Author: barryfisher

Another Case Confirms that the Sophistication of The Plaintiff Does Not Make an Illegal Termination Clause Suddenly Legal:

In  Campbell-Givons v. Humber River Hospital, ( 2021 ONSC 6317) Justice Black again faced the issue of the enforceability of a illegal just cause clause on a without cause termination.

In this case the Plaintiff was a Senior Labour Relations Specialist, who presumably would have a much better understanding of employment law that the average person.

In direct response to the recent decision in Rahman v. Cannon Design Architecture Inc., 2021 ONSC 5961. in which Dunphy J. did consider the sophistication of the Plaintiff in upholding a contract which violated the ESA, the Judge said :

[45] The fundamental determination, in my view, is whether or not the clause or clauses in issue violate the ESA. If it does, then the clause(s) is void, and cannot be used as evidence of the parties’ intention. 

[46] It is also problematic, in my opinion, to engage in a detailed analysis about the level of sophistication of an employee and whether or not they had time and opportunity to obtain legal advice. A termination clause cannot comply with the ESA for some employees but violate the ESA for others. It either violates the ESA or does not, and it either enforceable or not. It is a straightforward matter for an employer to incorporate clauses in an employment agreement that comply with ESA standards, and when that is not done the court should not be asked to rewrite the language of the termination provisions to achieve compliance.

For a copy of this case email me at barry@barryfisher.ca

EI Tells Employers How to Fill out ROE for Vaccine Refusnicks :

This is then latest release from Service Canada :

COVID-19 vaccination

When the employee doesn’t report to work because they refuse to comply with your mandatory COVID-19 vaccination policy, use code E (quit) or code N (leave of absence). 

When you suspend or terminate an employee for not complying with your mandatory COVID-19 vaccination policy, use code M (dismissal).

If you use these codes, we may contact you to determine:
if you had adopted and clearly communicated to all employees a mandatory COVID-19 vaccination policy
if the employees were informed that failure to comply with the policy would result in loss of employment
if the application of the policy to the employee was reasonable within the workplace context
if there were any exemptions for refusing to comply with the policy

My Comment : This most likely means that if the ROE is filled out this way, the claimant will be denied EI.

It seems that the purpose behind this edict maybe twofold:

  1. To encourage employees to get vaccinated.
  2. To discourage employers from putting unvaccinated employees on layoffs pending their vaccination and expecting EI to lessen the economic effect  of this event. Remember that it is a criminal offence for an employer to lie on a ROE.

Sophistication of the Employee Does Not Affect Legality of Termination Provision :

In Livshin v The Clinic Network Canada ( 2021 ONSC 6796) Black J. had situation where the termination clause breached the ESA in that they referenced ” just cause ” as a a ground for paying no severance , which following Waksdale v Swegon, ( 2020 ONCA 391) is illegal and voids the entire termination clause, including the “not for cause” provision. In this case the Plaintiff was not only very sophisticated and was represented by counsel throughout the negotiation process, but this employment contract was part of a larger corporate deal. The Judge found that this was not relevant in determining the enforceability of the clause.

The following are some quotes from this case on this point:

[52] In the case before me, the “just cause” provision is difficult to link to anything other than the Employment Agreement itself. There is no evidence to suggest that there were specific commercial imperatives arising in the transaction specifically or the industry more generally that required TCN to be able to dismiss Livshin for just cause without notice and without regard to the provisions of the ESA. 

[53] As such, and notwithstanding the relative sophistication of the plaintiff and his representation by counsel in the Share Purchase, in my view there is no compelling reason why TCN should be permitted to rely on termination provisions that do not comply with the ESA 

[55] While, as noted, I appreciate that these principles start from a presumed power imbalance, they strike me as providing guidance which, generally speaking, is not onerous for employers to follow. 

[56] Looking to Payette, if there is some commercial imperative driving the need for a particular provision, linked to, and necessitated by, a commercial transaction out of which the employment relationship arises, and if the reason for that provision is primarily related to the commercial transaction, then it may be that there is more latitude for a provision that is on its face at odds with protective legislation. However, I expect that this will rarely be the case and, indeed, am hard-pressed to come up with examples which would permit a breach of the ESA. 

[57] In any event, there are no such imperatives here. While Livshin may be more sophisticated than many employees, and notwithstanding that he was represented by counsel, I can see no reason why the clause at issue had to be drafted in a way that on its face contravenes the ESA. Further, in my view the goal that employers be encouraged to draft clauses that comply with the ESA trumps the suggestion that Livshin may have been better able than many or most employees to recognize the potential peril.

