Shakur v. Mitchell Plastics - A Cautionary Tale

The Superior Court of Justice recently released its costs decision in the Shakur v. Mitchell Plastics case.  The decision on the merits is here, and the costs decision is here.

The case was a wrongful dismissal involving a 35-year-old machine operator dismissed in 2007 after 6 years of service.  Just cause was alleged, arising from an argument between Shakur and another employee in which Shakur struck the other employee - as the judge found, an open-ended slap which caused brief redness.  The Court found that this fell short of just cause.  The employer tried to rely upon the principles from Bill 168 relating to workplace violence, but the Court concluded that, regardless of the applicability of Bill 168, prevention of workplace violence is a shared responsibility between employers and employees, and the absence of training regarding workplace violence and the absence of progressive discipline on the point undermined the case for just cause.  (Reading between the lines, it looks like the judge may have been somewhat persuaded by the employee's evidence that abusive interaction between the employees involved had frequently occurred before; the employer can't just sit back and wait until the first punch is thrown, and then fire whomever did so, but should proactively intervene to prevent violence.)

The employer also relied upon an employment contract which entitled the employee only to statutory minimums.  One problem:  The employment began on September 15, 2001, and the contract was signed on September 24, 2001.  Therefore, there appears to have been a lack of consideration (which I discussed in this post).  The employer argued the Techform case, but it has been consistently distinguished in the jurisprudence, and Shakur is no exception.

Mr. Shakur ended up getting awarded 4.5 months notice, being a total sum of just over $12,500.

As of January 2010, the Small Claims Court has jurisdiction for claims up to $25,000.  When this litigation began, the jurisdiction was limited to $10,000.  So there's no question that the Superior Court was the correct venue to commence the litigation...

...but the question then arises as to whether or not it should have been continued in the Superior Court after the Small Claims Court's jurisdiction was increased.

Because there is a major impact on costs.  The Plaintiff sought over $21,000 in legal fees.  As legal costs go, that's probably a pretty reasonable amount for his lawyer to have charged for the complexity of the issues and the length of the process (in fact, the lawyer probably charged more, and probably not unreasonably so).  Nonetheless, it is disproportionate to the amounts in issue, and proportionality often guides the Court in costs awards.  It would be a very exceptional scenario where the costs award is double the damage award.  (At Small Claims Court, the default cap on costs is 15% of damages, to put the numbers in perspective.)

But this is worse than that.  Not only did the Plaintiff not recover the $21,000 he sought, but he recovered absolutely no costs.

The Court rightly noted that Rule 57.05(1) of the Rules of Civil Procedure (i.e. the rules governing proceedings before the Superior Court) provide that, where a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the Court may deny the Plaintiff any costs.

At paragraph 7, the Court noted:

As stated by Justice Gray in Toronto-Dominion Bank v Thind at para. 25, “if the plaintiff has made a deliberate decision to bring the proceedings in the Superior Court where it is clear that the Small Claims Court has jurisdiction, then, save in exceptional circumstances, the plaintiff should recover no costs.”  To that statement I would add “bring or continue the proceedings.”

My Thoughts

The Court's interpretation of Rule 57.05 is important, and I can't disagree with it.  The Court noted that there is no transitional provision, no exception for claims started prior to an increase in the monetary jurisdiction.  In a similar costs provision, relating to proceeding in simplified procedure versus the ordinary procedure, there exists such transitional language.  The omission of similar language in Rule 57.05, as a matter of statutory interpretation, should likely be read as being intentional, with the result that the Court's interpretation is correct.

Furthermore, there is a basis for this rather 'black and white' viewpoint that an action should be transferred to Small Claims Court.  In Ali v. Schrauwen, in April 2011, the plaintiff moved to transfer a $30,000 action to the Small Claims Court, waiving the excess and reducing the amount of the claim to $25,000.  The defendant objected on the basis that it had already taken significant steps in preparing its defence pursuant to the Rules of Civil Procedure and had already prepared its affidavit of documents, for which costs likely would not be recoverable at the Small Claims Court.  The Court transferred the action, awarded the plaintiff $2500 in costs for the motion, but awarded the defendant $2800 for costs thrown away that would not have been necessary had the action been transferred in January 2010.

That being said, the Defendant in that case was actually ordered to serve the affidavit of documents it prepared.  In context, it seems that this was a fair balancing of interests - the plaintiff gets to change venues to a more streamlined one, it still gets the benefit of the increased procedural protections associated with the prior choice, but it also has to pay the costs associated with those procedural protections.  Makes sense.

To me, there is a world of difference between choosing to start a proceeding in a given venue and choosing to continue in the same venue.

The core principle for these punitive costs provisions is that a party is being punished for acting unreasonably; a reasonable plaintiff would have acted differently.  Today, commencing a $12,000 action in the Superior Court would be hard to justify, so yes, denial of costs would likely be appropriate in most circumstances.  Yet I would argue that a more careful analysis should be applied to a $12,000 claim that was already before the Courts when the Small Claims Court jurisdiction was increased.  The implication otherwise suggests that all $10,001-$25,000 claims existing in January 2010 should have been immediately transferred to the Small Claims Court, without regard to the amount at issue, the complexity of the dispute, or the stage the proceedings have reached.  Recognizing that there is a cost associated with transferring the proceedings to Small Claims Court, and that the benefits in terms of expeditiousness and cost savings of Small Claims Court largely occur at the stages prior to trial, it is easy to imagine a case in which the parties might reasonably have concluded that it made more sense to continue in the Superior Court than transfer to Small Claims Court.  This is especially so since the successful party ought to recover its costs which are reasonably incurred in a Superior Court proceeding, and if incurred at a time when the proceeding had to be in Superior Court, it seems rather harsh to tell parties, "Now that you've each spent thousands and thousands of dollars on this process, we're changing the rules so that the successful party won't recover more than 15% of the amount in issue."

Perhaps more importantly, it wasn't necessarily clear at the time that a transfer to Small Claims Court was always possible.  The only mechanism, in most cases, for transferring an action from the Superior Court of Justice to the Small Claims Court is under s.23(2) of the Courts of Justice Act, which on a face value reading appears to require the consent of all parties.  Prior to Ali v. Schrauwen, the leading case was a July 2010 decision in Capano v. Rahm in which the Court refused such a motion on the basis that there was no unanimous consent.  (The Court in that case contemplated that it may lie within the inherent jurisdiction of the Court to transfer the action anyways, which ultimately formed the basis of the decision in Ali, but declined to do so under the specific circumstances of that case.)

Therefore, while the parties might reasonably agree to transfer the matter into Small Claims Court, it seems to not be the least bit unreasonable, at least before the decision in Ali, for a plaintiff to hesitate to bring a contested motion to transfer into the Small Claims Court.

Now, following Ali and Shakur, with the case law being more certain on the point, it puts a plaintiff between a rock and a hard place:  Either bring a motion to move the proceedings into Small Claims Court, knowing that the costs entitlement at Small Claims Court is negligible and you may have to pay the defendant's costs thrown away, or proceed in the Superior Court and risk not recovering any costs at all even if you're successful.

