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Is This The Definitive Word on Termination Provisions/Consideration?

A series of Ontario cases dating back to 2012 has put into issue the question of what does, or doesn’t, make a termination provision enforceable.  After a number of recent employer-friendly decisions, the Ontario Court of Appeal has weighed in with a decision that contains some good news, and some bad news, for employers.

In Wood v. Fred Deeley Imports Ltd., the court primarily looked at: (i) whether or not consideration was required to uphold an employment agreement; and (ii) whether the termination provision in the agreement was unenforceable (thereby opening the door to a common law notice award).  The Plaintiff, Julia Wood, was an 8.4 year employee at the time of her termination.  She signed an employment agreement the day after she started work that contained a termination provision which provided for “2 weeks’ notice of termination or pay in lieu thereof for each completed or partial year of employment…”.  The termination provision also stated that “… the Company shall not be obliged to make any payments to you other than those provided for in this paragraph” and “The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000”. On termination, the employer provided Wood with 13 weeks of working notice, followed by a lump sum payment equal to 8 weeks of pay.

In looking first at the consideration issue, the court found that Wood had been provided with a copy of the Agreement prior to her start date, although it wasn’t signed until the day after she started work.  The court determined that this was not a case where Wood was seeing the Agreement for the first time when she signed it, nor was it a case where a new material term was introduced into the Agreement at the time of signing.  The court went on to find that the signing of the Agreement the day after Wood commenced employment was merely an administrative convenience and therefore fresh consideration such as a signing bonus was not required in order to make the Agreement valid and enforceable.  The employer was therefore successful in arguing that the Agreement was not void for lack of consideration.

However, things went downhill from there for the employer.  In looking at the termination provision, the court found that it contravened the Employment Standards Act, 2000 (ESA) and therefore was unenforceable.  It came to this conclusion for two reasons.  First, the court found that because the termination provision did not expressly require the continuation of benefits through the ESA notice period, it was in contravention of the minimum standards of the ESA.  This was so even though the employer gratuitously provided benefit continuance through the entirety of the ESA notice period.

Second, the court found that although it was possible that the termination provision could provide notice and statutory severance in accordance with or even in excess of the ESA, it was also possible for it to undercut the minimum provisions of the ESA.  Simply put, even though the “2 weeks per year” calculation could potentially result in the employee receiving more than her ESA notice and severance entitlements, it could also have the opposite effect.  In particular, Wood received less than her ESA severance in the case at hand because the payment of 8 weeks at the end of her working notice period was less than the 8.4 weeks of severance that she was entitled to under the ESA.

The court reviewed termination provisions in other cases and once again made it clear that each case will be decided based on its own facts.  For example, a termination provision which is not well drafted but does not expressly contract out of the ESA may yet be enforceable, despite this case. On the other hand, a termination provision which expressly contracts out of the ESA, as was the case here, will not be enforceable.

The broken record continues – the importance of properly drafting termination provisions cannot be understated and with so much at stake, it is critical that employers regularly review and update their termination provisions with the assistance of legal counsel.

The court’s decision in Wood v. Free Deeley Imports Ltd. may be found here.

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Is This The Definitive Word on Termination Provisions/Consideration?

Double Check those Bonus Plans!

The Ontario Court of Appeal’s decision in the case of Paquette v. TeraGo Networks Inc. should have all employers running to double-check and possibly amend their bonus plans.  A further case released on the same day by the same panel of judges further confirmed the law set out in the Paquette decision.

Trevor Paquette had been employed by TeraGo Networks for approximately 14 years at the time of termination.  He brought a motion for summary judgment and his common law notice period was found to be 17 months.  The motions judge also determined that he was entitled to damages in lieu of his remuneration for the entire notice period, although he denied entitlement to damages in lieu of bonus entitlement over the notice period.  The matter proceeded to appeal solely on the basis of whether or not Paquette was entitled to damages in lieu of bonus during his 17 month notice period.

