By Sara Parchello

Does an employer have a broad obligation to protect employees from mental distress that may be caused in the workplace? Ontario’s Court of Appeal recently answered this question in Piresferreira v. Ayotte and Bell Mobility Inc. with a resounding “no.” The decision reverses, in part, an award made back in 2008 – where an employee was awarded over half a million dollars in damages after her boss pushed her on the shoulder and verbally abused her during a workplace dispute.

Background
Piresferreira was a 60-something account manager who had worked with Bell Mobility for about 10 years. She reported to Richard Ayotte, a person known to be a “critical, demanding, loud and aggressive manager.” He was known to pound his fists on the desk, yell, and swear at his employees, and act in other intimidating ways toward employees. Piresferreira, on the other hand, was known to be a sensitive employee who didn’t take well to criticism.

Things came to a head between the two on May 12, 2005.

On that day, Ayotte discovered that Piresferreira had failed to arrange a meeting with a major client. Ayotte began yelling and swearing at Piresferreira and commenting on her inability to do her job. Piresferreira insisted that she had tried to arrange the meeting and, as evidence, attempted to show Ayotte the messages on her Blackberry. After some back and forth, when she held her Blackberry in front of Ayotte, he pushed her on her left shoulder, saying that she should get away from him. Ayotte followed up the incident by presenting Piresferreira a performance improvement plan and telling her that her job was in jeopardy if she didn’t sign it.

Human resources eventually became involved but didn’t interview Piresferreira or apologize to her. Instead, human resources also insisted she return to work and sign the performance improvement plan. Piresferreira refused and submitted a doctor’s note indicating that she couldn’t attend work because of stress and harassment in the workplace. After that Piresferreira never returned to work. She then sued Ayotte and Bell Mobility.

Trial decision
At trial, the judge awarded Piresferreira all of the normal types of damages arising out of a wrongful dismissal case.

In addition, the judge awarded Piresferreira damages for battery and intentional infliction of mental suffering – both resulting from the pushing incident. Bell Mobility was also held vicariously liable for those damages. Even more surprisingly, the judge said that Bell Mobility breached its duty of care to Piresferreira by failing to provide her a safe and harassment-free environment as spelled out in its Code of Business Conduct.

As a result, the judge awarded Piresferreira over half a million dollars, a large part of which was because of the judge’s finding of intentional and negligent infliction of mental suffering.

Ayotte and Bell Mobility appealed the decision to the Ontario Court of Appeal.

Court of appeal
The Court of Appeal overturned the award of damages based on intentional and negligent infliction of mental suffering.

Most notably, the court ruled that employees cannot sue their employer for negligent infliction of mental suffering. That isn’t a claim the courts should recognize. In this context, that meant there could be no separate negligence claim for the breach of the Code of Business Conduct. The employee was limited to claims arising from the breach of her employment contract. Those include damages arising from the constructive dismissal of the employee, as defined recently by the Supreme Court of Canada in Keays v. Honda.

The Court of Appeal reasoned that there is no legal duty for employers to “shield an employee during the entire course of his or her employment from acts in the workplace that might cause mental suffering.” As a result, there could be no damages awarded on the basis that such a “duty” hadn’t been fulfilled.

It’s also important to note, however, that the court left open the possibility of awarding damages for the intentional infliction of mental suffering on an employee. And an employer can be vicariously liable for such acts by its managers. In this case, the trial judge was found to be wrong in concluding that this was done to the employee. There is a high legal standard for proving intentional infliction of mental suffering, Here the conduct couldn’t be said to have been calculated to harm the employee.

Although an Ontario decision, this decision is expected to influence courts across Canada.

What this means for employers
Even though employers can breathe a brief sigh of relief that the Canadian courts may be reluctant to play the role of workplace referee when it comes to inappropriate workplace conduct, the decision underscores the importance of ensuring that your workplace has comprehensive reporting and investigative procedures for instances when an employee raises a complaint. It also underscores the importance of managers knowing they must not intentionally cause mental suffering.

Further, it’s not clear that the matter is actually over. The buzz is that Piresferreira intends on appealing the Court of Appeal’s decision.  Stay tuned.

By Kyla Stott-Jess

Canadian employers that fear large jury awards in wrongful dismissal cases can breathe a little easier in the wake of a recent Alberta Court of Appeal decision. In Elgert v. Home Hardware Stores Ltd., the court of appeal said a $500,000 jury award for aggravated and punitive damages in a wrongful dismissal case was too high, reducing it to $75,000.

Background
In the spring of 2002 the Home Hardware Distribution Centre in Wetaskawin, Alberta, fired Daniel Elgert without notice. He had worked for Home Hardware 17 years and was a supervisor at the distribution center when two female coworkers made sexual harassment complaints against him. Following the complaints, Home Hardware immediately suspended Elgert and engaged in what the court of appeal described as a perfunctory investigation that presumed his guilt.

The investigation ended up with Elgert getting fired. He sued for wrongful dismissal, and the lawsuit proceeded to a jury trial.

Jury decision
The jury decided that Elgert was innocent of sexual harassment and that the complainants were guilty of defamation. It also determined that Home Hardware fired Elgert in a manner that was unfair, in bad faith, misleading, and unduly insensitive.

In addition to awarding Elgert two years of pay in lieu of notice and damages for defamation payable by the complaining coworkers, the jury awarded $200,000 in aggravated damages and $300,000 in punitive damages against Home Hardware.

Court of appeal reduces award
The court of appeal agreed with the jury’s awards for pay in lieu of notice and defamation. But it significantly reduced the punitive damages and set aside the aggravated damages altogether. In setting aside the aggravated damages award, the appeal court said there was no evidence that Elgert had suffered as a result of the manner of his dismissal. So even though it agreed that Home Hardware had conducted an unfair investigation, the appeal court said there was no basis for aggravated damages.

The court of appeal agreed that punitive damages were justifiable but disagreed with the amount of the jury award. The appeal court said that the range advised by the trial judge was inaccurate in an employment context, where the upper range for previous punitive awards was $100,000. In reducing the award from $300,000 to $75,000, the court noted that “appellate courts can be more interventionist as regards punitive damages than other jury awards” and that an award of $300,000 in this circumstance was “inordinately high and unnecessary to convey the message intended.”

Impact for employers
While the prospect of a jury trial might create visions of large damage awards for employers, the decision in Elgert’s case indicates that wrongful dismissal actions in Canada should produce similar damages regardless of whether a judge or jury makes the award. While this is by no means an encouragement for companies to dismiss employees without due care and attention, it does provide employers with peace of mind in knowing that extravagant jury awards will likely be curtailed by Canadian courts.

By Ralph N. Nero and Keri L. Bennett

When is a layoff not a layoff? When it is a constructive dismissal, according to an Ontario judge. McLean v. The Rawyal Limited Partnership reaffirms the principle that unless incorporated as an express or implied term of the employment contract, a layoff may be treated as constructive dismissal–meaning the employee can sue for pay in lieu of reasonable notice.

Facts

The employee in this case was hired as a kitchen designer by Rawyal, a builder of custom kitchens. At her initial date of hire, the company had an employee handbook in place that included provision for possible layoffs. However, the employee’s contract of employment did not incorporate or refer to the employee handbook. The employee did not receive a copy of the handbook. She was not required to acknowledge receipt or agreement, or acknowledge that it constituted part of her contract of employment.

