Author: barryfisher

Termination of a Teacher at a First Nation School Covered by CLC Unjust Dismissal :

In an exhaustive 44 page decision entitled Kaiswantu v Piapot First Nation
( 2020 CarswellNat 2008) Adjudicator Cameron had to decide whether he had jurisdiction over the termination of a teacher on a First Nation teacher located on a First Nation.

For many years it was a given that teachers in this situation were covered by the CLC as the Constitution gives jurisdiction over “Indian” matters to the feds. Then some time ago, the analysis changed so that if the function performed by the employee was akin to what was done in non native societies, then the jurisdiction was provincial. Thus a teacher who taught reading and writing would be under provincial jurisdiction but an employee of the band who was responsible for negotiating treaty matters would be under federal labour jurisdiction.

In this case, the Adjudicator found that the teacher was governed by the Canada Labour Code. He does so by examining the actual relationship between the First Nation and the Federal Crown with respect to the education of students on a reserve. It is fascinating reading, especially for those who have an extensive understanding af aboriginal law. That group does not include me.

This clarity should be welcomed. The idea that First Nation employees could be under two different labour relations jurisdictions  always struck me as absurd and unnecessary. Hopefully this case will simplify this area of law and provide all First Nation employees with the same protections accorded to a clerk in a bank.

Termination Provision in Commission Plan Illegal as it Purports to Deny Commission Over the Statutory Notice Period:

In Kerner v Information Builders ( Canada ) (2020 ONSC 2975 ) Pollak J. had a case which involved whether the employee was entitled to commissions over the notice period in addition to his base salary. There were two different provisions at stake.
The 2017 Plan said that in order to receive a commission you must be employed at the time the sale was booked and billed.
It read as follows:

 

2017 Sales Plan

Please note that the governing principles set forth below are applicable in all cases. In order to be entitled to receive a commission you must met all of the requirements of paragraphs 1 through 3 below, as well as all applicable provisions of the attached documents. Unless you do so, no commission is earned, due, owing, or payable to you:

1.      You must have been a procuring cause of the sale and complied with all other applicable requirements. In some cases commissions may be payable in installments.

2.      No commissions are payable until the sale has been booked and billed.

3.      In order to be entitled to receive a commission you must be employed by IB at the time the sale has been booked and billed.

The 2018 Plan said that you get no commissions after you end active employment for any reason and also excluded statutory notice periods.
It added the following paragraph :

 

2018 Sales Plan

Commissions are not payable in respect of any period of notice, whether contractual, statutory or based upon the common law, following termination of your employment for any reason whatsoever, unless the sale transaction was booked and billed prior to the date of termination of your employment, The date of termination is the date on which your active employment with Information Builders ceases and you are no longer providing services to the company. [emphasis added]

 

In regards to the 2017 Plan, the Court found that the reference to ” termination” must mean lawful termination, thus at the end of the notice period. As such he was entitled to his commissions during the notice period.

In relation to the 2018 Plan, the Court found that the Employer failed to satisfy its onus to prove that they properly communicated this important change to the plaintiff when it was implemented thus it was not binding on him . Although the changes were in the 2018 Plan which the plaintiff was given, because this change was not not referred to in an accompanying document called “Major Changes ” nor was it discussed at a sales meeting intended to explain the new plan, the Judge accepted the plaintiff’s testimony that he was not aware of this change .

She also found that as this was an significant modification to the implied term of reasonable notice, that as there was no consideration , it was unenforceable . This is what she said :

Changes to the 2018 Sales Plan are not supported by the necessary consideration

[54]           The employer also has the burden of proving that a unilateral change to a significant term of employment is supported by consideration.

[55]           The Defendant’s alleged changes to the termination clause in the 2018 Sales Plan could have significantly modified the Plaintiff’s entitlements upon termination. The changes had the potential to disentitle the Plaintiff to a significant part of his income during his notice period. The evidence was that in the last four months of 2018, had the Plaintiff remained employed, he would have earned $99,237.36 in commission income but only $50,000.00 in base salary.

[56]           Our jurisprudence has held that a significant change to the terms and conditions of employment requires consideration. In this case, I find that there was no consideration.

[57]           The Court of Appeal, in Hobbs v. TDI Canada Ltd., 2004 CanLII 44783 (ON CA), [2004] O.J. No. 4876 (C.A.), described the law as follows:

“The requirement of consideration to support an amended agreement is especially important in the employment context where, generally, there is inequality of bargaining power between employees and employers. Some employees may enjoy a measure of bargaining power when negotiating the terms of prospective employment, but once they have been hired and are dependent on the remuneration of the new job, they become more vulnerable: at para. 42.”

