Bonuses and Active Employment

Back in September, I made this entry about the enforceability of a contractual or policy term which requires the employee to be "actively employed" as of a certain date to be eligible for a bonus.

For example, if the year's bonuses are announced and paid out in December, and I work the whole year until being dismissed at the end of November, and my notice period would carry me past the bonus date, but there's a term in my contract saying that I must be "actively employed" when the bonuses are announced in order to be eligible for a bonus...am I still entitled to the bonus?

The answer was "Sometimes".  It depends on the circumstances.  In Poole v. Whirlpool, which I discussed in that entry, the employee was not bound by the requirement for "active employment" because the company had inadvertently neglected to ensure that he was aware of it.

I went on to comment that I believe there is room for refinement of this doctrine in light of the requirements of the Employment Standards Act, and that such language should be unenforceable if it purports to deprive a dismissed employee of a bonus which is not "purely discretionary" though the vesting date may occur during the statutory minimum notice period.

More recently, the Superior Court decided the case of Sandhu v. Solutions 2 Go Inc., dealing with a motion for summary judgment on a similar issue, and moving a large step in the direction I proposed in my earlier post.

The Facts

Ms. Sandhu was employed by Solutions 2 Go from November 2005 until her dismissal on May 25, 2010.  The parties settled all issues except for her entitlement to participate in the company's profit-sharing plan in respect of the company's fiscal year which ended March 31, 2010.

The company had implemented this profit-sharing plan in 2006, and it entailed declaration of a total bonus amount, which was then divided up into 'full shares' and 'half shares', employees who had been there for the full fiscal year getting a full share and employees who had been there between six and twelve months of the fiscal year getting a half share.  (New employees, hired in the last six months of the fiscal year, would receive nothing.)

The bonus in respect of the 2010 fiscal year was declared and paid June 18, 2010, with a full share being slightly over $16,000.  Ms. Sandhu, in her employment, earned $13.50 per hour.  $16,000 would be pretty substantial for her.  But, having been dismissed 24 days earlier, she received nothing.

The company took the position that (a) it was a discretionary bonus and management was not under a contractual obligation to pay it at all (though it was acknowledged that, once the bonus was declared, its distribution was fixed), and (b) in any event it was only payable to people still actively employed.  While it had not been put in writing at first, the 'active employment' requirement never came to Sandhu's attention until a memo was posted to that effect in 2009.  (The Court also notes that the employer attempted to get all employees to sign a contract implementing that language in December 2010, but Ms. Sandhu didn't sign it.  That date is seven months after Ms. Sandhu's dismissal, so I'm not sure how it would even be relevant if the date's right.)

The Decision

The Court applied s.61 of the Employment Standards Act and found that, even if the employer's position were accepted regarding the preconditions for payment of the bonus, the fact that the bonus was paid within her statutory minimum notice period meant that she could not be deprived of it.  Describing the requirements on the employer through the notional statutory notice period, the Court noted that the employee must receive "what the employee would otherwise have been entitled to receive from the employer".

The Court goes on to note that this provision not only includes wages, "but also precludes an employer from altering any term or condition of employment which is of financial benefit to the employee during the statutory notice period".

The definition of 'discretionary' as it had been applied to the profit share was vague, and at its highest the discretion extended only to whether or not to announce a bonus and the aggregate amount thereof.  The Court therefore applied a simple but-for test:  Had Ms. Sandhu been given the notice contemplated in the Act, she would have been there on the date the bonus was declared and paid, and therefore entitled to receive it.

Thus, Ms. Sandhu was awarded the amount of the bonus.

My Thoughts:  Bonuses are often "Wages"

The Court's approach to s.61 of the Act is interesting, but there`s something missing.

The section guarantees payment of termination pay "in a lump sum equal to the amount the employee would have been entitled to receive under section 60".  Section 60 contemplates actual notice and sets out obligations on the employer through the notice period, including that the employer "shall not reduce the employee's wage rate or alter any other term or condition of employment", and pay the employee all the "wages" the employee is entitled to receive (and at minimum the amount the employee would receive in a "regular work week").  Both sections 60 and 61 require the employer to continue to make "whatever benefit plan contributions would be required to be made in order to maintain the benefits" of the employee through the notional notice period.

Nowhere is the phrase "financial benefit to the employee" used, and I'm not sure the Court was correct to interpret that into the section.

What is really interesting is that the Court doesn't seem to be interpreting the term "wages" as capturing this bonus, but nonetheless considers the bonus to be caught by the catch-all prohibiting the employer from altering "any other term or condition of employment".

Now here's what's missing:  At s.1(1) of the Act, there's a definition of wages, which is expansive and includes, among other things, "monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied", but specifically excludes "any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production, or efficiency."

Does this change the analysis?  It's arguable.  In statutory interpretation, when there are two possibly-conflicting provisions, one should generally look to the more specific (as opposed to more general) provision.

It's clear that, when a bonus is not "dependent on the discretion of the employer" and/or related in some way to hours, production, or efficiency, that bonus falls within the definition of "wages".  Thus, there is an argument to be made that bonuses should not fall within the scope of "any other term or condition of employment".

That being said, I also believe that the disposition of the case is correct; I doubt that the entitlement to participate in the declared bonus could fairly fall within the exclusion for purely discretionary bonuses.  The trial judge is very astute to the policy issues involved:

The logic for these provisions is obvious.  Otherwise, an employer could take advantage of an employee by terminating the employee immediately prior to a large payout and paying the employee just the wages portion during statutory notice period.  This could apply in many situations such as profit sharing, stock options, commissions, Christmas bonus and so on.

(NB:  Commissions would clearly fall within the statutory definition of wages.)

More Thoughts:  The actual length of the statutory notice period shouldn't matter

There's something else missing here, too:  The trial judge finds that enforcing the 'active employment' requirement would have a result which is inconsistent with the ESA, and appears to conclude that because the bonus was declared within the minimum notice period, she was entitled.  This isn't going far enough.  A contractual provision which is not consistent with the ESA is void ab initio, regardless of whether or not its application in the specific case would yield a result which is permissible under the ESA.

That's the argument I was making in my earlier entry, at least, and it is much less hypothetical now.  This case is a precedent for the basis of that argument, that an "active employment" clause is subject to scrutiny under the framework of the ESA.

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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. 

If You Can't Say Anything Nice...

Your mother always told you, "If you can't say anything nice, don't say anything at all."  That's a good life lesson for living in a civil society and getting along with others.

It's also a good way to avoid getting sued for defamation.

Defamation law is something that occasionally overlaps with employment law.  I have had cases (on both sides of the fence) where the employer has been accused of defaming a departing employee to other potential employers and/or to industry clients.  That being said, the extent of the paranoia many employers have about giving references is a little extreme.  The majority of such cases involve scenarios where the employer (through one of its agents) goes out of its way to communicate the defamatory message to third parties.  Sometimes it's just a rogue supervisor acting out of spite; sometimes it is an employer acting in a measured manner to control its own liabilities for the employee's misconduct, aware that the matter may need to be litigated and deciding to proceed anyways.

Though it's an oversimplification of the law, I think what most people need to remember is "If you can't say anything nice, or at least provably true, don't say anything at all."  When you get into a situation where you have a reason to say something negative about someone else, it's prudent to get legal advice on the point.  Far too many defamation actions arise from foolish casual tongue-wagging.

Proving defamation is usually simple.  Defamatory torts essentially require only proof that a defamatory statement was made by the defendant about the plaintiff.  In some types of slander, you need to be able to prove damages before the cause of action arises.  And there are a lot of technical requirements, like a notice requirement for libel in a newspaper or a broadcast.  (In essence, if you don't complain about it within six weeks, with certain specific technical requirements to the complaint, your action is barred.)