In 2008, ten years into the employment relationship, the employee was offered and accepted a new position. On commencement of this new position, the employee was required to accept a new written offer of employment in which she agreed that she had read and would follow the employee handbook. This handbook also contained layoff provisions.

The employee was laid off in October of 2010 and provided a recall date of June 27, 2011. The employee was in fact recalled on May 27, 2011. However, the employee did not return to work, but instead commenced a wrongful dismissal action against the company.

Decision

Justice Whitaker ruled that the employee had not validly consented to the layoff provisions in her original contract of employment, as it was not a valid term of her employment. Therefore, the question became whether the layoff provisions in the employee handbook referred to in the 2008 contract of employment were enforceable.

The judge found that the employee had received no consideration, or greater benefit, in exchange for signing the new contract of employment. There was no “obvious or certain improvement in compensation or other terms of employment” provided to the employee as part of the new position. The employee described the new position as a “lateral move.” As the mere continuation of employment generally does not constitute adequate consideration, the layoff provisions in the employment handbook were determined to be unenforceable.

Despite the fact that the employee was subsequently recalled and elected not to return to work, the judge awarded the employee 10 months’ pay in lieu of notice on the grounds that she had been constructively dismissed.

Take-Away For Employers

Employers all across Canada are advised to ensure that adequate and fresh consideration is provided to existing employees where the employer wishes to alter terms of employment or introduce significant new policies. This is obviously most important in the case of negative changes.

The enforceability of employee handbook provisions or policies is often at issue. In order to be binding, employees must be made aware of the policies or handbook and ideally they should be provided to employees prior to acceptance of employment. Employers are also advised to consider including reference to or attaching all key policies in the contract or offer of employment. A signed employee consent or acknowledgement can also be helpful.

This decision is consistent with the prior case law on layoff and constructive dismissal in provinces other than Quebec.  Whereas a temporary layoff of any level of employee may constitute constructive dismissal in all provinces but Quebec, only temporary layoffs of managerial employees are likely constitute constructive dismissal in Quebec.  As such, should employers in Quebec require the flexibility to temporarily layoff managerial employees and employers throughout the rest Canada require the flexibility to temporarily layoff any staff, they are advised to include express provisions for layoff in the employment contract or offer of employment.

By Keri Bennett

Canadian employees may believe that a change in ownership of a company results in a change in the terms of employment and requirement for a new employment contract. Not so. In Whittemore v. Open Text Corporation, the Ontario Superior Court made it clear that the original terms of employment remained valid after a share purchase. The court also made it clear that employees are required to advise their employer if they do not accept a change to their terms of employment.

Facts

Whittemore was employed as a software developer. He signed an employment agreement in 1999 that contained various provisions, including benefits, vacation time, and a one-month paid sabbatical after five years of service. The termination provision provided employees with more than four years of service four weeks’ salary in addition to their entitlements under Ontario’s Employment Standards Act.

Two years after Whittemore signed the employment agreement, the shares of the company were purchased by a larger entity. Whittemore signed a nonsolicitation and confidentiality agreement with the new entity but no further documentation. He was also advised that employees would no longer be eligible for a one-month sabbatical.

Whittemore did not make any statements to the company about the loss of the sabbatical and continued to work for the new amalgamated entity for another nine years.

When Whittemore’s employment was subsequently terminated, he commenced a wrongful dismissal action, arguing that the original contract of employment he signed was no longer valid. Instead, he claimed that he was entitled to more generous reasonable notice.

The decision

The court found that there had been a sale of shares and not a sale of assets in this case. Where a business is acquired pursuant to a share sale, the existing rights of the employees continue to flow through to the successor employer. Whittemore continued to work at the same salary, and with the exception of the sabbatical, under the same terms.

At no time during Whittemore’s employment did he advise the company that he was objecting to the loss of the sabbatical, or that he did not believe the terms of the previous employment contract continued to govern the parties’ relationship.

Pursuant to the Ontario Court of Appeal’s decision in Wronko v. Western Inventory, an employee must make it clear to an employer if the employee does not accept a fundamental change to an employment contract.

The court said that the new entity had assumed the employment contract, including the obligations with respect to dismissal, and was entitled to rely on the termination provision in that contract.

Takeaway for employers

This case would likely have been decided differently if the company had acquired the employees pursuant to an asset purchase where, presumptively, the employment relationship comes to an end at the time of purchase.

However, it is clear that Canadian employees continue to bear the onus to advise an employer if they object to a change to a term of employment. Where the employee remains silent and continues to report to work, the employee has accepted the change and the employer is entitled to rely on that acceptance.

By Eowynne Noble

In 2008, Ontario’s Human Rights Code was revised to specifically permit Ontario courts to award damages for breaches of the Code. Before this, it was only the Human Rights Tribunal that had jurisdiction to award damages for human rights violations in Ontario.

Since then, Ontario plaintiffs have made many attempts to obtain human rights damages in wrongful dismissal and other employment-related lawsuits, but none have succeeded until now. For the first time, the Ontario Superior Court has awarded damages for a breach of the Code in Wilson v. Solis Mexican Foods, 2013 ONSC 5799.

Facts

In Wilson v. Solis Mexican Foods, Patricia Wilson, a business analyst, was dismissed without cause after a year and a half of employment. At trial, the employer conceded that the employee had been provided with insufficient notice and proposed she be awarded three months’ notice. The court agreed and awarded her three months’ notice.

But the matter did not end there. The employee had also claimed damages arising from discrimination under the Code because of a failure of her employer to accommodate her disability. The court had to decide whether the employee’s dismissal was related to her back injury and whether she was entitled to human rights damages. The court decided she was, in the amount of $20,000.

The evidence, according to the court, suggested that the employee’s back injury was a factor in the decision to terminate. The judge rejected the employer’s stated reason for dismissing the employee – redundancy following company reorganization. The judge went further and said: “to say that an impression emerges that the defendant was disingenuous is an understatement. Ms. Wilson was given the run around.”

The runaround

The sequence of events was critical to the judge’s conclusion that the employee was given the runaround.

In early 2010 the employee had positive performance reviews. Later that year the employee complained of back issues. The evidence showed that five days after the employee complained of those back issues, the management team met to consider whether the employee was the right fit for the company. In March 2011, after the management discussions, the employee went on medical leave for her bad back.

During the employee’s time off, the employer and employee engaged in the typical back and forth regarding when and how the employee could return to work. Those exchanges went as follows:

1. In March 2011 the employee submitted a doctor’s note that proposed a graduated return-to-work plan.
2. A few days later, the employer rejected the plan, insisting the employee be “fully capable of returning to full-time hours and full duties before making the transition back to the workplace.”
3. In April 2011 the employee submitted a completed Functional Abilities Form clearing the employee to return to work with some accommodations, which included “a combination of sitting, standing and walking.”
4. The employer rejected the requested accommodations, insisting the employee be “completely recovered” before returning to work.
5. In late April 2011 the employee submitted a final doctor’s note that stated she would return to work in six weeks.
6. In May 2011 the employer terminated the employee’s employment.

