Did you know that under Ontario’s Employment Standards Act, a purchaser of a business will be deemed to be a successor employer, at least for the purpose of calculating reasonable notice of termination, if it hires an employee who worked for the company being sold within 13 weeks of the earlier of the employee’s last day of employment with the previous employer and the date of the sale – even if the employer was terminated with notice or pay in lieu of notice before the business was sold! Moreover, the new business would not get credit for any termination payments received by the employer from the previous business. That means, the employer is entitled to notice or pay in lieu of notice from the new business having regard to the day he or she started employment with the original business.
Archive for the ‘Employment Law’ Category
A recent Ontario Court of Appeal decision has endorsed the position of the Ontario Superior Court of Justice, that employees may owe their employee a significant amount of notice when planning to leave their employment. In the case of GasTOPS Ltd. v. Forsyth, four former employees of a company left their employment to start their own, competing business. Each of the four former employees provided the employer with two weeks notice, often considered to be a reasonable amount of time to offer when resigning from a job. However, given the importance of the roles that these employees played in the company they left, the trial judge held that they were integral to the direction and guidance of the company.
In upholding the trial judge’s decision, the Court of Appeal has reinforced the position that employees who are aware of their importance to the operations of their employer, and violate their responsibility to the employer by failing to provide adequate notice of resignation, may be financially liable to the resulting damage caused to their employer. In the GasTOPS case, the former employees, and their newly formed company, were found liable for damages to their former employer in the amount of over 12 million dollars, calculated as the amount of profits earned by the former employees through their newly formed company over a 10 year period. As well, an additional 3 million dollars in pre-judgment interest, and over 4 million dollars in legal costs, were awarded to the employer.
With regards to notice period, the trial judge noted the following:
“Failure of an employee to provide adequate notice will entitle the employer to an award of damages. Generally, reasonable notice is meant to give the employer time to hire and train a replacement. In determining the time required to hire and train a new employee, one must look at the nature of the employee’s position and the area of work that the employer was competing in.”
The Court of Appeal upheld the trial judge’s finding that the former employees had owed approximately 10 months notice to their former employer, given their roles and time spent with the company.
While many people are forced to work multiple jobs in this tough economy, employees should ensure that they properly consult with their primary employer before taking on any other unrelated work. The recent case of a bank employee, Marilyn Patterson, who worked as a real estate agent part time, serves as a warning for employees contemplating a similar move.
Ms. Patterson had been employed with a bank for 12 years, when she received a real estate license and began working part time with a local realty office. The bank became aware of this arrangement, and requested that Ms. Patterson discontinue her real estate activity or look for a new opportunity within the bank (one where no conflict with her current duties and her real estate activities would exist). After she refused these requests, Ms. Patterson was terminated without notice. Though no other performance issues were claimed by the bank, the judge in Ms. Patterson’s wrongful dismissal suit was forced to dismiss the action. The bank had clearly outlined guidelines regarding secondary employment and conflicts of interest, to which Ms. Patterson had agreed to in her employment contract.
The bottom line is that, while not all secondary employment will be viewed as posing a conflict with one’s primary employment, employees considering such an arrangement should spend the time reviewing their company’s policy regarding conflicts of interest and exclusivity of employment. Employers are entitled to set reasonable standards, such as prohibiting bank employees (where access to mortgage authorization may exist) from working as realtors. In light of Ms. Patterson’s case, conflicts that are obvious are likely to be upheld by the courts.
When a terminated employee decides to sue their former employer for damages, an important factor (which is often neglected) on the part of the suing employee is their responsibility to mitigate their losses resulting from the termination. Without proper mitigation, or the necessary documentation of mitigation efforts, the former employee may be entitled to a significantly reduced damage award.
Mitigation entails that the employee has made reasonable efforts to find new employment. Such efforts can be demonstrated by documenting all online job searches, preparing an updated resume, and utilizing the services of an employment agency or search firm. It is important to note that the mitigating claimant does not need to necessarily accept any offer of employment that comes their way, but merely must prove that reasonable attempts were made.
