Employment & Labour Law 

In the Ontario Divisional Court decision of Simpson v Global Warranty[1], the issue was the application of a specific termination clause in an employment contract where the employer violated the contract in the course of the termination.

The employer had laid the employee off, and had only paid out his termination entitlements several months later, when the layoff became permanent.  When the employee sued for additional amounts, the employer alleged just cause.

At trial, the Ontario Superior Court of Justice had determined that the employee had been constructively dismissed when he was laid off, and that the employee had not been terminated for just cause.  On appeal, neither of these conclusions was in dispute.  The only issue on appeal was the quantum of severance, and in particular whether the employer could rely on the termination provision in light of its alleged breaches of the contract, such that the employee was entitled to a longer common law reasonable notice period.

The employee argued that a termination provision in an employment agreement should not apply where (1) the employee had been constructively dismissed; or (2) the employer had unsuccessfully alleged just cause for dismissal.  The employee argued that in both cases, the employer had breached the contract, and therefore could not claim the benefit of the termination clause.

The relevant clause of the employee’s contract stated:

[U]nless an employee is terminated for cause, an employee’s employment may be terminated at the sole discretion of the Employer and for any reason whatsoever upon providing the employee with one (1) weeks [sic] notice or pay in lieu thereof, subject to any additional notice, pay in lieu thereof or severance that may be required to meet the minimum requirements of the Employment Standards Act…

As the employer had refused to accept that the employee’s employment had been terminated when he had been laid off and consequently delayed payment, the employee was delayed in (a) receiving severance; and (b) his efforts to secure future employment (because he believed he might be recalled).

The Divisional Court found that the fact that the employer was in breach of the contract by not immediately paying the amount owed was not a breach “of an order of magnitude…as to disentitle the [employer] from the benefit of the termination provision”.[2]

The employee also argued that because the employer labelled the termination as a “lay off”, the employer could not rely on the clause, which only referenced “termination”.  This argument was rejected because the clause addressed the events that transpired:  termination without cause, which included constructive dismissal.

In dealing with the argument that the allegation of cause rendered the employer unable to rely on the termination provision, the Divisional Court distinguished the facts before it from those cases where an employer knowingly wrongfully terminates a contract for cause, which would repudiate the contract.  In Simpson the Divisional Court acknowledged that the termination was initially effected not for cause and the termination amounts were paid out; consequently there was no repudiation.  As such, the failed defence simply resulted in a finding that the employee was terminated without cause, the situation directly addressed in the termination clause.

This case identifies several potential pitfalls when it comes to the application of employment contracts, and in particular highlights the need for employers to carefully and correctly apply termination provisions at the time of termination.  While the employer here was ultimately successful, the case is a useful reminder of just how important it is to cross the “t’s” and dot the “i’s” when proceeding with a termination, to avoid disputes that could lead to costly litigation.

In a decision released January 16, 2015, the Supreme Court of Canada once again revisited how much constitutional protection is afforded to the collective bargaining process. In Mounted Police Association of Ontario v. Canada (Attorney General), 2015 SCC 1, the Court held that a special labour relations regime legislated for the RCMP infringed section 2(d) of the Charter of Rights and Freedoms (freedom of association) and could not be justified as a reasonable limit under section 1. The relevant provisions were struck down, but will remain in effect for the rest of 2015 so that the Government can enact a replacement regime.

Collective bargaining was historically denied to RCMP members on the basis that it was necessary to preserve the RCMP’s stability, reliability, and image of neutrality. Initially, the RCMP was excluded outright from any labour relations scheme. Then, beginning in the 1970s, a series of reforms gradually allowed for some degree of representation, while limiting employees’ rights to be represented in grievances or other proceedings. At the time the case was heard, this system had evolved into three entities, with the Staff Relations Representative Program, or SRRP, at its core. The SRRP involves representatives who act as a point of contact with RCMP management but work under the assumption that management has the final say. The case was brought by several associations that lobby on behalf of RCMP officers, although none has ever been recognized as a collective bargaining agent by management or the Government.

