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20-Day Jail Sentence for Employee who Released Employer’s Confidential Information in Breach of Court Order

A former employee received a 20-day jail sentence after she flagrantly disregarded a court order by disclosing the plaintiffs’ confidential business methods and disparaging their business reputation.

Background

In July 2013, Ceridian entered into an agreement with Pendylum Inc. (“Pendylum”) to assist in the delivery of services to Ceridian’s customers. Under the terms of its agreement with Pendylum, Ceridian required that all of Pendylum’s subcontractors, including the Defendant, submit to a background check.  The Defendant refused.  As a result, Pendylum terminated the Defendant’s contract.

Following her dismissal, the Defendant embarked on an email campaign with Pendylum and Ceridian that culminated in threats and conduct akin to extortion.  In November 2013, the Defendant sent a letter to Ceridian advising that unless she received the sum of $23.2 million, she would disclose confidential information relating to the Plaintiffs’ business and their customers.  The Defendant subsequently reduced her demand to $500,000.00. On April 24, 2014, the Defendant sent another letter to Ceridian, in which she threatened to circulate a “press release” on May 12, 2014 containing the Plaintiff’s confidential information to “every press agency and HR and payroll agency across Canada and the U.S.”.  By letter dated May 8, 2014, the Defendant repeated her threat of disclosing her “press release” on May 12, 2014.

In response to the Defendant’s threats, the Plaintiffs brought an ex parte motion for, amongst other things, an interim injunction. The Court granted a five-day interim injunction prohibiting the Defendant from publishing the press release. Although the Defendant had knowledge of the court order, she disregarded the order and proceeded to issue the press release, which was widely disseminated on the internet by numerous news outlets.

The Finding of Contempt

The Court concluded that the Defendant knowingly and deliberately breached the court order by:

  1. releasing the enjoined document to press agencies;
  2. making absolutely no effort to stop the public release despite the pleas and offers of assistance from the Plaintiffs; and
  3. failing to provide the Plaintiffs with the list of persons to whom she had disclosed the confidential information.

The Court noted that if the Defendant disagreed with the court order, then the proper route would have been for her to challenge it by appeal or by another proceeding before the courts, not by ignoring its terms.

The Sentence

When considering the appropriate sentence for the Defendant’s non-compliance, the Judge commented that in his nine years as a judge he had “never encountered a more defiant or less remorseful Defendant”.  The Court found that the Defendant was deserving of significant sanction for, inter alia, the following reasons:

  • The Defendant knowingly and deliberately breached the court order, which can be evidenced by the emails that she exchanged with the Plaintiffs’ counsel in which she wrote “the court order has no effect” and “[the judge] cannot violate my right to free speech.”
  • The Defendant took no steps to retract the press release even after she was aware of the court order.
  • The Defendant continued to attempt to extort a settlement even after she had knowledge of the court order.
  • The Defendant continued to refuse to provide a list of the persons to whom the press release/confidential information had been disclosed.
  • There was uncontroverted evidence that the Plaintiffs may sustain significant harm as a result of the press release, which may have an impact on the Ceridian’s business and position in a competitive market.

Based on the foregoing, the Court found the Defendant’s breach of the order to be serious and continuing.  Moreover, the Court found no mitigating factors – the Defendant did not show remorse; she did not apologize; she made no attempt to purge the contempt; she made no effort to stop the press release when she had days to do so; and she refused to provide the names of persons to whom the confidential information was disclosed.  Furthermore, at the sentencing hearing she continued to argue that: this is nothing more than a defamation case; the order should never have been issued; the order was not breached; and that the Court and counsel have “colluded.”

The Court determined that a fine was an inappropriate sanction on the facts of this case.  The Defendant was a single mother and the costs awards to date, totaling approximately $27,500, had not been paid and the Court accepted would probably never be paid.

Typically, incarceration for civil contempt is a sanction of last resort.  However, the Court held that where the “the administration of justice has been flouted or ignored in public, imprisonment may be necessary for the court to send a clear a message that society as a whole disapproves of anyone who deliberately disobeys a court order”. The Defendant was sentenced 20 days in jail, to be served intermittently over five weekends so as not to jeopardize her employment income as the sole provider for her family.

