Bowes v. Goss Power Products Ltd. Reversed by Court of Appeal

I posted about Bowes v. Goss Power Products Ltd. twice before - once shortly after Justice Whitaker's initial decision on the application, and again when I saw it on the Court of Appeal's docket.

Background

Put very simply, Mr. Bowes was fired without cause, and had a contract which entitled him to six months' notice or pay in lieu on termination.  He started a new job, with equivalent pay, two weeks after being fired.  This case asks the question of whether or not Bowes is entitled to that six months' pay anyways.

The conventional wisdom is that he is not, that he has suffered no loss and has no basis to look to his employer for compensation.  He 'mitigated his loss', as they say.  Justice Whitaker held to this conventional wisdom, and dismissed Bowes' claim.  Bowes was clearly fighting an uphill battle.

I argued in my earlier entries that there are major flaws in the conventional wisdom - namely, that where an employer has the right to terminate without notice but with pay in lieu, there is no breach of contract that would give rise to the operation of the mitigation principle.  In order to get to Justice Whitaker's conclusion, I argued that one would have to "read in" a duty to mitigate into the contractual language itself.  And this is not good policy - as I wrote before, "In a contract drafted by the employer, and put to relatively unsophisticated employees for their signature, it is extremely undesirable to start reading in obligations based on arcane legal principles such as the duty to mitigate."  Essentially, my argument is that, if an employer wants the employee bound to an obligation to mitigate pay in lieu, the employer ought to be required to put express language to that effect into the contract.

The Decision

Primer

The Court of Appeal released its decision this morning.  It is a fairly lengthy decision, with a unanimous five-judge panel, authored by Chief Justice of Ontario Warren Winkler.  The Court allowed the appeal, finding that payment in lieu of a fixed term of notice is not subject to a duty to mitigate.

In explaining how it got there, I should first note that I skipped a step in my earlier posts when arguing 'No breach, therefore no duty to mitigate.'  Because if there's no breach, then why are they in Court at all?

Let's still try to keep this reasonably simple:  The terms of the employment contract gave the employer the contractual right to terminate without notice, on payment in lieu of notice.  (As distinct from the common law, which requires actual notice, and leads to an intervening 'damages' analysis to determine pay in lieu of notice.)  So the employer terminates the employee without notice, and this does not breach the contract.  The employee therefore has no obligation to mitigate, under ordinary common law principles, nor to account for mitigation earnings.  The employer then refuses to provide the agreed-upon pay in lieu of notice, and the employee argues that this does breach the contract.

What I didn't go into is why this breach doesn't give rise to a mitigation obligation.  I would ordinarily frame this argument with reference to the first principles of damages, in that mitigation relates to income earned through opportunities available because of the breach of contract.  The failure to give working notice, at common law, frees up an employee to work at a new job, so when the employee finds a new job, that's mitigation.  By contrast to an employee who wrote a book in his off hours while employed, and earns royalties which continue to come in after he loses his job; these earnings are in no way a result of his employment contract being breached.

With this contractual language, Goss Power Products had the right to send Mr. Bowes home without notice without breaching the contract, and that act frees up Mr. Bowes to look for new work.  Or sit at home and watch soap operas for six months.  His call, on the plain language of the contract.  So when he finds new work, and starts earning replacement income, the employer still hasn't breached the contract.  So, when the old employer later refuses to pay up, it is that refusal which breaches the contract, which is in no way causative of the employee's opportunity to earn new income.

The Court of Appeal took a slightly different tack, referring to other jurisprudence which resulted from those first principles.  In essence, their decision turns on a characterization of contractual pay in lieu of notice as "liquidated damages" or a "contractual amount".

Contractual Amounts vs. Common Law Notice

Bowes argued that, as the Court put it, "when an employment agreement specifies a period of notice the parties are merely inserting a term akin to a pre-estimate of damages that would flow from non-performance of the agreement."  Such pre-estimates of damages, are generally enforceable, provided that they are not in the nature of a penalty and are reasonable in the circumstances, and - outside the employment arena - are not subject to a duty to mitigate.

The employer's argument is fundamentally based on a passage from a decision by Justice Nordheimer in 2000, Graham v. Marleau, Lemire Securities Inc., stating that a contractual term fixing the notice period "is nothing more than an agreement between the parties as to the length of the reasonable notice to terminate the contract", without being intended to impact other matters such as the duty to mitigate.

The Court of Appeal rejected this argument, finding that "a fixed term of notice or payment in lieu is not equivalent to common law damages for reasonable notice".  When agreeing to contractual language with fixed entitlements on termination, the parties are agreeing to something entirely different from the common law.  The maximum length of the notice is half of the maximum damages which might be recoverable under common law principles and the calculation of pay in lieu was limited only to base salary, with no accounting for his bonus, car allowance, or other benefits (which, again, would be included pursuant to common law principles).  Thus, the Court found that it is an error to simply equate a contractual fixed term of notice or pay in lieu with common law wrongful dismissal damages.

The Court went on to cite language from a 1995 decision by the English Court of Appeal:  "The concept of a duty to mitigate is entirely foreign to a liquidated damage claim....How could it be right to hold the plaintiff, who can show that his actual damage is greater, to the stipulated sum, but permit an employer who can show that it is less to take advantage of that fact?"  (The English Court made the further criticism, quite astutely, that such an interpretation of such contractual language undermines a core objective of the term itself - to provide certainty and avoid the need for litigation.)

The Golden Parachute Concern

The employer argued that, from a public policy perspective, it was unfair to the employer to give the employee such a windfall, in the form of, effectively, double-recovery.

The Court had a number of responses to this, some of which appear to be little more than fact-based retorts, but others which are more substantial.  In particular, the Court notes that it is common in sports, entertainment, and senior management fields for mitigation to be excluded from such contractual provisions.  If it isn't unfair for "the rich, famous, and powerful" - gleeful side note:  Chief Justice Winkler uses the Oxford comma! - it isn't unfair for the "less privileged".  On a more sober side note, many 'less privileged' lacked the bargaining power to insist on an exclusion of mitigation, and yet now will benefit from the lack of language on the point because of the changing law; however, in some ways that's a problem of the employer's own making.

[55]  It is worthy of noting that, in most cases, employment agreements are drafted primarily, if not exclusively, by the employer.  In my view, there is nothing unfair about requiring employers to be explicit if they intend to require an employee to mitigate what would otherwise be fixed or liquidated damages.  In fact, what is unfair is for an employer to agree upon a fixed amount of damages, and then, at the point of dismissal, inform the employee that future earnings will be deducted from that amount.

[56]  Notably, the concern expressed in Graham seems to disregard the oft-observed disparity in bargaining power between employee and employer.  On this point, Iacobucci J. endorsed the following excerpt from K. Swinton, "Contract Law and the Employment Relationship:  The Proper Forum for Reform"...in both his decisions in Wallace v. United Grain Growers Ltd....and Machtinger...[citations omitted]:

[T]he terms of the employment contract rarely result from an exercise of free bargaining power in the way that the paradigm commercial exchange between two traders does.  Individual employees on the whole lack both the bargaining power and the information necessary to achieve more favourable contract provisions than those offered by the employer, particularly with regard to tenure.

