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“Oh, what a tangled web we weave when first we practice to deceive.”

Employer avoids liability for harassing texts sent by rogue employee

In an interesting decision, the Human Rights Tribunal of Ontario has ruled that an employer is not liable for discriminatory and harassing texts sent by a rogue employee to another of its workers.

In Baker v. Twiggs Coffee Roaster, Tamra Baker commenced a human rights application against her former employer, Twiggs Coffee Roaster, alleging that her pregnancy was a factor in the decision to terminate her employment. In support of her application, Baker relied on a series of text messages that she received from her friend and coworker, Cara VanDerMark in which VanDerMark advised Baker that the owner of the coffee shop had found out that Baker was pregnant and didn’t believe that she could do her job as she became “bigger”. Of course, this was all news to the coffee shop’s owner, who had instructed VanDerMark to call Baker and let her know that she was not needed for her scheduled shift; the owner intended to terminate Baker’s employment later that day for performance reasons.

Following a two-day hearing, the Tribunal ruled that there was no evidence to suggest that the employer knew that Baker was pregnant at the time that her employment was terminated. As a result, there was no breach of the Human Rights Code. Based on the evidence, the Tribunal concluded that VanDerMark had mistakenly thought that it would be less upsetting to her friend to think that her employment was terminated because of her pregnancy instead of her job performance, so she lied.

However, because VanDerMark’s text message could arguably constitute sexual harassment, the Tribunal considered whether the employer should be held vicariously liable for her behaviour. Ultimately the Tribunal recognized that under the Human Rights Code, a corporation cannot be held vicariously liable for the acts of its employees, agents or officers when it comes to sexual harassment unless the employer was aware of the behaviour and failed to take reasonable steps to correct it. Given that the employer was unaware of the co-worker’s texts, it could not be vicariously liable for these actions.

This case is a good reminder for everyone – employers and employees – to think before they click send on any text or e-mail message. As this case demonstrates, trouble may be only one click away!

Baker v. Twiggs Coffee Roaster, 2014 HRTO 460 (http://www.canlii.org/en/on/onhrt/doc/2014/2014hrto460/2014hrto460.pdf).

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“Oh, what a tangled web we weave when first we practice to deceive.”

Upcoming Ontario Ministry of Labour blitzes

Ontario’s Ministry of Labour has announced several upcoming blitzes during which it will ensure that employers in specified industries are compliant with particular areas of concern under the Employment Standards Act, 2000 (“ESA”).  Both provincial and regional blitzes have been announced.

A recent posting on this blog dealt with the issue of unpaid internships, in follow-up to the announcement by Toronto Life magazine and The Walrus magazine that they were ending their unpaid internships following recent government inspections.  Those inspections were part of the announced blitz with a focus on interns, which began in April and will continue until June in the areas of marketing/public relations, software development, retail, media, film and entertainment industries.

Also on the horizon is a provincial blitz to focus on vulnerable and temporary foreign workers which has been announced for the period from September to November 2014 in the following industries: restaurants, building services, personal care services, business support services and agriculture. 

Finally, that will be followed in early 2015 with a provinncial blitz on temporary help agencies, in order to ensure that they are compliant with the laws relating to temporary help workers.

On a regional level, Simcoe, Peel, Dufferin & York veterinary clinics and security service firms will undergo a general ESA blitz in June and July of 2014.  At the same time, Toronto and Durham region car dealerships and supermarkets will also undergo a general ESA blitz.  Ottawa, Kingston, Peterborough, Hamilton, Kitchener/Waterloo, London and Windsor seasonal businesses and tourism-related businesses will see their own general ESA blitz from June through August and finally, professional offices in Northern Ontario will see a similar blitz in June and July.

It is always good to have your house in order; however, for companies which may be targeted by one of the blitzes noted above, it is of particular importance that your business be compliant with the ESA.

For more information, the Ministry’s announcement can be found at the following link:  https://www.labour.gov.on.ca/english/resources/blitzschedule.php.

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Upcoming Ontario Ministry of Labour blitzes

Contract Requiring Ex-Employee to Compensate Former Employer for Competing Ruled Enforceable in British Columbia

A recent decision of the B.C. Court of Appeal has endorsed a novel approach to post-employment competition by upholding an employment contract whereby the employee was required to compensate the employer if she competed soon after her employment ended. In Rhebergen v. Creston Veterinary Clinic Ltd., 2014 BCCA 97, a newly licensed veterinarian signed a three-year employment contract with an established veterinarian clinic in a rural community. Under the contract, the veterinarian was required to pay her employer a set amount if she set up a practice in the same area within three years of the employment contract being terminated. The veterinarian left the clinic after fourteen months and soon established a mobile veterinary practice in the area. The veterinarian went to court to have the payment clause declared unenforceable.

The Court recognized that there were two approaches in establishing whether such a clause was a restraint of trade, either a “functional” approach, which asks whether the clause attempts to, or effectively does, restrain trade, or a “formalist” approach, in which the clause must be structured as a prohibition against competition, which does not include “mere disincentives”. The formalist approach is more commonly used in Ontario, but the B.C. Court of Appeal adopted the functional approach in its analysis, and concluded that the clause was, in fact, a restraint of trade.

Notwithstanding that the clause was found to be a restraint of trade, the Court held that the clause was not a penalty because it reasonably compensated the employer for the costs incurred in training the new veterinarian. The Court split on whether the clause was ambiguous and therefore unenforceable. A non-competition clause is ambiguous if it is not clear as to activity, time or geography. The majority of the Court concluded that there was only one reasonable interpretation to the clause and it was not ambiguous. The clause was therefore enforceable by the employer, and the veterinarian was required to pay the amounts under the contract to her former employer as a result of her competition.

This case demonstrates the continually evolving nature of post-employment covenants, and the fact that courts will give employers some latitude to develop contractual “tools” to provide protection (or at least give financial compensation) in the event a former employee engages in competition soon after employment. The fact that the Court of Appeal was not unanimous demonstrates, however, that this is a complex area requiring careful drafting of contractual terms.

A copy of the B.C. Court of Appeal decision can be found here: http://www.courts.gov.bc.ca/jdb-txt/CA/14/00/2014BCCA0097.htm

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Contract Requiring Ex-Employee to Compensate Former Employer for Competing Ruled Enforceable in British Columbia

Beware the Unpaid Intern – He/She May be Eligible for Pay

The issue of unpaid internships is becoming a growing concern for both employers and Ministry of Labour Inspectors. Recently, the publisher of magazines Toronto Life and The Walrus announced that they were pulling the plug on their unpaid internships following a Ministry of Labour inspection (http://www.cbc.ca/news/business/unpaid-internships-at-toronto-life-the-walrus-shut-down-by-ontario-1.2589115). Rogers has subsequently followed suit, with a company spokesperson announcing that the company wants all internships to be associated with an educational institution or to be paid (http://www.thestar.com/news/gta/2014/04/03/unpaid_interns_dropped_from_rogersowned_magazines.html).

