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Case in Point

Legal Developments in Human Resources Law

(Yet Another) Ambiguous “ESA-only” Termination Provision Unenforceable

Posted in Employment Law, Minimum Standards

Another “ESA-only” termination provision in an employment contract has been found unenforceable by the Ontario Superior Court. In Howard v Benson Group, the Court decided that the termination provision providing only Employment Standards Act, 2000 (“ESA”) minimum entitlements was ambiguous; therefore, the common law applied and the plaintiff was entitled to reasonable notice of termination.

The provision in question read:

8.1.      Employment may be terminated at any time by the Employer and any amounts paid to the Employee shall be in accordance with the Employment Standards Act of Ontario.

The problematic language was “any amounts paid to the Employee”, as it did not make reference to any other minimum entitlements guaranteed by the ESA, such as continuation of benefits during the statutory notice period. Since the provision referred only to “amounts paid”, it was not sufficiently clear that the plaintiff would receive all his entitlements under the ESA and not just the payment of termination and severance pay.

This is yet another decision in a line of cases that has found termination provisions in employment contracts unenforceable because they do not clearly comply with all obligations under the ESA.

It is important for employers to remember that the ESA provides not only for payment (or notice) of termination and severance pay (where applicable), but also continuation of benefits during the statutory notice period, which may include not only group benefits, but also pension contributions, car allowances, etc. (Miller v. A.B.M. Canada Inc.). Also, where the contract is not compliant with the ESA, provision of all ESA entitlements by the employer “does not alter the reality that the employment contract drafted by the employer is contrary to law” (Stevens v. Sifton Properties Ltd.); the termination provision will still be unenforceable despite actual compliance with the ESA.

These cases serve to remind employers of the following:

  1. Courts are reluctant to enforce ESA-only termination provisions which are ambiguous.
  2. A well-drafted employment contract or offer letter is important to have at the outset of the employment relationship as it will provide employers with certainty as to their exposure at the time of employment termination.
  3. Employment contracts or offer letters should be reviewed regularly to ensure that the language of any termination provision is not only compliant with the ESA, but also with the most recent decisions at common law.

Claim Against Employer Arising out of Social Event Allowed to Proceed

Posted in Employment Law

The decision of K.L. v. 1163957799 Quebec Inc. raises a caution for employers when planning social events. The employer hosted an unstructured evening social event at a water park where employees had unrestricted access to alcohol. The plaintiff brought an action against the employer and a supervisor as a result of an alleged sexual assault and forcible confinement that took place at the hands of the supervisor during the social event.

The employer brought a motion to strike out the claims of sexual harassment, sexual assault, assault, battery, false imprisonment and intentional/negligent infliction of mental harm.

The Court accepted that Canadian law does not recognize a tort of sexual harassment and dismissed this claim. However, it held that it was not “plain and obvious” that the employer could not be liable for the remaining causes of action, finding that the plaintiff need only to establish that the employer’s conduct “materially enhanced the risk, in the sense of significantly contributing to it” in order to establish that the employer was vicariously liable for the actions of its employee. In so finding, the Court noted that employer-hosted social events are very much connected to the employer as they generate goodwill and create a more loyal and dedicated workforce. As a result, the Court found that it was arguable that the plaintiff would be able to establish that the employer significantly contributed to the circumstances that gave rise to her assault.

The Court recognized that the test to continue with the action was “very low” and that the plaintiff may “face obstacles in proving her claim.” Employers, though, should continue to take steps to ensure supervision and control during employer-hosted social events in order to minimize their own liability.

Termination Clause in Federal Employment Agreement Enforceable

Posted in Employment Law

The recent decision in Luney v. Day & Ross Inc. is good news for employers. The Plaintiff worked for an interprovincial trucking company subject to the Canada Labour Code (“Code”). The Defendant terminated the Plaintiff’s employment without cause and offered the Plaintiff a severance package that it asserted was consistent with the termination clause in the employment contract.

The Plaintiff brought a summary judgment motion seeking a finding that the termination clause was unenforceable on two grounds: (1) that it was ambiguous and therefore did not rebut the presumption of reasonable notice at common law; and (2) that it violated the Code as it did not provide for benefits.

