Terminated without notice: are discretionary bonuses part of the severance package?

| August 15th, 2017 | No Comments »

Bonuses may make up a significant portion of pay for executives, senior managers, and other high skilled employees. Upon termination of the employment relation, notice or pay in lieu is meant to place an individual in a similar place had they not been terminated. Pay in lieu is refereed to as ‘notice pay’. Notice pay is how the courts determine the amount of pay in damages that an employee that was denied reasonable notice is owed. Consistent with this principle, discretionary bonuses may need to be included in an employee’s a severance when choosing no to give notice of termination.

Discretionary Bonuses

A discretionary bonus, by definition, is awarded at the employer’s will without objective criteria. When included in an employment contract, discretionary bonus will clearly specify that the bonus is solely to the determination of the employer and may or may not be granted. Employers often will argue that since the bonus is discretionary, it should not have to be included in notice pay. However, there are scenarios where discretionary bonuses will be included as damages by the courts when assessing the amount of notice pay the employee is owed.

Discretionary Bonuses and Notice Pay

When the employee has been with the employer for many years and the bonus was paid regularly, it is likely to be included in the notice pay, especially if it composed a significant portion of the employee’s total compensation. The less often and regular the bonus was paid, the greater the chance the bonus will not be included in the notice pay. Further, courts have also determined that if current employees of a similar position and status receive a discretionary bonus, the terminated employee must also receive the payment of the discretionary bonus in their notice pay.

Final Remarks

Overall, it is important for the discretionary bonus clause to be unambiguous because any difficulty in interpretation will fall in the employee’s favour. In addition, where the bonus is labeled as discretionary in the employment contract, but in practice is subjected to objective criteria, the courts will not view this as discretionary. When dealing with executive type compensation, properly drafted contracts and practices are very important. What was initially thought to be an agreed upon contact may end up being very costly for an employer. it is advisable to seek legal expertise when drafting contracts that seek to define the limits of severance payment with regards to discretionary bonuses.

When is a non-solicitation clause not enough?

| August 11th, 2017 | No Comments »

Non-solicitation clauses prohibit an employee from actively pursuing clients of the employer when the employment relation has ended. To be enforceable, the clause must have a time limit that is reasonable. Spatial limitation (or a geographical scope) in a non-solicitation clause is becoming less common and less necessary due to the advancements of telecommunications technology and organization of service work. Overall, any restriction that goes beyond an employer’s business assets will be deemed unenforceable.

Non-solicitation clauses are usually all that is necessary to protect an employer and their assets from an employee that resigns. In exceptional circumstances, however, employers may instead need to use a non-competition clause to protect their business. Non-compete clauses prevent an employee from pursuing employment in the same or similar capacity once the employment relation has been terminated. in other words, they are not allowed to compete against their former employer. Non-competition clauses must have a defined geographic and time limit to be enforceable. These limits must be clearly stated as any ambiguity will render the clause unenforceable. Courts are also reluctant to enforce non-competition clauses because it limits the employee’s ability to earn a living. This is why only under exceptional circumstances will a non-competition clause be enforceable.

Exceptional circumstances are usually for employees that occupy key senior or managerial roles with very close relations with customers or trade secrets that would severely hurt the employer’s business if the employee left to a competitor. With regards to clients, exceptional circumstance would entail a relationship with clients that is to the exclusion of anyone else. This means that the employee, in the eyes of the client, essentially is the business. Under such circumstances, an employee leaving to a competitor would likely result in former clients following the employee without being solicited. In such instances, a non-compete clause would be necessary to protect an employer’s business.

Overall, non-compete clauses must only be used when necessary. When conditions warrant a non-compete clause, the clause must be carefully drafted, as any ambiguity will render the clause unenforceable. It is important that employers seek the advice of an employment lawyer when considering a non-compete clause as such instances are rare and need legal expert analysis

Can an Employee be Dismissed for a Single incident of Insolence or Insubordination Towards Management

| August 10th, 2017 | No Comments »

Being rude, disrespectful, or insubordinate towards a superior within the workplace is subject to disciplinary measures. Under common law, discipline must be proportionate to the misconduct and also be intended to correct a behaviour rather than punish the employee. In addition, the discipline must be progressive. This means that discipline is usually multi-staged, which each stage being more sever aimed at correcting similar reoccurring misconduct. For this reason, termination of an employee for a single act of misconduct is a rarely justified.