The employer’s insistence that the employee return to full-time work and full duties led to the judge’s ultimate decision that the employer had breached the Code – for failing to accommodate the employee and for terminating the employee’s employment because of her disability.

The $20,000 award

Unfortunately, the court did not shed any light on how it arrived at the $20,000 award. However, the reasoning of the court suggests the damages were awarded because the employer failed to accommodate the employee’s disability and behaved in a dishonest manner.

Lessons for employers

Although a decision arising specifically from Ontario’s Code, provincial courts across Canada have the jurisdiction to award moral damages, including for discrimination, in a wrongful dismissal action. Thus employers across Canada should take note of the principles highlighted by this case, whether right or wrong:

• Temporary ailments and illnesses may be considered disabilities under provincial human rights legislation.
• Accommodating a disability is a serious issue and employers are under an obligation to accommodate an employee to the point of undue hardship.
• Do not reject, without due consideration, suggestions for modified work. Refusing to allow an employee to return to anything but full duties may get you in trouble.
• A disability cannot play any part in the decision to terminate employment.
• If terminating a disabled employee for performance issues, ensure that there is documentation to substantiate the performance issues.
• If terminating employment for an issue unrelated to the employee’s disability, ensure there is business documentation to substantiate the business reason for the employee’s termination.

Following these guidelines, in all provinces across Canada, should help keep you out of trouble.

by Bonny Mak Waterfall and Rachel Younan

When a Canadian employer transfers its employee to a non-Canadian entity, is it still on the hook for wrongful dismissal damages? Recently, an Ontario court declined to hear a civil action claiming wrongful dismissal damages from an employee who was transferred to a United States subsidiary of a Canadian company. However, the judgment left open the possibility that different facts may lead to a different result.

Facts

An employment relationship between an employee and Four Seasons Hotels Limited began in Toronto, Ontario, when the employee became Four Seasons’ director of sales. After five years in that role, the employee signed a new employment contract in Ontario that arranged for her transfer to and employment by Nevis Resort in New York. Nevis Resort was a subsidiary of Four Seasons.

Three years after moving to New York, the employee’s employment was terminated without cause. She commenced a civil action in Ontario against Four Seasons, alleging wrongful dismissal and various violations of Ontario’s human rights legislation.

In response, Four Seasons brought a motion before the Ontario court seeking a dismissal or permanent stay of the civil action on the grounds that the Ontario court lacked jurisdiction over the matter or, in the alternative, that the court should decline to exercise its jurisdiction.

At stake for the employee was the availability of common law reasonable notice of termination—an entitlement that existed in Ontario but not in New York.

Parties’ arguments—jurisdiction

In order to determine if the Ontario court had jurisdiction over the employee’s claims, the court asked whether there was a “real and substantial connection” between the dispute and the Ontario court by analyzing the relevant factors:

• Where the defendant is domiciled or resident in the province;
• Where the defendant carries on business in the province;
• The tort at issue was committed in the province; and
• A contract connected with the dispute was made in the province.

The employee argued that since Nevis Resort was managed by Four Seasons’ Ontario head office and was a subsidiary of the Ontario corporation, the first two factors were present. In addition, as both contracts were prepared and signed in Ontario, the fourth factor was also established. Finally, the employee referred the court to the “common employer” doctrine in Canada, which imposes joint and several liability for breaches of an employment contract on the legal entities that had a meaningful role to play in the employment relationship.

In response, Four Seasons argued that the common employer doctrine was not an appropriate factor to consider in the “real and substantial connection” analysis. Four Seasons emphasized that Nevis Resort was the true employer as it exercised control over the employee through the supervisors it employed. Further, Four Seasons noted that the execution of the second contract in Ontario showed only a “tenuous connection” since the contract was a contract for employment in the United States.

The court found that there were compelling reasons to conclude that Four Seasons’ human resources manager in the Ontario office had effective control over the employee’s employment as she had drafted the second contract, advised the supervisor who terminated the employee’s employment, and regularly advised human resources supervisors in other offices.

The court further agreed that Nevis Resort’s termination decisions were subject to the influence of the Ontario office. Based on those findings, the court concluded that there was an employment relationship between the employee and Four Seasons and that the Ontario court had jurisdiction to hear the dispute.

New York court better suited for case

The burden then shifted to Four Seasons to show that, despite having jurisdiction, the court should decline to exercise its jurisdiction on the basis that New York was a forum “better situated to deal fairly and efficiently with the dispute” in light of the relevant factors:

• The location where the contract in dispute was signed;
• The applicable law of the contract;
• The location of witnesses, especially key witnesses;
• The location where the bulk of the evidence will come from;
• The jurisdiction in which the factual matters arose;
• The residence or place of business of the parties; and
• The loss of a legitimate juridical advantage.

In this case, although both contracts were executed and signed in Ontario, the witnesses who would provide the majority of evidence at trial were situated in New York and the factual matters relating to the employee’s termination of employment also arose in New York. Further, the residence or place of business of the parties was generally split between Ontario and New York.

As the two contracts failed to address which law would apply to the dispute, the court could not assess this factor. Despite the employee’s emphasis on her loss of access to the remedy of common law reasonable notice if the Ontario court declined to exercise its jurisdiction, the court agreed with Four Seasons that this consideration should not weigh heavily in the analysis. Ultimately, the court concluded that New York was the more appropriate forum.

Lessons learned

In this case, the involvement of Four Seasons’ Canadian human resources manager in drafting the employment contract, assisting with the employee’s immigration matters, and providing performance management and termination advice to Nevis Resort were all significant factors that led the court to conclude that Ontario had jurisdiction over the employee’s claims.

In addition, it is likely that the court would have concluded that the action should proceed in Ontario but for the fact that the factual matters at the core of the dispute—and most of the witnesses and the evidence—were located in New York.

As a result, this case serves as a note of caution for Canadian employers who regularly transfer employees to the United States and intend for the non-Canadian entity to assume the role of the employer. Such employers may wish to carefully review their cross-border transfer practices to determine if they are exposed to similar risks as Four Seasons and then consider implementing strategies to minimize those risks.

by David McDonald

In Canada, the Court of Appeal for British Columbia recently issued a decision narrowing the possibility for employers to use re-employment offers to support an argument that an estranged employee has failed to mitigate damages by refusing to come back to work.

In the decision of Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357, a unanimous panel of the BC Court of Appeal found in favor of an employee who had refused a return-to-work offer with her employer. In doing so, the Court of Appeal overruled a trial judgment that had been favorable to the employer.

The Court of Appeal referred to this case as one of “initial misunderstanding and miscommunication.” While a review of the facts reveals that may be the case, the facts also suggest a scenario familiar to many employers.

The employee had been employed as a dental technician for eight and a half years in a small collegial office. A total of four people, including the owner of the company, worked closely together. The court decision refers to the employee as having been under significant stress related to an illness of a spouse and an injury to her child.

In April, the employee advised that she might not come back to work the next day. Then on the next day, she provided a medical note supporting a medical leave of absence. She remained on leave until July when she submitted a note from her doctor saying that she would be fit to return to work.

When she returned to work in July, her boss told her that there was insufficient work and that she would be laid off. This was clearly a negative reaction to her lengthy unscheduled leave.

