There's an interesting series of cases proceeding before the Human Rights Tribunal of Ontario (HRTO), including the recent decision in Fawzy v. Paris Jewellers.
Mr. Fawzy's allegation is that he reported to the employer sexual harassment allegations made by two of his staff members, Ms. Biazrov and Ms. Shiwrat, and all three of them were fired as a result. (Mr. Fawzy appears to have been dismissed in 2011, and the others were dismissed many months later in 2012.) Mr. Fawzy's version of events appears to be that the alleged harasser had a close relationship with management, and therefore management did not want to properly deal with the complaints, and instead cleaned house. It appears that the employer acknowledges that there were sexual harassment allegations, and that Mr. Fawzy communicated the allegations to the employer, but takes the position that his dismissal was for unrelated reasons.
All three filed applications, and the Tribunal queried whether or not the three should be consolidated, and requested that the parties advise if they objected to the consolidation. As well, Mr. Fawzy requested production of various documents, including the report resulting from the employer's investigation into the misconduct.
Consolidation
The employer made submissions arguing against the consolidation of Fawzy's application with the others, on the basis that the proceeding will focus on Fawzy's alleged performance issues, and not the allegations of sexual harassment themselves.
The Tribunal accepted this argument: The material facts to Fawzy's application are that he related allegations of sexual harassment to the employer, and the employer did not dispute that. Whether the allegations were justified is immaterial, and Mr. Fawzy's hearing will "not need to include evidence on whether the sexual harassment occurred, or whether Mr. Fawzy reported harassment complaints to the [employer], whereas Ms. Biazrov's and Ms. Shiwrat's hearing will need to focus on that evidence."
Disclosure
While some of the disclosure requests were granted, the report was not. Again, the Tribunal finds that whether or not the harassment was justified is not material to Mr. Fawzy's application, and therefore there is no reason that the report needs to be disclosed - if there was a reprisal, it exists regardless of whether or not the complaints were ultimately substantiated.
Similarly, while Mr. Fawzy asked for production of the alleged harasser's resume, on the theory that it would demonstrate that the harasser was unqualified for the position, thereby supporting his theory of nepotism, the HRTO concluded that the reasonableness of the employer's response to the complaints was not material to whether or not it engaged in reprisal against Mr. Fawzy.
My Thoughts
I would question this decision. Most of its conclusions ultimately turn on the premise that whether or not the employer dealt with the complaints themselves reasonably and in good faith is immaterial to whether or not Mr. Fawzy experienced reprisal.
Let me first highlight one important fact: It does not appear to be particularly clear that Mr. Fawzy's action, in advising the employer of the harassment complaints, is one which triggers reprisal protection. Reprisal protection covers enforcing one's own Code rights, and refusing to infringe another's Code rights. Mr. Fawzy's conduct is only protected if it can be characterized as a 'refusal to infringe' the Code rights of Ms. Biazrov and Ms. Shiwrat, though I would argue that a purposive interpretation of the provision would tend towards such a conclusion.
While that is important, it is in no way determinative of this decision. If his actions did not trigger reprisal protection, the case falls off the rails without even needing to ask why he was fired. If they did trigger reprisal protection, then the only question is "Why was he fired?" In other words, it is a question of motive for the employer.
With that in mind, and with the utmost respect to the HRTO, I would argue that it is highly problematic to argue that whether or not the employer approached the complaints themselves reasonably and in good faith is immaterial to its motive for terminating Mr. Fawzy. If one supposes that Mr. Fawzy's theory of the case is right, that the employer was highly motivated by a personal relationship with the alleged harasser, and therefore wanted to sweep the matter under the rug, the employer's interactions with the alleged harasser are very relevant, as is the investigation report and the employer's response to the report. On the other hand, if Mr. Fawzy is wrong, and the harassment allegations were unsubstantiated, it is much harder for him to point to some motive for the employer's alleged "shoot the messenger" response.
In other words, the Tribunal's preliminary decision here seems to presuppose that the substantive harassment allegations had nothing to do with the decision to terminate Mr. Fawzy, when that appears to be precisely what is being alleged by Mr. Fawzy.
There's also a question of process. It's not entirely clear whether or not Fawzy had an opportunity to make submissions in support of consolidation (if Fawzy supported consolidation, which is also unclear). The Tribunal proposed to consolidate, and upon receipt of the employer's submissions to the contrary, determined that consolidation is inappropriate, without querying whether or not Fawzy wanted to make submissions in support of consolidation. Does Fawzy retain the right to bring a new request for consolidation if he so desires? Probably not - the Tribunal determined the matter as between the parties. Yet to have made a binding determination of the matter without having given Fawzy an opportunity to make submissions would violate the principles of natural justice.
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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.
Wednesday, August 29, 2012
Monday, August 27, 2012
Bill 168: Culp Case Dismissed
Update: Earlier this month, the Culp application (which I discussed here) was dismissed. Not surprising, given the earlier interim decision, but there's some interesting commentary.
First, let me explain that, from the decision, it appears that Culp made submissions as to why her "application for wrongful dismissal" should be allowed to continue. (It really sounds like Culp needed/needs a lawyer. That phrase in and of itself was probably the death knell of her s.50 reprisal application.) She asserted that it was "unlawful" to terminate her for her actions, and went on to allege a pattern of harassing conduct.
Vice-Chair Anderson made a few observations. First, he refused to attach any weight to the rather vague and entirely new allegations of patterns of conduct.
Secondly, he made a distinction which might be very helpful for lay readers:
"Second, I note that this is not an application or action for wrongful dismissal. It is an application under section 50 of the Act. Culp’s references to the employer’s actions being “illegal” are not helpful. The issue for the Board is whether the application makes out an arguable case that there has been a breach of section 50 of the Act, not whether the employer’s actions are “illegal” in some other way. Whether the employer’s actions are “illegal” in the sense of constituting a breach of Culp’s contract of employment giving rise to a claim for wrongful dismissal is an issue for the courts, not this Board."The Vice-Chair is absolutely right in drawing this distinction. It bears noting that the Board *does* have a process for adjudicating something very similar to 'just cause', and can order statutory termination pay to be provided, but that does not appear to be in question here, and is an entirely different process. (Quite honestly, I tend to resist the characterization of 'breach of contract' as being 'illegal', anyways. I tend to think of 'illegality' as speaking to some broader prohibition than merely something that a party has agreed not to do as a term of contract.)
Third, and most importantly for our purposes, he drew a very important distinction between 'harassment' and 'reprisal'. The "essence" of the complaint was that she was harassed, and not that she experienced reprisal, and an application under section 50 only deals with reprisal allegations for standing on one's rights under the Act. If one assumes that the Act prohibits harassment, that does not lead to a freestanding right to make a s.50 complaint about harassment, any more than it does for physical hazards, inadequate safety systems, etc.
Very important. Suppose I'm concerned about exposed live wires in my workspace, which are objectively unsafe. I can do a number of things about it, such as refusing unsafe work. These are entitlements under the Act. If the employer turns around and fires me for making an issue of the live wires, that will constitute reprisal.
The analogy to harassment is this: If my employer is harassing me, I may have recourse, but not to s.50. My employer ought to have a policy and program for making harassment complaints. If not, I can complain to the Ministry about the lack of a policy. But let's assume that there is a policy, and I make an appropriate complaint under the policy. The unanswered question is: Then what?
