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Posts tagged: employment standards act

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.

 

Recent Changes to the Employment Standards Act – Part I

By , February 5, 2018 10:00 am

Trying to learn and apply the many recent changes to the Employment Standards Act to your workplace can be a daunting task. We are trying to make the process less intimidating by introducing the changes to you a few at a time.

This blog discusses five of the many changes that were made to Ontario’s employment standards legislation as a result of Bill 148

1.Every employee, including a part-time employee, with at least one week service is entitled to take 10 personal emergency days each year and the first two days are paid. An employee can take this leave for a personal illness, injury or medical emergency for themselves or certain family members, or to deal with an urgent matter for themselves or certain family matters. 

2. A pregnant employee can now take up to an 18 month unpaid leave of absence. This change came into effect about the same time that federal employment insurance legislation was amended to permit employees to collect employment insurance benefits over 18 months.

3. The new way to calculate statutory holiday pay is as follows: the total amount of regular wages earned in the pay period immediately preceding the public holiday, divided by the number of days the employee worked in this period. This new calculation will translate into an increase in statutory holiday pay for many part-time employees. There are currently nine paid statutory holidays under the Employment Standards Act. Make sure you use this calculation for Family Day.

4. An employee with at least three months service can request a change in work schedule or work location. The employer must either grant the request or provide reasons for denying the request. This law is subject to an employer’s duty to accommodate an employee on the basis of disability, family status or any other ground prescribed under the Ontario Human Rights Code.

5. As of April 1, 2018, a part-time employee must receive the same rate of pay as a full-time employee when they perform substantially the same kind of work, their performance requires substantially the same skill, effort and responsibility, and when their work is performed under similar working conditions unless an exemption applies.

For a more comprehensive summary of the Bill 148 changes to Ontario’s Employment Standards Act, 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.

 

Doug’s Year End Rant

By , December 19, 2017 8:46 am

Earlier this week I concluded that the rule of law no longer applies in many Ontario workplaces. The epiphany hit me when I was meeting with the Managing Director of a boutique law firm.

When I use the expression “rule of law” I mean the principle that all people and institutions are subject to and accountable to law that is fairly applied and enforced.

The fact is many employers are unaware of many of the laws that apply to them, and the Ontario government is not enforcing many of them.

You would think that a law firm would be aware of the laws that apply to it but the reality is that most small and medium size law firms do not have a dedicated HR person and do not have an employment lawyer on staff.

Here are some of the employment laws that apply to a small firm:

As of December 31, 2017 the Law Society of Upper Canada  – soon to be the Law Society of Ontario – requires: all lawyers to adopt a statement of principles acknowledging their obligation to promote equality, diversity and inclusion, and: all law firms with 10 or more lawyers to develop a human rights/diversity policy dealing with recruitment, retention and promotion. There is much uncertainty relating to the required contents of these documents.

As of December 31, 2017 an employer with 20 or more employees must file a compliance report under the Accessibility for Ontarians with Disabilities Act (“AODA”). By 2015 about 65 % of employers had not complied with the 2012 reporting obligation. In addition, nine new obligations were imposed on small employers under AODA earlier this year including the obligation to notify job applicants that accommodations for disabilities will be provided on request.  

On November 22, 2017 the government passed a myriad of significant changes to Ontario’s employment standards law. Some of the changes became effective immediately and many of the changes will take effect on January 1, 2018.

Although a law firm office is not a particularly dangerous place to work, all employees are required to receive mandatory health & safety awareness training under the Occupational Health & Safety Act and mandatory customer service training under AODA. In addition,  employers with more than 5 employees must prepare, post & review annually a health & safety policy, a workplace harassment policy, and a workplace violence policy. Furthermore, all employers are required to appoint a trained investigator to investigate an incident of workplace harassment, and the employer must have a written complaint and investigation process. The employee need not file a complaint; the obligation is to investigate incidents and formal complaints. If not, the Ministry of Labour can appoint an external investigator at the employer’s expense. 

The list of new obligations that have been imposed on Ontario employers in recent years goes on and on.

You would think a small or medium sized law firm would know about all of its legal obligations and comply with them but I doubt all or even most of these law firms are in compliance.

When reputable, well intentioned small to medium size law firms do not follow the rule of law how can we expect less knowledgeable employers to do so.

So I ask the Ontario government: Will you stop introducing new laws that are not being followed or being enforced, and start educating employers on their obligations? When this education process is complete will you start enforcing these laws?

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.

