Independent Employment RelationsOutline Spring 2010

Stephanie WalshDivision of powers

In Canada, most employment relationships are regulated by provincial laws. Under the division of powers, ‘property and civil rights’ go to the provinces and this covers most of employment law. These use the Employment Standards Code.

o Except: Federal works and undertakings, and truly national employers (banks, airlines, trains, inter-provincial trucking). These areas use the Canada Labour Code.

What governs the employment relationship?1. Express terms of the employment contract regulate the employment relationship.

2. Implied terms: when the parties have not addressed an issue and it comes up, the court may be called upon to determine whether parties would have agreed to something had they put their minds to it (gap filling)

Example: no express notice provision. If the parties have not addressed this in the employment contract, the law implies a term that says “you will provide an employee with reasonable notice for dismissal or pay in lieu of notice.” This can range anywhere from a few weeks to the upper maximum of 24 months.

3. Statutes: The Employment Standards Act has requirements for minimum wage,

holiday pay, leaves, etc. The Worker’s Compensation Act also sets out other important

information.

Conceptualizing the employment relationship The concept of ‘employment’ itself is a fairly recent idea. It used to be

Master and Servant Law. This was a status relationship rather than one of employment. Their reciprocal responsibilities flowed from that relationship. It’s been eroded over recent years...

1. Dishonesty and Dismissal Up until 10-12 years ago, the law in BC said that dishonesty is a cause

for dismissal. Many cases over the years said that it’s not the nature of the transgression itself that’s problematic, it’s what it reveals about the ‘character of the employee’ and whether the employer can trust you, so it was reasonable cause.

In a case called McKinley v. BCTel the SCC displaced the law in a fairly important way. In that case, BCTel dismissed an employee for cause

because he lied about his disability. The Court said dishonesty is not always cause for dismissal, you

have to have a contextual analysis of it. You look at the seriousness of the transgression, the length of the service, the history of transgressions, the position of the employee and make an assessment as to whether the conduct is incompatible with ongoing employment.

2. Requirements for Obeying Orders The old law said that as long as an employer asks you to do something

and it’s legal, you have to do it. Now you must make the requirements reasonable, and it must be

within the scope of employment.

Economic underpinnings to the employment relationship This can influence how the Courts interpret employment disputes and

employment contracts. Two approaches:

o Neo-Classical/Market Approach: simple supply/demand principles. The parties contract voluntarily, freely negotiating the terms and are able to leave if necessary.

Everyone gets what he or she deserves based on the supply and demand of the marketplace.

High level CEOs, software designers are capable of writing their own terms.

o Freedom and Coercion: Max Weber said that the idea of freely negotiated contracts don’t exist at tall. It’s really just legitimizing coercion.

Employees from other countries coming to Canada Courts often start from the presumption that because of the disparity

in bargaining power, any ambiguity should be construed against the drafter. Any harsh provisions should be construed narrowly against the employer.

Statutes have also changed things:o Employment Standards legislation: minimum wage, overtime

requirements, mandatory vacation provisions.

Identifying Parties of Employment Relationship

I. What are the characteristics of an ‘employee’

Work can be classified in several different ways:o Employer - Employee (most common)

o Partner – Partnero Contractor - Independent Contractor

The parties own characterization of their relationship will not be determinative.

The common law has struggled to try to develop a test to properly assess someone’s status.

Indicia of E: Who is supplying the tools, setting hours, who is in control (right to give orders/instructions), etc.?

In Canada, a number of tests have been developed (Sagaz Industries summarizes tests to determine EE or not).

o The first test is the ‘Control Test’ Control was the original criterion for employment status (R.

v. Walker and adopted by the SCC in Hopital Notre Dame, Redi-Mixed Concrete)

Control Text: extent to which ER can instruct EE about manner to conduct work

Ready-Mix Concrete – expansion of Control Test: the power of deciding the thing to be done, the power to decide the way in which it shall be done, the means to be employed in doing it, the time it shall be done, and the place it shall be done

Control isn’t everything, the test has involved This test had problems...

o The second test is the ‘Four Fold Test (Entrepreneurial Test)’ ** most cited test

Comes from the case of Montreal Locomotive. Includes: control, ownership of the tools (who

supplies them?), chance of profit and risk of loss This test also isn’t perfect – consider a life insurance sales

person – little direction in way they sell policies, own vehicle for transport, paid on commission, usually don’t lose money – under the 4-fold test, probably an IC – but might not be right, so another test created

o The third test is the ‘Organization Test (Integration Test)’ The question here is: Is the individual’s work an

integral part of the business, or is it an accessory to it? (from Cooperator’s Insurance)

We also gained the concept of a contract ‘for service’ (independent contractor) v. a contract ‘of service’ (employment relationship).

This test is a good test to apply to a salesperson case, where a lot of the factors point to independent contractor, but they don’t really seem like an independent contractor because they’re so important.

But this test has limits (Weib Door): they give the example of someone responsible for cleaning the premises. They’re

integral to the business, but this is usually contracted out to other businesses on their own account.

o Fourth test – the ‘Enterprise Test’ Developed to deal with whether an ER should be

vicariously liable for conduct of EEs (ER should bear responsibility of a tortuous act committed by EE in the course of employment)

Courts have said that ER’s should be vicariously liable b/c ER controls actions of EE, ER is in a position to reduce risk of loss to 3Ps, ER benefits from the work of EE’s, true cost of product/service should be born by ER

QUALIFICATION: conduct must have taken place in course of employment

Sagaz Industries Canada (2001, SCC)Facts: Sagaz bribes Canadian Tire to win over contract for supplying seat covers. Decision: Summarizes 4 tests (Canadian and English) used to assess employment status

No specific test will fit every fact pattern One element that is always important – CONTROL (right to give orders and instructions

to employees about how they carry out the work) In trying to synthesize these tests, Sagaz came up with a sort of 5th test/approach,

para 47: o There is no one universal test that can give clear and acceptable resultso It is all fact pattern based, and the weight that will be given each of the factors

will vary by fact patterno Court agrees that the persuasive approach is from Market Investigation

Central Question: Whether the person engaged is doing the actions did so as a person in business on his own account – in making this determination, level of control will always be a factor

o Other factors: hires own helpers? Degree of financial risk? Provides own tools? Workers’ opportunity for profit?

o Non-exhaustive list – relative weight determined by circumstancesPolicy - Imposing vicarious liability just and practical remedy for plaintiff’s harm and it encourages deterrence of future harms

II. Who is the employer?

Less often asked question, but can be important Can be more than one employer, and the court won’t limit you to just one Is the company paying you, as your employer of record, actually your employer?

o Ex. Think of personnel agencies, who pay the person but they are actually working in a law firm doing a secretarial position

o Length of prospective employment may be a factor Common Employer Test :

o Roots as a statutory test found in Labor Relations Code

o To remedy situations where employers who have unions might be able to evade obligations to their employees by transferring formal employment to another entity

o If the parent company has control over the subsidiaries, the test will say all are part and parcel of the same enterprise, will be treated as such

o It has become a common law test

Downtown Eatery v. Ontario (2001, Ont CA)Applies the common employer testFacts: A sued the company from whom he was receiving his paychecks and he was successful. But the employer didn’t pay. A retained the sheriff to go and seize the assets. He couldn’t satisfy the judgment, but then he noticed there were lots of companies involved – different companies that owned the liquor license, the trademark, etc. He then sued them all.

Sophisticated group of corporate companiesDecision: Although the law permits this, need to be vigilant that the level of permissible complexity doesn’t lead to injustices in other areas (like employment law)

Find in favor of Alouche The defence made an argument that there was no contract between A with the other

companies – and how can you impose contractual obligations where there is no contract The court said – contract is only one factor to consider in the employer employee

relationship – it is not determinativeo Or it would be far too easy to evade obligations to dismiss employees

Court relied on Sinclair v. Dovero S held himself out to public as employee of Dover, but he was payed by Cyrilo He was wrongfully dismissed, sued both companieso At trial, defendants argued that employees can only contract with a single

employero Court said NO – no reason you can’t have more than one employero This is not an unusual relationship, so long as there is a sufficient degree of

relationship b/w the different legal entities, no reason they can’t be considered common employers

Common shareholdings, interlocking, all part of common control

Section 95 – Employment Standards Act

Associated Employers:If the director considers that businesses, trades or undertakings are carried on by or through more than one corporation, individual, firm, syndicate or association, or any combination of them under common control or direction,(a) the director may treat the corporations, individuals, firms, syndicates or associations, or any combination of them, as one employer for the purposes of this Act, and(b) if so, they are jointly and separately liable for payment of the amount stated in a determination, a settlement agreement or an order of the tribunal, and this Act applies to the recovery of that amount from any or all of them.

Problems Caused by Sale of Business

What happens as an employee when the business for which you work is sold? Share purchase – business A acquires majority of a business by getting majority of voting

shares – but business still continues on as before Contrast with sale of business assets, or if an entire division of a company is sold Under the common law, the employer cannot, without employee’s consent, assign

the contract of employment to another employer

Constructive Dismissal – the employer unilaterally changes conditions of employment and the change is fundamental, the employee can treat it as a dismissal, which entitles them to resign and sue for damages under wrongful dismissal

Asset sale = technically a constructive dismissal But most employees do continue on with the employer If employee is given same terms and conditions with the purchaser, with recognition of

length of service, and the employee chooses not to accept the position, in most cases the employee will not get any kind of damages b/c of a failure to mitigate

Major v. Phillips Electronics (2005, BCCA)Facts: Assets of Philips Electronics are sold. Major agrees to stay on and work for Holly (purchaser) on similar terms. Holly also recognizes his length of service. Major and Holly have a falling out and Major’s employment is terminated. Major threatens litigation against Holly and they offer him 17 weeks pay, for which he settles and signs a release against Holly. Then he goes after Phillips.Issue: Did the original ER (the vendor) continue to be liable to Major for severance pay in lieu of notice even though Major stayed on with the new company?Decision:

B/C this was an asset sale, the fact that Phillips would no longer employ him amounted to a constructive dismissal

Novation – a trilateral agreement by which an existing K is extinguished and a new one brought into its place – 3 PART TEST

o (1) New employer must assume complete liabilityo (2) Employee must accept new employero (3) Employee must accept new K in full satisfaction and substitution of the old K

The test for novation must be clearly set out (high standard to meet) unless there is compelling policy reasons (onus on ER)

Phillips argues that b/c Major had a right to sue Holly, he was precluded from suing Phillips

o Court rejects the argument, NO NOVATION – there are 2 causes of actions in this case that overlap

First, constructive dismissal by Phillips Second, wrongful dismissal by Holly

BUT, Even though there are 2 potential claims, can’t have double recovery

Phillips also argues that under s. 97 of the ESA, the purchaser of the assets becomes responsible for the employee’s rights

Implied term that unless the parties specifically address it, the purchaser inherits the terms of employment of the vendor

o Under the C/L, the employee would have claim against both vendor and purchasero S. 97 is intended to supplement the common law, not take away c/l rights

Court rejects this argument too – s. 97 doesn’t apply in the circumstances

Formation of the Contract of Employment

Majority of K’s of employment are oral But becoming increasingly popular to rely on written K’s to specify rights and

obligationsEmployment Contracts

Opportunity for employers to limit liability, avoid problems Advantages:

o Certainty – lessens incidents of lawsuits for two reasons – legal certainty flows from properly drafted document, and psychological advantage

Wage, bonus, length of contract, probation periods, hours of work/flexibility, notice of dismissal, etc

o Limit Liability o Flexibility – provide employer with ways to change the employment contract in

ways they wouldn’t be allowed to do otherwiseo Clarify expectations – lots of litigation driven by misunderstanding and

miscommunicationo Limitation of Promises – the promises contained in the written K represent all the

promises made to the employeeo Post termination obligations (maybe restrictive covenants)

