SCC: Unjust Dismissal: Big Win for Employees

The Supreme Court of Canada has issued a landmark employment law decision.  The case of Wilson v. Atomic Energy of Canada focused on the definition of “unjust dismissal” under Part III of the Canada Labour Code.  In a nutshell, the Supreme Court has held that the vast majority of federally regulated employees can access the unjust dismissal provisions of the Code.  These employees can seek reinstatement or significant compensation on dismissal.

In other words, a Federally regulated employer, for example a bank or cable company, cannot simply dismiss an employee on a “without cause” basis and provide severance arrangements.  Dismissed employees in these circumstances can file unjust dismissal complaints and seek reinstatement.

The Wilson v. Atomic Energy decision considered the circumstances of a four and a half year employee with a clean disciplinary record.  The employee was dismissed on a “without cause” basis and provided with a severance package.  He challenged the decision and filed an unjust dismissal complaint.  Although successful at adjudication, the decision was overturned at the Federal Court and Federal Court of Appeal levels and worked its way up to the Supreme Court of Canada.

Writing for herself and five other Supreme Court justices, Abella J reviewed the history of the Canada Labour Code’s unjust dismissal provisions, which were enacted in 1978.  She concluded that the purpose of these enactments was to ensure that non-unionized Federally regulated employees would be entitled to protection from dismissal without cause.  Federally regulated employees, she concluded, enjoy “fundamental protection from arbitrary dismissal” even with pay.

Although there are certain exceptions including situations involving the “discontinuance of a function” or a “lack of work,” this Supreme Court decision makes it abundantly clear that employers in the Federally regulated sector cannot simply terminate the employment of most employees.

This decision could greatly increase the number of unjust dismissal complaints in Federally regulated workplaces.  For example, any non-managerial employee, with one year or more of service, working for a Canadian bank can seek reinstatement if the employee is dismissed on a “without cause” basis, even if a severance package is provided.  This would, of course, invalidate the minimum type severance provisions that some Canadian banks have tried to use in their employment contracts with employees.

Employees who have been dismissed by a Federally regulated employer must file the unjust dismissal complaint within 90 days of the dismissal.  If not, it appears from the decision that the employee loses the right to this statutory framework and is left with common law remedies alone.

Three of the Supreme Court justices endorsed a vigorous dissent in which they would have held that the Canada Labour Code is, essentially, procedural and does not override Canadian common law.  The minority interpretation would have gutted the Code of any real meaning for Federal employees.

The dissenting justices correctly highlighted the fact that a Federally regulated employee can lose his or her protection if the employee misses the 90 day timeline.  Perhaps a future court decision will enable employees to use the civil courts, if necessary, to enforce the unjust dismissal provisions if the deadline has been missed.  However, for now, dismissed employees and their counsel should ensure that they file an unjust dismissal complaint within the 90 day time period.

It is interesting that the Supreme Court, in both the minority and majority reasons, chose to comment on the common law standards of dismissal by way of obiter.  The court noted that, at common law, employers can dismiss employees “for whatever reason they want so long as they give reasonable notice or pay in lieu of notice.”  This suggests that, for the time being, the court is not about to add in a “good faith” obligation as a requirement for dismissing a non-federally regulated employee.

This decision reinforces the wide gap between employees in the Federal sector and employees in most other provincial jurisdictions.  An employee dismissed on a without cause basis in Ontario can file a wrongful dismissal complaint and sue for dismissal damages in the court system.  In some cases, the employee may also have a valid claim for other damages or remedies.  But reinstatement is not an option, nor is the court required to consider why the employee was dismissed, if the dismissal was on a “without cause” basis.

But in the federal sector, it is now clear that the vast majority of dismissed employees enjoy “union-like” protection.  They can file unjust dismissal complaints and seek reinstatement or significantly increased damages.  Non-managerial employees with more than one year of service who have been dismissed from Canadian banks, telephone and cable companies, radio stations and other industries have significant negotiating leverage and may demand reinstatement or negotiate significantly higher severance packages.

