Firing for Cause, but Hedging Bets

In light of the Oosterbosch case hitting the media again (which I discussed to some extent in this post), this time on the Star's Moneyville blog, another comment on it seems appropriate.

First, though, some background.

It has long been the law in Ontario that an employer who provides any amount of pay in lieu of notice of termination is blocked from later arguing that the termination was for just cause.

In 1964, in a decision upheld by the Court of Appeal (in Tracey v. Swansea Construction Co. Ltd., [1965] 1 O.R. 203), Justice Thompson held as follows:

The simple position appears to me to be this. The defendant desired to dismiss the plaintiff. If there was misconduct or default sufficient to justify discharge it had one of two courses open to it. It could have summarily dismissed for cause or it could have decided to overlook, waive or condone the misconduct and terminate upon notice, or payment in lieu of notice, in accordance with the provision of the contract for termination implied by law. It could not do both, for one would operate as a repudiation of the contract for a breach thereof, and the other, conversely, would operate as an affirmation of the contract and the adoption of its provisions for termination. The fact that the defendant was in error as to the length of, or sufficiency of, the notice given could in no way alter the effect of its intention as expressed by its conduct.

The legal jargon aside, the practical effect is that an employer who says "Yeah, there's misconduct, but it'll be easier to make this go away if we put money on the table" will not generally be able to retract that position if the employee isn't happy with 'a bit' of money.

Considering that (a) many employers don't realize that employees might have entitlements in excess of the statutory minimums; (b) the threshold for just cause is often very high; (c) employers can get hit with moral damages for alleging cause improperly and/or failing to promptly pay the statutory minimums; and (d) the doctrine of 'near cause' - reduced notice periods due to misconduct - has been thoroughly rejected in Canada (though there is still some judicial murmuring from respected sources otherwise), this Swansea doctrine put employers in a very difficult position at the point of termination. There were a lot of reasons to pay the statutory notice except in the clearest cases of just cause, and doing so meant they'd be on the hook for the whole reasonable notice cost.

But now we have the Oosterbosch case which, if it holds up, seems to undermine Swansea. Recall in Oosterbosch that we have an employee who was found to be overly careless justifying summary dismissal, but that the misconduct wasn't wilful so as to disentitle him to the $25,000 in statutory minimums. It seems pretty employee-friendly, but when you turn it around you realize that employers can now use the Oosterbosch decision as a precedent for the proposition that there is nothing inconsistent with terminating for just cause and still having paid statutory minimums. Directly contradicts Swansea, and could end the doctrine that has given employees a great deal of bargaining power for nearly fifty years.

This turnabout isn't uncommon in employment law. Take, for example, the constructive dismissal doctrine that says that, under some circumstances, a constructively dismissed employee might reasonably be expected to stay in the job to mitigate his or her losses (see, for example, Mifsud). Seems pretty employer-friendly, aye? Enter Russo v. Kerr, in which an employee took a significant pay cut, and successfully sued to be topped up through the reasonable notice period while still working for the employer.

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This blog is not intended to, and does not, provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Mandatory Mandatory Retirement for Firefighters

A recent story ran in the Toronto Sun: Province forcing firefighters to retire at 60.

In a nutshell, most fire services across the Province already have mandatory retirement for firefighters engaged in fire suppression duties. Usually, the mandatory retirement age is 60, though it can vary.

Up until a few years ago, Ontario's Human Rights Code did not protect people over 65 from discrimination based on age, so mandatory retirement didn't need to be justified at 65. However, that limit has been removed, and since then mandatory retirement has been a hot issue. The Human Rights Tribunal has considered mandatory retirement for firefighters on a few occasions. There was a significant decision in 2008 in the Espey v. London (City) case, essentially finding that the mandatory retirement provisions were justified on the basis of increased risk of heart disease. The decision was followed in Nearing v. Toronto (City) in 2010.

That doesn't mean that it's a closed question, however. In the Espey case, the door was left open for the prospect that, particularly given advancing medical testing technology, it would likely be reasonable in the foreseeable future to implement a scheme involving individualized testing, or for individuals to seek individual accommodation providing evidence that they personally didn't have a high risk of problems associated with heart disease.

This conclusion is further advanced by a discussion paper released by the Ontario Association of Fire Chiefs at around the same time as the Espey decision, entitled Managing the End of Mandatory Retirement in the Fire Service. Note the overall conclusions beginning at page 42 of the paper:

Seven other provincial and territorial jurisdictions in Canada do not have
a mandatory retirement age. None of them reported a problem with
firefighters staying active past 60 years of age.