Paquette’s bonus plan stated that he had to be “actively employed” at the time the bonus was paid in order to receive same.  The Court of Appeal reviewed a number of similar bonus and stock option plan cases, and confirmed that the following is the state of the law in Ontario:

  • Subject to contractual terms, a terminated employee is entitled to compensation for all losses arising from the employer’s failure to give proper notice, and the damages award should place the employee in the same financial position he or she would have been in had such notice been given.  In Paquette’s case, since he would have earned a bonus had he been given working notice, the use of the words “active employment” could not be used as an end-run around his claim for the bonus over the pay in lieu of notice period.
  • The test to be followed is two-fold: (i) the first step is to determine an employee’s common law rights and whether a bonus forms an integral part of the employee’s compensation; and (ii) the second step is to determine whether there is something in the bonus plan that would specifically remove that common law entitlement.
  • An “active employment” requirement does not preclude the employee from receiving damages representing compensation for the bonuses which the employee would have received if employment had continued through the reasonable notice period.

The key for employers then, is to ensure that the language of any bonus plan is sufficiently clear that the common law entitlement to damages in lieu of bonus is expressly removed.  As every bonus plan is different and as the drafting of this sort of exclusionary language is obviously complex, legal advice should always be sought by employers when it comes to limitations set out in bonus plans.

The Court of Appeal’s decision in Paquette v. TeraGo Networks Inc. can be found here:  http://www.canlii.org/en/on/onca/doc/2016/2016onca618/2016onca618.html.

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Double Check those Bonus Plans!

The Final Word? The Ontario Court of Appeal upholds an astounding 10 years of back pay and employee reinstatement

Readers of this blog may recall reading in 2014 about the Ontario Divisional Court upholding the Ontario Human Rights Tribunal’s order for 10 years of back pay and employee reinstatement.  The decision was reached in the case of Hamilton-Wentworth District School Board v. Fair and can be read about in more detail here:  http://www.employmentandlabour.com/school-board-taught-a-costly-lesson-court-upholds-reinstatement-with-10-years-of-back-pay.

Not surprisingly, the Hamilton-Wentworth District School Board (“the “Board”) decided to appeal the Divisional Court’s decision and late last month, the Ontario Court of Appeal rendered its own decision on the same matter.  In doing so, it agreed with the Divisional Court on virtually every point, thereby upholding the astounding 2013 decision of the Human Rights Tribunal for 10 years of back pay, as well as employee reinstatement a decade after termination.

In summary, Ms. Fair was an employee with the Board who was on disability leave for about 3 years prior to being terminated.  At the time of termination she had sought a return to work but the employer refused to accommodate her into another position.  The standard of review on an appeal such as that before the Court of Appeal is one of “reasonableness” – namely, was the Tribunal’s decision reasonable?  Under that test, the Ontario Court of Appeal unanimously determined that the Human Rights Tribunal’s decision was reasonable with regard to the facts and law before it.

Although no new law was made by the Ontario Court of Appeal, it did reaffirm the law in areas that employers should pay particular heed to.  First, the Court confirmed that in order for an employer to fulfil its duty to accommodate an employee’s disability, the employer may be required in an appropriate case to place the disabled employee into a position for which he or she is qualified but not necessarily the most qualified.  Second, the Court confirmed that the passage of years is not determinative of whether reinstatement is an appropriate remedy; rather, context is key.  In this case, the evidence was that Ms. Fair’s relationship with the Board had not been fractured and the passage of time had not materially affected her capabilities, both of which led to the conclusion that reinstatement after a decade was not unreasonable.

Employers would do well to keep in mind the inherent uncertainties of litigation, the fact that the Human Rights Tribunal can order reinstatement, and the fact that a complaint which moves slowly through the system can ultimately increase the bottom line for an unsuccessful employer.  While not every case should necessarily be settled, Hamilton-Wentworth District School Board v. Fair is a good example of a case which became far more costly to the employer due to the passage of time.

The Ontario Court of Appeal’s decision in Hamilton-Wentworth District School Board v. Fair can be found here:  http://www.ontariocourts.ca/decisions/2016/2016ONCA0421.htm.