The employee engaged counsel in early September. The employer’s response was “please return to work,” a strategy designed to limit wrongful dismissal damages. After the commencement of legal proceedings, the employer repeatedly offered a return to work, including back pay dating back to its original offer of re-employment in September 2011.

The employee’s position at trial was that refusing to accept all offers of re-employment was reasonable in the circumstances since it was the company’s behavior that had broken the employment relationship. Further, she argued it was unreasonable for her to return to work in a small office. She also provided evidence that she had applied for over 100 positions without success.

At trial, the court accepted the employer’s position that there were no barriers to the acceptance of the offers of re-employment and that coming back to work would have been the reasonable thing to do. Accordingly, the court awarded damages only from the period of the initial “layoff” to the first offer of re-employment in September 2011, a couple months of pay. On appeal, the Court of Appeal was asked to deal with the following proposition:

Normally allegations of failure to mitigate revolve around complaints that the dismissed employee did not make adequate efforts to find alternative employment that was there to be found. However, the theory that a plaintiff cannot recover damages that could have been mitigated applies as well to offers to return to employment, provided the offer of return to employment is to a reasonable working situation. (Paragraph 18)

The court was asked to decide and in effect narrow the law as set out by the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31, 2008 SCC 20, where an offer of re-employment was found to lessen an employer’s obligations to a wrongfully dismissed employee.

In dealing with the case on the facts before it, the appeal court found that the trial judge had erred in failing to accord significance to the fact that the offer to pay did not cover the entire period of unemployment and, as such, was an incomplete offer that was not a reasonable one. Further, the appeal court judges found that the trial judge had failed to reflect the “intangible element of mutual trust, commensurate with the nature of the employment, that flows like a current in the employment relationship.” (Paragraph 23)

The Court of Appeal found that in the context of a small workplace, the trial judge had failed to “reflect the mutuality of trust.” It accepted the employee’s arguments that she had lost trust in her employer because of his efforts to originally “lay her off,” which she viewed as a pretext to get rid of her. That trust was gone and it was no longer reasonable for her to accept employment. In part, this argument was supported by evidence that the employer’s principal had discussed her employment situation with another employee in the small workplace.

The lesson for other employers in Canada here is not to shy away from making offers of re-employment but to make complete offers. Offers should be considered early in circumstances where the employer may have erred or been too hasty in firing. Further, the importance of discretion and confidentiality by managers and human resource personnel in the context of terminations of employment cannot be overstated. After a successful trial on the matter, the employer was exposed to significant damages in addition to ongoing legal expenses of litigation.

by Shane Todd

Disability claims management is never easy. It is particularly difficult when employees refuse to provide enough medical information to substantiate their absence and entitlement to benefits, while also refusing to return to work. The decision in Betts v. IBM Canada Ltd., 2015 ONSC 5298, provides guidance to employers dealing with such cases. It confirms that failing to comply with the terms of a disability plan or to return to work may constitute job abandonment.

What happened in this case

Anthony Betts worked for IBM for 15 years. He stopped reporting to work because of depression. Manulife, IBM’s disability plan and attendance management program administrator, wrote to Betts to request information from his treating physician. It sought substantiation of his claim. Betts missed the deadline to submit the medical information. Around this same time, without telling IBM, Betts moved from New Brunswick, where he was employed, to Ontario to live with his fiancee.

Manulife denied Betts’ claim for disability benefits. IBM wrote to Betts to explain he could either return to work or submit the necessary medical information to support his claim. The letter further explained that if he did not submit the information he would be deemed to have abandoned his claim for disability benefits.

Over the next seven months, IBM sent another four letters to Betts. Each of the letters explained Betts’ options in the face of his noncompliance with the disability benefit plan’s terms. His failure to provide the requested information continued even when filing deadlines were extended. The last four letters all warned Betts if he did not return to work or submit the requested medical documentation, he would be deemed to have abandoned or resigned his employment.

Finally, in June 2014, after Betts failed to submit medical information for his final appeal and failed to return to work, IBM ended Betts’ employment. They said that he had abandoned his job or resigned. Betts sued IBM for wrongful dismissal.

What the court decided

The court dismissed the lawsuit because it concluded Betts had clearly indicated his intention to abandon or resign his employment by:

• Failing to report to work for eight months;
• Failing to follow the disability plan policies and procedures;
• Failing to heed five clear written warnings about the consequences of those failures; and
• Selling his home in New Brunswick and moving to Ontario to live with his fiancee.

The fact that Betts was suffering from depression did not excuse him from complying with the disability plan. There was no evidence that he was medically unable to comply. Betts was familiar with the plan’s requirements, having made a prior claim.

The court said that an employee suffering from a medical condition is “not immune” from being found to have abandoned employment. The failure to follow the requirements of a disability plan can justify dismissal in the appropriate case. The court rejected the argument that there was—outside of human rights law and beyond the disability benefits plan—a further, independent duty to accommodate that required IBM to retain a physician to assess the truth of Betts’ claims. The court said it was difficult to imagine what more IBM could have done.

What you should take away

An employer is legally entitled to information confirming that an employee’s absence from work is medically necessary. Where, over a long period of time, an employee refuses to provide that information, comply with the disability plan, or return to work, the employee may be found to have abandoned employment.

In assessing whether an employee has indeed abandoned a job, the court will look for objective factors demonstrating an employee’s intention. For example, long-term noncompliance with the disability plan, failing to report to work for a long time, ignoring clear and simple warnings of the consequences of doing so, and moving away.

While the court said there was no independent duty to accommodate Betts with respect to his disability claim, that must be read in the larger context of the case. Betts filed but withdrew a claim for damages under the Human Rights Code, so there was no alleged failure to accommodate his disability in employment at issue.

Employers do of course have a duty to accommodate disabilities to the point of undue hardship. If the duty to accommodate is triggered, an employer may need to take additional steps to accommodate, which may arguably include tolerating the failure to return to work or inability to provide medical information if caused by a disability, such as depression.

Employers in a similar situation should be proactive and send clear and simple letters to guide employees. Employees should be informed of the consequences of failing to follow the disability claims process. Where an employee refuses to return to work and noncompliance with the plan continues (and is not caused by the disability itself), an employer may be justified in terminating for job abandonment.

by Keri Bennett

As noted in past articles here, Canadian employees can sue for lack of adequate notice of termination. Fired employees seeking damages for inadequate notice have a corresponding duty to mitigate or minimize any resulting losses. If other work is available, their losses may be minimal. Employees frequently claim a lack of available work. But who must prove what?

In a recent decision, the British Columbia Court of Appeal ruled that where lack of work is claimed, the employee must prove it. It is not up to the employer to prove the opposite.

Facts

Mr. C was employed by Sierra Systems Group as an IT consultant. A few months after he started, the company initiated a new compensation plan. It gave employees a choice on how they would be paid. Four different compensation options were presented to employees. Mr. C chose a plan that compensated him by paying a fixed amount for each hour billed to the client. Time the employee did not bill to a client was unpaid and was referred to as “bench time.”

Mr. C billed and was paid for a significant number of hours in the first part of 2013. But later in the year, there was no available work, so no pay. He was given notice of termination on October 24, 2013, with his employment ending effective December 5, 2013.

