This is a short list of a few of the main topics that I will be covering and some of the key points:

1.  Workplace  Accommodation: Sabbath Observance:  Many Canadian employees of different faiths observe a weekly Sabbath.  Since the Canadian Charter of Rights and Freedoms (the “Charter”) came in effect in 1985, the Canadian Supreme Court has, on a number of occasions, recognized the importance of accommodating minority religious requirements, including a weekly Sabbath.  Canadian employers are required to accommodate the Sabbath observance of their employees by permitting employees to take the day off unless doing so would create “undue hardship” for employers.  In unionized workplaces, unions are also responsible for cooperating with this duty to accommodate these needs.  There are very few cases in which Canadian courts, tribunals or arbitrators have actually found that it would create “undue hardship” to permit an employee to observe his or her weekly Sabbath, although there have been some.  One recognized exception would be if the employer was looking to hire a person specifically to work on the Sabbath day.  Another would be if work on the Sabbath could be shown to be an essential requirement of the position.  For the most part, however, even small workplaces have been required to permit employees to observe their weekly Sabbath breaks.

2.  Workplace Accommodation: Religious Holy Days:  As with weekly Sabbath observance, Canadian employers have also been required to permit employees to take time off to celebrate or observe religious holy days, subject to “undue hardship.”  This may include a significant number of days in a calendar year.  However, the legal question has been whether employers are required to pay for these observances.  The short answer, for the most part is “no.”  If employers provide “discretionary days off” or “personal days” or most other types of paid days, employees are permitted to use these days, as paid days off, to observe holy days.  Employees are not required, and cannot be required, by their employers to use up paid vacation time for these days. Moreover, if there is a way to make up the days through scheduling time, extra hours, or time shifting, employers are required to permit their employees to use these methods.   Many employers do provide two or three paid annual “personal” or “discretionary” days which employees can use for these purposes.  But, in most cases, employers are not required to pay for religious holy days even though they must permit employees to observe these days by not attending at work.   If employees elect not to use their vacation time for these observances, they can take unpaid holy day time – or try to make up the time otherwise.

3.  Workplace Accommodation: Daily Prayer Breaks: There are fewer cases involving daily prayer breaks.  However, Canadian law recognizes that employers must accommodate these requirements to the point of undue hardship.  Employers may put rules into place to ensure that a workplace or a post is not left vacant while an employee takes a prayer break.  For example, a system of notifying a superior, obtaining approval or “signing out” at the required time may be reasonable.  Employers are not necessarily required to pay for this prayer break time and can ask employees to work extra time to make up this break time – unless the employees are simply using break time that is otherwise available to all employers.  Employers are not necessarily required to provide designated prayer areas, though if this is something that can be arranged, it may be preferable over having the employees leave the workplace.

4.  Workplace Accommodation: Religious Dress: Canadian employers are required to permit their employees to wear various forms of religious dress unless doing so would create undue hardship (which usually means safety concerns in this area).  Thus employees may wear turbans, kippahs (yarmulkes), hijabs, crosses, kirpans and other forms of religiously required headgear or attire to work.  Employers, in most cases, cannot require employees to shave their beards or other facial hair that is grown for religious purposes.  Clothing that is not religiously required but is a cultural practice may be permitted as well, though this may be open to question.  Clothing worn for religious or cultural reasons which completely covers a person’s face such as a niqab or a burka may also create issues if the employee works, for example, in a customer service environment.  Employers may argue that it is an essential requirement of the position that the employee’s face be visible while working.  It is unclear how courts and tribunals will decide these cases.  In 2012, the Supreme Court determined that women who wear niqabs may be required to remove them when testifying in court in some circumstances.  However, this has not yet been applied to workplaces.

4.  Workplace Accommodation: Employer Requirements:  If employees are asked to do something that would violate their religious beliefs, practices or customs, they may be able to get an exemption from these requirements for religious reasons.  The test would be whether the issue can be accommodated without creating undue hardship.  In one case, for example, some 407 employees refused to participate in a new security system that involved biometric hand scans, for fear of having the “Mark of the Beast” imprinted on their hands.  An arbitrator accepted this argument and exempted the employees from the biometric hand scan program, finding that this was something that could be accommodated.  Employers are not required, however, to accommodate religious requirements that would affect the human rights of other employees.  So if, for example, an employee requests that he or she not be required to work with members of the opposite gender, that request need not be accommodated in a Canadian workplace since it would affect the equality rights of other employees.