As I said before, I consider this to be the most important policy concern.  The legal question, framed at its simplest, is:  When a contract sets out a fixed notice period or pay in lieu, who benefits from silence on the question of mitigation?  The answer consistent with the entire body of law interpreting employment contracts is simple:  If the employer wants to require the employee to account for mitigation, the employer can build in language.

(Of course, the fact that the parties can contract into a mitigation obligation is emphasized several times, and was never in doubt.  So now employers will start building that language into their termination clauses as a matter of course.  No problem, that's their right.  But I wonder how many such clauses, moving forward, will end up failing altogether because of an accidental extension of the mitigation principle to the statutory minimum notice?  Remember:  statutory minimum notice isn't subject to mitigation, and a clause that purports to make it subject to mitigation will be void.  Reasonably easy to account for, if you're aware of the problem, but easy enough to miss, too.)

Consequences

A lot of employment contracts in Ontario have language akin to Bowes'.  While many such contracts limit the employee to the statutory minimums (which means you can't exclude mitigation), and it's relatively unusual that a dismissed employee finds employment quite as quickly as Mr. Bowes did, there are still going to be a lot of dismissals into the future where this case is very significant to the employer's liabilities.

That is, of course, unless the Supreme Court overturns it.  The employer will likely seek leave to appeal, and it's anybody's guess whether or not the Court will hear it.

Did the Court of Appeal Go Too Far?

I'm a little bit concerned about some parts of the decision that are a bit overbroad.  In particular, I've been operating on the premise that a contract contemplating pay in lieu of notice is fundamentally different from the common law, whereas a contract which simply fixes the notice period (without a 'pay in lieu' option) will otherwise operate within the common law framework.

The Court, however, suggests (maybe?) that a contractually fixed notice period is still a different creature in kind from the common law notice period, and therefore might also be treated differently, perhaps also being excluded by default from an obligation to mitigate.  It isn't certain; the Court doesn't really parse the effect of a contractually fixed notice period without pay in lieu, but some of the language used by the Court suggests that it may go that way.

Again, I would feel uncomfortable with that, because it doesn't accord with the first principles of contract law.  If we contract for actual notice, and you fire me without notice, my obligation to mitigate should apply in full force.  Even on the analysis used by the Court, it doesn't seem to me that there's any way of expanding "contractual amounts" to cover language that doesn't include "or pay in lieu".

Congratulations

I'd like to express congratulations to Mr. Bowes, and to his lawyer, Alex Van Kralingen, who contacted me this afternoon to bring the decision to my attention, noting that I "seemed to be the only one in cyberspace on [Bowes'] side".  They were the underdogs in this fight, and - assuming again that it holds up - it will have a significant impact on the law.  The best wins are always the ones that everyone thought you would lose.

*****

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.

Toyota Service Manager Should Have Mitigated

Justice Belobaba recently released a decision in the case of Ghanny v. 498326 Ontario Limited, and summed up the case quite concisely at paragraph 1.

You’ve been a valued employee for 18 years. One day you’re told that you position is being eliminated at the end of the month but that another job at a related company is available – the same kind of position with the same pay. You’re upset and not thinking clearly and you turn down the replacement job offer. You sue for wrongful dismissal. You eventually find other work but at a much lower position and salary. When the events are replayed at trial and are viewed more objectively, you realize that you should have taken the offered position, that in failing to do so you didn’t mitigate your losses and your action for wrongful dismissal will probably not succeed.

That's essentially the fact pattern.  The owner of Downtown Toyota acquired a Suzuki dealership and reorganized his staffing, telling Mr. Ghanny that his job as Service Manager was ending, but he could take the Parts and Service Manager job at Suzuki, with the same compensation package.  Mr. Ghanny refused, and commenced a wrongful dismissal action.  His concerns included, among other things, that the Suzuki business was smaller, less secure, and a smaller department that he would manage, and also that he would lose the benefit of his 18 years' seniority.  (It is unclear whether his seniority had any impact other than notice of termination.)  There was conflicting evidence on this point, though - management said that they made it clear that his seniority would be carried over.  Management also insisted that they promised job security.  The Suzuki dealership did close 22 months later, but its employees were absorbed by other related companies.


It appears that the different dealerships were operated by separate (albeit related) corporations.


Justice Belobaba concluded, that, whether this is framed as a wrongful dismissal action or a constructive dismissal action, it had to be dismissed because Ghanny should have mitigated his loss by taking the new position.  He applied the framework at play in cases like Evans and Mifsud, which I have discussed before. See this entry for an explanation of the mitigation framework in these cases.


There's also some very interesting obiter:  After the parties got lawyers involved, the employer's counsel made it clear that the Suzuki job was still open, including accrued seniority.  The employee's counsel responded with conditions:  Downtown Toyota had to guarantee Ghanny's salary and benefits; lost wages and costs to that date had to be addressed; and the plaintiff had to be permitted to continue his law suit.

The employer refused these conditions.  The Court concluded that it was unreasonable for Ghanny to insist on the first two conditions, though the third condition was a "legitimate entitlement and the former employer would have been wrong to insist otherwise".  (Frankly, I'm not sure why one would require A, B, *and* C.  If you're continuing the law suit, you're still chasing remedies A and B.  If you get A and B, you don't need to continue the law suit.)  But the Court considered the initial failure to mitigate to be determinative in any event.

My Thoughts


I've noted in the past that I have concerns about the "mitigation with the same employer" cases.  In essence, it often results in the conclusion that the employer unilaterally implemented changes outside of its rights, but the employee should have accepted the changes anyways.  I feel that this is incoherent, and the tests need to be streamlined:  Either an act is a constructive dismissal, and the employee is entitled to quit and seek damages, or it isn't a constructive dismissal, and the employer was entitled to so act.  None of these analytical acrobatics, finding that an act was a constructive dismissal, but the job was still equivalent for the purposes of mitigation and accordingly the employee should have stayed while seeking new employment.

The simple fix, which makes sense from a first principles approach, is that where a unilateral change by the employer has so modified the employment relationship as to create a constructive dismissal, the changed job must inherently be so different as to render it 'not equivalent', such that the mitigation principle will not require the employee to accept the position.  (Reading the other mitigation jurisprudence, one would think that, if anything, mitigation would permit the employee more flexibility than the constructive dismissal doctrine.)  This could involve moving the constructive dismissal threshold up, or lowering the duty to mitigate.

That being said, I think that this case is probably rightly decided, and yet it still raises similar concerns for me.

First and foremost, this case has to be considered in the same context as the constructive dismissal cases, even though it may not strictly be a constructive dismissal case itself.  Because we're talking about related employers, treating them as being actually different would result in arbitrary distinctions.  So I'm glad that the judge felt that it didn't make a difference.

But the judge goes on to note, also in obiter, that even had he believed that Ghanny's seniority would have been lost by the transfer, it wouldn't have made a difference.  It was still unreasonable not to accept it.

