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Human Rights claims in the Ontario courts – Now What?

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

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

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

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

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

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Human Rights claims in the Ontario courts – Now What?

Receipt of Pornographic Material was not Just Cause for Dismissal: Appeal Court

In the 2001 case of McKinley v. B.C. Tel, the Supreme Court of Canada ruled that a contextual approach is required in order to determine whether there is just cause for termination of employment.   A recent wrongful dismissal case involving receipt of pornographic material illustrates how the contextual approach will be applied by courts.

In February 2013, the Court of Appeal of New Brunswick upheld a lower court finding in the case of Asurion Canada v. Brown and Cormier,  to the effect that dismissal without notice was a disproportionately severe penalty for receiving pornographic emails at work.  At the time of termination, Cormier had been with Asurion for 8 years and was a call centre supervisor.  Brown was employed by Asurion for 9 years and was vendor payables specialist.  Both men had a good employment history with the company.  Both men, unfortunately, also had a mutual friend who liked to send them pornographic emails.

During the period from mid May to mid July 2010, Cormier and Brown were sent over a dozen unsolicited emails from their friend.  The emails were promptly sent to home email accounts and deleted.  They were not shared with anyone at work. When Asurion became aware of the emails in July as a result of its network monitoring system, both men were dismissed immediately due to breach of the company’s policies and breach of trust.

While the company did have a policy which prohibited “accessing, transmitting, receiving or storing discriminatory, profane, harassing or defamatory information”, the court found that the policy was not reasonable given that: (i) ”receiving” information does not involve a positive act; and (ii) the emails in question were unsolicited.  More importantly, the court confirmed that the response of the company was not proportionate to the actions of the employees.  In particular, these longstanding employees had unblemished records, none of the emails were shared with fellow employees, and the images attached to the emails fell within the category of “perfectly legal adult pornography” and were not in violation of the Criminal Code of Canada.

Asurion had an employee handbook with a comprehensive Computer Use and Harassment policy.  The company’s employees were required to read the company’s policies and there was some suggestion that they were reminded of the Computer Use policy each time that they logged onto their work computers.  The company went even further, and used a network monitoring system in order to ensure that the policies were being complied with.  Ultimately it was all for naught, as the policy was found to be unreasonable and the application of it was disproportionately severe when viewed through the lens of the employees’ years of service and specific actions or inactions in the case at hand.

This recent decision serves as a good reminder that any time a termination for cause is being considered, the employer should consider not just the offending actions of the employee, but the other relevant circumstances of the employee’s employment.

Asurion Canada Inc. v. Brown and Cormier, 2013 NBCA 13 (CanLII)

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Receipt of Pornographic Material was not Just Cause for Dismissal: Appeal Court

HR Professionals: The Key to Smooth Corporate Acquisitions

Although human resources professionals are not always recognized for their efforts during a corporate acquisition, the work which they do behind the scenes can often make the difference between an acquisition succeeding or failing.  The following is a brief summary of key issues for HR professionals to stay on top of, long before an acquisition is ever contemplated, during the due diligence phase and right through to closing.

There are two types of transactions which can result in the purchase and sale of a business – a share purchase and an asset purchase.  In a share purchase, the corporate identity of the target company does not change and as a result, the employees remain employed by the same purchaser after closing.  Unless new employment agreements are negotiated with the purchaser, the employment terms and conditions of those employees will not change on closing.  In an asset purchase however, only certain assets of the target company are purchased and the employees are therefore generally terminated by the target company unless they agree to accept new employment with the purchaser.

Keeping Your House in Order:

All too often, proposed acquisitions fall through after the purchaser becomes aware of potential employee liabilities which it will have to assume in the event of an acquisition.  As an HR professional, you can assist with minimizing those liabilities long before an acquisition is being contemplated, by ensuring that: (i) well-drafted employment agreements are properly entered into; (ii) the company is protected with any necessary confidentiality, intellectual property and restrictive covenant agreements; (iii) there are no significant wages, vacation pay and overtime pay accruals; (iv) employee claims and complaints are kept to a minimum; and (v) mandatory statutory obligations are complied with (eg. WSIB registration; compliance with the Occupational Health and Safety Act; compliance with the Pay Equity Act).  When potential employment liabilities are kept to a minimum, it greatly reduces the risk of a purchaser walking away from a deal due to the added costs of correcting the liabilities.

Due Diligence:

HR professionals should be aware of the fact that even in an asset purchase, the Employment Standards Act, 2000 contains successor employer provisions.  In particular, section 9 of the ESA states that if a purchaser hires an employee of a vendor within 13 weeks of closing, the purchaser will be deemed to have taken on the employee with all of his or her prior years of service with the vendor.  Therefore, although the inclination may be to think that the purchaser in an asset deal can “fix” employment problems hand-in-hand with the hiring of employees on closing, sometimes employees will balk at going to a new employer if they are not being hired on similar or better terms to those which governed their employment with the vendor.  In this regard, it is often helpful for the vendor to work with the purchaser during the due diligence phase in order to determine who will be provided with offers of new employment and what the new and continuing terms of employment should be.

