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Posts tagged: MacLeod Law Firm

Will a Judge Enforce the Termination Clause in Your Employment Contract?

By , August 14, 2018 10:27 am

A Termination Clause can Save an Employer a lot of Money

An employer can significantly reduce the amount of termination pay that it would otherwise owe an employee by including a termination clause in an employment contract.

Accordingly, most employers require that all new hires sign an employment contract with a termination clause.

Often the employer tries to limit the employee’s entitlement on termination to the minimum notice of termination required under Ontario’s Employment Standards Act (“ESA”).

Employee Lawyers Attack Termination Clauses

Employee lawyers often claim that these ESA termination clauses are not enforceable and there have been a myriad of court cases dealing with this issue.

Three Termination Clauses That have Been Litigated

Here are three termination clauses that were litigated and an indication as to whether or not the judge concluded the clause was legally enforceable:

  1. Movati Athletic Inc. may terminate your employment without cause at any time during the term of your employment upon providing you with notice or pay in lieu of notice, and severance, if applicable, pursuant to the Employment Standards Act, 2000 and subject to the continuation of your group benefits coverage, if applicable, for the minimum period required by the Employment Standards Act, 2000, as amended from time to time. (Not enforceable)
  2. In the event Hampton wishes to terminate your employment without cause they may do so by paying you the minimum amounts required pursuant to the ESA in force at the time of termination; no further compensation shall or will be provided. You agree by signing this agreement that such amounts are the total compensation you will receive if terminated without cause. (Not enforceable)
  3. If you are terminated by IBM other than for cause, IBM will provide you with notice or a separation payment in lieu of notice of termination equal to the greater of (a) one month of your current annual base salary or (b) one week of your current annual base salary, for each completed six months worked from your IBM service reference date to a maximum of 12 months of your annual base salary. This payment includes any and all termination notice pay, and severance payments you may be entitled to under provincial employment standards legislation and Common Law. Any separation payment will be subject to applicable statutory deductions. In addition, you will be entitled to benefit continuation for the minimum notice period under applicable provincial employment standard legislation. In the event that the applicable provincial employment standard legislation provides you with superior entitlements upon termination of employment (“statutory entitlements”) than provided for in this offer of employment, IBM shall provide you with your statutory entitlements in substitution for your rights under this offer of employment. (Originally not enforceable but decision reversed on appeal)

As you can see, although it is theoretically possible to limit an employee’s rights on termination to ESA minimums it is difficult to do so in practice because trial judges are reluctant to enforce them.

Lessons to Be Learned

  1. Every employment contract should have a termination clause.
  2. If an employer wants to limit an employee’s rights on termination to ESA minimums then the termination clause should be drafted extremely carefully.
  3. Because trial judges have not adopted a uniform approach to interpreting ESA termination clauses and new decisions on this issue are being released regularly, every organization should have an employment lawyer review its termination clause regularly.

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.

Secretly Recording Conversations at the Workplace: A Slippery Slope

By , August 9, 2018 5:12 pm

Clients often ask me whether a supervisor or manager can record a conversation with a subordinate without the subordinate’s knowledge. As technology has advanced to the point that we all have recording devices in our pockets (i.e. our smartphones), this issue will only become more prevalent in the workplace.

The first question I am usually asked  is “Is it legal?” Although I do not profess to be a criminal lawyer, my understanding is that it is not a crime to secretly record a conversation as long as the individual doing the recording is an “open participant” in that conversation. For example, it is not criminal to place your smartphone on a table and record the conversation you have with an employee, whether or not the employee is aware or consents to the recording. However, if you leave the room and leave your phone behind, and the phone records a conversation between that employee and a third party, then the recording becomes criminal.

In my opinion, the more important question  is “Should I record a conversation with my subordinate?” In other words, although something may be legal, is it appropriate to do in the context of an employment relationship?

With the advent of technology, it’s important for employers to turn their minds to this issue. Should an employer record audio in the workplace to capture employee misconduct or to further document an employee’s discipline? One thing to keep in mind is that secret recordings could capture personal information and infringe on privacy rights, which may lead to a claim for breach of privacy. In 2012, the Ontario Court of Appeal established a new tort of “intrusion upon seclusion” and awarded damages for the breach of privacy in a case where an employee of a major bank accessed the personal financial records of her ex-husband’s new girlfriend on at least 174 occasions. This tort could arise in a situation where an employee’s expectation of privacy is violated by being surreptitiously recorded.

