Dismissing Long-Term Employees

I had someone find my blog recently through a search for how to get rid of long-term employees.  It's actually a good question, and calls to be addressed.  I've had a number of small employer clients come to me with such issues.

Long-service employees can have very significant entitlements.  Even at lower levels, this is true now - in the wake of the Court of Appeal's Di Tomaso case last year (discussion here), long-service clerical and unskilled labourers can now be entitled to notice periods up to two years (and possibly higher in exceptional circumstances).

These concerns can be avoided, with advance planning.  If you implemented a written contract with the employee at the point of hire with a good termination clause, then your liabilities might be limited to those in the termination clause.  In some cases, the issue arises for successor employers, where a business was purchased with the employment relationships intact - if this is a concern, make sure that the vendor severs the employment relationships involved first, and you'll need further legal advice if you intend to make new offers of employment to their employees, because such a severance may not work.  Whether it's an asset purchase or share purchase, if the purchaser just assumes the employment relationship without more, they'll be buying into potentially dysfunctional employment relationships with the prospect of significant liability.

But, without advance planning, sometimes you have to take the cards you end up with, and do the best you can.

The first thing to know is that there are ways of bringing in employment contracts even after the point of hire.  But you need legal advice to do so, and by the time you know you want to get rid of the person, it's probably too late to do so.

So let's look at how you can get rid of a long-term employee, while trying to avoid a hefty payment in lieu of notice:

(1)  Dismissal for Just Cause

It's an option, but usually not a good one.  If an employee has engaged in misconduct rising to a certain threshold, you are entitled to terminate summarily without notice.  (Depending on the nature of the misconduct, a trail of progressive discipline is often necessary.)

If the reason you want to be rid of the employee tracks to a singular (and recent) egregious episode, such as theft (which you can prove), then this may be prudent.  If there has been an ongoing series of more minor problems, with documented discipline, but the misconduct has continued, then this could be an option.

However, in most of these cases that I see, the employer's decision that they want to be rid of such an employee is based on a series of minor incidents which the employer accepted, permitted, and tolerated, but there's a recent "straw that broke the camel's back".  The employer now wants to be rid of the employee, and the employee doesn't realize he or she has done anything wrong in the first place.

In such cases, a dismissal for cause becomes a project, not an action, and one that's usually impractical.  The first thing that you need to do is clarify expectations for conduct and make sure that the employee knows that, moving forward, the various shenanigans which may have gone on in the past are not permissible.  (This needs to be done carefully, too.  Employers have a wide range of power in the workplace, but unilateral changes which go to the heart of the employment relationship may generate a constructive dismissal, triggering notice obligations - the very thing you're trying to avoid.  Also, there are times when, while implementing these changes, you need to bear in mind your human rights obligations.)  Then you need to start disciplining if the employee fails to meet these new standards of conduct.  At some point, maybe soon or maybe not, you may have built a case sufficient that a Court might find just cause.

If you've already decided that you want to be rid of the employee, this is not an easy approach.

(2)  Convince the Employee to Quit

This is one that I usually file away with "bad ideas".  Taking actions against an employee simply for the purpose of trying to get them to leave is almost constructive dismissal by definition.  But it's seldom that simple.  For instance, in the situation where the employer has lost control over the employee, the employer might just be able to hope that its legitimate efforts to get the employment relationship back under control might persuade the employee to look elsewhere.  It's unwise to count on this, though.

It's also possible to offer a voluntary separation package of less than an employee's full common law notice entitlements.  (Essentially, paying the employee to resign.)  The employee may or may not accept this, and trying to be too...persuasive...can amount to constructive dismissal.  (Indeed, you need a lawyer's assistance for this approach:  When you're implicitly telling an employee that you don't want him around anymore, you need to be careful with you do it.)

(3)  Dismissal on Actual Notice

This is unusual, and carries with it risks and problems, but in some scenarios can be effective.  Indeed, this is an employer's obligation when it wants to fire somebody without just cause.  (It doesn't usually happen; normally, an employer prefers to breach this obligation and provide pay in lieu of notice instead.)  But for an employer unable to afford to pay the departing employee *and* the departing employee's replacement, it's an option to consult a lawyer about.

One of the major practical difficulties with this is that you're then relying on an individual for a lengthy period of time who knows that they aren't going to be there long.  You run the risk of misconduct, whether intentional or through carelessness.  To that extent, you need to monitor the employee's performance to make sure they're still doing their job, and go down the 'discipline' road if necessary and appropriate.

(In some cases, statutory severance will still be owed at the end of the notice period.  This isn't usually true of smaller employers, however.)

*****

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.

Differences between Employees and Contractors

Theoretically speaking, there's a world of difference between an employee and a contractor.

Why Does It Matter?

Let's start by looking at the legal consequences of the distinction, before we start looking at the legal differences between them.

An employee, unlike an independent contractor, gets protection of various statutes like the Employment Standards Act.  Minimum vacation entitlements, minimum wage, limitations on hours of work, mandatory breaks, etc.

An employment relationship also requires the employer to withhold and remit income taxes to the CRA on the employee's behalf, as well as EI and CPP contributions.  (Employers are also required to make EI and CPP contributions of their own in respect of employees.)  By contrast, an independent contractor has to make his own CPP contributions (in the full amount, including what would otherwise be the employer portion), doesn't get EI, and collects the full amount of his bill plus HST, with no obligation on the payor to withhold and/or remit taxes to the CRA.

The independent contractor, unlike the employee, is seen as a business owner, and is therefore able to write off  business expenses for tax purposes.  

Thus, all other things being equal, there are advantages and disadvantages to workers of being employees versus independent contractors.  (Contractors don't get protection of employment standards nor EI, and the framework on termination is often less favourable, and there's also more personal administrative responsibility for accounting and payment of taxes, etc.; on the other hand, there are often tax savings to being an independent contractor.)

For businesses, it's generally better to have contractors than employees.  Yes, I may pay 13% HST for the services I'm buying, but I get that back through credits based on the HST I'm collecting from my own customers.  In the mean time, I'm saving on EI, CPP, and potentially on other things like overtime costs, public holiday pay, vacation pay, etc.

So many payors want to structure their contracts as contracts for service (i.e. independent contractors) as opposed to contracts of service (i.e. employment contracts).  To do so, they put terms expressly saying that the worker is an independent contractor, not an employee, and will be responsible for their own CRA remittances, and will provide accounts to the payor for services rendered, with HST, etc.  (At least, the more elaborate ones go down that road.)

And workers will agree to this, partly because of an imbalance in bargaining power, but also partly because there's something attractive about being able to write off expenses as business expenses like a wealthy business-owner does.  Particularly on the termination of the relationship, though, a contractor may be in a much worse position than an employee.

The Legal Test

I know many experienced and sophisticated businesspeople, some of whom are extremely successful, and among them there seems to be a belief to the effect that the contract is God.  They are often quite surprised when I tell them otherwise.  (I recently had a dinner conversation with such an individual where he was quite surprised to learn that the minimum statutory notice cannot be contracted out of.  He doesn't like this reality, because of the prospect that a sophisticated employee could take advantage of an employer by negotiating terms he knows are unenforceable.  This is possible, but I would never recommend an employee do that for reasons of poor predictability, and it's certainly the minority case for employment contracts that a sophisticated employee is able to pull the wool over the eyes of a less sophisticated employer.)

The contractual terms aren't irrelevant.  How the parties have chosen to characterize the relationship is not completely devoid of legal meaning, but nor is it determinative - it is one among several factors that Courts will look at to determine whether an arrangement is a contract of service or a contract for service.

There are other factors, too:

(1)  Control:  To what extent is the worker directed by the payor?  Does the payor control the hours of work?  How and when the work will be performed?  Is the payor able to discipline the worker?