TCN’s argument that Livshin’s representation by counsel should result in him being taken to understand the potential pitfalls of the Employment Agreement at issue here might be turned back on TCN to suggest that an employer, represented by counsel, particularly in the period after the Court of Appeal’s decision in Fred Deeley, ought to know better than to draft a termination provision that fails to comply with the ESA.

[68] Ultimately, I come to the same landing as Justice Feldman’s conclusion above in Metaswitch. That is, the employer here was free to make a legal contract that limited the plaintiff’s rights on termination to the standards set by the ESA. The employer failed to do so, and there was no commercial imperative arising from the Share Purchase that would justify such failure. To me, the encouragement of employers to comply with the ESA is the overriding goal, and if compliance is achieved it is not necessary to undertake subjective assessments of sophistication. Accordingly, I find that the termination provisions in the Employment Agreement are void. 

The Judge also found that the savings or severance clause did not work to legalize the illegal clause.

As this was a fixed term contract of three years, and because the termination clause was void , the Judge awarded the Plaintiff the balance of the fixed term , with no duty to mitigate , following the ONCA in Howard v Benson Group. ( 2016 ONCA 256).

Then without any reasons ( which may be because the Plaintiff did not argue the point) the Judge deducted the CERB payments that the plaintiff received during the balance of the term.

My Comments:

This case stands in contradiction to a case from a few weeks back from Justice Dunphy called Rahman v Cannon Design Architecture ( 2021 ONSC 5961) which I blogged about. If both cases are appealed, the Court of Appeal will have to sort this out . Otherwise we will will two cases with two different outcomes. You gotta love the common law.

If you want a copy of this case, email me at barry@barryfisher.ca

Why You Want To Get The Whole Deal Done at the Mediation, Not Afterwards:

In Peres v Moneta Porcupine Mines ( 2021 ONSC 5798) Justice Pinto had the task of determining whether or not a deal had been struck at a mediation where instead of leaving the mediation with a fully executed Memorandum of Settlement ( MOS) the parties exchanged a series of emails setting out the bare bones of the deal with the intention of finalizing it later.

This sometimes occurs at a mediation, especially at the end of a long day when everyone is tired and nobody wants to face the long and boring job of actually writing up the deal.

In this case, there was an agreement that the Plaintiff would be issued a large amount of stock options with the proviso that it was ” subject to Board approval acting reasonably”.

Then what happened? The Board of Directors met and decided the whole deal was too generous and refused to approve the settlement.

The Court found that the Employer had not provided any evidence that there was a reasonable basis for refusing to grant the stock options after its representatives at the mediation had agreed to the deal.

It therefore enforced the deal with the caveat that if specific performance of the deal was not possible then the Plaintiff would be entitled to monetary damages. In accordance with the MOS, the Court appointed the mediator as an arbitrator if there were any issues outstanding between the parties.

Here is the funny part. The MOS was to include a confidentiality clause. In his judgement the Judge of course  set out the correspondence   between the lawyers which  set out the terms of the ” confidential ” agreement. So now the entire world knows the deal!

Here are some tips on how to avoid this nightmare scenario :

  1. Since the purpose of the mediation is to settle the case, come prepared with a draft MOS with all the usual clauses and releases, leaving blanks for the monetary terms.
  2. As the mediation is proceeding and items are agreed to, add these items to your draft MOS.
  3. Be patient when the mediator says that they insist that the deal be put into a MOS  and signed during the mediation, not after.
  4. If you need approval at a mediation from a person or persons not present, tell them to make themselves available by phone as you may well be calling them later that night for approval.

If you want a copy of this case email me at barry@barryfisher.ca

Another Bonus Clause Bites the Dust:

In Koski v Terago Networks ( 2021 BCSC 117) Justice Hori considered the following bonus language to see if it disentitled the Plaintiff to a bonus over the notice period:

“Eligibility”:

Actively employed by Terago on the date of the bonus payout in 2020. For greater certainty, any statutory severance period or reasonable notice period applicable to an employee who has been dismissed by the Company (whether with or without cause) that overlaps with a bonus payout date shall not be considered as satisfying the “actively employed” requirements of the Program.

As such, employees who have been terminated or who have
resigned prior to the bonus payout date are not eligible for any bonus
payments referenced herein.