Another problem is that secret recordings can erode the trust that is necessary in the employment relationship and lead to constructive dismissal claims. The case law around constructive dismissal is quite complicated, but generally speaking, a constructive dismissal occurs when an employer makes a significant change to an employee’s employment that shows the employer no longer wants to be bound by the contract. Furthermore, employers are subject to a duty of good faith both during a person’s employment, and at the time of termination. If employees have never been subjected to surveillance, suddenly introducing surveillance could be seen as a significant change that shows the employer is not willing to be bound by the original employment contract. Introducing new surveillance could also be seen as a breach of the duty of good faith. Judges have found that a breach of the duty of good faith can lead to aggravated and punitive damages in addition to wrongful dismissal damages.

On the other side of the coin, if you’re concerned about employees secretly recording conversations, it is best to address this concern proactively by introducing policies about the propriety of secret recordings at the workplace in your employment handbook. In particular, you can include a clause in an employment contract or introduce a policy which prohibits an employee from secretly recording a conversation.

Thus, just because something is legal, does not mean it is advisable. While I do not profess to know the law around recording conversations in the United States, I think we can all agree that even if it is “legal,” no one will be using Michael Cohen as an attorney after finding out he secretly recorded his conversations with Donald Trump. Secretly recording a conversation with your employee could open a can of worms, legal and otherwise; there are definitely more considerations to keep in mind than whether the act itself is criminal. If you are thinking of recording a conversation or introducing video surveillance into the workplace, please contact me at [email protected] or 647-985-9894.

“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.”

Can An Employee’s Off-Duty Behaviour Constitute Just Cause for Termination?

By , August 8, 2018 12:34 pm

We receive calls from employers asking whether they can terminate an employee for off duty conduct. Unfortunately there is not an easy answer. This blog discusses two cases of similar off-duty conduct. A judge found the employer did not have just cause to terminate in one case whereas in the other case the judge concluded the employer did have just cause.

Case Where Off-duty Conduct Did Not Amount to Just Cause

In a 2018 decision, a judge concluded that driving a Company vehicle while impaired was not just cause for termination.

Mr. Klonteig worked with the City of West Kelowna (“the District”) as a firefighter and later as the Assistant Fire Chief. He had an unblemished employment record and it was undisputed that he was an exemplary and valued employee.

After 13 years of employment with the District, Mr. Klonteig was terminated based on an off-duty incident of driving while impaired. Mr. Klonteig was driving home in the vehicle allocated to him as an Assistant Fire Chief. This vehicle was a pick-up truck and there were no policies restricting its personal use. The only indicator that it belonged to the District at all was a fleet number on its rear. Mr. Klonteig was pulled over for suspected impaired driving and failed two roadside breathalyzer tests. The District vehicle was impounded and Mr. Klonteig received a 90-day administrative driving prohibition.

That same day, Mr. Klonteig reported the incident to the District’s Chief and a human resources advisor. Mr. Klonteig was sent home and he believed he was simply suspended from work. However, once the District’s Chief Administrative Officer, Mr. Johnson, was informed of the incident, he exercised his discretion to terminate Mr. Klonteig’s employment. Mr. Johnson chose termination despite the advice of two senior managers because of his concern for potential liability and public safety.

Mr. Klonteig was provided with a cheque for his outstanding unpaid wages, a payout of his accrued vacation time, and a promise of a written reference letter.

The District alleged that the incident was serious enough to amount to just cause for termination, while Mr. Klonteig submitted that he was wrongfully terminated.

The BC Supreme Court agreed with Mr. Klonteig that his dismissal was wrongful and found that the District did not have just cause to terminate him.

Case Where Off-duty Conduct Amounted to Just Cause

The facts of the Klonteig case can be contrasted with a 2012 Ontario case we previously discussed  here.

In this case, Mr. Dziecielski was an employee of the Company for 13 years and had no history of misconduct or performance issues. Mr. Dziecielski borrowed a company vehicle without permission and crashed it while under the influence of alcohol. The vehicle was destroyed and the employee sustained life-threatening injuries. Based on the test that judges apply when deciding whether just cause for termination exists, the judge found the employer was justified in terminating the employee for just cause.

The Test for Determining Whether Just Cause Exists

A judge will adopt a contextual approach when determining the degree of misconduct that will justify summary dismissal. One must look at both the circumstances surrounding the misconduct and the nature of employment relationship. Further, the principle of proportionality is vital; balance must be struck between the severity of the employee’s misconduct and the sanction imposed.

Judges have found that in order for off-duty conduct to amount to cause, the conduct must be or be likely to be prejudicial to the interests or reputation of the employer.