Damages under the Canada Labour Code can be exponentially higher since employees can be awarded reinstatement and compensated for the time that they were out work.  Overall, this is an extremely helpful decision for federally regulated employees.

 

 

 

 

 

Just Cause for Dismissal: Is One Incident Enough?

Is one incident of dishonesty just cause for dismissal?  What if it involves a long-serving employee?  This was the issue that was decided recently by the B.C. Court of Appeal in  Steel v. Coast Capital Savings Credit Union.  

The plaintiff, Susan Steel, was a help desk analyst.  She had been employed by the Credit Union for 21 years.  In 2008, the plaintiff accessed the personal folder of a manager.  The manager kept a folder for assigning parking spaces and the plaintiff wanted to check her status.  She was caught because the manager was accessing the folder at the very same time.  She was confronted and admitted her misconduct.  She also acknowledged that she did not have authorization.

At trial, the judge reviewed the case law, focusing on the Supreme Court of Canada’s landmark decision in McKinley v. B.C. Tel (2001) SCC 38. The court dismissed the case and found that Ms Steel had been dismissed for just cause.  The plaintiff appealed to the B.C. Court of Appeal.

By a 2-1 majority decision, the B.C. Court of Appeal upheld the trial court decision and dismissed the appeal.  As the Court of Appeal put it, “McKinley requires courts to apply a contextual analysis to determine whether employee misconduct amounts to just cause for dismissal….Following McKinley, a single act of dishonesty as a matter of law no longer gives an employer an absolute right to dismissal its employee.”

However, the Court of Appeal also noted that “a single act of misconduct can justify dismissal if the misconduct is of a sufficient character to cause the irreparable breakdown of the employment relationship.”

The majority of the court held that a breach of privacy was such a fundamental obligation in this type of employment position that the plaintiff’s action could be seen as causing a “fundamental breakdown of the employment relationship.”

In dissenting reasons, Justice Donald included this sentence:  “What is absent from the trial judge’s reasons is an explanation why a single instance of a breach of the privacy rules should end a 21 year career….The record does not show deceit, fraud, theft or stealth.  The misconduct was serious, as the judge found, but her analysis of the proportionality of the penalty left out a vital factor.”  Justice Donald would have allowed the appeal and remitted the case to the trial judge for an assessment of damages.

The McKinley decision has been cited many times and has been interpreted in different ways.  In some cases, it has been used to help dismissed plaintiffs obtain damages where many people might find the results to be puzzling and overly sympathetic.  In other cases, courts have limited the application of McKinley to minor or more limited instances of dishonesty or misconduct.

Ultimately, each judge applies his or own sense of “proportion” and reasonableness.  Here two appellate court judges held that one instance of this type of dishonesty was cause for dismissal, whereas one judge disagreed.

For plaintiffs and for employers these are risky cases.  They are fact driven.  But they also depend on sensibilities of the particular judge hearing the case as well as the appellate court panel that might hear the case if it is appealed.

For Susan Steel, this was a very costly and time consuming ordeal.  The Court of Appeal decision was released in 2015, some seven years after Ms Steel was dismissed.  Ultimately, she has been awarded nothing after 21 years of employment and may well have incurred significant legal fees.  The case is a reminder of the high stakes of pursuing just cause litigation where an undisputed instance of improper conduct is involved.

 

Are Employment Contracts Negotiable?

Are the terms of employment contracts negotiable?  More often than not, the answer is yes.  But it amazes me how many people tell me that they assumed that the proposed employment contract was simply a “standard form” agreement and just signed it – even when accepting fairly high level positions.

In other posts, I have looked at the types of clauses that can be used in employment contracts and what they really mean.  You can find the most recent discussion here.

But I wanted to consider some more practical points.  Some might seem obvious.  But people holding a new job offer in hand don’t always think of everything that should be considered.  While you may be anxious to sign the employment contract and start the new job, especially if you have been out of work for some period of time, you really do need to look at the contact closely.  Not all of the terms are written in stone.

What items can be negotiated?