The result for Mr. Shakur, who was wrongfully dismissed and had to sue to recover the money to which he was entitled, is most likely that his successful law suit has been a significant net loss for him.

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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.

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.

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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.

Self-Represented Litigants

There's an interesting phenomenon which one can easily notice when surveying jurisprudence:  When one side is self-represented, and the other is represented by a lawyer, the side represented by a lawyer is almost always successful.

This is just as true at the Human Rights Tribunal and Small Claims Court - processes designed to be more accessible to self-represented litigants - as at other court levels.  (Indeed, the trend is more easily seen at those levels, because there are many more self-represented litigants.)

Why is this?

I could engage in shameless self-promotion and say that it's because a lawyer's advocacy skills are superior to the self-represented litigant; the lawyer is able to present his client's case in a better light and convince the adjudicator to come down on his side.  To some extent, this is true - the advocacy aspects of law are not to be underestimated.  But it is only a part of the explanation, I think.

I have heard people argue that Courts and Tribunals do not treat self-represented litigants fairly, and do not take them seriously.  I don't really believe this - in terms of process, Courts and Tribunals bend over backwards for self-represented litigants.  And it's far easier for me to believe that a Court is ignoring a self-rep's argument because of the tenuous (or non-existent) merits of the argument itself, rather than an inherent bias towards self-represented litigants.  You might be surprised by how many times I have seen people who represented themselves complain that the judge ignored their incontrovertible proof that they were right...where it does not appear to me that the facts proven have any relevance to the issues in dispute.  If there is an aspect of the system that does not treat self-represented litigants fairly, it is the fact that the legal system itself is so arcane and complicated that it cannot easily be understood by a self-represented litigant.

No, the biggest reason for the discrepancy in the jurisprudence is that a self-represented litigant is less likely than a represented party to be aware of the inherent difficulties of his or her position.  In other words, they will litigate matters that should not be litigated, taking positions which any lawyer would know are unsustainable.

I have been retained to act opposite self-represented litigants on a few occasions.  The truth is that this makes my job harder.  When I am facing a lawyer on the opposite side, we have a common understanding of process and substantive law.  This means that I expect to be able to have a meaningful discussion with the lawyer about settlement, and if we cannot settle the matter, it is usually because the matter is one which reasonably calls for adjudication.  Moreover, it means that I can usually expect the lawyer to follow the proper process, disclosing the necessary documents in a timely manner, etc.  With a self-represented litigant, you never know what you may have to deal with.

On one occasion that particularly stands out, I dealt with a self-rep taking a position which was quite weak, but she did not file or serve any documents in advance of the application hearing.  It was not even clear that she would show up.  Because of the failure to serve documents, she was not technically entitled to even address the Court on the matter, much less to lead any evidence.  The trouble is that, as I noted above, the Courts tend to bend over backwards for self-represented litigants, so there was a risk that she would be allowed to do both.  Being cognizant of the possibility, I had to spend even more time preparing for the hearing than I would have had to if it were a lawyer on the other side.

Lo and behold, she shows up with a sheaf of documents in hand that she wants to rely on.  I was pretty confident in my case, but nonetheless I didn't want to have to deal with documents I had never seen before, so I took a position which I felt I could portray as eminently reasonable:  I won't object to her making submissions, but I will object to her relying on any documents or other evidence not properly before the Court.  The judge agreed.  Not surprisingly, she had to be curbed a couple of times during her submissions when she tried to branch off into unsupported facts.  Not surprisingly, my client was successful.  Equally unsurprisingly, my client got a costs award - it didn't address her costs in full, yet it was still a substantial amount of money for the other party.

The lesson is simple:  Lawyers may be expensive, but they are important.  It isn't just that they'll help you to win your case, or achieve a more favourable settlement, but there is also significant value added in learning that your case is unlikely to be successful.  People are always coming to me for good news.  They always want me to tell them that they're right to do what they hope to do, or that they're going to be successful in their cases.  Fortunately for all of them, I don't bow to that pressure.  I give advice which is realistic and practical.  But, as disappointing as realistic advice may be in some situations, knowing what you can't do is just as important as knowing what you can do in terms of managing risk and reducing liabilities.  And if you're already in litigation, knowing that you will most likely not succeed can be just as valuable as knowing that you likely will.

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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.

Negotiating a Severance Package

When discussing severance packages on termination of employment, the first thing employees need to remember is this:  Never sign anything without legal advice.

Similarly, one of the first things employers should remember is never to ask an employee to sign anything without giving them an opportunity to obtain legal advice.

On some wrongful dismissal disputes, you get 'make-or-break' issues, where the employer might not have any liability at all if successful.  These are cases involving issues such as constructive dismissal, deemed quit, or just cause.  Or sometimes a dispute can be between minimal liability and significant liability, where there is a question as to the enforceability of a written contractual term.  If there's a real dispute on any of these points on a high value case, it could well require a trial, or a significant compromise on the parts of both sides to reach a settlement.

However, in the vast majority of terminations, the only real dispute is about 'how much' - namely, the length of the notice period.  Sometimes, this is coupled with an argument about some of the Bardal factors - most notably, the character of employment.  But in most cases this dispute is not going to hold up a settlement for long.

If each side has a good lawyer in most of these cases, then both sides will probably have a similar estimated ranges - and an estimate is all you ever get in cases without a written termination clause - of the reasonable notice period that a Court would award.  So, in a given case, I might opine that an employee is entitled to 8-10 months notice, give or take.  There's always uncertainty.  A judge sympathetic to the employee might go higher; an unsympathetic judge might go lower.  So the employee hoping for a 12-month notice-period probably doesn't have his head in the clouds, nor does the employer hoping for a result in the ballpark of 6 months.  But neither side is likely to be able to reasonably expect such results.

As a lawyer, my job is to assess the risks of different strategies and advise my clients of the same, but it's up to the client to determine his/her own risk tolerance.  The key thing to remember is that nobody wants litigation, but some people are more willing to go that route than others.  Offers send messages - a skilled negotiator can often read the sweet spot on the deal after the first couple of offers - and the message that an unreasonable offer can send is “I’m not prepared to settle except on terms unfairly favourable to me.”

The other party might be prepared to concede, and settle on less-than-favourable terms to avoid litigation, but otherwise they're more likely to go further in the other direction, to send a clear response that they are not going to play ball, and to bring you into the range they regard as reasonable.  So, in the scenario I described above, suddenly you have an employee asking for 16 months and an employer offering only 4.  That is a big difference, and it is going to require both parties to completely change the philosophy of their positions to reach any middle ground.  Initiating litigation will often be necessary, and the more legal steps and the more negotiation that is necessary, the higher the legal costs of both sides go.

