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.

The consequences of avoiding to pay a dismissed employee with a severance package

| November 16th, 2015 | No Comments »

Employers should be careful when fabricating an allegation of cause for termination in order to avoid paying a dismissed employee with a severance package.  A recent decision confirms that these allegations can expose employers to increased cost consequences.

The ordinary rule is that an unsuccessful party to a lawsuit pays around 60% of the successful litigant’s legal costs.  However, in Tetra Consulting and Lewis Cassar v. Continental Bank of Canada and Continental Currency Exchange Canada Inc., 2015 ONSC 6546 – a case that we recently argued on behalf of the plaintiff employees – the court ordered Continental Bank of Canada (“CBC”) pay the plaintiffs not only a proper severance package, but nearly all of their legal costs.

The court found that CBC’s unfounded allegation of cause for terminating the plaintiffs made their case more difficult than it should have been, thereby increasing their legal costs.  The principles of justice favoured providing the plaintiffs with nearly complete indemnification for having to litigate the unfounded allegation.  They were awarded costs in the amount of $42,394.26.

Knowing which strategies to use, and not use, can be difficult in wrongful dismissal cases.  Employers, and employees alike, are encouraged to consult with an employment lawyer to minimize their potential liability and avoid a humiliating loss at trial.

Author: Ozlem Yucel, Whitten & Lublin

My Boss Made Significant Changes to My Employment

| August 27th, 2015 | No Comments »

Drastic Changes to My Employment

The concept of an employer making a change to a workers employment is not odd. It’s possibly more common than we think. The issue employees take is the extent and significance of these changes, and this concern has legal merit. Take for instance employee A, who has independently worked in their department, earning commissions based on sales. Suddenly, the employer explains that a colleague (employee B) will be working with employee A, and based on his/her performance, employee A’s commission will be dependent on employee B’s sales as well. Readers of the Globe and Mail are interested in finding out, can an employer legally make such a significant change to their employment?

Claims for Constructive Dismissal

Daniel Lublin, Toronto employment lawyer provides his professional opinion by explaining that the answer lies in determining how significant the changes are to an employee’s work duties and their compensation. An employer must seek the employees consent to the changes or provide reasonable notice of the changes. When changes to an employees work duties and compensation are significant, an employee may claim constructive dismissal and sue for lost wages.

Claims for constructive dismissal are unique on a case-by-case basis. As such, retaining a lawyer to provide you with case specific advice is crucial. Consult with our team at Whitten and Lublin to book your appointment and read Daniel Lublin’s Globe and Mail column and full article Does my boss have the right to change my compensation and work load?

Q&A: Can an employer significantly reduce an employee’s pay?

| August 10th, 2015 | No Comments »

QUESTION

Employers are finding that under recent economic changes, the salary paid to employees may need to reflect this change by significantly reducing an employees pay to account for their budget. Employee’s on the other hand, are dissatisfied. Initially, an employer may consider changing the pay rate based on cost of living. But what happens when the cost of living significantly rises, and then drastically reduces? Readers of the Globe and Mail are asking, can an employer significantly reduce an employee’s pay? 

ANSWER

Circumstances Where an Employee’s Pay Decrease Will Be Considered Lawful

Daniel Lublin, Toronto Employment lawyer says that employers cannot drastically reduce an employee’s pay. All the same, an employee cannot pursue their employer for a minimal pay reduction. There are few circumstances where a pay decrease will be considered lawful and these need to be understood thoroughly.

Find out the answer by reading Daniel Lublin’s Globe and Mail column and full article I have to work through my severance. Is this legal?

Q&A: Is my non-compete agreement binding 15 years later?

| August 4th, 2015 | No Comments »

QUESTION

A contract is a document drafted by the employer and signed by their respective employee. It is up to the employee to review this document and, if in agreement with the content, the employee signs it away, binding them to those terms. One particular clause that comes up often during discussion is the non-compete agreement.

A non-compete is a form of restrictive covenant drafted by the employer which restricts the employee from working for another industry. Let’s say an employee signed a non-compete 15 years ago and was not given a copy. Readers from the Globe and Mail would like to know, can the employee be bound by this agreement today? Or does he/she need to sign every so often to make it valid?

ANSWER

The Non-Compete Agreement

Well-known Globe and Mail columnist for the Report of Business and Toronto Employment lawyer, Daniel Lublin answers this question with his expertise. He says that non-compete agreements do not need to be renewed, unless stated otherwise in the contract. It is also worth mentioning that the agreement is not deemed invalid simply because the employee did not receive a copy of the agreement. An employer can rely on this document regardless.