Ceridian Canada Ltd. v. Azeezodeen, 2014 ONSC 4162 (CanLII)

20-Day Jail Sentence for Employee who Released Employer’s Confidential Information in Breach of Court Order

Top Ten Tips for the Workplace

Every now and then, it’s worth it for even the most seasoned HR professional to receive a reminder about best practices in the workplace.  Ensuring compliance with our Top Ten Tips list below will help to keep your workplace running smoothly.

1.  Ensure that all  employees sign employment agreements that clarify potentially contentious issues up front, such as entitlements on termination.

2.  If your workplace has any concerns about protecting company confidential information or intellectual property, ensure that employees also sign some form of Confidential Information and Intellectual Property Agreement (“IP Agreement”).

3.  Remember that employment agreements and IP Agreements must be signed before an employee’s start date.  If that doesn’t happen, then the employee must be provided with some sort of “consideration” for signing (eg. a signing bonus; a promotion and salary increase), and the consideration should be specifically referenced in the agreement(s).

4.  Remember that the law is ever-changing:  a good employment agreement template one year will not necessarily be legally compliant the next year.  An annual legal review of your employment agreement templates will provide a significant cost savings to your business in the long run.

5.  If it is important to your business that restrictive covenants be entered into, ensure that non-competition covenants are not used where non-solicitation and confidentiality covenants would suffice to protect the company.  In addition, ensure that the covenants are sufficiently narrowly drafted in terms of scope, duration and jurisdiction so that they can be upheld by the courts.

6.  Provide employees with at least several days to consider any employment agreements that they are being asked to sign, so that they may obtain legal advice if they wish.

7.  Ensure that your workplace is up-to-date and compliant with all of its statutory obligations.  In Ontario for example, that includes ensuring that all employees have undertaken mandatory Workers and/or Supervisors Health & Safety Awareness Training, ensuring compliance with the Access to Ontarians with Disabilities Act (AODA), ensuring compliance with the Pay Equity Act if applicable, and ensuring that your workplace has posted all required Employment Standards Act (2000) posters and all required Occupational Health & Safety Act posters and policies.

8.  In the event of employee disability issues, consider obtaining legal advice to help you to properly assess and monitor the situation, so that both your workplace and the employee are protected and treated appropriately.

9.  In the event that an employee must be terminated, ensure that he/she is provided with reasonable notice in accordance with the applicable statute, any applicable employment agreement, or the common law (except in the case of a just cause termination).  Do not seek a release unless the employee has been offered something more than the minimum statutory entitlements, and if the employee refuses the offer, provide all minimum statutory amounts even in the absence of a release.  Ensure that benefits and vacation pay continue to accrue through the statutory notice period, and ensure that the Record of Employment is properly completed and submitted in a timely manner.

10.  Don’t hesitate to seek legal advice.  Oftentimes, the biggest problems can be made much smaller if legal counsel is contacted before action is taken.

 

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Top Ten Tips for the Workplace

Get ready for the new Ontario Retirement Pension Plan

Now that the 2014-2015 Ontario budget has been passed by the Ontario legislature, Ontario employers should think about how the new Ontario Retirement Pension Plan (ORPP) could affect them.

The ORPP is part of the Ontario government’s solution to help individuals save for retirement. It’s a new “made-in-Ontario” solution to the federal government’s inaction on expanding the CPP. The ORPP will be a defined benefit pension plan, similar to the CPP, that will be publicly administered at arm’s length from the Ontario government.

Mandatory participation in the ORPP is set to begin in 2017, with enrolment occurring in stages starting with the largest employers. Contributions will be split equally between employers and employees, up to 1.9% each (3.8% total) on an employee’s earnings above a yet-to-be-determined minimum threshold and up to a maximum annual earnings threshold of $90,000. The ORPP aims to provide individuals with retirement benefits that replace 15% of the individual’s pre-retirement earnings (up to $90,000).

The question that employers should be asking is simple: Will I have to participate in the ORPP? The answer, however, is not so simple.