However, there are a number of substantive defences to defamatory torts, which can be very complicated and technical, and for which the onus is on the defendant.  Think about it this way:  As the plaintiff, all I have to establish is that it is more likely than not that you said something defamatory about me.  Then the ball is in your court, and you can lead a number of defences to it, which you have to prove on a balance of probabilities.

Defences to Defamation Torts

The simplest defence, in theory, is the defence of Truth, or justification.  If you can prove that what you said about me is true, then no matter how nasty or malicious it may be to spread it about, I can't sue you for defamation.  (Of course, if the information you're spreading is of a private or confidential nature, there may be other actions available.)

This is commonly misunderstood aspect of Canadian defamation law (I think because the U.S. law is not the same):  It is on the defendant to prove that the statement is true, NOT on the plaintiff to prove the statement false.  In other words, in the absence of proof one way or another, the defamatory statement is treated as false.

There are a number of other technical defences, such as "qualified privilege" and "fair comment".

Qualified privilege applies where the defendant made the statement in good faith, without malice, because of some moral or legal obligation to do so, where the person receiving it has a reciprocal legal or moral duty to receive it.  This protects, for example, a lawyer making submissions in court.

Fair comment protects a comment on a matter of public interest, based on fact, which could be expressed by a reasonable person on the basis of proven facts, and (while perhaps including inferences of fact) are recognizable as comment.  Once again, this defence is not available where the statement was made with malice.

2964376 Canada Inc. (Ameublement Prestige Furniture) v. Bisaillon

This is a recent case out of the Ontario Superior Court dealing with a defamation claim following a consumer dispute.  The defendant's parents had ordered a furniture set from the plaintiff, at the cost of $8200.  Prestige forwarded the order to its supplier in Montreal.  Neither party realized that the the set was being manufactured in China.  It took seven months for the set to come in, and the table was in very poor condition.  Prestige had repairers examine and attempt to repair the table, but concluded that the damage was far too severe.  So Prestige went back to the supplier to try to get a replacement table, but the set was no longer available because the importer was no longer in business.  Finally, Prestige offered to pick up the table and send it back to Montreal to either be brought up to appropriate Canadian standards or to have a new comparable table rebuilt.  The purchasers, at this point, wanted nothing less than a full refund, which Prestige was not prepared to provide.

Given the impasse, the purchasers made a BBB complaint, which was resolved with the conclusion that Prestige had acted in good faith.  So the purchasers sued in Small Claims Court, where the Court concluded that Prestige had "endeavoured to find a solution", but the purchasers were still wronged, and so partial compensation was ordered - $750, plus $175 for Court filing fees.  Prestige paid the judgment.

The next chapter, which prompted this subsequent litigation, begins with Ms. Bisaillon (the purchasers' daughter) disseminating a "Buyers Beware" email, calling Prestige "untrustworthy", and making accusations which, in the words of the trial judge, "are not substantially true".  She sent the email to 38 people, asking them to forward it to others.  She sent it from her work email account with the Museum of Civilization.  (Note to employees:  This is a bad idea.  Sending personal emails from your work account is often a breach of policy in the first place, but sending actionable personal emails from your work account is a very serious matter.  Getting yourself sued is one thing, but bringing your employer's name - or domain, as the case may be - into it is another thing entirely.)  When the defendant received a copy of the email, they contacted her employer about it, and she was disciplined and instructed to apologize.  She refused to apologize, and Prestige sued her.  Prestige brought a motion for summary judgment, which resulted in the above-linked decision.

She attempted to defend on the basis of 'fair comment', but this was entirely unsuccessful.  It didn't really help that she admitted to being motivated by revenge, and malice defeats the fair comment defence.  Prestige won a judgment of $15,000.

Incidentally, both sides are probably in deeper than $15,000 in legal fees in the first place, without even counting the Small Claims Court action, and assuming that no further litigation will be necessary to collect.  Prestige will likely get a costs award as well, but given the overall modest damage award, costs will likely be constrained.

Still, while Prestige will probably end up in a net-negative position for having litigated these issues, there's often a point to be made for businesses.  A business' reputation is important, and when somebody tarnishes it, it is not uncommon to litigate as a way of remedying the situation.  So Prestige probably isn't particularly unhappy about this result.  The defendant, on the other hand, has to pay her own lawyers, has to pay the judgment, and will probably have to pay a costs award.  A pretty significant cost for some ill-thought-out online venting.  Not to mention the discipline at work.

More food for thought:  We're now well over 4 years past the original delivery of the furniture.  Prestige has responded to a BBB complaint and a Small Claims Court action (albeit largely successfully), and has now had to litigate a defamation claim.  After that much time, that many headaches, and significant legal fees, do you suppose that they wish they had just given the refund when asked?

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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.

When is an Employee Accountable for Representations in the Job Interview?

You occasionally hear about employees who are caught having lied on their resumes or in their job interviews, usually about their own qualifications.  In general, that's going to be fairly serious when your employer finds out about and, depending on the context and the importance of the misrepresentation, could constitute just cause in some cases.

Earlier this month news broke about Yahoo CEO Scott Thompson having represented himself as having a degree in accounting and computer science from Stonehill College, when in fact he had never received a computer science degree.  He resigned as a consequence of the scandal.

But here's an interesting new twist:  A case came out recently in which an employer alleged just cause because the employee had made representations regarding the sales he could bring to the company, and these promises didn't pan out.

The case is McGregor v. Atlantic Packaging Products Ltd. The employee, Mr. McGregor, was hired in April 2005 to manage the employer's Niagara Peninsula branch, and fired in October 2007.

Incidentally, just cause was not alleged at the time of the dismissal.  He was offered a package.  The package wasn't good enough, so he sued in February 2008.  The employer defended, again not alleging just cause, then in 2010 amended its pleadings to allege just cause.  By trial, the only allegation of just cause still being pursued was the above, that he made promises in the interview that he couldn't keep.

McGregor had spent 25 years with another company in the same industry, and was the VP Sales when he left. There was a restrictive covenant preventing him from competing for 18 months; towards the end of the 18 months, he entered into discussions with Atlantic for them to hire him to set up a distribution centre in Niagara.  They asked him to put together a business plan, which he did, including a sales forecast.  He was hired after his non-comp clause expired.

The employer's allegations, which the trial judge ultimately didn't accept, was that the sales numbers had been promised based on clients which McGregor guaranteed he would be able to bring to Atlantic.  The trial judge concluded that, based on the business plan, there was no evidence of any such 'guarantee'.  Moreover, Atlantic knew that McGregor had not been in contact with his old clients for 18 months, and it seemed obviously unreasonable to believe that he could actually guarantee that clients would come over to Atlantic.  (Also, in a more general sense, the trial judge did not find the employer's witnesses to be credible.)

Suffice it to say that the Niagara centre didn't work out.  In August 2006, the employer decided to cut its losses and close the facility, and transitioned McGregor to its Burlington office, until he was fired in October 2007.

He had not received any discipline whatsoever nor any performance evaluations, nor was he advised of any performance concerns at the time of his termination.  Only three and a half years later did the employer first allege gross misconduct as justification for summary dismissal.

Suffice it to say that the employer was unsuccessful in its defence.  The judge didn't believe that the employee had made fraudulent misrepresentations in the first place, but in any event the fact that the employer had kept McGregor on for over a year after determining that the Niagara plan was "hopeless" amounted to 'condonation'.  They knew of all the relevant facts at that point, and nonetheless continued to employ McGregor.

When an employer has just cause, he has to act on it.  Use it or lose it.  He can't just sit on it until he decides he wants to be rid of the employee for whatever reason, and play it then like a trump card.

