Author: barryfisher

In Livshin v. The Clinic Network Canada Inc., 2021 ONSC 6796 (CanLII) Justice Black had a situation where the termination clause referred to ” just cause” and as such was illegal under the Waksdale case. The Defendant argued that this should not matter as the parties were highly sophisticated, were both represented by lawyers and that the employment agreement was part of a larger sale of business transaction .

The Court held that there was no ” commercial imperative ” that prevented the contract from complying with the ESA.

This is the part of the decision that I love.

The Defendant argued that because the Plaintiff had a lawyer in his negotiations, he should be held to the contract, even if it was technically illegal . The Court’s response was as follows:

“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.”

The result of this illegality was immense as the employment contract was a for three year fixed term and thus the breech meant that the Plaintiff was entitled to the balance of the contract, not just reasonable notice . Thus the Plaintiff received compensation for 20 months , with no duty to mitigate.

I have always said that the most important part of any employment contract is the termination clause.

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

In 1159273 Ontario Inc. v. The Westport Telephone Company Limited (2022 ONSC 1375) Justice Kershman had to determine whether the relationship between the parties was that of an independent contractor vs a dependant contractor as the Defendant had terminated the Plaintiff. The Plaintiff was not claiming an employment relationship.

In finding that the relationship was that of an independent contractor, the Court was influenced by the following factors :

1. The two principals of the corporate entities, ( Tom was the Plaintiff and Steve the Defendant) arranged their complex corporate structure with the help of professional tax advisors, thus the structure was not imposed on the Plaintiff.
2. Tom was a traditional employee of the Defendant from 1977 to 1996. From 1996 until his termination in 2019 he carried out the same duties but through the corporate Plaintiff.
3. Tom worked full time for the defendant ( 40 hours a week ) and had the title of Director of Technical Services, President and Vice President at various times.
4. Tom was a shareholder, an officer and a director of the Defendant. Tom and/or the corporate Plaintiff owned one third of the shares in the Defendant until shortly before his dismissal.
5. An analysis of Tom’s income tax returns indicated that for a a period of 4 years  only 50% of his income came from the Defendant where the other 50% came from other sources. Of the last two years of his relationship with the Defendant , 70% of his income came from the Defendant and the remaining 30% came from other sources.
6. The primary source of the income from other than the Defendant was from Ancillary Companies, which were all related to the Defendant.
7. Tom’s income ( not the corporate Plaintiff) derived between 52 % 71% of his income from the Defendant, according to the relevant tax returns. The Court  found that this did not amount to income exclusivity, the central component of a dependant contractor relationship.
8. Steve and Tom are brothers.
9. Tom was publicly identified as an owner of the Defendant .
10. Although Tom had various  executive titles, the Plaintiff, which is a corporation, did not. Of course it is obvious that only a real person can be an officer or a director.
11. For the time that the Plaintiff had some shares in the Defendant, Tom effectively had some control over the Defendant as he was also a director and an officer, thus the Defendant did not control the Plaintiff to the degree necessary for a dependant contractor relationship to exist.
12. Notwithstanding that the Defendant provided Tom with an office and thus the tools necessary to do his job, the Judge found that was not a factor in favour of dependant contractor status.
13. Although there was no expectation of profit or loss in the consulting agreement between the Plaintiff and the Defendant, when one looked at the big picture, Tom ( who was not a personal litigant ) made a profit or a loss dependant on the overall success of the Defendant as he  was a shareholder for most of the time but not at the end.
14. Although Tom was an integral part of the Defendant, the corporate Plaintiff was not.

My Comments:

This case is very troubling .

At times the judge completely separates Tom from the corporate Plaintiff as when he said that although Tom was the President of the Defendant , the corporate Plaintiff was not. and when he said that although Tom was an integral part of the Defendant the corporate Plaintiff was not.

At other times he looks at the tax returns of Tom, not the corporate Plaintiff, to determine what portion of the income was derived from the Defendant. and what was derived from other entities.

