Employer fails to established just cause for disobedience; should have given "cooling off" period

Another just cause case was recently decided by Deputy Judge Prattas - he's deciding a lot of these, it seems - in Borges v. Midland Food Products Inc.  The employer alleged just cause, in the form of disobedience in a meeting the day prior to dismissal, and secondly alleged 'cumulative cause' on the basis of a series of incidents.

Summary

Borges worked for Midland for about 10 years as a salesperson, until he was dismissed in March 2011.

In a nutshell, his sales numbers had been struggling a little bit.  It doesn't sound like the problem was particularly significant - he had exceeded his 2009 and 2010 targets, but the year-over-year numbers had declined in the previous six months.  It also bears noting that he hadn't historically met his targets before those two years (though much of his employment had been in a different division at the time).  It also bears noting that there was no evidence as to how realistic the quotas were.

Most of Borges' work was out of the office, which is not at all uncommon in a sales role.  However, when you're starting to question the performance of someone outside of the office, many employers will start to ask the question "What's he doing when he isn't here?"

In March 2011, Borges' boss called a meeting with him to discuss the decreasing sales.  By all accounts, it became a heated discussion (Borges alleged that there were 'slurs' against himself and his family), and the major problem was a note presented to Borges requiring him to be in the office until 5pm three days per week (and until 1pm on the other days), and to advise his boss in advance of any meetings.

Borges' exact response to this was also in dispute.  The employer took the position that he refused the direction.  It appears that Borges' position is that he said that it didn't make sense - most successful salespeople don't sell from behind a desk, and the employer was basically looking to chain Borges to his desk and micromanage his work.

The Deputy Judge appears not to have been satisfied that there was any actual refusal, but in any event felt that any refusal would have been "in the heat of the moment".  The requirement was a "significant change", and he "should have had time to absorb the shock and even if he failed to comply he should have been given a proper warning about it."

Common sense would dictate that there should have been a cooling off period following the heated discussion - for both parties - and the plaintiff allowed some reasonable time to comply.

The Deputy Judge highlighted that the appropriate next step would have been to continue to require Borges to comply with the direction, and expressly warn him that his continued employment was in jeopardy if he failed to do so.

The warning has to be actually conveyed to the employee, and the employer cannot simply rely on an impression that the employee may have received it. The March Note did not contain any such warning or any consequences for failure to comply and no such warning was evident from Provost.

In addition, the employer took a 'kitchen sink' approach, alleging all sorts of other problems - an issue about whether or not the quota policy had been given to the plaintiff; an issue where the employer over-ordered tillapia allegedly because of assurances from Borges that he could sell that much (Borges had a different factual take on this); an issue regarding completion of call sheets and punching in and out; not using current prices; declining sales; and singing in the office.

Yes, you read that right:  Singing in the office was alleged to contribute to a just cause argument.  I'm pretty sure that is the metaphorical kitchen sink in employment law.  As Prattas DJ put it, "One would have to stretch things a long way to show that this constituted a ground for dismissing him without notice."

Ultimately, the court felt that these were not misconduct, were condoned, or otherwise didn't rise to the level of just cause.  (For instance, while the Deputy Judge didn't expressly decide which side he believed regarding the tillapia incident, aside from a general statement that he preferred Borges' evidence, it's clear that he felt that the employer was the author of its own misfortune on the point.)

The court found that Borges was entitled to a reasonable notice period of 10 months, but reduced it by 25% because of a failure to mitigate - that is, Borges failed to produce records of his mitigation efforts (because he changed email providers) in the six months following dismissal, and because, though minimal efforts in the 2-3 months immediately following termination are understandable, Borges "may not have been as diligent as he ought to have been prior to September 2011".

Commentary

It's an interesting thought, and not entirely unprecedented, that an employee shouldn't be held to things said in the heat of the moment, but should be entitled to a 'cooling off' period.  It is also very practical for employers to take such a cooling off period in any event...and then seek legal advice.

Deputy Judge Prattas' analysis on just cause is sound.  He wasn't satisfied that Borges actually refused, and that factual finding is pretty fatal to the just cause claim, but in any event he's also quite right that the correct approach would have required an express warning that failure to comply would lead to dismissal - followed by an opportunity to comply.

I'm not sure that would have been enough, though, because it's not entirely clear that the employer was entitled to unilaterally change the terms and conditions of employment so significantly:  Recall my discussion about an employee's options in the face of constructive dismissal?  Had Borges refused, that might be characterized as a 'third option' case, with Borges rejecting the change and putting it the employer:  Either leave my employment as is or fire me.

It's not entirely clear if the change would rise to the level of constructive dismissal, but there would be a pitch:  Being tied to his desk, being micromanaged, these are pretty significant changes...but add to that a reasonable expectation that it will impair his sales performance, when his compensation package is at least partly based on commission...well, as I said, there would likely be an argument.

However, I'm less certain about the Deputy Judge's treatment of the mitigation issue.

Mitigation is a high threshold:  The onus is upon the employer to lead evidence of a failure to mitigate, and to establish that proper mitigation efforts would have led to re-employment.  The Deputy Judge ultimately accepted Borges' evidence of, among other things, his mitigation efforts, but held it against him that he failed to produce records (which failure was explained).  Drawing an adverse inference on the facts from an unexplained failure to produce documents might be one thing, but that's not what's going on here.  Particularly in light of the onus, it's a rather strange thing to say "I believe you, but because you couldn't produce a paper trail, I'm going to reduce your damages."

Even more troubling is the language of "may not have been".  That may have been an intentional understatement, but the bottom line is that it is a misstatement of the test:  To reduce damages for failure to mitigate requires a finding, on a balance of probabilities, that he was not as diligent as he ought to have been.  (Nor is that the end of the analysis.)  The burden of proof being what it is, a wrongfully dismissed employee is presumed to have taken reasonable steps to mitigate, unless proven otherwise.

Even beyond that, while a lack of diligence in a job search frequently results in a reduction of the notice period (though 25% seems quite significant, under the circumstances), I would argue that the approach is wrong, for much the same reason the Supreme Court did away with Wallace damages:  The well-established test for mitigation requires an employer to show that, through reasonable efforts, the employee would have obtained replacement employment within the reasonable notice period.  There's no room for a presumption to that effect; there's an evidentiary burden on the employer, and to simply say "failure to take reasonable steps results in a reduction of x" is arbitrary and baseless.

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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.

Law Clerk Dismissed For Cause After Starting Competing Business

Vardalas v. 1455358 Ontario Limited is a recent and interesting Small Claims Court case involving a law clerk suing his former employer, Bougadis Chang LLP, in wrongful dismissal.

The Court found that the employer had just cause to dismiss Vardalas, and dismissed the claim.

The Facts

Mr. Vardalas worked for BC for a little under five years as a law clerk, from July 2006 to June 22, 2011.  BC practices in the areas of insurance lawsuits, personal injury, disability claims, medical malpractice, and "commercial/contractual actions", primarily catering to the Greek, Chinese, and South Asian communities in the GTA.