To be fair to the employer's position, the employer gave evidence that McGregor had essentially admitted in a conversation in September 2007 that he knowingly lied about the numbers to trick Atlantic into giving him the job.  If true, that may have defeated the condonation argument - okay, we knew that the numbers hadn't panned out, but it wasn't until just before we fired him that we knew that he had knowingly and intentionally deceived us.  One problem, though:  The trial judge didn't believe the employer.  The overall lack of credibility of the employer's witnesses on the point, particularly combined with the lack of written records that one would expect following such an important conversation - memoranda, correspondence, written notes, etc. - caused the judge to reject this evidence.

The trial judge's alternative reasoning is that condoning it until the termination would be fatal to the employer's defence (even if the defence had merits in the first place).  But there's a further point that the trial judge didn't address:  There is case law suggesting that dismissing a person on a non-for-cause basis is further condonation of misconduct of which the employer is aware.

In 1965, the Ontario Court of Appeal affirmed a decision by Justice Thompson in Tracey v. Swansea Construction Co. Ltd., with the following passage:

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.

It's not a hard-and-fast rule that you can't assert just cause after the fact.  Particularly in cases of "after-acquired cause", where the employer didn't know about the misconduct until after the dismissal, it can't be argued that the employer ever 'condoned' the misconduct.  But it undermines the employer's case for cause when, knowing of the misconduct later alleged, the employer nonetheless dismissed the employee on a not-for-cause basis.

Aside from the technical 'condonation' argument, the further difficulty is this:  Just cause is an extremely high threshold in the first place.  If the employer equivocates and hedges by failing to allege just cause at the outset, the employer will tend not to be as credible when arguing, at the eventual trial, that the misconduct should be perceived as rising to the level of just cause.

In this case, the employer was faced with an impossible task:  If these alleged misrepresentations were so important, then why didn't you fire him in 2006?  Why didn't you raise the issue when you finally did fire him in late 2007?  Why didn't you even raise them in your statement of defence in 2008?

I would have been shocked had the defence succeeded.  Indeed, on the facts as presented by the judge's reasons, I'm surprised that the employer actually amended its pleadings to allege just cause in 2010.  The argument itself seems fairly tenuous, and the condonation response is pretty academic.  And you can certainly expect that this will not have a favourable result on costs for the employer - when the main issue at trial (reasonable notice and mitigation were also argued, but these alone seldom require a trial) wasn't even raised until more than 2 years into the litigation process, and was unsuccessful, it doesn't look good 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.

Wrongful dismissal action by an employee who moved across the country

Interesting case just out of the British Columbia Supreme Court:  Staley v. Squirrel Systems of Canada Ltd.

Put briefly, Mr. Staley worked for Squirrel since 1995 in Burnaby, starting as a call centre agent but working his way up through the ranks.  In 2009, he married a Mountie, who was trying to secure a posting in her home Province of Quebec.  She eventually got the posting, and so Mr. Staley and his wife sold their condo in Chilliwack and moved to Montreal in September 2010.  When Mr. Staley thereafter refused to report in to the office, he was dismissed.  So he sued for wrongful dismissal.

Never quite that simple, of course.  There had been ongoing discussions with the employer about potentially arranging the employment to function as a long-distance relationship, so to speak.  Staley first told his supervisor in April 2010 about the possibility of an eventual move, wanting to continue his work from Montreal.  The supervisor was open to the idea of hiring him on as a contractor working remotely from Montreal.  What exactly was said in the April conversation is in question, and is important because it appears that Staley walked away thinking that he would be able to keep working from Montreal, and the supervisor walked away thinking that, if and when it happens, we'll talk about it.

When Staley left in September, he continued his duties remotely, and was permitted to do so.  In late October, the employer wrote to the plaintiff noting (in language that I'm guessing came from a lawyer) that he had asked to alter the terms of employment to permit him to work from Montreal, and that the employer "temporarily permitted" remote duties "while we consider your request", with the final decision being under consideration by senior management.  Staley took issue with this, and sent a reply summarizing various conversations in which he alleged that the employer had agreed to let him work from Montreal.  They had further discussions trying to reach an agreement to new contractual terms, but nothing was ever signed, and eventually (March 2011) the employer gave the employee notice that he would be required to resume reporting to the office in Burnaby as of July 2011.  This was not an option from Staley's perspective, so they were at an impasse, and the employer dismissed him.

Staley sued, but was unsuccessful.  He argued that he had relied upon representations by his supervisor that he would be able to continue to work from Montreal.  (It appears that he probably would have moved either way, but his unemployment would have affected their decision to purchase the house they did.)  The Court concluded that there had been a misunderstanding, and essentially felt that Staley was making a very tall order, and "it was not reasonable for him to make his commitment to Montreal on the basis that his continued employment was assured."

Accordingly, Staley's refusal to report to work constituted abandonment of his position, or insubordination, and either way permitted the employer to dismiss him.

My Thoughts

Considering the facts, the employer came awfully close to very substantial liabilities.  The Court's assessment of the plaintiff's conduct is probably fair - if you're going to move across the country and want some assurances that you'll still have your job, get it in writing.  Work out the details before you move.  Don't have a few casual conversations about it and assume that the whole thing will be fine.

Still, the employer could easily have been hanged by the fact that it doesn't appear to have specifically advised the plaintiff of its position that its acceptance of the arrangement was 'temporary' and subject to senior management approval until it had already existed for a month.

The Court concludes that, in the discussions leading up to the move, neither the word 'temporary' nor 'permanent' was used by the employer.  However, in the absence of that kind of express language, it would be very easy for a Court to conclude that the employer, by permitting Staley to work from Montreal, had agreed to change the employment relationship on an indefinite basis.

There was an internal email circulated when Staley moved, stating that he was now an independent contractor.  Not too much was made of it in the judge's reasons.  It would have been difficult for the employer to use that email to take a position that the employment relationship had ended and Staley was now an independent contractor, but more importantly that would not have been a helpful position for the employer - there is little doubt that, had it been agreed that Staley would work as an independent contractor working from Montreal, this would have put him, at best, into the intermediary category of employment relationships, which would still have entitled him to reasonable notice in the absence of enforceable written language to the contrary.

I find it difficult to reconcile that email with the judge's conclusion that the employer's tolerance of Staley working from Montreal was temporary and subject to final approval.  There doesn't appear to have been any actual evidence of the employer reserving a right to require Staley to return until late October, and that October letter has a certain lawyerly air to it, as if they had gotten their lawyers involved at that point because they had decided not to permit him to continue and therefore wanted to end the employment relationship, and the lawyers opined that they had not been clear enough in asserting an entitlement to do so.  That sort of letter, clarifying your position, can be very helpful later on if the recipient doesn't challenge the assertions in it.  Silence gives consent, as they say.  In this case, however, the employee answered immediately with a 'Hang on, where's this coming from?' type of response, which ultimately set the stage for a legal dispute in which the employer was fortunate to have been successful.

If the employer had been clearer from the outset, however, there would have been no reason for a legal dispute to have been necessary in the first place.

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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.

Summary Judgment on a Simple Wrongful Dismissal

The Court recently decided the case of Pegus v. Ecorite Distributors Ltd..  It's an odd case in a couple of ways, but has some interesting issues, and what's truly interesting is the relatively summary manner in which the case is decided, which likely has a great deal to do with limited damages at issue.

The facts aren't complicated.  The plaintiff was allegedly induced by the defendant to leave his previous employer (where he had been for a number of months), was employed for about two months in marketing, making $4000 per month, and then fired on April 18, 2008.  It took 9 months for him to find a new job.

In early 2009, the plaintiff hired a lawyer, who wrote to the employer seeking pay in lieu of notice.  A statement of defence was prepared by a non-lawyer, Brij Kapur, who appears to be the directing mind of the employer.  This is a problem:  Individuals are able to represent themselves, but corporations generally need to be represented by lawyers.  In June 2009 the defendant was ordered to retain counsel, but did not do so, despite reminders from the plaintiff's lawyer, until November 2011.  In the mean time, in January 2011 the plaintiff served a "Request to Admit" on the defendant.

