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.

Establishing Whether an Employment Relationship Exists

| December 13th, 2016 | No Comments »

employment relationship agreementBoth parties have an interest in determining if there is in fact an employment relationship between the employer and individual providing service. If there is no employment relationship, then the Employment Standards Act (ESA) does not apply. For employers, this means that they are not liable for wrongful dismissal or other obligations that otherwise would apply under the ESA. Conversely, individuals providing service have an interest in establishing the existence of an employment relationship to make a wrongful dismissal claim in the appropriate situation.

How to Establish Whether There is an Employment Relationship

The relation between an individual providing service for an organization may be ambiguous at times – an example includes long-term contracted employees. The tests developed by the courts were established overtime and are used to analyze the fundamental nature of the employment relationship, and ultimately whether there can be a wrongful dismissal claim. The four tests below are not used in isolation by the courts; the courts will apply all relevant factors. As such, the question of whether there is an employment relationship can be complex and warrant the expertise of a legal expert. The tests below are not comprehensive and are meant to serve as a general guide.

The Control Test

The control test views the essence of the employment relationship being a question of control over the work performed. The most important aspects of this test include the discretion over payment, the control over the timing, type and manner of work, and disciplinary power. If the individual is subject to a high degree of control over the duties being performed, terms of payment and discipline imposed by those receiving the service, this is indicative of an employment relationship.

The Fourfold Test

In the case of professional or highly skilled individuals, the control test may not truly capture the essence of the employment relations as skilled employees tend to have more autonomy and control over their work. The fourfold test seeks to determine the owner of the business. Likewise, the test analyses the degree of control the employer has over the work, the ownership of tools, who stands to make a profit, and conversely, who is at risk of a loss. Generally, if the employer owns the tool and equipment and bears most of the risk for a loss, then this is indicative of an employment relationship.

The Organization Test

This test is usually a last resort used in conjunction with some of the factors in the control or fourfold test when no clear answer is rendered. This test seeks to establish whether the individual’s services are fundamental to the business or if the individual is dependent upon the organization as their main source of income. It is used as a broad overview in determining whether an employment relationship exists.

The Permanency Test

This test is most appropriate for contract employees and seeks to establish the overall stability of the relationship. Indicators of an employment relationship include the employer providing training, selecting the individual for employment rather than having a staffing agency make the placement, and continued supervision. In such instances, a long-term contracted individual may be seen as an employee rather than a contract worker.

Q&A: Unjust Performance Review?

| May 19th, 2015 | No Comments »

QUESTION 

This concerns an unjust annual performance appraisal that will affect my salary. My manager is expecting me to sign or to contest, the bogus appraisal this week. Should I do that? What options do I have?

ANSWER

You are not required to sign an unjust performance review that you find to be “bogus”.  If you disagree with the fact and content of the review, you should contest it immediately.  Otherwise, it will go undisputed in your file and your employer could use it against you to allege cause for your dismissal.  Terminating your employment for cause would dis-entitle you from severance.

In your rebuttal, you should include the following:

  • Your version of the story;
  • Any mitigating circumstances;
  • Whether there are any inconsistencies between the negative appraisal and your previous reviews or achievements;
  • Whether your performance standards were unreasonable;
  • Whether you lacked the support needed to meet your performance standards;
  • Whether your deficiencies were communicated to you before the appraisal;
  • Whether there were any inequities in the evaluation process;
  • Whether there were any inconsistencies between the appraisal process and company policies; and
  • Your need for time to improve.

You should also make sure to:

  • Challenge the forthcoming reduction in salary;
  • Document your disagreement in writing; and
  • Request that your rebuttal be placed in your file.

Applying these guidelines will allow you to build your own documentary campaign against cause for your dismissal.  If you think your employer is building a case against you, consult with an employment lawyer today.

I worked long term and disagree with these changes- what next?

| April 27th, 2015 | No Comments »

I have worked as a courier for 26 years.  This week, my company hired a third party courier company who will handle all courier deliveries.  I have been offered an office job in the lab, which has slightly less pay overall.  I don’t agree to these changes.  Do I have any recourse?  

If your job and responsibilities are going to be substantially different along with a pay cut, this is usually considered as the type of change that you may not have to accept.  You should tell the employer that you disagree with the changes and insist that your job and pay remain as before.  If, after 26 years on the job, they are not prepared to act reasonably with this request,  you could treat yourself as though you have been terminated, by leaving your job and suing for lost wages while you look for another job.

Q&A: Employment contracts and fundamental changes

| April 20th, 2015 | No Comments »

I have an employment contract stating my work location to be downtown. I have been told however that I will now be working for a satellite office which is 20KM away.  This may not seem like a huge distance but with the traffic in Toronto during the morning and evening commute times, I would be in my car for 45 minutes longer in each direction.  This seems unfair.  Do I have any right to reject the change?

You can reject changes to your job that fundamentally alter your working conditions.  This is known as a constructive dismissal.  A new work location is sometimes considered a fundamental change but it will depend on the circumstances.  If your contract guaranteed you a downtown Toronto location and that was important to you, the employer’s decision to change that term should be considered a fundamental alteration.

In a situation like this, you should make it known to your employer that you reject the change.  If the employer will not resume your employment at the downtown location, and insists that you work from the satellite office, you may be able to consider yourself as constructively dismissed, leave the workplace and sue for lost wages while you look for other work.

Employee Work Skeletons Can Harm Future Employment

| April 16th, 2015 | No Comments »

Employees-beware of your work skeletons! Social media can be a good source for many things, even handy for employers to uncover employee work skeletons. Potential job candidates and employees need to be cautious about what they post and make public. More and more, employers are relying on this information and employees should be aware on how and when employers can rely on this information.

Toronto Employment lawyer, Daniel Lublin is an expert in the employment law field. His cautions consist of the following:

For employees

  • Upon termination- employees are still subject to allegations of misconduct; and
  • If your skeletons are severe and you cannot risk exposure- do not challenge your employer’s decision. Some employment skeletons can be more harmful than beneficial to both your case and your career.

For employers

  • When employee skeletons come to light following termination, it can be reason for a ‘just cause’ termination. Employers should consult with a law expert to find out their rights.
  • When employee misconduct comes to light and factors of this action affect the severance agreement, employers may be entitled to cease further payments. However, this is determined through tests that only an experienced legal professional can detect.

Read Daniel Lublin’s Globe and Mail column and full article Your old job skeletons can come back to haunt you

Q&A: Resignation rights

| April 13th, 2015 | No Comments »

I have provided my current employer with a resignation letter that included a proposed resignation date in one month’s time.  I was, however, told to immediately leave the workplace.  I have not been paid for the one month’s notice that I was prepared to provide.  I am wondering whether or not I am entitled to payment for this time frame, considering I do not presently have another job.  

While an employer can ask your to leave work before your proposed resignation date, it must nevertheless provide you with the salary and benefits that you would have earned had you actively worked for the entire one month notice period.  By relieving you of your duties and not paying you for the one month notice period, the employer effectively terminated your employment during your resignation notice period.  Subject to any contractual clause defining the amount of notice you had to provide, the employer would typically be liable to pay you for the remaining period of notice that you provided.

Addictions in the workplace- can I fire my alcoholic employee?

| February 18th, 2015 | No Comments »

The workplace environment brings a number of people together under one roof which may include employees with addictions. There are no clear cut ways of identifying someone as an alcoholic. However, there may be signs during the course of employment that allows the employer or colleague to see that something is off. Perhaps, behavior changes, absence from work or mistakes etc. Though, how does one classify an individual as an addict or a mere social drinker? Can an employer fire an alcoholic? These questions cannot be taken lightly and require legal expertise.

Employers should take the appropriate steps to safeguard their workplace. They must also abide by the legislation that protects the affected employee. One simple error can be costly. In the past, an employer was legally allowed to fire an alcohol addicted employee. However, today, the Ontario Human Rights Code protects employees who suffer from alcoholism and classifies alcoholism as a disability. The following rules outline some basic procedures to follow:

1.         Employee’s with alcohol addictions are protected under the human rights law;

2.         Individual assessment is needed, the Zero tolerance policy is rarely accepted; and

3.         Document the harms done by the employee and use written warnings.

It is important to consider that these will vary accordingly as all situations are different. To protect your best interests and follow the law accordingly, consult with one of our lawyers who can provide expert advice.

Should I tell prospective employers about my disability?

| February 9th, 2015 | No Comments »

Disability is a factor that can affect your job search efforts.  For instance, there are disabilities classified as “invisible” disabilities that are not physically noticeable, such as Asperger syndrome. People who have this do not display any symptoms. However, it is considered a high functioning form of autism which can affect a person’s ability to read body language among other factors. This can potentially affect their social abilities and further, their employment.

Readers for the Globe and Mail have taken an interest on this topic and are curious to know; do prospective employers need to know that the applicant employee has a disability? What does the legislation say? Toronto Employment lawyer, Daniel Lublin advises that during the interview process, an applicant employee does not have an obligation to disclose this information if it does not affect one’s work performance. However, there are other factors to consider.

To understand more on this topic, read Daniel Lublin’s Globe and Mail column and full article I have Asperger syndrome. Should I tell interviewers?

Legal implications from 2014 workplace employment cases

| January 28th, 2015 | No Comments »

Big employment cases from 2014 drew a good amount of attention to workplace law. Specifically, it demonstrated the legal implications to employees and employers.  To date, we continue to see the consequences of these fallouts. Whether through poor judgment, ignorance of the law or quite simply wrongful conduct, Canadians and Americans have been at the forefront of workplace legal disputes. Some cases that have drawn media attention include the Jian Ghomeshi scandal regarding allegations of sexual harassment, Donald Sterling and his discriminatory comments, the two Liberal MP’s accused of harassment. The list goes on.

Toronto Employment Lawyer, Daniel Lublin discusses in his most recent Globe and Mail article five (5) key points to look out for regarding employment issues that arose in 2014, and will continue to have an impact in 2015. These include:

  1. The freedom of speech fallout;
  2. Behavior unbecoming;
  3. Probing Allegations;
  4. Boomers Beware; and
  5. Honesty is the best Policy.

To understand these key points in great detail, read Daniel Lublin’s Globe and Mail column and full article Fallout still spreading from big workplace cases