HR professionals in Ontario should also be aware of the fact that the Personal Information Protection and Electronic Documents Act (PIPEDA) does not yet have a business transaction exemption.  Although employee personal information is not generally caught under PIPEDA, it can be subject to PIPEDA when employee personal information is being collected, used or disclosed for commercial purposes such as an acquisition.  In order to ensure that there are no personal information breaches in connection with the acquisition of a company, if you work for the vendor it is wise to get the employees to sign a consent to the disclosure of their personal information at the time that they are first hired, as to do so in the midst of a transaction can tip employees off before the transaction becomes publicly known.  Whether or not the employees have signed consents at the time of hire, it is also wise for the vendor and the purchaser to enter into confidentiality agreements with respect to employee personal information which may be disclosed in relation to the transaction.

Closing:

As the closing of the transaction approaches, it is particularly important for HR professionals for both the vendor and the purchaser to try to work together to determine such issues as who will take responsibility for accrued vacation, whether releases will be sought from employees who are part of an asset purchase, whether and what type of new employment agreements will be offered to those employees who are remaining on, and ensuring that employees who are not remaining on are properly terminated at or prior to closing.  As well, there is often a need for certain key employees to remain on for a limited period to assist with transition work, and thought often needs to be given to whether those employees should be provided with a special retention bonus agreement or whether the expectation is that they will simply work out their notice of termination period doing transition work.

As always, it is important for HR professionals to obtain legal advice from an employment law specialist in conjunction with the above steps.  Together, they can make the difference between a difficult acquisition and a successful one.

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HR Professionals: The Key to Smooth Corporate Acquisitions

Ontario Jury Awards Ex-Employee $1.4 Million for Mistreatment by Former Manager

In a cautionary tale for employers, a jury in Windsor, Ontario awarded $1.4 million in damages to a former Wal-Mart employee who alleged that she had been constructively dismissed after being subjected to intentional infliction of mental suffering by her former manager.

The jury award included $1.2 million in punitive damages and damages for mental distress against the employer, and an additional $250,000.00 in punitive damages and damages for mental distress against the manager. The former employee established that the manager had punched her on the arm on two occasions, and had subjected her to profane and insulting mental abuse. Those allegations were that the manager had called the employee “a [expletive] idiot” in front of her co-workers, and that the manager had made the former employee count skids in front of co-workers in order to prove to him that she could accurately count.

A link to the Windsor Star article on the court decision is attached: http://blogs.windsorstar.com/2012/10/10/walmart-must-pay-1-4-million-for-mistreating-employee/

The employer has already appealed the jury’s verdict to the Ontario Court of Appeal, calling the award “…wholly disproportionate and/or shockingly unreasonable.” This is not surprising, given that this award would set a new high-water mark for punitive damages in a wrongful dismissal case. (It appears that the jury may have based its award roughly on the amount that the former employee, who is currently 42 years of age, would have earned had she remained employed in her position until age 65. This figure had been raised by the former employee’s counsel in his closing submissions, although the trial judge had specifically instructed the jury not to consider that figure.)

Although, in our view, it is likely that the jury award will be set aside or reduced on appeal, this decision does underscore how important it is for employers to have a clear policy against incidents of workplace violence and harassment and to take prompt action to address such incidents when potential allegations of this nature come to light.

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Ontario Jury Awards Ex-Employee $1.4 Million for Mistreatment by Former Manager

Terminated Employee who signed Release Still Entitled to Accumulated Sick Leave Benefits

Employers are often concerned about whether terminated employees can claim entitlement to accumulated sick leave credits. This case shows how important it is to scrutinize every word in termination agreements; unclear language can come back to haunt the employer.

The employee had been employed for 29 years with the County of Haldimand and its predecessor municipalities. He was presented with and accepted a severance package. He signed a Release and in essence retired.

The severance agreement was incorporated into the Release and allowed for a claim for “usual retiree benefits.” The employee relied on that language to claim payment of accumulated sick leave pursuant to a section of the employer’s Policy Manual which stated:

“An employee hired prior March 12, 1981 and who has a minimum of five (5) years of continuous service will be entitled to a payment equal to the value of one-half (.5) of the balance of the employee’s accumulated sick leave credits to a maximum of one hundred thirty (130) days pay at current salary, upon termination of employment for any reason.”

At trial, judgment was awarded to the plaintiff for payment of accumulated sick leave credits. The employer appealed and argued that the severance agreement did not specifically give entitlement to sick leave credits, and the Release barred the employee’s lawsuit.

The court decided that the only “retiree benefit” that the employee had was the payment of accumulated sick leave pursuant to the Policy Manual. As such, the severance agreement’s reference to “retiree benefits” must mean the accumulated sick leave credits.

The court also held that the Release did not bar the claim because the severance agreement was incorporated into the Release.

Lastly, the court rejected the employer’s argument that the two-year limitation period started when the employee signed the severance agreement. Instead, because sick leave credits are part of retiree benefits, the court decided that the limitation period should begin May 31, 2008, the day when he “retired”.

Daniel John Burgener v. Corporation of Haldimand County, 2012 ONSC 5230

The author gratefully acknowledges the assistance of Simmy Yu in the writing of this article.

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Terminated Employee who signed Release Still Entitled to Accumulated Sick Leave Benefits

The Return of Large Punitive Damages Awards in Wrongful Dismissal Cases?