Alternatively, if both parties from the outset send messages that say “Let’s make a deal”, then there`s a higher probability that a quick agreement will be reached with minimal legal expenses, though both sides may be left wondering if they could have perhaps gotten a slightly better deal had they pressed the point further.

In other words, the harder you press your bargaining position, in an attempt to get a better deal, the more you will likely have to pay your lawyer.

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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.

Legal Remedies of the Still-Employed

I've had a remarkable number of calls lately from people who still have their jobs, but who take issue with actions of their employer, be they disciplinary issues, changes to the nature of the job, or unreasonable employer demands backed up by a threat of termination.

It is possible to take the position that you have been constructively dismissed.  As I've discussed before, it isn't easy, and it's never guaranteed.  It adds an additional couple of layers of uncertainty onto an already uncertain process.  And while it is possible to sue your employer while still working for them, that’s only appropriate in some situations (and will likely cause problems for you with most employers).

The last example I gave really puts this in perspective.  An employee facing unreasonable demands and a threat of termination has two choices:  Give in to the demands, or risk being unemployed.  Assuming that it isn’t a demand they are entitled to make, they won’t be able to make out a case for just cause when you refuse to do so, which means you’ll be entitled to pay in lieu of notice of termination if you get fired.

But how much is that?  And is it enough?  Let’s suppose that you make $50k per year, and are entitled to approximately six months’ notice.  You’ll have a claim worth $25,000.  Which seems like a lot of money, when you say it this way:  If I get fired, I can get $25,000.  But it isn’t that simple.  First off, it’s truer to say “I can maybe get $25,000 or so.”  And then you have to factor in legal fees (which can be substantial), taxes, the fact that any EI entitlements will be deferred until after the six month period...not looking like such a lot of money anymore, is it?  Oh, and don’t forget that you may have to go to the end of a litigation process, years out, before you see a dime of it - unlike straight dismissal cases, employers are often very reluctant to acknowledge any basis for liability in constructive dismissal cases.

And here’s the hitch:  You’ll be unemployed.  How long will you be out of work?  Six months?  A year?  Longer?  Even if it’s shorter, there’s no windfall to be had here – if you find an equivalent new job in two months, you’d only win two months’ pay from your own employer, assuming you win at all.  (That's the 'mitigation principle' at work.  Don't be discouraged from looking for work, though, or accepting a job - failing to take reasonable steps to secure replacement employment can reduce your entitlements, too.)

So you really have to say “I can maybe get $25,000 or so, less legal fees, but I’m not sure when I’ll get it, and in the mean time I’ll be unemployed and I’m not sure when I’ll start getting a steady pay cheque again.”

In other words, when remaining gainfully employed is an option for you, you should think very carefully about your options before throwing that away in exchange for a chance of some litigation entitlements.



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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.

Supreme Court of Canada Addresses Costs at Canadian Human Rights Tribunal

I recently made a post addressing some of the challenges of the human rights system.  One of the observations I made is that, with many legitimate claims resulting in entitlements in the 4-digit range, forcing complainants to go to Court for their entitlements would be tragic because of the legal costs of doing so.

A recent decision of the Supreme Court of Canada, in Canada (Canadian Human Rights Commission) v. Canada (Attorney General) illustrates that the same tragedy can result at administrative tribunals where complainants are provided with inadequate systemic assistance and required to retain their own lawyers:  In 2003, the Canadian Human Rights Commission decided to restrict the advocacy assistance it provided to complainants.  As a consequence, it seems, Donna Mowat was required to incur her own legal fees in pursuing her complaint before the Canadian Human Rights Tribunal following sexual harassment and release from her employment with the Canadian Forces.

Following a six-week hearing in 2005, the Tribunal found that she had been sexually harassed and the CF's response had not been adequate, but dismissed the rest of her complaint.  Ms. Mowat was awarded $4000.  She asked for costs, noting that her legal fees were nearly $200,000.  (A six week hearing is exceptional, and speaks to the complexity of the matters in issue, and legal fees of that order do not seem unusual for such a protracted hearing, though the Tribunal was critical of the "lack of precision" in identifying the key issues, which is surprising for a represented litigant.)  Noting the concern that, without a costs order, her victory would be "pyrrhic", the Tribunal looked to its broad jurisdiction to compensate a victim and make her whole, and awarded $47,000 in costs.  The Supreme Court of Canada eventually (recently) concluded that the Tribunal had been wrong to interpret its powers thus, and found that the Canadian Human Rights Act did not empower the Tribunal to award costs:  Costs, in law, are treated differently from compensatory damages, and so the Tribunal's compensatory powers did not include the power to award costs.

While there's a certain controversy and imbalance to Ontario's new approach, having free legal assistance available to applicants, there is a good argument to be made that it is preferable to this alternative, where a human rights remedy is going to usually cost more to obtain than it is worth.

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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.

Back to Basics: A Practical Guide to Wrongful Dismissal Resolution

While there's a new wrongful dismissal case coming out of Ontario's Superior Court of Justice every few days or so, the truth is that the vast majority of dismissals get settled very quickly, often even before issuing a statement of claim.

This post isn't designed to help people see the process through themselves; both sides really do need lawyers, and for very compelling reasons.  I practice on both sides the fence, so I would encourage anyone finding themselves in this situation to contact me.  Rather, I want to give readers a sense of what to expect, to be more comfortable with the process.

Before Termination

Employers should consult a lawyer before terminating the employee in the first place.  (Indeed, you should consult a lawyer before even hiring, to get a good written contract in place.)  If you want to terminate for just cause, you need a legal opinion about it first.  Just cause is very difficult to make out, with risks of increased liabilities - sometimes significantly so - if you fail.  And, where there is no just cause, you need to know what your "notice" obligations may be.  (With a good written contract, drafted by a good employment lawyer and properly executed, these may be minimal.  Otherwise, you're looking at owing "reasonable" notice, which even a good employment lawyer will only be able to estimate and give you a range.)

Upon Termination

Employers:  There's a correct process for termination meetings.  Half of it is common sense (yet frequently not done), but a good portion of it might not occur to everyone in every case.  Have at least two people in the termination meeting, one taking notes.  Be professional.  Don't get dragged into an argument about the reasons for termination - have a script, preferably vetted by your lawyer, and refuse to be pulled off of it.  (In most cases, you won't even want to give any substantive reasons.)  Be discrete and sensitive.  There is a lot to be said about how to behave on terminations, and a lot of it depends on the nature of the workplace and the specific employee.  The termination meeting should be accompanied by the delivery of a termination letter, which will advise them about receipt of their last pay and statutory entitlements (which should be conditional on absolutely nothing), and requiring them to return all company property, reminding them of any ongoing confidentiality concerns, etc.  At the same time, there should be a second letter, marked "Without Prejudice", offering them something further in exchange for signing a full and final release.  (In the wake of Brito v. Canac Kitchens, there's a thought that more than the statutory minimums should be provided upon termination.  I don't think that's yet having any real impact on the standard practice, though.)