The Judge said at one point that 71% does not show economic exclusivity but 88% does ? Where is the dividing line?  The Judge quoted a Court of Appeal case which states the test as follows:

Exclusivity is a categorical concept — it poses an either/or question, and “near-complete exclusivity” must be understood with this in mind. “Near complete exclusivity” cannot be reduced to a specific number that determines dependent contractor status; additional factors may be relevant in determining economic dependency. But “near-exclusivity” necessarily requires substantially more than 50% of billings. If it were otherwise, exclusivity — the “hallmark” of dependent contractor status— would be rendered meaningless.

I would think that 71% was  “substantially more than 50% of billings”.

In any event, as the Judge found that the Ancillary Companies were the source of the other 30% of his non passive income and that the Ancillary Companies were all related to the Defendant, in essence 100% of his non passive income came the Defendant and its related entities.

Moreover the Judge mentioned a few times that this complicated corporate structure was designed by professionals to minimize Tom’s ( not the corporate plaintiff’s) income tax liability. So what. How is that relevant?

Excuse me, this should have been seen as a simple case of a person who for years was considered to be an employee of the Defendant and then the parties decided to change the structure to save taxes but the Plaintiff continued in the same functional role as before. Whether Tom made other monies over and above his full time job with the Defendant should also be irrelevant. Full time employees often have second or even third jobs. One can wear different hats at the same time. You can be an employee, a director, an officer and even a shareholder. Each has their own set of rights and remedies which are independent of each other. The termination of one status has no effect on the other. This is even more important when the other income is from companies related to the Defendant, not real third parties.

In fact, as the Judge determined, at the time of his dismissal neither Tom nor the corporate Plaintiff owned any shares in the Defendant as Tom had sold his shares to an arms length third party against the wishes of his brother who wanted to buy out his brother but they could not agree on the price.  This is apparently what caused the Defendant to terminate the arrangement with the Plaintiff.

In non legal terms, Tom and his brother were partners and when Tom would not agree to the price his brother was offering, he sold his shares to a stranger, which upset the brother. The brother  returned the favour by firing Tom without paying him a dime.

I am not aware if this case is being appealed.

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

 

 

 

 

 

 

 

 

In Austin v. Kitsumkalum First Nation, 2020 BCSC 2298, Justice Groves had a situation of a 15 year School Principal in a First Nation school who gave notice of resignation 11 months in advance saying that she was leaving in November. The Employer turned around and terminated her in June, 5 months before her resignation date, and did not allege just cause at that time . The Plaintiff sued only for the 5 months. The Employer then alleged all sorts of criminal behaviour and alleged that it was after acquired cause.

The Judge found that the Defendant was fully aware of all of the necessary facts prior to termination and that those facts did not constitute just cause. In awarding aggravated damages , this is what the Judge said :

[33] In my view this defendant in raising in their statement of defence unfounded allegations which through a reasonable interpretation suggest potential criminal behaviour, suggest theft, suggest inappropriate reimbursement for expenditures, support a finding that this employer engaged in conduct that was unfair and in bad
faith. They are not saying she did not do her job. They are saying she was dishonest. They were saying she was fraudulent. They are saying she conducted herself in a semi criminal manner. All those things have not been proven, and in my view as they are unproven, they are both unfair and they were made in bad faith.

[35] And let us put this in context. She is a teacher in a small aboriginal community in Northern British Columbia near Terrace. She resides in that community. Upon her dismissal, everyone, she says, knew that she was dismissed. It was apparent. It is not like she is living in a big city and loses her job and no one knows.

If you would like a copy of this case, email me at barry@barryfisheer.ca

In Reotech Construction Ltd. v. Snider, BCSC 317, Justice Fleming , sitting on appeal from a decision of the Provincial Court, found that the trial judge erred when the Court failed to deduct the $9,000 CERB payment received by the Plaintiff from the damage award.

The Court referred to the following factors in making this decision:

1. CERB was not private insurance nor did the Plaintiff contribute ( unlike EI where the employee pays part of the premium).

2.There was no obligation under the CERB legislation whereby the Plaintiff would be required to repay CERB ( again unlike EI)

3. As such, the application of the collateral benefit rule did not apply.

4. CERB was designed to be a indemnification against wage loss and to not deduct it from the award would put the Plaintiff a better position than had the contract not been breached by failing to pay reasonable notice.