Are large punitive damages awards in wrongful dismissal coming back?  Looking at the trial court’s decision in the case of Pate v. Galway-Cavendish and Harvey (Townships), which is currently under appeal, one wonders.

Mr. Pate was a 9+ year employee at the Townships, who was terminated for cause due to his alleged non-remittance of building permit fees.  When he refused to resign (after being given no details of the allegations against him), he was dismissed and the matter was reported to the police.  In part due to the allegations against him and the ensuing criminal trial, Mr. Pate’s marriage and his side business with his wife both failed.  In addition, he was unable to re-establish a career as a municipal official.

Mr. Pate was subsequently acquitted, and it was determined by the trial judge that the employer had failed to disclose key information to the Crown which would have resulted in no charges having been laid in the first place.  The trial judge felt that the employer’s conduct merited relief in the form of a punitive damages award, due to the fact that damages for wrongful dismissal could not adequately address the fact that Mr. Pate’s career was effectively destroyed due to the allegations.  However due to the principle of proportionality, the trial judge awarded Mr. Pate only $25,000 in punitive damages.  The Ontario Court of Appeal subsequently overturned that decision and ordered that a new trial be conducted with respect to the quantum of punitive damages and another issue.

With reference to the damage caused to Mr. Pate as well as the fact that both the criminal proceedings and the wrongful dismissal trial took years to be dealt with, on the second time around the trial judge took full advantage of the Court of Appeal’s open invitation to punish the employer for its conduct, and increased the punitive damages award from $25,000 to $550,000.

While the matter is under appeal once again and it may be that the $550,000 was excessive, the Court of Appeal’s unusual invitation to the trial judge to reassess punitive damages at a higher amount makes it clear that our province’s highest court is not averse to punishing employers whose conduct is deserving of signficant punishment.

Pate Estate v. Galway-Cavendish and Harvey (Townships), 2011 ONSC 6620 (CanLII)

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The Return of Large Punitive Damages Awards in Wrongful Dismissal Cases?

Denunciation, Deterrence and Retribution: Jury Awards Dismissed Employee $573,000 in Punitive Damages

The Vancouver Sun has reported that a British Columbia jury recently awarded employee Larry Higginson over half a million dollars in punitive damages, on top of a $236,000 award for wrongful dismissal, taking damages flowing from a wrongful dismissal to new heights in Higginson v. Babine Forest Products Ltd. and Hampton Lumber Mills Inc.

The Jury decision is not reported, however according to reports, Mr. Higginson had been employed for 34 years with the Defendant, Babine Forest Products Ltd., until he was dismissed on October 14, 2009, apparently for just cause. The employer alleged that Mr. Higginson failed to perform his duties as a manager. In response, Mr. Higginson alleged that cause had not been established and that the employer had set him up for termination of employment, had made his working environment miserable and had alleged cause to avoid the obligation to pay notice of termination of employment to long-term employees.

The Prince George B.C. jury found that the employer did not have cause to terminate his employment, and awarded damages in excess of $800,000 as a result of the wrongful dismissal.

Such a large punitive damages award has not been seen since the 2008 Ontario Superior Court of Justice awarded $500,000 to a wrongfully dismissed employee in Keays v. Honda Canada Inc.  However, in Keays, the Supreme Court of Canada (2008 SCC 39) overturned the punitive damages award on appeal.

A Notice of Appeal was filed in Higginson on July 18, 2012.

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Denunciation, Deterrence and Retribution: Jury Awards Dismissed Employee $573,000 in Punitive Damages

Being Kicked in the Behind is No Laughing Matter: Employee’s Exaggerated Account of Workplace Altercation not Grounds for Summary Dismissal

Teresa Scholer was a fifty-five year old employee working in an entry-level position with the defendant employer. At the time of the termination of her employment, she had been working with the employer for approximately nine or ten months. In early 2010, Ms. Scholer was attending to her duties when she had an exchange with a co-worker. Inexplicably, after the exchange, her co-worker kicked Ms. Scholer in the buttocks. This event was captured by the employer’s video surveillance. The video surveillance also captured Ms. Scholer attempting to return the kick.

It was not clear from the video whether this was horseplay or something more aggressive. However, Ms. Scholer’s position was that she had been assaulted, and she complained to the employer that she was considering seeking criminal charges against her co-worker. She also complained about an earlier incident involving the same co-worker and about the fact that the co-worker had been scheduled for more shifts.

The employer viewed the surveillance, and considered that Ms. Scholer had not been honest about the incident, and had exaggerated it. Ms. Scholer was informed of the employer’s view of her description of events, but before Ms. Scholer was given an opportunity to review the surveillance, the employer terminated her employment, allegedly because she was difficult. Ms. Scholer was paid statutory notice of termination of employment, but the employer nevertheless insisted at trial that the termination had been for just cause.

The B.C. Provincial Court found that the employer had not established just cause. In particular, the Court found the employer’s focus on Ms. Scholer’s description of the incident, rather than the fact that she had been kicked in the buttocks, perplexing.  In all, the Court found that Ms. Scholer’s inaccurate description of the incident was neither in and of itself just cause for dismissal, nor was it a culminating incident that would justify the termination of her employment. There was no evidence that prior to her termination Ms. Scholer was aware that her job was in jeopardy. Finding that she was wrongfully dismissed, the Court assessed a notice period of four weeks given her particular circumstances including her short service.

