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Ontario Court Rules that ESA Temporary Layoff may still Result in Constructive Dismissal

An Ontario Court has ruled in Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127 that even in cases where an employer has complied with the temporary layoff provisions of the Employment Standards Act, 2000 (the “Act”), the layoff does not protect the employer from a successful claim in constructive dismissal by the employee at common law. In the case, a 15 year Facilities Manager was told by his employer that he was being temporarily laid off and that he would be recalled in three months. His company benefits were continued during the layoff period. While the layoff was done in accordance with the Act, the employee immediately took the position that he had been effectively terminated when he was placed on layoff. The Court agreed with the employee, and held that absent a provision in the employee’s employment contract allowing for a temporary layoff, a unilateral layoff constituted a constructive dismissal, regardless of whether it was done in compliance with the Act. The employee in the case, who was unemployed for 15 months after he was placed on layoff, was less successful with the remedy that the Court ordered. The employee was entitled to be paid for the three months he was on layoff, but the Court found that he had failed to mitigate his damages when he declined the employer’s offer to return to his old job after the layoff period was over.

Employers who wish to place employees on unpaid layoff should use this case as a reminder to update their employment agreements to provide for the right to unilaterally impose temporary layoffs in accordance with the Employment Standards Act, 2000 without further notice or compensation.

To view the decision, click here: http://www.canlii.org/en/on/onsc/doc/2016/2016onsc4127/2016onsc4127.html.

 

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Ontario Court Rules that ESA Temporary Layoff may still Result in Constructive Dismissal

BC Minimum Wage Increase Now in Effect

British Columbia employers are reminded that the general minimum wage in British Columbia increased on September 15, 2016 to $10.85 per hour, up from $10.45 per hour.  The liquor server minimum wage also increased to $9.60 per hour. Employers are reminded to update their employment contracts and practices to ensure they reflect the new minimum wage.

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BC Minimum Wage Increase Now in Effect

RECORDS OF EMPLOYMENT – NOT JUST FOR TERMINATIONS

The end of summer is (unfortunately) just around the corner, which for many employers means saying goodbye to student employees and seasonal workers. Most employers know that they need to complete a record of employment (ROE) when an employee terminates, but there are a number of other circumstances that require an ROE. Now is as good a time as any for a quick refresher on when employers need to complete a record of employment (ROE) for an employee and why it is important to do so correctly. My goal is not to give detailed instructions about completing ROEs; but to highlight the importance of properly issuing them and the potential liability from failing to do so.

ROE Overview

The ROE is the form employers complete when an employee receiving insurable earnings stops working such that he/she experiences an interruption of earnings. Service Canada considers ROEs to be the single most important documents in the Employment Insurance (EI) program.

When to Complete an ROE

You may have noticed I used the term “interruption of earnings” above and not “termination of employment” when describing when an ROE is required. That is because, as mentioned, ROEs are required in a wider range of circumstances (I will not get into the technical definition of “insurable earnings”, but suffice to say it includes most employees’ salary or wages).

An interruption of earnings occurs in the following situations:

  • when an employee has had or is anticipated to have seven consecutive calendar days with no work and no insurable earnings from the employer (the “seven-day rule”);
  • when an employee’s salary falls below 60% of his/her regular weekly earnings because of certain absences (illness, injury, quarantine, pregnancy, parental leave, compassionate care leave or family responsibility leave); or
  • when an employee starts receiving wage loss insurance payments.

In addition to the above interruptions of service, employers must also complete ROEs in the following instances:

  • when Service Canada requests an ROE for an employee;
  • when an employee’s pay period type changes (e.g., weekly to bi-weekly);
  • when an employee is transferred to another Canada Revenue Agency (CRA) payroll number;
  • when there is a change in ownership leading to a change in the employer;
  • when the employer declares bankruptcy;
  • when a part-time, on-call or casual worker is no longer on the employer’s active employment list or has not done any work or earned any insurable earnings for 30 days; or
  • when an employee is on a self-funded leave of absence.

The Importance of ROEs

There is not a great deal of litigation relating to ROEs, but incorrectly completing (or failing to complete) an ROE has attracted common law liability for employers.

One type of case occurs when an employer intentionally misrepresents the reason for the interruption of service or withholds an ROE from a departing employee. Allegations of misconduct on an ROE can disqualify an employee from eligibility for EI. If the allegations are untrue, or if an ROE is withheld, the employer can be liable to the employee for the resulting loss of EI payments and potentially for additional damages for bad faith conduct towards the employee.

