I was at an introductory session for the Newmarket Chamber of Commerce this morning, which I recently joined. Its President & CEO, Debra Scott, gave an excellent presentation regarding the benefits of membership.
One of the services that can be purchased through the Chamber is an HR consultant service, First Call HR. Ms. Scott explained that the Chamber itself has recently started using First Call for its own recruitment, and spoke very highly of the services they provided, and she highlighted that, while many small businesses claim that they can't afford to pay for HR consulting, the reality is that it can be far more expensive not to.
I fully agree with that. Getting assistance with matters like recruitment, discipline, policy development, and other aspects of HR management is crucial for any employer. And there's some overlap between what an HR consultant and a labour/employment lawyer can do for your business, and within the scope of their expertise HR consultants can be very effective.
However, there are a few lines that can be drawn, where an employer should retain a lawyer's assistance.
Preliminary Remarks: The Legal Monopoly and Interdisciplinary Practices
The Law Society of Upper Canada regulates the provision of all legal services and the practice of law in Ontario. There are things that look like legal services that some HR professionals are entitled to do, but there are lines that even they can't cross.
In general, legal advice is something that is strictly limited to licensees of the Law Society, and in general the business itself has to belong to licensees. In other words, Wal-Mart can't hire lawyers to service its clients; however, it can rent space to lawyers who will service its clients.
There are also multidisciplinary practices, subject to strict and narrow criteria, allowing lawyers to enter into partnerships with other professionals. It can be a fairly complicated framework, but the takeaway is that, if you're receiving advice or representation that's supposed to come from a lawyer, you should make sure that you know where it's coming from.
Where you should talk to a lawyer
Certain members of the HRPA - specifically, those with the CHRP designation - have certain exemptions under the Law Society's bylaws: Specifically, they are entitled to offer 'legal services', provided that certain other criteria are met. The Law Society Act defines providing legal services as "conduct that involves the application of legal principles and legal judgment with regard to the circumstances or objectives of a person", including giving advice regarding rights and responsibilities, drafting certain types of documents, representing a person, or negotiating a person's legal interests, rights, or responsibilities.
Which means that there's actually quite a bit that a CHRP can do - pretty much everything up to and including representing a client in labour arbitrations, administrative tribunals, and Small Claims Court. (The limits on non-CHRP human resources professionals are a little more grey.)
Does that mean that you should just retain an HR Consultant with a CHRP designation to defend yourself against a wrongful dismissal action at the Small Claims Court? Probably not. While they have an HR expertise that most paralegals lack, the reality is that litigation itself is quite a specialized field, and most CHRPs will have little-to-no exposure to it in the ordinary course. Depending on the value of the claim, it is much more prudent to hire a paralegal or lawyer. (And I have commented before about the value of specific expertise, too, in a niche area of law like employment law. It is really important to have a representative at Small Claims Court who knows the area of law.)
Likewise, it is not uncommon for CHRPs to represent employers in labour arbitrations or other tribunals, but the reality is that they do not have the training or expertise that lawyers have, particularly relating to procedural or other technical legal matters - jurisdictional disputes; constitutional arguments; debates over the admissibility of evidence or burden of proof...these are all issues that can easily arise in any legal proceeding, and for which you are much better off with a lawyer.
Even short of actual legal proceedings, though, the best value for HR consultants is achieved when used in conjunction with good legal advice. HR consultants may be able to draft policies, but will it address the needs of your business and changes in the law without compromising what it sets out to do? HR consultants and labour/employment lawyers essentially work out of similar precedent banks. I have my own precedents, which draw on other precedents drafted by lawyers before me, which were based on other precedents drafted by other lawyers before them. Much of the language is age-old, and respected by the courts. Most HR consultants will have precedents of similar origin, so the precedent itself should be pretty good, except for two things: Firstly, who knows how old the precedent is, and whether or not it accounts for changes which need to be made based on evolving case law, and secondly, there is no such thing as a "one size fits all" policy manual. Every employment policy and contract needs to be tailored, to some extent, to fit the needs of the employer.
So you have this good precedent, with good lawyer-drafted language, tested for enforceability a hundred times over the course of many decades, and you're asking your HR consultant to tinker with it. You see the problem, I hope: It's like taking a high-rise drawing designed by a team of architects and engineers, and then asking the construction foreman to change the placement of the support beams. Not only may the end result not turn out as expected, but the whole project could collapse. The same is true of employment contracts - relatively minor errors or inconsistencies can render critical parts of the contract unenforceable. At a minimum, you would want to ask your architects and engineers if the modifications to the design are acceptable; likewise, you want to run your policies and contracts by an experienced employment lawyer.
So while an HR consultant may well be a good starting point for your employment policies and contracts and other aspects of HR management, it is also important to have a competent employment lawyer as part of the team - lawyers bring different and specialized expertise and training to the table.
*****
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.
Thursday, June 26, 2014
Wednesday, June 18, 2014
Time to Revisit Stevens v. Globe & Mail?
It has long been considered trite law that common law pay in lieu of notice is inclusive of amounts paid in respect of notice and severance under the Employment Standards Act. So you usually get your statutory entitlements shortly after termination, and then if you have to litigate the court will assess your overall notice period, and conclude that you're entitled to an award equivalent to x, minus amounts already paid for statutory notice and severance.
It was not always so obvious - at least, not for statutory severance. It used to be a disputed issue, subject to conflicting jurisprudence, until the debate was settled eighteen years ago by the Ontario Court of Appeal in the case of Stevens v. Globe & Mail, finding that statutory severance should be treated like statutory notice, and deducted from common law entitlements.
It's a proposition that has not arisen particularly frequently in the case law since then. In the case of Antonacci v. Great Atlantic & Pacific Company of Canada, Limited, in 2000, the Court of Appeal referred back to that case. (In recent years there have only been a few reported citations of Stevens, but more for its proposition on when interest starts accruing, rather than the interaction between statutory severance and common law damages.)
By way of background, it's important to understand that this is only an issue at all in a relatively small subset of cases. Most employees are entitled to what we call 'statutory notice', which is a modest entitlement capping out at 8 weeks for long-service employees. Only certain employees (i.e. employees with more than 5 years of service) working for certain employers (usually employers with payrolls exceeding $2.5 million) have severance entitlements, but those entitlements can go significantly higher, up to six months' pay. (This is in addition to statutory notice.)
There's one other central distinguishing difference between statutory notice and statutory severance: An employer can elect to satisfy its notice obligations by way of actual notice or pay in lieu of notice. Severance pay, where applicable, usually has to take the form of a lump sum payment. There are also slightly different tax treatments available, impacts on continuation of benefits, and different treatments of non-continuous employment.)
In recent years, the Supreme Court of Canada has largely worked on streamlining employment law with the first principles of contract law. To a lesser extent, the Ontario Court of Appeal has done the same. (The Court of Appeal has even rejected other "well-settled" doctrines of law to return to first principles of contract law, as in Bowes v. Goss Power Products Ltd.) So let's attack this problem from a first principles perspective:
Suppose that I'm a major Ontario corporation, and you've worked for me for 15 years, and suppose that, in the circumstances, you are entitled to 12 months' notice. There are three core elements governing your termination entitlements:
In other words, if I give you a year's notice as the contract requires, that means 67 (or 68) weeks of salary in your pocket. (Of course, you have to work for 52 weeks of that, but that's not generally considered relevant in employment law.) None of that is controversial - it's a pretty straightforward application of the law, and the OLRB has consistently held that additional actual notice cannot satisfy statutory severance obligations. (See, for example, Assurant Group v. Filion.)
But what if I don't give you actual notice? What if I fire you effective immediately, as is so common?
At the core of contract law lies the 'compensation principle', the notion that you are entitled to be put in the same position as you would be had I complied with the contract. At a glance, it seems fairly simple: Subject (in part) to the duty to mitigate, you are entitled to 67 weeks' pay altogether.
Yet Stevens goes another way. I would pay you 23 weeks' statutory notice and severance shortly following the termination, and then you would sue me for your common law entitlements, and the court would award 52 weeks minus the 23 weeks' wages I already paid you. (It isn't exactly the same as saying '29 more weeks', because statutory severance doesn't include things like compensation for lost health benefits, unlike common law damages.)
The conclusion is that, absent a written contract limiting employees' entitlements to (or near) the statutory minimums, a severance-eligible employee is really not in any better of a position than a severance-ineligible one. It isn't an incoherent policy position, treating most employees more-or-less equally. But, on the current framing of the ESA, it is completely incompatible with the compensation principle.
In Stevens, the finding ultimately turned on a proposition from a much older case (1982) that statutory termination and severance pay have a shared purpose, being to "cushion the economic dislocation of the employee", and that this overlapped with the purpose of common law pay in lieu of notice. (I'm not sure that this is entirely consistent with the purpose as set out in the 1987 Hansard records we recently reviewed, but this is the standing judicial interpretation.)
However, the law of dismissal has since been refined in the Ontario jurisprudence, recognizing that pay in lieu of notice is an application of the compensation principle, arising from breach of the contract by failing to provide actual notice. See, for example, Taylor v. Brown or Love v. Acuity Investment Management.
Not to say that this proposition wasn't recognized by the Court of Appeal in Stevens, in at least a cursory way. There was a dispute before them as to the nature of pay in lieu of notice, and they ruled on that in a manner consistent with the later cases. But it is not consistent with the later cases to imply as they did that the purpose of common law pay in lieu of notice is to provide the employee with an economic cushion.
The purpose of the obligation to give reasonable notice of termination of an employment contract is to permit the non-terminating party to take the necessary steps to secure its interests prior to termination: For a resignation, that means that an employer is entitled to have enough time to reasonably recruit/train/schedule a new worker to fill in for the resigning one; for a dismissal, it means that an employee is entitled to have enough time to reasonably find a new job.
It's about giving the employee an opportunity to make a smooth transition from one job to the next, and it is not about requiring employers to provide a financial cushion to dismissed employees. (Indeed, pay in lieu of common law notice is often unpaid until well after the notice period ends, meaning it doesn't make for much of a cushion.)
This is why there's a disconnect between the Stevens doctrine and the compensation principle: If you look at pay in lieu of notice as being intended to provide a financial cushion, then you get a doubling of the cushion if you award severance plus common law pay in lieu of notice. But common law pay in lieu of notice isn't really a 'thing'. It's shorthand for damages for breach of the obligation to give actual notice. And when you look at a case where actual notice is given, it doesn't provide any sort of financial cushion at all in the event a new job isn't found by the end of the notice period. (If you're eligible for statutory severance, however, you will get a financial 'cushion', regardless of whether or not you have a new job lined up.)
The only way of reconciling the disconnect would be to read into the implied term of reasonable notice an accounting for severance pay - an implied contractual term reducing the period of reasonable notice, as implied by common law, by the amount of the severance obligation. But that too would be incoherent, because the two obligations are apples and oranges, time (actual notice) versus money (liquidated damages). If you went down that road, it would have to be by creating a time-based reduction in the reasonable notice period based on the time factor used for the calculation of severance - in other words, if severance pay is equal to x weeks salary, then the reasonable notice period implied at common law gets reduced by x weeks. But even aside from the analytical strangeness that would otherwise result, the end result would be to actually treat severance-eligible employees worse than other employees, since severance pay, unlike pay in lieu of notice, isn't calculated on the basis of the whole remuneration package.
While the policy considerations underlying the decision in Stevens make a certain degree of sense, the simple reality is that the ESA does not treat everyone equally. If I've worked for over 5 years with a large employer, my statutory entitlements are greater than if I have worked for the same amount of time with a small employer.
The underlying rationale of the distinction is that smaller employers are more vulnerable, and may incur more significant hardship if required to provide severance pay. It's not to say that employees with smaller employers are less deserving of recognition for their service, or a financial cushion, but their interests are being balanced against the interests of employers who cannot afford to provide one.