If the employer takes reasonable steps to investigate and deal with the complaint, then that's the ideal scenario. But what if the employer ignores the complaint? Or worse, starts treating me worse (up to and including termination) because I made that complaint?
The second scenario is where I argue s.50 applies. It strains reason to imagine that the legislature would obligate employers to create a process to address complaints of harassment, and not protect employees for utilizing that process. But it is the reprisal, not the harassment itself, which triggers the availability of the process.
The first scenario is, incidentally, far more difficult, but will not usually trigger s.50 either. It's another door through which the Board will be able to dispose of many of these complaints. s.50 cannot become a mechanism for second-guessing whether or not an employer's response to a harassment complaint was adequate. (My argument would be that it should be treated as a defect in the program itself. The statutory language requires the program to "set out how the employer will investigate and deal with incidents and complaints of workplace harassment" [my emphasis]. My argument is that, by implication, this requires an employer to actually investigate and deal with such incidents, and requires the program to reflect the reality of how the employer will do so. I would argue that a Ministry inspector is therefore empowered to order an employer not just to create a meaningful policy and program, but also to comply with its own policy and program.)
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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.
Monday, August 20, 2012
Bennett v. Cunningham - Court of Appeal Cautions Employees About Standing Up For Themselves
In January, I posted about the Divisional Court's decision in Bennett v. Cunningham. This was the case of a junior lawyer who sent a scathing email to her boss criticizing her office practices and lack of response to concerns she had previously raised, and in particular billing errors which ultimately reduced Bennett's commissions. She was fired, and at trial the judge held that there was just cause for termination, but under appeal the Divisional Court allowed the appeal and found that the letter, read in context, should properly be interpreted as a constructive attempt to resolve these concerns.
The Court of Appeal heard the matter, and released its decision on Friday, allowing Cunningham's appeal and restoring the trial judge's decision.
The Court of Appeal's decision essentially hinged on deference. A trial judge is entitled to deference, particularly as regards factual findings, and concluded that the Divisional Court mistakenly substituted its view of the facts for the trial judge's findings.
Analysis
First of all, it should be noted that most of the material facts were agreed upon - the letter which was at the core of the 'just cause' analysis was simply a matter of record. As for whether or not the majority of the concerns Bennett raised were justified, the Divisional Court did not attack the trial judge's findings that they were not.
The core aspects in which the Divisional Court disagreed with the trial judge were the following:
(1) The trial judge concluded that the letter was "critical", "disrespectful", "accusatory", and suggested that Cunningham was "disorganized, incompetent, dishonest and negligent". This was insolent. The Divisional Court found that the only part of the letter which could be considered 'insolent' was the sole allegation that the docketing errors (affecting Bennett's commissions) were 'dishonest and negligent'.
(2) The Divisional Court disagreed with the trial judge's failure to give weight to the closing of the letter, which was an invitation to discuss and resolve the issues, and also the failure to consider the overall context and purpose of the letter, as private correspondence between employer and employee, not disclosed to third parties.
(3) The Divisional Court viewed the trial judge as having failed to consider the full context in light of the high threshold for an employer to meet in establishing just cause: "As in other employment relationships, there remains a power imbalance and there is a strong policy interest in encouraging open and frank discussion between employer and employee of workplace issues."
My personal view is that this quotation of the Divisional Court is a highly important aspect of this case. As an employment lawyer, I'm fairly confident that I can draft a letter in most contexts to address an employee's concerns and strengthen their position in possible subsequent wrongful dismissal litigation without crossing the line into 'insolence'...however, it's often a fine line, and many (I'd dare say most) employees are not entirely capable of toeing that line. Therefore, a certain latitude needs to be afforded.
The Court of Appeal found that the trial judge had applied the necessary contextual analysis, and that the Divisional Court simply came to its own different conclusions.
Impact
This decision could be significant, for a couple of reasons. Despite the title of this entry, the Court of Appeal didn't really address the merits of the case directly. The Court didn't say "Employees should be more cowed". But by restoring the trial judge's decision, that's the precedent being set.
I'm concerned, moreover, about the characterization of the finding of just cause as being "essentially factual in nature". There are well-established and not-so-straightforward legal tests for proving just cause. To call it a question of fact...well, it's highly inconsistent with the existing case law, including case law which the Divisional Court accurately summarized by noting that a trial court is required "to consider not just whether an employee may be found guilty of misconduct giving rise to just cause dismissal, but also whether the nature and the degree of the misconduct warranted the employee’s summary dismissal."
The Court of Appeal heard the matter, and released its decision on Friday, allowing Cunningham's appeal and restoring the trial judge's decision.
The Court of Appeal's decision essentially hinged on deference. A trial judge is entitled to deference, particularly as regards factual findings, and concluded that the Divisional Court mistakenly substituted its view of the facts for the trial judge's findings.
Analysis
First of all, it should be noted that most of the material facts were agreed upon - the letter which was at the core of the 'just cause' analysis was simply a matter of record. As for whether or not the majority of the concerns Bennett raised were justified, the Divisional Court did not attack the trial judge's findings that they were not.
The core aspects in which the Divisional Court disagreed with the trial judge were the following:
(1) The trial judge concluded that the letter was "critical", "disrespectful", "accusatory", and suggested that Cunningham was "disorganized, incompetent, dishonest and negligent". This was insolent. The Divisional Court found that the only part of the letter which could be considered 'insolent' was the sole allegation that the docketing errors (affecting Bennett's commissions) were 'dishonest and negligent'.
(2) The Divisional Court disagreed with the trial judge's failure to give weight to the closing of the letter, which was an invitation to discuss and resolve the issues, and also the failure to consider the overall context and purpose of the letter, as private correspondence between employer and employee, not disclosed to third parties.
(3) The Divisional Court viewed the trial judge as having failed to consider the full context in light of the high threshold for an employer to meet in establishing just cause: "As in other employment relationships, there remains a power imbalance and there is a strong policy interest in encouraging open and frank discussion between employer and employee of workplace issues."
My personal view is that this quotation of the Divisional Court is a highly important aspect of this case. As an employment lawyer, I'm fairly confident that I can draft a letter in most contexts to address an employee's concerns and strengthen their position in possible subsequent wrongful dismissal litigation without crossing the line into 'insolence'...however, it's often a fine line, and many (I'd dare say most) employees are not entirely capable of toeing that line. Therefore, a certain latitude needs to be afforded.
The Court of Appeal found that the trial judge had applied the necessary contextual analysis, and that the Divisional Court simply came to its own different conclusions.
Impact
This decision could be significant, for a couple of reasons. Despite the title of this entry, the Court of Appeal didn't really address the merits of the case directly. The Court didn't say "Employees should be more cowed". But by restoring the trial judge's decision, that's the precedent being set.
I'm concerned, moreover, about the characterization of the finding of just cause as being "essentially factual in nature". There are well-established and not-so-straightforward legal tests for proving just cause. To call it a question of fact...well, it's highly inconsistent with the existing case law, including case law which the Divisional Court accurately summarized by noting that a trial court is required "to consider not just whether an employee may be found guilty of misconduct giving rise to just cause dismissal, but also whether the nature and the degree of the misconduct warranted the employee’s summary dismissal."
I can't really fault the Court of Appeal for its findings regarding difference #1 above. Strictly speaking, a finding that the language and tone of a letter is altogether insolent is probably squarely within the realm of factual findings. The Divisional Court may have stepped over the line of deference slightly when it zeroed in on the language of the letter and determined that only one narrow part was really insolent. But when you start getting into the question of "Is it bad enough to justify summary dismissal?", that's more than just a simple question of fact.