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The Final Word? The Ontario Court of Appeal upholds an astounding 10 years of back pay and employee reinstatement

The Duty to Provide Reasonable Notice of Termination Cuts Both Ways

It is a relatively little-known fact to non-lawyers that just as employers are required to provide employees with reasonable notice of termination, employees are likewise required to provide employers with reasonable notice of resignation.  A 2016 Ontario Superior Court of Justice case has recently confirmed same.

In the case of Gagnon & Associates Inc. v. Jesso et al., the company sought damages from employee Barry Jesso (“Jesso”) for having resigned his employment without notice.  Jesso had been employed by Gagnon & Associates Inc. (the “Company”) for 10 years and at the time of resignation was responsible for approximately 30% of the Company’s annual HVAC sales.  His colleague Patrice Comeau, also a defendant in the litigation, was responsible for a further 30% of the Company’s annual sales.  In 2006 Jesso and Comeau approached one of the Company’s competitors and entered into an agreement with it to open a satellite office.  It was at that point that they both provided the Company with their notices of resignation.

The court stated that the notice of resignation period required by an employee will be a function of the employee’s position with the employer and the time that it would reasonably take the employer to replace the employee or otherwise take steps to adjust to the loss of the employee.  The court then made a finding on the evidence that although Jesso was not a fiduciary employee, a reasonable notice of resignation period was 2 months given that: (i) Jesso was responsible for a significant percentage of the Company’s sales; (ii) the market for experienced HVAC salespeople was limited and it would likely take approximately 2 months to find a replacement; and (iii) Jesso knew that the Company’s other senior salesperson was resigning on the same day, thereby putting the Company in a very difficult position.

It is important to bear in mind that where an employee has signed a proper employment agreement which sets out a notice of resignation period, the employee will probably be bound by that contractual provision.  Likewise, for employees who work in jurisdictions that have employment standards legislation containing a notice of resignation provision, they may be bound by same.  Finally, there is a long line of separate case-law which confirms that fiduciary employees have obligations to provide reasonable notice of resignation to their employers.  That said, the Gagnon v. Jesso case is a helpful reminder that even when there is no contract, no legislation and no fiduciary relationship, an employee may still owe his or her employer a reasonable notice of resignation period.

The case of Gagnon & Associates Inc. v. Jesso et al. can be found here:  https://www.canlii.org/en/on/onsc/doc/2016/2016onsc209/2016onsc209.html?autocompleteStr=gagnon%20%26%20associates&autocompletePos=3.

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The Duty to Provide Reasonable Notice of Termination Cuts Both Ways

Miscarriage is a Disability

In a recent interim decision of the Ontario Human Rights Tribunal, adjudicator Jennifer Scott found that miscarriage could constitute a “disability”.  The door was also left open for employees terminated due to miscarriage to claim discrimination due to sex.

In the case of Mou v. MHPM Project Leaders, Mou was off work for approximately 3 weeks in January 2013 due to injuries sustained from a slip and fall accident.  She subsequently suffered a miscarriage in June of the same year and was off work for 2 days.  Her employment was terminated in February 2014 and Mou alleged that the termination related to her absences from work.  In February of 2016, a hearing took place to determine the threshold issue of whether Mou had established that she suffered from a disability.

The employer argued that in order for an illness or injury to constitute a disability, there must be some aspect of permanence or persistence to the condition.  In short, the employer argued that Mou’s health issues were temporary in nature and that Mou fully recovered from them prior to her termination.  Adjudicator Scott felt otherwise.  In coming to her decision she noted that while normal ailments such as a cold or flu are transitory, a miscarriage is not a common ailment and is not transitory.  In reaching that conclusion, Adjudicator Scott made reference to the fact that Mou continued to feel “significant emotional distress from the miscarriage” to the date of the hearing.

No mention is made in the decision as to whether any expert evidence was adduced by the employer with respect to whether miscarriage is a common ailment and it is suspected that no such evidence was provided.  One wonders whether the decision might have been different if the adjudicator had heard evidence to the effect that at least 1 in every 4 pregnancies is believed to end in miscarriage, or that a majority of women have at least one miscarriage during their childbearing years.  While there is no doubt that miscarriage can lead to emotional distress and even physical problems, it is possible that had this expert evidence been provided, it might have affected the adjudicator’s conclusion that miscarriage is not a common ailment.

Separate and apart from the issue of the miscarriage, it is clear from the decision that Mou’s slip and fall injuries also constituted a disability as they took approximately 3 weeks to heal.  Just as importantly, Adjudicator Scott made note of the fact that the employer invited Mou to apply for short-term disability coverage after her slip and fall, which is presumed to have been an indication that the employer believed her to be disabled.

It is important to note that although the Tribunal concluded that a miscarriage can constitute a disability, there has not yet been a final hearing in this case and no determination has been made as to whether Mou’s disability was a factor in her employer’s decision to terminate employment.

The case of Mou v. MHPM Project Leaders may be found here:  http://www.canlii.org/en/on/onhrt/doc/2016/2016hrto327/2016hrto327.html.

 

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Miscarriage is a Disability

The Final Word on Dependent Contractors

I wrote last year about the Ontario Superior Court of Justice’s decision in the case of Keenan v. Canac Kitchens (a link to same can be found here:  http://www.employmentandlabour.com/?s=Canac).   Last week the Ontario Court of Appeal upheld the Superior Court’s decision in Canac, and added some additional guidance with respect to the law surrounding dependent contractor relationships.

First, a quick reminder as to the facts of this particular case.  Lawrence and Marilyn Keenan were employed by Canac Kitchens beginning in 1976 and 1983 respectively.  In 1987, both were advised that their employment was coming to an end but that they could carry on as independent contractors.  An independent contractor agreement was signed by Marilyn and the Keenans carried on as before.  They continued working for Canac until the company closed its operations in 2009.  No notice of termination or pay in lieu of notice was provided.

While there were some factors in this case which suggested an independent contractor agreement, the lower court was particularly fixated on the fact that the Keenans worked exclusively for Canac until 2007.  Although they did some small amount of work for a competitor named Cartier between 2007 and 2009 due to a shortage of work at Canac, the judge accepted that Canac turned a blind eye to same.  In other words, for all intents and purposes the Keenans provided services only to Canac for almost the entire duration of the relationship.  Moreover, Canac had almost complete control of the work performed by the Keenans.

As a result, the Superior Court found that although the Keenans were contractors, they were in a dependent relationship to Canac and therefore entitled to notice of termination.  Due to the 32 and 25 years of service provided by Lawrence and Marilyn respectively (which resulted in an average length of service of 28.5 years between the two of them), the court found that a whopping 26 month notice period was reasonable.

Canac contended that the trial judge erred: (i) in finding that the Keenans were in an exclusive relationship with Canac; and (ii) in awarding 26 months of notice.  The Ontario Court of Appeal determined that while the Keenans performed some work for Cartier, the substantial majority of their work was for Canac.  More specifically, of the approximately 32 and 25 years of service which Lawrence and Marilyn gave to Canac, all but two were exclusively in the service of Canac.  The court further stated that the full history of the working relationship between the parties must be examined, and not just a snapshot at the time of termination.

In addition, the Court found that because of the age and length of service of the Keenans, the fact that for over a generation they were Canac’s public face to the outside world, and the fact that their income had come from Canac during the entirety of their working lives, an award in excess of 24 months was justified and the trial judge’s finding for a 26 month notice period was reasonable.

A copy of the Court of Appeal’s decision in Keenan v. Canac Kitchens may be found here:  http://www.ontariocourts.ca/decisions/2016/2016ONCA0079.htm.

The Final Word on Dependent Contractors

Terminating for Financial Reasons? Don’t Expect the Courts to Help You Out

Employers who undertake reductions in force due to financial difficulties should not count on employee notice periods being reduced as a result of the financial troubles.  This point was recently emphasized by the Ontario Court of Appeal in the decision of Michela v. St. Thomas of Villanova Catholic School.

Michela, Gomes and Carnovale were long-term teachers at St. Thomas of Villanova Catholic School, with 11, 13 and 8 years of service respectively.  All worked under a series of one-year contracts.  In May of 2013, the employer advised each of them in writing that they would not receive a contract renewal for the coming year because enrolment was expected to be lower.  Subsequently, in June of 2013 each of them was provided with a termination letter and advised that notice was not owed because they were employed pursuant to fixed-term contracts.

The claims were dealt with by summary judgment, and the motions judge determined that due to the succession of fixed-term contracts, the employees were really indefinite term employees and entitled to common law notice of termination.  However in determining that the reasonable notice period for each employee should be 6 months rather than the 12 months which was claimed, the judge made reference to the employer’s poor financial position.
In overturning the decision, the Court of Appeal made reference to the Bardal factors used to calculate reasonable notice at common law: the employee’s character of employment, length of service, age, and availability of similar employment having regard to experience, training and qualifications.  The Court found that the motions judge had mistakenly viewed “character of employment” through the lens of the employer rather than the employees, and stated that the financial position of the employer does not factor into the calculation of reasonable notice.  The court confirmed that while an employer’s financial position may be the reason for a termination without cause, the financial position of the employer does not justify a reduction in the notice period in bad times nor an increase when times are good.

For employers considering reductions in force during difficult times, it may be best to consider other options such as a temporary layoffs, ensuring that proper termination provisions are in place which provide only statutory minimums in the event of termination, or the provision of working notice.  While legal advice should be sought in order to ensure the best plan of action, it is clear at the very least that employers should not count on a reduced notice period due to a difficult financial position.

The decision in Michela v. St. Thomas of Villanova Catholic School can be read here:  http://www.ontariocourts.ca/decisions/2015/2015ONCA0801.htm.

Terminating for Financial Reasons? Don’t Expect the Courts to Help You Out

Medical Marijuana in the Workplace

With the recent expansion of legislation permitting the production, sale and use of marijuana for medical purposes, employers should begin to think about crafting a policy which addresses medical marijuana use in their workplace.

For example, the smoking of regular cigarettes is not permitted in buildings or near entrances and exists to buildings.  Employees who want a smoke usually need to head further afield during their breaks.  But is it proper to ask the same of employees who are smoking medical marijuana and may have a disability?  Is it proper to make them smoke in the presence of others, so that their disability is no longer a private matter?  Is it proper to have regular smokers ingesting medical marijuana smoke if all smokers are required to smoke in the same area?
These are but some of the questions which an employer should be considering  when drafting a policy to address the use of medical marijuana in the workplace.  Other questions to be considered include the following:

  • Should a designated room be provided on the premises in which medical marijuana users can smoke on a private and confidential basis?
  • What rules will apply to the employee?  Should he or she be required to cease working and report to a manager in the event of feeling unwell after medicating?  Should he or she be required to refrain from operating a motor vehicle or machinery for work purposes after medicating?
  • What documentation will be required from the employee’s treating healthcare professional?
  • What steps will be taken by the employer in order to ensure that the needs of the employee are being met, without compromising the employee’s ability to perform his or her job, or the safety of the workplace?
  • Who at the company must know about and approve an employee’s use of medical marijuana in the workplace?  What steps will be taken in order to otherwise keep that information confidential?

There are no guidelines in place to assist employers with drafting policies such as this, although reference to policies which provide for accommodations to disabled employees may be a good starting point.  The important thing for an employer is to be aware of the fact that it is best to have a policy in place in advance of these questions being raised by an employee seeking to medicate at work, and that we can assist with ensuring that your workplace policy strikes the proper legal balance with respect to meeting the needs of all potentially affected individuals.

Medical Marijuana in the Workplace

What If Your Independent Contractor Is Really a Dependent Contractor?

Many employers hire independent contractors to assist in their workplace and in most cases, the assumption is that doing so will result in minimal or no notice of termination having to be paid at the end of the relationship.  A recent case has confirmed that that assumption can be a risky one to make.