By turning common law pay in lieu of notice into a great equalizer, the courts superimpose equality over top of a statutory regime that entrenches differential treatment.
In that light, one might regard it as somewhat ironic that smaller employers tend to have more significant obligations on dismissal. Larger employers, with an HR department and a budget for legal fees, are far more likely to implement employment contracts limiting their employees to the statutory minimum. Even with statutory severance (where it applies), that is invariably going to be much less than the common law pay in lieu of notice owed by small employers who didn't hire an expert to draft the contract.
One might reasonably question whether or not the $2.5 million payroll threshold for severance obligations remains good public policy in Canada. Indeed, it's easy to argue that it should either be raised or scrapped altogether. $2.5 million was the original threshold implemented in 1987, when severance pay was significantly expanded from its historical roots - in 2014 dollars, that would have been well over $4.5 million.
Unlike, say, minimum wage, there's been no real pressure to raise the threshold. $2.5 million isn't what it used to be - no doubt about it - but at what threshold would we start to feel sympathetic for the poor employer who has to pay a 30-year employee, dismissed without cause, more than 8 weeks pay in lieu of notice? Even with statutory severance, the statutory minimum entitlements are pretty barebones. It would be very cogent to suggest that, in 21st century Canada, employees should be treated equally, regardless of the size of the employer.
I've occasionally seen broader discussion of the need to reform the termination and severance provisions in the ESA. I think there is a lot of room for improvement, though I generally disagree with suggestions that the ESA should completely replace common law notice with more substantial statutory notice. However, a statutory amendment to make severance payable to all long-service employees, regardless of the size of the employer, would probably be very appropriate, whether such statutory severance was in addition to or included within traditional wrongful dismissal damages.
*****
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.
It was not always so obvious - at least, not for statutory severance. It used to be a disputed issue, subject to conflicting jurisprudence, until the debate was settled eighteen years ago by the Ontario Court of Appeal in the case of Stevens v. Globe & Mail, finding that statutory severance should be treated like statutory notice, and deducted from common law entitlements.
It's a proposition that has not arisen particularly frequently in the case law since then. In the case of Antonacci v. Great Atlantic & Pacific Company of Canada, Limited, in 2000, the Court of Appeal referred back to that case. (In recent years there have only been a few reported citations of Stevens, but more for its proposition on when interest starts accruing, rather than the interaction between statutory severance and common law damages.)
By way of background, it's important to understand that this is only an issue at all in a relatively small subset of cases. Most employees are entitled to what we call 'statutory notice', which is a modest entitlement capping out at 8 weeks for long-service employees. Only certain employees (i.e. employees with more than 5 years of service) working for certain employers (usually employers with payrolls exceeding $2.5 million) have severance entitlements, but those entitlements can go significantly higher, up to six months' pay. (This is in addition to statutory notice.)
There's one other central distinguishing difference between statutory notice and statutory severance: An employer can elect to satisfy its notice obligations by way of actual notice or pay in lieu of notice. Severance pay, where applicable, usually has to take the form of a lump sum payment. There are also slightly different tax treatments available, impacts on continuation of benefits, and different treatments of non-continuous employment.)
In recent years, the Supreme Court of Canada has largely worked on streamlining employment law with the first principles of contract law. To a lesser extent, the Ontario Court of Appeal has done the same. (The Court of Appeal has even rejected other "well-settled" doctrines of law to return to first principles of contract law, as in Bowes v. Goss Power Products Ltd.) So let's attack this problem from a first principles perspective:
Suppose that I'm a major Ontario corporation, and you've worked for me for 15 years, and suppose that, in the circumstances, you are entitled to 12 months' notice. There are three core elements governing your termination entitlements:
- Under the ESA, you are entitled to 8 weeks notice or pay in lieu of notice;
- Under the ESA, you are entitled to severance pay equivalent to 15 weeks' salary (well, maybe a little over 15); and
- At common law, you are entitled to actual notice of 12 months.
In other words, if I give you a year's notice as the contract requires, that means 67 (or 68) weeks of salary in your pocket. (Of course, you have to work for 52 weeks of that, but that's not generally considered relevant in employment law.) None of that is controversial - it's a pretty straightforward application of the law, and the OLRB has consistently held that additional actual notice cannot satisfy statutory severance obligations. (See, for example, Assurant Group v. Filion.)
But what if I don't give you actual notice? What if I fire you effective immediately, as is so common?
At the core of contract law lies the 'compensation principle', the notion that you are entitled to be put in the same position as you would be had I complied with the contract. At a glance, it seems fairly simple: Subject (in part) to the duty to mitigate, you are entitled to 67 weeks' pay altogether.
Yet Stevens goes another way. I would pay you 23 weeks' statutory notice and severance shortly following the termination, and then you would sue me for your common law entitlements, and the court would award 52 weeks minus the 23 weeks' wages I already paid you. (It isn't exactly the same as saying '29 more weeks', because statutory severance doesn't include things like compensation for lost health benefits, unlike common law damages.)
The conclusion is that, absent a written contract limiting employees' entitlements to (or near) the statutory minimums, a severance-eligible employee is really not in any better of a position than a severance-ineligible one. It isn't an incoherent policy position, treating most employees more-or-less equally. But, on the current framing of the ESA, it is completely incompatible with the compensation principle.
Time for a Change
In Stevens, the finding ultimately turned on a proposition from a much older case (1982) that statutory termination and severance pay have a shared purpose, being to "cushion the economic dislocation of the employee", and that this overlapped with the purpose of common law pay in lieu of notice. (I'm not sure that this is entirely consistent with the purpose as set out in the 1987 Hansard records we recently reviewed, but this is the standing judicial interpretation.)
However, the law of dismissal has since been refined in the Ontario jurisprudence, recognizing that pay in lieu of notice is an application of the compensation principle, arising from breach of the contract by failing to provide actual notice. See, for example, Taylor v. Brown or Love v. Acuity Investment Management.
Not to say that this proposition wasn't recognized by the Court of Appeal in Stevens, in at least a cursory way. There was a dispute before them as to the nature of pay in lieu of notice, and they ruled on that in a manner consistent with the later cases. But it is not consistent with the later cases to imply as they did that the purpose of common law pay in lieu of notice is to provide the employee with an economic cushion.
The purpose of the obligation to give reasonable notice of termination of an employment contract is to permit the non-terminating party to take the necessary steps to secure its interests prior to termination: For a resignation, that means that an employer is entitled to have enough time to reasonably recruit/train/schedule a new worker to fill in for the resigning one; for a dismissal, it means that an employee is entitled to have enough time to reasonably find a new job.
It's about giving the employee an opportunity to make a smooth transition from one job to the next, and it is not about requiring employers to provide a financial cushion to dismissed employees. (Indeed, pay in lieu of common law notice is often unpaid until well after the notice period ends, meaning it doesn't make for much of a cushion.)
This is why there's a disconnect between the Stevens doctrine and the compensation principle: If you look at pay in lieu of notice as being intended to provide a financial cushion, then you get a doubling of the cushion if you award severance plus common law pay in lieu of notice. But common law pay in lieu of notice isn't really a 'thing'. It's shorthand for damages for breach of the obligation to give actual notice. And when you look at a case where actual notice is given, it doesn't provide any sort of financial cushion at all in the event a new job isn't found by the end of the notice period. (If you're eligible for statutory severance, however, you will get a financial 'cushion', regardless of whether or not you have a new job lined up.)
The only way of reconciling the disconnect would be to read into the implied term of reasonable notice an accounting for severance pay - an implied contractual term reducing the period of reasonable notice, as implied by common law, by the amount of the severance obligation. But that too would be incoherent, because the two obligations are apples and oranges, time (actual notice) versus money (liquidated damages). If you went down that road, it would have to be by creating a time-based reduction in the reasonable notice period based on the time factor used for the calculation of severance - in other words, if severance pay is equal to x weeks salary, then the reasonable notice period implied at common law gets reduced by x weeks. But even aside from the analytical strangeness that would otherwise result, the end result would be to actually treat severance-eligible employees worse than other employees, since severance pay, unlike pay in lieu of notice, isn't calculated on the basis of the whole remuneration package.
What About Treating Everyone Equally?
While the policy considerations underlying the decision in Stevens make a certain degree of sense, the simple reality is that the ESA does not treat everyone equally. If I've worked for over 5 years with a large employer, my statutory entitlements are greater than if I have worked for the same amount of time with a small employer.
The underlying rationale of the distinction is that smaller employers are more vulnerable, and may incur more significant hardship if required to provide severance pay. It's not to say that employees with smaller employers are less deserving of recognition for their service, or a financial cushion, but their interests are being balanced against the interests of employers who cannot afford to provide one.
By turning common law pay in lieu of notice into a great equalizer, the courts superimpose equality over top of a statutory regime that entrenches differential treatment.
In that light, one might regard it as somewhat ironic that smaller employers tend to have more significant obligations on dismissal. Larger employers, with an HR department and a budget for legal fees, are far more likely to implement employment contracts limiting their employees to the statutory minimum. Even with statutory severance (where it applies), that is invariably going to be much less than the common law pay in lieu of notice owed by small employers who didn't hire an expert to draft the contract.
An Alternate Approach: Statutory Reform
One might reasonably question whether or not the $2.5 million payroll threshold for severance obligations remains good public policy in Canada. Indeed, it's easy to argue that it should either be raised or scrapped altogether. $2.5 million was the original threshold implemented in 1987, when severance pay was significantly expanded from its historical roots - in 2014 dollars, that would have been well over $4.5 million.
Unlike, say, minimum wage, there's been no real pressure to raise the threshold. $2.5 million isn't what it used to be - no doubt about it - but at what threshold would we start to feel sympathetic for the poor employer who has to pay a 30-year employee, dismissed without cause, more than 8 weeks pay in lieu of notice? Even with statutory severance, the statutory minimum entitlements are pretty barebones. It would be very cogent to suggest that, in 21st century Canada, employees should be treated equally, regardless of the size of the employer.
I've occasionally seen broader discussion of the need to reform the termination and severance provisions in the ESA. I think there is a lot of room for improvement, though I generally disagree with suggestions that the ESA should completely replace common law notice with more substantial statutory notice. However, a statutory amendment to make severance payable to all long-service employees, regardless of the size of the employer, would probably be very appropriate, whether such statutory severance was in addition to or included within traditional wrongful dismissal damages.
*****
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.
Monday, June 16, 2014
Superior Court finds that the severance threshold includes extra-Provincial payroll
Hat tip to Ottawa employment lawyer Sean Bawden for catching this one, Paquette c. Quadraspec Inc., a French-language decision out of Ontario's Superior Court of Justice with important implications.
(If your French is as bad as mine, Google Chrome's translation feature does a pretty decent job of making French-language decisions comprehensible, and Mr. Bawden included a translation of certain critical elements in his own blog.)
The case involved a senior-level employee who worked in Ontario for a Quebec-based employer since the 1980s. He signed a contract in 1998, entitling him to "deux (2) semaines par année complète de service, jusqu’à concurrence d’un maximum de six (6) mois" - 2 weeks per completed year of service, up to a maximum of six months - or pay in lieu calculated on the basis of base salary alone, paid by instalments. The pay in lieu clause indicated that it would be paid by salary continuance, and would terminate if new employment was obtained. As well, the contract did expressly disentitle him to any other payments or damages arising from his termination.
So, under the contract language, upon dismissal he was entitled to six months' pay.
The employee sued, however, making two arguments that he was entitled to more. Firstly, he argued that he was entitled to statutory severance pay. Secondly, he argued that the contract was unenforceable for its attempt to contract out of the Employment Standards Act, and therefore that he was entitled to pay in lieu of reasonable notice..
Severance Pay
Statutory severance pay is only payable under certain circumstances, including - most often - that the employer has a payroll over $2.5 million.
