Is an Employer Entitled to Recover Advances Against Commissions?

For commissioned salespeople, there's a huge range of options in terms of structuring a compensation package.  For a salesperson taking a new job where 100% of the compensation package is commission, there's huge risk, but that risk is sometimes abated by 'advances' against commission:  The notion is typically a recognition that it takes some time for a salesperson to get going, and so needs a bit of money to pay the bills until the commissions start rolling in.  Once the commissions start coming in, they are first applied against the advanced money.

But what happens if the salesperson never makes enough commissions to offset the advanced money?  Is the employer entitled to have it repaid?

The answer depends on the terms of the contract, as Eco-Shift Power Corporation recently discovered the hard way.

The Facts

Gord Butler started working for Eco-Shift in January 2012.  He had 20 years' sales experience, but was unfamiliar with Eco-Shift's specific industry.

Mr. Butler was an independent contractor, not an employee.  (I'm not entirely sure that this finding considered all the requisite factors, but it's of relatively marginal importance to the case.)

The contract between the parties is referred to as the "MRA" (Manufacturer Representative Agreement), for a one-year term, which Eco-Shift enters into with all its salespeople.  However, there was a 'side deal' not integrated into the MRA involving 'advances' of $2500 bi-weekly.

By November 2012, Eco-Shift was becoming concerned by Butler's performance; his advances to date were far in excess of his earned commissions.  Accordingly, they told him that the advances would be discontinued.  (They wanted him to keep working to pay off the advances, but it's hard to imagine that happening under those circumstances.)  Butler quit in response to the termination of advances.  Eco-Shift sued in Small Claims Court to recover the outstanding advances.

What were the contractual terms relating to advances?

The exact terms of the advance deal are the crux of this case.  While Eco-Shift understood the term "advance" to mean "interest-free loan" (which is certainly a reasonable interpretation), there is no reason to think that Butler shared that understanding; none of the documents actually referred to the advances as a loan, nor was any end date for provision of advances provided.  The agreement itself contemplated that commissions would be applied to the advances, but didn't go beyond that to state that Eco-Shift could otherwise recover the advance monies, or that they constituted a debt to Eco-Shift.

Accordingly, Eco-Shift's claim against Butler was dismissed.

What could Eco-Shift have done differently?

There have been cases where advances were found to be recoverable debts, but it turns on the wording of the agreement.

In other words, a relatively simple rider in the contract, requiring repayment of outstanding advances at the end of the relationship, would have done the trick.

Yet another reason why it's important to have a lawyer look at your contracts.  It certainly makes sense to think that an 'advance' would generate a debt, but it's important to be express, especially where employer remedies are concerned.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

The Boucher Appeal: Wal-Mart Wins (Mostly)

In October 2012, I posted about the case of Boucher v. Wal-Mart, where a constructively dismissed assistant manager at Wal-Mart was awarded approximately $1.4 million.  It was a huge award, and a no-brainer that Wal-Mart would appeal.  The appeal decision was released yesterday, and involved a huge reduction of Ms. Boucher's damages.

Background

One of the challenges when looking at jury awards is that detailed reasons aren't released, and so my earlier entry relied on media reports for the facts.  The appeal decision contains some more precise details.

Ms. Boucher started with Wal-Mart in 1999; in 2008, she was promoted to an assistant manager position, and she had a falling-out with her manager, Pinnock, in May 2009 when she refused an instruction to falsify a temperature log, after which Pinnock "became abusive towards her."  She complained about the abusive treatment, and Wal-Mart concluded that her complaints were unsubstantiated and "that she would be held accountable for making them."  A few days later, Pinnock "again humiliated Boucher in front of other employees", so she quit.

The jury concluded that she was constructively dismissed, and awarded damages as follows:

1. 20 weeks' pay in lieu of notice, as specified in her employment contract;
2. $200,000 aggravated damages against Wal-Mart for the manner in which she was dismissed;
3. $1,000,000 against Wal-Mart in punitive damages;
4. $100,000 against Pinnock for intentional infliction of mental suffering (the "tort award"), and
5. $150,000 against Pinnock in punitive damages.

In the media reporting after the trial, a $10,000 award for assault was noted.  There's no reference to this in the appeal decision.  On the other hand, I commented earlier that I couldn't find any reference in the media to pay in lieu of notice, but observed that it would be dwarfed by the rest of the award anyways.

In my previous post, while I noted that the findings of liability were unlikely to be challenged on appeal, I expressed a few opinions about the damage award as reported:

Firstly, I felt that there appeared to be some analytical dissonance and possible double-recovery in the tort award and the aggravated damages award.  Basically, I felt that Wal-Mart should be vicariously liable for Pinnock's tortious conduct, and that - while it might make sense for Wal-Mart to have some liability for aggravated damages over and above Pinnock's own liability, arising from their own conduct that was independent of Pinnock's misconduct, it didn't make sense on the facts that she suffered $100,000 worth of damages at Pinnock's hands and another $200,000 worth of damages at Wal-Mart's.  (As it turns out, Wal-Mart was vicariously liable for the awards against Pinnock.  Still, there seems to be something wonky in the numbers on the facts.)

Secondly, the punitive damage award against Wal-Mart was unprecedented, but on the facts might be warranted, and wasn't inherently disproportionate to the amount of the compensatory award.

Thirdly, I considered the punitive damage award against Pinnock to be unlikely to stand on appeal.  Simply put, the point of punitive damages is to send a message, and a $150,000 award against a Wal-Mart manager...well, it's a little more than necessary to send a message.  I projected a significant reduction in that award.

