Fixed Term Contracts: To include or not to include a termination clauses

| June 7th, 2017 | No Comments »

Often, the most cost effective way to fulfill a temporary business need is to hire an individual on a fixed term contract. However, what may not be known to most employers is if the employment contract comes to a premature end, then the employee would legally be owed the amount for the remainder of the contract. The way to avoid this outcome is to include a termination clause in the employment contract.

When including a termination clause there are a few options available to employers. Employers may opt to include a reasonable notice provision, which would entitle the employee common law notice. At common law, notice periods are usually longer than those provided by minimal standards employment legislation, as factors such as age, tenure, skill level, responsibilities and so on will be factored in to the length of the notice pay. However, they are easier to draft and less likely to be found unenforceable due to errors of law.

Alternatively, employers may opt to provide the minimum notice period under law. However, due to recent common law developments (see Wood v. Deeley Imports Ltd., 2017, ONCA), employers must be very careful when drafting clauses that seek to provide for the mandatory minimum. For instance, payments for notice, benefits and severance cannot be grouped into a lump sum payment. The clause must specify the amount for each requirement of severance pay under the law. Otherwise, the clause is unenforceable and essentially non-existent.  The wording is key and thus more susceptible to legal error. It is always best to seek the service of an employment lawyer when seeking this option.

Overall, it is best to include a termination clause for a fixed term contract, as this will ensure the goal of cost effectiveness. It is important to seek the assistance of an employment law expert when implementing termination clauses.  The onus on employers to draft clear, unambiguous and legally compliant termination clauses is high, and any errors will render the clause unenforceable.

Employment Insurance Eligibility: Leaving Employment to Accompany a Relocating Spouse/Child

| June 7th, 2017 | No Comments »

Individuals that voluntarily leave their employment are not entitled to Employment Insurance (EI) benefits unless they leave upon a justifiable cause under the Employment Insurance Act (see section 29 c for a complete list). In addition, individuals must also be available to work while receiving EI benefits to maintain their eligibility. One reason that qualifies as a ‘just cause’ includes accompanying a spouse or a dependent child that has relocated. A case that illustrates this is a claim by Ms. Annie Laroche archived as CUB 57793 under the Government of Canada’s website (www.ei.gc.ca).

Ms. Laroche and her husband shared the responsibility of caring for their young child. Ms. Laroche worked evenings and her husband worked days, each caring for their child when the other was at work. Ms. Laroche’s husband eventually accepted an employment offer in a farther region. Ms. Laroche relocated with her husband and child, as they were both the caregivers. Initially, Ms. Laroche was denied benefits because she did not make herself available to work by securing childcare arrangements immediately after leaving her employment. However, this was overturned. Ms. Laroche was found to have just cause for leaving her employment due to her accompanying her relocating spouse, which also affords an individual a reasonable amount of time to secure living and childcare arrangements.

The takeaway from the case here is that voluntarily leaving employment to follow a relocating spouse is a ‘just cause’ and therefore entitles an individual to EI benefits. Further, an individual does not have to immediately make themselves available to work to continue eligibility for EI – there is a reasonable amount of time given to secure living and childcare arrangements

Important Information for Conducting Criminal Background Checks for Condition of an Employment Offer

| June 7th, 2017 | No Comments »

Employers must treat criminal record checks similarly to other protected grounds of discrimination such as race, religion and so forth. A criminal conviction for which a person has been pardoned is a protected ground of discrimination under human rights law.  Any workplace policies that inadvertently have an adverse affect upon individuals with pardoned convictions must be dealt with accordingly.

Hiring Process

An employer concerned about employing an individual with a past criminal record may request a perspective employee to undergo a criminal background check. However, this should be done with proper precautions. It is advisable to make the background check a requirement once a conditional offer has been made. This would avoid any allegations that hiring practices contravened human rights law upon a discriminatory ground. For instance, requesting a criminal background check after extending a conditional offer avoids the possibility of a hiring decision being influenced by past criminal offences.