In March 2011, Vardalas registered a sole proprietorship called "Nomos Consulting Services" - 'nomos' being the Greek word for 'law'.  It officially opened in early June, 2011, and shortly thereafter BC was told about it by the President of the Greek Community of Toronto.  George Bougadis asked Vardalas about it, and Vardalas explained that Nomos was his wife's business, and simply assisted people in filling out forms for citizenship, passport, and pension applications, and that Vardalas himself had nothing to do with it.  Basically, it was a translation service, to hear Vardalas tell it.

Bougadis was satisfied by the explanation, even offering to refer clients to Nomos in appropriate circumstances.  (I'm surprised by this, actually - neither Vardalas nor his spouse were licensed by the Law Society, and carrying on a business under that name would send up alarm bells about what exactly they're holding themselves out as.)

However, the next day, the President of the Greek Community sent an email to Bougadis, enclosing Nomos' "Grand Opening Flyer" - indicating that Nomos assisted with completing forms for a large variety of proceedings, completing 'appeal letters', and provided representation at tribunal hearings - suggesting that Nomos was acting in direct competition with BC in a number of ways.  Furthermore, Bougadis received Vardalas' business card from Nomos, identifying Vardalas as a Nomos 'Consultant'.

Bougadis then confronted Vardalas again, and Vardalas continued to deny involvement in the business.  (It didn't help that Nomos was registered in his own name, either...)  Vardalas was dismissed for cause.

The Issues

The primary issue was 'just cause'.  However, just cause being a high threshold, there were a lot of more technical issues to fight about along the way.  There was a contract executed nearly four months after Vardalas started, imposing restrictions on outside work Vardalas could perform.  Did the contract have 'fresh consideration'?  The Deputy Judge found that it did.  Were the restrictive covenant provisions enforceable?  The Deputy Judge found that they were...but ultimately, it didn't matter, because even without an express written contract, an employee impliedly owes a duty of fidelity:

• Serve the employer faithfully
• Not to compete with the employer
• Not to reveal confidential information
• Not to conceal from the employer facts which ought to be revealed
• To provide full time service to the employer

So, contract or not, Vardalas engaged in misconduct by starting up a competing business.  (Had it been a non-competing business, that would have had different considerations...it might still have violated the terms of the employment contract, but would not so obviously have jeopardized legitimate interests of the employer.)

Worse, when confronted about Nanos, Vardalas lied about it.

The real problem for Vardalas arises because he was often the first point of contact with new clients - he was responsible for client intakes and initial client screenings and pre-interviews.  This required a high degree of trust, and afforded Vardalas an opportunity to steer away clients from BC to Nomos.

Thus, the Deputy Judge was satisfied that Vardalas' conduct was incompatible with his employment obligations, and found that Vardalas had just cause.  (The Deputy Judge went on to assess damages, finding a reasonable notice period of 5 months, but after mitigation income and a 'gratuitous payment' by the defendants of $4,000, the damages only would have been less than $2,700.)

Commentary

I don't really take issue with any of the Deputy Judge's findings - the specifics of the 'fresh consideration' aren't really set out in much detail in the decision, but from his description, it certainly sounds like that finding was available.  It doesn't surprise me that he concluded that there was just cause, and the reasonable notice period and treatment of mitigation earnings seem perfectly appropriate.  (It appears that the defence actually called the mitigation employer to the stand to give evidence of mitigation earnings.  This is very unusual...but recall my remarks recently about how the onus of proving mitigation earnings is on the defendant?  There you go.)

However, there are two issues I would highlight:  Firstly, the treatment of additional misconduct - while obiter - is troubling, and secondly, there's a potential condonation argument that doesn't really seem to have been addressed.

Additional Misconduct

The employer took a little bit of a 'kitchen sink' approach, raising prior issues of insubordination and absenteeism by Vardalas to bolster its case for cause.  Following one incident, the decision notes that Vardalas "refused to meet with the defendants' Office Manager to discuss this incident and also questioned the Office Manager's authority to deal with the issue".

However, there is absolutely no indication on the face of the decision that any discipline ever occurred for any of these incidents.

The Deputy Judge noted that the 'Nomos' issue was enough to constitute just cause, but even if it wasn't, he would have cumulatively considered its effect with the prior insubordination issues.  And, unless there was discipline for such events, it would have been questionable to do so.  He cited authority for the proposition that prior misconduct can be weighed as well, but such accumulation typically requires a disciplinary record for that misconduct.

Condonation is said to be subject to an implied condition of 'future good behaviour', and there's a line of cases suggesting that 'condoned' behaviour can be used cumulatively with new misconduct to warrant summary dismissal for cause.  However, the language in that line of cases is a little dated, and the word 'condoned' is being used there in the sense of 'forbearance from dismissal at the time', whereas nowadays condonation also may refer to conduct which has tacitly been accepted by the employer.  (For example, if my employee shows up half an hour late to work every day, and I don't object, then the employee comes to believe that I'm okay with it.  My condonation of him showing up late every day last month isn't subject to an implied term that he will show up on time tomorrow...unless I've disciplined him and made it clear that I expect him to show up on time moving forward.)  To borrow an uncited passage from Lancaster House's eText on dismissal, "An employer cannot treat matters of which it was previously aware, but which it never brought to the employee's attention, as cumulativecause for dismissal."

From a policy perspective, that's the preferable analysis, too:  It would be troubling to allow an employer to take the "kitchen sink" approach to just cause, piling onto a new allegation of misconduct every gripe the employer had throughout the employment relationship, but for which discipline was never issued - employees with no disciplinary record, no awareness that they failed to meet the employer's expectations in any way, would suddenly be faced with a mountain of previously unknown complaints.  Not only would it lead to just cause positions being taken against a lot of employees who had no reason to believe their employment was ever in jeopardy, but it would also be a huge burden on the court system and on the parties in terms of complexity and cost of proceedings - suddenly, you have to litigate about a dozen customer complaints received over the last decade, and about a handful of allegedly unjustified absences over the same period, and about that one time in 2007 when the employee allegedly swore at a co-worker...  Discipline not only makes the litigation much cleaner, but it's much healthier in terms of employee relations.

Condonation

There was a brief reference to a "gratuitous payment" made by the employer, and no indication as to exactly how that came about.

There's conflicting jurisprudence on how that might play out:  There's a 1964 case from the Ontario High Court of Justice, affirmed by the Court of Appeal, called Tracey v. Swansea Construction Co. Ltd., often cited as an authority on condonation, but also interesting for a more narrow proposition regarding the form of termination of the contract:

The simple position appears to me to be this. The defendant desired to dismiss the plaintiff. If there was misconduct or default sufficient to justify discharge it had one of two courses open to it. It could have summarily dismissed for cause or it could have decided to overlook, waive or condone the misconduct and terminate upon notice, or payment in lieu of notice, in accordance with the provision of the contract for termination implied by law. It could not do both, for one would operate as a repudiation of the contract for a breach thereof, and the other, conversely, would operate as an affirmation of the contract and the adoption of its provisions for termination. The fact that the defendant was in error as to the length of, or sufficiency of, the notice given could in no way alter the effect of its intention as expressed by its conduct.

Legal language is often inaccessible, and the older the language, the more foreign it tends to appear.  In a nutshell, what that says is this:  If you fire on a not-for-cause basis, then when the employee insists on more notice than you anticipated, you may be precluded from asserting cause afterward.  From a policy perspective, it makes sense:  Just cause is a very heavy hammer, and shouldn't be used as a matter of course to try to intimidate employees into accepting less than their entitlements.  There's also a sound legal logic underlying it.