This is what the Judge found:

[60] In my view, the two provisions of the Terago bonus policy referenced above, when read together, create ambiguity. The Supreme Court in Matthews, at para. 66 cited above, makes it clear that for the purposes of wrongful dismissal damages, the employment contract is not considered terminated until after the reasonable notice period expires. If termination of the contract does not occur until after the expiry of the notice period, then it is unclear whether either of the provisions removes or limits Mr. Koski’s common law entitlement.

My Comment: The Judge seems to focus on the issue of “terminated”. Since an employee is only lawfully terminated as of the end of the notie period,( not on the date that they receive notice of termination) this clause could also mean that they do not receive a bonus for the period which follows after the reasonable notice period .

In other words ” terminated ” means ” lawful terminated”.

If you want a copy of this case email me at barry@barryfisher.ca

If the Employer Alleges Just Cause but Fails to Prove it, Can They Then Rely on the Not for Cause Clause?

In Humphrey v Mene  ( 2021 ONSC 2539) Justice Papageogiou was faced with this issue . Here is what the judge said about the law on this issue

136      In my view, the following principles emerge from the above cases:
a. Where an employer alleges cause and fails, or withdraws its cause allegation, or repudiates an employment agreement through acts which constitute constructive dismissal, the employer is not precluded from subsequently invoking a without cause termination provision for the purpose of calculating the employee’s damages: Roden , Moore , Simpson ;
b. However, in all cases, it is a question of construction of the without cause termination provision before the Court as to whether, properly construed, the without cause termination provision applies. Such clauses are subject to strict construction: Ebert , Matthews.
c. Even if the contract, properly construed, permits an employer to terminate without cause after a failed for cause termination, there are some breaches or acts of repudiation which are so significant, or of such an order of magnitude, that they render a without cause termination provision unenforceable: Dixon . Although Dixon has not specifically been considered and accepted by appellate courts I find the reasoning compelling. All employment agreements are negotiated and agreed to on the basis of certain implied minimum expectations as to how the employer will conduct itself, the duty of good faith being one. An employee’s agreement to accept terms which significantly impact on the employee’s common law rights must be taken to be made in the expectation that the employer will comply with these minimum implied expectations. Where the employer significantly departs from such expectations, in my view, the employee should not be held to extremely disadvantageous provisions which he, she or they agreed to. This is not rewriting the contract but giving effect to what the parties must reasonably have intended.
d. However, minor or technical mistakes made in good faith by the employer will not constitute a repudiation sufficient to prevent the employer from relying upon the without cause termination provision: Amberer , Oudin.
My Comments :
In this case the Employer first alleged just cause but withdrew the allegation before trial. The court found that the Employer had so mistreated the Plaintiff that their  behaviour disentitled the Defendant from relying upon the Without Cause Termination Clause. This is what the Court said :
137      I am satisfied that in the circumstances of this case outlined above, Ms. Humphrey has established on a balance of probabilities that Men’s conduct, objectively viewed, demonstrates an intention to no longer be bound by the December 2018 Employment Agreement, thus repudiating it. The conduct which I have found includes setting her up to fail, subjecting her to a toxic workplace, embarrassing and humiliating her before co-workers and clients after her suspension, significantly exaggerating performance issues and the evidence it had in support of these at the time of termination, and alleging cause when it knew or should have known it did not have it. These are not mere technical breaches made in good faith. Men’s conduct in this case goes to the heart of the employment relationship.
138      I also find that these many acts of repudiation are of such a magnitude that Men is disentitled from relying on the Without Cause Termination Provision.
By the way, this case is a great read, if only to see how outrageous the Defendant acted and what the Judge did about it. The Plaintiff was a 32 year old COO of a start up with under three years service.
She was awarded :
12 months notice, and
$50,000 in aggravated damages and
$25,000 in punitive damages .
I can’t wait to see what the costs award looks like .
If you want a copy of this case email me at barry@barryfisher.ca

 

“Just Cause ” Clause in Ontario is Upheld :

In Rahman v Cannon Design Architecture ( 2021 ONSC 5961 Justice Dunphy had to consider whether the following clause was illegal in light of the Waksdale v Swegon North America Inc ( 2020 ONCA 391) decision of the Ontario Court of Appeal:

“CannonDesign maintains the right to terminate your employment at any time and without notice or payment in lieu thereof, if you engage in conduct that constitutes just cause for summary dismissal.”

