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

Employment Contract – What to Include and Why

| June 20th, 2017 | No Comments »

A written employment contract is essential for employers and employees to minimize future disputes and the risk of costly litigation.  If properly drafted, an employment contract will clearly out the respective rights, obligations and expectations of the employer and employee. In preparing an employment contract, here are some of the most salient features to consider:

  1. Overall Clarity: an employment contract should be written in clear and precise language. In circumstances where its terms are vague or ambiguous, the courts will apply an interpretation that is least favourable to the party responsible for its drafting.
  2. Independent Legal Advice/Review: the employer should provide the employee with a reasonable opportunity to review and obtain independent legal advice before signing an employment contract, to preclude claims by the employee that it was signed under duress and therefore unenforceable.
  3. Signing and Acceptance: an employment contract should be signed before employment is commenced in order to avoid issues concerning its enforceability. If a contract is signed after employment was commenced, the employer should ensure that it provide additional consideration to the employee (g., a raise or bonus).
  4. Scope of Employment: the employment contract should clearly set out the employee’s title, duties and responsibilities. An employee’s duties and responsibilities cannot be unilaterally altered by the employer during the course of their employment. Therefore, in order to prevent claims of constructive dismissal, the employment contract should clearly state that the employee understands and accepts specific changes to conditions of employment, such as changes to salary, work location or responsibilities.
  5. Probation Period: the employment contract should clearly state whether there is to be a probationary period during which the employee could be dismissed for any reason, without pay or notice. If so, it should stipulate the length of such probationary period.
  6. Termination Clause: the employment contract should clearly state the means by which either party can terminate the employment relationship. In the case of termination for “just cause,” the employment contract stipulate what grounds will constitute “just cause.” For terminations “without cause,” it should provide for at least the minimum requirements for “notice” or “pay in lieu” of notice under the Employment Standards Act (“ESA”).  The employment contract should also make clear that in the event of termination of their employment, an employee will receive statutory severance pay (if applicable), and benefits continuation for, at the very least, the length of the ESA notice period.
  7. Restrictive Covenants: restrictions on post-employment activities are viewed by the courts as restraints of trade, and therefore are generally difficult to enforce. This is especially true in the case of a non-compete clause.  If some form of restrictive covenant is necessary, an employer should consider a non-solicitation clause that is narrowly aimed at prohibiting an employee from soliciting its customers, clients, suppliers or employees.
  8. Compensation: the employment contract should clearly set out all terms of compensation, including salary, health and medical benefits, life or disability insurance, stock options, bonuses or car allowance.
  9. Compliance with Statutory Minimums: an employment contract must comply with all basic statutory minimums under the ESA, including but not limited to, minimum wage; notice of termination (pay in lieu thereof); and vacation with pay.

Additionally, employers and employees should particularly note and account for the proposed amendments to the ESA, such as the increases to minimum wage and vacation allowance; personal emergency leave; and the risk of misclassifying employees as “independent contractors.”

If you require an experienced lawyer to prepare or review the terms of an employment contract, please contact one of our lawyers at Whitten Lublin.

 

Author: Sezar Bune, Whitten & Lublin

Probationary period: Common Law v. Employment Standards Law

| June 7th, 2017 | No Comments »

It is commonly assumed that the probationary period is an implied condition of employment. Although the probationary period is part of employment standards law – for instance, the Employment Standards Act (2000) in Ontario stipulates that employees employed for less than 3 months are not entitled to statutory notice – this does not mean that probation is an implied term of employment. Employees that are not subject to a probationary period clause may be awarded notice pay at common law in the event such issue is brought to court.

Including a probationary clause is especially important when dealing with highly skilled employees, as they would be entitled to a longer notice period if challenged in court. The clause should demonstrate that each party contemplated the need to test each others’ suitability, and the option for either party to choose to end the employment relation within the set probationary period. It is also necessary to ensure that the probationary clause adheres to employment standards legislation, as failing to do so will render the clause unenforceable. The probationary period, therefore, cannot be longer than what is stated in employment standards law ­– in Ontario, probation is a three-month period.

The courts have outlined the common law standards of termination during the probationary period that would relieve employers of a notice requirement.  In the case Mision v. Bank of Nova Scotia (1994) heard by the Ontario Supreme Court, there were guidelines outlined for the employer when demonstrating  that the employee was not suitable during the probationary period. Firstly, the employer should be able to justify the discharge of an employee on probation. This burden of proof is less than what is required for ‘just cause’ after the probationary period has ended. During the probationary period, the employer must demonstrate that the employee was not suitable, which may include more subjective reasons such as character, compatibility, uncertainty of future performance or their ability to meet business objectives, and so forth. The employer’s judgment towards the claim of unsuitability will not be questioned, however, the motivation for dismissal must be shown to be in good faith and not for unjustifiable reasons.

Overall, employers should be prepared to support claims of unsuitability as much as possible. Setting out instances that demonstrate unsuitability within the probationary clause would aid in this objective in the case it is challenged in court. Employers should also be cautious of limiting sick days to zero, as the courts have not been favourable to employers when including unpredictable circumstances within probationary clauses.

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

Proposed Changes to Labour and Employment Legislation

| May 31st, 2017 | No Comments »

The Ontario government has announced its intention to introduce several widespread reforms to labour and employment laws in the province.  The reforms, which will be set out in The Fair Workplaces, Better Jobs Act, 2017, are meant to strengthen legal protections for workers in Ontario.

New Minimum Wage:

The proposed reforms would see minimum wage increase to $14.00 by January 1, 2018, and increase again to $15.00 by January 1, 2018.  The special minimum wages for liquor servers, students under age 18, hunting and fishing guides, and homeworkers will increase by the same percentage as minimum wage.

Penalties for Incorrect “Independent Contractor” Classifications:

The new legislation attempts to discourage employers from misclassifying employees as independent contractors by setting out penalties such as prosecution and monetary penalties.  The proposed scheme would require employers to prove that an individuals is not an employee, if that individual disputes their status.

Expanded Leaves of Absences

Under the proposed reforms, employees would be entitled to a new type of 104-week unpaid Leave for Death of a Child.  Employees would remain entitled to a separate 104-week unpaid leave for Crime-Related Child Disappearance.  Family Medical Leave would be increased to 27 weeks in a 52-week period.  Employers would be prohibited from requesting a sick note from an employee taking a Personal Emergency Leave.  Finally, all employees would be entitled to 10 Personal Emergency Days per year, and two of those Emergency Days must be provided with pay.

Proposed Protections for Employees’ Schedules:

  • Employees would have the right to request schedule or location changes after having been employed for three months with the same employer without fear of reprisal.
  • Employees can refuse to accept shifts without reprisal if their employer asks them to work with less than four days’ notice.
  • If a shift is cancelled within 48 hours of its start, employees must be paid at least three hours at their regular rate of pay.
  • Employees who regularly work more than three hours per day, but upon reporting to work are given less than three hours, must be paid three hours at their regular rate of pay.
  • When employees are “on-call” and not called in to work, they must be paid three hours at their regular rate of pay for each 24 hour period that they are on-call.

Author: Simone Ostrowski, Whitten & Lublin

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.

Acceptable Scope of a Non-Solicitation Clause: A Real-Life Example

| April 17th, 2017 | No Comments »

For most employees, a non-solicitation clause should be all that is necessary if an employer is seeking to protect his/her business interests (clients) from employees who leave to a competitor. However, employers must be careful with the wording of such clauses because the clause must only go as far as necessary to protect the employer’s business interests. This is the ‘reasonableness’ standard with which the courts will review a non-solicitation clause. Any restrictions on the employee’s freedom to work must be necessary to protect the employer’s business or the clause will be unenforceable.

Non- Solicitation Clauses

There are a few things that a non-solicitation clause must contain to be enforceable. The clause must have a limited geographic scope and time in place that is reasonable. Further, a non-solicitation clause must be limited to the act of solicitation. If the wording of the solicitation clause goes beyond the solicitation of the employer’s client base, then it is likely to place unreasonable limits on the employee’s ability to freely compete and earn a living. Lastly, it is wise to limit the act of solicitation so that it is not too burdensome. This may entail only restricting the solicitation of the clients that the employee dealt with or the types of clients that the employee works with. To better understand the limits of a non-solicitation clause, the case of Donaldson Travel Inc. v. Murphy et al. 2016 is useful to review.

Donaldson v. Murphy, 2016 (Superior Court of Justice – Ontario)

In the case, Murphy was a former employee of Donaldson Travel that left to work for a competitor company named Goliger. One of Donaldson Travel’s claims was that Murphy solicited clients and therefore violated the non-solicitation clause that Murphy had signed. The clause reads:

Mary agrees that in the event of termination or resignation that she will not solicit or accept business from any corporate accounts or customers that are serviced by … Donaldson Travel, directly, or indirectly. (emphasis added)

The court deemed this clause unenforceable for several reasons. Firstly, there was no limit in time and geography. As it is worded, this clause would never expire and would apply anywhere in the country. This is unnecessary to protect Donaldson Travel’s business interests. Secondly, the phrase “or accept business from” goes beyond the act of solicitation. This places an unreasonable restriction on Murphy’s ability to earn a living because it is not necessary to protect Donaldson’s business interests. Lastly, the term “any corporate account” is also too broad. It would be reasonable to limit the solicitation of clients that Murphy dealt with; however, the wording here would prevent Murphy from conducting business with any clients of Donaldson, even the ones that Donaldson establishes after Murphy had left. This is not needed to protect Donaldson’s business interests by the departure of Murphy.

Closing Remarks

The burden is placed on the employer to carefully draft such clauses and to show that the clause is reasonable. The wording of the clause is important as the courts will not look beyond the wording of the clause, nor will they change the clause so that it is legally enforceable. For employees that are not in a managerial role, a non-solicitation will almost always suffice in protecting an employer’s business interests. It is important to seek the assistance of an employment lawyer when seeking to protect business interests through non-solicitation clauses.

Health and Safety: Can a Corporation be held Criminally Negligent for the Conduct of Supervisors?

| April 11th, 2017 | No Comments »

Upon other employer duties relevant to health and safety, the duty to provide competent supervisors may be the most important. An employer may have all the requirements of a safe workplace, however, having a supervisor that is negligent may result in criminal charges against the business resulting in sever fines. Criminal negligence charges are for extreme cases such as the one below.

R. v. Metron Construction Corporation

The case of R. v. Metron Construction Corporation (Metron) is an important case to be aware of and also a sad one. In this case, Metron was given a project of restructuring the balconies of several high-rise buildings. The president of the company hired a project manager, whom then hired a supervisor for the workers on site. Swing-stage scaffolding was needed for the workers to work on the buildings’ exterior balconies. Life lines were required to be worn by each worker and were attached to each swing-stage, ensuring any falls wouldn’t result in injury or death. The supervisor was responsible for insuring that safety procedures were followed.

The company ordered additional swing-stage scaffolding that did not have proper labels for maximum capacity as required under the Ontario Health and Safety Act (OHSA). On December 24th, 2009, 6 workers including the supervisor boarded onto a swing-stage to travel to the 14th floor. The normal practice is for only 2 individuals to be on a swing-stage at once. The combined weight led to the collapse of the swing-stage, leading to 4 deaths (including the supervisor). There were only 2 life lines available on the swing-stage, only one of which was used properly – the worker that properly used the lifeline was uninjured and the other that used it improperly was injured. The use of a lifeline is also a regulation required by the OHSA. A report concluded that the combined weight and the faulty design of the swing-stage was the reason for the collapse. Further, had all workers used lifelines, the deaths would be prevented. A toxicology report also revealed that workers were under the influence of marijuana, including the supervisor.

Decision:

Metron was found criminally negligent under the Criminal Code for the conduct of the supervisor. This was due to the degree of blameworthiness and severity of the accident. Specifically, the departure from the 2-person limit norm, the improper use of lifelines, workers being under the influence of marijuana, and the fact that the supervisor allowed all this to take place were all factors leading to this decision. The fine was set at $750 000, from the initial $200 000 in order to denunciate and deter such negligence that place workers in danger.

Takeaway:

Corporations can be found criminally negligent for the actions of anyone in a supervisory role. Specifically, the court maintained that the seriousness and the corresponding penalty is not to be diminished by the fact that the negligence was the fault of the supervisor rather than a more prominent figure of the company. It is therefore important for human resource and health and safety professionals to be aware of the importance of having competent and diligent supervisors responsible for the health and safety of workers. Employers must ensure that supervisors are properly trained and that all standards are followed so that unnecessary accidents are avoided. Training, inspections, workplace policy and proper lines of communication should all be used as a means of maintaining high standards of health and safety. In addition, any violations by supervisors should be dealt with in a serious manner with discipline imposed accordingly. If there are any concerns in your workplace regarding health and safety policy and compliance, please seek the advice of an employment lawyer.

Termination Clauses and Contracting Out: Clarity Given by Recent Ontario Appeals Court Ruling

| March 13th, 2017 | No Comments »

Employment Standards Act Review:

The Employment Standards Act (2000) grants employees minimal guarantees. In terms of termination, the Employment Standards Act (ESA) provides one week of notice or pay in lieu for every year of service, for a maximum of 8 weeks. Severance pay is a separate payment that employers must provide if their payroll exceeds 2.5 million or if the employee was one of 50 employees that has been terminated within a 6-month period. In addition, employers are to provide all benefits throughout the notice period or pay in lieu. Employers are legally prohibited from contracting out of the ESA, unless the clause offers a greater benefit to the employee. In the instance where an employment contract offers less than the minimum provided under the ESA, then the provision in the contract is void. In this instance, the courts will award the employee common law notice (damages), which are often considerably more than minimal standards. A recent case heard before the Court of Appeals for Ontario highlights the importance of unambiguous language in termination clauses, as any ambiguity will render the clause unenforceable.

Facts from Wood vs. Deeley (OCA 2017):

 In the case, Wood served 8 years as a Sales and Event Planner, earning about $100 000 annually including benefits. Wood’s termination clause provided 2 weeks of notice for each year served (or pay in lieu) and stated that Wood is only entitled to the terms set within the termination clause of the employment agreement. Deeley ended up paying Wood 21 weeks worth of salary, which was more than the minimum Wood would have received under the ESA. Deeley argued that the extra payment provided after termination covered Wood’s benefits. Wood argued that the termination clause was unenforceable, however, because it excluded benefit pay and severance pay as per the wording of the clause. The Appeals Court of Ontario agreed, ruling that the clause was void because it contracted out of the ESA. Only the cause itself was to be considered in terms of enforceability, which means remedies implemented afterwards are irrelevant. Wood was awarded 39 weeks of notice pay (9 months), Wood’s common law entitlement.

Main Issues in the Termination Clause:

All-inclusive clause:

The language used in the termination clause effectively limited Wood’s entitlements to those provided in the clause. This meant that anything not covered in the clause but guaranteed under the ESA to not apply. The ESA entitles employees to their benefits during the notice period. The clause did not mention anything about Wood’s benefits and therefore was found to contract out of the ESA.

Ambiguous use of ‘notice pay’:

The termination clause Wood was subject to provided more than the minimum required notice pay under the ESA. However, notice and severance pay are two separate entitlements under the ESA, and combining both under “pay” here created ambiguity. For example, the termination clause entitled Wood to 2 weeks notice for every year of employment, or pay in lieu. If 10 weeks were given as notice, then the remaining 6 weeks were not enough to cover the minimum amount of severance pay that Wood was entitled to under the ESA. Rather, the termination clause should have allotted the necessary amount to each, severance and notice, rather than combining both under “pay”.

 

This case shows that employers are held to a rigorous standard in terms of drafting employment contracts. This reflects the purpose and intentions of the ESA. The ESA aims to protect employees that are unaware of their employment rights and the court seeks to interpret these clauses in ways that encourage employers to draft clauses that comply with minimal standards. As such, when determining the legal compliance of a termination clause, only the clause itself is considered and any remedies the employer seeks to implement at the time of termination will be irrelevant to the enforceability of the clause. It is important to seek legal advice from an employment law expert to ensure termination clauses are properly drafted. Any ambiguity will either be interpreted by the courts in the most favourable way for the employee or be deemed unenforceable, which entitles the employee to common law notice (damages). Again, common law notice (damages) is usually far more than minimal standards.

How To Choose the Best Wrongful Termination Lawyers

| January 18th, 2017 | No Comments »

wrongful terminationYou have questions about your wrongful termination, but how can you find a wrongful termination lawyer you can trust?

Do your research.  Like all service-based industries, it pays to spend some time and effort researching potential wrongful termination lawyers.

What to look for? Look for a wrongful termination lawyer who practices exclusively in employment, human rights and/or labour law, and licensed to practice in the jurisdiction in which you work or reside.  You probably do not want to entrust your case to a general practitioner as employment law is nuanced and changes frequently.

Look for someone who is regularly interviewed, published, and does speaking engagements with reputable organizations.  That way you are sure to find a wrongful termination lawyer who is up to date on the state of the law.

You may also wish to speak with someone certified by the Law Society of Upper Canada as an expert in the field.

Ask around.  Talk to friends, relatives, anyone who has experience with a wrongful termination lawyer. Get their impressions of the lawyer, the firm, their fees, and what their overall experience was like.

Beware of wrongful termination lawyers who want to meet with you for free.  Often you get what you pay for and these wrongful termination lawyers may just be fishing for lucrative cases.

Feel free to get a second opinion or meet with a few lawyers at different firms until you find the right wrongful termination lawyer for you and you case.

Finding a lawyer and a firm that you are comfortable with is key as a successful case depends on trust and communication between lawyer and client.

 

Author: Ellen Low, Whitten & Lublin