Though it isn't expressly put this way in the ESA, the established wisdom has been that only Ontario payroll counts for the purpose of determining if an employer is obligated to pay statutory severance pay. The OLRB has generally opined that Ontario's ESA lacks the jurisdiction to regulate payroll outside of Ontario, and therefore that only Ontario payroll should count. It hasn't often arisen in the Superior Court, but when it has, the Superior Court has followed the OLRB's lead...until now.
It's a distinction that matters for Quadraspec. It has significant operations in Quebec, but less significant operations in Ontario - it has an aggregate payroll over $2.5 million, but an Ontario payroll that doesn't meet the threshold.
Justice Kane reviewed the statutory scheme and its purpose, including a Hansard reference to Minister of Labour William Wrye's justification for the scheme when it was brought to its (more or less) current state in 1987. Put briefly, severance pay was intended to recognize the skill-specific investment made into a career by long-term employees of large employers, and the legislation intended to capture all large employers, by aggregating the payrolls of the nominal employer with related companies. For ease of reading, here's the original untranslated text of what Mr. Wrye said.
Justice Kane noted that, had the legislature intended to only capture Ontario payroll, that could easily have been included in the wording of the provision - which, he notes, they did in the Pay Equity Act.
As for the jurisdictional objections raised in the earlier jurisprudence, Justice Kane rejects that position: We aren't regulating what employers do in other jurisdictions; we're regulating operations in Ontario by looking at the size of the employer, and there's no reason that we can't observe their operations outside of Ontario when doing so.
Accordingly, Mr. Paquette was entitled to severance pay.
Validity of the Contract
There may well be a few challenges to the contract's validity, but Justice Kane's decision focused on the issue of group benefits.
The wording of the provision was pretty clear: If you're fired without notice, you'll get pay in lieu on the following basis, and you will get nothing else, "except for wages, vacation pay, and other benefits earned and unpaid at the time of termination. [Translation]"
Justice Kane felt that this expressly denied any entitlement on the employee to have his group benefits continued through the statutory notice period, as required by the ESA. By expressly conceding 'benefits earned and unpaid at the time of termination', and denying everything else, it wouldn't make sense to argue that the contract doesn't block an obligation to continue group benefits not yet earned at the time of termination.
The employer argued that the contract was silent on benefits, however, and that the case law supports a proposition that - in silence - the contract should be interpreted in a way that complies with the ESA, relying on a line of cases going back to the 1998 decision of the Ontario Court of Appeal in MacDonald v. ADGA Systems International.
(By way of background, MacDonald involved a case where the contract entitled either party to terminate the contract by giving "not less than" a month's notice. The trial judge had concluded that this language didn't create a ceiling at all, but merely established a higher floor, and therefore didn't conflict with the ESA, but also didn't displace the common law presumption of reasonable notice. The Court of Appeal agreed that it didn't conflict with the ESA, but felt that it did demonstrate an intention by the parties to displace the common law presumption of reasonable notice. This case remains good law in Ontario.)
Accordingly, the contractual termination clause is void, and the employee is entitled to pay in lieu of reasonable notice at common law.
Commentary
The severance analysis is detailed and compelling, with a better analysis of the purpose of the statutory provision than I've seen in any of the opposing jurisprudence. I wouldn't call the question settled, but Justice Kane makes a good case.
Mr. Bawden, in his entry, expressed some concern that Justice Kane's decision, at paragraph 41, appears to conflict with MacDonald. Justice Kane wrote that the defendant can't implement a detailed 15-page contract and then ask to receive the benefit of terms that are absent or unclear. It's not an unusual way of looking at contract interpretation, but it pretty much flies directly in the face of the Court of Appeal's reasons in MacDonald.
Personally, I've always had a bit of trouble with MacDonald. It seems to me that there are two ways of looking at the language in that case: Either as restrictive, with the effect that neither party can terminate the contract on less than a month's notice, or as permissive, creating a contractual entitlement to terminate the contract so long as at least a month's notice is given. When you look at it in light of the former, you can see the trial judge's analysis: All it does is create a floor, but there may be other terms or statutory provisions creating additional entitlements. If you look at it in light of the latter, and say that it creates a free-standing contractual entitlement to terminate the contract on a month's notice, that would in fact be a clear attempt to contract out of the ESA. There's simply no basis for interpreting the language as, on the one hand, displacing the common law entitlement to reasonable but, on the other hand, not attempting to limit entitlements to a month, which can be less than the ESA minimums.
Still, MacDonald is a close case, with unusually minimalistic contract language: It set a minimum period of actual notice, and did not have language excluding potential further entitlements. In that sense, it is very different from the contract language at issue in Paquette. Notwithstanding Justice Kane's invocation of contra proferentum-style language (that the contract should be interpreted against the party that drafted it), I would suggest that it's pretty generous to find any ambiguity at all in the language. As Justice Kane pointed out, the contract created a total obstacle to any claim beyond 26 weeks' base salary, created an exception for accrued salary, vacation, and other benefits, and limited this exception to amounts unpaid at the time of termination. The defendant argued that it didn't specifically say that no benefits would be continued past the termination date...but it really doesn't need to say that specifically, when it's the necessary consequence of the language they do use.
So the lesson for employers - and lawyers drafting contracts - is this: With typical 'ceiling' language (that there are no entitlements beyond those in the contract), it's really when you start restricting the contents of the notice period that you start running into trouble, because if you haven't caught all ESA entitlements, you really need ESA saving language. That's not at all inconsistent with MacDonald.
Beyond that, there are other red flags with the contract language, too. The "completed years of service" language is the first alarm bell, though probably not an issue in the context of this case, but I *have* seen new hire contracts using very similar termination language, and without ESA saving language, that runs into problems. (In particular, consider the entitlements of a 6-month employee under such language: Under the ESA, such an employee would be entitled to no less than a week's pay; with contractual language such as this, such an employee would be entitled to nothing. Clear attempt to contract out of the ESA. And there's a growing line of cases making it clear that, even if the contract gives you ESA-sufficient entitlements as at the actual termination date, formulaic deficiency will void the clause anyways. That said, in a case such as this, where the contract was signed years after the start date, it's less likely to be an issue.)
Limiting entitlements to 'base salary' can be a fatal problem in ways other than benefits, too. I don't see any justification for excluding Mr. Paquette's payable commission through the statutory notice period.
Likewise, this contract language seems to fairly expressly exclude the prospect of statutory severance pay beyond the contractual amounts: You'll get up to six months' pay, and nothing beyond that. The problem becomes that severance pay plus statutory notice can cap out above that threshold.
But perhaps the most obviously fatal flaw with this language is the mitigation clawback clause: It expressly entitles the employer to discontinue pay in lieu of notice as soon as the employee obtains replacement employment, the problem being that statutory minimum entitlements are not subject to mitigation. If Mr. Paquette obtained a new job two weeks after his dismissal, the contract would entitle him to nothing beyond two weeks' pay, despite the fact that the ESA would entitle him to a full 8 weeks' pay in lieu of notice (plus severance pay, as it turns out) regardless of mitigation earnings.
Such language is becoming more common, following the Bowes v. Goss Power Products decision, and I anticipate more than a few contracts being set aside for failing to account for the mitigation-proof nature of statutory minimum entitlements.
*****
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.
(If your French is as bad as mine, Google Chrome's translation feature does a pretty decent job of making French-language decisions comprehensible, and Mr. Bawden included a translation of certain critical elements in his own blog.)
The case involved a senior-level employee who worked in Ontario for a Quebec-based employer since the 1980s. He signed a contract in 1998, entitling him to "deux (2) semaines par année complète de service, jusqu’à concurrence d’un maximum de six (6) mois" - 2 weeks per completed year of service, up to a maximum of six months - or pay in lieu calculated on the basis of base salary alone, paid by instalments. The pay in lieu clause indicated that it would be paid by salary continuance, and would terminate if new employment was obtained. As well, the contract did expressly disentitle him to any other payments or damages arising from his termination.
So, under the contract language, upon dismissal he was entitled to six months' pay.
The employee sued, however, making two arguments that he was entitled to more. Firstly, he argued that he was entitled to statutory severance pay. Secondly, he argued that the contract was unenforceable for its attempt to contract out of the Employment Standards Act, and therefore that he was entitled to pay in lieu of reasonable notice..
Severance Pay
Statutory severance pay is only payable under certain circumstances, including - most often - that the employer has a payroll over $2.5 million.
Though it isn't expressly put this way in the ESA, the established wisdom has been that only Ontario payroll counts for the purpose of determining if an employer is obligated to pay statutory severance pay. The OLRB has generally opined that Ontario's ESA lacks the jurisdiction to regulate payroll outside of Ontario, and therefore that only Ontario payroll should count. It hasn't often arisen in the Superior Court, but when it has, the Superior Court has followed the OLRB's lead...until now.
It's a distinction that matters for Quadraspec. It has significant operations in Quebec, but less significant operations in Ontario - it has an aggregate payroll over $2.5 million, but an Ontario payroll that doesn't meet the threshold.
Justice Kane reviewed the statutory scheme and its purpose, including a Hansard reference to Minister of Labour William Wrye's justification for the scheme when it was brought to its (more or less) current state in 1987. Put briefly, severance pay was intended to recognize the skill-specific investment made into a career by long-term employees of large employers, and the legislation intended to capture all large employers, by aggregating the payrolls of the nominal employer with related companies. For ease of reading, here's the original untranslated text of what Mr. Wrye said.
Justice Kane noted that, had the legislature intended to only capture Ontario payroll, that could easily have been included in the wording of the provision - which, he notes, they did in the Pay Equity Act.
As for the jurisdictional objections raised in the earlier jurisprudence, Justice Kane rejects that position: We aren't regulating what employers do in other jurisdictions; we're regulating operations in Ontario by looking at the size of the employer, and there's no reason that we can't observe their operations outside of Ontario when doing so.
Accordingly, Mr. Paquette was entitled to severance pay.
Validity of the Contract
There may well be a few challenges to the contract's validity, but Justice Kane's decision focused on the issue of group benefits.
The wording of the provision was pretty clear: If you're fired without notice, you'll get pay in lieu on the following basis, and you will get nothing else, "except for wages, vacation pay, and other benefits earned and unpaid at the time of termination. [Translation]"
Justice Kane felt that this expressly denied any entitlement on the employee to have his group benefits continued through the statutory notice period, as required by the ESA. By expressly conceding 'benefits earned and unpaid at the time of termination', and denying everything else, it wouldn't make sense to argue that the contract doesn't block an obligation to continue group benefits not yet earned at the time of termination.
The employer argued that the contract was silent on benefits, however, and that the case law supports a proposition that - in silence - the contract should be interpreted in a way that complies with the ESA, relying on a line of cases going back to the 1998 decision of the Ontario Court of Appeal in MacDonald v. ADGA Systems International.
(By way of background, MacDonald involved a case where the contract entitled either party to terminate the contract by giving "not less than" a month's notice. The trial judge had concluded that this language didn't create a ceiling at all, but merely established a higher floor, and therefore didn't conflict with the ESA, but also didn't displace the common law presumption of reasonable notice. The Court of Appeal agreed that it didn't conflict with the ESA, but felt that it did demonstrate an intention by the parties to displace the common law presumption of reasonable notice. This case remains good law in Ontario.)
Accordingly, the contractual termination clause is void, and the employee is entitled to pay in lieu of reasonable notice at common law.
Commentary
The severance analysis is detailed and compelling, with a better analysis of the purpose of the statutory provision than I've seen in any of the opposing jurisprudence. I wouldn't call the question settled, but Justice Kane makes a good case.
Mr. Bawden, in his entry, expressed some concern that Justice Kane's decision, at paragraph 41, appears to conflict with MacDonald. Justice Kane wrote that the defendant can't implement a detailed 15-page contract and then ask to receive the benefit of terms that are absent or unclear. It's not an unusual way of looking at contract interpretation, but it pretty much flies directly in the face of the Court of Appeal's reasons in MacDonald.
