Frustration of Contract and Long Term Disability Benefits

| November 2nd, 2017 | No Comments »

Employers should be familiar with the concept of frustrated contracts in employment law. Frustration considers what the parties (employer and employee) could reasonably contemplate at the time the employment agreement was made. Put simply, when an event occurs that prevents a worker from performing the essentials of their job, then the contract may become frustrated since this was unforeseen at the time the employment contract was agreed upon.  If so, the employment relation can end with no severance owed to the employee.

When an employer offers long term disability benefits (LTD), this may create a situation where the employer should have seen the possibility of a disability preventing an employee from working at some point in the future. This is because the employer could have reasonably contemplated this as a possibility when employment offers or subsequent entitlement contain LTD benefits. Essentially, LTD benefits offered by an employer will create a situation where an employer will find it more difficult to argue an employment contract has ben frustrated, which was the case in Antonacci v. Great Atlantic & Pacific Co. of Canada.

 In this case, the court stated that the provision of LTD benefits shows that the employer was able to contemplate the possibility of a lengthy leave of absence during the course of employment. In particular, the employee here was a long term worker that eventually had to take an extended leave. The fact that the employee had been with the employer for a long period of time and the provision of LTD benefits made the employer’s argument of frustration harder to prove.

When faced with an employee on an extended leave it is necessary to take a holistic analysis of each fact. Proving frustration is a high burden, and having an employee on a long term leave lasting 2 or more years does not necessarily frustrate the employment contract. It is advisable to seek the advice of an employment lawyer when faced with such a situation.

Can an employer impose a longer probationary period than 3 months?

| October 17th, 2017 | No Comments »

It is common knowledge for employment probationary periods to last for three months from the commencement of the employment relation. Under minimal standards employment law (for example, the Employment Standards Act in Ontario), employers do not owe any notice or pay in lieu before 90 days. This is often believed to constitute the probationary period. Minimal standards legislation, however, does not contain any provisions on probationary periods, and as such, they may extend past 3 months.

Employers that implement probationary periods past 3 months must consider additional factors. If the probationary period extends past three months, employers will at the least owe an employee a week of notice or pay in lieu for termination of the employment contract. In the event that no termination clause is agreed upon or the clause violates minimum standards law, ‘reasonable’ notice established through common law will apply, which may entitle the employee to considerable more notice or pay in lieu. Employers that wish to limit the termination pay to the legal minimum of 1 week between 3 -12 months of employment would require a termination clause that complies with minimal employment legislation.

It is also advisable to include the probationary period within the employment contract. This way it can be shown that both parties contemplated an extended probation period and that it was mutually agreed upon. Otherwise, an extended probationary period may constitute a breach of contract by the employer.

Always seek services from an employment lawyer when seeking to implement the aforementioned clauses and limitations.

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.

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.

Employers beware of ‘Dependent’ Contractors

| October 16th, 2014 | No Comments »

When an employer decides to hire for their business, they can recruit employees, independent contractors or dependent contractors.  Distinguishing the difference can be difficult, and noting the significant advantages and disadvantages can be tricky.  With the right guidance, an employer can avoid many unpleasant surprises, like that in Khan v. All-Can Express Ltd.  Particularly, when paying close attention to drafting an employment contract that relates to the specific relationship between employer and employee, independent contractor or dependent contractor.

Employers must know that the law examines the reality of the relationship, not the words used to describe it.  Employee’s and dependent contractors have some very similar qualities.  The element that stands out most is they are both entitled to reasonable notice of termination.  Unlike independent contractors who can be terminated without, or very little, notice. Employers must ensure that they protect themselves against future dilemmas when recruiting an independent contractor.  They can certainly appreciate the benefits of independent contractors by learning more on the law that surrounds it.

The following are factors to help you beware of misclassification between employees, independent contractors and dependent contractors:

  • The reality of the relationship is key- simply calling someone an independent contractor does not make it true.
  • Employees and dependent contractors are normally entitled to reasonable notice of termination.
  •  A proper contract can eliminate the risk of a large award of pay in lieu of notice of termination for an independent contractor.


Everything you need to know when it comes to termination

| September 2nd, 2014 | No Comments »

An employee’s right to protect themselves from termination of employment is reasonable. Daniel Lublin, Toronto Employment Lawyer offers some insight on this topic in his most recent Globe and Mail column.

