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Posts tagged: employment lawyer Toronto

The Cost of Terminating Employees When a Business is Sold

By , April 17, 2018 8:29 am

When a business is sold the cost of terminating unwanted employees can significantly impact the sale price. The purchaser does not want to pay the cost of terminating long service employees, and the seller doesn’t want to incur termination costs which reduces the net sale price.

General Rules on Termination Pay Obligation when a Business is Sold

  1. Under the Employment Standards Act (the “ESA”)

A section in the ESA states that when a business is sold an employee’s service with the seller is deemed to be service with the buyer when the buyer subsequently terminates the employee. So if an employee worked five years with the seller and is terminated six months later by the buyer then the buyer owes the employee five weeks notice of termination; not one week notice.

  1. At Common law

Unless the buyer stipulates otherwise, an employee’s service with the seller is taken into account by the courts when determining common law reasonable notice of termination when the buyer subsequently terminates the employee.

How the Seller of a Business Can Reduce Termination Costs

If you are thinking of selling your business over the next 2 to 3 years then a great way to reduce termination costs is to make sure that all of your employees have signed an employment contract with an enforceable termination clause. This clause can significantly reduce your termination pay obligations for employees you are required to terminate as a condition of the sale.

Existing employees can sign an employment contract but managing this process can be very tricky. We help sellers navigate this legal and HR minefield.

How a Purchaser of a Business Can Reduce Termination Costs

If you are buying a business then a great way to limit liability for termination pay for the employees you inherit from the seller is to require them to sign an employment contract with an enforceable termination clause.

We help buyers prepare employment contracts for the seller’s employees that address employee benefits, vacation, termination pay and other terms of employment that are of interest to the seller’s employees. This is especially important for key employees who are critical to the continued success of the business.

Lessons to Be Learned:

1. The cost of terminating long-term employees can be significant. In fact, in some cases I have seen termination costs eat up most of the sale proceeds.

2. To avoid this situation, termination costs can be reduced by including a termination clause in an employment contract. These contracts can significantly benefit the seller.

3. Often one of the key challenges for the seller is convincing the buyer to take on all employees on substantially the same terms and conditions of employment. We help our clients with this issue.

4. On the other hand, one of the key success factors in a sale of a business for the buyer is retaining certain key employees. Negotiating a “fair” employment contract with these employees can be difficult because these employees have so much bargaining power. We help our clients with this negotiation.

5. Sellers and buyers can benefit from speaking with an employment lawyer well in advance of the sale of a business.

For over 30 years Doug MacLeod has been advising employers on all aspects of the employment relationship. You can contact Doug directly at 416 317-9894 or at [email protected]

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.

 

Employer Alert: Payroll Costs in Ontario are Going Up (Again) on April 1, 2018.

By , March 20, 2018 9:10 am

Who Should Read this Blog

If you use a temporary help agency or hire casual or part-time employees then you should read this article. Because starting next month there is a change to the Employment Standards Act, 2000 (the “ESA”)  that could increase your payroll costs.

Equal pay for equal work takes effect on April 1, 2018

As of April 1, 2018 Ontario employers are required to pay temporary workers and casual & part-time employers the same rate of pay as full-time employers performing substantially the same work unless an exemption applies.

Wage rates can no longer be kept confidential.

Assignment employees from a temporary help agency can ask your non-assignment employees how much they are paid for doing substantially the same work.

A casual or part-time employee can ask you how much you pay a full-time employee doing substantially the same work. If you terminate or punish an employee for making this inquiry then you could be required to reinstate the employee to his or her job or compensate the employee for any wage loss.

What are the exemptions to this new law?!!!

It should be noted that there are certain exceptions to the provisions regarding equal pay for equal work. The provisions do not apply when the difference in rates of pay are made on the basis of  (a) a seniority system, (b) a merit system, (c) a system that measures earnings by quantity or quality of production, or (d) any other factor other than sex or employment status. Nevertheless, before you assume that this exemption applies to your organization, you should consult a lawyer.

Lessons to be Learned

1.The cost of temporary agency workers who perform substantially the same work as full-time employees is going up unless your organization can fall into one of the statutory exemptions.

2. Similarly, the wage rates of casual employees, and part-time employees is going up unless your organization can fall into one of the statutory exemptions.

3. Do not discipline a casual or part-time employee for asking how much your organization pays a full-time employee doing substantially the same work.

4. An employer generally has the right to establish an employee’s job duties and therefore determine whether temporary agency workers, casual employees and part-time workers are performing substantially the same work as full-time employees.

5. As long as an employer does not set different wage rates based on sex or employment status, an employer generally has the right to set wage rates based on seniority, merit and production quantity/quality.