Application of the Test in the Klonteig Case

Mr. Klonteig was found not to be representing his employer when he was stopped for impaired driving. The vehicle he was driving was essentially unmarked and his conduct was not considered to be of the same high moral reprehensibility as some of the cases cited by the District. Further, the court pointed out that Mr. Klonteig’s role was more administrative so he was not the public face of the Fire Department, nor was the public aware of his administrative suspension.

Based on the fact that Mr. Klonteig’s conduct did not cause his fellow firefighters to lose confidence in him, the court concluded the public would be unlikely to do so either. All in all, Mr. Klonteig’s off-duty conduct was not incompatible with faithful discharge of his duties, nor was it prejudicial to the interests or reputation of the District.

Application of the Test in the Dziecielski Case

The employee in the second case was charged with a number of criminal offences related to drunk driving. The judge stated that the employee was guilty of serious misconduct and discussed the problem of drunk driving in our society. He noted that the employee’s conduct was prejudicial to the employer’s business as the employer’s goodwill and reputation could have been significantly affected. Further, the employee had signed an Employee Handbook that made it clear consuming alcohol on the job could result in termination of employment because it is a violation of a serious workplace rule. Based on the context of this case, the judge concluded that this single act of drunk driving was enough to constitute just cause for dismissal.

What These Conflicting Cases Mean for Employers

The differing outcomes in these two cases show how important it is for employers to thoroughly assess the circumstances surrounding misconduct in its entirety before terminating an employee for just cause for off-duty conduct.

As can be seen from the cases discussed in this blog, although the test applied by the the courts is consistent, outcomes are determined on a case-by-case basis. Driving a company vehicle can amount to just case in some cases but not others.

If you are considering disciplining or terminating an employee for off-duty conduct, you can reach one of our lawyers at [email protected] or 647-204-8107.

“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.”

Is an Employer Required to Provide a Bonus to an Employee Who is Not Employed on the Date the Bonus is Paid?

By , July 31, 2018 1:05 pm

What is an employer’s responsibility to pay bonuses to an employee who resigns after the year in which he or she earns a bonus, but before payment has occurred?

The Ontario Court of Appeal (“OCA”) tackled this question once again in Bois v MD Services, 2017 ONCA 857.

Facts

The appellant, Mark Bois, worked for the employer for approximately 14 years. Mr. Bois was awarded bonuses under his employer’s Variable Incentive Plan (“VIP”), where a bonus was payable in equal installments over the 3 years following the calendar year for which the bonus was awarded.

Mr. Bois resigned in 2011, before the payout dates for the third installment of his 2009 bonus and two installments of his 2010 bonus. Mr. Bois started an action seeking these instalments, which amounted to nearly $115,000.

The employer’s VIP contained provisions regarding entitlement to payments. Further, a letter from the employer, signed and agreed to by Mr. Bois, stated:

In any given year, you must be a permanent employee of the CMAH Group of Companies on December 31 of the year for which the incentive is paid and continue to be so employed on the payment date(s) to receive a payment. Any employee who is no longer employed with the organization or has given notice of termination prior to the payout date will not be eligible to receive a payment.

The issue in this appeal was whether the requirement to “continue to be so employed”, as per the employer’s VIP, conflicted with the Employment Standards Act, 2000 (“ESA”).

Mr. Bois argued that the effect of s. 11(5) of the ESA was to accelerate his employer’s obligation to pay out future installments, regardless of the language in the VIP. Further, he argued that that the VIP disentitling him to future instalments was a violation of ss. 13(1) of the ESA.

Analysis

The Court held that the requirement of continued employment in the employer’s VIP did not conflict with the ESA and Mr. Bois’s appeal was dismissed.

The OCA agreed with the lower court’s interpretation that the VIP requires an employee to continue to be employed with the employer on the date of the bonus installment payout to receive the installment. Since Mr. Bois resigned before the incentive pay date, he became ineligible to receive the bonus payment.

The Test and Previous Cases Finding for the Employee

In a Paquette v. TeraGo Networks Inc., 2016 ONCA, which we wrote about here, the OCA found that the relevant provision in employee’s contract did not limit the employee’s claim to the bonus. The contract simply stated, that the employee must be “actively employed by TeraGo on the date of the bonus payout”. The Court looked at more than if the term “actively employed” was ambiguous. Rather, the wording of the bonus plan was viewed broadly in determining that the employee’s award was not to be limited.

The court outlined a test to determine whether a terminated employee is entitled to damages on account of a lost bonus. The court will ask:

  1. does the employee have a common law right to damages for breach of contract that would include compensation for a lost bonus?
  2. is there language in the bonus plan that unambiguously alters the common law entitlement?