Trial decision

The trial judge found that the date the employee was effectively “on the bench” constituted the actual termination date of his employment. Specifically, the trial judge found that by placing Mr. C “on the bench” the company had initiated a temporary layoff under the British Columbia Employment Standards Act. She also found as fact that other job opportunities for Mr. C during the reasonable notice period were “scarce.” She awarded Mr. C damages for lost pay from that date, for the full period of reasonable notice.

Court of appeal

The court of appeal overturned the trial court on the “bench time” issue. It ruled that being placed “on the bench” did not constitute a temporary layoff. Rather, Mr. C had chosen a specific compensation model and was paid in accordance with it. This choice of compensation model also impacted the calculation of damages.

Sierra led evidence at trial that there were many jobs available to Mr. C outside the company. It relied on job postings in April 2014, about six months after Mr. C was told he was being terminated. Sierra also argued that IT skills are readily transferable and that the court should take judicial notice of that fact.

After his termination, Mr. C had focused on building his own private company, rather than seeking a new position. He argued there was a lack of available work that would allow him to mitigate his damages otherwise.

The appeal court found that just because there may have been a lack of work within the company for this specific employee, that did not support his argument that there was a lack of work in the IT sector generally.

The appeal court ruled that it is up to the employee to prove that there is a lack of available work. In this case, Mr. C failed to provide such evidence. The notice period for which he could claim damages was accordingly reduced by two months.

Takeaway

In wrongful dismissal trials, employers will still be required to provide evidence that an employee has failed to mitigate his or her damages. However, where an employee claims a lack of alternate employment options as an explanation for not actively seeking other jobs—but fails to provide the evidence to prove that—the employer may be able to have the employee’s damages award reduced accordingly.

by Shane Todd

In an attempt to their limit severance exposure, employers often require that an employee be “actively employed” on the bonus payment date in order to be eligible to earn a bonus. The idea being that the severance payable to a dismissed employee would not have to take into account an employee’s bonus earnings as the employee would not be able to satisfy the “active employment” requirement contained in the applicable bonus plan. However, as the Court of Appeal for Ontario recently confirmed in Paquette v. TeraGo Networks Inc., 2016 ONCA 618, “active employment” requirements are insufficient to remove or limit a dismissed employee’s rights.

What happened

Trevor Paquette was employed by TeraGo Networks for 14 years. He earned a base salary and was eligible for an annual bonus. The bonus plan required Paquette to be “actively employed” at the time the bonus was paid in order to receive it. In November 2014, Paquette was terminated without cause. The parties could not agree on a severance package and so Paquette sued TeraGo for wrongful dismissal.

The court decided Paquette was entitled to 17 months’ notice of termination. The court awarded damages equal to the salary and benefits Paquette would have earned during that period but refused to award damages for the bonuses that Paquette would have during this same period. This was because the bonus plan required that Paquette be actively employed when the bonus was paid (typically, February of each year), and as a result of the termination of his employment, he was not.

Paquette appealed the decision.

Court of Appeal’s decision

The Ontario Court of Appeal affirmed the basic principle that wrongfully dismissed employees should be made whole and compensated for all loses arising from the employer’s failure to give proper notice of termination. These damages will usually include all compensation and benefits the employees would have earned during the reasonable notice period. This may include a bonus where the bonus is an integral part of the employees’ compensation—regardless of whether it is described as a discretionary bonus.

Whereas the lower court focused its analysis on whether the “active employment” requirement in the bonus plan was ambiguous, the Court of Appeal ruled that it should have determined whether Paquette’s legal rights upon termination were effectively limited by the “active employment” condition in the bonus plan.

As the Court of Appeal confirmed, the analysis is a two-part process. The first step is to determine if the bonus is an integral part of the employee’s compensation package. If it is, the court should presume the employee’s right to wrongful dismissal damages is based on the complete compensation package, bonuses included. Next, the court must consider whether the bonus plan unambiguously alters that right.

Bottom line: the question is not whether a bonus plan is ambiguous, but whether the wording of the plan unambiguously limits an employee’s right to receive compensation for the loss of the opportunity to earn a bonus during the period of reasonable notice.

Ultimately, the Court of Appeal concluded that a requirement to be “actively employed,” without more, is not sufficient to deprive an employee of a claim for the bonuses that he or she would have received had the employer provided notice of termination and allowed the employee to work throughout the applicable notice period. As a result, Paquette was awarded damages for the bonuses he would have earned during the 17 month notice period.

Take away

The decision in Paquette v. TeraGo Networks Inc. should not be taken to mean that an employer cannot limit an employee’s right to claim damages for the loss of bonuses the employee would have received during the notice period. Employers can exclude bonuses from severance packages and wrongful dismissal damages with careful drafting. As the financial implications are not trivial, employers should be proactive and review their individual employment agreements and bonus plans frequently. If they do not contain language that clearly displaces the presumption that damages are based on the complete compensation package, including bonuses, they should be amended.

by Keri Bennett

In Canada, courts can award two extraordinary forms of damages in a wrongful dismissal action: aggravated damages or punitive damages. In a wrongful dismissal action, employees who are terminated for cause often claim that they should be awarded aggravated and/or punitive damages in addition to reasonable notice damages.

In a recent decision of interest to employers in Canada, Smith v. Pacific Coast Terminals Co. Ltd., 2016 BCSC 1876, the British Columbia Supreme Court ruled that these types of damages will not be awarded simply because an employer continues to assert it has cause for termination at trial.

What happened in this case

Mr. S was employed by Pacific Coast Terminals as a manager of maintenance and engineering. In his role, he was responsible for obtaining permits for two large company projects. However, he engaged a third party to commence work on the projects prior to the permits being issued.

Mr. S’s employment was subsequently terminated. Initially, the company offered a severance package. However, once the company assigned a new employee to Mr. S’s work, it learned additional information about Mr. S’s actions during his employment, including disclosure of confidential board information and assisting a former employee with whom he had a relationship to negotiate a salary increase, contrary to Mr. S’s obligations to the company in his senior role. The company investigated and ultimately asserted after-acquired cause for termination.

What the court decided

The court agreed with the company that Mr. S had engaged in unacceptable conduct. The court also agreed that Mr. S made a significant error in judgment by commencing work without the permits. However, the court found that he did not intentionally mislead the company about the work permits. Therefore, the court did not uphold the termination for cause and awarded reasonable notice damages.

Mr. S claimed that he should also be entitled to aggravated damages or punitive damages because he alleged that the company breached its duty of good faith and fair dealing in the manner of dismissal.

The court did not agree with Mr. S. The court held that the termination was performed in a respectful manner, and the issue of cause reasonably arose after termination when another employee took over Mr. S’s projects and reviewed his correspondence. The investigation conducted by the company was fair and reasonable.

The court confirmed that even if a for-cause termination is not upheld, that does not mean that aggravated or punitive damages will be awarded by a court. In this case, the company acted in good faith in maintaining its position on cause through the trial.