Provincial employment standards legislation in Canada generally requires that all “employees” receive minimum wage and that the employer meets other minimum standards. The legislation does, however, recognize that there is a benefit to allowing unpaid internships, while at the same time ensuring that certain requirements are met in order to prevent an employer from characterizing vulnerable workers as “interns” to avoid the obligation to provide the minimum standards.

The employment standards requirements for retaining unpaid interns vary significantly across Canada. This blog will examine the requirements in Ontario and Québec.

Ontario Requirements

Internships in the School Context

An individual can work and not be subject to the Employment Standards Act, 2000 (the “ESA”) in either of the following circumstances:

  • he/she is a secondary school student who performs work under a work experience program authorized by the school board that operates the school in which the student is enrolled; or
  • he/she performs work pursuant to a program approved by a college of applied arts and technology or a university.

If either of these exemptions applies, the individual can be retained without the organization meeting the requirements of the ESA.

Internships Outside of the School Context

If the internship program is not affiliated with a college of applied arts and technology or a university, an individual receiving training in skills similar to those used by the organization’s employees is an “employee” and is entitled to the minimum requirements of the ESA (including minimum wage), unless all of the following conditions are met:

  • The training is similar to that which is given in a vocational school;
  • The training is for the benefit of the individual;
  • The organization providing the training derives little, if any, benefit from the activity of the individual while he or she is being trained;
  • The individual does not displace employees of the organization providing the training;
  • The individual is not accorded a right to become an employee of the organization providing the training; and
  • The individual is advised that he or she will receive no remuneration for the time that he or she spends in training.

Only if all of these requirements are met is the person exempt from the ESA. If even one of these conditions is not satisfied, the individual would be entitled to the minimum standards of the ESA.

Québec Requirements

Internships in the School Context

Section 3(5) of Québec’s Act respecting Labour Standards (the “ALS”) provides that the ALS does not apply to a student who works during the school year in an establishment selected by an educational institution pursuant to a job induction program approved by the Ministère de l’Éducation, du Loisir et du Sport (the Ministry of Education). The fact that the ALS does not apply to such students implies that an employer may not be required to pay them.

However, each of the conditions mentioned in this provision must be present in order for the exception to apply. To be excluded from the application of the ALS, the individual must meet all of the following four conditions, namely:

  • be a student;
  • who works during the school year;
  • in an establishment chosen by an educational institution;
  • pursuant to a job induction program approved by the Ministère de l’Éducation, du Loisir et du Sport.

Internships Outside of the School Context

In Québec, whenever an “internship” takes place outside of the school/student context such that the above exception is not applicable, the Regulation adopted under the Act respecting Labour Standards (“RLS”) provides that the minimum wage requirement does not exist for “trainees” or “students” such as:

  • a student employed in a non-profit organization having social or community purposes, such as a vacation camp or a recreational organization;
  • a trainee under a program of vocational training recognized by law (this law must provide for the nature and duration of the vocational training, i.e. internship in a law firm after Bar school); or
  • a trainee under a program of vocational integration under section 61 of the Act to secure the handicapped in the exercise of their rights.

The mere fact that trainees fall within any of the three above exceptions does not mean that they should not be paid at all during the internship, but rather means that the employer is not bound by the minimum wage rate requirement. However, where an employer chooses not to pay such trainees at all, the trainees do not have recourse pursuant to the ALS.

Whether in Ontario, Québec or elsewhere in Canada, we recommend that if an employer is contemplating retaining unpaid interns, legal advice be sought to ensure that the program meets the applicable provincial criteria. In addition, there should always be written documentation (such as an offer letter) making clear that the position is unpaid because the person is a student, trainee or an intern, to avoid later disputes that the individual did not understand the nature of the opportunity or the fact that he/she would not be paid.

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Beware the Unpaid Intern – He/She May be Eligible for Pay

(Not) April Fools Day – Changes to the Canada Labour Federal Code effective April 1, 2014

For those federally regulated employers that are governed by the Canada Labour Federal Code (the “Federal Code”), there are some substantive changes coming of which you should take note.

The Jobs and Growth Act, 2012 made certain amendments to the Federal Code. The amendments stem primarily from the public consultations that followed the Report of the Federal Labour Standards Review Commission that was released in 2006. The Government has indicated that the amendments are designed generally to make compliance with the Federal Code easier for employers and employees, and to reduce the employers’ costs of administering the legislation.

It has now been announced that the changes will come into force on April 1, 2014.

Limitation Period for Recovery of Wages

Currently there is no established time limit beyond which wages under Part III (labour standards) cannot be recovered. As a result, inspectors can issue written payment orders to employers or directors, ordering them to pay to the employee any wages or other amounts owing to which an employee is entitled going back as far as the evidence establishes that an amount is owing, potentially years prior.

The amendment will set a six-month time limit for the filing of a complaint alleging unpaid wages. As such, if an inspector concludes that an employer has paid to an employee all wages and other amounts under Part III for the six-month period preceding the complaint, the inspector will issue a notice of unfounded complaint. If an amount is found to be owing within this period, the inspector may make an order for wages and other amounts owing for a period starting 12 months (or 24 months for vacation pay) before the date on which the complaint is made, the date on which employment was terminated, or the date on which the inspection started (where a payment order results from a proactive inspection).

For employers, this means that an inspector will not be able to reach back indefinitely in reviewing an employee’s complaint for wages, and brings the Federal Code in line with most provincial statutes in setting a reasonable limit on the inspector’s power to issue orders.

Establishment of a 30-Day Time Period to Pay Vacation Pay on Termination of Employment

The Federal Code currently requires employers to pay outstanding vacation pay “forthwith” to employees when they cease to be employed. As vacation pay is considered wages under the Federal Code, this creates an anomaly, because the Federal Code generally requires employers to pay any wages “within 30 days” from the time when the entitlement to the wages arose. The amendment will ensure that employers pay employees any vacation pay owed within 30 days (rather than “forthwith”) after the day on which the employment ends.

Administrative Review Mechanism for Payment Orders and Notices of Unfounded Complaint

The amendments provide for an administrative review mechanism. Within 15 days of a payment order, the rejection of an unjust dismissal complaint or a notice of unfounded complaint, a person affected by an inspector’s decision can request a review of the decision, with written reasons. An employer or corporate director requesting a review would have to pay the Minister the amount indicated in the payment order as a condition of the review. A payment order or a notice of unfounded complaint could be confirmed, amended or rescinded on review. The decision on review could be further appealed to a referee, but only on a question of law or jurisdiction. The Minister could also refer a complex case directly to a referee, rather than going through the new review mechanism.