The Appeal Decision

Wal-Mart made the 'double-recovery' argument I raised, but the majority of the Court of Appeal rejected it, finding that the aggravated damages for manner of dismissal are conceptually discrete from the tort damages against Pinnock.  The majority of the court regarded both the tort award and the aggravated damage award to be very high, but within the realm of reasonableness as reflecting the jury's "strong disapproval" of Wal-Mart's conduct.

The million dollar punitive damage award against Wal-Mart, however, was reduced to $100,000, and the award against Pinnock was reduced to $10,000.  In both cases, it was on the basis that "in light of the significant compensatory awards against each appellant, those amounts are all that is rationally required to punish Pinnock and Wal-Mart and to denounce and deter their conduct."

Wal-Mart argued that the "independent actionable wrong" element (which is required for punitive damages in breach of contract cases) wasn't made out for them.  The Court of Appeal accepted that the trial judge erred in instructing the jury that Pinnock's tort could be considered an independent actionable wrong by the employer.  (I have some difficulty with this, given Pinnock's managerial role.  It is not simply a matter of vicarious liability, but Pinnock's dealings with Boucher carried the full weight of the employer's authority.)  However, the Court of Appeal gave no effect to the error:  The jury's award illustrated a finding that Wal-Mart breached its duty of good faith and fair dealing, which is an independent actionable wrong for the purpose of punitive damages.  (This has long been established in personal injury law, but arises relatively seldom in employment contexts.)

Boucher cross-appealed, arguing based on expert evidence that her lifetime earning capacity was significantly reduced by the determination - after the dismissal, she was required to 'start over' in entry level work, taking a significant pay cut.  The Court of Appeal rightly rejected this argument:  That's a loss that flows from the fact of dismissal itself, which is only a breach of contract to the extent that it was without contractual notice.  The 20 weeks' pay in lieu of notice is full compensation for the fact of the dismissal.

Justice Hoy dissented on the double-recovery issue, expressing concerns similar to my own:  It simply doesn't make sense that Pinnock's egregious misconduct caused $100,000 worth of damages, and that Wal-Mart's (relatively limited) conduct over and above Pinnock's own caused an additional $200,000 (or even an additional $100,000) of damages.  Justice Hoy would have reduced the aggravated damage award against Wal-Mart to $25,000.

Commentary

It seems to me that the majority decision makes a bit of a trade-off between punitive and aggravated damages.  It grants the $300,000 in tort and aggravated damages in place as reflecting the jury's disapproval of the defendants' conduct (which is more appropriately considered for punitive damages), but then significantly reduces the punitive damage award on the basis that "the defendants have paid enough".

Nonetheless, I'm still a little surprised by the scale of the reduction of Wal-Mart's punitive damages.  All things considered, the judgment against it remains quite substantial (including the Pinnock award and trial costs, it comes to something to the effect of close to six hundred thousand dollars), but for the sake of perspective, that's a fraction of a Wal-Mart's executive salary.  A hundred thousand dollar punitive damage award against a company like Wal-Mart doesn't say much of the blameworthiness of the conduct.  Wal-Mart employs large numbers of vulnerable employees, and makes a boatload of money doing it, and the jury award implies a finding that Wal-Mart not only failed to properly investigate Boucher's complaints, but chose to protect its manager to the detriment of its staff.  Is this award enough to prompt Wal-Mart to take the necessary steps, on an organizational level, to ensure that it doesn't happen again?

As well, taking the costs award into account when determining the necessary punitive damage award...seems backward, firstly because punitive damages will factor into costs, and secondly because it actually discourages settlement, and encourages employers facing punitive damages to drive up the employee's costs, since they'll get credited for their share of those costs in the form of a reduction in the punitive damage award.  Completely irrational, in my view.

The reality is that these cases are very difficult, in many ways.  Simply establishing dismissal, in a conventional wrongful dismissal or constructive dismissal sense, would have put Boucher's claim - despite being an assistant manager with 10 years of service - within the Small Claims Court jurisdiction.  The tort/aggravated/punitive damages are quite exceptional in employment law, and high risk.  Had Boucher lost, she would probably have been hit with a six digit costs award for her trouble.  It's very high stakes for the employee.  So even though Wal-Mart was very successful on the appeal, what Boucher is left with is still quite an impressive success.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Stairway to Taurus - Plagiarism?

Interesting story in the music world - there's been a fair bit of discussion about possible allegations of plagiarism against Led Zeppelin, that its iconic 1971 Stairway to Heaven ripped off a 1968 piece by Spirit, called "Taurus".

Listen to them both, and judge for yourself.

They do sound very similar.  Similar cadence, similar progressions, similar themes.  It's very clear that Spirit 'influenced' Led Zeppelin.  But that's not the same as saying that Led Zeppelin ripped them off.

You see, every musician is influenced by other groups.  That's a big part of what art is all about - about developing new genres and sounds by building on what's already out there.  And when you're talking about contemporary bands playing to similar audiences (in fact, they occasionally played together), it's not at all surprising that you'd see a number of common elements between them.

There are only so many chord progressions.  For some insight into this phenomenon, watch Rob Paravonian's rant on Pachelbel's Canon in D.  (It's worth watching, both for the humour and the education value.  I'd discovered the phenomenon when I learned to play guitar in my teenage years, and discovered that U2's With Or Without You and Bush's Glycerine are really just the same song in different keys.)

Particularly within the same genre, at a given point in time, you really expect a lot of similarities between pieces.

Spirit's bassist, Mark Andes, admitted that he hadn't seen the similarity until relatively recently.  "The clarity seems to be a present-day clarity, not at the time of infringement.  I can't explain it."  I think I can:  In the early 70s, a lot of rock had similar elements.  If you put Led Zeppelin and Spirit beside, say, the Doors and the Stones (at least, the work they were doing at the time), it's clear that they all belong in the same group, and the relative similarities between two songs won't stand out as much.  On the other hand, if you put Stairway and Taurus together with modern-day rock songs, they look pretty much identical against the stark contrast.

