Difference between revisions of "Employment Law Issues (9:V)"

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If the employee suffers a serious, permanent, debilitating illness or injury, this could frustrate the contract; see ''Wightman Estate v 2774046 Canada Inc'', 2006 BCCA 424. However, note that in any case where an employee is dismissed due to a disability, there may be a case at the Human Rights Tribunal; the employer must have a bona fide occupational requirement that cannot be met by the employee due to their disability, and the employer must follow a proper process to attempt to accommodate the employee, in order to avoid liability. See [[Governing Legislation and Resources for Human Rights (6:I) | Chapter 6: Human Rights]] for additional details.

If an employer validly terminates a contract on the basis of frustration, they are not required to provide severance.

Prior to terminating an employment contract on the basis of frustration, employers should provide the employee with an opportunity to provide any additional medical information which might change their decision. Failure to do so might result in a finding of without cause dismissal, as opposed to frustration of contract.

== F. Post-Employment Issues ==

=== 1. Restrictive Covenants ===

It is becoming increasingly common for employment contracts to include restrictive covenants that prevent former employees from doing certain things, including but not limited to: divulging company secrets, working for competitors, or setting up their own competing business. While restrictive covenants have historically applied to upper level employees, they are more and more common for all types of employees as specialization increases and more companies sell information as opposed to goods.

Whether a particular provision is a restraint of trade is determined not only by the form of the clause, but by the effect of the clause in practice (''Levinsky v The Toronto-Dominion Bank'', 2013 ONSC 5657). Restrictive covenants may also influence the assessment of reasonable notice (see “Two Topics Relating to Restraint of Trade in Employment: Practical Alternatives to Restrictive Covenants and the Impact of Restrictive Covenants on Reasonable Notice”, Richard Truman and Valerie S. Dixon, Employment Law Conference 2014, Paper 3.2, CLE BC). As a general common law rule, restrictive covenants are presumed to be invalid. It is up to the party trying to enforce the covenant (usually the employer) to prove that it should be enforced, and it can be quite difficult to write a covenant narrow enough to be upheld in court. In deciding whether or not to enforce a restrictive covenant, the court must balance the interests of society in maintaining free and open competition with the interests of individuals to contract freely. The “public policy test” that emerges from the common law consists of the following considerations (per ''Shafron v KRG Insurance Brokers (Western) Inc'', 2009 SCC 6):

*i) the employer must show a legitimate business interest for imposing the covenant on the employee - there must be a connection between the covenant and the business interest that is sought to be protected;

*ii) the covenant must minimally impair the employee’s ability to freely contract in the future;

*iii) the restraint must be fair and reasonable between the parties, and must be in the public interest, having regard to the nature of the prohibited activities and the length of time and geographic area in which it will operate; and

*iv) the terms of the covenant must be clear and unambiguous – it will not be possible to demonstrate the reasonableness of an ambiguous covenant.

The courts are unwilling to re-write restrictive covenants if they contain uncertain and ambiguous terms; these covenants are deemed prima facie unreasonable and unenforceable (''Shafron v KRG Insurance Brokers (Western) Inc''). It can often be a simple matter to find an ambiguity: the length of time or geographic area might not be specified, or there may be a prohibition against soliciting clients that the employee did not work with, or the employer may have used a non-compete clause when a non-solicitation clause would have adequately protected their legitimate business interests.

=== 2. Record of Employment and Reference Letters ===

There is no statutory requirement under the ''ESA'' for an employer to provide a reference. Employers are required to provide former employees with a record of employment, which includes information such as the length of service, wage rate, but does not include anything about the employee’s performance.

Since the decision of ''Wallace v United Grain Growers'', the view has been that an employer should provide a reference unless they have good reason not to. Failing to provide a reference could be construed by the courts as evidence of bad faith. In practical terms however, there is no way for a former employee to force their employer to provide a suitable reference letter without making some other sort of claim covered by the ''ESA'' or the common law.

If an employer tells an employee that they will only receive a reference letter if they resign, in order for the employer to avoid liability for severance payments, the employee may be able to make a claim for both wrongful dismissal and punitive damages (''Vernon v British Columbia (Liquor Distribution Branch)'', 2012 BCSC 133).