1. Salary.  Well, of course this is not really a legal point.  But most people realize that salary is negotiable.  So I often have employees tell me that they negotiated up the salary level of a new position – but ignored everything else in the contract.  Don’t assume that the salary is fixed.  There may well be room to improve it.  Most of the time, it can’t hurt to try.

2. Vacation and Bonus.  In a sense, these benefits go hand in hand with salary.  They are tangible items that an employer might agree to increase.  Often, both items are subject to a grid or a plan.  But I regularly see employers making agreements to increase vacation time at the request of a new hire – especially from two to three weeks or from three to four.

3. Severance.  This is crucial.  Even though it might seem like the last thing on the mind of someone who is about to be hired, it can be incredibly significant.  Some employers will use clauses that drastically limit the amount of potential severance to be paid on a dismissal.  Any clauses that say “employment standards legislation” or something similar should be questioned and considered.  They might even be deal breaking clauses.  As a result, employers will often negotiate these clauses.  If they will not, you should get proper legal advice so that you understand the implications of signing away such important and monetarily valuable rights.

4. Non-Competition Agreements: People generally realize that these clauses are significant, even if they have not had legal advice.  But I often hear employees telling me that a friend or family member told them not to worry because these clauses are rarely enforced and may not even be enforceable.  While that advice might be true sometimes, it is not always the case.  Signing a non-competition agreement – or even a “non-solicitation” agreement can greatly impact your future opportunities after leaving this new employer.  These clauses are also often negotiable, particularly the proposed time period of the restrictions.

5. Probation and Benefits Clauses.  Believe it or not, these too are negotiable items.  If an employee is being recruited from another position, the potential employer may agree to waive a probationary period and/or start benefits right away.  Sometimes a signing bonus can even be negotiated.

These are just a few of the points to consider.  Competent legal counsel can often point out a number of different clauses in a proposed employment contract that are problematic or that should be considered very carefully.  It may well be much cheaper, in the long run, to go through an employment contract review process at the outset than a legal battle at the end of a relationship.  It is usually far worse to find out, after being dismissed, that a signed employment agreement has now left you with below-market severance, enforceable post-employment restriction and no real legal alternatives.

If the employer is reasonable and is genuinely interested in treating its employees fairly, it should be prepared to negotiate reasonable provisions in all of these areas and maybe some others as well.

 

 

Less Money for Dismissal in Tough Economic Times?

Should a dismissed employee be entitled to less severance when the employer is facing tough economic times?  This was the question facing an Ontario Superior Court judge recently in Gristey v. Emke Schaab Climatecare Inc, a case released on March 20, 2014.  According to the trial court judge, the answer was yes.

The plaintiff had worked in residential gas installation for 12 years for the defendant.  He was earning an income of approximately $55,000 annually, though it fluctuated depending on the availability of work.  He was dismissed after 12 years of service on a “without cause” basis.  A number of other employees were also dismissed at the time.

At the time of dismissal, the defendant offered to pay the plaintiff a total of 8 weeks’ pay, which was the minimum that would have been owed under the Ontario Employment Standards Act.  It asked for a signed release.  The plaintiff refused and brought a claim for wrongful dismissal.  The defendant paid out the 8 weeks’ pay.

At trial, the defendant argued that business was slow.  It took the position that the plaintiff would have have worked a very small number of hours if he had not been dismissed and that his damages would have been reduced to a very nominal amount.  The trial judge rejected the argument that there was sufficient evidence to draw this conclusion.  In other words, the court concluded that the plaintiff still would have earned an income if he had not been dismissed.

However, the trial judge expressly accounted for tough economic times in assessing the notice period.  First, the judge concluded that the appropriate notice period should have been 12 months.  This is probably a reasonable conclusion, based on all of the common law factors.  The plaintiff was 52 when he was dismissed.  Looking at all of the common law factors, including length of service, position, age, availability of comparable work and other relevant factors, a 12 month award would have made sense.

Justice Conlan then proceeded to reduce the plaintiff’s award by four months’ pay because of the “market and economic health of the [defendant]” at the time of dismissal.  In doing so, the court relied on the decision of Bohemier v. Storwal International, (1982) CanLii 1764 (Ont S.C.J.), a decision that had been affirmed by the Ontario Court of Appeal in 1983.