Criminal Record Policy

Having a workplace policy that prohibits employment of those with past convictions for which a pardon has been granted is a violation of human rights law. However, there is an exception if, and only if, the workplace policy is a bona fide occupational requirement (“BFOR”). This means that under no circumstances is it possible to employ an individual with a past particular criminal conviction  without suffering undue hardship as an employer.

This is a difficult standard to meet. At the very least, a workplace policy that prohibits a past conviction should be limited to past convictions that closely relate to the job. For instance, if the nature of employment deals with handling sensitive financial information, then having a policy that disqualifies individuals based on recent past convictions of financial fraud would likely be reasonable.

Conclusion

When seeking to enforce or implement workplace policy that deals with criminal record checks, it is important to take all necessary precautions as this is a human rights matter. The policy should relate to past convictions closely related to employment and take into consideration the time past since the conviction took place. It is always best to seek consultation from an employment lawyer when dealing with human rights matters.

My Business is Suffering: Can I Change Employee Compensation Schemes in an Attempt to Save the Business?

| May 24th, 2017 | No Comments »

Employee compensation is one of the most fundamental aspects of an employment contract. In most cases, a fundamental change in an employment contract would result in damages if litigated by the employee. An employee subject to such changes could claim ‘constructive dismissal’, which means that the employee’s employment terms were altered substantially enough to force him/her to resign.  The employee can then seek damages for wrongful dismissal.

There are exceptions, however, that would not typically trigger a constructive dismissal. In an attempt to save the business, small changes to all employees under the business will normally not warrant a constructive dismissal and would therefore be legal. Such changes should align with the goal of saving the business. For instance, a change from profit sharing to commission for a large group of employees may allow a business to be more profitable, thus being consistent with the goal of saving the business. The change should be minimal and reasonably necessary to save a struggling business. To illustrate this, consider the case of Pullen v. John C. Preston Ltd (Preston Ltd).

Pullen was hired by Preston Ltd. in 1979 as a sales manager. His base salary was $30 000 per year plus some profit sharing. Preston Ltd. was experiencing significant financial difficulties during hard economic times. Preston Ltd. reduced Pullen’s base salary by $3 000 and changed Pullen’s profit sharing compensation to a commission based compensation scheme. Further, Preston Ltd. also changed Pullen’s job description, leaving Pullen to feel as though he was a salesman rather than a manager. Pullen left his employment and claimed constructive dismissal. The court ruled that this was not constructive dismissal. Not all of Pullen’s managerial duties were taken away, and the changes to Pullen’s compensation were viewed as genuinely necessary in light of Preston Ltd.’s financial struggles.

This case shows that changes to compensation can be made while a company faces financial difficulties. However, financial difficulties must be severe enough to require changes to employee compensation schemes in order to save a business. When dealing with a similar situation, employers must be careful as changes to compensation is a fundamental term of an employment contract. It is important to seek advice from an employment law expert, especially when seeking to implement such changes to a large group of employees. Whitten and Lublin Employment Lawyers have the employment law experts to assure you are in legal compliance and do not suffer additional hardships due to costly litigation during tough financial times.

Unwritten Terms of Employment Contracts

| May 23rd, 2017 | No Comments »

Contracts- Implied Terms:

It is not uncommon for terms of employment between workers and employers to be unwritten. Disputes between an employee and employer may arise over past verbally-agreed-upon terms, established unwritten practices, and more. This can result in litigation and unseen costs resulting from workplace conflict. In general, the courts will attempt to determine what terms would have been agreed to between the parties if they were to produce a written contract. This is done by examining the common practices within the workplace, interactions between the employee and superiors, and so forth. Employees and employers also have duties that the courts established through common law, whether or not it is in writing.

Common Law Employer Duties:

Employers have a duty to pay their employees. There must be a regular pay period set by the employer, and this means that employees are not to be paid in arrears. The law recognizes the inherent power imbalance between employees and employers, and paying in arrears would subject employees to too much control. There are fines and penalties associated with failing to establish a regular method of pay – weekly or biweekly is most common.
Employers also have a duty to provide employees with a safe workplace and equipment. If an employee suspects they are being put in harm’s way, then they have the right to refuse any work they believe is unsafe. There are protocols for this under the Ontario Health and Safety Act. This includes the employee first notifying a supervisor, the supervisor then eliminating the hazard to the employee’s satisfaction, and, if no resolution is agreed upon, an inspection by the Ministry of Labour to determine if there is a hazard.