While these changes do not represent a major overhaul of the Federal Code, they do move in the right direction, in providing additional clarity and efficiency for employers subject to the Federal Code. The most significant change, the introduction of a limitation period for orders to pay wages, is an important and long overdue addition to the Federal Code, and is a welcome change for employers.

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(Not) April Fools Day – Changes to the Canada Labour Federal Code effective April 1, 2014

Criminal Sentence for Unauthorized Access of Former Co-Worker’s E-mail Reduced on Appeal

A terminated employee was convicted of “Mischief to Data” and “Unauthorized use of a Computer” contrary to the Criminal Code after he remotely accessed a former co-worker’s e-mail without her authorization and forwarded several e-mails to his personal account. In this recent appeal decision, the Summary Conviction Appeal Court reduced the terminated employee’s sentence to a conditional discharge after taking into consideration, among other things, the potential impact of a criminal conviction on his current and potential employment opportunities.

In R. v. Charania, the appellant was terminated from his employment as the Director of Care at a nursing home. Later that same evening, the appellant used the username and password of Ms. Caven, the Human Resources Coordinator at the nursing home, to remotely access her e-mail. Once in her e-mail, the appellant forwarded several e-mails relating to their meeting and his employment to his personal e-mail account. At the same time, Ms. Caven was also attempting to remotely access her e-mail using her username and password. She was repeatedly denied access and eventually locked out of the system, which led to a complaint to IT, and subsequently, to an investigation by the nursing home and the police.

Contrary to the appellant’s claim, Ms. Caven denied providing the appellant with her username and password. Based on the totality of the evidence, the trial judge found the appellant guilty of the offences charged. She conditionally stayed one count and on the other count sentenced the employee to a fine of $1,300.00 and placed him on probation for 18 months with terms including restitution. The appellant appealed his sentence.

The Summary Conviction Appeal Court found that the trial judge committed an error by considering the appellant’s defence as an aggravating factor and again when considering the viability of a conditional discharge. In considering whether to vary the sentence imposed by the trial judge, the court stated that the potential impact of a criminal conviction on the offender’s current and potential employment opportunities is a relevant consideration in deciding between a criminal conviction and a conditional discharge. The court went on to consider that the appellant was a first time offender with no prior criminal record. He had a Bachelor of Science in Nursing, with a minor in healthcare administration and was studying for his Master’s degree. Prior to these offences he had a solid employment history and had contributed to the community through volunteer work. Further, as a registered nurse the appellant was facing additional consequences for his conduct as a result of disciplinary proceedings by the College of Nurses of Ontario.

Ultimately, the Summary Conviction Appeal Court held that, in these particular circumstances, a conditional discharge would neither be contrary to the public interest nor would be inconsistent with the fundamental purpose and principles of sentencing in the Criminal Code.

R. v. Charania, 2014 ONSC 1695

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Criminal Sentence for Unauthorized Access of Former Co-Worker’s E-mail Reduced on Appeal

Direct Evidence of Discrimination not Required: Ontario Human Rights Tribunal

Direct evidence of discrimination is not required for an employee to succeed before the Human Rights Tribunal of Ontario, the Tribunal has decided.  The decision provides guidance as to what evidence is required to prove discrimination.

In Islam v. Big Inc., 2013 HRTO 2009, the Human Rights Tribunal of Ontario ordered a Toronto restaurant to pay nearly $100,000 in damages to three former kitchen employees.

The former employees alleged discrimination in employment contrary to the Ontario Human Rights Code after their employment ended (two of the employees were dismissed while the third quit). The applicants were immigrants from Bangladesh who spoke Bengali and were practising Muslims. They alleged discrimination by their employer on the grounds of race, colour, ancestry, place of origin, ethnic origin and creed. Their complaints included allegations that the owners mocked them when they spoke Bengali, implemented an “English in the kitchen” rule, insisted that two of the employees taste pork even though it was against their religious beliefs, and forced one worker to taste the food he was preparing while he was fasting during Ramadan.

In its decision, the Tribunal discusses what evidence is required to prove discrimination:

Direct evidence of discrimination, such as testimony from a witness to discriminatory conduct, is not necessary to establish a breach of the Code. The applicant may rely on circumstantial evidence, which may include evidence of actions or omissions on the part of the respondent that raise inferences that a Code provision has been breached. The inference drawn need not be inconsistent with any other rational explanation to provide evidence of discrimination. Rather, it must be reasonable and more probable than not, based on all the evidence, and more probable than the explanation offered by the respondent. Evidence must always be sufficiently clear, convincing and cogent to satisfy the “balance of probabilities” test stated by the Supreme Court of Canada in F.H. v. McDougall, 2008 SCC 53 (CanLII).

In this case, the parties disagreed as to whether many of the alleged incidents had occurred at all. The Tribunal held that “finding that it is more probable than not that a contested event occurred or did not occur is not the same as finding that any particular witness is not speaking the truth”. There is a difference between credibility (i.e. a willingness to speak the truth as the witness believes it to be) and reliability (i.e. the actual accuracy of the witness’s testimony). The Tribunal outlined the following factors to be considered in appraising reliability and credibility of witnesses:

  • The internal consistency or inconsistency of evidence;
  • The witness’s ability and/or capacity to apprehend and recollect;
  • The witness’s opportunity and/or inclination to tailor evidence;
  • The witness’s opportunity and/or inclination to embellish evidence;
  • The existence of corroborative and/or confirmatory evidence;
  • The motives of the witnesses and/or their relationship with the parties;
  • The failure to call or produce material evidence.

Despite the fact that the Tribunal found “[t]here is little uncontested or objectively verifiable evidence available to guide [it] in making findings of fact”, the Tribunal ordered the respondent to pay to the three applicants close to $28,000, plus interest, to compensate for loss of income. In addition, the Tribunal awarded damages to the three employees, in the amounts of $37,000, $22,000 and $12,000 respectively, to compensate for violations of the inherent right to be free from discrimination, and for injury to dignity, feelings and self-respect, including the continuing stress caused by failure to investigate his complaints of discrimination.

Islam v. Big Inc., 2013 HRTO 2009

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Direct Evidence of Discrimination not Required: Ontario Human Rights Tribunal

Don’t be “Convicted” of Discriminating based on Criminal Convictions

Picture it: you have the perfect person to hire. You run the background check, and discover a criminal conviction. You are inclined to withdraw the offer, but suddenly you are faced with the question: can I do it?

The answer will depend on which province you are in. Below is a summary of the human rights implications of asking about criminal convictions in Ontario, BC, Quebec, Alberta and Saskatchewan. In addition to the human rights implications, an employer will also have to consider privacy rights in proceeding.

