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The primary purpose test – deciphering CASL’s charities exemption

Image: ddpavumba |

Image: ddpavumba |

Canada’s Anti-Spam Legislation (“CASL”) has been in force for almost one month and, according to the media, there have already been thousands of complaints filed with the CRTC over alleged violations of CASL.

What about registered charities? Are they required to comply with CASL’s requirements or are they exempt from compliance? The answer to that question was made somewhat clearer on July 4, 2014.

Does CASL apply to Charities?

As some of you may already know, CASL does not regulate “spam”. Rather, it regulates the sending of “commercial electronic messages” (“CEM”). CEMs are broadly defined in CASL as messages sent by electronic means (e.g., emails, texts, instant messages etc.) that have, as one of their purposes, to encourage participation in “commercial activity”. “Commercial activity” is defined as any transaction, act or conduct that has a “commercial character”, whether or not there is an expectation of profit.

Given this definition, there is no doubt that CASL applies to charities and that charities send out CEMs. Examples of CEMs sent by charities include: email requests for donations; emails promoting charitable events; and emails promoting the charity’s activities (if those activities have a commercial character”).

The charities exemption

In general terms, CASL prohibits the sending of a CEM, unless the recipient has given his / her consent to receiving that CEM and certain prescribed information is included in the CEM, or unless certain exemptions are met.

One of the CEM exemptions is commonly known as the Registered Charities Exemption. This exemption states that registered charities are exempt from the CEM requirements, only if the “primary purpose” of the CEM is to “raise funds for the charity”.

The wording of this exemption raised many questions for charities, such as: what types of activities would be considered “raising funds” for the charity?; would “raising funds” be interpreted by the CRTC in the same manner as the word “fundraising” (as per the Income Tax Act) is interpreted by the Canada Revenue Agency?

On June 5, 2014, by Imagine Canada (an umbrella organization for charities) attempted to provide charities with answers to these questions. According to Imagine Canada :

“Industry Canada has advised us that they interpret [the words “raising funds”] to mean:

  • all activities that fall under the Canada Revenue Agency definition of fundraising, and which registered charities use to calculate their fundraising ratio, are exempt from the regulations;
  • a number of other activities, that lie beyond the CRA fundraising definition, and which charities do not have to report when calculating their fundraising ratio, will also be exempt.”

Thus, it appears from this publication that Industry Canada (the Government body that drafted the registered charities exemption) considers the exemption to apply to a broad range of fundraising activities, as long as the funds flow to the charity.

The “primary purpose test”

That being said, it is clear that the charities exemption does not fully exempt registered charities from complying with CASL – only CEMs sent for the “primary purpose” of raising funds for the charity will be exempt from complying with CASL’s CEM requirements. Indeed, in FAQs published on July 4, 2014, the CRTC (the Government body tasked with regulating this part of CASL) confirmed that it will be applying the “primary purpose” test to determine if a particular CEM is exempt.

When is a CEM sent for the “primary purpose” of raising funds for the charity? According to the CRTC, the “primary purpose” means “the main reason or main purpose of the CEM. There could be a secondary or additional purpose to the message, but the principal purpose of the CEM must be to raise funds for the charity.”

The CRTC has stated that it, if faced with a complaint against a charity, it “will focus on messages sent by those attempting to circumvent the rules under the guise of a registered charity.” Hopefully, this means that the CRTC will not strictly apply the wording of the exemption but, rather, would apply a common sense and contextual approach to enforcing CASL against charities.

What about E-Newsletters sent by charities?

In its FAQs, the CRTC has confirmed that e-newsletters sent by charities are CEMs if they contain wording that encourages participation in a commercial activity (such as a request for donations). The CRTC has also provided some examples of the application of the charities exemption to e-newsletters. According to the CRTC staff:

  • “A registered charity sends, by e-mail, a newsletter which provides information about the charity’s activities or an upcoming campaign, but which also contains a section which solicits donations and may also mention corporate sponsors who supported the charity (but does not encourage the recipient to participate in a commercial activity with that sponsor). While this message may be considered a CEM under CASL, the primary purpose of the message may be viewed as raising funds” and therefore may be subject to the exemption.
  • “A registered charity sends, by e-mail, a newsletter which provides information about the charity’s activities or about a particular social issue. If this e-mail also advertizes the corporate sponsors of a charity’s event and encourages the recipient to participate in a commercial activity with that sponsor, then section 6 of the CASL may apply without any exemption. The primary purpose of the message may not be to raise funds for the charity.”

These examples confirm that not all e-newsletters sent by charities will be exempt from complying with CASM.

What should charities do to comply with CASL?

Given that not all CEMs sent by charities are exempt from compliance, registered charities should not ignore CASL. Rather, registered charities should familiar themselves with CASL’s requirements and develop and implement CASL compliance policies that are tailored to their particular circumstances and needs.

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Maanit Zemel

Internet and Social Media lawyer, commercial litigator at MTZ Law
Maanit Zemel is a commercial litigator admitted to practice in Ontario and New York, with substantial experience and expertise in Internet and social media law, including Canada’s Anti-Spam Legislation (CASL), privacy, online defamation, cyberbullying and cyber-security. Read more.
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