Mandatory physical fitness training is recommended, and the report goes on to note:

Appropriate BFOR tests for measuring the physical abilities of
firefighters, at various ages, to perform satisfactorily in the tasks of
suppression, search and rescue do exist and are available for use in
Ontario.

In other words, the Espey case is not a perpetually bullet-proof endorsement of a mandatory retirement age for firefighters.

Also of interest in this debate is a recent decision released by the Federal Court involving mandatory retirement for pilots, in Air Canada Pilots Association v. Kelly, where the Court rejected mandatory retirement under the circumstances.

The theory I've heard, which seems sensible, is that the municipalities don't care about the mandatory retirement age. By the time firefighters reach 60, they are at least Captains, not carrying out extensive heavy physical duties. However, a mandatory retirement age of 60 allows for more upward movement of younger firefighters, which makes it attractive to the Unions. But the relationship between Unions and firefighters is excluded from the jurisdiction of the Ontario Labour Relations Board, meaning that the usual recourse a person might have against unfair treatment by the union doesn't exist for firefighters.

With the Espey case being potentially open to challenge, it seems strange that the Ontario legislature is looking to implement legislation which requires all fire services to have a mandatory retirement age. Such a law will likely have to withstand some close Charter scrutiny.

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This blog is not intended to, and does not, provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

A Word on Finality

In most of my recent posts, I've commented on recent decisions from lower courts or tribunals, which may or may not be subject to appeal or judicial review.

In my recent post discussing Oosterbosch v. FAG Aerospace Inc., for example, I noted that I am watching for an appeal. If the Courts continue to recognize the distinction between common law "just cause" and wilful misconduct within the meaning of the Employment Standards Act, 2000, there will be several other major consequences on the law of wrongful dismissal. (For example, there is a doctrine dating back to a 1965 Ontario Court of Appeal decision, Tracey v. Swansea Construction Co. Ltd., which holds that an employer cannot terminate on minimal notice and then later take the position that the termination was for "just cause". This has had a lasting impact on employer practices in termination and on wrongful dismissal law in general.) Yet, while employment lawyers cannot ignore the Oosterbosch decision, it is possible that it will be appealed to the Ontario Court of Appeal, or that subsequent Superior Court decisions could hold that it was wrongly decided.

Similarly, my commentary on Brito v. Canac Kitchens noted that Justice Echlin is highly respected in the employment law arena, yet his award of what appear to be punitive damages for paying only the statutory minimum entitlements is novel, and probably in conflict with existing jurisprudence on punitive damages. It may be that this is a new evolution in the law which will hold. Or it may be that this decision will be overturned by future decisions.

Or my most recent post, in which I was critical of a dismissal of a Human Rights Application as out of time in the Deane v. Ford Motor case. The Human Rights Tribunal has reconsideration mechanisms, and is subject to judicial review at the Divisional Court.

In law, we tend to look at judicial decisions as having a certain amount of finality in most cases. Occasionally, we know when an issue is big enough that it will be appealed, but most decisions are not, or at least are settled before the appeal is decided. So the initial level decisions are important.

The structure of our Courts in Ontario - as far as labour and employment law is concerned - goes something like this: We have the Superior Court of Justice, which is the normal 'civil' Court. In general, if you're suing somebody, that's where you go. But the SCJ has different branches, including the Small Claims Court and the Divisional Court.

The Small Claims Court, now with a jurisdiction of $25,000.00, uses Deputy Judges - practicing lawyers brought in to decide cases, paid on a per diem basis. The Divisional Court is largely an appellate level Court. It hears appeals from the Small Claims Court and from some other Superior Court matters. In other words, if you get a decision at the Small Claims Court, and you want to appeal, it goes to the Divisional Court.

Then there's the Court of Appeal, with is Ontario's highest Court, hearing appeals from some Superior Court decisions and also from the Divisional Court. So if you've been to the Divisional Court, and you want to appeal, you go to the Ontario Court of Appeal.

The only Canadian Court above the Ontario Court of Appeal is the Supreme Court of Canada. Any civil appeals must seek 'leave' of the Court to appeal. So if you're not happy with what the Ontario Court of Appeal held, you have to ask the SCC to hear your case. They don't hear many.