The Divisional Court looked to the letter directly to come to its own assessment of the severity of the misconduct. As I said, this may have been slightly over the line, but not unforgivably so, because the letter was simply a matter of record. Perhaps more importantly, there was a reason they looked at the letter directly: The analysis of severity in the trial judge's reasons were relatively scarce.
The trial judge's reasons, regarding just cause, boil down as follows:
Paragraphs 30-34: The concerns raised in the letter were largely unjustified.
Paragraphs 35-37: Bennett wrote the letter out of frustration, but her action was unreasonable. She had an opportunity to apologize and failed to do so.
Paragraphs 38-40: The overall tone of the letter was not courteous, and he doubted Bennett's sincerity in inviting a constructive discussion, because she hand-delivered it and also sent it by registered mail.
Paragraph 41: Cunningham decided that she could no longer maintain the employment relationship.
Paragraph 42: Cunningham's conclusion was justified. "The comments and accusations in the letter undermined the confidence she had in Bennett and destroyed the employment relationship."
Paragraph 43: The letter constituted just cause.
When the Divisional Court said that there was an absence of contextual analysis, this is what they were talking about. There were no detailed reasons about how Cunningham's confidence was undermined. She was shocked and angry, certainly. But no examination of the severity of the insolence in light of the context of the employment relationship. Just a blanket statement that Cunningham's conclusion was justified and that her confidence was undermined. The problem is exacerbated by the subjective language the trial judge continued to use - the Divisional Court rightly called him on that, noting that the question isn't whether or not Cunningham was able to continue the relationship, but whether or not - in light of all the circumstances - the misconduct was objectively serious enough to regard the employment relationship as being at an end.
In other words, what we're looking at is a 'sufficiency of reasons' problem. When it comes to simple factual findings, such as "John said x", then there's a low threshold for the judge to meet. If there's contradictory evidence on the point, the judge probably needs to nod to the opposed evidence and explain why he disregarded it, but not in too much detail. "I preferred John's evidence" is usually enough. From there, it's simply a question of whether or not there's evidence on the record capable of supporting that conclusion, and that the trial judge didn't simply misapprehend what John was saying.
However, for questions of law, or of mixed fact and law, there are greater obligations. It is not enough for a trial judge to show that he is aware of the issues; he must explain how he came to his decision, in such a way that his reasons can be subjected to appellate review. Whether or not an act of misconduct rises to the level of just cause is certainly in that area. The Court of Appeal's treatment of the issue of just cause as being simply factual...is worrying.
If the Court of Appeal really wanted to hold the Divisional Court's feet to the fire in terms of inappropriate appellate intervention, it should have sent the matter back down to the trial level for a new trial of the issue. Respectfully, I think even that might have been overkill, given that there were really no contested facts at issue on the appeal.
At the end of the day, the Divisional Court's decision was based on a look at the record and a look at the trial judge's reasons, and a conclusion that 'It wasn't really all that bad'. However, all of the underlying findings of pure fact were left completely intact. Bennett sent the letter. The language of the letter was harsh. The allegations in the letter were wrong. There was misconduct. It was inappropriate to call Cunningham 'dishonest and negligent'.
But, said the Divisional Court, this didn't rise to the level of just cause.
Other Thoughts
Beyond the issues strictly on appeal, the trial judge's decision contains an asymmetry which should be troubling in light of the power imbalance of an employment relationship. The expectation seems to be that, to the extent that there are difficulties in the relationship between Bennett and Cunningham, it falls to Bennett to be proactive and resolve them.
Consider, on the one hand, the trial judge's treatment of the "docketing system" issue. Bennett submitted her docketed hours to Cunningham's assistant, who entered them into a system for billing. She was entitled to a percentage of her collected billings. However, she discovered that some of her hours were being entered as Cunningham's hours, presumably as an error by the assistant. Cunningham's response was to tell Bennett that the errors would be corrected if Bennett provided the accounts in which the errors had occurred. The trial judge felt that this was enough.
In other words, this was a system established by Cunningham, administered by an employee of Cunningham, which resulted in errors which favoured Cunningham, and Cunningham's answer was to put Bennett to the strict proof of each error. Assuming Bennett still had copies of her handwritten dockets and access to all the accounts in question, it would still be a time-consuming and menial process to perform a line-by-line comparison of all of her time entries with the accounts on each file.
On the other hand, consider the trial judge's discussion of the possibility of an apology for the letter. Bennett delivered the letter on December 21, immediately before Cunningham left for a two week vacation, and failed to apologize in the two week window before she was summarily fired. "Although that would have been difficult, if not impossible, to do in person, Ms. Bennett could have prepared and placed a written apology on Ms. Cunningham’s desk for her attention when she returned from vacation." This implies that an apology would have been sufficiently mitigating that it might have changed the trial judge's analysis of just cause (and perhaps even suggests that the 'failure to apologize' was aggravating), and yet recognizes that there was no meaningful interaction between the parties between the delivery of the letter and the termination. It also suggests that Bennett should have anticipated that a personal apology after Cunningham's return would be impossible, and that the absence of a proactive apology cemented cause for dismissal.
The relevance of this asymmetry is simply this: The trial judge was always looking to Bennett's acts or omissions - what could Bennett have done differently to save the employment relationship? At no point does the trial judge ask whether or not Cunningham could or should have done something differently which might have salvaged the employment relationship, and there is usually such an obligation upon the employer: That's what progressive discipline is all about.
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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.
Friday, August 17, 2012
Case Synthesis: Bowes and Kelcher
While I have seen it argued that the Bowes v. Goss Power Products Ltd. case pushes employment law further into its own unique species of contract (i.e. one in which the vulnerable employee needs to be protected), I have argued the contrary, that it reconciles much of employment law with the general principles of contract law.
It is an implied term of every employment contract that the employer will not terminate the employment relationship without just cause except on reasonable notice. That's actual notice. Most employers choose to breach this, and to be liable for damages for their failure to do so (i.e. pay in lieu of notice). The obligation to pay arises by virtue of the breach of contract.
However, the implied term can be modified by an express contractual term. This is what happened in Bowes. The employer reserved the right to terminate on a certain amount of notice or pay in lieu, and when it terminated without actual notice, the pay in lieu provisions of the contract were enforced. The obligation to pay arises by virtue of the contract itself, and isn't subject to other principles of damages. What Goss Power thought was a right to terminate the contract without actual notice turned out to also be a contractual obligation to pay.
But that right to terminate without actual notice may have other impacts in a few other areas. Whether or not a contract has actually been breached is going to have consequences.
In this post, I'd like to consider the interrelationship with the proposition set out by the Alberta Court of Appeal in Globex Foreign Exchange Corporation v. Kelcher. Globex dismissed Mr. Kelcher without notice, and then attempted to enforce restrictive covenants against him. The majority of the Alberta Court of Appeal, citing the principle from General Billposting Co. v. Atkinson, concluded that the wrongful dismissal meant that Globex was no longer entitled to rely on the restrictive covenants.
What if somebody in Kelcher's position wasn't entitled to actual notice? What if an employee with a termination clause like Mr. Bowes, as well as an otherwise-enforceable restrictive covenant, was fired on pay in lieu of notice?