Other issues may arise that relate to religious freedom in the workplace.  The Supreme Court of Canada has established that employees seeking any of these accommodations for religious purposes are not required to prove that they are religiously required by a particular religion or religious leader to observe such practices.  Rather, they need only prove that they are sincere in their belief and observance of a particular practice.  In other words, employees must show that they believes that they are required to observe a particular practice and actually follow it, sincerely.  If this can be demonstrated, Canadian employers are required, in most cases, to accommodate the practice to the point of undue hardship.

Linda Fraser had worked for UBS for more than 20 years.  She became ill after a holiday and was off work for six months on short term disability leave.  She tried to return to work but was unable to do so due to her illness, which had become more severe.  She went off again on short term disability leave for another six months.  After her second leave, Ms Fraser was off for a two year period on long term disability leave.

Most LTD policies change after two years.  For the first two years, Ms Fraser was required to show that she could not perform the duties of her employment, meaning the specific job that she had with UBS.  After two years, she was required to show that she could not perform the duties of any gainful occupation.  The insurer cut Ms Fraser off benefits when the definition changed and Ms Fraser sued the insurer to challenge that decision.  The lawsuit was totally separate from her wrongful dismissal case.

From UBS’ perspective, Ms Fraser’s disability coverage ended even though she was suing the insurer.  She was off work and no longer in receipt of benefits for a period of five months.  She did not keep UBS informed about her status.  After five months, UBS wrote to Ms Fraser and stated that her employment was being terminated.  It paid her out 8 weeks’ notice pay and 22 weeks’ severance pay under the Ontario Employment Standards Act and continued her extended health benefits for three more months.  Ms Fraser did not accept this decision and sued for wrongful dismissal.

At trial Justice Wein of the Ontario Superior Court reviewed the law of “frustration” and concluded that it applied in this case.  Ms Fraser was found to be “permanently disabled.”  The Court held that she is “totally disabled and her disability is permanent such that she will never be able to work again.”  As a result, the employment contract had ended and UBS was not required to provide any further payments.  The wrongful dismissal lawsuit was dismissed.

For employees in Ontario, the case is a reminder that employees have an obligation to keep their employers updated as to their status when they are off on a sick leave.  If disability benefits are cut off, they must provide information to their employers about their proposed actions.  If it becomes clear that the employee will not be able to return to work again, the employer may be able to conclude that the employment relationship has ended.  This will not necessarily lead to a viable wrongful dismissal lawsuit.

For employers, this type of decision is rare.  If the employee can show that he or she simply required more time to recover and kept the employer informed, the employer will not necessarily be able to rely on “frustration.”  The situation may also be different where the employee continues to receive LTD benefits.  Employers looking to rely on “frustration” will need to be reasonably sure that the employee will not be able to return to work for the foreseeable future.

In this case, Fredrickson v. Newtech Dental Laboratory Inc. the plaintiff had worked as a registered dental assistant for more than 8 1/2years.  After what appears to have been an office dispute with her boss, the plaintiff went off on a medical leave.  During the leave, she provided minimalist medical notes.  In response to her leave, her boss demanded that she return to work and threatened to fire her without notice or compensation.  Nevertheless, she remained off on a medical leave.

A few months later, the plaintiff provided a note indicating that she was fit to return to work.  She showed up for work at her usual time and was promptly told that she was being put on a lay-off due to lack of work.  Two months after that, she retained a lawyer who sent a demand letter.  In response, the defendant told her that she was being recalled and  should return to work.  The plaintiff did not return to work but commenced a claim for wrongful dismissal instead.   The defendant subsequently offered to pay for the time that she had been out of work as part of the return to work proposal and made a similar offer after litigation was commenced.

The plaintiff sued for wrongful dismissal.  At trial, the defendant admitted that the plaintiff had been wrongfully dismissed but took the position that she had failed to mitigate her damages by returning to work.  The trial court judge agreed.

The court applied the Supreme Court of Canada decision of Evans v. Teamsters Local Union No. 31 and ultimately concluded that it was objectively reasonable for the plaintiff to have been required to return to work.  According the trial court, there had been a failure to mitigate.