If that's right, then the Machtinger line of jurisprudence (i.e. you can't enforce a contract without fresh consideration) dissolves entirely into having all procedural content and no substantive protection for anyone (except for lawyers, I suppose).  It would mean that an employer who is concerned about the notice entitlements of a long-service employee is entitled to simply terminate an employment contract without notice (or on the minimum notice in the ESA) and offer the same job but with different terms, which means that the continued job is 'fresh consideration', and the employer is insulated from a wrongful dismissal suit because of the employee's duty to mitigate.

Finally, some commentary is called for about the employee's imposition of conditions on returning to work.  On these facts, the judge is right - the initial failure to mitigate is determinative, and the subsequent discussions don't matter.  But if one supposed that there hadn't been an initial failure to mitigate, Justice Belobaba is suggesting that the imposition of conditions would still have resulted in a failure to mitigate.

Let's suppose for a moment that you have a wrongfully dismissed employee suing 3 months after the dismissal, and then being offered his job back.

What Justice Belobaba is saying is that the employee is entitled to insist on continuing the law suit - i.e. he can't be required to waive his rights to sue - but he is not entitled to make his due entitlements a condition of accepting the job.  Respectfully, I can't agree that the objectively reasonable expectation is that the employee will take the job back under those circumstances.  Even if there wasn't an acrimonious relationship before...he's suing them now.  It's hard enough to imagine an employee suing his or her current employer while remaining employed (though it has happened).  Saying that an employee is expected to take the job while having to pursue litigation for the unpaid three months...is simply not realistic.

Jack already owes Jill money from breaching a previous contract.  Jill has commenced litigation against Jack to get paid.  Jack now wants Jill to enter into another contract.  Jill responds, "Pay up what you already owe, then we'll talk."  To me, that seems like an eminently reasonable response in any context.  (Indeed, to me, it seems reasonable to insist on additional protections in the new contract to protect Jill's interests in case of another breach.)

Anyone disagree with me on that?

*****

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.

Stranger than Fiction: Dr. Dawg v. FreeDominion

I've posted before about the dangers of online speech.  It is an issue with specific applications in workplace law, but it also has much more significant ramifications in other areas of law.  For instance, The Oatmeal recently explained a dispute it has been having with FunnyJunk:  Oatmeal has received a threat letter, demanding damages for defamation, because Oatmeal has publicly accused FunnyJunk of copyright infringement.

More and more defamation actions are arising from internet speech.  Many people who would be apprehensive about being broadcast publicly have no reservations at all about posting on the internet.  There's a sense of security in the anonymity of the internet.  False security, though.

Many people go online to vent about poor service they've received, or about a personal dispute they're having with somebody else.  Many people go online to debate politics.  These debates can get downright nasty, with personal insults, usually culminating in one side comparing the other to Hitler in some fashion.  (See Godwin's Law.)  Because, in general, these arguments are between people well-shielded behind anonymity, they're pretty meaningless.  But it isn't the anonymity of the poster which gives protection; rather, it's the anonymity of the receiver of the over-the-top insults.  If I post somewhere under a pseudonym, and virtually nobody knows that it's my pseudonym, then I can hardly claim that, when somebody accuses me (via the pseudonym) of some depraved conduct, it injures my reputation in the community.

The Court of Appeal recently heard a case involving such a political debate gone too far.

Yes, you read that right:  The Court of Appeal is at the point of adjudicating disputes between people having online political arguments.

On the one hand, you have "Dr. Dawg", a left-wing political blogger who, despite his pseudonym, is well-known to be John Baglow, who does contract-work for many clients including in the public sector, and who has had political opinion pieces published in mainstream media sources.

On the other hand, you have "Peter O'Donnell", which is a pseudonym used by Roger Smith, and FreeDominion, a right wing discussion site moderated by Mark and Connie Fournier.

Dr. Dawg and Peter O'Donnell carried on arguments on a number of sites, including FreeDominion.  At its essence, the debate was that Dr. Dawg argued against Canada's continued involvement in Afghanistan and supports the repatriation of Khadr on the basis that he is entitled to be regarded as a child soldier; Peter O'Donnell by contrast argues that the goals of the Afghanistan conflict (i.e. bringing down an oppressive religious fundamentalist regime) are noble, and sees the Khadr family as traitors who "should be deported".

Peter O'Donnell proceeded to call Dr. Dawg "one of the Taliban's more vocal supporters."

And that, says Dr. Dawg, went too far.  He apparently was prepared to live with being called a "traitor" and accused of "treason", but calling him a Taliban supporter went beyond the limits of what he could stand for.  (Incidentally, there may have been technical legal advantages to also pleading the 'treason' allegation...but that's neither here nor there.)  Not that the debate was clean up to that point.  Dr. Dawg used the term "yokels with pitchforks" to describe Conservative supporters, and referred to Connie Fournier as the "Free Dominatrix".

On a motion for summary judgment, Dr. Dawg's action was dismissed.  The motion judge concluded that, given the nature of internet debates (including the ability to rebut), the comment in that specific context did not carry a defamatory meaning.  The motion judge felt that Peter O'Donnell, when saying that Dr. Dawg supported the Taliban, was really implying that his opposition to the war in Afghanistan has the impact of advocating a position which would help the Taliban.

(Think of it in terms of the criminal justice system:  I might say that I favour the status quo, which requires the Crown to prove guilt beyond a reasonable doubt and gives the accused significant procedural and substantive protections, including a right against self-incrimination.  A critic might reasonably respond that a consequence of my approach is that people guilty of serious crimes might be acquitted, and therefore that my approach benefits criminals.  Saying instead that I support setting murderers loose, however...well, if understood to be a literal accusation, that would probably be defamatory.  However, if one instead takes it as a hyperbole, then it's really just a comment on the consequences of my position.)

The Court of Appeal reversed the motion judge's decision.  "The issues in this action are all important issues because they arise in the relatively novel milieu of internet defamation in the political blogosphere."  The issues did not lend themselves to a determination on a motion for summary judgment, and a trial was called for.

The motion judge was right to consider context - the meaning of the allegation has to be read in light of the circumstances in which it was made.  Nonetheless, the Court of Appeal was also right to overturn it, because the Court of Appeal wasn't satisfied that the motion judge could have achieved a sufficient appreciation of the full context in which the statements were made on a motion for summary judgment.

The Court of Appeal also hinted that the parties should be prepared to lead expert evidence at the trial on the functioning of the blogosphere and what the "right-thinking person" would take from the accusations made against Dr. Dawg.  This would provide some contextual insight for the court "whose members are perhaps not always the most up-to-date in matters involving the blogosphere".

Essentially, the Court of Appeal is clearly signalling that matters of internet defamation are going to require full trials for a time.  There are a lot of questions to be answered.  Should the blogosphere be treated differently from publications in traditional media?  What about a Facebook status or comment, or a Tweet?  Should they be treated yet differently from blogs?

It's an interesting case, and it would be interesting to see how it turns out, if the parties still have an appetite for a trial after fighting a motion for summary judgment and an appeal.  (Dr. Dawg received a total costs award of $14,000 on the motion and appeal.  Actual costs on both sides are probably substantially higher.)