Personally, I've always had a bit of trouble with MacDonald. It seems to me that there are two ways of looking at the language in that case: Either as restrictive, with the effect that neither party can terminate the contract on less than a month's notice, or as permissive, creating a contractual entitlement to terminate the contract so long as at least a month's notice is given. When you look at it in light of the former, you can see the trial judge's analysis: All it does is create a floor, but there may be other terms or statutory provisions creating additional entitlements. If you look at it in light of the latter, and say that it creates a free-standing contractual entitlement to terminate the contract on a month's notice, that would in fact be a clear attempt to contract out of the ESA. There's simply no basis for interpreting the language as, on the one hand, displacing the common law entitlement to reasonable but, on the other hand, not attempting to limit entitlements to a month, which can be less than the ESA minimums.
Still, MacDonald is a close case, with unusually minimalistic contract language: It set a minimum period of actual notice, and did not have language excluding potential further entitlements. In that sense, it is very different from the contract language at issue in Paquette. Notwithstanding Justice Kane's invocation of contra proferentum-style language (that the contract should be interpreted against the party that drafted it), I would suggest that it's pretty generous to find any ambiguity at all in the language. As Justice Kane pointed out, the contract created a total obstacle to any claim beyond 26 weeks' base salary, created an exception for accrued salary, vacation, and other benefits, and limited this exception to amounts unpaid at the time of termination. The defendant argued that it didn't specifically say that no benefits would be continued past the termination date...but it really doesn't need to say that specifically, when it's the necessary consequence of the language they do use.
So the lesson for employers - and lawyers drafting contracts - is this: With typical 'ceiling' language (that there are no entitlements beyond those in the contract), it's really when you start restricting the contents of the notice period that you start running into trouble, because if you haven't caught all ESA entitlements, you really need ESA saving language. That's not at all inconsistent with MacDonald.
Beyond that, there are other red flags with the contract language, too. The "completed years of service" language is the first alarm bell, though probably not an issue in the context of this case, but I *have* seen new hire contracts using very similar termination language, and without ESA saving language, that runs into problems. (In particular, consider the entitlements of a 6-month employee under such language: Under the ESA, such an employee would be entitled to no less than a week's pay; with contractual language such as this, such an employee would be entitled to nothing. Clear attempt to contract out of the ESA. And there's a growing line of cases making it clear that, even if the contract gives you ESA-sufficient entitlements as at the actual termination date, formulaic deficiency will void the clause anyways. That said, in a case such as this, where the contract was signed years after the start date, it's less likely to be an issue.)
Limiting entitlements to 'base salary' can be a fatal problem in ways other than benefits, too. I don't see any justification for excluding Mr. Paquette's payable commission through the statutory notice period.
Likewise, this contract language seems to fairly expressly exclude the prospect of statutory severance pay beyond the contractual amounts: You'll get up to six months' pay, and nothing beyond that. The problem becomes that severance pay plus statutory notice can cap out above that threshold.
But perhaps the most obviously fatal flaw with this language is the mitigation clawback clause: It expressly entitles the employer to discontinue pay in lieu of notice as soon as the employee obtains replacement employment, the problem being that statutory minimum entitlements are not subject to mitigation. If Mr. Paquette obtained a new job two weeks after his dismissal, the contract would entitle him to nothing beyond two weeks' pay, despite the fact that the ESA would entitle him to a full 8 weeks' pay in lieu of notice (plus severance pay, as it turns out) regardless of mitigation earnings.
Such language is becoming more common, following the Bowes v. Goss Power Products decision, and I anticipate more than a few contracts being set aside for failing to account for the mitigation-proof nature of statutory minimum entitlements.
*****
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.
Friday, June 13, 2014
Ontario Election After-Action Report: Where Hudak Went Wrong
In this election, we had a governing party ripe for removal: Scandal-plagued, with record deficits, and lacking a plausible plan to get the Province's finances back in order. This election was the Tories' to lose.
And they did lose. Badly.
How?
Notwithstanding a number of campaign fumbles, the problem with the Hudak PCs ran quite a bit deeper. Fundamentally, the issue is that, like pre-2004 Stephen Harper, Tim Hudak's policies targeted a niche group on the far right of the political spectrum, and failed to appeal to the mainstream electorate and, in particular, the centre swing.
Even beyond that, though, the Hudak Tories made a number of serious political miscalculations, running back to the days immediately following the last election.
It is well-known that the ballots in the 2011 election had barely been counted when Tim Hudak started demanding another election. Right from the time the government introduced the 2012 budget, he made it very clear that there was absolutely no way he was going to support a Liberal budget. From that point on, the ball was in NDP leader Andrea Horwath's court: She had the power, at any time, to force an election, and that power meant that she could exert very significant pressure on the Liberals. The result is that the 2012 and 2013 budgets were both very 'progressive' - the kind of high-spending budgets one might expect from an NDP government. Likewise, the budget Wynne introduced in 2014 might as well have been an NDP budget.
This was not an accidental result of Hudak's refusal to negotiate. It was foreseeable, and it was almost certainly foreseen. Hudak hoped that he would come off as the good guy standing by his principles while the other parties colluded to stay in power, and that he would be able to paint the Liberals and NDP as indistinguishable from each other. The Conservatives' best chance of winning an election - and especially of winning a majority government - has always been through a Liberal/NDP split vote among the left and centre-left. Hudak hoped to exacerbate this split by forcing Wynne over to the left side of the spectrum, leaving the entire centre and right to the PCs.
It appears to have backfired. If anything, the Liberals ended up with a more favourable split in this election than in 2011. (Indeed, their percentage of the popular vote is only slightly higher than 2011, yet they took several more seats.) This may be, in part, a result of having more appeal to the centre-left. However, it is likely that strategic voting had a major impact, as well, with Wynne effectively pushing for votes from NDP supporters to stave off a possible Hudak win.
It is possible, though I'm not sure I'm quite cynical to believe, that by forcing the government to seek NDP assistance, Hudak actually intended the government to engage in fiscally irresponsible behaviour - creating a fiscal crisis to drive Ontarians to demand a fiscally responsible alternative, so that he could ride in and save the day. Whether or not that was the intention, many of us in the centre realized that this would be the consequence of Hudak's intransigence, and it did not endear him in our eyes. Not to mention that he also lost marks in the "Plays well with others" column.
Despite having forced Wynne out of the centre and into the left, Hudak maintained and even deepened his commitment to "Tea Party"-style policies, floating trial balloons such as 'right to work' and privatizing Ontario's moneymaking Crown corporations, and running on a platform built on corporate tax cuts, sweeping spending cuts, and across-the-board de-regulation.
Of the three mainstream parties, two were pretty far into the left, and the other was very far into the right. The centre - where I daresay most Ontarians live - was completely devoid of options.
The PCs had a great opportunity in this election. Had they campaigned to the centre, with a more moderate style of conservatism, they would have absolutely cleaned up. No question.
Instead, they gambled that the Wynne Liberals would be so unpalatable to Ontarians, in light of the fiscal situation and their history of scandals, that Ontarians wouldn't have a choice but to endorse Hudak's policies.
They were wrong.
There are certain assumptions held at the far right of the political spectrum, which are provably wrong, yet to a small and insular subset of the population, self-evident in their truth. A classic example of this is the belief that you can make communities safer by punishing criminals more harshly - simply not true, as has been quite thoroughly established through the work of prominent criminologists such as Anthony Doob and Cheryl Webster. Another great example is the belief, held almost religiously among U.S. Republicans, that tax cuts universally improve government revenues. If that were true, then a government would rake it in with a tax rate of zero...obviously false. Within fixed limits, tax cuts can lead to an enhanced tax base over time, but the Laffer curve - used to justify tax cuts under the Reagan administration - necessarily implies that there is also a tax level at which tax increases will improve government revenues, and the empirical evidence would suggest that that level is actually much higher than believed during the 80s.
The assumption that corporate tax cuts create jobs is a distant cousin to that Reaganomic assumption, and is just as untrue. Ontario already has one of the lowest corporate tax rates on the continent, and the consequences are clear: Corporations are hoarding the cash, not spending it on growth initiatives, not using it to create jobs. (There's a logic to this, too. Growth spending and payroll is generally tax deductible. Tax cuts will not incent tax-deductible behaviour; it will incent non-deductible behaviour, like retained earnings.)
Then there are the promised job eliminations and sweeping cuts.
Before I go on, let me tell you a bit about my background: I was raised in a fiscally conservative household, with the belief that almost all debt is bad, that individuals and businesses should live within their means, not spend money they don't have, and that government should act like a prudent family or business.
I still hold to the belief that personal debt - outside of secured debts such as mortgages and car loans - are to be avoided if at all possible. But my understanding of the nature of debt - for businesses and government - was shaken up when I got to university and took Economics 102 with Professor Larry Smith, who explained how and why many corporations operate in perpetual debt, and why this is a very lucrative way of doing business.
When dealing with governments, it's a bit more complicated, and brings in considerations of Keynesian economics: After the stock market crash of 1929, governments around the world did what all smart families did, and tightened their belts. Less spending, fewer public servants, fewer government contracts. This response exacerbated existing problems by further increasing unemployment and making it harder for businesses to survive, and the situation quickly exploded into what we know as the Great Depression. Keynes argued that, instead of tightening their belts, governments should borrow and spend - what we now call 'stimulus' spending. This way, we keep our economic infrastructure in place, we are able to employ people at a time when jobs are scarce, and we send our public servants out into the market with money to spend. Then, once the economy is back on its feet, we scale back public spending again. (That last part is too often missed by left-wing governments, sadly.)
Right now, our unemployment rate is still high; our economy still fragile. Eliminating 100,000 jobs from the public service, as Hudak promised, would be more than the private sector could absorb right now, and would have the impact of increasing our unemployment rate, potentially sending us back into recession.
To be clear, the policy questions as to whether or not we need those jobs are another matter. I'm also not satisfied that it is prudent to cut the number of teachers Hudak would, from the perspective of education quality. But looking at it from strictly an economic recovery and job creation perspective, which was at the centre of Hudak's platform, it was a ridiculous promise.
So what we have here is a pair of well-meaning policy items which would not only be ineffective at their stated goals, but would actually be counterproductive to the job creation Hudak promised. It might persuade the Tea Party supporters, but to the rest of us in the centre, this was alarming. Hudak's trying to sell his economics degree, yet he's making promises that suggest a complete lack of familiarity with contemporary economic practices.
His infamous calculation errors are the tip of the iceberg. Counting 'person-years of employment' as full-time permanent jobs is simply a silly mistake. Accepting his own assumptions as true (which, as I have suggested above, most people don't), his policies would have created approximately 75,000 jobs over 8 years - less than the 100,000 he planned to axe from the public service. And, perhaps worse, even after these miscalculations came to light, he still stood by his numbers - probably because he had so deeply branded his campaign with that policy - the "million jobs plan" - that he couldn't back off of it.
Thus, for those Ontarians looking for a better option in terms of economic and fiscal policy - an area in which Wynne and Horwath failed to pass muster - Hudak simply failed to present himself as possessing the competence to properly guide Ontario's economy.
My worst fear is that the far right members of the party continue to control the party's dialogue, despite this crushing defeat, and choose to attribute Hudak's loss to something other than his policies. His personality and leadership weren't altogether terrible, he performed quite well in the debate, and his opponents were heavily compromised, but his policies made him completely unelectable in Ontario. If we want to restore a healthy dialogue to Ontario politics, and give ourselves more meaningful options moving forward, it will be by the PCs finding a leader who is closer to the centre of the spectrum, who advocates fiscal restraint in a more moderate way.
And they did lose. Badly.