== G. When an employer can sue an employee ==

Generally, it is rare for an employer to sue an employee. This might occur if an employee breaches a term of a contract (including an implied term), or if an employee breaches a fiduciary duty. Sometimes, after an employee brings an action against an employer, the employer will make a counterclaim against the employee as a strategic move to encourage the employee to settle for a lower amount; the strength of the employer’s case should be carefully considered if this occurs.

The duties listed below are generally implied in employment contracts. This list of duties is not exhaustive.

=== 1. Duty to perform employment functions in good faith ===

Employees owe a duty of good faith to the employer; this is an implied term of employment contracts. An employee might breach this by actively working against one of their employment duties; for example, a supervisor who is supposed to retain employees could breach this duty by inducing the employees they supervise to resign in order to complete against the employer. See ''RBC Dominion Securities Inc v Merrill Lynch Canada Inc'', 2008 SCC 54, for further details.

=== 2. Duty to give reasonable notice of resignation (wrongful resignation) ===

An employee must give their employer reasonable notice if they are resigning. “Reasonable notice”, in the case of resignations, is much shorter than the notice that employers must give to employees who are being dismissed. Although giving two weeks’ notice is the usual practice, the courts may require more or less than that amount, depending on the employee’s responsibilities. If an employee breaches this duty, they may be held liable for the profits that their continued employment would have generated for the employer; this is generally only of concern if the employee generates significant profits for the employer. For further details, see ''RBC Dominion Securities Inc v Merrill Lynch Canada Inc'', 2008 SCC 54.

=== 3. Competition against the employer ===

If an employment contract contains a restrictive covenant (such as a non-competition clause or a non-solicitation clause), see [[{{PAGENAME}}#1. Restrictive Covenants | section IV.F.1: Restrictive Covenants]], above. Employees without a valid non-competition clause (and who are not in a fiduciary position – see [[{{PAGENAME}}#5. Fiduciary duties | section IV.F.5: Fiduciary duties]], below) may compete against an employer as soon as they are no longer employed by the employer (''Valley First Financial Services Ltd v Trach'', 2004 BCCA 312).

=== 4. Duty not to misuse confidential information ===

It is an implied term of an unwritten employment contract that the employee will not misuse the employer’s confidential information. A common example of confidential information is the employer’s list of customers. Employees who take a customer list by printing it out or putting it on a USB key and taking it with them, or by emailing it to themselves, would be in breach of this duty. One notable exception is that an employee may use any part of the customer list that they have simply memorized (per ''Valley First Financial Services Ltd v Trach'', 2004 BCCA 312). Additionally, employees such as financial advisors, who have developed ongoing relationships with clients, may be entitled to take a list of their own clients to inform them that they are departing, and where they will be working in the future (''RBC Dominion Securities Inc v Merrill Lynch Canada Inc et al'', 2007 BCCA 22 at para 81, reversed in part at 2008 SCC 54; ''Edwards Jones v Voldeng'', 2012 BCCA 295). Note however that this may be prevented if the employee is in a fiduciary position, and there may be limits on the permitted contact or other complications if the employee signed a non-solicitation agreement.

=== 5. Fiduciary duties ===

Only a small fraction of employees are in a fiduciary position. They may have fiduciary duties if they are directors of the company, or if they are senior officers in a top management position (per ''Canadian Aero Service Ltd v O’Malley'', [1974] SCR 592). A fiduciary position is generally one where the fiduciary (the employee) has some discretion or power that affects the beneficiary (the employer), and the beneficiary is peculiarly vulnerable to the use of that power (per ''Frame v Smith'', [1987] 2 SCR 99).

Employees who are in a fiduciary relationship to their employer have duties of loyalty, good faith, and avoidance of a conflict of duty and self-interest. They cannot, for example, take advantage of business opportunities that they should have been pursuing for their employer, even if they resign from their position.