Quite frankly, I would like to see the action succeed.  As a blogger and Facebook user myself, I make an effort to apply the "If you can't say anything nice, or at least provably true" axiom to my online presence.  It really isn't that difficult.  If you can't say it without casting an aspersion at someone, it probably doesn't need to be said.

But many people don't do so.  Many people are impolite and engage in name-calling, personal attacks, and other such nonsense.  There are many "trolls" on the internet.  And these detract from the quality of the discourse on the internet generally.  I have occasionally engaged in political debate online.  Real debates are great.  It is really beneficial to hear different bona fide opinions on a subject, and the reasons people hold them.  But so many people can't be bothered to debate, and arguments degenerate into petty insults.  If you go online and post anything about any politician, you can expect a half dozen people with different politics to come in and essentially say that you're stupid.  Reasonable posters are often dissuaded from participating in such online discussions, because really, who has patience for that many trolls?

That's how it is, perhaps, but not how it should be.

I don't think it's reasonable to expect that the Courts will start policing online debates, but at the same time I am uncomfortable with the notion of giving a judicial imprimatur to internet trolling.

And search engines add a whole other dimension to the issue.  Once something's on the internet, it's potentially there forever, accessible for all to see.  Even if you assume that those in the blogosphere did have a mutual understanding that such debates are No Holds Barred, there is the potential for spectators who don't fully appreciate the context.  Defamation is about saying something that reduces a person's standing in the community generally...and not just the specific community for which it was intended.  So even if the right-minded blogger might not take the allegation of Taliban support too seriously, folks from outside the blogosphere might not appreciate that.  Imagine if Mr. Baglow seeks a public sector contract which requires security clearance, and CSIS were to discover that he is alleged to be a Taliban supporter.  What do you suppose they would make of that?  Do you think they would see it as simply a rhetorical device in a debate filled with caustic and hyperbolic language?  Or do you think that they would err on the side of caution and refuse to grant clearance?

*****

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.

Why won't many lawyers "take on the union"?

I've had multiple prospective clients express concerns that lawyers are 'afraid' of the unions, that they aren't willing to challenge the union.  They imagine that the power of the labour movement discourages some lawyers from getting involved.

In reality, that isn't what's going on at all.  It isn't the case that lawyers are unwilling to assist against unions or unionized employers; rather, in the majority of such cases there isn't much a lawyer can do.

I've noted before that civil actions against employers are only available to non-union personnel, and the vast majority of claims to be made against a unionized employer has to be made through the union.  (Put simply:  You can't hire a lawyer to sue your employer when you're unionized.)

If you're not happy with the way that your union is representing your interests, there could be recourse, but generally speaking there isn't unless you can show that your union is acting in a manner which is arbitrary, discriminatory, or in bad faith.  (This is what we call a "DFR" application.)  It's not an easy threshold in many cases.

So when a unionized employee finds that his pleas for assistance from the union are falling on deaf ears, he might start calling around for lawyers.  And usually "are you in a union" is one of the first questions he'll get asked.  And often, regardless of how the lawyer explains it, all the employee will take away is "I can't get help because I'm unionized."

If he's lucky, he might have a case capable of supporting, say, a human rights-based claim or a DFR, and so a lawyer might help him.

If he's unlucky, a lawyer might take his money to pursue a human rights-based claim or a DFR even though it may not have any realistic chance of success.

If he's really unlucky, he might end up with a lawyer who doesn't know that employees can't sue their unions, and end up incurring hefty legal fees to go to Court, just to have the case dismissed because the Court can't hear it.  It does happen from time to time.

(To be fair, however, not all cases like these which go to Court do so because of ignorance of counsel; occasionally you see a self-represented litigant, and once in a while you see experienced lawyers arguing a fine technical distinction, trying to get a cast a dispute as not being one arising from the employment relationship.  However, the Courts have made it virtually impossible to sidestep the labour relations process that way; such cases are not generally successful.)

But what people really don't understand is why a union doesn't have to go to bat for a wronged employee.  After all, the employee pays his union dues, ratifies the collective agreement because he thinks it is in his best interests, then the employer breaches the collective agreement in a way which harms him in a significant way. Then the union turns around and says "We won't help you", and other lawyers say "We can't help you."

It seems pretty bad, doesn't it?

In truth, while I can be pretty critical of unions on occasion, and while I think the system could use many improvements, there is nonetheless a certain logic to the way the system is set up.  The union is not obliged to pursue every tenuous or trivial complaint.  And the union's good faith judgment on what it should let slide will not be second-guessed lightly.

As a lawyer, my job is to advise and represent my clients in accordance with their instructions.  Under certain circumstances I can refuse instructions and fire the client if the instructions are insisted upon, but in general my job is to do what the client wants me to do.  For example, if a client tells me to offer a settlement based on x, and persists despite my advice that x is clearly unreasonable (or, as has occasionally happened, that he can clearly do much better than x), I will generally comply with the instruction.  If a client wants to retain me to pursue a matter despite having been advised that the chances of success are limited and the cost of proceeding will be high, then in general I will accept the retainer, while making sure in no uncertain terms that the client understands my reservations and getting a substantial monetary retainer.  (The purpose of the monetary retainer is as much to ensure that the client is serious about proceeding as it is about protecting my own account.  In the majority of such cases, the response to my request for a retainer is "I'll get back to you on that" and I never hear from them again.)  Bottom line:  The client tells me what to do, and if the client and I can't work together, the client can get a different representative.

The union's role as a representative is not equivalent.  The union has discretion to act in a manner which best promotes the interests of the bargaining unit as a whole.  To some extent, that includes a gatekeeper role, filtering out frivolous issues to preserve its finite resources for fights that make more sense.  Its obligations to individual employees extend only to representing their interests in a manner which is not arbitrary, discriminatory, or in bad faith.

In other words, where the union has not advanced an employee's interests, the question is not one of 'right' or 'wrong', but whether or not the failure was arbitrary, discriminatory, or in bad faith.  The fact that the employee may have legitimately been wronged is of virtually no import, and in most scenarios there is absolutely no other way of seeking to right the wrong.

And thus, not much a lawyer can do, in many cases.

*****

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.

Breaching Employment Contracts

In my recent post about employment contracts and statutory minimum entitlements, it might be noted that some of the 'example' language used did not allude to 'pay in lieu of notice'.  When terminating employees on a not-for-cause basis, most employers give pay in lieu of notice rather than actual notice, so doesn't it make sense to build 'pay in lieu of notice' into the contractual language?  Give the employer the contractual right to do that which the employer is most likely to actually want to do?

To be perfectly frank, that's a common approach.  Many - perhaps most - employer-side lawyers use contractual notice entitling the employer to dismiss on a certain amount of "notice or pay in lieu of notice", or some such formulation.  And in some circumstances I will as well, but in general I find the term to be better without the 'pay in lieu' option.

This is an area where the principles of employment law are slightly broken, which is why the standard approach of entitling the employer to terminate on 'pay in lieu of notice' hasn't exploded in anyone's face yet.  But if it ever gets fixed, there will be a lot of employers out there with numerous contracts that don't do what they want.

