Workplace Wire - Connecting Employers to Developments in Labour, Employment & Pension Law

Maureen Quinlan recently posted on an important Ontario decision, Kafka v. Allstate Insurance Company of Canada (“Kafka”), where the court refused to certify a class action on behalf of a number of employees alleging constructive dismissal.

The court refused to certify the class action in Kafka primarily because it found that the question of whether an employee has been constructively dismissed is a highly individualized exercise and not appropriate to a class action. Another decision of the Ontario court, Brown v. Canadian Imperial Bank of Commerce (“Brown”), has just been released, and like in Kafka, the court refused to certify it as a class action because the primary issues in the action were individual to each potential class member. In Brown the claim was for overtime pay on behalf of allegedly misclassified Investment Advisors and Analysts working for and previously employed by the Bank.

Brown was decided by Mr. Justice Strathy who several years ago certified an overtime class action by bank clerks against the Bank of Nova Scotia (at around the same time that another Ontario judge refused to certify a similar class action on behalf of non-management employees at the Canadian Imperial Bank of Commerce.

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The BC Court of Appeal says: Quit when given inadequate working notice of termination and still sue for wrongful dismissal;

Facts:

Part time bus driver employed for 5 years is provided written notice of termination of 5 weeks.   

Bus driver leaves the day he was provided working notice and refused to work out his notice.   

Bus driver sues for wrongful dismissal. 

Company says bus driver quit and has no cause of action.

The BC Court of Appeal says:

The bus driver can still sue because the insufficient notice constituted a breach of contract by the employer creating a cause of action for wrongful dismissal.   Even though the bus driver's failure to work the notice itself constituted repudiation bringing employment to an end, the bus driver's repudiation did not take away his cause of action for damages for being provided insufficient notice.   The driver was entitled to damages for the difference between the working notice period that the employer had offered and what the Court determined was his reasonable notice period. 

Its noteworthy that the Court's theory is not based on inadequate notice constituting constructive dismissal. In fact, the Court found that the employer had not constructively dismissed the bus driver by providing inadequate notice.  Rather, the Court reasoned:  "although [the bus driver's] repudiation ends the ongoing rights and obligations of parties under a contract, it does not affect rights and obligations that have accrued.  In the present case, the [bus driver's] right to damages in lieu of reasonable notice had accrued when he was given inadequate notice.  His repudiation did not take away that right and it did not take away the right of the [employer] to the [bus driver's] services during the period of notice given."  Consequently, the driver was entitled to damages for the difference between the working notice period that the employer had offered and what the Court determined was his reasonable notice period.

 Concerns:

Previous caselaw in B.C. had established that when an employer gives working notice of termination, the employer has the right to the services of the employee, meaning that the employee must remain ready and willing to carry out the contract of services until the end of the notice period. The BC Court of Appeal has departed from that view and said that although the employee's early departure was improper, it only reduced the amount of damages they could recover rather than depriving them of the right to sue the employer at all.

Determining an employee's reasonable notice period is not an exact science.   Judges exercise discretion in assessing a notice period and their assessment is often influenced by the job market and other factors that an employer cannot predict with any great certainty at the time of termination. The employer knows the range in which the employee's notice period is likely to fall, but the exact notice period will be determined many months - sometimes years - later by the court. According to the B.C. Court of Appeal's approach, if an employer is off on notice by a week, the employer can be deprived of the benefits of working notice.  It's a bit of a game of chicken.  This places employers in a difficult position in the event that they need the employee to work through all or part of their notice period. 

While most employees will choose not to give up the financial benefit of notice, termination is an emotional event and decisions are not always made rationally.  This can place an employer in a tough spot.  Imagine a situation where an employer terminates the employment of a highly skilled long term employee and provides a combination of one month's working notice and a lump sum payment in lieu of the remaining notice period.  From the employer's perspective, the month of working notice is critical to structure a transition period prior to the employee's departure.  An angry employee might be all too willing to give up 1 month of a lengthy notice entitlement by quiting immediately out of anger, frustration or embarrassment.  The employer, as a result, is deprived of the ability to effectively transition the terminated employee's work. 

I wonder if this case will bring back a discussion of "ball park" notice periods?  Certainly the doctrine creates one more incentive to avoid giving working notice. 

Read the case at:  http://canlii.org/en/bc/bcca/doc/2012/2012bcca18/2012bcca18.html

The question of whether the estate of an applicant who has died may continue to pursue an application with the Human Rights Tribunal of Ontario was addressed in the 2010 HRTO decision Morrison v. Ontario Speed Skating. In that case, the Tribunal refused to dismiss the application of a deceased applicant which was being advanced by the applicant’s wife (who was also executor of his estate).

The Tribunal determined that a human rights application was not automatically extinguished through common law.  It ruled that the rights of an applicant do not automatically abate upon death, noting that the Human Rights Code contemplates complaints being brought forward by persons other than the applicant.