For five other recent changes to the ESA that recently came into effect click here.

For 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at [email protected]

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.

 

Patrick Brown: Could the Alleged Sexual Harassment/Assaults Have Been Prevented?

By , January 25, 2018 5:04 pm

Yesterday, CTV reported that two women alleged Ontario Progressive Conservative leader Patrick Brown sexually harassed and/or sexually assaulted them. Shortly after the story broke Mr. Brown resigned as party leader.

I don’t think Mr. Brown will deny he met either women. Instead I think he will claim that whatever happened was consensual.  In other words, classic “he said, she said” situations. If criminal charges are laid against Mr. Brown then the Crown will need prove the charges beyond a reasonable doubt. The same burden of proof as in the Jian Ghomeshi case.

This blog considers whether either situation could have been avoided from an employment law perspective.

If the federal government had addressed sexual harassment and sexual assault in the federal civil service and the House of Commons prior to 2013, then I think the 2013 incident could have been prevented. The Prime Minister could have stood up in the House of Commons and said the federal government is going to take a leadership role on this issue and take proactive steps to redress this societal problem. First, by saying it won’t be tolerated; second, by requiring all employees and MPs to comply with a sexual harassment policy; and third, by introducing a complaint procedure and encouraging employees to use it. This would have put MPs on notice of the cultural change the government was committed to leading and would have made all MPs think twice about sexually harassing staff. It would also communicate a very strong message to staff that the employer wanted people to bring forward sexual harassment complaints. In this climate, I think Mr. Brown would have thought twice before allegedly bringing a staff member back to his home or into his bedroom.

I don’t think the incident that took place over 10 years ago could have been prevented through workplace policies. According to the CTV report, the 17 year old female high school student did not appear to have any connection to Mr. Brown’s workplace and they do not appear to have met at a workplace event.

Given the societal change that has taken place in connection with sexual harassment and sexual assault over the last 5 years I do not believe nearly as many employees or politicians will put themselves in compromising situations in the future. The adverse consequences associated with sexual harassment and sexual assault allegations in 2018 is staggering.  Without these allegations, polls show Mr. Brown would have been premier of Canada’s largest province in June.

For over 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at [email protected]

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.

 

Wal-Mart Employee Awarded $250,000 in Moral Damages and $500,000 in Punitive Damages

By , January 23, 2018 9:00 am

When deciding whether to settle a case, a lawyer assesses the risks and uncertainties inherent in the litigation process including the quantum of damages that a judge will likely order for each head of damages claimed. I call this litigation risk.  

As I have written beforeemployees seldom claim only wrongful dismissal damages in an employee termination case. Additional heads of damages include human rights damages, moral damages, punitive damages, and damages for the intentional infliction of mental stress. This results in more litigation risk but despite this increased risk more than 90% of cases still settle.

Every once in a while a case goes to court and the decision increases the litigation risk for all subsequent cases. This is one of those cases. Based on the reported facts in this caseI would never have predicted that Wal-Mart would have been ordered to pay the employee $ 250 000 in moral damages and $ 500 000 in punitive damages.

Until this case is appealed or followed/considered/distinguished by other trial judges, I will need to consider this decision when assessing the chances a judge will order moral damages and punitive damages in my cases. And in the meantime, litigation risk has increased for employers in employee termination cases.

The Facts

In September 2002, Gail Galea started working at Wal-Mart and about 8 years later her employment was terminated without just cause. About 10 months before her employment was terminated, her position was eliminated because of a re-organization. During her last 10 months of employment, Wal-Mart tried to find her another position within the organization and sent her to Harvard for an 8-week executive management program. When Wal-Mart couldn’t find her a suitable position she was terminated without cause. Instead of paying her the two years pay she was owed, Wal-Mart continued her benefits and the equivalent of her salary for 11.5 months.

Trial Decision

The judge concluded that an agreement between Ms Galea and Wal-Mart obliged Wal-Mart to pay her damages equal to the compensation and benefits she would have earned during the two year period after her termination.

As far as paying Ms. Galea damages for variable compensation during the 2 year period after her termination was concerned, Wal-Mart took the position it owed her no monies under a Management Incentive (Bonus) Program, Deferred Profit Sharing Plan, Executive Retirement Plan and a Long Term Incentive Plan. The trial judge disagreed except for damages claimed under the Long Term Incentive Plan.

Ms. Galea claimed moral damages because of the manner of her termination. The trial judge awarded her $200,000 for the treatment she received from Wal-Mart during the last 10 months of her employment including the 2 months she spent at Harvard. “She was made to suffer repeated humiliation, starting with the announcement of her re-assignment from Vice President, General Merchandising to that of a roving vice president of little substance.”