What you should take away

This case highlights the importance of fair dealing with employees in the manner of termination. Many issues can cause a court to determine that a termination does not meet the legal threshold of “cause” for termination, including the way the evidence is entered at trial. However, when the employer acts in a reasonable and fair way when investigating employee misconduct and in the manner of termination, costly awards of aggravated and/or punitive damages may be avoided.

by Hannah Roskey

Off-duty misconduct could lead to an employee’s dismissal. But a recent court decision in Ontario suggests that the circumstances where that will amount to just cause for termination are quite limited. The court found that an employee who had been fired after being criminally charged with sexual assault was wrongfully dismissed. The employee was awarded damages.

Background
Merritt was a 67-year-old laborer with Tigercat Industries. The company produces forestry and industrial machines. It has several production facilities in Ontario. Merritt was hired in 1998. He was fired in February 2015. The company said it had just cause.

Merritt was arrested at a Tigercat facility. He was charged with two counts of sexual assault against minors. Management met with Merritt the following day, but he declined to provide any details of the charges. He said only that the alleged events did not happen at the workplace and did not involve any Tigercat employees. Merritt was asked to resign, but he refused. Instead he agreed to take a two-week leave of absence.

When he returned from the leave, Merritt was fired right away. No investigation report was generated. No written notice or reasons for termination were given.

Merritt then sued Tigercat for wrongful dismissal. The company defended the lawsuit by saying that Merritt’s criminal charges and the reputational harm those charges had caused to Tigercat gave it just cause to fire him.

Decision
The trial judge agreed with Merritt. The judge criticized Tigercat for failing to conduct an investigation before making the decision to fire Merritt. The criminal charges were not associated with his employment and did not involve other employees. There was no evidence of damage to Tigercat’s reputation. The court decided that Tigercat had failed to demonstrate it had just cause. Merritt was thus awarded 10 months’ pay as damages for wrongful dismissal.

The decision highlights that improper conduct of an employee while not at work may form grounds for termination with cause but in very limited circumstances. The onus is on the employer to prove one or more of the following about the off-duty conduct:

1. It harms the company’s reputation or product;
2. it renders the employee unable to satisfactorily perform his or her duties;
3. it leads other employees to refuse or be reluctant or unable to work with him or her;
4. it amounts to a serious breach of the Criminal Code of Canada that is injurious to the general reputation of the company and its employees; or
5. it makes it difficult for the employer to efficiently and effectively manage the workforce.

It is not necessary that all of the above factors exist. Depending on the impact, any one factor may warrant discharge for cause. What is crucial is that there is a justifiable connection between the conduct and the employer or nature of employment.

The court clearly stated, though, that criminal charges alone do not constitute just cause for dismissal when they arise outside of work.

Takeaway for employers

Off-duty conduct, no matter how reprehensible, will generally not constitute just cause for dismissal. There must be a clear link between the behavior and the job; or the employee is in a “front-line” or public position and could damage the employer’s reputation.

It is important for employers to proceed cautiously in these cases. A proper investigation will be crucial. This process should involve obtaining relevant statements, keeping thorough records, complying with all workplace policies, and giving the employee an opportunity to respond to the allegations of misconduct.

This is not to say that employers may never terminate or discipline employees for conduct outside the workplace. But employers should be aware of the risks and protect themselves from liability.

Contemplating opening operations in Canada or already operating there? You need to understand the complexities of Canadian employment laws. Because both Canadian federal and provincial governments have jurisdiction over employment, it is important that you know which one regulates your industry and how to abide by their laws. Join us on January 10 for Canadian Employment Laws 2017: Best Practices and Key Rules for Operating North of the Border. Fasken Martineau DuMoulin LLP attorneys Brian P. Smeenk, Emilie Paquin-Holmested, and David G. Wong will provide up-to-date explanations on the latest Canadian employment laws and regulations impacting how you conduct business  to help you minimize your company’s legal risks. For more information, click here.

by Hannah Roskey

An employee who was repeatedly sexually harassed by her coworker sued her employer after being terminated. In addition to normal damages for wrongful dismissal she was awarded $60,000 for “moral damages” by the trial judge, plus damages for the employer’s violation of human rights laws.

In Doyle v. Zochem Inc., 2017 ONCA 130, the Ontario Court of Appeal recently upheld this award and dismissed the employer’s appeal. This decision is a stark reminder of the importance of properly investigating employee complaints. It also confirms that moral damages and damages under human rights laws may both be awarded to an employee, without being characterized as “double dipping.”

Facts

MD worked with Zochem Inc. for nine years, supervising an all-male group of refinery workers. She was the only woman working there. BR was the plant maintenance manager. Zochem considered him to be irreplaceable. In the course of their work, BR sexually harassed MD, making frequent inappropriate and belittling comments.

Prior to a July 14, 2011, meeting, BR and another coworker had been informed that MD was to be terminated. During the July 14 meeting, BR and the coworker ignored the harassment issues raised by MD and demeaned and belittled her. MD left the meeting in tears. Still unaware that she would soon be terminated, she made a complaint of sexual harassment. Zochem did a cursory investigation and heard from BR but did not give MD an opportunity to respond.

Five days later MD was terminated without cause. She had to go on medication for anxiety.

Trial judgment

MD filed a wrongful dismissal claim seeking, among other things, moral damages for the manner of her dismissal. She also sought general damages for breach of the Ontario Human Rights Code arising from the poisonous work environment and retaliatory termination following her complaint. Zochem defended itself by arguing that it had discovered just cause for her termination after the fact.

The trial judge found no evidence of just cause and determined that MD was wrongfully dismissed. She was awarded damages in respect of a 10-month notice period. Further, after finding no documented concerns with her performance, the trial judge held that the manner of her dismissal warranted an additional $60,000 in moral damages.

Factoring into this decision was that Zochem knew MD suffered from depression prior to her dismissal, the response to her sexual harassment complaint was inadequate, the self-serving investigation of her complaint was unfair, the termination itself was “cold and brusque,” and she was pressured to sign a release upon her departure.

Finally, the trial judge awarded a further $25,000 for damages under the human rights statute. Zochem had an obligation to investigate MD’s complaint properly and the hurried, biased investigation was insufficient.

Appeal decision

Zochem appealed only the amount of damages awarded. It argued that $20,000 was a more appropriate amount for moral damages. Zochem also argued that the amount of damages awarded pursuant to the Human Rights Code should be deducted from the award of moral damages. The company’s rationale was that the same conduct was the basis for both awards.

The Court of Appeal disagreed and dismissed Zochem’s appeal. The amount of damages awarded to MD was not high enough to warrant intervention on appeal. Further, the awards of moral damages and Code damages served distinct legal purposes. Moral damages are awarded as a result of the manner of dismissal, where the employer engages in conduct that is unfair or in bad faith. By contrast, Code damages are remedial, and not punitive, in nature.

Costs were awarded against Zochem on a “substantial indemnity scale” (that is, recovery of most of her legal costs). This was done on the basis that Zochem’s appeal was a continuation of its oppressive conduct toward MD.

Takeaway for employers

This case highlights the importance of properly investigating employee complaints. Both the trial and appeal judgments were critical of the employer’s response to the sexual harassment allegations. To avoid these issues, employers should adhere to the following best practices:

(a)   A safe, confidential manner for an employee to lodge a complaint should be established;

(b)   The complainant should be removed from the environment while the investigation proceeds;

(c)   If possible, an external firm or trained human resources staff should conduct the investigation;

(d)   If the investigation is conducted internally, it should proceed in as thorough, uniform, and unbiased a manner as possible. Notes of the interviews should be recorded in an impartial manner; and

(e)   The complainant should be informed of the outcome of the investigation as soon as possible.