The principles of progressive discipline do apply for acts of insolence and/or insubordination towards a managerial figure of supervisor. A single act will usually require a verbal or written warning that clearly communicates the misbehaviour and what is expected going forward. Further steps for reoccurring incidents may include suspension or termination. However, there are also scenarios where a single act of insolence and/or insubordination towards a superior may warrant termination, and these standards are established through common law by the courts.

In the case of Henry v. Fox Ltd. the court defined the difference between insolence and insubordination for the purposes of workplace discipline. Generally speaking, insubordination is intentional disobedience of lawful instructions given by a superior and is of more serious misconduct than insolence. Insolence, on the other hand, is contemptuous or abusive language directed towards a superior, and less serious of the two. However, each act may warrant an immediate dismissal if one of the three results from the act itself:

  1. the act results in the employee and superior no longer being able to maintain a working relationship
  2. the act undermines the superior’s credibility and, as a result, the superiors ability to supervise effectively in the workplace
  3. the incident resulted in the employer suffering a material loss, loss in reputation, or the employer’s business interests severely prejudiced

For a single act of insolence or insubordination to warrant a summary dismissal, it usually must take place in front of other employees. The culture of the workplace will be considered. If it is a workplace that tolerates profanity and aggressive behaviour, a single act is less likely to justify a dismissal. Further, if the employer does not impose a ‘cooling off’ period so that the relation may be restored, the courts may see the employer’s decision to terminate in a less favourable light. In all, all relevant factors will be considered when determining whether a dismissal was justified, including the employee’s length of service and disciplinary record. Employers should take a comprehensive approach when deciding to impose immediate dismissal in such instances and legal assistance is always recommended where uncertainty lies.

Three Rights Every Employee Should Know Regarding Health and Safety

| August 4th, 2017 | 1 Comment »

Health and Safety in the workplace is seen as a joint responsibility between the employer and employees. Glancing over the Occupational Health and Safety Act, for example, clearly defines duties for both employees and employers. Essentially, each party is required to remain vigilant: both play key roles in noticing and reporting unsafe working conditions. There are three rights that employees should know and exercise in order to remain in control of their health and safety in the workplace. These rights are:

  1. The Right to Know

There are certain standards that employees need to be provided in order to be aware and competent in workplace health and safety. This includes the right to attain safety information, training, supervision from competent individuals, and adequate instructions. For instance, employees are to be made aware of any hazardous material or substances within the workplace, and training for proper handling and use of protective gear.

  1. The Right to Refuse Unsafe Work

Under all jurisdictions in Canada, workers are permitted the right to refuse work when conditions are dangerous or may reasonably cause harm. This includes the condition of any equipment required for use, the physical condition of the workplace itself (building structure, lose wiring, etc), or the task itself providing the danger is not inherent within the job (ie. police, firefighting, etc).

Employees must report any danger and refusal to their immediate supervisor or manager, whichever present. This will require an initial investigation by the manager/supervisor to correct the danger. If the worker is not satisfied with the remedies implemented, then an investigation that involves a representative from the health and safety committee or the workplace health and safety representative (whichever applicable) will follow in the presence of the worker. If the worker still remains unsatisfied with the results of the investigation, a minister from the government may be contracted and an independent investigation will follow.

  1. The Right to Participate

Employers are required to implement joint health and safety committees with representatives for both the employer and employees on the committee. Depending on the number of workers at the workplace, employers may be required to have one workplace representative or a committee of 2 – 4 representatives. The committees are to identify any dangerous or hazardous workplace conditions, make recommendation for improvement of health and safety and also handle employee concerns and/or complaints. Representatives also have the right to participate in any health and safety investigations, establish training or educational programs and gather any information from the employer pertaining to safety.

Overall, these are the basic three rights any employee should be aware. These rights grant employees the knowledge and power to take responsibility of their own health and safety, which fulfils a very important objective and purpose of health and safety legislation.