However, it's not a hard-and-fast rule.  After-acquired cause is an easy exception - we fired you on a not-for-cause basis, but that was before we discovered that you had been embezzling large sums of money.  Following Tracey, courts have also found that intention is of great importance, and so there have been cases where an employer was permitted to renege on a 'not-for-case' dismissal and plead cause where the intention was something other than condonation (say, to spare the employee's feelings).

So, when I see a reference to a 'gratuitious payment' which would ostensibly satisfy an employee's ESA minimums, that raises a red flag for me as to whether or not a just cause defence is still available.  But, as I said, the facts surrounding the payment aren't clear here.

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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.

It's in the paper; it must be true!

There's a piece in the Toronto Star today about wrongful dismissals and summary judgment motions.  This is a topic I've written about on a number of occasions, including recently following the decision in Beatty v. Best Theratronics.

The Star piece, by Toronto lawyer Sheryl Smolkin, is entitled "Court opens way to faster settlements of wrongful dismissal cases" - a deceptive headline, in my view, but in my media experience, the headlines are typically drafted by the editors.  In law, when we talk about "settlement", we're talking about a resolution reached through the agreement of the parties.  ("Settle" can have other meanings, and you might say that courts 'settle' disputes, but it's confusing at minimum to say that a 'settlement' is reached through a court order.)

What the piece is getting at, ultimately, is the impact of the Hryniak decision from the Supreme Court earlier this year on wrongful dismissal cases.  Recall my commentary back in January:

Civil trials are relatively rare already.  And while the Hryniak case remains an example of a rare case requiring a trial, the framework laid out in this decision will send very large numbers of other cases to summary judgment motions - probably including most wrongful dismissal actions.

I've posted about several other wrongful dismissal actions decided on summary judgment in the past; it can be a very expeditious way of dealing with a matter.  The case of Pegus v. Ecorite Distributors Ltd. comes to mind as a decision very reflective of the 'proportionality' concerns raised by the SCC in Hryniak.  (In that case, there was a motion for summary judgment based on 'deemed admissions' by the employer in a low-dollar-value case which had been pending for three years.  The employer sought to withdraw the deemed admissions, and Justice Gray permitted said withdrawal, but proceeded to decide the issues in dispute anyways and grant summary judgment.)

I suspect that we'll be seeing a lot more summary judgment motions in the days to come.

Basically, Ms. Smolkin is saying something similar, that Hryniak has the result that a lot of wrongful dismissal matters will be resolved by way of summary judgment motion.  The article covers a lot of territory, in terms of civil litigation process, and is remarkably short for doing so, with the result that it oversimplifies a lot of what it discusses, and also with the result of overstating the article's own thesis:  The reality is that "straightforward wrongful dismissal cases" were always amenable to summary judgment motion, where the basic facts were undisputed.  The impact of Hryniak is that the scope of wrongful dismissal case amenable to summary judgment motion is even wider than ever.  It's no longer the case that a dispute as to the character of employment will necessary recall a trial, for example.  After Hryniak, the fact that certain facts are disputed will not be fatal to a summary judgment motion.

But what's particularly troubling is the blanket statement that a summary judgment motion "is not a good idea if you are also asking for punitive or aggravated damages or damages for mental stress.  In these situations the issues are sufficiently complex that a full trial is required".

Incorrect on both counts, as evidenced by the Beatty case.  The takeaway from Beatty was this:  You can still bring a motion for summary judgment even if you're seeking punitive and aggravated damages - you might not get those damages on summary judgment if the issues require a trial, but even then the judge may order a "summary trial" just of those issues, granting judgment on the rest.  So that can still be a "good idea", and doesn't require the matter to go to a "full trial".  Beatty will still be an immensely more affordable process than the conventional full trial it would have required pre-Hryniak.

Here's the rub, though:  Ms. Smolkin knows that.  When Stuart Rudner pointed it out on Twitter, she responded, "Thanks Stuart.  I wrote about that decision but parts of the article got cut."

You see, Ms. Smolkin is a lawyer who routinely writes about employment law matters.  She knows the area of law quite well, and is a very credible source, being published out of a major news outlet.  But, in the print media, the editor has the final say in what gets printed, and that may or may not omit crucial information or context.

Brevity is extremely important in journalism.  Lawyers tend to be on the other extreme - I'll be the first to admit it, but the first of a very long line.  Part of that is because context is so very important in all things legal.  So lawyers make things longer to avoid over-generalizing or to make sure they're not omitting important details, and that can be a problem...but what happened to Ms. Smolkin's piece is arguably worse, because the cuts ended up leaving an overall impression which is demonstrably untrue.

This is one of several reasons to always remain sceptical of what you read in the newspaper.  Even if it's a credible newspaper, written by a sophisticated journalist who knows the topic, that doesn't necessarily make it true.

And to a lesser extent, even when you're reading unedited materials directly from a credible source (such as this blog), you should still remain a bit sceptical, because context is everything, and there's absolutely no substitute for getting legal advice dealing specifically with your legal issue directly from a lawyer.

*****

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 Double-Standard: Does Suing Your Employer Poison the Relationship?

There's a recent article in the Financial Post by Howard Levitt (you might remember him as the lawyer who abandoned a Ferrari California in rising floodwaters) about a constructive dismissal case in Nunavut decided this past January, in Kucera v. Qulliq Energy Corporation.

This is the factual gist:  Ms. Kucera and her significant other lived in Toronto until she accepted a position with Qulliq in Nunavut, starting July 1, 2009, as an Executive Assistant.  There were a number of issues that arose involving the Director of HR - largely office politics, etc., but her position was downgraded, her duties were changed, and then she was awarded a salary increase significantly lower than what her boss (the President of the company) had agreed to.  The problem was subsequently fixed, but not before a discussion with the Director of HR led Kucera to believe that she was 'undervalued' by the employer.

A few months later, Kucera came across an email from the HR Director to other staff regarding the salary increase, "Please ensure that the changes are made to Sarah's salary or I will face being shot in the face with 50 of her earrings."  Kucera felt that the comment was 'hurtful'; the HR Director said that it wasn't intended to be hurtful, but couldn't otherwise explain the context.

On August 5, 2010, Kucera's lawyer wrote to the employer taking the position that "she is in a position to pursue a claim for constructive dismissal", and sought to open negotiations for a severance package.  Qulliq took the position that the letter was insubordinate, and dismissed her for just cause on August 20, 2010.

The Court reviewed a number of precedents finding that "commencing a lawsuit against the employer is conduct that is incompatible with the employment relationship", and concluded that the demand letter was "a repudiation of the employment contract".  (Importantly, the Court also decided that Kucera's complaints did not satisfy the test for constructive dismissal.)

It's an important contextual factor in the case that, in the view of the Court, Kucera's letter and other conduct clearly suggested that she had no intention of staying in the employment relationship.