By structuring the contract in such a way that the employer can pay the employee to go away without breaching the contract at all, the employer would be protecting itself from liabilities or losses of rights incidental to repudiating the contract, including - most likely - application of the General Billposting principle.
Also, it would be much harder for an employee to make a claim for moral damages, bad faith damages, aggravated damages, etc., without an actual breach of contract to point to.
All that being said, it's quite difficult to implement restrictive covenants in such a way that they will be upheld by the Court. An employer hoping to rely on a restrictive covenant really needs to have a competent lawyer involved right from the recruitment stage. I would encourage Ontario employers to contact me for assistance in drafting employment contracts.
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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.
It is an implied term of every employment contract that the employer will not terminate the employment relationship without just cause except on reasonable notice. That's actual notice. Most employers choose to breach this, and to be liable for damages for their failure to do so (i.e. pay in lieu of notice). The obligation to pay arises by virtue of the breach of contract.
However, the implied term can be modified by an express contractual term. This is what happened in Bowes. The employer reserved the right to terminate on a certain amount of notice or pay in lieu, and when it terminated without actual notice, the pay in lieu provisions of the contract were enforced. The obligation to pay arises by virtue of the contract itself, and isn't subject to other principles of damages. What Goss Power thought was a right to terminate the contract without actual notice turned out to also be a contractual obligation to pay.
But that right to terminate without actual notice may have other impacts in a few other areas. Whether or not a contract has actually been breached is going to have consequences.
In this post, I'd like to consider the interrelationship with the proposition set out by the Alberta Court of Appeal in Globex Foreign Exchange Corporation v. Kelcher. Globex dismissed Mr. Kelcher without notice, and then attempted to enforce restrictive covenants against him. The majority of the Alberta Court of Appeal, citing the principle from General Billposting Co. v. Atkinson, concluded that the wrongful dismissal meant that Globex was no longer entitled to rely on the restrictive covenants.
What if somebody in Kelcher's position wasn't entitled to actual notice? What if an employee with a termination clause like Mr. Bowes, as well as an otherwise-enforceable restrictive covenant, was fired on pay in lieu of notice?
By structuring the contract in such a way that the employer can pay the employee to go away without breaching the contract at all, the employer would be protecting itself from liabilities or losses of rights incidental to repudiating the contract, including - most likely - application of the General Billposting principle.
Also, it would be much harder for an employee to make a claim for moral damages, bad faith damages, aggravated damages, etc., without an actual breach of contract to point to.
All that being said, it's quite difficult to implement restrictive covenants in such a way that they will be upheld by the Court. An employer hoping to rely on a restrictive covenant really needs to have a competent lawyer involved right from the recruitment stage. I would encourage Ontario employers to contact me for assistance in drafting employment contracts.
*****
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.
Tuesday, August 14, 2012
Another Injunction Declined
Last week, a decision was released in Measuremax v. Nelsons. There isn't too much factual detail, but it's an instance of an employer having obtained an injunction without notice. When such an injunction is obtained, it is only for a short period of time and needs to come before the Court for a full hearing as to whether or not to extend it.
Mr. Nelsons worked for Measuremax for several years as a technical information supplier to salespeople. Nelsons resigned on six weeks' notice, and was sent packing promptly. Measuremax then became concerned, and came to believe, that he had started conducting competing business while still working for Measuremax, including issuing a client a $15,000 invoice for work he had completed while employed by Measuremax. There were also allegations that Nelsons was using confidential information to compete.
On the basis of these allegations, Measuremax obtained an injunction. However, there were apparently innocent explanations for at least some of their evidence, and the motion judge here accepts that no such $15,000 invoice was issued and that Nelsons' work while employed at Measuremax was for Measuremax. Furthermore, the alleged proprietary information related to bids for contracts with government agencies, and accordingly is public record.
With no non-competition or non-solicitation clause, and no obvious basis for finding fiduciary duties, the employer failed to convince the Court to extend the injunction, failing the test on several fronts. No irreparable harm was established, and the balance of convenience favoured "the former employee who is entitled to earn a living". Furthermore, bringing the initial motion without notice couldn't be justified - under such circumstances, you need to show either that you have reason to believe that giving notice will interfere with the relief you're seeking (for example, if you're bringing a motion to seize and search a party's computer, and you expect the party to delete the incriminating data if they have notice), or that the matter is so urgent that the delay associated with proper notice will cause irreparable harm, and in that case it's still expected that the moving party will give informal 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.
Mr. Nelsons worked for Measuremax for several years as a technical information supplier to salespeople. Nelsons resigned on six weeks' notice, and was sent packing promptly. Measuremax then became concerned, and came to believe, that he had started conducting competing business while still working for Measuremax, including issuing a client a $15,000 invoice for work he had completed while employed by Measuremax. There were also allegations that Nelsons was using confidential information to compete.
On the basis of these allegations, Measuremax obtained an injunction. However, there were apparently innocent explanations for at least some of their evidence, and the motion judge here accepts that no such $15,000 invoice was issued and that Nelsons' work while employed at Measuremax was for Measuremax. Furthermore, the alleged proprietary information related to bids for contracts with government agencies, and accordingly is public record.
With no non-competition or non-solicitation clause, and no obvious basis for finding fiduciary duties, the employer failed to convince the Court to extend the injunction, failing the test on several fronts. No irreparable harm was established, and the balance of convenience favoured "the former employee who is entitled to earn a living". Furthermore, bringing the initial motion without notice couldn't be justified - under such circumstances, you need to show either that you have reason to believe that giving notice will interfere with the relief you're seeking (for example, if you're bringing a motion to seize and search a party's computer, and you expect the party to delete the incriminating data if they have notice), or that the matter is so urgent that the delay associated with proper notice will cause irreparable harm, and in that case it's still expected that the moving party will give informal 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.
Between a Rock and a Hard Place
There's an interesting recent case from the Superior Court, Barton v. Rona Ontario Inc., involving a dismissed manager who was fired for just cause after compromising safety in favour of human rights.
The Facts
Barton was an assistant store manager at Rona's Barrie location, responsible for managing 140 employees.
In April 2009, a training program was scheduled in the store's training centre, and one of the employees, Kai Malmstrom, wanted to take the course. Management wanted him to take the course, too. The one problem was...well, physics. Malmstrom was confined to a wheelchair, and the training centre was on the upper level of the store, and not wheelchair accessible. The official plan was that, after the training session on April 17th, one of the attendees to the training session would provide training to Malmstrom on the ground floor.
Malmstrom wasn't happy with this. He wanted to join his colleagues on the second floor, and take the training directly.
So Malmstrom and his colleague Mr. Stirk, came up with a plan to get Malmstrom upstairs using an order picker. The essentials of the plan involved strapping Malmstrom's wheelchair to a skid and lifting him up to the second floor, and bringing him back down the same way. On the evening before the training session, Malmstrom suggested this plan to Barton. Barton, at the time, was in the middle of coordinating a major event in the store, and while he did not expressly permit the plan, he failed to expressly prohibit them from carrying out their plan before he was called away. The evidence on the conversation was conflicting - the trial judge accepted that Barton reminded Malmstrom of the plan to have him trained later, but also accepted Malmstrom's evidence that Barton seemed agreeable to the plan, despite Barton's evidence that he tried to express his discomfort with the idea.
The next morning, as they began to carry out their plan, the Operations Manager, Clint Marsh, asked them what they were doing, and his evidence was that he prohibited them from doing so. Then he was called away, and they continued nonetheless.