The Ontario government has stated that employers with a “comparable workplace pension plan” will be exempt from participating in the ORPP. But what does “comparable” mean? Does it mean a registered defined benefit pension plan? Probably. What about a registered defined contribution pension plan (DCPP)? Maybe. How about a group Registered Retirement Savings Plan (group RRSP) or a Pooled Registered Pension Plan or even a Tax-Free Savings Account? I don’t know.

To date, the government has not offered any details on what would constitute a “comparable” plan.
If the intent is to require employers to help contribute to their employees’ retirement savings, offering a group RRSP where employer contributions are optional may not suffice. It also might not be enough for an employer to provide a DCPP to its employees since the minimum employer contribution in a DCPP is 1% of an employee’s earnings, almost half of the maximum 1.9% required under the ORPP.

Employers need to start thinking about how the ORPP could affect their business. Employers who aren’t exempt will certainly have increased payroll costs. In addition to that fact, an employer offering a comparable pension plan to its employees may want to consider whether to integrate its current plans with the ORPP, to offload some responsibility, costs and future risk. An employer wishing to wind up a registered pension plan and replace it with a group RRSP in order to save costs may want to wait and see if a group RRSP counts as a comparable pension plan before making changes. Until more details about the ORPP are released, any Ontario employer who doesn’t have a defined benefit pension plan should be monitoring this since we can’t be sure how the ORPP will affect them.

If you’d like more information on the ORPP and its impact on your business, contact one of the pension and benefit experts at Dentons.

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

Get ready for the new Ontario Retirement Pension Plan

Significant Changes Proposed to Ontario’s Workplace Laws

Ontario’s government introduced workplace legislation on July 16, 2014 that would affect five labour and employment statutes in the province. Significant changes that are proposed in the Stronger Workplaces for a Stronger Economy Act, 2014 include:

  • Eliminating the $10,000 cap on the recovery of unpaid wages by employees through the Ministry of Labour claim process under the Employment Standards Act, 2000;
  • Increasing the limitation period to two years for employees to recover unpaid wages through the Ministry of Labour claim process under the Employment Standards Act, 2000.  The current limitation period is six months or one year depending on the type of claim;
  • Requiring employers to provide each of their employees with a copy of the most recent poster published by the Ministry of Labour that provides information about the Employment Standards Act, 2000. An employer must provide available translations of the poster if requested by an employee;
  • Making temporary help agencies and their clients jointly and severally liable for unpaid regular wages and unpaid overtime pay;
  • Requiring the Workplace Safety and Insurance Board to assign workplace injury and accident costs to temporary help agency clients when an employee is injured while performing work for the agency’s client;
  • Extending the safety protections under the Occupational Health and Safety Act to unpaid workers receiving training under prescribed conditions;
  • Decreasing the construction industry’s open period, when construction workers can join a different union close to the end of the term of their collective agreement, from three months to two months;
  • Expanding employment protections for foreign nationals who are in Ontario under an immigration or foreign temporary employee program. The protections include a prohibition on charging a recruiter fee or taking possession of the foreign national’s property, such as their passport or work permit; and
  • Tying future minimum wage increases under the Employment Standards Act, 2000 to the Consumer Price Index. The new minimum wage will be announced by April 1 of each year and will come into effect on October 1.

It is currently unclear when the proposed changes will be passed by the Ontario legislature. We will keep you apprised of any developments.

A copy of the Stronger Workplaces for a Stronger Economy Act, 2014 can be found here: http://www.ontla.on.ca/bills/bills-files/41_Parliament/Session1/b018.pdf

Significant Changes Proposed to Ontario’s Workplace Laws

Yet Another Reminder on the Importance of Careful Drafting of Termination Clauses…

As if employers needed one, we now have yet another decision invalidating a termination provision for failure to comply with the Employment Standards Act, 2000 (the “ESA”)Miller v. A.B.M. Canada Inc., 2014 ONSC 4062 (CanLII).

Mr. Miller applied for and obtained the position of “Director, Finance and Business Process Improvement”.  Prior to commencing employment, he had signed an employment contract, which contained the following elements of “remuneration”:

  • A base salary of $135,000 per year;
  • Pension contributions up to a maximum of 6% of base salary; and
  • A car allowance of $680 per month.

