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

There are many potential issues involved if an employee is terminated.  The below checklist and the information in this section of the chapter merely provide a starting point for further legal research.

☑ This section applies to both provincially and federally regulated non-unionized employees, dependent contractors, and independent contractors. It is necessary to determine which category the worker falls under. See [[Preliminary Matters for Employment Law (9:IV) | Section IV: Preliminary Matters]] to determine this.  

☑ If the potential award for (i) reasonable notice and (ii) aggravated and punitive damages is under $35,000, as of June 1, 2017, consider filing a claim in  Small Claims Court; see [[Introduction to Small Claims (20:I) | Chapter 20: Small Claims]]. If the worker has a strong case for an award significantly greater than $35,000, the worker should strongly consider contacting an employment lawyer to discuss proceeding with a claim in BC Supreme Court. If the potential award is only slightly over $35,000, the employee may wish to file in Small Claims Court, and waive their entitlement to any amount over $35,000, as proceeding in Small Claims Court can be less costly than proceeding in BC Supreme Court.

As discussed earlier, the employer-employee relationship is contractual.  Every employee has an employment contract, even if a written document does not exist.  

Be aware that the BCCA case of ''Rosas v. Toca'', 2018 BCCA 191, while not an employment law case, may present some arguments for employers that new employee contracts entered into during the course of employment should be enforceable, even if there is no valid consideration.  At paragraph 183 of Toca: “When parties to a contract agree to vary its terms, the variation should be enforceable without fresh consideration, absent duress, unconscionability, or other public policy concerns, which would render an otherwise valid term unenforceable.”.  As this Toca case is new a note up of employment law cases referencing or applying Toca will be important to an analysis under this topic.  

==== Invalid Contracts – Vagueness or Ambiguity ====

Many employers enter into written employment contracts that purport to allow the employer to dismiss the employee without cause by providing only the Employment Standards Act minimum severance.  These clauses will often be enforceable.  However, some arguments are available to attempt to have these ESA severance termination clauses unenforceable.  

Any term of the written contract that does not meet the minimum standards set out by the Employment Standards Act (for provincially regulated employees) or the Canada Labour Code (for federally regulated employees) is invalid.   

However, this principle may have been qualified with respect to severance clauses and fixed term contracts (see ''Miller v Convergys CMG Canada Limited Partnership'', 2013 BCSC 1589 (upheld on appeal); ''Rogers v Tourism British Columbia'', 2010 BCSC 1562).

If a contractual ESA severance termination clauses does not set out that this severance is the maximum an employee will receive, the employee may not be limited to such a severance.  

Other general rules regarding contracts may also invalidate the contract, such as duress, undue influence, and unconscionability, but these occur less frequently.  

Under certain circumstances, employers and employees cannot use the above rules to invalidate a contract for their own benefit.  If a new contract is imposed in which all the benefit is to the employee, the employee cannot have the contract invalidated for lack of fresh consideration to the employer in order to avoid a severance provision or other provision of the contract.  Additionally, the employer cannot back out of a contract that only gave benefits to the employee, due to lack of fresh consideration to the employer.  

Employers can dismiss an employee in one of two ways:  

Without cause dismissals and just cause dismissal are both express dismissal. An employer tells the employee they are being dismissed, generally by having a meeting and providing the employee with a letter of dismissal.  

If an employee is dismissed without cause, he is entitled to a reasonable notice of dismissal, or pay in lieu, under both statute law and common law.  

iv) the availability of similar employment, having regard to the experience, training and qualifications of the employee.  

Reasonable notice is an entitlement to assist the employee.  In ''Michela v. St. Thomas of Villanova Catholic School'', 2015 ONCA 801, the Ontario Court of Appeal held that the financial health of a company does not reduce its notice obligations to employees.   

Additionally, the UBC Law Library and many other law libraries hold publications with tables of cases sorted by job type, such as the Wrongful Dismissal Practice Manual by Ellen E. Mole (which is also found on Quicklaw).  WestlawNext Canada also offers Quantum Services Database for wrongful dismissal.  Comparing the Bardal factors of the employee in question with those of previous cases using either of these methods can assist in finding an appropriate range for the reasonable notice period.  As a starting point, you can ask the particular employee how much time it would take or has taken to find similar work for similar pay.