Disadvantages:o Certainty – employers must recognize they will be bound by and held accountable

for the deal which is consummated in the written K

Ambiguity almost always construed AGAINST the party who drafted the document = contra preferentum

o May cause difficulties in hiringo Cost of administrationo Enforceability – a written K is vulnerable in circumstances where it was not

properly entered upon Need adequate CONSIDERATION Was the term in the agreement that the ER wants to rely on obtained

through adequate consideration? If agreed to and executed prior to first day of work, the

consideration is them coming to work for a salary BUT if employee doesn’t sign it until a week after they’ve started,

there’s no good consideration Must recognize that if a K is being implemented during the course of the

employment relationship, fresh and valid consideration must be provided to the employee to make it enforceable

Key Contractual Termso Termination Provisions

Particularly change of control provisions – to address a specific or developing situation

o Resignation – can stipulate minimum required notice and how they want it provided before an employee can finish

o Return of Propertyo Confidentialityo Restrictive Covenants

Common law protections such as not taking customers away from a business where you used to work, Reasonable notice of resignation

Beyond these and what is negotiated in the contract, the employer doesn’t have much protection

Fixed Term Contracts Most employment K’s in Canada have no set end date They are for continuous employment And so ERs must give notice before termination of employment But can have a provision in the K for fixed term – for example, a K for working for the

Olympics

See handout of sample contracts Often in form of a letter

The Employment Standards Act

Sets out rights and obligations below which NO employer or employee may go – CAN’T be waived

There are 2 million people in Canada earning $10-12 or less per hour

o Usually vulnerable people – like immigrants, young personso Common law offers very little protectiono How can one of these persons afford to take their employer to court?

ESA is therefore very important

History The origins of ES minimums don’t reach that far back Usually evolved under pressure from labor organizations

S. 63 – right under ESA to notice of dismissal or termination payo Statutory floor for 6 years is 3 weeks

If the employer enters an employment agreement that doesn’t mean the minimum standards, what will the court do?

o The term is not enforceableo The court wont rewrite the K, it will do away with the clause and you will be left

with the common lawo Under the common law, after 6 years you would be entitled to MONTHS of

severance, not weekso Which is obviously hard on the ER – better to just draft properly in the first place

BC ESAPart 2 – Hiring EmployeesPart 3 – Wages, Special Clothing, Records

Minimum wage set by regulation In BC, it’s $8/hr

Part 4 – Hours of Work and Overtime Entitled to premium wage for working more than 8 hours a day or 40 hours a week After 12 hours its double time

Part 5 – Statutory Holidays Day off with pay for each If required to work, paid premium (time and a half) and given another day off with pay at

another timePart 6 – Leaves and Jury Duty

Unpaid leaves Maternity, paternity, family responsibility, bereavement, and jury duty Entitled to these leaves, and entitled to your position or a substantially similar position

back at the endPart 7 – Vacation and PayPart 8 – Termination of Employment

s. 63 – Formula for termination – maxes out at 8 weeks s. 64 – Group termination pay – within 60 days terminate 50 or more employees from a

single location – you have to give MORE noticeo You must also tell the Minister of Labor so they have time to soften the impact on

the communityPart 9 – Variances

The Director of Employment Standards has to power to grant employers “variances” or exemptions from certain obligations like those relating to paydays, special clothing, split shifts etc

IF a majority of the affected employees consent to such an applicationPart 10 – Complaints, Investigations and Determinations – an employer is prevented from retaliating against employees who make complaints under the Act

Coverage and Exclusions S. 4 - Regulations are minimum requirements that can’t be waived by employees S. 127 allows the LG in Council to make regulations that exclude classes of persons from

all or part of the Act S. 31 of the Regulations – the Act doesn’t apply to lawyers, doctors, dentists, engineers,

accountants, sitterso Likely because these groups are not vulnerable, don’t need it’s protections

Over 25 occupational categories are excluded from Part 4 – such as teachers, police officers, master or crew of a chartered boat, managers etc

o Managers act independently to influence the work being done Frequently litigated, as many companies have a huge hierarchy of

“manager” type positions being filled – courts are quick to cut through the management title in favor of an employee when the job description doesn’t really fit that of a manager

Changes Since 2002 Wanted to give more protection to sectors where employees may be more vulnerable to

abuse or where business operators need more education Child Labor

o Minimum age of employment lowered from 15 years of age to 15 days (s.9)o Children 12-14, employer needs written consent of child’s parent or guardiano Children 11 and under employer also needs permission of the Director and must

comply with any conditions the Director may seto Regulations accompanied – employer can’t make 12 year old work more than 4

hours on a school day, 7 hours on a non-school day, 20 hrs in a week of 5 school days, and more than 35 hours a week otherwise

Overtime Averaging Agreementso Enable employers to avoid overtime obligationso Under s. 37, the employer (w/ consent of employee) can average an employee’s

hours of work over 1, 2, 3, or 4 weeks for the purpose of overtime entitlement

ESA Enforcement Process and Mechanisms Enforceability is responsibility of Director and Employment Standards Tribunal Director requires employees to complete ES Self-Help Kit and present copy to employer

before complain will be acceptedo Has materials to help the parties resolve the dispute informally

ES officer acting as delegate of the Director will review and investigate the complaint, make a decision

Can appeal to the Tribunal

o Appeals available on errors of law, on principles of natural justice or if there is new evidence that wasn’t previously available

o This is not a trial de novo Decisions of the tribunal are final and not open to further appeal to court, although

judicial review is available If going to file, must do so within 6 months of termination Under s. 80 of the Act, an employer’s liability for unpaid wages is limited to wages that

became due 6 months prior of the earlier of the date of the complaint or termination of employment

S. 82 – can proceed under act or common law, employee has to make a choice and can’t proceed in both forums

o There are also stat protections that don’t exist under the C/Lo For example, requirement to pay overtime is ONLY statutory – so can’t go to

court to have it enforcedMackerag

Discussed on page 383 Person made a claim in court to enforce overtime provisions of the act The BCCA said, if this is a right that’s purely statutory, the courts DO NOT have

jurisdiction to enforce that statutory right There is mechanism for enforcement is the Employment Standards Branch and Tribunal,

so enforcement options are limited to those provided in the statute

Working Time Huge area of tension – worker’s needs and desires don’t always accord with employer’s

business interests Regulation of Working time has 3 distinct components

o 1. Regulation of hours of work that employees can be permitted or required to work

o 2. Entitlements to paid time off work (holidays/vacations)o 3. Leaves of absence for specific reasons, such as health and family

responsibilitiesHours of Work

Laws in this area regulate supply in demand by imposing obligations on employers to pay overtime premiums and by establishing limits on maximum hours of work and requirements for minimum rest periods for employees

Common Law and Statutory Obligations of Employer under a contract for employment

1. Duty to Pay Basic Duty of employer to pay Both common law and ESA regulate this

ESA Part 3 – Wages S. 16 Requires employers to may minimum wage set by regulation S. 15 of Regulation sets minimum wage for most workers at $8/hour

o Notable exception – the Regulation was amended to provide for a “starter” wage – person is paid $6/hour for the first 500 hours of paid employment

S. 21(1) An employer must not directly withhold or deduct any part of any employee’s wages for any purpose

Case Example person drives bus for non-profit society Accused and charged with sexually touching person What should the society do? The employment contract was silent on the issue of

suspension The case law suggests that the driver must be suspended WITH pay – when you remove

his ability to perform the task, you have to still pay him If a person is suspended without pay and is then acquitted of a criminal charge, he must

be back paid for all the salary withheld during the period of suspension

The smart solution to this sort of problem Have a provision in the employment contract that deals with suspensions for certain

actions But must consider that non-profits and small businesses don’t have the resources to hire

lawyers to contract for every possible situation

Common Law and Civil Law Duty to Pay an Employee who is Suspended

Cabiakman v. Industrial Alliance Life Insurance Co (2004, SCC) ** Case decided under Quebec civil lawFacts: EE charged with extortion, suspended w/o pay. Later he was acquitted and re-instated into his old positionIssue: Whether an employer has the obligation to pay an employee while the EE is under a suspension imposed by the ER to protect the interests of the business and its customers while criminal charges are pending against the employeeDecision: Suspension justified, but can’t suspend w/o pay

K is silent wrt ER’s power to suspend Looks to implied powers of the employment relationship In an employment relationship / relationship of subordination, the employee is agreeing

the employer must make decisions in the business’s interests, and the employee’s work must be performed in a manner consistent with that interest (subject to contractual terms)

o If the employee’s ongoing performance would compromise that interest, the power of suspension is a necessary component of the employment relationship

o An implied term under the common law Requirements to suspend for administrative reasons:

o Action must be necessary to protect legit business interestso Employer must be guided by good faith and act fairly when making decisiono The temporary interruption of employee’s work must be interrupted for relatively

short period of time that is fixedo Suspension (unless there are exceptional circs) must be WITH pay

NOTE power to suspend for administrative reasons does not entail the right to suspend the payment of salary

ER can’t unilaterally avoid obligation to pay because it has taken away the EE’s opportunity to work

Court enunciated a balancing of interestso One hand, preventative action to protect the employer’s businesso Other hand, a person’s employment is essential component of his/her sense of

identity and emotional wellbeing Examples of factors an employer might consider when deciding whether to impose

suspension (ie, the acting in good faith requirement)o Whether sufficient connection between act and kind of employment the employee

holdso Actual nature of chargeso Reasonable grounds to believe that maintaining the employment relationship

would be prejudicial to business or reputationo Was the purpose of the suspension to protect the image of the business

The determination of whether suspension was reasonable is taken as the perspective at the time the decision was made – so doesn’t matter if person later acquitted or not

Duty to Pay an Employee who is Temporarily Ill or absent from work for health reasons

What are an ER’s obligations in these circumstances? Difficult area to handle Recent trends show heightening absenteeism in the workplace, leading to questions are

EE’s abusing the right to sick days

Still cited as leading case in common law:Dartmouth Ferry Commission v. Marks Estate (1904, SCC)The doctrine of frustration can apply to employment K’s in cases where an EE is unable to work because of a disabling illnessFacts: P is widow of man who worked for Dartmouth as captain during life. Marks stopped working when he came ill, never returned to work and was never paid beyond when he stopped working. Widow wants pay for 7 months before husband died. There was a written resolution that there would be no pay for illness. Although he knew of it, he was never given consideration and he didn’t approve of the resolution.Decision: Appeal allowed, Dartmouth wins

The illness can’t be classified as temporary From the day he stopped working, the consideration (wages for service) was gone “The mutuality necessary for longer continuance of the contract ceased” There is an obligation to pay an EE who is temporarily ill, subject to the K

Insurance companies and Benefit Plans Long term disability plans – income replacement If disabled further than 24 months, will continue to receive up to age of 65 Not around when Dartmouth was litigated Workers Compensation Programs – no fault – if EE suffers injury in course of

employment, the WCB will step in and provide you w/ replacement income

If you are an EE in Canada, mandatory to participate in insurance program – premiums deducted from wages, and the ER also has to contribute wages

NOTE: All of these terms we discuss are subject to the K – it supersedes anything the common law might say about implied terms