Employers are also obligated to provide notice or pay in lieu in the event an employer wishes to terminate an employee. This pay or notice is based upon an estimate of how long an employee would need to find comparable employment.

Common Law Employee Duties:

Employees have a duty to obey. This is fundamental to the employment relationship, as workers are providing their service in exchange for pay. Willful disobedience can lead to a summary dismissal, which means that the employer can terminated the employee without severance pay or a notice. The exception to the duty to obey is when an employee is asked to do something illegal or perform work that is unsafe. Employees also have a duty to exercise skill and care while doing their job. This includes using the skills required and also not being negligent while performing job duties.

Employers also cannot intentionally cause an employer harm, which falls under an employee’s duty of good faith and fidelity. This includes protecting trade secrets of the employer even after employment has ended, not pursuing or completing other work during hours of work, work for a competitor and so on.

Conclusion:

The above duties are a part of every employment relationship within Canada. For oral agreements that go beyond theses duties, drafting a carefully written agreement may avoid future disputes over misunderstandings within the workplace and also avoid costly litigation. For complex scenarios and terms of employment, it is best to seek an employment law professional. For any related issues, Whitten and Lublin Employment Lawyers have a team of professionals dedicated to providing great service.

Ensuring Employees are Given Adequate Time to Review Employment Contracts

| April 21st, 2017 | No Comments »

The law recognizes that there is an imbalance of power between employees and employers. Employers hold the advantage in contract negotiations because they are in a more favourable position to pressure or influence employees into agreeing or signing terms of contract. In the case of job offers, courts will examine the surrounding circumstances in assessing whether the employee was pressured into agreeing on the terms being challenged. Employers seeking to enforce minimal standards under law within their employment contracts are more at risk of being challenge. However, there are ways to avoid the terms of the contract being deemed unenforceable by the courts.

Adequate time to review the contract:

Foremost, the employer should grant adequate time for the employee to review and consider the terms within the employment contract being offered. This is especially the case for when the parties seek to limit the amount of notice or severance pay in the event the employee is dismissed from employment. This is usually done with the goal of offering the employee less than entitled under common law, but equal or more to the entitlements that are guaranteed under the minimal standards of employment law. Time should be given from the date of the employment offer so that the employee can understand and reflect upon their entitlements in the event the employment relation is ended by the employer. Employers should provide the employee with a copy of the contract and a few days to review the terms and conditions.

Ensuring legislative compliance:

Pitfalls to avoid for employers are ensuring that the employment contract offered legally complies to the minimal standards of employment guaranteed by law. If the employment contact is found to violate law, the courts will not just simply adjust the compensation owed to the employee to match minimal standards. Rather, the courts will enforce common law entitlements which can be much more that the minimal standards guaranteed by law.

Staying up-to-date on changes in employment legislation:

In addition, it is important to be up-to-date and aware of any changes under employment law that would render the past agreed upon employment contract legally incompliant. For instance, if changes to employment law raises the minimal severance packages employees are entitled to, then all contracts signed by employees prior to the change in law must adhere to the new changes. If not, courts will apply the common-law awards in damages to employees in the event of a termination.

Be Wary of the Employment Contract – Key Terms Affecting Employee Rights

| April 7th, 2017 | No Comments »

You just received that call, the one you have been sitting by the phone waiting for.  You have been offered the job of your dreams.  Everything is perfect. Shortly afterward, the company sends you a written offer letter or employment contract to formalize everything.  However, it contains many terms that were not specifically discussed during your pre-hire negotiations. While it is very tempting to cross your fingers and hope for the best when starting out this new and exciting relationship,  before signing on that dotted line, be wary of key terms that may impact your rights and obligations.