I've heard other songs with more similar elements.  It happens, and it's often coincidence, or at least inadvertent, and in this case, I think if anything's being copied, it's the style, not the song itself.  This certainly isn't a "Sweet Little Sixteen"/"Surfin' USA" kind of copying.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

The Kotecha Appeal - A Surprising Analysis

Last year, I commented on the case of Kotecha v. Affinia, involving an elderly employee with 20 years of service, who was awarded twenty-two months' pay in lieu of notice, after bearing in mind two months' of working notice.

Affinia originally resisted the summary judgment motion primarily on the basis of procedural fairness issues, that it shouldn't be adjudicated prior to examinations for discovery.  However, this was not picked up on appeal.

The appeal centred on the length of the reasonable notice period.  The employer argued that the motions judge was bound by a previous unreported decision of the Superior Court (which is, simply, wrong) in Sharma v. Affinia, awarding 13 months of notice on "almost identical facts" (whereas in fact Sharma was significantly younger with shorter service).

There's no question that 24 months was high end - 24 months is, barring "exceptional circumstances", the ceiling for reasonable notice periods.  But it's clear on the case law that this employee was entitled to, as I put it before, a "very substantial notice period".  Ordinarily, the Court of Appeal been somewhat reluctant to interfere with assessments of reasonable notice periods - even where a notice period falls slightly outside the appropriate range, appellate intervention would amount to "unwarranted tinkering".

It's relatively unusual to see notice periods much higher than 20 months without exceptionally long lengths of service, so - with 'only' 20 years of service, one might naturally think that Mr. Kotecha shouldn't expect much more than 18-20 months...but his age puts him a little outside the ordinary analysis.  (It is clear on the original decision that the motion judge weighted his age heavily, which I think is reasonable under the circumstances, as well as the fact that Mr. Kotecha had in fact been searching for employment for two years without an interview.)  I might still think 24 months is a little ambitious, but not so far out of line as to warrant appellate intervention.

However, the awarded notice period effectively amounted to slightly more than 24 months (i.e. 24 months and 13 days) because, in fact, the working notice wasn't just 2 months; it was closer to 2.5 months.  So the Court of Appeal appears to have applied an "exceptional circumstances" analysis appropriate to awards over 24 months, and found that no exceptional circumstances existed.  So the Court of Appeal reduced the award to eighteen months (which I would consider to be at the very low end of the reasonable range in Mr. Kotecha's case), less the 11 weeks of working notice.

Ultimately, the appeal did, in fact, bring the overall amount of the judgment down below Mr. Kotecha's $50,000 offer to settle, but because of the motion judge's finding of unreasonable conduct by the defence, the Court of Appeal didn't interfere with the costs award at the motion level.  (They awarded Affinia $2500 in costs of the appeal, though.)

So, at the end of the day, the appeal was a fairly big win for Affinia, reducing its liabilities from over $90,000 to around $63,000 (without considering what it has to pay its own lawyers).  In the final analysis, though, Affinia still would have been significantly better off accepting Kotecha's offer to settle.

Commentary

As one might glean from my above framing, I'm a little struck by the stark reduction from the very high end to the very low end.

But I'm more struck by the analysis that was applied.  It is very clear on the face of the motion judge's decision that the award was intended to be 24 months, and ended up going higher only as a function of rounding.  (In fact, the rounding was done by plaintiff's counsel, which is fine as an advocacy technique, and the judge accepted the result.)  At best, it's through an arithmetical error that the award ended up higher than 24 months, so it seems very odd to apply an "exceptional circumstances" analysis to determine whether or not an award of 24.5 months was appropriate.  It makes more sense to correct the rounding error, and then determine if the 24 month award - as decided by the motion judge - is sufficiently far off the mark to warrant appellate intervention.

Then the analysis the Court of Appeal applied to come up with 18 months was frankly rudimentary, looking only at the Sharma case and at the Di Tomaso case, neither one of which is particularly comparable on the facts.  While the Di Tomaso case dealt with a longer period of service, neither case involved employees quite as elderly as Mr. Kotecha.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Stranger than Fiction: Judge Mocks Bickering Neighbours

In my view, the parties do not need a judge; what they need is a rather stern kindergarten teacher.  I say this with the greatest of respect, as both the Plaintiffs and the Defendants are educated professionals who are successful in their work lives and are otherwise productive members of the community.  Despite their many advantages in life, however, they are acting like children.  And now that the matter has taken up an entire day in what is already a crowded motions court, they are doing so at the taxpayer's expense.

This is the operative passage in a recent decision by Justice Morgan of the Ontario Superior Court of Justice in Morland-Jones v. Taerk, which is basically going viral - at least in legal circles.  (I've seen it pop up from multiple sources already today on Facebook and Twitter.)  Read the case.  It's not that long, and it's a good read.

The fact pattern is fairly convoluted, as neighbour disputes tend to be.  These two couples live across the street from each other in a posh Forest Hill neighbourhood, on a "well-manicured, picturesque street", with "numerous high end automobiles parked outside their homes".  Mr. Morland-Jones is an oil executive, and Mr. Taerk is a psychiatrist.  Both very successful and well-to-do professionals.

The Plaintiffs (the Morland-Joneses) have multiple video cameras around their home for security purposes, including two aimed directly at the Taerks' front door and driveway.  (This, in my view, is asking for trouble.  Security cameras are fine, but positioning should be discreet with an aim to record only what happens on your own property and surrounding public lands; when you start recording when your neighbours come and go, that's likely to build into a problem.  As Justice Morgan put it, the security system is "as much a sword as it is a shield.")