This reasoning has since been adopted in two subsequent tribunal decisions (Dorosz v. Kingston General Hospital and Roy v. Wal-Mart Canada), and the principle appears to be settled.

To successfully continue to pursue this kind of claim, the person bringing the claim forward on behalf of the applicant must prove his or her authority to act on behalf of the applicant’s estate, such as submitting documentation proving the appointment as the estate trustee.

As for evidence at the hearing, the case law suggests that the adjudicator can use his or her discretion in determining whether to admit the hearsay evidence and what weight to give it, considering any other evidence regarding the circumstances.

With thanks to Roni Hoffman, Articling Student.

In the Fall, I blogged about the McGuinty government appointing Toronto lawyer Andrew Pinto to conduct a review of the effectiveness of the June 2008 changes to Ontario’s human rights system. Those changes included creating a direct access complaint model, creating the Human Rights Legal Support Centre to assist complainants and significantly changing the role of the Human Rights Commission.

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On September 21, 2011, the Financial Services Commission of Ontario (FSCO) released its Risk-Based Framework Document, which describes a broad-based framework for the risk-based regulation of pension plans in Ontario. The Framework represents an enhanced form of risk monitoring by FSCO.

The proposed Framework will consider a broad universe of risk factors in areas such as administration, governance, and sponsor related risks. The Framework’s goal is to provide a base level of regulation across all pension plans which will include monitoring key risk indicators, improved dialogue with stakeholders, and promotion of best-practices.

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The Ontario Divisional Court has recently taken some of the “frustration” out of frustration of employment contract cases. In Cowie v. Great Blue Heron Casino, the Divisional Court overturned a trial decision which found no frustration of contract where a security guard’s continued employment was made illegal by a change in the law. The Divisional Court clarified the test for frustration of employment contract cases, finding that where an employee is unable to perform his or her contractual obligations because a change in the law makes his or her continued employment illegal, the employment contracted is frustrated at the point when the law takes effect.

Most frustration of employment contract cases arise from situations involving a prolonged disability or illness where an employer can spend years accommodating the employee before the employment contract is frustrated. In illness or disability cases, frustration is assessed by asking whether the disability prevents the performance of the essential functions of the employee’s job for a period of time sufficient to say that the employment contract is no longer capable of being fulfilled. The difficulty in illness and disability cases is figuring out at what point is the employment contract frustrated. Usually this is a case-by-case assessment taking into account the severity of the illness or disability, when or if recovery is expected, and the length of service of the employee. This analysis does little to pinpoint the moment of contract frustration, leaving employers without guidance on when the employment relationship can be severed due to frustration.

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In the recent decision in McKinstry v. Stone, 2011 ONSC 5544, the Court dismissed the employer's motion for summary judgment on the issue of reasonable notice because the employment agreement referred a "policy booklet" and "standard code of ethics guide", and these were not produced at the motion.

This illustrates a common problem.  It is not unusual for employers to make reference to other documents in their employment agreements, whether it be policies, non-competition agreements, confidentiality agreements, etc.  The risk, from an employer's perspective, is that termination provisions that might seem clear in the employment agreement can be rendered ambiguous (and possibly even unenforceable) by these other documents.  In many cases, a better practice is not make specific reference to external documents at all, other than (perhaps) to state that the employee will comply with the employer's policies and procedures in effect from time to time. 

If the employer needs an employee to sign a confidentiality agreement, for example, provide the confidentiality agreement at the time of hiring and don't bother referring to it in the employment agreement. 

It is worth reading the decision of the court on this point, to drive it home: 

[15]           The Defendants have the burden of proving that Mr. McKinstry has been paid his full legal entitlement arising from his wrongful dismissal from employment without cause.  In order to do so, the Defendants must prove what that entitlement of Mr. McKinstry is.  They submit that it is the amount set out in the termination provision of the Agreement.  They must therefore prove what the specific terms of the Agreement are with respect to Mr. McKinstry’s entitlement.  Mr. McKinstry submits that in order to do so, the Defendants must produce the entire Agreement in its motion record.  This includes the documents referred to in the Agreement.  The Defendants have not produced the policy booklet and standard code of ethics guide which is referred to in the Agreement.  It is argued that it is therefore not possible to properly interpret the termination provision of the Agreement as this Court does not have access to the entire Agreement, which includes these documents.

[16]           I agree with this submission.  To succeed on this motion, the Defendants have a burden of proving that they are entitled to a dismissal of Mr. McKinstry’s claims for damages in wrongful dismissal arising from the failure to provide reasonable notice or pay in lieu thereof.  I agree that they cannot satisfy this burden of proof without establishing what the terms of employment were with respect to termination of employment.  This is a basic requirement that the Defendants must meet and they have not done so.  This is particularly so, in light of the conflicting evidence and submissions of the parties with respect to the effect that two employee manuals distributed after the date of the Agreement may have on the Agreement, as they contain what appear to be different termination of employment provisions.  The entire manuals were not produced by the Defendants.  Mr. McKinstry produced only excerpts of these manuals.  I find that the Defendants have not satisfied their burden of proof on this summary judgment motion with respect to wrongful dismissal claim regarding the failure to provide reasonable notice.  The motion for summary judgment on the wrongful dismissal claim is therefore denied.

