Those who are engaged in the negotiation of purchase and sale agreements involving the transfer of employees from the seller to the purchaser should be aware of the implications of the B.C. Supreme Court’s recent decision in Kerfoot v. Weyerhaeuser Company.
Kerfoot arose in the context of a transfer of a pulp mill. As a part of the transaction, the employment of all employees was terminated by the seller, and the purchaser offered them new employment in the same positions that they had had with the seller, at the same or similar wages. However, the pension plan provided by the purchaser was inferior to that provided by the seller.
Two long-term, non-managerial employees who accepted employment with the purchaser were awarded damages in excess of $90,000 for the difference between the pension benefits that they would have earned in the seller’s employment during a reasonable notice period and what they actually earned with the purchaser.
For further details and analysis of this decision, please see Heenan Blaikie’s latest Fl@sh Bulletin.
Full and final releases executed by terminated employees are primarily viewed as a means for the former employer to be relieved of any liability related to termination of employment. However, as the Ontario Court of Appeal’s decision in Zelsman v. Meridian Credit Union Limited, 2012 ONCA 358 (“Zelsman”) demonstrates, properly reviewing and understanding the language of a comprehensive employment release is critical for a terminated employee as the language of the release may act to bar the employee from claiming against third parties, such as long-term disability insurers, who are not parties to the employment relationship.
In Zelsman, the plaintiff, Ms. Francine Zelsman, an employee of the College of Family Physicians of Canada was eligible for Long Term Disability (“LTD”) benefits according to a Group Policy between the College and Great-West Life (“GWL”). Following the termination of her employment in April 2008, Ms. Zelsman filed a complaint with the Human Rights Tribunal of Ontario (“HRTO”) against the College claiming her employment was terminated on the basis of disability and reprisal. At the same time, she applied for LTD benefits within the period of coverage with GWL.
In November 2008, Ms. Zelsman’s claim for benefits with GWL was rejected. In August 2009, Ms. Zelsman entered into Minutes of Settlement with the College in relation to the HRTO proceedings, receiving a payment from the College of some $90,000 which appears to have been largely based on compensation for the denial of her LTD benefits claim. Ms. Zelsman then retained other counsel and appealed the denial of her LTD benefits with GWL. Her appeal was successful and GWL paid the claim retroactive to August 2008. Ms. Zelsman did not disclose to GWL at any time before the approval of her LTD benefits that she had filed a Human Rights complaint against the College or that she had entered into Minutes of Settlement and signed a comprehensive release in settlement of that claim. When GWL learned of the settlement between the College and Ms. Zelsman, including her waiving of any right to pursue any claims with GWL, it took immediate steps to reverse the payment for LTD benefits by relying on and enforcing the release.
Ms. Zelsman brought a motion seeking an order declaring the release did not have the effect of releasing any claims against GWL. She also sought a declaration that GWL could not enforce or rely on any of the terms of the Minutes against her.
Usually the doctrine of privity provides that a contact cannot confer rights or obligation on a third party. There are, however a few exceptions. These exceptions were argued by GWL in this case. The two factors the motions judge analyzed were:
a) Did the parties to the contract intent to extend the benefit in question to the third party seeking to rely on the contractual provision?
b) Were the activities performed by the third party the very activities contemplated as coming within the scope of the contract in general as determined by the intentions of the parties?
The motions judge held that the clear and unambiguous meaning and intention of the parties was to resolve all matters arising out of Ms. Zelsman’s employment with the College including the claims for benefits under the Group Policy. The intention to fully and finally release and discharge the College and GWL from all and any actions and claims relating to benefits, including short-term and long-term disability benefits, was also expressly stated in the Minutes.
Therefore, the motions judge held that GWL, a third-party insurer, satisfying the exceptions to the doctrine of privity of contract, was entitled to rely on and enforce the Minutes between the Group Policy holder and the employee and the Minutes therefore had the effect of releasing any claims of Ms. Zelsman against GWL under the Group Policy.