The motion judge dismissed the Plaintiff’s motion. The Plaintiff then appealed to Divisional Court. The relevant section of the employment contract read as follows:

If your employment is terminated for other than ‘just cause’, or if a competent tribunal should rule that your termination was ‘unjust’, you will be entitled to two weeks notice or pay in lieu of notice and a severance of one week’s regular pay for each full year of service, less statutory deductions. The payments are not to exceed the equivalent of 15 weeks pay.

It is understood and agreed that in the event the aforesaid notice and severance entitlements are not in conformity with the notice and severance provisions prescribed by the Canada Labour Code or other similar legislation, the statutory minimums shall apply and be considered reasonable notice and severance.

Dismissing the appeal, the Divisional Court found that the wording was sufficiently clear to rebut the presumption of reasonable notice. It also rejected the Plaintiff’s argument that the failure to mention benefits was fatal. This was due to the inclusion of the wording that provided if the severance entitlements are not in conformity with the severance prescribed by the Code, the statutory minimums shall apply. The takeaway for employers is to include language indicating that statutory minimums will prevail in order to defend against claims that the language is unclear or otherwise unenforceable.

Federal Court: Unjust Dismissal Complaint for Without Cause Termination Requires Evidentiary Hearing

Posted in Employment Law

In a recent decision, Sigloy v. DHL Express (Canada) Ltd., the Federal Court overturned the decision of an adjudicator which had granted an employer’s preliminary objection and dismissed a complaint of unjust dismissal for lack of jurisdiction because the complainant had been dismissed without cause.

At the adjudication, the employer objected to the unjust dismissal claim on the grounds that the complainant was dismissed without cause and was provided with his notice and severance entitlements pursuant to both the Canada Labour Code and a valid contract of employment. The employer further argued that the only allegation in the complaint was that the dismissal occurred without just cause. Referring to the Federal Court’s decision in Wilson v. Atomic Energy of Canada Ltd., the adjudicator upheld the employer’s preliminary objection and dismissed the complaint on the basis that dismissals without cause were permitted under the Code and that the complaint contained no other allegations to suggest that the dismissal was “otherwise unjust.”

In this case, the Federal Court applied the subsequent Federal Court of Appeal decision in Wilson and held that it is incorrect for an adjudicator to assume that a dismissal is automatically just if it occurs without cause and the complainant receives compensation that satisfies his legal entitlements. Rennie J. directed that “there must be an evidentiary inquiry, whether cursory or extensive, into the circumstances of the dismissal”.

The Court set aside the adjudicator’s decision on the basis that the parties had not turned their minds to the complainant’s entitlement to an evidentiary hearing, which resulted in a breach of procedural fairness.

Interestingly, the Court indicated support for the “outcome” of the adjudicator’s decision despite its finding regarding procedural fairness. The Court also directed that the adjudicator may determine the extent of the evidentiary hearing required in the circumstances but that it is a breach of procedural fairness to dismiss such a complaint on the basis of a “preliminary legal determination.”

Indefinite Suspensions with Pay: The SCC Clarifies the Test for Constructive Dismissal

Posted in Employment Law

The Supreme Court of Canada recently considered the common law doctrine of constructive dismissal in Potter v. New Brunswick Legal Aid Services, where a majority of the Court (with two justices concurring in the result) concluded that placing an employee on an indefinite administrative suspension with pay constituted constructive dismissal. It found that even where pay is provided, employers do not “have an unfettered discretion to withhold work” and that no employer may withhold work from an employee “either in bad faith or without business justification.” Of note, the Court applied its reasoning in Bhasin v. Hrynew, which extended the duty of good faith to the performance of contractual obligations, in finding that the employer failed to act in an honest and forthright manner.

Midway through Mr. Potter’s statutory appointment (a seven-year Executive Director term), relations deteriorated and the parties began negotiating a buyout of his employment contract. He went on sick leave before the matter was resolved. Unbeknownst to Mr. Potter, the Commission wrote a letter to the Minister of Justice recommending his termination for cause. He was advised not to return to work, and subsequently he was suspended indefinitely with pay. Mr. Potter commenced an action for constructive dismissal, which the Commission took as a voluntary resignation.