Wightman Estate v. 2774046 Canada Inc (2006, BCCA)Has superseded Dartmouth on being leading case on doctrine of frustration in BC jurisdictionFacts: W very sick. During his period of sick leave, he received long term disability benefits in the amount of 2/3 his salary, as provided for in the plan his ER had. His employment was terminated, but he received benefits until he died. He was dismissed w/o notice or cause (although he had been off work for 2 years at the time). The ER’s defence for the wrongful dismissal case was that they had been discharged of K obligation b/c the K had been frustrated by the sickness that prevented W from working. Issue: Can an employment K that provided insurance for payment of long-term disability benefits to a disabled EE for the remainder of his working life be frustrated?Decision:

The ER must show that the K was frustrated Standard for frustration: Unreasonable to foresee that the EE would be resuming

employment 5 Factors to consider whether or not frustration has happened

o 1. The terms of the K, including the provisions as to sickness pay BUT the right to sick pay may expire before its clear whether the EE will

be able to return to work – and this doesn’t necessarily mean frustrationo 2. How long the employment was likely to last in the absence of sickness

Relationship unlikely to survive if it was meant to be temporaryo 3. Nature of the employment

Relationship less likely to survive if it is a key post that must be filled on a permanent basis, versus more likely to survive if the EE is one of many who fill the same role

o 4. The nature of the illness or injury, how long sick, prospects of recovery Greater degree of incapacity and longer period persists, more likely

relationship wont survive THE MOST IMPORTANT FACTOR

o 5. The period of past employment One of long standing not so easily destroyed

W’s entitlement was not dependent upon the continued existence of the employment K, it was to continue even if employment ended due to sickness

Policy: the ER purchased the disability insurance to protect itself, and this practice should be encouraged – If the court had said that Ks could never be frustrated when LTD is involved, then ER’s would never both buying it b/c would have to pay out twice – once for the premiums and once for wrongful dismissal/severance

Illness is to be assessed at the time of dismissal – concluded at that time there was no likely possibility he would return to work

2. Duty to Provide Work

Statutory Leaves ESA provides for unpaid leaves: pregnancy, parental, family responsibility,

compassionate care, reservists’ and bereavement leave While various insurance plans have entered the workplace to protect injured or ill

workers, there is limited protection for various unpaid statutory leaves S. 54(1) says employees must be given these leaves if asked for ER can’t terminate employment or change a condition of the employment while EE on

leave As soon as leave ends, EE must be given back same position as before or a comparable

position

Questions to ask when working through the ESA and ESA Regs re: leaves1. Is the EE covered by the ESA in general, or a specific provision?2. Who qualifies for the leave?3. Are there minimum service requirements for the leave?4. Is entitlement to the leave dependent on characteristics of the ER (like size of employer?)5. Is there anything the EE must do to obtain the leave – like get a medical certificate or

advance application6. What is the EE entitled to on leave? E.g. to accumulate seniority, incremental wage

increase, contribute to benefit/pension plans7. Is the EE entitled to return to the same job at the expiry of the leave

Common Law Obligations of the Employee under the Contract of Employment

Ability to enforce discipline in work place is touchy area Common law often viewed as inadequate What can you do if threshold for dismissal not reached?

o Can you suspend?

Duty to Obey

Haldane v. Shelbar Enterprises Ltd. (1999, Ont CA)

Facts: Haldane engaged in inappropriate conduct in workplace. She was asked to apologize and told she would be suspended for 3 days w/o pay. She asked that instead of a suspension they deduct 3 days pay from her vacation pay. The ER refused and her employment was terminated. The ER contended that her refusal to accept the (in their minds reasonable) discipline gave them just cause to fire her, or in the alternative she wasn’t fired but chose to quit rather than accept the discipline. H now suing for being dismissed w/o cause, claiming they were giving unreasonable discipline as a pretense to firing her.

Issue: TJ found for the P. It was appealed, and at the appeal oral reasons were given allowing the appeal. However, 2 weeks late, the judge then issued further reasons deciding that upon further

consideration, the appeal should be dismissed and judgment given in favor of Haldane. The new judgment introduced the question of the ER’s right to discipline her by suspending w/o pay.

Decision: Trial Judgment is restored Insolence may be a ground for dismissal, but that threshold not reached here The ER wanted her to be dismissed the whole time, and that is the reason it made such

unreasonable terms of discipline and would not accept her compromise The only way an ER can discipline an EE through unpaid suspension is if it is

contractually provided foro It may flow from an implied term of the employment K – terms may be implied

into a K based on custom and usage or presumed intent of parties Terms are implied when they are “necessary in a practical sense to the fair functioning of

the agreement” This was 10 years ago, and still no case in Canada has said that an ER is entitled to

implement an unpaid suspension as a form of discipline

Progressive discipline – to prevent surprise on part of EE, if they do something wrong, you should start with smaller punishment and work up to larger for more times wrongs are committed

McKinnley v. BC Tel case There are lesser forms of discipline Para 52 (obiter) there are lesser sanctions for less serious conduct that don’t amount to

cause – EXAMPLE an ER may be justified in docking an EE’s pay for any loss incurred by a minor misuse of company property

Duty of Good Faith

Two general situations:1. The EE is acting in such a way as to undermine the ER’s interest but not competing

economically2. The EE is competing with the ER

Fiduciary EE’s – EE’s who exercise a broad and independent discretion in handling the critical elements of an ER’s business and the ER’s business interests are vulnerable to the fiduciaryTest for fiduciary status – Frame vs. Smith (187, SCC)

3 part testo (1) The fiduciary has the scope for exercise of some discretion or power on behalf

of the ER (beneficiary)o (2) The fiduciary can unilaterally exercise the power or discretion so as to affect

the beneficiary’s legal or practical interestso (3) The beneficiary is vulnerable to or at the mercy of the fiduciary that holds the

discretionary powerThe concept has its roots in equity – the associated remedies are greater, includes the remedy of return of profits

Canaro – the president and CEO was one EE. He had been pursuing a project that wasn’t finished when he left the business. Him and the VP left the company together and continued pursing the project, and the old employer ultimately sued them. At SCC, they were found to be fiduciaries of Canaro. They were senior officers w/ responsibilities

Trade Secrets – information over which the ER has proprietary interest, that the ER has either expressly or impliedly made clear that it is confidential AND could only be obtained in the course of employment

Duties are most robust during working hours – off duty conduct is only grounds for dismissal if it interferes w/ the ER’s business interestsNOTE: disclosure of confidential information is a breach, regardless of when it is disclosed

Three key elements to consider wrt this duty – (1) the type of EE (fiduciary or not), (2) the type of information, and (3) when the EE is alleged to have breached

Potential remedies – summary dismissal, injunction, accounting for profits (see Bank of Montreal), action for contractual damages, tort of conversion, etc

If the EE is a fiduciary, more causes of action for the ERo ER’s are entitled to an accounting of profitso While non-fiduciaries mean that the ER can only have damages for their loss

If the info is confidential, then there are restrictions Most restricted in trade secret information – as it is related to the proprietary interest of

the ER If the breach happens during paid work time, the EE will get nailed for everything

o If it occurs after hours, harder to get remedyo If it occurs after employment ends, the hardest to seek relief

The Rules1. The DGF prevents the EE from working on ER’s paid time or after duty in a way that

directly competes with the ER2. The DGF prevents fiduciaries from competing, even after the K has ended account for

profits3. The DGF protects the ER’s confidential information and trade secrets during working

hours, after, and after employment, due to proprietary naturea. Confidential information is explicitly or implicitly confidentialb. Trade secret has to be something you can only learn

Bank of Montreal v. Kuet Leong Ng (1989, SCC)

Facts: While employed with the bank, the EE carried out transactions that enabled him to make profits in the amount of $660,135.82. While the ER arguably didn’t lose anything, the EE had a huge personal gain.

Issue: The obligations of an EE who has the authority and duty to enter into K’s on behalf of his ER who enters such K’s using the funds of his ER and received secret commissions for his own profit.

Decision: He must account for all profits made

o “The perpetrator of a wrongful act should not profit thereby, as that would encourage wrongdoing”

RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc (2008, SCC)

Facts: P and D competing brokerage firms. All the investment advisors (under the mass orchestration of one employee) left RBC and moved to Merrill, taking with them client records. They left w/o notice to RBC.

TJ held that the former employees breached the implied terms of their employment K’s to provide reasonable notice of termination of employment and not to compete unfairly with RBC. Found them liable in tort for conversion of RBC confidential client records.

At appeal are a whole bunch of damage awards – see page 176.

Key Issue: What type of remedy is available to the former ER?

Decision: The sales EE’s that left were NOT fiduciaries With respect to the branch manager, he only spent 30% of time managing branch and his

discretionary powers were limited, often needed approval from people higher up to make significant decisions, and so even he was not a fiduciary

There was no non-compete agreement b/w the EE and the ERs, and is no general duty on non-fiduciary EE’s not to compete

This case encourages due diligence on the part of the ER – if you want no competition, you need to put in a no compete clause

EE’s DO have an obligation to give reasonable notice prior to resigning o The ER can obtain damages for failure to give notice of resignation but cannot

also claim damages for competition during this notice period WHY? Post employment duties are restricted to not misusing confidential

information (as well as fiduciary duties and restrictive covenants) If there is a loss of profit, it cannot be too remote The branch manager had an implied term in his K, which was to retain RBC’s EEs who

were under his supervision – so orchestrating mass resignations by co-workers was a breach of the DGF under the employment K

o And his actions caused the virtual collapse of RBCo RBC was awarded nearly 1.5 million on this finding alone

Duty of confidentiality does not necessarily prevent the departing EE from taking client contact information

Dissent (Abella)If he/she has competed or made improper use of confidential information

Human Rights in Employment

Common Law and Legislation At C/L, freedom of contract included freedom to discriminate at will Before human rights legislation, no legal avenue for claim based on discrimination or

gender Prohibited grounds of discrimination – race, color, ancestry, place of origin, political

belief, religion, marital status, family status, physical or mental disability, sex, sexual orientation, age, or criminal conviction (IF it is unrelated to the employment of that person)

The Human Rights Code How the legislation works:

o S. 2: No intention necessary – discrimination is discrimination Used to be that you had to prove than an ER purposely didn’t hire you

based on some discriminatory ground Now, the focus is on effect, not intent

o S. 3: Purposes of the code (public elements) – foster a society without impediments to full participation – foster mutual respect – prevent discrimination – provide a means for redress

The code prevails over all other legislation Described as quasi-constitutional

The code regulates 3 areas of private lifeo Tenancyo Employmento Services

Employment related provisions: ss. 11, 12, 13o S. 11 – Employment advertisements

Not used very often – obvious that you can’t say in a help wanted ad that you only want certain people to apply

o S. 12 – Discrimination in wages [ground protected in this provision is only sex] Not a pay equity provisions Protects against discrimination of men and women who are performing the

same, or substantially the same, worko S. 13 – discrimination in employment

You cannot refuse to employ or refuse to continue to employ a person or discriminate against a person regarding employment or any term or condition of employment based on one of the listed grounds

Doesn’t need to be an employment relationship – volunteers are protected by this section – any relationship that looks like an E relationship covered

Discrimination is prohibited, unless such discrimination is based on a bona fide occupational requirement – that is, unless there is a valid, job related reason for the apparent discrimination

Administration of the HR Code:o S. 21 – who can make a complaint: ANYONE – doesn’t have to be the

complainant (ie. can make a complaint on someone’s behalf)o Time limit: 6 months (much narrower than in past)o Interveners

Seneca College of Applied Arts & Technology v. Bhadauria (1981, SCC)

Facts: Plf (east Indian woman) has PHD in math, valid teaching certificate and 7 years teaching experience. Plf made 10 applications for the position over 4 year period. She received letters telling her she would be contacted for an interview but she was never given one, nor any reason for rejecting her applications. She alleged the positions she applied for were given to people who didn’t have as high of qualifications that were not of East Indian origin.

