2019 brought several notable cases impacting employment and labour law. We have put together a brief summary of 10 Canadian decisions we believe employers should be aware of as we head into 2020.
Ontario Court of Appeal provides an important lesson that overly aggressive tactics can cross the line to bad faith, and result in significant penalty
Mr. Ruston was terminated from his employment with Keddco MFG (2011) in June 2015. Mr. Ruston was told that he was being terminated for cause and when he indicated that he would be hiring a lawyer, Keddco advised him that if he did so, they would bring a very expensive counter-claim against him. In response to Mr. Ruston’s statement of claim seeking damages for wrongful dismissal, Keddco filed a statement of defence and counter-claim alleging cause and claiming damages of $1.7 million for unjust enrichment, breach of fiduciary duty and fraud, as well as $50,000 in punitive damages.
The trial judge found that Keddco had failed to prove any of their allegations and determined that Keddco’s counter-claim had been a tactic to intimidate Mr. Ruston. Moreover, the trial judge concluded that Keddco had breached its obligation of good faith and fair dealing and awarded Mr. Ruston damages in lieu of reasonable notice based on a 19 month notice period, a bonus and benefits, punitive damages in the amount of $100,000, moral damages in the amount of $25,000, as well as costs in the amount of $546,684.73. Keddco appealed the decision arguing that the trial judge awarded excessive damages to Mr. Ruston.
The Ontario Court of Appeal reiterated that employers have an obligation of good faith and fair dealing in the manner of dismissal and that an employers’ conduct both before and after termination may be relevant to the moral damage analysis if such conduct is a component of the manner of dismissal. The Court of Appeal held that not only was the manner of dismissal devastating, Keddco’s conduct in threatening Mr. Ruston not to make a claim caused Mr. Ruston considerable stress.
The Court of Appeal discussed the importance of considering the overall damages award when selecting an appropriate quantum and stated that courts must be careful to avoid double compensation or double punishment. In this instance, however, the Court of Appeal did not agree that awarding both aggravated damages and punitive damages amounted to double recovery. The Court of Appeal stated that aggravated damages aim to compensate a plaintiff for heightened damages caused by the breach of the employer’s duty of good faith and fair dealing in the manner of dismissal, while punitive damages seek to punish and denunciate inappropriate or unfair conduct.
Ultimately, the Court of Appeal held that Keddco’s conduct rose to a level deserving of denunciation for all the reasons cited by the trial judge. The Court of Appeal upheld the award and dismissed the appeal awarding costs of $35,000 to Mr. Ruston, bringing the costs award against Keddco to almost $600,000.
Supreme Court of Newfoundland and Labrador decision provides lessons for competitors competing for employees
Mr. Murphy, employed by Safety-First Contracting (1995) Ltd. in a managerial position, resigned from his employment after 14 months of service to join Hi-Vis Traffic Control Inc., a competitor. When Mr. Murphy jumped ship to the competitor, Safety-First alleged he was in breach of his confidentiality and non-competition agreement, and, in the alternative, that he violated his common law obligations of confidentiality and non-competition.
The problem? Safety-First could not prove that Mr. Murphy ever signed a confidentiality and non-competition agreement. While they had emailed Mr. Murphy a copy of this document, they failed to obtain a signed copy and the Court was satisfied that Mr. Murphy had, in error, not seen the document. Accordingly, there was no confidentiality and non-competition agreement to enforce.
Nonetheless, the Court accepted that employees carry a common law duty of post-employment confidentiality. However, Safety-First had no actual evidence that Mr. Murphy had misappropriated any confidential information. While Mr. Murphy had knowledge of Safety-Firsts customers, those customers were easily identifiable and, in any event, that kind of knowledge committed to memory is not, in the Court’s view, protected by Mr. Murphy’s common law confidentiality obligations.
Finally, the Court also accepted that “fiduciary” employees may have post-employment obligations not to actively solicit customers for a competitor. While this will be a helpful principle in certain cases, Mr. Murphy’s role was not sufficiently senior to warrant a fiduciary designation. Accordingly, he carried fewer post-employment restrictions.