One of the major red flags to watch out for is the termination clause. While most individuals prefer not to think about  termination at the very beginning of a new and ideally long term employment relationship, this is one of the most contentious and litigated issues in employment law.   Typically, the termination clause is crafted by the employer specifically to protect the employer, not the employee.  In fact, you may be potentially giving up significant severance entitlements if the clause limits your rights to minimum employment standards legislation, or sets out a severance formula that slightly exceeds the minimum standard.  In fact, removing the termination clause altogether can in most instances be more favourable to the employee.

Another red flag is any restriction on incentive compensation or annual bonus payouts.  This is particularly critical if variable compensation forms a material part of your overall remuneration.  Many contracts indicate that bonus payouts will not be paid out at all, unless you are actively employed on the payout date, and will not paid out on termination.  This type of restriction can potentially result in forfeiture of your bonus entitlement, if you are laid off or terminated, before the annual bonus payout.  This can be true, even if you worked for the entire fiscal year and put in all that hard work to earn the bonus!   Similarly, if you are receiving restricted share units (RSUs), share grants or options, most often employers will include a similar restriction resulting in forfeiture of all unvested equity on termination. Verify the vesting schedule and any language that could impact your eligibility for ongoing vesting.

Additionally, there may be clauses, which could impact your rights and obligations, not only during the employment relationship but also afterward.  Many contracts contain post-employment non-solicitation or non-competition restrictions that purport to limit your ability to re-employ in your profession, or which might impact your ongoing relationship with clientele.   If enforceable, these can be extremely onerous obligations that you may owe your employer following your departure, and which may impact your re-employment prospects and marketability.

If you have any of these clauses in the written job offer, what should you do?   Get proper legal advice to determine how these provisions may impact your rights, if at all.   Secondly, negotiate!  Many employers present the contract as a ‘standard form’ document that “all” employees sign.  However, the reality is, anything is up for negotiation and there is really no downside to trying.   Before you negotiate, make sure you are adequately informed about your legal rights and have a negotiation strategy in place.

 

Author: Jonquille Pak, Employment Lawyer

Are your Employment Contracts Illegal?

| March 8th, 2017 | No Comments »

Employers often require their employees to sign employment contracts that limit the amount of notice of dismissal they are required to provide.  In most cases, the employer attempts to limit its obligation to the bare minimums under the Employment Standards Act, as opposed to the more onerous obligation of providing reasonable notice.

Many of these contracts, however, violate one or more minimum standards under the Act, which renders the entire termination provision illegal.  Many judges in the last several years have granted leniency to employers, rather than overrule the illegal clause.

Recently, Whitten & Lublin was successful in convincing Ontario’s highest court to put an end to this practice, in the case of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 The law on this point is now clear: a termination provision that can reasonably be interpreted as contravening the Act will fail, and the employer will be required to provide reasonable notice of dismissal.

Determining whether an employment contract violates the Act is a difficult task that requires a competent employment lawyer to assess.   Nonetheless, the following are a few guidelines for determining whether a contract is illegal:

  • Are benefits mentioned? The Act allows employers to provide payment instead of formal notice of dismissal, provided that the employee’s benefits are continued for the minimum notice period. Since benefits are not a form of “pay”, they must be separately referenced
  • Can severance be worked? Severance pay under the Act must be paid. If the contract permits an employer to satisfy all obligations with working notice, or a combination of pay in lieu of notice without separately referencing severance pay, then the contract is illegal
  • How is pay in lieu of notice calculated? Pay in lieu of notice must be calculated based on what the employee would have received, had they been given working notice of dismissal. Limiting pay in lieu of notice to just base salary may violate the Act
  • Does the contract exclude a minimum standard, or is it just silent? A contract that states that the employee will receive no further entitlement is more likely to be illegal than one that is silent on the point.

Illegal termination clauses come in all shapes and forms, and are used by large corporations, all the way down to small businesses.  Contact our lawyers to determine your rights on dismissal.

For further reading, the judgment in Wood v. Fred Deeley Imports Ltd. can be viewed here.