Claim: College had duty not to discriminate against her, breached s. 4 of Ontario Human Rights Code, claimed damages for being deprived of teaching opportunities, mental distress, frustration, loss of self esteem.

She is pursuing it through the courts because she could receive more money than if pursued through HR commission

She invokes tort law (ie. tort of discrimination), claims that what was done was a private, personal wrong against her

Decision: If the only complaint is discrimination, go to HRT – affirmed in Honda v. KeaysThe enforcement mechanism in the HRC is comprehensive

Even though we may want the CL to evolve, it hasn’t – the legislature has spoken and relegated these issues to admin law and HR codes/tribunals/commissions

Underlying concern that not explicitly claimed – would clog up the court system if HR code claims allowed to be heard in courts instead of by tribunals/commissions

Enforcement System under the B.C. Code prior to 2002 Complaints filed and received by the Commissioner

o Who would investigate claim, submit report, or choose to dispose of it without any investigation

The Code also sets up the BC HR Tribunalo Separate body that holds hearings on complaints referred to it by the

commissioner2002 Changes

Commission eliminated with Commissioner position Now BC is the only jurisdiction in Canada that does not publicly promote and enforce

HR legislation Instead, enforcement of the code is private, like a small claims proceeding Go straight to the HR Tribunal

NO HR officers to investigate, mediate, assist parties to prepare for a hearing Complainants are solely responsible for case preparation Tribunal may refuse to accept a complaint, can combine complaints Costs can be awarded to any party for improper conduct

Direct vs. Adverse Effect Discrimination Direct – just have to point to the bad conduct that links the adverse treatment to the

ground of discriminationo Realized there are ways around this – less direct ways of excluding people you

don’t want to hire Adverse effect – even if its not direct, if it has an adverse effect on someone its

discriminatoryo Facially neutral, but discriminates in effecto Binder – legitimate rule (hard hat requirement) – but need to look into

accommodating them w/o undue hardship when they cannot follow the rule for a legit reason

o O’Malley (couldn’t work Saturdays due to religion)o Must try to accommodate

Test for Proof of a Human Rights complaint

1. Is there prima facie discrimination?Civil standard of proof of a prima facie case of discrimination – balance of probabilities

Plaintiff/complainant bears the burden of proof Is it more likely than not that discrimination happened?

o Note – must be 51% more likely than not – if each scenario is equally likely, the complainant loses

3 parts to this:o 1. Can the complainant evoke a protected ground (sex, disability, religion etc)

Ex. If they claim discrimination based on disability, must actually show they have a disability

o 2. Has the complainant received adverse treatment in relation to a particular activity (in our case, employment)?

What does adverse mean? Adverse as compared to who/what?

It’s a comparative term – not just was the complainant treated worse than he wanted to be, but rather “have you been treated worse than the proper comparator”

o 3. Is it reasonable to infer that the protected ground was a factor in the adverse treatment?

Doesn’t have to be the only factor or the most important factor, it just has to be there

Very tough for an ER to prove that something did not take any part in a decision – low threshold for the factor’s involvement

2. If a prima facie case is made out, is the apparent discrimination nevertheless justified? Evidentiary burden switches to the respondent 3 part test from Meiorin

o 1. Did the ER establish the standard for a purpose rationally connected to the job?o 2. Did the ER adopt the standard in an honest and good faith belief that it was

reasonably necessary for the fulfillment of the job?o 3. Is the standard reasonably necessary for the accomplishment of the legitimate

work related purpose? Onerous to prove Undue hardship: Cost, safety, disruption of the workplace COST is NOT a justification for discrimination Generally safety is the only one that is successfully argued This step is an individual assessment, must be made in the circumstances

of every case

BC v. Meiorin (1999, SCC)Facts:

M was female forest fighter Policy of requalification – test of aerobic capacity – M couldn’t pass the test Found that most women could not pass the test, while most men could No evidence of a connection b/w performing well on the test and being a good forest fire

fighterIssue: Was she improperly dismissed?Decision:

Burden on the Plaintiff/EE to show prima facie discrimination 3 step test to establish if a prima facie discriminatory standard is a BFOR : (ER must

justify the impugned standard by showing on a BoP’s)o 1. That the ER adopted the standard for a purpose rationally connected to the

performance of the job

o 2. That the ER adopted the particular standard in an honest and good faith belief that it was necessary to the fulfillment of that legitimate work-related purpose

o 3. That the standard is reasonable necessary to the accomplishment of that legitimate work-related purpose

To show this, must demonstrate that it is impossible to accommodate individual EEs sharing the characteristics of the claimant w/o imposing undue hardship on the ER

in considering accommodation measures, ERs must have regard to characteristics and circs of the individual EE, not those of the group or category to which the EE belongs

The obligation to accommodate can include both parties

Problems arose after this case, because of the fact that it had to be impossible to accommodate the EE.

Authority has held that this obligation prompts a related by separate duty to investigate the nature of an EE’s disability before making decisions wrt the possibility of accommodation and that the failure to do this investigation is, in and of itself, a breach of the code

Martin???? (not in casebook)Facts: Discrimination on the basis of disability based on hip condition (made her unable to meet quota – couldn’t cross the car lot fast enough)

Prima facie discrimination: to prove this, must show connection between the adverse treatment and the prohibited ground

o No positive duty to accommodateo Must show something bad happened before entitled to the accommodation

Burden of proving the adverse effect is on the plaintiffo Don’t have to show that the disability was the only reason she was let go, or that it

was the primary reason – just has to be reasonable to infer on the evidence that it was a factor (low bar)

o She couldn’t meet sales quota because of trouble with her hip – enough evidence to show there was a link

o ER knew enough that it should have inquired

Mazuelos v. Clark (2000, BCHRT)Facts: M hired to take care of Clark’s kids as a nanny. She becomes pregnant, hard to do her job, and she is firedWas pregnancy a factor in the termination? She couldn’t do her job because of pregnancy, so clearly a factorWas the discrimination justified?

Reasonable related to performance of work? YES Imposed in good faith? YES ER accommodate or demonstrated it was impossible to do so? NO

Decision: Clark could have and should have made some effort or inquiry into alternatives before firing her.

Oak Bay Marina vs. BC HR Commission (2005, BCHRT)Facts: EE is bipolar – acts inappropriately at work – psychiatrist says ok to work after a while off the job, but ER refuses to employ him again. Tribunal Decision 1: ER not justified in letting him go – should have made more inquiries into his condition and taken him backTrial/BCCA: ER was justified.

No failure to investigate – don’t need to embark on extensive inquiries, because they knew he wasn’t able to do the job

Smaller ER – not able to investigate as fully as larger ERs Sent it back to the Tribunal

Tribunal Decision 2: Reaffirmed it’s first decision – OBM was still in the wrong ER has a duty to obtain all relevant info about EE’s disability where it is readily available Psychiatrist offered to meet with ER ER can’t be considered an already informed ER if they rely on outdated medical info or

based on a previously unsuccessful attempt

Hydro-Quebec v. SyndicatCourt clarifies the third step of part 2 – “Undue Hardship”. The burden on ER’s was so onerous to show it was impossible to accommodate, so they refined the stepIf the characteristics of a condition are such that the proper operation of the business is hampered excessively or the EE is unable to work in the foreseeable future even though the ER has tried to accommodate.Facts: Woman had medical conditions, had been away for 960 days over 7 years, the ER had made several efforts to get her back. In July 2001 she was dismissed after being absent continuously since Feb 8. The psychiatric report suggested she would have lengthy absences for the foreseeable future and the ER would have to continuously provide her with new work environments and new immediate supervisors in order to accommodate herDecision:

The test is not whether it was IMPOSSIBLE for the ER to accommodate the EE’s characteristics

The ER does not have a duty to change working conditions in a fundamental way, has a duty to, without undue hardship, arrange the EE’s workplace or duties in a way that enables the EE to do his or her work

Test for undue hardship is NOT total unfitness for wok in foreseeable future If the characteristics of an illness re such that the proper operation of the business is

hampered excessively or if an EE with such an illness remains unable to work for the reasonably foreseeable future, even though the ER has tried to accommodate, the ER will have satisfied the test

ER’s duty to accommodate ends where EE no longer able to fill basic obligations associated with emp relationship for the foreseeable future

McGill (2007, SCC)(REALLY REALLY IMPORTANT)

The Majority applies the test, while the concurrence wants to look at the law and reanalyze it

Case is in unionized environment (lots of important cases in this area are – why? Because the unions have the money to subsidize litigation)

Illustrates tension between employment objectives (K, what is necessary to operate in workplace) and anti-discrimination objectives (post Meiorin, ER should do everything to make it work)

Facts: Brady was receptionist at McGill university hospital. She had a nervous breakdown. She was absent due to that. She tried to return to work, the ER tried to accommodate but it didn’t work. She was absent for over 2 years, got into a car accident, and then was absent for another year. At the time of her first hearing she was still waiting for surgery. She can’t work, no one knows if she can go back to work and the ER terminates her employment. This is a unionized environment that has a negotiated term of the employment K that says after 3 years, if you still can’t work, employment is automatically terminated. (This is fair from a HR perspective – even generous)

Decision: Both decisions agree that termination should be upheld, but majority and concurring judgments are VERY differentMajority: (not the law in BC)

Prima facie discrimination is assumed in disability cases – they skip right to the second step – which is strange given that the concurring judgment is all about whether or not she even meets the first step

Really about duty to accommodate and whether parties can agree in advance to this 3 year term and accommodation duties

o Current HR thinking says, no, you can’t do this because b/c each EE needs an individualized assessment

o Court decides that if there is a pre-contracted accommodation period, it is a consideration, but one consideration among others because it must still be an individualized assessment

o “It has long bee recognized that the parties to a K cannot agree to limit a person’s fundamental rights… The importance of the individualized nature of the accommodation process cannot be minimized. The scope of the duty to accommodate varies according to the characteristics of each enterprise, the specific needs of each EE and the specific circumstances in which the decision is to be made”

o Question to be asked is: Did the ER IN THIS CASE accommodate the EE to the point of undue hardship?