Ms. Galea claimed damages for the way Wal-Mart acted after her termination. The judge awarded her an additional    $50,000 damages for the following behavior. “I consider Wal-Mart’s decision to stop the continued payment of her base salary and the health and dental coverage to her and her family (after 11.5 months) to be unduly insensitive, and to have caused her mental distress. I consider Wal-Mart’s delay in answering its undertakings until the eve of trial, and the torrent of productions made in the course of the trial,… capable of causing Ms. Galea  prolonged anguish about the case.”

Ms. Galea provided no medical evidence that these actions caused her mental distress.

Ms. Galea claimed punitive damages. The trial judge awarded her $ 500 000 punitive damages for the following behaviour: “ All of Wal-Mart’s conduct that justifies an award of punitive damages occurred between January 29, 2010 and November 19, 2010 when Wal-Mart would make representations to Ms. Galea about her career prospects while making decisions that detracted from, or even defeated that purpose. It is not that Wal-Mart set Ms. Galea up to fail; it is that Wal-Mart built her up, only to let her down that much more. That corporate behaviour was not just unduly insensitive, it was mean.”

Lessons to be Learned

  1. Wal-Mart’s decision to stop termination payments after 11.5 months instead of continuing the payments for the contractually prescribed 24 months was a reason the judge ordered Wal-Mart to pay Ms. Galea moral damages. Accordingly, in this case, damages flowing from the breach of contract was more than would normally be awarded in a case like this which is the difference between the 11.5 months and the 24 months.
  2. If an employer does not want an employee to receive damages for the variable compensation that she would have earned had she received notice of termination then the variable compensation plan must clearly say so. For earlier blogs on this issue, click here
  3. If an employer implements a re-organization and does not immediately offer a new job to a person whose position has been eliminated then the employer should provide a reasonable road map to the displaced employee on how her continued employment will be handled and act consistently with this plan. In this case, the judge stated: “Conduct that can trigger moral damages includes an employer’s conduct that is untruthful, misleading or unduly insensitive, and a failure to be candid, reasonable, honest and forthright with the employee.” He found that Wal-Mart breached this duty as it was trying to find a new position for Ms. Galea. I don’t know if this case will turn out to be an outlier but in the meantime employers should be very careful when dealing with an employee who is between jobs within the organization.

For over 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at [email protected]

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.

 

Significant Changes Coming to the Human Rights Code

By , November 17, 2017 1:09 pm

Bill 164, Human Rights Code Amendment Act, 2017 passed second reading by the Ontario government on October 26, 2017 and has been referred to Standing Committee.

The Bill proposes to make significant changes to the Ontario Human Rights Code (Code). It proposes to add immigration status, genetic characteristics, police records, and social conditions as human rights grounds. The Bill is supposed to provide better protections to the most vulnerable in society.

Social conditions will be defined as social or economic disadvantage arising from (a) employment status; (b) source or level of income; (c) housing status, including homelessness; (d) level of education, or “any other circumstance similar to those mentioned in clauses (a), (b), (c) and (d).  

While a significant change, Ontario will not be alone in recognizing social condition as a protected human rights ground. Human rights in Alberta, Manitoba, New Brunswick, Quebec, Newfoundland and Labrador, and Northwest Territories all recognize social condition, social origin, or source of income.

Ontario will also be joining other provinces like British Columbia in having a more fulsome protection against discrimination on the basis of “police records.” The Bill proposes to include charges and convictions and police records such as those that involve a person’s contact with police. This would replace the current human rights ground of “record of offences,” which is defined as an offence for which someone has been pardoned.

Genetic characteristics will be defined as refusing to undergo a genetic test or refusing to disclose, or authorize the disclosure of, the results of a genetic test. Ontario will join the Federal government in this regard.  Of note, there is no proposed change to section 22 of the Code, which would mean the current exemption given to insurance companies to discriminate on the basis of age, sex and marital status would not apply to genetic characteristics. Previous bills attempting to include genetic characteristics in the Code allowed insurers to discriminate on this basis if the policy payout was over a certain amount.

If all of these changes become law, employers, service providers, and landlords will need to carefully examine their policies and practices to ensure they are compliant with the new law.  

It is possible that the Bill’s current form could change before becoming law.  Many bills are altered at the Committee stage – often significantly.

We will update this blog as soon as further legislative steps are taken.

In the meantime, if you have concerns that your human rights policies need updating, a lawyer at MacLeod Law Firm can assist you. You can reach us at [email protected] or 647-204-8107.

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