This decision illustrates a few key lessons:
1) Don’t lose sight of the importance of a good onboarding process – before your employees begin working, make sure they sign and return their employment contracts, and ensure that all employment records are properly maintained and protected.
2) Before taking action against an employee who has left for a competitor, employers should consider the employee’s position, express contractual duties and the degree to which there is material evidence of wrongdoing.
3) The calculus is not one sided – an employer considering hiring a competitor’s employee should exercise reasonable diligence to ensure it is not enticing the employee to breach their confidentiality or non-competition obligations.
New Brunswick Court of Appeal clarified that minimum wage rules apply to commissioned employees
The general rule is that employees are entitled to minimum wage. A recent decision from the New Brunswick Court of Appeal demonstrated that employers must pay attention to this requirement when compensating employees based on commission or other variable compensation.
Specifically, the New Brunswick Court of Appeal found that a car salesman paid by commission was entitled to receive at least the minimum wage for all hours worked under New Brunswick’s Minimum Wage Regulation. Fortunately, in this case, the order only amounted to $2,195.93 being owed to the employee to make up for earning below minimum wage. However, employers who pay employees by commission or other variable compensation are well advised to keep track of any minimum wage obligations and hours worked, as this could add up to a substantial liability over time if earnings fall below minimum wage.
Employer does not have to pay settlement funds after grievor brags on Twitter in breach of confidentiality provisions
The Acadia University Faculty Association filed grievances for the termination of a tenured professor and the parties entered into a settlement agreement, which required strict confidentiality. The only statement that could be made public was that the grievances were resolved through mediation. After signing the settlement agreement, the professor posted on social media, tweeting that he was “a vindicated former professor”. The Arbitrator ordered that the tweets be deleted in compliance with the settlement agreement, but the professor continued to tweet about his severance pay being withheld.
The Arbitrator determined that the tweets breached the confidentiality provisions of the settlement agreement and that repeated use of “vindicated” and “severance” seemed to acknowledge wrongdoing. Given the repeated and continuing breaches of the terms of settlement, together with the absence of any mitigating circumstances, the Arbitrator held that the University no longer had to honour their settlement payment provisions. Giving teeth to confidentiality clauses, this case provides that non-payment of settlement funds may be an appropriate remedy for a breach of confidentiality, particularly where the breach is flagrant.
Ontario Court of Appeal confirms analysis of “comparable employment”
In business transactions, there is often an obligation placed on the purchaser to offer continued employment to employees on comparable, or substantially similar, terms. The reason for this is that, at common law, employees generally cannot claim wrongful dismissal damages against their employer when terminated if they have turned down offers of continued comparable employment from the purchaser.
In Dussault v. Imperial Oil Limited, the Ontario Court of Appeal upheld a lower court decision that provides some guidance on assessing what “comparable employment” is, and demonstrates the potentially significant consequences of failing to properly meet that standard.
In this case, Imperial Oil sold a division to Mac’s Convenience Stores and, in connection with that transaction, Mac’s offered continued employment to certain employees. However, two particularly long term employees (39 years and 36 years’ service) rejected Mac’s offers and claimed wrongful dismissal damages against Imperial Oil.
In finding that the employees were entitled to wrongful dismissal damages, the Court held that Mac’s failed to offer comparable employment to these employees, and therefore they were not obligated to accept those offers. In particular, it was noted that:
- Imperial’s requirement that the employees sign a release in order to obtain employment with Mac’s unfairly required them to give up potential rights to amounts otherwise owed by Imperial.
- Mac’s offers did not recognize the employees’ prior service with Imperial Oil which presented a significant downside to the employees.
- Mac’s offers only guaranteed the same salary for a period of 18 months and did not indicate what their salary may be after that point.
- Mac’s offered materially less beneficial benefits.
As a result of the failure to ensure comparable employment was offered to these employees, the employees were entitled to 26 months’ compensation in lieu of notice.
6. Calgary (City) and CUPE, Local 37 (Mossman), Re, 2019 Carswell Alta 1073
Arbitrator upholds termination of long-term employee with a clean disciplinary record for engaging in sexual harassment of a co-worker
Mr. Mossman worked for the Calgary Roads Department for over 30 years and reported to a female foreman (AB) for roughly 10 years.
