• When a Non-Solicitation Clause is Actually a Non-Competition Clause

    Employers often place a restrictive covenant, such as a non-competition or a non-solicitation clause, into their employment contracts in an attempt to protect their business interests from competition from departing employees. The challenge for employers is that restrictive covenant in an employment contract will be presumed by a court to be void and will only be enforced if the covenant is reasonable limited to protect the employer’s legitimate business interests. The difference between a non-competition clause and a non-solicitation clause is that a non-competition clause will restrict a former employee from any form of competition whereas a non-solicitation clause will only restrict the former employee from actively contacting clients (normally just specific clients) in search of business opportunities that are competitive with that of the former employee. In Ontario a court will only enforce a non-competition clause in exceptional circumstances. This is because in the vast majority of cases the court will find that a more limited non-solicitation would have sufficient to protect the employer’s legitimate business interests. In practice it is not unusual for a restrictive covenant in an employment contract to be titled “non-solicitation” even though the language in the clause prohibits competition generally and is therefore actually a non-competition of clause. The Ontario Court of Appeal recently considered this type of clause in Donaldson Travel Inc. v. Murphy, 2016 ONCA 649. The impugned “non-solicitation” clause provided as follows: [The employee] agrees that in the event of termination or resignation that she will not solicit or accept business from any corporate accounts[Read More]

    Active Employment Language Does Not Remove Dismissed Employees' Entitlement to Bonus

    It is common in Ontario for an employer who provides a dismissed employee with pay in lieu of reasonable notice of dismissal to not include payment of any bonuses that the employee would have earned had he or she been given working notice of dismissal. To justify this position, the employer will often point to language in its bonus policy that requires the dismissed employee to be “actively employed” at the time bonus is paid. However, in Paquette v. TeraGo Networks Inc., 2016 ONCA 618 the Ontario Court of Appeal rejected this argument. The Court found that a term in a bonus policy that requires active employment when the bonus is paid, without more, is not sufficient to deprive an employee terminated without reasonable notice of a claim for compensation for the bonus he or she would have received during the notice period, as part of his or her wrongful dismissal damages. In reaching this conclusion, the Court began by reviewing the principle that is to be applied by a court when determining damages for wrongful dismissal. At paragraphs 16 to 18 van Rensburg J.A wrote: The basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice. The damages award should place the employee in the same financial position he or she would have been in had such notice been given. In other words, in determining damages for wrongful dismissal,[Read More]

    The Court of Appeal Considers the Duty to Mitigate

    A dismissed employee has a legal obligation to take reasonable steps to minimize the financial loss suffered as a result of their dismissal. The legal term for this obligation is “the duty to mitigate”. It requires the dismissed employee to take reasonable steps to find comparable employment elsewhere. The employer bears the evidentiary burden of proving that the employee failed to take reasonable steps to mitigate their damages. In a wrongful dismissal action the dispute between the dismissed employee and employer often revolves around the whether the employee’s job search was reasonable and whether the employee failed to apply to comparable job positions. A recent decision by the Ontario Court of Appeal in Maasland v. Toronto (City), 2016 ONCA 551 provides additional guidance as to what a reasonable search for “comparable” employment looks like in practice. In Massland the employer argued that the employee failed to take reasonable steps to mitigate her damages because she: did not apply for any positions outside of Toronto. In particular, the employer pointed to the fact that the employee did not apply for a position for which she was qualified in York Region because it was 50km from her home; and took time off her job search to attend the criminal trial of the individual accused of murdering her brother. The Court of Appeal firmly rejected both submissions. Dealing with the argument that the employee had not acted reasonably when she failed to seek employment outside of Toronto the Court wrote, “the motion judge’s conclusion[Read More]

    When Does an Employee’s Mental Illness Trigger an Employer’s Duty to Accommodate?

    The need to accommodate mental illness in the workplace is rapidly growing. A 2012 Ipsos-Reid poll found that 22% of Canadian workers’ experience depression. Mental illness accounted for 30% of short term disability and long term disability claims in 2010 and 47% of all approved disability claims in federal civil service, double the percentage of 20 years earlier, according the Mental Health Commission of Canada. An employee who is disabled as a result of a mental illness is entitled, pursuant to the Ontario Human Rights Code (“Code”), to be accommodated by his or her employer up to the point of undue hardship. However, the employee is only entitled to the protections of the Code if the employee is able to prove that his or her mental illness is sufficiently serious to be considered to be a disability. The employer has no legal obligation to accommodate the employee if the employee’s mental illness does not rise to the level of a disability. The most widely accepted definition of a mental disability that will trigger the protection of the Code was set out by Vice Chair Mark Hart in Crowley v. LCBO, 2011 HRTO 1429. In Crowley the Vice Chair wrote at paragraph 63: “I agree that in order to meet the definition of mental disability within the meaning and protection of the Code, where the case does not involve an allegation of discrimination on the basis of perceived disability, there needs to be a diagnosis of some recognized mental disability, or at[Read More]

    Small Claims Court v Summary Judgment Motions

    In Ontario monetary claims for $25,000 or less are supposed to be heard in Small Claims Court. If a claim is brought before the Superior Court of Justice and the Court awards the plaintiff less than $25,000 the Court may refuse to award the plaintiff costs of the action as punishment for failing to bring the before the Small Claims Court. The problem with the $25,000 monetary limit in wrongful dismissal cases is that judges have a great deal of discretion when deciding a plaintiff’s entitlement to reasonable notice of dismissal. In particular, cases involving short service employees have a wide range of outcomes. As a result, it is not uncommon for the range of possible outcomes in a wrongful dismissal action to overlap the $25,000 monetary limit. The dismissed employee is placed in the unenviable position of having to decide whether to limit their claim to $25,000 or claim a higher amount and risk the possibility that the judge will refuse to award costs if the damage award is ultimately less than $25,000. A recent Superior Court decisions gives some comfort to dismissed employees deciding whether to proceed in Small Claim or Superior Court. In Asgari v 975866 Ontario Ltd., 2015 ONSC 7508 the plaintiff commenced his action in Superior Court claiming $37.083.33 for the defendant’s failure to provide the plaintiff with reasonable notice of dismissal and $6,000 for failure to pay tuition. A claim for punitive damages was abandoned before trial. Justice Dow ordered the defendant to pay the plaintiff[Read More]