The plan proceeded essentially without incident, except that Stirk wasn't wearing the appropriate safety equipment when bringing Malmstrom back down. Nobody was injured. Nonetheless, it was an egregious safety violation.
Gierak, a Human Resources Advisor, conducted an internal investigation into the incident, and there were significant excerpts from her notes reproduced in the decision. Both Marsh and Barton acknowledged they would have done things differently if given another chance - i.e. they would have stopped it (which is strange to me, given Marsh's evidence that he instructed them not to proceed). They also noted that, had they not been confident that it would proceed safely, they would have stopped it.
It appears that, given Malmstrom's impression that Barton was okay with the plan, he left Stirk with the impression that Barton had given permission, who conveyed that same impression to Marsh.
Gierak's report did not recommend termination. Up until her discovery that Stirk had foregone the appropriate safety equipment herself, she wasn't sure that there even was a safety violation, and felt that everyone's actions to get Malmstrom to the training session were, while perhaps ill-advised, understandable.
Nonetheless, following a second investigation by a second HR professional, management terminated Stirk and Barton for cause, and disciplined Marsh. There is no indication in the decision as to whether or not Malmstrom was disciplined, nor any of the others involved. (Apparently, several people assisted in the process of getting Malmstrom upstairs.)
The Decision
The question in this case was whether or not Barton's failure to stop the lift constituted just cause for termination.
Rona has very clear policies regarding safety protocols, including that immediate dismissal may be called for in specific cases of safety breaches, including deliberate acts that could endanger safety, riding on moving equipment, and deliberate violation of safety rules.
Furthermore, the Court accepted the proposition that managers are held to a higher standard than non-managerial employees.
The judge is not at all critical of Rona's decision to terminate Barton. There were many 'good and valid' business reasons to terminate an employee in that context. "In this case, for example, Rona might have formed the view that Mr. Barton lacked the character required of a senior management person and did not want him back. Rona could have decided that, given the large number of store staff who witnessed the event and assisted in the lift and the descent, it was necessary to make an example of him...."
However, these reasons do not necessarily "pass muster as just cause". The Court rightly notes that its assessment is simply whether or not the misconduct in and of itself justifies termination. In this case, there is no reason to suggest that discipline would have been inadequate to preserve the relationship as between Rona and Barton. No reason to think that a stern warning would have been insufficient to prevent Barton from engaging in such misconduct again. His specific acts were not so egregious as to warrant termination, and progressive discipline would have been appropriate.
My Thoughts
This is a close case in some ways, but I believe the Court got it exactly right. All Barton did was fail to prohibit a plan brought to his attention in a brief conversation during which he was otherwise occupied, and which was carried out the next morning before he arrived at work.
He probably should have said "Don't do it", and it's probably culpable misconduct that, as a manager, he failed to do so. But just cause is a high threshold. And it's interesting that Rona rolled the dice on this one, because it just so happens that the lawyer who represented Rona was one of the instructors for my law school employment law class, back in the day, where I was taught how high a threshold just cause is. (I recall one of the instructors relating an anecdote from Court where a judge queried whether or not just cause still exists at all.)
One of the things which really surprises me about this decision, though, is how little discourse there was on the human rights aspects of the case. The parties were clearly aware that the incident was simply an effort to get Malmstrom access to the training facility, and Barton himself was of the view that some blame lay with the lack of accessibility in the store.
It's hard to fault Malmstrom for wanting to attend the seminar in person. Getting instruction from somebody who happened to attend the seminar is hardly a substitute for having gotten professional instruction in a structured classroom. It seems like a discriminatory result.
Suppose, for a moment, that the lift could have been and was completed in a way that reasonably controlled for all risks involved. (Even though not all safety protocols were observed during the descent, that's hardly Barton's fault: He wasn't even there at the time, and even had he given express permission one would reasonably infer that it was subject to ordinary safety protocols being observed.) A Rona safety policy saying "Don't do it" might not be sufficient to justify rejecting the plan; you would have to carefully and contextually examine the risks, figure out why the particular policy is in place and whether or not the risks it seeks to avoid can otherwise be accounted for. We don't know what Rona's human rights policy says, but there's a good chance that it is also disciplinable for managers to engage in discrimination.
And also suppose that Barton hasn't memorized all such policies. This is a fair supposition, I think. Given an opportunity to review the safety policies and the human rights policies, and the specifics of the request being made, there may have been a right answer and a wrong answer within the context of Rona policy, but in the absence of such an opportunity to review, we're looking at two answers which could be wrong. This is not a scenario where you can necessarily err on the side of caution, because there is no cautious approach.
Barton doesn't want to refuse the request, because he sees it as his responsibility (and Rona's responsibility) to accommodate Malmstrom. He may be wrong. It may be that the plan was inherently unsafe in such a way as to justify refusal, and it may also be that creating an access route or a ground floor training facility would amount to 'undue hardship', which would mean that Malmstrom would have no legal right to be so accommodated. But this is a complex and nuanced human rights question, which lawyers could certainly and reasonably disagree about.
At minimum, this mitigates the severity of his failure to instruct Malmstrom not to carry out the plan. We know that he was busy with other matters, he wasn't able to complete the conversation, and he didn't have an opportunity to return to the matter to finish dealing with it. That he could reasonably and in good faith believe that his decision was to protect Malmstrom's human rights makes it difficult to argue that the decision, even if wrong, could be such misconduct as to warrant summary dismissal for cause.
But it's more than that: Refusing to discriminate against somebody is a protected act under the Human Rights Code. The law on this point is not particularly well-settled either - it is reasonably clear that a good faith complaint of discrimination will give rise to reprisal protection, even if the original complaint was not founded. Imagine, for example, that I was denied a promotion, and I felt in good faith and reasonably that the denial was due to my religion, and I made a complaint accordingly, and was fired for it. Even if I cannot prove the actual discrimination (and indeed, even if the denial of the promotion could be shown to not be discriminatory at all), the termination would still likely be an unlawful reprisal. It is not so clear that the same principle applies to people refusing to breach another's Code rights, but it's arguable. So if refusing to allow Malmstrom to attend the seminar would be unlawful discrimination (which could be argued), then not prohibiting him from doing so would likely be Code-protected. Alternatively, even if it wasn't unlawful discrimination, the failure to prohibit him from doing so based on the good faith belief that Malmstrom was entitled to accommodation might still be Code-protected.
Highlights
I'm pretty sympathetic to Barton, but that sympathy arises from several places, and I wouldn't want to be taken as suggesting any sort of general proposition that safety ought to be compromised in favour of human rights.
Firstly, he wasn't there. He discussed the matter the night before in what sounds like a fairly cursory manner, and didn't prohibit it. That amounts to, at best, lukewarm complicity.
Secondly, not being there, he can hardly be faulted for the fact that not all safety precautions were taken. He was dealing with people well-qualified and trained in the use of the equipment, and ought reasonably to have presumed that these folks would take all safety precautions.
Thirdly, nobody was injured. Had there been injuries, that could be a whole different matter.
Fourthly, it was Malmstrom's idea in the first place. Inherently unsafe, perhaps, but most of the risk was to Malmstrom, and he would have been aware of such risks. (If it was the employer's idea, pressuring Malmstrom to engage in something unsafe as an alternative to reasonable accommodation, it could be a very serious problem under both the Human Rights Code and the Occupational Health & Safety Act.)