Can a Non-Payment of a Bonus Trigger Constructive Dismissal?

| February 24th, 2017 | No Comments »

In the case of bonus pay, would a disagreement over the entitlement, and subsequently a non-payment, be enough for an employee to claim constructive dismissal? When an employer changes an essential term of an employment contract without the consent of the employee, this is a unilateral change and would warrant a constructive dismissal claim. This means that the employee had no reasonable alternative but to walk away from the job. This requires a fundamental change to the terms of employment such as pay and responsibilities. The remedy sought would be damages in the form of ‘notice pay’.

This, of course, is circumstantial. Important factors include the amount of the bonus in question. If the bonus makes up a large proportion of the employee’s pay and is guaranteed, then a failure of payment would more likely result in a successful constructive dismissal claim. Alternatively, if the bonus was a small amount with no other alteration to the employment contract, a constructive dismissal claim will unlikely be successful. A 2016 Ontario Superior Court case of Chapman vs GPM Investment Management (the company) deals with exactly this.

In this case, Chapman was the CEO and President of GPM. Chapman felt he was entitled to a bonus of 10% of profits made off the sale of an asset (property) for which GMP was involved. GPM disagreed over this 10% bonus because they claimed the gains made did not fall under the definition of ‘profit’ as defined in the employment contract. Chapman quit and claimed constructive dismissal in addition to payment for the 10% bonus he felt was owed. The Ontario Superior Court found that Chapman was entitled to this bonus, however, the failure to make this payment was not enough to trigger constructive dismissal.

The reasons the court did not find this to be constructive dismissal was due to a few reasons: the bonus was not much compared to Chapman’s overall compensation, the terms of the employment contract (the bonus structure) were not altered, and the employer intended to continue  honouring the employment contract in the future. The disagreement was also over a particular type of asset that the employer was never going to deal with again, thus making this a one-time isolated event. Overall, the circumstances here did not fundamentally change the conditions of employment, and therefore did not amount to a constructive dismissal. In addition, the employer here gave Chapman options to peacefully resolve the issue.

If there is a concern over an issue regarding the payment of a bonus, it is important to attain legal advice. The issue may involve a disagreement over the interpretation of an employment clause, which requires a wholesome approach – it is often not enough to only consider the clause in question. For both employers and employees, it is advisable to seek legal assistance in determining the appropriate remedies.

Geographic Relocation and Constructive Dismissal

| February 17th, 2017 | No Comments »

Constructive dismissal is when an employer alters the fundamental conditions of the employment contract, which gives the employee little choice but to resign. Many employees do feel that relocation is constructive dismissal. The general rule for establishing constructive dismissal is whether the employment contract has been fundamentally changed. Relocation may be a fundamental change to the employment contract as displayed in past court cases. The following are a few factors to be aware of when deciding to seek representation by an employment lawyer.

It is important to be aware of whether relocation is an implied term of the employment contract as terms of the employment contract are often not in writing. ‘Implied’ terms are certain provision that should be reasonably assumed even though not formally written. In the case of a relocation request from an employer, the request may be implied in a number of circumstances. This includes whether the employer has relocated other workers in the past, whether the business is international (has many locations internationally), and the size of the organization. When the business is international and the position is not a demotion, it is generally seen as an implied condition of the employment contract and therefore not grounds for constructive dismissal.

Other factors to be aware of are whether the relocation is temporary, whether there are changes to other fundamental terms of the employment contract (such as pay and responsibilities), whether relocation expenses are being covered by the employer and whether undue hardship will result from the relocation. Further, the relocation must be done in good faith (i.e. for a legitimate business purpose). If you feel that a relocation request would be constructive dismissal for the reasons mentioned or any other factors, it is important to seek legal consultation from an employment law expert.

Courts have ruled against employers when relocation was not a term included in writing within an employment contract, even when the business was international with offices in other countries. For employers, it advisable to included relocation clauses in initial written employment contracts if this is a reasonable expectation given the nature of the company’s operation. For any uncertainties, seek the advice of an employment lawyer.