense for bidders and proponents to expose themselves to the risks associated with the competitive process if the owner was allowed to then ignore that process and accept a non-compliant response. Failing to reject a non-compliant response and subsequently awarding ‘Contract B’ to a non-compliant respondent may result in a claim for damages by an unsuccessful respondent who submitted a compliant bid or proposal. If that claim is successful, damages will be awarded both for the unsuccessful respondent’s lost profit and, usually, for at least a portion of their legal costs. Owners that fail to reject non-compliant bids and proposals may therefore end up paying twice for the same goods or services that were procured – once to the company they awarded it to, and once to compensate the company they should have awarded it to, had they followed their own rules.

To protect against liability, owners will often include privilege clauses in their procurement documents. A privilege clause is a provision in the RFX that gives the owner a specific right or ‘privilege’ in the procurement process, typically the right to accept or reject any response in its discretion or the right to waive defects. Privilege clauses may also give the owner the right to negotiate with respondents, to communicate for clarification purposes, or to rectify ‘minor deficiencies.’ As litigation escalates and challenges become more frequent, we see a corresponding increase in the number and variety of privilege clauses owners choose to insert.

Privilege clauses are useful tools that give owners flexibility and discretion in the procurement process, and they can be particularly beneficial for owners in more complex procurements where there are uncertainties that may be difficult to predict. For example, in a procurement where an owner is seeking proposals for a project that requires complex technology, it may be beneficial to retain the flexibility to allow for further discussions with proponents after initial proposals are reviewed, leading perhaps to a final BAFO stage based on revised specifications.

Generally speaking, the more complexities and uncertainties in the procurement, the more likely it is that privilege clauses need to be included. Owners should, however, remember the benefits of moderation in using privilege clauses. Notwithstanding the advantages of the flexibility provided by privilege clauses, owners should also remember that, in general, there is a direct correlation between the prices received and the number of privilege clauses, as respondents factor in the uncertainties created by privilege clauses and include a ‘risk premium’ in their pricing. Worse still, they may even decline to participate if the opportunity is too uncertain.

Owners should therefore include only those privileges necessary for dealing with the specific uncertainties and complexities of the procurement under consideration, remaining mindful of the impact this may have on the competitive tension. An owner should decide whether a privilege clause is “nice” or “necessary” to have, and include only the latter.

Privilege clauses, in common with all other aspects of issuing and administering procurement processes, should be exercised fairly and in good faith. Remember that discretion is a double-edged sword: it leaves room for flexibility, but owners should expect to be challenged on why they did or did not exercise the discretion in any given case.

Joining NECI’s Instructor Team in 2016, Lindsay Parcells practices local government law with Lidstone & Company, Barristers & Solicitors, a firm specializing in local government law with offices in Calgary and Vancouver. Lindsay has been practicing law since 1991 in Alberta and British Columbia. He completed a Masters’ degree in Municipal Law from Osgoode Hall Law School in 2009 and a combined Bachelors of Laws and Masters of Business Administration degree from Dalhousie University in 1991. In addition to his practice in procurement law, Lindsay also advises clients in municipal law, land use, real property and corporate and commercial matters. Lindsay is a past Chair of the Municipal Law Section of the BC Branch of the Canadian Bar Association and currently serves as vice-chair of the National Municipal Law Section of the Canadian Bar Association. He can be reached at [email protected].

Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case. For any particular legal problem, seek advice directly from your lawyer or in-house counsel. All dates, contact information and website addresses were current at the time of original publication.

National Education Consulting Inc.

Phone: (250) 370-0041     Toll Free: (888) 990-7267

[email protected]

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“Smart Contracts”: Magic, Myth or Misnormer?

“Smart Contracts”: Magic, Myth or Misnormer?

by Paul Humbert

The potential to use blockchain technology to create so-called “smart contracts” for a variety of commercial transactions has been much in the news lately. Some see the objective as using the self-executing code of a blockchain to automatically create and implement a transaction, thereby increasing efficiency by avoiding the time, effort, expense, and burdens of negotiating and implementing “paper” contracts.

I am no expert on blockchain technology. My understanding is that a blockchain is essentially a database that keeps records in “blocks”. Each block is timestamped and linked to a previous block and once recorded are designed to be secure. They act as a shared distributed digital ledger (on either a private or public peer-to-peer network) that can record and update transactions chronologically and publicly. It could also be used to trigger transactions automatically, i.e., if some event occurs, then some action is triggered.

Blockchain is the technology underlying cryptocurrencies such as Bitcoin and one of its major attributes is the security of the transaction. As expected, this nascent technology has attracted a lot of attention in many industries seeking to apply blockchain in a variety of contexts including as a means to save time, reduce costs, increase security, and track the ownership of assets.

There is huge potential for the application of this technology including in the fields of finance, manufacturing, and supply chain management. For example, blockchain technology could ensure a chain of custody to guarantee that goods being sold are not counterfeit or that produce is in fact organic. There is also the potential to have machines interact in what might seem like a very contractual manner, e.g., machinery could authorize and pay for its own maintenance, repair or recharging as the need arose. It’s all very new and, like any new application of a developing technology, challenges and uncertainties remain.

Against this background, the term “smart contract” has entered the picture. As Confucius so wisely stated, “The beginning of wisdom is to call things by their proper name.” The term “smart contract” doesn’t help and is the beginning of confusion, not wisdom.