Random Alcohol and Drug Testing Policy: When is this discrimination in Safety Sensitive Workplaces

| August 4th, 2017 | No Comments »

Under human rights law, individuals that suffer from addiction are protected under prohibited grounds of discrimination. For this reason, any policy that has an adverse effect on employees with addictions will have to be a bona fide occupational requirement (BFOR).  This means that employees found in violation of such policies will have to be accommodated for up to the point of undue hardship.

For a job requirement or workplace policy to qualify as a BFOR, it first has to rationally connect to the performance of the job. For random and unannounced drug/alcohol testing in a safety sensitive environment, the goal would be that the employees performing the job are doing so under conditions that do not compromise safety. The condition of sobriety definitely rationally connects to the objective of workplace safety. Secondly, the policy has to be implemented with honesty and good faith. In this instance, it is reasonable to believe that random testing is a tool that would contribute towards a safer working environment in safety sensitive workplaces.

Lastly, the policy must be reasonably necessary to accomplish the objective of workplace safety. To establish this, it must be shown that not only is the policy necessary, but that impaired individuals cannot be accommodated without the employer suffering undue hardship. This requires exploring possibilities such as modifying tasks or providing alternative work. For workplace that is safety sensitive, there may not be alternatives to accommodate those unable to perform work in safety sensitive roles. It is always best to consult with an employment law expert when seeking to accommodate with minimal options. At the very least, an attempt must be made by the employer.

In terms of policy, employers should be cautious when implementing random drug testing. Methods of testing that do not measure present impairment will be found to be in violation of human rights. Methods of testing must be able to test for present impairment because this is a direct measure of an individual’s ability to perform while on the job. In the eyes of the law, measuring past impairment discriminates against those with addiction, while providing little indication of their present ability to perform their jobs safely.

When is Domestic Violence an Issue of Workplace Health and Safety

| August 1st, 2017 | No Comments »

It may not be well known, but there are instances where domestic violence is an issue of workplace health and safety. There is situation, therefore, where it is the employer’s responsibility to make sure an employee that is a victim of domestic violence is safe while at work. Violence may take many forms, as domestic violence is an attempt to gain power or control over a person with whom one has an intimate relationship. This may take many forms, such as texting, email, phone or stalking.

Where domestic violence is between two current employees, the employer has an unquestionable responsibility to ensure that the victim is free from violence while at work. This may include modifying tasks to ensure that the individuals do not cross each other during the course of work, limiting or eliminating communication between the employees involved, or even termination if it is impossible to ensure the victim’s safety and well being. In essence, domestic violence, in this case, would be viewed equally to workplace violence and should elicit the same response from the employer.

In the instance that the aggressor is not an employee, the employer still has a responsibility to ensure that the employee is safe while at work. This may include screening the employee’s calls, providing a photo of the abuser to security and reception, notifying security personnel in in case the aggressor appears at the workplace, ensuring that immediate help is called upon if physical contact is attempted at work, and providing a personal work plan to assist the victim. It is also important to ensure that the employee is safe during their route home after work, as the abuser may anticipate contact during this time. Allow the employee to express their concerns so that a meaningful plan may be developed.

Under the Ontario Occupational Health and Safety Act, employers are required to implement domestic violence policy and have a plan in place to minimize the impact of domestic violence if it becomes workplace issues. The program should include training to identify indicators, methods of reporting, educational materials and so forth. It is in the employers best interest to have an effective policy that goes beyond minimal requirements, as domestic violence may impact job performance, attendance, and workplace morale. Contact an employment law expert to ensure that workplace policies regarding domestic violence are current, and prevention programs are properly in place.