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@@ Line 805: / Line 805: @@
 If the employee suffers a serious, permanent, debilitating illness or injury, this could frustrate the contract; see ''Wightman Estate v 2774046 Canada Inc'', 2006 BCCA 424. However, note that in any case where an employee is dismissed due to a disability, there may be a case at the Human Rights Tribunal; the employer must have a bona fide occupational requirement that cannot be met by the employee due to their disability, and the employer must follow a proper process to attempt to accommodate the employee, in order to avoid liability. See [[Governing Legislation and Resources for Human Rights (6:I) | Chapter 6: Human Rights]] for additional details.
+If an employer validly terminates a contract on the basis of frustration, they are not required to provide severance.
+Prior to terminating an employment contract on the basis of frustration, employers should provide the employee with an opportunity to provide any additional medical information which might change their decision. Failure to do so might result in a finding of without cause dismissal, as opposed to frustration of contract.
+== F. Post-Employment Issues ==
+=== 1. Restrictive Covenants ===
+It is becoming increasingly common for employment contracts to include restrictive covenants that prevent former employees from doing certain things, including but not limited to: divulging company secrets, working for competitors, or setting up their own competing business. While restrictive covenants have historically applied to upper level employees, they are more and more common for all types of employees as specialization increases and more companies sell information as opposed to goods.
+Whether a particular provision is a restraint of trade is determined not only by the form of the clause, but by the effect of the clause in  practice (''Levinsky v The Toronto-Dominion Bank'', 2013 ONSC 5657). Restrictive covenants may also influence the assessment of reasonable  notice (see “Two Topics Relating to Restraint of Trade in Employment: Practical Alternatives to Restrictive Covenants and the Impact of  Restrictive Covenants on Reasonable Notice”, Richard Truman and Valerie S. Dixon, Employment Law Conference 2014, Paper 3.2, CLE BC). As a general common law rule, restrictive covenants are presumed to be invalid. It is up to the party trying to enforce the covenant (usually the employer) to prove that it should be enforced, and it can be quite difficult to write a covenant narrow enough to be upheld in court. In  deciding whether or not to enforce a restrictive covenant, the court must balance the interests of society in maintaining free and open competition with the interests of individuals to contract freely. The “public policy test” that emerges from the common law consists of the following considerations (per ''Shafron v KRG Insurance Brokers (Western) Inc'', 2009 SCC 6):
+*i) the employer must show a legitimate business interest for imposing the covenant on the employee - there must be a connection between the covenant and the business interest that is sought to be protected;
+*ii) the covenant must minimally impair the employee’s ability to freely contract in the future;
+*iii) the restraint must be fair and reasonable between the parties, and must be in the public interest, having regard to the nature of the prohibited activities and the length of time and geographic area in which it will operate; and
+*iv) the terms of the covenant must be clear and unambiguous – it will not be possible to demonstrate the reasonableness of an ambiguous covenant.
+The courts are unwilling to re-write restrictive covenants if they contain uncertain and ambiguous terms; these covenants are deemed prima  facie unreasonable and unenforceable (''Shafron v KRG Insurance Brokers (Western) Inc''). It can often be a simple matter to find an ambiguity:  the length of time or geographic area might not be specified, or there may be a prohibition against soliciting clients that the employee did not work with, or the employer may have used a non-compete clause when a non-solicitation clause would have adequately protected their legitimate business interests.
+=== 2. Record of Employment and Reference Letters ===
+There is no statutory requirement under the ''ESA'' for an employer to provide a reference. Employers are required to provide former employees  with a record of employment, which includes information such as the length of service, wage rate, but does not include anything about the employee’s performance.
+Since the decision of ''Wallace v United Grain Growers'', the view has been that an employer should provide a reference unless they have good reason not to. Failing to provide a reference could be construed by the courts as evidence of bad faith. In practical terms however, there is no way for a former employee to force their employer to provide a suitable reference letter without making some other sort of claim covered by the ''ESA'' or the common law.