The majority of the Court decided that the SRRP was an unconstitutional deprivation of collective bargaining rights. In doing so, the majority clarified what section 2(d) protects:

(1) The right to join with others and form associations;
(2) The right to join with others in pursuit of other constitutional rights; and
(3) The right to join with others on equal terms the power and strength of other groups.

The Court held that in deciding whether section 2(d) of the Charter has been violated, the question is whether there has been substantial interference with the employee’s right to a “meaningful process” of collective bargaining. This “meaningful process” essentially boils down to employee choice and independence from management. The requirement of employee choice is satisfied by a process that allows employees to have effective input. Employees may do this through creating associations, dissolving existing ones, and choosing representatives who can be held accountable.

In the Court’s view, the SRRP failed because the system did not allow the employees to choose their own representative. In addition, the system was not designed to provide the employees with sufficient independence from management. As explained by the Court, “independence” means that employees have effective input into the proposals that are put forward, they are represented separate from management’s structure, and they control their own activities. The SRRP failed on this ground as well. The program was an internal scheme controlled by management, and its very raison d’être was to resist independent association and create an alternative to unionization.

While the decision represents a more generous interpretation of section 2(d) than previous decisions, it is equally important to recognize what the majority held the Charter does not protect. There is still no constitutional right to strike (though this could change when the Court releases its decision in Saskatchewan Federation of Labour v. Saskatchewan, which was heard last May), nor is there any requirement that the bargaining process be adversarial or that there be a particular labour relations scheme.

Elsewhere the Court has held that the Charter protects processes and activities, but does not guarantee outcomes. This principle was mentioned in the companion case Meredith v. Canada (Attorney General), 2015 SCC 2, where the Court found that a statute limiting wage increases for the RCMP was constitutionally valid. Generally speaking, as long as a labour relations scheme allows employees to bargain independently without substantial interference from management, it should be able to withstand a constitutional challenge.

On December 18^th, 2014, the Ontario government released its consultation paper on the new Ontario Retirement Pension Plan (ORPP).

What’s important to note is that the government’s “preferred approach” is to impose the ORPP on Ontario employers who have defined contribution registered pension plans, group RRSPs, PRPPs and DPSPs.  The government plans to exempt employees who participate in comparable workplace pension plans from participating in the ORPP, but proposes to only include defined benefit and target benefit multi-employer pension plans in the definition of “comparable plan”.  However, this could be changed.

Not all workers in Ontario will be affected by the ORPP.  The government has confirmed that Ontario employees who work in federally regulated sectors, such as telecommunications and banking, will not be required to participate.  In addition, employees earning less than $3,500 and the self-employed are proposed to be exempt from participating.

The government is inviting submissions on the consultation paper until February 13, 2015.

For more information on the ORPP, please see our earlier blog postings on December 9, 2014 and July 28, 2014.

On December 8, 2014, the Ontario government introduced Bill 56: An Act to require the establishment of the Ontario Retirement Pension Plan regarding the establishment of the new, mandatory Ontario Retirement Pension Plan (ORPP) effective January 1, 2017.  Bill 56 provides information about additional ORPP legislation to come.  It also provides details about the administrative entity that will need to be set up to administer the ORPP and the collection of information that’s necessary for the purpose of establishing the ORPP.

The ORPP was introduced in the 2014 Ontario budget as a new “made-in-Ontario” solution to the federal government’s decision to not expand the CPP.  It will be similar to, and build on key features of, the CPP and will be publicly administered at arm’s length from the Ontario government.  Employers and employees who are required to participate in the ORPP would be required to contribute up to 1.9% each (total of 3.8%) on the employee’s earnings, up to a maximum earnings threshold of $90,000. Additional details about proposed features of the ORPP can be found in our earlier blog posting here.