    Wrongful Dismissal Trends for 2016

    One of the last wrongful dismissal decisions of 2015, Drysdale v Panasonic Canada Inc., 2015 ONSC 6878 (“Drysdale”), provides some useful insights into the judicial trends that will likely continue into 2016 when deciding wrongful dismissal actions. Summary Judgment Motions Drysdale was decided by way of a summary judgment motion. The use of summary judgment motions to decide wrongful dismissal where the employee was terminated from his or her employment without cause has become the norm in Ontario. A summary judgment motions offers a faster and more cost efficient resolutions of a wrongful dismissal resolution of a wrongful dismissal claim than a trial. Character of Employment Another judicial trend in Ontario that picked up speed in 2015 is for the courts to place less emphasis on the character of employee when determining the reasonable notice period for lower skilled employees. Justice Lederer, in awarding the 58-year-old warehouse ship with 23 years of service a notice period of 22 months, wrote at para. 15 of Drysdale: The character of the plaintiff’s employment is for the most part one of physical labour. He held a non- managerial position and was responsible along with 30 or 40 other material handlers in moving product in and out of and within the defendant’s warehouse. Of note, is the fact that his hourly wage was $28/hour which would appear to be considerably higher than the wage earned by other shippers in the industry. Even if the plaintiff could be considered a low level unskilled employee, it does not mean[Read More]

    Low Skilled Employee Entitled to Longer Notice Period

    Traditionally the courts have awarded senior and highly skilled employees longer reasonable notice periods than lower level employees. The justification for the longer notice periods was based on a presumption that it generally takes longer for these types of employees to find new employment because there are fewer job positions open to them.  For example, there are more open positions for a receptionist than a senior vice president. In recent years Ontario’s courts have questioned this long held presumption. The Ontario Court of Appeal held in both Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469 and Arnone v. Best Theratronics Ltd., 2015 ONCA 63 that the character of employment is factor that is declining in importance when determining a dismissed employee's reasonable notice period. This is particularly true in circumstances when an employer attempts to argue that a low level unskilled employee is deserving of a shorter notice because he or she should have an easier time finding alternative employment. In the September 2015 decision, Zoldowski v Strongco Corporation, 2015 ONSC 5485, Justice Hood inverted this presumption and found that an unskilled employee is likely to find it more difficult to find new employment. The judge wrote at para. 14: If anything, employees with a particular marketable skill are more valuable to employers and should have an easier time finding employment. The plaintiff herself is a case in point. Her skills were vulnerable to automation and she was replaced by a computer. The plaintiff was 39 years old and had been employed[Read More]

    Abandoning Allegations of Cause on the Day of the Hearing Triggers Cost Award on a Substantial Indemnity Basis

    Fabricating or puffing up allegations to justify a termination for cause is a litigation tactic used by unscrupulous employers. By alleging cause, the employer drives up the legal costs of the litigation and places a significant amount of emotional pressure on the dismissed employee.  The intent of the employer is to force the dismissed employee to abandon the litigation. The Court in Tetra Consulting v Continental Bank et al., 2015 ONSC 6546 recently responded to this employer tactic by ordering Continental Bank to pay costs on a substantial indemnity basis. The Court ordered this punitive cost award because, on the day of the hearing, the Bank had dropped its allegation that it had cause to dismiss the employee.  Morgan J. described the Bank's tactic as follows: As an aside, I observe that the Bank originally pleaded that Mr. Cassar was terminated for cause, but has subsequently abandoned that line of attack. The reason for having abandoned it is that there is not a stitch of evidence to support it. Mr. Cassar was highly successful in the tasks he performed for the Bank, and the Bank’s lawyer was in the process of drafting his permanent employment agreement when the Bank ceased its operations. The pleading of termination for cause was, as far as I can tell, nothing more than a cynical tactic deployed by the Bank to discourage this legal action. Mr. Cassar’s termination by the Bank was entirely unrelated to his performance. Justice Morgan viewed the Bank's litigation strategy as an attempt to hinder the dismissed employee's access to justice.  He wrote at paragraphs[Read More]

    Discrimination in the Workplace: Choice of Forum

    Since 2008 a claim for a breach of the Ontario Human Rights Code ("Code") can be advanced as a civil cause of action if the pleading discloses a reasonable cause of action that does not arise solely from a breach of the Code.  For example, a claim for discrimination in the workplace is not limited to being heard by the Human Rights Tribunal of Ontario (the “Tribunal”) if the employee also has a wrongful dismissal or tort claim against his or her former employer.  The employee can bring the claim for damages for breach of the Code as as part of a civil action before the Court.  The availability of two different forums to resolve qualifying human rights claims raises the question of which forum, the Tribunal or the Court, is the better choice for any given fact scenario.  In 2015 two key human rights decisions provided an insight into this choice.  Both decisions considered very similar fact scenarios - extremely vulnerable workers who had been sexually harassed and assaulted in the workplace.  One decision was decided by the Tribunal, the other by the Court. The decision of the Tribunal, O.P.T. v. Presteve Foods Ltd., 2015 HRTO 675, gained prominence because of the Tribunal's high general damages awards of $150,000 and $50,000, respectively, to two sisters who were sexually assaulted by their employer. In contrast, in the lesser known civil decision, Silvera v Olympia Jewellery Corporation, 2015 ONSC 3760, a former jewelry store employee was awarded $297,000 in damages as a result of her sexual assault and[Read More]