Earlier this year, the Ontario Superior Court of Justice released its decision in the case of Keenan v. Canac Kitchens.  For those familiar with employment law in Ontario, the name Canac Kitchens will be familiar as it has been on the losing end of a number of employment law cases.

In this particular case, Lawrence and Marilyn Keenan were employed by Canac Kitchens beginning in 1976 and 1983 respectively.  In 1987, both were advised that their employment was coming to an end but that they could carry on as independent contractors.  Independent contractor agreements were signed and the Keenans carried on as before.  They continued working for Canac until the company closed its operations in 2009.  No notice of termination or pay in lieu of notice was provided.

The court looked back at the 2009 Ontario Court of Appeal decision in McKee v. Reid’s Heritage Home Limited and confirmed that employment relationships exist on a continuum, with employees at one end, independent contractors at the other, and dependent contractors in the middle.  The court also confirmed that unlike independent contractors, dependent contractors are entitled to reasonable notice of termination.  In determining the status of the Keenans, the court looked to the following:

  • Whether the individuals were limited exclusively to the service of the company;
  • Whether the individuals were subject to the control of the company, not only as to the product sold, but when, where and how it was sold;
  • Whether the individuals had an investment in the “tools” relating to their service;
  • Whether the individuals undertook any risk in relation to their business, or had an expectation of profit apart from a fixed fee or commission; and
  • Whether the business was that of the individual or the company.

While there were some factors in this case which suggested an independent contractor agreement, the court was particularly fixated on the fact that the Keenans worked exclusively for Canac until 2007.  Although they did some small amount of work for a competitor between 2007 and 2009 due to a shortage of work at Canac, the judge accepted that Canac turned a blind eye to same.  In other words, for all intents and purposes the Keenans provided services only to Canac for almost the entire duration of the relationship.  Moreover, Canac had almost complete control of the work performed by the Keenans.

As a result, the court found that although the Keenans were contractors, they were in a dependent relationship to Canac and therefore entitled to notice of termination.  Due to the 32 and 25 years of service provided by Lawrence and Marilyn respectively (which resulted in an average length of service of 28.5 years between the two of them), the court found that a whopping 26 month notice period was reasonable.

As always, independent contractor agreements should be entered into with careful consideration as to the true nature of the relationship between the parties.  As the saying goes, “if it walks like a duck and talks like a duck, the chances are good that it’s a duck”.  In such a case, no amount of contractual drafting will lead to another conclusion.

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What If Your Independent Contractor Is Really a Dependent Contractor?

Ontario’s Changing Workplaces Review

In May, Ontario’s Ministry of Labour commenced what is being called the “Changing Workplaces Review”.  The review is intended to take a close look at the Employment Standards Act, 2000 (“ESA”) and the Labour Relations Act, 1995 (“LRA”), with the special advisors making recommendations to the Ontario government.  The review has been ordered both to address the significant period of time which has passed since both statutes were enacted, and the changes that have occurred in the workplace and society since then.   The special advisors appointed to conduct the review and issue recommendations are Michael Mitchell, a former Toronto partner from employee-side law firm Sack Goldblatt Mitchell, and the Honourable John Murray, a former judge and former a management-side lawyer.

It is anticipated that the advisors’ report to the government will touch on such things as: (a) the increase in non-standard working relationships (eg. involuntary part-time work, temporary jobs, and self-employment); (b) greater workplace diversity; (c) technological change; and (d) minimum standards under the ESA and LRA.  More specifically, and with reference to the questions posed in the government’s Guide to Consultations, it can be expected that the advisors may look at things like: (i) whether there should be more or less (or different) overtime exemptions for different groups of employees; (ii) whether additional types of leaves of absence are recommended; and (iii) whether the notice of termination provisions currently set out under the ESA are sufficient.

Public consultations are being held across the province from June through September, and written submissions can also be provided to the advisors by email, fax or regular mail prior to September 18th.  For further details on the dates and locations of public consultations, as well as where to direct written submissions, please click here.

 

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Ontario’s Changing Workplaces Review