Employment Standards Alert: The Cost of Doing Business in Ontario Just Went Up

By , November 23, 2017 11:54 am

The Ontario government’s much publicized overhaul to the province’s employment standards legislation will take effect as early as December 3, 2017.

For the most part, vulnerable employees and employees in precarious employment will benefit from these legislative changes.

As far as employers are concerned, these changes will result in higher payroll costs and a more regulated workplace.

I believe most employers will need to change existing employment practices and policies to comply with this new law.

This blog summarizes a few of the changes to Ontario’s Employment Standards Act.

Increased Payroll Costs

The minimum wage increases from $11.60 to $14.00 as of January 1, 2018 and to $15.00 on January 1, 2019 – about a 30% increase.

Employees are entitled to an extra week of paid vacation after 5 years employment.

For the first time, employees are entitled to paid leaves of absence.

The cost of replacing an employee who is on a leave or is unable to work will in many cases be going up. It will not matter whether you hire someone on your own or you use a temporary help agency unless your organization can satisfy a statutory exemption.

Wages for part-time workers are also going up unless an employer can satisfy a statutory exemption.

The cost of cancelling a shift on less than 48 hours’ notice, or sending a person home early if the person is scheduled to work 3 or more hours is also increasing.

Restrictions on an Employer’s Traditional Management Rights

New limits on scheduling work have been introduced which allow employees to refuse changed schedules.

Employees have the right to take more time off work. In particular, employees are entitled to longer and new leaves of absences. For example, combined pregnancy and parental leave is being increased from 12 months to 18 months, the family medical leave is being increased from 8 weeks to 28 weeks, the critically ill child care leave has been expanded and renamed the critical illness leave and now encompasses not only children of the employee but minor and adult family members as well, and employees are now entitled to take up to 17 weeks of domestic assault leave.

Employers can no longer request a doctor’s note if a person asks for a personal emergency leave day, including a sick day.

How to Comply with the Changes to the Employment Standards Act

To help employers understand the implications of these legislative changes on their workplaces the MacLeod Law Firm has developed a compliance service. It involves reviewing your organization’s current employment practices and policies and recommending changes that are needed to bring them into compliance with the changed employment standards legislation.

For more information on this service, please contact Nadia Halum at 647-985-9894 or at [email protected]. Additional compliance services are found here.

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.

Case Study: Why You Need to Periodically Review Your Employment Contract

By , October 11, 2017 9:08 am

A well-drafted employment contract is the best employment law investment an employer can make. It protects an employer from significant liability and will usually save thousands of dollars in termination costs.

An employment contract should be reviewed periodically because judges are refusing to enforce termination clauses if they are not drafted properly.

In a recent case, Covenoho v. Pendylum Ltd.,2017 ONCA 284, Ontario’s highest court concluded a termination clause was not legally enforceable because it might breach the Employment Standards Act (“ESA”) in the future.

The Facts

Joss Covenoho signed a one year fixed-term contract with Pendylum Inc. The employer terminated her agreement without advance notice when she had been employed for less that 3 months. The termination clause stated in part that the contract could be terminated before the end of the fixed-term “if the Pendylum Client to which you have been contracted terminate[s] its contract with Pendylum for your services”.

Decision by Motion Judge

The motion judge concluded that since the employee had been employed for less than three months, she was not entitled to any notice of termination. Under the ESA an employer is not required to provide any notice of employment to an employee during the first three months of employment.

Decision by Court of Appeal

The Court of Appeal reversed the motion judge’s decision and found that the termination provisions were void. It ruled that “the terms must be construed as if (the employee) had continued to be employed beyond three months; if a provision’s application potentially violates the ESA at any date after hiring, it is void”. In this case, if Ms. Covenoho had been terminated after three months of work, then the termination clause would have violated the ESA because she could have been terminated without any notice of termination (or any payment in lieu of notice) contrary to the ESA.  The court also ruled the employee was entitled to receive the salary that she would have earned for the balance of the fixed-term contract.

Lessons for employers:

1)   Employers should periodically review their termination clauses to ensure they are properly drafted and do not provide shorter notice than required by the ESA.

2)  As we have written about before, it is generally a bad idea to enter into a fixed term contract. If a fixed term contract must be used, it must include an enforceable early termination clause.

On October 16 and October 20 MacLeod Law Firm is holding seminars in Toronto and Barrie that will cover three topics. One topic is why employment contracts need to be reviewed periodically. Cases like this one is one reason but there are other reasons. Information on the seminar can be found here.

For over 25 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.

 

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