The purpose of a Request to Admit is to try to reach certain common grounds, agreed-upon facts and documents, as between the parties.  If the parties have agreed on a material fact, then there's no need to lead evidence on the point - the Court can just presume that the fact or document in question is true, because the parties have agreed to admit it.  This saves time and money, and there are cost consequences built into the Rules of Civil Procedure of unreasonable refusals to admit facts or documents.

By operation of the Rules, non-response to a Request to Admit within a certain time results in the deemed admission of all facts therein.  In this case, the employer never responded to the Request to Admit.  So in January 2012, the plaintiff brought a motion for summary judgment based on the facts per the employer's deemed admissions.

The Court permitted the defendant to withdraw its admissions.  Kapur swore an affidavit that as a non-lawyer he hadn't appreciated the requirement to respond to the Request nor the consequences of failing to do so, and the Court accordingly accepted that the non-response was inadvertent.

This isn't a surprising result, all things considered, but I'm sympathetic to the plaintiff for trying to argue the point:  The defendant was ordered in June 2009 to retain counsel, and nonetheless the employer played the "self-represented litigant" card in respect of a process it botched in 2011.  It's tough to justify, really, and the judge's determination of 'inadvertence' is pretty generous.  The Form for a Request to Admit, on its face, says "You are requested to admit..." (which would seem to call for a response), and then goes on to set out the actual consequences of non-response.  And nonetheless, the employer ignored it completely.

It's hard to imagine a much clearer case for holding a party to the deemed admissions from a failure to respond.

Despite relieving against the deemed admissions, though, Justice Gray was not going to let this case go on any longer.  She found that, even without the admissions, there was no serious issue to be tried, and proceeded to award summary judgment.

This is tricky, because without the admissions there were significant factual disputes.  While the defendant raised a lot of chaff as supposedly "triable issues", such as whether or not there was a wrongful dismissal, etc. (though they did not appear to deny that they dismissed the employee, did not allege just cause, acknowledged that no notice was provided, and appears not to have alleged a contractual entitlement such as a probationary period), the judge gleaned three factual issues in dispute:  Was the employee induced away from his old employer?  What were the nature of the employee's duties?  What should the impact be of his 9 months of unemployment?

But Justice Gray's decision appears to amount to a conclusion that none of these issues are significant enough to warrant a trial of them.  In all the circumstances, it was clear enough that a very short notice period was called for.  The inducements wouldn't have much impact, because of his short service with the prior employer, and the length of the job hunt might extent the notice period slightly.  The employee was awarded $12,000 - 3 months' notice.

My Thoughts

I see the merits of this approach.  The plaintiff's claim, while clearly meritorious, was unlikely to be for a significant amount of money, yet on the flip side the litigation is already 3 years old and hasn't actually gotten anywhere.  To require the case to proceed to trial, to get a conclusion on issues that might push the ultimate damage award a little bit either way, would be disproportionate to the amounts in issue.

Really, the parties should have settled the case long before this.  They didn't, so Justice Gray imposed an expedient solution.

Yet I question the disposition of the inducement issue.  I've had occasions to research inducement, and the effect of an inducement is not exactly settled law.  While there are exceptions, it has not tended to be a matter of adding up the cumulative length of service, and substituting that figure for length of service in the notice period assessment.

It seems to me that, if this fellow could establish that he had secure employment in his old job, that he hadn't been interested in leaving the old employer, and that he was induced away with promises of job security, the measure of the effect of the inducement would not be tied to his notice entitlements from the old job, and might not have necessarily been tied to his short length of service even there.

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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.

Garrie v. Janus Joan

Here's another case that Professor Doorey posted about a few months ago, from the HRTO.

It's a very unsatisfying case.  Terri-Lynn Garrie has a developmental disability, and worked for Janus Joan Inc. from the late 90's to October 2009.  The employer didn't participate in the process, and the applicant was represented by her mother.

From the Tribunal's survey of the evidence, it appears that Janus Joan employed several general labourers.  Some of the general labourers had developmental disabilities, and others did not, but they all performed essentially the same job.  The ones without disabilities were paid at minimum wage or higher.  The ones with disabilities were compensated only by way of an 'honorarium' - at first equivalent to $1 per hour, and eventually increased to the rate of $1.25 per hour.  Garrie worked 40 hours per week.

Most likely, the employer thought it was doing these employees a favour by giving them something to keep them busy while paying them little enough as to not affect their ODSP benefits.

In October 2009, Janus Joan dismissed all of its employees with developmental disabilities.  Garrie made an application to the HRTO claiming that the wage rate and the dismissal were both discriminatory on the basis of disability.

The Tribunal concluded that Garrie was out of time to complain about the discriminatory wage rate (i.e. the application should have been brought within one year of the implementation of the discriminatory wage rate), and therefore didn't consider that allegation.  However, the dismissal was found to be discriminatory, and Garrie was awarded lost income benefits until she obtained replacement employment at Walmart in November 2010...but the damage award was at the rate of $50 per week, totaling $2,678.50.  (She also received compensation for injury to feelings, dignity, and self-respect regarding the discriminatory dismissal.)

This is controversial.  As Professor Doorey pointed out, awarding damages at a rate which blatantly disregards the minimum wage requirements of the Employment Standards Act seems deeply concerning.

I am of mixed minds on that point.  It is likely true that, but for the unlawful dismissal, she would have continued working at $1.25 per hour without complaint, making $50 per week.  Yet she would probably have been entitled to a remedy for that underpayment (i.e. from October 2009 to November 2010) through the employment standards complaint process, which was no longer available to her because of the dismissal.

But I am more concerned about the decision regarding timeliness.  The Tribunal looks at the implementation of the discriminatory wage as being the act complained of, which continued to have effects into the future but which did not keep the limitation period running.

I could understand this analysis in context of, say, denial of a promotion - a single discriminatory event with echoes into the future.  But wage discrimination is different, because there's a clear and contemporary comparison to be drawn.  The Code right is to 'equal treatment'.  Clearly, in 2009, Garrie was not being treated equally to her non-disabled co-workers.  I would argue that the fact that she agreed to an unfair contract 10 years earlier cannot create an estoppel barring her from asserting her rights to fair treatment on an ongoing basis.

So yes, a very unsatisfying decisions.

But there's a new development as well.  Apparently, Janus Joan Inc. is no longer in business, and now there's "Janus Joan (1996) Inc." instead.

One could see this coming in the original decision.  The respondent had sent a letter to the Tribunal indicating that the corporate respondent was "closed" (there was an individual respondent as well, but she was not found liable).  "The applicant's parents deny that the organizational respondent is closed, and state that the name has simply been changed from Janus Joan Inc. to Janus Joan Inc. with a number after the name."  They also led photographic evidence that the business was still operating and that the personal respondent's car was in the parking lot.

At a glance, it appears that the same principals are behind the new corporation, carrying on the same business.

The Applicant has now sought the assistance of the Human Rights Legal Support Centre, wisely, and they brought a Request to add a party, which the Tribunal has denied:  "the applicant seeks to make the proposed respondent liable on the basis of a hearing of which it had no notice and in which it had no opportunity to participate".  Which is, most likely, sort of true.

It sounds like Janus Joan made a risky play here, deciding not to participate and sheltering behind a changed name.  It isn't uncommon for a party to be incorrectly named at the HRTO, and usually it's clear enough who is being claimed against that the party will respond anyways and correct the name.  Cases involving actual new corporations aren't as common, and have trickier considerations.  Is the new corporation actually liable to the employee in a direct sense?  Often not - in order to be a successor employer, you actually need to employ the individual in question.  Consider the circumstance of an asset purchase, where ABC Inc. purchases all the assets of XYZ Inc. (per value), but doesn't hire an employee of XYZ.  The employee's contract is with XYZ, and he has no relationship with ABC nor a right to be hired by ABC.  (Assume, for the sake of the example, that ABC is not unionized.)  In such a case, the employee probably cannot successfully sue ABC, but has to sue XYZ instead.