How?
Notwithstanding a number of campaign fumbles, the problem with the Hudak PCs ran quite a bit deeper. Fundamentally, the issue is that, like pre-2004 Stephen Harper, Tim Hudak's policies targeted a niche group on the far right of the political spectrum, and failed to appeal to the mainstream electorate and, in particular, the centre swing.
Even beyond that, though, the Hudak Tories made a number of serious political miscalculations, running back to the days immediately following the last election.
A Crowded Left
It is well-known that the ballots in the 2011 election had barely been counted when Tim Hudak started demanding another election. Right from the time the government introduced the 2012 budget, he made it very clear that there was absolutely no way he was going to support a Liberal budget. From that point on, the ball was in NDP leader Andrea Horwath's court: She had the power, at any time, to force an election, and that power meant that she could exert very significant pressure on the Liberals. The result is that the 2012 and 2013 budgets were both very 'progressive' - the kind of high-spending budgets one might expect from an NDP government. Likewise, the budget Wynne introduced in 2014 might as well have been an NDP budget.
This was not an accidental result of Hudak's refusal to negotiate. It was foreseeable, and it was almost certainly foreseen. Hudak hoped that he would come off as the good guy standing by his principles while the other parties colluded to stay in power, and that he would be able to paint the Liberals and NDP as indistinguishable from each other. The Conservatives' best chance of winning an election - and especially of winning a majority government - has always been through a Liberal/NDP split vote among the left and centre-left. Hudak hoped to exacerbate this split by forcing Wynne over to the left side of the spectrum, leaving the entire centre and right to the PCs.
It appears to have backfired. If anything, the Liberals ended up with a more favourable split in this election than in 2011. (Indeed, their percentage of the popular vote is only slightly higher than 2011, yet they took several more seats.) This may be, in part, a result of having more appeal to the centre-left. However, it is likely that strategic voting had a major impact, as well, with Wynne effectively pushing for votes from NDP supporters to stave off a possible Hudak win.
It is possible, though I'm not sure I'm quite cynical to believe, that by forcing the government to seek NDP assistance, Hudak actually intended the government to engage in fiscally irresponsible behaviour - creating a fiscal crisis to drive Ontarians to demand a fiscally responsible alternative, so that he could ride in and save the day. Whether or not that was the intention, many of us in the centre realized that this would be the consequence of Hudak's intransigence, and it did not endear him in our eyes. Not to mention that he also lost marks in the "Plays well with others" column.
An Empty Centre
Despite having forced Wynne out of the centre and into the left, Hudak maintained and even deepened his commitment to "Tea Party"-style policies, floating trial balloons such as 'right to work' and privatizing Ontario's moneymaking Crown corporations, and running on a platform built on corporate tax cuts, sweeping spending cuts, and across-the-board de-regulation.
Of the three mainstream parties, two were pretty far into the left, and the other was very far into the right. The centre - where I daresay most Ontarians live - was completely devoid of options.
The PCs had a great opportunity in this election. Had they campaigned to the centre, with a more moderate style of conservatism, they would have absolutely cleaned up. No question.
Instead, they gambled that the Wynne Liberals would be so unpalatable to Ontarians, in light of the fiscal situation and their history of scandals, that Ontarians wouldn't have a choice but to endorse Hudak's policies.
They were wrong.
Credibility Problems on the Right
There are certain assumptions held at the far right of the political spectrum, which are provably wrong, yet to a small and insular subset of the population, self-evident in their truth. A classic example of this is the belief that you can make communities safer by punishing criminals more harshly - simply not true, as has been quite thoroughly established through the work of prominent criminologists such as Anthony Doob and Cheryl Webster. Another great example is the belief, held almost religiously among U.S. Republicans, that tax cuts universally improve government revenues. If that were true, then a government would rake it in with a tax rate of zero...obviously false. Within fixed limits, tax cuts can lead to an enhanced tax base over time, but the Laffer curve - used to justify tax cuts under the Reagan administration - necessarily implies that there is also a tax level at which tax increases will improve government revenues, and the empirical evidence would suggest that that level is actually much higher than believed during the 80s.
The assumption that corporate tax cuts create jobs is a distant cousin to that Reaganomic assumption, and is just as untrue. Ontario already has one of the lowest corporate tax rates on the continent, and the consequences are clear: Corporations are hoarding the cash, not spending it on growth initiatives, not using it to create jobs. (There's a logic to this, too. Growth spending and payroll is generally tax deductible. Tax cuts will not incent tax-deductible behaviour; it will incent non-deductible behaviour, like retained earnings.)
Then there are the promised job eliminations and sweeping cuts.
Before I go on, let me tell you a bit about my background: I was raised in a fiscally conservative household, with the belief that almost all debt is bad, that individuals and businesses should live within their means, not spend money they don't have, and that government should act like a prudent family or business.
I still hold to the belief that personal debt - outside of secured debts such as mortgages and car loans - are to be avoided if at all possible. But my understanding of the nature of debt - for businesses and government - was shaken up when I got to university and took Economics 102 with Professor Larry Smith, who explained how and why many corporations operate in perpetual debt, and why this is a very lucrative way of doing business.
When dealing with governments, it's a bit more complicated, and brings in considerations of Keynesian economics: After the stock market crash of 1929, governments around the world did what all smart families did, and tightened their belts. Less spending, fewer public servants, fewer government contracts. This response exacerbated existing problems by further increasing unemployment and making it harder for businesses to survive, and the situation quickly exploded into what we know as the Great Depression. Keynes argued that, instead of tightening their belts, governments should borrow and spend - what we now call 'stimulus' spending. This way, we keep our economic infrastructure in place, we are able to employ people at a time when jobs are scarce, and we send our public servants out into the market with money to spend. Then, once the economy is back on its feet, we scale back public spending again. (That last part is too often missed by left-wing governments, sadly.)
Right now, our unemployment rate is still high; our economy still fragile. Eliminating 100,000 jobs from the public service, as Hudak promised, would be more than the private sector could absorb right now, and would have the impact of increasing our unemployment rate, potentially sending us back into recession.
To be clear, the policy questions as to whether or not we need those jobs are another matter. I'm also not satisfied that it is prudent to cut the number of teachers Hudak would, from the perspective of education quality. But looking at it from strictly an economic recovery and job creation perspective, which was at the centre of Hudak's platform, it was a ridiculous promise.
So what we have here is a pair of well-meaning policy items which would not only be ineffective at their stated goals, but would actually be counterproductive to the job creation Hudak promised. It might persuade the Tea Party supporters, but to the rest of us in the centre, this was alarming. Hudak's trying to sell his economics degree, yet he's making promises that suggest a complete lack of familiarity with contemporary economic practices.
His infamous calculation errors are the tip of the iceberg. Counting 'person-years of employment' as full-time permanent jobs is simply a silly mistake. Accepting his own assumptions as true (which, as I have suggested above, most people don't), his policies would have created approximately 75,000 jobs over 8 years - less than the 100,000 he planned to axe from the public service. And, perhaps worse, even after these miscalculations came to light, he still stood by his numbers - probably because he had so deeply branded his campaign with that policy - the "million jobs plan" - that he couldn't back off of it.
Thus, for those Ontarians looking for a better option in terms of economic and fiscal policy - an area in which Wynne and Horwath failed to pass muster - Hudak simply failed to present himself as possessing the competence to properly guide Ontario's economy.
What's Next for the Ontario Progressive Conservatives?
My worst fear is that the far right members of the party continue to control the party's dialogue, despite this crushing defeat, and choose to attribute Hudak's loss to something other than his policies. His personality and leadership weren't altogether terrible, he performed quite well in the debate, and his opponents were heavily compromised, but his policies made him completely unelectable in Ontario. If we want to restore a healthy dialogue to Ontario politics, and give ourselves more meaningful options moving forward, it will be by the PCs finding a leader who is closer to the centre of the spectrum, who advocates fiscal restraint in a more moderate way.
Wednesday, June 11, 2014
Why I will not decline my ballot
Ontario's Provincial election is tomorrow.
There's no doubt that this election is all about who is the lesser evil. So, in the absence of great options, there's this "None of the Above" option catching on, declining ballots as a protest.
I see the appeal. It really shows the political parties, "You need to earn my vote; I pay attention to politics, and you could have won my support had you tried harder, but you didn't." (As distinct from simply not showing up, which illustrates apathy, or intentionally spoiling a ballot, which illustrates that you don't know how to follow the directions.)
The problem is that, in the mean time, there's still an important election up for grabs, with a close race, where voter turnout is likely to be quite low, at the end of which one of these options - awful as they may be - will form a government. Meaning that, by not being counted, you're giving your voice to the relatively small handful of people who will vote for one of the parties. And unless you're completely ambivalent about which party wins, that's a bad thing. It will not incent the winning party to make changes, because, hey, they still won.
I have my opinions about which party is the lesser evil. And so I will vote for that party, not because I think they've earned my vote, but because it is the only input I have into the Province's governance, and I only get to exercise my voice once every four years or so. Given that, when I have the opportunity to speak, I think that it's important to say something constructive, rather than simply protesting that I don't like the options.
Folks, I think all the politicians know that we regard the choices as awful. The Conservatives have got to be shocked that this isn't a walkover, and the Liberals clearly recognize that they have to do damage control. Rather than going out to tell them something they already know, go out to have your say in terms of which one you prefer to govern - or, if nothing else, which ones you prefer *not* to govern.
There's no doubt that this election is all about who is the lesser evil. So, in the absence of great options, there's this "None of the Above" option catching on, declining ballots as a protest.
I see the appeal. It really shows the political parties, "You need to earn my vote; I pay attention to politics, and you could have won my support had you tried harder, but you didn't." (As distinct from simply not showing up, which illustrates apathy, or intentionally spoiling a ballot, which illustrates that you don't know how to follow the directions.)
The problem is that, in the mean time, there's still an important election up for grabs, with a close race, where voter turnout is likely to be quite low, at the end of which one of these options - awful as they may be - will form a government. Meaning that, by not being counted, you're giving your voice to the relatively small handful of people who will vote for one of the parties. And unless you're completely ambivalent about which party wins, that's a bad thing. It will not incent the winning party to make changes, because, hey, they still won.
I have my opinions about which party is the lesser evil. And so I will vote for that party, not because I think they've earned my vote, but because it is the only input I have into the Province's governance, and I only get to exercise my voice once every four years or so. Given that, when I have the opportunity to speak, I think that it's important to say something constructive, rather than simply protesting that I don't like the options.
Folks, I think all the politicians know that we regard the choices as awful. The Conservatives have got to be shocked that this isn't a walkover, and the Liberals clearly recognize that they have to do damage control. Rather than going out to tell them something they already know, go out to have your say in terms of which one you prefer to govern - or, if nothing else, which ones you prefer *not* to govern.
Tuesday, June 10, 2014
Does a Plaintiff Need to Prove He Didn't Get a New Job?
As promised, here's my commentary on Garcia v. 1162540, a decision from the Divisional Court last year.
Mr. Garcia worked for 12 years at Venice Fitness, and submitted bi-weekly invoices. After the defendant failed to pay an invoice, he took $2,700 cash from the employer and stopped reporting for work. The defendant called the police, and Garcia returned the cash in response for a promise to pay the invoice. The invoice wasn't paid, nor was a subsequent invoice.
Garcia sued the corporation as well as his boss, Jack Eghbali, for constructive dismissal. Deputy Judge Prattas found that failing to pay his invoice constituted a constructive dismissal, and awarded $25,000 against both defendants, jointly and severally, including the two unpaid invoices ($3,524.33) and the balance in wrongful dismissal damages.
The defendants appealed on multiple grounds.
Firstly, they challenged the finding of personal liability primarily on the basis that it wasn't raised until closing submissions. It's an interesting issue, but Justice Wilton-Siegel was almost certainly correct to allow that ground of appeal on that basis.