    Employer Pummelled By Punitive Damage Award Wacked Again By Huge Cost Award

    The inglorious defeat that befell Altus Group and its lawyers and resulted in Altus being ordered to pay $100,000.00 in punitive damages has turned into an unmitigated disaster. The cost award for Gordon v Altus, 2015 ONSC 6642 has just been released and Altus has been ordered to pay $225,000.00 plus HST plus disbursements of $37,722.29. I previously wrote about the trial decision which saw the trial judge order Altus to pay $100,000 in punitive damages because Altus had fabricated allegations that it had cause to dismiss Gordon. That decision is a warning to any employer tempted by the strategy of fabricating allegations of cause in order to avoid having to provide a dismissed employee with a severance package. Gordon followed up his trial victory by asking the judge to award him $500,000 in substantial indemnity costs. Justice Glass rejected Gordon’s request and instead ordered $250,000 in partial indemnity costs to compensate Gordon for the legal costs he had incurred throughout the litigation that had concluded with a seven day trial. In reaching his decision Justice Glass wrote: I am not surprised that much time is at stake here. I conclude that a reasonable client would expect that costs would be very considerable because of the contentious nature of this litigation as exhibited by both sides. There is no likelihood that costs of a few dollars would be expected by either client. When I looked at the materials filed in this action, I could not help but conclude that this litigation was an all-out[Read More]

    No Independent Duty to Investigate Allegations of Workplace Discrimination

    It is well established that an employer’s failure to investigate a human rights complaint may result in the employer being ordered to pay the employee additional damages for its failure to investigate. However, a question arises as to whether an employer will have breached the Ontario Human Rights Code (“Code”) if it fails to investigate a complaint of workplace discrimination even though, had it conducted a proper investigation, it would have found that there was no discrimination. There is a line of decisions from the Human Rights Tribunal of Ontario (“Tribunal”) where employers have been found liable for breaching the Code for failing to investigate even though the Tribunal dismissed the allegation of workplace discrimination. That said, recent Tribunal decision have found that an employer will not have breached the Code for failing to investigate a complaint of workplace discrimination if no discriminatory act occurred. This was confirmed by the Ontario Divisional Court in Walton Enterprises v. Lombardi, 2013 ONSC 4218 [“Walton Enterprises”]. The Court quashed the decision of the Tribunal writing at para. 54 that employer “liability for a discriminatory dismissal does not rest on a freestanding duty to investigate”. Since Walton Enterprises was released Tribunal decisions have applied the reasoning of the Divisional Court, with one notable exception. In Sears v. Honda of Canada Mfg., 2014 HRTO 45 [“Sears”] Vice Chair Judith Keene ignored Walton Enterprises, writing at para. 169: It is well-established in the Tribunal’s jurisprudence that the Code imposes a duty on organizations to investigate a complaint of discrimination,[Read More]

    Employee Terminated Before Starting New Job Entitled To 6 Months’ Notice of Dismissal

    It is a little known employment law principle that an individual who accepts an offer of employment may be entitled to notice of dismissal if the individual is wrongfully dismissed before his or her first day on the job. This happened in the case of DeGagne v. City of Williams Lake, 2015 BCSC 816. Donald DeGagne accepted an offer of employment as the City’s Chief Administrative Officer. The employment contract he signed provided that the City could terminate his employment with 1 months’ notice during his 6 month probationary period and 6 months’ notice if the employment contract was terminated during his first year of service. The City provided DeGagne with a severance package representing 1 months’ notice when it terminated his employment. At trial the judge rejected the City’s argument that DeGagne was only entitled to a notice period of 1 month because could not reasonably have anticipated that he would be entitled to a greater severance payment if the employment contract was terminated before he commenced employment. Recognizing that an employer has an obligation to act in good faith during the probationary period the judge found that “it would be most unjust to impose a reduced obligation for severance without any corresponding obligation of the employer to assess in good faith Mr. DeGagne’s suitability for the position during an actual probationary period of employment.” The judge awarded DeGagne 6 months’ notice of dismissal on the basis that the termination clause in his employment contract provided him with 6 months’ notice of dismissal[Read More]

    “Independent” Contractor with 2 Years’ Service Awarded 8 Months’ Notice of Dismissal

    It is common today for corporations and other organizations to hire consultants to assist them with various aspects of the business. For example, individuals are hired as “independent contractors’ to staff accounting and information technology departments. These individuals may work full time at the same employer for years invoice the organization through personal service corporations. In situations there is little to distinguish a “independent contractor” from other employees other than the manner in which the individual is paid, a court is likely to find that the individual is either an employee or dependent contractors and, therefore, entitled to reasonable notice of dismissal. In Tetra Consulting v Continental Bank et al., 2015 ONSC 4610 Justice Morgan considered the case of the plaintiff, Lewis Cassar, an expert in the banking sector. Mr. Cassar owns the plaintiff, Tetra Consulting (“Tetra”) which was retained by the Bank to assist it in obtaining approval from the federal regulator, the Office of the Superintendent of Financial Institutions (“OSFI”), to operate as a Schedule 1 bank. It was the common intention of all parties that although Tetra would commence its work in a consultant capacity, Mr. Cessar was to become an employee of the Bank once OSFI’s approval was achieved. To this end, in the Bank appointed Mr. Cassar as its Chief Compliance Officer (“CCO”) and Chief Anti Money Laundering Officer (“CAMLO”). He attended the Bank’s board of directors meetings as a senior management employee, used the Bank’s email address, worked from his desk at the Bank’s premises, was[Read More]

    Employer Ordered to Pay $100,000 in Punitive Damages for Fabricating Allegations of Cause