Ontario

In Ontario, there is no protection for applicants for employment against differential treatment based on a conviction, unless the conviction is for (i) a provincial offence or, (ii) in the event of a criminal offence, a pardon has been obtained. This occurs because although the Ontario Human Rights Code does provide protection from differential treatment based on a “record of offences”, it defines “record of offences” as follows:

“a conviction for,

(a) an offence in respect of which a pardon has been granted under the Criminal Records Act (Canada) and has not been revoked, or

(b) an offence in respect of any provincial enactment.”

Given this definition, there is no protection against differential treatment based on a criminal offence (which is a federal statute), unless a pardon has been obtained. Accordingly, an employer can treat a person differently based on an unpardoned criminal conviction in Ontario.

British Columbia

The B.C. Human Rights Code prohibits discrimination in employment on the basis of a summary or criminal conviction where the offence is “unrelated to the employment or to the intended employment of that person”. As such, an employer may not treat a person differently on account of a criminal record unless it is related to the employment. In this respect, the B.C. Code protects a broader range of situations than the legislation in Ontario. The B.C. Human Rights Tribunal and courts have consistently held that whether a conviction is related to employment must be considered in every case with respect a series of factors, including:

  1. whether the behaviour for which the charge is laid, if repeated, would pose a threat to the employer’s ability to carry on business safely;
  2. the circumstances and particulars of the offence, including the individual’s age and other extenuating circumstances; and
  3. the amount of time elapsed since the charge and the individual’s activities or rehabilitation efforts since that time.

Given these provisions, employers in BC must be cautious in asking for information concerning a criminal record; depending on the type of job for which the person is being hired, even asking for this information may expose an employer to a human rights or privacy complaint.

In B.C., if an employer asks a job applicant whether he or she has a criminal record, and the applicant answers “yes” to the question, the employer may not disqualify the person simply on that basis without exposing itself to a human rights complaint. From a practical perspective, it may be difficult to defend such a complaint if the person is otherwise qualified for the position. An employer would have to demonstrate that the particular offence is related to the person’s employment by obtaining more information about the offence and the circumstances surrounding it, including considering the above factors. If it can demonstrate that the conviction is related to the person’s employment – for example, an applicant for a controller position has a fraud conviction from six months ago – then it may be able to disqualify the applicant on that basis.

Quebec

The Quebec Charter of Human Rights and Freedoms (the “Charter”) prohibits discrimination in employment on the basis of a penal or criminal conviction where the offence is “in no way connected with the employment or if the person has obtained a pardon for the offence”.

Accordingly, in Quebec, if an employer refuses to hire an applicant because of his/her criminal record or dismisses an employee for the same reason, it must be able to demonstrate that there is a connection between the criminal record and the employment. The question of the connection to the employment is examined on a case-by-case basis, considering factors similar to those outlined in respect of the B.C. legislation above. In general terms, the greater the degree of integrity and trust that the position requires, the easier the connection may be to establish because the expectations of an employer in such a position will be higher.

 Alberta

Alberta does not have “criminal convictions” or something similar as one of the prohibited grounds in its Human Rights legislation. There is therefore always an argument that a refusal to hire someone due to a criminal record is not discriminatory in Alberta with respect to human rights. That said, employers should be careful when making a hiring decision based on information or a conviction that is not related to the position for which the person is being hired. The employer should also obtain consent to conduct these searches and procedures should be put in place to satisfy any privacy obligations with respect to the disclosure of this personal information (i.e. only limited personnel in Human Resources should view the results and the information should be kept in a secure location, etc.). Alberta’s Personal Information Protection Act may also place restrictions on what personal information an employer may gather in the course of background-checking a job applicant.  B.C. and Quebec also have their own provincial personal information protection legislation that should be considered in those provinces.

Saskatchewan

Similar to Alberta’s legislation, The Saskatchewan Human Rights Code does not list “criminal convictions” or anything similar as one of its prohibited grounds. It appears that the Saskatchewan Human Rights Commission conducted an extensive review of its Code in 1996 and recommended that the list of prohibited grounds be expanded to protect people from discrimination if they have been charged with or found guilty of a criminal or summary conviction offence that is unrelated to their employment or intended employment. However, this recommendation still does not appear to have made its way into the current version of the Saskatchewan Code. As a result, asking this type of question should not be considered discriminatory in Saskatchewan because it is not a protected ground. Nevertheless, similar to Alberta, employers should be cautious in proceeding with such checks and in relying on such information.

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Don’t be “Convicted” of Discriminating based on Criminal Convictions

Settling With a Fraudulent Employee: Will you be the next Defendant?

A recent Ontario decision dealt with the issue of liability as between two defrauded employers: is a past (former) employer liable to a new employer when a fraudulent employee steals money from the latter to satisfy its debt to the former?

In the recent Ontario Superior Court of Justice decision in Healthy Body Services Inc. v. 1261679 Ontario Ltd., 2013 ONSC 6396, the defrauded employer, Healthy Body Services, attempted to recover from the former employer, Raytek, on the basis that the fraudulent employee, Mr. Patel, paid Raytek a settlement with funds stolen from Healthy Body Services. As is the case with many fraudsters, Mr. Patel appeared to have a history of fraud, and had similarly defrauded his prior employer, Raytek. Using funds stolen from Healthy Body Services, Mr. Patel paid significant amounts to satisfy the claims of Raytek.

Healthy Body Services based its claim against Raytek in the causes of action of knowing receipt and unjust enrichment. The claim of knowing receipt requires the plaintiff to establish that the defendant received trust property, with knowledge that the property was transferred to that defendant in breach of a trust. If the funds can be traced, the only issue for the Court is whether or not the defendant “had knowledge of facts that would have put a reasonable person on notice or inquiry as to the source of the funds.” If so, the claim will succeed, and the plaintiff is entitled to the return of its money.

The claim of unjust enrichment has 3 necessary elements: an enrichment, a corresponding deprivation, and the absence of a juristic reason for the enrichment. Assuming that tracing can be established, the central issue is whether or not a juristic reason exists for the payments. In the Healthy Body Services case, the Court noted several factors to support a juristic reason; namely that the first employer acted in “commercial good conscience” when making the settlement agreement, the employer had a civil judgment on same issue, and the funds the employer received were applied for commercial purposes.

The Healthy Body Services decision provides useful direction for settlements with a former employee. The key point is that the former employer must take care to shield itself from future liability concerning the source of settlement payments in case their source is a subsequent fraud. These steps should include:

  • Carefully assessing the circumstances regarding payment of the funds. Are there any facts which may put the employer “on notice” to make reasonable inquiries as to the source of the funds? While the employer does not need to be “unduly suspicious”, the employer cannot turn a blind eye to facts that reasonably require investigation.
  • Entering into a settlement agreement, obtaining a judgment or otherwise documenting the obligation of the fraudster.