(2)  Ownership of tools:  Who actually owns the tools and other devices necessary for the work to be completed?  If I actually had to invest in my own business by purchasing the tools of my trade, then it's much more likely that I'm a bona fide business owner.  If I rely on my client to have the tools of my own trade for me to use, then...less so.

(3)  Chance of profit:  In general, most employees will have the bulk of their remuneration calculated by a pre-established formula based on a salary or hourly wage.  Contractors, on the other hand, tend to get paid by the job, and while hourly billing isn't unheard of, especially in certain industries, there's certainly a per value element to the calculation.

(4)  Risk of loss:  Most employees pay virtually nothing out of their own pockets.  If a job goes south, an employee loses income, but hasn't usually invested much more than time into it.  On the other hand, a contractor may have incurred out-of-pocket expenses, wages for other employees, and other overhead costs, meaning that if the job ends up taking longer or more resources to complete than anticipated, or the payor doesn't end up paying, the contractor has potentially suffered a loss of more than just time.

At its core, factors such as these are designed to flesh out the essential question, posed by Lord Wright in 1947:  Whose business is it?

Then What Happens?

There are a few contexts in which these disputes get fleshed out.  Sometimes, the CRA lifts up the rug on a 'contractor' relationship and reassesses the parties on that basis.

More often, the worker comes back at the payor after the end of the relationship wanting entitlements based on an employment relationship - EI remittances, pay in lieu of reasonable notice, unpaid overtime or holiday pay.

Even though the parties may have governed their relationship as a contract for service for an indefinite period of time, it remains open to the Courts - at the instance of the CRA or either party - to re-evaluate it.

One should note that, where termination of the relationship is involved, there's also what sometimes gets referred to as the intermediate category, or "dependent contractors", who are not employees yet still get employee-style rights such as reasonable notice of termination.

*****

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.

Wrongful Dismissal and Restrictive Covenants

Here's an interesting decision from the Alberta Court of Appeal, released last August:  Globex Foreign Exchange Corporation v. Kelcher, which discusses, among other things, the effects of wrongful dismissal upon restrictive covenants.  So suppose I sign an agreement that I will not solicit clients of my employer within two years after the end of my employment, and then my employer eventually fires me without cause and without notice.  What happens to that non-solicitation agreement?

I think it's important to highlight, at the outset, the definition of "wrongful dismissal":  You've seen me refer to Love v. Acuity Investments on a couple of occasions before to note that an employer's actual obligation on termination is to provide actual notice, and that firing without notice but providing pay in lieu is still a breach of contract; the pay in lieu is an attempt to compensate the employee for the breach.

The Alberta Court of Appeal similarly references Love v. Acuity Investments, with the result that we can safely understand that, when they're talking about "wrongful dismissal", they're talking about just about any termination without actual notice.

The conclusion the Court comes to is this:  An employer who wrongfully dismisses an employee is not entitled to rely on restrictive covenants.  They have repudiated the contract, and are not entitled to continue to hold the employee to his obligations thereunder.

There doesn't appear to be much jurisprudence on the point.  A similar, but not quite the same, argument has been raised in respect of termination clauses:  Some have argued that a failure by the employer to honour its contractual obligations means that it cannot rely on contractual language limiting pay in lieu of notice.  The general conclusion is that this argument must fail:  When you're fired without notice, but you're only entitled to a certain amount of notice, your employer's liability is still going to be limited to the notice that they should have provided you if they had complied with the contract.

But restrictive covenants are different.  Termination clauses are about obligations of the employer (even though they usually work to the employer's benefit by contrast to common law), whereas restrictive covenants relate to obligations of the employee.  So the jurisprudence on termination clauses essentially says:  Employer, you breached the contract, so now you have to compensate the other party on the basis of what your contractual obligations were.  For this restrictive covenant case, the logic runs much differently:  Employer, you repudiated the contract, so now you are not entitled to expect the employee to continue to perform his obligations under it.

Pretty simple when you think about it that way.

The Alberta Court of Appeal relied on a rather old British case - General Billposting v. Atkinson - from 1909, which involved an employer trying to rely on a restrictive covenant after firing an employee with insufficient notice.  The House of Lords concluded that the employee was relieved of obligations under the restrictive covenant by the breach of the contract.  The case has been cited favourably by the Supreme Court of Canada in the past, but not in a restrictive covenant context.

The logic underlying this case isn't automatic, however:  Not every breach of contract will relieve the other party of ongoing responsibilities, nor are all collateral covenant terminated even by a fundamental breach.  There is a strong dissent in this case, pointing out that some covenants are clearly indicated to survive the end of an agreement, and that the body of Canadian case law suggests that - notwithstanding a breach of other contractual duties - these will survive.  (The dissenting judge, Justice Slatter, points out that the employee is not relieved either of other obligations - for example, it's probably uncontroversial that it would still be wrong for him to misuse confidential information of the employer.)

My Thoughts


This is a close one.  Justice Slatter has some very good points - it's hard to deny his logic.  (He is also quite critical of some Ontario law jurisprudence on "fresh consideration", and as much as I think the fresh consideration doctrine in Ontario is useful law, his criticisms of it as being "artificial" are not unfounded.)

The majority points out several good reasons why an employer who dismisses without notice should not be entitled to rely on the restrictive covenant, yet they aren't necessarily persuasive on a closer look.  The first two are from other British jurisprudence; the third is an addition of their own.

(1)  Otherwise an employer could hire a potential competitor and dismiss them shortly thereafter just for the benefit of the restrictive covenant.  This is true, and concerning, but not solved by the majority's approach here.  The unfairness is not caused by the wrongfulness of the termination.  Particularly if the employer used a well-drafted employment agreement with a good termination clause, the employment could be terminated shortly thereafter with very minimal responsibilities, without actually breaching the contract.  Thus, the majority's solution...isn't a solution.  Justice Slatter argues that enforcing a restrictive covenant in such a case would be unconscionable, which seems like a cleaner way of dealing with the problem.

(2)  Enforcing a restrictive covenant in the face of a wrongful termination negates the consideration for the acceptance of the restrictive covenant.  This one doesn't seem right:  If I accepted a job with a restrictive covenant attached, the consideration was "the job", not "continued employment".  If I performed services and received remuneration under the contract of employment, it's hard to say that, just because it's terminated without appropriate notice, the original contract is now devoid of consideration.  The principle is framed separately as suggesting that the premature termination of the contract will deny the employee the "extra amount of remuneration" for having agreed to the restrictive covenant.  Still seems wrong.  Contracts are whole entities.  You don't need separate consideration for each and every covenant in a contract.  If there were, it isn't necessarily true that the employee would be denied it.  ("Okay, I'll agree to the restrictive covenant, but in that case I'll want a premium on my wage rate throughout the employment.")  Even if the consideration were tied to the termination of employment...well, let's run with this for a second.

Let's clear out the rest of the contractual terms, and discuss only contractual notice of termination and the restrictive covenant.  Suppose I have a contract that entitles me to 3 months notice of termination, with no restrictive covenants.  You're my employer, and you ask me to agree to a non-competition agreement for one year after the end of my employment.  I answer, "Well, it will be harder for me to find a new job in a different field.  I'll tell you what, I'll agree to the non-comp if you extend my contractual notice period to 9 months."  We agree on those terms, and you later fire me without actual notice.

Okay, so I've lost the benefit of the extension of the notice period, right?  No, still wrong.  Because in fact, I am still entitled to a remedy for that breach, now being three times what it would have been but for my agreement to the restrictive covenant.  That still smells like consideration to me.

(3)  Mitigation.  This is actually a good point, and the first thought that came into my head.  The duty to mitigate by finding new employment, triggered by the wrongful dismissal, is in conflict with a restrictive covenant which limits the prospects of new employment.  To wipe restrictive covenants off the plate where the duty to mitigate is triggered...well, it's a nice clean solution.