    Alleging cause as a tactic to avoid providing an employee with proper notice of dismissal can be tempting for the unscrupulous. This bad faith tactic is not, however, without risk. An Ontario judge recently punished an employer by ordering it to pay $100,000.00 in punitive damages to its former employee in addition to damages for wrongful dismissal. In the words of the trial judge, the employer “got mean and cheap”.  The employer “put together a process to justify their [decision to terminate the employee for cause] after the fact” which included unfounded allegations and “puffing up complaints”. The unfounded allegations included conflict of interest and using derogatory and profane language. In Gordon v Altus, 2015 ONSC 5663 Gordon sold his company to Altus Group Ltd. for several million dollars. Gordon also agreed to work for Altus after the sale of his business. The parties entered into a 3 year fixed term employment contract that provided Gordon with a payout provisions if Altus terminated the contract early without cause. Significantly, some of the sale proceeds of Gordon’s company were linked to its performance after the closing with an adjustment to be made in the purchase & sale price by February 2010. As February 2010 approached, and a possible readjustment to the purchase price, the relationship between Gordon and Altus deteriorated. Gordon invoked an arbitration clause in the purchase agreement to have his dispute with Altus over the purchase price of the company settled at arbitration Altus responded by alleging that Gordon was not “was not producing[Read More]

    Employee Loses Battle with Cancer; Estate Entitled to ESA Notice and Severance Pay

    The estate of an employee who died three months after being diagnosed with cancer and being placed on a medical leave of absence has been awarded the employee’s statutory notice and severance pay pursuant to the Ontario Employment Standards Act (“ESA”).  Justice Gray made the award in Estate of Cristian Drimba v Dick Engineering Inc., 2015 ONSC 2843 [“Dick Engineering”] based on his finding that the employee’s employment contract had become frustrated. Dick Engineering is noteworthy because employees are typically not entitled to severance pay or pay in lieu of reasonable notice if they die.  However, Justice Gray awarded statutory notice and severance pay not because the employee had died but because he found that the employee’s relatively short terminal illness made it impossible for the employee to ever return to work, thereby frustrating the contract.  The learned judge reached this conclusion even though neither party ever took the position that the employee’s employment contract had been frustrated prior to the employee’s death.  On the contrary, the employer had offered to keep the employee’s position open for him in the event that he ever recovered, a decision that appears to have been primarily motivated by sympathy for the employee’s grave medical condition. Gray J. found that although it was impossible to pinpoint when the employee’s employment contract became frustrated it was at some point after his diagnosis and before his death. His finding on this point was critical because an employee in Ontario is entitled to notice and severance pursuant to the ESA if[Read More]

    Equity Partner Entitled to the Protection of the Ontario Human Rights Code

    The Human Rights Tribunal of Ontario ("Tribunal") recently decided in an interim decision, Swain v. MBM Intellectual Property Law LLP, 2015 HRTO 1011 (“Swain”), that a law firm equity partner is entitled to the protection of the Human Rights Code (“Code”). The partner alleged her removal from the firm was discriminatory and in breach of the Code because it was based, at least in part, on allegations that she had certain psychological illnesses that impacted her performance and her relationships at the law offices, and that she derived certain considerations because of her status as a former spouse of another partner of the firm. Swain is noteworthy because the Supreme Court of Canada recent ruled in McCormick v. Faskens Martineau DuMoulin LLP, [2014] 2 S.C.R,.108 (“McCormick”) that an equity partner in a law firm in British Columbia was not entitled to the protections of the British Columbia Human Rights Code. That partner had alleged that she suffered discrimination based on the law firm’s mandatory retirement policy. The Court reached its decision based on its finding that the equity partner was not an employee. McCormick sets out criteria that will guide a determination of whether someone who is a partner in name can, in certain circumstances, be treated as an employee. The Tribunal distinguished McCormick based on the broader protections offered by Ontario’s Code which provides “a right to contract on equal terms”, a protection not offered by British Columbia’s Code. In reaching its decision the Tribunal held that the Code's protection is not[Read More]

    ONCA Opines on Wrongful Dismissal

    In February 2015 the Ontario Court of Appeal (the “Court”) released Arnone v. Best Theratronics Ltd., 2015 ONCA 63. The decision is noteworthy because the Court made a number of findings that will impact future employment law decisions. 1) Bridging an Employee to the Date of Pension Eligibility is Not a Relevant Factor When Calculating a Reasonable Notice Period In cases where an employee is dismissed before the arrival of a date that triggers an entitlement to a benefit, such as the date when the employee will have earned the right to a full pension, a question inevitably arises as to whether the severance package offered to the employee should be structured in a way to “bridge” the former employee so that trigger date is achieved. In Armone the Court held that he amount of time required to ‘bridge’ the dismissed employee to his date of eligibility for a full pension is not a relevant factor to consider when determining the employee’s right to reasonable notice of dismissal. The Court stated that this factor is not part of the “Bardal” analysis. The Bardal analysis focuses considers four primary factors when calculating the appropriate reasonable notice period: the dismissed employee’s (i) age; (ii) length of service; (iii) character of employment; and (iv) the availability of similar employment. However, other factors may also be considered. 2) The Declining Importance of “Character of Employment” When Calculating a Notice Period Armone reiterated that the character of an employee’s employment is of declining relevance when applying the Bardal analyses to determine[Read More]

    Ontario’s Minimum Severance Requirements Reinterpreted for Large Out-of-Jurisdiction Employers

