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

== B. Breach of contractual terms of employment ==

The most common breach of an employee’s contract (whether the terms of that contract are oral or in writing or a combination of the two) is a breach of a term that the employer will provide notice of dismissal.   

When an employee is fired without being provided with reasonable notice of dismissal or being paid money in lieu of reasonable notice (i.e. severance), the employee may have a breach of contract claim.  The failure to provide reasonable notice is also referred to as a wrongful dismissal.  See [[Section V.C: Termination of Employment (V.C) | Section V.C: Termination of Employment]].

If an employer has significantly changed the type of work done by an employee, the employee’s rate of pay, or other working conditions, the employee may have been “constructively dismissed” and may be entitled to damages.  See [[Section V.C: Termination of Employment (V.C) | Section V.C: Termination of Employment]] for further information.   

There are also situations during the employment relationship where an employer can breach other terms of an employment contract (other than the notice requirement). For example, an employer might fail to pay a previously agreed upon bonus to an employee. See ''Gadbois v Newcom Business Media Inc.'', 2016 ONCA 898; ''Paquette v TeraGo Networks Inc.'', 2016 ONCA 618.

Claims for breach of contract  are addressed through civil court claims, either at Provincial Court or Supreme Court depending on the potential value of the case.   

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.  

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.  

If there was a fixed term contract and the employee continued to work after the term’s expiration, the contract then becomes an indefinite contract. If the employee had an indefinite contract, but then signed a fixed-term contract, determine whether the new contract is valid; see '''Section V.C.2(c) and (d) Invalid Contracts''', below.

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.

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.  

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.   

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.  

In Movati Athletic ( Group) Inc v Bergeron ( 2018 ONSC 7258), 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.  

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.  

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.   

Employees are entitled to notice, or pay in lieu, under the ESA. These are the minimum statutory requirements for compensation for individual terminations. For periods of employment greater than three months, the employer must pay severance to the employee, or satisfy that obligation by giving a written notice of termination.  

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:

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

In addition to ''ESA'' notice, employees are entitled to a reasonable notice of dismissal at common law, or pay in lieu of such reasonable notice.   

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, the 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   

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.  

There is case law that supports the principle that more vulnerable employees, for example due to injury or illness, are entitled to more notice.   

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.

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.

Employers are required to provide employees with a reasonable notice of dismissal. This could be provided by advance notice, in which case the employee would work for the prescribed amount of time, and continue to receive all elements of his compensation, such as wages, benefits, pension, car allowance, etc.   

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.)

If an employee is guilty of serious misconduct which goes to the heart of the employment relationship, the employer may dismiss the employee for just case.  

Although there is no comprehensive list of what constitutes just cause, the list below discusses some of the more common grounds for a dismissal.

Insubordination or insolence that is incompatible with the continuation of the employment relationship is just cause for dismissal (''Latta v Acme Cheese Co'' (1923), 25 OWN l95 (Ont Div CT)). A single incident that is very severe and interferes with and prejudices the safe and proper conduct of the business will be just cause for dismissal (''Stilwell v Audio Pictures Ltd'', [1955] OWN 793(CA)). Poor judgment, insensitivity, or resentment, is generally not sufficient (''Leblanc v United Maritime Fisherman Co-op'' (1984), 60 NBR (2d) 341 (QB)).   

'''NOTE:''' A refusal to co-operate, a neglect of duties, or a refusal to perform the job may be just cause for dismissal ('''Lucas v Premier Motors Ltd''', [l928] 4 DLR 526 (Alta CA)). However, if an employer proposes a unilateral change in position, job function, pay, hours, etc., it is not just cause if the employee refuses the change. Rather, it may be considered a constructive dismissal. Failure to accept a reasonable  transfer not involving demotion or undue burden or hardship may be cause for dismissal, if such a transfer is determined to be an express or implied term of the contract.

