Archive for the ‘Termination’ Category

Employees Beware: Reasonable Notice is a Double-edged Sword

March 23rd, 2012

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.

Perils of taking on a second job

February 8th, 2012

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.

The Declining Role of “Character of Employment”….

November 7th, 2011

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.

Wrongful Dismissal or Frustration of Contract?

October 4th, 2011

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.

The Importance of Warnings

September 26th, 2011

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!

What is an Adequate Notice of Employment Termination

August 29th, 2011

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.

On What Grounds can an Employee be Terminated?

August 24th, 2011

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.