    An Ontario court has decided that an employer’s global payroll is to be counted when determining whether it is required to pay a dismissed employee severance pay in addition to providing the employee with a maximum of 8 weeks’ notice of dismissal pursuant to its minimum statutory obligations set out in the Employment Standards Act, 2000 (“ESA”).* The ESA requires larger employers to pay a minimum of one week of severance pay to a dismissed employee for each year of service up to a maximum of 26 weeks’ pay if an employee has employed by the employer for at least 5 years. The requirement to pay severance applies to employers with annual payrolls of $2.5 million or more.  Employers with smaller annual payrolls are generally exempt from the requirement. Section 64 of the ESA states: Entitlement to severance pay 64.  (1)  An employer who severs an employment relationship with an employee shall pay severance pay to the employee if the employee was employed by the employer for five years or (a) the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or (b) the employer has a payroll of $2.5 million or more The $2.5 million dollar payroll requirement had previously been interpreted as referring only to an employer’s Ontario payroll.  The result was that some large employers (including multi-billion dollar multi-national corporations) were exempt from paying statutory[Read More]

    Granting Judgment before the Conclusion of the Reasonable Notice Period

    The increasing use of summary judgment motions to decide straight forward wrongful dismissal actions has resulted in it now being commonplace for a court to grant judgment in a wrongful dismissal action before the expiration of the dismissed employee's reasonable notice period. This raises the question of how the court should take into account the plaintiff’s duty to mitigate his or her damages during the balance of the notice period after judgment. This question was recently considered by Justice Perell in Paquette v TeraGo Networks Inc., 2015 ONSC 4189. The plaintiff was a 49 year old lead systems architect who had worked for the company for 14.5 years when he was dismissed from his employment without cause. He brought a motion for summary judgment and was awarded a reasonable notice period of 17 months. Judgement was granted less than 7 months after the plaintiff had been dismissed. Justice Perell wrote at paragraph 48 that when judgment is granted before the expiration of the reasonable notice period the courts have employed three approaches to deal with the plaintiff’s own going duty to mitigate during the balance of the notice period: 1. The Contingency Approach – The employee’s damages are discounted by a contingency for re-employment during the balance of the notice period. See Russo v. Kerr, 2010 ONSC 6053 (CanLII); Smith v. Pacific National Exhibition (1991), 1991 CanLII 2366 (BC SC), 34 C.C.E.L. 64 (B.C.S.C.). 2. The Trust and Accounting Approach – The employee is granted judgment but a trust in favour of the employer is[Read More]

    Human Rights Tribunal Awards $150,000 in General Damages for Sexual Harassment

    Two sisters who had come to Ontario from Mexico to work at Presteve Foods on temporary work visas were awarded $150,000.00 and $50,000.00 respectively by the Human Rights Tribunal of Ontario in O.P.T. v. Presteve Foods Ltd., 2015 HRTO 67.  The award of $150,000.00 is by far the largest general damage awarded ever awarded by the Tribunal (the previous high water mark was $50,000.00) Presteve Foods’ owner, Jose Pratas, invited the first sister on dates and forced her to perform sexual acts on him by threatening to send her back to Mexico if she refused.  The second sister claimed that Pratas sexually propositioned her and touched her breasts and slapped her buttocks. Vice Chair Mark Hart found that Pratas engaged in "a pattern of persistent and unwanted sexual solicitations and advances and sexual harassment” in the workplace.  He justified the award for $150,000.00 as follows: In my view, the amount of compensation for injury to dignity, feelings and self-respect requested on behalf of this applicant is not unreasonable and is justified, given the unprecedented seriousness of the personal respondent’s conduct in this case, the particular vulnerability of O.P.T. as a migrant worker, and O.P.T.’s personal circumstances and the impact of the conduct on her. Accordingly, in my view, an award of compensation for injury to dignity, feelings and self-respect in the amount of $150,000 as requested on behalf of O.P.T. is appropriate. The Tribunal has been criticized in the past for its relatively small general damage awards.  General damage awards for employees who have[Read More]

    Gap Appears Between Ontario and BC Regarding the Test to Determine Just Cause for Dismissal

    The recent split decision of the British Columbia Court of Appeal in Steel v. Coast Capital Savings Credit Union, 2015 BCCA 127 (“Coast Capital”) appears to have opened a gap between Ontario and British Columbia regarding the factors that must be considered when a court applies the contextual approach to determine if an employer has cause to summarily dismiss an employee. The majority held in Coast Capital that the trial judge has discretion whether to consider the dismissed employee’s length of service and prior employment record when deciding whether an employer’s decision to summary dismiss an employee was a proportionate response to an employee’s misconduct. Coast Capital is inconsistent with the leading Ontario decision, Dowling v. Ontario (Workplace Safety and Insurance Board), 2004 CanLII 43692 (ON CA)(“Dowling”), which mandates that Ontario courts must consider factors such as the employee’s length of service and prior employment record when applying the contextual approach mandated by the Supreme Court of Canada in McKinley v. BC Tel, 2001 SCC 38 (“McKinley”). Facts Ms. Steel had worked on the IT helpdesk at the credit union for 21 years when she was terminated from her employment for cause. Her role on the helpdesk gave her unfettered access to every document in the credit union’s database. However, she was forbidden by the company’s policy from accessing any other employee’s personal folder without that employee’s permission. In breach of that policy Ms. Steel accessed a manager’s confidential personal folder in order to view a document that contained a waiting list of employees eligible for[Read More]

    BCCA Relies On Employer Code Of Conduct When Assessing Whether Employer Had Cause To Summarily Dismiss Employee

