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Posts tagged: employee termination

Employer Alert: Termination Clause UPHELD by Ontario’s Court of Appeal in Nemeth v. Hatch Ltd

By , January 12, 2018 2:20 pm

On Monday, Ontario’s Court of Appeal concluded in Nemeth v. Hatch Ltd., 2018 ONCA 7 that the following termination clause was legally enforceable and that the terminated employee who had been employed for 19 years was entitled to 19 weeks termination pay:

The Termination Clause

The Company’s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation.

My guess is that most employment lawyers who have read this decision are scratching their collective heads, and asking, “What?”

This decision will result in many plaintiff side lawyers taking pause and re-evaluating their cases.

Until this case was released many trial judges were bending over backwards to find uncertainty and ambiguity in termination clauses and striking them down which benefited employees. For a summary of some of these cases click here

The decision in Nemeth v. Hatch Ltd. is a good case in point. An enforceable termination clause meant the employee was entitled to 19 weeks termination pay. If the clause had been found to be unenforceable however then the employee would have been entitled to closer to 19 months notice.

Lesson To Be Learned

At the moment, it is extremely difficult if not impossible to guess whether or not an Ontario trial judge will enforce a termination clause in an employment contract. The Court of Appeal has found a number of such clauses to be enforceable however for the last few years trial judges have been finding ways to get around these cases or as, lawyers say, have concluded these decisions are distinguishable.

In Nemeth v. Hatch Ltd. the Court of Appeal may have been trying to bring more certainty to the law as it relates to the enforceability of termination clauses. In the short term, however, I predict that this decision will create more uncertainty in this area of the law.

Can a successor employer offer a person lessor termination pay than the original employer?

By , November 17, 2017 5:13 pm

Can a successor employer offer a person lessor termination pay than the original employer?

This issue was addressed by Ontario’s Court of Appeal in Krishnamoorthy v. Olympus Canada Inc., 2017 ONCA 873

Facts:  Carsen Group Inc. was the exclusive Canadian distributor for Olympus America Inc. Olympus America decided to terminate its distribution agreement with Carsen, and started a related company, Olympus Canada Inc. to distribute its Canadian products. In July 2006, Olympus America terminated its distribution agreement with Carsen and offered employment to one of Carsen’s employees, Nadesan Krishnamoorthy .  

Olympus Canada provided an offer of employment to Mr. Krishnamoorthy. The terms of the employment agreement limited the notice of employment he was entitled to receive to Employment Standards Act (“ESA”) minimums.  When Mr. Krishnamoorthy accepted Olympus Canada’s offer, he did not receive a signing bonus or any other additional compensation for entering into an employment agreement with Olympus Canada.  

Ten years later, Olympus Canada terminated Mr. Krishnamoorthy’s employment  without cause. Olympus Canada offered him the termination pay he was owed under his employment agreement.  Mr. Krishnamoorthy refused the offer claiming  the termination clause was unenforceable because Olympus Canada had not provided him with any legal consideration.

Issue on appeal: Did the motion judge err in concluding that the termination clause in the parties’ employment agreement was unenforceable due to a lack of consideration?

Decision: The Court of Appeal reversed the motion judge’s decision and ruled that Olympus Canada’s offer of employment amounted to consideration for the termination clause.

Mr. Krishnamoorthy relied on a provision of the Employment Standards Act which deems there to be continuity of employment where an employer sells his business to a purchaser who employs an employee of the employer. However, the Court ruled that this statutory provision  can not be used to claim rights or entitlements on which the ESA is silent. For example,  it does not require the purchaser of a business’ assets to offer employment to employees of that business on the same terms as their original contracts as claimed by Mr. Krishnamoorthy.  Olympus Canada became a new employer upon its purchase of some of Carsen’s assets, and the fact that Mr. Krishnamoorthy’s day-to-day job did not materially change after the sale was not relevant. As such, the Court of Appeal found that Olympus Canada’s offer of employment amounted to consideration for the termination clause.

Lessons to be learned:

  1. If your organization purchases the assets of another business you can offer employees of that business lessor terms of employment such as a lower pay rate and less termination pay.
  2. The employee is generally not required to accept substantially lesser terms of employment.
  3. If the employee accepts lesser terms of employment then a court will generally enforce the lesser terms of employment provided the contract is drafted properly and the terms comply with the Employment Standards Act.

An update on mitigation: What happens when a wrongful dismissal case gets to court while the employee is still unemployed?