There are unfortunate incidents when an employee finds that it is necessary to file a complaint against a co-worker.  What happens when the employer does not address the situation properly or at all?  Mr. Lublin explains that formal or informal complaints need to be addressed.  An employer has a legal duty to investigate the complaint and take the necessary measures to prevent the issue at hand from occurring in the workplace. If your employer does not take proper action, an employee has alternatives.  He offers this piece of advice, it is a good idea to document in writing that you are making a complaint, although oral complaints still require the employer to act. If the complaint is based on bullying or harassment, there are other factors that can come into play.

In the event that an employee gives an employer notice of resignation in the long unforeseen future and the employer deems this an immediate resignation, what should an employee do?  Daniel Lublin states that you need to write to the employer immediately and repeat that you are not resigning and that you intend to keep working.  Since this was not a resignation of immediate effect, you can be entitled to more.

To find out more about these issues read Daniel Lublin’s Globe and Mail column and full article, How can I ensure I won’t be fired at a new job?

Follow the Rules for Termination

| September 12th, 2013 | No Comments »

Follow the rules for terminationHow to Follow the Rules for Termination

There are a few key rules employers should follow when terminating their employees.  In his latest Globe and Mail video of a series regarding severance, Daniel Lublin explains which rules to follow and gives some tips for employers once they decide to let their employees go, regardless if there was a written contract or verbal contract in place.

If Employers Don’t Follow the Rules for Termination

What happens if employers don’t follow those rules? An employer needs to check the contract, a policy manual and comply with the legislation (provincial or federal related employer). If you don’t apply with the Employment Standards Act — it is illegal.

The legislation is the minimum and Daniel Lublin explains that it is there to give someone the minimal protection after being terminated. If employers have refused to comply, then it is problematic and employers need to be educated when it comes to termination because of these issues.


Constructive dismissal defined

| January 4th, 2012 | No Comments »

See Daniel A. Lublin’s Globe& Mail column in the Report on Business regarding “what to do when your position eliminated” which addresses the issue of constructive dismissal in workplace law.

Can you work for the competition?

| June 14th, 2010 | No Comments »

By: Cédric P. Lamarche

The upcoming G20 has spurred much talk about the large sums of money that the Canadian government is spending on the event.  Reports indicate that the Harper government plans on spending almost 1-billion for the summit.

Securing Toronto’s downtown core during the short meeting “requires the largest deployment of security personnel for a major event in Canadian history.”  According to the RCMP, the deployment of police, military and private security personnel will cost an estimated $321 million.

Due to the sudden need for security personnel and the hefty amounts invested, many government subsidized security positions have become available.  These positions are very appealing for many who currently work in the private security industry and earn meager wages.  According to newspaper advertisements by a company awarded a federal government contract, security guards hired for the event will earn approximately $20-$24 per hour.  This represents about double the average hourly wage earned by security guards in Ontario.

Some private security firms have expressed concerns regarding the retention of their staff during the summit.  As mass hiring begins, many private security firms are concerned that the attractive salaries will result in a high attrition rate, which may lead to staff shortages.

As attractive as the highly paid work opportunities may appear, security personnel should be very careful before bailing on their current employers.  Employment contracts often contain restrictive covenants (such as non-competition clauses) limiting one’s activities while employed, or following the termination of employment.  The breach of an enforceable restrictive covenant may give rise to legal liability.

The simple fact that an employment contract contains a non-competition clause does not automatically mean that it is enforceable.  Canadian courts will scrutinize these types of clauses very carefully to determine whether or not they should apply.  Restrictive clauses will be enforced if the courts conclude that the restrictions are reasonable to protect the proprietary interests of an employer as well as the interests of an employee to pursue his/her skills and earn a livelihood in a free and open market.  The question is whether a restrictive covenant does more than what is necessary to protect legally recognized interests of employers.

Whether or not a restrictive covenant is enforceable will depend on the circumstances of every case.  Before crossing the street to work for the competition, employees are encouraged to be diligent and have their employment contracts reviewed by employment law experts.

Cédric Lamarche is an employment lawyer with Whitten & Lublin LLP, which is a team of legal experts who provide practical advice and advocacy for workplace issues.