Commentary

I seldom insert myself into ongoing employment relationships with constructive dismissal allegations, because lawyers are notorious for breaking deals, not making them, but there have been cases where I have done so.  In such a circumstance, the demand tends to include (and probably focus on) an option of a 'make-whole' remedy to restore the employment relationship.  Given the significant evolution in this area of law in the past several years, I think it was a mistake for Kucera's lawyer to use a 1999 precedent.  Sadly, the decision in Russo v. Kerr, which provides a much better rubric for such demands, wasn't released until three months after Kucera's lawyer sent this letter.

There is a fine line to walk, and sometimes it must be walked - think about the OLRB decision in Webster v. Securitas (my commentary here), dismissing a constructive dismissal claim on the basis that the objections hadn't been raised with the employer.  (I might question the correctness of that decision, but that's not much help to Webster.)

There is a logic to the conclusion here:  Kucera was essentially taking the position that the employment relationship was already over, and that she was entitled to wrongful dismissal damages.  She tried to hedge her bets by not resigning, but when you're alleging a poisoned work environment, that might be counter-productive:  It undermines the strength of the claim regarding the extent of the poisoned relationship, and yet the fact that you're claiming that the relationship is poisoned would, in and of itself, make it hard for the employer to continue that relationship.

But there strikes me as a conflict between the line of cases saying 'suing or threatening to sue your employer is just cause' and a separate line of cases saying 'your duty to mitigate can require you to stay with the employer you're suing'.

Consider, for example, Chevalier v. Active Tire (see my commentary here and here), where Mr. Chevalier was constructively dismissed - yes, as a matter of fact and of law, he was, and the court so found - and commenced litigation against his employer.  The employer, after obtaining legal advice, realized "Oops, we shouldn't have done what we did" and offered him his job back.  However, the fact that Mr. Chevalier had already commenced litigation was "not determinative", and he was found to have failed to mitigate.  (He ended up on the hook to his employer for very substantial legal fees as a result.)

Or consider Ghanny v. 498326 Ontario Limited, (my commentary here), where the Court felt that it was unreasonable for the plaintiff to impose conditions on his return to work that involved addressing the concerns in his ongoing wrongful dismissal action...except for the condition that he be permitted to continue the action.  "However, the third condition, the continuation of the lawsuit, was a legitimate entitlement and the former employer would have been wrong to insist otherwise."  Which seems kind of backwards to me:  If my employer fires me, and then two months later when I'm already suing offers me my job back, it seems to me that a resolution of the action - i.e. backpay, if nothing further - should be a necessary precondition for my acceptance of the offer.  And moreover, that's the commercially reasonable approach to take:  As a lawyer, if I'm suing a client on an outstanding bill, and suddenly the client comes to me asking for help on a fresh legal matter, then I'm absolutely going to refuse to be retained unless the client pays the old bill, with interest and costs, and provides a substantial monetary retainer against the new file.  (Not to say I'd necessarily take on the new matter on those conditions - there's kind of a 'fool me once, shame on you; fool me twice, shame on me' aspect to it.)  The notion that you should be required to enter into a new contract with a party while still suing them for breaching the last one...sorry, it doesn't make sense to me.

The proposition isn't entirely one-sided.  Consider the case of Benson v. Bird Mechanical (my commentary here), which extended a limitations period partly on the basis that it was 'unworkable' to sue while still employed.  This would seem to be more consistent with the Kucera proposition.  One might dispute as to whether or not Russo v. Kerr (noted above) contradicts Kucera:  Russo had been constructively dismissed, and made it clear that he was staying in the position only to mitigate his loss.  If he had been dismissed for commencing legal action, that would simply have the result of eliminating his mitigation earnings.  But the lead case on the mitigation issue, Evans v. Teamsters does suggest that the prior commencement of litigation is a relevant factor.  (This was considered in Chevalier, but simply not given a whole lot of weight.)

Conclusion

There's a clear conflict in the jurisprudence, to at least a small extent...but the trends are that the courts will generally say that an employee poisons the relationship by suing, but can nonetheless be expected to mitigate his or her losses by staying in the relationship while suing.  (Even though, yes, because you have to sue for your constructive dismissal entitlements, that relationship now may be poisoned.)

It doesn't mesh.  The way that the 'mitigation with the same employer' test has been set out by the Supreme Court and other appellate courts is that it will be a 'relatively rare' circumstance, marked by "a situation of mutual understanding and respect".  And as a litigator with plenty of experience representing both employers and employees, I can tell you that, by the time a statement of claim is issued, there's seldom much "understanding and respect" left as between the parties.  On either side.  Yet you still get cases like Chevalier and Ghanny, envisioning the parties tearing each other apart in an adversarial discovery process in the morning and then working productively together in the afternoon of the same day.

*****

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.

Dismissed Employee Jailed for Contempt

Another very unusual fact pattern has arisen involving Ceridian, a major human resource service provider, in the case of Ceridian Canada Ltd. v. Azeezodeen.

Ceridian entered into a business relationship with Pendylum Inc., which involved Pendylum and its subcontractors assisting in providing services to Ceridian customers.  Because of the sensitive nature of much of Ceridian's information (consider that Ceridian processes payroll directly into the bank accounts of its customers' employees), Ceridian required Pendylum employees and subcontractors to undergo background checks and enter into strict confidentiality agreements.

In July 2013, Pendylum hired Ms. Azeezodeen - the court describes her occasionally as an employee, though other language would suggest that the relationship may have been characterized as an independent contractor relationship - to assist with Ceridian contracts.  She entered into the requisite confidentiality agreements, but it appears that she among others were not required by Pendylum to submit for a background check...at least, not until Ceridian found out about it in October.  When Pendylum sought to correct the oversight, she refused, and her contract was terminated.

That circumstance could raise a number of interesting questions from an employment law perspective, and the right thing for her to do would have been to consult with an employment lawyer to assess whether or not she might have any recourse for her dismissal.

Unfortunately, what she actually did was basically the opposite of the 'right thing':

In November 2013, the defendant sent a letter to Ceridian in which she made numerous defamatory statements about the plaintiffs’ business practices and operations, which she threatened to make public. The defendant advised Ceridian that unless she was paid the sum of $23.2 million, she would make public confidential information relating to Ceridian, Pendylum and their customers. On January 6, 2014, the defendant again wrote to Ceridian threatening to “go public” with numerous allegations about Ceridian and Pendylum.  The defendant now offered not to publicize the allegations in exchange for a “settlement” of $500,000.

On April 24, 2014, she wrote again and threatened that, on May 12, 2014, she would circulate a press release - which would include, according to the court, "confidential information regarding Ceridian and Pendylum's business methods".  On May 8, 2014, she reiterated that threat.

So, on May 9, 2014, Ceridian and Pendylum brought an ex parte motion (i.e. without notice to the defendant) seeking an injunction.  Justice Belobaba granted the injunction, prohibiting her from carrying out her threat for a five-day period, so that the matter could be brought on for a full hearing on the merits.  A process server tried to serve her personally with the order, but she didn't answer the door; a copy was left at the door.  On May 10, 2014, the plaintiffs' counsel, David Lederman, sent her a copy of the order by email.  She responded very quickly that it was "too late" and that the press release was "already submitted and paid for".