But not all employment or labour matters go to Court at the first instance. We have other adjudicative processes, including arbitration (which is used for most disputes involving unions) and administrative tribunals created by statutes (the HRTO, OLRB, WSIB/WSIAT). If somebody isn't happy with how these processes have resolved, and have exhausted their procedural remedies under the statutes creating the processes, then they can seek "judicial review" of the decision at the Divisional Court. This sounds a lot like an appeal, and it has its similarities, but the important thing to note is that the Divisional Court tends to grant a lot of deference to the administrative tribunals.

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This blog is not intended to, and does not, provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Justice Delayed

The Human Rights Tribunal of Ontario is designed to be a relatively short and cost-effective method of resolving disputes under the Human Rights Code. The process was essentially redesigned in 2008 to remove the Commission from its "gatekeeper" role and speed up the process of dispute resolution.

Whereas administrative tribunals are frequently reluctant to dismiss proceedings on procedural or technical grounds without hearing the merits, bending over backwards to ensure a just disposition on the merits of any case, the HRTO has taken a fairly hardline approach to delay. Lawyers are often taken by surprise by the HRTO's reluctance to grant adjournments on consent, and missing the deadline to file the Application in the first place is usually fatal to the Application, unless there's a good reason for it. (For example, if you tell your employer that you're pregnant and he immediately fires you, you usually have one year to bring an Application on that basis. If you bring the Application a year and a day later, you'd best have a good reason for it.)

This might be explained by the fact that - while there's no arguing that the old human rights system was broken - there was value in the Commission's gatekeeper role. The Tribunal is being inundated with Applications of questionable merits being filed by people who often don't take the process itself very seriously.

The recent decision in Deane v. Ford Motor is the first decision I'm aware of in which the same hard line was applied to a circumstance in which the Application alleged breach of a settlement agreement. The timeframe for that is only six months - if you don't bring the Application within six months of the last contravention, you're probably out-of-luck. The Applicant brought the Application 9 months after discovering the contravention, following unsuccessful negotiations with the employer. The Tribunal dismissed the Application because it was brought too late.

I am somewhat concerned about this decision. Six months isn't a lot of time in legal disputes, particularly when you're dealing with a file in which a settlement was reached. Quite often, a breached settlement isn't a matter of disregarding the entire agreement, but a matter of disagreement over the requirements of some of its terms. Minor points in terms of the overall settlement, over which nobody really wants to litigate if it can be avoided. And with some employers (and lawyers) tending to drag their feet, months can go by pretty quickly.

With many Applicants being self-represented, foot-dragging might actually become a winning strategy when protracted negotiations are not an excuse for a delay of more than six months.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Wrongful Dismissal Damages for Contractors

Usually, when we think about wrongful dismissal, we're talking about employees. You can't fire someone not in your employ, after all.

Independent contractors are usually retained for particular tasks, then their engagement ends on completion of the task, so there's really no such thing as wrongful dismissal in that context, right?

But, as is common in law, there are grey areas.

The employee/independent contractor distinction is the subject of a lot of jurisprudence, and there are fairly well-established tests for the distinction. Putting in the contract that the worker is an independent contractor is only one factor. When the worker doesn't control his or her hours of work, doesn't own his or her tools, doesn't control the timing and manner of completion of the task, and/or doesn't bear a risk of loss or chance of profit in the arrangement, it is more likely that the worker will be found to be an employee.

There is also an intermediary category, however, often referred to as a "dependent contractor". This is a contractor who doesn't meet the definition of an employee, but who relies so heavily upon one client that the relationship is akin to an employment relationship. Recently, in the Sarnelli v. Effort Trust Company case, a locksmith contractor was blacklisted for no apparent reason by a mortgage company. Effort Trust had made up 2/3 of the locksmith's total billings. (You might ask why a mortgage company would so extensively need a locksmith: Unfortunately, mortgagees occasionally have to take possession of the mortgaged property.)

The Court found that the contractor was a dependent contractor, and awarded an estimate of what profits he might have made through a six month notice period, being $18,900.

It is, however, a small victory for the plaintiff. The relationship was terminated was in August 2005; the judgment was in April 2011. Devastated by the loss of his major client, he basically gave up on the business and closed it down in 2006.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Canac Kitchens Takes Another Hit in Court

Over the past several years, Kohler Ltd., also known as Canac Kitchens, has shown up more than a few times in employment law jurisprudence, defending against various wrongful dismissal suits. Many of these cases are notable for their own reasons.