The problem with the term “smart contract” in the context of blockchain technology starts with the word “smart”. To me, being “smart” means applying learning and experience to make good business or personal decisions or choices. For example, I like to think that my students get smart (or at least smarter) about how to structure and manage commercial transactions as a result of taking my course on contract management.

Using blockchain technology to create “smart” contracts, would require a very substantial exercise in putting into code all the nuances of language and the law, including statutes, treaties, conventions and court decisions. There is an old saying among attorneys that “No matter how flat you make the pancake, there are always two sides.” Some people see this as unavoidable ambiguity due to the nature of language. I see it as necessary flexibility given the complex ways in which people need to interact and communicate. And if an ambiguity does present itself or if some scenario occurs that was not anticipated by the parties to a contract, the general intent and objective of the contract can be ascertained by the parties through negotiation (or if need be by the courts or some other dispute resolution mechanism) by applying legal principles and precedent in the context of what is reasonable under the facts and circumstances. Will taking language and the law and translating it into computer code make it easier to address complex issues? Aside from the challenge of doing so, there is the very real risk that “bugs” in the code could yield unintended consequences. I think most would agree that bugs in such a complex coding effort would be inevitable. “Garbage in garbage out” as the saying goes. And what about a scenario where certain information is not provided in the blockchain, i.e. an error of omission? How would code address that?

I have yet to discover a “smart” machine despite the efforts of skilled programmers and code writers. Moreover, despite being called “smart” most machines (e.g. smart TVs, smart cars, smart phones, etc…) are not really “smart” at all. You may be born with a certain level of innate measurable “intelligence”, but you get “smart” as a result of learning, making mistakes, and then adapting your experience to future behavior. Most machines or appliances labeled as “smart” are simply connected to the internet. To me that does not make them smart. Will blockchain technology breathe the ability to think into the code that will create “smart” contracts?

Despite warnings from Bill Gates, Stephen Hawking, and Elon Musk on the dangers of artificial intelligence (“summoning the demon”), we can sleep peacefully secure in the knowledge that for the time at least machines are safely dumb. Perhaps a few machines (smart bombs?) are capable of making adjustments that resemble human decisions, but we are a long way from autonomous machines or technology taking over the world.

Putting the word “contract” after the word “smart” doesn’t help. The definition of a “contract” is deceptively simple, namely: “An agreement between two or more parties creating obligations that are enforceable by law.” Black’s Law Dictionary. This small group of words is simultaneously clear yet complex; obvious but nuanced. In fact, it is simply not possible to completely define the term “contract” in a sentence or two. Any short definition requires further explanation of the underlying principles and facts under which a contract can be created, changed or ended.

So, what is really meant by the term “smart contract”? There is room for both confusion and competing definitions. It would appear that many people use the term “smart contract” to mean essentially blockchain technology that uses code to create and administer a legally enforceable agreement. By the press of a button, could we eliminate the time, treasure and headache of the hard work of negotiating contracts, not to mention putting all those boilerplate scriveners out of work? Seems unlikely. Could some savant make the “smart” contract so “flat” that controversies would never occur? Even if the code operated precisely as intended, yet a party was disappointed, could you envision a scenario whereby the disappointed party would claim not only error, but fraudulent inducement, unjust enrichment, superior undisclosed knowledge, bad faith, violation of public policy, promissory or equitable estoppel and run to the nearest friendly jurisdiction?

The law makes it easy to enter into agreements as long as the elements of offer, acceptance, consideration, indicating a meeting of the minds for some lawful purpose are met. However, there is a huge variety and different types of contracts. In addition, the importance of individual facts and circumstances pertaining to a particular transaction as well as how the parties choose to allocate risks and responsibilities cannot be overstated. That’s not to say that certain simple circumstances could not be coded to be “self-executing”. Certainly, payment could be programmed by code to occur immediately upon delivery and acceptance (after due inspection of course) of goods or services. But, rather than try to translate into code an endless variety of contractual transactions with so many permutations and combinations of outcomes, why not simply combine some simple “black and white” code-driven scenarios (like payment for conforming goods or services) with traditional legal language reflecting the rights, risks, and responsibilities according to each party’s capabilities and risk tolerance.

Moreover, a contract consists of many respective rights and responsibilities as well as the assumption of certain risks. How the parties choose to allocate those risks via the sometimes very complex contractual language used in indemnification clauses, insurance provisions, restrictions on the use of information, limitations of liability or other such language allocating risks and responsibilities between the parties varies. These and other factors may be a limitation to the application of so-called “smart contracts”.

That’s not to say that blockchain technology has no role in facilitating transactions. It can be a real game changer for many industries, including supply chain management. Tracking and recording the quantity, quality, certifications and transfer of goods as well as sharing information about products, together with the greater transparency, scalability and security are among the benefits of using blockchain technology. However, let’s avoid blockchain fever and not let the magic of blockchain trespass into fever and myth.

Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case. For any particular legal problem, seek advice directly from your lawyer or in-house counsel. All dates, contact information and website addresses were current at the time of original publication.

Paul Humbert is president of The Humbert Group, llc and provides consulting services on process improvement and transactional matters. He has co-authored several books for use in contract development and implementation, project management, and process improvement. They include: Playbook for Managing Supply Chain Transactions with Desktop Tools, References and Sample Forms; Contract and Risk Management for Supply Chain Management Professionals; and Model Contract Terms and Conditions with Annotations and Case Summaries. This article originally appeared on the European Financial Review site on December 28, 2015. It has been edited for style and is reprinted by permission of the author.

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