Fifthly, it was necessitated by an unfortunate absence of accessibility, which means that the employer probably has to shoulder at least some of the blame, and can't just point fingers at Barton.
In general, I'm inclined to believe that Barton was probably wrong, but not even at the longest stretch could I imagine this constituting just cause.
*****
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.
The Facts
Barton was an assistant store manager at Rona's Barrie location, responsible for managing 140 employees.
In April 2009, a training program was scheduled in the store's training centre, and one of the employees, Kai Malmstrom, wanted to take the course. Management wanted him to take the course, too. The one problem was...well, physics. Malmstrom was confined to a wheelchair, and the training centre was on the upper level of the store, and not wheelchair accessible. The official plan was that, after the training session on April 17th, one of the attendees to the training session would provide training to Malmstrom on the ground floor.
Malmstrom wasn't happy with this. He wanted to join his colleagues on the second floor, and take the training directly.
So Malmstrom and his colleague Mr. Stirk, came up with a plan to get Malmstrom upstairs using an order picker. The essentials of the plan involved strapping Malmstrom's wheelchair to a skid and lifting him up to the second floor, and bringing him back down the same way. On the evening before the training session, Malmstrom suggested this plan to Barton. Barton, at the time, was in the middle of coordinating a major event in the store, and while he did not expressly permit the plan, he failed to expressly prohibit them from carrying out their plan before he was called away. The evidence on the conversation was conflicting - the trial judge accepted that Barton reminded Malmstrom of the plan to have him trained later, but also accepted Malmstrom's evidence that Barton seemed agreeable to the plan, despite Barton's evidence that he tried to express his discomfort with the idea.
The next morning, as they began to carry out their plan, the Operations Manager, Clint Marsh, asked them what they were doing, and his evidence was that he prohibited them from doing so. Then he was called away, and they continued nonetheless.
The plan proceeded essentially without incident, except that Stirk wasn't wearing the appropriate safety equipment when bringing Malmstrom back down. Nobody was injured. Nonetheless, it was an egregious safety violation.
Gierak, a Human Resources Advisor, conducted an internal investigation into the incident, and there were significant excerpts from her notes reproduced in the decision. Both Marsh and Barton acknowledged they would have done things differently if given another chance - i.e. they would have stopped it (which is strange to me, given Marsh's evidence that he instructed them not to proceed). They also noted that, had they not been confident that it would proceed safely, they would have stopped it.
It appears that, given Malmstrom's impression that Barton was okay with the plan, he left Stirk with the impression that Barton had given permission, who conveyed that same impression to Marsh.
Gierak's report did not recommend termination. Up until her discovery that Stirk had foregone the appropriate safety equipment herself, she wasn't sure that there even was a safety violation, and felt that everyone's actions to get Malmstrom to the training session were, while perhaps ill-advised, understandable.
Nonetheless, following a second investigation by a second HR professional, management terminated Stirk and Barton for cause, and disciplined Marsh. There is no indication in the decision as to whether or not Malmstrom was disciplined, nor any of the others involved. (Apparently, several people assisted in the process of getting Malmstrom upstairs.)
The Decision
The question in this case was whether or not Barton's failure to stop the lift constituted just cause for termination.
Rona has very clear policies regarding safety protocols, including that immediate dismissal may be called for in specific cases of safety breaches, including deliberate acts that could endanger safety, riding on moving equipment, and deliberate violation of safety rules.
Furthermore, the Court accepted the proposition that managers are held to a higher standard than non-managerial employees.
The judge is not at all critical of Rona's decision to terminate Barton. There were many 'good and valid' business reasons to terminate an employee in that context. "In this case, for example, Rona might have formed the view that Mr. Barton lacked the character required of a senior management person and did not want him back. Rona could have decided that, given the large number of store staff who witnessed the event and assisted in the lift and the descent, it was necessary to make an example of him...."
However, these reasons do not necessarily "pass muster as just cause". The Court rightly notes that its assessment is simply whether or not the misconduct in and of itself justifies termination. In this case, there is no reason to suggest that discipline would have been inadequate to preserve the relationship as between Rona and Barton. No reason to think that a stern warning would have been insufficient to prevent Barton from engaging in such misconduct again. His specific acts were not so egregious as to warrant termination, and progressive discipline would have been appropriate.
My Thoughts
This is a close case in some ways, but I believe the Court got it exactly right. All Barton did was fail to prohibit a plan brought to his attention in a brief conversation during which he was otherwise occupied, and which was carried out the next morning before he arrived at work.
He probably should have said "Don't do it", and it's probably culpable misconduct that, as a manager, he failed to do so. But just cause is a high threshold. And it's interesting that Rona rolled the dice on this one, because it just so happens that the lawyer who represented Rona was one of the instructors for my law school employment law class, back in the day, where I was taught how high a threshold just cause is. (I recall one of the instructors relating an anecdote from Court where a judge queried whether or not just cause still exists at all.)
One of the things which really surprises me about this decision, though, is how little discourse there was on the human rights aspects of the case. The parties were clearly aware that the incident was simply an effort to get Malmstrom access to the training facility, and Barton himself was of the view that some blame lay with the lack of accessibility in the store.
It's hard to fault Malmstrom for wanting to attend the seminar in person. Getting instruction from somebody who happened to attend the seminar is hardly a substitute for having gotten professional instruction in a structured classroom. It seems like a discriminatory result.
Suppose, for a moment, that the lift could have been and was completed in a way that reasonably controlled for all risks involved. (Even though not all safety protocols were observed during the descent, that's hardly Barton's fault: He wasn't even there at the time, and even had he given express permission one would reasonably infer that it was subject to ordinary safety protocols being observed.) A Rona safety policy saying "Don't do it" might not be sufficient to justify rejecting the plan; you would have to carefully and contextually examine the risks, figure out why the particular policy is in place and whether or not the risks it seeks to avoid can otherwise be accounted for. We don't know what Rona's human rights policy says, but there's a good chance that it is also disciplinable for managers to engage in discrimination.
And also suppose that Barton hasn't memorized all such policies. This is a fair supposition, I think. Given an opportunity to review the safety policies and the human rights policies, and the specifics of the request being made, there may have been a right answer and a wrong answer within the context of Rona policy, but in the absence of such an opportunity to review, we're looking at two answers which could be wrong. This is not a scenario where you can necessarily err on the side of caution, because there is no cautious approach.
Barton doesn't want to refuse the request, because he sees it as his responsibility (and Rona's responsibility) to accommodate Malmstrom. He may be wrong. It may be that the plan was inherently unsafe in such a way as to justify refusal, and it may also be that creating an access route or a ground floor training facility would amount to 'undue hardship', which would mean that Malmstrom would have no legal right to be so accommodated. But this is a complex and nuanced human rights question, which lawyers could certainly and reasonably disagree about.
At minimum, this mitigates the severity of his failure to instruct Malmstrom not to carry out the plan. We know that he was busy with other matters, he wasn't able to complete the conversation, and he didn't have an opportunity to return to the matter to finish dealing with it. That he could reasonably and in good faith believe that his decision was to protect Malmstrom's human rights makes it difficult to argue that the decision, even if wrong, could be such misconduct as to warrant summary dismissal for cause.