All Ontario employers should be aware of the ORPP and how it might impact their business.

The main concern for most Ontario employers is whether they will be exempt from mandatory participation in the ORPP.  The only information released by the Ontario government so far is that employees who participate in a “comparable workplace pension plan” will be exempt.  It’s unclear what “comparable” means.  The legislation doesn’t tell us exactly what types of retirement savings plans will exempt employers from the ORPP.

We will continue to provide updates on the ORPP as information becomes available.

If you have questions about the ORPP or would like more information, please do not hesitate to contact one of the pensions and benefits experts at Dentons.

For more information from the Ontario government on the ORPP and Bill 56, click here.

An employer is paying the price for dismissing an employee who was recruited with an attractive job offer.

Bruce Rodgers had been the president of a transportation company for 11 years when CEVA Freight Canada Corporation approached him with a job opportunity. After being flown twice to Houston, attending 7 interviews, and meeting the CEO of the global parent company, Rodgers was offered a position as CEVA’s Country Manager. He turned it down, and was given a second offer with a higher salary and a signing bonus, which he accepted. Rodgers was also told that he was required to invest in the company to demonstrate his commitment, so he borrowed $102,000 to purchase CEVA’s shares.

A little less than 3 years later, Rodgers was dismissed by CEVA without cause. He was paid 2 weeks’ salary, along with severance of just under one additional week and outstanding vacation pay. His employment agreement had a termination provision that stated: “[y]our employment may also be terminated by our providing you notice, pay in lieu of notice, or a combination of both, at our option, based on your length of service and applicable legal requirements.” CEVA argued that while Rodgers was entitled to some damages, they should be limited by the fact that this provision highlighted length of service and Rodgers was there for less than 3 years.

The Court disagreed, finding that a reasonable notice period for Rodgers would have been 14 months. In the end, CEVA was ordered to pay Rodgers $345,985.

While the Court acknowledged that Rodgers’ short length of service was a relevant factor, it found that it did not deserve any particular weight because the employment agreement was not clear that his length of service would outweigh all other considerations. Instead, the Court turned its focus to the way Rodgers was recruited to the position.

The case serves as an important reminder that even where job security is not explicitly promised, or even discussed, the method of recruitment can be viewed by the Court as an implicit promise of job security. Here, the Court noted the “attractive” financial package Rodgers was offered, and that this was an improvement over the original offer that he declined. The Court was also persuaded by the fact that Rodgers was forced to make an investment in the company, giving him the impression that he could expect above average job security. As such, Rodgers was “induced” to join CEVA, and deserved a longer notice period.

Since inducement tends to be considered alongside other factors, it is difficult to gauge how it will affect the Court’s assessment of the notice period. In this case, there were other issues at play, including the employee’s age, his high level of responsibility, and the difficulty in finding a replacement position. However, the Court was clear that CEVA’s recruitment of Rodgers from a secure position of employment contributed to the long notice period awarded.

Employers should be aware of the unspoken commitments they make when recruiting employees who are already employed in secure positions. An employer’s efforts to convince someone to leave employment to join its organization may commit that employer to more than it had ever intended on termination. In these cases, it is particularly important to consider termination at the point of hiring, and to give serious thought to whether an appropriately drafted termination provision should be included as part of the employment contract, to avoid disputes as to entitlements on termination of employment.

Rodgers v. CEVA, 2014 ONSC 6583 (CanLII)

Ontario’s Human Rights Commission issued a statement on November 25, 2014 in relation to sexual harassment and the Ontario Human Rights Code. The statement reminds employers as to what constitutes sexual harassment as well as how to prevent it or deal with it in the workplace. The statement also links the Commission’s Policy on Preventing Sexual and Gender-Based Harassment.

The primary recommendations of the Commission are as follows: (i) employers should have a clear and comprehensive policy in place; (ii) employers should ensure that all employees have access to the policy and are aware of their rights and responsibilities; and (iii) employers should ensure that all employees in positions of responsibility have been trained in relation to the policy.

While the statements and policies of the Commission do not have the force of law and instead simply set out the Commission’s interpretation of the law as of the date of posting, they are a good reminder of what the Ontario Human Rights Tribunal looks to when determining a sexual harassment complaint.

For more information, the Commission’s recent statement can be reviewed at the following link: http://www.ohrc.on.ca/en/news_centre/sexual-harassment-and-ontario-human-rights-code.

Unpaid internships were discussed in an April 8th posting in this blog and it is clear that most Ontario interns have to be paid.  But what about employees in start-up companies?  Can employers provide them with stock options, shareholdings or the promise of future payment in lieu of current payment of wages?  The short answer is that except in certain defined circumstances, employees must be paid wages, and they must be paid on a regular basis from the time that they begin working for a company.

The Employment Standards Act, 2000 (Ontario) (the “ESA”) defines an employee as “someone who performs work for an employer for wages”.  In turn,  the term “wages” is defined as “monetary remuneration”.  Section IX of the ESA requires employees to be provided with “at least the prescribed minimum wage”.

The Regulations under the ESA have some exemptions in relation to Section IX, but they are limited and generally only apply to certain defined professionals (eg. doctors, lawyers, engineers, architects, teachers), commissioned salespeople, and other specified groups of employees (certain student employees such as camp counselors, and janitors/superintendents who reside in the building that they are responsible for).  It is particularly important for start-up companies to note that there is no wages exemption under Section IX of the ESA for information technology professionals, managers, supervisors or executives.

In addition, because the ESA expressly prohibits employers and employees from entering into an agreement to circumvent the provisions of the ESA, it is not possible for a company founder or similarly-placed employee to agree to forego wages during the start-up period.  The potential risk to a company which permits employees to work without receiving at least minimum wage, is that the employee can make an unpaid wages claim, which in turn can also be a liability to the directors and officers of the company.  In addition, a failure to pay wages as earned can lead Canada Revenue Agency to have a claim for unpaid tax and other withholdings which should have been made.

While there are risks with entering into independent contractor agreements, particularly if the contractors are actually employees under various legal tests, sometimes the safest path for a financially strapped start-up is to consider short-term contractor arrangements until the company is on its feet and generating revenue which can be used to cover payroll for employees.  This can be a tricky area to navigate and should never be done without legal advice, but done properly, it is a better and safer option than failing to pay employees during the initial start-up period.

Ms. Fair was employed by the Hamilton-Wentworth District School Board (the “Board”) from 1988 to 2004, when her employment was terminated.  During her employment, Ms. Fair had developed a psychiatric disorder, namely, generalized anxiety disorder.  She took a disability leave on October 2, 2001, as a result of depression and post-traumatic stress disorder related to the stress of her job.  When the Board determined it could not accommodate her, the Board terminated her employment in July 2004.  At that point, she filed a human rights complaint, alleging discrimination based on disability.

Due to amendments to the Human Rights Code in July 2008, Ms. Fair was given the opportunity to, and did, refile her complaint as a “transitional application” under the transitional rules that were put in place at that time.  The result of this refiling was that for the first time, Ms. Fair formally identified the remedies she was seeking, including the remedy of reinstatement.  The result:  years after dismissing her, the Board learned that she was seeking reinstatement as a remedy.

In February 2012 the Tribunal finally issued its decision on liability, and concluded that there were in fact positions into which Ms. Fair could have been placed without causing undue hardship, but the Board had failed to make the attempts to do so.  As such, the Board had failed in its duty to accommodate.