An unexpected conflict arose on December 12, 2006.  On one hand, Ontario joined a growing list of jurisdictions that abolished mandatory retirement.  But on the other, the amending bill left provisions in the Human Rights Code (“Code”) untouched that have long permitted insurance, benefit, and pension plan providers to differentiate in coverage based on age.  This means that older workers who continue to work past 65 may lawfully receive diminished benefits compared to their younger peers.

In a recent arbitration, the Ontario Nurses’ Association unsuccessfully challenged the constitutionality of these provisions.  The grievance challenged an employer-sponsored plan that substantially reduced, and in some cases eliminated, benefits to employees aged 65 and older.  Because the decision dealt with a fully-insured plan, however, no comment was made about whether self-insured plans containing age-based distinctions could also claim protection under the Code.

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Winds of investigatory change are blowing through courts and workplaces.  Less then a decade ago, unfounded complaints made against a manager could justify stripping him or her of supervisory duties and bar an action for constructive dismissal.  These employees had no right to know the details of the complaints against them, nor were they entitled to give a response.  Simply put, procedural fairness received little consideration in the non-unionized workplace.

Now, however, with new human rights and occupational health and safety laws that put employers under a duty to investigate discrimination and harassment claims, courts are becoming aware of improper investigations carried out under the guise of other HR functions.

An Ontario court recently ruled on this topic in Chandran v. National Bank of Canada when it held that a senior manager demoted pursuant to an employee satisfaction survey had actually been constructively dismissed because of, among other things, improper workplace investigation procedures.

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Employers must be both cautious and fair when pressing for criminal charges against a dismissed employee. The Court of Appeal clarified in Pate v. Galway-Cavendish (Township) that it is easier for a dismissed employee to prove malicious prosecution by an employer than by a Crown attorney and in particularly egregious cases, trial judges will need to provide sound reasons as to why substantial punitive damages awards for wrongful dismissal should not be ordered against the employer.

Trial Judge: No Malicious Prosecution and Modest Punitive Damages

In Pate, the employer terminated a building inspector for discrepancies in remitting permit fees that had been paid to the inspector. The employer pressed for criminal charges to be laid against the inspector and withheld exculpatory evidence from the police.

After a four day criminal trial, the inspector was acquitted and exonerated. The employer’s actions with respect to the dismissal and withholding of exculpatory evidence came out at the criminal trial. The inspector then sued the employer for wrongful dismissal and malicious prosecution. The trial judge dismissed the claim for malicious prosecution. There was no dispute in the civil trial that there was no cause for termination. The trial judge awarded a reasonable notice period of 12 months plus: 

• a four-month bump-up to the notice period for Wallace damages;
• $75,000 for general and aggravated damages for intentional infliction of mental distress and social and economic damages;
• $7,500 for special damages; and
• $25,000 for punitive damages.

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The Indalex decision, released by the Ontario Court of Appeal earlier this year, gave priority to pension plan members over other secured creditors that had advanced funds to keep Indalex from bankruptcy.  This case came as a surprise to many practitioners and may have far-reaching implications for pension plan administrators and creditors alike. 

Background

Indalex Limited filed for protection under the Companies' Creditors Arrangement Act (CCAA) in 2009. The CCAA Court authorized a loan to Indalex and, in exchange, gave the debtor-in-possession (DIP) lender a super priority over “all other security interests, trusts, liens, charges, and encumbrances, statutory or otherwise.”  This loan was guaranteed by Indalex U.S., Indalex’s parent organization.  When the sale of Indalex was subsequently approved by the CCAA Court, the DIP lender understood that it would have priority over other creditors. 

Indalex was the sponsor and administrator of two underfunded pension plans.  The pension plan members argued that the sale proceeds should first fund the pension plans’ deficiencies, which amounted to $6.75 million.  The first plan, the Executive Plan, had not been wound up as of the date of the CCAA filing.  The second plan, the Salaried Plan, was wound up in 2006 – prior to the filing of CCAA.  The CCAA Court ruled that the sale assets were properly paid to the DIP lender. 

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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 gave advice to construction managers on how to effectively draft an incident response plan.

This is the second video from a four-part series from Jeremy’s presentation recorded by Reed Construction Data Canada. We will continue to post video clips over the next two weeks.

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
• transportation.

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.

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Effective January 1, 2012, most private sector businesses will need to comply with new customer service requirements under the Accessibility for Ontarians with Disabilities Act.

The new requirements, which are described in the Accessibility Standards for Customer Service, are intended to promote the accessibility of goods and services to people with disabilities. These requirements already apply to parts of the public sector.

As of January 1, 2012, the requirements will apply to all people, businesses and organizations that:

• Provide goods or services either to the public or to other businesses or organizations; and
• Have at least one employee in Ontario.

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