There are several possible issues, including formulaic ESA compliance, actual increased ESA liabilities, and mitigation.

But first let me begin with an explanation of why the language usually doesn't help an employer much.

Efficient Breach

The concept of "efficient breach" has long been an integral part of contract law.  With a handful of exceptions, you can, and should, breach a contract when the cost of completing the contract is more than the damages the other side will suffer because of its breach.   Then you compensate the other party by paying him the value of his losses, and all is well.  It's a complicated and nuanced doctrine, but the point is this:  There is nothing wrong with breaching a contract, in general.  The Courts will make you compensate the other person, but they will not look to punish you for a breach of contract, without more.

There are caveats, of course.  Sometimes, a party can seek 'equitable' relief to force you to carry out your obligations.  (This doesn't apply to notice requirements, though it can apply to restrictive covenants.)  Punitive damages can be sought where there is a separate actionable wrong - i.e. where you did something worse than simply breach the contract.  And you have to take a somewhat expansive view of 'damages' - if it is reasonably foreseeable that the non-breaching party is going to suffer significant mental distress as a result of the breach of contract, you may have to compensate them for such damage as well.  (That's relatively new - it used to also require a separate actionable wrong - but we used to have Wallace damages instead.  For employers, this is a good trade-off.)

When you breach a contract, the measure of compensation for the other party will be whatever is required to put them into the same position they would have held had the contract been satisfied.  In a dismissal context, this means that, if you're entitled to dismiss only on notice, but you dismiss without notice, the damages suffered by the employee will be based on what they would have earned through the notice period - i.e. pay in lieu of notice.  This is the common law framework.  Under the ESA, you're entitled to satisfy statutory obligations via pay in lieu (with continuation of benefits), so that isn't a problem.

Assuming you do terminate an employee without notice, the difference between a contract entitling you to do so and a contract that doesn't is this:  One way, you pay x pursuant to the terms of the contract; the other way, you pay the same x by way of damages for breach of contract.

Not quite right, though.  Mitigation expenses could get added to the tab of the breaching employer, but for reasons I'll go into shortly, the flip side of that is potentially beneficial to the employer.

Also, it is possible that certain sums - bonuses for example - could be excluded from a contractual 'pay in lieu of notice' term, whereas they would be inferred to be part of a damages calculation.  Yet the exclusion from the 'pay in lieu of notice' term could invalidate the termination language itself, as I explained in this recent post.  In reality, it would be no less difficult to craft an *actual* notice clause which excludes bonus entitlements, and doing so one would be more likely to be cognizant of the ESA requirements.

In general, though it requires attention regardless, a party's obligations following a breach of contract will be calculated from the perspective of what the minimal performance of the contract would have been.  So common law damages principles will often, in and of themselves move the employer's liabilities towards the lower end of what is required, without the potentially risky task of spelling out each entitlement specifically.

Problems with Contractual Pay in Lieu of Notice

Formulaic ESA Compliance

Recall that I recently posted about the Superior Court's confirmation that a formula which will not - in all possible scenarios - fully meet the ESA minimums will be void, and not enforced.

What I pointed out in that post is that many contracts are too specific in the employee's entitlements and too broad in excluding the possibility of additional rights.  "Pay in lieu of notice" lacks clear definition in contractual language, and will often be accompanied by a description of what it includes, and language making it very clear that nothing behind the specifics described are included.  If you fail to include something that would be captured by the ESA - benefits, shift premiums, vacation pay, overtime in some cases, bonuses in some cases - that puts the whole clause at risk.

This is an existing problem, but it can be circumvented by a general guarantee that the payment on termination won't be less than the minimum required under the ESA.

Additional ESA Liabilities

This is an interesting point which I've extracted from an argument made by Professor David Doorey.  He argues that all common law pay in lieu of notice is protected by the ESA, because of the expansive definition of wages under the ESA, which includes "monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied".  By operation of this, he argues, the pay in lieu of notice to which an employee is entitled at common law, arising out of an implied contractual term, should be considered wages owing within the meaning of the ESA.

The argument is completely inconsistent with the established jurisprudence, though you have to admit that there's a certain persuasiveness to it at face value.  However, I disagree with it, on the basis that, at common law, there's not really such a thing as "pay in lieu of notice".  There is *actual notice*, and there are damages for failing to provide adequate notice.  The principles of damages are tied into the compensation principle and mitigation principle, and they aren't always owing.  Accordingly, it doesn't seem correct to call them 'wages' within the meaning of the ESA.

However, that counter-argument doesn't extend to written contractual terms expressly entitling the employer to dismiss on 'pay in lieu of notice'.  In such a case, the contract itself says "The employer will pay x to the employee".  Fits pretty neatly into the statutory definition of wages, in that case.

As I said, this is still in conflict with the established jurisprudence.  But there's a persuasive legal argument for it.  In which case an employer with such a written contract would be statutorily obligated to pay out the full contractual notice within the narrow time frames set out by the ESA, and unable to insist on a release being signed in exchange.

Mitigation


I explained part of this in context of the Bowes v. Goss Power case, which has been heard but not yet decided by the Ontario Court of Appeal.  The mitigation principle arises from a breach of contract.  If the contract has not been breached, it seems incoherent to suggest that the mitigation principle arises.  (Again, this is at odds with established jurisprudence, but again, there's a strong argument that the established jurisprudence is wrong.)

If I'm right about this, then a contractual term permitting an employer to dismiss on pay in lieu of notice would require the full amount be paid regardless of mitigation efforts or even of successful mitigation.

In theory, one could draft language permitting salary continuance, which preserved the obligation of the employee to mitigate and preserved the right of the employer to discontinue the payments upon successful mitigation...but this would be complex, and it ultimately may not work.  In particular, I'm concerned about how the employer would enforce the employee's obligation to seek replacement work.  In practice, it would probably be seen as continuing the employment relationship on actual notice and in a different form, and terminating payments because of a failure to mitigate would probably be seen as a termination for "just cause", which is a high threshold for the employer to prove.

Similarly, the possible expansion of ESA protection to contractual pay in lieu of notice would likely lead to the same conclusion, that the contractual pay in lieu of notice is not subject to mitigation, and must be paid regardless.

All things considered, an employer will often be served perfectly well by a contract which makes dismissal without notice into a breach, whereas a contract entitling them to dismiss on pay in lieu of notice is not without its risk.

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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.

Employment Contracts - All the Small Things

I recently posted about the growing body of case law suggesting that a failure of a contractual notice formula to at last meet the statutory minimum notice period in all possible scenarios renders the provision void.

In that case, I noted that statutory severance can complicate matters, but I did not elaborate on the point.

Under Ontario's Employment Standards Act, employees with more than three months have entitlements to minimum notice periods.  This caps at 8 weeks for an employee with at least 8 years of service.  We call this "statutory notice".