Know what you are owed past employment

| July 25th, 2017 | No Comments »

It is standard to receive a notice when an employer wishes to end an employment relation. This notice must grant a reasonable amount of time for the employee to find a comparable job. Alternatively, the employer may provide the employee payment equivalent to the amount the employee would have earned during the notice period, inclusive of all benefits, in lieu of a notice period. When an employer fails to provide notice, then the employee may litigate to receive the notice pay for the breach of contract. The length of the notice period or pay in lieu must consider certain factors, such as age, position, length of service and labour market conditions. Overall, notice period is intended to place an employee in a comparable position had there been no termination. However, employees may also face harsh treatment from employers wishing they resign, in hopes the employee leaves voluntarily – be mindful that an employee may still seek notice damages in this instance. If the time leading to dismissal and manner of dismissal itself caused significant hardship, employees may be owed additional compensation in aggravated and/or punitive damages.

 Aggravated damages are awarded as additional compensation to the employee when it can be established that the manner of dismissal was done in bad faith, and that the breach of contract caused mental distress or damages to reputation as it relates to future employment opportunities. Bad faith conduct may include being extremely insensitive or untruthful in the dismissal process. Further, the employee must be able to prove that damages such as mental distress were also suffered. For instance, it is not enough to claim mental distress or psychological harm. Rather, there must be evidence that proves mental distress was suffered during the course of dismissal.

Punitive Damages are awarded to the employee to punish the employer for actions during the dismissal that the courts find exceptionally indecent. For punitive damages to be awarded, there needs to be an ‘independent actionable wrong’ such as a breach of good faith. To be clear, these are additional wrongs committed by the employer, independent of the breach of contract. There also may be punitive damages awarded if it is determined that the employer’s misconduct was so malicious that it offends the court’s sense of decency – an example being an employer exploiting an employee’s disability in attempt to force them to quit.  Depending on the wrongs committed, damages may range from $10 000 – $450 000. It is important to note that punitive damages require wrongs that are exceptionally reprehensible, and are thus rarely awarded. An employment law expert will be able to assess the possibility of receiving such damages.

 Overall, when facing a dismissal that caused exceptional difficulty, it is advisable to seek the assistance of an employment lawyer. It may be the case that notice pay does not fairly compensate the harm suffered, and additional damages will need to be pursued.

‘Entire Agreement’ Clauses: Usefulness and Precautions

| July 20th, 2017 | No Comments »

Implementing an entire agreement clauses is a useful way to ensure that no verbally expressed promises are contested by an employee for being unfulfilled. An entire agreement clause can eliminate dispute over the terms of employment that were not explicitly stated within the written employment contract. The clause specifically should state that all promises and terms of employment are sufficiently expressed within the written contract. The clause must also express that the contract supersedes all discussions, negotiations and documents prior to the signing of the contract, and that all agreed terms of employment are represented within the contract being signed. This may avoid unnecessary legal costs if any future challenges of unfulfilled promises are made by the employee.

Employers must be careful not to take advantage of an entire agreement clause because the courts will not be favourable to negligent misrepresentations made to the employee, regardless of what the employment agreement states. Employers must also ensure individuals placed in positions that represent the company accurately represent the position being offered. If promises made were a necessary condition to having the employee accept the offer of employment, it is likely the promises are fundamental to the employment agreement. If found to be untrue, such a promise would be considered negligent misrepresentation. An example may be an employee being promised long term employment based on the availability of future projects, only to be terminated shortly after due to there being no such work available.

Overall, an entire agreement clause offers employers peace of mind in knowing that costly litigation will be less likely in the event an employee claims a promise has not been fulfilled. This does not absolve employers, however, of their duty to fairly represent the position offered prior to an employment agreement being signed. Courts will never act favourable to entire agreement clauses when it is found that the employer was negligent in the representation of the position offered. When drafting entire agreement clauses, it is necessary to have a legal professional draft such clauses properly and to be advised of which promises must be honoured to avoid claims of negligent misrepresentation.

Do I Owe A Contractor Reasonable Notice to End Services?

| July 17th, 2017 | No Comments »

Independent contractors are not bound to their clients by an employment relation. Independent contractors are, in essence, their own employers. The courts will apply a number of tests which look at certain factors such as economic dependency, permanency, control, and risk of loss/profit among other factors to establish whether there is an employment relation. The less integrated the contractor is within the business to which services are rendered, the more likely the contractor is an independent contractor. When the contractor is deemed a dependent contractor, however, the courts view this as an employment relationship. In this instance, the contractor would be owed reasonable notice or pay in lieu if services are no longer required.