Severance is generally awarded in a manner correlated to length of service.  However, is some circumstances short service employees can be entitled to proportionally more severance.  Senior level short term employees, particularly upper management employees, may be entitled to proportionally more severance than their more junior counterparts.  An example of an extended severance period for short service employees is found in ''Chapple v. Big Bay Landing Ltd. (Inc. No. 0764163)'', 2018 BCSC 1666, where the employee was 61 years old, and had worked as a resort manager for less than two years.  The Court awarded a nine month notice period.

==== Extensions to Notice Period ====

Generally, the maximum reasonable notice period is 24 months.  In exceptional circumstances, such as very long services cases, courts can award notice periods beyond 24 months; see ''Markoulakis v Snc-lavalin Inc.'', 2015 ONSC 1081.

Determine whether the contract itself specifies the conditions under which the employer can dismiss the worker, and what amount of notice or severance is required.  If this is specified, and the contract and termination clause are valid (see Section V.C.2(c) and (d) Invalid Contracts), this will generally be determinative.

==== Calculating Damages for Wages, Benefits, Pension Plans, and Bonuses ====

If an employer provides an employee with pay in lieu of notice, that pay in lieu of notice should account for all the elements of compensation the employee would have earned had he worked for the reasonable notice period.  

For example, if an employee receives a company car for personal use, and that personal use is recognized by both the employer and employee as  a benefit of employment, the employee is entitled to compensation for the loss of that car during the notice period.   

Other lost benefits, such as extended health and dental coverage are also recoverable during the notice period. Usually a judge will calculate this loss by adding up all of the medical expenses incurred by the dismissed employee during the notice period that would have been recoverable under the employer’s benefits plan had the employee been working.  

If the employee had a pension plan, the loss is generally calculated as:  

The commuted value is the net present value of the invested money, and its calculation is complicated; the pension plan administrator can provide the employee with the current and projected commuted values.   

At common law, the employee is only entitled to be compensated for wages and benefits to which he or she would have been contractually entitled during the notice period, and not for any ex gratia expectancies (see ''Swann v MacDonald Dettwiler and Associates Ltd'', [1995] BCJ No 1596 (QL) (SC)).  

Where an employee earns a variable income, courts may average the rate of pay within the relevant notice period for calculating damages; see ''O’Dea v Ricoh Canada Inc.'', 2016 BCSC 235.)

Note that in the case of independent contractors, courts may instead consider whether there was a fundamental breach of the contract, or one  that goes to the root of the contract, depriving one party of the whole or substantially the whole benefit of the contract (see ''Hunter Engineering Co v Syncrude Canada Ltd'',[1989] 1 SCR 426; ''1193430 Ontario Inc v Boa-Franc Inc'', 78 OR (3d) 81); ''Fernandes v Peel Educational & Tutorial Services Limited (Mississauga Private School)'', 2016 ONCA 468.  The law on this topic can be complex and may require additional research.  

Common law has defined just cause as conduct that is inconsistent with the fulfilment of the express or implied condition of service (''Denham v Patrick'' (1910), 20 OLR 347 (Div Ct)). It is conduct inconsistent with the continuation of the employment relationship, which constitutes a  fundamental breach going to the root of the contract (''Stein v BC  Housing Management Commission'' (1989), 65 BCLR (2d) 168 (SC), (1992), 65  BCLR (2d) 181 (CA)). This includes serious misconduct, habitual neglect of duty, incompetence, conduct incompatible with the employee’s duties  or prejudicial to the employer’s business, or wilful disobedience to the employer’s orders in a matter of substance; see ''Port Arthur Shipbuilding Co v Arthurs et al'', [1968] S.C.J. No. 82, [1969] S.C.R. 85.

A single incident is usually insufficient to justify dismissal (''Buchanan v Continental Bank of Canada'' (1984), 58 NBR (2d) 333 (QB)), unless that act is extremely prejudicial to the employer such as dishonesty or immoral character that causes a failure of trust (''Stilwell v Audio Pictures Ltd'', [1955] OWN 793(CA)).   