(One particularly interesting example was Correia v. Canac Kitchens, 2008 ONCA 506 (CanLII), an Ontario Court of Appeal decision involving a fact pattern in which Canac hired a private investigator to look into a series of thefts. The investigator determined that a Portuguese fellow named Joe in his mid 20s was a suspect, and later submitted a report accordingly implicating Joao Correiro. Canac acted on the report, called the police and terminated the employee...except somehow along the line, they'd gotten their wires crossed, and ended up accusing and firing 62-year-old Joao Correia instead of Joao Correiro.)

One recent case was the subject of a column in the Toronto Sun this past week: The Brito v. Canac Kitchens, 2011 ONSC 1011 (CanLII) decision involved Mr. Olguin, who was terminated in 2003 after almost 24 years of service. He was paid his statutory minimum termination and severance payment of almost 32 weeks, and nothing further. He found a new job two weeks later, albeit at a lower rate of pay. The reasonable notice period would have been 22 months.

The problem, it turns out, is that Mr. Olguin's disability insurance was terminated, and he began cancer treatments 15 months after his termination. It isn't uncommon for employers to insist on terminating disability benefits at the end of the statutory notice period, even if they've negotiated an additional package. But there's risk in doing so.

It is extremely common for employers to pay only the statutory minimum at first instance, and then negotiate and/or litigate for a determination as to what additional entitlements might exist, and get a release in exchange for any additional payment in settlement.

Justice Echlin, a well-respected jurist in the employment law field, characterized the recognition of only the statutory minimum as a 'hardball tactic', and awarded $15,000.00 in damages relating to Canac's "cavalier, harsh, malicious, reckless, outrageous and high-handed treatment" of the plaintiff. After all, it never took - nor could it reasonably have taken - the position that the appropriate notice period was only 32 weeks. At trial, Canac argued for a notice period of 16-19 months.

That, in and of itself, could shake the ground for employers. A substantive damages award for only meeting statutory obligations. Justice Echlin is telling employers that they must make a payment towards the employee's reasonable notice unilaterally, without requiring a release in exchange.

But the bigger hit is that the Court ordered Canac to compensate the plaintiff for what he would have received from his disability coverage - to the tune of nearly $200,000. Employers be warned: Terminate disability coverage at your own peril.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Enforcing a Non-Competition Clause

A recent decision from the Ontario Superior Court of Justice, Dent Wizard v. Catastrophe Solutions, could have important implications for non-competition agreements.

Robert Pietrantonio had been the head of Dent Wizard Canada, a paintless dent repair (PDR) company, the Canadian franchisee of Dent Wizard International. He sold the franchise back to DWI and became an employee, then later (in 2007) signed a termination agreement with a non-competition clause.

Following a major hailstorm in Calgary in 2010, DWI failed to take full advantage of the business opportunity presented thereby. Dent Wizard executives and technicians went to Pietrantonio, who at that point was enjoying his retirement on the links in Florida. Pietrantonio started up a new company, Catastrophe Solutions, primarily to capitalize on the Calgary storm.

By the time DWI came around and decided to send technicians to Calgary three weeks after the storm, it had already lost its major contracts with various insurers. Catastrophe Solutions, on the other hand, made millions.

But what about the non-competition clause?

Following the Shafron case, his non-comp was seen as being part of an employment contract (as distinct from a commercial sale contract), which calls for closer Court scrutiny of the reasonableness of its terms.

The issues in this case are complex and myriad, but while the Court's finding that the restrictive covenants are unenforceable is, perhaps, uncontroversial, some of the Court's alternative findings (i.e. if the covenants had been enforceable) are more interesting:

Dent Wizard was leaving its customers high and dry, so to speak, and was exposed to possible litigation for having done so. It was content to allow Catastrophe Solutions to step in and pick up the slack, and therefore was estopped from later suing Catastrophe Solutions. And further, the reason the customers refused to come back to Dent Wizard was because it had left them high and dry (and not because Catastrophe Solutions had come along), so Dent Wizard was the author of its own misfortune and suffered no damages through Pietrantonio's actions.