The Commission prevailed before the lower courts but Mr. Potter was successful before the Supreme Court. In allowing the appeal, the Court clarified the two-branch test for constructive dismissal in Farber:

  • Under the first branch, the determination of a “substantial breach” involves two distinct steps: (1) whether there is a unilateral breach of an express or implied term of the contract; (2)  “if it does constitute such a breach, it must be found to substantially alter an essential term of the contract.” The Court noted that the trial judge erred (in part) by conflating the two steps of the analysis.
  • Under the second branch, an employer’s conduct will constitute constructive dismissal if it more generally shows that the employer intended not to be bound by the contract: “[t]his approach is necessarily retrospective, as it requires consideration of the cumulative effect of past acts by the employer and the determination of whether those acts evinced an intention no longer to be bound by the contract.”

The Court noted the evidentiary shift in burden in cases involving administrative suspensions with pay. It stated that “[i]n all cases, the primary burden will be on the employee to establish constructive dismissal, but where an administrative suspension is at issue, the burden will necessarily shift to the employer, which must show that the suspension is justified.” The absence of such a justification will signal the existence of a breach and the burden will then revert to the employee to prove that the suspension is a substantial alteration to the essential terms of the contract.

The Court found that in the absence of express authorization, an employer’s implied authority to invoke a suspension with pay is subject to a basic requirement of business justification undertaken in good faith, which necessarily involves a factual inquiry. Without such a justification, the suspension is unauthorized and therefore a unilateral change to the employment contract.

Applying the two-branch test for constructive dismissal, the Court noted that it is unlikely an employer could establish there was implied authority for the unilateral change to the employment contract in the absence of demonstrated legitimate business reasons for the suspension with pay, unless the unauthorized suspension was of a particularly short duration. It held that any reasonable person, faced with the employer’s unreasonable and unjustified decision to invoke a paid suspension (i.e. without a legitimate business justification), may permissibly infer that the employer’s conduct evinced an intention to no longer be bound by the contract.

In this case, the Court found, among other things, that a constructive dismissal had occurred because of the indefinite duration of the employee’s suspension, the employer’s failure to act in good faith by its failure to be forthright and by withholding valid business reasons from the employee, and the employer’s decision to conceal its intention to dismiss the employee for cause. In sum, the employee’s awareness of his circumstances was limited to his knowledge that he was being indefinitely suspended when he had been given no reason for the suspension. Referring to Bhasin v. Hrynew, the Court stated that “At a minimum, acting in good faith in relation to contractual dealings means being honest, reasonable, candid, and forthright.”

This case presents a cautionary tale for employers and demands careful consideration of the circumstances in which a paid suspension may be imposed on employees. An employer should ensure that such decisions are capable of being defended by reference to the employer’s legitimate business interests and demonstrable good faith. Further, employers should be sure to communicate the reasons for the paid suspension with a scrupulous forthrightness to ensure that the employee cannot claim to have been left in the dark.

The HRTO and the Duty to Accommodate: How Far Does an Employer Have to Go?

Posted in Human Rights

In a helpful decision for employers, Pourasadi v. Bentley Leathers, the Human Rights Tribunal of Ontario (“HRTO”) found that an employer’s duty to accommodate did not extend to altering the essential duties of a position.

In this case, the Applicant, a retail store manager, requested a workplace accommodation for a wrist injury which prevented her from assisting customers with certain products and performing some merchandising and housekeeping tasks when working alone. Bentley Leathers determined that it could not accommodate the Applicant’s physical restrictions and, as a result, referred her to a work transition program with the WSIB and ended her employment.

The HRTO examined Bentley’s duty to accommodate the Applicant in light of the Supreme Court of Canada’s decision in Hydro-Québec, which summarizes the underlying principles of the duty to accommodate as follows:

[14]      […] the goal of accommodation is to ensure that an employee who is able to work can do so. […]

[16]      The test is not whether it was impossible for the employer to accommodate the employee’s characteristics. The employer does not have a duty to change working conditions in a fundamental way, but does have a duty, if it can do so without undue hardship, to arrange the employee’s workplace or duties to enable the employee to do his or her work.

