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

Sometimes, a written contract, or certain provisions within it, will be invalid. See [[#2. Employment Contract Considerations | Section V.2: Employment Contract Considerations]] to determine whether the contract or any of its provisions are invalid.

At common law, employers can dismiss an employee at any time without cause, on provision of reasonable advance notice or pay in lieu thereof. In rare circumstances, employers can dismiss an employee for just cause, if the employee is guilty of serious misconduct.

In practice, dismissals are normally without cause.  In without cause dismissal scenarios, employees are entitled to notice of dismissal, or pay in lieu of such notice, under both the ESA and common law (unless the employee’s contract validly restricts the employee to only the ESA minimum severance).   

The ESA (or the CLC for federally regulated employees) provides statutory minimums for notice, or pay in lieu, if an employee is dismissed from their employment.  The maximum an employee can receive under the ESA is 8 weeks of notice or pay.  

The entitlement to notice at common law is a contractual entitlement.  All employees have an employment contract, even if there is no written contract.  Employment contracts can be written, oral, or a combination of both written and oral terms.     

By default, there is an implied term in indefinite hire employment contracts (either oral or written contracts) that employers will provide employees with a reasonable notice of termination if they dismiss the employee without cause.   

If the employer fails to give the employee reasonable notice or pay in lieu, this would constitute a breach of the employment contract by the employer, and the employee could sue the employer for a severance in Small Claims Court, the Civil Resolution Tribunal, or BC Supreme Court.  This is commonly called a wrongful dismissal claim.

*If the worker was dismissed at the end of a fixed-term contract of employment, then their contract has simply been completed and there is generally no further entitlement to severance pay (unless their contract specifies otherwise).  

*If the worker voluntarily resigned, they are generally not entitled to severance pay (unless their contract specifies otherwise).  

*If the contract has been frustrated then generally there is no entitlement to severance pay. Otherwise, continue to the next step of the checklist.   

☑ Determine whether the terms of the contract specify the amount or length of notice or severance pay the worker will receive if dismissed.  

*If this amount is not specified, or if the contract or that provision of the contract is invalid, then:  

**Employees and dependent contractors who are employed for an indefinite term will generally be entitled to “reasonable notice”; go to the next step of the checklist.  

**For independent contractors with an indefinite contract, the rules are more complex; see the cases listed in Section III.C.1 as a starting point for research as to whether the contractor may be entitled to reasonable notice. If the contractor is entitled to reasonable notice, continue to the next step of the checklist.   

*If you think that the employer can prove in court that they truly had just cause for dismissing the worker, and the worker does not have a defence, the worker will generally not be entitled to severance pay.   

*If there is a reasonable chance that the employer did not have just cause for dismissal, or if the employer may not be able to prove that there was just cause, continue to the next step of the checklist.  

Most employment contracts are contracts of indefinite hiring.  This means that no definite term of employment was set out at the time of the contract, and there is an implied term that either party may terminate the contract upon giving “reasonable notice”.  The implied term to give reasonable notice can be overridden by an express notice provision limiting the amount of notice the employer is obligated to give the employee.  Accordingly the courts will assume that an employee should receive “reasonable notice” prior to termination unless the contract explicitly says something different.  If there is an express notice provision in the employment contract, then that clause is binding, unless there is a reason for it to be invalid (see '''Section V.C.2(c) and (d) Invalid Contracts''', below).  

Note that any wage claims that crystallized before the termination of the contract are not eliminated by just cause for dismissal. Just cause only relieves the employer from notice and severance pay requirements, but not liability for past wages, etc.   

If an employee had successive fixed term contracts, the courts may find there is in fact an indefinite term of employment; see ''Ceccol v Ontario Gymnastic Federation'' (2001), 55 OR (3d) 614, https://canlii.ca/t/1fnnp.  

Once a job offer is made and accepted, a contract is in place (though as discussed above, it may be unwritten).  In order to change the terms of the contract after it is in place, there must normally be fresh consideration flowing from each party to the other.  Consideration in contract law is the benefit one party receives from another as a result of entering into a contract with another party.  This means that to change an existing contract, the new contract must contain a new benefit for both the employer and the employee. Because of this, an entire written contract might be invalid if the contract was imposed on the employee after they had already accepted the job offer: the employee would already have a contract, and the written contract would need to have some new benefit, or “fresh consideration”, for the employee.  Compare the signature dates on the written contract to the actual start dates, to determine if there is an argument that the contract is unenforceable for lack of consideration.