In 2013, the Tribunal issued its decision in respect of remedies.  The Tribunal rejected the Board’s argument that the length of time between the termination and the decision made it unfair to order reinstatement.  The Tribunal ordered the Board to reinstate Ms. Fair to a suitable position, being a position at or equivalent to the position she was in before the termination of her employment in 2004.  The Tribunal also ordered the Board to compensate Ms. Fair for her loss of earnings for the entire period between her dismissal and the reinstatement, less any mitigation earnings, as well as $30,000 for compensation for the injury to her dignity, feelings and self-respect.  Since Ms. Fair had earned minimal amounts since her dismissal, the amount owing was in excess of $400,000, plus pension and CPP adjustments and compensation for lost medical benefits, and a gross-up for tax (given the lump sum payment).

Not surprisingly, the Board filed for review of the decision with the Divisional Court.  The Board made a number of what might be called “technical” arguments about the decision, including that the Tribunal breached its duty of fairness in the way the hearing was conducted, that there was a “reasonable apprehension of bias” because of certain comments made by the Vice-Chair during the hearing, that the Tribunal failed to properly follow its own Rules, and that it had not provided sufficiently detailed reasons for its decision.  The Divisional Court rejected all of these arguments, holding that there was no reasonable apprehension of bias on the part of the Tribunal, and that there were no procedural defects in the conduct of the hearing or in the decisions that had been issued.

The Board also argued that the Tribunal’s decision was unreasonable.  The Board tried to attack the portion of the decision in which the Tribunal found that there was no appropriate accommodation made by the Board.  The Board argued that it had made a number of accommodations for Ms. Fair, and that the Tribunal’s conclusion that the Board had not met the standard of undue hardship was unreasonable based on the evidence.

The Divisional Court rejected the Board’s arguments, and found that the Tribunal’s conclusion was supported by the evidence.  The Court held that the Tribunal’s decision was reasonable, considering that the Board had taken a number of steps to avoid finding alternate employment for Ms. Fair, including a refusal to consider alternate roles and failing to seek out further medical evidence it needed to accommodate her.

In terms of the remedy, although the Court agreed with the Board that reinstatement was an “uncommon” remedy before the Tribunal, the Court held there was nothing unreasonable about such a remedy.  The Court justified its conclusion by referring to the broad remedial authority of the Tribunal, and as well the Court referenced the unionized workplace setting, where reinstatement is not unusual where there has been a breach of a collective agreement.

With respect to the fact that so much time had passed between the dismissal and the order of reinstatement, the Court held that the goal of the remedial provisions of the Code ought not to be “thwarted” because of the passage of time, particularly since the delay was largely beyond the control of Ms. Fair.

There is a significant body of case law on the duty to accommodate disabilities in the workplace, and the high threshold needed to meet “undue hardship”.  Were it not for the remedy (reinstatement with 10 years of back pay), this decision would not likely have raised eyebrows.  There are relatively few cases in which the Tribunal has awarded reinstatement as a remedy, but certainly the award of reinstatement in this case, and the significant monetary damage award that followed, serves as a warning to employers about the risks inherent in the human rights process.

Ultimately, this decision underscores the importance of lining up any defence – and assessing the relative strengths and weaknesses – early on.  It also demonstrates that the Courts will in general defer to specialized tribunals when it comes to fact-finding and remedial issues, so employers should not expect that Courts will readily relieve them from onerous decisions at the Tribunal.  One thing is clear:  if reinstatement is sought as a remedy, care should be taken on the employer side to ensure that the case is strong, and that it proceeds expeditiously through the system.  In that sense, delay can certainly work against the employer where reinstatement is on the table, so employers should make every effort to ensure the case moves forward as quickly as possible.  In that sense, if there is a real risk of reinstatement, delay could be said to work against the employer.

Of course, given the nature of the decision and the “costs” of the remedies (both financial and logistical), it can be expected that the Board will carefully consider seeking further review from a higher level Court.  We will continue to watch the evolution of this case if/when it works its way to a higher level of authority.

Recently, the Ontario Ministry of Labour released the results of its recent internship inspection blitz, revealing that many internship programs violated the Employment Standards Act, 2000 (the “ESA”).  In this blitz, the Ministry targeted the advertising, public relations, computer systems design, consulting services and information services industries, among others. The Ministry found 31 employers with internship programs, of which 13 were violating the ESA.