Liability may also arise in cases where an ROE is used as evidence that a seasonal or fixed-term employee is in fact a permanent employee and therefore entitled to common law notice.  Courts have found that using the word “unknown” instead of “not returning” on an ROE for a seasonal worker indicated that the employment was permanent and that the seasonal return date was simply unknown at the time. Similarly, failing to issue an ROE at the end of each of a series of fixed-term contracts has been evidence that an employee was a permanent employee.

ROEs may be a hassle to complete, but it is important that employers keep track not only of when they need to be issued, but to ensure that they are completed correctly and accurately. For more information about completing ROEs, the CRA provides a helpful guide (Guide) and, of course, you may get in touch with a member of Dentons’ Labour and Employment group.

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RECORDS OF EMPLOYMENT – NOT JUST FOR TERMINATIONS

Sale of a Business is Not Constructive Dismissal

In the decision 2108805 Ontario Inc. v. Boulad[1] rendered on January 25, 2016, the Quebec Court of Appeal overruled the trial judge who had considered that the change of employer resulting from a change of ownership constituted a unilateral and substantial modification of Mr. Boulad’s essential terms and conditions of employment and therefore awarded him an indemnity in lieu of notice of termination of employment equivalent to 24 months of salary and benefits.

Mr. Boulad was director of a hotel owned by the Westmount Hospitality Group (“Westmount“) an important international hotel group. Westmount sold the hotel for which Mr. Boulad was responsible to Jesta, a much smaller hotel group.  Pursuant to the transaction and to section 2097 of the Civil Code of Quebec (“CCQ“), Jesta undertook to continue Mr. Boulad’s employment under the same terms and conditions of employment.  Mr. Boulad refused to pursue employment with Jesta and asked Westmount to relocate him at another hotel or pay him a severance package.  Westmount denied Mr. Boulad’s request as it considered his employment was being continued with Jesta pursuant to section 2097 CCQ.  Mr. Boulad sued Westmount claiming that the change of employer amounted to a constructive dismissal, namely considering the loss of prestige associated with his employment with an important hotel group and the loss of transfer and promotion opportunities at the international level.

In its decision, the Court of Appeal confirmed the imperative and declaratory nature of section 2097 CCQ which stipulates that the employment contract continues to be in force and binding following the alienation of an enterprise.

The change of employer shall not be considered a substantial modification of the essential terms and conditions of employment for the sole reason that the new employer becomes the debtor of the previous employer’s obligations. The Court of Appeal also acknowledged that a business is not static and may evolve through time.  The workplace atmosphere and environment, as well as transfer and promotion opportunities are generally not part of the terms and conditions of employment unless expressly stipulated in the employment contract. In this particular case, the evidence fell short from demonstrating that Westmount and Mr. Boulad had agreed to such considerations being part of the terms and conditions of employment.  Both Westmount and Jesta abided by their legal obligations pursuant to section 2097 CCQ and Mr. Boulad could not legally or contractually require Westmount to relocate him or pay him severance. Mr. Boulad’s refusal to work for Jesta therefore constituted a voluntary resignation.

Accordingly, an employee who does not wish to continue employment with a successor employer may resign from employment but will have no recourse against the vendor or the purchaser, subject to specific undertakings in the employment agreement.

[1] 2016 QCCA 75.

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Sale of a Business is Not Constructive Dismissal

July 1 Changes to AODA Customer Service Standards

Effective July 1, 2016, the Customer Service Standard Regulation will be revoked.  An expanded Integrated Accessibility Standards Regulation will include all standards, including customer service requirements.

Following public consultations, there are certain changes to the accessible customer service standard:

Training Required for ALL Employees 

The primary change is with respect to the extent of training required on accessible customer service.  As you will recall, training on accessible customer service has been required for employees and third parties who work with customers or who participate in developing your policies on accessible customer service.  As of July 1, 2016 all employees must be trained on accessible customer service, as well as any third parties who provide goods, services or facilities on your behalf to the public or participate in developing your policies (for example, a member of your board of directors).  While the government has been notifying organizations that the training must be completed by July 1, 2016, the Regulation states that the training must take place “as soon as practicable”.  Ongoing training is also required on any changes to the company’s policy.  All organizations with 50 or more employees must keep records of the training provided, including the dates of training and the number of people trained.  We advise sign-in sheets or on-line logs with names included.  In addition, all organizations with 50+ employees must prepare a document that describes the training policy, summarizes the content of the training, specifies when training is to be provided and, on request, provide a copy of this document to any person who so requests.