Employees:  When you are terminated, you will often receive an offer, conditional on you signing and returning it within x days.  At this stage, there are several things to note:

(1)  You are going to feel a range of negative emotions.  It's almost a grief response.  Anger, betrayal, despair, frustration...these are all perfectly normal.  It's one small part of the reason you will need a lawyer - it's going to be difficult for you to deal productively and professionally with your employer in light of these feelings.  (As a note to employers:  This is also the reason that working notice is seldom a good idea.)

(2)  Do not sign anything until you get legal advice.  Employers are seldom generous with their initial offers, and in the vast majority of cases there is some flexibility for movement on both monetary and non-monetary terms.  Sometimes, the entitlements are significantly more than what has been offered.  Even if you have a written contract limiting your entitlements, termination clauses are hard enough to enforce that it is often worth seeking advice on the enforceability of the contract.

(3)  Even if you have signed something without legal advice, it's still prudent to consult a lawyer.  I have seen some employers put a release to a dismissed employee in exchange for payment of the statutory minimum.  (In one case, the strict deadline was the day before stat minimums were due anyways.  I can't help but think that that was calculated.)  A release on such a basis will often be unenforceable.  The rule is that an employee should never assume, without proper legal advice, that the fact they signed something means they are bound to it.  (Of course, it is almost *never* a good idea to sign anything on the assumption that it will not be upheld by a court.)

(4)  If you can't meet with your lawyer until after the strict deadline is up, don't despair.  I've never seen an employer refuse to extend the timeframes of an offer upon request.  In most cases, they know that, if they get sued, they'll owe more than the contents of the offer anyways.  So they don't usually pull offers off the table.

(5)  In my years of experience, I have very seldom seen offers from employers that I could tell an employee was better than they would likely do in Court.  In the vast majority of cases, I respond with a demand letter for the client's full entitlements. (In the rare cases where an employer is being generous, unlike some lawyers, I do tell my client as much and try to respond reasonably.  If there's room for improvement with non-monetary terms, etc., I'll recommend the request, but an employer who is being generous knows that the offer is generous, and isn't going to move much on the monetary aspects of the settlement.)

(6)  If you haven't been asked to sign anything, it's often because you've only been given your statutory entitlements.  You likely still need to make a demand, and you'll need a lawyer to figure out what to demand.

Employer's Response to the Demand


There are myriad employer responses to a demand letter.  Know that most demand letters will frame the employee's entitlements generously.  Many employers will try to negotiate the demand down.  While there's not much certainty as to reasonable notice periods, there's enough clarity as to the appropriate ranges that both lawyers can tell their clients, "This is the range, and there's a good chance that the other lawyer is telling the other side the same thing."  So the employer tries to negotiate something at the low end of the range, the employee tries to negotiate something at the high end, and neither side really has much of a will to litigate when there are offers inside the range.

By contrast, many employers will completely reject demand letters at the outset.  Even large and sophisticated employers do so.  This is often strategic, and done with employees whose entitlements are fairly limited.  (Sadly, it often also factors in the employee's tolerance for stress.)  This approach is usually rationalized by the logic that, if you make the employee sue for his entitlements, some percentage of employees will simply not do so, and the increased costs and liabilities of dealing with the ones who do will be less than what is saved on the employees who walk away.  In these cases, an employee can often expect that the employer will come to the table promptly upon issuance of a statement of claim.  (Many prominent employer-side firms take the approach that, when served with a statement of claim, they immediately make a semi-reasonable offer to settle and ask for an indulgence so as not to be required to file a statement of defence while settlement discussions are ongoing.  If the offer to settle appears to be in good faith, then most employee-side counsel will recommend granting the indulgence, as they know that a settlement is imminent, and there's little to be gained through hardball at that point.)

The ones that go to trial, these days, usually have a fair bit of money at stake and a real fight about one of a handful of things, such as whether or not there is just cause, enforceability of the written contract, how to characterize one of the factors that defines the reasonable notice period, or a dispute about constructive dismissal.  Without some fundamental factual dispute underlying the calculation of the reasonable notice period or the entitlement to reasonable notice, the margins between what the employer might expect to have to pay and what the employee might expect to get are so small that the cost of litigation is prohibitive for both sides.  Even when there is a fairly fundamental dispute, if there isn't a lot of money at stake, both sides still know that the most cost-effective approach is through an early settlement.  What's a few months' notice for a minimum wage employee beside the amount of money it would cost to get to trial?

That being said, many employers will fight certain cases 'on principle':  Where there's a clear-cut case for cause, an employer isn't going to settle, because it sends the message to other employees that they can act badly then cash out.

It's always important to hire a lawyer who knows what they're doing, but that's especially important for low-value cases.  I've taken on clients whose cases I assessed at being mid four digits.  At a lawyer's hourly rate, it doesn't take long before that all gets eaten up in legal fees, so a lawyer on such a case really needs to be careful about how much time is being spent.  So far, in my practice I've been pretty good about being able to settle efficiently enough that my clients still get to keep most of their money.  On the other hand, I have seen lawyers (even boutique employment lawyers) go five digits into legal fees before even issuing a statement of claim, on files that were not high value.

That's why the choice in lawyers is important.  It is important to me to try to ensure that my client will be better off at the end of the day for having hired me, and if I don't think that's going to happen, I tell the client that.  I offer free consultations to dismissed employees in most cases (some exceptions apply), so I would encourage any dismissed employees to contact me immediately.

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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 Challenges of Human Rights

I've tried to write a policy-oriented human-rights entry a couple of times, and abandoned the attempts before.  The challenge is that I really am a centrist in this area.  Unlike many on the right, I believe in human rights.  I think that they are important to a fair and democratic society, and that their growth is a very positive thing for Canada.  However, unlike many on the left, I do understand the objections to an overly broad approach to human rights.  So I'm trying to strike a delicate balance.

The "Human Rights Have Gone Too Far" Camp

On the one hand, let's look at the far-right, such as polemicist Ezra Levant, who argues that the 'human rights commissions' are out of control.  It's difficult to completely ignore the imprecision and overbreadth in Levant's language:  He generalizes human rights on the national stage based on his experience with the Alberta Human Rights Commission, and there are some very significant differences between systems, relevant to his objections.    He argues that Human Rights Commissions and Tribunals are "kangaroo courts", with unqualified adjudicators appointed by the government.  He also uses criminal language - referring to the initiation of the proceeding as being a 'charge', referring to the proceedings as 'prosecutions', findings of Code breaches as 'convictions', and awards of compensatory damages as 'fines' - all of which is incorrect and misleading, in an attempt to set up an argument that the government should bow out of these essentially civil disputes and let the Courts handle it.

There are no fewer than four massive problems with Levant's position that the Human Rights Commissions and Tribunals are unqualified bureaucrats expanding the interpretation of human rights unduly beyond what it can reasonably bear.