But it's more than that: Refusing to discriminate against somebody is a protected act under the Human Rights Code. The law on this point is not particularly well-settled either - it is reasonably clear that a good faith complaint of discrimination will give rise to reprisal protection, even if the original complaint was not founded. Imagine, for example, that I was denied a promotion, and I felt in good faith and reasonably that the denial was due to my religion, and I made a complaint accordingly, and was fired for it. Even if I cannot prove the actual discrimination (and indeed, even if the denial of the promotion could be shown to not be discriminatory at all), the termination would still likely be an unlawful reprisal. It is not so clear that the same principle applies to people refusing to breach another's Code rights, but it's arguable. So if refusing to allow Malmstrom to attend the seminar would be unlawful discrimination (which could be argued), then not prohibiting him from doing so would likely be Code-protected. Alternatively, even if it wasn't unlawful discrimination, the failure to prohibit him from doing so based on the good faith belief that Malmstrom was entitled to accommodation might still be Code-protected.
Highlights
I'm pretty sympathetic to Barton, but that sympathy arises from several places, and I wouldn't want to be taken as suggesting any sort of general proposition that safety ought to be compromised in favour of human rights.
Firstly, he wasn't there. He discussed the matter the night before in what sounds like a fairly cursory manner, and didn't prohibit it. That amounts to, at best, lukewarm complicity.
Secondly, not being there, he can hardly be faulted for the fact that not all safety precautions were taken. He was dealing with people well-qualified and trained in the use of the equipment, and ought reasonably to have presumed that these folks would take all safety precautions.
Thirdly, nobody was injured. Had there been injuries, that could be a whole different matter.
Fourthly, it was Malmstrom's idea in the first place. Inherently unsafe, perhaps, but most of the risk was to Malmstrom, and he would have been aware of such risks. (If it was the employer's idea, pressuring Malmstrom to engage in something unsafe as an alternative to reasonable accommodation, it could be a very serious problem under both the Human Rights Code and the Occupational Health & Safety Act.)
Fifthly, it was necessitated by an unfortunate absence of accessibility, which means that the employer probably has to shoulder at least some of the blame, and can't just point fingers at Barton.
In general, I'm inclined to believe that Barton was probably wrong, but not even at the longest stretch could I imagine this constituting just cause.
*****
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.
Tuesday, August 7, 2012
Enforcing Restrictive Covenants - Altus Group Limited v. Yeoman
I've commented before that, in the cases where an employer sues its former employees for unfairly competing, it is often a make or break issue whether or not the employees walked away with proprietary confidential information of the old employer.
A new case, Altus Group Limited v. Yeoman, highlights this.
Altus Group is involved in, among other things, Realty Tax consultation. In November 2011, the employment of its CEO, Gary Yeoman, was terminated. Gary's sons, who also worked for Altus, resigned shortly thereafter, as well as several other employees, and they have since established Yeoman & Company Paralegal Professional Corporation (YPC), which directly competes with Altus' realty tax business. They have poached 48 of Altus' clients thus far.
Altus argues that it has restrictive covenants - non-solicitation and non-competition agreements - binding the employees, and that they are in breach of those covenants, and so it moved for an injunction to shut them down.
The employees are challenging the enforceability of the restrictive covenants, on a number of bases. They also argue that Altus knew about and even supported their initial start-up efforts, until YPC started attracting more of Altus' employees. (Shades of the Dent Wizard case I discussed last year.)
Altus also believes that one of the defecting employees brought confidential information with him, and wanted an order appointing a forensic investigator to look into it. The employee's laptop was re-imaged before being returned, which suggests to Altus that the purpose was to conceal data transfers.
The Court declined to grant either order, finding that the 'irreparable harm' requirement for an interlocutory injunction wasn't met to enforce the restrictive covenants, and that the evidence of stealing confidential data was insufficient to warrant a forensic investigator.
The Law
There's some interesting discussion about the test for interlocutory injunctions. (For lay readers, an "interlocutory injunction" means an order to do something or refrain from doing something during the course of proceedings. Essentially, where you need relief and simply can't wait for a full trial, you ask the Court to grant you interim relief until the matters are finally decided.)
Traditionally, the test is three-fold. To obtain an injunction, you need to establish (1) a serious issue to be tried; (2) that you will suffer 'irreparable harm' if the injunction is not granted; and (3) that the balance of convenience favours granting the injunction (i.e. that the harm to you of not granting you the injunction is more serious than the harm to the other party of granting it).
But there has been some evolution in recent years, and it isn't completely settled. It harkens to the difference between a "serious issue to be tried" and a "strong prima facie case". The former requires a motions judge to say only that the case doesn't look frivolous - the plaintiff appears to be raising a case that is capable of succeeding. The latter is a much higher standard, requiring the Court to say that the plaintiff has led a case strong enough that it is likely to win the case. It used to be argued (until the Supreme Court dealt with it in 1994 in RJR MacDonald) that a "strong prima facie case" was required for an injunction to be granted. The Supreme Court found in RJR MacDonald that, in general, only a "serious issue to be tried" is required.
But that wasn't the end of the matter. In some Provinces, and in some cases, Courts over time have looked at certain cases as being outside of the framework of RJR MacDonald. Where a mandatory injunction is sought (requiring some positive act, rather than just restraining from a given act), the Courts may find that a "strong prima facie case" is required. (This is a difficult distinction. Many orders cannot meaningfully be defined in these terms, and once you're at the point of litigation, it usually means that the status quo is already changed. For example, when you have an employee who has breached a non-solicitation agreement and proceeded to enter into major contracts with clients of the employer, does an order requiring him to terminate those contracts require positive action, or merely restrain him from acts?)
Some Courts have held a plaintiff to the "strong prima facie case" standard where there are no material facts in dispute. This makes a certain amount of sense, making it akin to a motion for summary judgment. The logic is that the Court is able to fully decide the issue without needing a trial. (Of course, without material facts in dispute, it doesn't make sense that the standards would be different. If I'm the plaintiff, and the defendant agrees with me on all the material facts, and the judge still isn't satisfied that it's likely that I'll win, it doesn't make sense to go on to say that nonetheless there is a serious issue to be tried.)
Some Courts have required a "strong prima facie case" where granting the order will effectively render the litigation moot. Imagine a dispute arising as to an event in the near future. Let's say that we're approaching the Olympics, and I've succeeded in Olympic qualifying rounds, so I should be going to London. At the 11th hour, my sport's Canadian association says to me "You don't meet the criteria to represent your country in this sport." (Suppose it's a citizenship issue, or a disagreement as to the interpretation of the qualifying criteria. Some sports associations don't strictly require citizenship, but sometimes have looser requirements including residency or contribution to the sport domestically, the interpretation of which might be argued about.) So I sue them, and bring a motion seeking an interlocutory injunction that they reinstate me. If the motion is granted, the dispute is over - they have to send me to the Olympics, and I've won. In such a case, the Courts may require me to prove a 'strong prima facie case'.
So the standard to be applied has been increasingly loose over the years, but now there's a new hiccup: Some Courts are now beginning to say that, where you have a strong prima facie case, you may not need to prove irreparable harm or balance of convenience. If the Court is saying "I expect that you will succeed", it makes more sense to just grant the relief.