In Waksdale it was found that language of this sort was contrary to the ESA as just cause was a lower standard than wilful misconduct as set out in the ESA and as such the entire termination clause is a nullity and therefore common law notice would apply.

Somewhat surprisingly Mr Justice Dunphy found that this case did not fall within Waksdale for the following reasons:

  1. The Plaintiff  obtained competent  legal advice before signing the agreement.
  2. The Plaintiff negotiated an improved termination provision and at no time objected to the just cause language. ( Note: the contract was negotiated years before the Waksdale decision )
  3. The contract provided for more than the ESA if she signed a release, but presumably less than the common law.
  4. She had a senior role, make lots of money and ” was a woman of experience and sophistication”.
  5.  “The offer letter contains an explicit “for greater certainty clause” recognizing that the employer’s “maximum liability … for common law notice, termination pay, benefits continuation, severance pay, or payment in lieu of notice” shall be limited to the greater of the notice required in the Officer’s Agreement or the minimum amounts specified in the ESA
  6. The Judge emphasized that the agreement represented the mutual intention of the parties, was unambiguous and provided a benefit in excess of the ESA minimums.

My Comments:

With the greatest of respect, I think that Mr Justice Dunphy approached the whole issue from the wrong perspective. Waksdale is a finding that the use of the words ” just cause ” is illegal as it contradicts the ESA standard. It also found that such a clause poisons the entire termination  provision, even the “without cause ” provision.

Illegality leads to nullity says the Supreme Court of Canada in Mactinger v. HOJ Industries Ltd., [1992] 1 S.C.R. It is therefore decidedly not an issue of what was in the minds of the parties when they entered into the contract nor is it relevant whether the clause is clear and unambiguous.

You could have a properly drafted and legally reviewed agreement with a Mafia hitman to kill your business rival. When he or she refuses to do the hit you cannot sue him or her in the Superior Court because the contract is illegal  and our courts will not enforce an illegal contract as a matter of public policy.

Moreover, as an illegality is a legal nullity, we are instructed to read the contract as if the affected clause is not there at all. It is legally incorrect to look at or to refer to an illegal clause as a way to uncover the true intentions of the parties.

Therefore all the reasons given by Mr Justice Dunphy should be irrelevant as they relate to traditional ways of attacking the formation of the contract which focuses on the intention of the contracting parties.

I would not be surprised if this matter were appealed.

If you like a copy of this decision please email me at barryfisher@rogers.com.

 

Judgement = $19,860 But Costs Award = $23,500

In Mazanek v Bill & Son Towing ( no citation yet ) Steele J. awarded $23,500 ( inclusive of disbursements and HST) on partial indemnity basis even though the recovery was within the jurisdiction of Small Claims Court. The judge seemed to do so for the following reasons :
1) The Plaintiff won and is presumptively entitled to costs.
2) The Defendant brought a $100,000 counterclaim which was not abandoned but in which they led no evidence.
3) There were 5 allegations of cause alleged which were litigated
4) The only defence offer was made 8 days before trial for only $5,000.
5) The Plaintiff spent 118 hours on the file while the Defendant spent 95 hours.

Heller v Uber: My Modest Analysis :

In  Heller v. Uber Technologies Inc., 2021 ONSC 5518 Justice Perell certified a class action involving UBER drivers seeking a declaration that they are employees and thus obtain damages for alleged breaches of the ESA as well as unjust enrichment and negligence.

In the end the Judge certified the ESA claims only and denied certification for the unjust enrichment claims and the negligence claims, however theses claims seem to largely cover essentially the same issues anyways.