Based on the Applicant’s physical restrictions, the HRTO decision referenced two possible forms of accommodation.

First, prior to the termination of her employment, the Applicant had requested that Bentley ensure that she not be required to work alone by scheduling a second employee to assist her. Bentley had gratuitously scheduled a second employee to work with the Applicant for a lengthy period of time. At the preliminary hearing stage, the Applicant conceded that the duty to accommodate under the Code does require an employer to schedule another employee to perform the Applicant’s duties.

Second, the Applicant raised for the first time during the HRTO proceeding that if she worked alone she should have been permitted to: (1) turn away customers who required assistance that was outside her physical restrictions and (2) to defer the merchandising and housekeeping tasks that were outside her physical restrictions to other employees.

The HRTO recognized that accommodation cases “often turn upon the identification of the essential duties or requirements of an employee’s work or position.” Here, the parties disagreed on the percentage of her duties that were outside her physical restrictions – that is, the frequency with which the Applicant would need to turn away customers and/or defer duties.

The HRTO concluded that the accommodation now being sought by the Applicant would go beyond Bentley’s duty to accommodate. It was an essential duty of the Store Manager position to assist customers. This duty was required to be performed whenever there was a need for it; it was not sufficient that the Applicant could perform this essential duty “most of the time” as she had submitted. To find otherwise, the HRTO concluded, would be to exempt the Applicant from performing the essential duties of her position as a Store Manager.

This case provides an important reminder that identifying the essential duties of a position is a critical step in the duty to accommodate process undertaken by an employer. A duty is not essential simply because it is assigned to the employee by the employer. Instead, employers should be prepared to provide evidence to support that the duty is in fact essential in the sense that it is a necessary and indispensable function of the position.

The case also demonstrates that once a duty is established to be an essential duty, an employee must be able to perform it whenever it is required, with or without accommodation. That is, while the Code may require an employer to arrange the workplace to allow an employee to perform the essential duties of their position, it does not go so far as to “require permanently changing the essential duties of a position or permanently assigning the essential duties of a position to other employees.”

Bentley was represented by Hicks Morley’s Jodi Gallagher Healy.

Supreme Court of Canada On Pregnancy and Parental Leave Top-Ups

Posted in Human Rights

The Supreme Court of Canada recently upheld a decision of a British Columbia arbitrator which had found that denying birth mothers entitlement to parental supplemental employment (“SEB” or “top-up”) benefits where they had received pregnancy SEB plan benefits was discriminatory.

The issue before the arbitrator turned on an interpretation of the collective agreement in place between the British Columbia Public School Employers’ Association and the British Columbia Teachers’ Federation. The language in issue read:

i) The Board shall pay a pregnant employee who takes pregnancy leave pursuant to the pregnancy leave provisions of the Employment Standards Act (as amended in 1996) of B.C. (or to a parent who qualified for Employment Insurance benefits for birth or adoption) 95% of the employee’s current salary for the first two (2) weeks of the leave, THEREAFTER,

ii) For a further fifteen (15) weeks, the Board shall pay the employee the difference between 70% of the employee’s current salary and the amount of E.I. benefits received by the employee. (Article G.21.4)

A review of the bargaining history between the parties shows that entitlement to SEB benefits had been gradually extended beyond birth mothers, who were solely entitled to that benefit in the 1988-1990 collective agreement. The language was amended in 1990-1992 such that SEB benefits would be eligible for “a parent who qualifies for Unemployment Insurance benefits for birth or adoption” thus extending entitlement to adoptive parents. During this round of bargaining the union was unsuccessful in its attempt to have separate maternity and parental leave provisions inserted into the collective agreement.

A grievance was filed in 1998 which argued that failure to provide for SEB parental benefits to birth fathers was discriminatory. The question of discrimination against birth mothers regarding this benefit was not raised at this time. The arbitrator stated that while the mutual intent of the 1990-1992 amendment was that the SEB benefits apply to adoptive parents, the language was sufficiently broad to apply to birth fathers. He concluded that the exclusion of entitlement to this benefit for birth fathers was discriminatory. The grievance was upheld and SEB benefits then became payable to eligible birth fathers, as well as adoptive parents. Birth mothers continued to be eligible for the SEB benefits when they took pregnancy leave.