There can be ways of getting around the problem, but not always, and they can be tricky.  It would be interesting to see Garrie's next move here, now that she is represented by competent counsel.

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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.

Further Difficulties with Fixed Term Contracts

I recently explained the limitations and difficulties of fixed term contracts.  One of the points I highlighted is that a fixed term contract displaces the employer's common law entitlement to terminate employment on notice.

One employer recently discovered that this phenomenon can be extremely expensive.  Earlier this month the Superior Court released its decision in Loyst v. Chatten's Better Hearing Service.  In a nutshell, Loyst started running the Chatten's office in 2003, and when Chatten's was purchased in 2006, the purchaser kept her on as Office Manager on a 5 year fixed term contract for service.  (Raises spectres of my recent posts about buying a business and independent contractors, but neither one was a major issue in this case.)  The contract was extremely simple, setting out the position, the remuneration, and stating that at the end of the 5 years, Loyst was to receive a 15% interest in the company.  A year later, the contract was amended only to the extent that it made it into an employment contract rather than a contract for service.

Over time, Loyst developed a strained relationship with the new owner, to the point that, on March 12, 2009, the new owner told Loyst that she could no longer be the office manager but instead her duties would be restricted to bookkeeping and accounting.  He could no longer have people reporting to her or have her dealing with customers, receiving any bonuses, bonus trips, or attending partnership meetings.  Her salary would remain the same, and while the owner claimed at trial that he had assured her that the 15% interest in the company would still be provided at the end of the contract, the judge found this to be improbable.  Loyst did not recall that being mentioned, and in her evidence the owner had basically denied the existence of a written contract.

Loyst responded that the changes to her contract were not acceptable, and the owner told her that if she did not want to accept the new conditions she could pack up her desk and leave.  She did so.

There were just cause allegations, mostly turning on things that Loyst had allegedly said to customers or co-workers at some point in time.  After-acquired cause was alleged in respect of a complaint to a third party about the owner which the owner discovered after the termination.  In context, all the allegations were fairly tenuous - the judge found that, at worst, the after-acquired cause was something deserving of sanction but not summary dismissal.

The truly striking issue on this case is the damages.

As I have noted in the past, when terminating a fixed term contract which does not have an early termination clause (which clause can present its own challenges), the measure of damages is not held to the common law reasonable notice period.  Rather, the employee is ostensibly entitled to receive the damages she would have received throughout the rest of the contract, had the contract been completed, subject only to the obligation to mitigate.

In other words, in this case, where there were nearly 30 months outstanding in the contract at the time of termination, she was compensated on the basis of her earnings over those 30 months.  (If it weren't a fixed term contract, her entitlements at common law very likely would have been less than a year.  If there were a good written termination clause, her entitlements could potentially have been limited to less than 2 months.)  Even after taking into account her mitigation earnings, this left nearly $77,000 in salary outstanding (about 15 months salary), despite the fact that she was not compensated for loss of bonuses, etc.  Plus $180,000 in respect of the 15% interest in the company.

So this wrongfully dismissed employee, with a salary of $60,000 per year and six years of service, ended up with entitlements to the effect of $300,000(!!!!!), reduced to about a quarter million after mitigation earnings.

The problem with the employment contract, which ended up being very expensive for the employer, is that the parties clearly did not contemplate at the time what would happen if the relationship broke down.  Having lawyers in at that stage, instead of trying to clean up contractual entitlements through litigation, probably could have had the result that the employer's liabilities on termination of the contract would have been reduced by more than $200,000.

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Hat tip to Professor David Doorey for posting about this case in his Workplace Law Blog, which brought it to my attention.  He focused on the actual dismissal itself, and his discussion on the point is interesting, though as a minor point I disagree with the breadth of his assertion that an employer cannot unilaterally amend employment contract terms.  An employer cannot unilaterally amend fundamental terms of the employment contract.  However, unilateral amendments which do not go to the heart of the employment contract are permissible in most contexts.

It's largely a matter of scale.  If an employee's reporting structure is changed so that he reports to the VP Communications instead of the VP Marketing, then that's probably not going to be a problem.  You probably don't need the employee's consent for that.  However, changing from reporting to the President to reporting to a mid-level manager suggests a significant demotion, which is more likely to be a fundamental change.  Likewise, modest changes - even adverse changes - to an employee's remuneration package will not generally be a problem, depending on the terms of a written contract.  As the easiest example, consider a scenario where an employer switches group health insurance providers, and ends up with slightly different coverage (better dental and optical, maybe, but worse AD&D coverage).  An employee would have a very difficult time treating himself as having been constructively dismissed by such a change.  (The trouble is that there are a lot of grey areas in this analysis.)

Indeed, in this case, when assessing damages, the trial judge noted that the yearly bonus, bonus trips, and attendance at partnership meetings, despite being things that Loyst had enjoyed through the employment relationship, "were not an integral part of Loyst's compensation and were not called for in the contract".  By contrast, the changes to her job description alone "constitute unilateral changes to a fundamental term of the employment contract" (para 36).

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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.

Notice Formulas and Employment Standards

I've often discussed written employment contracts, and how a good and binding termination clause in a contract can reduce an employer's liabilities on termination from substantial "reasonable notice" to the relatively constrained statutory minimum notice, or anywhere in between.

However, termination clauses are closely scrutinized by the Courts in several ways, which is why it is of the utmost importance to have a good employment lawyer involved in drafting the contract at the outset.

One of the key problems that such clauses frequently suffer is statutory non-compliance.  The Employment Standards Act sets out minimum entitlements on termination, and the Act is express that any attempt to contract out of the minimum standards is void.  So when you get a contract saying that an employee can be fired at any time without notice, the Courts will usually disregard that language, and find accordingly that the employee is entitled to "reasonable notice".  (The Supreme Court has been very clear:  You don't read in an intention to limit the notice period.  If the clause is void, it is ignored.  The message is clear to employers:  If you want to limit your liabilities, you have to do it properly.)

Under Ontario's Employment Standards Act, an employee with 3 months of service is entitled to a minimum of one week notice.  An employee with 12 months of service is entitled to a minimum of two weeks' notice.  An employee with 3 or more years of service is entitled to 1 week's notice per completed year of service, up to a maximum of 8 weeks.

In addition, in some contexts there may be statutory 'severance' payable as well.  That's distinct from notice, but let's leave it aside for now for the sake of simplicity.

First, suppose my contract entitles the employer to fire me at any time on 8 weeks' notice or pay in lieu thereof.  That should be fine, at least from an ESA perspective, because unless the ESA is amended at some point the contract will never entitle me to less than the statutory minimum.

Next, suppose instead that I have a contract entitling my employer to fire me at any time on only 4 weeks' notice or pay in lieu thereof, and I get fired after 6 years of service.  My statutory minimum entitlement is 6 weeks; the contract says I only get 4, so the contractual provision is void and I get to claim "reasonable notice" - several months, depending on the exact circumstances.

What happens, though, if I have a contract promising 4 weeks' notice and I get fired after only 2 years?  Statutory minimum is 2 weeks; the contract says I get 4.  That should be fine, right?

Wrong.

This issue isn't frequently explored in the jurisprudence, but there have now been a few cases across the country dealing with it, and the results are pretty one-sided.  If the formula doesn't comply with the Employment Standards Act formulaically, the clause is void "ab initio" (from the start).

In Shore v. Ladner Downs in 1998, the British Columbia Court of Appeal dealt with this issue:  The contract permitted termination on 30 days notice, and even though the statutory minimum notice for the dismissed employee was two weeks at the point of discharge, the employer could not rely on the provision.