On appeal, Ms. Zelsman argued that the release clause should not be held enforceable as it violated sections of the Ontario Employment Standards Act, 2000 (the “ESA”), was ambiguous and that the motions judge erred in interpreting the clause.
The Court of Appeal dismissed the appeal. The Court noted that the motions judge had engaged in a very thorough and well-reasoned analysis in holding that GWL, a third-party insurer, was entitled to rely on and enforce the Minutes between the College and Ms. Zelsman. The Minutes therefore had the effect of releasing any claims of Ms. Zelsman against GWL under the Group Policy.
With respect to Ms. Zelsman’s argument regarding the ESA, the Court confirmed that the legislation provides that when an employee is terminated, the employer must provide either the minimum notice or payment in lieu thereof and must continue to make whatever benefit plan contributions are required to maintain the employee’s benefits during the notice period.
However, the Court dismissed Ms. Zelsman’s argument that by including a release of claims for benefits in the Minutes, the employer was requiring the employee to waive her right to receive benefits coverage during the notice period, contrary to the ESA. The Court commented that “[t]he ESA is minimum standards legislation. It is not benefits legislation. Once the appellant was entitled to benefits she could compromise the amount, if any, she was entitled to.”
The ESA provides that benefit coverage must continue, however, it does not require claims to be paid where there has been a contractual settlement of such claims.
The implications of this decision are notable for employees, employers and third party insurers.
During the notice period, the ESA provides that dismissed employees remain eligible to benefits pursuant to the Group Policy coverage; they are not entitled to a payment of benefits as a right.
The Court of Appeal upheld the parties’ right to freely contract out of such benefits or any other amounts paid above the ESA minimum standards.
For employers, it is important to continue coverage throughout the ESA notice period and to respect minimum standards legislation. For third party insurers, what is important is to work with your Group Policy holder to be kept abreast of any Minutes of Settlement reached with terminated employees, particularly the inclusion of any release clauses that may relieve the insurer of the responsibility of paying benefits.
Trillium Lakelands District School Board v Elementary Teachers’ Federation of Ontario is a labour arbitration award of interest for employers, notably those in the education sector, who face the “headache” of dubious sick leave claims. It is a decision that is not insensitive to the realities facing employees who suffer disabling conditions. But it is also a case that is steeped in common sense and reminds us of the need for personal responsibility in certain situations.
A teacher suffered a migraine headache on her last day of vacation (in Rome, Italy) and as a result missed her flight home, which in turn caused her to miss her first scheduled day of work following her vacation.
After investigation the Employer decided not to treat the absence as a disciplinary matter. However it denied the teacher a paid sick day. A grievance ensued, which went to arbitration.
On November 15, 2011, the Canadian Association of Pension Supervisory Authorities (CAPSA) released two guidelines on pension plan governance. These guidelines outline the expectations relating to the investment of pension plan assets, as well as best practices when developing and adopting a funding policy for pension plans that provide defined benefits.
Heenan Blaikie’s Jeremy Warning recently spoke at the Construction Labour Relations Conference in Toronto, hosted by Insight Information. During the session “Preparing for the Worst: How to Respond to a High Risk Incident” Jeremy provided advice on contingency planning for safety incidents in the workplace.
This is the fourth and last video from Jeremy’s presentation. Thank you to Reed Construction Data Canada for allowing us to re-post these videos.
The Ontario government released the Integrated Accessibility Regulation – its second set of standards under the Accessibility for Ontarians with Disabilities Act on June 3, 2011. The Regulation aims to promote access for people with disabilities in three broad areas:
- information and communications;
- employment; and
The Regulation was released following two rounds of public consultation and addresses several of the broader concerns that were raised by the private sector. For example, the definition of “small organization” was expanded to include organizations with 1 to 49 employees (as compared to only 1-19 employees under the Accessibility Standards for Customer Service). This came in response to concerns raised by mid-sized employers that the obligations were too onerous given the size of their operations. Similarly, many of the requirements under the information and communications standard are relaxed as compared to their first incarnation. The deadlines for compliance are also extended to take into consideration the fact that many organizations will need to invest in new software.