The current fight basically boils down to an incident several years ago.  Ms. Taerk did something terrible:  After her dog did its business on her lawn, she picked up and bagged the product, and - rather than go around to her own garbage at the back of the house - dared to discard the bag in the Morland-Jones' garbage bin at the curb.  And, to boot, when Mr. Taerk walked the dog, the dog occasionally dared to 'water' bushes lining the Morland-Jones' lawn.  This led, in 2008, to a lawyer's Cease and Desist letter, enclosing stills from the video coverage.

And, as neighbour disputes tend to, this deteriorated into a whole lot of bickering.  The Morland-Joneses complain that the Taerks occasionally park one of their cars in front of their (the M-Js) home...however, this accusation "was admittedly pressed rather sheepishly by Plaintiff's counsel, since the Plaintiffs have conceded that they park one of their own cars in front of the Defendants' home every day."  (Which they couldn't help but admit, since their own security footage "shows the Plaintiff's car sitting there day after day.")  The Plaintiffs complain that Mr. Taerk always walks by their home with an audio recorder, which Mr. Taerk says he does because Ms. Morland-Jones "occasionally shouts profanity or other insults at him when he is on his walks".

The Plaintiffs also complain that Ms. Taerk stands in her driveway and stares at their home, or stands there with a camera phone taking photos of them or their house (or their housekeeper taking their own dog for its "daily constitutional").  Surprisingly, Justice Morgan did not highlight the irony of this complaint in light of the Plaintiffs' own admission that they take 24/7 video footage of the Taerk house - indeed, the evidence of her doing so, standing in her own driveway taking pictures, is from cameras on the other side of the street.

Ms. Taerk's evidence is that, in fact, she doesn't take pictures.  She just stands there with a camera phone pretending to take pictures.  (Justice Morgan seems none-too-impressed with this, too, though it seems to me that there's an element of "How do you like having everything you do recorded?" to Ms. Taerk's conduct.)  "In any case, Ms. Morland-Jones can be counted on to respond as predicted.  It is a repeated form of hijinks that could, if a sponsor were found, be broadcast and screened weekly, although probably limited to the cable channels in the high 300's."

Likewise with the audio recording - it has come to the point that the Taerks intend to provoke "the very outbursts that he was at first reacting to".

It escalated, with the Taerks calling the police, the Morland-Joneses applying for a peace bond, and then on to this civil litigation.  This decision was in context of a motion by the Morland-Joneses seeking injunctive relief.

The Morland-Joneses also summonsed a whole bunch of other neighbours and former-neighbours as witnesses to prove that everyone hates the Taerks...but as it turns out, that wasn't the evidence they gave.  (The evidence that they were looking for has all the earmarks of neighbourhood gossip - for instance, they asked a professor to confirm that "she sold her house for below market value just to get away from the Defendants; she said that she did not."  Summonsing an unwilling witness, for this very reason, is something that litigators very seldom consider.)

Suffice it to say that the motion was unsuccessful.  "As I explained to Plaintiffs' counsel at the hearing, a court cannot order the Defendants to be nice to the Plaintiffs.  Litigation must focus on legal wrongs and legal rights - commodities which are in remarkably short supply in this action."

However, no costs were ordered.  Justice Morgan felt that the Taerks egged on the Plaintiffs to provoke the law suit.

Commentary:  As Neighbour Disputes Go...

In my general litigation experience, I've dealt with a number of neighbour disputes.  Suffice it to say that this is a mild one.  Both sides appear to fundamentally respect the property line to the extent of not crossing it.  No vandalism, no trespassing, no physical assaults, no actual threats, no property damage, no allegations of attempts to kill family pets (which, believe it or not, I've seen on multiple occasions).  Of course, it helps that, in this case, there's no dispute about the property line itself - it's a common feature of neighbour disputes that they involve a dispute over the location of the property line, or over rights associated with easements or rights-of-way.  Still, as juvenile as this bickering is, it's a fairly unusual feature of this case that it didn't actually deteriorate into any really tortious or criminal misconduct.

Thus, I see the Taerks' response as actually being fairly restrained.  They're getting recorded 24/7, getting Cease and Desist letters for some really marginal stuff, and getting (allegedly) yelled at and sworn at just walking by their neighbour's house.  Nobody wants to live like that.  Some people would do whatever they could to avoid triggering the Morland-Joneses, not going outside when they're there, etc., becoming prisoners in their own homes.  The Taerks went the other way, and decided that, if they're going to have to live with that nonsense, they might as well find some pleasure in it.  I feel bad for the fact that they incurred tens of thousands of dollars in costs, defending an action which was clearly devoid of any merit, even if they weren't entirely blameless in it having been brought.  In essence, the legal process is being used as a punishment for their conduct.

But, given the complete absence of tortious conduct here, I'm a little surprised by the Plaintiffs' counsel.  They had a senior litigator (and a junior-but-still-seasoned second chair) from a major Bay Street firm, lawyers who shouldn't need to have it explained to them that "a court cannot order the Defendants to be nice to the Plaintiffs".  (These weren't the same lawyers, it appears, who sent the original Cease and Desist.)

Don't get me wrong - I don't assume that the Plaintiffs didn't have it explained to them that this was a nonsense case.  Quite the contrary, unless there are a lot of facts that didn't make it into Justice Morgan's judgment, I have to assume that the Plaintiffs have had it explained to them on multiple occasions that this case is a loser, and that they wanted to proceed anyways.  Still, it's probably not the case that the Plaintiffs' counsel explained it in the strong terms Justice Morgan used, and it's quite appalling that this case ever saw the inside of a courtroom.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Hudak's "Million Jobs Plan": Details, Please

Ontario's into an election campaign now.  The general consensus, except among the most hardened partisans, seems to be that our choices are between bad, worse, and worst, with varying views on which is which.