Many employers prefer to simplify matters, keying the notice payable to the employment standards minimum themselves.  This is theoretically fine, but still not without its risks.  The language used must still be precise in order to accomplish its objective.  Using language like "the applicable law" probably will not be clear enough, yet being too specific can be a problem, too.  In Waddell v. Cintas Corp, another B.C. case, the initial employment contract had been entered into in Ontario, and the employee later transferred to B.C.  His contract, however, tied his entitlements to Ontario's Employment Standards Act, which calculates entitlements slightly differently from B.C.'s employment standards regime, which could theoretically result in a conclusion that the contractual entitlements (as determined with reference to Ontario's ESA) would be less than the minimums to be determined under the B.C. statute (which now governed the employment relationship).  Therefore the contractual provision was void and the employee was entitled to "reasonable notice".

It's a tricky area of law.  Occasionally a contract will use language creating a formula for notice based on each "completed year of service".  Most of the time, when you see this language, there's a minimum, or else an additional/alternative tie-in to the employment standards minimum.

For example, Obaidi v. Home Depot deals with a contractual provision offering 2 weeks pay in lieu of notice "per completed year of service", but no less than 2 weeks notice and no more than 26 weeks notice.  (Though that case deals with lack of consideration - it's a different issue.)  Likewise, in Ahmed v. Athabasca Tribal Council Ltd., the language promised the employment standards minimums plus one month "for each completed year of service".

This type of language is generally fine.

However, I have also seen contracts drafted by lawyers which only deal with notice "per completed year of service", with no other minimum.  Meaning that a person fired after 364 days of service has, under the contract, no entitlement to notice.  Despite the fact that, under the ESA, there's a minimum notice period of one week.  See the problem?

Obviously, an employee fired after 364 days would not be held to the contractual term if the statutory entitlement was greater.  But the point is that it's a bigger problem than that.  Even if, at the point of dismissal, the contractual entitlements exceed the statutory minimums, the termination provision in its entirety would likely be seen as being void, with the result that the employee would be able to seek reasonable notice.  So if I'm entitled only to two weeks notice per completed year of service, and I'm fired after 18 months, then my contract says I get two weeks, and the ESA says I get a minimum of two weeks, but regardless, I'd be able to seek common law reasonable notice, which would usually be much more substantial.

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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.

Employees Quitting and Competing

Every so often, a case comes up involving an employee who departs from employment and immediately starts a new business, taking the old employers customers and sometimes even employees.

There is nothing inherently wrong with this, unless there is a contractual non-solicitation/non-competition clause (though these are often difficult to enforce) or common law fiduciary obligations.

Frequently, the employer will go to Court seeking an injunction preventing the employee from competing or soliciting customers.  A common feature of these cases, however, and one which makes the employee much less likely to succeed, is the misappropriation of proprietary information.  There's nothing wrong with an employee walking away, but when the employee walks away with the employer's files, that's a problem.  This is particularly problematic in the digital age, where copies of large numbers of files can be made with a few keystrokes.

In the recent case of Corona Packaging Inc. v. Singh, departing employees made exactly this mistake.  Two employees left Corona (Cascioli in June 2011 and Singh in March 2012).  Singh indicated that he was planning to return to India.  However, in April 2012 a representative of Corona saw Singh and Cascioli at a trade show representing a new competitor company (which had incorporated in July 2011), Aura Packaging.  This made Corona suspicious, so they called in forensic IT specialists.

It's pretty impressive what these forensic IT specialists can do.  If you do something on your computer - use a program, delete a program, access data, copy data, upload data to an external device, etc. - they can figure out with astonishing detail what you actually did.

In this case, they looked at Singh's old workstation and determined that, the day before he left, he connected an external device (likely a BlackBerry) and copied 8,465 files to it, including proprietary information of Corona.  The data included "all of its products technical specifications, the Corona budget setting forth confidential information including price lists, gross profit margins, machine cycle times, and input costs; the "Pre-Form" products' catalogue of Corona which is akin to the blue print for the final bottle products, with all the specifications created by Corona for such products; "Bottle Drawings" which include the final form bottle specifications; the Price List Notification which includes the proprietary formula utilized by Corona to determine its price list; product-related documents such as quality control testing, sample lists and packaging layouts; work place policies; confidential customer information including customer-owned mould specifications; and financial and administrative documents."

Sounds pretty much like Singh cleaned them out, no?

I retain a healthy dose of scepticism.  Before I go into the details of why, let me explain that this motion was brought on an urgent basis.  The defendants were given notice of the motion, and two of them had lawyers show up, but they were not given an opportunity to prepare responding materials.  So all of the evidence before the Court was the evidence led by Corona.  (Under these circumstances, if the injunction is granted, it can only be for ten days, subject to continuation following a hearing on appropriate notice.)

I'm no tech expert, but I know a thing or two about computers, and a lot about lawyers.  You can have thousands of files with no usable data, or a single file with a huge amount of material data.  The actual number of files transferred seems huge, but the number is essentially meaningless.  I couldn't begin to estimate how many files might be transferred in an ordinary automated synchronization process.  Still, a lawyer will throw in the total number of files because it sounds good.  (Law is still, in many ways, in the 'old school', where people think of a 'file' as being an assortment of data inside a physical folder.  A thousand files takes several filing cabinets, would include huge amounts of data, and represent years of work.  In the digital world, a simple program might have hundreds or even thousands of files associated with it, and barely made a dent in the storage space of a small USB key.)

Hansford, Corona's IT specialist, called Singh, and Singh "admitted that he had taken data files from Corona".  Singh asked if he could delete the data, and Hansford said that it was very difficult to permanently delete such data.

This is true.  Especially once data has begun to be disseminated into a new server, new databases, etc., it is immensely difficult to trace it through a system.  I was once involved in litigation similar to this where we had obtained an order that all the confidential data be destroyed, and years later, despite what the Court found to be good faith efforts to comply, we were still seeing reports generated by the defendant's system including excerpts from the confidential data in question.

Nonetheless with Singh's permission Hansford remotely logged into Aura's servers and deleted everything that he could find from Corona.

Not good enough, however:  The Court still gave Corona the injunction it was seeking.  There are three elements to awarding such an injunction:  There must be a 'serious issue to be tried', evidence that the plaintiff will suffer 'irreparable harm' - harm that can't be remedied just by an award of damages - in the absence of the injunction, and the balance of convenience must favour the injunction.

Serious issue to be tried:  "The evidence suggests that Messrs. Singh and Cascioli are in breach of their employment contractual obligations and common law duty of confidence to their former employer not to disclose or use trade secrets and confidential information.  Arguably, they are also in breach of a restrictive covenant in their contractual relationship with Corona to not compete with Corona for a three-year period following upon leaving their employment with Corona."

Irreparable harm:  The Court concluded that the misappropriation of the customer data would result in "permanent market loss" and "irrevocable damage to the business".

Balance of convenience:  Aura is a relative startup, by contrast to Corona's significant long-term investment in developing a business base.  So the harm to Aura by preventing competition is less than the harm to Corona of permitting competition.

The effect of the apparent deletion of the data isn't much discussed, but it doesn't appear to have helped Aura that they were halfway through a contract to produce a million bottles for Corona's biggest customer - the Court concluded that they could not have obtained this contract without the misappropriated data.