Scholer v. Hart Drug Mart Ltd., 2012 BCPC 220 (CanLII)

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Being Kicked in the Behind is No Laughing Matter: Employee’s Exaggerated Account of Workplace Altercation not Grounds for Summary Dismissal

Termination For Cause: Another Case of “Employer Beware”

A termination for good business reasons does not always equate to a termination for just cause.  In the recent decision of the Ontario Superior Court in Barton v. Rona Ontario Inc., Mr. Justice Lauwers stated that even if an employee’s serious misconduct was such that the employer concluded that it needed to dismiss him to make an example of him, the misconduct might not necessarily be sufficient to warrant a termination without notice.

The Facts:

Barton was employed by the defendant for over 10 years and at the time of termination he was an assistant store manager.  Under his watch, an order picker truck was used to lift a wheelchair-bound employee from the ground floor to a second floor training centre and back again, for computer training (due to the fact that the only training office in the store was on the second floor and not otherwise accessible to wheelchairs).  This incident was contrary to the defendant’s safety expectations as set out in the Employee Handbook, the Health and Safety National Manual and the Occupational Health and Safety Act.  While Barton indicated his discomfort with the planned incident to both the operator of the order picker truck and the disabled employee, he was aware that the disabled employee wanted to attend the training and he did nothing to stop the employees from proceeding with their plan.  The incident turned out to be even more dangerous than might otherwise have been the case, as the wheelchair was not secured to the skid during the descent to the ground floor, and as the area around the order picker truck was not secured and someone walked under it during the lift. Fortunately for all, nobody was hurt during the incident.

Several employees were disciplined due to their part in the incident, but Barton’s employment was terminated for cause due to the fact that he was held to a higher standard than the non-managerial employees.

The Decision:

Mr. Justice Lauwers referenced Mr. Justice Echlin’s statement that just cause is “the capital punishment of employment law”.  He also referenced the contextual approach set out in the leading case of McKinley v. B.C. Tel and stated that although Barton’s misconduct was serious, his performance appraisals were good, he had no disciplinary record and he did not give permission for the lift or descent (although neither did he stop them).  By applying the principle of proportionality set out in McKinley, he found that Barton’s actions were not sufficient to warrant a with-cause termination.  He found that while there may have been good business reasons for Rona to terminate Barton’s employment and make an example of him in order to ensure that this sort of incident did not happen again, those reasons were not sufficient to elevate the termination to one without notice.  As a result, Barton was awarded 10 months of damages due to wrongful dismissal.

Barton v. Rona Ontario Inc., http://canlii.ca/t/fs8n7

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Termination For Cause: Another Case of “Employer Beware”

Employee Denied Damages for Failure to Return to Work When Called Back

Earl Chevalier was employed by Active Green + Ross for 33 years and was a service centre manager for 18 of those years. On October 28, 2008, he was notified that he was being temporarily laid off from his job at the end of the month. When Mr. Chevalier later commenced an action for wrongful dismissal, his employer called back stating that it had acted under the mistaken belief that it could lay off Mr. Chevalier. Mr. Chevalier however refused to return to work and decided to continue with this litigation.

The Ontario Superior Court of Justice held that Mr. Chevalier was constructively dismissed when he was laid off by Active Green + Ross on October 28, 2008. Accordingly, he was entitled to notice in the range of 18 to 24 months. However, the Court found that Mr. Chevalier failed to mitigate his damages when he refused to return to work.

Where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept the offer to return to work. However, the employee would not be obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation.

Mr. Chevalier claimed that management had engaged in conduct intended to “make his life miserable” in order to cause him to leave his employment. The conduct alleged by Mr. Chevalier included unfair criticism of his work, treating him in a demeaning fashion and ignoring his contractual rights by requiring him to work in Toronto more the 50 kilometres from home.

The Court found that Mr. Chevalier appeared to be very bitter about his experience and as a result the significance of various incidents covered in his evidence became magnified and distorted in his mind over time.

Mr. Chevalier was failing to meet performance goals and comply with company policies particularly on customer service. As a result, more senior managers frequently provided him training and assistance in order to improve. It was also clear from Mr. Chevalier’s employment agreement that he would be expected to travel as part of his job. Mr. Chevalier was reassigned because of the poor performance of his branch to another location where management hoped that Mr. Chevalier would be more effective. He would be working at a busier location with another manager who was considered to have been successful in carrying out the company’s operating procedures.

The Court held that the employer’s conduct was directed toward making Mr. Chevalier a more effective contributor as an employee of Active Green + Ross rather than making his life miserable so that he would leave the company. The Court concluded that a reasonable person would have returned to work and therefore Mr. Chevalier had acted unreasonably when he refused to return to work. As such, he had failed to mitigate his damages, and was thus not entitled to any damages.

For a copy of decision in Chevalier v. Active Tire & Auto Centre Inc., 2012 ONSC 4309, please visit: http://canlii.ca/t/fs4p6

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Employee Denied Damages for Failure to Return to Work When Called Back

Évitez les mauvaises surprises : notions de base en droit canadien de l’emploi, de l’immigration et du travail

L’article dont il est question dans le présent billet a été rédigé par Andrea Raso Amer et Tony Schweitzer.