*d) the possible repercussions of failing to meet those standards were clearly communicated.  

Incompetence as grounds for dismissal needs to be considered in light of the ''Human Rights Code'' and the ''bona fide'' occupational requirement (“BFOR”) test (see ''British Columbia (Public Service Employee Relations Commission) v British Columbia Government and Service Employees’ Union'' (BCGSEU), [1999] 3 SCR 3). In a case of poor employee performance, the ESB will not find just cause for dismissal unless the employer can demonstrate a “neglect of duties”.  

==== Dishonesty ====

==== Intoxication ====

Deleting or altering company information in the course of departure from employment may in some circumstances be grounds for a just cause dismissal.  However, as with all just cause cases a McKinley contextual analysis should be applied.  In the case of ''Kerr v. Arpac Storage Systems Corporation'', 2018 BCSC 704, the court found the employee’s deletion of company information around the end of employment was not enough to constitute a just cause dismissal, partially due to the employee’s mental state and because the employee apologized.

If an employer alleges just cause for dismissal, the employee might have one of the following defenses to the just cause allegations.   

However, if the employer already knew of the employee’s misconduct, but terminated the employee without alleging cause or gave the employee a letter of reference, in some cases the employer has been held to be estopped from alleging cause or has been taken to have condoned the employee’s misconduct.  However, there is conflicting case law on this subject and many cases have held that the employer may still allege cause. See ''Smith v Pacific Coast Terminals'', 2016 BCSC 1876; ''Technicon Industries Ltd v Woon'', 2016 BCSC 1543.

=== Improper Just Cause Allegations as a Litigation Tactic ===

Some employers assert just cause (or file counterclaims) as a litigation tactic to deter an employee from advancing a valid wrongful dismissal claim.  In these scenarios employees may use that employer tactic as both a defence, and as grounds for additional damages claims against the employer.  See R''uston v. Keddco Mfg. (2011) Ltd.'', 2018 ONSC 2919 , where the court awarded moral damages, extensive costs, and $100,000 in punitive damages for improper cause allegations.  

Where the company no longer requires the employee, or the employer encounters economic difficulties or undergoes reorganization, the employee is still  entitled to reasonable notice (''Paterson v Robin Hood Flour Mills Ltd (l969)'', 68 WWR 446 (BCSC)). In times of economic uncertainty, redundancy is not cause  for dismissal. The economic motive for terminating a position does not relate to an individual’s conduct and hence is not adequate cause (''Young v Okanagan College Board'' (1984), 5 CCEL 60 (BCSC)).  

“Temporary layoff” is defined in section 1 of the ''ESA''. A recent B.C. Supreme Court decision, ''Besse v Dr AS Machner Inc'', 2009 BCSC 1316, established that the temporary layoff provisions of the ''ESA'' alone do not give employers the right to temporarily lay off employees: a layoff constitutes termination unless it has been provided for in the contract of employment either expressly or as an implied term based on well-known industry-wide practice, or the  employee consented to the layoff. If the right to temporary layoff exists for one of these reasons, then the limits set out in section 1 apply: where an employee has been laid off for more than 13 consecutive weeks, and this has not been extended either by agreement or by the Director, the employee is considered to have been terminated permanently, and is entitled to severance pay. He or she also may be able to sue for wrongful dismissal before the 13-week period has expired. This would be the case where, although the employer has used the term “layoff”, it is nonetheless clear that the employee has been terminated.  

The Employment Standards Act does not require any payment for length of service during the first three months of employment (s 63).   

*4. Act fairly and with reasonable diligence in assessing suitability.

In the past, judges have reduced the notice period where there has been near cause (i.e. where even if there were no grounds for dismissal, there was  substantial misconduct).  

The Supreme Court of Canada in ''Dowling v Halifax (City)'', [1998] 1 SCR 22 expressly rejected near cause as grounds for reducing the notice period. This decision has been consistently followed.

In some circumstances, an employer can make fundamental changes to the terms of an employee’s employment in such a way that the employee may be forced to leave their job.  This is called “constructive dismissal”, and an employee who is constructively dismissed is entitled to the same benefits as if he were fired without cause.