Please feel free to contact Jordan Deering of our Fraud, Corruption & Asset Recovery Group directly if you would like to discuss the application of this decision to your particular circumstances.

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Settling With a Fraudulent Employee: Will you be the next Defendant?

New standards allow compassionate care leave for employees

Alberta’s Employment Standards Code, has been amended to provide new minimum standards to allow employees to take compassionate care leave. On February 1, 2014, these amendments will take effect.

Employees will be eligible to take up to 8 weeks of leave in order to provide care or support to a seriously ill family member if the employee is the primary caregiver. In order to qualify the family member must be:

  • a spouse or common law partner of the employee,
  • a child of the employee or a child of the employee’s spouse or common law partner,
  • a parent of the employee or a spouse or common law partner of the parent, and
  • any other person who is a member of a class of persons designated in the regulations for the purpose of this definition.

Currently there are no other persons designated in the regulations for the purpose of the above definition.

The employee’s employment is protected during this leave and no employer may terminate the employment of, or lay off, an employee who has started compassionate care leave.

In order for employees to take compassionate care leave they must meet the following requirements:

  • The employee must be employed for at least 52 consecutive weeks with the employer;
  • The employee must produce a physician’s certificate stating that the family member has a serious medical condition with a significant risk of death within 26 weeks and they require the care or support of one or more family members; and
  • The employee must be the “primary caregiver”, meaning that the employee has the primary responsibility for providing care or support to a seriously ill family member for that family.

Given these new requirements for compassionate care leave, we recommend that employers review their workplace policies to ensure compliance with the Employment Standards Code.

New standards allow compassionate care leave for employees

Compliance Reminder – Accessibilty for Ontarians with Disabilities Act

The Accessibility for Ontarians with Disabilities Act (“AODA”) has been around for a while.  So what’s the big deal now?

For starters, recent Freedom of Information Act requests have demonstrated that about 70% of Ontario private sector employers with 20 or more employees have not yet complied with required self-reporting requirements to demonstrate that they are compliant with the AODA.  Perhaps more importantly, most private sector employers with 20 or more employees don’t even realize that they have certain obligations under the AODA as of January 1, 2014.

While reference should be had to the legislation for particulars as to the imminent requirements, the following should serve as a high level overview of what needs to be done by certain employers.

1.  Public sector employers with 20 or more employees are to file a compliance report with the Ontario government by December 31, 2013, confirming that they are currently compliant with the Accessibility Standards for Customer Service.  The filing can be done online.

2.  By January 1, 2014, those same employers must also develop policies governing how they will meet their requirements under the Integrated Accessibility Standards.   In addition, a multi-year accessiblity plan must  be developed, posted on the organizations’ websites, and provided in an accessible format upon request.

3.  For employers with 50 or more employees in Ontario that are launching a new website or undertaking a significant website refresh after January 1, 2014, the website is required to conform to the World Wide Web Consortium Web Content Accessbility Guidelines 2.0 Level A unless an exception applies or the company can demonstrate that meeting the guidelines is not practical.

Because most Ontario businesses are not compliant with the AODA, the Ontario government has begun issuing notices of non-compliance and has indicated that it intends to pursue businesses which are non-responsive.

For further information, see the Ontario government’s website on AODA requirements: http://www.mcss.gov.on.ca/en/mcss/programs/accessibility/

 

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Compliance Reminder – Accessibilty for Ontarians with Disabilities Act

Human Rights claims in the Ontario courts – Now What?

Way back in 2008, the Ontario Human Rights Code was amended to permit human rights claims to be piggybacked onto wrongful dismissal actions in the Ontario courts.  Prior to that time, the only recourse for an employee with a discrimination claim was to make a complaint to the [then] Human Rights Commission.  Some 5 years later, the Ontario Superior Court of Justice has recently released its very first decision in a joint wrongful dismissal/discrimination action.

The case in question was the September decision of Justice Grace in Wilson v. Solis Mexican Foods Inc.  Patricia Wilson was a 16 month employee at the time of her termination, and off work due to back problems.  The reason given for Ms. Wilson’s termination was a corporate reorganization, but the court found that reasoning “[defied] common sense” as Ms. Wilson was never told about the impending reorganization while it was taking place.  The court looked closely at the communications between Ms. Wilson’s doctor and employer, and found that the only conclusion that could be drawn was that the employer was not happy with Ms. Wilson’s ongoing back problems and absences from work, or her requests for accomodation.  Justice Grace reiterated that as long as an employee’s disability is a factor in the decision to terminate, there will be a finding of discrimination.  That is the case whether the disability is the sole factor or simply one small factor in the decision-making process.  In this case it was clear to the judge that Ms. Wilson’s back problems were a significant factor in the decision to terminate, but the result would have been the same even if her back problems were but one factor along with the reorganization.

Having determined that Ms. Wilson had been discriminated against, the court awarded her $20,000 due to the fact that she “lost the right to be free from discrimination” and experienced “victimization”, and due to the fact that the employer orchestrated her dismissal and was disingenuous both before and during the termination.  That amount was in addition to the damages received in lieu of notice of termination.

Interestingly, the court did not comment on whether or not reinstatement of employment was an option, thereby leaving that issue to another court on another day.  While employees pursuing complaints at the Human Rights Tribunal can seek reinstatement, and while the Human Rights Code appears to permit courts to make similar orders, we still have no guidance as to whether reinstatement will become a tool used by our courts.

To view the decision, click here:  http://canlii.org/en/on/onsc/doc/2013/2013onsc5799/2013onsc5799.html

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Human Rights claims in the Ontario courts – Now What?

Compliance Reminder – Ontario Pay Equity Commission is open for business

The Pay Equity Act of Ontario requires every provincially regulated employer with ten or more employees to ensure that pay equity exists in the workplace. This is not a one-off compliance requirement. Rather, employers must maintain pay equity on an ongoing basis. This means that both unionized and non-union employers need to re-visit their pay equity compliance when changes occur in the workplace such as the creation of new job classes, significant changes to job duties, elimination of a prior male comparator job class or a business acquisition or reorganization. Pay equity compliance is voluntary and self-directed. However, the Pay Equity Commission operates two programs that permit the Commission to reach out to employers even in the absence of a complaint in order to determine whether the employer is pay equity compliant. These two programs are described briefly below.

Monitoring Program

The Monitoring Program has been underway for a number of years. By September 30, 2010 (most recent date for which information is publicly available), the Monitoring Program had contacted over 3,000 Ontario employers. In the past, the Pay Equity Commission tended to focus on particular industry sectors (for example retail, food) or geographic areas (for example Greater Toronto Area and northern regions of the province). However, the Monitoring Program is currently focussed on contacting employers who were flagged as part of the Wage Gap Program or did not respond to a contact under the Wage Gap Program. Pursuant to the Monitoring Program, the Pay Equity Commission contacts employers to request three years of compensation data and information about jobs, locations and the employer’s pay equity process. The Review Officer can require up to seven years of data where concerns are raised. If the employer is not compliant with the Pay Equity Act, the Review Officer will require compliance pursuant to a set time line.