In coming to this conclusion, the trial judge:

-ignored or disregarded the fact that plaintiff was put on a lay-off right when she returned from a medical leave and that she had been threatened while on leave with termination;

-disregarded or minimized the fact that the employer provided an unprofessional reference letter and a botched ROE;

-overlooked the fact that the employer did not offer to compensate the plaintiff for the time lost until after the plaintiff filed the lawsuit

-minimized the notion that the plaintiff had been subject to embarrassing and humiliating treatment.

The court concluded that the employer had not had a “sinister motive” when he put the plaintiff on lay-off and that would have been able to return to the work that she had performed for more than 8 years.  Accordingly the plaintiff was only entitled to damages from the date of the lay-off until the date she was recalled to work.  Ouch!

You can find a discussion of some other similar cases here.

The bottom line is this:

If an employer wrongfully dismisses an employee and then decides to recall the employee back to work – even after the employee commences a lawsuit, there are many court decisions from across Canada that support the position the employee must return to work.

If the employee is “recalled” to work, even after filing a wrongful dismissal lawsuit, but refuses to return, the damages awarded by a court may be minimal.

I wrote about the trial court decision in Rhebergen v. Creston Veterinary Clinic last year.  The B.C. Court had held that a three year non-competition agreement was unenforceable.  This decision was recently overturned.  The B.C. Court of Appeal has now ruled that the non-competition agreement in question was enforceable.  It is worth looking at some of the key facts.

Factual Background and Key Clauses

Creston Veterinary Clinic (“CVC”) is located in Creston B.C.  There are no other clinics within a 100 mile radius.  Most of CVC’s business comes from servicing eight dairy farms in the Creston area.

CVC hired a newly graduated physician, Dr. Rhebergen, to train and work in the field of dairy medicine.  The parties signed an employment contract with some key terms:

1.  This was a three year contract, that could only be terminated for “cause” or under certain other conditions;

2.  The contract provided that Dr. Rhebergen could not set up a veterinary practice within a twenty-five mile radius of CVC within three years of the end of her employment.  If she were to breach this clause within a year of leaving CVC, she would have to pay $150,000.  The amount would decline by $30,000 for each of the subsequent two years.

3.  Dr. Rhebergen was being paid $65,000 per year.  When differences arose some fourteen months later, Dr. Rhebergen brought a court application asking the B.C. court to rule that the clause was unenforceable.

Trial Court Ruling:

As I discussed in May 2013, the trial court held that the clause was unenforceable.  It ruled that that the clause was vague and uncertain.  Could Dr. Rhebergen set up a practice 30 miles away but still service those eight dairies?  What if she was set up 50 miles away and was serving two of the dairies in question with most of her work from other sources?  Would this be a violation?  At what point would the damages payment kick in?

The trial court also ruled that the non-competition clause was a restraint of trade clause and  was unenforceable because it was unreasonable.  It was too long (three years) and provided for a payment of a very large sum of damages in the event of a breach, without any proof of actual damage caused.  The trial court judge held that a payment of $120,000 for setting up a practice within a 25-mile radius was a “penalty” clause rather than a genuine pre-estimate of liquidated damages to be incurred.

All of this seemed quite logical to me in reviewing the decision last year.

Court of Appeal Ruling:

The B.C. Court of Appeal overturned the trial ruling in a two to one majority decision.

The Court of Appeal agreed that this clause was a “restraint of trade” clause.  However, it held that the clause was a reasonable one.

The Court of Appeal accepted the argument that the damages clause was a reasonable calculation of the cost of “mentoring, training and equipment costs to the clinic” if Dr. Rhebergen were to leave before the conclusion of the three year period.  The Court of Appeal also looked at the impact on the clinic’s “goodwill and volume of business.”  The court concluded that this clause was not a penalty and that the only question was whether, overall, the clause was reasonable.

The court seems to have blended in costs of mentoring and training – that the clinic would have had during the three years of the agreement as a factor in assessing a possible breach of the agreement even after the end of the three year period.

The majority concluded that the clause was not ambiguous.  It applied a far reaching definition and held that Dr. Rhebergen would be barred from serving the eight dairy farms that are within a twenty-five mile radius of Creston.  If she were to “provide…services on a regular or continuous basis…” to those eight dairies, regardless of where she was actually based, this would constitute a breach of the agreement and trigger the payment.

The dissenting appellate court judge held that the clause was unenforceable since it was uncertain.  It was unclear at what point Dr. Rhebergen would have been taken to have “established” a practice and at what point the entire $150,000 damages clause would kick in.

Conclusion

The Court of Appeal accepted the underlying premise that CVC was entitled to protect its business with this type of three year agreement.  In doing so, the Court of Appeal must be taken to have viewed this type of arrangement as more of an business contract than an employment relationship.  CVC agrees to train, mentor and develop a new veterinarian – but in exchange it is largely insulated from competition for three years after the initial three year period.  Presumably, the majority of the court felt that the amounts set out as damages for breach would be reasonable business costs of competing in the in specific area.  Perhaps the majority felt that the $150,000 or $90,000 payment was more like a licence to compete – after having received all of the training and mentoring in the field from CVC.

While there is something to be said for this type of analysis, there are some other compelling factors that come into play.  Dr. Rhebergen was only earning $65,000 and was bound to work for three years in an area in which CVC had a virtual monopoly.  To continue working in her chosen field (dairy medicine) in the same area, Dr. Rhebergen would have to pay an amount close to two and a half year’s salary.  Is it really in the public interest to assist professionals, whether veterinarians, lawyers or dentists, in their efforts to  protect lengthy geographic monopolies over the provision of professional services?  In this case, Dr. Rhebergen received training and mentoring from CVC during the initial fourteen month period but, presumably, CVC earned money as a result of her work as well.  It seems far from clear to me that the costs of training, mentoring etc., should be factored in to the reasonableness of the post-employment non-competition provision.

While it would seem reasonable to allow CVC to protect its client base from competition from a newly trained competitor, a much shorter time period ought to have been adequate.  This provision would require Dr. Rhebergen to pay one and half year’s salary in exchange for setting up a vet practice three years after having left CVC.  That does not seem consistent with much of the established law across Canada on “reasonableness.”  Reasonableness should be measured between the parties and as it relates to the public interest.  It seems like quite a stretch on reasonableness to say that CVC requires three years of non-competition to protect its legitimate proprietary interests from a newly graduated vet.

It is unclear to me whether Dr. Rhebergen intends to ask the Supreme Court of Canada to hear this case.  The Supreme Court has adjudicated a number of non-competition cases and will sometimes agree to hear these cases where there is a split court of appeal and an interesting theoretical issue that raises concerns of national importance.   This seems like the type of case that would meet those criteria.

Assuming that the case is not heard by the Supreme Court of Canada, the decision in Rhebergen v. Creston Veterinary Clinic will stand as a decision that further clouds the judicial waters in assessing non-competition agreements.  Moreover, it may give employers renewed hope that they can enforce these agreements by using reasonable damages clauses in their restrictive covenant agreements.

Katie Hamilton worked as a cashier and cook in Crepe It Up, a small restaurant owned and operated by Chris Quy Lee on Church Street in Toronto. She worked there for about six months. She quit work and filed a complaint against Mr. Lee at the Ontario Human Rights Tribunal, alleging that she had been forced to endure a poisoned work environment.  Ms Hamilton’s claim went to a two day tribunal hearing in May 2012. At the hearing the adjudicator heard evidence of various comments made by Mr. Lee, some of which were only partially contested. The adjudicator made a number of findings of inappropriate comments on the part of Mr. Lee.

The findings included:

• Lee had referred to a Black employee as being on “Jamaican time”
• He had made a comment about anal sex to Ms Hamilton that he knew or ought to have known was unwelcome;
• He had sent an allegedly inappropriate text to Ms Hamilton’s boyfriend when Ms Hamilton had not phoned in to Mr. Lee. This was the day after Halloween and Ms Hamilton had dressed up as Little Red Riding Hood. The adjudicator found that the text said “where is she, did you eat her?” The adjudicator found that this was an unwelcome comment containing sexual innuendo;
• Staff members were asked to wear buttons that said “A kiss gets you 14% off.” The adjudicator held that Mr. Lee knew or should have known that this was would be an invitation to kiss staff.

Ultimately, the adjudicator held that Ms Hamilton had experienced a poisoned work environment, contrary to section 5(1) of the Ontario Human Rights Code. Ms Hamilton was awarded $3,000 as compensation for injury to dignity, feelings and self-respect. Mr. Lee brought a judicial review application to the Ontario Divisional Court.

The Divisional Court overturned the decision and sent it back to the Tribunal to be heard by a different adjudicator. The Divisional Court decision is somewhat puzzling.

Essentially, the Divisional Court rejected two of the factual findings and conclusions of the adjudicator.

With respect to one set of findings, it questioned the process by which the adjudicator had concluded that the comments about anal sex had been made. As a result, it concluded that the adjudicator’s “finding that the allegation was proved is consequently unreasonable.”

The Divisional Court also took issue with the post-Halloween text. It held that Ms Hamilton’s boyfriend would not have shown the allegedly offensive text to her; that it was not “workplace-related” and Ms Hamilton did not complain about it at the time. The Court concluded that “it is difficult to see how this conduct, even if it is discriminatory, could have contributed to the poisoning of the work environment.”

Accordingly, the Divisional Court found that two of the findings by the adjudicator were “unreasonable” and the “finding of liability based on a poisoned work environment must be set aside.”

What has really occurred here? The Divisional Court, without actually hearing the witnesses at a hearing, has substituted its views for those of the adjudicator. Perhaps, the court did not really believe that these comments, even if all true, were serious enough to warrant a finding of a poisoned work atmosphere. That might have been the court’s prerogative, as a matter of law, but that is not what the court chose to say. Instead, the court held that the adjudicator’s findings were “unreasonable.” While the court may not have liked the adjudicator’s decision, it seems like quite a stretch to call the adjudicator’s conclusions “unreasonable.”

Perhaps the court’s view was coloured by the fact that Mr. Lee is an openly gay man. It may be that the judges of the court had concluded that the comments were not as threatening or offensive when made by a gay man to a female employee as they would have been from a straight boss who was seeking sexual favours from a complainant.

In any case, the divisional court applied the 2013 decision of the Ontario Court of Appeal in General Motors of Canada v. Johnson (2013) ONCA 52. Here is the key passage, picked up by the court:

“[E]xcept for particularly egregious, stand-alone incidents, a poisoned workplace is not created, as a matter of law, unless serious wrongful behaviour sufficient to create a hostile or intolerable work environment is persistent or repeated.”

Following the Johnson decision, the Crépe It Up v. Hamilton decision is a further example of a judicial pendulum that has swung back somewhat in favour of employers. Ontario courts have been making it more difficult for employees to establish a “poisoned work atmosphere” in cases of isolated comments or incidents that are viewed by the courts as less serious. This is a marked departure from some early decisions of the Ontario Court of Appeal in a sexual harassment context, such as Bannister v. General Motors [1998] O.J. No. 3402, in which the court took a much stricter view of certain types of unwelcome comments.

In the present case, the matter is not yet concluded. Crépe It Up may still find itself in hot water at the conclusion of another hearing as long as the reasons of a new adjudicator are not held to be half-baked. The adjudicator will need to sift through the new evidence more carefully and apply the divisional court’s definition of a “poisoned work environment” to all of the evidence that it hears.

Of course, Ms Hamilton may prefer to try to take this case to the Ontario Court of Appeal. She would need to “seek leave” but the Court of Appeal may well agree to hear the case. She could certainly argue that there seems to be some very questionable legal analysis by the Divisional Court in this decision.

This could all make for very interesting law. However, another possibility is that Ms Hamilton might simply choose to drop the matter altogether. Given the amount of money at stake ($3,000 plus legal fees awarded to Mr. Lee of approximately $2,000), this might be the most financially sound decision.

We’ll watch for any developments.

1.  Ghomeshi and the CBC

This case is not completely over since there is a still a potential labour arbitration pending.  Moreover, the case was not adjudicated.  It was settled.  However, it created a great deal of discussion in the employment law world and for that reason it is worth including.  What are the key points to think about?

A.  Unionized employees will have an incredibly difficult time launching wrongful dismissal or other employment law related cases in the court system.  The proper venue for these cases is labour arbitration hearings.  For the most part, dismissed unionized employees must file a grievance.

B.  Egregious personal conduct, even off-hours conduct, can be cause for dismissal, particularly if at least some of it spills over into the workplace or into workplace related events.  Employers will need to pay careful attention to allegations of improper personal conduct and should address and deal with these matters before they become unmanageable.

C.  Taking an extremely aggressive approach to employment law litigation is simply not always the best strategy for plaintiffs.

There may still be more on this in 2015 as Canadians follow Ghomeshi’s criminal proceedings and his labour arbitration case.  The high profile nature of the dispute warrants its inclusion on a list of interesting developments.

2.  Boucher v. Wal-mart

The Ontario Court of Appeal awarded more than $400,000 to an employee who had been subjected to humiliating treatment in the workplace.  It is still rare in Canada to see these types of awards.  Although the amount of the trial judgment was reduced considerably, this case is still a significant weapon in the arsenal of decisions upon which abused employees and their counsel will rely.  It remains to be seen whether large scale punitive and aggravated damages become more commonplace in Canada.  Employees facing humiliating workplace conduct and bullying bosses have additional legal options to consider in light of this decision.

3.  AG Canada v. Johnstone

In this key case, the Federal Court of Appeal looked at the issue of “family status” under human rights legislation and concluded that family status includes childcare responsibilities and similar family care obligations.  This means that an employee with childcare responsibilities may, in certain circumstances, be entitled to protection and accommodation under applicable human rights legislation.  The Court set out a number of criteria that must be met and tried to make it clear that not every employee with some child care responsibilities will be able to request accommodation.  However, many employers are trying to deal with the issues pro-actively and are finding ways to accommodate the needs of employees with child care and elderly care responsibilities.

4.  Jan Wong and the Globe and Mail

Although I originally discussed this in 2013, the adjudicator’s decision was upheld in 2014 and Jan Wong was left facing a significant award as well as an award of legal costs.  The case illustrates a few points:

A.  The difficulty of proceeding in any kind of dispute in a unionized workplace without the backing and support of the union;

B.  The seriousness of confidentiality provisions in a settlement.  Employees who sign confidentiality provisions in settlements with their former employers can expect to face repercussions if they breach these provisions.  In some cases, a breach can mean a requirement to pay back to the employer the full amount of the original settlement.

5.  Fulawka v. Bank of Nova Scotia (Originally 2012 Ontario CA)

The Bank of Nova Scotia reached a settlement of a class action lawsuit with a group of bank employees claiming entitlement to overtime pay.  This settlement means that as many as 16,000 employees of the Bank of Nova Scotia could be entitled to overtime pay for overtime hours worked during the time period 2000 to 2013.  The affected employees were required to submit their claims by October 2014.  The case is a significant illustration of the availability of class actions to deal with widespread policies of large employers that may affect many different employees.  It is also which has caused employers and employees to examine their overtime hours and overtime policies.  Just because an employee is paid a salary does not mean that the employee can be required to work uncompensated overtime hours.

2014 Blog Posts – Selected Highlights

As well as they the key cases and issues set out above, I have highlighted a few of my blog posts from the past year.  In case you missed any of these, you might find them interesting:

1.  Hollander v. Tiger Courier Inc. (Sask C.A.)

It was not considered wrongful dismissal where a package of marijuana was delivered to an employee at his workplace.    The employee claimed that he knew nothing about the pot and that it wasn’t his…Fascinating reading.

2.  Rhebergen v. Creston Veterinary Clinic (B.C.C.A.)

The B.C. Court of Appeal upheld a very onerous non-compete provision for a veterinarian.  The clause prohibited a vet from setting up a practice within 25 miles of her employer’s clinic, for a period of 3 years.  It included huge financial penalties that would become payable in the event of a breach.  Surprisingly, the B.C. Court of Appeal upheld this clause.

3.  Steps to Take When You Are Fired

In this blog post, I have set out some things to consider when facing a dismissal situation.

4.  Are Employment Contracts Negotiable?

This post deals with aspects of employment contracts that can and should be negotiated.

5.  Poisoned Work Environment?  Not in this Restaurant.

Discussion of a recent Ontario Human Rights Tribunal decision addressing allegations of a poisoned work environment.

For 2015, I will aim to put up one or two new posts a month and I hope to send out an email update quarterly, or so.

Wishing everyone a Happy New Year.

The plaintiff, Razmig Tossanian, moved from Vancouver, B.C. to accept a position at Cynphany Diamonds in Toronto.  According the trial decision, the plaintiff was looking for an opportunity to move his family to Toronto.  After lengthy negotiations, he accepted an email offer of employment that purported to be based on an oral agreement.  The email set out the various terms that had been agreed upon, but made no mention of a five year fixed term.  The plaintiff did not respond in writing, though he indicated that he had called the owner of Cynphany to confirm the five year guarantee.