Where there is actual incompetence, not just dissatisfaction with an employee’s work, the employee may be dismissed with cause if such incompetence is the fault of the employee (''Waite v La Ronge Childcare Co-operative'' (l985), 40 Sask R 260 (QB)). If an employee presents an exaggerated assessment of his or her own skills, a company is justified in dismissing that employee after finding out his or her true abilities (''Manners v Fraser Surrey Docks Ltd'' (1981), 9 ACWS (2d) 155). Incompetence is assessed using an objective standard of performance, and it  is for the employer to prove that the employee fell below the standard. Usually, one isolated example of failure to meet such a test does not  warrant discharge (Clark v Capp (1905), 9 OLR 192). The employer must prove that:

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 must be proven on a balance of probabilities and the burden rests with the employer (''Hanes v Wawanesa Insurance Company'', [1963]  SCR 154). The employer must show that the employee intentionally and deceitfully engaged in the misconduct. Failure by the employer to prove  dishonesty may lead to punitive damages. Dishonesty may be a cause for dismissal, especially if it indicates an untrustworthy character or is  seriously prejudicial to the employer’s interests or reputation (''Jewitt v Prism Resources'' (1981), 127 DLR (3d) 190 (BCCA)). In ''McKinley v BC Tel'', [2001] 2 SCR 161, the Supreme Court of Canada used a contextual approach to make this assessment. The test is whether the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship or is fundamentally or directly inconsistent with the employee’s  obligations to his or her employer. An effective balance must be struck between the severity of the misconduct and the sanction imposed.  

Depending on the extent of intoxication and degree of prejudice to the employer, intoxication may be a cause for dismissal; see ''Armstrong v Tyndall Quarry Co'' (1910), 16 WLR 111 (Man KB).  But, intoxication in itself is not grounds for dismissal.  The courts should undertake a contextual approach, per McKinley, look at all relevant factors (i.e., work history, discipline history, and whether the position is safety sensitive.  Courts may be sympathetic to alcohol abusers especially if they are long-term employees; see ''Robinson v Canadian Acceptance Corp Ltd'' (l974), 47 DLR (3d) 417 (NSCA).

Consider whether the intoxication is part of a larger substance abuse issue. If so, the employee may have a Human Rights claim (see [[Introduction to Human Rights (6:I) | Chapter 6: Human Rights]] and the duty to accommodate).

When an employee is frequently absent from work, the absence occurs at a critical time, or the employee lies about the absence, it may be a cause for dismissal. Chronic lateness may also be cause for dismissal.  

Consider whether the lateness or absenteeism are caused by a physical or mental disability. If so, the employee may have a claim at the B.C. Human Rights Tribunal (see [[Governing Legislation and Resources for Human Rights (6:I) | Chapter 6: Human Rights]]).     

Temporary illness does not constitute just cause ('''McDougal v Van Allen Co Ltd.''' (1909), 19 OLR 351 (HC)). For a lengthy illness, one must consider the nature of the services to be performed, the intended length of service of the employee, and other factors (''Yeager v RJ Hastings Agencies Ltd'' (l985), 5 CCEL 266 (BCSC)). In some cases, a period of one year may not be too long for an employer to await the return of a valuable employee (''Wilmot v Ulnooweg Development Group Inc'', 2007 NSCA 49). If the employee is permanently incapable of performing work duties, he or she may properly be dismissed (''Ontario Nurse’s Federation v Mount Sinai Hospital'', [2005] OJ No 1739). Illness is usually considered frustration of contract, and is not grounds for dismissal for just cause; however, if the contract is frustrated, the employee is not entitled to severance pay.  

Consider whether the illness is actually a physical or mental  disability. If so, the employee may have a claim at the B.C. Human Rights Tribunal (see [[Introduction to Human Rights (6:I) | Chapter 6: Human Rights]]).

An employee has a duty to be faithful and honest. Information obtained in the course of employment may not be used for their own purposes or purposes that are contrary to the interests of the employer (''Bee Chemical Co v Plastic Paint and Finish Specialists Ltd et al'' (l979), 47 CPR (2d) 133 (Ont CA)). An employee may be liable for damages for breach of contract where he or she is running a business contemporaneous with being an employee (''Edwards v Lawson Paper'' (1984), 5 CCEL 99). An employee’s conduct that is seriously incompatible with their duties and creates a conflict of interest can be grounds for summary dismissal (see ''Durand v Quaker Oats Co of Canada'' (1990), 45 BCLR (2d) 354 (CA). Following the end of employment, an employee is not permitted to compete  unfairly against the employer, for example by using confidential information.  