In addition to statutory notice, some employees are entitled to additional amounts, which we refer to as "statutory severance".  In order to be so entitled, an employee must have at least 5 years of service, and the employer must have an Ontario payroll of at least $2.5 million per year.  (Mass layoffs can trigger the severance obligation for employers who don't meet the payroll threshold, too.)  This accrues at 1 week per year of service, rounded down to the month (so if I have just over 10 years and 5 months of service, my severance pay is 10 and 5/12 weeks).  This caps at 26 weeks, for those with 26 or more years of service.  (Naturally, in the event that the ESA definition of 'just cause' is made out, statutory severance doesn't apply.)

So, for some long service employees, statutory minimums can reach as high as the equivalent of 34 weeks' pay.

However, the difference in the nature of these entitlements requires some attention in drafting employment contracts.

You see, if a contract says that an employer can terminate an employee on 8 weeks notice, that will likely be ESA compliant, and may be enforced by a Court.  An employee with 10 years of service, who is entitled to severance, will be able to insist on the 8 weeks' pay in lieu of notice, as well as the 10 weeks' severance pay, but may not be able to claim for additional common law notice, because the contract gave the employer the entitlement to fire on a fixed amount of notice.  Other entitlements - outstanding wages, commissions, vacation pay, etc. - are all fair game to pursue, but not notice.

However, employers and their lawyers want to make the termination clause final and certain, ensuring that the employee knows, "This is what you're getting, and you won't get anything else beyond it."  The concern is that there have been cases where Courts have decided that language along the lines of "If you are fired, you will be given x notice or pay in lieu of notice" fails to actually displace the presumption of reasonable notice, because it fails to clarify that the employee won't get more than that.

In my view, framing the notice period in terms of the employer's entitlement should solve this problem:  Saying that the employer is entitled to terminate the relationship on x notice clearly displaces any obligation on the employer to provide greater notice.  Yet even I tend to err on the side of caution and disclaim further obligations.

And if you drafted the language to clarify that the employee isn't getting any more notice or pay in lieu than x, that's still not going to be a problem.

Where you start running into problems, however, is when you start getting too specific as to what the employee will receive, and too broad as to the entitlements that satisfies.

The Wright Case

In the 2011 case of Wright v. The Young and Rubicam Group of Companies (Wunderman) from the Ontario Superior Court of Justice, the employment contract at issue included a relatively complicated formula:

The employment of the Employee may be terminated by the Employee at any time on 2 weeks prior written notice (one week’s notice during Probationary Term), and by the Company upon payment in lieu of notice, including severance pay as follows:

a)         during Probationary Term – one week’s notice;

b)         within two years of commencement of employment – four (4) weeks Base Salary;

c)         after two and up to three years after commencement of employment – six (6) weeks’ Base Salary;

d)         after three but less than five years after commencement of employment – eight (8) weeks' Base Salary;

e)         five years or more and up to ten years after commencement of employment – thirteen (13) weeks' Base Salary, plus one (1) additional week of Base Salary for every year from 6–10 years of service up to a maximum of 18 weeks;

f)         after more than ten years but less than 19 years from the commencement of employment – six months’ Base Salary;

g)         After 19 years or more from the commencement of employment – 34 weeks' Base Salary (or eight months)

This payment will be inclusive of all notice statutory, contractual and other entitlements to compensation and statutory severance and termination pay you have in respect of the termination of your employment and no other severance, separation pay or other payments shall be made.

The employee was terminated after just over five years, giving him a contractual entitlement to 13 weeks' pay, whereas his statutory minimum was 5 weeks' notice and 5 weeks' severance.  So it would have been fine.

But what you need to remember, and what the Court decided (relying on the Shore v. Ladner Downs case which I sometimes allude to), is that you need to look at the language itself - and not the specific context - to determine whether or not it is enforceable.

And there are two glaring problems with this language.

Problem 1:  Partial Years of Severance

There's a problem for employees with certain lengths of service.  The trouble happens once you hit 8 years and 1 month.  At that point, the contract says that you get 16 weeks.  The ESA says that you get 16 and 1/12 weeks.  Likewise, at 9 years exactly, you're fine again, but throughout the following year the contractual term would short you by your partial year of severance.  (The judge says that the same is true of 10.5 years.  I don't think that's correct - paragraph (f) is fine until you get over 18 years of service.  (Six months is 26 weeks.  At 18 years of service, notice plus severance is 26 weeks.  Once again, the partial year's severance up to 19 years gets shorted by the contract.

In other words, over the course of a 19 year+ career, there will have been three 11-month periods of time in which an employee would be left marginally short of his statutory entitlements.  This is a big enough problem to void the contract.

Problem 2:  Benefits

Whenever the employee's entitlements are limited to "base salary", that should raise red flags.  It doesn't mean that there actually is a problem, but that's the starting point for a lot of difficulties.

In this case, the issue is that the contract doesn't provide for a continuation of benefits.  Under the ESA, benefits must be continued through the statutory notice period.  In the event that they aren't continued, the employee is entitled to the money the employer would have applied to the benefit plan.  The employer argued that it doesn't *displace* the continuation of benefits either, and pointed out that the employee's benefits were actually continued through the statutory notice period.

The judge, however, disagreed on the interpretation of the contract.  There's some discussion of the contra proferentum rule, but I'm not sure that's quite correct.  (Ambiguity is to be decided against the party that drafted the contract.  However, it seems odd to apply that rule in such a way that decreases the liability of the drafter so as to make the agreement void.)  The Court concluded that employers commitment to not provide "other payments" extended to payments to the benefits provider.  Whether or not you agree with that, I would argue that, with the agreement silent as to benefits, at a minimum there's a prospect that the employee could be entitled to monetary compensation under the ESA for the cancellation of benefits.

Other Thoughts

The benefits problem arose in large part because of the broad language disclaiming "other payments".  I've often seen language indicating that a sum would be inclusive of all entitlements to everything under the sun, including all entitlements under the ESA, the Human Rights Code, the Occupational Health and Safety Act, etc.  (I've also seen contracts use such vague language as "the applicable laws", which would likely be too vague to be enforced.)

There's little doubt that a provision in a contract waiving rights against subsequent breaches of the Human Rights Code would be disregarded, so the language is of little value, but the attempt to lump them all together might undermine the rebuttal of the presumption to reasonable notice.

One other interesting thought:  Whether or not an employee is entitled to severance is contingent on contextual factors.  All employees will be entitled to statutory notice of termination after three months, but only under certain circumstances with an employee be entitled to severence.  It's a contingent entitlement, and I don't think the Courts have ever considered how that fact interacts with this doctrine.

Many employers will never be on the hook for severance - their business models just wouldn't bring them to that point.  It would seem silly to say that they need to account, in their contractual language, for the purely hypothetical possibility that they might someday have to pay severance.  But consider the employer whose payroll varies from year to year between 2.4 million and 2.6 million.  What is clear is that a termination clause is either valid or it isn't.  It won't flip back and forth between being enforceable and not being enforceable depending on the staff complement.  So language which rules out the prospect of severance pay may not be enforced, regardless of whether or not severance pay may be required of the employer.