The plaintiff moved from Vancouver to Toronto without anything further in writing.  He began working for the defendant in late August 2011.

Some weeks later, the parties signed an “Employment Contract.”  This document did not reference the five year term.  A further document, for mortgage purposes was prepared, and signed by the defendant.  The second document stated that the plaintiff had a “guaranteed five year position.”

There was yet another document that also referenced a five year period, which was also prepared for mortgage confirmation purposes.  When the bank called to confirm, the owner of the defendant confirmed the five year term.

Mr. Tossanian worked for a total of approximately 8 months for the defendant.  At some point, according to the evidence, the plaintiff began having discussions with another potential employer and he shared information with these discussions with at least one co-worker.  He apparently suggested to his co-worker that he had a guaranteed job if he was fired by Cynphany Diamonds.  The owner of the defendant found out about these discussions and became quite upset.  There was a factual dispute about whether or not the plaintiff resigned or was fired but the evidence seems to be fairly clear in this regard that he was fired.  He was not fired for just cause as it is not cause to fire an employee for looking for other work.  Just cause was not argued at trial.

After being dismissed, the plaintiff went to the potential employer but the job opportunity that he had been pursuing fizzled.  Ultimately, he wound up returning to Vancouver and going back to his old position after just more than 4 months.  This position was at a much lower rate of pay.

The plaintiff sued for wrongful dismissal.  He alleged that he had a five year fixed term employment agreement and that it had been breached.  Even though he found work after four months, he claimed that his losses over a period of five years would amount to approximately $175,000.

The court does not seem to have been impressed by the plaintiff or his evidence.  Despite the various written agreements, the court held that the initial email between the parties was the key document and it did not reference a five year term.  Although the employer made “inflated representations about the duration of Mr. Tossanian’s employment contract to help him get a mortgage” the five year term had not formed part of the initial employment contract.  The court held that there was no new consideration for the five year guarantee.  The decision notes that the presiding judge did not feel that a salesperson of fine jewellery would require a five year fixed term employment contract.

Even though the court refused to find that there had been a five year guarantee, it still found that the plaintiff had been wrongfully dismissed. The court then had to turn to the applicable notice period.  The judge was not particularly sympathetic to Mr. Tossonian.  He was awarded a total notice period of two months, amounting to just over $13,500.  This was awarded after a trial that spanned over seven days, not to mention all of the preliminary motions, examinations and other court appearances.  Ouch!

In some respects, the decision is puzzling.  The plaintiff had at least two documents, signed by the defendant, providing for a guaranteed five year period.  Although the owner of the defendant provided evidence that things were not really as they seemed, the court’s explanation of why the five year fixed term employment agreement should not be enforceable is not particularly convincing.  If the defendant signed a document guaranteeing a five year period, provided that document to third parties and answered oral inquiries in a manner consistent with that document, there seems to be ample reason to find that the document was binding.

The court’s decision was likely coloured by the plaintiff and by the court’s assessment of the plaintiff as a witness.  The judge did not seem to like the plaintiff’s explanation as to why the five year fixed term was not included in the original email.  The court was less than impressed by the plaintiff’s efforts to find work for another employer, while still employed by the defendant.  In particular, the court found that the plaintiff had discussed that with at least one other employee and this caused the judge to empathize with the employer. As well, the court noted that the plaintiff returned to his old position reasonably quickly after being dismissed and may have had other opportunities as well.

The judge’s assessment of the plaintiff and that plaintiff’s character was quite damaging.  Not only did the court reject the five year term but it also awarded the plaintiff a very short notice period of only two months.  Courts have a great deal of latitude in selecting the appropriate notice period.  Although judges are supposed to consider the length of service, age, type of position and a variety of factors, decisions are inevitably coloured by the likeability of the plaintiff as a witness.

It may well be that this case is headed for an appeal to the Ontario Court of Appeal for a reassessment.  While the two month notice period is probably not likely to change if the Court of Appeal upholds the court’s findings, the real issue is whether or not the employer was bound by a five year employment contract.  This seems to be a question of law and one which the Court of Appeal may well consider carefully and could even reverse, depending on the particular Court of Appeal panel.