The employment contract contained the following provision in respect of termination without cause:

“Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.”

 Mr. Miller commenced employment on September 1, 2009 and was dismissed on a without cause basis on January 26, 2011. The primary issue was whether the termination provision limited Mr. Miller’s entitlement to the ESA minimum (two weeks), or whether he was entitled to common law pay in lieu of notice.

After examining the clause and considering case law (including Wright v. Young and Rubicam Group of Companies and Stevens v. Sifton Properties Ltd.), the Court came to the following conclusions:

  • the length of the notice period in the contract, being “the minimum period of notice prescribed by applicable legislation”, was effective to rebut the presumption of reasonable notice according to common law, and as such (provided the remainder of the contract was valid), the amount of notice was legitimately established in the contract as being the ESA minimum; but                                     
  • the contract breached the ESA requirement that if pay in lieu of notice is provided, all benefits must be continued.  The contract only required the payment of “salary” in lieu of notice. The failure of the contract to require payment of the 6% pension contribution and the car allowance rendered the clause contrary to the ESA, and void for all purposes, such that Mr. Miller was entitled to common law pay in lieu of notice.

The Court also made the observation (although technically this was not a required part of the decision and would be considered obiter), that the wording of the provision at issue will determine whether it is enforceable, rather than the actual actions of the parties.  In other words, if a provision is unenforceable because it does not comply with the ESA in some respect, the fact that the employer does actually comply with the ESA will not render the provision at issue enforceable.

Interestingly, the Court held that although the termination provision was invalid, Mr. Miller “cannot escape bearing some responsibility for the fact that both parties entered into a contract which fell below ESA standards”, which seems to suggest that the Court still considered the contract when assessing the common law notice period. Ultimately, after considering Mr. Miller’s age (39), length of service (17 months) and position (Director, Finance and Business Process Improvement), the Court awarded three months of pay in lieu of notice at common law.

Mr. Miller thus received three months of pay in lieu of notice, rather than the minimum two weeks pursuant to the ESA.  This case stands as yet another reminder that termination provisions must be carefully drafted to meet the ESA in every respect, or they will be subject to attack, resulting in the employee potentially being entitled to common law pay in lieu of notice.

Miller v. A.B.M. Canada Inc., 2014 ONSC 4062 (CanLII)

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Yet Another Reminder on the Importance of Careful Drafting of Termination Clauses…

Ontario’s New Human Rights Policy

In mid-June, the Ontario Human Rights Commission released a new policy entitled “The Policy on Preventing Discrimination Based on Mental Health Disabilities and Addictions” (the “Disability Policy”), which builds on the Commission’s prior Policy and Guidelines on Disability and the Duty to Accommodate.

The Disability Policy covers some of the following areas: recognizing mental health disabilities and addictions, establishing discrimination, forms of discrimination, reprisal, the duty to accommodate, undue hardship, and preventing and responding to discrimination (including the development of policies, education and training). Although the Disability Policy covers protection from discrimination in the course of employment, it also applies to protection from discrimination in relation to goods, services, accommodation and housing.

Particularly important for employers to note is the Commission’s statement that when employees request accommodation due to disability, the employer is not generally to “second guess” the health status of an employee. That presumption can be overruled in a situation where there is a legitimate reason to question the employee; however the general rule is for the employer to take the request in good faith without seeking additional medical documentation. In the words of the Commission, “Where more information about a person’s disability is needed, the information requested must be the least intrusive of the person’s privacy while still giving the accommodation provider enough information to make the accommodation”.

Similarly, an organization must not ask for more confidential medical information than necessary because it doubts the person’s disclosure of his/her disability based on its own impressionistic view of what a mental health disability or addiction disability should “look like”.

As also stated in the Disability Policy, “In the rare case where an accommodation provider can show that it legitimately needs more information about the person’s disability to make the accommodation, it could ask for the nature of the person’s illness, condition, or disability, as opposed to a medical diagnosis”.

While the Disability Policy does not set out new law, it is a helpful summary of the current state of the law with respect to discrimination due to disability and the duty to accommodate, and it should be reviewed by employers dealing with mental health disabilities (including addictions) in the workplace. One note of caution, however: this is an evolving area of law, and the Disability Policy, like all policies of the Commission, do not have the force of law; they merely set out the Commission’s interpretation of the law as of the date the Policy is posted.