Bien que le Canada et les États-Unis entretiennent d’étroites relations et que leur gouvernance et leurs lois présentent de nombreuses similarités, il existe entre les deux pays des différences importantes et distinctes, dont il faut tenir compte dans la conduite d’activités commerciales transfrontalières. La façon d’attirer, de gérer et de fidéliser les employés est notamment assez différente au Canada et toutes les entreprises qui songent à brasser des affaires au nord de la frontière devraient être informées de certains points très importants à prendre en considération.

FMC vous invite à lire un article traitant de différents sujets de façon approfondie, notamment les permis de travail, les membres de la famille qui accompagnent les travailleurs, les heures supplémentaires et les congés.

Pour lire l’article, veuillez cliquer ici (en anglais seulement).

 

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Évitez les mauvaises surprises : notions de base en droit canadien de l’emploi, de l’immigration et du travail

Avoiding Frostbite: A Primer on Canadian Employment, Immigration and Labour Laws

This article was written by Andrea Raso Amer and Tony Schweitzer.

While Canada and the United States share very close bilateral ties, and there are many similarities in our governance and laws, there are also some very distinct and important differences that are relevant to cross-border business. One key difference exists in attracting, managing and retaining employees in Canada. Any company contemplating business north of the border should be made aware of these very significant considerations.

This article contains in-depth discussions on various topics including work permits, accompanying family members, overtime, and leaves of absence.

To read the full article, please click here.

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Avoiding Frostbite: A Primer on Canadian Employment, Immigration and Labour Laws

Employee Fails to Mitigate Damages by Turning Down Employer’s Replacement Job Offer

An Ontario Judge has confirmed that an employee’s duty to mitigate may well include taking a job that is offered by the dismissing employer.

In June 2008, Aleem Ghanny was told by his employer that his employment as the Service Manager of a local Toyota dealership would terminate at the end of the month. However, at the same time, Ghanny was told that he would be relocated to a related dealership where he would continue as Parts and Service Manager and receive an identical compensation package. Despite the employer’s assurances that Ghanny’s seniority would be transferred to the new dealership which was located only a few blocks away from his current workplace, Ghanny rejected his employer’s replacement job offer and commenced a claim for wrongful dismissal.

Holding that Ghanny had acted unreasonably in rejecting his employer’s offer, the Judge dismissed Ghanny’s claim. Viewed objectively, there was no difference between the two positions nor was there any indication that the working conditions at the new dealership were demeaning or that Ghanny’s relationship with the owner or other employees had become difficult or acrimonious. Further, while Ghanny had expressed some concern over the future of the new dealership, the Judge noted such concerns were unfounded – “Even if the replacement job had only lasted nine months… that was still nine months of reasonably required mitigation.”

Ghanny v. 498326 Ontario Limited: http://www.canlii.org/en/on/onsc/doc/2012/2012onsc3276/2012onsc3276.pdf

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Employee Fails to Mitigate Damages by Turning Down Employer’s Replacement Job Offer

Re-Employed After 2 Weeks, Employee Gets 6 Months: Mitigation did not Apply to Contractual Notice Clause

The Ontario Court of Appeal has held that an employee who found a new job after two weeks was entitled to the full six months’ pay in lieu of notice under his written employment contract because the principle of “mitigation” had not been specified in his contractual termination clause.

Peter Bowes was hired by Goss Industries Inc. as Vice-President, Sales and Marketing in the fall of 2007.  Bowes signed an employment agreement in September 2007 and began working for Goss in October 2007.  The employment agreement provided:

“The Employee’s employment may be terminated in the following manner and in the following circumstances . . . (c) By the Employer at any time without cause by providing the Employee with the following period of notice, or pay in lieu thereof:  . . . (iii)   Six (6) months if the Employee’s employment is terminated prior to the completion of forty-eight (48) months of service . . .”

The employment agreement was silent with respect to whether, if the employee found a new job within that six months, his “mitigation” income would be deducted from the six months of pay in lieu of notice.

On April 13, 2011, Goss terminated Bowes’ employment without cause. Bowes started a new job on April 25, 2011 with another employer at the same salary that he had been paid by Goss.  When Goss found out, it stopped paying Bowes and took the position that he was only entitled to receive the minimum entitlement under the Employment Standards Act, 2000 of three weeks’ pay in lieu of notice because he had fully mitigated his loss by finding a new job.

The Court of Appeal reasoned that because a contractual termination provision “caps” an employee’s termination entitlement, often at an amount less than the common law notice that the employee would have received without a written employment contract, Goss should not be permitted to take advantage of Bowes reemploying quickly to reduce its payment obligation.  The court noted:

“It is noteworthy that in the sports, entertainment and senior management fields it is commonplace for such contractual provisions to not be subject to mitigation.  Where the rich, famous, and powerful are involved, there is no suggestion that such payments are unfair to the other contracting party [the employer], even where there is, in effect, total mitigation of the loss.  A contract is a contract, and it is expected that it will be honoured.  Nothing short of this can be countenanced where the terminated employee is less privileged.” (para. 52)

In the Court of Appeal’s view, there is nothing unfair about requiring employers to be explicit – specifically stating in the employment contract that mitigation will apply – if they intend to require an employee to mitigate what would otherwise be fixed or liquidated damages.  What is unfair, according to the Court, is for an employer to agree upon a fixed amount of damages with an employee and then at the point of dismissal inform the employee that future earnings will be deducted from the fixed amount.