To find out more on this topic, read Daniel Lublin’s column and full article I have to work through my severance. Is this legal?

Addressing Legal Issues Related to Mental Health

| May 21st, 2015 | No Comments »

The Mental Health of Employees at Work

Addressing the legal issues related to the mental health of employees at work is one of the more perplexing issues facing employers in Canada. It is because of the nature of this sensitive topic and a lack of awareness that issues begin stemming from mental health in an office environment. It is important to protect your employees and educate yourself on the steps to take to accommodate your employees. 

An Employer’s Lack of Awareness 

In the Globe and Mail article, Dealing with mental illness in the workplace, employment lawyer, Daniel Lublin, concludes that an employer’s lack of awareness of their employees’ mental well-being may not free them from liability in the event that violence occurs in the workplace. In the article, Mr. Lublin details and explains the following key points:

  • Employers have a duty to accommodate their employees so that the employee may fulfill their job responsibilities;
  • Employers have a duty to inquire where the mental state of their employee is in question;
  • Employees may even in some instances have a duty to disclose their mental illness to their employer;
  • Employers have a duty to prevent harm to others in the workplace by taking every reasonable measure to protect their employees from committing or being victims of violence;
  • Employers should establish procedures for informing their employees of health benefits and wellness programs that are available to them;
  • Employers should remain vigilant and record any unusual behaviours. They are responsible for ensuring employees receive all reasonable accommodations; and
  • Employers should regularly review and update their action plan for managing a potential or real fallout from workplace incidents.

The ‘genius’ class action lawsuit by the Canadian Hockey League

| October 21st, 2014 | No Comments »

The lawsuit filed last week by the junior hockey players against the Canadian Hockey League (CHL) has been classified by Toronto employment lawyer, Daniel Lublin, as ‘genius’.  After all, it is the first case where junior hockey players have filed a lawsuit. The players are seeking up to $180 million in wages and other compensation from the CHL.

Mr. Lublin explains the definition of an employee as being someone who works for wages.  This particular relationship fits the category and as such, holds the responsibility of, at least paying the players the minimum wage and overtime. The junior hockey players claim in their lawsuit to have up to 65 hours of work per week.  Accordingly, an employee who works 40 or 44 hours of work each week should be paid according to the law.

For more on Daniel Lublin’s opinion, read his full article on CTV News at http://bit.ly/1vI4hZl

Employment terminations

| October 10th, 2014 | No Comments »

Employment terminations can be cruel, and finding a lawyer that suits your wallet, is intimidating.  All termination scenarios vary from employee to employee, and finding a lawyer to counsel you every step of the way is the best advice.  In the Globe and Mail’s Report on Business, Toronto employment lawyer, Daniel Lublin says dismissed employees should never sign termination documents, such as a release, without at least having them first reviewed by a lawyer.

Daniel Lublin explains this further and answers some questions from readers regarding constructive dismissals.  In particular, where an employer assigns a vastly different role in a different location, what are your legal rights? Daniel Lublin explains that an employer cannot force you to take on a vastly different role in a different location. You do not have to accept the change rather; you can protest this in writing. If your employer refuses, you may have the option to sue in court for constructive dismissal.

Read Daniel Lublin’s Globe and Mail column and full article Can my company force me to take a wildly different job?

U.S. employer refuses to pay Canadian employee’s wage

| September 29th, 2014 | No Comments »

When a U.S. employer refuses to pay a Canadian employee’s wage and claims they are not within the jurisdiction to file a claim, the employee has options.  The foundation of an employer/employee relationship is that in exchange for an employee’s hard work, the employer pays a salary.  Simply because the employee works from home in Ontario for an employer in the U.S., does not mean that the employer/employee relationship functions any differently.

Daniel Lublin, Toronto employment lawyer provides reader’s with his response to the question, can a Canadian employee file a claim against a U.S. employer for wages owed?  His answer is yes.  You can commence proceedings against the employer in either Ontario or the U.S. state where the business is located. Although choosing where to pursue the claim is a matter of strategy.

Initiating the claim in Canada can be more costly for a number of reasons. Mr. Lublin explains that the best option is to hire a lawyer in the U.S. state where the business operates and explains in more detail the reasoning for this.

Read more about this topic in Daniel Lublin’s Globe and Mail column and full article My U.S. employer owes me $36,000 and refuses to pay