The twist is that there are really easy fixes for this sort of thing.  Lawyers try to be fancy, and implement complicated formulas to show off, but minor defects can be fatal.  Keep it simple, ensure that the contract expressly guarantees minimum compensation in accordance with the applicable employment standards, and the contract - in that sense, at least - should be fine.

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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.

Another Summary Judgment Motion Dismissed

There have been a few changes in recent years to civil litigation procedures in Ontario, and a significant one was the expansion of the rule permitting motions for summary judgment, to allow the rule to capture a broader number of cases and reduce the necessity of trials.  When seeking summary judgment, a party is asking the Court to find that there is "no genuine issue for trial" - that the opposing party's case is simply unsustainable.  In the past, a motions judge was unable to weigh the evidence or assess credibility:  If there was conflicting evidence as to any material facts, a trial would be necessary.  Now, however, motions judges are permitted to weigh evidence, assess credibility, and draw inferences of fact when determining whether or not there is a genuine issue for trial.

Simple wrongful dismissal cases, where no just cause is alleged and no punitive or moral damages are sought, are often suitable for summary judgment motions.  This is especially important as these actions do not always involve a great deal of money.  In most such cases, the dispute is over the length of the reasonable notice period, and the law on reasonable notice is well-established in principle, though every case is unique on its own merits.  In determining the reasonable notice period, the usual factors - referred to as the Bardal factors - are the age of the employee, the length of service, the character of employment, and the availability of replacement employment.

I've never seen a case where age was a matter of dispute.  The facts surrounding length of service are seldom disputed - for longer-service employees, the start date may be uncertain, but it is unusual for this to be a source of argument.  Where the length of service is in issue, it is usually because there was some interruption in the employee's service or some other reason to question whether or not a given period of time is to be included for the purpose of calculating the notice period.

The availability of replacement employment is seldom the source of much discussion, either.  Occasionally, expert evidence will be led by one side or another, but in general this one is driven more by the 'mitigation' discussion - if the plaintiff has been diligent in seeking new employment and has been remarkably unsuccessful, that may weigh in favour of a slightly longer notice period.  In most cases, this factor is hardly even mentioned in the Court's analysis.

The character of employment, however, can be more difficult.  Was the position supervisory?  How much responsibility was involved?  How specialized were the duties?  Sometimes, you get a case where there are grey areas of how much personal responsibility an employee had, whether or not the employee's role had supervisorial/managerial aspects to it, and what the bulk of the employee's job actually was.  I might say that I was an accountant, and point to the myriad tasks involving the company's books.  The company might turn around and say that I was an admin assistant, that my bookkeeping responsibilities were a small part of my duties and in any event only related to simple data entry.  This is the kind of dispute we sometimes run into here.

Incidentally, there is case law suggesting that the character of employment is of "declining relative importance", but the consequences of that are yet uncertain.

In addition to the Bardal factors, the issue of mitigation is usually raised in wrongful dismissal.  Did the employee take reasonable efforts to reduce his losses by obtaining reasonable employment?  However, the threshold for this test is not particularly high, and the onus is on the employer, so this seldom makes a difference.

There are some cases in which the Courts have found summary judgment is not appropriate.  I posted about the Thorne case some time ago, in which the character of employment was in dispute and called for a trial.  Recently, the Court released its decision regarding a summary judgment motion in Bomhof v. Eunoia Inc. et al., dismissing the motion.  In this case, a 64-year-old registered nurse with 8 years of service was dismissed.

It is well-known that there is a nurse shortage in Ontario.  It should not be difficult for an RN to find new work.  However, this RN did not include hospital settings in her employment search, and when she finally obtained part-time employment ceased searching for a new job altogether.  The employer alleged that these actions were unreasonable, and inadequate for mitigation.  The trial judge accepted that they are triable issues, and declined to order summary judgment.

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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.

Back to Basics: I've Been Fired - What Now?

There is a remarkable variety of different circumstances of dismissal.  Yet, for non-union employees, the immediate actions you should take are surprisingly similar across the board.

(1)  Apply for EI benefits.  Maybe you were fired for misconduct.  Maybe not.  Maybe you're receiving pay in lieu of notice.  Maybe not.  But EI recommends applying "as soon as you stop working even if you don't have your Records of Employment."

People fired for misconduct may have their claims denied, but there is absolutely nothing to be lost by applying anyways.  If you are denied, there is an appeal process available, which is usually a good idea to attempt.

(2)  Contact a lawyer.  Maybe you've been offered a package and asked to sign a release.  Maybe just cause is alleged and/or you've been sent on your way without any offer at all.  Maybe your employer just yelled at you over the phone "You're fired!" and hung up with no further adieu.  Regardless, you may or may not have entitlements, which may or may not be significant, and you need to talk to a lawyer to figure out your options.  You should do so before you sign anything and before you try to negotiate directly with the employer.  I cannot emphasize that enough:  Never sign anything after being fired without first consulting a lawyer.

There are a few things you should try to pull together, if possible, when seeing a lawyer about a dismissal, including but not limited to:

• The termination letter, and any other documentation received from your employer at the time of termination.
• A copy of any written contract you may have signed.
• Copies of any disciplinary notices you may have received recently.
• Your most recent T4.
• Your most recent pay slips.

If some of those can't be found or aren't applicable, though, don't let that stop you from calling a lawyer about it.  Also, depending on the circumstances, other documents may be relevant as well - medical records and prescriptions, discipline and termination policies and other policies you may have been accused of breaching, etc.  Your lawyer should tell you what he or she needs to see, but at first instance just use your best judgment.

(3)  Dust off your resume.  As your lawyer will tell you, you have an obligation to mitigate any losses you may have suffered.  Either way, starting to look for a job asap is just plain smart, unless your doctor orders you not to.  You may want to take advantage of services available to help with job searches, and depending on your re-employment opportunities it may be worthwhile to update your training or even to train for employment in an entirely different field sometimes.  Talk to your lawyer about that first, though.  Keep a written record of every step you take looking for a job, from digging out the box with your old resume in it to attending job interviews.

(4)  Find a way to manage the stress.  (Note:  I have no association with the linked site, and offer no assurances regarding their services or the safety thereof.)  Until you've settled into a new job and gotten any money you're entitled to from your old employer, you're in for a tough time.  Just walking out of the termination, it's perfectly normal to experience varying levels of shock, and it is often prudent to take a cab home.  (A prudent employer should offer a taxi chit for the purpose, but even if they don't, you should carefully assess whether or not you are able to drive safely.)

Hobbies are useful.  Though you do need to search for a job, you should also make sure that you're not cooped up at home all day.  If you don't play sports, consider taking up running or cycling, or just walking if those are too strenuous for you.  I know people who became very fit and lost a lot of unwanted weight after being fired.  I know of others who ended up spending most of their days in bed and/or in front of the television eating comfort food.  That isn't what you want to do.  You should also turn to friends and family for support; don't shut them out.

In many cases, it will be prudent to see your doctor after being dismissed.  Many people require medication to help with the stress of being fired.  It isn't as bad as it sounds - maybe you just need something to help you sleep at night.  In addition, if your lawyer ultimately thinks a claim for moral damages might be appropriate, medical records are a good starting point.