Lederman's response, sent about 20 minutes later, was pretty much exactly what he should have said under the circumstances:

Pursuant to the terms of the attached Order, you and anyone acting on your behalf have been prohibited from publishing or disclosing any of the statements in the press release.  You will be held in contempt of Court if you do not abide by the terms of this Order.  I suggest you speak with a lawyer who can explain the ramifications to you should you choose to ignore the attached Order of the Court.

There was a lengthy exchange after that.  She claimed "free speech", and said that from her perspective the judge's order had "no effect", but she would try to stop the press release if Ceridian 'settled'.  Once again, that's exactly the wrong answer.  If she said, "I would if I could, but I can't", then that may well have provided her with a defence to a finding of contempt.  However, claiming that the judge's order had "no effect", and refusing to even try to comply, is pretty much the definition of contempt of court.

The press release was circulated online, and the plaintiffs brought a motion to find her in contempt.  On June 24, 2014, Justice Belobaba found that she was in contempt of court; on July 8, 2014, she was sentenced to 20 days in jail.

Commentary

While the original publication of the press release has been taken down, the reality is that, once something is on the internet, it's probably there forever.  I was able to view a copy of it without much difficulty, despite a relative lack of technical expertise for such things.

I'm not going to reproduce the text, for reasons which should be fairly obvious, but I will make a few observations about it:  It's not that bad.  She didn't publish sensitive customer information, bank accounts, etc.  She did publish business practice information which would likely be caught by a standard confidentiality agreement, but no sensitive business strategies, and nothing likely to be prejudicial - at least, not from a confidentiality standpoint.

In fact, a large majority of the press release's contents, in terms of facts, are either expressly contained in the judicial decisions I've linked above, or else can be gleaned from them.

The two central thrusts of the press release appear to be allegations that (a) Ceridian is failing to protect sensitive customer information - including by having subcontractors upon whom background checks have not been carried out (pretty thick, isn't it?) - and that (b) Ceridian and Pendylum mistreat their subcontractors by illegally trying to work around employment standards legislation.

For clarity, I should highlight that I am not saying that these allegations are necessarily true - only that these appear to have been the allegations that Ms. Azeezodeen will go to jail for having made.  At the end of the day, it's likely that Ceridian would be more concerned about the unflattering allegations than about the disclosure of confidential information.

So it's important to emphasize that Ms. Azeezodeen was not sent to jail for breaching confidentiality.  Nor for defamation.  Indeed, there is a distinct possibility that, had she retained counsel and fought the injunction properly, she might have succeeded.  The reason she was sent to jail was because she published the press release despite a judge having ordered her not to.

There's no question that Ms. Azeezodeen did everything wrong.  Nor do I question the appropriateness of the sentence.  Still, I find myself a little concerned about one passage in the sentencing decision:

[T]he defendant’s breach is known to many Ceridian employees, who are actively following this dispute. These employees, who have their own strict obligations of confidentiality, are aware of the defendant’s breach, her confidentiality agreement and of her violations of this Court’s Order.  Given the nature of Ceridian’s business, it is important that confidentiality obligations be complied with and enforced in order to deter future violations.

In other words, Ceridian's goal here was to send a message to its other employees:  Don't go public about our business practices.  Which, respectfully, is not what contempt is about.  Contempt is the court's way of sending a message to the parties and to the general public to comply with its orders, and to punish parties for failing to do so.  And, as far as I know, no other Ceridian employee is subject to an injunction prohibiting such disclosure.  Merely contractual obligations - which are presumably civilly actionable if breached, but not the kind of thing you go to jail for.

If the fact of disclosure is what they're concerned about, the mechanism to remedy that is through a civil action, seeking compensatory and punitive damages from Ms. Azeezodeen for the disclosure.

*****

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.

Employee "Theft" Found Not to be Just Cause

The decision released yesterday in Dennis v. Ontario Lottery and Gaming Corporation is a delightful and convoluted example of why context can be so incredibly important in employment law, and why lawyers can never make blanket statements like "theft is just cause".

Ms. Dennis worked for OLG for over 13 years, until they decided to fire her without cause.  They offered her a package being roughly equivalent to 53 weeks' salary, and she accepted it.

Then they found out that Ms. Dennis had done something bad.

For several years, in addition to her regular duties, she had volunteered to handle ticket sales and cash receipts relating to an arrangement between OLG and Canada's Wonderland involving admission ticket sales to the park.  However, in the summer leading up to her dismissal, she fell for a classic Nigerian fraud scheme on the internet, and was taken for somewhere between $12,000 and $15,000.  She drew a little over a thousand dollars of that money from the proceeds of sales of Wonderland tickets.

Fully intending to repay it, of course.  But still, sometimes you have to wonder what people are thinking.

So when OLG discovered the shortfall in the Wonderland cash, they called the OPP, who investigated and charged Ms. Dennis with theft under, a charge which was subsequently withdrawn at the request of the Crown.

OLG, for its part, refused to pay out on the settlement it had agreed to, taking the position that it had just cause for termination and that Ms. Dennis' failure to disclose the cash shortfall permitted it to resile from the agreement.  In deciding to do this, they embarked on what Justice O'Marra called an "inadequate and inaccurate internal investigation", which concluded that Ms. Dennis had admitted to theft and admitted guilt in court.  (She admitted to taking the money.  It may be a nuance only lawyers understand, but that's not the same as admitting theft - no mens rea.  But the more obvious defect is that they assumed that she had pled guilty, whereas in fact the charge had been dropped.)

The Court upheld the settlement agreement, finding that, in light of her intent to repay the money, the fact that her role managing that money was outside the scope of her ordinary employment duties, and the inadequate and inaccurate investigation, it was "totally disproportionate for OLG to view her conduct as support for termination with cause."

Commentary

First, I would like to point out an interesting missing link in the decision.  The fact that the misconduct did not amount to "just cause" is very important, but it's rather different from the question of whether or not OLG should be able to resile from the settlement agreement.  There are circumstances in law where a material non-disclosure can be treated as a misrepresentation sufficient to ground rescission for a contract.  It may well be that the test for rescission of the settlement is met, even though the test for just cause is not.

This would yield the interesting circumstance of Ms. Dennis being able to pursue damages not limited by the settlement agreement or release.  (That said, I don't have any reason to believe that the settlement was too low in the first place.)

Conversely, it's also not generally going to be true that an employer will be able to assert after-acquired just cause after a settlement agreement is made.  Even if the conduct would amount to just cause, it does not necessarily follow that the employer would be entitled to rescission of the contract.

Secondly, the employer's 'duty to investigate' has long been a point of discussion - there's a real question in law as to whether an employer is obligated to hold a procedurally fair investigation before termination for cause, or if it's just a really good idea but not mandatory.  It seems strange to me that her conduct might no longer stand as just cause because the employer overstated the case in its investigation conclusions.

Thirdly, I don't take issue with Justice O'Marra finding that it was mitigating that overseeing that money wasn't a part of her regular employment responsibilities - if it was, say, a bookkeeper tasked with maintaining petty cash, it would have been worse - but it's important to highlight that it's not entirely a defence on its own.  Misconduct of that nature that's connected to the employment relationship - and this certainly was - would absolutely be disciplinable.

But ultimately, the most important thing that this case does is highlight the fact that even relatively egregious conduct - taking over a thousand dollars that wasn't hers - might not stand as just cause, in the right fact pattern.