Secondly, they challenged the finding of constructive dismissal. Deputy Judge Prattas had concluded that Eghbali "never had any intention of paying the plaintiff any money" (not believing his explanation at trial, an assessment of credibility well within the purview of the trial judge) and that the withholding of pay constituted a fundamental breach of the employment contract. Justice Wilton-Siegel found that this was warranted on the evidence. (There was some question as to whether or not Deputy Judge Prattas was entitled to consider post-resignation events. Justice Wilton-Siegel appears to have been doubtful of that, but considered the pre-resignation events to be more than sufficient.)
Thirdly, they challenged the Deputy Judge's refusal to give weight to two written statements admitted under the Small Claims Court Rules, by Garcia's co-workers. The statements were very general in nature, though, and didn't necessarily lead to the conclusion urged by the defendants, according to Justice Wilton-Siegel. Trial judges are entitled to significant deference in how much weight they give to the evidence.
The fourth ground of appeal is far more bizarre and cerebral, that the plaintiff had failed to lead evidence of damages. The plaintiff did not testify that he had been unemployed for any particular period of time, and this was not queried on cross-examination. Nor was he questioned about his efforts to mitigate his losses by obtaining replacement employment. In any event, failure to mitigate wasn't pleaded. So, despite the complete absence of any evidence as to how long the plaintiff was actually out of work, or what efforts he took to obtain new work, the Deputy Judge awarded significant wrongful dismissal damages.
The defendants argued that this was an error, that "the plaintiff had the onus of proving damages, even though the defendant had the onus of demonstrating an absence of mitigation." Justice Wilton-Siegel accepted this argument, and therefore overturned the entire wrongful dismissal damage award. (It appears that the judgment was not appealed to the extent of the invoices.)
For costs, Justice Wilton-Siegel reversed the plaintiff's award of costs at trial ($3,500) and awarded the defendants $3,500 in trial costs and another $3,500 as costs of the appeal.
Mr. Garcia worked for 12 years at Venice Fitness, and submitted bi-weekly invoices. After the defendant failed to pay an invoice, he took $2,700 cash from the employer and stopped reporting for work. The defendant called the police, and Garcia returned the cash in response for a promise to pay the invoice. The invoice wasn't paid, nor was a subsequent invoice.
Garcia sued the corporation as well as his boss, Jack Eghbali, for constructive dismissal. Deputy Judge Prattas found that failing to pay his invoice constituted a constructive dismissal, and awarded $25,000 against both defendants, jointly and severally, including the two unpaid invoices ($3,524.33) and the balance in wrongful dismissal damages.
The defendants appealed on multiple grounds.
Firstly, they challenged the finding of personal liability primarily on the basis that it wasn't raised until closing submissions. It's an interesting issue, but Justice Wilton-Siegel was almost certainly correct to allow that ground of appeal on that basis.
Secondly, they challenged the finding of constructive dismissal. Deputy Judge Prattas had concluded that Eghbali "never had any intention of paying the plaintiff any money" (not believing his explanation at trial, an assessment of credibility well within the purview of the trial judge) and that the withholding of pay constituted a fundamental breach of the employment contract. Justice Wilton-Siegel found that this was warranted on the evidence. (There was some question as to whether or not Deputy Judge Prattas was entitled to consider post-resignation events. Justice Wilton-Siegel appears to have been doubtful of that, but considered the pre-resignation events to be more than sufficient.)
Thirdly, they challenged the Deputy Judge's refusal to give weight to two written statements admitted under the Small Claims Court Rules, by Garcia's co-workers. The statements were very general in nature, though, and didn't necessarily lead to the conclusion urged by the defendants, according to Justice Wilton-Siegel. Trial judges are entitled to significant deference in how much weight they give to the evidence.
The fourth ground of appeal is far more bizarre and cerebral, that the plaintiff had failed to lead evidence of damages. The plaintiff did not testify that he had been unemployed for any particular period of time, and this was not queried on cross-examination. Nor was he questioned about his efforts to mitigate his losses by obtaining replacement employment. In any event, failure to mitigate wasn't pleaded. So, despite the complete absence of any evidence as to how long the plaintiff was actually out of work, or what efforts he took to obtain new work, the Deputy Judge awarded significant wrongful dismissal damages.
The defendants argued that this was an error, that "the plaintiff had the onus of proving damages, even though the defendant had the onus of demonstrating an absence of mitigation." Justice Wilton-Siegel accepted this argument, and therefore overturned the entire wrongful dismissal damage award. (It appears that the judgment was not appealed to the extent of the invoices.)
For costs, Justice Wilton-Siegel reversed the plaintiff's award of costs at trial ($3,500) and awarded the defendants $3,500 in trial costs and another $3,500 as costs of the appeal.
Commentary
The only particularly striking ground of appeal is the fourth, and I disagree with Justice Wilton-Siegel's analysis on the point. (I say this with the utmost respect. I have had the pleasure of appearing before Justice Wilton-Siegel, and found him to be a very sharp and detail-oriented judge.)
First, it must be understood that a plaintiff suffering a loss generally has an obligation to take reasonable steps to 'mitigate' the loss, and that if and when you start receiving replacement income, that income gets deducted on a dollar-for-dollar basis from the damage award.
However, the burden of proof is upon the employer to establish failure to mitigate. So the failure of a plaintiff to lead evidence relating to mitigation is not necessarily a problem.
It is true, of course, that the onus is upon the plaintiff to lead proof of damages. So there's a logic to Justice Wilton-Siegel's reasoning, and there are others who agree with him. (See, for example, Sean Bawden's "Labour Pains" blog.) But the nuance in this case is in what a wrongfully dismissed employee must do to 'prove damages'. And that, simply, is answered by an examination of what wrongful dismissal damages are.
An employee is contractually entitled to notice of dismissal, and if dismissed without notice, an employee loses the value of his full remuneration package over the full notice period. To prove damages, an employee need only prove that he was dismissed without adequate notice, and what he would have received over the reasonable notice period.
Wrongful dismissal damages are ordinarily to be assessed as at the point of breach. They do not accrue over time; from the moment of the dismissal, the dismissed employee has a cause of action and is entitled to seek full pay in lieu of notice, and may be able to obtain summary judgment to that effect as quickly as he can get into court, as in Bernier v. Nygard. It's pretty simple, really: The employer was supposed to continue to pay me, and didn't. So I've suffered a loss. That's not to say that the 'point of breach' assessment is the end of the analysis - for example, those damages are subject to mitigation, as noted above...which was addressed in Bernier by impressing damages with a trust.
By extending the obligation to prove damages to establishing that replacement income wasn't earned, Justice Wilton-Siegel created an additional requirement to prove damages which is indistinguishable from proving absence of mitigation (for which, as was conceded, the onus is upon the defendant). If I'm entitled to 12 months' notice and earn $5,000 per month, then when I'm dismissed without notice, at a glance I've suffered losses to the tune of $60,000. If you take Justice Wilton-Siegel's approach and say that my losses require the absence of replacement earnings, then those losses will be impossible to prove until the full reasonable notice period runs its course, and more importantly that very question is not at all different from the question of whether or not I've earned mitigation earnings.
The question of onus relating to proving mitigation earnings actually arises pretty infrequently compared to the onus for failure to mitigate, but the answer is the same. Justice Wilton-Siegel referred to the Supreme Court's decision in Michaels v. Red Deer College, a 1975 case still considered to be the authority for mitigation in employment law; immediately after the cited passage, the Court quoted Williston on Contracts:
It seems to be the generally accepted rule that the burden of proof is upon the defendant to show that the plaintiff either found, or, by the exercise of proper industry in the search, could have procured other employment of an approximately similar kind reasonably adapted to his abilities, and that in the absence of such proof the plaintiff is entitled to recover the salary fixed by the contract.
In other words, by requiring the plaintiff to lead evidence of the absence of further employment earnings, Justice Wilton-Siegel improperly reversed the onus.
Costs
Just a brief note on costs: it isn't clear to me that the reversal of trial costs is appropriate, even given their success on the wrongful dismissal damages. Small Claims Court has some relatively inflexible rule about costs, and where the plaintiff obtains judgment at all (as in for the invoices, which weren't challenged on appeal), the only way the defendant can obtain costs is if it made an offer to settle which was at least as favourable to the plaintiff. In the absence of such an offer (which wasn't alluded to in Justice Wilton-Siegel's decision), there's simply no basis in the Small Claims Court Rules for awarding trial costs to the employer in this case.
*****
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 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.
SCJ: An Intention to Retire Might Affect the Reasonable Notice Period
There are increasing numbers of cases dealing with elderly employees, and the effect of age on the reasonable notice period. The Superior Court recently dealt with a summary judgment motion in Kimball v. Windsor Raceway Inc., involving a 71-year-old employee dismissed after 43 years of service.
In 2007, the employer made enquiries about Kimball's retirement plans. His response was "I am anticipating continuing to work for a year after I reach my 65th birthday in Dec. of 2007." There's some ambiguity in that sentence, as to whether he plans to retire in December 2007, or a year after December 2007. However, from other facts in the case, it appears that the 65th birthday occurred in December 2007, with the result that he was clearly saying that he'd retire in December 2008. However, Justice Heeney appears to have taken this as a commitment to retired in December 2007, and notes "He did not, however, retire at that time."
In December 2008, Kimball was asked again if he was going to "honour his commitment to retire", and he did not retire then either. In December 2010, he was asked again when he was planning to retire, and he answered "at the end of 2012".
He was dismissed in July 2012.
The employer paid out the statutory notice owing, but not statutory severance, and there doesn't seem to be any basis on the record for that failure. Kimball was granted partial summary judgment for statutory severance (notwithstanding the employer's rather strange argument that there was no evidence that Kimball had not sought severance pay through the Ministry of Labour, which would have engaged a statutory bar), but was denied the remainder of the summary judgment claim.
Part of the reason the summary judgment claim was denied was because there was no evidence of damages - i.e. that the plaintiff had not led affidavit evidence to establish that he was not working. Justice Heeney cited a Divisional Court case from last year, Garcia v. 1162540 Ontario Inc. (c.o.b. as Venice Fitness), where Justice Wilton-Siegel reversed a Small Claims Court award of wrongful dismissal damages where the plaintiff hadn't led evidence of unemployment after the termination. Likewise, in this case, no evidence had been led as to mitigation efforts or income (or lack thereof).
Mitigation hadn't been pleaded, but was raised as an issue requiring a trial (also requiring an amendment of the defence), which Justice Heeney also accepted, given that there was no evidence on the point one way or another.
The other reason the summary judgment claim was denied was because of questions surrounding the intention to retire. The employer made some hearsay allegations that Kimball had said he planned to hang on until the employer fired him, in order to secure a payout.
Justice Heeney found that "If the dismissed employee has no intention to look for work, but has instead decided to retire, the very purpose for which reasonable notice is required to be given is absent. That is a factor that may well be relevant in assessing what constitutes reasonable notice in this case."
On the question as to whether damages have been proven, I have serious doubts about Garcia's correctness, but I will comment on that issue in another entry.
Mitigation is, in some ways, a more interesting issue. It's always a tough one - the onus is on the employer, but it turns on information known to the employee. Yet the threshold for proving failure to mitigate is very high and relatively seldom successful. This motion is early in the proceedings, with no affidavits of documents having been exchanged, meaning that the discovery process that might allow a defendant to examine the mitigation efforts of the plaintiff are not yet underway. So it's not surprising that the defendant would raise mitigation as an issue, nor that it would lack the particulars to substantiate its position. Yet the complete failure to raise any evidence supporting a point for which the employer bears the burden of proof would not necessarily cause the court to think that the issue 'requires a trial'.
It's a tough question at the best of times, and when the employer has failed to plead the mitigation issue, it's not the best of times. Still, there's another reason to think that mitigation might be a live issue - namely, the allegations that Kimball intended to retire. I'll touch on that momentarily.
The notion that the intention to retire might affect the reasonable notice period is, in my mind, a bit troubling, for a few reasons. First, I should say that I consider it poor practice to pressure an employee to retire, possibly opening up an employer to human rights-related liabilities. Asking the question, in the interest of succession planning, might be appropriate, but trying to shoo older employees out the door is very risky.
If the parties have a fixed expectation of retirement on a certain date - say, pursuant to a mandatory retirement contractual clause (if otherwise lawful), or because the employee has formally indicated an intention to resign, then damages might well be 'capped' at the expected retirement date.
However, despite the nature of compensatory damages, it is not a matter of looking into a crystal ball to predict whether the employee would have worked through the full notice period, and for the court to conclude that a given employee would have retired on a certain date...would be highly questionable, at least without some fairly firm indicators. (Even a fixed intention to retire can change with circumstances. But it would be highly inappropriate to start regarding elderly employees as bearing an additional burden of establishing that they were not going to retire.)
So if Kimball can be said to have given a notice, on which the employer was entitled to rely, that he was going to retire at the end of 2012, then that might be something that could limit his rights. But especially when he had said that once before - meh, I'll retire in a couple years - and kept working for years longer, the employer would not likely be able to make much of it.
As well, I consider the employer's argument that Kimball was just hanging on to let them get rid of him, looking for a package, to be very weak. In fact, worse than weak, counterproductive, in terms of assessing the reasonable notice period. There's absolutely nothing wrong with saying "I don't plan to ever retire voluntarily." An employer has absolutely no right to expect employees to retire at a given time, or at all. If he kept going and continued to perform his job satisfactorily, it would be entirely inappropriate for the employer to hope or expect him to retire voluntarily.
And if he had made a decision to not retire voluntarily, then that would completely undermine any notion of "he wouldn't have continued to work for another two years anyways"...because he presumably would have.
Not to say that an elderly employee is entitled to regard pay in lieu of notice as some kind of pension. They aren't. It's compensatory damages, and tied to the obligation to mitigate. Thus, an employee who gets dismissed and concludes "I'm done working", and never seriously looks for another job, will likely have their damages seriously reduced on the basis of a failure to mitigate. But it doesn't change the initial damage assessment.
In other words, I think the employer might have a triable issue of failure to mitigate on the basis of their evidence regarding Kimball's intentions to retire, but not an issue relating to the prima facie damage calculation. Aside from the failure to plead mitigation, therefore, it's probably appropriate that the summary judgment motion was largely unsuccessful.
*****
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.
In 2007, the employer made enquiries about Kimball's retirement plans. His response was "I am anticipating continuing to work for a year after I reach my 65th birthday in Dec. of 2007." There's some ambiguity in that sentence, as to whether he plans to retire in December 2007, or a year after December 2007. However, from other facts in the case, it appears that the 65th birthday occurred in December 2007, with the result that he was clearly saying that he'd retire in December 2008. However, Justice Heeney appears to have taken this as a commitment to retired in December 2007, and notes "He did not, however, retire at that time."
In December 2008, Kimball was asked again if he was going to "honour his commitment to retire", and he did not retire then either. In December 2010, he was asked again when he was planning to retire, and he answered "at the end of 2012".
He was dismissed in July 2012.
The employer paid out the statutory notice owing, but not statutory severance, and there doesn't seem to be any basis on the record for that failure. Kimball was granted partial summary judgment for statutory severance (notwithstanding the employer's rather strange argument that there was no evidence that Kimball had not sought severance pay through the Ministry of Labour, which would have engaged a statutory bar), but was denied the remainder of the summary judgment claim.
Part of the reason the summary judgment claim was denied was because there was no evidence of damages - i.e. that the plaintiff had not led affidavit evidence to establish that he was not working. Justice Heeney cited a Divisional Court case from last year, Garcia v. 1162540 Ontario Inc. (c.o.b. as Venice Fitness), where Justice Wilton-Siegel reversed a Small Claims Court award of wrongful dismissal damages where the plaintiff hadn't led evidence of unemployment after the termination. Likewise, in this case, no evidence had been led as to mitigation efforts or income (or lack thereof).
Mitigation hadn't been pleaded, but was raised as an issue requiring a trial (also requiring an amendment of the defence), which Justice Heeney also accepted, given that there was no evidence on the point one way or another.
The other reason the summary judgment claim was denied was because of questions surrounding the intention to retire. The employer made some hearsay allegations that Kimball had said he planned to hang on until the employer fired him, in order to secure a payout.
Justice Heeney found that "If the dismissed employee has no intention to look for work, but has instead decided to retire, the very purpose for which reasonable notice is required to be given is absent. That is a factor that may well be relevant in assessing what constitutes reasonable notice in this case."
Comments
On the question as to whether damages have been proven, I have serious doubts about Garcia's correctness, but I will comment on that issue in another entry.
Mitigation
Mitigation is, in some ways, a more interesting issue. It's always a tough one - the onus is on the employer, but it turns on information known to the employee. Yet the threshold for proving failure to mitigate is very high and relatively seldom successful. This motion is early in the proceedings, with no affidavits of documents having been exchanged, meaning that the discovery process that might allow a defendant to examine the mitigation efforts of the plaintiff are not yet underway. So it's not surprising that the defendant would raise mitigation as an issue, nor that it would lack the particulars to substantiate its position. Yet the complete failure to raise any evidence supporting a point for which the employer bears the burden of proof would not necessarily cause the court to think that the issue 'requires a trial'.
It's a tough question at the best of times, and when the employer has failed to plead the mitigation issue, it's not the best of times. Still, there's another reason to think that mitigation might be a live issue - namely, the allegations that Kimball intended to retire. I'll touch on that momentarily.
Intending to Retire
The notion that the intention to retire might affect the reasonable notice period is, in my mind, a bit troubling, for a few reasons. First, I should say that I consider it poor practice to pressure an employee to retire, possibly opening up an employer to human rights-related liabilities. Asking the question, in the interest of succession planning, might be appropriate, but trying to shoo older employees out the door is very risky.
If the parties have a fixed expectation of retirement on a certain date - say, pursuant to a mandatory retirement contractual clause (if otherwise lawful), or because the employee has formally indicated an intention to resign, then damages might well be 'capped' at the expected retirement date.
However, despite the nature of compensatory damages, it is not a matter of looking into a crystal ball to predict whether the employee would have worked through the full notice period, and for the court to conclude that a given employee would have retired on a certain date...would be highly questionable, at least without some fairly firm indicators. (Even a fixed intention to retire can change with circumstances. But it would be highly inappropriate to start regarding elderly employees as bearing an additional burden of establishing that they were not going to retire.)
So if Kimball can be said to have given a notice, on which the employer was entitled to rely, that he was going to retire at the end of 2012, then that might be something that could limit his rights. But especially when he had said that once before - meh, I'll retire in a couple years - and kept working for years longer, the employer would not likely be able to make much of it.
As well, I consider the employer's argument that Kimball was just hanging on to let them get rid of him, looking for a package, to be very weak. In fact, worse than weak, counterproductive, in terms of assessing the reasonable notice period. There's absolutely nothing wrong with saying "I don't plan to ever retire voluntarily." An employer has absolutely no right to expect employees to retire at a given time, or at all. If he kept going and continued to perform his job satisfactorily, it would be entirely inappropriate for the employer to hope or expect him to retire voluntarily.
And if he had made a decision to not retire voluntarily, then that would completely undermine any notion of "he wouldn't have continued to work for another two years anyways"...because he presumably would have.
Not to say that an elderly employee is entitled to regard pay in lieu of notice as some kind of pension. They aren't. It's compensatory damages, and tied to the obligation to mitigate. Thus, an employee who gets dismissed and concludes "I'm done working", and never seriously looks for another job, will likely have their damages seriously reduced on the basis of a failure to mitigate. But it doesn't change the initial damage assessment.
In other words, I think the employer might have a triable issue of failure to mitigate on the basis of their evidence regarding Kimball's intentions to retire, but not an issue relating to the prima facie damage calculation. Aside from the failure to plead mitigation, therefore, it's probably appropriate that the summary judgment motion was largely unsuccessful.
*****
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.
Tuesday, June 3, 2014
Ontario's Upcoming OHS Changes: You ARE Affected
On July 1, 2014, Ontario's new Occupational Health and Safety Awareness Training Regulation comes into effect, requiring all employers to ensure that all workers and supervisors receive OHS training that meets certain requirements.
This is not industry-specific, nor is there a threshold figure for the number of employees. Basically all employers in Ontario are affected. (Of course, in law, there are always exemptions and exceptions of some form. In this case, though, the exemptions are limited to workers and supervisors who have already completed training that meets the requirements of the Regulation. As well, Federally-regulated employers are generally not regulated by Ontario's OHSA. However, even Federally-regulated contractors performing work in Provincially-regulated workplaces are subject to the OHSA.)
A basic occupational health and safety awareness training program for workers must include the following:
A basic occupational health and safety awareness training program for supervisors (which the OHSA defines as any person "who has charge of a workplace or authority over a worker") must include:
The reality is that this new obligation is not particularly onerous, and the Ministry has provided useful resources to help employers to meet their obligations, including free training manuals and workbooks, as well as the development of free online learning modules to provide this training. In other words, you don't have to pay expensive consultants or lawyers to come in and provide basic occupational health and safety awareness training programs. So the cost can be as low as the time it takes for your employees to complete the training.
That said, there are advantages to actually holding training seminars. The e-learning modules are best suited for individual learning in environments where most or all employees have access to a computer. (There's a certain degree of interactivity which could be adapted to group learning, but ultimately you only get to print out one certificate.) Especially for larger employers, having a qualified presenter teach the program will probably improve the effectiveness and efficiency of the training, including the ability to tailor the program to the workplace.
This training is not 'fire and forget'. Employers have to keep records - who has completed the training, and who is exempt (i.e. because they did the training already and provided proof when they started, or performed equivalent training before the regulation came into effect). Employers are also obligated to provide workers with proof of completion (or exemption) upon request, during employment and within six months afterwards.
I am able to provide assistance to employers to comply with their new obligations arising from this Regulation.
*****
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.
This is not industry-specific, nor is there a threshold figure for the number of employees. Basically all employers in Ontario are affected. (Of course, in law, there are always exemptions and exceptions of some form. In this case, though, the exemptions are limited to workers and supervisors who have already completed training that meets the requirements of the Regulation. As well, Federally-regulated employers are generally not regulated by Ontario's OHSA. However, even Federally-regulated contractors performing work in Provincially-regulated workplaces are subject to the OHSA.)
What is required?
A basic occupational health and safety awareness training program for workers must include the following:
- The duties and rights of workers under the Occupational Health and Safety Act;
- The duties of employers and supervisors under the Act;
- The roles of health and safety representatives and joint health and safety committees under the Act;
- The roles of the Ministry of Labour, the Workplace Safety and Insurance Board and entities designated under s.22.5 of the Act with respect to health and safety;
- Common workplace hazards;
- WHMIS;
- Occupational illness, including latency.
A basic occupational health and safety awareness training program for supervisors (which the OHSA defines as any person "who has charge of a workplace or authority over a worker") must include:
- The duties and rights of workers under the Act;
- The duties of employers and supervisors under the Act;
- The roles of health and safety representatives and joint health and safety committees under the Act;
- The roles of the Ministry of Labour, the Workplace Safety and Insurance Board and entities designated under s.22.5 of the Act with respect to health and safety;
- How to recognize, assess and control workplace hazards, and evaluate those controls;
- Sources of information on occupational health and safety.
How much will this cost?
The reality is that this new obligation is not particularly onerous, and the Ministry has provided useful resources to help employers to meet their obligations, including free training manuals and workbooks, as well as the development of free online learning modules to provide this training. In other words, you don't have to pay expensive consultants or lawyers to come in and provide basic occupational health and safety awareness training programs. So the cost can be as low as the time it takes for your employees to complete the training.
That said, there are advantages to actually holding training seminars. The e-learning modules are best suited for individual learning in environments where most or all employees have access to a computer. (There's a certain degree of interactivity which could be adapted to group learning, but ultimately you only get to print out one certificate.) Especially for larger employers, having a qualified presenter teach the program will probably improve the effectiveness and efficiency of the training, including the ability to tailor the program to the workplace.
What other obligations arise beyond the training?
This training is not 'fire and forget'. Employers have to keep records - who has completed the training, and who is exempt (i.e. because they did the training already and provided proof when they started, or performed equivalent training before the regulation came into effect). Employers are also obligated to provide workers with proof of completion (or exemption) upon request, during employment and within six months afterwards.
I am able to provide assistance to employers to comply with their new obligations arising from this Regulation.
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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.
Monday, June 2, 2014
Vist v. Best Theratronics Ltd.: Non-continuous service and reasonable notice
One question that periodically arises in employment law is the impact of non-continuous service. For example, let's say you're employed by a given company for ten years, and then you resign to pursue other opportunities, but come back a couple years later.
For non-union employees, 'length of service' only has a meaningful impact at law on termination entitlements. Other typical seniority-based benefits (such as position on a compensation grid, amount of vacation time, etc.) are simply matters of contract and/or employer policy. If your new employer agrees to return you to your old 4 weeks of vacation instead of starting you back at 2, great. If not...well, you don't have to take the job.
And in large part because of the lack of other meaningful legal consequences to non-union seniority, termination entitlements can often be a bit grey. If you're fired five years after returning to work, are you a 5-year employee, a 15-year employee, or a 17-year employee? Or none of the above? This is an issue raised in the recent Superior Court of Justice case of Vist v. Best Theratronics Ltd.
There were a number of changes in the employer's corporate existence (name changes, acquisitions, asset sales, etc.) over the relevant time period, but that's not really the issue.
Mr. Vist is 54 years old, with a Masters Degree in biophysics. He first started working for the company AECL Medical in 1988. In September 1992, he accepted a different job in California, but didn't stay there long - in June, 1993, he accepted an offer with AECL (by then known as "Theratronics International" again, and returned in September of that year. (So...one year off.)
TI was acquired by MDS Nordion in 1998, and Vist stayed. MDS Nordion then sold the assets of his division to another company, Delft, at arm's length, in February 2003, and so off Vist went to Delft. He left Delft at the end of May, 2004. He started doing contract work for MDS Nordion in October of that year. His next employment position (as described by the court) was for another company, Dinmar, for a few months in 2006, after which he left (when Dinmar was acquired by another company) and continued his consulting work, including for MDS Nordion. MDS Nordion hired him to begin a new employment position in January 2007, on a roughly 11 month contract. After six months, they made his position permanent, making an offer that included a service date (for the purpose of calculating vacation and service milestones) of January 1, 1993.
Then MDS Nordion sold Vist's division to Best Theratronics, and Best formally offered him employment in a similar role on February 13, 2008, including a guarantee that "[y]our terms and conditions of employment will continue on terms no less favourable than your employment terms with MDS Nordion immediately prior to closing."
In May, 2008, Vist was asked to act as General Manager of Best. (The Court found that he started in the role immediately, though wasn't formally promoted until January 1, 2009.)
It appears that Vist performed well as GM, but it wasn't really what he wanted to do. In May 2009 he wrote to the president of the company asking to return to an engineering role. He received no response to his letter, and a little under a month later was dismissed.
So the major question is how long the period of reasonable notice runs. And to answer that, length of service is important.
For the purposes of Vist's employment, Best is clearly the successor to MDS Nordion, and Nordion is clearly the successor to AECL/TI. So he worked at these companies from 1988 to 2009, with a break of 1 year in 1993/4, and a break of just under 4 years from 2003 to 2007. So he'd worked there for sixteen of the past 21 years.
The trial judge found that the 'service date' agreement was ambiguous - that the parties had not turned their minds to whether or not it past service would impact termination entitlements. (She relied on evidence from Best's HR Director as to her "understanding" of the agreement relating to the 1993 service date, which seems rather strange in light of the fact that it was actually negotiated with Nordion. As well, while the HR Director's evidence was that they used January 17, 2007 "to count his years of accrued continuous service", it is not at all clear for what purpose "accrued continuous service" was used during the employment relationship, given that it wasn't being used for vacation or service milestones.) Therefore, Justice Blishen concluded that Vist should be given "some credit for his past services", and "treated as a long term employee having given sixteen years of service to the defendant and its predecessors."
However, while they impacted the reasonable notice period, Justice Blishen did not consider the years of service to be "cumulative". The end result is that she gave "some weight" to the earlier years of service - i.e. awarded more than she would have for a 2.5-year employee, but did not regard him as a 16-year employee. She awarded him six months pay in lieu of notice.
I can't say I'm particularly enthused about the approach, that he was regarded as a long-service employee, but his years were not treated 'cumulatively'. This is a distinction drawn by a 1989 case from the Alberta Court of Queen's Bench. It's a rather unclear distinction in the first place, and when the best precedent for it is a 25-year-old decision from another jurisdiction, I query its persuasive value. Perhaps more importantly, this is not a very frequent issue, but it isn't so infrequent that we need to look so far afield for relevant law. Consider Gibara v. ABN-Amro Bank, a 2003 decision from the Ontario Superior Court finding:
Then there's the issue of the notice period itself. While notice periods for short-service employees are notoriously unpredictable, it's probably a fair estimate that 6 months would have been within or near the reasonable range (for a 50-year-old General Manager) even if he only had 2.5 years of service. If he's getting partial credit, so to speak, for his long service, it isn't clear why the overall notice period would still be that low.
Then again, for reasons unclear to me, Vist was only seeking a 9-month notice period. If taking the position that he should be regarded as a 15- or 16-year employee, at age 50, in a very senior role, the resulting notice period would be far more substantial. So there's likely something going on here that isn't clear to me on reading the decision.
*****
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.
For non-union employees, 'length of service' only has a meaningful impact at law on termination entitlements. Other typical seniority-based benefits (such as position on a compensation grid, amount of vacation time, etc.) are simply matters of contract and/or employer policy. If your new employer agrees to return you to your old 4 weeks of vacation instead of starting you back at 2, great. If not...well, you don't have to take the job.
And in large part because of the lack of other meaningful legal consequences to non-union seniority, termination entitlements can often be a bit grey. If you're fired five years after returning to work, are you a 5-year employee, a 15-year employee, or a 17-year employee? Or none of the above? This is an issue raised in the recent Superior Court of Justice case of Vist v. Best Theratronics Ltd.
The Facts
There were a number of changes in the employer's corporate existence (name changes, acquisitions, asset sales, etc.) over the relevant time period, but that's not really the issue.
Mr. Vist is 54 years old, with a Masters Degree in biophysics. He first started working for the company AECL Medical in 1988. In September 1992, he accepted a different job in California, but didn't stay there long - in June, 1993, he accepted an offer with AECL (by then known as "Theratronics International" again, and returned in September of that year. (So...one year off.)
TI was acquired by MDS Nordion in 1998, and Vist stayed. MDS Nordion then sold the assets of his division to another company, Delft, at arm's length, in February 2003, and so off Vist went to Delft. He left Delft at the end of May, 2004. He started doing contract work for MDS Nordion in October of that year. His next employment position (as described by the court) was for another company, Dinmar, for a few months in 2006, after which he left (when Dinmar was acquired by another company) and continued his consulting work, including for MDS Nordion. MDS Nordion hired him to begin a new employment position in January 2007, on a roughly 11 month contract. After six months, they made his position permanent, making an offer that included a service date (for the purpose of calculating vacation and service milestones) of January 1, 1993.
Then MDS Nordion sold Vist's division to Best Theratronics, and Best formally offered him employment in a similar role on February 13, 2008, including a guarantee that "[y]our terms and conditions of employment will continue on terms no less favourable than your employment terms with MDS Nordion immediately prior to closing."
In May, 2008, Vist was asked to act as General Manager of Best. (The Court found that he started in the role immediately, though wasn't formally promoted until January 1, 2009.)
It appears that Vist performed well as GM, but it wasn't really what he wanted to do. In May 2009 he wrote to the president of the company asking to return to an engineering role. He received no response to his letter, and a little under a month later was dismissed.
So the major question is how long the period of reasonable notice runs. And to answer that, length of service is important.
For the purposes of Vist's employment, Best is clearly the successor to MDS Nordion, and Nordion is clearly the successor to AECL/TI. So he worked at these companies from 1988 to 2009, with a break of 1 year in 1993/4, and a break of just under 4 years from 2003 to 2007. So he'd worked there for sixteen of the past 21 years.
The Court's Ruling
The trial judge found that the 'service date' agreement was ambiguous - that the parties had not turned their minds to whether or not it past service would impact termination entitlements. (She relied on evidence from Best's HR Director as to her "understanding" of the agreement relating to the 1993 service date, which seems rather strange in light of the fact that it was actually negotiated with Nordion. As well, while the HR Director's evidence was that they used January 17, 2007 "to count his years of accrued continuous service", it is not at all clear for what purpose "accrued continuous service" was used during the employment relationship, given that it wasn't being used for vacation or service milestones.) Therefore, Justice Blishen concluded that Vist should be given "some credit for his past services", and "treated as a long term employee having given sixteen years of service to the defendant and its predecessors."
However, while they impacted the reasonable notice period, Justice Blishen did not consider the years of service to be "cumulative". The end result is that she gave "some weight" to the earlier years of service - i.e. awarded more than she would have for a 2.5-year employee, but did not regard him as a 16-year employee. She awarded him six months pay in lieu of notice.
Commentary
I can't say I'm particularly enthused about the approach, that he was regarded as a long-service employee, but his years were not treated 'cumulatively'. This is a distinction drawn by a 1989 case from the Alberta Court of Queen's Bench. It's a rather unclear distinction in the first place, and when the best precedent for it is a 25-year-old decision from another jurisdiction, I query its persuasive value. Perhaps more importantly, this is not a very frequent issue, but it isn't so infrequent that we need to look so far afield for relevant law. Consider Gibara v. ABN-Amro Bank, a 2003 decision from the Ontario Superior Court finding:
In my view the authorities establish that where an employee has quit and later returns, the earlier period will not be considered in determining reasonable notice unless there is agreement to that effect or circumstances such as inducement to leave a secure position.It's a little oversimplified - there's a lot of case law establishing that it's a far more contextual question, looking at matters such as the overall length of service relative to the length of the interruption, or conduct by the employer evincing an intention to recognize the prior service, but there's little question that an agreement as to length of service - subject to statutory compliance - will suffice for an employee. On these facts, either there was an agreement recognizing his prior service, or there wasn't. It's a question of contractual interpretation, and the ambiguity found by Justice Blishen needs to be resolved, one way or another. If the agreement doesn't speak to termination entitlements, then there are other questions to consider. But Justice Blishen's compromise approach seems to simply avoid all the principled legal questions surrounding this issue.
Then there's the issue of the notice period itself. While notice periods for short-service employees are notoriously unpredictable, it's probably a fair estimate that 6 months would have been within or near the reasonable range (for a 50-year-old General Manager) even if he only had 2.5 years of service. If he's getting partial credit, so to speak, for his long service, it isn't clear why the overall notice period would still be that low.
Then again, for reasons unclear to me, Vist was only seeking a 9-month notice period. If taking the position that he should be regarded as a 15- or 16-year employee, at age 50, in a very senior role, the resulting notice period would be far more substantial. So there's likely something going on here that isn't clear to me on reading the decision.
*****
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.
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