[58]           There was no evidence regarding how the changes to the 2018 Sales Plan would benefit the Plaintiff. The Plaintiff testified that the changes to the Plan would help some but not others.

[59]           The Defendant’s attempt to limit the Plaintiff’s right to commission during the notice period is a significant modification which would require reasonable notice.

[60]           Further, A new notice of termination provision in an employment contract is “a significant modification of the implied term of reasonable notice” that requires consideration. There was no consideration for this change.


However the big takeaway is her finding that as the 2018 Plan purported to deny his right to commissions during the statutory notice period under the ESA, the clause was illegal as commissions are wages under the ESA. 

This is what she said :

 

Limiting provision in the 2018 Sales Plan is void because it potentially violates the ESA

[61]           In Covenho v. Pendylum Inc., 2017 ONCA 284, 43 C.C.E.L. (4th) 99, the Court of Appeal held, at para. 7:

In determining whether the contract is in compliance with the ESA, the terms must be construed as if the appellant had continued to be employed beyond three months; if a provision’s application potentially violates the ESA at any date after hiring, it is void. [emphasis added]

[62]           The language in the 2018 Sales Plan has the potential effect of contracting out of the Defendant’s statutory obligation to provide the Plaintiff with his full wages during the statutory notice period, which includes commissions that become payable during the notice period.

[63]           Commissions are included as “wages” pursuant to s. 1(1) of the ESA. The Court of Appeal, in North v. Metaswitch Networks Corporation, 2017 ONCA 790, 417 D.L.R. (4th) 429, has held that commissions must be paid during the notice period. If no notice period is provided, commissions must be paid as part of the lump sum wage payment in lieu of notice (s. 61).

[64]           The Plaintiff argues that the “termination clause” in the 2018 Sales Plan contracts out of the ESA, contrary to s. 5(1) of the Act, and is therefore void and unenforceable.

[65]            Section 5(2) of the ESA does permit an employer to contract out of the ESA as long as a greater benefit is given to the employee. There is no evidence that the 2018 Sales Plan gives Mr. Kerner a greater benefit. The termination clause in the 2018 Sales Plan does not substitute a greater benefit by providing reasonable notice; rather, it provides for the ESA’s minimums.

[66]           The Plaintiff submits that there are circumstances where the Plaintiff would be better off if he were to be paid his minimum ESA entitlements instead of his base salary during a reasonable notice period determined at common law. Pursuant to the ESA, the Plaintiff would be entitled to two weeks’ notice of termination and 17.92 weeks’ severance pay. Pursuant to s. 60 of the ESA, the Plaintiff would be entitled to receive his wages, including any commissions that become payable in those weeks.

[67]           Therefore, the Plaintiff’s minimum statutory entitlement to termination of employment must include notice of termination, severance pay, and any commissions payable during the notice period. These payments would not be subject to the duty to mitigate.

[68]           If the provision in the 2018 Sales Plan’s termination clause were enforceable to exclude commission payments to the Plaintiff earned during his notice period, the greatest entitlement benefit the Plaintiff could receive would be reasonable notice at common law, based on his base pay only, excluding commissions. I find that there is a real possibility that a common law notice period calculated using the Plaintiff’s base pay would be less than the Plaintiff’s minimum statutory entitlements. Section 5 of the ESA prohibits such a result.

[69]           The Plaintiff’s evidence was that his largest booking and billing was an $11,000,000 deal with a commission earned between $150,000 to $200,000. It would be better for the Plaintiff to be paid commission during the statutory notice period instead of being paid base salary during the reasonable notice period.

My Comments :
This case is one of a spate of recent cases which deals with the enforceability of clauses that seek to limit the implied term of reasonable notice. It is important because it deals with four key areas, namely :
1) lack of clarity in excluding the common law
2) failure to properly identify the restrictions
2) lack of consideration for the change
3) illegality as it offends the ESA
One last comment. I am not sure that Justice Pollak’s analysis of the ” greater benefit shall prevail ” arguments is correct. As I understand this provision you look at each employment standard on its own and you do not do the comparison on a a cumulative basis. In other words if someone were to be paid only one week vacation per year but had a wage of $40 per hour, the one week vacation clause would still be in violation even though the wage was considerably higher than the minimum wage .
Therefore, in this case the simple issue is if commissions are wages and you must get your wages over the statutory notice period , then any attempt to deny that payment is illegal. Imagine that the employee was fired on January 1st and was entitled to 8 weeks of his full wages. However he gets a new job on January 2 ( or he dies ) so he has no common law damages. This clause would deny him his full wages. Thus it is illegal. Period , End of story.