As this ''Toca'' case is relatively new, a note up of employment law cases referencing or applying ''Toca'' will be important to an analysis under this topic.  For example, recently, in obiter in the case of ''Quach v. Mitrux Services Ltd.'', the BCCA commented that ''Rosas v. Toca'' may not apply in the employment context or act to “change the authority of ''Singh'' in the nuanced world of employer and employee contractual relationships.”

Vague or ambiguous contract terms may be unenforceable. Courts will examine the wording of the contract terms to determine whether a clause is  enforceable for vagueness or ambiguity. If a clause is not enforceable, courts may rule on the term of agreement based on the conduct of the employer and employee and pre-contractual communication between the parties.  See ''Alsip v Top Rollshutters Inc. dba Talius'', 2016 BCCA 252, https://canlii.ca/t/gs477.

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.   

If a term of the contract is invalid, then the employee will likely receive whatever the common law provides instead of what the contract said.  

For example, a termination clause might say the employee will receive 30 days notice if they are being terminated without cause.  Under the ESA, the employee could receive up to 8 weeks notice.  The contractual termination clause would be invalid because it purports to provide the employee with less than the minimum statutory entitlement.  

Note that in assessing whether a term of a contract breaches the ESA, one must consider the maximum entitlement that an employee could ever receive under the ESA at any point in time, rather than their current entitlement.  

As this area of employment law continues to be litigated and develop, students should review the most recent state of the law prior to advising clients on potential enforceability of a severance provision.  

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.  

In ''Movati Athletic ( Group) Inc v Bergeron''  2018 ONSC 7258, https://canlii.ca/t/hwg5n, the Ontario Divisional Court also found a termination clause that allowed the employer to terminate employment without cause at any time upon providing notice or pay in lieu of notice  pursuant to Ontario Employment Standards was also not sufficient to limit the employee’s severance, as it did not clearly state that the minimum statutory severance was a cap.  

There exists a duty of honest performance of contractual obligations, including in the termination of contracts.  See C.M. Callow Inc. v. Zolinger, 2020 SCC 45, https://canlii.ca/t/jc6vt. There is also a duty to exercise contractual discretion in good faith, which operates in every contract. See Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, https://canlii.ca/t/jd1d6.  These general concepts will likely have applicability in the employment context.

Other general rules regarding contracts apply and may also invalidate the contract. Examples of these are duress, undue influence, and unconscionability, but these occur less frequently.  

Employers can dismiss an employee in one of two ways:  

=== 4. Without Cause Dismissal and Reasonable Notice ===

If a non-unionized, federally regulated employee has been dismissed without cause, refer to sections 240-246 of the CLC; see ''Wilson v Atomic Energy of Canada'', 2016 SCC 29, https://canlii.ca/t/gsh2f.   

For service between three months and one year, one week of wages (or notice) is required. For one to three years, two weeks’ wages or notice are required. For three years, three weeks’ wages or notice are required. After three consecutive years of employment, one additional week of wages or notice is required for each additional year of employment, to a maximum of eight weeks (s 63(3)(iii)). Additional compensation is required for group terminations (see below).   

Group terminations (those of 50 or more at a single location) have additional requirements under the ESA. First, the employer must give written notice to the Minister, to each employee being terminated, and to the union. This notice must specify the number of employees being terminated,  the date(s) of termination, and the reason for termination. According to s 64, the number of weeks notice for group terminations varies with the number of employees being terminated:

*quits or retires;  

*is fired for just cause (see discussion of just cause below);  

*was employed for a definite term and the employment ends in accordance with the end of the term of employment;  

*was hired for specific work to be completed in 12 months or less;  

*was a teacher employed by a board of school trustees.  

The entitlement to notice at common law is a contractual entitlement. As such, there may be a valid termination clause in an employment  contract which sets out the employee’s entitlement to common law notice.   