Expanded Definition of “Service Animal”

While this is unlikely to affect many customer service policies, the definition of a service animal has been expanded to include a number of ways in which the individual with the service animal can confirm that they need the service animal for reasons relating to a disability.  Documentation from a number of different regulated health professionals will be acceptable, including, for example, a member of the College of Psychologists of Ontario.

Support Persons

In the event that your organization has health and safety reasons  to require a person with a disability to be accompanied by a support person when on your premises, you must consult first with the person with the disability, consider the available evidence and make a determination that the support person is necessary and there is no other reasonable alternative.

Expanded Feedback Process

The feedback process that you have established under the Accessible Customer Service Standard to allow the public to comment on how you provide accessible customer service has been expanded.  The feedback process must be accessible to people with disabilities, and accessible formats and communication supports must be provided on request.  Organizations with 50 or more employees must prepare a document describing the feedback process, provide this document to anyone on request and include a notice on the premises and/or on the website (or any other reasonable method) that this document is available upon request.

Because the Regulation now defines a large organization as having 50 or more employees, a business with 20 to 49 employees is no longer legally required to have the accessible customer service policy in writing or to make it public.  However, it is advisable, in our view, to have the policy in writing in the event of any complaints or disputes.

Reporting Online

As a reminder, the Regulation sets out the following timetable for filing the online compliance report:

  • Government of Ontario – annually commencing December 31, 2013
  • Public sector organizations – every 2 years commencing December 31, 2013
  • Large organizations with 50 or more employees – every 3 years commencing December 31, 2014
  • Organizations with 20 to 49 employees – every 3 years commencing December 31, 2014, but only with respect to the accessibility standards for customer service
  • Organizations with 1 to 19 – no online compliance reporting is required.

The Ontario government is preparing a new training module, expected to be available in August 2016.  In the meantime, you can access a free customer service training module at: http://curriculum.org/sae-en/index2.php Just click on the “Start course” button.

July 1 Changes to AODA Customer Service Standards

A Reference Guide for Reference Letters

One of the more confusing issues that employers deal with is what to do in the face a request for a reference letter by a departing employee. While dealing with a reference letter for a stellar employee is easy, the task becomes more difficult when determining what to do with a request for a reference letter from an employee whom the employer was glad to see go or whom the employer was forced to dismiss.

A.  When should a reference letter be provided?

There are two reasons why an employer should think carefully before refusing to provide a letter of reference to a departing employee.

First, a reference letter generally assists a departing employee in finding new employment. As a result, on a practical level it is usually in the best interest of both the employer and the employee for the employer to provide a reference letter.

Second, in Canada the courts impose a duty of good faith and fair dealing in their treatment of departing employees. As part of this duty, employers are expected to be candid, reasonable and honest in dealing with departing employees. Where an employer breaches this duty, the employer may be held liable for damages to the employee that arise as a result of the breach.

One of the obligations that has been identified as part of the duty of good faith and fair dealing is for the employer to provide a letter of reference to a departing employee where there is no legitimate reason for refusing the request. For example, employers have been found to have breached their duties of good faith where the refusal to provide a letter of reference was calculated to purposefully make it harder for an employee to find new employment, to pressure the employee into settling a wrongful dismissal claim or to punish the employee. As a result, an employer must have a legitimate reason for refusing to provide a letter of reference. Where there are no specific performance issues and the employee was not terminated for cause, the safest course is to provide a letter of reference.

As a consequence, the better practice is to only refuse to provide a letter of reference in cases where the employer has a legitimate reason for the refusal, such as where the employee’s performance during employment was unsatisfactory.

B.  What should the reference letter say?

Reference letters can cover the range from a glowing endorsement, to a neutral confirmation of employment to a warning to prospective employers regarding a highly unsuitable employee. In order to know how to approach the reference letter, it is important to know something of potential liabilities.

For the most part the liability that arises out of authoring a reference letter is governed by the law of tort with liability focusing on two primary groups of potential claimants – the former employee and the new employer.

a) Liability Toward the Departing Employee

With respect to the former employee, claims will generally arise as a result of a negative reference letter that damages the former employee’s reputation or interferes with the former employee’s ability to find work and maintain employment. In order for liability to attach, the former employee will have to show that the letter materially affected his or her ability to find work and that the negative reference was either untruthful or misleading in some way. Common examples of such liability include:

  • Liability in defamation for statements made about the employee in a reference letter that are untrue and are damaging to the employee’s reputation;
  • Liability under the principles of interference with contractual relations or inducement of breach of contract where an untrue reference provided by the former employer causes the employee’s current employer to terminate the former employee’s employment. A common example of this would be where a former employer decides to unfairly “blackball” a former employee in a particular industry;
  • Liability in the form of increased exposure to damages in the case of a wrongfully dismissed employee where the employee is unable to find alternative employment as quickly as he or she may have otherwise found alternative employment due to a misleading or untruthful reference; and
  • Liability imposed as a result of a breach of the duty of good faith as a result of the employer providing a misleading or untruthful reference.

b) Liability Toward a Prospective Employer

In contrast to the liabilities that may arise with respect to former employees, the liability that may arise with respect to prospective employers is usually based on reference letters that are unjustifiably positive.

In general terms such liability arises out of the principles of negligent misrepresentation. Liability for negligent misrepresentation can arise where a prospective employer reasonably relies on a misleading positive reference from a former employer in making a hiring decision that goes very badly.

An example of such a situation might be where a former employer who has terminated an employee for theft proceeds to negligently provide a positive reference for the employee to a prospective employer for a position where the employee will be handling large sums of cash in an unsupervised position. Should the employee subsequently steal from his or her new employer, the former employer may be held at least partially liable for the loss.

c) Avoiding Problems

To avoid problems, there are a number of guidelines to follow.

  1. Make sure the information in your reference letters is accurate. Most if not all liability arises out of reference letters that are either misleading or untrue.
  2. Avoid subjective opinions and stick to objective facts.
  3. Do not use reference letters to “punish” a former employee or make it more difficult for the former employee to find alternate employment.
  4. Use caution in drafting negative reference letters. Negative reference letters should be reserved for the clearest of cases involving employee misconduct that is objectively verifiable and well documented. When in doubt, the employer should err on the side of caution and either refuse to provide a reference or in more marginal cases provide a neutral reference that merely provides confirmation of past employment without any comment on the employee’s suitability.

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A Reference Guide for Reference Letters

Limiting Liability: Incentives and Benefits on Termination of Employment

You’ve terminated an employee without cause, what do you owe them? It may be more than you think.

As a starting position, employees are entitled to compensation for what they would have earned during a reasonable period of notice, unless that right is limited by specific agreement. This includes all elements of an employee’s compensation.

Employment agreements often set an agreed notice period in the event of without-cause termination, limiting the broad and unpredictable common law notice period to some other (presumably shorter) length of time, such as the minimum notice period under employment standards legislation. In any event, if the employer wants to provide payment in lieu of working notice, what must be paid?

Not all of an employee’s compensation is contained in the four corners of the employment agreement. The entitlements under any benefit or incentive plan (such as a bonus, stock option or registered pension plan) need to be accounted for when determining damages arising from termination without cause. For instance, what is the terminated employee’s entitlement to options that vest during the notice period? What about scheduled bonuses? Is an employee entitled to remain a member of the pension plan throughout any notice period?

The answer lies in the text of the relevant agreement, be it a stock option agreement, a particular stock option grant, a bonus plan, a pension plan or some other agreement. Just as with employment agreements, the terms of a benefit or incentive plan can limit an employee’s post-termination entitlement – including restricting participation to periods of active employment – but only to the extent that the plan terms are clear and unambiguous, and are brought to the employee’s attention when they are introduced. The general legal principles are:

  • An employee’s rights and obligations are generally governed by the terms of the agreement.
  • If an employee’s entitlement is limited, but the limiting language is ambiguous, a court will typically resolve the ambiguity in the employee’s favour. This is especially true if the agreement was imposed by the employer without negotiation.
  • If the agreement is unambiguous and clearly states that the employee’s rights are limited in a specific way, including on a dismissal without cause, the agreement should govern, as long as (1) the employee was provided with a copy of the plan and/or advised of the plan language during employment, such as through a benefit booklet; and (2) the plan otherwise complies with employment standards legislation.

So a plan/agreement may rebut the principle that the benefit continues during the common law notice period, as long as it clearly and unambiguously states that any right to participate in the plan ends on the later of (i) the day active employment ends (i.e., does not continue into the notice period); or (ii) the end of the minimum period during which benefits must be continued by legislation (for instance, Ontario’s Employment Standards Act, 2000 requires that employers maintain a terminated employee’s benefits during the statutory notice period).  In that case, the agreement will stand and plan participation will end accordingly. However, if the language of the plan is unclear, the employee will be entitled to any benefit that would have accrued during the notice period.