But it isn't the only solution.  Indeed, where an employee is prevented from working in his/her field for a period of time, it would make more sense to argue that the duty to mitigate should be largely lifted through the running of the restrictive covenant.

Let's put these beside some of the legitimate concerns raised by Justice Slatter, namely that an employer can, without blameworthy conduct, fail to provide the necessary notice - for example, in a scenario where the notice provided falls slightly short of the notice period a court finds, or where the assessment at the time of "just cause" falls slightly short of the threshold at trial.  It does indeed seem unjust to deny an employer of the benefit of such a clause under such circumstances.

*****

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.

Bowes v. Goss Power Products Ltd. update

Last August, I posted about the decision in Bowes v. Goss Power Products Ltd., in which Mr. Bowes was terminated from his position as Vice-President.  Under the terms of his contract, he was entitled to 6 months' notice or pay in lieu thereof.  He found a new job with equivalent income 12 days after his termination.  Essentially, he was trying to enforce the contractual term requiring the employer to pay him the 6 months' notice anyways.

The Court said No, because he had mitigated his loss based on the loss of employment.

I noticed recently that an appeal is scheduled to be heard next month.  Should be interesting to see.

Bowes is definitely the underdog here.  He lost his job, suffered no loss, presumably already received a modest windfall in the form of his statutory minimum notice, so he's suing for damages he hasn't really incurred in any meaningful sense.  The body of employment law jurisprudence is against him.

But, on more basic principles of contract, I'm not so sure that he's actually wrong.

When I'm rooting for the employee here, it isn't because of a pro-employee bias.  I think of myself as being fairly balanced.  I fight vigourously for the interests of my clients, be they employee or employer, in specific files.  But outside of my files, I'm on the side of law which makes sense.

Wrongful Dismissal:  The Usual Case


Normally, at common law, an employer is entitled to dismiss an employee on reasonable notice.  Contractual language can define the reasonable notice period, or change the reasonable notice period, within limits.  Notionally, an employer is entitled to say to an employee:  "Your employment will end on date x, which is y months out."  Then the employee would keep working until date x, looking for a new job for afterwards.

In practice, this never happens.  Most employers send home a dismissed employee immediately, preferring instead to provide "pay in lieu of notice".

However, under the common law default, an employer is not contractually entitled to fire without notice notwithstanding a payment in lieu.  As much as we might tend to conflate reasonable notice, notional notice periods, and pay in lieu of notice, the actual default obligation is to provide actual notice.  The Court of Appeal made this clear recently in Love v. Acuity Investments.  When an employer fires without notice (and without just cause), this is a breach of contract, and pay in lieu is "an attempt at compensation for the breach."  Pay in lieu is, in essence, damages.

This is important to understand, because then we start to understand why the mitigation principle applies.

There are two very fundamental principles in damages for breach of contract.  The first is the compensation principle, that the non-breaching party should be put in the position it would have been in had the contract been honoured (i.e. had actual notice been provided), to whatever extent this can be achieved by the payment of money.

The second is the mitigation principle, that a loss which is avoidable cannot be recovered.  This principle essentially creates an obligation on a fired employee to seek new work.

These are principles of damages, not of contractual interpretation.  They presuppose that a party has been wronged and suffered damage as a result.

If I get fired on actual working notice which is reasonable, then the contract hasn't been breached.  These principles don't apply.  I keep working, and once the notice period runs its course we go our separate ways.  There's no obligation to look for a new job during working notice - though it's just good sense to do so.

If I get sent home, however, without notice, then my contract has been breached.  I'm entitled to continue to be paid as I would have been had notice been given (compensation principle), but that doesn't mean that I'm entitled to sit at home and watch soap operas for y months.  I need to get out there and take reasonable steps to find another job.  If I don't do so, then my entitlements get reduced accordingly.

If I actually find a new job, with new income, then my income through the new job gets deducted from my entitlements from my old employer, because that goes partway to putting me back into the position I would have been in but for the breach.  This is what we're talking about when we describe "mitigation income".

Put into this framework, Bowes clearly shouldn't recover much:  After all, he earned mitigation income sufficient to put him back into the position he would have been but for the breach...but wait...what breach?

How this Case is Different


Goss Power Products was entitled by the employment contract to dismiss on provision of pay in lieu of notice.  Therefore, by terminating him without actual notice, there was no breach of contract.

No breach of contract, no duty to mitigate.  No duty to mitigate, no need to account for mitigation earnings.

Essentially, the language in the contract appears to have been quite simple:  We can fire you without notice, and we'll pay you this much for it.  In fact, this type of contractual language is not uncommon.  Which is why there will be an impact if Bowes wins.

Bowes' position is almost elegant for its simplicity.  The contract says the employer should pay, so the employer should pay.

The Superior Court's response was quite complex, actually, finding that the contractual language was not intended to displace the obligation to mitigate that exists in the usual case, and therefore does not do so.  But that seems not to be quite right, either:  Obligation to mitigate what?  If one supposes that Bowes had not obtained new employment, and the pay continuance had continued through the notional notice period, there would have been no breach of any contract at all, such that an obligation to mitigate is triggered.  In other words, the contract on its face suggests that Bowes could have spent six months watching soap operas, and the employer couldn't say anything about it.

To sum up:  Unlike the usual case, in which the termination without notice is a breach of contract requiring the employee to mitigate his loss, Bowes' termination without notice was not a breach of contract, meaning that he suffered no loss thereby which he could be required to mitigate.

Indeed, in order to get to the Superior Court's conclusion, one would have to actually read mitigation into the contract as an obligation of Bowes' in his performance of the contract.  That is problematic:  In a contract drafted by the employer, and put to relatively unsophisticated employees for their signature, it is extremely undesirable to start reading in obligations based on arcane legal principles such as the duty to mitigate.

At the end of the day, I would argue that Bowes has a point:  If an employer wants a contract to include a right to provide pay in lieu of notice while still preserving the employee's duty to mitigate, it should expressly include that in the contract language.

*****

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.

HRTO Refuses to Hear Systemic Discrimination Claims

There is a new development in the Carasco v. University of Windsor case at the Human Rights Tribunal of Ontario.  This is a case which has already drawn some attention because of the remedy being sought by the applicant:  Emily Carasco is a law professor at the University of Windsor who alleges that the decision not to appoint her as Dean of Law was based in illegal discrimination, and is seeking an order from the Tribunal that the University appoint her to the position.

In a previous interim decision by the Tribunal, the Tribunal determined that it did have jurisdiction to award that remedy if it deemed such appropriate.

In support of her application, Carasco made significant allegations of systemic discrimination against women and minorities, particularly in senior positions, going back all the way to 1967, pointing out that all the Deans and Acting Deans - excepting only one Acting Dean from '83 to '85 and one Dean from '96 to '99 - have been white males.  These allegations are made in support of public interest remedies sought, but if proven they would provide important background to Carasco's own allegations of individual discrimination, being something akin to similar fact evidence.

The effect on the narrative is quite clever:  The argument is essentially that white males have always dominated the Faculty of Law, which is why she, a minority female who cares about equity, is unwelcome, and also why the Tribunal, which also cares about equity, should want to put her in a position of authority.

The new interim decision deals with Carasco's ability to advance allegations of systemic discrimination, and the Tribunal holds that she cannot advance allegations of discrimination that did not affect her.  The Tribunal directed her to revise her Application to remove allegations where there is "no link" to alleged infringement of her individual rights, and to clarify what she's including as an allegation for which she's seeking relief and what she is including simply as evidence or background (for example, she alleges discrimination against her in the application dating back to when she was first hired in 1980, though the Tribunal infers that this is just background).

Does this mean that the systemic allegations of discrimination are completely out?  Well, there's a proviso in the decision noting that something that doesn't properly form an allegation capable of generating a remedy may still be considered evidence in support of a remedial allegation.  It wouldn't surprise me if Carasco still tries to get many of the systemic allegations as evidence in support of her own allegations.