On this basis, the Court of Appeal ordered Goss to pay Bowes the full six months of salary in lieu of notice, even though Bowes had been unemployed for only two weeks.

A number of earlier trial-level decisions had held that mitigation is automatically “read in” to contractual termination terms even if mitigation is not expressly stated.  The Bowes case appears to overturn those previous decisions.  The result in any future case will depend on the particular language of the employment contract at issue, but it appears that, at the very least, the principle of mitigation will not be automatically read in.  As a result, Ontario employers should review their contractual termination provisions and consider whether they wish to specify that if the employee finds a new job during the contractual termination notice period, the “mitigation income” will be deducted from any contractual pay in lieu of notice in excess of Employment Standards Act entitlements.  It is well-settled, though, that mitigation will not apply to pay in lieu of notice and severance pay under the Employment Standards Act.

Bowes v. Goss Power Products Ltd.: http://www.ontariocourts.ca/decisions/2012/2012ONCA0425.htm

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Re-Employed After 2 Weeks, Employee Gets 6 Months: Mitigation did not Apply to Contractual Notice Clause

“Eleventh Hour Claim of Just Cause” Rejected by Court: Witnesses “Tailored” Evidence

An Ontario judge has rejected a just cause defence raised by an employer two and a half years after the employee was dismissed.  The company alleged that the plaintiff, a sales manager, made fraudulent misrepresentations about future sales revenues during his hiring process.

The judge noted that a key employer witness’s evidence was “glaringly devoid of written corroboration” and that he “often appeared as if he was making his answers up as he went along”.  That witness testified, for instance, that he always jotted notes of discussions but he didn’t keep them, although he had earlier testified that he had not kept notes.

The judge stated, “The court was left with the definite impression that the defendant’s witnesses tailored their evidence to support their eleventh hour claim of just cause.”

Deciding that the employer did not have just cause for immediate dismissal, the court stated that the employee’s business plan, which he prepared and gave to the employer during the hiring process, was not a promise or guarantee of sales, but instead was a forecast of what he hoped could be achieved over the next five years.  The business plan was not “fraudulent” as alleged by the employer.  Further, the employer could not rely on conduct that they knew had occurred more than a year before the termination; the company had condoned or accepted the employee’s conduct.

The court awarded the sales manager, who had only two and a half years’ service, 6 months’ pay in lieu of notice.

This case illustrates that employers who wish to allege just cause for dismissal based on facts known at the time of termination should, in general, do so at the time of termination.  In this case, by waiting two and a half years to allege just cause, the employer subjected its position, and its evidence, to criticism by the court.

McGregor v. Atlantic Packaging Products Ltd.

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“Eleventh Hour Claim of Just Cause” Rejected by Court: Witnesses “Tailored” Evidence

Bill 44: British Columbia’s Alternative to Court Proceedings

In early May 2012 the British Columbia Legislature introduced the Civil Resolution Tribunal Act, creating a new adjudicative tribunal with jurisdiction to hear and decide some claims that are currently heard by the B.C. Courts.  The Act has now received Royal Assent and will come into force by regulation.

When the Act comes into force, the Tribunal will be structured to provide an alternative to traditional dispute resolution processes, such as the B.C. Provincial Court’s small claims division.  In the words of the Ministry of Justice, the Tribunal “will be structured to encourage people to use a broad range of non-litigation based dispute resolution tools to resolve their disputes as early as possible, while still preserving adjudication as a valued last resort.”

These non-litigation based dispute resolution tools include an on-line dispute resolution process and an initial case management phase in which the parties may seek a negotiated resolution.  Of particular note are Sections 19, 25 and 29 of the Act, which allow for the use of electronic communication tools in conducting all or part of a tribunal proceeding or facilitated dispute resolution process, and Section 20 which prohibits parties from being represented by legal counsel subject to certain exceptions.

Currently the Act applies only to strata property disputes and some small claims matters. It remains to be seen whether the Tribunal’s jurisdiction will increase over time.

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Bill 44: British Columbia’s Alternative to Court Proceedings

Release No Bar to Wrongful Dismissal Claim

A recent decision of the Ontario Supreme Court, Rubin v. Home Depot Canada Inc., 2012 ONSC 3053, has some potentially dangerous implications for employers and the agreements they make with their employees.

The plaintiff, a competitive shopper, was employed by Home Depot for 19.75 years and was 63 years old when his position was eliminated. At the termination meeting, Home Depot presented him with an offer of 28 weeks’ pay in lieu of notice that it said was to “exceed our obligations under the Employment Standards Act” in exchange for a release. It did; but only by .25 of a week’s pay. The plaintiff accepted the offer and signed the release before leaving the termination meeting, although the letter indicated that he had one week to review.

Shortly after signing the release, the plaintiff realized that he’d made a mistake and he attempted to negotiate a better severance package. Home Depot refused and relied upon the release.