Important to the decision is that at the date of the hearing there was no evidence suggesting she would ever be able to return to work

o Would have been excessive, undue hardship to keep her on the books The decision gives no certainty and invites endless litigation on the topic – makes no

suggestion about what the decision would have been if she could have potentially returned to work after a year or two

Difference b/w majority and concurrence (all agree in ultimate decision): Deschamps (majority): “This appeal concerns the interaction between labour law and the

right of a person to be absent from work owing to an illness or disability.  More

specifically, what is in issue is the role of a collective agreement in the assessment of an employer’s duty to accommodate an employee who is absent for an indeterminate period owing to personal health problems”

Abella (concurrence): “An employer has a duty to provide a discrimination-free workplace.  It is important, therefore, to be clear about what discrimination is — and what it is not — so that employers know their duties and employees know their rights… The central issue is whether Ms. Brady has established prima facie discrimination, shifting the onus to the employer to justify its workplace standard or conduct. ”

Concurrence (Abella): This is the law in BCResult: No discrimination, and therefore don’t think there’s any need to accommodate

Just because you say you have a disability doesn’t mean you pass the first step!o The claimant has not proven “that she has been disadvantaged by the ER’s

conduct based on stereotypical or arbitrary assumptions about persons with disabilities, thereby shifting the onus to the ER to justify the conduct”

This is the law in BC, upheld in Goodingo Gooding was an alcoholic liquor store manager stealing booze – premeditated

repeated theft warrants termination and is reasonable (no arbitrary/stereotypes) Think the test for discrimination is wrong

o There is a difference between discrimination and distinction – not every distinction is discriminatory

o Its not enough to show those three elements, there must be an element of stereotyping or arbitrariness – can’t just be any “factor”

Arbitrary means irrational, unpredictable, unjustifiable Doesn’t think that the existence of the clause in the K is discrimination – how is it

targeting people with a disability? It lasts for 3 years and it applies to EVERYONE It doesn’t unfairly disadvantage people with a disadvantage because of stereotypical

attributes of their disability It actually protects more people with disabilities by saying its ok to negotiate these types

of clauseso Policy: “designating such clauses as presumptively discriminatory removed the

incentive to negotiate mutually acceptable absences. It suggests that, regardless of the reasonableness of the duration of the protection (which 3 years arguably is), an EE can still, by bringing a grievance, render the clause’s term meaningless, shifting the burden to the ER to explain why it was reasonable to terminate a particular EE. This would leave disabled EE’s without the lengthy guarantee of job and seniority protection such clauses offer”

If the rule is reasonable, the fact that it’s finite doesn’t matter – must have arbitrary or stereotypical assumptions about a person’s ability or inability

“ At the heart of these definitions is the understanding that a workplace practice, standard, or requirement cannot disadvantage an individual by attributing stereotypical or arbitrary characteristics.  The goal of preventing discriminatory barriers is inclusion.  It is achieved by preventing the exclusion of individuals from opportunities and amenities that are based not on their actual abilities, but on attributed ones.  The essence of discrimination is in the arbitrariness of its negative impact, that is, the arbitrariness of the

barriers imposed, whether intentionally or unwittingly. What flows from this is that there is a difference between discrimination and a distinction.  Not every distinction is discriminatory.  It is not enough to impugn an employer’s conduct on the basis that what was done had a negative impact on an individual in a protected group.   (*has previously been the test*) Such membership alone does not, without more, guarantee access to a human rights remedy.  It is the link between that group membership and the arbitrariness of the disadvantaging criterion or conduct, either on its face or in its impact, that triggers the possibility of a remedy.  And it is the claimant who bears this threshold burden. (paras.48-50)”

Changing prima facie discrim test – not enough to show 3 elements – must be element of stereotyping or arbitrariness

Mandatory Requirement and Age Discrimination There used to be MR at age 65 Did not consider it age discrimination when demographics and economics demonstrated

that we needed older workers to leave the workplace (baby boomers coming in) Now, we have ended MR because we have a skill shortage, and with the collapse of

pension plans we can’t afford for them to retire Interestingly, most people want to retire around the age of 62 – but often they can’t

o Creates difficulty because they are crabby Another difficulty – people get sick more when they are older Getting increase in number of temporary or contingent non-benefit work instead of full

time w/ benefits The SCC ruled in McKinney that MR is justified, not discriminatory Since then, we have aging population, declining birth rate, longer life expectancy

o So legislation has eliminated the upper bound on age BUT the saving provision in s. 13(3) of the BC HRC wasn’t changed

o Age discrimination does not include seniority schemes, bona fide group insurance plans, etc

So, for example, could be working past age of 65 but have no LTD benefits because they end at 65

Tony Sheppard’s Article 4 things left in the code

o Age < 19o Bona fide occupational requirements (pilots)o Group insurance schemeso Discriminations found in other statutes

We continue to exclude people who are under 19 – claims that it encourages kids to “stay in school” whereas persons over the age of 65 who are seeking employment already have the necessary skills and training to work in these positions, but were prevented from doing so because of MR

Terminating the Employment Relationship

Dismissals are litigated more than any other matter. The have the most serious consequence for the EE (job loss) and there is money involved (requirement to provide reasonable notice/pay in lieu of notice).

Courts hate to deny EEs severance if dismissed – will require clear evidence of misconduct or resignation if ER tries to get out of paying it

Resignation and Constructive Dismissal

Although distinct, they are often dealt with together

“Work is one of the most fundamental aspects in a person’s life, providing individual with means of financial support and as importantly a contributory role in society. A persons employment is an essential component of their identity, self worth, and emotional well-being”- Reference re: Pubic Servants EE Relations Act

Resignation = EE quits ER doesn’t need to give notice or pay severance because initiated by EE

Constructive Dismissal = takes place where ER unilaterally alters a fundamental condition of employment

o EE has option of resigning employment but treating themselves as dismissed

Resignation:

Danroth v. Farrow Holdings (2005 BCSC)Facts: P employment as carpet cleaner for 7 years. P worked a lot of overtime. Towards the end of employment, the P became unhappy about reduction of overtime hours (they were giving more to a junior EE).

Just before Christmas break the EE, P went into work to pick up pay cheque and found that he had no been paid. ER responded that P had not been paid because he didn’t fill out required worksheets. P never returned to work.

P said to ER that the failure to pay constituted a CD and that the ER owed him 7 weeks severance.

ER claimed that P had quit. P later withdrew claim of CD.Issue: Given the circumstances, would a reasonable person (objective test) understand, based on the EE’s comments, that he had just resigned.Decision: P had resigned

You don’t have to use the words “I quit/resign” for resignation to be established

At common law, an EE has no obligation to give reasonable notice to an ER upon resignation. An E K may stipulate notice is required, but the ESA says nothing about an EE having to give notice.

Constructive Dismissal: A law suit on this is risky – if you win you get payment, but if you lose you will likely be

held to have resigned and not get anythingo More difficult since Evans v. Teamsters – in some circumstances, even if you are

wrongfully/constructively dismissed, you may have to stay on with ER to mitigate damages

Farber v. Royal Trust (1997 SCC)Facts: P started with RT as a real estate agent. He was promoted several times until he was a regional manager for western Quebec. In that capacity, he supervised 21 offices with 400 agents with a base pay of $150,000 plus benefits.

WHETHER OR NOT THERE HAS BEEN RESIGNATION IS DETERMINED ON AN OBJECTIVE STANDARD = would a reasonable person understand, based on the EE’s comments, that he had resigned (Assouline v. Ogivar)

RT engaged in restructuring which eliminated 11 of 12 regional management positions, including the P’s. After eliminating positions, D offered P the manager position at a branch with compensation based on commissions only.NB: He had been a branch manager 8 years and several positions earlier. This particular branch was the least profitable and problematic branch.

P is now suing RT for CD.NOTE: This is a civil law claim in Quebec, but the CL principles of CD are very similar.Decision:

Where one party to a K demonstrates an intention no longer to be bound by it, that party is committing a fundamental breach of the K that results in its termination

In the E context, where an ER unilaterally makes a fundamental change to an EE’s E K, the ER is committing a fundamental breach of the K that results in its termination and entitles the EE to consider himself constructively dismissed

The EE can then claim damages in lieu of reasonable notice Held that the CD took place due to unilateral changes that fundamentally altered E K

o Serious demotion, salary altered

Examples of what constitutes CD: Demotion – if you have to report to someone you used to be in charge of, its almost

always a CD Salary Reduction – 5% may not qualify but 10% may get you there Change in manner of calculating compensation – especially in sales person cases when

going from secure salary to commission basedo Or, if the jurisdiction you work has narrowed but the commission structure hasn’t

Geographic relocation – especially if you have a familyo Although there are jobs where relocation should be expected

Series of small changes that accumulate over timeo EE has to act, not just accept them over long time and give ER impression you are

fine with the changes

Termination by ER

Courts recognize power imbalance both at the time of K formation and at time of dismissal when EE’s are extra vulnerable.

What amounts to serious misconduct? Case by case determination – ex. Fraud, theft.

What amounts to neglect of duty? Repeated failure to perform duties at request of ER.

Incompetence/Performance issues – DIFFICULT to establishER must establish:

1. It has set reasonable objectives for the position2. EE failed to meet reasonable objectives3. EE was warned that if he was not able to meet standards he could be terminated4. ER gave EE reasonable opportunity after warning to meet standards

a. Assistance often required5. And despite all that, EE still unable to meet standards

Conduct Incompatible with Duties May be inside or outside the workplace Ex. School teacher convicted of public indecency

Willful Disobedience – often relates to failure to carry out lawful and reasonable requests of ER

The most important case on cause for dismissal:Establishes that there are no hard and fast rules for what constitutes cause – overrules previous law that made certain things clear cause for dismissal and institutes a case-by-case approach.McKinley v. BC Tel (2001 SCC)Facts: P worked for BC Tel. He began to experience hypertension and took leave of absence. When on leave, BC Tel dismissed him

Reasons for dismissal changed numerous times. First, S o D stated that D offered severance package. Second, D amended statement to allege P’s illness amounted to frustration of K. Third, at trial D amended statement to allege cause for dismissal – dishonesty (alleged P was dishonest about medical condition and treatments for it).

Evidence suggested doctor said P could return to previous position and treat hypertension. Also suggested that P told ER that he should be given new (less stressful) job and did not mention beta-blocker option to ER. P seemed (honestly) to believe beta-blockers should only be used as a last resort. Issue: Just cause for dismissal?Trial court: no just cause, awarded damagesAppeal Court: BC Tel relied on what was then a leading case, Phillips which stated that honesty is ALWAYS a cause for dismissal. They won. P appeals to SCC

What amounts to just cause for dismissal?

“If the EE has been guilty of serious misconduct, habitual neglect of duty, incompetence, or conduct incompatible with his duties or prejudicial to the ER’s business, or if he has been guilty of willful disobedience to the ER’s orders in a matter of substance, the law recognizes the ER’s right, summarily, to dismiss the delinquent EE”- Port Arthurs Ship Building

SCC Decision: 2 lines of cases were reviewed

o 1. Context must be considered when looked at just cause In Port Arthurs, referred to “serious” dishonesty as the important context

o 2. Dishonesty is always cause for dismissal in and of itself regardless of circumstances and degree

Boston Deep Sea Fishing, Federal Supply and Cold Storage – dishonesty reveals character always cause

Court adopted 1st line of authority – must consider contexto Specifically – test is whether the EE’s dishonesty led to breakdown in the

employment relationship Maybe it violates an essential condition of E K, or inconsistence with the

EE’s obligation to their ERo Creates 2 part test:o 1. Whether the evidence establishes EE’s conduct was deceitful on a BoP’so 2.Wheter the nature and degree of dishonesty warrants dismissal

In obiter there can be less serious sanctions for less serious types of misconducto Idea of proportionality – balance severity of conduct with the sanction imposed

What do they decide for McKinley?o His conduct was not dishonest enough to justify dismissal

Near Cause

This doctrine existed in some jurisdictions but was not widely expected Idea was than where ER couldn’t quite meet the standard of cause, the court could

consider that and downrade the amount of damages to award Dowling v. Halifax (1998, SCC) abolished the doctrine If you can’t prove cause as an ER, context isn’t taken into account when issuing damages ALTHOUGH Crawford seems to think that judges apply it without saying so and issue

damages at a lower end of the range

Termination by Notice

Where there is no cause for dismissal, some form of notice or severance in lieu of notice is required.

This is subject to the qualifier than some E K’s are for a fixed term – this isn’t the case for those K’s

Absent that, E K’s are considered to be of indefinite duration, can only be terminated lawfully w/o cause by giving reasonable notice

- Purpose is to give EE time to find other employment

Most ER’s opt against working notice – productivity/morale issues, sabotage, ER may not know far enough in advance, etc.