The Progressive Conservative Platform hinges on what they call a "Million Jobs Plan", the details of which were released this morning.

Which seems strange, given that Statistics Canada's most recent numbers put Ontario's unemployment numbers at barely more than half that - at about 555,000.  (Even if you factor in the 100,000 public sector jobs he plans to eliminate, it still doesn't seem to add up.)  The PC platform itself pegs the number of unemployed at 800,000, but it's not clear where they're getting that figure.  (Perhaps it's a rounding-up of the number including those who have stopped looking for work.)

I'm not proposing to comment broadly on all facets of the platform - for example, there are people better qualified than I to assess the merits of the PC math suggesting that a reduction in corporate taxes from 11.5% to 8% would generate 119,808 jobs.  (Personally, I've always seen the connection between corporate tax rates and job creation as rather counter-intuitive:  There are tax deductions for investments in growth of jobs and infrastructure, so corporate taxes primarily impact things like retained earnings.  Thus, corporate taxes incent investment in business growth by fostering an "It's deductible" mentality, whereas lower tax rates tend to encourage companies to stockpile more cash and pay out larger dividends to shareholders.  The empirical evidence tends to support this logic, as well.)  Also, aside from pointing out that Mr. Hudak needs to brush up on his Keynes if he thinks that eliminating 100,000 jobs will stimulate private sector job growth, I'm going to stay out of that particular debate.

Mainly, I'm going to draw attention to a few of the workplace-related reforms being proposed, as I think many of them need more detail.

Cutting the Red Tape

The PCs propose to "Eliminate rules and regulations that don't benefit consumers, workers or employers, reducing the total by one-third over three years", claiming that Ontario companies spend $11 billion per year on compliance, and that the regulations make it particularly difficult for small businesses, "the ones who don't have HR and legal departments and can't afford experts to help them figure out how it all works."

First off, the notion that the aggregate collection of rules and regulations can be quantified, such that they might be reduced by "one-third", is perplexing.  Laws are complicated things, and it would be next-to-impossible to parse a statute like the Employment Standards Act and list off the myriad obligations it imposes, particularly when many of the rules and regulations are consequential or conditional.  And if you did so, the number you'd end up would be deceptive, because you'd include fundamental contractual obligations like "You have to pay your employees" as government rules and regulations.

Secondly, when an employer says it can't afford to figure out the legal framework, that's a false economy.  Even without government regulation, there are a lot of contractual issues that employers need to address up front, and failing to do so can create massive expenses and liabilities.  An employer can pay me up a bit of money up front to help them structure their employment relationships, or they pay me a lot of money at the tail end to do damage control when they're staring down the barrel of legal proceedings.

There is a lot of red tape for employers.  There's no denying it.  But much of it has purpose, and while there are probably ways of simplifying and streamlining it, it sets off alarm bells in my mind to hear political party broadly promising to cut the red tape, without specifics.

The specifics I've seen laid out are pretty limited, such as some talk of eliminating the 'government monopoly' for workplace insurance.  In fact, that's likely to complicate matters:  Unless you remove the necessity for insurance altogether (which would be insane - the end result would be that many employers would choose to go uninsured, and that a workplace injury would result in the injured employee suing the employer into the ground, destroying the business and ultimately leaving the employee without significant compensation; WSIB protects both workers and employers), you're going to have implement a whole new host of rules and regulations regarding the requirements for private sector workplace insurance.

The PCs also write about eliminating "rules that prohibit competitive bids on government construction contracts".  It's not entirely clear what he means by this - government construction projects are typically subject to competitive tender processes - but it appears that this may be related to his objection to the TDSB's obligation to "give its union all building maintenance jobs".  Which is different from construction, and more importantly is a fundamentally contractual matter, rooted fairly abstractly in the Labour Relations Act, and it's not clear how the legislature would change this reality.

There are a handful of statutes that specifically create rules and regulations for employers, such as the Employment Standards Act, the Labour Relations Act, the Occupational Health and Safety Act, the Workplace Safety Insurance Act, the Human Rights Code, and a few others that are smaller or have more limited application.  These are the kinds of statutes you're talking about when you talk about needing HR departments to parse your obligations.  And yes, there are a lot of obligations in those, but I'd really like to know what Mr. Hudak intends to remove in the name of simplicity, because most of those obligations are in place for the express purpose of protecting workers, and compromising substantive worker protection in the interests of saving employers the costs of implementing policies would be...a little backward.  The right approach to such an issue is to streamline and simplify the obligations to make them easier to fulfill.

Though it does seem that the PCs are going beyond strictly employment regulations, and also looking at industrial regulation as well - loosening regulations for apprenticeships and changing the mandate of conservation authorities.  Not to mention eliminating "hundreds of unnecessary" (and unspecified) "rules that bog down the social assistance system".

Re-Balance Labour Laws

As my readers will know, I fully acknowledge that reforms are necessary to the Labour Relations Act.

But the PC platform is odd:  Firstly, it promises "a secret ballot in certification votes".  Which would be great.  So great, in fact, that it already happens:  Certification votes already have a secret ballot.  Again, I would support certain reforms in terms of the certification process, and the elimination of card-based certification (so a vote in all certification applications), but that's not what the platform describes.  Secondly, they're promising "paycheque protection so that workers are not forced to pay fees towards political issues they don't support".  Which sounds strangely like the "right to work" policy that Hudak so recently waffled on.  Unless he plans to make the 'opt-out' specific to the portion of dues the union is applying toward political activities, which would be (a) very complicated if possible at all and (b) constitutionally questionable.