[189] Notwithstanding that DWC effectively abandoned the business opportunity of serving the PDR needs of Aviva and Intact following the July 12, 2010 hailstorm as a result of DWI’s withdrawal decision, Maracle imposes a significant burden on the respondents to establish promissory estoppel. Certainly McNamara did not give any express assurance to Pietrantonio which was intended to affect the legal relationship embodied in the Termination Agreement. Pietrantonio, through Morrison, floated the trial balloon of a royalty agreement, and it was shot down. Given that response by DWI’s President, I do not think that Pietrantonio could reasonably take from the reading of the Intact and Aviva Confirmation Emails to him by Morrison that DWI was providing him with an unambiguous assurance that it would not enforce the restrictive covenants; DWI was hedging its bets. I think Pietrantonio’s approach throughout was to the effect, “If you are not going to tell me to stop, then I’ll go ahead”. Pietrantonio elected not to clarify matters directly with McNamara, and by proceeding with CSI he took on the risk that he might be skating on very thin ice which could crack at any moment.

[190] Yet, at the critical times in July when CSI was moving to meet Aviva and Intact’s business needs with, as I have found, the knowledge of the applicants, that ice did not crack. The applicants’ executives stood by silent, content I think, to allow CSI to mollify Aviva and Intact, thereby reducing the risk that either customer would sue DWC for leaving them high and dry in their time of need.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Different Standards of Misconduct Justifying Termination

Quite often, even those well-versed in employment law will speak of the standard of misconduct justifying termination as if it is one, uniform standard. It is easy to blur the distinction between "just cause" at common law (which would remove an entitlement to reasonable notice), misconduct justifying termination without notice under the Employment Standards Act, 2000, and misconduct which would render a person ineligible for EI benefits. The first distinction is between "just cause" and ESA misconduct - "wilful misconduct, disobedience or wilful neglect of duty".

Traditionally, the question on a wrongful dismissal action (where liability is in dispute) is whether or not there is "just cause", and the analysis ends there. But the Ontario Labour Relations Board has developed a line of jurisprudence suggesting that there is a difference in the two tests:

In addition to proving that the misconduct is serious, the employer must demonstrate, and this is the aspect of the standard which distinguishes it from ‘just cause’, that the conduct complained of is ‘wilful’.

Similarly, a recent case from the Superior Court of Justice finds the same distinction: In Oosterbosch v. FAG Aerospace Inc., Justice Haines held that there was just cause, but the threshold for ESA misconduct was not met, so the employee was awarded statutory notice and severance:

[19] A person is reckless when he engages in conduct without regard for the outcome or consequences. Notwithstanding the number of infractions recorded I do not see that the conduct of the plaintiff rises to that level. He was undoubtedly careless and the persistence of that carelessness justified his dismissal. I would not, however, characterize his offending behaviour as “wilful misconduct, disobedience or wilful neglect of duty” that would disentitle him to receipt of termination and severance payments under the provisions of the Employment Standards Act, 2000.

I'm watching to see if there is an appeal.

Then there is the Employment Insurance Act, which disqualifies claimants who lost employment "because of their misconduct". Does this line up with common law "just cause"? The answer to that would appear to be No. In 1999, the Ontario Court of Appeal released their decision in Minott v. O'Shanter, a wrongful dismissal case.

By way of background, the employee had applied for EI benefits and been refused on the basis that his termination resulted from misconduct. He appealed the decision to the Board of Referees and the employer did not participate in the process, but he lost the appeal anyways. The employer then argued that the employee was estopped (barred) from re-litigating the issue in a wrongful dismissal action.

The Court of Appeal held that there were two central problems with this argument. First, because the employer didn't participate in the process before the Board of Referees, the issue hadn't been decided as between the employer and the employee. Secondly, because the Board of Referees hadn't made specific evidentiary findings, it was difficult to say that the issue being argued was the same.

The Court of Appeal also raised concerns in that the EI adjudication process is much more summary with less money at stake than in a Court proceeding, and there seemed to be a fairness concern if a finding in a quick low-stakes EI proceedings would later bind the parties in a longer higher-stakes proceeding with greater procedural protections.

Contrast this to Korenberg v. Global Wood Concepts, a 2005 judgment by Justice Harvison Young (former Queen's Law dean): In this case, the employer had appealed the EI Umpire's decision to the Board of Referees and lost, with the Board of Referees concluding that there was no misconduct. The employee then sued in wrongful dismissal, and the employer tried to allege just cause. The Court distinguished Minott on the basis that the employer was arguing the same misconduct that the Board of Referees found hadn't occurred. The employer had participated in the EI process in this instance, and thus was simply trying to relitigate the issue of the misconduct, and was estopped from doing so.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.