Failure to Give Proper Notice of Forfeiture of Unvested Stock Options Makes Clause Unenforceable :

In Battiston v Microsoft Canada ( 2020 ONSC 4286 ) Justice Faieta had to determine the enforceability of a clause in a Stock Option Agreement that said in essence that the employee’s entitlement to have the benefit of future unvested stock options ceased immediately upon the cessation of employment, even where that termination was unlawful.

The Judge found that ” the Stock Award Agreement unambiguously excludes Battiston’s right to vest his stock awards after he has been terminated without cause.”

Normally you would think that the Plaintiff would therefore lose the argument.

But you would be wrong.

[70]           I find that the termination provisions found in the Stock Award Agreements were harsh and oppressive as they precluded Battiston’s right to have unvested stock awards vest if he had been terminated without cause.  I also accept Battiston’s evidence that he was unaware of these termination provisions and that these provisions were not brought to his attention by Microsoft.  Microsoft’s email communication that accompanied the notice of the stock award each year does not amount to reasonable measures to draw the termination provisions to Battiston’s attention.  Accordingly, the termination provisions in the Stock Award Agreements cannot be enforced against Battiston.  Battiston is entitled to damages in lieu of the 1,057 shares awarded that remain unvested.

In other words, the ” harsh and oppressive ” provision was buried in the plan text and there is no evidence that the employer brought this to the attention of the employee.

It looks like this case stands for the proposition that where the employer wants to rely on a termination type clause, they must bring it to the employee’s attention and if they fail to do so , and the employee testifies that he never saw it , the employee wins. It would also seem that the defendant  has the burden of proof on this issue, once the plaintiff says that he or she never saw it .

Lessons learnt from this case.

  1. The more harsh and oppressive a clause is,  the more likely a Court will find a way around it . So Lesson # !. Don’t draft harsh and oppressive termination clauses.
  2. As the employer must prove that the clause was brought to the attention of the employee do so in a transparent and clear way. So Lesson #2. Instead of burying the clause in a complicated legalese filled document ( like a consumer licensing agreement which is designed not to be read) rather insert the termination provision in every letter granting the award and get the employee to acknowledge that he or she has read that particular  provision . I even have drafted the clause  for you :

” Please note that all of the nice stuff that we promised you in this  letter will be forfeited if we decide to fire you for any reason, even if we fire you illegally. So don’t you go buying a new house on the assumption that you will ever get any of these options, because we may fire you the day after you sign the house deal and there ain’t nutting you can do about it . ” 

One other thing. Plaintiff counsel also made the argument that the clause was contrary to the ESA, presumably because the clause changes the terms of his compensation within the statutory termination period. The judge decided he did not have to decide this issue. This is a shame because this critical issue needs to be resolved some day . Even the Supreme Court of Canada shied away from looking at ESA arguments in Heller v UBER.

One more comment. In his conclusions, the judge ordered compensation for these lost stock options in the following manner:

5)   Battiston is awarded damages for the granted stock awards that would have vested during the notice period had his employment not been terminated.  Such damages are to be assessed as of the date of the breaches using the closing market price for the stock on those dates.

One can make many arguments as to how to properly measure the loss of stock options. This method  assumes that the  employee would have cashed in his shares on the vesting date. Any other method leads to speculation . Although not perfect, this method is at least certain and easy to calculate.

My very rough calculation of the value of this part of the award is approximately $150,000 USD. I came up with this number  by looking at the average price of Microsoft from date of termination to the present .

 

 

 

 

 

 

Heller Beats UBER in SCC:

Here are quick takeaways from Heller v Uber ( 2020SCC 16) :

1. Employment cases are to determined under the Arbitrations Act even if they have a international aspect.

2. Under the Arbitrations Act, a Court may choose not to defer to an arbitrator on the issue of jurisdiction if the validity of the agreement is in question.

3. An arbitration agreement can be illegal if it is unconscionable.

4. If an arbitration procedure is effectively not accessible to one party, then that can make it unconscionable.

5. This agreement was not accessible to Heller due to cost, location of arbitration and choice of law., thus it was unconscionable, thus illegal and unenforceable .