(1)  These are administrative tribunals.  I've blogged about administrative tribunals on several prior occasions, and the key thing here is that they are *everywhere*.  There are literally hundreds of them across the country, of different shapes and sizes, specifically designed to address certain types of disputes.  The point is to take the strain off of Courts, and provide a - hopefully - expedient avenue of recourse for these disputes.  Not to suggest that these processes are perfect - far from it - but neither are the Courts, and in specific contexts the flaws of administrative tribunals are preferable to the flaws of the Courts.  Many lawyers dislike administrative tribunals generally.  The objections Levant raises are common to many of these tribunals, but he treats the human rights processes as being uniquely appalling, and even has a prominent link on his web site seeking "donations" for his ongoing campaign against "the HRC".  And Levant's solution of handing off human rights disputes to the Courts would be catastrophic:  The vast majority of legitimate human rights complaints result in awards in the four-digit range or the low five-digit range.  The existence of such civil claims often create a tragic hole in the 'access to justice' coverage, because even a plaintiff who can afford to pay a lawyer to bring such a claim...won't and shouldn't, because they'll pay more to the lawyer than the claim is worth.

(2)  Human rights proceedings are almost always civil disputes between private parties.  The implication of 'prosecution' is that the 'bureaucrats' are starting these proceedings of their own initiative.  That is very seldom the case.  In most cases, the proceedings are initiated by people who feel that their rights under the Code have been violated; the mandate of the Human Rights Tribunals is to adjudicate these disputes.  This is not unlike the Landlord Tenant Board, adjudicating disputes between residential tenants and landlords.

(3)  Human Rights Tribunals are subject to judicial oversight.  If the Tribunal committed a reviewable error, including misinterpretation of the Code, then judicial review can be sought.  All Tribunals and Courts make mistakes from time to time, and so, outside of the Supreme Court of Canada, no judicial or quasi-judicial body is completely immune from appellate/judicial review.  (Some would argue that the expense of this is prohibitive.  Yes, Court is expensive.  That's a big reason we have the Tribunal in the first place.  Moreover, once you get to that level, one of Levant's key objections to the tribunal process, being the unavailability of cost sanctions, dissolves.)

(4)  Human rights do not exist at common law.  The judges I've talked to about the topic don't want jurisdiction to handle human rights disputes.  At the ground level, these are tricky issues, requiring expertise in terms of how the relationships triggering human rights disputes work.  This is why we don't use judges to adjudicate these decisions, but lawyers and other professionals experienced in labour relations and other Code-related areas.  Indeed, the Commissions and Tribunals simply interpret what the government enacts.  The government is free, subject to constitutional constraints, to change the language if they feel the intention behind it hasn't been correctly interpreted.

Many of Levant's criticisms are anecdotal in nature, taking examples which are on the fringe.  For example, he wrote in November 2010 of a pastor who had been "fined" - not so, it was a compensatory award to a complainant - for writing a letter to the editor "criticizing gay marriage" (which is a *very* mild way of characterizing the letter's contents).  Levant neglected to mention that the Tribunal's decision had, in fact, been reversed on judicial review, highlighting that it was, in fact, a borderline case.

That being said, I don't necessarily disagree with all of Levant's objections.  One of his most persuasive pitches is the one he makes against the anti-hate speech provisions contained in some - that's right, not all - of the human rights statutes in Canada.  That doesn't exist in Ontario, so it's not something I've developed a strong feeling about.  While I understand the policy motivations behind such a provision, I also understand Levant's objections on the basis of free speech, and I'm inclined to think that such a provision is unworkable.  There are clear lines that shouldn't be crossed in criminal legislation, and I think we can leave it there.

It's a shame that this message gets lost when Levant muddies the water with his polemicist rhetoric, crusading with equal vigour against the human rights processes generally and other applications of substantive human rights.

To give a lay perspective, let's look at my father.  My father is a retired police officer, and pretty far right, and we have some interesting conversations.  I've had clients whose workplaces had pretty flagrant human rights breaches...for example, a woman obligated to wear dresses - not pants - even when men performing similar job functions were fine in ripped jeans...and my dad's viewpoint on these cases is that, if these employees knew about the job conditions before going in, and agree to it, they shouldn't really complain about it afterward.  I respond with the question, "Okay, what if somebody agreed to work for $2/hour?  Should they not be able to complain about it afterwards?"  His response was, "Well, we have minimum wage laws, so that would be illegal."  He didn't recognize that human rights and employment standards are similar in the way they legislate over the freedom to contract.

There *are* legitimate human rights issues out there, major issues that the majority of Canadians would agree should be addressed. (Mind you, there are still surprising numbers of people who think that an employer should be able to fire an employee who gets pregnant, judging from public reaction to the Jessica Maciel case.)  There are also more marginal issues, that perhaps don't have the same clear-cut answers, such as Bill Cosby's right not to be harassed on the basis of race by Chris Rock at a comedy club.  And there are trickier questions as well where human rights obligations may conflict with other legal obligations such as occupational health and safety.  (See, for example, the recent decision in Loomba v. Home Depot.)

The Other Side:  Human Rights Breaches are Everywhere


I've mentioned Professor David Doorey before, as having a workplace law blog I follow and sometimes comment on.  He made a post a while back about the Starbucks employment application breaching the Human Rights Code by asking what high school the applicant attended and whether or not the applicant is available to work overtime.

Let's be clear:  There are certain questions which are clearly illegal.  Do you have kids?  How old are you?  Are you married?  What are your religious beliefs?  You can't ask these of a job applicant.  But these questions don't seem so inherently unreasonable.

Ontario Human Rights Commission literature backs him up on the 'high school' question.  And the logic seems to be that asking what school a person went to can reveal a great deal about their religious background, racial background, place of origin, etc.  The overtime question is seen as troublesome because people who have families are far less likely to be able to work overtime.

I have a hard time accepting such a broad interpretation of the Human Rights Code.  The high school question...well, if the fact that a question may reveal factors with a probable connection to a prohibited ground made the question itself illegal, then the result would be that just about any question would be illegal. Heck, the "name" field would likely be illegal.  These questions are clearly not proxies to pick up information to classify people on discriminatory grounds.  And if Microsoft were unable to distinguish between a Computer Science degree received from the University of Waterloo versus some less prestigious institution, that would strike me as being a commercially absurd result, extended the prohibited grounds to covering "where did you get your education"?  (And if an employer wants to see a transcript...well, you can just about forget that, no?)

The overtime question...is trickier.  Yes, people with kids are less likely to be able to work overtime.  Yes, that ends up being a discriminatory result if people are going to be treated differently on the basis of a "no" answer.  Yet the similar extension of this principle would be that it would be illegal to advertise positions for full-time only, or for certain hours.  Or to ask how much travel a potential employee is willing to do.  Again, where it doesn't seem to me that hours of availability are a clear proxy for a prohibited ground, I think that the commercial absurdity of the result is hard to justify.