*****

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.

10 Tips for Managing the "Problem Employee"

I have seen a great many employment relationships as they have come to very sour endings, and in a great many cases there is fault on both sides for that - where there was some failing by the employee, in many cases it is also true that the employer failed to manage the employee, resulting in a scenario that the employee is not cognizant that his/her conduct is failing to meet the employer's expectations.

The result of this failure to manage is not simply that the employer may not be able to assert just cause for dismissal; in many of these cases, it is probable that dismissal would not have been necessary at all - thus saving the employer turnover-related costs.

Sometimes, an employer doesn't want to have to deal with an employee's failings.  That's generally fine, provided that the reason doesn't fall within the narrow scope of reasons you can't fire (think: ESA-protected leaves of absence; human rights grounds; union membership; reprisal for standing on certain statutory rights), but - in the absence of just cause (which can, in severe cases, be made out by a singular instance of misconduct, but the test is high), the employer has to be prepared to provide pay in lieu of notice.  And sometimes it's worth it; keeping a "problem employee" in the workplace, paying them despite their problems, and having them potentially impact workplace morale, can be very costly in some cases.

So if you just want to get rid of the employee, contact a lawyer, and that lawyer can advise you if you have an arguable case for just cause, or in the alternative what the scale of your liabilities are likely to be.

But if you don't have just cause, and don't want to pay out the employee, here are a few steps to bear in mind for managing the employment relationship once problems have arisen:

(1)  Set Clear and Consistent Expectations

Employees can't read your mind, and sometimes they're coming at an issue or problem from a very different perspective than you.  Maybe they don't realize that what they're doing is wrong, and their behaviour can be corrected by clarifying expectations.  Maybe they realize there's a rule against what they're doing, but they don't realize the importance of the rule, and their behaviour can be corrected by explaining to them the rationale behind the rule, or at minimum highlighting that it is important to you (and, by extension, to their continued employment prospects) that they comply with the rule.

Even if it seems like common sense to you, if you've never explained your expectations, assume that the employee doesn't know.

Likewise, sometimes they see other workers disregarding a rule without consequence, and therefore regard it as acceptable conduct.  You may want to accept your most productive employee taking a few extra minutes for lunch, or swearing in the workplace, but if tardiness and decorum are at all important to you, that's a problem:  Other employees will see this, and some will mimic the behaviour.  (And as for that top employee:  Rewarding excellence should be done in an express and direct fashion; never through condonation of what otherwise constitutes misconduct.)

(2)  Accept Feedback

If you're making the best use of your workforce, your employees should generally know their jobs as well as anyone (and certainly better than HR or senior management).  Sometimes there's a reason that an employee wants to perform a task a certain way.  Management should want to know that reason, and should listen with an open mind, for two reasons:  Sometimes, the employee's way might be better, and so everyone wins by taking the employee's advice.  Otherwise, having listened to the employee's concerns puts management in a position to much more effectively respond to those concerns.  If you're still convinced that your way is better, or that the employee's way will generate unforeseen consequences, or perhaps that both ways are equally valid but you'd rather the workforce do things uniformly, then you can explain your concerns to the employee.

In cases where the employee remains unconvinced, or protests that they think that your way will cause serious problems, then tell the employee, "I've heard your concerns, and I understand them, but this decision is my responsibility.  If there are consequences, that's my problem, and we'll address them when the time comes."

This is a particularly common issue involving long-term employees when a new junior manager comes in:  I've been doing my job this way for 30 years, and now you're telling me to change it?  Sometimes, it's just a matter of getting used to changes, and you're entitled to expect the employee to try it your way.  But there's some folly in failing to even try to understand the perspective of such an experienced employee.

(3) Be Constructive

"You made a mistake", on its own, isn't helpful.  It won't assist the employee in avoiding the mistake next time, nor will it help you down the road if you're trying to assert just cause because of a series of successive mistakes.

Telling the employee what mistake he/she made is a start.  You want to point out the specific error, help the employee understand how it arose, and coach the employee as to how to avoid it happening again.  And, again, that's a two-way conversation which includes accepting feedback - sometimes there's a legitimate reason that the employee made the mistake:  Lack of training in a specific area, lack of support from another department, or poor channels of communication with the rest of the team.  Work with the employee to develop a strategy to prevent the problem from happening again.

Performance improvement plans, properly implemented, should look very positive - they aren't about past failure; they're about future success, about establishing fixed short-to-mid-term goals, with a practical strategy for achieving them.

(4) Investigate - Don't Jump to Conclusions

I have seen a number of cases where a customer or co-worker complains about an individual, and the employer immediately assumes the allegations to be wholly true.  Sometimes, the allegation is partly or entirely false.  Sometimes, it's missing exculpatory context.  The precise nature of an investigation depends on the nature of the misconduct alleged, but the one thing that you need to do in almost every case is to get the other side of the story.

Failing to appropriately investigate complaints of misconduct can, and has, put employers into very bad situations with very significant liabilities, often because of marginal-to-non-existent misconduct.  (These are some very tragic cases indeed - consider the case of Correia v. Canac Kitchens, where 62-year-old Joao Correia, a long term employee, was dismissed from employment and charged with theft, following a third party investigator concluding that the thief was 20-something-year-old Joao Correio.  A unique case, certainly, but consider the result for the employer:  Firstly, they were on the hook for wrongful dismissal damages, as well as potentially significant additional moral damages.  Secondly, it resulted in lengthy and complicated litigation as to exactly what those additional moral damages were.  Thirdly, and here's the real kick in the teeth, they lost a good long-term employee.  Never forget the importance of attention to detail.)

(5)  Explain the Consequences of Continued Misconduct

"Don't do this again" is helpful, but you really do need to add an "or else" there before you can start thinking about a dismissal for just cause.

This is a hard one for many managers.  Threatening to fire somebody...well, it's pretty harsh.  Not nearly as harsh as actually firing somebody (especially without advance warning), but at least the manager doesn't have to deal with the employee at the office the next day after a dismissal.  A dismissal threat can strain the relationship between the employee and employer.

But it needs to be done, and when combined with the other tips in this entry, it's not quite so terrible:  If you've taken the necessary steps to identify the misconduct and provide the employee with the tools and understanding to avoid recurrence, then the termination threat is little more than an incentive:  If you want to keep this job, start doing it the way we've discussed.

This is also completely essential for most 'just cause' dismissals to stand up in court, incidentally.

(6)  Document Discipline, but don't "Build a Case"

I almost never recommend an employer "build a case" for cause.  If the employer already has a settled intention to get rid of an employee, hopefully you either already have cause, or can afford to provide pay in lieu of notice.  If you're starting the process with the intention of bringing the employment relationship to an end (whether because of misconduct you've already identified, or for other reasons entirely), that will bleed through to your disciplinary efforts, and bad faith will likely be apparent.  You'll be left in a situation where (a) you kept the employee on payroll longer than you wanted; (b) you incurred significant litigation costs following dismissal; (c) you may well be on the hook for bad faith damages; and (d) you still have to provide pay in lieu of notice.