The union in this case argued that the language of the existing collective agreement was broad enough to entitle birth mothers who had received pregnancy leave SEB benefits to SEB parental leave benefits as well. In essence, the earlier reasoning which had resulted in a finding of discrimination against birth fathers denied parental leave was used here in support of the claim of birth mothers to parental leave. The union asserted that denial of those parental top-up benefits was contrary to human rights legislation and the equality rights provision of the Canadian Charter of Rights and Freedoms. The employer argued, among other things, that the collective agreement did not confer two types of top-up benefits; rather birth mothers could access either the top-up benefit during pregnancy or during parental leave, thereby receiving the same benefit as birth fathers or adoptive parents.

The arbitrator referred to a “respected and unassailable body of case law” which differentiates between pregnancy and parental leaves and concluded that the purpose of those leaves was separate and distinct. He cited examples where birth mothers must recover from pregnancy health-related issues before they could be in the same position as birth fathers and adoptive parents “to care for and bond with their children.” The arbitrator concluded that birth mothers would be subject to differential treatment if they were forced to forego the pregnancy leave top-up benefits in order to claim the parental leave top-up, which was available to all other parents. As a result, the impugned provision of the collective agreement infringed section 15 of the Charter and the infringement could not be saved by section 1. A violation of the Human Rights Code (discrimination in employment) was also found. A declaration of invalidity was suspended to allow the parties time to renegotiate non-discriminatory language into the upcoming renewal collective agreement.

The B.C. Court of Appeal found that the arbitrator erred in his finding that birth mothers were subject to unequal treatment, and set the decision aside.

In a brief oral ruling, the Supreme Court of Canada restored the arbitrator’s decision, stating that it was entitled to deference and that the Court of Appeal failed “to recognize the different purposes of pregnancy benefits and parental benefits.”

What does this case mean for employers? The underlying message is that in designing a top-up plan for parents, all parents must be given the same benefit or a finding of discrimination may result. There is no obligation to offer any benefits at all. However, once the benefits are provided, they must be provided in a non-discriminatory way. In this case, the employer offered pregnancy SEB benefits and parental SEB benefits. If the employer offered only one type of benefit – SEB parental benefits for all parents, and not SEB pregnancy benefits (birth mothers only) the outcome would likely have been different.

This case is also significant because of the remedy awarded by the arbitrator. Given the bargaining history, the remedy of sending the matter back to the parties to renegotiate was the optimal result in the circumstances. This is preferable to an arbitrator imposing an expensive financial remedy under human rights legislation or the Charter where the union agreed to the benefit that was subsequently found to be discriminatory, especially where there is clear evidence that the union has been unable to achieve an extension of the benefits at bargaining. The law regarding discrimination evolves over time. Employers who negotiate benefits in good faith that subsequently become the subject of a meritorious claim of discrimination, should try to negotiate a compromise rather than simply agreeing to extend the benefit to the excluded group.

Solicitor-Client Privilege Does Not Necessarily Arise Where Lawyer Copied on Internal HR Email

Posted in Civil Procedure, Employment Law

Is an email sent by a human resources employee and copied to the employer’s lawyer covered by solicitor-client privilege? The Ontario Superior Court of Justice recently answered this question in Jacobson v. Atlas Copco Canada Inc.

This action involved a plaintiff’s claim for wrongful dismissal. His employment had been terminated for allegedly participating in a physical altercation with a fellow employee. The email in question outlined a potential course of action for dealing with the employee. The Court held that the email was not privileged and that it must be produced by the employer in the litigation.

The Court applied the typical three-part test required to establish solicitor-client privilege, namely, was the email:

(1) a communication between solicitor and a client;

(2) intended to be confidential between the parties; and

(3) regarding the seeking or giving of legal advice?

The plaintiff conceded that the first two tests were met. The Court found, however, that the third was not met. It stated that the onus rested on the employer to establish the privileged nature of the communication; in this case, it had failed to do so. The Court specifically found that the employer had inexplicably failed to introduce any direct evidence of the email writer’s intentions, and neither the circumstances in which the communication was made nor the contents of the email itself were sufficient to establish that the message was sent for the purpose of obtaining legal advice.