My Thoughts

The Tribunal's decision not to allow her to bring an Application on behalf of others generally is an interesting question of its own, but I think there's a certain logic to the decision.  As to the potential question of whether or not Carasco should be able to lead systemic discrimination evidence in support of her allegations of individual discrimination, I think that under the right circumstances such a thing should be possible, but I'm not sure that these are the right circumstances.

I would question the probative value of some of the statistics she brings to bear in support of her allegations of systemic discrimination.  One cannot assume from looking at the demographics of occupants of a high-level job that the decision-makers for that particular position have been biased, unless one also looks at the demographics of the pools of qualified and interested candidates.

Deans of Law are drawn from relatively limited pools of senior legal scholars.  In 1967, it goes without saying that the vast majority of senior legal scholars were white males.  At that time, it even remained true that a very small minority of law students were women or visible minorities.  So, even decades later, when students from that class had achieved the experience necessary for an appointment as Dean, it would still obviously have been true that the vast majority of candidates would have been white males.

Today, law school classes reflect the diversity of our society, and usually are more than 50% female.  But there's obviously some catch-up on that before they'll become Deans, and there are other equity issues with which the profession is struggling which may result in continued inequity at senior levels:  Among others, there are well-documented challenges with the profession's retention of women.  A disproportionately high number of female lawyers leave the profession early, with the result that we're still going to see a smaller number of them at senior levels.  That will create inequity in the candidate pools for Dean positions without by any means implicating the decision-makers in any discrimination.

Perhaps more to the point, even if you could establish that the hiring committee in 1967 excluded a qualified candidate on discriminatory grounds, it would be pretty difficult and tenuous to go from there to an inference that the current hiring committee, with no common links to the one 45 years ago, must therefore share the same improper values.

If there is solid evidence that the individuals who dictated the results of this contest, directly or indirectly, were prone to discriminate in such contests, that could support an inference of discrimination in this contest.

However, it seems to me that Carasco's allegations of systemic harassment are built largely on allegations against the amorphous and ethereal "they".  Granted, the application is far too sophisticated to overuse the term "they" itself, it instead uses the passive tense, the "University" or the "administration", which glosses over the fact that the University and its administration are merely institutions, directed by individuals, which individuals have changed numerous times over the period which she discusses.

To be fair, she often does mention the individuals involved at certain points.  For example, in 1990 she was passed over for a promotion in favour of a "white colleague" (female, notably), and she names the professors on the search committee; however, there is no clear link between these professors and the search committee for the Dean contest primarily at issue in this Application.

Then, in 1999, she was denied a promotion to full professor, which decision was overturned on an internal appeal.  Of the four people she identifies as being on the promotions committee, at least two of them (including the dean) were not white males, and only one of the people on the promotions committee was at all involved in the dispute relating to the later Dean contest, and that relation was indirect.  (This was Professor Moon, whom Carasco alleges 'sabotaged' her application to become Dean by making unfounded allegations of plagiarism during the contest.)

Even assuming that Carasco could establish a history of unfair treatment against her, it's an uphill battle to go from "I was treated unfairly" to "I was treated unfairly because of my race and/or gender".  An Applicant is required to lead "clear and cogent evidence" of that the treatment was at least partly motivated by a prohibited ground of discrimination.  Simply put, not all personal antipathy is based on race or gender, and antipathy not based on prohibited grounds of discrimination is not remedial by the Tribunal.

*****

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.

Brito v. Canac Kitchens Appealed

Last week, the Ontario Court of Appeal released its decision on the appeal of the late Justice Echlin's decision in the Brito v. Canac Kitchens case.  I discussed the original decision shortly after it was released in this post.

This was one of many wrongful dismissal cases against Canac, and included several plaintiffs.  One of the plaintiffs, Mr. Olguin, became disabled during the notional notice period, battling cancer.  Incidentally, he had found a new job fairly quickly after being fired, albeit at a lower rate of pay, and his new job didn't have benefits, so when he had to stop working, it was without any LTD coverage.

Justice Echlin found Canac Kitchens responsible for what the LTD policy would have paid out, but for the termination of benefits, to the tune of nearly $200,000.  Justice Echlin was pretty displeased with the employer's approach to termination of the coverage and litigating the point, and awarded $15,000 in what he called "ancillary damages" for not unilaterally continuing disability coverage and paying out only the statutory minimum notice.  There was some murmur in the employment law bar about this - it was novel, and condemned essentially what has become standard employer practice.  I commented in a discussion on Professor David Doorey's blog at the time that I wondered if this would hold up on appeal, as the ancillary damages "[look] like punitive damages to me, to which the appellate Courts have applied an extremely high standard in employment cases."

However, while the $15,000 in ancillary damages was novel, and in some ways asked for an appeal, Justice Echlin's reasoning on the damages for loss of LTD benefits looked relatively solid.  Both points were appealed, and the result is as expected.

The Court of Appeal upheld the award of damages in respect of LTD benefits, but found that the "ancillary damages" were in the nature of punitive damages...

...and that since punitive damages weren't pleaded in the statement of claim or sought at trial, the award could not stand.

My Thoughts


I'm a little disappointed with the Court of Appeal's dodge of the ancillary damages question.  It's a novel question of law, and while the decision was no doubt correct that it can't be awarded if not pleaded, I would have liked to see some obiter as to whether or not the award might have been upheld if pleaded.  As it stands, this does not endorse Justice Echlin's finding that Canac's conduct was blameworthy, but nor is it an outright rejection of the suggestion that paying only the statutory minimums might give rise to such damages. Given that this suggestion was made by a widely-respected judge and expert in the employment law arena, it's something that still might carry some sway.

Also note the costs award:  Canac Kitchens defeated the $15,000 ancillary damages award, but lost on the $200,000 issue, and therefore was ordered to pay another $20,000 to offset Mr. Olguin's costs on the appeal.  Just can't catch a break.

*****

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.

Olivares v. Canac Kitchens

Justice Lederman recently released his decision in what he calls "yet another in a long list of wrongful dismissal actions...arising from the cessation of Canac's manufacturing operations in 2008."

It's a pretty standard wrongful dismissal case in many respects.  A 48-year-old shipping supervisor with 24 years of service sought pay in lieu of notice.  Some other interesting factors:  The plaintiff started working at Canac immediately after moving to Canada from Chile at age 24, and was able to function there speaking mainly Spanish.  Result:  Limited English skills, limited education, limited Canadian re-employability.

The Canac Kitchens cases seem to generally have fairly generous notice periods, by contrast to other jurisprudence.  Still, at this stage of the game the Canac cases are becoming a jurisprudential force all their own:    The plaintiff in this case was able to point to other generous awards Courts have made to his co-workers, in support of his own claim for significant pay in lieu of notice.  Successfully so:  He was awarded a notice period of 20 months.

There are a couple of curious features to this case, though.

Cancellation of Benefits


It's trite law that an employee is entitled to the full benefits to which they would have been entitled throughout the notice period.  Accordingly, when an employee is terminated without notice, and their health benefits are cancelled, they should get some compensation.

Traditionally, there have been decent employer arguments that the employee should only be compensated for out-of-pocket expenses actually incurred, and that if the employee really wants insurance coverage for significant expenses they should pay for coverage (which then becomes a recoverable out-of-pocket expense).  This argument does seem to ignore the reality that displaced employees are ill-positioned to invest in insurance, and will tend to just avoid health-related expenses they can't afford.  That doesn't mean they haven't suffered any loss.

In Brito v. Canac Kitchens, however, Justice Echlin rejected the argument that failing to purchase replacement benefits was a failure to mitigate, awarding the employee damages in respect of lost LTD coverage.