6. The SCC declined to rule of the issue as to whether it was invalid because it offended the ESA.

No Holiday Pay During Notice Period:

In Kraus v S3 Manufacturing ( 2020 SKQB 175 ) Justice Megaw determined that the plaintiff was entitled to 18 months notice but that to pay him both 18 months wages plus the stat holiday pay for those holidays in the notice period would count as double recovery and thus was not allowed. The judge determined that there was no evidence to show that had the plaintiff actually worked out his notice period that he would not have been permitted to take those stat holidays and be paid when he was not at work.

The same issue would apply to a claim that I often see in mediation, which is a claim for vacation pay over the notice period. Unless there is a pattern shown that the plaintiff routinely did not take his or her vacation and was paid money instead, this claim fails. However where the employee’s vacation pay is paid on every pay check ( which is common in some industries) the plaintiff would be entitled to this payment over the notice period.

Having said that it is always prudent for plaintiff counsel to review with the client whether there is outstanding vacation pay from either the current year or as carryover from previous years. Also remember that vacation pay is payable on all cash compensation, including commissions and bonuses. This is often not done correctly and thus there can be very large claims for past vacation pay owing on bonuses, particularly for employees whose bonus compensation is a large part of their total compensation.

Also, it may be a small amount, but under the Ontario  ESA , employees are entitled to vacation pay on their termination pay but not on severance pay. This is often forgotten in termination letters.

 

Does Mitigation Income Earned During the Balance of Fixed term Contract Reduce Damages ? Depends on Which Province You Live in :

The law across all common law provinces seems to be that if an employee is terminated before the end of a fixed term contract and there is no valid early termination clause, then the employee is entitled to be paid for the balance of the unexpired term .

Secondly there seems to be a consensus that there is no duty for the employee to mitigate his or her damages. She can sit at home and collect her money.

But what if the employee does actually mitigate and earns income? After all, dismissed employees still have to eat while the court case goes on.

In Ontario it would seem that this income is not deducted but at least in BC and Saskatchewan it seems it is .

This is all discussed in great  detail in Crook v Duxbury, 2020 SKCA 43.

Maybe one day the SCC will sort this out.

No Duty to Investigate Where Just Cause is Upheld:

In McCallum v Saputo ( 2020 MBQB) Justice Rempel found that an employee had stolen product from a customer of the employer. The Employer relied solely on evidence they had collected and did not give the employee a real chance to give his side of the story.

However the Court found that absent a contractual obligation to do so, there is no duty of procedural fairness before terminating someone for cause and furthermore the employer can properly rely on additional evidence that they obtained after the dismissal.

My Comments:

The issue is not whether the employer made a reasonable decision about just cause. The issue is whether the Court finds that the employer has proven on the balance of probabilities that the plaintiff committed an act of just cause.

Thus where the employer conducts no investigation or a poor investigation but the Court finds the employee committed theft, just cause has been proven.

Where the employer conducts a perfect investigation which finds the employee guilty of theft but the Court disagrees with that conclusion, the employee will succeed.

Remember an investigation report is itself is NOT evidence of the matters set out in report. Each of those facts must be independently proven in Court.

I arbitrated a case awhile back where the case looked airtight for the employer to prove cause based on the evidence that the investigator had found. However, for various reasons the employer did not or could not present  the same evidence at the arbitration and they were unable to prove just cause.
On the other hand,  plaintiffs sometimes want to advance the argument that the investigation was faulty or negligent. Presumably this is to advance claim for punitive damages. If they do this the report does go into evidence and can be considered by the Court . Although this report  should not be considered as evidence of the facts set out in the report, it does get read by the judge and may well affect the judges’ view of the case.
I think in most cases plaintiffs are better off trying to keep the entire report out of evidence and forcing the employer to prove every point of the just cause allegation by live witnesses and admissible documents .

Court Finds that Investment Advisor Who Forges Client Signature and has License Suspended is Just Cause:

I read a lot of cases to keep up with my Wrongful Dismissal Database and this blog. I am constantly amazed at some of the cases that make their way to trial.

In Movassaghi v. Harbourfront Wealth Management Inc.,
(2020 BCSC 579) an investment advisor who was switching firms, forged the signature of one of his clients, without her consent, inorder to transfer her account to his new firm. The client found out and reported it both to his employer and the securities commission. His license was suspended for 8 months. The Plaintiff admitted the forgery.

As the Court noted, forgery is a criminal offence. Not surprisingly , the Court also found that it was just cause.

Duh! If this guy had walked into my office ( when I was an advocate ) , I would have told him he was lucky that he wasn’t facing criminal charges and to move on with his life.