Problems of Perception


One further difficulty is that people don't really understand what "human rights" means.  Even some very sophisticated people don't understand that it isn't just a venue for dealing with general unfairness.  It addresses unfairness on some very specific bases.  So people think "If I'm treated unfairly, it's a human rights matter", leading to frivolous and vexatious proceedings, leading to others criticizing the Tribunals for hearing such frivolous matters.

Let's be clear.  *Most* human rights applications seem to fall into one of three categories:

(1)  Not in the Tribunal's jurisdiction.  Whether because not based on a prohibited ground, not in an applicable social category, or because of some other jurisdictional bar, the proceeding gets shut down early because the Tribunal can't hear it.

(2)  A case with substantial personal importance and a bona fide human rights-based objection.  For instance, consider the mandatory retirement cases.  Clearly, there are some circumstances in which mandatory retirement might be justified.  That cannot be carte blanche for people to discriminate against the elderly.  Thus, a person facing mandatory retirement, win or lose, can't be faulted for arguing the case before the Human Rights Tribunal.

(3)  A case with deeply unacceptable conduct by the respondent, if perhaps not a great deal of direct personal importance.  A good friend of mine and law school classmate is visually impaired, and uses a service animal.  (The dog has quite the character, too. Very quiet, never made much noise or disrupt classes, but would occasionally snore or snort at times that were very appropriate to the lecture material.)  I noticed a case a while back in the Tribunal's jurisprudence involving her being excluded from a store because of a "no animals" policy.  I doubt my friend was put to great hardship by the exclusion - no doubt she took her business somewhere else.  Yet I don't think she's seeking a big payout - really, if you look at the value of her time on an hourly basis, the award she'll probably get from the Tribunal at the end of the process will be less for her time than she could have billed on client matters.  It's the principle of the thing, and it's an important principle.  Most establishments permit service animals simply because it is a well-known law that they are obligated to.  If we didn't hold people to this obligation, then they would stop, and that *would* generate hardship.

While imperfect, as are all things human, the Human Rights Tribunals serve important policy objectives.  We need to scrutinize them, and decide carefully the form and substance of our human rights, but abandoning them would be a tragic mistake.

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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.

Third Party Insurers can (sometimes) rely on Post-Employment Releases

An employee always has to be careful when signing a full and final release, for a few reasons.  The recent decision in Zelsman v. Meridian Credit Union is an excellent example of this.

Ms. Zelsman's employment was terminated, following which she applied for long-term disability benefits to the LTD insurer, Great West Life.  This application was denied.  Ms. Zelsman proceeded to litigate the termination of her employment via the Human Rights Tribunal, resulting in a settlement achieved at the mediation, involving a payment to Ms. Zelsman of $90,000, which appears largely to be compensation for the loss of her LTD insurance due to the denial of the LTD benefits.

Then, retaining a different lawyer, Ms. Zelsman appealed the denial of her LTD benefits, and was eventually successful...however, after granting her LTD application, resulting in a hefty lump sum of retroactive benefits in excess of $46,000, Great West Life found out about the full and final release, and - moreover - found out that it contained a term releasing Great West Life from any such liabilities, and reversed the payment.

Normally, if you're not a party to a contract, you don't get to benefit from it.  In this context, however, because the release so expressly released Great West Life, the Court was prepared to conclude that Great West Life could rely on it; in other words, the LTD benefits were toast.

So how does this happen?  The biggest question is this:  How did Ms. Zelsman get to the point of litigating against Great West Life after signing such an express release?  Indeed, after getting the LTD benefits, Ms. Zelsman would have been happy to resile from the minutes of settlement, but that's not usually possible to do - particularly without $90,000 cash in hand to refund the employer.

Every management-side lawyer appears to have a different way of dealing with Minutes of Settlement and Full and Final Releases, but the one consistent fact is that they are all quite comprehensive, releasing anything and everything.  In fact, usually the releases go well beyond the subject-matter of the current dispute, which adds real value to them for employers, but the consequence is that employee-side counsel have to be careful to ensure that their clients understand that they can't proceed with other claims afterward.

Indeed, given the extremely final nature of these Full and Final Releases, I've occasionally had to go back to employer counsel to get exemptions inserted for such things as pensions - so we're dealing with pay in lieu of notice, but the employee still has a tidy sum tied up in an employer pension plan to be dealt with (which usually isn't in dispute, so my client doesn't need to pay me to help deal with it).  The response I usually get is "Well, of course the intention isn't to waive these entitlements", whereupon I respond, "Then you won't mind expressly saying so."

Simply, these releases envision a completely cut cord, saying "We're done dealing with you, and we won't deal with you again."  If there is an unforeseen dispute down the road, I don't want these releases getting in the way.  But that isn't always the case.  So the releases have to be tailored.

Most of the time, it's a matter of saying to the client, "If you sign this, you don't get to come back and sue for more, you don't get to make a Human Rights Application, you don't get to make a claim for any more wages due, etc."  Every so often, this shocks the client, because they thought they'd hired a lawyer just to deal with one isolated aspect of their relationship with their employer, and thought very cleverly that they'd get money now then come back for more money later on a different aspect.

In this case, the first lawyer assisting with Ms. Zelsman knew that there had been an unsuccessful application for LTD benefits, and presumably opined that it was better to go after the employer for it than to take on the insurance company.  The second lawyer didn't realize that a settlement had been reached, and agreed to take on the insurance company.  (They both were pretty successful in their respective tasks, it seems, but it was really one or the other.)

This is the other thing that can happen when you change counsel too many times:  Facts get lost.  It takes time, effort, and often money for your new lawyer to achieve the same level of familiarity with the file that your previous lawyer had.

Was Ms. Zelsman not told that the Minutes of Settlement would prevent her from going after Great West Life?  Perhaps she was told, but didn't fully appreciate it?  Or did at the time, but forgot?  Or thought that she'd pull a fast one and try to proceed with her claim anyways (she very nearly pulled it off, after all)?  As outside observers, we can't know.  What seems almost certain is that, had she gone back to her first lawyer afterwards and said, "Now I want to go after the insurer", the first lawyer would have said, "Sorry, with the release you signed, you really can't."  (Maybe this happened, and the client didn't listen.  Who knows.)  But retaining a second lawyer means increased legal fees of her own appealing the denial, increased legal fees (with a third lawyer) in making the Court Application, plus there's now a good chance that she'll end up having to pay several thousand dollars toward the insurer's legal fees.

The lesson to clients is:  Tell your lawyer everything, and make sure you listen to what they say.  The lesson to lawyers is not to take anything for granted.  Maybe you think that the client has accepted your advice not to go after the insurer, but you never know if in the back of their own minds they're thinking that they'll be clever and try for both.

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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.

Back to Basics: Why should we use an employment contract?

Most sophisticated employers use (or should use) written contracts for their employees.  The advantages are myriad, in terms of setting out expectations for how the employment relationship should move forward, including remuneration, yet the most significant advantages arise upon termination of the employment relationship.