In this case, Justice Lederman took it a step further towards employee-friendly.  Mr. Olivares had waived dental and medical coverage, instead taking the coverage available through his wife's employment.  In other words, Canac wasn't paying for dental and medical coverage for him.  Nonetheless, Justice Lederman concluded that there was value added in the peace of mind of having those benefits available to be opted into in the event that his wife lost her job, and therefore he awarded damages on the same scale as other employees had received who had relied on those benefits.

Mitigation and Estoppel


It is also trite law that mitigation earnings should be deducted from an award of damages in respect of pay in lieu of notice, at common law, but that the statutory minimum notice and severance payments are not subject to mitigation.

Thus, if I get a job with equal pay the day after being fired, I'm still entitled to my statutory minimum notice and severance if applicable.  But likely nothing beyond that.

In this case, the plaintiff had a statutory notice period of 8 weeks, and statutory severance pay of another 24 weeks.  During his first 32 weeks after being fired, he did some work as a drywaller earning $26,600.  The question becomes whether that is mitigation income which should be deducted from his common law entitlements, or whether the common law analysis of mitigation doesn't even begin until after statutory minimum pay runs its course.

As it turns out, there's conflicting law on the subject...both in Canac Kitchens cases.

In Yanez v. Canac Kitchens in 2004, Justice Echlin deducted an employee's mitigation earnings from his common law entitlements, notwithstanding that part of those earnings were covered by the statutory notice period.  By this logic, Canac should get credit for Olivares' $26,600 earned during the stat notice period.

In Moldovanyi v. Canac Kitchens, on the other hand, Justice Brown held otherwise, relying on a subsequent decision by the Divisional Court.

Quite frankly, I think that Justice Echlin's approach is much easier to reconcile with the first principles of employment law.  Justice Brown's approach requires one to perceive the common law notice period as something that doesn't even begin until the statutory notice period runs out...particularly when we're dealing with statutory severance as well, which cannot be paid via pay continuance, that is a difficult concept to justify.

Nonetheless, Justice Lederman's approach is even more curious.  In the Olivares case, Canac is arguing that Justice Brown was wrong.  Justice Lederman's response:  Why didn't you appeal, then?  He finds that it would be an abuse of process to allow Canac to re-litigate the same issue again.  So they're stuck with Justice Brown's approach.

This is akin to, but not quite, issue estoppel.  In the ordinary course, if you and I have litigated an issue before and received a final decision, that decision is binding and immune to subsequent litigation as between us.  However, as between you and a third party...not so much.  Nothing usually stops you, strictly speaking, from litigating the same question against others, even though you may have lost against me.

Thus, where we're talking about a different employee with different mitigation income, it would be unusual and incorrect to apply the doctrine of issue estoppel, despite it being a similar question of statutory interpretation.

The consequences?  Well, if an organization is stuck with any unfavourable legal conclusion that may be raised by others in subsequent proceedings, we would see much more value added in appeals, and significant difficulty in settling appeals.  Every Court loss a company suffers will go from being an unfavourable persuasive case to a binding precedent.  The same, of course, cannot be said of wins.

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Employment Disputes of Lawyers

I came across an interesting case some time ago involving two lawyers in a small firm, Dawn Bennett and Karen Cunningham.

Cunningham was called to the bar in 1996, and opened up her own practice in 1997 in several areas of law.  Bennett was called to the bar in 2001, and accepted a position as a junior litigation lawyer with Cunningham in July 2002.

The relationship broke down quickly, with Cunningham terminating it on January 10, 2003.  Despite the brief relationship, there are a number of interesting employment issues in it, including the distinction between employees and independent contractors and just cause.

Bennett's compensation was not salaried.  Rather, Bennett was to be paid a commission of 50% of all fees billed and collected.  She received advances on commission at a rate of $38,000 per year.  All office equipment and infrastructure was provided, and all files ultimately belonged to Cunningham, but Bennett was responsible for the payment of her own Law Society dues and professional insurance premiums, as well as employee deductions.

Bennett developed some concerns with the relationship fairly quickly.  In particular, though she was busy and working long hours, she was concerned that the office lacked the tools (technological in particular) for her to do her job.  She proposed a business plan to Cunningham to correct this, about a month in.  At the same time, she expressed concern about the fact that she had been required to sign a written employment agreement on the first day of work, though no written employment agreement had been discussed before then.  In response to these concerns, Cunningham invested in voicemail and a well-known piece of practice management software called Amicus Attorney, and also implemented some of Bennett's other file management suggestions.

A common practice among older lawyers (though growing less so with younger lawyers, including Bennett and Cunningham's generation) is to handwrite all time dockets for data entry by the receptionist.  This was the practice in Cunningham's office, at least until the introduction of the Amicus Attorney software.  The process was interrupted somewhat by the sudden departure of the receptionist in August 2002.

By November, Bennett was becoming concerned about the entry of her time dockets and collection of her accounts.  A subsequent comparison between her handwritten notes and computer records indicated that 42.8 hours of time had not been entered.  In addition, though her share of fees billed at that time was approximately $26,500, only 10% of that had been collected.  As December rolled along, Bennett became increasingly concerned; the gap between fees billed and collected was increasing, to the point that her advances exceeded her actual commission after only five months by about ten thousand dollars.

In December, Bennett reviewed some of the accounts rendered, and discovered something quite alarming:  There were a number of instances in which time she had docketed had been credited to Cunningham.  She met with Cunningham about it, and was advised that the errors would be corrected upon receipt of copies of accounts where such errors had occurred.

Just before Christmas, 2002, Bennett gave Cunningham a letter documenting 9 areas of concern.  In it, she was highly critical of Cunningham's systems for, among other things, file management and docketing.  On docketing, especially, she said the following:

Many of the dockets that were entered by hand were credited to your dockets instead of my dockets.  There has been no attempt on your part to reconcile these problems despite my repeated and numerous requests.  As my income depends solely on my billable hours docketed and collected, the monetary gain to you is both dishonest and negligent.  I have no control over the docketing system.  It is your system.  As a result of your flawed docketing system you have gained income that should be attributed to me.  I need an accurate reconciliation of the docketing system to reflect my dockets.

This letter became a major factor in the litigation, when Bennett sued for unpaid commissions and wrongful dismissal, because Cunningham took the position that it created just cause for termination.  Bennett's defence to that hinged on the closing language of the letter:  "I would like to work together to resolve these issues.  Kindly contact me so that we may work together to make this arrangement a successful one for both of us."  When the case went to trial in 2006 (decision found here), the trial judge described it thusly:

The overall tone of the letter was anything but courteous.  It was critical. It was accusatory. It was disrespectful. The letter suggested that Ms. Cunningham was disorganized, incompetent, dishonest and negligent.

The Issues


(1)  Contractor versus Employee


Cunningham took the position that Bennett was an independent contractor, and therefore not entitled to reasonable notice of termination.

Cunningham noted, in support of this argument, that Bennett was paid on a commission basis; that she submitted periodic invoices for professional services rendered; that Bennett was responsible for her own income taxes/payroll deductions and professional dues and insurance; and that the intention of the parties was that Bennett would be an independent contractor.

The trial judge, however, noted that it was for the Court, and not the parties, to determine whether or not Bennett was an independent contractor.  The intention of the parties is not determinative.  The trial judge found that she was either an employee or a member of the "intermediary category", which meant that in the absence of just cause she would be entitled to reasonable notice of termination.

The factors reviewed in the trial judge's reasons included that Bennett was expected to be in Cunningham's office 9-6 Monday to Friday; that the clients and their files belonged to Cunningham; that Bennett did not provide any of her own office equipment; that Bennett did not hire any employees at her expense nor did she pay rent for her office; that Bennett took some financial risk in the commission structure (this was the sole factor leaning towards a finding that she was not an employee); but Bennett did not have any opportunity for profit beyond the 50% commission structure.