Instead, he brings a hopeless lawsuit that holds him responsible for the defendants costs and makes public his misdeeds for all to see.

Ontario Court of Appeal Says Just Cause Clause Offends ESA and Voids Entire Termination Clause and Not Saved by Severability Clause:

In a short and punchy decision  called Waksdale v Swegon North America ( 2020 ONCA 391 which was released on the same day as I am writing this blog ) the Ontario Court of Appeal had a two part termination provision in an employment contract.

The first part said that if you were terminated for just cause , you get nothing. The Employer conceded that this was illegal because the ESA has a higher test for when you gets nothing and thus that clause was illegal . That is old news. Nothing special so far .

The second, separate clause had a perfectly legal if you are fired without cause all you get is the ESA minimums.

The Plaintiff was terminated without cause.

At the trial level the Judge   said that because they are different paragraphs, the illegality of the one clause does not affect the legality of the other clause.

This always struck me as a meaningless distinction. The Court of Appeal agreed with me .

This is what they said:

[9]          In the present case, there is no question that the respondent would not be permitted to rely on the Termination for Cause provision. The issue is whether the two clauses should be considered separately or whether the illegality of the Termination for Cause provision impacts the enforceability of the Termination of Employment with Notice provision. The respondent submits that where there are two discrete termination provisions that by their terms apply to different situations, courts should consider whether one provision impacts upon the other and whether the provisions are “entangled” in any way. If they are not, the respondent argues, then there is no reason why the invalidity of one should impact on the enforceability of the other. 

[10]       We do not give effect to that submission. An employment agreement must be interpreted as a whole and not on a piecemeal basis. The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee’s common law rights on termination, violated the employee’s ESArights. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal.  In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked. Here the motion judge erred because he failed to read the termination provisions as a whole and instead applied a piecemeal approach without regard to their combined effect.

[11]       Further, it is of no moment that the respondent ultimately did not rely on the Termination for Cause provision. The court is obliged to determine the enforceability of the termination provisions as at the time the agreement was executed; non-reliance on the illegal provision is irrelevant.

[12]       The mischief associated with an illegal provision is readily identified. Where an employer does not rely on an illegal termination clause, it may nonetheless gain the benefit of the illegal clause. For example, an employee who is not familiar with their rights under the ESA, and who signs a contract that includes unenforceable termination for cause provisions, may incorrectly believe they must behave in accordance with these unenforceable provisions in order to avoid termination for cause. If an employee strives to comply with these overreaching provisions, then his or her employer may benefit from these illegal provisions even if the employee is eventually terminated without cause on terms otherwise compliant with the ESA.  

Having lost that argument, the Defendant tried to rely on a sever ability clause.

Nope, says the Court.

14]       We decline to apply this clause to termination provisions that purport to contract out of the provisions of the ESA. A severability clause cannot have any effect on clauses of a contract that have been made void by statute: North v. Metaswitch Networks Corporation, 2017 ONCA 790, 417 D.L.R. (4th) 429, at para.

44. Having concluded that the Termination for Cause provision and the Termination of Employment with Notice provision are to be understood together, the severability clause cannot apply to sever the offending portion of the termination provisions.  

This case will have a monumental effect because almost every  termination clause that that I have ever read has the typical just cause clause.

Moreover this will not just affect ESA termination clauses but every  single termination provision in Ontario. In other words, even if the termination provision said you get 3 weeks per year  of service with a maximum of 52 weeks, but it also had the just cause clause, the employee would be entitled to common law reasonable notice.

 

 

 

29 Month Break in Service Ignored in Assessing Reasonable Notice :

In Hetherington v Sask Liquor & Gaming Authority ( 2020 SKQB 110 ) Mitchell J. had a situation where the plaintiff worked for 19 years for the Sask govt, then quit and worked for another employer for 29 months, then returned to the Sask govt and 10 years later was laid off at age 65.

In deciding that for notice purposes that she was a 28 year employee, the judge noted the following factors:

1) Upon her rehire, she was granted the highest salary grade.

2) She was given 5 weeks vacation in recognition of her prior service.

3) She was given prior service recognition for her pension.

4) Her 29 month absence amounted to only 7.86% of her time with the Sask Govt.

5) In her 25th year, she got a letter from the Premier thanking her for her 25 years of service.

She was awarded 17 months notice.

This reminds me of a case I had similar to this many years ago where the fact that my client had a watch from the company thanking him for his 30 years of service clinched the deal. Thank God my client held onto that watch !