And fundamentally, it's not so much about protecting the workers as it is a politically self-serving move, given the traditional antipathy between unions and conservatives.

I would support labour relations reforms to give bargaining unit members a more meaningful choice in whether or not to become and remain part of a union, as I recently proposed.  But policy notions such as 'right to work' are specifically designed to kneecap unions, and I can't get behind that.

At the end of the day, the platform makes big promises, but is really scant on the details of how these promises are achievable.

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

A Case for Change: Recognizing Bargaining Unit Members as Stakeholders in Labour Relations

There's a lot of room for discussion in many areas of labour relations, from grand questions of whether to use the Wagner model (which prevails in North America) or some other model, to policy questions of 'right to work', the Rand formula, and the scope of freedom of association.

I propose to touch on a smaller, and hopefully less controversial, reform which is badly needed in Ontario's Labour Relations Act.

By and large, the LRA is built around the relationship between the union and the employer.  In many ways, this makes sense:  The very point of labour relations is that the union stands as a singular whole for the multitude of employees.

Yet, if we lose sight of employees as stakeholders in the process, we have lost sight of the entire purpose of labour relations.  And, more importantly, there are circumstances where employees are entitled to direct access to procedures under the LRA, and yet the processes under the LRA are far from accessible to individual employees.  There are very significant "access to justice" problems in the labour relations regime.

The primary areas in which problems arise are where the individual employees' interests run contrary to the interests of the union.  These are the situations where an employee is totally on his/her own, without guidance from the representatives to whom he or she is paying union dues.  The vast majority of these scenarios are in the context of applications to terminate bargaining rights (referred to as "decertification" or "termination" applications) and "duty of fair representation" applications brought against the union.

I am not going to address the issues with the DFR process at this time.  They are not straightforward, and involve issues of substantive law.

However, I will suggest that there are minor yet important changes to be made in the LRA itself, the Ministry of Labour's policies, and the OLRB's Rules of Procedure, which will ease the 'access to justice' problems of individual bargaining unit members.

Reform #1:  Let the Bargaining Unit Know About Conciliation

The Problem

I've blogged about this issue before.  By way of background, there are only certain times when a termination application can be made.  This is complex enough in the first place.  There are s.63(1) applications, which allow a termination application if more than a year has passed since the union was certified but no collective agreement has been reached.  (In the construction industry, there are s.132 applications available after six months.)  Then there are s.63(2) applications, which are available during the last three months of the third year and every year thereafter of its operation.  (So if a collective agreement has a five year term, an application can be brought in the last three months of years 3, 4, and 5.)   As well, s.63(2) applications are available after the start of the last three months of a collective agreement, until a new collective agreement is reached.

However, there are certain bars.  One of them - the centrally problematic one - is the appointment of a conciliation officer.  The union or employer is entitled to request that the Ministry of Labour appoint a conciliation officer to help work out a collective agreement, and once the conciliation officer is appointed, the effect is to bar a s.63(1) application altogether, bar a s.132 application altogether, and bar a s.63(2) application after the expiration of the existing collective agreement.

There's a logic to it, of course:  It creates a process for conciliation without the threat of a decertification application hanging over the union's head.  For the same reason, no decertification application can be brought in the first six months of a lawful strike - it gives the union a meaningful opportunity to make the strike work.

So how long does the bar last?  Well, there are a few scenarios in which the bar could theoretically expire, but by far the most common is 30 days following the issuance of a 'no board' report - the parties being advised that no conciliation board will be appointed.

So what's the problem, then?

Put simply, it's that individual members of the bargaining unit have no way of determining whether or not this bar exists.  Despite the fact that the appointment of a conciliation officer and the issuance of a 'no board' report both significantly impact the statutory rights and remedies of bargaining unit members, they are not entitled to be advised of either event.

In the ordinary course, the bargaining unit is not notified that a conciliation officer has been appointed.  The Ministry advises the union and the employer, and those are the only parties who know.  A bargaining unit member considering a decertification application can't ask the union about it, because that will send up a red flag for the union - if they haven't sought the appointment of a conciliation officer yet, they will now.  The bargaining unit member likely can't ask the employer about it, because of the risk that the employer's response will be construed as employer influence.  (I'm not familiar with any case law on the point, but I have seen the argument made.)

So...what about the Ministry of Labour?  Will they tell bargaining unit members whether or not a conciliation officer has been appointed?  I actually inquired with the Ministry about this last year, and they said no:

Under the Labour Relations Act, 1995, for collective agreements of three years in length or less, the last three months is an ‘open period’ for replacement and termination applications.  For collective agreements of more than three years in length, the ‘open period’ occurs in the three-month period immediately preceding the agreement’s third anniversary and then again immediately preceding each subsequent anniversary.  These guaranteed three-month ‘open periods’ are unaffected by the appointment of a conciliation officer or the issuance of a ‘no-board’.

After a collective agreement has expired (and if a renewal agreement has not been concluded), an ‘open period’ can also exist.  Such unguaranteed ‘open periods’ may be affected by the date a conciliation officer was appointed and/or the date a ‘no-board’ was issued.

The Ministry treats the notification of the appointment of a conciliation officer and the issuance of a ‘no-board’ as private correspondence between it and the parties.  Thus, it may be more straightforward for employees to ascertain the dates of the guaranteed three-month ‘open period’ than for an unguaranteed ‘open period’.