The Bohemier decision held that a notice period should be fair to both the employee and the employer.  However, as it has been interpreted subsequently by other court decisions, it did not say that the plaintiff’s notice period should be eviscerated because the employer is facing tough economic times.  In fact, if times are really tough, the dismissed employee will have a more difficult time finding alternate employment and could require a longer notice period.

It may be that Justice Conlan was swayed in this particular case by the fact that the plaintiff’s hours fluctuated and there might have been less work over the notice period.  Or perhaps the court was not fully convinced of the plaintiff’s mitigation efforts, even though the court expressly concluded that the plaintiff had mitigated his damages satisfactorily.  In any case, the court concluded that 12 months’ severance was too much for the plaintiff and reduced it to 8 months, expressly relying on the fact that the defendant was facing difficult economic times.

It remains to be seen whether the plaintiff will appeal this decision.  the amount at stake would be approximately $20,000.  There could also be significant legal costs at stake, depending on what types of offers to settle, if any, were exchanged between the parties before the trial.  The Ontario Court of Appeal does not like to “tinker” with notice periods if they are in a “reasonable range.”  However, the plaintiff could try arguing that the court made an error in principle by placing an overly significant emphasis on the economic challenges facing the defendant.

If this decision stands, it would be a very helpful piece of ammunition for defendants facing tough times.  Defendants can use this argument to limit severance liability in tough economic times.

For plaintiffs, it can be a real double whammy.  The employee is let go in difficult economic times, where it may well take longer to find work. Then the plaintiff faces a reduced notice period because of those same difficult economic times.  There seems to be a problem with this logic…

We will watch to see what happens with this case and how (if at all) it is applied.

Not My Pot: Wrongfully Dismissed Courier Wins…

A wrongfully dismissed courier has won a lawsuit at the Saskatchewan Court of Appeal.  In Hollander v. Tiger Courier Inc. (2014) SKCA 7, the courier was dismissed when a package of marijuana was delivered to the office addressed to him.  He claimed it was not his package and he had no knowledge of it.  The employer called the police but no charges were laid.  However, the employer terminated the courier and alleged that it had just cause.  It was not clear from the decision what happened to the pot, but presumably the police confiscated it.

The case had an unfortunate twist.  The courier had worked as an employee with the company for ten years.  But after that, he had become an “independent contractor” and worked in that capacity for three years before this incident occurred.  He had signed an independent contractor agreement that provided for thirty days’ notice of any dismissal (without cause).

When the courier was wrongfully dismissed, he sued for breach of contract but he did not sue for wrongful dismissal.  He did not claim that he was really an “employee,” nor did he directly challenge the independent contractor agreement, although he claimed other damages flowing from breach of contract.  If the courier had been able to challenge the contract and prove “wrongful dismissal,” he might have been awarded a year’s pay or more.

However, he only alleged “breach of contract.”  As a result, the courier put himself in a situation where if were to win his lawsuit, he would win thirty days’ pay, as required under his contract.  If he were to lose, he would get nothing.

At trial, the lower court judge held that the package of pot, that had been sent to the courier from his brother in Vancouver, was “clear evidence of illegal or criminal conduct” and this would justify termination, even though no criminal charges were ever laid.

The Court of Appeal disagreed.  It overturned this finding and ruled that there was no clear evidence that the courier himself had engaged in any criminal or other misconduct.  Just because a family member delivers a package of illegal drugs to a person’s workplace, this does not mean that the person has engaged in any improper activity..or at least there is no clear evidence of such misconduct.

However, the Court of Appeal went on to award damages of only thirty days’ compensation, which amounted to the grand total of $2,973.70.   This was really a pyrrhic victory for the plaintiff.  He lost his courier job and got only 30 days’ compensation after 13 years of work.  He also lost the pot, which may well have been worth close to the amount of the judgment.  And we haven’t even mentioned legal fees…

 

 

 

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