(2)  Just Cause

The letter was the crux of the "just cause" argument.  The trial judge notes that a single incident of insolence (defined as "derisive, contemptuous or abusive language or conduct directed by an employee at his/her employer") can be sufficient to justify summary dismissal if the employee and employer are no longer capable of maintaining a working relationship.

Finding that "[t]he relationship between lawyers practising in the same law office is fundamentally based on confidence, respect and trust", the trial judge concluded that the insolence undermined the relationship and that Cunningham's conclusion that the relationship could no longer be sustained was reasonable.  Therefore, there was just cause for termination, and no pay in lieu of notice was required.

The Divisional Court, however, reversed the finding of just cause on appeal in 2011.  (Decision found here.)  The Divisional Court concluded that the only passage which could reasonably be seen as insolent was the phrase "dishonest and negligent", and that all of this should have been read in light of the invitation at the end of the letter to resolve the existing issues; thus, the letter could not be seen as making the continuation of the employment relationship impossible.  (Further, Bennett's employment was not immediately terminated, which did not amount to condonation but did provide a contextual factor supporting the conclusion that the employment relationship was possible to continue despite the letter.)

Lessons to Learn


Firstly, just because you have a contract saying that somebody is an independent contractor does not prevent a Court from going underneath that characterization and finding otherwise, depending on the actual circumstances of the relationship.

Secondly, this case gives some guidance to employees who find themselves having increasing issues with their employer.  There's a lot of wisdom in the "If you can't say anything nice..." saying.  While I'm a big advocate of 'setting the record straight', Courts do tend to understand that employees don't necessarily feel empowered to contradict the employer or seek to change conditions which are intolerable.

However, the Divisional Court's decision in this case sends a clear message to employees that they are allowed to object to employer actions that they find intolerable, and do not have to do so in a manner which is overly cowed or deferential.  Provided that the overall message of the objection is "These are the issues; let's work on fixing them", and there is nothing that clearly crosses the line into the inappropriate in the letter, it will not be regarded as just cause for dismissal.  (However, when one starts getting into swearing, name-calling, gratuitous strong language, sarcasm, etc., it gets more risky.)

Likewise, this case is a caution to employers not to overreact to such letters from employees.  When an employee is expressing concerns, an employer should consider the employee's concerns.  Ideally, if a concern has merit, an employer ought to address that concern with the employee, and seek a solution.  On the other hand, employees often over-estimate their own power in the employment relationship, and so will sometimes make demands that are unreasonable, in which case an employer can go to varying levels of effort to explain to the employee why his demands are unreasonable.  Ignoring a critical letter from an employee is never a good idea.

Where the line is crossed into insolence, however, appropriate discipline should be imposed, regardless of whether or not the employee's concerns in the letter are justified.  So one can imagine a circumstance in which an employee writes a letter which has insolent tones and contents, but which seeks, for example reasonable accommodation of a medical condition.  The employer then needs to address the request for accommodation through its ordinary accommodation policies, but should *also* consider disciplinary action for the impropriety in the letter itself, making it clear that the substance of the request for accommodation has absolutely nothing to do with the imposition of discipline.

*****

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.

Pregnancy and Accommodation

The Globe published a story today, "Should pregnancy be considered a disability?"  It addresses a live issue in the U.S., where pregnancy does not incur entitlements to accommodation, with appalling results.  Professor Cox, of the University of Dayton, argues that pregnancy should be included in the Americans with Disabilities Act.

Prof. Cox found examples of women who lost their jobs because employers failed to offer special treatment, including a retail worker who drank water while working and thus violated store policy, and a police officer whose department would not allow her to perform lighter duties.

In Ontario, we don't have the same legal regime.  Not the same issues, and not really the same question.  Ontario law treats discrimination on the basis of pregnancy as sex discrimination.  This approach makes sense in a certain light.  After all, when you discriminate on the basis of pregnancy, you create hurdles that only women will ever have to deal with.  But the consequences get awkward, meaning that light duties are for people with physical injuries, physical disabilities...and women.  How exactly does an employer ask for a doctor's note proving that one has entitlement to accommodation on the basis of sex?  "Please confirm that your patient is, in fact, a woman."

To be clear, pregnancy-related limitations do result in an entitlement to accommodation under Ontario law, but it's awkward, and the awkwardness really seems, in my mind, to arise from the fact that pregnancy-related limitations really are akin to disability.  I've seen an argument about 'temporary disability'.  I think I buy it, though this is awkward, too.  Filling out typical disability forms asking when the accident occurred or symptoms first manifested seems not to fit with the framework of a pregnancy.  Furthermore, quite often the limitations are not related to a physical inability to do something, or a risk of injury to oneself, but because performing certain duties might create risks for the foetus.

So...maybe the appropriate ground of comparison is family status?

The above is fairly academic.  Ontario law is reasonably set that pregnancy-related limitations do trigger the accommodation provisions in the Human Rights Code.  But not all employers know that, it seems.  I have seen cases in which employers have raised every hurdle possible to pregnant women seeking accommodations, from telling them that there's no entitlement to accommodations, to ignoring requests for accommodations, to playing hardball on the implementation of accommodation measures.  "That doctor's note isn't sufficient."  "That [common sense] limitation isn't expressly set out in the FAF."  So on, so forth.

I had a friend who got pregnant shortly after starting work at a clothing store.  (Women's apparel - female manager, all female staff, all female customers.)  As the pregnancy progressed, she began to have difficulty getting stock from the top shelves, and working long shifts without breaks.  Her manager's response was essentially to suck it up.  "I worked through my pregnancy."  When she came in with a doctor's note saying that she needed reduced shifts, with several weeks left to go, her manager put her on unpaid sick leave and told her to apply for EI sick benefits.

Hard to believe that an employer - especially that employer - could be so insensitive, in breach of its Human Rights Code obligations.  But if you read through the comments on the Globe's story, you'll see that a lot of the commenters share that same kind of insensitivity to human rights.  It's shocking.

I wonder if having statutory provisions more expressly dealing with pregnancy might not only give pregnant women a more appropriate legal framework, but also promote a better awareness among employers of their own obligations.

*****

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.

Company not advised of employee's concerns; OLRB concludes no constructive dismissal

I very frequently get calls from people who think they see the 'writing on the wall', so to speak, worried that they are about to get fired.  There are various reasons that these concerns arise, ranging from disciplinary measures to reorganization of job functions or reassignment of duties.  Regardless of the reason, it is very stressful on employees to go into work every day feeling like, to borrow a comparison from the late Justice Echlin, the sword of Damocles is hanging over their heads, and there is often a real temptation to pre-empt the termination by quitting.

I generally advise against that.  If the core of an employee's concern is that they are worried that they will be fired, then I often say "Let them fire you, then."  Don't give them a reason, of course - you don't want to be dismissed for just cause - but the truth is that it usually isn't all that hard to not give them just cause.

If you're fired for just cause, the employer has to prove that they had just cause, and this is a high threshold.  If you're fired without cause, then the only question is how much money you're entitled to.  If you quit, however, the onus is upon you to establish that you were constructively dismissed, and this often puts an employee into a weaker bargaining position.

The recent OLRB case of Webster v. Securitas Canada Limited is a cautionary tale about quitting in advance of an expected termination, and may be a significant comfort to employers concerned about an employee quitting out of the blue and then claiming constructive dismissal.

Ms. Webster was a non-union office worker with the employer for several years.  She quit her job in July 2010, and brought a proceeding at the OLRB seeking statutory termination pay on the basis that of a claimed constructive dismissal.  The OLRB rejected the claim.

There were four alleged bases for the claim:

(1)  Change in Compensation

This strikes me as something that was likely thrown in to try to bolster the claim on other grounds.  She was removed from the bonus plan at the start of 2010, but was given a raise to make up for it reflecting the average bonus for the previous 3 years, and she signed off on the change.  The OLRB found that this change was not significant enough to constitute a constructive dismissal, and in any event she did not resign in response to this change, particular given her acceptance of it at the time, and even if she had it was not within a reasonable time.

