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Posts tagged: termination

Wrongful Dismissal Update: Recent Case Law Increases Legal Uncertainty

By , January 8, 2019 10:04 am

Recently, it has become increasingly difficult for employment lawyers to assess an employer’s potential legal liability in connection with an employee termination. The law is pretty straightforward but predicting how a judge will apply the law to a specific termination is riddled with legal uncertainty.

A recent case involving a 54-year-old senior executive who earned about $275 000 a year who was terminated for just cause after 11 years service is a good case in point.

The Issues

The judge in this case decided three main issues; namely: (i) did Keddco Mfg. have just cause to terminate Scott Ruston’s employment; (ii) if not, how much notice of termination should he have received; and (iii) was Mr. Ruston entitled to any punitive damages or aggravated damages because of the way Keddco treated him?

The Law

When deciding whether an employer has just cause to terminate an employee and avoid paying termination pay, a trial judge is required to apply the test set out by the Supreme Court of Canada (the “SCC”) in a well-known 2001 case, as interpreted by the Ontario Court of Appeal in another well-known 2004 case.

If an employer cannot prove just cause, then the employee is entitled to receive reasonable notice of termination (or pay in lieu of this notice) unless the employee signed an employment contract with an enforceable termination clause. The test a judge applies to determine the appropriate reasonable notice period is set out in a 1960 court case.

Since the SCC clarified the law in 2008, trial judges have had jurisdiction to award employees punitive and aggravated damages.

The Decision

  1. Just cause: It is generally very difficult for an employer to prove just cause – especially for a long service employee with no prior discipline like Mr. Ruston. Alleging just cause and then leading very little, if any, evidence at trial really annoys judges. I believe unsubstantiated allegations of just cause results in longer reasonable notice periods, aggravated damages in some cases, and a higher cost award against the employer.
  2. Reasonable notice: Although the Ontario Court of Appeal has specifically directed trial judges not to apply the “one month notice per year of service” rule of thumb when determining the reasonable notice period, this rule of thumb has been a good place to start for employees like Mr. Ruston until the last couple of years. In this case, after an 11-day trial the judge concluded Keddco should have provided an 11-year employee with 19 months’ notice of termination or about 1.7 months per year of service.
  3. Punitive damages & aggravated damages: When the SCC issued its 2008 decision on punitive damages and aggravated damages, most employment lawyers believed it closed the door on these types of damages except in extraordinary cases. Now, however, there is much uncertainty as to whether a particular set of facts will attract punitive and/or aggravated damages. In this case, the judge awarded the employee $100 000 in punitive damages for a number of reasons including the fact that Keddco intimidated Mr. Ruston in the termination meeting,  threatened to sue Mr. Ruston for fraud, and led no evidence at trial to substantiate the fraud allegations. Keddco was also ordered to pay $25 000 in moral damages because, among other things, the employer failed to be candid in the termination interview as far as the reasons for his termination were concerned, made unsubstantiated allegations of fraud, and knew the fraud allegations would be very stressful for Mr. Ruston.

To my knowledge, this case has not been appealed.

Lessons to be Learned:

  1. Every employee should be required to sign an employment contract with a legally enforceable termination clause. In this case, the notice period could have been limited to 8 weeks in a contract, decreasing legal uncertainty. Mr. Ruston’s bonus accounted for about 41% of his total annual compensation. The termination clause can also restrict (or eliminate) the amount of bonus an employee is entitled to receive during the notice period, decreasing uncertainty. This kind of clause could have saved Keddco hundreds of thousands of dollars.
  2. An employer should not allege just cause unless it plans to lead credible evidence to substantiate the allegations. If just cause had not been alleged in this case, then the wrongful dismissal damages could probably have been decided by way of a summary judgment; not an 11 day trial. My guess is that if the parties cannot agree on legal costs, Keddco will be ordered to pay Mr. Ruston at least $100 000 in legal costs – although the cost order could be much larger.

  3. An employer should act in good faith when terminating a person’s employment. This should eliminate legal uncertainty and risk that a judge will order the employer to pay any punitive and/or aggravated damages, which totalled $125 000 in this case.  