The most common violations included:

•   failure to pay employees the minimum wage

•   failure to pay vacation pay

•   failure to pay public holiday pay

Altogether, the Ministry issued 37 orders, including a total of $48,543 in back pay for those interns who the Ministry deemed were “employees” under the ESA.

These results point to the need for employers to carefully consider whether their “interns” will actually be viewed as “employees” under the ESA.  As the Ministry warned in a 2011 publication, just because someone is labeled an “intern” does not mean that an employer can hire that person without compensating him/her like any other employee. Last April, Jeff Mitchell and Virginie Dandurand wrote a post explaining the limited scenarios in which an employer can hire someone to perform work without providing the minimum standards of compensation required by the (Ontario) ESA and the Québec Act respecting Labour Standards.

Employment standards are not the only area where unpaid interns are receiving attention in Ontario. Bill 18 (a.k.a. the Stronger Workplaces for a Stronger Economy Act), which would give interns in Ontario protection under the Occupational Health and Safety Act, is already in the process of being passed by the Ontario government. As well, one private member’s bill has proposed requiring that employers post their interns’ rights as employees and creating a new complaints system. So far, there is no legislation being tabled in Ontario to modify or repeal the existing statutory exception that legalizes certain unpaid internships. Nevertheless, the results of this blitz demonstrate that employers offering unpaid internships would be well advised to ensure that they meet the narrow criteria established by the province.

Employers should be aware that effective as of October 29, 2014, statutory leaves of absence in Ontario under the Employment Standards Act, 2000 (the “ESA”) will be expanded to include the new “family caregiver leave”, “critically ill child care leave” and “crime-related death and child disappearance leave”.  These leaves of absence are in addition to the current Ontario “organ donor leave”, “family medical leave”, “personal emergency leave”, “pregnancy leave”, “parental leave”, “reservist leave” and “emergency leave – declared emergencies”.  Details of the new leaves of absence are as follows:

1.  Family caregiver leave – Up to 8 weeks per year can be taken in order to take care of a family member with a serious medical condition.

2.  Critically ill child care leave - Up to 37 weeks per year can be taken in order to care for a critically ill child under the age of 18.

3.  Crime-related child death and disappearance leave - Up to 52 weeks can be taken if an employee’s child disappears and it is probable that the child disappeared as the result of a crime.  If a child dies as a result of the crime, the leave period is increased to up to 104 weeks.

Each of these leaves of absence are unpaid, and under each leave time off can be taken by the employee in bits and pieces rather than altogether.  Employees using the critically ill child care leave may be eligible for Employment Insurance benefits for a portion of the leave; however guidance should be sought from Service Canada, as the leave provisions do not match up precisely with EI benefit eligibility.

As a reminder, the current statutory personal leaves of absence which are already in place in Ontario are the following:

(i)  Personal emergency leave – Up to 10 days of leave per year to deal with a personal emergency, illness, injury or urgent matter for oneself or a specified family member.  Personal emergency leave is only required in workplaces with 50 or more employees in Ontario.

(ii)  Family Medical Leave – Up to 8 weeks of leave per year to provide care or support to certain family members for whom a qualified health practitioner has issued a certificate stating that the family member has a serious illness with a significant risk of death occurring within a period of 26 weeks.

(iii)  Organ Donor Leave – Up to 13 weeks of leave per year for those employees who have undergone surgery for the purpose of organ donation.

(iv)  Reservist Leave – Time off for reservists to assist with international and domestic emergencies, for the period of time required to assist with the operation.

In addition to the above leaves, all employers should be aware of their obligations to provide pregnancy and parental leave under the ESA.

Employers should review their employee handbooks prior to October 29th in order to determine how the new leaves fit with existing statutory and non-statutory leave entitlements.