Minimum standards Set out in ESA s. 63 REMEMBER – can’t K out of statutory minimums – any attempt is void (s.4) ESA s. 64 group termination provisions – additional notice/pay required

Machintinger v. HOJ Industries Ltd (1992, SCC)Facts: M worked as car salesman for HOJ 1978-1985, no cause for dismissal

o Earnings for last year of employment = 85,342.36 L (second applicant) worked 1978-1985, no cause for dismissal

o Earnings for last year of employment = 74,220.79Both had K’s of employment for indefinite terms. When they were dismissed, they were each paid equivalent of 4 week’s salary

PROBLEM – K of employment provides for notice periods less than the minimums prescribed by the Employment Standards Act

Issue: Does the EE get reasonable notice of dismissal (common law amount) or the minimum statutory notice period? Of what significance is an attempt to K out of the minimum notice period in the Act?DecisionReasonable Notice at common law:

The c/l principles of termination of reasonable notice is a PRESUMPTION, rebuttable if the K of employment clearly states a different period of notice – expressly or impliedly

Reasonable notice will vary in circs of case – cites Bardal for factorso Length of service, age of EE, availability of similar employment, the

experience, training and qualifications of the EEThe Employment Standards Act:

The presumption at c/l noted above would be rebutted by the clear language of the K, so what about the Act?

Relevant provision – any EE employed for 5 years or more is entitled to 4 weeks notice, and if that’s not given, must be paid for that number of weeks

The provisions of the ESA set out minimum notice periods AND DO NOT displace the presumption at c/l of reasonable notice (ie. floors not ceilings)

Can a term that doesn’t comply with the minimum notice of the Act displace the c/l presumption of reasonable notice?

Effect of s. 4 of the ESA is that attempts to K out of statutory minimums are null and void

o So, the portions of the P’s employment Ks that give smaller amounts of notice are null

3 sources for notice periods:1. Employment K2. Employment standards act (escalating cap to 8 wks)3. Common Law

Further, the terms of the K can’t be looked at as evidence of intention of the parties wrt termination – the term is null and void for all purposes

So the appropriate minimums in this case are those of the CLPolicy Considerations

Important question b/c work is fundamental to individual’s identity Objective of Empl Standards is to require ER’s to comply with standards in order to

protect interests of EEs Act seeks to remedy unequal bargaining power between EE and ER Many EEs don’t know what their statutory rights are If punishment for ER’s failure to comply with the Act is simply to make them minimally

comply, little incentive to make K’s with their EEs that comply An approach that is more consistent with the Act is that is the employment K fails to

comply with the minimums in the Act, then the c/l presumption is NOT rebutted This approach protects EEs but doesn’t unfairly burden ERs, who can easily just K for

the right minimums They end up getting 7.5 and 7 months reasonable notice

Calculating Reasonable Notice

Ansari v. BC Hydro (1986)This is the leading case in BC – in Ontario, its Bardal (which is frequently cited)Facts: 1984, Canada was in a depression. BCH terminated a number of graduate engingeers. Used a formula to determine severance and a number of EE’s disagreed, brought actions. This gets litigated as a test case to give the others guidance. It goes by summary trial of affidavit evidence.Decision:

Also cites the Bardal factorso Character of E and level of responsibility – more senior you are, more notice

period

NOT a measure of how well you performo Length of serviceo Age of servant – prospects for older engineers get smallero Availability of equivalent/alternate E

Take into account type of position as well as income Length of notice is NOT equivalent to length of time to find another job

because there is a duty to mitigate May factor in depressed economy but DON’T give undue emphasis

So, in each case, have to deal with submissions on what proper notice is and determine severance based from there

Duty to Mitigate (discussed further below) In E context, to try and find other work (Red Deer College v. Michaels) If reasonable opportunities of E are offered, should be accepted to mitigate If find lesser paying job – the damages might be the difference between your old wage

and your new wage Obligation on EE is not to accept any old job BUT it is a high burden for an ER to show that you failed to mitigate – the court will

often require proof that an ER would have hired that EE had they applied (who can convince an ER to come to court as a witness and say that! Rarely Done)

What if you find a new job during the notice period? NO REQUIREMENT IN BC TO PAY ANY OF IT BACK Examples:

o 1. During trial, you find new job after 4 months. At trial, you will probably be awarded 4 months notice

o 2. You don’t find anything until after trial. You get awarded 12 months but have a job after nine. No need to pay back those 3 months. SUCKERS!

Cronk v. Canadian General Insurance Company (1994, Ont) – TRIAL DECISIONWhat amount of weight is to be given to an EE’s position in the hierarchy of company when determining reasonable notice?Facts: C lost her job at insurance company when it restructured. Her and her ER disagree on how much compensation should be paid. She Seeks 20 months salary as compensation

o This much has been awarded previously, but all the EEs were 45 or older, had worked for company for 20+ yrs, and were in senior management positions

Cronk is 55, has worked there 29 years, but is not senior manager – she was a clerical EE.Major issue – is an EE’s position in the hierarchy of a company a major factor is

assessing the compensation entitled to if dismissed w/o cause? When her employment terminated, she was offered 39 weeks (9 months) salary. Was given 24 weeks in one lump sum in late 1993

Issue 1 – What is the reasonable notice period to which the P was entitled upon being dismissed from her job?

States factors from Bardal These factors suggest generous notice period for Cronk She is too old to re-train for anything, too young for retirement

She has only been employed by the insurance company, has no qualifications for other jobs, she has given long and loyal service

Factors suggest she should get something close to the upper limit, which is 24 months in the case law

The D submits it should only be 9 months for two reasons – first, her employment term is not 29 years (she took time off to have a kid, worked only part time) and second that she is not a senior manager

o Reasoning for senior manager thing is that the more specialized the position, the smaller number of similar jobs are available so need more time to find equivalent employment

Rejects the D’s argumentso Her employment prospects are no better than the senior managers in the cases

previously decided by the courto Education and training are directly related to employment – senior managers

actually have better chance of obtaining employment Awards her the 20 months

Issue 2 – Should the notice period determined in issue 1 be reduced because of the P’s failure to mitigate her damages by searching diligently for new employment?

An EE has a duty to mitigate in wrongful dismissal claims She has been looking – has visited the employment centre twice a week Has no drivers license, is reasonably searching only what is publicly accessible She was fired for ECONOMIC, not performance reasons – Ontario was in a recession She has mitigated as best she can

Cronk v. Canadian General Insurance (1995, Ont CA)Reverses lower court decisionNo error in the calculation of the period of employment – the break while she had child does not wipe out her earlier length of employment

Issue of mitigation was also properly determined – her training limited her to clerical positions in the insurance industry, and she was restricted to public transit, she met the requirements by visiting the employment agency often

Distinction b/c clerical and managerial EEs in characterizing employment Did the trial judge err in law by departing from principle that clerical EEs are entitled to

shorter notice periods than senior EE’s? The judge rejected a well accepted and established principle His reasons do not justify the departure, erred in doing so The character of employment does not entitle Cronk to lengthy period of notice “While the character of her employment will restrict her to the level of a clerical, non-

managerial EE, the respondent’s age and lengthy faithful service for the appellant properly qualify her for the maximum notice in her category”

Gives her 12 months

Calculating Damages

Damages – what wages EE would have earned if given proper notice – ie. strives to put EE in position they would have been inCOMPLICATED!!! A EE’s salary is not limited to wages

Situations where EE paid on commission, salary varies – how does an ER predict what would have happened?

o Courts will look at running average of 3 years, make adjustments for weak/strong economy

Bonuses Share and share options – if common practice, court may calculate and add in Vesting of share options (ie. rather than straight out granting shares, give EE’s options to

purchase at given price regardless of market value) Pensions Benefits – though if you want to claim for this, have to prove to court you had to spend

money to replace benefits Long term disability plans – very tricky area

o If you’re hurt, even outside of work, LTD plans cover your wages while injured, so long as you were their EE when it happened

o So what if you get hurt in the reasonable notice period?? Prince v. T Eaton – will likely give you amount you would have received

under the LTD plan

Onus lies on the EE to show damages owing

Exemplary and Punitive Damages and Bad Faith Damages An EE MAY be entitled to “bad faith” damages – when ER behaved high-handedly In very rare cases, punitive and exemplary damages Wallace established idea of mental distress damages

o Situation where bad facts bad lawo Set right in Honda v. Keays – got rid of the Wallace bump up

Wallace v. United Grain Growers Ltd (1997, SCC)Creates the Wallace Bump Up – when ER acts in bad faith in the manner of dismissal that causes some kind of harm – in this case, mental distress – then get extra months added to reasonable notice in recognitionFacts: When Wallace hired, was 45 and told company he would only leave his current employment if United promised him job security. Told that if worked as expected, he would be employed until retirement. Great success at company, top salesman every yr employed

Terminated at age of 59, told it was b/c of inability to perform duties satisfactorily. Termination psych problems, couldn’t find new job, ended up voluntarily assigning into bankruptcy. UGG kept saying he was terminated for cause until the trial started

SCC Decision

Issue 1 – Can an undischarged bankrupt bring an action for wrongful dismissal? Yes – discussion omittedIssue 2 – Was there a fixed term K? NO

The TJ made this decision on a basis of fact, CA agreed – not enough evidence to show he had entered a fixed term K to employment – would need explicit terms for this

SCC doesn’t want to overturn these findingsIssue 3 – Did the CA err in overturning the TJ’s award for aggravated damages resulting from mental distress?

To get damages beyond compensation for breach of K for failure to give reasonable notice of termination, it must be “founded on a separately actionable course of conduct” (Vorvis)

Foreseeability of mental distress or the fact the parties contemplated it is of NO consequence

Agrees with CA that there is insufficient evidence to support an independent wrong BUT where an EE has been dismissed in circ that cause mental distress but fall short of

an independent actionable wrong, the EE is not w/o recourse – the TJ has discretion to extend the period of reasonable notice

THUS, ALTHOUGH RECOVERY FOR MENTAL DISTRESS MIGHT NOT BE AVAILABLE UNDER A SEPARATE HEAD OF DAMAGES, POSSIBILITY OF RECOVERY STILL REMAINS = WALLACE BUMP UP

Issue 4 – Can the appellant sue in either K or tort for “bad faith discharge”? Contract – he wanted court to imply in the emp K a term that he would not be fired

except for causeo SCC says no – law recognizes freedom of EEs and ERs to end E K’s at any

time provided there are no express provisions to the contraryo A requirement for good faith reasons would hinder this principleo If the E industry wants such a term, should be legislatively enacted, not read in by

the courts Tort for breach of a good faith, claimed they couldn’t fire him except for cause or legit

business reasons – this claim is also rejectedo No persuasive authority for it

Issue 5 – Is the appellant entitled to punitive damages? Purpose of such an award = punishment of defendant Not warranted in this situation

Issue 6 – Did the CA err in reducing the appellant’s reasonable notice damages from 24 to 15 months?

Restores the 24 months Shout out to Bardal factors, adopted by SCC in Machtinger Bardal factors are NOT exhaustive - always depends on circs of the case Factor – whether the dismissed EE had been induced to leave previous secure

employmento Courts want to compensate the reliance and expectation interests

Factor – presence of a promise of job security – lacks contractual force but is significant to the issue of reasonable notice

In this case, UGG went to great lengths to relieve him of his fears about losing job security, enticing him to come to their company

Behavior of the ER – SCC doesn’t want to condone bad behavior like treating EEs callously, insensitively, no regard for their welfare

Bad faith conduct should therefore be another factor to consider in deciding appropriate period of reasonable notice

Compensation doesn’t flow from the fact of dismissal itself, but rather from the manner in which dismissal was effected by the ER

o Ie, the court creates the tort of bad faith conduct in the manner of dismissal In this situation, caused Mr. Wallace mental anguish, depression, etc – gave him

“Wallace bump up”

The court didn’t intend for there to be damages at every instance of dismissal, but that’s what happened after Wallace. Wallace claims were routine.

Problem: There was also a serious issue because the extra damages were given in terms of months of reasonable notice.WHAT HAPPENS IF a person making $60,000 and a person making $360,000 are both dismissed in a poor manner? One person is way better off for the same thing happening to them.

