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.

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.

Surprisingly, this was not the conclusion of the Ontario Court of Appeal in a recent decision.  In Nagribianko v. Select Wine Merchants Ltd., the Court reviewed a case that had been to the Ontario Small Claims Court and the Divisional Court.  The employee had signed a contract that referenced a six month probationary period.  But the contract does not appear to have specified a payment that the employer was required to provide if dismissed after the first three months.  This should have made the contract null and void in accordance with the Supreme Court of Canada’s powerful decision in Machtinger v. HOJ Industries Ltd. [1992] 1 S.C.R. 986.

The employee had worked for the employer for just less than six months.  He was dismissed on a without cause basis.  He sued for damages and was awarded four months’ compensation in the Ontario Small Claims Court.  The judge ruled that he had been induced to join the employer and that the clause did not effectively oust the employee’s common law entitlement.  This seems consistent with most of the case law.

The Ontario Divisional Court reversed the decision and held that the trial judge had failed to give effect to the probationary language.  The Ontario Court of Appeal upheld the Divisional Court’s decision and held that the term “probation” was not ambiguous. It ruled that “probationary status enables an employee to be terminated without notice during the probationary period if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided the probationary employee was given a fair and reasonable opportunity to demonstrate their ability.”

The Appeal Court went on to conclude that the employer could not contract out of the minimum standards required by the Ontario Employment Standards Act, 2000 and that therefore the employee was entitled to one weeks’ pay, which the employee received, even though this one week’s pay was apparently not specified in the contract.

This analysis all would have been correct if the contract had specifically stated that the employee could be dismissed after three months but before six months with the payment of one week’s pay and the continuation of one week’s benefits.  However, if the contract did not say that specifically, it should have been viewed as a contract that would violate the common law case law as set out in Machtinger v. HOJ.  The contract appeared to specify that the employee could be dismissed at any time during the six months as a probationary employee with no notice or payment.  The fact that the employer paid the minimum one week’s compensation required by the ESA 2000 ought not to have fixed a poorly drafted contract.

Here, in contrast to the Brake v. PJ-M2R Restaurant Inc. that I looked at last week, the Ontario Court of Appeal weighed in heavily on the side of employers and was quite unsympathetic to what should have been a reasonable employee claim.  The decision is good news for Ontario employers, even those with poorly drafted contracts, who may now find it easier and cheaper to dismiss probationary employees.  The decision also demonstrates, as I indicated previously, that the outcome of a case at the Ontario Court of Appeal may well depend on the particular panel that is hearing the decision.  In this case, justices LaForme, Hourigan and Paciocco have issued a ruling that strongly favours employers and provides quite the contrast with the previous decision that I examined in Brake v. PJ-M2R Restaurant Inc., which went the other way.

Other recent Ontario Court of Appeal decisions have also gone in different directions and I will review two or three more of them in coming blogs.  The most significant take-away is probably a strong measure of uncertainty, which underscores the risks inherent in civil ligation and, particularly, in employment law cases. Contact us today!

As we face increasingly restrictive measures across Canada, employers and employees have many questions about rights and obligations in the workplace in times of a pandemic. I thought it would be helpful to discuss a few of these issues.

Safe Workplace

Employers always have an obligation to provide a safe workplace. But these days, many employees find themselves in workplaces with a high level of exposure to the public. That is becoming more and more dangerous. Given the spread of Covid-19, employers must be prepared to take all appropriate precautions immediately. Employees may need to wear masks, gloves and maintain an appropriate distance from customers and other employees. Is this enough? In some workplaces, it seems doubtful. The virus is spreading at an alarming rate. Many employees may conclude that the workplace is unsafe and may exercise their rights under the Occupational Health and Safety Act to refuse work and stay at home. Employers may not be obligated to continue salary during this period, but employees may be eligible for EI benefits. If employees are fired or disciplined for refusing to work, they may have rights under the OHSA to reinstatement and damages. Normally, there are several hurdles for employees to meet to be able to prove that the workplace is unsafe. However, these days, it is likely that it will be much easier for employees these days to demonstrate an undue level of risk if any of these cases are litigated.

