Over the past several years, provincial sports organizations and their member associations have been diligently updating their by-laws and completing the transition requirements required to comply with the Not-For-Profit Corporations Act ("ONCA")(an act that was first enacted way back in 2010). It is clear from recent case law, and the stated purpose of the legislation, that ONCA has provided members of not-for-profit corporations additional powers to contest the actions of organizations that do not follow their own by-laws and other governance documents. A recent case involving the Provincial Women's Softball Association provides an excellent example.
Majors v. PWSA
The recent Ontario Superior Court case between the Mississauga Majors and the Provincial Women’s Softball Association (PWSA) sheds light on governance challenges within sports organizations. The court addressed whether the Majors could challenge the PWSA under ONCA for denying membership despite meeting stated criteria outlined in its by-laws.
Key Facts
Membership Application Denied: The Majors, a baseball and softball organization governed by a board and with established by-laws, applied for PWSA membership in 2022 and 2023.
PWSA’s Grounds for Denial: The PWSA claimed the Majors failed to meet requirements, citing concerns about diluted competition and “poaching” from neighboring associations, relying on operational rules rather than by-laws.
Court Intervention: The Majors sought legal remedy under ONCA, arguing they had no other recourse to address their concerns through the courts and arguing that they had jurisdiction to do so under ONCA.
Court Analysis
Standing Under ONCA
The court deemed the Majors a “proper person” under s. 191 of the ONCA, giving them standing to challenge the PWSA's decision. This is significant as the Majors had not been accepted as a member association. This ruling shows that the courts may take a broad view of the types of individuals who can challenge decisions made by not-for-profit organizations.
Compliance with By-Laws
Evidence showed the Majors met the by-law requirements for membership, which included very basic criteria such as governance by a board, by-laws, policies and managing multiple teams.
Limits of Discretion
The court found that the PWSA lacked discretion to deny membership to associations meeting the conditions explicitly stated in its by-laws.
The court ordered the PWSA to comply with its by-laws and grant membership to the Majors. It emphasized that any changes to membership criteria must be made through a special resolution and incorporated into the by-laws.
Lessons for Sports Organizations
There are many lessons to be learned from this case.
Clarity in Governance: Membership criteria must be transparent and enshrined in by-laws to prevent arbitrary decision-making. Organizations must follow the membership criteria outlined in their by-laws.
Fair Application of Rules: Operational rules cannot override by-laws. Neither can things like past practice, conventions or informal rules. Changes must follow proper legal processes.
Preparedness for Legal Challenges: Organizations must ensure decision-making processes align with their governance framework to avoid litigation.
Court Oversight: Historically, courts have been reluctant to get involved with the affairs of not-for-profit sports organizations. Sports organizations have largely operated in a bubble and rely on various internal dispute resolution mechanisms. These mechanisms now need to align with and not contradict organizational by-laws and ONCA. I consider increased court oversight a good thing. Many others in the industry will disagree.
"Safe Sport Values": The individual handling this matter on behalf of the PWSA had suggested that members of the Major acted contrary to "safe sport values" for challenging the PWSA decisions and pushing back when proper process was not followed. This argument had no impact on the court's ruling. In my view, it is not contrary to safe sport values to require sport organizations to follow their own by-laws and threatening "safe sport" as a way to quash dissent raised by a member is entirely inappropriate. The safe sport systems exist as a mechanism to ensure sports organizations are behaving properly. Disagreeing with decisions made and raising concerns is not a safe sport violation.
In sum, sports organizations (both provincial and local) need to be far more careful to ensure that they are complying with their governance documents. It is very common for those documents to be ignored, forgotten about or contradicted by either written or ad-hoc operational policies. Previously, members had limited ability to do anything about it other than attempt to use internal independent complaint and appeal mechanisms (some are more independent than others), lobby for changes or attempt to replace board members. This new option is a powerful one as the court now has the power to make orders that bind the organization and the court typically orders that the loser of these disputes pay a portion of the legal fees incurred by the challenging party. These cases will be expensive to defend and are not typically something that would be covered by an insurance policy.
Now is the time to make sure you are aware of what is in your organizations by-laws and make sure that you are following them. If not, you may have to pay a firm like ours a lot of money one day. Prevention is far more ideal and affordable.
Our firm is available to provide advice on these issues for anyone involved in the sports system.
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