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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Discrimination due to Family Status – The Final Word?

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

Background:

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

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

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

The Decision:

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

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

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

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

 

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Discrimination due to Family Status – The Final Word?

Join us May 1st for Dentons’ Spring Employment and Labour Law Update

Please join us on May 1st for a complimentary seminar /webinar on the following topics:

July 1st Deadline Looming: How to Comply with Ontario’s New Safety Awareness Training Regulation
Adrian Miedema

Internal Fraud — Managing Termination and Asset Recovery Options
Mark Evans and Blair McCreadie

An Update on Ontario’s Workplace Violence and Workplace Harassment Law
Saba Zia

CHRP Accreditation
This program may be eligible for recertification points.

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

Event Details

May 1, 2014
Registration & Breakfast
8:00 – 8:30 a.m. EDT
Seminar
8:30 – 10:00 a.m. EDT

Dentons Canada LLP, 77 King St West, North Building, 5th Floor, Toronto

Or by webinar

To RSVP:

RSVP to Carla Vasquez, Specialist, Marketing and Events at carla.vasquez@dentons.com.

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Join us May 1st for Dentons’ Spring Employment and Labour Law Update

Benefits for Employees over Age 65

As of December 2006, the Ontario Human Rights Code was amended to abolish mandatory retirement. However, the provincial government intentionally did not make corresponding revisions to the Employment Standards Act or the Workplace Safety and Insurance Act. As a result, the law prohibits employer-initiated termination of employment because an employee has reached the age of 65. Voluntary retirement remains acceptable and common. However, employees who work past age 65 are not covered for work-related injuries and need not be covered by group benefit plans. The maximum period for which loss of earnings benefits will be paid under the workers’ compensation system is two years after the date of injury if the employee was age 63 or older on the date of injury. While some employers have arranged for benefit plans to cover employees over age 65, given the increased premium costs, this can lead to a decrease in benefit coverage for all employees or other types of trade-offs. In addition, some unionized employers have been required to provide group health benefits to employees over age 65 due to the wording of a collective agreement – typically a benefits clause which describes the benefits for all members of the bargaining unit.

It was foreseeable that this hybrid status of a worker over age 65 – legally protected from mandatory retirement but not legally protected to receive continued benefits – would lead to litigation. Such an employee would face difficulty succeeding with a complaint under the Employment Standards Act, Human Rights Code or Workplace Safety and Insurance Act since these provincial laws all permit this differentiation.

The Human Rights Tribunal of Ontario (HRTO) is currently hearing such a case. The employee is a unionized teacher who is representing himself. His union cannot bring forward a grievance because it has reached an agreement with the school board in exchange for lump sum payments to teachers over age 65. Nor is the union appearing at the HRTO proceedings. So far, there have been a number of Interim Decisions and Case Assessment Directions issued in the case and the teacher has been unsuccessful in alleging unlawful age discrimination. The final argument, which continues to proceed through the HRTO process, is whether the Human Rights Code of Ontario contravenes the equality rights provisions of the Canadian Charter of Rights and Freedoms, a significant legal challenge for a lone, unrepresented employee.

We will be following this important case as it continues to unfold.

Talos v. Grand Erie District School Board, 2013 HRTO 1949; 2014 HRTO 529

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Benefits for Employees over Age 65

Not Quite an Eye for an Eye – Judge rules that Employee’s “Kick in the Butt” Excuses Co-Worker’s Punch in the Mouth

Does a “kick in the butt” excuse a punch in the mouth? That was the question facing the Court in the recent case of Li v Furguson, 2013 CanLII 91746 (Ont. Sm. Cl. Ct.).

Peng Li and Winston Furguson worked in the shipping and receiving department of a furniture company. Li and Furguson’s coexistence was initially uneventful; however, their relationship had begun to disintegrate following allegations by Li that Furguson was stealing from the company.

On April 19, 2011, things between Li and Furguson reached a boiling point. After searching for Furguson throughout the warehouse, Li finally found his target and confronted him. What happened next was a source of disagreement between the parties, although the judge adopted the following facts. Li began speaking very closely to Furguson; so close that spit was transferred to Furguson’s face, albeit unintentionally. As Furguson tried to break free, Li kicked Furguson in the “butt” with his steel-toe boots. Furguson then wheeled and punched Li twice – one blow was inconsequential, the other was not as it resulted in Li incurring over $7,000.00 in costs for restorative dental services.

At trial, Li argued that he was entitled to damages from Furguson for the tort of battery. However, in the judge’s view, Li’s actions amounted to implied consent to the battery:

Having insulted, berated and confined a person at close quarters, then scuffled with them and kicked them I cannot see how a reasonable person could maintain that a punch or two in return was beyond their reasonable contemplation as being with the scope of what they had implicitly consented to.

 

In addition, the judge held that Li had provoked Furguson by kicking him. Although provocation was not a complete answer to Li’s claim of battery, it nonetheless operated to mitigate the damages that Li had in turn claimed.

In light of these facts, the judge dismissed Li’s claim in its entirety.

It is important to note that while Li had originally brought an action against his employer in which he made a number of claims, including one for “wrongful dismissal”, this action was discontinued before trial. Regardless, apart from the civil liability above, the altercation between Li and Furguson would certainly attract the attention of any employer’s workplace violence policy and potentially lead to discipline.

Li v Furguson, 2013 CanLII 91746 (Ont. Sm. Cl. Ct.)

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Not Quite an Eye for an Eye – Judge rules that Employee’s “Kick in the Butt” Excuses Co-Worker’s Punch in the Mouth

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

Employer avoids liability for harassing texts sent by rogue employee

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

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

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

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

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

Baker v. Twiggs Coffee Roaster, 2014 HRTO 460

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

Upcoming Ontario Ministry of Labour blitzes

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

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

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

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

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

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

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

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Upcoming Ontario Ministry of Labour blitzes

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

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

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

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

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

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

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

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

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

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

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

Ontario Requirements

Internships in the School Context

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

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

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

Internships Outside of the School Context

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

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

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

Québec Requirements

Internships in the School Context

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

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

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

Internships Outside of the School Context

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

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

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

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

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