Quarantine

Some employees may be quarantined. This could be because of recent international travel, exposure to someone who had the virus or their own illness. Employees should inform their employers immediately and should not try to come for work and endanger others. This may involve an unpaid leave but, again, quarantined employees may be entitled to EI benefits without the normal waiting period. Some employers may decide to implement a paid leave policy for some or all of the quarantine period. This may also depend on the employer’s general sick leave policy but will not be mandatory for many employers. Some insurance policies may cover quarantine periods. Employers are entitled and maybe even required, to ask employees questions about exposure levels, where they have travelled and whether they have any symptoms.

Temporary Layoffs

Employment standards legislation across Canada allows employers to put employees on an immediate temporary lay-off without pay for a limited time period – and provided the employer continues providing benefits during a lay-off period. However, Canadian common law has traditionally viewed most lay offs as a “constrictive dismissal.” Since it is a term of employment that an employee will work and expect to be paid, when an employee’s work stops, that has been viewed as a breach of the contract and therefore a dismissal. Historically, there have been a few exceptions to the common law. If the employee has an employment agreement that allows for a temporary lay-off, works in a seasonal business or other type of business where layoffs are expected or if the employer has traditional put employees on layoffs, a lay-off is permissible. If the situation does not fit one of these exceptions, employees have been able to assert claims of “constructive dismissal” and demand full severance.

Some employment lawyers have suggested that employees who face a temporary lay-off can claim constructive dismissal and sue their employers for full severance. I think this is risky business. For employers who are facing a massive reduction in business, it would make no sense to force those employers to continue to pay their employees where there is no work. I would think that Ontario courts would recognize that all employers are facing a similar situation and that this type of rare and exceptional situation falls into one of the categories of traditional exceptions to the common law rule.

Employers may need to disclose their confidential information including sales and other data as part of providing their case. This is not to say that employers should use the current coronavirus crisis to “lay-off” workers without compensation where they cannot justify it economically. For example, if only one or two employees are put on layoff, that might be a fairly transparent case of constructive dismissal. Courts are entitled to review these situations on a case by case business. But if government-imposed restrictions have led to a massive decline (or shutdown) of the business, it seems to me that common sense will prevail here. Bringing a constructive dismissal claim in these circumstances may only benefit the employment lawyer who suggested it.

Creative Solutions

Some workplaces may suggest work from home arrangements, reduced hours, reduced pay or other changes to the terms of employment. Normally these types of changes would also lead to constructive dismissal claims. For example, an employer cannot normally insist that an employee accept a significant pay cut. Imposing one is a constructive dismissal and allows an employee to sue for full severance.

But in crazy and challenging times, employees will need to show some flexibility to try and retain employment and help their employers get through this crisis. Obviously, employees will have to make their own assessment of what is actually taking place. For example, if employees of a supermarket chain or a drug store are asked to take a pay cut while the company is enjoying some of its highest sales ever, that would make no sense. On the other hand, employees of a business that is obviously facing drastically reduced sales may be willing to discuss temporary changes to their terms of employment.

If an employer is suggesting these changes, employees should try to negotiate and insist on certain protections. Get the employer to put everything into writing and confirm that the changes are temporary. Ask for information that will help demonstrate the need for the changes. Insist that the measures are being imposed fairly and that all levels of management are also making sacrifices. Depending on the size of the company, employees may need to act collectively here, and this may be trickier than it sounds. But the point here is that both employees and employers may take a different approach to this unanticipated situation.

Conclusion

Ultimately, in this crisis, many employees will be facing an extremely tenuous situation with little or no income coming in. This is especially problematic for people who are already having a tough time getting by. The Federal government has started to address this by rolling out a plan for emergency EI benefits. But these benefits will not provide nearly enough income for most people who find themselves out of work. Some employees in these situations will benefit from wrongful dismissal lawsuits and will be able to get reasonable compensation from their employers.

But some employers are also facing enormous challenges and may wind up requiring creditor protection or may simply go out of business. In these circumstances, wrongful dismissal litigation may not get employees anywhere since there may be no money to pay, even if the employees win a judgment.

Hopefully, we will find a medical solution to the Coronavirus problem sooner than anticipated so that many of these issues will be moot. But in the meantime, employees and employers should get proper legal advice in these situations before making any rash decisions, which might have significant financial consequences.