The case of ''Bardal v Globe and Mail Ltd'', 1960 294 ONSC, https://canlii.ca/t/gghxf includes a list of the four primary factors to be considered in  determining the appropriate length of a notice period:  

The current upper limit of “reasonable notice” is 24 months, generally for the longest-tenured, older, and senior-level employees.  While there are some case beyond this upper 24-month limit, which should be reviewed carefully if employees fall within the relevant age and years of service categories, these cases are the exception.  There has been a trend over the past years with long term employees working for employers their entire lives and dismissed in their late 60s and early 70s claiming severances of 30 or more months.  However, in ''Dawe v. Equitable Life Insurance Company of Canada'', 2019 ONCA 512, https://canlii.ca/t/j12wp, the Ontario Court of Appeal decision suggests that “''exceptional circumstances''” must be present to award a notice period above 24 months, and that lengthy service and age would not generally suffice to enlarge a “cap” of beyond twenty-four (24) months.

In addition, be aware that employers may try to rely on termination provisions in an employee handbook or other such workplace policy documents.  For example, in ''Cheong v Grand Pacific Travel & Trade (Canada) Corp.'', 2016 BCSC 1321, https://canlii.ca/t/gskng the BC Supreme Court found that an employee handbook termination clause did not act to limit the employee’s reasonable common law severance.  It is important to review and question all documentation relied on to limit an employee’s severance.

To determine how much notice an employee might get, compare their case to previously decided cases. Carswell hosts an online Wrongful Dismissal Database.  The database calculates average notice period awards from precedential cases.  Reports can be purchased individually or by subscription.  This is a helpful tool for searching for cases where an employee had a similar range of age, length of service, and job type as compared to the employee in question.  The database is accessible online at: http://www.wrongfuldismissaldatabase.com   

'''Note that Reasonable Notice is concerned with a period of time, not an amount of money. A permanent part-time employee is entitled to the same notice as a full-time employee. The fact that the employment is part-time will be reflected in the amount of compensation, based on the amount of time the employee was actually working (Stuart v. Navigata Communications Ltd., 2007 BCSC 463 at para. 15).'''

There is case law to support the principle that an employee’s unique background and the nature of their responsibilities can outweigh an employee’s short length of employment in assessing a reasonable notice period upon termination.  For example, the employee’s notice period was increased from 5 to 10 months in ''Waterman v Mining Association of British Columbia'', 2016 BCSC 921, https://canlii.ca/t/grtkl, based on the employee’s position in the company, her unique background and the nature of her responsibilities.  Also see ''Munoz v Sierra Systems Group Inc.'', 2016 BCCA 140, https://canlii.ca/t/gp1cv.

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, https://canlii.ca/t/gh79b.

Fixed term contracts have a defined end date.  In the normal course, fixed term contracts simply end when the term expires, or they are terminated in accordance with termination provisions in the fixed term contract itself.  Reasonable notice is not normally required to end a fixed term contract.   

After determining the damages the worker may be entitled to, return to '''Section IV.D.1: Termination of Employment Checklist'''.

Of course, pay in lieu of notice would include replacement of the employee’s lost wages over the course of the severance period.  However, arguments can be made that severance should also include replacement of other aspects of an employee’s lost compensation.  

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. A judge might 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, or by awarding the employee his or her actual out of pocket costs to purchase comparable replacement benefits themselves during the notice period.

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

There are two general categories of pension plans: defined benefit plans and defined contribution plans. The calculation formula above is generally applicable for determining the loss of a defined benefit pension plan over a notice period.  In some situations, a more simplified process of calculating the loss of employer pension contributions over the course of a notice period will be used for estimating the lost value of defined contribution pension plans. As a big picture concept, the idea is that if an employee receives pay in lieu of notice, the employee should be put in the same place financially in respect of their pension as if they had worked and continued making regular pension contributions during the notice period.

An employee may be entitled to compensation for loss of bonus during the notice period.  This assessment will require a consideration of whether the bonus was discretionary or based on quantifiable metrics, and whether the employee would have likely received a bonus had they worked during the notice period.   

Research should be done on this topic to determine potential entitlement.

There is authority for the inclusion of estimated tips in an award of damages for wrongful dismissal: Patriquin, ''Pier Marine Pub Ltd. v. Brown'', 1992 BCJ No 2868 (BCSC). Where a plaintiff’s earnings are in part from cash gratuities, damages reflecting that lost income are not assessed as the amount that the plaintiff declares and pays taxes upon: ''Chapple v. Umberto Management Ltd.'', 2009 BCSC 724, https://canlii.ca/t/23qr4

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, https://canlii.ca/t/gncc4).

=== 5. Just Cause Dismissal- General ===