In another case where the court found for the employee, the employee was entitled to the bonus for the time he worked, as well as what he would have earned during the 18-month notice period. Read more about this case here

A third decision that found for the employee is Lin v OTPPB 2015 ONSC, which we wrote about here. The court held that the employer’s annual incentive plan was integral to the Mr. Lin’s compensation. The court reiterated that there are different types of bonuses and in this situation, the bonus was significant and non-discretionary. Even though Mr. Lin was not working with the employer at the time the bonus compensation was paid, he was entitled to bonus income that he would have earned during the reasonable notice period.

What Do These Inconsistent Decisions Mean?

The Bois case seems to be in line with the principle of freedom of contract. the Court stated that it is open to the parties to agree how and when any bonus was declared, earned, accrued and would be payable. As shown above, however, not all judges consistently apply this principle in the employment law context.

This begs the question, when will contractual language purporting to limit an employee’s right to bonus pay be enforced?

Previous cases illustrate a variety of factors to consider. Not only should employers use clear language and unambiguous provisions, employers should also consider the type of bonus it is. Considering the increasing complexity in this area, employers should consult a legal professional to determine the sufficiency of their contractual provisions on bonus awards.

We note that the OCA sided with the employer in the Bois case where the employee resigned whereas the OCA sided with the employee in the Paquette and Lin cases where the employee was terminated. The court in Bois stated that Mr. Bois had notice of the active employment eligibility requirement and knew (or ought to have known) that when he resigned, he would forfeit his bonus award.

If you are looking for experienced employment lawyers to review or draft your bonus entitlements provisions, contact us at [email protected] or 647-204-8107 and one of our lawyers would be happy to assist you.

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.

A Benefit of Working Past 65: Employee Benefits Must Continue

By , July 31, 2018 12:21 pm

A recent human rights decision may result in Ontario employers paying higher premiums for group employee benefit plans.

Mr. Talos was a secondary school teacher and decided to keep teaching after he turned 65 years old even though he could retire and receive a pension and other government benefits. He was financially motivated to continue working because he needed the health benefits. These benefits paid for medical and other expenses in connection with his wife’s serious illness. In this regard, his wife had no employer sponsored benefits and, as she was younger than 65 years old, she did not qualify in her own right for various government income supports like Old Age Security and Ontario Disability Drug Benefits Plan.

When he turned 65, Mr. Talos’ employer terminated his membership and its extended health, dental and life insurance benefits plan pursuant to section 25(2.1) of the Ontario Human Rights Code and section 44(1) and a number of regulations under the Employment Standards Act (collectively referred to as the “Age Exemption”).

Mr. Talos filed an application under the Human Rights Code claiming the Age Exemption violated section 15 of the Canadian Charter of Rights and Freedoms (the “Charter”) and was not saved by section 1 of the Charter.

In this regard,  Section 15(1) of the Charter states:

15(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

And, section 1, that provides both a guarantee of rights and freedoms and justification for limitations on those rights and freedoms, states:

1 The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.

The adjudicator appointed under the Ontario Human Rights Tribunal agreed with Mr. Talos.

He concluded:

The impugned provisions (i.e. The Age Exemption) could have been better tailored to preserve the viability of workplace benefit plans without the “carve out” that left older workers vulnerable to a lessening of their compensation based solely on their age, and not their ability, performance or any other bona fide qualification.” The adjudicator also stated: For greater clarity, this decision does not address long term disability insurance, pension plans and superannuation funds.”

Although the Tribunal’s decision does not address long-term disability insurance, pension plans and superannuation funds, there may be similar challenges in the future to such employee benefits.

We note that the merits of this case have yet to be determined as this is an interim decision. We will keep you updated as this case progresses.

Lessons to be Learned:

  1. The cost of group employee benefit plans may be going up. Employers should therefore speak with their group insurers to find out how much extra it will cost to extend group benefits to employees over 65 years of age.
  2. Depending on the size of the increase in premium costs, employers should start thinking about whether group benefits need to be restructured if Mr. Talos wins his case on the merits and the decision is not overturned on appeal.
  3. I would not be surprised if similar challenges are made to long-term disability insurance and pension plans. If so, employer associations should try to intervene in these cases. The cost of obtaining and presenting expert evidence is expensive and beyond the means of most individual employers. Cases are decided based on the evidence before the decision maker and social science evidence is critically important when considering whether or not “reasonable limits prescribed by law (such as the Age Exemption) … can be demonstrably justified in a free and democratic society.”

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.

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