For some people, it can be a rough ride down a very long road.  Being fired is stressful.  Hunting for a job is stressful.  Not having income is stressful, particularly when legal fees get added to your expenses.  And litigation can be a major source of stress for a prolonged period.  It can be the hardest time in a person's life, and so you need to take your physical and emotional health seriously, right from the outset.  And remember that you aren't alone.  Lots of people get fired, often for little or no fault of their own, and the negative emotions that follow are perfectly normal and natural.  And there are lots of people there to help you.  Friends, family, career support professionals, doctors, lawyers, and others.

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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.

Ontario Court of Appeal Strikes Down Mountie Unions

In September, I made an entry about a case that was about to be heard by the Ontario Court of Appeal regarding whether or not the RCMP can unionize.

There's a long-standing ban on RCMP unions.  They have associations, but these associations are not recognized by management.  Rather, the Mounties have a mechanism called the "Staff Relations Representative Program" (SRRP), which lacks independence and only has 'consultation' rights, not robust collective bargaining rights.

The Mounted Police Association of Ontario (among others) challenged the ban on unions, and its application was decided by Justice MacDonnell in April 2009.  Justice MacDonnell allowed the application, finding the ban unconstitutional.

Here's the fun part about fast-moving law:  Every litigation is trying to hit a moving target.  When the application was decided in April 2009, we had the Dunmore and B.C. Health Services decisions from the Supreme Court of Canada, establishing broad Charter protections for unions and union activities, including meaningful collective bargaining.  Justice MacDonnell's conclusions probably looked fairly firm, given those cases.

At that point, the Fraser case was moving through the Courts.  The Fraser case was the sequel to Dunmore, a challenge by agricultural workers against their exclusion from the Ontario Labour Relations Act.  (In Dunmore, they were ultimately successful, and given the right to join associations.  The Province responded minimally, by giving them the right to join associations and to 'make representations' to employers.  So Fraser was a challenge to that new regime.)  Fraser was first heard before B.C. Health Services was decided, and Justice Farley concluded - rightly at the time - that Dunmore did not provide a Charter right to collective bargaining.  Then B.C. Health Services was released, which did provide such a right, so the terrain was changed for the Fraser appeals.

Last year, the Supreme Court ruled against the agricultural workers in Fraser, concluding - in a feat of statutory interpretation that rivals David Copperfield - that the minimalistic language implemented by Ontario could be interpreted as including an obligation to bargain in good faith, and that the absence of a rigourous process in line with traditional labour relations wasn't fatal.  The traditional model of labour relations that has been applied in Canada - called the Wagner model - is not constitutionally entrenched.

So when I posted in September about this case, I suggested that Fraser might be a major obstacle to the challenge to the ban on unions.  The Court of Appeal recently released its decision on the matter, allowing the government's appeal and finding that, following Fraser, the SRRP was sufficient.

There's no question that the unions will seek leave to appeal to the Supreme Court, but in the mean time the Court of Appeal's decision is quite interesting.

New Questions of Law

The Court of Appeal notes that there are two different questions in this case from the previous Supreme Court cases:  Does the Charter guarantee a right of employees to select their representative association; and does the Charter guarantee a right of employees to have a representative association which is "structurally independent" of management?  The differences in the question afford the Court an opportunity to interpret the principles applied by the Supreme Court in previous cases, extrapolating its results in a principled manner.

Derivative Rights

The Court of Appeal notes that the Supreme Court referred to the Charter's protection of collective bargaining as right in a "derivative sense", and explains the history of derivative rights.  Essentially, when a positive government action may be a "necessary precondition" to the exercise of a fundamental freedom, the government may be obligated to do so.


For example, while there is no Charter obligation on the government to provide access to information, there may be a derivative right to disclosure where such disclosure is a necessary precondition to meaningful public discussion on matters of public interest; in other words, where such discussion is "substantially impeded" by the non-disclosure of such information.

The Court of Appeal concludes, accordingly, that "a positive obligation to engage in good faith collective bargaining will only be imposed on an employer when it is effectively impossible for the workers to act collectively to achieve workplace goals."

That latter sentence may be a slight oversimplification, in part because on the facts of this case, the employer is a government agency.  The Charter has no direct impact on private actors, including private employers.  It impacts only governments.  In a more general sense, it would be fairer to suggest that the Charter imposes an obligation on government to legislatively require employers to engage in good faith collective bargaining only when it is effectively impossible for the workers to act collectively to accomplish workplace goals.

On the Facts


The Application judge made several findings of fact which are difficult for the union to overcome.  In particular, the judge found that "RCMP management listens carefully and with an open mind to the views of SRRs in the consultative process established by the SRRP."

That being the case, Fraser basically had to be fatal to the claim.  The SRRP is a labour relations model with different features from the Wagner model, but it appears to give Mounties a meaningful ability to act in concert to achieve workplace goals, which is - at its core - what is protected by s.2(d) of the Charter.

Implications Moving Forward


We can anticipate a series of "right to strike" cases moving forward.  One has already been heard in Saskatchewan, and we can reasonably expect several more, following from one or more of the designation of the TTC as an essential service or the various back-to-work legislation enacted and/or threatened by the Federal government in recent months (Canada Post, Air Canada, CP).  I don't know if any actual legal processes have been initiated to date for these matters.

If we assume that the Supreme Court does not overturn the Court of Appeal's decision here, then the future of a "right to strike" in Canada is bleak.

When the Saskatchewan Court of Queen's Bench concluded that there is a right to strike, this decision was heavily weighted by referencing international law.  Canada is a signatory to a number of international treaties, including ILO Convention 87, which guarantees rights of trade unions.  While Convention 87 doesn't expressly guarantee a right to strike, adjudicative bodies interpreting it at international law have interpreted the right to strike as an ancillary right protected by the convention.

Earlier decisions of the Supreme Court (and in particular B.C. Health Services) have implied that the rights found in s.2(d) of the Charter should be interpreted to include at least those rights contained in related treaties that Canada has ratified.

Accordingly, said the Saskatchewan judge, the right to strike is constitutionally entrenched.

The Ontario Court of Appeal's consideration of this issue is much more nuanced, and in particular the highlighting of the right to collectively bargain as being a 'derivative right' will inform the discussion:  The Charter doesn't include the right to collectively bargain as a freestanding right, but rather provides that collective bargaining may be guaranteed where necessary to protect the association rights at the core of s.2(d).

Extending these principles to the right to strike, I would anticipate a conclusion that the government is generally entitled to provide alternate recourse to the right to strike, provided that the alternate recourse is even-handed and does not meaningfully interfere with the collective bargaining process.

(To clarify:  In no way to I wish to be taken as endorsing any notion that a general prohibition on the right to strike, such as what we are currently seeing at the federal level, would be good public policy.  On the contrary, I believe that it is far better to have parties reach their own resolution, generally speaking, and in many contexts to permit labour interruptions as a tool for reaching those resolutions.  However, there is a world of difference between calling something "poor public policy" and saying that it should be constitutionally prohibited.)

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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.