+If an employer tells an employee that they will only receive a reference letter if they resign, in order for the employer to avoid liability for severance payments, the employee may be able to make a claim for both wrongful dismissal and punitive damages (''Vernon v British Columbia (Liquor Distribution Branch)'', 2012 BCSC 133).
+== G. When an employer can sue an employee ==
+Generally, it is rare for an employer to sue an employee. This might occur if an employee breaches a term of a contract (including an implied term), or if an employee breaches a fiduciary duty. Sometimes, after an employee brings an action against an employer, the employer will make a counterclaim against the employee as a strategic move to encourage the employee to settle for a lower amount; the strength of the employer’s case should be carefully considered if this occurs.
+The duties listed below are generally implied in employment contracts. This list of duties is not exhaustive.
+=== 1. Duty to perform employment functions in good faith ===
+Employees owe a duty of good faith to the employer; this is an implied term of employment contracts. An employee might breach this by actively working against one of their employment duties; for example, a supervisor who is supposed to retain employees could breach this duty by inducing the employees they supervise to resign in order to complete against the employer. See ''RBC Dominion Securities Inc v Merrill Lynch Canada Inc'', 2008 SCC 54, for further details.
+=== 2. Duty to give reasonable notice of resignation (wrongful resignation) ===
+An employee must give their employer reasonable notice if they are resigning. “Reasonable notice”, in the case of resignations, is much shorter than the notice that employers must give to employees who are being dismissed. Although giving two weeks’ notice is the usual practice, the  courts may require more or less than that amount, depending on the employee’s responsibilities. If an employee breaches this duty, they may be held liable for the profits that their continued employment would have generated for the employer; this is generally only of concern if the employee generates significant profits for the employer. For further details, see ''RBC Dominion Securities Inc v Merrill Lynch Canada Inc'', 2008 SCC 54.
+=== 3. Competition against the employer ===
+If an employment contract contains a restrictive covenant (such as a non-competition clause or a non-solicitation clause), see [[{{PAGENAME}}#1. Restrictive Covenants | section IV.F.1: Restrictive Covenants]], above. Employees without a valid non-competition clause (and who are not in a fiduciary position – see [[{{PAGENAME}}#5. Fiduciary duties | section IV.F.5: Fiduciary duties]], below) may compete against  an employer as soon as they are no longer employed by the employer (''Valley First Financial Services Ltd v Trach'', 2004 BCCA 312).
+=== 4. Duty not to misuse confidential information ===
+It is an implied term of an unwritten employment contract that the employee will not misuse the employer’s confidential information. A common example of confidential information is the employer’s list of customers. Employees who take a customer list by printing it out or putting it on a USB key and taking it with them, or by emailing it to themselves, would be in breach of this duty. One notable exception is that an employee may use any part of the customer list that they have simply memorized (per ''Valley First Financial Services Ltd v Trach'', 2004 BCCA 312). Additionally, employees such as financial advisors, who have developed ongoing relationships with clients, may be entitled to take a list of  their own clients to inform them that they are departing, and where they will be working in the future (''RBC Dominion Securities Inc v Merrill Lynch Canada Inc et al'', 2007 BCCA 22 at para 81, reversed in part at 2008 SCC 54; ''Edwards Jones v Voldeng'', 2012 BCCA 295). Note however that this may be prevented if the employee is in a fiduciary position, and there may be limits on the permitted contact or other complications if the employee signed a non-solicitation agreement.
+=== 5. Fiduciary duties ===
+Only a small fraction of employees are in a fiduciary position. They may have fiduciary duties if they are directors of the company, or if they are senior officers in a top management position (per ''Canadian Aero Service Ltd v O’Malley'', [1974] SCR 592). A fiduciary position is generally one where the fiduciary (the employee) has some discretion or power  that affects the beneficiary (the employer), and the beneficiary is peculiarly vulnerable to the use of that power (per ''Frame v Smith'', [1987] 2 SCR 99).
+Employees who are in a fiduciary relationship to their employer have duties of loyalty, good faith, and avoidance of a conflict of duty and  self-interest. They cannot, for example, take advantage of business opportunities that they should have been pursuing for their employer, even if they resign from their position.
 p9-43

Difference between revisions of "Employment Law Issues (9:V)"

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