For almost 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.

Proposed Changes to the Canada Labour Code – Bill C86

By , November 14, 2018 12:23 pm

On October 29, 2018, the Federal government introduced the omnibus Bill C86 titled “A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures”.  If passed, Bill C86 would introduce changes to the Canada Labour Code (“Code”) that would have a significant impact on federally regulated employers.

Some of the changes proposed in Bill C86 include:

1) Scheduling and Hours of Work

Employers would be required to provide employees with a 30-minute unpaid break after 5 consecutive hours of work and would be entitled to a minimum rest period of 8 hours between shifts.

Employers would also be required to provide employees with at least 96 hours written notice prior to scheduling a shift, without which employees have the right to refuse this work.

Employers would be required to provide unpaid breaks needed for medical reasons or for nursing.In the case of medical breaks, employers would be permitted to request a written medical certificate.

2)Expenses

Employers would be required to reimburse employees for reasonable work-related expenses.

3) Vacation

Vacation time and pay entitlements would be increased for employees:

o Employees with 1 year of service: 2 weeks’ vacation and 4% vacation pay;

o Employees with greater than 5 years of service: 3 weeks’ vacation and 6% vacation pay;

o Employees with greater than 10 years of service: 4 weeks’ vacation and 8% vacation pay.

3) Leaves of Absence

Employees will be entitled to up to 5 days of annual personal leave. After 3 months of continuous employment, the first 3 of these days will be paid. Employees will be eligible to take this leave for personal illness or injury, responsibilities relating to the health care of family members, responsibilities relating to the education of family members under the age of 18, to address urgent matters concerning themselves or family members, to attend their citizenship ceremony or for any other reason prescribed by regulation.

The sick leave provisions would provide employees with up to 17 weeks of “medical leave”, including for personal illness or injury, organ or tissue donation or medical appointments during working hours.

4) Termination

The Proposed Act would provide employees with at least three months of service with:

  • two to eight weeks’ written notice of termination;
  • two to eight weeks’ pay in lieu of notice at their regular rate of wages for their regular hours of work; or
  • a combination of the two, equivalent to at least two to eight weeks depending on length of service.

This would not apply to employees whose employment was terminated for just cause or as part of a group termination of employment.

5) Pay Equity Act

Bill C-86 would also introduce new legislation known as the Pay Equity Act. The Act would require all federally regulated employers with 10 employees or more to provide men and women employees with equal pay for work performed which is of equal value, and to establish and maintain a pay equity plan.

If you would like to speak to an employment lawyer at the MacLeod Law Firm, you can reach us at [email protected] or 647-204-8107.

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.

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.”

Preparing an Employee Severance Package: Five Reasons to Hire A Lawyer

By , March 31, 2017 1:29 pm
  1. A lawyer can explain your obligations under the Employment Standards Act. Did you know there are employees who are not entitled to vacation pay, overtime pay, termination pay and severance pay under this law? For employees who do not work a regular work week did you know there is a formula to determine how to calculate termination pay?
  1. An employer can explain your obligations to provide reasonable notice of termination at common law. If the employee has not signed an employment contract with an enforceable termination clause then a lawyer can provide you with an idea of what is “reasonable” notice of termination in the circumstances. An lawyer can also inform you whether you are legally required to pay an employee who has received a bonus during the notice period.
  1. An employer can explain whether you are exposed to non-wrongful dismissal damages. For example, if the employee is disabled or has recently returned from sick leave or a pregnancy leave the employer may be exposed to damages under human rights legislation.
  1. A lawyer can suggest the best way to structure termination payments. Sometimes a lump sum payment is the best option and sometimes periodic payments are a better option. Another issue to carefully consider is which benefits to continue and for how long? Did you know that some insurers will not continue some employee benefit coverages after an employee is terminated?
  1. A lawyer can suggest ways to minimize the out of pocket costs associated with a termination. This includes steps you can take to help the employee find alternative employment which generally reduces an employer’s monetary exposure. For example, in what circumstances is it a good idea to offer the terminated employee a reference or outplacement counselling?

 

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.

 

 

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.

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