    The importance of applying the contextual approach when deciding whether an employer has cause to summarily dismiss an employee was recently reiterated by the British Columbia Court of Appeal (the “Court”). It allowed the appeal of the employer after the trial judge had found that the employer did not have cause to dismiss the plaintiff. The Court relied upon the well established principle that senior managerial employees who hold positions of trust will be held to a higher standard than other employees. More significantly, the Court also relied upon the employer’s Code of Business Conduct and Ethics (the “Code of Conduct”) which stated that employees were “to act in an honest and ethical manner at all times” (emphasis the Court’s) when considering whether the summary dismissal was justified. In Roe v. British Columbia Ferry Services Ltd., 2015 BCCA 1, the plaintiff had been employed for approximately 4.5 years when he was terminated for cause from his position as manager of a ferry terminal. An internal investigation had concluded that he had knowingly provided his daughter's sports teams with complimentary food vouchers on at least two occasions without prior authorization. This was contrary to the employer's policy. The plaintiff had also taken steps to conceal his misconduct. The trial judge found that the plaintiff’s misconduct, when viewed objectively by a reasonable employer in all of the circumstances, was "bordering on trifling" and "relatively minor". The plaintiff’s conduct, even though dishonest, did not fundamentally undermine the employment relationship. In particular, the trial judge was[Read More]

    Corporate Directors Personally Liable for Wrongful Dismissal Damages

    A basic corporate legal principle is that a corporation is an independent legal personality distinct and separate from its shareholders and directors.  As a result, shareholders and directors are generally not personally liable for the actions of the corporation.  There are however, exceptions to this general principle.  For example, various statutes, including the Ontario Business Corporations Act (“OBCA”) and Ontario Employment Standards Act, 2000 (“ESA”) state that corporate directors are liable for unpaid “wages”.  Section 81 of the ESA states that directors are jointly and severally liable for all debts not exceeding six months’ wages that become payable while they are directors and for the vacation pay accrued while they are directors for not more than twelve months. “Wages” do not include an employee’s entitlement to termination pay such as that owed to an employee if the employer wrongfully dismisses the employee by failing to provide the employee with reasonable notice of dismissal.  Therefore, directors are generally not personally liable for wrongful dismissal damages. That said, there are circumstances when a dismissed employee may be able to successfully claim wrongful dismissal damages from a corporate director if his or her corporate employer does not have sufficient funds to pay a wrongful dismissal award.  The employee would do this by relying upon the oppression remedy.  Section 248 of the OBCA provides: 48(1) A complainant . . . may apply to the court for an order under this section. (2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or[Read More]

    Be Wary of Resigning and Claiming Constructive Dismissal

    One of the biggest risks an employee can take during his or her career is to resign and claim constructive dismissal. Susan Bolibruck recently took this risk and lost… badly. The decision in her case, Bolibruck v. Niagara Health System, 2015 ONSC 1595, is a cautionary tale for any employee who is considering quitting his or her employment to claim constructive dismissal. A constructive dismissal occurs when an employer makes a substantial change (or changes) to the terms of an employee’s employment without the employee’s consent. The changes must be significant and go to the very root of the employment contract. The employee has the option of treating his or her employment as having been terminated.  The employee resigns and demands that the employer provide a severance package. A former employee claiming constructive dismissal bears the evidentiary burden at trial of proving, on the balance of probabilities, that a constructive dismissal has occurred. If the former employee fails to prove that a constructive dismissal has occurred the employee will not be entitled to any award of damages and, as the loser of the court action, will likely be ordered to pay a portion of the employer’s legal costs. Taking a constructive dismissal case to trial is therefore an all or nothing bet. In Ms. Bolibruck’s case, Justice Nightingale reviewed the facts and came to the conclusion that the changes to Ms. Bolibruck’s job were not significant enough to trigger a constructively dismissed.  As a result, he dismissed her action and order her to[Read More]

    Short Service Employee is Awarded a Long Notice Period

    In Munoz v. Sierra Systems Group Inc., 2015 BCSC 269, a summary judgment motion, the plaintiff was awarded 10 months reasonable notice of dismissal despite the fact that the plaintiff, a 43 year old senior systems administrator, had only 2 years and 7 months of service when he was dismissed from his employment.    The defendant provides information technology ("IT") management and consulting services to clients across Canada.  It contracts with clients to provide a variety of IT-related services by placing consultants with the clients, either onsite or remotely from its offices.  The plaintiff was hired by the defendant because one of its clients required a Spanish speaking system administrator.   During the interview process, the defendant's representatives advised the plaintiff that they had a long-term and stable agreement with that client for the provision of IT consulting services. However, after less than 3 years of service the defendant was informed by its client that it no longer required the services of the plaintiff.  As a result, the plaintiff was placed on the “bench” without pay while the defendant looked for new work for the plaintiff.  Ultimately, the defendant terminated his employment without cause. Justification for the Longer Notice Period The motions judge justified the award of 10 months’ notice of dismissal for several reasons.  Regarding the plaintiff’s 2 years and 7 months of service the judge wrote at para. 81 that this “must be regarded as a relatively short term of employment; however, the notice period is not generally restricted to a proportionate formula. Shorter term[Read More]

    Employer Blows Itself Up Using Hardball Litigation Tactics

    It is often tempting for a party in litigation to treat the lawsuit as a “war” against the other side. This can mean employing bad faith tactics such as frivolous motions to drive up the cost of litigation, failing to comply with orders in a timely manner and, if the party is the defendant, deliberately attempting to delay the action from proceeding to trial. An employer, with its greater financial resources, may be tempted to use these type of tactics to attempt force a former employee to discontinue the litigation and accept a very poor settlement. Although this type of strategy may succeed if the former employee is timid, it will almost certainly backfire if the employee is prepared to take the issue to trial. The employer may be forced to pay a punitive cost award (ie. substantial indemnity costs) that reflects the vast majority of the former employee’s legal costs and, in extreme cases, an award of punitive damages. Judges are well aware of the power imbalance between most employers and employees and normally do not take kindly to a large corporation beating up on an average “Joe” (or “Jill”) who has a mortgage to pay and a family to support. The cost endorsement in Tossonian v. Cynphany Diamonds, 2015 ONSC 766 is a example of an employer with a good wrongful dismissal case ultimately shooting itself in the foot as a result of the litigation tactics it employed. The main issue before the court was whether the plaintiff had a[Read More]