This decision is also an important reminder of the fact that employees may be awarded amounts under various heads of damages, even if the underlying conduct overlaps. Employers that do not follow these best practices could wind up with a steep payday.

by Stefan Kimpton

Employers don’t often enough think about the consequences of a heat-of-the-moment resignation. It is generally assumed that when an employee says “I quit” or storms out of the workplace, the employment relationship has come to an end and the employer owes no further obligations to the employee.

Think again. As a recent decision of the Ontario Superior Court of Justice – Johal v Simmons da Silva LLP, 2016 ONSC 7835 – reminds us, employers ought to exercise caution before accepting a resignation from an employee who quits suddenly following an emotional outburst at work. For the resignation to be valid, it must be clear and unequivocal. Most importantly, it must reflect the employee’s intention to resign.

Facts

The employee, Rajinder Johal, worked as a senior family law clerk at Simmons da Silva LLP, a law firm, for 27 years. On June 3, 2015, a partner of the firm called her in for a meeting. During this meeting, she was informed of certain changes that were to be made to the family law group.

At the time, the family law group consisted of four lawyers, three senior law clerks, including Johal, and two junior law clerks. Johal was told that one of the lawyers was resigning and that one of the senior law clerks would soon be returning to work from a parental leave. According to Johal, she was also told that she would now be reporting to this other senior law clerk and that her work would be assigned to her by this other law clerk. Suffice it to say, Johal was not at all impressed.

The next morning, (June 4, 2015) Johal removed all of her personal belongings from the office. She went to see the partner who had spoken with her the day prior, gave him her security pass, and walked out of the office. She did not return to work on Friday, June 5, 2015, or on Monday, June 8, 2015. She did not contact any partner of the firm or the human resources department.

Soon thereafter, the employer mailed a letter to Johal accepting her resignation and confirming that it was effective as of June 8, 2015, at 5 p.m.

On June 9, 2015, Johal wrote an email to her employer asking to withdraw her notice of resignation. The employer refused on the basis that it had relied on her resignation. Specifically, the employer said they had already (1) notified a probationary junior law clerk that her employment was secure, (2) advised clients about Johal’s departure, and (3) advised the other staff members that she had resigned.

The employer was concerned that rehiring Johal would encourage other employees of the firm to resign without notice, as they would not be subject to any repercussions for such actions.

Applicable law

It is now well-established law that a resignation must be clear and unequivocal to be valid. The employee, by his or her words and actions, must reflect an intention to resign. Whether words or actions equate to resignation must be viewed contextually. The surrounding circumstances are, of course, relevant to help determine whether a reasonable person, viewing the matter objectively, would have understood that the employee intended to resign.

In Johal, the court considered several factors surrounding Johal’s alleged resignation:

• She was 62 years old;
• She had worked for her employer for 27 years;
• She had never before threatened to resign;
• She did not provide written notice of resignation;
• She did not state verbally that she was quitting or resigning (she merely walked out);
• Her resignation was out of character;
• Her employer did not attempt to discuss the matter further with her;
• No one attempted to contact her following her departure; and
• It occurred suddenly after a meeting about important changes in the workplace.

In considering the totality of the circumstances, the court concluded that Johal had not voluntarily resigned from her employment. Instead, she needed a few days to consider the changes that were taking place and what they meant for her going forward.

Given the context, Johal’s employer was required to take additional steps following her sudden departure to determine her true and unequivocal intention. The court, therefore, found that she was wrongfully dismissed and, failing an agreement of the parties, ordered a trial on the issue of the quantum of damages.

Takeaway for employers

Employers should always ensure that a resignation is clear and unequivocal, especially if it occurs “in the heat of the moment.” An employer who jumps the gun and accepts a notice of resignation without considering the surrounding circumstances risks significant exposure for wrongful dismissal.

When in doubt, provide the employee with sufficient time to “cool down” and then seek to clarify the employee’s intention before processing the resignation.

by Jacqueline Gant

For employers shutting down operations, providing working notice is often the best way to reduce severance amounts owed. Except when it’s not. In McLeod v. 1274458 Ontario Inc., an Ontario court confirmed that working notice is appropriate only for employees capable of working during the notice period.

Facts

The employer sold furniture and appliances. The employee (KM) had worked for the employer as a mover for 18 years.

On September 18, 2015, KM was involved in a nonwork-related car accident. He was unable to attend work and began an unpaid leave of absence. On January 29, 2016, KM provided a doctor’s note stating he would be unable to work until March 15, 2016. Two days later, while KM was still off work, the employer sent its employees termination notice. The employer advised that it was shutting down operations on July 31, 2016, and the period from January 31 to July 31 would constitute working notice.

On March 15, the date the employee was originally scheduled to return to work, KM provided a note from a new doctor stating that he was unable to work. Over the next few months, the employer requested further medical information supporting KM’s continued absence. KM provided medical information indicating he could not return to work in any capacity.

On July 21 KM’s doctor cleared him for light duties on a part-time basis. He returned to work on July 27 and 29. As planned, on July 31, the employer closed down operations. On October 31, 2016, KM started a new job for comparable pay.

Working notice

In April 2017, KM filed a claim alleging wrongful dismissal. The key issue for the court was whether working notice was appropriate when KM was unable to work.

The employer argued working notice was appropriate, claiming that KM had been capable of working. The employer questioned the integrity of the doctor’s notes, alleging that KM had “shopped around” for a doctor that would opine that he was incapable of working. The court summarily dismissed this argument, with the judge finding zero evidence supporting the employer’s position.

The court found that when KM received notice of termination he was incapable of working. Accordingly, working notice was inappropriate and he was entitled to damages representing the salary he would have earned had he worked during the notice period. In coming to this conclusion, the court confirmed that employers should not issue working notice to employees who are incapable of working during the notice period.

Further, the court commented on the employer’s argument regarding KM’s doctor’s notes. If the employer believed the notes were false, it could have rejected them notes at the time and terminated the employee for cause. However, it did not. The court stated the employer was not entitled to accept the doctor’s notes when offered, then question their validity at trial.

Notice awarded

In order to determine the appropriate notice period, courts consider the character of employment, length of service, age of the employee, availability of similar employment, and the experience, training, and qualifications of the employee.

In this case, KM had been a driver/mover for the employer for 18 years and was 43 years old when he was terminated. The court determined that KM was entitled to 12 months’ notice. The 12-month notice period was reduced by three months as KM had mitigated his losses by finding a new position. KM was awarded nine months’ base salary as pay in lieu of notice, representing his salary from January 31, 2016, when he received notice of termination to October 31, 2016, when he began his new job.