The Court found the release to be unconscionable and set it aside. In doing so, it reasoned that it actually did not matter how much more than the statutory requirements the offer represented, “but, whether in the circumstances, it is so unreasonable as to be grossly unfair”. According to the Court, this determination comes from assessing the situation as a whole. In the Court’s assessment, the notice period was “grossly inadequate” and “sufficiently divergent from community standards that it ought to be set aside”. In particular the Court held as follows: “The idea that, in the modern day, a twenty-year employee, moving to the end of his expected working life, who is fired without cause, for reasons reflected in an internal re-organization of the company, would receive only six months’ notice, is far removed from what the community would accept.” The Court also faulted Home Depot for being misleading in suggesting that he would not be paid at all if he didn’t sign the release and in taking advantage of the plaintiff’s vulnerability and the power imbalance in its favour. The Court thus set aside the release and set the reasonable notice period at 12 months’ salary and benefits.

The Court’s willingness to intervene, not because the termination letter was misleading, but because it determined the agreement was grossly unfair, is of concern. It creates unpredictability if employers are not able to rely on compromise agreements reached with their employees because the employee may simply be able to renege without consequences.

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Release No Bar to Wrongful Dismissal Claim

Employer’s Failure to Provide Consideration for Termination Provision Fatal to Defence of Wrongful Dismissal Case

Investments Hardware Ltd. engaged in verbal negotiations with Anthony Fasullo with respect to a sales position that Fasullo applied for with the Company.  The parties discussed salary, commissions and benefits for the sales position and reached an agreement on those terms in May 2007.  The parties shook hands on the oral agreement and Fasullo was scheduled to start work with the Company on June 18, 2007. 

After Fasullo started work, on June 20, 2007, the Company presented him with a written employment agreement to sign.  The written employment agreement largely reflected the substance of the parties’ oral agreement, but for one key aspect; the written agreement stated that if Fasullo’s employment was terminated without cause, his entitlements would be restricted to his minimum entitlements under the Employment Standards Act, 2000.  According to Fasullo, the issue of his entitlements on termination of employment had not been discussed back in May 2007 such that, in his view, this restriction was a “new” term of his employment.  The Company maintained that it had verbally explained Fasullo’s limited entitlements on termination without cause back in May 2007.  Notwithstanding this discrepancy, Fasullo signed the June 20, 2007 written employment agreement and continued working.  Fasullo’s terms and conditions of employment were amended in writing twice more during his employment with the Company – once in October 2007 and once in June 2008.  The October 2007 amendment referred back to Fasullo’s “existing offer of employment of June 20, 2007″ and the June 2008 amendment referred back to Fasullo’s “original offer of employment”. 

Fasullo’s employment with the Company was later terminated without cause on March 10, 2011 after approximately four years of employment with the Company.  He was provided with his entitlements under the Employment Standards Act, 2000, in accordance with his written employment agreement, but nothing further.  Fasullo sued the Company for wrongful dismissal and sought common law reasonable notice.  Fasullo alleged that his employment was governed by the May 2007 oral employment agreement, not the June 20, 2007 written employment agreement, because he was not provided with any consideration for the termination provision in the written employment agreement. 

After reviewing the evidence, Justice Sanderson found as a fact that the Company had not explained Fasullo’s entitlements on termination of employment in May 2007 when the oral employment agreement was reached, such that Fasullo was entitled to common law reasonable notice under this agreement.  Justice Sanderson further found that the June 20, 2007 written employment agreement – which  purported to unilaterally reduce Fasullo’s entitlements on termination without cause from common law reasonable notice to only his minimum statutory entitlements – was void for lack of consideration.  In other words, the Company had not provided Fasullo with additional compensation, or some other new benefit, in exchange for Fasullo agreeing to reduced entitlements in the event his employment was terminated without cause.  As such, Justice Sanderson concluded that the termination provision contained in the June 20, 2007 written employment agreement was unenforceable at law and Fasullo was entitled to common law reasonable notice.  Further, Justice Sanderson found that neither the October 2007 nor the June 2008 amendments to Fasullo’s terms and conditions of employment cured the issue.  Therefore, Justice Sanderson awarded Fasullo 3.9 months’ common law reasonable notice, less the amounts already provided to Fasullo by the Company.

This case serves as yet another cautionary reminder to employers to exercise care when orally negotiating employment agreements with prospective employees.   A good practice is to tell the prospective employee that any verbal agreements reached are conditional upon the prospective employee signing a written employment agreement that includes termination provisions, and that the employee have the time to review, consider and execute the written employment agreement before commencing employment.  This simple process can help employers avoid the unpalatable situation that occurred in this case.

Fasullo v. Investments Hardware Ltd., 2012 ONSC 2809 (CanLii):  http://canlii.org/en/on/onsc/doc/2012/2012onsc2809/2012onsc2809.pdf

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Employer’s Failure to Provide Consideration for Termination Provision Fatal to Defence of Wrongful Dismissal Case

Court Awards Employee the Balance of a Five Year Contract and Value of 15% Ownership Stake

Dawn Loyst commenced employment in 2003 with Chatten’s Better Hearing Service (“Chatten’s”) in the role of Office Manager.  When the business was purchased by Jim Maizis in 2006, Maizis entered into an agreement with Loyst whereby Loyst would continue her work as Office Manager for Chatten’s for a period of five years, at the conclusion of which Maizis would turn over 15% ownership in the business to Loyst and would work with Loyst to renegotiate her employment contract.  Loyst agreed.