It is important to keep in mind that the threshold for clarity is high and can be difficult to meet in cases of termination without cause. For example, Canadian courts have, in certain circumstances, decided that the terms “termination for any cause” or “involuntary termination” were not sufficiently clear or unambiguous to prohibit continuation during the reasonable notice period, because it was not clear in the plan whether employment was “terminated” as of the last day of work, or at the end of the common law notice period.

If you are looking for clarity and predictability in settling severance packages, you should set clear and unambiguous parameters on notice periods and post-termination entitlements, not only in your employment agreements, but also in the documents that make up your benefits and incentive programs.

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Limiting Liability: Incentives and Benefits on Termination of Employment

Critical employment issues facing multinational employers

Join Dentons’ global Employment and Labour practice group for a unique, multi-country panel discussion examining critical employment issues that multinational employers face. The event will be held in person in our New York office and broadcast via webinar.

Agenda and speakers
Panels moderated by global practice leader Brian Cousin

Wednesday, June 29, 2016
3:45 p.m. – Registration
4:30 p.m. – Program
7 p.m. – Cocktail reception

Registration (3:45–4:30 p.m.)

Avoiding Violations of Employee Privacy Rights (4:30–5:20 p.m.) Neil Capobianco (US), Dante Trevedan (Mexico), Michael Bronstein (UK), Katell Deniel-Allioux (France), Markus Diepold (Germany), Grace Aoshuang Young (China), Jeff Mitchell (Canada)

Break (5:20–5:30 p.m.)

Implementing an Effective Restrictive Covenants Strategy (5:30–6:30 p.m) Richard Scharlat (US), Dante Trevedan (Mexico), Michael Bronstein (UK), Katell Deniel-Allioux (France), Markus Diepold (Germany), Grace Aoshuang Young (China), Jeff Mitchell (Canada)

Best Practices in Coordinating Global Human Resource Solutions (6:30–7 p.m.) Richard Scharlat (US), Katell Deniel-Allioux (France)

After the discussion, please stay for a networking cocktail reception.

Venue
Dentons
Tribeca conference room
1221 Avenue of the Americas
New York, NY | Map

Questions For more information, please contact Susan DeLeva at +1 212 398 8474.

Click here to RSVP

Critical employment issues facing multinational employers

Fixed Term Contracts: Damages for “trouble and inconvenience”

In a recent decision[1], the Superior Court of Quebec held that the termination of a fixed term contract of employment constitutes a breach of contract which may allow for an award of damages for “troubles and inconveniences” suffered by the employee, in addition to damages for early termination.

The Plaintiff had been terminated without cause 15 months before the expiry of the term of his employment contract. The Court concluded that the unilateral termination of the Plaintiff’s fixed term contract was illegal and ordered the Employer to pay the Plaintiff an indemnity equivalent to the wages he should have received until the end of the contract.

The main interest of this case is the Plaintiff’s claim for $50,000 as damages for “troubles and inconveniences”, which required the Court to consider whether such damages could be compensated in the context of a fixed term contract of employment.

In its analysis, the Court first establishes that, while the termination of the Plaintiff was not based on serious grounds, it was not made in an abusive or humiliating fashion. However, the judge accepted that it had nonetheless caused severe stress and anxiety to the Plaintiff, as is almost always the case when a person is terminated.

The Court noted that according to a well-established jurisprudence[2], in the case of an indeterminate term contract, its unilateral termination by the employer is not, in itself, a civil fault, even if it prejudices the employee. Consequently, except when the termination is made in an abusive way, the compensation for troubles and inconveniences is not available to the employee. This rationale is grounded in the principle that either party to an indeterminate term contract of employment may terminate it by giving notice of its termination to the other party, as recognized under Section 2091 of the Civil Code of Quebec.

However, a fixed term contract is binding on the parties until its expiry and may only be unilaterally resiliated for a serious reason. Thus, the employer who, without a serious reason, resiliates the fixed term contract of an employee does not exercise a right, but rather breaches one of its contractual duties. If the evidence shows that this breach of contract caused troubles and inconveniences, such as stress or anxiety, the terminated employee could be compensated for these damages. In this matter, the Court awarded the Plaintiff $5,000 for troubles and inconveniences.

Thus, according to this decision, a distinction must be made between the unilateral resiliation of indeterminate and fixed term contracts with regards to the award of damages for non-pecuniary loss.

[1] Bouasse v. Gemme canadienne PA inc., 2016 QCCS 1263.

[2] 1994 CanLII 5837 (QC CA).

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Fixed Term Contracts: Damages for “trouble and inconvenience”

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