Lessons for employers

• Do not give working notice to employees who cannot work during that period. Had the employer waited until KM was capable of returning to work, it would have been liable for only three months’ notice, as KM mitigated his damages within three months of the operation’s closing.
• An employer cannot accept doctor’s notes stating an employee is incapable of working at the time, then question the notes after the fact. If an employer is suspicious about the validity of an employee’s doctor’s notes, the issue should be addressed immediately. Waiting until trial to question whether the employee was actually capable of working will find no favor with the court.

by Julie Robinson

Employees in Canada are usually entitled to receive reasonable notice of termination or pay in lieu of notice unless fired for cause. But if the employees receive pension or sick leave payments during the notice period, are they entitled to both their regular salary in lieu of notice and such pension or sick leave payments? Should the latter amounts be deducted from the salary otherwise owed by the employer in respect of the notice period?

Double recovery?

Sometimes, depending on the circumstances, dismissed employees may be entitled to draw on their pension immediately upon dismissal. This might start during the period for which they would otherwise receive pay in lieu of notice. In other cases, employees may be terminated while on sick leave and already in receipt of short- or long-term disability benefits. This might seem like double recovery. Can employees legitimately demand that the employer put them in a better situation than they would have been in had their employment not been terminated (at least for that notice period)?

The legal answer is: It depends.

The issue used to be quite complex. The question of who had paid for the pension or disability insurance plan was central to the analysis (see for example: Sylvester v. British Columbia; Sills v. Children’s Aid Society of the City of Belleville; McNamara v. Alexander Centre Industries Ltd.) This is still a factor, but in 2013, the Supreme Court of Canada stated that it should no longer be given much weight (see IBM Canada Ltd v. Waterman). The new rules are easier to apply.

The short answers

There are always going to be exceptions, but the short answers to our questions are as follows.

Pension benefits: As a general rule, when an employee has directly or indirectly contributed to a pension plan, the employee is entitled to both the pension and pay in lieu of notice. This is because pension benefits are a type of retirement saving. They do not constitute an indemnity, that is wage loss coverage, due to unemployment.

Disability benefits: Conversely, as a general rule, short- or long-term sick leave payments received by a dismissed employee during the reasonable notice period would reduce the pay in lieu of notice owed by the employer (see, in addition to Waterman, Morris v. ACL Services Ltd.; Lethbridge Industries Ltd. v. Alberta (Human Rights Commission)). This is because disability benefits are intended to act as a wage replacement, so it’s for essentially the same purpose as pay in lieu of notice.

A principle … and exceptions

The basic principles that apply are as follows. It is a general rule of the law of contracts in Canada that, except in special circumstances, where a contract is breached, damages are awarded to place innocent parties in the economic position they would have been in had the contract been performed. They are restorative in nature. This is also generally true of damages for wrongful dismissal, because that is considered to involve a breach of the employment contract. The employee is to be “made whole” by being awarded pay in lieu of notice for a “reasonable” notice period.

Sometimes, however, certain “advantages” may flow to the terminated employee over and above the pay in lieu of notice. In some cases, the employer can get “credit” for those advantages, in other cases, it is not possible.

One example of a case where “double recovery” by the employee is allowed is when the “private insurance exception” applies. This exception provides that benefits received by an employee through private insurance (or through other benefits analogous to private insurance) are not deductible from the amount otherwise payable by the employer to the employee.

The nature and purpose of the benefit can help decide whether it falls under the private insurance exception. The fact that the benefit constitutes an indemnity for the sort of loss caused by the breach is highly relevant. If the benefit is not paid to compensate the employee for the sort of monetary loss suffered (here: loss of salary), the arguments in favor of deducting it from the pay in lieu of notice are weaker. Conversely, the more closely the benefit constitutes an indemnity against the loss caused by the breach (here: loss of salary), the stronger the case for deduction.

Takeaway

When wondering if deducting pension benefits or disability benefits from pay in lieu of notice is appropriate, an employer should look at the nature and purpose of the plan. As a general rule, pension benefits will often be “non-indemnity” in nature, and thus will not reduce the pay in lieu of notice the employer must pay. But sick leave benefits will generally be “indemnity” in nature, thereby offsetting the employer’s severance obligation.

by Theodore Fong

The risks to employers in sexual harassment cases can be big. Potential liability can arise from any decision. Employers may then find themselves having to make tough decisions on tight timelines.

The key to ensuring an appropriate response is to be prepared. Preparation will permit an employer to take a proactive approach, as opposed to a reactive stance, when sexual harassment is discovered. That is a lesson that can be drawn from the recent Alberta Court of Queen’s Bench case of Watkins v. Willow Park Golf Course Ltd.

Facts

Mr. W was a golf course superintendent at the Willow Park Golf Course. During his 12 years on the job, he never had any discipline problems. Not even any warnings.

At some point, W developed romantic feelings for Ms. L, one of his subordinates. When L rejected W’s advances, he began a campaign of escalating behavior to gain her attention. He continually expressed love and affection for her. He sent her numerous personal and intimate text messages. He showed disproportionate interest in her. At times, he engaged in bullying behaviors.

There were no policies in place about harassment or the need for a respectful workplace.

L eventually submitted a letter about her concerns to the managing committee of the golf course. In response management met with W for an hour to allow him to respond to the allegations. He denied them. Management also spoke with other employees regarding L’s concerns. However, nobody spoke with L about her allegations until after the employer took action.

W was terminated for cause. He then sued for wrongful dismissal. The case went to trial.

Summary termination

Whether summary termination is justifiable depends on the facts. The question is whether, in the circumstances, the conduct violates an essential condition of the employment contract, is fundamentally inconsistent with the employee’s obligations to the employer, or destroys the mutual faith necessary for the employment relationship.

In this case, the trial judge decided that summary dismissal was justified because:

• W was L’s senior supervisor. As such, he had a duty to create a safe workplace environment;
• There was a long history of serious hostility and sexual harassment. Despite being aware of L’s discomfort, W intensified his verbal and sexual harassment; and
• L was economically dependent on the job. W had significant control over her career aspirations.

Golf course’s response

Despite finding that summary termination was appropriate, the golf course’s response to L’s complaint was found wanting. The key points that concerned the trial judge included:

• W was not offered a reasonable time to meaningfully respond to the complaint. The court found that a one-hour meeting was not sufficient.
• The employer did not speak to L regarding her complaint until after W was terminated. This should have been done beforehand. It contributed to the court’s finding that that the golf course had failed to conduct an adequate investigation.
• While the employer interviewed several employees, none of the employees who testified felt that they had been part of any official investigation. The seriousness of sexual harassment and any related investigation should be emphasized.
• While W’s claim that the employer had condoned his behavior was rejected, the fact that he made that argument demonstrates the importance of making clear the employer’s stance. A workplace-safety and harassment policy could have been advanced as evidence against the condoning argument had such a policy existed. So too with any prior warnings about such behavior had they happened.

Lessons for employers

Employers can learn from this case about how to ensure that harassment claims are investigated appropriately. Employers also can learn how to minimize risk of liability if a harasser is terminated.

1. Create and enforce workplace policies. It is important to have a policy in place that clearly states the employer’s position on harassment and that allows management to effectively receive complaints.
2. Consider the use of warnings. Issuing appropriately worded warnings, when appropriate, for less serious forms of harassment can help to avoid the argument that the employer condones such conduct.
3. Investigate complaints thoroughly. When complaints are received, it is important to conduct a thorough and proper investigation. Interview the complainant and the person against whom the complaint is made, as well as other potential witnesses. Provide a reasonable opportunity for the employee about whom the complaint is made to meaningfully respond.