    Another Termination Clause Bites the Dust

    Employers typically insert termination clauses into their employment contracts to reduce the cost of terminating employees.  As long as the termination clause provides at least the minimum notice and severance set out in the Ontario Employment Standards Act (“ESA”) a court will enforce the termination provision.  However, if the termination clause provides the employee with less notice than required by the ESA the court will strike the clause from the employment contract and award the former employee with reasonable notice of dismissal, which will typically entitle the former employee to a much longer notice period than that provided for by the termination clause. As I have discussed before, it is truly amazing how many termination clauses in Ontario employment contracts breach the minimum standards of the ESA and, therefore, will not be enforced by a Court.  Based on my experience, I would estimate that 30% of termination clauses in current employment contracts are void. One of the latest decisions to find that a termination clause is void is Miller v. A.B.M. Canada Inc., 2014 ONSC 4062.  The relevant portions of the termination clause are: Subject to the provisions of applicable legislation, probationary employees may be terminated at any time without notice or cause. Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation. [emphasis added] Justice Glithero found that the termination clause breached the[Read More]

    The Mistake Employees Make That May Cost Them a Year’s Salary

    Every day thousands of Canadians make a mistake that will ultimately cost many of them tens, and in some cases, hundreds of thousands of dollars.  The mistake is to accept an offer of employment without appreciating that their employers will have the right to terminate their employment for any reason by providing a severance package that is far below what they may otherwise be entitled to. It can cost an employee well over a year’s salary if the employee has signed an employment contract that has removed the right to reasonable notice of dismissal.  To give an example, in Ontario an older, long service employee who is employed by a small employer might be entitled to a severance package representing up to 24 months compensation and benefits.  However, that same employee would only be entitled to 8 weeks’ notice of dismissal if he or she had signed an employment contract that only required the employer to provide the minimum notice required by law.  If that employee’s annual compensation was a $75,000 per year the potential financial loss he or she may suffer if dismissed would be approximately $184,000. Even someone who has only been employed for a few years can suffer a significant loss if their employment contract contains a termination clause.  It would not be unusual for an average employee who is dismissed after being employed for 2 years to be legally entitled to severance package representing 3 to 6 months’ notice.  However, that same employee may only be entitled to[Read More]

    Short Service, Long Notice Period

    Here is another recent example of a relatively short service employee being awarded a significant reasonable notice period. In Joe Felice v Cardinal Health Canada Inc. 2014 ONSC 1190 the plaintiff was 52 years old and employed as a senior executive (Vice President of Operations and Information Technology). He earned an annual salary of $130,000 and participated in an executive incentive plan and executive benefits plan. He was terminated without cause after only 19 months of employment. Justice Pollak awarded the plaintiff 12 months reasonable notice. The decision can be found on WestlawNext Canada (registration required). It is not currently available on Canlii or Quicklaw.[Read More]

    Employer's Systemic Wrongdoing = Risk of Greater Punitive Damage Award

    A small minority of employers play hardball with their employees.  Tactics can include threatening and bullying existing employees; fabricating allegations of cause to avoid having to provide reasonable notice of dismissal; misleading employees about their post termination obligations; and employing bad faith litigation tactics against those few employees who challenge their actions.  These employers often rely on their superior financial position to intimidate most, if not all, of the effected employees. Employers who follow this strategy do so at their own risk. The law is now clear that a former employee can base a claim for an increased punitive damage award on their employer’s systemic bad faith policies or practices in the manner in which it treats its employees.  The litigation process will not only be focused on the events that directly impacted the plaintiff but also on how the employer treated other employees. The resulting punitive damage award may be substantial. A claim for an increased punitive damage award based on systemic wrongdoing may strike some lawyers as dubious on the basis that a plaintiff should not be able to claim damages for the harm done to others.  However, in Whiten v. Pilot Insurance Co., 2002 SCC 18, an insurance decision, the Supreme Court of Canada held in obiter, at para. 120, that an increased punitive damages may be awarded as a deterrent in situations the defendant has had a practice using it superior bargaining power to exploit vulnerable individuals.  Justice Binnie wrote: Deterrence is an important justification for punitive damages.  It[Read More]

    More Than Fresh Consideration Required to Support New Termination Clause

    It is now common for employers to present offers of employment that contain termination clauses that remove the employees' right to reasonable notice of dismissal. These clauses are popular with employers because they significantly reduce the cost of dismissal. A termination clause will be enforced by a court as long as it provides at least the minimum notice and severance provisions required by the Ontario Employment Standards Act 2000. Inserting a termination clause into an existing employee’s contract is much more difficult. It is well established that this type of substantial change to the employment contract requires new consideration. A court will not view continued employment as consideration except in exceptional circumstances. Therefore, the employer must ensure that it provides the employee with a promotion, bonus or something else of value at the time the employee signs the new employment contract. Providing new consideration is not, however, sufficient to ensure that a court will enforce a new termination clause. The employer must also be prepared to lead evidence that the employee was aware that he or she was giving up the right to reasonable notice. This requirement was established by the Ontario Court of Appeal in Braiden v. La-Z-Boy Canada Limited 2008 ONCA 464. Gillese J., writing for the Court, set out a three requirements that, at a minimum, the employer must prove before a court will enforce a new termination clause. At paragraph 61 Gillese J. wrote: Nothing in these comments is intended to suggest that it would not have been possible[Read More]

    Employers Lose a Tool from the Tool Box When Negotiating With Constructively Dismissed Employees