Personally, I question the OLRB's way of reaching this conclusion.  It has broken down the bases of alleged constructive dismissal into discrete areas, which raises concerns for me.  Bear in mind that the statutory test for termination pay on constructive dismissal is threefold:  The employee must have been constructively dismissed; the employee must have resigned in response to the constructive dismissal; the resignation must be within a reasonable time.

The trouble with using discrete analyses for separate changes to an employment relationship is that it can ignore the cumulative effect of the changes.  There is no reason why a series of changes over a modest period of time could not, taken together, constitute a constructive dismissal even where a single change could not.  If I resign because of the constructive dismissal generated by a series of events, one cannot look to the first event in the series and say "He didn't quit because of that", nor can one reasonably say that the clock on the "reasonable time" starts at the time of the first event.

The Board member is aware of this argument, and does address it towards the end of the decision, acknowledging that it must be determined whether or not the changes to the employment relationship cumulatively constitute a constructive dismissal.  My concern is that, for all of the detailed reasons which go into the Board's rejection of each of the four grounds individually, the cumulative analysis is quite cursory.  I would argue not only that the cumulative analysis is more important, but that the individual analysis is actually quite unimportant, bordering on irrelevant.

However, this ground may have had another fatal flaw.  That she signed off on the change should have only one, if any, effect on the test:  If her agreement was legally binding (i.e. amended the contract at law) then the change was not unilateral by the employer, and therefore cannot form a constructive dismissal.

(2)  Change in Reporting Structure

Prior to her resignation, her direct supervisor changed.  She had been reporting to the IT manager and the Human Resources manager; the new supervisor was a Human Resources professional who was not a manager.  She didn't have a problem with the new supervisor, but alleged that it reduced her status.

The OLRB finds that there are a couple of problems with this argument:  Firstly, "this concern was never raised with the employer prior to the resignation", and secondly she appeared not to have been aware that her new supervisor was not a manager until after starting the complaint process.

(3)  Change in Duties

The IT manager, noted above, was terminated when the IT function was moved to the United States in early 2010.  Thus, her IT-related duties disappeared.

However, the work she continued to do was similar in kind to the duties she did beforehand.

(4)  Lack of Work

This seems likely to be where the crux of the issue was.  After her IT-related duties were eliminated, she no longer had enough work to keep her busy.  She felt "unsatisfied, unneeded, and unwanted".  In essence, she thought it was just a matter of time before she was laid off because she was no longer needed there.

The Board rejects this argument, too, finding that the company was in transition, and she was obligated to "give the employer time to work through the transition, or if she was very concerned, raise the concerns with the employer."

My Thoughts

I touched on the issue of the cumulative effect above, and I think the Board's analysis somewhat ignores the totality of the narrative:  First they take away my bonus, then they remove my IT functions and lay off my manager, and relieve my other manager of the burden of me reporting to her, then they don't give me any new work.  They took away everything about my job except my salary, and were essentially just paying me to twiddle my thumbs.

This issue doesn't frequently arise in the jurisprudence, because employers don't generally like to pay employees to do nothing, but there's a pretty decent argument to be made that an employee does have a contractual right to their duties - not just the salary, but also to the actual job, for two reasons.  Firstly, experience is important.  Many jobs are stepping stones on a career path, that you take for the experience of the position and not just for the salary.  Secondly, it has long been accepted in the jurisprudence that a person's job is integral to their sense of self-worth.  That's a reflection of the duties, about the satisfaction of doing one's job, and not just about taking home the pay cheque at the end of the day.

I'm not saying I think the Board's decision is wrong.  Assuming that she did have an obligation to put the employer on notice of her concerns, the Board is almost certainly right.

I'm not sure where that obligation originates, though.  It seems a reasonable expectation of the employer, of course, to be able to correct this sort of thing before liabilities are incurred, and yet at the same time I have concerns about the consequences of such a doctrine.  Constructive dismissal is often about the straw that broke the camel's back.  I have concerns about this, that, and the other thing.  I don't want to make a stink, because I don't want to risk conflict with my manager.  But these push me to the breaking point.  Then the employer crosses the line one last time, so I quit.

Yes, it's a healthier working environment when an employee is comfortable approaching his or her manager with concerns, and where the manager can process and address concerns.  But in reality, many (most?) workplaces don't work that way.  The employees do what they're told, the managers expect nothing less, and both employer and employee often expects that if an employee doesn't like how the employer does business, the employee can leave.  That is what constructive dismissal is.  It isn't about the employer refusing to reasonably address employee concerns, it's about the employer unilaterally changing the relationship in a fundamental way.  To argue that the employee is obligated to go back to the employer and say "Change it back or I'm out" before a constructive dismissal can be said to have occurred in effect gives the employers an unlimited right to make changes to the employment relationship and an obligation only to negotiate about these changes after the fact.  That's not what the law does.

*****

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.

Court of Appeal discusses ESA Layoff Provisions

I recently posted this entry about temporary layoffs and dismissals in a non-union context, noting that they are quite rare and that "in the absence of a contractual basis for layoff, the device of layoff does not exist at common law and any purported layoff will be, in fact, a dismissal".

The Court of Appeal recently heard another case where this was an issue.  A very unusual case, and quite odd in many respects.  Elsegood v. Cambridge Spring Service (2001) Ltd. involved a non-union technician with seven years of service.  There was no written contract.  He was first laid off on April 4, 2009, and then recalled on June 9, 2009.  He was laid off again on July 28, 2009.

The Employment Standards Act has provisions regarding temporary layoffs, essentially imposing limits on them:  Under the ESA, a temporary layoff that exceeds 35 weeks in any 52 week period has the effect of triggering a termination of employment, entitling the employee to applicable statutory notice and/or severance payments.

Mr. Elsegood was not recalled as of January 22, 2010, at which point he had been laid off for 35 weeks in a 52 week period, and he brought a Small Claims Court action seeking pay in lieu of reasonable notice.  He was successful, and was awarded six months pay in lieu of notice.

The employer appealed, however, arguing that the ESA's layoff provisions result only in liabilities for statutory notice and severance, and not common law notice.  It is an interesting position, but rife with problems.

Problem Number One:  Defining the Contractual Terms

The employer's position was premised on an assertion that there was a contractual term entitling it to implement indefinite layoffs.  With no written contract, how does one get there?  The argument is that the employee's acceptance of the first layoff and recall, together with the employee having regarded himself as still being an employee up to the end of the 35 weeks, resulted in the layoff being an implied contractual term.  The Court doesn't decide what precise scope of any such contractual term was, but if it did, I expect that the employer would have had a difficult time convincing a Court to find that it was entitled to implement an indefinite layoff at common law, simply because of the employee's acceptance of a previous layoff of a relatively short term.

Problem Number Two:  Justifying the Contractual Terms

The Court observes that even an express contractual term entitling the employer to layoff for a longer period than 35 weeks out of 52 would be null and void by operation of the ESA:  It would, in effect, be an attempt to contract out of ESA protection.

Well, maybe not quite.  The employer's argument is, in essence, that the longer layoff triggered a specific and defined liability within the ESA, which would have no impact on common law rights and obligations.  However, that's a difficult argument as well, and one which the Court also rejects (see below).  Of course, if there were express contractual terms limiting the employer's liability on a statutory layoff to the statutory minimums, that would of course be permissible...yet without a written contract, there's really no way of getting there.

Problem Number Three:  The Termination of Employment is a Factual Issue, and not a Legal Construct

Here's the crux of the issue, and what makes this case more broadly interesting:  Does termination of employment for the purposes of the Employment Standards Act mean termination of employment for all purposes?  The Court's answer is Yes.