Termination by the Employee

This is a minor point, but not unimportant.  Many employees wrongly think that 2 weeks notice of resignation is just a courtesy.  Only in certain narrow circumstances is it statutorily required in Ontario, but under common law an employee must give "reasonable notice" of resignation.  That's contextually based, and not the subject of much case law, but it's safe to say that 2 weeks isn't always the magic number.  (If you have a great deal of responsibility, and you expect the employer to need time to assign your duties elsewhere, you might consider giving more notice.)

So the advantages of having a clause addressing this in the contract are two-fold:  Firstly, it tells the employee in no uncertain terms that they are, in fact, required to give notice, rebutting the myth that they can leave at will if they want to.  Secondly, it determines how much notice is required.  If the employer thinks that 4 weeks is necessary to make the transition, 4 weeks notice can be required.  Or longer, in the right case.  Employees seldom feel very empowered to negotiate the terms of an employment contract, and even less so as regards termination clauses.  (See this earlier entry regarding negotiating termination clauses.)

That being said, insisting on too much notice may send the wrong message to the employee.  I have seen contracts requiring employees to give three months of notice, but in one of those contexts (being a contract that was being put to me personally by a prospective employer) it was coupled with other red flags that told me that the firm was having difficulties with employee retention, which factored significantly into me not accepting the offer.

Termination by the Employer

This is, by a large margin, the most common issue to arise from employment contracts.  As I discussed in detail in this recent entry, when terminating an employment relationship without just cause, an employer is likewise obligated to give notice or pay in lieu thereof.  There's the statutory minimum, which creates a floor for most employees, yet the implied term requiring an employer to give "reasonable notice" usually makes for much more significant liabilities.

So, once again, there are two advantages to the termination clause:  It can be used to reduce liabilities to as low as the statutory minimum, and it also provides some degree of certainty.  Calculating "reasonable notice" is not an exact science, and an employer shouldn't be surprised if the employee's lawyer is demanding a significantly higher amount of money than the employer's own lawyer opines they should need to pay.  Just negotiating a settlement is going to drive up legal fees, and it gets even more expensive if it has to go to litigation.

As well, there are related advantages in terms of limiting the employer's responsibilities.  When setting out the terms of the remuneration package in the written contract, Courts have held in some circumstances that terms requiring 'active employment' as of certain dates for bonus eligibility can be enforceable.

Post-Employment Obligations

A written contract at the outset of employment is really the best time to set out any restrictive covenants.  If you're going to require non-solicitation or non-competition clauses, that's the place for them.  Of course, there are certain requirements for restrictive covenants to be enforceable (which I previously discussed here).

Tomorrow, how to make a written employment contract binding.

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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.

Does an employer need to pay the bonus due during the notice period?

It's simple and well-established law that the employer who dismisses an employee without notice and without just cause must provide pay in lieu of notice. How much notice should be provided is often complicated, but a question that is sometimes equally complicated is what compensation aspects should be figured into the calculation.

Salary's easy, but what about bonuses? Health benefits? Company car?

The default answer is...everything. But bonuses are more complicated than that. Purely discretionary bonuses can be difficult for an employee to pursue, but if there's a consistent pattern of bonuses in the past, or a fixed mechanism for calculating bonuses, then there's a chance. If there's a bonus structure worked into the employee's contract, and/or if the bonus can be said to be an integral part of the compensation package, the employee is in a very good position to make a claim for the bonus.

However, these are all common law defaults, subject to the freedom of contract, and it is not uncommon to see contractual language or language in the policy establishing the bonus structure that states that employees must be actively employed as of a particular vesting date in order to be entitled to the bonus for that period of time. (For example, if you want your annual bonus, you have to be actively employed as of December 31st of that year. If you quit your job on December 30th, you get nothing.)

However, if the employee hasn't been made aware of that limitation, then the employer can't rely on it. In the recent case of Poole v. Whirlpool Corporation, Mr. Poole was on international assignment when the Bonus Plan was implemented in 2005, and was never advised of the 'active employment' requirement until after his termination in 2010. Accordingly, he remained entitled to his bonus throughout the notice period, which the Court found was 19 months. This bonus entitlement ultimately amounted to more than $100,000 through the notice period.

Other points of interest in this case include the choice of proceeding: While it was certainly not a Simplified Procedure case (the overall judgement ended up being in excess of half a million dollars), the plaintiff moved for summary judgment, leading affidavit evidence. The main issues appear to be the length of the notice period, entitlement to the bonus, and entitlement to other benefits, but there were no major factual disputes. Neither party cross-examined the other side on their affidavits, and so the proceedings were relatively expeditious. However, "relatively expeditious" is still expensive - the Court ended up awarding the plaintiff partial indemnity costs in the amount of $25,000.

Thoughts on Bonus Limitations

Where the bonus limiting language exists, and the bonus is not established to be an integral part of the compensation structure, the limtation can be upheld. However, I believe that there are difficulties with this approach that have not been explored in the jurisprudence.

We start, as I have said, with the default position that the employee is entitled to receive, as pay in lieu of notice, compensation for anything he would have received had his employment been continued through the notice period. When there is bonus language implemented in a manner insufficient to constitute a binding term of the contract, it cannot rebut that common law presumption - when you are terminated, your entitlement to damages for pay in lieu of notice continues to include everything you would have received had you been actively employed through the notice period. This issue is similar to the one I argued when dealing with the share repurchase agreement in Love v. Acuity Investments, in a previous blog I maintained. (See footnote below.)

Where there is ostensibly binding contractual language stating that an employee must be actively employed at certain dates, such that the bonus will not be payable if terminated prior to such dates, then this must be seen in light of certain restrictions surrounding entitlements on termination: The Employment Standards Act, 2000 sets minimum requirements for notice periods which cannot be contracted out of, and these minimum requirements have only one relevant exclusion, being for purely discretionary bonuses "that are not related to hours, production or efficiency." In other words, where bonuses are not purely discretionary, or are based at all upon hours, production, or efficiency, any contractual provision which purports to relieve the employer of the obligation to provide such bonuses on termination would be void.

All that being said, I think such language should generally be sufficient to avoid any pro rata calculation of bonuses: If the notice period proceeds past the vesting dates, the employee gets the bonus. If not, he doesn't. (This is usually reflected in the existing law, though I note that my other thoughts may not be.)

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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.

Love v. Acuity Investments footnote:

Put briefly, the Court of Appeal in Acuity held that a termination without notice (in the absence of just cause) is, in and of itself, a contractual breach, ending the employment immediately and entitling the employee to damages...and therefore, a separate share repurchase agreement allowing the employer to repurchase employee-owned shares at the end of employment could be triggered immediately upon such termination, without waiting for the end of the notice period, and therefore the employee has no claim to damages based on subsequent appreciation in the value of the shares. I would argue that this decision is simply internally inconsistent: If the employer has no contractual right to terminate the employment relationship immediately, then the compensation principle entitles the employee to monetary damages to put him into the same position he would have been in but for the breach of contract - i.e., had he been allowed to continue to hold the shares to the end of the notice period.