It is important to note that the Court’s decision does not mean that privilege cannot apply to any communications sent simultaneously to lawyers and non-lawyers. In fact, the Court stated that there may be situations in which a communication given simultaneously to a lawyer and non-lawyer could be for the purpose of seeking legal advice (in which case it could still be privileged).

This decision demonstrates that the purpose of a communication is very important when asserting privilege. The Court’s reasoning also serves as a reminder that, if the privileged nature of a communication is called into question, employers will be well-served to lead with the best evidence of the writer’s intentions in order to demonstrate this purpose.

Court Upholds Two-Year Limit on LOE Benefits for Workers Age 63 or Older

Posted in Constitutional Law

The Ontario Divisional Court’s recent decision upholding the two-year limitation on loss of earnings (“LOE”) benefits for workers age 63 and older should reassure employers that Ontario courts take notice that LOE benefits are not meant to be paid for life.

Section 43(1)(c) of the Workplace Safety and Insurance Act (“WSIA”) limits LOE entitlement for workers age 63 or older to two years. This section reflects expert evidence that 90% of Ontario workers retire by age 65, and that almost 90% of workers injured after the age of 61 return to work within two years. By limiting LOE entitlement to two years, s. 43(1)(c) recognizes that the majority of Ontario workers do not remain in the workforce past age 65, and even if injured after age 61, a worker will most likely return to the workforce within two years. In Gouthro v. Workplace Safety and Insurance Appeals Tribunal, a worker challenged s. 43(1)(c) alleging it discriminated on the basis of age and therefore violated s. 15(1) of the Canadian Charter of Rights and Freedoms (“Charter“).

The Ontario Divisional Court dismissed the worker’s appeal from a decision of the Workplace Safety and Insurance Tribunal (“WSIAT”) in which the majority concluded that s. 43(1)(c) did not violate s. 15(1) of the Charter. The WSIAT panel had considered expert evidence that relatively few Canadians work past age 65. It also noted that the WSIA operates as an insurance scheme (not a social program for workers) which is to be administered in a financially responsible and accountable manner.

The Court agreed with the WSIAT panel’s findings, stating:

“If the Workplace Safety and Insurance Act provided that injured workers were to receive LOE benefits until they died, that would imply that people work until they die. Both intuitively and statistically this seems incorrect.”

The Court found that while the impugned provision created a distinction based on age, it did not create a disadvantage based on a stereotypical attribute. Rather, the provision “is grounded in the statistically verifiable facts referred to earlier; namely that as of 2008 90% of Canadian workers stop working at age 65 years and 90% of workers injured after the age of 61 return to work within two years.”

While there has been, and may continue to be, litigation regarding the age limitation in s. 43 of the WSIA, courts have continually acknowledged the statistical reality of the Canadian workforce, and that workers’ compensation is an insurance program. These realities enforce that provinces are entitled, as a matter of policy, to decide how they will compensate injured workers.

Divisional Court Finds Arbitrator’s Approach to Pre-Access Drug and Alcohol Testing Reasonable

Posted in Human Rights, Labour Relations

The Divisional Court has dismissed a judicial review application of an arbitration decision that held that pre-access drug and alcohol testing was contrary to the parties’ collective agreement and the Ontario Human Rights Code. While the Court declined to comment on the Code, it upheld Arbitrator Surdykowski’s finding that the applicant had violated the collective agreement and was therefore ordered to cease and desist pre-access alcohol and drug testing of employees.

In addressing a policy grievance brought by the United Association of Journeymen, Local 663, Arbitrator Surdykowski applied the Supreme Court of Canada’s 2013 decision in Irving Pulp & Paper v. CEP Local 30. In particular, the arbitrator noted that the dangerousness of a workplace will not automatically justify the unilateral imposition of random drug or alcohol testing. In fact, as the Supreme Court noted, additional evidence of enhanced safety risks, such as evidence of a general problem with substance abuse in the workplace, is required.

While drug and alcohol testing may still be appropriate and permissible in certain circumstances, such as post-incident and reasonable cause situations, the Divisional Court’s decision reinforces the need for evidence of drug and alcohol-related issues in the workplace to justify pre-access testing.