The purpose of discipline is corrective.  If you're not interested in fixing the employment relationship, bite the bullet and just fire the employee.  (But, of course, call a lawyer first.)

When you're satisfied that an employee has committed disciplinable misconduct, it's important to actually discipline the employee.  The disciplinary notice should bear in mind all these tips - clarify expectations, be constructive, seek employee feedback, explain the consequences of continued misconduct, etc.:  Again, I have seen cases where employers have issued vague disciplinary notices, without meaningful investigation, and without specifying what the employee did wrong, but with the conclusion that they'll be fired if any of the misconduct is repeated.

Not only is such a disciplinary notice not likely to be effective to support a subsequent dismissal for cause, but it could be argued to constitute, or at least support, a constructive dismissal.  (Ever since I first read Justice Echlin's decision in Carscallen v. FRI Corp, that situation always evokes Voltaire's description of the banquet of Damocles.)

So disciplinary notices should be documented (even if it's just a verbal warning), should specifically indicate the misconduct and the corrective action taken and to be taken, and written warnings should be acknowledged by the employee - i.e. have the employee sign an acknowledgement field at the bottom.  (I have seen cases that turned in large part on a dispute as to whether or not the disciplinary notices in question had ever been given to the employee.)

(7)  Don't Overstep

Speaking of Carscallen, it's important to remember the limits of your entitlements as an employer:  By default, an employer does not necessarily have a right to issue, say, a disciplinary suspension.  There's not a whole lot of case law on this, but Justice Echlin's reasoning in Carscallen is pretty widely accepted:  If there's no contractual right to suspend, then a disciplinary suspension will constitute constructive dismissal, unless the misconduct constituted just cause for dismissal in the first place.

(This is a common mistake in unionized workplaces:  Most collective agreements do include provision for disciplinary suspensions, and so become a part of an employer's ordinary disciplinary practice...which they then apply to non-bargaining unit employees, and end up getting sued for constructive dismissal.)

Even aside from bright lines like that, an employer should be cautious not to appear to be too heavy-handed - as judges say in the criminal arena, sentencing is an art, which takes into account many factors.  If you issue a "final warning" the first time a long-service employee walks in 30 seconds late, that may raise questions about your true motivations for doing so.

(8)  Be Proactive

Managing difficult employees isn't something you should disregard until you have a difficult employee.  Set expectations from the outset of the employment relationship with a detailed and thorough policy manual.  (It's wise to either have a lawyer draft the manual, or at least review the manual if a non-lawyer drafted it.)  That makes it much easier to establish fixed expectations applicable to all employees, rather than having the line (or possibly various lines) drawn on an unpredictable case-by-case basis.

Don't wait until employee use of work equipment and/or personal use of work time (i.e. surfing Facebook from your work computer or taking personal phone calls on the work phone) becomes a problem before implementing a policy to set out the expectations in your workplace.  Don't wait until two of your employees become romantically involved before you think about a fraternization policy.  Don't wait until you start smelling marijuana in the lunchroom before you implement a drugs-and-alcohol policy.  Don't wait until you receive accommodation requests before implementing a human rights policy.  Absolutely don't wait until you start getting harassment complaints before implementing harassment and violence policies (these are legally mandatory under Ontario's Occupational Health and Safety Act).

As well, for cases where you can't (or don't want to) salvage the employment relationship, it's really important to have a good lawyer-drafted employment contract executed in advance of the start of the employment relationship, to control your liabilities on dismissal.  (It's easiest to implement such contracts at the start of the relationship, but if you haven't done that yet, it's not impossible to do so for continuing employment relationships.  Contact a lawyer to see how to implement written contracts for your existing employees.)

(9)  Never EVER try to get the employee to quit

This is another scenario I've seen far too often - an employer doesn't want to (or can't afford to) provide pay in lieu of notice, but really wants the employee out of the workplace.  So instead of firing the person, the employer just changes the terms and conditions of employment in such a way that will be unacceptable to the employee, or otherwise tries to make life difficult.

This is, almost by definition, constructive dismissal.

Don't get me wrong, there are situations where adverse changes to the employment relationship are necessary and justifiable.  If you've failed to take the "be proactive" advice, then sometimes you have to make changes after employees have started to act in problematic ways, and sometimes you might even secretly cross your fingers and hope that the problem employees will say "What do you mean I can't surf Facebook all day at work?  I'm out of here."  But if the court believes that part of the motivation for the changes was to drive the employee out, then that's probably going to be constructive dismissal, so especially if you're actually hoping for that result, you'd best make absolutely sure that the changes you're implementing are objectively justifiable.

(10)  Get appropriate help

Small and mid-size employers often fall into the trap of thinking that they can save a few bucks by taking care of their HR and legal needs in-house.  After all, business owners and entrepreneurs are, by and large, intelligent and sophisticated people - how hard can it be to put together an employment contract or policy manual?  How hard can it be to properly discipline an employee or implement a performance improvement plan?  How hard can it be to properly dismiss somebody?

And the answer is that it's not a question of intelligence, sophistication, or difficulty:  It's a matter of expertise.  It's a matter of knowing, through industry experience, what actions are needed and what pitfalls are to be avoided.

As an employer, you really do have a choice:  You can pay at the front end of your employment relationships, or at the tail end.  If you pay at the front end, you're talking about budgeting a relatively modest amount for legal fees and HR consultants to help with recruitment, policy development, employee relations, and dismissals.  If you opt not to pay at the front end, you're very likely going to pay at the tail end for legal fees and substantial liabilities, the amount of which would make the front end costs look like pocket change.

Not to say that getting good assistance at the front end guarantees that no employee will sue you, or even that no employee will sue you successfully - there are no guarantees in life (or litigation, for that matter).  But it's a very good gamble that the work and expertise you pay for at the front end will pay off, not only in terms of reduced liabilities later on, but also in terms of having a productive workforce, and maintaining freedom as an employer to appropriately manage your workplace.

In other words, employers may well claim that they "can't afford" legal assistance, but that's a lot like saying that you "can't afford" business insurance - the reality is that you can't afford not to get appropriate legal assistance (i.e. from a lawyer such as myself).

*****

These tips are not legal advice, but are for general information purposes and are primarily aimed at non-unionized workplaces.  In unionized workplaces, different considerations may apply, as the specifics of labour relations tend to be governed in great detail by collective agreements.  I would encourage unionized employers to contact me for a consultation (service and fee information to be provided) regarding how to correct difficult behaviour within the scope of the collective agreement.

*****

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.

Miller v. A.B.M. Canada Inc: Court strikes down contractual language

This week, Justice Glithero released his reasons in Miller v. A.B.M. Canada Inc., a wrongful dismissal action hinging on the enforceability of the termination language in an employment contract.

Mr. Miller starting working for ABM on September 1, 2009, in a 'middle management' position (if perhaps at the upper end of middle management).  As of November, 2010, he was told that he was doing a good job, yet in January 2011 he discovered an invoice from a hiring consultant which indicated that they were advertising job, trying to replace him.  He approached the president of the company to discuss it, and was dismissed without notice effective January 26, 2011.

His contract contained language limiting his termination entitlements:

Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.