These are what I consider the most interesting aspect of the decision.
1. At para 18 the Judge clearly identifies the three types of workplace relationships that are possible and how the Court determines which category a person falls into. These categories are employee, independent contractor and dependant contractor. For Heller to succeed under the ESA there must be a finding of employment as dependant contractors are not covered by the ESA.
2. The major issue in determining whether or not to certify the class has to do with the matter of ” commonality versus idiosyncrasy” . Therefore the bulk of the arguments focused on whether the issues in dispute were common enough that a single ruling would bind the class or whether , as UBER argued, each of these issues requires an individual analysis of the situation of each driver thus a class action would not work.
3. This a huge potential class. The Court identified 366,359 putative Class Members, that is drivers who have provided at least one ride or delivery using the UBER app from January 1, 2012 to March 31, 2021.
4. Following UBER’s loss in the Supreme Court of Canada which found that their mandatory arbitration clause was illegal, they revised the arbitration clause in various ways so that it purportedly complies with SCC ruling. In essence it allows employees to opt out of the arbitration process but if they do not opt out they are deemed to be in the arbitration regime and  as such they waive any right to receive any money or other relief from any class action. In response to this the Plaintiff wanted a ruling that this new arbitration clause with its class action waiver was invalid and in return UBER asked that the class action be limited to those drivers who opted out of the arbitration procedure, a move which the Judge said ” ” I can safely assume that if I were to amend the class definition, it would gut the class action.”
In the end the Judge decided that either he did not have the authority to determine these issues on a certification motion or that he did not need to as that issue would be decided by the trial judge. He invited the parties to request that this issue be added to the common issues.
5. The normal limitation period is 2 years. As Heller started the action on January 22, 2018, UBER proposed that the class should be limited to claims starting on January 22, 2016. Insofar as the limitation period is subject to the discoverability principle which could push that date back, the Judge decided that he would not change the temporal length from 2012 and that any issues about extending the limitation period could be addressed “at individual trials if the action goes that far”.
6. The Judge refused to allow for aggregate damages as a common issue . He determined that ” individual questions of fact relating to the termination of each Class Member’s damages remain to be determined. UBER’s liability remains to be determined , and the aggregate of its liability cannot be determined without proof by individual Class Members of their individual claims, which some of them may not wish to advance at individual issues trials.”
This last issue is extremely important. If Heller wins the liability argument, but in order to require UBER to a actually pay any damages, each of the 366,259 Class Members would have to have  separate mini trials to determine how much they would receive, then the process will probably break down. In a previous class action involving thousands of dismissed Kmart employees seeking wrongful dismissal damages, the entire process broke down , despite many attempts by the Court to devise a system of individual adjudication, because of the difficulty of contacting Class Members and the cost of adjudicating small claims. The net effect of that process was only a few individuals actually got paid any monies and  I suspect that Class Counsel took a bath.
Therefore unless the parties either agree or the Court orders a process of determining a methodology based on UBER’s records, it might be a loss for Heller whether they win the case or not. It strikes  me that some of the math could be quite easily determined by simply looking at UBER’s records. For instance the claim for vacation pay under the ESA would presumable be 4% ( in some cases for drivers with more than 5 years then 6% ) of the earnings. UBER knows exactly what they have paid each driver so that should be easy. Things like overtime would be much more difficult because. this would have to analyzed on a individual basis, presumably based on when the driver booked on the app and when the driver booked off. Even if a driver booked on for 12 hours that does not mean that he or she was working for 12 hours as they are allowed to turn down a certain number of ride requests.
Another contentious issue may be whether every UBER driver is an employee or not ,even if the contracts were the same. One can see that a driver who has worked 40 hours a week for 2 years may be more like an employee that a driver who drove one hour back in 2012. Again, either the parties or the Court could define an employee as someone who worked at least a certain number of hours or drove a certain number of kilometres in a defined time frame. My understanding is that UBER has all these types of records in their system already.
This case is far from over. Given the litigation history to date, we can expect many more appeals, motions  and trials.
Samfiru Tumarkin and Wright Henry acted for Heller. Tory’s acted for UBER.
If you want a copy of this case, send me an email at barryfisher@rogers.com.

Court Certifies Misclassification Case:

In Navaratnarajah v FSB Group ( 2021 ONSC 5418) Justice Morgan certified a class action on behalf of insurance sales agents ( called producers) who are claiming that they are employees rather than independent contractors.

What I found interesting about the case was the common issues that related solely to the remedy if there was a finding that they were employees.

These issues included : overtime pay, termination and severance pay, minimum wage protection, vacation pay, requirement to record hours of work, and reimbursement of EI and CPP excess payments made by class members.

Another interesting issue was whether a class action was the preferable procedure when each producer could file its own ESA complaint with the Ministry of Labour. However as that procedure is subject to a strict 2 year limitation period ( whereas in a class action the discoverability issue can be argued) then the Ministry approach would ” exclude at least some members from any access to justice.”

Moreover even though the fact that if the Plaintiff succeeds it may result in a unfavourable tax and business situation for many of the class members was held not to be a valid consideration in the certification process.

If you want a copy of this case, email me at barryfisher@rogers.com .