My Thoughts

This is a close case.  Having misappropriated data definitely hurts Aura, yet it has since been ostensibly deleted.  The thoroughness and effectiveness of the deletion is questionable, perhaps, but the efforts were undertaken by Corona's own IT specialist.  So I would question the appropriateness of granting an injunction based on the likely impact of continued use of misappropriated data.  That being said, where they have already gained market share through use of the data - i.e. a major contract from Corona's biggest customer - it may make some sense to require Aura to step away from that customer.  However, aside from this potential loss in market share (which may have at least been mitigated by the deletion of the confidential data), it appears that the only loss which may be suffered by Corona is the ostensible loss of this contract, and by no means would that harm be 'irreparable'.  The judge even queried Aura as to whether or not it would be prepared to complete the current contract but pay the profits into escrow pending determination of the issues in dispute.  Aura declined to consider such an agreement, and probably correctly so.  If disposition of the profits from that particular contract were the only unresolved issue on this motion, then granting an injunction would be wholly unnecessary and inappropriate - there are orders available for a defendant to preserve assets pending disposition of a claim, but they are available under only very specific circumstances.  In general, a plaintiff sues a defendant, and only gets to chase the defendant's assets after obtaining judgment.

I'm also concerned by the reference to the restrictive covenants.  On a motion of this nature, there is no reason why they could not be considered thoroughly, determining whether or not their terms ought to be upheld.  The effect they had on the ultimate decision is unclear; in my humble opinion they ought to have been discussed thoroughly or not at all.

Furthermore, this motion has all the earmarks of a motion without notice.  (In fact, the parties received notice, but not nearly sufficient notice to satisfy the rules for a motion made on notice, and thus I suspect that it should have borne essentially the same scrutiny as an ex parte motion.)  There is no discussion whatsoever of the 'urgent basis' on which the motion was made, and whether or not it was appropriate.

For a good discussion of the circumstances required for motions without notice, see Robert Half Canada Inc. v. Jeewan.  In that case, the Court notes that the first enquiry to be made is: "Why did you not give notice?"  If the answer doesn't reveal "extraordinary urgency", the motion must be refused.

There are two categories of "extraordinary urgency":

(1)  There are circumstances where there is reason to believe that, if given notice, the affected parties will act to frustrate the proceedings.  (For example, if I'm concerned that a person is going to move their assets to another jurisdiction to frustrate my interests, and I'm bringing a motion for the preservation of property, I might justifiably be worried that they're just going to make the transfer immediately upon receiving notice of the motion.)  Anton Piller orders - essentially private 'search warrants' - traditionally fall into this class.  True that an Anton Piller order was sought in this case, but it isn't much discussed, and given that Corona's IT people had already been given access to Aura's servers prior to the hearing, it doesn't seem like it would have been a compelling argument.  In any event, the fact that short notice was given completely would completely undermine the strength of such an argument.

(2)  In some cases the circumstances are of such exigency that any delay will defeat the plaintiff's claims.  "This is a distinctly rare circumstance."  This would clearly be the argued basis in this instance - the Courts will often insist on some form of notice, even if it is just a phone call to opposing counsel to notify them, and this would be why the plaintiff did put the defendants on notice of the motion.

Robert Half was also a non-competition case, and the Court noted that while loss of a competitive position in the marketplace may certainly ground an interlocutory injunction, it is another matter to justify an ex parte injunction.  In such a case, it must be established that "irreparable harm" would be established simply by virtue of the requirement to give appropriate notice.

The misappropriation of confidential information may have initially justified a motion without notice, but once Corona had an opportunity to destroy the confidential information on Aura's servers, it's unclear that there was continuing urgency to justify a motion without notice.

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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.

Harassment-Free Workplace Obligations - Still Up for Debate

I've posted several times on the workplace harassment consequences of Bill 168, and was quoted in the Law Times about it.  To put it briefly, though I suggest reading my previous posts for a better understanding of the issue (Feb 27, Jan 26, Jan 11, Nov 24, Nov 18), Bill 168 amended the Occupational Health and Safety Act to require employers to implement policies and programs regarding harassment in the workplace, and there's some question as to how far that obligation goes.  At its simplest level, the question boils down to this:  Do employers now have a substantive obligation to provide a workplace free from harassment?  (In reality, there are several much more nuanced questions - Must the employer follow its policy in any particular manner?  Is an employer precluded from engaging in reprisals for good faith complaints under the policy?  Must an employer actually respond reasonably and in good faith to such complaints?  But I suspect that, of logical necessity, all of these questions will have the same answer, one way or another.)

Almost all the cases are reprisal cases - I make a harassment complaint, then my employer fires me.  So really, the question we're looking at, in the most direct sense, is whether or not reprisals are prohibited.

The initial jurisprudence has leaned towards a negative response, that the employer must implement the policy but need go no further.  This is based on a bluntly literal reading of the statutory amendments, and is not difficult to understand.  The premise was first advanced in September by Vice-Chair McLean in the Conforti case, but it was speculative in that case and he didn't actually decide the issue.  In Harper v. Ludlow, Vice-Chair Serena picked up on Vice-Chair McLean's logic and applied it, concluding that a reprisal due to harassment complaint, even if true, is not a violation of the Occupational Health and Safety Act.  That seemed like it might be the end of the issue.

But it wasn't.

I was surprised to see the Walters case in January, in which Vice-Chair Kelly looked at a similar issue to Conforti and Harper and, despite noting those cases including that the Board in the latter case "determined categorically that it lacks jurisdiction", proceeded to say that it was "unnecessary to decide the question of jurisdiction in this case" because he didn't believe there was, in fact, a reprisal.  This suggested to me that the Board might be backtracking from the Conforti analysis, and that the door may still be open.  (A couple days later, Vice-Chair Kelly looked at the Parsons case and came to the exact same conclusion in that context - unnecessary to decide the jurisdictional question - without even mentioning Harper.)

As well, in late December there was the Murphy decision, in which Vice-Chair Rowan distinguished Conforti and Harper on the basis that Mr. Murphy's employer was already in violation of the Act by not having a harassment policy in the first place.

Then we have Vice-Chair Anderson in several cases, looking to Conforti, suggesting that the reasoning may be correct, but inviting submissions from the applicants on the topic.

More Recent Developments

The above is essentially just a brief summary of the evolution described in my previous posts.  And nothing fundamental has changed, except that the Board has continued on the same course, looking at Conforti as perhaps being persuasive, but not necessarily something that will be followed.  The more recent decisions have gone from omitting Harper to ignoring it completely.

Of particular interest is Alternate Chair Diane Gee's decision in Kazenel v. Citi Cards Canada Inc., in March.  As is the case in most of the above decisions, this was a preliminary decision, with the employer seeking to dismiss the application for lack of jurisdiction.  And in this case, the employer was unsuccessful.  Not that the Alternate Chair decided the jurisdictional issue, but she declined to dismiss the application at the preliminary stage and directed the employer to file its response to the application.

In coming to her decision, she noted the following:

It is questionable as to whether the Act imposes an obligation on an employer to keep the workplace harassment free (see:  Investia Financial Services Inc., 2011 Can LII 60897 (ON LRB)).  Accordingly, there is an issue as to whether, assuming without finding that the applicant was terminated for complaining about being harassed by her manager, such would amount to a violation of the Act.  This issue has not yet been decisively determined by the Board.

It's a concise way of summing up the issue, but the truly interesting point is the last sentence, which backtracks from Harper significantly.  This is a signal that, at least until the question is definitively answered - and Harper is not the definitive answer I initially thought it was - it may not be appropriate to dismiss reprisal allegations at a preliminary stage on the basis of the reasoning in Conforti.

My Thoughts

Those who read my previous posts will know that, from my perspective, this is a welcome change.  In my earlier posts I vigourously argued that Conforti is wrong, making the harassment provisions of Bill 168 into form without substance, and that in light of Bill 168 the Act can no longer be read as not treating harassment as a risk to workplace health and safety.  (I would also suggest that the very literal reading of the provisions per the Conforti analysis ignores certain elements of the language.  A careful reading of the language, requiring that the mandatory policy set out "set out how the employer will set out and deal with incidents and complaints of harassment" suggest that there has to be some connection between what the policy says the employer will do and what the employer actually does - the language of the statute requires the policy to have some predictive value.)