While Mr. Mossman and AB exchanged texts about work duties, the tone changed in February 2017 when Mr. Mossman began sending sexually charged messages to AB. In April of 2018, these actions culminated when Mr. Mossman showed AB a photo of his genitals. Although he initially apologized, Mr. Mossman later asked AB (on two occasions) if she wanted a copy of the image sent to her via text. AB began the process of a formal complaint against Mr. Mossman who was suspended with pay that day, and was dismissed on May 8, 2018.
The union grieved the termination and Mr. Mossman wrote a letter of apology. Mr. Mossman’s conduct after AB filed the formal complaint, however, showed that he blamed the victim for betraying him rather than accepting responsibility for his actions. The Arbitrator upheld the dismissal stating that the intentional nature of Mr. Mossman’s misconduct was an aggravating factor, particularly given that he pressed AB to accept a copy of the photograph on two separate occasions.
This decision presents a welcome example of arbitral recognition that sexual misconduct is among the most egregious, and that employers must respond accordingly.
Ontario Court of Appeal upholds the 24 month presumptive “cap” for reasonable notice award
After 37 years of employment, Mr. Dawe was terminated without cause by The Equitable Life Insurance Company of Canada. Mr. Dawe was 62 years old when he was terminated and had worked with Equitable Life for his entire career. Mr. Dawe sued for wrongful dismissal, claiming damages over the reasonable notice “cap” of 24 months.
Determining the appropriate length of reasonable notice for a particular employee is fact specific and looks at factors such as age, length of service and expected difficulty in finding comparable employment. For many years, 24 months has been viewed as the maximum notice period available to an employee, regardless of circumstances. That being said, in the past few years, we have seen courts issue awards in excess of 24 months for particularly long term, older employees.
In this case, the motion judge seemed to take this development further, finding that “when there is no comparable employment available, termination without cause is tantamount to a forced retirement”. The motion judge found that Mr. Dawe was entitled to a notice period of 30 months. Equitable Life appealed, submitting that the motion judge’s determination of reasonable notice was excessive.
The Ontario Court of Appeal allowed the appeal on the issue of notice, reducing the notice period to 24 months, confirming that 24 months remains the maximum reasonable notice award, absent exceptional circumstances. The motion judge’s conclusion that a notice period of 30 months was appropriate did not rest on the presence of exceptional circumstances, and was instead based on the judge’s perception of broader social factors. The motion judge should not have relied on his own impression of the change in society’s attitude regarding retirement, particularly as “there was no basis in the record for making such sweeping statements”. Moreover, the Court of Appeal held that mandatory retirement considerations were irrelevant to Mr. Dawe’s situation, as he had sworn in his affidavit that he planned to retire at the age of 65 and there was no basis to find that he would have worked later.
While Mr. Dawe’s circumstances (his senior position, career-long years of service, age, and difficulty in finding new employment) did warrant a lengthy notice period, the Court of Appeal found that there was no basis to exceed 24 months’ notice.
This decision confirms an employee would have to demonstrate exceptional circumstances to receive an award in excess of 24 months. However, we note that in this case, the fact that Mr. Dawe had requested an “exit strategy” from his employer played against a finding of exceptional circumstances. To this end, it is interesting to contrast this result with the decision in Dussault v. Imperial Oil Limited, where employees of similar age and length of service were awarded 26 months based on a finding that exceptional circumstances were present in their cases.
We also note that leave to appeal was filed with the Supreme Court of Canada on November 19, 2019 and we continue to wait to see whether the appeal will be heard.
Ontario Human Rights Tribunal finds requirement for “permanent” eligibility to work in Canada discriminatory, holds employer liable to the tune of $125,000
Mr. Haseeb was offered a position at Imperial Oil Limited. After learning that Mr. Haseeb was not a Canadian citizen, nor a permanent resident of Canada, Imperial rescinded the job offer. At the time, Mr. Haseeb had a student visa and planned to obtain a post graduate work permit for a term of three years. He did not, however, meet Imperial’s requirement that candidates be eligible to “work in Canada on a permanent basis”.