Stranger than Fiction, Volume I

Not to say that workplace law doesn't yield a wide variety of mind-boggling and entertaining cases (the employee who, while on disability leave due to back pain, wins a golf tournament; the Human Resources personnel who, upon being asked to schedule an exam around a required religious observance, told the employee that she was sure God would be very understanding that he had to work...etc.), but civil litigation generally has a wide spectrum of cases that just make you want to shake your head.

Fire-Breathing Dragons on the CBC

Most of you will have heard of the CBC's show Dragon's Den (I believe it's a Canadian syndication of a BBC show). As reality shows go, it's a little less of a game and a little more reality. It involves entrepreneurs (or, in cases that are usually unsuccessful, wannabe entrepreneurs) making a pitch to five of Canada's most successful people (the "Dragons"), trying to get investments.

It isn't free money, even for those who succeed in their pitch: They're trying to sell a part of their company to the Dragons, and the Dragons are trying to make purchases that will make them money. (That said, even for those who don't get an offer, it can be great publicity for good ideas.)

But the Dragons are not only scrutinizing; they can be vicious and unforgiving. Anyone who has watched the show, even once, knows this well. Unfortunately for John Turmel, he had never seen an episode before he went on the show, and was, perhaps, unprepared for the roasting he had in store.

Hence, the litigation, Turmel v. CBC, with three reported decisions:

Justice Lofchik's decision of September 27, 2010, dismissing Mr. Turmel's suit on motion by CBC;
Justice Arrell's decision of March 17, 2011, dismissing a second suit on motion by CBC; and
The decision by the Ontario Court of Appeal, dismissing Mr. Turmel's appeals on both of the above decisions.

So what happened?

Well, this is best summed up by Justice Lofchik in the second paragraph of his decision:

The producers of the show decided, in their discretion, to include excerpts of Mr. Turmel’s appearance on the show in a one minute segment that was broadcast on the January 13, 2010 episode of the Dragons’ Den. In the segment broadcast, the panel of Dragons was, to say the least, not kind to Mr. Turmel, one member of the panel having told him she had no idea what he was talking about, another invited him to burst into flames, and a third told him he was “blowing air up a dead horse’s ass”.

Mr. Turmel sued in defamation (without having complied with notice requirements under the Libel and Slander Act) though Justice Lofchik noted that "[u]pon examining the statement of claim, one might also glean the suggestion of a claim for breach of contract."

Justice Lofchik examined the information and warnings that had been given to Mr. Turmel prior to the taping of the show, including the Contestant's Guide which warns that "Anything goes" and a Consent giving the CBC full discretion in deciding what to broadcast, if anything. He concluded that there was no genuine issue for trial, and dismissed the action.

In the mean time, eight days before the motion before Justice Lofchik was heard, CBC broadcast the segment again. So Mr. Turmel initiated a second action in November 2010, this time expressly pleading breach of contract, on the basis of the second broadcast.

Not surprisingly, CBC brought another motion for summary judgment, and not suprisingly, they won this too.

Mr. Turmel, of course, appealed both Orders, again unsuccessfully.

Interesting facts: Mr. Turmel represented himself, but has been ordered to pay over $18,000 toward CBC's costs. This is likely a fairly small fraction of CBC's overall costs of defending the action, and enforcing costs awards is not always easy.

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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.

Bad Faith Dismissals and Systemic Practices

Ever since Honda v. Keays changed the face of employment law in June 2008, most dismissed employees have found that their implied contractual right to be dealt with fairly and in good faith by the employer has been a right without a remedy. In order to recover on the basis of a breach of the employer's duty of good faith and fair dealing, an employee has to prove that he has suffered compensable losses as a result of the breach itself.

Combined with repeated affirmations by appellate courts that the test for punitive damages in employment cases remains very high, there is not much incentive for employers to comply with the duty of good faith and fair dealing at this point.

The employer has a lot of bargaining power at every stage in the relationship. And while the law tends to be employee-friendly (in most areas, at least), the legal arena is not. Employees are often unable to afford the legal fees necessary to move forward. When liability is in issue, lawyers are less willing to enter into creative billing arrangements that allow payments out of the settlement proceeds (i.e. contingency fees, etc.). Some employers rely on that to differing extents.

An organization with bargaining power, who owes a duty of good faith to the other party, isn't supposed to play hardball. Yet, given the usual lack of a remedy for that, I am coming to suspect that, for an organization large enough to terminate frequently, a limited amount of hardball may actually be the prudent course of action. Many employees won't fight back at all. Many will have a limited capacity to litigate, and will have to enter into settlements that are unfavourable to them. And while hardball escalates legal fees, it also sends a message to other employees who may later end up in the same place.

In Covelli v. Sears, the the plaintiff has pleaded that Sears takes that sort of approach as a matter of practice, and Sears brought a motion to strike those pleadings.

“11. Mr. Covelli pleads that Sears has adopted a corporate policy or practice of terminating employees for just cause, notwithstanding that it knows or ought to know that no just cause at law exists, as a means of unlawfully evading its statutory and common law obligation to provide employees with notice of termination, or compensation in lieu of notice. Pursuant to this policy, Sears has engaged in similar conduct with other (now former) employees, which is also the subject matter of litigation. Mr. Covelli further pleads that Sears’ cavalier and reprehensible conduct in this regard will invariably exacerbate his ability to secure alternate, comparable employment.

17. …

• Adopting and applying a corporate policy or practice of asserting and maintaining allegations of cause where Sears knows or ought to know that no legal cause exists as a means of unlawfully evading its legal obligation to provide statutory and common law notice of termination (or pay in lieu)

19. …”in particular its corporate policy or practice of asserting just cause when it knew or ought to have known that it did not have just cause at law as a means of evading its legal obligations…”

The plaintiff (actually, the plaintiffs...the decision actually deals with three separate wrongful dismissal actions) was seeking production of documents relating to other terminations within a two year period of employees in certain classes. The plaintiffs argue that the systemic practice helps make out their claims for punitive damages.

Sears argued that these other terminations are matters between the employer and the specific employee, and that it would be improper for the plaintiff to gain a benefit from conduct by Sears which had absolutely no effect on the plaintiff.

The Court did not accept Sears' arguments. In this case, the scope of productions and discovery which would be necessitated by the claim was not of "monstrous proportions". So the plaintiffs can pursue and lead evidence of the systemic practice by the employer. These cases, if they don't settle, will be interesting to watch unfold.

What are the wider implications of this, though? The "monstrous proportions" argument is one that could only be made in the first place by an extremely large employer, and was circumvented in this case by the plaintiff limiting the scope of productions sought. What about smaller employers who only terminate infrequently? One would think it would be even harder for them to resist production requests based on allegations of systemic misconduct. This could well open the door to a new boilerplate pleading in wrongful dismissal actions.

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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.