It isn't unusual, either, to see administrative tribunals second-guess their early interpretations of new statutory amendments, particularly regarding jurisdictional matters.  The trouble is that the earliest interpretations are usually made in very summary proceedings with self-represented litigants, or sometimes even litigants who don't make any submissions.  (The summary nature of the proceedings is why these decisions make it out of the gate first.)  Subsequently, when you get more rigourously contested proceedings raising similar issues, the tribunals will start to hear new, better, and more sophisticated arguments on the issue.  Therefore, it is prudent for an administrative tribunal to maintain an open mind, and not be too firmly beholden to their own precedents.

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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.

Shakur v. Mitchell Plastics - A Cautionary Tale

The Superior Court of Justice recently released its costs decision in the Shakur v. Mitchell Plastics case.  The decision on the merits is here, and the costs decision is here.

The case was a wrongful dismissal involving a 35-year-old machine operator dismissed in 2007 after 6 years of service.  Just cause was alleged, arising from an argument between Shakur and another employee in which Shakur struck the other employee - as the judge found, an open-ended slap which caused brief redness.  The Court found that this fell short of just cause.  The employer tried to rely upon the principles from Bill 168 relating to workplace violence, but the Court concluded that, regardless of the applicability of Bill 168, prevention of workplace violence is a shared responsibility between employers and employees, and the absence of training regarding workplace violence and the absence of progressive discipline on the point undermined the case for just cause.  (Reading between the lines, it looks like the judge may have been somewhat persuaded by the employee's evidence that abusive interaction between the employees involved had frequently occurred before; the employer can't just sit back and wait until the first punch is thrown, and then fire whomever did so, but should proactively intervene to prevent violence.)

The employer also relied upon an employment contract which entitled the employee only to statutory minimums.  One problem:  The employment began on September 15, 2001, and the contract was signed on September 24, 2001.  Therefore, there appears to have been a lack of consideration (which I discussed in this post).  The employer argued the Techform case, but it has been consistently distinguished in the jurisprudence, and Shakur is no exception.

Mr. Shakur ended up getting awarded 4.5 months notice, being a total sum of just over $12,500.

As of January 2010, the Small Claims Court has jurisdiction for claims up to $25,000.  When this litigation began, the jurisdiction was limited to $10,000.  So there's no question that the Superior Court was the correct venue to commence the litigation...

...but the question then arises as to whether or not it should have been continued in the Superior Court after the Small Claims Court's jurisdiction was increased.

Because there is a major impact on costs.  The Plaintiff sought over $21,000 in legal fees.  As legal costs go, that's probably a pretty reasonable amount for his lawyer to have charged for the complexity of the issues and the length of the process (in fact, the lawyer probably charged more, and probably not unreasonably so).  Nonetheless, it is disproportionate to the amounts in issue, and proportionality often guides the Court in costs awards.  It would be a very exceptional scenario where the costs award is double the damage award.  (At Small Claims Court, the default cap on costs is 15% of damages, to put the numbers in perspective.)

But this is worse than that.  Not only did the Plaintiff not recover the $21,000 he sought, but he recovered absolutely no costs.

The Court rightly noted that Rule 57.05(1) of the Rules of Civil Procedure (i.e. the rules governing proceedings before the Superior Court) provide that, where a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the Court may deny the Plaintiff any costs.

At paragraph 7, the Court noted:

As stated by Justice Gray in Toronto-Dominion Bank v Thind at para. 25, “if the plaintiff has made a deliberate decision to bring the proceedings in the Superior Court where it is clear that the Small Claims Court has jurisdiction, then, save in exceptional circumstances, the plaintiff should recover no costs.”  To that statement I would add “bring or continue the proceedings.”

My Thoughts

The Court's interpretation of Rule 57.05 is important, and I can't disagree with it.  The Court noted that there is no transitional provision, no exception for claims started prior to an increase in the monetary jurisdiction.  In a similar costs provision, relating to proceeding in simplified procedure versus the ordinary procedure, there exists such transitional language.  The omission of similar language in Rule 57.05, as a matter of statutory interpretation, should likely be read as being intentional, with the result that the Court's interpretation is correct.

Furthermore, there is a basis for this rather 'black and white' viewpoint that an action should be transferred to Small Claims Court.  In Ali v. Schrauwen, in April 2011, the plaintiff moved to transfer a $30,000 action to the Small Claims Court, waiving the excess and reducing the amount of the claim to $25,000.  The defendant objected on the basis that it had already taken significant steps in preparing its defence pursuant to the Rules of Civil Procedure and had already prepared its affidavit of documents, for which costs likely would not be recoverable at the Small Claims Court.  The Court transferred the action, awarded the plaintiff $2500 in costs for the motion, but awarded the defendant $2800 for costs thrown away that would not have been necessary had the action been transferred in January 2010.

That being said, the Defendant in that case was actually ordered to serve the affidavit of documents it prepared.  In context, it seems that this was a fair balancing of interests - the plaintiff gets to change venues to a more streamlined one, it still gets the benefit of the increased procedural protections associated with the prior choice, but it also has to pay the costs associated with those procedural protections.  Makes sense.

To me, there is a world of difference between choosing to start a proceeding in a given venue and choosing to continue in the same venue.

The core principle for these punitive costs provisions is that a party is being punished for acting unreasonably; a reasonable plaintiff would have acted differently.  Today, commencing a $12,000 action in the Superior Court would be hard to justify, so yes, denial of costs would likely be appropriate in most circumstances.  Yet I would argue that a more careful analysis should be applied to a $12,000 claim that was already before the Courts when the Small Claims Court jurisdiction was increased.  The implication otherwise suggests that all $10,001-$25,000 claims existing in January 2010 should have been immediately transferred to the Small Claims Court, without regard to the amount at issue, the complexity of the dispute, or the stage the proceedings have reached.  Recognizing that there is a cost associated with transferring the proceedings to Small Claims Court, and that the benefits in terms of expeditiousness and cost savings of Small Claims Court largely occur at the stages prior to trial, it is easy to imagine a case in which the parties might reasonably have concluded that it made more sense to continue in the Superior Court than transfer to Small Claims Court.  This is especially so since the successful party ought to recover its costs which are reasonably incurred in a Superior Court proceeding, and if incurred at a time when the proceeding had to be in Superior Court, it seems rather harsh to tell parties, "Now that you've each spent thousands and thousands of dollars on this process, we're changing the rules so that the successful party won't recover more than 15% of the amount in issue."

Perhaps more importantly, it wasn't necessarily clear at the time that a transfer to Small Claims Court was always possible.  The only mechanism, in most cases, for transferring an action from the Superior Court of Justice to the Small Claims Court is under s.23(2) of the Courts of Justice Act, which on a face value reading appears to require the consent of all parties.  Prior to Ali v. Schrauwen, the leading case was a July 2010 decision in Capano v. Rahm in which the Court refused such a motion on the basis that there was no unanimous consent.  (The Court in that case contemplated that it may lie within the inherent jurisdiction of the Court to transfer the action anyways, which ultimately formed the basis of the decision in Ali, but declined to do so under the specific circumstances of that case.)

Therefore, while the parties might reasonably agree to transfer the matter into Small Claims Court, it seems to not be the least bit unreasonable, at least before the decision in Ali, for a plaintiff to hesitate to bring a contested motion to transfer into the Small Claims Court.

Now, following Ali and Shakur, with the case law being more certain on the point, it puts a plaintiff between a rock and a hard place:  Either bring a motion to move the proceedings into Small Claims Court, knowing that the costs entitlement at Small Claims Court is negligible and you may have to pay the defendant's costs thrown away, or proceed in the Superior Court and risk not recovering any costs at all even if you're successful.

The result for Mr. Shakur, who was wrongfully dismissed and had to sue to recover the money to which he was entitled, is most likely that his successful law suit has been a significant net loss for him.

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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.