The strict language of the ESA provisions defining termination are 'for the purpose of' the provisions requiring payment of termination pay.  The employer's argument, in essence, is that it is therefore possible to engage the statutory definition of termination without actually terminating the employment relationship at common law.  It is an interesting and nuanced argument, but the Court sees through it:

The employer proposes the scenario where the employee would actually be on a prolonged indefinite layoff, but terminated for the purposes of the statute. I find it telling that the employer offers no date when a prolonged indefinite layoff would become a termination. It is telling because in the employer’s scenario, there is no date when the employer becomes responsible for termination pay in lieu of notice.

The employer's argument actually appears persuasive, at a glance, but there are a couple of reasons why it really had to fail.  Firstly, bifurcating the notion of statutory termination from common law termination would be confusing.  The ESA does not displace the common law, but is instead an overlay.  So we really can't put ourselves in the position of having to distinguish between an employment relationship at common law and an employment relationship under the ESA.  The question "Is Mr. Elsegood an employee of the company?" is a question which should have a yes or no answer.

Secondly, the employer is trying to turn an arguable right to layoff into a right to effectively cease to employ an individual without ever incurring the liabilities associated with common law notice.  Parties *can* contract out of common law notice, and I always recommend that employers should do so, and terminations of employment under such provisions are clear, certain, and final - both parties know that the relationship is at an end, and they know the employee's entitlements.  On the contrary, what the employer in this case is suggesting is that an employer could limit its own liabilities by stringing along the employee, saying "We may recall you at some point in the future", even where the employer knows that this is not going to happen.  This position is bad public policy, bad employment relations, and is anathema to the employer's duty of good faith and fair dealing.


*****


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.

Manager fired for just cause after sleeping with administrative assistant

Romantic and/or sexual workplace relationships are nothing new, and they're difficult for employers to deal with, in part because they're so prolific.  Employees spend an extremely large proportion of their waking hours in the workplace, and it's to be expected that many will develop strong emotions towards each other, whether in the nature of friendship, hatred, love, or lust.

A relationship can be quite benign when between two single people in different departments, and will have little impact on the employer, provided they remain discrete and professional in the workplace.  However, when people who are emotionally involved must work closely together, or are in a reporting relationship, it is more concerning to the employer:  It is more difficult for the employees involved to be discrete, and almost inevitable that others on the team will become aware of it.  This can cause uncomfortable situations, perceptions of favouritism, and increases office politics and drama, and that's unpleasant enough...but what happens if they have a bad break-up?  Suddenly, the employer is dealing with major conflict in the workplace.

There are also Human Rights Code concerns about intra-office flirtation.  Unwelcome advances by a person in a position to confer a benefit on the other in the workplace are Code violations, and while that's ordinarily viewed as a supervisor/subordinate matter, it may also apply to peers not in a reporting relationship, in the "I can move your vacation request to the top of the manager's pile" sort of sense.  (I'm not familiar with any cases concerning a strictly work-related benefit, where the person making the advance is in a position to make the other person's job easier, but that would be a trickier case.)

For an employer to hire the spouse of an existing employee often doesn't create the same issues, when done carefully, because the employer defines the working relationship of the couple (instead of the couple defining themselves regardless of working relationship) and moreover there is less chance of a break-up (though you never know).

But the real issues occur where you have a clear power imbalance.  When a manager engages in a relationship with a non-managerial employee, an employer should worry.  This remains true, if less so, even where the employee is not a direct report of the manager.  Concerns about favouritism are more severe at that level.  If the manager crosses the line in terms of the above-noted Code concerns, the employer is likely directly liable for that.

Thus, even employers who don't feel that they need a nepotism policy (i.e. family members working together) should always have a good fraternization policy.

And there's good news for employers dealing with managers who violate fraternization policies, in the form of the recent case in Reichard v. Kuntz Electroplating Inc.

The Case

Mr. Reichard was a manager of Kuntz, having worked there since 1984, and at age 41 began an extramarital affair with Ms. Thompson, an administrative assistant who at the time was, to use the words of the trial judge, "not directly under Reichard".  In 2005, Kuntz introduced a non-fraternization policy, as a mechanism to carry out its obligations to ensure that its workplace is free from sexual harassment.  The policy is not reproduced in the decision, but it appears that it may not have an absolute prohibition on romantic relationships, but requires disclosure to the employer of any romantic relationships.

8.  The policy was not introduced for moral reasons.  It was introduced to protect both employees of Kuntz and Kuntz.  Kuntz has a vested interest in not having any of its employees harassed sexually or otherwise.  It also wants to guard against any favouritism or perceived favouritism between employees.  In particular, the reporting provision would allow Kuntz to make arrangements to eliminate or mitigate a conflict of interest if there was a romantic relationship between two employees.

Under the policy, Reichard was required to disclose his ongoing romantic relationship with Ms. Thompson.  There were many rumours about the relationship, and Reichard's superiors asked him about it on multiple occasions, and he denied it.  (One has to wonder if these suspicions prompted the implementation of the policy in the first place.)

In 2006, on Reichard's suggestion, Thompson was transferred into his department over two other candidates, and he gave her "glowing" reviews.  There was evidence of favouritism, making other subordinates uncomfortable, and Reichard routinely took extended lunches with Thompson.

Finally, in 2008, Reichard confided about his troubled personal life, including that he had fathered Thompson's infant son, in another employee, who reported it to the employer.  Reichard then finally admitted the affair to the employer, and was suspended and told that he was on suspension and could not return until called by someone from the company.  The employer's evidence was that they were leaning towards discipline short of dismissal, but then discovered that in the days following the suspension he returned twice to the office despite the suspension.

The employer then concluded that it was unable to trust Reichard as his position required, and so terminated him for just cause.  The judge agreed with the decision, and dismissed Reichard's action.  It all turns not so much on the relationship itself, but on his continued deception about the relationship, breaching the non-fraternization policy.

My Thoughts


The Court's reasoning is a little thin on a couple of points.  Firstly, Reichard argued that the non-fraternization policy didn't apply to the relationship, because it pre-dated the implementation of the policy.  I'm not sure this should hold much sway, but I'm not comfortable with the way the judge disposed of it, either, being because Reichard had simply denied the affair rather than asserting that the policy didn't apply to him.

If one assumes that there wasn't a free-standing obligation on Reichard to disclose the relationship upon request (which may not be the case) and that the policy either did not or could not apply to pre-existing relationships (albeit doubtful), then Reichard would have been entitled to conclude that the relationship was none of the employer's business, and that he had no obligation to disclose.  To refute the applicability of the policy would have entailed telling the employer (at least impliedly) that the relationship predated the policy, which would in effect disclose the relationship and comply with the policy.  Therefore, the judge's conclusion that the policy applied because he didn't refute it has the effect of saying that disclosure was  necessary to preserve his entitlement to not disclose.  Incoherent.

Next, I'm concerned with the absence of any indication as to why Reichard returned to the office while on suspension.  If it was to talk to Thompson, then that's clearly aggravating.  If it was for some other reason - say, picking up the heart medication he forgot - then maybe not so much.

Third, the details of the suspension are thin, as well.  There's a line of case law suggesting that you can't discipline twice for the same offence (meaning that a suspension pending a final determination must be very carefully implemented, and it isn't clear that this happened in this case), and that, in the absence of contractual language to the contrary, an employer cannot suspend an employee unless just cause already exists.

The judge looked at everything in its totality and found that Reichard's misconduct was sufficient to justify termination, and that the return to the workplace was the straw that broke the camel's back, so to speak.  But if you suppose that just cause wouldn't have existed without the returns to the workplace, it isn't clear that the employer was entitled to tell Reichard to stay away (without entirely repudiating the employment contract), which would obviously impact the extent to which his returns can be seen as misconduct.

*****

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.