The Ontario Human Rights Tribunal found that this requirement was discrimination based on the protected ground of citizenship. The Tribunal applied the remedial principle that Mr. Haseeb should be put in the position he would have been in, had there been no violation of his human rights. The Tribunal concluded that had Imperial not violated Mr. Haseeb’s rights he would have been hired, and would have been employed by Imperial for at least three years.
Mr. Haseeb was awarded compensation totalling over $100,000 for his lost income for the entire period of unemployment resulting from the discrimination. Mr. Haseeb also obtained an award of $15,000 for injury to dignity, feelings and self-respect. Imperial ultimately had to pay Mr. Haseeb over $125,000, a steep price for the requirement that candidates be eligible to “work in Canada on a permanent basis.”
Imperial revised its hiring practices and now requires that applicants be eligible to “work in Canada” without a requirement for proof that they can do so on a “permanent basis.”
Ontario decision suggests that occasional leniency with regard to a term of employment will not necessarily alter the term of employment
Ms. Peternel worked for Custom Granite and Marble Limited. Although her hours were 8:30 a.m. to 4:30 p.m., the employer was flexible about Ms. Peternel’s start time, enabling her to care for her children in the mornings. While on maternity leave for her third child, the Employer told Ms. Peternel that when she returned to work she would be required to arrive no later than 8:30 a.m.
Ms. Peternel claimed that she was unable to secure child care, and ultimately she did not return to work. Ms. Peternel brought a claim alleging that her start time was a fundamental term of her employment contract and one which her employer could not unilaterally alter. Ms. Peternal further argued that she was statutorily entitled under the Employment Standards Act to return to a job that had some flexibility in its start time, and that it was a breach of contract and a breach of the employer’s duty under the Human Rights Code for the employer to insist that she start at 8:30 a.m. each day.
The Court determined that the 8:30 a.m. start time was an existing term of Ms. Peternel’s employment prior to her going on maternity leave. Therefore, by insisting that she start her work day at 8:30 a.m., the employer did not violate Ms. Peternal’s right to be reinstated to her former position as required by the Employment Standards Act. The Court also concluded that the employer’s insistence on the 8:30 a.m. start time did not represent a breach of contract.
Finally, the Court found that the employer’s actions did not engage a duty to accommodate under the Human Rights Code. Ms. Peternel failed to show that the 8:30 a.m. start time was discriminatory as she did not provide the employer with important information regarding her childcare needs. As such, Ms. Peternel frustrated any efforts that may have been made by her employer to accommodate her childcare needs.
Ontario Court of Appeal throws kink in use of “failsafe” termination clauses
While employers look for certainty in defining and limiting employee termination entitlements, it seems that the law shifts on this subject every year.
In 2018, the Ontario Court of Appeal released its decision Amberber v. IBM Canada Ltd., 2018 ONCA 571, wherein it held that a termination clause that otherwise violated employment standards legislation was saved and enforceable due to a “failsafe” clause that guaranteed the employee any greater entitlements that may be owed under employment standards legislation.
2019 then brought the decision in Andros v Colliers Macaulay Nicolls Inc. In this case, the employment contract contained a termination provision allowing the employer to terminate employment by providing the employee the greater of (1) their entitlement pursuant to the Employment Standards Act; or (2) at the employer’s discretion, either (a) two months’ working notice; or (b) payment in lieu of notice in the amount equivalent to two months’ base salary.
The Ontario Court of Appeal confirmed that the termination clause was unenforceable. The drafters of the termination provision may have intended the first part to be a “failsafe” clause, however the Court of Appeal concluded that the termination clause, as drafted with two distinct and separate parts, was ambiguous. The Court of Appeal stated that if a termination clause purports to contract out of statutory entitlements without substituting a greater benefit in its place, the entire termination clause will be unenforceable. The employee was therefore entitled to a common law notice period (including a pro-rated bonus he would have earned during that period).
Admittedly, it is unclear why the Court of Appeal found that a guarantee that the employee would receive the “greater of” statutory entitlements or other amounts was insufficient to protect the employee’s statutory entitlements. However, for the time being, the case demonstrates that reliance on a failsafe provision may not be the best tactic for employers and that, if a failsafe provision is to be used, employers must be very clear in their drafting.