    The Supreme Court of Canada held in Evans v. Teamsters Local Union No. 31, 2008 SCC 20 that an employee who has been constructively dismissed may be obliged to return to work for his or her former employer in order to mitigate their damages.  The Court stated that there was no difference between asking a dismissed employee to return to work in order to mitigate his or her damages and providing the employee with working notice of dismissal.  This is because there is no reason to distinguish between a constructive dismissal and a wrongful dismissal when evaluating the duty to mitigate since both types of dismissals are the result of the employer terminating the employment contract without cause. Employers have relied on Evans as leverage when negotiating settlement packages with employees who claim they were constructively dismissed.  In these negotiations an employer will typically take the position that: (i) the employee was not constructively dismissed, and (ii) even if the employee was constructively dismissed, applying Evans, the employee should have remained with the employer to mitigate his or her damages.  Having failed to mitigate his or her damages, the former employee should be prepared to accept a lower settlement package. The Ontario Court of Appeal recently clipped the wings of any employer intending to rely on Evans as leverage when negotiating severance packages with a constructive dismissed employee.  In Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA 177 at para. 20 the Court held if the employer intends to trigger the form of[Read More]

    Avoid These Common Mistakes When Terminating Employees

    I represent both employers and employees as legal counsel. Let me take a moment to use that experience to provide an insight into the mistakes that employers commonly make when terminating an employee’s employment. 1) Relying on a Void Termination Clause By far the most common mistake that employers make is also amongst the most costly. It is a mistake that is made long before the employee is dismissed. The employer has the employee sign an employment contract that contains a termination clause that will not be enforced by a court. As a result, the employee will be entitled to reasonable notice of dismissal which, in most cases, will result in the employer providing a severance package that is far greater than what the employee would have be entitled if the termination clause was actually enforceable. The number of employers who provide their employees with employment contracts containing void termination clauses is amazing. I would estimate in Ontario that 30% of the termination clauses in employment contracts are void. This includes employment contracts relied upon by large corporations with thousands of employees. The problem is so widespread that employment lawyers who represent employees have become experts at quickly spotting flawed termination clauses. I do it almost every day. Employers should have their existing employment contracts reviewed by experienced counsel to ensure that the terms in the contract will actually be enforced by a court. It is not an expensive and the potential savings are massive. Be aware, however, that if an employment contract contains a void[Read More]

    Canadian Courts Speak Different Languages When Interpreting Stock Option Agreements

    When an employer terminates an employee by providing the employee with pay in lieu of notice, rather than working notice, the employer becomes liable to pay the employee damages that place the employee in the position that he or she would have been had the employer provided the employee with working notice of dismissal. An employee who has been dismissed without being provided with working notice has been wrongfully dismissed.  A wrongful dismissal is considered to be an “unlawful” dismissal because it is a breach of contract. An employer may limit the damages it is required to pay a dismissed employee upon dismissal by inserting language into the employment contract that limits the employee’s entitlement to damages upon termination. However, the courts will interpret the language used in any limitation clause in favour of the employee and will only limit the employee's common law rights if the limiting language used is clear and unambiguous. The courts do so because the courts are reluctant to allow the employer to benefit from its wrongdoing (i.e. the wrongful dismissal). In this regard, a court will presume that the language used in a termination clause references a lawful termination (i.e. a dismissal in which the employee has been provided with working notice) unless the language clearly provides for a different interpretation. The issue regarding what type of language is required to limit an employee’s entitlement upon termination is significant in Canada because many employers compensate their employees by providing the employees with stock options and bonuses that[Read More]

    Workplace Sexual Harassment: A Review

    The media attention focused on Jian Gomeshi and the allegations of sexual harassment has brought the issue of sexual harassment and the workplace to the forefront of public discussion. It is therefore an appropriate time to summarize the law of workplace sexual harassment. Workplace sexual harassment is an abuse of sexual and economic power that attacks the dignity of the victim as an employee and a human being. It is not tolerated in the workplace. While, generally, employers have to overcome a very high bar to successfully dismiss an employee for cause that bar is lowered if an employee has committed acts of sexual harassment. Sexual harassment in the workplace falls along a continuum. It can range from non-consensual physical contact that rises to the level of a criminal offence to less serious forms of harassment that would include off colour jokes and suggestive words and gestures. Serious acts of sexual harassment will likely justify the immediate dismissal of the offender for cause. Less serious forms of harassment will likely require that the offending employee be warned as part of a progressive disciplinary process. If the sexual harassment continues, then summarily dismissing the employee may be appropriate. The courts and human rights tribunals are very sensitive to the power imbalance that exists between senior employees who engage in sexual harassment and their victims. As a result, supervisors and managers are held to a higher standard. The Ontario Court of Appeal has stated that “when a manager or other senior employee engages in serious[Read More]

    Poisoned Work Environment Defined

    The Ontario Court of Appeal has clarified the circumstances when a work environment will be found to be poisoned thereby allowing an employee to claim that he or she has been constructively dismissed.  In General Motors of Canada Limited v. Johnson, 2013 ONCA 502 the Court overturned the decision of the trial judge who had awarded Johnson $160,000 in damages.  Johnson, who is black, claimed that the work environment at GM had been poisoned by racisms and, as a result, he had been constructively dismissed.   The statements made by the Court in reaching its decision provide importance guidance to employers confronted with allegations of a poisoned work environment.  The Court began by recognizing that an allegation of a poisoned work environment can have serious implications for all involved.  The Court wrote: An allegation of discriminatory treatment in the workplace due to racism is a serious claim that implicates the reputational and employment interests of the claimant, as well as those of the alleged perpetrators.  It can also affect the dignity, self-worth and health of both the alleged victim and those accused of racist conduct.  An allegation of this type can reverberate for many years after the incident or incidents in question, with potentially long-term consequences for all concerned.  No less serious are judicial findings of racially-motivated conduct in the workplace and a poisoned work environment due to racism.  Judicial consideration of an allegation of constructive dismissal based on alleged racism in the workplace requires careful scrutiny of and balanced attention to all the evidence[Read More]