ONE | DRUG AND ALCOHOL TESTING

Drug and alcohol testing will remain a hot topic in 2014 following the Supreme Court of Canada's 2013 decision in Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper, Limited. Considering whether an employer could unilaterally impose random alcohol testing in a unionized work environment, the court held that the existence of a dangerous work environment alone does not automatically entitle employers to impose random testing on employees. Instead, businesses operating in dangerous work environments must demonstrate the existence of enhanced safety risks to support the introduction of random testing programs. Moreover, safety concerns must always be weighed against employee privacy interests.

Although the Irving decision was confined on its facts to random alcohol testing implemented in a unionized work environment, likely it will significantly influence how courts and tribunals assess drug and alcohol testing programs. Given the court’s strong language regarding the importance of employee privacy and the deference lower courts give to Supreme Court decisions, drug and alcohol testing cases that come before the lower courts and other adjudicative bodies post-Irving will need to be watched closely to see how decision-makers will interpret and apply Irving to different sets of facts.

TWO | CHALLENGES TO CHANGES TO RETIREE BENEFITS

Recent cases from two Canadian provinces have highlighted the challenges facing employers who want to amend, modify or terminate benefit programs available to retired employees. In the 2012 Lacey v. Weyerhaeuser decision, the British Columbia Court of Appeal opined that communications from the company to its employees created a “common understanding that benefits would be for life” and thus the company had no right to reduce benefits for employees who had already retired. Leave to appeal this decision was denied by the Supreme Court of Canada late in 2013.

In the 2013 O’Neill v. General Motors decision, an Ontario Superior Court judge undertook a careful review of the history of employee communications about retiree benefits at General Motors and came to a similar conclusion to that of the British Columbia court. Specifically, the Ontario court found that employer communications that promised “retirement security” to its salaried employees did not effectively reserve the company’s right to reduce benefits post-retirement. The court held that the reservations of rights clauses relied on by the company were not sufficiently clear and unambiguous to amount to a right to change benefits after an employee retired. General Motors has appealed this decision to the Ontario Court of Appeal. It is also important to note that in both cases, the courts agreed that in Canada reservations of rights clauses in employment agreements should be strictly construed against the employer because of the imbalance of bargaining power inherent in the employer/employee relationship.

In light of these decisions, we expect to see more challenges to employer efforts to reduce or eliminate employee benefits for existing retirees. 

THREE | ENFORCING SELLER RESTRICTIVE COVENANTS

In another important Supreme Court of Canada decision from 2013, Payette v. Guay, Inc, the court ruled that post-employment restrictive covenants negotiated in the context of a sale of a business must be interpreted using commercial law rules and not the rules applicable to covenants negotiated between employees and employers at the outset of the employment relationship. According to the court, this is true even when the covenants are found in an employment agreement made between a seller party and the buyer. The rationale for the difference is that in the employment context, there is a presumption of a power imbalance between the company and the employee. In fact, restrictive covenants entered into in the employment context are presumptively void in Canada as against public policy, whereas covenants negotiated in a commercial context are presumptively enforceable.

In determining whether the covenants are enforceable, courts considering covenants negotiated as part of a commercial transaction can consider such factors as the sale price, the nature of the business’s activities, the parties’ experience and whether the parties had access to professional advice. The Payette decision requires that Canadian courts give substantial deference to the terms of the parties’ commercial agreement, especially where there is evidence that the parties negotiated on an equal footing and were advised by competent professionals. However, the decision also requires that Canadian courts continue to examine the overall reasonableness of restrictive covenants, including whether the clause is limited to what is reasonably necessary for the protection of the purchaser based on the nature of the business and where it is operating at the time of the sale.

We will be watching the 2014 jurisprudence with interest to see if evidence about bargaining power will now play a bigger role in cases considering restrictive covenants in both the employment and commercial transaction context.