Unfortunately, the business relationship between Loyst and Maizis began to sour.  In early March 2009, Loyst and Maizis had a tense phone call.  When they met a few days later to discuss the phone call, tensions once again escalated.  During this conversation, Maizis said he could no longer allow Loyst to be the Office Manager and that going forward, she was to have limited access to the business’ patients and she was to perform accounting services only.  He also told her that there would be no more bonus trips, or partnership meetings – which she had frequently attended in the past – as he did not want her representing the company.  Loyst responded that the proposed changes were unacceptable, to which Maizis replied that if she felt that way, she should pack up her desk.  Loyst did so later that day, left the office and did not speak to Maizis after that time.  Loyst then commenced a wrongful dismissal action against Chatten’s in the Ontario Superior Court of Justice.

At trial, Justice McEwen found that Chatten’s, by changing Loyst’s job description and her remuneration, had unilaterally altered fundamental terms of Loyst’s employment contract and that Loyst had expressly rejected the new terms.  Justice McEwen went on to state that since Chatten’s did not respond to the rejection by terminating Loyst with proper notice and offering to re-employ her on the new terms, it owed her what it had promsied to her under contract.

As a result, Justice McEwen ordered Chatten’s to pay Loyst her salary for the remaining 29 months and 13 days of her five year contract (less income she had earned during that period).  In addition, because Chatten’s agreement with Loyst stated that Maizis would turn over 15% ownership in the business to Loyst at the end of the five year period, the court ordered Chatten’s to pay Loyst the cash equivalent of 15% of the value of the business in addition to her salary over the remainder of the five year period.  As a result, Loyst was awarded approximately $257,000 in damages.

This case illustrates that employers need to proceed with caution when attempting to implement significant changes to an employee’s terms and conditions of employment – particularly where those changes are likely to be rejected by the employee.  The employer may need to resort, in many cases, to terminating the employee’s employment with proper notice and offering re-employment on the employer’s new terms.

Loyst v. Chatten’s Better Hearing Service, 2012 ONSC 1653:
http://www.canlii.org/en/on/onsc/doc/2012/2012onsc1653/2012onsc1653.pdf

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Court Awards Employee the Balance of a Five Year Contract and Value of 15% Ownership Stake

L’importance de la disposition de cessation d’emploi

La décision qu’a rendue la Cour supérieure de justice de l’Ontario (CSJO) dans l’affaire Wright v. The Young and Rubicam Group of Companies a confirmé que les dispositions de cessation d’emploi qui figurent dans les contrats de travail ne seront pas reconnues valides si le texte de celles-ci est ambigu.

En 2005, Wright a été embauché à titre de cadre par la société défenderesse. Avant son premier jour de travail, il avait déjà signé un contrat prévoyant des droits en cas de cessation d’emploi, lesquels allaient d’une semaine de préavis à 34 semaines de salaire de base, selon le nombre d’années de service. Lorsqu’il a été congédié en 2010, Wright a reçu 13 semaines de salaire en guise de préavis, conformément au contrat en question. Insatisfait du montant reçu, il a intenté une action et présenté une requête en jugement sommaire.

Lors de l’audience, la juge Low a invalidé le contrat de travail, car elle estimait, comme Wright, que ce dernier aurait dû recevoir le préavis de licenciement prévu sous le régime de la common law. Le contrat a été invalidé pour deux raisons. Premièrement, le contrat ne respectait pas les normes minimales fixées par la Loi de 2000 sur les normes d’emploi de l’Ontario (la « LNE ») et, par conséquent, M. Wright aurait pu toucher une indemnité plus élevée, pour quelques-unes des années visées, en vertu du délai de préavis prescrit et de la prestation de départ prévue par la LNE qu’en vertu des clauses de son contrat. Cela n’est pas permis, même dans les cas où il n’existe qu’une faible possibilité que le contrat soit moins généreux que la LNE. La deuxième raison, mais la plus importante, c’est que la disposition sur la cessation d’emploi ne contenait aucune mention relative au traitement des avantages sociaux durant la période vidée par le préavis. La juge Low n’a pas jugé pertinent le fait que les avantages sociaux aient été fournis à Wright durant la période visée par son préavis statutaire et a déclaré que la disposition sur la cessation d’emploi aurait dû énoncer clairement les droits aux avantages sociaux, de même que les droits en matière de préavis et d’indemnité de départ.

Peu importe la fréquence à laquelle votre société examine et révise ses contrats de travail, un examen approfondi est toujours recommandé. De plus, à la lumière du jugement de la CSJO, les employeurs devraient envisager d’inclure, dans leurs contrats de travail, le traitement des avantages sociaux en cas de cessation d’emploi.

Wright v. The Young and Rubicam Group of Companies :
http://www.canlii.org/en/on/onsc/doc/2011/2011onsc4720/2011onsc4720.html

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L’importance de la disposition de cessation d’emploi