They're right that a s.63(2) application has certain (almost) guaranteed open periods.  However, this response does not at all account for the availability of s.63(1) applications or s.132 applications, which do not follow on the heels of a 'guaranteed' open period.  Furthermore, it fails to appreciate that there are legitimate scenarios where the reasons a bargaining unit wants to decertify arise after the expiration of a collective agreement (i.e. because of dissatisfaction with the ongoing bargaining process).

In such scenarios, the only real course of action available to a bargaining unit member is to make the application without knowing if it's timely, and keep his/her fingers crossed.

It's an unwieldy process, which many bargaining unit members are unable to pursue without assistance, and they have to pay for such assistance out of their own pockets.  It's not cheap, and a lack of knowledge as to whether or not the application is even timely - meaning that the legal fees incurred in the process could well be for naught - is a significant disincentive to proceeding with the application.

What's more, there is no good policy rationale for keeping bargaining unit members in the dark about the conciliation process.  They are stakeholders in the process, and there's every reason for them to be entitled to be kept up-to-date regarding collective bargaining and conciliation.

So what we have is an absurd reality where stakeholders in the process cannot know of the status of the process, even though their legal rights and remedies turn on the status of the process.

What's the Solution?

The reality is that it isn't a complicated problem, and there are several possible solutions.  The easiest solution doesn't even require statutory amendment; it simply requires an about-face from the Ministry of Labour, to be willing to advise bargaining unit members (or their counsel) whether or not a conciliation officer has been appointed, and whether or not a "no board" report (or conciliation board report) has been issued.

However, this still puts the ball in the employees' court to proactively seek out the information and know where to look.  In this particular context, in light of the broader access to justice issues, the less burden you place on individual employees, the better.  The longer-term solution is to recognize the bargaining unit members as stakeholders in the process by implementing statutory reforms to keep them in the loop, requiring the employer to post notices in locations where they are likely to come to the attention of bargaining unit members of:

• the appointment of a conciliation officer under s.18 of the LRA;
• the appointment of a mediator under s.19 of the LRA;
• the appointment of a conciliation board or the issuance of a no board report under s.21 of the LRA; and
• the issuance of a report by the conciliation board under s.34 of the LRA.

To the extent that these notices affect employees' rights to bring a termination application, they should be on forms which explain these effects.  (So the notice of the appointment of a conciliation officer should indicate that the right to bring a termination application is suspended until certain criteria are fulfilled; a notice of a no board report should indicate that the right to bring a termination application will be available again as of a particular date.)

One might also consider adding a notice requirement for other events such as first contract arbitration.

Reform #2:  Inform Bargaining Unit Members of Open Periods

Information about open periods is fairly limited.  In the modern information era, there are certain online resources - a Google search relating to the decertification process will bring you to results such as a prior entry in this blog, a helpful guide from labourwatch.com, etc.  However, all online descriptions of open periods, of necessity, deal in abstractions, with a lot of if's and or's.  It's never easy reading for somebody without legal training, and to many people it's simply inaccessible.

What many bargaining unit members need, in order to be able to meaningfully consider whether or not they want to initiate a termination application, is a simple application of the rules to their collective agreements.  So if I'm in a bargaining unit with a collective agreement effective from January 1, 2014, for a five year term, what I need to know is something to this effect:  "You may bring an application to terminate the union's bargaining rights between October 1 and December 31 in the years 2016, 2017, or 2018.  Following the expiration of the collective agreement on December 31, 2018, if no new collective agreement has been reached, you will still be able to bring a termination until a new collective agreement is reached, a conciliation officer is appointed, a lawful strike commences, or the OLRB orders otherwise."

Simple, to the point, and combined with a few other notice requirements (such as the ones I suggested above), it would ensure that employees know what they need to know.  Ultimately, the point is to tailor the notice to the specifics of the collective agreement.  As well, the notice should point bargaining unit members in the right direction in case they choose to exercise their right to bring an application.

So the question is how to tell them.  There are three possibilities:  Mandate that collective agreements include such a notice (and that all bargaining unit members receive a copy), permit or oblige the employer to keep such a notice posted throughout the currency of the collective agreement, or permit or oblige the employer to post a notice whenever an open period occurs.

The third option is ideal.  The first is not really capable of addressing open periods under s.63(1) or s.132 of the LRA, and the second, while acceptable, also has its limitations.  The point is to actually disseminate information regarding their rights and remedies, ensuring that people make educated and meaningful choices, and that means maximizing the information's visibility and the likelihood of it being noticed when it has a meaningful impact for the employees.  As well, while I would be loathe to put too many mandatory posting requirements on employers - they have enough such things already - I believe that it's better not to leave them discretion in this particular area.  (This isn't because employers aren't generally going to jump at being able to tell employees that they can get rid of the union.  Rather, it's because it removes the question of employer motivations from the equation.  If they posted the notice, it's not because of anti-union animus; it's not to put pressure on the employees to go one way instead of another; it's simply because they were obligated to do so.)

Reform #3:  Relieve Applicants of Red Tape

The application process is intimidating, in part because of the elaborate paperwork requirements.  Filling out the necessary documents isn't that difficult, though there are issues with the information being asked of employees.  (For example, it's relatively unusual that the individual bargaining unit members can identify the "senior union official responsible for the bargaining unit", and particularly in larger bargaining units it's relatively improbable that a bargaining unit member will know the number of bargaining unit members, all work sites, and appropriate voting locations.  None of these issues are particularly critical, in most cases, but most applicants looking at the application form won't know that.)

But the real problem is requiring the assembly of termination packages.  The termination package for the union includes a notice, a copy of the application, a blank response form, three information bulletins, and part of the Board's Rules of Procedure.  The package for the employer includes similar (but not entirely the same) documents, plus an additional document.  Both packages need to be complete, and even in the correct order, and they each typically exceed 40 pages.  (Which is insane, considering that most of the pages are just information bulletins or blank forms available for download on the OLRB website, and are typically served by fax.)  Then, on top of that, the applicant needs to actually file the application, which means sending a different (though somewhat less daunting) package to the Board.

There's a similar model across Board applications, and in many contexts it kind of makes sense:  Board applications move really fast (usually), and so you want to be giving the other parties everything they need to respond.  So in a certification application, the union has to serve the employer with a package, which tells the employer everything they need to know to respond quickly.  Since the employer probably has no familiarity at all with the labour relations regime, that's important.

However, in the overwhelming majority of termination applications, the applicant is by far the least sophisticated party in terms of labour relations knowledge and experience.  Both the employer and union have been around the block in terms of the OLRB; how on earth does it make sense to put the burden on the individual employee to make sure that they're aware of the procedural requirements?

The fix really isn't anything too magical.  It doesn't require statutory or regulatory reform.  It requires modifications to the Board's process and forms:  First off, one form which includes the core information of the application and notices to the union and employer.  Secondly, page one of that form should (a) highlight the urgency of the party's response and (b) provide a URL and a phone number (for those few who still don't know how to use the internet) which can be used to acquire a respondent's or intervenor's package, including the necessary blank response form, Schedule C as needed, information bulletins, and rules of procedure.  (How hard would it be for the OLRB to create a single downloadable pdf for each of the employer and union packages?  I'd do it myself, but the Board amends one or more of the documents a bit every few months, so it might be tricky for a third-party publisher to keep it up-to-date.)

Conclusion

Put briefly, I think the changes we need are as follows:

1. Notice requirements within the LRA for collective bargaining related steps (including conciliation and others);
2. Notice requirements within the LRA of open periods; and
3. Simplifying the paperwork for an application to terminate bargaining rights.

I'm not recommending changes to the substantive requirements for a decertification application.  (One might reasonably argue that, when the vote itself is determined by a majority of votes cast, requiring 40% support among eligible voters to justify a vote at all is a little high.  But there are good reasons to have a threshold - at some level - and require an applicant to get evidence that the threshold is met.)  But making the process more user-friendly simply makes sense.

Don't get me wrong, I've gotten a number of paying clients in the door who wanted to decertify a union and were so intimidated by the process that they felt the need to hire a lawyer.  The lack of accessibility is literally cash in my pocket.

But I wonder:  For everyone who actually comes to me to decertify a union willing to pay my fees, how many people are there who would avail themselves of the right to bring such an application if it didn't require them to pay me hundreds of dollars per hour?

The reforms I'm proposing herein are not radical.  They do not place particularly onerous or unprecedented obligations upon anyone.  They may not be the only options for dealing with these problems, but the problems they address are very real and unjustifiable in a regime intended, at its very core, to protect the interests of the workers.  (Indeed, the very existence of the first problem is completely irrational and absurd.)

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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.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

Flextronics Moving Solar Panel Manufacturing to Mexico

YorkRegion.com is reporting some unfortunate news for the Newmarket community:  Flextronics, a company with a manufacturing plant in Newmarket (just around the corner from my office, incidentally), is downsizing its Newmarket facility, moving its solar plant manufacturing operations to Mexico.

Newmarket-Aurora MPP candidate Jane Twinney is cited as saying that several hundred jobs are likely to be affected.  (Indeed, their press release from 2011, in advance of starting solar panel production here, indicated that it would employ 400 people.)

Their cell phone refurbishment operations, employing approximately 50 people, will remain in Newmarket.

Why Move?

Question of the hour:  Why open an operation in Ontario in 2011 and move it in 2014?  One would assume that it's more cost-effective to do business in Mexico, so the real question is:  Why did they come here at all?

Presumably, it has something to do with the Feed-In Tariff (FIT) program:  The FIT program was established in 2009 under the Green Energy Act, enabling Ontarians to sell renewable energy to the OPA under 20-year contracts.  These contracts have taken some criticisms for overcommitting the OPA to long-term contracts at too high a price point, but the motivation was to create jobs and clean up energy production by enabling the development of an Ontario market for green energy production.

To help create jobs, the FIT program required 'local content' - meaning that a portion of the equipment had to be Ontario-made.  The effect was to create a huge demand for Ontario-made equipment, including solar panels.  So companies manufacturing such equipment, such as Flextronics, had an incentive to open plants in Ontario.

Just one problem:  It amounted to protectionism, plain and simple.

In 2010 and 2011, Japan and the EU complained to the World Trade Organization that the 'local content' requirement violated the GATT (General Agreement on Tariffs and Trade).  In 2012, the WTO ruled against us; we appealed, and in 2013 we lost.  As a result, the FIT is changing to remove local content requirements, and the inflated demand for Ontario-made equipment is quickly vanishing.

What about the Workers?

The YorkRegion.com report also paraphrased a Flextronics VP as saying that "Impacted employees will receive severance packages in accordance with company customs and local laws".

Interesting choice of words.

It bears noting that Ontario's Employment Standards Act sets out only minimum standards for notice and severance, and that actual entitlements upon dismissal are largely governed by contract.  And where there is no written contract (with enforceable language dealing with termination entitlements) or collective agreement, common law doctrines of 'reasonable notice' govern.

Accordingly, it's important for employees, being asked to sign off on a package, to seek appropriate expert advice.

I'm not aware whether or not the affected employees are members of a bargaining unit (i.e. unionized).  Unionized workers can (and generally must) turn to their union with such concerns.  Non-union employees, when being offered a package, would be prudent to consult with an employment lawyer about it.

*****

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 author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.