The case of Leo Magnan, a nearly 30 year employee of Brandt Tractor in Alberta, provides a cautionary tale regarding the failure to mitigate damages resulting from an unlawful termination. Mr. Magnan was forced to retire, based on an unwritten company policy that demanded employees to step aside by age 65. Upon reaching 65 years of age, Mr. Magnan expressed his desire to remain employed, but the company refused, relying on the company policy that Mr. Magnan had consented to. Though Brandt Tractor eventually offered Mr. Magnan his job back, he refused the offer, and successfully sued the company based on constructive dismissal. Unfortunately, due to Mr. Magnan’s earlier indications that he would have accepted his forced retirement, and his failure to look for new work upon termination, the court only awarded him 3 months of income as a damage award, where he would have been entitled to a significantly larger notice period award, given his many years of service.
To summarize, despite the legitimacy of your claim for unlawful dismissal, if you cannot prove a financial loss by making reasonable efforts to find new employment, your damage award may be significantly reduced.
There are many examples of people who are employed in the workforce as “independent contractors”, such as independent sales agents, consultants, legal professionals, just to name a few. However, just because an employment contract states the employee is an “independent contractor/agent”, doesn’t necessarily mean that such an employee is “independent” for the purposes of employment rights. An “independent contractor” may in fact be a “dependant contractor”, or even a full-fledged employee, which changes their entitlements quite drastically.
In a 2007 Ontario Superior Court of Justice case, Slepenkova v. Ivanov, the employee, who was employed as an “independent contractor” real estate agent for a firm operating under a brokerage, was deemed to be an employee for the purposes of determining reasonable notice upon termination of employment. The plaintiff employee had signed multiple agreements over a 3 year period, agreeing to work for the defendant employer as an “independent contractor”. However, the plaintiff had also initially signed a general employment agreement with the real estate brokerage that employed her employer, which contradicted her subsequent agreements with the defendant employer.
In determining the issue of the nature of employment, the Trial Judge, considering the existing agreement between the plaintiff and the real estate brokerage, took note of the following factors:
- That the employer had substantial control over the employee;
- the employer owned and provided the majority of the tools the employee used in the course of her employment duties;
- the employee’s chance for profit was limited;
- the employer bore most of the risk of loss;
- the business was clearly the employer’s.
The above factors, all answered in the affirmative, clearly demonstrate that, regardless of the label given to an employee in an employment contract, employers cannot contract out of their obligation to provide reasonable notice upon termination, among other entitlements afforded to employees under statutes such as the Employment Standards Act, as well as the common law, merely by stating that an employee is an “independent contractor”.
Though employers are legally responsible to maintain a healthy and safe workplace, that responsibility must be weighed against an individual’s right to privacy regarding his or her medical conditions. As such, if an employer has a legitimate purpose tied to the employer- employee relationship, it may be justified in requesting medical information regarding an employee. That being said, the extent of the information to be divulged should be limited to the extent to which the employee can perform his or her job function, and not necessarily the nature of the illness or injury.
The Declining Role of “Character of Employment” in Determining the Notice Period
“Character of employment” is one of the four factors that the courts consider in determining the notice period when an employee is wrongfully dismissed (the other 3 are age, length of service, and length of time needed for the employee to find a new comparable job). Typically, an employee who worked in an executive, managerial or skilled position is entitled to a longer notice period than an employee whose job is clerical or administrative in nature. This is an example of how the courts have dealt with the “character of employment” factor. The assumption was that there are more higher level positions available than administrative jobs, which means that an employee seeking a new managerial job would typically take longer to find employment than a recently terminated administrative employee.
In Di Tomaso v. Crown Metal Packaging Canada LP, the Ontario Court of Appeal recently considered what the appropriate role of an employee’s “character of employment” should be in determining the notice period. In this case, the employee worked for 33 years as a mechanic and press maintainer, and admitted that this was an unskilled labourer position. At trial, he was awarded a 22 month notice period. Despite the employee’s many years of service, the employer argued for a reduced notice period on the basis of the “character of employment.”
In upholding the 22 month notice period, the Court of Appeal suggested that character of employment is “a factor of declining relative importance,” especially when an employer “attempts to use character of employment to say that low level unskilled employees deserve less notice because they have an easier time finding alternative employment.” It is a proposition that “cannot simply be taken for granted, particularly in today’s world.” In other words, we cannot simply assume that an employee seeking a new managerial job will take longer to find employment than a recently terminated administrative employee, and that the managerial employee should therefore be entitled to a longer notice period.
Do Human Rights Bodies Have Jurisdiction to Award Legal Costs to the Successful Party?
