This article first appeared in “La chronique des experts de l’APECQ” newsletter on August 27th, 2014.

In the matter of Commission des normes du travail v. Compagnie d’assurances Standard Life du Canada1, the Court of Québec had to decide whether an employer could counterclaim against an employee in proceedings in which Quebec’s Labour Standards Commission2 (the “Commission”) was suing the employer on the employee’s behalf. It should be noted that the majority of the Court’s previous decisions were to the effect that it could not, despite the fact that the Court of Appeal has suggested that an employer could do so. 

The facts were as follows. Following the termination of her employment, the employee filed a complaint with the Commission because the employer refused to pay her the amount of $2,301 for unpaid vacation days. The employer maintained that it owed her nothing, as the employee had received salary advances of more than $5,000 and signed an undertaking to repay that amount, which she had not fulfilled. The employer accordingly set off the amount due by the employee from the amount it owed her, resulting in a balance in its favour of $2,589.93, which it counterclaimed from the employee. 

The Commission filed a motion to dismiss the counterclaim on the grounds that the Labour Standards Act, the majority case law of the Court of Québec and the employee’s undertaking to repay the salary advances did not allow the employer to exercise its right of setoff.  In addition, the Commission maintained that it was not possible for the employer to claim the excess amount that the employee owed it in a counterclaim, as the principal action was instituted by the Commission, a separate party, and not by the employee. As the employee was not party to the proceedings, it argued, a counterclaim was not possible. 

The Court of Québec rejected the Commission’s arguments and allowed the employer to make its defence and counterclaim against the employee in a single proceeding. It held that the defence of setoff is a principle recognized by the courts, and because the employer was entitled to set up against the Commission any ground of defence it had against the employee, it could therefore counterclaim for the excess amount owed it by the employee for un-repaid salary advances. 

The Court also pointed out that it was bound to respect the proportionality principle set forth in the Code of Civil Procedure. Given the small amounts at issue in the case before it, the Court felt that it would be inappropriate to oblige the employer to institute a separate proceeding against the employee in order to claim the excess amount owed it and that it would be preferable to have all the litigious issues between the parties dealt with in a single proceeding. 

It is thus distinctly possible that, pursuant to the action instituted by the Commission against the employer, it will ultimately be the employee who is ordered to pay damages and interest to the employer.