The decision is a reminder of some very key points that apply to many employment law situations:

1.  An enforceable contract must contain all of the terms and must be agreed upon by both sides, in advance, prior to the start date.  Oral representations, side agreements and “confirmation of employment letters” may not be binding if they conflict with the original contract;

2.  Where an employee finds work after being dismissed, courts will be reluctant to award large scale damages unless there is a very compelling reason to do so;

3.  Whether or not a witness makes a favourable impression on the court is crucial.  If a court has concerns about a witness’s honesty, character, motivation or if a court has other concerns, that may well have disastrous consequences for that side.

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.

Lengthier Notice Periods and Greater Challenges for Employers Bringing Non-Competition Cases

Our office has been involved in two recent decisions of the Ontario Court of Appeal, which are likely to impact different areas of employment law in Ontario and across Canada.

S.I. Systems Partnership v. Geng et al – Lawsuit Claiming Breach of Non-Competition Clause Thrown Out with Costs

In S. I. Systems Partnership v. Geng https://www.canlii.org/en/on/onsc/doc/2020/2020onsc8086/2020onsc8086.html, the Court dismissed an appeal brought by S.I. Systems and upheld the complete dismissal of a lawsuit that SI Systems had brought against some former subcontractors claiming breach of a non-competition clause of a sub-contractor agreement.

SI Systems is a supplier of IT services to the RCMP, among other clients. The defendants were sub-contractors who were retained to provide IT services to the RCMP through SI Systems. They were retained because of their past experience in dealing with the RCMP. Initially, the subcontractors were hired without any non-competition clause in their subcontractor agreements. When SI Systems later won a new contract, it included a new non-competition clause in its agreements for the subcontractors, which it asked them to sign through an on-line portal. At least one of the subcontractors did not even realize that SI Systems had added the clause to the contract when he renewed his contract with SI Systems.

After the sub-contractors left SI Systems to work for another sub-contractor (doing other RCMP work), SI Systems sued for damages, claiming that the sub-contractors had breached the non-competition clauses. The Ontario Superior Court held that the non-competition clauses were overbroad – since they would have prevented the sub-contractors from doing any work with the RCMP, anywhere in the world, even work that had nothing to do with the work project that they were actually working on with SI Systems. In any event, SI Systems had not even bid on future projects with the RCMP, so it was unable to prove that it had suffered any damages.

On Appeal, the Ontario Court of Appeal dismissed the appeal in its entirety in a short endorsement, while adding a $30,000 award of legal fees to be paid to the respondents. This case demonstrates the difficulties that employers and contractors can face in pursuing non-competition lawsuits, especially where the non-competition clauses are overly broad.

The case of Currie v. Nylene Canada Inc. involved a 39-year employee a company and its predecessors. Ms Currie was dismissed on a without cause basis but offered a very short period of notice. At trial, the trial judge awarded the plaintiff 26 months’ compensation. The judge held that her case was exceptional and warranted a longer than usual notice period because:

The judge reviewed all of the appropriate common law factors and also considered the Ontario Court of Appeal’s decisions in a number of cases including Lownds v. Summit Ford Sales and Dawe v. The Equitable Life Insurance Company. The Court of Appeal accepted the trial judge’s analysis and reasons and dismissed the appeal.

It is noteworthy that Nylene had also alleged that the plaintiff should be given a very short notice period because she had “retired” for the purpose of collecting a pension that she had earned with a predecessor company. Despite the allegations that she had “retired,” she actually continued to work for the company on all of the same terms and conditions. This argument that her “retirement” to collect a pension should be considered a “break in service” was roundly dismissed at trial and by the Court of Appeal.

One takeaway from this case is that long service employees, who have worked for one employer for most or all of their careers, are likely to fall into the “exceptional circumstances” category and may be entitled to notice in excess of the twenty-four month “soft cap” that the Ontario Court of Appeal has sometimes imposed.

A second takeaway is that litigants should try to go with their best arguments that seem to be reasonable in all of the circumstances. Advancing untenable positions is likely to irritate judges and cause them to award even more in damages to dismissed employees. We cannot say this was a key factor for the trial judge or for the Court of Appeal, but it certainly didn’t help the employer’s cause.

Congratulations to Melynda Layton who argued both of these cases at trial and at the Ontario Court of Appeal.