By , April 3, 2017 8:42 am

The Basics

A wrongful dismissal occurs when an employer does not provide enough notice of termination. An employee can claim damages equal to the remuneration the employee would have earned during the applicable notice period. During the notice period, an employee is subject to the “duty to mitigate,” which means they must look for alternative employment. Notice periods can be as long as 24 months, and even longer in exceptional circumstances. Increasingly, wrongful dismissal cases are getting to court before the reasonable notice period has expired. In these cases, the employee is still subject to the duty to mitigate for the balance of the notice period. In a recent case, the Superior Court of Justice had to answer the question of how the issue of future mitigation should be recognised in the calculation of damages given the fact that the period of reasonable notice had not yet expired.

Patterson v IBM Canada Ltd, 2017 ONSC 1264

In Patterson v IBM Canada Ltd., the hearing took place in February 2017, just over eight months after the Mr. Patterson’s employment was terminated. The judge found that the reasonable notice period in Mr. Patterson’s case was 18 months.

Mr. Patterson claimed that, given his job search history thus far, his prospects of finding alternative employment were low, and he should therefore receive the full 18 months’ pay. IBM suggested the court should discount any award of damages by 10% to reflect the possibility of future mitigation, i.e. that Mr. Patterson may obtain employment during the remainder of the notice period.

The judge noted that the courts have used several approaches in these cases, the two main ones being the “trust and accounting” approach (where the plaintiff is required to account to the defendant for future income if any is earned during the notice period) and the contingency approach (which is the approach IBM was suggesting).

In this case, the judge preferred the contingency approach, and reduced Mr. Patterson’s damages accordingly. The judge found that if the trust and accounting approach were to be applied, Mr. Patterson would have no incentive to continue in his job search. Furthermore, the contingency approach avoids the possibility of future legal entanglements between the parties.

Lessons to be Learned

There is no consensus on which approach an Ontario judge will follow when a wrongful dismissal case is decided before the end of the reasonable notice period. If you are planning on dismissing a long-term employee, it is important to consult with a lawyer to discuss whether a severance package with a built-in contingency approach can be offered, rather than leaving that decision to a judge after spending significant legal costs. The lawyer can also explain the extent of the employee’s obligation to mitigate (look for work) throughout the litigation process.

“The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.”

Are terminated employees entitled to their unpaid bonuses?

By , January 30, 2017 4:18 pm

We have previously written about when employees have been found to be entitled to receive their bonus at the time of termination.

To recap, when an employee is terminated without cause, they are entitled to receive notice or pay in lieu of notice. Wrongful dismissal damages are intended to place the terminated employee in the same financial position they would have been in had such notice been given. When the court is calculating wrongful dismissal damages, it will typically include all of the compensation and benefits that the employee would have earned during the notice period. However, whether a bonus the employee would have received should be included in such an award is a complicated question that depends partly on whether it has become an integral part of the employee’s salary.

Bain v UBS Securities Canada Inc.

In this case, Mr. Bain, a 14-year employee, earned a base salary of $385,000 plus  bonus.

Although at the beginning of his employment his bonus was paid by cash, payment changed so that his bonus was paid partly by cash and partly by shares in UBS.

Mr. Bain lost his job when it became redundant. He was paid his entitlements under the Employment Standards Act but was not paid his bonus for 2012 or for the three months that he worked in 2013.

After concluding that Mr. Bain was entitled to receive 18 months’ reasonable notice, the judge turned to the question of whether Mr. Bain should receive his bonus for 2012 and the three months he worked in 2013. The judge decided that the bonus was an integral part of Mr. Bain’s remuneration: he received it, albeit in different amounts, every year; he had always been awarded a bonus in his 14 years of employment and it was a significant component of his income. In fact, Mr. Bain had negotiated a minimum bonus as a term of his employment contract when he decided to join UBS.

The judge noted that UBS had a detailed compensation scheme in place and had the stated goal of transparency and fairness in the granting of bonuses. The fact that the bonus was solely in the discretion of management did not relieve UBS from its obligation to follow a process that was fair and reasonable, using objective criteria applied consistently among employees. The judge also noted that Mr. Bain’s 2012 evaluation contained many “exceeded objectives” assessments, and that his numbers were higher for 2012 than for 2011. The judge looked at evidence from other managers and the bonuses they received, which ranged from $402,300 to over $2 million.

UBS attempted to argue that a new compensation plan was introduced in 2011 that stipulated employees had to be employed with UBS to be paid their bonus. The judge could not conclude that Mr. Bain had accepted this fundamental change to his entitlement to a bonus, or that the new limitations were brought to his attention. The judge concluded that to accept UBS’ argument would mean that Mr. Bain became disentitled to a bonus because of the unilateral actions of UBS, over which Mr. Bain had no control. The judge concluded that Mr. Bain should receive his bonus for 2012, the three months he worked in 2013 and the bonus he would have earned over his 18 month notice period.