If you wish a copy of this decision, email me at barry@barryfisher.ca

In Verigen v. Ensemble Travel Ltd., ( 2021 BCSC 1934) Justice Milman had a situation of a 55 year old Business Development Director ( really more of a sales person ) with 13 months service who was given a temporary layoff notice at the beginning of COVID. The plaintiff consented to the first time limited layoff and consented to a second one but did not consent to at. third  extension beyond August, 2020.

1. The Judge found that because she had consented to the first two layoff periods, the date of her constructive  dismissal was not her original layoff date in March but only when she refused to consent to a third extension in August.
2. At the time of hiring there was a clause in her contract agreeing that she was bound by the Employee Handbook which they said was enclosed, but in fact it was not enclosed.  The Defendant did not actually give her  a copy of the Employee Handbook until a few months after she started and, lo and behold, the Handbook contained an ESA termination clause. The Court found that because there was no termination clause in the original hire letter, that extra consideration would have had to be paid to the Plaintiff at the time she was asked to agree to the termination clause, and as no such extra consideration was paid, the termination clause was not enforceable .
3. The Defendant then tried to argue that COVID had devastated the travel industry so that the doctrine of frustration applies and therefore the Plaintiff was not entitled to any common law notice . This is how the Court dealt with that issue:[59] The issue in Wilkie was whether the imposition of additional purchase tax on a prospective purchaser of real property frustrated the contract of purchase and sale. In answering that question in the negative, Warren J. canvassed various authorities holding that a purchaser’s inability to perform due to a lack of adequate funds will not generally justify a finding of frustration. She summarised the relevant principles as follows:

   [38] That a lack of money to perform does not, generally, give rise to frustration is not surprising because, as noted, frustration arises from a supervening event that results in performance becoming a thing radically different from that which was undertaken. While a lack of money affects a party’s ability to perform an obligation, it does not normally alter the nature or purpose of the obligation itself.

   [60] So too here, the collapse in the travel market goes to ETL’s “ability to perform”, rather than “the nature of the obligation itself.” This case is unlike the CRT decisions relied upon by ETL, where the very subject matter of the contract had been lost due to discrete, pandemic-related events. Although much of the consumer demand driving the business on which ETL and its members depend has abated, at least for the time being, not all of it has, and then not permanently. Moreover, although ETL chose to terminate a large part of its work force in the summer of 2020, at least some positions have been preserved and a recently-opened vacancy has been filled. ETL chose to relinquish Ms. Verigen’s branch of the business with a view to cutting operating costs so that it could better weather an ongoing storm. The fact that the pandemic had admittedly not brought about a frustration of the contract as of July 2020 makes it implausible for ETL to maintain that the contract had become frustrated only a few weeks later.

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

 

I was asked the other day by an employment lawyer if I had a precedent for a Mediation/Arbitration clause that could be used in an Ontario employment contract .

I didn’t have a precedent so I composed my own. Here it is :

Med/Arb Dispute Resolution Procedure:

The parties agree that any and all disputes arising from the interpretation or application of this agreement (including but not limited to the termination of this agreement) shall be resolved by the following process:

1. The parties shall select a sole Arbitrator within 30 days of the request to arbitrate. If the parties cannot agree on an Arbitrator, then one shall be appointed pursuant to section 10 of the Arbitration Act, 1991 .

2. The parties shall first attempt to resolve the issues in dispute by way of a mediation conducted by the Arbitrator.

3. If the matters are not resolved, then the Arbitrator will decide all outstanding issues by way of a final and binding arbitration pursuant to the Arbitration Act, 1991. There shall be no appeal from the award of the Arbitrator. 

4. This provision does not prevent either party from pursuing any statutory right that they may have before the appropriate statutory tribunal, although that party may choose instead to pursue this Med/Arb procedure.

5. The parties shall share the fees of the Arbitrator equally unless the Arbitrator orders otherwise.

6. The entire process shall take place in the Province of Ontario at a place chosen by the Arbitrator after consultation with the parties.

I look forward your comments and compliments. Feel free to use this clause in your practice.

Med/Arb can be a much better way of resolving non union disputes than resorting to the Courts . Try it!