Wage Gap Program

The Wage Gap Program was launched in 2011. Its goal is to cover all Ontario workplaces to determine whether wage gaps persist. Using the Dunn & Bradstreet listing of employers, the Pay Equity Commission has completed its pilot project of canvassing employers with 500 or more employees. As it winds down phase two, covering employers of 250 to 499 employees, it is now turning its focus to employers with 100 to 249 employees. Employers are not required to produce employee data for the unionized work force. Currently the Wage Gap Program is not contacting employers which have been visited by the Pay Equity Commission within the last ten years. If an employer does not respond by the deadline or the wage data indicates possible pay inequities, the file is referred to a Review Officer.

Our advice

The Pay Equity Act is unusual in that it does not include a limitation period. Therefore, it is possible for the Pay Equity Hearings Tribunal to order an employer to comply retroactively to a date in the early 1990’s, depending on when the company began operations in Ontario and depending on the size of the work force. We strongly recommend that all employers become compliant with the pay equity requirements, generally by selecting a realistic retroactivity date for which the employer has sufficient data about pay, gender dominance and job duties. Be sure that all new positions are evaluated under your job evaluation system. Keep records so that you can show compliance at least to your selected retroactivity date. Build pay equity compliance into the H/R systems by ensuring that all jobs have up to date job descriptions, all positions are evaluated under your job evaluation system and all newly created positions are immediately evaluated and paid according to your job evaluation system.

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Compliance Reminder – Ontario Pay Equity Commission is open for business

The Non-Working Worker: A Practical Guide for Dealing with Employee Absences – Seminar

We hope that you will join us in Vancouver on Wednesday, November 20th as we discuss:

  • When They’re Not at Work: Managing Employees on Leave – Jeff Bastien
  • When They Don’t Return: Managing Employees who are Unwilling or Unable to Return – Andrea Raso
  • They’re Baaaaack…: Managing Reintegration and Performance Expectations – Dana Hooker

BC HRMA members – this workshop may be eligible for CHRP recertification credits.

Event Details
November 20, 2013
8:00 AM – 10:00 AM PDT

Terminal City Club
Walker Room
837 West Hastings St.
Vancouver, British Columbia
Canada

This session is complimentary. Please email vancouver.events@dentons.com to RSVP before November 15th.

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The Non-Working Worker: A Practical Guide for Dealing with Employee Absences – Seminar

Latest from the Supreme Court of Canada on restrictive covenants in the commercial context

On September 12, 2013, the Supreme Court of Canada issued its decision in Payette v. Guay Inc. Although this decision originated in the Quebec courts and involved the application of the Civil Code of Quebec, the Court’s decision also dealt with common law principles and so this case is applicable throughout the common law provinces.

This decision is noteworthy for anyone dealing with restrictive covenants in the context of the sale of a business and is welcome news for businesses seeking to endorse restrictive covenants in order to protect their interests.

The key points made by the Court are as follows:

  • The rules applicable to restrictive covenants relating to employment will differ depending on whether those covenants are linked to a contract for the sale of a business or to a contract of employment. This reflects the imbalance of power that generally characterizes the employer-employee relationship. No imbalance of power is presumed to exist in the vendor-purchaser relationship and so these rules will not have an equivalent in the commercial context.
  • The common law rules for restrictive covenants relating to employment do not apply with the same rigour or intensity where those obligations are assumed in the context of a commercial contract, particularly where the parties negotiated on equal terms, were advised by competent professionals and the contract did not create an imbalance between them.
  • In order to determine whether a restrictive covenant is linked to a contract for the sale of assets or to a contract of employment, it is important to clearly identify the reason why the covenant was entered into. The goal of the analysis is to identify the nature of the principal obligations under the master agreement and determine why and for what purpose the accessory obligations of non-competition and non-solicitation were assumed.
  • A restrictive covenant in the commercial context is lawful unless it can be established on a balance of probabilities that its scope is unreasonable. Thus the burden of proof will be on the vendor to prove that the restrictive covenant is unreasonable.
  • An acknowledgement by the parties subject to the restrictive covenant that the covenant is reasonable is not determinative, but it is a relevant factor and indicator that the Court will consider when determining whether the covenant is reasonable.
  • In the commercial context, a non-competition covenant will be found to be reasonable and lawful provided that it is limited, as to its term, territory and applicable activities, to whatever is necessary for the protection of the legitimate interests of the party in whose favour it was granted. The factors that may be considered include the sale price, the nature of the business’ activities, the parties’ experience and expertise, and the fact that the parties had access to the services of legal counsel and other professionals.
  • While in the case of a non-competition covenant, the applicable territory must be identified, a non-solicitation covenant may be considered reasonable and lawful absent a territorial limitation. In the modern economy, with new technologies and customers who are no longer geographically limited, territorial limitations in non-solicitation clauses have generally become obsolete.

Ultimately, on the facts before it, the Court found that the 5 year non-competition covenant with an expansive territory and 5 year non-solicitation clause were reasonable given the highly specialized and mobile nature of the purchaser’s business activities (crane rentals).

Latest from the Supreme Court of Canada on restrictive covenants in the commercial context

Alberta Court of Appeal reverses the burden of proof for employee theft

by Jordan R.M. Deering and Byron Reynolds

The Alberta Court of Appeal recently considered and clarified the nature of the relationship between employers and the employees they entrust with handling funds. As a result of the decision in 581257 Alberta Ltd. v Aujla, 2013 ABCA 16, employers may more easily recover assets stolen, converted or misappropriated by dishonest employees using a civil cause of action. The Alberta Court of Appeal found that, in cases of theft, an employee owes fiduciary obligations to its employer. In addition, the Court overturned the lower court’s decision that the plaintiff employer was responsible not only for demonstrating that a fraud or theft had occurred, but also for showing that all of the discovered loss was a result of the employee’s theft or fraudulent acts.

According to the Alberta Court of Appeal, where an employer gives an employee the responsibility for handling the employer’s funds, that employee has fiduciary obligations with respect to those funds. Employers have a strong argument that a similar fiduciary relationship exists where:

• Employees handle inventory or valuable assets.

• Employees handle cheques or transfers and have signing authority.

The fiduciary obligation does not impose obligations of non-competition or fidelity, but it shifts the evidentiary burden respecting dealings with those funds.

The Court of Appeal held that once the employer proves fraud or breach of fiduciary duty, the employer only needs to establish reasonable efforts to determine the amount taken by the thieving employee. At that point, the evidentiary burden shifts to the employee to disprove the amount and the cause of the loss. This shifting burden of proof enforces the policy that an employer should not be precluded from recovery where the employee has covered his tracks and compromised the ability of the employer to prove the quantum of loss.