If the employer makes a fundamental, unilateral change in the employment contract, it may amount to constructive dismissal. Changes to a “fundamental term of  the contract” includes changes such as: significant reduction in salary, a significant change in benefits, a significant change in job content or status, or a job transfer to a different geographic location if such a transfer is not a normal occurrence or contemplated in the employment contract. Generally, a  reduction in pay of more than 10% may result in a constructive dismissal.  See ''Price v 481530 BC Ltd et al'', 2016 BCSC 1940.  

The imposition of a temporary layoff, where not provided for in the contract, has also been deemed to constitute constructive dismissal (see [[{{PAGENAME}}#7. Redundancy and Layoff | Section V.C.7: Redundancy and Layoff]] for details).  

Suspensions from work may result in a constructive dismissal, particularly if the suspension is without pay. The case of ''Cabiakman v Industrial Alliance Life Insurance Co'', [2004] 3 SCR. 195 and ''Potter v. New Brunswick Legal Aid Services Commission'', 2015 SCC 10, [2015] 1 S.C.R. 500,  reinforced an employer’s right to impose a suspension for administrative reasons, with pay, provided the employer is acting  to protect legitimate business interests, the employer is acting in good faith and fairly, and the suspension is for a relatively short period.  

An employee bringing a claim for constructive dismissal is making a claim for the severance they would have received had they been dismissed without cause.   

==== Mitigation Required ====

==== Condonation ====

Employees alleging constructive dismissal bear the risk that the court finds they have repudiated their contract of employment by either leaving the workforce  or commencing legal proceedings against their employer (or both). If a court finds the employee repudiated the contract (i.e. quit instead of being constructively dismissed) then the employee does not get severance.  

Not all resignations are resignations, and not all dismissals are dismissals. The legal test is what a reasonable person would have understood by the relevant statements and actions, taking into consideration the context of the particular industry, and all surrounding circumstances.  

To be effective, resignation must be clear and unequivocal. There must be a clear statement of an intention to resign, or conduct from which that intention  would clearly appear. See ''Koos v A & A Customs Brokers Ltd.'' (2009 BCSC 563).  

If a business is sold, unless the seller specifically dismisses the employees there may be an implied assignment to the new owner if the employee continues to  provide services as before and the new owners accept those services (''ESA'', s 97). See also ''Helping Hands Agency Ltd v British Columbia (Director of Employment Standards)'', [1995] BCJ No 2524.  

==== Aggravated Damages ====

'''Bad Faith Performance of Contracts'''

*i) where the employer lied to the employee about the reason for dismissal (see ''Duprey v Seanix Technology (Canada) Inc'', 2002 BCSC 1335, where an employer told a commissioned employee he was being released due to financial hardship,  when it was found he was being released so the employer would not have to pay owed commission);

*Defamation

*Duress  

*Interference with the employee’s compensation

A flawed workplace investigation followed by a dismissal can attract aggravated damages; see ''Lau v. Royal Bank of Canada'', 2015 BCSC 1639; ''Kong v. Vancouver Chinese Baptist Church'', 2015 BCSC 1328; and ''George v. Cowichan Tribes'', 2015 BCSC 513.

==== Common Law ====

If the employee was working a second job before being dismissed but earned more in the second job (e.g. by putting in more hours) after dismissal, their severance pay will be reduced by the extra amount they have earned. (''Pakozdi v. B&B Heavy Civil Constructions Ltd''., 2018 BCCA 23 at paras 36-51)

If the contract becomes impossible to perform through no fault of the employee or the employer, then the contract is frustrated, and may be terminated without liability. The contract must be impossible to perform, not merely less profitable. The impossibility of performance must be  unforeseen, there must be no alternative to termination, and termination must not be self-induced. Frustration of contract is a separate  ground for termination of contract, separate from just cause, which is a breach of the employment contract by the employee.

Frustration normally arises in cases of long term disability where the employee has been off work for 1 or 2 years. Courts will consider whether the worker is likely to be able to return to work in the reasonably foreseeable future, see ''Hydro-Quebec v Syndicat des employe-e-s de techniques professionnelles et de bureau d`Hydro-Quebec'' (2008 SCC 43) and ''Naccarato v Costco'' (2010 ONSC 2651).  

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