The Importance of Knowing Whether A Fiduciary Relationship Exists

| September 25th, 2017 | No Comments »

For employees, a fiduciary relationship exists where the employee is in a position to cause the employer damage due to the duties of employment. This is not limited to senior managers or executive – a key employee may also be in a fiduciary relation. Such a relationship may exist where the employer is placed in a vulnerable position in order to receive services from the employee. An example may be where an employee is exposed to trade secrets in order to fulfill services owed to the employer. There are a number of of fiduciary duties such employees will have in order to protect the employer from the inherent vulnerabilities of the employment relation.

When assessing whether a fiduciary relationship exists, the courts have set the following criteria. To be in a fiduciary relation, (1) the employee must have scope for the exercise of some discretion or power, (2) the employee must be able to unilaterally exercise that power or discretion so as to affect the employer’s legal or practical interests, and (3) the employer must be peculiarly vulnerable to the employee holding the discretion.

Employees in a fiduciary relation have a duty of “loyalty, good faith and avoidance of conflict of duty and self-interest” (Supreme Court of Canada – 1973). This means that employees with fiduciary duties cannot solicit any customers/clients from their previous employers, enter anything that causes their personal interests to conflict with their employer’s interests during their employment, or deprive their former employer of business opportunities which belong to the employer. Each duty will be limited in duration in accordance to the facts of each particular case, which makes it important to seek advice from an employment law expert if in a fiduciary relation with an employer.

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

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.

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.