Contractual language giving only the statutory minimums is relatively easy to draft, because you can refer directly to the statutory minimums.  So it's surprising to see this clause include the phrase "salary in lieu", because 'salary' is not a term properly invoked in context of the ESA minimums.  The plaintiff argued that this language excluded non-salary components of his remuneration package, including pension contributions and car allowance (even though the contract reserved a right to the employer to discontinue these benefits at any time anyways).

Justice Glithero agreed, and awarded damages based on a reasonable notice period of 3 months.  It's clearly a low-end notice period, particularly given the senior-level position, and Justice Glithero bore in mind the fact that Miller admitted not having read the termination clause.

Had he done so, he could have voiced objection to whatever provisions he found unsatisfactory, either as to the length of the notice period, or the fact that it did not call for payment of benefits during that period.  The contract terms made it clear what the employer intended.  Mr. Miller in his curriculum vitae indicated that he had experience in and had been responsible for human relations at Dieter's.  Part of his job description with the defendant made him responsible for monitoring all legislation relevant to the organization, and specifically listed employment standards.  By signing the contract, Mr. Miller signified to the employer that had read, and understood, and accepted the terms of the contract.  Had he in fact read what he acknowledged having read, the parties could have either negotiated their differences, or parted ways and avoided a period of employment that has been unhappy and no doubt costly for both.  In the circumstances of this case, the employee cannot escape bearing some responsibility for the fact that both parties entered into a contract which fell below ESA standards.

Commentary

It's slightly troubling that Justice Glithero did not address the effect of the "or as may otherwise be required by applicable legislation" phrase.  It seems to me that some judges would have read a lot into that phrase, such as a common intention between the parties that statutory minimum payments would be made.  (Justice Glithero did note that the employer's own payments and proposals included no provision for pension contributions, which might undermine such an interpretation.)  That being said, I could argue conversely that the meaning of the phrase, in the overall context of the sentence, is pretty ambiguous.

ESA saving language is quite common, and usually enforced, but there are often troubling elements, such as instances where the express language actually directly contradicts the ESA requirements:  If a contract expressly contradicts the ESA, such as by expressly disclaiming the continuation of some benefit through the notice period, can a clause otherwise promising not to contravene the ESA really save it?

It would be helpful to see Justice Glithero's actual line of reasoning on that point.

What's more difficult, however, is the segment of text I quoted above.  If you haven't read a contractual term, then that's usually your own problem.  But where the contractual term is illegal in any event, it's hard to see how not having read it can be at all relevant to the resulting implied terms.

The notion that the reasonable notice period should be reduced in recognition of the fact that the intended effect of the contractual clause is clear...is wrong.  That is almost exactly the proposition that the Supreme Court rejected in Machtinger.

Justice Glithero appears to consider it relevant that Mr. Miller has an expertise in human resources and employment standards compliance.  I'm not sure I see the relevance of that in general, but in the circumstances of this case it seems a misplaced criticism:  By and large, it would take an employment lawyer to spot the problem in the language in that contract.  Mr. Miller was not a lawyer at all, much less an employment lawyer.  (Despite being responsible for employment standards compliance, this is a very fine point of statutory interpretation.  This is why companies need to hire lawyers, and not rely on in-house non-lawyer expertise.)  So blaming him for the unenforceable contractual term seems highly inappropriate.

Or is it that Justice Glithero figures that Mr. Miller wouldn't have accepted the term had he read it, either negotiating something that is ESA-compliant or alternatively not accepting the job, and that either one of these solutions would have been better all around?  That seems fairly speculative to begin with - on the contrary, I would think that if he didn't read the termination clause, it's because the termination clause was not something he considered a negotiating priority - but where do you go from there?  The parties did enter into an employment relationship, and as unhappy as it might have been, the employer did not have just cause to terminate the relationship, and the employee did not resign.  And there would be no basis for trying to figure out what the parties would have agreed to had they negotiated the point:  This is precisely what the common law notion of 'reasonable notice' is designed to accomplish.

The real question is this:  At the point of termination, how much notice would have been 'reasonable' to give to Mr. Miller?  It is hard to see how the answer to this question is affected by the question of whether or not, prior to entering into the employment relationship, Mr. Miller read a contractual clause which is unenforceable in any event.

*****

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.

Beatty v. Best Theratronics: Partial Summary Judgment in Wrongful Dismissal

The 'standard' wrongful dismissal action involves factual issues that are usually relatively straightforward:

1. How long is the notice period?  For that, we turn to either a written contract or else to the Bardal factors, like age, length of service, character of employment, and availability of replacement employment - usually (though not always) factually straightforward.
2. What would the employee have received over the notice period?  This question looks to issues like salary, bonuses, overtime, stock options, etc.  Valuing a month isn't always completely simple, but the factual issues aren't usually overly complicated.
3. There are always boilerplate pleadings of mitigation, but those are unlikely to get anywhere unless there's either a complete failure to seek replacement employment or else a specific instance of failure to mitigate, such as by turning down a comparable replacement job.  Again, the facts usually aren't that complicated.

These are basically the 'bread and butter' of wrongful dismissal, and while they can raise plenty of interesting legal issues, there are seldom very significant arguments about the underlying facts.

There are also plenty of other issues that can arise in specific cases - constructive dismissal, deemed quit, just cause, to name a few - which tend to be more factually nuanced.  But these are a relative minority of dismissals.

So wrongful dismissal actions are frequently well-suited to determination on summary judgment, especially following the Supreme Court's interpretation of the new rules governing such motions.  Except for one thing:  Bad faith.

It's a very common feature of wrongful dismissal litigation to see allegations of bad faith conduct.  It used to be completely ubiquitous, when Wallace damages were available.  Now, it's harder to get moral damages based on bad faith conduct, but it's still not uncommon to see them awarded.  Allegations of bad faith conduct, in pursuit of moral damages, can require a court to have a much more fulsome understanding of the history and context of the termination, and frequently involve significant factual disputes.

Thus, an employee who is wrongfully dismissed, in a context where the employer has acted poorly, is frequently in the position of having an academic claim for wrongful dismissal damages, very much amenable to summary judgment, yet with a more difficult ancillary claim for moral damages arising from contested facts, which is far less amenable to summary judgment.

So the question for the plaintiff becomes:  What to do?  Do I drop the bad faith claim to get a quicker route to judgment?  Do I wait to have a full trial on the whole matter?  Or can I have my cake and eat it too - bring a partial summary judgment claim in respect of the 'standard' wrongful dismissal elements, and have a trial in respect of the other disputed issues?

While there will always be strategic elements to consider, the recent decision in Beatty v. Best Theratronics is very helpful in framing a partial summary judgment award in such a context.  The plaintiff sought full summary judgment, and was largely successful:  Justice Hackland considered it appropriate to evaluate the reasonable notice period and the value of the reasonable notice period, and found that there was no evidence to warrant a finding of failure to mitigate, so awarded traditional pay in lieu of notice.  However, Justice Hackland was not persuaded that the evidence on the motion was enough to allow him to grant the plaintiff relief in terms of aggravated or punitive damages, and ordered a summary trial, for which he was seized, on the issue.

It's an important decision.  Not particularly shocking, and in fact it very closely adheres to the Supreme Court's instructions in Hryniak, but the importance arises from the fact that Beatty is such a common scenario in employment law.

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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.