Solution:

Honda Canada Inc v. Keays (2008, SCC)Changes nature of Wallace Bump Up – moves mental distress to its own category, Mental Distress Damages – paid in MONEY not REASONABLE NOTICEMoney at stake: 24 months pay + $500,000 punitives from the TJ decisionFacts: Keays sick w/ chronic fatigue syndrome, took time off and received disability benefits. Returned to work when Honda’s insurer determined he could and discontinued his benefits, despite his own protestations of suitability. Ended up sick on many occasions, Honda wanted him to see their own specialist, he refused on basis of ILA

Honda made efforts to get him to come to work, to cooperate with their specialist, etc, told him if he didn’t cooperate his employment would be terminated. Terminated after 14 years of employment

TJ found he was entitled to notice period of 15 months, plus additional damages b/c of manner of dismissal – the Wallace Bump Up, so got 24 months altogether PLUS $500,000 in punitive damages

CA upheld decision except reduced punitive damages to $100,000

SCC Decision TJ made a number of errors – ex, made an allegation of a “corporate conspiracy” Sets aside Wallace bump up and punitive damages

The General Damages – 15 month reasonable notice period No one factor gets disproportionate weight TJ only applied one factor – “flat management structure” which stopped his rise in

hierarchy, instead of looking at Keays’ actual functions But, 15 months is still a reasonable amount

Damages for Conduct of Dismissal – Bastarache reconfigures the law on duty of good faith and fair dealing:

TJ felt that Honda acted egregiously so raised notice to 24 months SCC disagrees – in no way was it an egregious display of bad faith – overturns finding of

fact (Bastarache later criticized for that)o None of the TJ’s foundations for deciding this were valid (TJ thought that he was

being set up, that cancelling accommodation was a reprisal for the fact that he hired a lawyer, etc)

Current State of the Law:o 1. Vorvis – the EE/ER relationship has always been one where either party could

terminate the K of emp by due notice, and therefore the only damage which could arise would result from a failure to give such notice

o 2. Wallace – absent an independently actionable wrong, foreseeability of mental distress doesn’t matter

o 3. Fidler – no longer necessary to have IAW before damages for mental distress can be awarded for breach of K, whether or not it’s a peace of mind K

Based on Hadley v. Baxendale – 2 part test – reasonable foreseeability and special circumstances

Damages are recoverable for a K breach if the damages are such as may fairly and reasonable be considered either arising naturally from breach of K itself or may have been reasonably supposed to have been in contemplation of parties

Thus, in cases where parties have contemplated at the time of K that a breach in circs would cause the P mental distress, the P can recover

So in E context, psychological damages from mere fact of dismissal is a obvious possibility and so not recoverable as damages

BUT parties do not contemplate the ER being unduly sensitive, playing hardball in manner of dismissal… SO damages resulting from the manner of dismissal are recoverable if conduct is such as was described in Wallace

o Where the ER engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”

No more need to distinguish b/w moral damages and true aggravated damages with an independent actionable wrong all stem from same conduct

EE must now prove:To achieve damages for manner of dismissal, EE must prove mental distress and award must reflect ACTUAL damages to be proven by EE

Need actual evidence that manner of dismissal has caused MD Evidentiary burden as opposed to after Wallace just claiming MD HURDLE to Wallace damages

Mitigation

The leading decision on general duty to mitigate damages by a wrongfully dismissed EE is Red Deer College v. Michaels (1975, SCC)

ERs stand to gain a lot by a finding of no-mitigation If EE mitigates, amount is deducted from damages during reasonable notice period

Mifsud v. MacMillan Bathurst Inc. (1989, Ont CA)(Leave to appeal to SCC denied)Deals with issue of when an EE may have an obligation to mitigate damages by returning to work for a dismissing ERFacts: Misfud awarded money by TJ for constructive dismissal from his job at MB

o Sum given = notice period of 10 monthsContinuously employed by MB for 18 years when his employment ceased Sept, 1984. During spring/summer 1984, plant manager had sent around memos expressing dissatisfaction w/ the plant and its EE’s – including Misfud. By Aug, no doubt they were not happy with M’s performance, they transferred him to different plant and demoted him one position down, though his salary and benefits remained the same

o His job did change a bit – less responsibilityHe didn’t want the job – had meeting with GM who told him to take 1 wk vacation to think about it. Wrote him a letter that explained their position, said if you don’t come back to work on Sept 2nd we will assume you have quit. Misfud didn’t go back

The practical ramifications of Honda are:1. In Honda the court said damages under Hadley v. Baxendale have to be proved – so damages not just assessed as an extension of the notice period, will be assessed as actual damages suffered2. An EE alleging breach has to prove it as well as actual damages suffered

Mental distress will likely require expert evidence

2-part test used to determine if EE has failed to mitigate following wrongful or constructive dismissal1. EE has failed to take reasonable efforts to secure reasonable employment

2. Had reasonable efforts been made, the EE would have secured alternate employment

Note: an ER pretty much has to bring forward another ER that will act as a witness saying “Yah, I would hire him.” The chances of this happening? NilSo, court rarely finds EE has failed to mitigate

Issue One: Was Misfud constructively dismissed by MB?Issue Two: If he was, was the dismissal for just cause?Issue Three: Did Misfud take reasonable efforts to mitigate his damages?

The fact that he was being changed from 2-shift to 3-shift work is a factor to determining if he was demoted, and whether that demotion was a fundamental change in the employment K that amounted to constructive dismissal

Court is satisfied he has been demoted – change in title, change in shift work, less people under his supervision, etc – but that does not necessarily = CD

Question becomes = was there an implied term of the employment K that if at any time the company validly considered Misfud’s performance to be unsatisfactory, it could, without his concurrence, demote him to a position of lesser responsibility but equal pay?

o Court said yes, had they considered it, they would have agreed that the company could demote him

o Note – this is obiter, because the decision rested on failure to mitigate, and BC courts have not followed Misfud to hold that this sort of an implied term in employment K’s regarding demotion exists

Court doesn’t actually say yes or no to constructive dismissal His refusal to accept the alternative position = failure to mitigate and so the result is

the same either way

The Mitigation Issue In wrongful dismissal claims, if EE leaves immediately, he is required to take reasonable

steps to mitigate his loss and (barring agreement of the parties to the contrary) moneys earned in mitigation must be credited against his damages

The fact that transfer to new position = constructive dismissal does not eliminate obligation of EE to look at the new position as a means of mitigating

Where working conditions are not substantially different, the salary is the same, work is not demeaning, personal relationships not acrimonious, not unreasonable to expect an EE to return to the ER until find new employment or until the end of the reasonable notice period

In Misfud’s case, reasonable to expect EE to take position during reasonable notice period

RECALL: Constructive dismissal = unilaterally making a fundamental change to essential terms in employment K – the EE does not agree to/chooses to leave job

You CAN unilaterally change a term in an employment K as an ER without repudiating the K, it happens all the time – so long as its not fundamental

o To make a determination of constructive dismissal, you have to determine which terms of the K are fundamental and what the nature of the breach is

In a few years prior to Misfud, BC released a very similar decision in Farquhar – “where returning to work with same ER wouldn’t amount to working in embarrassing humiliating or hostile workplace there will be situations where you will be expected to return to work for an ER who has constructively dismissed you”.

So these were around for several years before Evans came from the SCC

Evans v. Teamsters Local Union No. 31 (2008, SCC)Extended analysis from constructive dismissal to WRONGFUL dismissal – no reason to distinguish between the two – EE may be required to take position with ER for reasonable notice period in order to mitigate even if EE has been wrongfully dismissedFacts:

Evans worked for T for 23 years. Dismissed after election of new union executive, Hennessy. During election campaign, Evans supported his opposition. Hennessy faxed Evans a letter of “termination”, called him to begin “discussions” to negotiate an end to the employment K.

Evans’ legal counsel wrote Hennessy a letter saying Evans was entitled to reasonable notice and that Evans would take 24 months. He left the office.

Counsel for H wrote letter that said that E must return to work on June 1, 2003 to serve out the balance of the 24 months (which started in January with the letter and discussions and he had been paid since) to end work on December, 2004. Letter also stated that if he refuses, then that will be just cause to terminate employment without notice and will be taken as failure to mitigate. They were paying him still.

He doesn’t go back to work, claims that the letter never started his notice period, but if they rescind termination he will come back to work and the notice period could start then

Bunch of other shit happens – ends w/ letter on June 2, 2003 saying that the union would be pleading Evans failed to mitigate by declining to return to workDecision

Majority didn’t find the letter of January 2nd to be a letter of termination WRT mitigation, don’t distinguish wrongful dismissal from constructive dismissal cases

o Key element is that in both situations the ER has ended the K w/o noticeo No support for proposition that it would be a rare case where terminating would

lead to EE returning to the ER In previous cases, had been suggested that if wrongfully dismissed, not required to

mitigate damages by going back to ER that fired you However, in Farquhar, the BCCA stated that even a wrongfully dismissed EE could be

required to mitigate by going back on a temporary basis Cox case – the BCCA had accepted that even a wrongfully dismissed EE in the right

circs have an obligation to return to work w/ the same ER to mitigate Should be on case-by-case basis, as the relationship b/w EE and ER can be in varying

states of disrepair Consistent with the notion that damages are meant to compensate for lack of notice NOT

to penalize the ER for the dismissal itselfo Assuming no barriers to re-employment, requiring an EE to take temporary work

to mitigate is consistent with this When ER offers EE chance to mitigate, the central issue is WHETHER A

REASONABLE PERSON WOULD ACCEPT SUCH AN OPPORTUNITY – assessed on an objective standard

o From Misfud – where working conditions are not substantially different, the salary is the same, work is not demeaning, personal relationships not acrimonious

o ER bears the burden of proving reasonable person would have returned to work Court finds he failed to mitigate – no evidence to support he had a poor relationship w/

the company Key passages at page 337 of materials – “In my view the foregoing factors show a multi-

factored contextual analysis”o Critical element – an EE not obliged to work in atmosphere of hostility,

embarrassment or humiliationo This inquiry is at the forefront of what is reasonableo Although its an objective standard, it is extremely important that the non-tangible

elements of the situation be included in the evaluation Non-tangible elements = work atmosphere, stigma, loss of dignity

Dissent – STRONGLY worded by Abella No obligation to return to work in light of the facts as she found them She would have found Evans was terminated in Jan, there was never mention of a notice

period On fair reading of the evidence, she was probably right Litigation commenced between the parties and that is a factor for applying Farquhar to

give evidence of the relationship between the parties She also noted that in March, there was an audit on the office run by Evans (he wasn’t at

work at that point) Evans felt they were trying to find something to hang him with

o There was also evidence that if he had returned to work he would not have had the respect of the community given that they knew of his termination

Reasonable Notice and other Statutory Benefits: Offsetting

Wrongfully dismissed EEs may also be entitled to many other statutory or contractual benefits during the period that reasonable notice damages is intended to cover

Compensation benefits, employment insurance, long term disability payments, etc Sylvester – case that said benefits not to be deducted from awards of damages for 2

primary reasonso LTD benefits intended to be substitute for EE’s regular salary – not an intent to

receive both if you cant worko What position would the EE have been in at the end of the notice period?