In legal proceedings that have been commenced in court, the party who is successful at trial is generally entitled to recover a portion of their legal costs from the opposing party.
The Supreme Court of Canada recently considered the question of whether a party who has succeeded at a hearing at the Canadian Human Rights Commission should also be awarded a percentage of their legal expenses, to be paid by the other side. More specifically, the court considered whether the provisions of the Canadian Human Rights Act which authorize the Tribunal to “compensate the victim for any expenses incurred as a result of the discriminatory practice” permit an award of legal costs.
The Supreme Court ultimately decided that the Tribunal had no authority to award legal costs, since “costs” are to be distinguished from “compensation” and “expenses.” The court further commented that the lower court decision, which would have permitted a costs award, made its decision based on what it thought was a beneficial policy outcome, rather than engaging in a proper legal analysis.
This decision will hopefully encourage the government to amend the Canadian Human Rights Act, and other provincial human rights legislation, to permit human rights bodies to award costs. This way, employees with valid human rights complaints will be encouraged to continue bringing them, and employers would be able to recover legal costs from employees who initiate frivolous human rights complaints.
If an employee is off work for an extended period of time due to illness or disability, is the employer entitled to terminate the employment contract? Or would this be considered a wrongful dismissal?
A contract is frustrated when it becomes incapable of being performed when new circumstances arise, by no fault of either party, that would turn the contract into something completely different than what was initially contemplated.
To avoid a wrongful dismissal claim, the employer must prove that the employee is no longer able to fulfill the basic obligations associated with the employment relationship for the foreseeable future.
In assessing whether an employment contract has been frustrated, the court will consider the following factors:
1) the terms of the contract;
2) how long the employment was likely to have lasted but for the illness;
3) the nature of the illness/injury;
4) how long the illness/injury had lasted and the prospects of recovery; and
5) the period of past employment.
If an employment contract is found to have been frustrated, the employer would have no common law obligations to the employee. However, the employer must still ensure that they comply with their obligations under the relevant employment standards legislation.
Employers beware! If you are considering terminating an employee for just cause (to avoid giving the employee a severance package), it is important to give verbal and written warnings, and to document all incidents. The employer should also not condone any inappropriate behaviour by the employee, such as perpetual lateness. In one case, an employee was late for work 57 times in about 5.5 months, but the court found that there was no just cause for the termination because the employer had condoned the behaviour!
Senior partner, Larry W. Keown is quoted in this article from the Ryerson Review of Journalism. Check it out!
If an employee has been terminated, and one reason for the termination relates to a prohibited ground of discrimination, such as ethnic origin, religion or gender, the employee would be entitled to additional compensation from the employer. The employee has the burden to establish a prima facie case of discrimination, on a balance of probabilities. If the employee is able to do so, the burden then shifts to the employer to prove, also on a balance of probabilities, that the reasons for termination were unrelated to any prohibited grounds of discrimination.
Direct evidence of discrimination is not required in order for an employee to be successful on this type of claim. The decision-maker is permitted to draw an inference that discrimination occurred based on the facts presented.
An employee who believes they have been subjected to a discriminatory termination from his or her employment has the option of commencing a claim in the civil courts or at the Human Rights Tribunal.
The Human Rights Tribunal has the authority to award a wide range of remedies to the individual whose human rights have been breached. Some of these remedies have included requiring the employer to write a letter of apology to the employee, and to require the employer to complete a session of training with a human rights lawyer.
There is no hard and fast rule as to what constitutes adequate notice of termination. In the absence of an employment contract dealing with termination, the courts look at employment statutes and cases to determine what is an appropriate amount of notice of termination for each individual. The courts take into consideration such things as: age, length of employment, duties, length of time it would reasonably take to find comparable employment.
An employer is entitled to terminate an employee for virtually any reason so long as the employer provides adequate notice, or pay in lieu of notice, of the termination and so long as the reason for the termination is not related to the employee’s race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, record of offences, marital status, same-sex-partnership status, family status or disability. If the termination is related to one of those grounds listed, than there has been a contravention of the Ontario Human Rights Code with respect to which a claim may be made to either a Judge of the Court or an arbitrator at the Human Rights Tribunal. The Courts are empowered to make monetary awards to a wronged employee. The Tribunal is empowered to make orders both requiring monetary compensation as well as reinstatement of employment.