Private conduct will be considered just cause for dismissal if it is incompatible with the proper discharge of the employee’s duties, or is prejudicial to the employer. This depends on the conduct and the nature of the job. Alleged criminal conduct or conduct that interferes with the internal harmony of the workplace, if it is prejudicial to the employer, may also be just cause.  

A personality conflict, i.e. inability of an employee to function smoothly in the work environment on a personal level, is not grounds for dismissal unless it is inconsistent with the proper discharge of the employee’s duties or is prejudicial to the employer’s interests (''Abbott v GM Gest Ltd'', [l944] OWN 729). If the inability to get along with others results in business interference, the employee may be dismissed (''Fonceca v McDonnell Douglas Ltd'' (l983), l CCEL 51 (Ont HC)).  

An employee’s unauthorized disclose of employer confidential information may amount to a cause dismissal. An employee’s secret recording of meetings with management might be found to be a breach of confidentiality and privacy obligations amounting to cause.  See Hart v. Parrish & Heimbecker, Limited 2017 MBQB 68

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.   

It can be argued that an employer must warn an employee before firing that employee for a series of trivial incidents that are not serious enough alone to justify dismissal (''Fonceca v McDonnell Douglas'' (l983), l CCEL 51 (Ont HC)).

If an employer’s behaviour indicates that they are overlooking conduct which gives cause, that employer cannot later dismiss the employee without new cause arising; see  (McIntyre v Hockin (1889), 1l6 OAR 498 (CA)).  This applies only where the employer knows of the conduct.  The employer is entitled to reasonable time to decide whether to take action, and this reasonable time period commences at the time that the employer learns of the employee’s conduct.

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.

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 Ruston 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.

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.   

An employee is still required to mitigate his damages if he is constructively dismissed. Sometimes, the employee will be required to mitigate by continuing to work for his current employer. See ''Evans v Teamsters Local Union No. 31'' (2008 SCC 20) for a discussion of the relationship between constructive dismissal and  the employee`s duty to mitigate.  

If an employee accepts the imposed changes without complaint, he or she is considered to have accepted the change, and will therefore be barred from action; however, employees are generally permitted a reasonable time to determine whether they will accept the changes.   

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.  

For example, harassment at work  could cause the employee to be unable to continue working and this might cause them to resign; in cases such as these, additional research should be done to determine whether the situation should be considered a resignation or a dismissal.  

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.  

Courts can award aggravated damages if the employer acted unfairly or in bad faith when dismissing the employee, and the employee can prove that they suffered harm as a result of the manner of dismissal.  

What constitutes “bad faith” is for the courts to decide, and has in the past centred on deception and dishonesty.  Mere “peremptory” treatment is not sufficient: see, for example, Bureau v KPMG Quality Registrar Inc, [1999] NSJ No. 261 (NSCA).  Sexual harassment has been held not to give rise to additional damages (Chiang v Kejo Holdings Ltd, 2005 BCSC 414).  See, however, Sulz v Minister of Public Safety and Solicitor General, 2006 BCCA 582, where punitive damages were awarded for sexually harassing conduct in the employment context.   

What constitutes “bad faith” is for the courts to decide, and has in the past centred on deception and dishonesty. Mere “peremptory” treatment is not sufficient: see, for example, ''Bureau v KPMG Quality Registrar Inc'', [1999] NSJ No. 261 (NSCA). Sexual harassment has been held not to give rise to additional damages (''Chiang v Kejo Holdings Ltd'', 2005 BCSC 414). See, however, ''Sulz v Minister of Public Safety and Solicitor General'', 2006 BCCA 582 where punitive damages were awarded for sexually harassing conduct in the employment context. “Bad faith” has been found in cases the  following cases: