Some resignations are terminations in disguise

| March 22nd, 2017 | No Comments »
Daniel Lublin, Employment Lawyer

Daniel Lublin, Employment Lawyer

When is a resignation a termination in disguise?

Sometimes employers too easily confuse when an employee has voluntarily decided to leave. Whether through insincerity or neglect, this is one situation where employers may try to rid themselves of an undesirable employee, without paying any severance. But not so fast. Some resignations are actually terminations in disguise.

If an employee is faced with an ultimatum between resigning or dismissal, it will almost never be a valid resignation. Some employers feel that by offering the opportunity to resign instead of facing allegations of misconduct, they are doing their employee a favour. In some cases this may be true. But in many other there is an ulterior motive. Employers know that proving just cause for dismissal is a difficult task, so they will sometimes threaten misconduct as a means to provoke a resignation instead. However, courts often recognize that employees who submit hasty resignations when faced with unproven allegations of misconduct have not legally resigned. Rather these are resignations given under pressure or duress, which are almost never upheld. A true resignation is a voluntary act, not a camouflaged termination.

A resignation must also not be given on impulse. The law recognizes that spontaneously made statements or actions, such as walking off the job after an argument, usually do not constitute a valid resignation. Several court cases have held that employers must not seize upon an employee’s emotional outbursts. In one recent decision, the court even went as far as stating that employers have a duty to provide a cooling off period to an employee who proclaims “I quit” in the heat of the moment and then confirm whether this is truly his or her intention.

A resignation, to become effective, has less to do with an employee’s statements and much more to do with his or her actions. The real test is whether an employee’s actions are consistent with someone voluntarily wishing to leave and not return. I currently have such a case. In it, the employee emphatically denies that she told her employer that she was “done” although the employer certainly feels that she did. However, she still came to work the next day as if nothing unusual had happened. It was only then when her employer, not expecting her to show up, purported to accept her resignation allegedly given the night before. The problem with the employer’s case is that, if my client truly intended on leaving for good, she would not have come back to work the very next day. So when she was told to leave, it should be viewed as a termination, not the other way around.

Employees tendering their resignation are sometimes free to withdraw it and continue working as before, as long as the employer has not already accepted the resignation and taken steps to move on. For example, an employee who gives two weeks’ notice of his or her resignation is entitled to change his or her mind, but only if the employer has not already hired or promoted a replacement.

What about an employee who is asked to leave after giving advance notice of their future resignation? Unless that employee engaged in misconduct and resigned before it came to light, employees who are asked to leave during their resignation notice period are entitled to payment for the remainder of the time frame they were prepared to work.

Even an employee who just does not show up for several days may not have resigned either. Courts often caution employers against snapping up the opportunity to claim an employee has resigned or abandoned their job and a number of cases have found that, in this situation, an employer has to take steps to reach out to the employee and try to confirm whether he or she no longer wants their job, before concluding there is a resignation.

The lessons for both employees and employers is clear. If either side finds itself in the “twilight zone” somewhere between a resignation and a termination, there are several practical steps to consider:

  • From an employee’s perspective, immediately protest any assertion that you resigned, if that was not what you intended to do. Further, if unclear, request that your options be outlined in writing and seek advice before taking any action, especially before leaving the workplace, as difficult as that may be.
  • From an employer’s perspective, the courts are increasingly requiring evidence that they were looking out for an employee’s best interests before accepting what appears to be a resignation. Therefore, if an employee’s behaviour or statements towards resigning are out of character or appear given impulsively, it is a good idea to ask them to first take some time to consider their actions and confirm their intentions in writing.

Published in the Globe and Mail.

Dismissal for Poor Performance: Does an Employer Need to Provide Severance?

| March 21st, 2017 | No Comments »

Only if there is just cause for termination, the employer may terminate the employee without severance pay. As an employer, it is very difficult to establish just cause for employee incompetence or poor performance. To do so, the employer must prove that the employee fails to perform essential duties or meet the required working standard, and that this has been ongoing; an isolated incident of poor performance will likely not be sufficient. To establish just cause for termination, there must be an established objective standard of performance, and proof that the employee’s poor performance is their own fault. Any mitigating factors can be considered by the courts. Among other, mitigating factors may include volume of work, whether the employee was hired as an experienced hire, and the training provided.

If an employer claims that there are ongoing issues of unacceptable performance, then the employer must provide a warning to the employee. The warning must include the employer’s performance related concerns and the consequences that may result. It is advisable that the warning be in writing and is clearly presented so that there is no possibility of confusion. An effective warning will identify what the employee is doing wrong, along with the preferred standard by the employee. Further, support for improvement such as supplemental training should be provided and stated in the warning, with a time limit for improvement and potential consequences for failure to meet the stated objective standard.

There are rare instances that may grant an employee just cause to terminate without a severance for isolated incidences. These cases usually involve gross negligence or incompetence that cause an employer significant harm, or a lack of skills that the employee claimed to have during the hiring process.

Whenever faced with an issue of poor performance by an employee, it is always best to seek the advice of an employment law expert. It is difficult to establish just cause for performance related issues, so any decisions to terminate without severance pay should be reviewed by 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.

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.

Are you entitled to bonus pay that would have been earned during your notice period in the case of wrongful dismissal?

| March 6th, 2017 | No Comments »

A notice period is required by an employer seeking to terminate an employee. Employers can either provide the employee with notice or pay that would have been earned had the employee worked throughout the notice period. When an employee is terminated without a notice or pay in lieu, this is a wrongful termination and a breach of the employment contract. The remedy is damages paid by the employer in the amount equal to the compensation that would have been earned by the employee during the reasonable notice period that is owed.

What about bonuses that would have been owed to the employee, but require the employee to be “actively employed” at the time the bonus is to be paid? A clause that requires ‘active employment’ during the time of payment does not apply in the case of wrongful dismissal. This was affirmed in the case of Paquette vs. TeraGo Networks Inc. (2016). Employees are generally entitled to bonuses that would have been paid during the notice period, regardless of whether or not the employee was actively working during the time. This is especially the case when bonus pay is essential to overall compensation (i.e. a significant proportion).

To gain a better understanding, it helps to review the Paquette (employee) vs. TeraGo Inc. case. Paquette was under an employment contract that required him to be “actively employed” at the time the bonus was to be paid. The bonus here was set to be paid every February for the previous year’s work. The judgement by the Superior Court of Justice awarded Paquette 17 months of damages for only base-salary and benefits. Paquette appealed this decision, arguing that he is also entitled to bonuses that would have been received had he actually worked for the duration of the notice time (17 months). The Court of Appeals (Ontario) awarded Paquette the bonus pay as well. Simply put, the notice pay is meant to place an employee in a similar position had there been no breach in the employment contract. Here, if Paquette was not wrongful dismissed, he would have collected his bonus at each payment date (February 2015 and 2016). In other words, Paquette had the right to work but was prevented from doing so as a result of the employer’s breach. For the year that Paquette did not work (2016), the bonus was calculated by taking the average of the previous years’ bonus payment.

If you are an employee that receives bonuses as an essential part of compensations (ie. a significant portion), then a clause requiring you to be employed at the time of bonus pay may leave you vulnerable if wrongfully dismissed. Employees in this situation are encouraged to seek legal advice to ensure you are fairly compensated for damages and are fully aware of your workplace rights.

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.

Lateness and Absenteeism

| February 17th, 2017 | No Comments »

In General, an employer has a reasonable expectation that employees will not be late for work on a regular basis and on time. If an employee is regularly absent without permission then, under the right circumstance, the employer may have grounds for a summary dismissal. With a summary dismissal, the employer is entitled to end the employment relationship and not be liable for notice pay.

Circumstances that warrant a summary dismissal for lateness may include instances where the employee was absent during a very important time, where the absence was deliberate after having received warnings from the employer regarding past absenteeism, and where the employer was prejudiced (or harmed) by the employee in their absence. A couple examples of the above are as follows:

If there is a very important 3-day sales event and the employer makes it clear to a key sales manager that his or her presence is necessary, a deliberate absence would probably grant the employer just cause for termination. In this example, the relevant factors are the importance of the event and the position of the sales person being managerial (a key role). An example of prejudice by an employee may be an instance where a request for vacation time was denied due to business reasons (short staff, busy time-period, etc.). In this instance, if an employee were to be absent during the time that was requested off, this could be cause for dismissal because the employee caused the employer harm, knowing that the time off was not granted.

With regards to lateness, the threshold for summary dismissal is higher. Lateness usually must hinder the employee from performing the essential duties of their job. Important factors to consider are whether the time was ever made-up by the employee, whether lateness is an ongoing issue, whether warnings were previously issued, the harm caused to the employer, and whether the lateness was the fault of the employee. A single lateness is unlikely to be cause for summary dismissal.

In considering termination for lateness and absenteeism, an employer must ensure that no human rights grounds are being violated. If an employee’s lateness or absenteeism is the result of illness, childcare obligations, or any other prohibited discriminatory grounds under the Ontario Human Rights Code, the employer must reasonably accommodate. In this instance, it is advised that employers seek legal advice as the duty to accommodate can be a complicated issue. Employees also should make employers aware if lateness or absenteeism is a result of illness, medical conditions, or childcare obligations as an employer cannot accommodate without knowledge of the situation.

Tips for Legally Sound Termination Letter

| February 13th, 2017 | No Comments »

It is all too easy to write a termination letter that does not comply with the law.  Here are some common pitfalls and tips for ensuring that your termination letter is legally sound:

  • Tip #1 – Consider whether you may be using out-of-date precedent: This one is most common.  Sometimes employers use and reuse the same termination letter for years.  While the letter was drafted by a lawyer at one point in time, it has not been reviewed by a lawyer in years.  Employment laws have changed in the meantime, and the termination letter has become unlawful.  If your company uses a precedent termination letter, have your employment lawyer review it at least once a year.
  •  Tip #2 – Ensure that the letter states that the employee is being provided with at least the minimum requirements under the Employment Standards Act, 2000: If the employee’s employment is terminated without cause, they must be provided with a specific amount of notice of termination, and, if applicable, severance pay.  If the termination letter provides less termination and severance pay than what the Employment Standards Act, 2000 says the employee should get, it may be unlawful.  Be aware that even employees who are paid solely on the basis of commission are entitled to termination pay.  Similarly, if the termination letter does not provide for the employee’s benefits to continue during the time period that they receive termination pay, it may be illegal.
  •  Tip #3 – Provide Valid Consideration: If you are asking the employee to sign a legal release on or after termination, you must offer them something that more than just the termination and severance pay that they are otherwise entitled to under the Employment Standards Act, 2000.   You cannot offer an employee something that they already entitled under the law in exchange for their signature on a release.  You must offer something them something in addition to their existing legal entitlements.
  •  Tip #4 – Do not Attempt to Rely on an Employment Contract that is Invalid: Often, in a termination letter, an employer will reference an employment contract signed years ago, such as a termination provision limiting the employee’s entitlements on termination. For the same reason as Tip #1, above, you should ensure that the contract language that you want to repeat in your termination letter is still legally valid. Some common termination provisions found in older employment contracts have been deemed invalid and inapplicable in recent court decisions.
  •  Tip #5 – Be Careful when Alleging a Reason for the Termination: If the termination is without cause, there is no general requirement for an employer to provide a reason for the termination.  However, if the termination is with cause, you generally must provide a reason.  It is important to get the exact reason for a with-cause termination right.  If you terminate an employee’s employment for cause for a reason that turns out to be false or flimsy, they could sue for additional damages on that basis.

If you have questions about writing a legally sound termination letter, or if you think that your termination letter is unlawful, contact one of the lawyers at Whitten & Lublin for assistance.

 

Author: Simone Ostrowski, Whitten & Lublin

Can an Employer Terminate an Employee Charged But Not Yet Convicted of a Criminal Offence?

| January 23rd, 2017 | No Comments »

An employer may be concerned about damaging their reputation by continuing to employ an individual that has been charged with a criminal offence. This may especially be the case if the employer is known to be involved with the community in which it operates its business. In trying to establish whether there is just cause for termination, a court looks at the following:

  • The amount of responsibility the employee has in relation to his/her duties
  • The degree to which the company’s reputation in the community may be harmed
  • Whether the accusation involved the use of company equipment

To illustrate, the case of Kelly v Linamar (Ontario Supreme Court of Justice) speaks to the above listed points quite well.

Kelly supervised 10-12 employees, managed deliveries and was in contact with customers on a regular basis. Linamar is located in Guelph, Ont., a small town of about 100 000 residents. Linamar had a great reputation in Guelph, especially with its contributions to children for educational donations, sponsoring many youth sports teams and assisting local schools in educational initiatives. Kelly was charged with possession of child pornography at the time he was employed by Linamar and the local media identified Kelly as an employee of Linamar.

Linamar terminated Kelly before he was convicted of this criminal offense and the court found the termination was justified. Considering the points above, Linamar was justified in terminating Kelly because:

The amount of responsibility the employee has in relation to duties:

Kelly was a supervisor and was in constant contact with customers. The fact that the community was aware of the charges against Kelly due to the local press made this a concern for Linamar and its brand.

The degree to which the company’s reputation in the community may be harmed:

Given that the charges dealt with allegations concerning children, this directly conflicted with the image Linamar had in the community. Linamar made efforts to positively impact the children of the Guelph community. Given the press releases and Kelly’s interaction with customers within the Guelph community, Kelly’s continued employment definitely posed a threat to Linamar’s reputation. This was the most significant factor in this case.

Whether the accusation involved the use of company equipment

Kelly did not use company computers to commit the alleged acts. Had he done so, this would undoubtedly be enough for termination.

This case illustrated the three key factors to be determined if employers are considering terminating an employee for being charged criminally for acts committed outside of the workplace. It is important to understand that such decisions should be made with careful consideration of all the factors. The unique facts of each case must be considered because an employee being charged with a crime that is morally reprehensible, such as the one described, does not on its own grant an employer cause to terminate an employee without compensation (notice pay).  Please seek the advice of an employment law expert if faced with a similar situation.

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