In Aujla, the defendants were cashiers and shelf stockers at the plaintiff’s liquor store. The plaintiffs became suspicious that funds were going missing, but did not have sufficient evidence because their inventory system was unsophisticated and their surveillance was inadequate. The employer later installed a hidden camera, which showed the employees stealing some money from the till. This evidence established fraudulent behavior and breach of fiduciary obligations, but only proved a small quantum of thefts. However, the employee’s bank records disclosed $116,000 in funds that were not accounted for.

The shifting burden of proof of quantum of losses for breach of fiduciary or fraud dramatically reduces the difficulty faced by employers, who can only prove a few incidences of theft, but fairly believe this theft represents part of a larger pattern. Employers may be able to rely on the employee’s lifestyle, habits (such as gambling or shopping), or bank records to prove the loss.

While employers previously considered recovery impossible because of insufficient proof of the full quantum of the loss, the Alberta Court of Appeal has now leveled the playing field and provided significant recourse for employers.

Please feel free to contact Jordan Deering of our Fraud Corruption & Asset Recovery Group directly if you would like to discuss the application of this decision to your particular circumstances.

581257 Alberta Ltd v Aujla, 2013 ABCA 16

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Alberta Court of Appeal reverses the burden of proof for employee theft

Technology in the Workplace

I have trouble programming my television and need my teenage daughter to lend a hand.  I also know that I am not alone in this world of rapidly changing technology.  It is of little wonder then, that even the best HR professionals can sometimes use a reminder of best practices when it comes to the use of technology in the workplace.  This ever-changing area encompasses so many technological issues that this is only intended to provide a very high level overview.

Workplace Surveillance:

For employers in a unionized workplace or employers which are federally regulated (eg. banks, telecoms), collective agreements and federal privacy legislation respectively  set out strict parameters with respect to what sort of workplace surveillance is permitted.  For employers in B.C., Alberta and Quebec, applicable provincial privacy legislation may also set out parameters with respect to permitted workplace surveillance.  For all other employers, the workplace surveillance findings of the Privacy Commissioner of Canada are instructive but not generally applicable.

With regard to the Privacy Commissioner’s findings, the use of video surveillance and GPS is generally not permitted for productivity management although it may be permitted if the employer can show a bona fide safety or security reason for the surveillance.  In those cases, employees should be given advance written notice of the surveillance and the surveillance must be reasonable in scope.  On the other hand, unionized workplace arbitration findings sometimes permit keystroke monitoring to manage productivity, but it is considered intrusive and other means of monitoring productivity should be used if possible.

Computer Use in the Workplace:

Much has been written about the extent to which employers can monitor an employee’s computer use in the workplace, particularly in light of the Supreme Court of Canada’s 2012 decision in the case of R v. Cole.  In that decision, the court held that employees have a reasonable expectation of privacy in connection with personal information on workplace computers.  This criminal decision involving Charter rights is only directly applicable to public sector employers, but it gives employers some idea of where the courts may go on this issue in the future.

As a result of this decision and the apparent desire of the courts to protect employee personal information even when located on company property, it is absolutely necessary for employers to have a computer use policy which confirms that: (i) the employer’s computer systems are company property and should only be used for company business; and (ii) employees should understand that they have no expectation of privacy when it comes to personal information when using the employer’s computer systems.  Employees should be regularly reminded about the policy and asked to confirm their understanding and agreement.

Teleworking:

The two biggest issues with allowing employees to work from home are productivity and confidentiality.  With respect to confidentiality, employers should assist in the set-up of the home office and insist upon some or all of the following protections: (i) home computers which are password enabled, email encrypted, firewalled and/or subject to biometric ID; (ii) all company work must go through the company’s internal network through a platform such as Citrix; (iii) sensitive company and customer information should not be maintained on laptop computers, cell phones or other portable devices; (iv) hard copies of sensitive company or customer information kept at home should be stored in a locked filing cabinet; and (v) home computers used for work purposes should not be accessible to family members.  It is also a good idea to conduct periodic checks in order to ensure that your employees are following proper procedures.

Social Media:

If your organization decides that it wants to permit social media in the workplace, drafting a good policy is your starting point.  Among other things, the policy should: (i) make it clear that employees cannot use social media to disclose company or customer confidential information, engage in workplace gossip, do anything discriminatory or harassing, or otherwise say anything which might harm the company or its customers; (ii) advise employees that their use of social media may be monitored; (iii) advise employees that the use of social media at work is for work-purposes only; (iv) require workplace bloggers to identify themselves by their real names and make it clear that the views expressed are not necessarily those of the organization (unless the organization requires blog entries to be approved prior to posting); and (v) require employees to have a stand-alone work account for their blogs so that they do not use a personal account for work-related matters.

On-Line Recruiting:

To understand what you can and cannot do on an on-line basis when it comes to recruiting, you need to understand what you can and cannot do off-line.  One of the general rules of thumb is that you cannot make a decision to not hire based on an employee’s age, race, religion, ethnicity, sexual orientation, etc.  If an employee is looked up online before a decision is made whether or not to hire, or even whether or not to interview, one runs the risk of finding out something about the employee’s personal background which could lead to a Human Rights complaint.  As a result, it remains best practice to interview first, and then make any hiring decision subject to reference checks and other background checks (and to obtain the prospective employee’s consent for those checks before undertaking them).

Closing:

Although technology is ever-changing and some of the issues set out above will become non-issues with the passage of time and technologies, the one constant thread which runs through most of these issues is the need to have strong policies which outline what is and isn’t permitted in the workplace.  Notwithstanding the same, employers should be aware of the fact that employees may have reasonable expectations of privacy in the workplace, even when using company technology.

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Technology in the Workplace

Fight over reduction of GM retiree benefits not over

General Motors of Canada suffered a blow this summer when an Ontario court held that GM was not entitled to reduce benefits it had promised to its retired workers. The decision can be found here.

GM informed non-union retirees in 2009 that as a cost-cutting measure, GM had to reduce benefits that it had promised to certain retirees while they were employed. The reductions included significantly lower amounts of life insurance, and the elimination of semi-private hospital coverage. The retirees responded with a class action claiming that they were “stunned” by GM’s actions, and that GM’s actions were illegal. GM’s position was that language in employee booklets allowed it to make such changes. GM’s employee booklets had typical language that purported to give GM the right to make changes to all benefits, “at any time”. The Ontario Superior Court of Justice disagreed with GM’s position. The language in GM’s employee booklets wasn’t sufficiently clear, said the Court, to allow GM to impose the unilateral changes on retirees following their retirement. The Court made very helpful comments about exactly what wording in employee booklets may be effective to give an employer the legal right to reduce retiree benefits.

It is common for employers to change employee benefits promised to current, non-union employees. The considerations for terminated or retired employees are very different. The recent GM case confirms the reality that Canadian courts will likely not allow employers to unilaterally change the benefits of non-union retirees, unless the employer has communicated that possibility very clearly to the employees while they were employed.

GM has not given up the fight. It has announced that it will appeal the Court’s decision. Meanwhile, employers would be well-advised to take a look at the wording in their employee booklets and other benefit communications that says benefits can be changed in future. Will that language withstand a court challenge that it isn’t sufficiently broad or clear to allow changes to be made? The answer may lie in the reasons for judgment in the GM case and pending appeal.

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Fight over reduction of GM retiree benefits not over

Fall Employment and Labour Law Update – Seminar

Dentons Canada LLP
77 King Street West, 5th Floor
Toronto, ON M5K 0A1
Canada
 

On October 9th, 2013, Dentons hosted the Fall Employment and Labour Law Update.  This seminar featured presentations from our firm members Anneli LeGaultJeff Mitchell and Andy Pushalik.

Presentations include:

  • AODA Update: What Employers Should Know About the Accessibility for Ontarians with Disabilities Act, 2005, presented by Anneli LeGault
  • Return to Work Strategies: Sick and Disabled Employees, presented by Jeff Mitchell
  • Non-Solicitation and Non-Competition Covenants: Making them Enforceable, presented by Andy Pushalik

CHRP Accreditation

This program may be eligible for recertification points.

CPD Accreditation

This 1.5 hour program can be applied toward 9 of the 12 educational hours for Continuing Professional Development required annually by the Law Society of Upper Canada. Please note that these CPD hours are not accredited for the New Member Requirement.

This seminar is also offered via webinar.

To download a PDF of the presentation, or the seminar booklet, click here.

To view the full presentation, click here.

For additional information, please contact:

Marina Tsouloufas
Event Specialist, Toronto
+1 416 361 2398
marina.tsouloufas@dentons.com

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Fall Employment and Labour Law Update – Seminar

Internal Reorganizations and Constructive Dismissal: Minimizing Risk

While not making new law, the recent Divisional Court decision in Ghanny v. 498326 Ontario Limited 2013 ONSC 4057 provides a useful reminder of the steps an employer should take to minimize the risk of constructive dismissal when engaging in a good faith reorganization that impacts on the terms and conditions of its employees’ employment.

The facts of the case are quite simple. The employee, Mr. Ghanny, had been employed with Downtown Toyota for 18 years as Service Manager, earning $80,000 per year. The owner of Downtown Toyota also owned Downtown Suzuki. The owner advised Mr. Ghanny in June 2008 that his position was being eliminated at the end of the month, but that Mr. Ghanny would be relocated to Downtown Suzuki, which was just a few blocks away. Mr. Ghanny was advised that he would continue as Parts and Service Manager at Downtown Suzuki, and would earn the same $80,000 compensation package.

Mr. Ghanny refused the position at Downtown Suzuki for two reasons. First, he believed that his 18 years of service would not be recognized at the new location, and second, he was concerned that the position at Downtown Suzuki was uncertain, because the owner had also told him that in the near future it was likely that the Suzuki location would either be converted into a Lexus dealership, relocated, sold or possibly closed. As such, Mr. Ghanny felt that the position at Downtown Suzuki would only be temporary.

There was a conflict in the evidence as to whether Mr. Ghanny was told that he would lose his seniority. The employer gave evidence that it highly valued Mr. Ghanny, and legitimately wanted him to accept the position at Downtown Suzuki. To that end, the employer’s evidence was that it told Mr. Ghanny that his years of service would be transferred to Downtown Suzuki, and further that Mr. Ghanny was told that whatever the future of Downtown Suzuki, his job was not at risk.

On the issue of recognition of service, the trial judge preferred the evidence of the employer over the evidence of the employee. The Court held that it was unlikely that the employer, who was attempting to convince a valued employee to accept a new role, would have told him that his service was being eliminated. It found that it was more likely that the employer told him that although his service at Downtown Toyota was being eliminated, his service would be transferred to Downtown Suzuki.

The Court found that one month’s notice of the change was insufficient, and that if Mr. Ghanny’s action had been successful, 14 months would have been reasonable notice. That said, relying heavily on the Supreme Court of Canada decision in Evans v. Teamsters Local 31, [2008] 1 S.C.R. 661, the trial judge dismissed the action, finding that it was unreasonable of Mr. Ghanny to refuse to accept the position at Downtown Suzuki. The Court stressed a number of factors in coming to this conclusion:

  1. Although not an identical job, the position at Downtown Suzuki was the same type of job, and as such the new position would not have been demeaning or insulting.
  2. The employer legitimately wanted to retain the employee, and as such this was not a veiled attempt to get rid of him.
  3. The employee was given assurances that his overall compensation would remain the same.
  4. The employee was told that although there was a risk that the dealership might close, the employer would find a place for him within its organization.

Key to the Court’s conclusion was the fact that with the exception of the issue of service recognition, the terms of the new position were clearly outlined by the employer. As such, there was no ambiguity as to the nature of the position or the compensation the employee would receive. Given that the new position was comparable to the previous position, Mr. Ghanny failed to mitigate his damages by refusing to accept the new role, and was not entitled to pay in lieu of notice. On appeal, in a brief endorsement, the Divisional Court determined that the trial judge had correctly applied the law, and upheld the decision.

For employers, this case reinforces that legitimate organizational changes can be implemented without triggering constructive dismissal where the new position and compensation are comparable to the previous role. When proceeding with organizational change that impacts terms and conditions of employment, this case highlights the importance of the following:

  1. Give as much notice of the change as possible.
  2. Be clear with the employee as to: (i) the nature of the new position; (ii) any revised compensation; and (iii) how the employee’s service will be recognized. In Ghanny, it appears that one of the reasons the employee rejected the change was a misunderstanding as to whether his service at the new location would be recognized. Had the employer been clear in its offer (for example, by sending an e-mail or other written communication confirming the terms of its offer), a significant issue at trial could have been avoided.
  3. Where appropriate, make it very clear to the employee that this is an organizational change, and that he/she is a valued employee whom the employer wishes to retain.
  4. If the employee rejects the change, make efforts to find out why, and if possible address the concerns, or at a minimum explain why the employer needs to implement the aspect of the change that the employee finds objectionable. The employee should then, if possible, be given the opportunity to reconsider accepting the role.

Proceeding with these considerations in mind will make an employee more likely to accept a new position, and if the matter proceeds to litigation, reduce the risk (and liability) of constructive dismissal.

To view the Trial Decision click here:

To view Divisional Court Decision client here:

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Internal Reorganizations and Constructive Dismissal: Minimizing Risk