Lessons to be learned:

  1. In some circumstances, an employee may be entitled to the bonus they would have earned had they not been dismissed, which includes the bonus they would have earned during their notice period.
  2. An employer may limit an employee’s right to receive bonus payments upon termination, in certain circumstances.
  3. An employer must ensure that this limit is brought to the attention of the employee and forms a part of the employment contract.

The material and information provided on this blog and this website are for general information only and should not, in any respect, be relied on as legal advice or opinion. The authors make no claims, promises or guarantees about the accuracy, completeness, or adequacy of any information linked or referred to or contained herein. No person should act or refrain from acting in reliance on any information found on this website or blog, without first retaining counsel and obtaining appropriate professional advice from a lawyer duly licensed to practice law in the relevant jurisdiction. These materials do not constitute legal advice and do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

Damages for Reprisal under Occupational Health and Safety Act

By , January 20, 2017 2:25 pm

It should be common knowledge that changes were made to the Occupational Health and Safety Act (“the OHSA”) that have been in effect since September 8, 2016 (and if it’s not common knowledge, you haven’t been reading our previous blogs on the subject). One of these changes allows employees who have been sexually harassed at work to file a complaint under the OHSA.

Prior to September 8, 2016, an employee’s only recourse to address sexual harassment at work was to file an application at the Human Rights Tribunal of Ontario. Now employees may choose where to bring their complaint. Because of how recent the changes to the OHSA are, there are no reported cases where an employee has been terminated in connection with a workplace sexual harassment complaint. However, the example below still illustrates the consequences an employer may face if it terminates an employee for making a sexual harassment complaint.

Facts

In Thompson v 580062 Ontario Inc., a restaurant employed Ms. Thompson as a night manager. Ms. Thompson accused the restaurant owner of calling her rude names and making profane statements on November 8, 2014. Ms. Thompson also accused the owner of grabbing her and pushing her toward the door. Ms. Thompson reported the incident to her manager on the same evening.

Two days later, Ms. Thompson attended the restaurant to check her work schedule and found she was not scheduled to work. The manager told Ms. Thompson that the owner had requested that she not be scheduled. Ms. Thompson then reported the incidents of November 8, 2014 to the Ministry of Labour.

On November 18, 2014, Ms. Thompson sent the owner an email complaining of workplace harassment and violence, and requested a copy of the restaurant’s workplace violence and harassment policies. On November 21, 2014, the owner advised Ms. Thompson that the Ministry of Labour had commenced an inspection under the OHSA. The owner never provided the requested policies to Ms. Thompson, and she was never scheduled to work again despite repeated requests.

Decision

As mentioned above, the OHSA has provisions on workplace harassment, workplace violence and the duties of employers to protect workers and prepare policies with respect to workplace harassment and violence.

The OHSA also has reprisal provisions that prohibit employers are also prohibited from dismissing, disciplining, imposing a penalty upon a worker or intimidating a worker because they have sought enforcement of the OHSA. In order for there to be a breach of these reprisal provisions, there must be the exercise of rights by a worker, a prohibited action on the part of the employer and a causal connection between the two.

The adjudicator was satisfied that at least part of the employer’s reason for ceasing to schedule Ms. Thompson was connected to the fact that she raised health and safety issues in the workplace.

Damages awarded

The remedy for a reprisal is to reinstate the discharged employee and to provide the employee with lost wages from the date of the discharge up until the date of the reinstatement. Depending on how backlogged the Ontario Labour Relations Board is, those wages could add up.

If the employee does not wish to return to work for the employer, which will usually be the case where the employee has complained of workplace violence or harassment (including sexual harassment), the complainant is entitled to damages for loss of employment in lieu of reinstatement. These kinds of damages are meant to compensate for the loss of the job itself. Additionally, employees are also entitled to damages for loss of wages (i.e. to compensate for the wage loss experienced as a result of the termination, subject to the duty to mitigate). Despite the clear overlap between these two kinds of damages, adjudicators have been known to award both kinds of damages, which could lead to a steep award. In one case, a two-year employee was awarded 8 months’ pay.

Lessons to be learned

  1. Make sure you have a written policy to investigate workplace harassment complaints, which has been a requirement under the OHSA since September 8, 2016. For information about our fixed fee service, click here.
  2. Investigate all workplace harassment complaints promptly.
  3. If an employee raises health and safety concerns, be very careful about taking any disciplinary action, even if the decision to discipline the employee in question precedes the employee’s concerns.

The material and information provided on this blog and this website are for general information only and should not, in any respect, be relied on as legal advice or opinion. The authors make no claims, promises or guarantees about the accuracy, completeness, or adequacy of any information linked or referred to or contained herein. No person should act or refrain from acting in reliance on any information found on this website or blog, without first retaining counsel and obtaining appropriate professional advice from a lawyer duly licensed to practice law in the relevant jurisdiction. These materials do not constitute legal advice and do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

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