Would have been getting LTD not severanceo Payment of disability benefits and damages for wrongful dismissal have different

purposes – made no sense to pay botho EE’s contractual rights after wrongful dismissal is based on the assumption that

the EE is able to work while with disability benefits, they’re based on an inability to work

No sense to pay damages based on an assumption that the employee would have worked in addition to benefits because the EE couldn’t work

May be different in cases where person seeking LTD benefits are akin to benefits from an insurance plan to which the EE has sought independently of the ER

Or, where it is a group LTD plan provided through the ER but in fact the premiums entirely paid by the EE

2 recent cases from Ontario – McNamara v, Alenxander Centre and Sills v. Children’s Aid Society state the current law there on disability benefits, able to get around Sylvester through the loopholes on EE contributions: they are NOT to be deducted from the award of damages for wrongful dismissal

o In McNamara, they said, he contributed to the LTD by accepting a lower salary as compensation

o In Sills, the court created a fiction that there was consideration paid at the outside even though no evidence supported it

o So there seems to be considerable resistance to apply Sylvester What should ERs do? PUT AN EXPRESS TERM IN THE EMPLOYMENT

K/DISABILITY AGREEMENT

Statutory Benefits Ex. Workers Compensation - Should they be deducted from severance? BC law suggests yes they will be deducted

o Reasoning is similar to Sylvester – they are entirely ER funded insurance scheme, the EE doesn’t pay the premiums

Taxation of Damages for Wrongful Dismissal

Generally speaking, they are treated as income from employment The courts will require payment of taxes ER’s are actually required to without tax from the settlements and pay it directly to the

Canada Revenue Agency – moves in tiers from 10-30% depending on the amount of the settlement

Some flexibility – it is possible to structure the settlement in a way that will attribute portions of the settlement of the amount to other categories

o If a wrongfully dismissed EE has retained legal counsel to pursue the claim and payment is ultimately made, permissible to characterize portion for legal expenses

o Wont be taxed for thato Could attribute some to a “Retiring allowance” = payment made to EE on

termination of employment for long serviceo If payment made directly by the ER into the EE’s RRSP, then it wont be taxed

Also possible to stretch the payment over a couple of years to lessen the tax burden

Releases Commonly used Trade payment for the EE signing the release so that they are foreclosed from pursuing

any further claims against the ER

Be careful with – employing high pressure tacticso If ER makes offer that is high pressure court will frown on it

Be careful with – ensuring compliance with the ESA

Enforcement – Common Law and Employment Standards Act

Common Law – Reinstatement Very unlikely measure under the common law Courts very reluctant to enforce K’s of personal service Much more common in the union context – happens frequently

o Is there an available remedy under the Canada Labor Code

National Ballet of Canada v. Glasco (Ont SC, 2000)Rare case where reinstatement on interim basis was orderedFacts: G is principal dancer for NBC. Canadian Actors Equity Association has a collective agreement with NBC that states certain minimum conditions including notice periods if NBC decides not to renew a dancer’s K

o Must give 6 months notice plus severance pay, if failed to do so then K automatically renewed for 1 year

She was given 6 months – later alleged that she wasn’t renewed because of some political positions she had taken. Brought a ton of legal proceedings – unfair labor practice, age discrimination, wrongful dismissal, breach of K, etc. There were 3 hearings – all by affidavit

Interlocutory award issued – arbitrator ordered the operation of the non-renewal of her K be suspended until the determination of her complaints on their merits, and that she be deemed employed by NBC and assigned roles and performances. This kind of order is highly unusual in the employment context

Court looks at decisions that mention mutual confidence between an ER and EE as a condition/factor to be considered in making such a mandatory order

o The ER needs to have confidence in EE, the situation needs to be “workable”NBC argued that there was no mutual confidence – the artistic director had no confidence in

casting G, she is incompatible with his visionHowever, there is nothing that says such an order can’t be made, and the appeal court doesn’t

have grounds to interfere with the interlocutory order

Arbitration Agreements in the Employment K In BC, we do have an Arbitration Act In commercial disputes, arbitration clauses are commonly used in agreements between

the partieso What they entail is that parties waive the right to go to court and agree that the

matter will be dealt with by arbitration A number of advantages to arbitrations

o Availability of confidentiality (though not iron clad, b/c all subject to limited form of JR by the courts)

o Can choose arbitrator who has specialized knowledge in that area

In theory, available for use in employment agreements

“A comparative analysis of the law regulating employment arbitration agreements in the US and Canada”

Use of arbitration and ADR is increasing in employment disputes Few Canadian employment K’s have arbitration provisions – why? Because Canadian

courts haven’t really addressed the enforceability of arbitration decisions Primary legal setting for resolution of employment disputes = administrative tribunals

and agencieso So disputes go to quasi-judicial bodies – which are specialized in their

jurisdictions No fed or prov statutes in Canada expressly govern arbitration agreements b/w non-union

EE’s and their ER’s Empl arbitration agreements are thus regulated by general statutes that regulate all

domestic contractual arbitration agreements Courts tend to uphold arbitration agreements, restrict court involvement in them

o Subject to their discretion to determine the validity and enforceability of the agreement pursuant to the Arbitration Act

Agreements may be unconscionable – courts willing to recognize this in face of unequal bargaining power b/w EE and ER

Class Actions

Macaraeg v. E Care Contact Centers (2008, BCCA)Class action launched to enforce employment standards rightsFacts: An individual was working for E-Care, which employed about 100 individuals. Worked there for 30 mos, her written K of employment said nothing re: overtime pay, though was verbally told the company didn’t pay for overtime

Facts showed she worked long hours but not paid for any over time wages. After termination of her employment she brought a claim seeking damages for overtime pay (breach of K claim) for herself and also wanted to have the claim certified as a class action on behalf of a class of EEs at e-care

Claim for damages based on mandatory provisions set out in the ESA, said that they should be taken as an implied term of every employment K. BUT Under C/L, no implied term to pay OT, unless parties specifically address OT in the K of employment, courts won’t imply it

Lower Court: Held that overtime provisions aare implied terms of K She relied on Machtinger for the proposition that where severance provisions are void

because they don’t comply with ESA minimum, the more generous of the ESA or the common law will apply

o It was also said that if the court determined the ESA severance provisions applied, the EE’s would have had the right to enforce statutory provisions through court

So by analogy, can also pursue statutory overtime in the courts Relied on BCSC decision Kempo, for the proposition that where an E K doesn’t meet

minimums of ESA, the minimums of the act apply applies that principle to over time provisions

So therefore, statutory minimums become implied terms of K of employment In the second part of her analysis, she refused to follow a whole bunch of other cases that

said that EEs have no right to pursue statutory rights under the ESA in courtso Distinguishes past decisions b/c they didn’t consider the fact that statutory

minimums were implied terms of the K (just considered them statutory rights)… she finds they are implied terms and so can be addressed by court

Past decisions, b/c statutory rights, have to go through appeal mechanism set up by the Act

o The act did not expressly or by implication preclude Macaraeg from pursuing her action civilly for breach of K

The ER appealedBCCA Decision

Rejected her analysis and application of Machtinger and Kempoo That case was not concerned with whether statutory minimums become implied

terms of the employment Ko It was about what parties intend the notice provisions to be in the event that

provisions were null and voidTo address this case, the first question is whether a person who alleges minimum rights under the ESA breached has access to courts to enforce those rights

o GENERAL RULE: no right to courts at common law to enforce statutorily conferred rights, exceptions will arise where, on consideration of the whole legislation, it intended parties to be able to enforce it through civil action

Need to the review the ESA to determine whether the act provides for enforcement mechanism

o The court then reviewed all the enforcement mechanisms of the Act – found that there was an effective mechanism for enforcement of OT rights

o Therefore, general rule applied and there was no access to the courts

NOTE: If the court had found that the ESA did not provide for an effective enforcement mechanism and therefore the legislature intended for the courts to be involved, the court would have found that the OT provisions were indeed implied terms of K of employment

But they didn’t - so there was no claim, and no claim could be certified as class actionCrawford says: Decision sounds death knell for class actions in terms of bringing class actions re: employment standards

Restrictive Covenants

Deal with what you can do after employment. They consist of ongoing obligations on a former EE even after termination of employment

Very important mechanisms used by ER’s to protect their proprietary interests Types that will be seen in employment agreements/as appendices to them are:

o 1. Non-compete agreement – will restrict the EE from working in certain competitive activities for a period of time after termination of employment and within a certain geographic area

o 2. Non-solicitation agreement Variant 1 – restriction on soliciting customers

Unlike non-compete agreement, this is less invasive in that you’re still allowed to compete against your formal ER but you can’t solicit customers you were working with with your former ER

Will usually set out geographic limitation Variant 2 – non-solicitation of EE’s

Prevents you from getting your colleagues to come with you

At c/l, courts generally hostile to restraints of trade Why? Policy: Violate public policy encouraging individual liberty and an individual’s

ability to earn a living There is a public interest in free exchange of goods and interests and non-compete

clauses run counter to that policy

The starting position of the courts is that all restraints of trade are prima facie unenforceable, unless they are reasonable in the public interest

So what is a reasonable restrictive covenant? 3-4 factorso 1. Geographic scope of the restrictive covenanto 2. Length of Timeo 3. Scope of Activity restricted

Tratch case – had sold LTD insurance, signed a non-compete agreement that prevented him from selling ANY KIND of insurance – BCCA held that was invalid because the scope was too broad

Good summary of case law (case arises in BC):Shaffron vs. KRG (2009, SCC) Facts: Shaffron owned insurance business, sold his insurance agency to KRG in 1987, he remained employed there for 14 years and each of those employment K’s had a non-compete agreement in them which prevented him for a period of 3 yrs after leaving KRG from being employed in the business of insurance brokerage within the metropolitan city of VancouverSide issue: whether the restrictive covenant was arising from sale of business or from employment agreement, held that arose from employment agreements

He goes to work in Richmond. KRG seeks injunction to enforce non-compete agreementProblem – no legal entity of the metropolitan city of VancouverTJ Decision: Action was dismissed – the covenant was ambiguous, couldn’t meet burden of reasonableness because couldn’t say what the covenant even meant

Court of Appeal set this judgment aside, found that it was enforceable Essentially decided to rewrite the clause to interpret to mean “the city of Vancouver, the

university of BC, Richmond and Burnaby”

Applied the tool of severance to rewrite the agreement – involves reading down an otherwise invalid restrictive covenant to what the court determines to be reasonable

SCC: overturned Court of Appeal Put end to idea that courts will apply doctrine of severance to fix a defective

restrictive covenant in employment context There are 2 types of severance – blue pencil (used when a portion of the K can simply be

crossed out, making the remainder effective) and notional severance (reading down a provision to make it legal and enforceable)

Notional severance is not appropriate and should not be used in context of employment agreements for 2 reasons

o 1. Unlike Transport North America where there was a clear, bright line test for legality, in restrictive covenants there is no bright line test for what’s reasonable and legal

o 2. If were going to apply notional severance, would invite ER’s to impose unreasonable restrictions on EEs, knowing courts would fix it

Would also result in many EEs deciding to abide by unreasonable covenants that never get challenged

Blue pencil can be used sparingly, but only when something can clearly be fixed simply by crossing a word or two out

o KRG asked for the court to apply blue pencil, just remove “metropolitan” o Court said NO, the technique will be used narrowly, no evidence that the parties

would have unquestionably agreed to remove the word metropolitan

Tie these cases back to RBC v. Meryl Lynch Shaffron is good example of well intentioned ER that tried to have restrictive covenant

but didn’t draft well enough to have it enforced Had it been drafted properly it may well have been enforced Contrasted with RBC where RBC had no restrictive covenants in place, didn’t even try

and so in that circumstance, there was no restriction on the EEs at allo The only issue was whether the branch manager was a fiduciary, so might have

had a duty not to solicit clients Meryl Lynch – branch manager had an obligation not to encourage mass exodus of all the

EEs Absent a restrictive covenant, EEs are free to compete – whether you’re a fiduciary

or not