To my mind, there's a major theoretical problem with that argument: Injunctive relief of this nature is in the nature of 'equitable' relief, which is only available where common law remedies are inadequate. In other words, at the end of a trial, I can only force you to comply with the terms of our contract if my loss by your breach could not be compensated by payment of money. Let's use the example of a housing purchase - I'm buying your house, and you refuse to close. I *really* like your house. Its architecture, location, and character are precisely what I'm looking for, and there's no other house that suits my needs quite like it anywhere. In this case, I might be able to force you to close. However, these cases are quite rare, because the simple truth is that houses are increasingly mass-produced. If another similar house in the same neighbourhood is up for sale, but for a higher price, it's open to me to just buy that house instead and go after you for the extra cash. Because that option is available to me, I can't compel you to close. If we go to the end of the trial, and I succeed in proving that you breached the contract and it will cost me an extra $50,000 to get an equivalent house now, the only remedy available to me is the $50,000. To some extent, the "irreparable harm" requirement imports that principle, and if you ignore the irreparable harm, then at the interlocutory injunction stage you could simply say "strong prima facie case; therefore close the transaction", thereby awarding me a remedy to which I would never otherwise be entitled.
However, the law in Ontario seems to be leaning towards shades of grey - essentially that, the stronger the plaintiff's apparent case, the less important the irreparable harm and the balance of convenience. That might make sense, provided they never become altogether meaningless.
Application
In this case, the motion judge found that there was a serious issue to be tried, but the evidence was short of establishing a strong prima facie case, and there was no irreparable harm established.
*****
This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.
A new case, Altus Group Limited v. Yeoman, highlights this.
Altus Group is involved in, among other things, Realty Tax consultation. In November 2011, the employment of its CEO, Gary Yeoman, was terminated. Gary's sons, who also worked for Altus, resigned shortly thereafter, as well as several other employees, and they have since established Yeoman & Company Paralegal Professional Corporation (YPC), which directly competes with Altus' realty tax business. They have poached 48 of Altus' clients thus far.
Altus argues that it has restrictive covenants - non-solicitation and non-competition agreements - binding the employees, and that they are in breach of those covenants, and so it moved for an injunction to shut them down.
The employees are challenging the enforceability of the restrictive covenants, on a number of bases. They also argue that Altus knew about and even supported their initial start-up efforts, until YPC started attracting more of Altus' employees. (Shades of the Dent Wizard case I discussed last year.)
Altus also believes that one of the defecting employees brought confidential information with him, and wanted an order appointing a forensic investigator to look into it. The employee's laptop was re-imaged before being returned, which suggests to Altus that the purpose was to conceal data transfers.
The Court declined to grant either order, finding that the 'irreparable harm' requirement for an interlocutory injunction wasn't met to enforce the restrictive covenants, and that the evidence of stealing confidential data was insufficient to warrant a forensic investigator.
The Law
There's some interesting discussion about the test for interlocutory injunctions. (For lay readers, an "interlocutory injunction" means an order to do something or refrain from doing something during the course of proceedings. Essentially, where you need relief and simply can't wait for a full trial, you ask the Court to grant you interim relief until the matters are finally decided.)
Traditionally, the test is three-fold. To obtain an injunction, you need to establish (1) a serious issue to be tried; (2) that you will suffer 'irreparable harm' if the injunction is not granted; and (3) that the balance of convenience favours granting the injunction (i.e. that the harm to you of not granting you the injunction is more serious than the harm to the other party of granting it).
But there has been some evolution in recent years, and it isn't completely settled. It harkens to the difference between a "serious issue to be tried" and a "strong prima facie case". The former requires a motions judge to say only that the case doesn't look frivolous - the plaintiff appears to be raising a case that is capable of succeeding. The latter is a much higher standard, requiring the Court to say that the plaintiff has led a case strong enough that it is likely to win the case. It used to be argued (until the Supreme Court dealt with it in 1994 in RJR MacDonald) that a "strong prima facie case" was required for an injunction to be granted. The Supreme Court found in RJR MacDonald that, in general, only a "serious issue to be tried" is required.
But that wasn't the end of the matter. In some Provinces, and in some cases, Courts over time have looked at certain cases as being outside of the framework of RJR MacDonald. Where a mandatory injunction is sought (requiring some positive act, rather than just restraining from a given act), the Courts may find that a "strong prima facie case" is required. (This is a difficult distinction. Many orders cannot meaningfully be defined in these terms, and once you're at the point of litigation, it usually means that the status quo is already changed. For example, when you have an employee who has breached a non-solicitation agreement and proceeded to enter into major contracts with clients of the employer, does an order requiring him to terminate those contracts require positive action, or merely restrain him from acts?)
Some Courts have held a plaintiff to the "strong prima facie case" standard where there are no material facts in dispute. This makes a certain amount of sense, making it akin to a motion for summary judgment. The logic is that the Court is able to fully decide the issue without needing a trial. (Of course, without material facts in dispute, it doesn't make sense that the standards would be different. If I'm the plaintiff, and the defendant agrees with me on all the material facts, and the judge still isn't satisfied that it's likely that I'll win, it doesn't make sense to go on to say that nonetheless there is a serious issue to be tried.)
Some Courts have required a "strong prima facie case" where granting the order will effectively render the litigation moot. Imagine a dispute arising as to an event in the near future. Let's say that we're approaching the Olympics, and I've succeeded in Olympic qualifying rounds, so I should be going to London. At the 11th hour, my sport's Canadian association says to me "You don't meet the criteria to represent your country in this sport." (Suppose it's a citizenship issue, or a disagreement as to the interpretation of the qualifying criteria. Some sports associations don't strictly require citizenship, but sometimes have looser requirements including residency or contribution to the sport domestically, the interpretation of which might be argued about.) So I sue them, and bring a motion seeking an interlocutory injunction that they reinstate me. If the motion is granted, the dispute is over - they have to send me to the Olympics, and I've won. In such a case, the Courts may require me to prove a 'strong prima facie case'.
So the standard to be applied has been increasingly loose over the years, but now there's a new hiccup: Some Courts are now beginning to say that, where you have a strong prima facie case, you may not need to prove irreparable harm or balance of convenience. If the Court is saying "I expect that you will succeed", it makes more sense to just grant the relief.
To my mind, there's a major theoretical problem with that argument: Injunctive relief of this nature is in the nature of 'equitable' relief, which is only available where common law remedies are inadequate. In other words, at the end of a trial, I can only force you to comply with the terms of our contract if my loss by your breach could not be compensated by payment of money. Let's use the example of a housing purchase - I'm buying your house, and you refuse to close. I *really* like your house. Its architecture, location, and character are precisely what I'm looking for, and there's no other house that suits my needs quite like it anywhere. In this case, I might be able to force you to close. However, these cases are quite rare, because the simple truth is that houses are increasingly mass-produced. If another similar house in the same neighbourhood is up for sale, but for a higher price, it's open to me to just buy that house instead and go after you for the extra cash. Because that option is available to me, I can't compel you to close. If we go to the end of the trial, and I succeed in proving that you breached the contract and it will cost me an extra $50,000 to get an equivalent house now, the only remedy available to me is the $50,000. To some extent, the "irreparable harm" requirement imports that principle, and if you ignore the irreparable harm, then at the interlocutory injunction stage you could simply say "strong prima facie case; therefore close the transaction", thereby awarding me a remedy to which I would never otherwise be entitled.
However, the law in Ontario seems to be leaning towards shades of grey - essentially that, the stronger the plaintiff's apparent case, the less important the irreparable harm and the balance of convenience. That might make sense, provided they never become altogether meaningless.
Application
In this case, the motion judge found that there was a serious issue to be tried, but the evidence was short of establishing a strong prima facie case, and there was no irreparable harm established.
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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.
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