A case that demonstrates a relationship of a dependent contractor is Mancino v. Nelson Aggregate Co., [1994]. Mancino was a self-employed truck driver that served Nelson Aggregate almost exclusively. Nelson Aggregate closed the shipping location that was responsible for providing Mancino his work. Although Mancino was under his own business, the trial judge found that there was a dependency between Mancino and Nelson Aggregate characterized as “mutual and permanent in nature”. The judge looked at Mancino’s economic dependency, consistent daily attendance, requests for vacation time, and so on. Ultimately, what was an independent contractor on paper was determined to be a ‘dependent’ contractor and thus deemed an employment relation. The trial judge found that Nelson Aggregate had disclosed the likelihood of the shipping location being closed, as it was under contract, a year prior to its closing. Nelson Aggregate therefore did fulfill its duty of reasonable notice to Nancino.

Overall, employers must be aware of the difference between independent and dependent contractors. Often, businesses will seek service from an independent contractor for efficiency and affordability. However, employers must recognize situations that indicate a dependency with a contractor. Factors such as length of service, regular attendance, economic dependency, and lack of control over hours and work may indicate dependency. If services are no longer required after a dependency is established, reasonable notice may be owed. Ontario employment laws are going to become more strict in this regard, which means employers must be more aware of the nature of their relation with independent contractors. It is always advisable to seek the advice of an employment lawyer if faced with this uncertainty to avoid possible claims of notice pay, which can be costly.

Constructive Dismissal – An Intolerable Environment or Culture

| July 6th, 2017 | No Comments »

When an employer unilaterally changes a fundamental term of an employee’s job, then an employee may quit and claim ‘constructive dismissal’. Essentially, what this means is that the changes to the employment relation would have left any reasonable individual with no other option rather than to quit. The employee may then claim constructive dismissal, and if successful, would be owed a severance (referred to as ‘notice pay’) as compensation.

Unilateral changes that usually trigger constructive dismissal include significant reduction of pay, demotion, discrimination, reduction of hours and so on. The cause of a constructive dismissal is usually easily identified as a single factor of significant affect. However, the courts do not necessarily look at a single factor. Constructive dismissal may result from several changes or circumstances that create an intolerable environment for an employee. The cumulative effect, therefore, would trigger a constructive dismissal.

This was demonstrated in Shah v. Xerox Canada Ltd 2000 (OCA). Shah was an employee of Xerox for 12 and a half years with a good performance record, bonuses and raises. Shah accepted an internal transfer and reported to a manager with a personality and philosophy that was not compatible with Shah’s. Shah’s new manager was aggressive in style, very outgoing and confident, assertive and combative; Shah was reserved, withdrawn, and gentle. This created uncertain expectations for Shah, as his new team encouraged an ‘empowerment’ culture, free thinking and independence, whereas Shah liked direction and structure. Shah’s new manager raised multiple performance concerns. The first critical performance review used poor factual evidence, and the second one provided poor detail and questionable claims. Shah then received 3 unexpected and unwarranted warning letters over a 2-month span, the last placing Shah on probation without defining any expectations or allowing an opportunity to respond. This also added to the mental distress Shah was experiencing in addition to stress from his personal life. Shah requested a transfer and once his manager denied him, Shah quit and successfully claimed constructive dismissal.

The court considered the cumulative effect of Shah’s change of environment. This included the change in culture, the manager’s style and treatment towards Shah, including the lack of detail contained in the warning letters, unclear expectations and unfounded claims. Whereas Xerox argued that constructive dismissal must result from a unilaterally imposed fundamental change to the employment contract, the court maintained that the focus must be on whether the employer intends to be bound by the employment contract. The cumulative effect of the multiple warnings that lacked details for corrective action signified Xerox did not intend to continue the employment relation with Shah. This, in addition to the cultural change affecting Shah, resulted in a constructive dismissal.

Overall, constructive dismissal may result from conditions not typical of most constructive dismissal causes. It is important to speak with an employment law expert if faced with an intolerable situation in the workplace that makes continued employment unreasonable.