The Disability Policy can be found at the following link:  http://www.ohrc.on.ca/sites/default/files/Policy%20on%20Preventing%20discrimination%20based%20on%20mental%20health%20disabilities%20and%20addictions_ENGLISH_accessible.pdf.

Ontario’s New Human Rights Policy

Lack of Full Disclosure: Special Costs in Failed Anton Piller Order

In recent years, employers have increasingly sought and obtained Anton Piller Orders (“APO”) where a departing employee leaves with confidential information. The strategy is often extremely effective: the employer recovers the confidential information and obtains significant leverage in the litigation, usually prompting settlement. While effective, APOs are not for the uninitiated – the Courts have referred to this remedy as one of the “nuclear weapons” of litigation. Employers and their counsel must exercise extreme caution when using APOs.

The British Columbia Supreme Court’s recent decision in Pierce v Jivraj, 2014 BCSC 926 represents a warning for employers and their counsel in seeking an APO. In that case, the Court ordered special costs personally against the plaintiff’s counsel for failure to meet the high burden of full disclosure in the APO application.

The action originated as a defamation suit by Mr. Pierce against Mr. Jivraj. Mr. Pierce alleged that Mr. Jivraj improperly published statements that various securities exchange commissions had imposed regulatory sanctions against Mr. Pierce for ‘ill-gotten gains’ from stock manipulation. Mr. Pierce brought an ex parte application for an APO to preserve evidence on Mr. Jivraj’s personal computer relating to the defamation suit. At the ex parte hearing, the Court made inquiries of Mr. Pierce’s counsel concerning regulatory sanctions and fines against Mr. Pierce. Counsel was “evasive at best” concerning these inquiries. The Court granted the APO, directing a search of Mr. Jivraj’s personal residence and seizure of his computer.

In fact, Mr. Pierce had been subject to three regulatory sanctions, and was ordered to disgorge “ill-gotten” profits of over $9 million. On a motion by Mr. Jivraj, the Court set aside the APO on the basis that the merits for granting an APO were not met, in light of the new evidence regarding Mr. Pierce’s reputation: Pierce v Jivraj, 2013 BCSC 1850. Further, the Court found that it would have set aside the APO for Mr. Pierce’s complete failure to provide full and frank disclosure of the prior regulatory sanctions.

Mr. Jivraj brought a motion for special costs against Mr. Pierce and his counsel for the material non-disclosure: Pierce v Jivraj, 2014 BCSC 926. In finding counsel personally liable for special costs, the Court concluded that an APO “requires ‘fastidious’ disclosure and to be ‘profoundly fair’ in presenting facts. Neither occurred here.” The Court was particularly concerned that the APO involved entry into a personal residence.

APOs are serious and significant remedies. This decision represents an important reminder of the high standards of complete disclosure of all objectively material facts in applying for an APO.  Employers and their counsel must include all possible material facts as part of the evidence, particularly where the Order will direct a search of a personal residence. The APO is no doubt a nuclear weapon, and employers and their counsel must take care in its use.

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 in your particular circumstances.

Case Information

Pierce v Jivraj, 2014 BCSC 926: http://www.canlii.org/en/bc/bcsc/doc/2014/2014bcsc926/2014bcsc926.pdf

Lack of Full Disclosure: Special Costs in Failed Anton Piller Order

Sanity Prevails: The Tale of a 90% Reduction to a Punitive Damages Award

In the May 2014 Ontario Court of Appeal decision in the case of Boucher v. Wal-Mart, the $1,150,000 in punitive damages previously awarded to Boucher by a jury was reduced to $110,000. The decision represents a good monetary result for Wal-Mart but it is laced with lessons for employers to keep in mind when faced with allegations of managerial harassment.

The Case:

Boucher was a 10 year Wal-Mart employee at the company’s Windsor store. After a series of promotions and good performance reviews, she was promoted to assistant manager in 2008. The following year, store manager Pinnock began a series of actions intended to harass and belittle Boucher after she refused to falsify a temperature log. Boucher complained to Wal-Mart’s senior management but her complaints were held to be “unfounded” and Boucher was told that she would be held accountable for making them. With her complaints falling on deaf ears and the harassment continuing (often in full view of other assistant managers at the store), Boucher left and claimed constructive dismissal.

The case was tried by a jury and Boucher was awarded damages as follows: (i) $1,200,000 from Wal-Mart, made up of punitive damages of $1,000,000 and aggravated damages of $200,000; and (ii) $250,000 from Pinnock, made up of punitive damages of $150,000 and damages for intentional infliction of mental suffering in the amount of $100,000. As the employer, Wal-Mart was ultimately responsible for the damages award against Pinnock. While there have been a few extremely high punitive damages awards under Canadian law, they are the exception to the rule. Needless to say, Wal-Mart appealed the decision.

The Appeal:

The Court of Appeal conducted an analysis of the different types of damages. Among other things, it confirmed that aggravated damages are intended to be compensatory, whereas punitive damages are intended to punish the wrongdoer. It also confirmed that “if the award of punitive damages when added to compensatory damages, produces a total sum that is so ‘inordinately large’ that it exceeds what is ‘rationally’ required to punish the defendant, it will be reduced or set aside on appeal.” When the damages award against Pinnock was reviewed, the court felt compelled to reduce the $150,000 punitive damages award to $10,000, although the $100,000 award for intentional infliction of mental suffering was left in place.

A similar analysis was used when looking at the damages assessed against Wal-Mart. The $200,000 aggravated damages award was permitted to stand, and the $1,000,000 punitive damages award was then reviewed in conjunction with it. Ultimately, the court decided that “an additional punitive damages award of $1,000,000 [was] not rationally required to punish [Wal-Mart] or to give effect to denunciation and deterrence”, and it reduced the $1,000,000 punitive damages award to $100,000.

Boucher ended up with: (i) 8 months of pay (which was not the subject of litigation); $110,000 from Pinnock for intentional infliction of mental suffering, together with punitive damages; and (ii) $300,000 from Wal-Mart for aggravated damages, together with punitive damages. Ultimately, $1,040,000 in punitive damages was removed from the jury’s findings, thus bringing the decision back into the reasonable range of damages which we have come to expect from Canadian courts. A lesson still remains for employers however, which is that workplace investigations need to be performed thoroughly, objectively and fairly, and a price will be paid when managers are permitted to intimidate and harass the employees that they supervise.

Sanity Prevails: The Tale of a 90% Reduction to a Punitive Damages Award

Your Partners Are Not Your Employees: Supreme Court of Canada Clarifies the Application of the Control/Dependency Test

In 2009, John McCormick, an equity partner in the law firm Fasken Martineau DuMoulin LLP (the “Firm”) filed a complaint with the British Columbia Human Rights Tribunal, alleging the Firm’s requirement that equity partners retire from the partnership and divest their equity at age 65 was age discrimination in employment, contrary to section 13 of the British Columbia Human Rights Code, R.S.B.C. 1996, c. 210 (the “Code”).

The Firm applied to have the complaint dismissed on the basis that the matter was not within the jurisdiction of the tribunal, and that there was no prospect that the complaint would succeed. The Firm’s primary position was that because Mr. McCormick was an equity partner in the firm, there was no employment relationship that could be the subject of a complaint under section 13 of the Code. The Tribunal denied the Firm’s application to dismiss however, and concluded that the relationship between Mr. McCormick and the Firm was one of “employment” for the purposes of the Code.

On judicial review, Justice Bruce of the Supreme Court of British Columbia agreed with the Tribunal, indicating that the application of the Code must be based on a conclusion that the complainant and the alleged offender are in an employment relationship in fact and in substance. In Mr. McCormick’s case, many of the attributes of his relationship with the Firm were the same as those found in a traditional employer/employee relationship and therefore the Tribunal’s decision to deny the Firm’s application to dismiss was justified.

The Court of Appeal disagreed however, and held that despite the broad, liberal and purposive interpretation that must be given to the Code, it is a legal impossibility for a partner to be employed by the partnership of which he or she is a member. The fact that the Firm’s management may exercise similar aspects of control over the partners as may be exercised by the management of a corporation over its employees does not change the relationship from one of partners running a business to one of employment by one group of partners over an individual partner. Accordingly, in a unanimous decision the Court of Appeal determined that there was no employment relationship, so the complaint should be dismissed. Mr. McCormick was subsequently granted leave to appeal this decision of the Court of Appeal to the Supreme Court of Canada.

On May 22, 2014 the Supreme Court of Canada released its highly anticipated decision dismissing Mr. McCormick’s appeal. Unlike the Court of Appeal which held that as a rule, it was impossible for a partner to be employed by the partnership of which he or she was a member, Madam Justice Abella, on behalf of a unanimous court, took a more contextual approach holding that that the primary question was to examine the essential character of the relationship between Mr. McCormick and the Firm and the extent to which it was a dependent relationship. While Justice Abella agreed with the Court of Appeal that on the circumstances of this case, it was impossible for Mr. McCormick, an equity partner in the Firm, to be employed by the partnership, she refused to close the door on finding a partner could be an employee in other situations. The key, according to Justice Abella, was “examining how two synergetic aspects function in an employment relationship: control exercised by an employer over working conditions and remuneration, and corresponding dependency on the part of a worker.” (at para. 23)

In this case, the Supreme Court confirmed that the Code is quasi-constitutional legislation and that the definition of employment for the purposes of the Code must be approached “consistently with the generous, aspirational purposes set out in s. 3 of the Code and understood in light of the protective nature of human rights legislation which ‘is often the final refuge of the disadvantaged and the disenfranchised’ and of ‘the most vulnerable members of society’”. (at para. 19, references omitted) Nevertheless, even considered in this philosophical framework, the Court found that the protections of the Code could not extend to Mr. McCormick.

Importantly, Justice Abella held that control and dependency are more than a function of whether a worker receives immediate direction from or is affected by the decisions of others, but whether the employee has the ability to influence decisions which critically affect his or her working life. In the case of Mr. McCormick, as an equity partner for some 30 years, he was part of a collective of individuals who had control over workplace conditions and remuneration—i.e. he was part of the collective employer and was not necessarily someone who was in a vulnerable position vis-à-vis that group. The Firm’s management structure and administrative polices to which Mr. McCormick was subject were not viewed as limitations on his autonomy making him dependent on the Firm, but rather, were viewed as necessary incidents of its management. Furthermore, though his income was pooled with his colleagues, his remuneration was set in accordance with his contributions to the Firm, in accordance with polices he would have had a right to vote to implement, and he drew income from the Firm’s profits and was liable for its debts and losses. Overall, the Court found that he was not working for the benefit of someone else, but to his own benefit.

Referring specifically to the decision of the Human Rights Tribunal, Justice Abella found that the Tribunal, in considering the control aspect of the relationship had given insufficient consideration to the underlying power dynamics of the relationship between Mr. McCormick and the Firm, and had focused unduly on the administrative polices which governed his activities within the Firm. In this case, where there was no genuine control over Mr. McCormick, an employment relationship could not be established for the purposes of the Code.

Justice Abella was careful not to close the door on other partners being found to be employees for the purposes of the Code in other circumstances. However, she was clear that such a situation would require normal partnership rights, powers and protections to be “greatly diminished”. (at para. 46). The Court was also careful to point out in obiter that while Mr. McCormick might not be able to avail himself of the protections of the Code, partners alleging discrimination nevertheless could have recourse against their partners with respect to the duties of utmost fairness and good faith required by the Partnership Act. However, the Court was careful to avoid commenting on whether such recourse was available in this instance.

Noteworthy, also released today was the United Kingdom Supreme Court decision of Clyde & Co LLP and another v. Bates van Winkelhof, [2014] UKSC 32. In that case, an equity partner in a law firm sought whistleblower protection granted to employees under the Employment Rights Act 1996. In this decision the Supreme Court came to the conclusion that the partner was a “worker” (as defined) for the purposes of that legislation. In that case, the Court was clear that there was no contract of employment between the partner and the firm in question, rather the decision turned on whether under the partnership agreement in question, the partner had undertaken “to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by that individual.” In this case, whether or not the partner was a worker turned largely on interpretation of the applicable statute in conjunction with the applicable partnership legislation. However, the Court also reviewed the concept of “subordination” (a permutation of the control and dependency test) and held that because the partner could not market her services to anyone other than the firm with which she was employed, and because she was an integral part of her business, she fell within the definition of worker in that case. Notably, the partner in question, although an equity partner, was junior in the sense that she received a fixed income and that there was a level of Senior Equity Partner above her, the antecedents to which appeared to fall more in line with the traditional benefits of partnership. Nevertheless, the Court in Clyde & Co did not necessarily focus on these factors in rendering its decision.

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Your Partners Are Not Your Employees: Supreme Court of Canada Clarifies the Application of the Control/Dependency Test

Discrimination due to Family Status – The Final Word?

In a just-released decision, the Federal Court of Appeal has confirmed that the ground of discrimination due to family status under the Canadian Human Rights Act includes parental obligations which engage a parent’s legal responsibility for a child, such as childcare obligations.  But fear not employers - parental choices such as voluntary family activities will not trigger similar claims of discrimination due to family status.

Background:

On May 2, 2014, the Federal Court of Appeal released its long-awaited decision in the case of Johnstone v. Canada Border Services Agency (“CBSA”).  Fionna Ann Johnstone had been employed by the CBSA since 1998, and her husband was employed by the CBSA as well.  After having children, Johnstone asked for accommodation to her work schedule at Pearson International Airport.  The CBSA had a complicated work schedule for its full-time employees, which included rotating through 6 different start times over the course of days, afternoons and evenings with no predictable pattern, as well as working different work days during the duration of the schedule.  The schedule was based on a 56 day pattern and subject to change on 5 days’ notice.  Johnstone could not find a caregiver due to her schedule and her husband was unable to cover her work days with any certainty as he was subject to the same unpredictable schedule, albeit one that was not coordinated with hers.

Johnstone requested accommodation in the form of a fixed full-time schedule but was only offered a fixed part-time schedule.  Interestingly, the CBSA had previously accommodated disabled employees with a fixed full-time schedule, but it refused to do so in this case because it felt it had no duty to accommodate Johnstone’s childcare responsibilities.

The case moved through a long and circuitous route beginning in 2004 from the Human Rights Commission to the Federal Court, back to the Human Rights Tribunal and finally to the Federal Court of Appeal (with judicial review of some decisions along the way).

The Decision:

After reviewing the law in great detail, the Federal Court of Appeal determined that family status includes childcare obligations which a parent cannot neglect without engaging his or her legal liability.  The court was careful to confirm however, that voluntary family activities such as family trips and extracurriculars do not fall under the family status protections, as they result from parental choices rather than obligations.

In turning to whether or not a prima facie case of discrimination due to family status has been made out, the court stated that an employee must be able to demonstrate the he or she has unsuccessfully sought out reasonable alternative childcare arrangements, and is unable to fulfill his or her parental obligations as a result.  More particularly, the court invoked a four-part test under which the individual making the claim of discrimination must show: (i) that a child is under his or her care of supervision; (ii) that the childcare obligation at issue engages the individual’s legal responsibility for that child, as opposed to a personal choice; (iii) that he or she has made reasonable but unsuccessful efforts to meet those childcare obligations through reasonable alternative solutions; and (iv) that the workplace rule interferes in a manner that is more than trivial or insubstantial with the fulfillment of the childcare obligations.

Based on all of the above, the Court upheld the finding in favour of Johnstone, together with most of the remedies awarded by the lower court (lost wages and benefits from 2004; $15,000 for pain and suffering; $20,000 in special compensation due to the fact that CBSA was found to have engaged in a discriminatory practice wilfully and recklessly).  In addition, the CBSA was ordered to consult with the Canadian Human Rights Commission to develop a plan to prevent future incidents of discrimination due to family status.

There remains just one ground of appeal left for this matter, and it will be interesting to see whether the CBSA moves for leave to appeal to the Supreme Court of Canada.

 

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Discrimination due to Family Status – The Final Word?