Wednesday, April 23, 2014

Dismissed Sales Manager in Barrie Gets $100,000 Windfall

The Ontario Superior Court of Justice released a decision last week on a summary judgment motion in the wrongful dismissal case of Smith v. Diversity Technologies Corporation.  The motion was heard in Barrie by Madam Justice Vallee, a Newmarket judge.

Mr. Smith was a sales manager at the company from 1991, which was then known as Drillwell.  Drillwell was purchased in 2007 and rebranded to DiCorp.  In October 2011, he was dismissed, allegedly for cause.

The Employment Contract

There's some issue as to whether or not there was an enforceable written employment agreement, but in a stark reversal of the norm, the employee was arguing that there was an enforceable agreement, and the employer was arguing against it.

It's a Bowes v. Goss Power Products type of case:  Mr. Smith was dismissed, but found a new job three weeks later.  In the absence of a written employment agreement, common law doctrines would say that he mitigated his damages, and therefore he would obtain very low damages.

However, when Drillwell was purchased in 2007, an employment agreement was signed which entitled Mr. Smith to a year's notice or pay in lieu.

DiCorp was under the belief that the employment agreement had never actually been executed:  The previous owners of Drillwell had intended to make Mr. Smith a partner, and so when they sold instead they insisted that Mr. Smith be offered an employment contract...but the demand was dropped in the course of negotiations, and Drillwell made a $200,000 payment to Mr. Smith instead.

The trouble with DiCorp's recollection is this:  There were copies of the written employment agreement which had been signed by the parties.  (No single copy signed by both, but contracts executed in counterparts are not unusual.)  As well, DiCorp had acted in accordance with the employment agreement, modifying Smith's salary accordingly.

The judge accordingly found that the contract was enforceable.  In light of that finding, there was no issue of a mitigation credit (following Bowes, no doubt):  His damages were $100,000 - his annual salary at the time of dismissal.

Just Cause

DiCorp took the position that it had just cause to dismiss Smith, in connection with a client with large outstanding receivables:  In September 2011, they claim that they told Smith that all sales to that client should be on a cash or credit card basis, yet Smith went on to accept an order from the client and instruct the production staff to put a 'rush' on it.  Supposedly, DiCorp gave Smith a written warning, though this wasn't in evidence.  Later, they claim that they instructed him not to accept any orders from the client, expressing an intention to commence legal action against the client for the outstanding debts, and Smith went on to accept an order for $1,168.94 from that client, accepting a cheque in payment.

Smith's recollection of events was that he never received any written warning, and that the only instruction he had received was that sales should be on a "cash on delivery" basis.  Furthermore, he claimed that it was not him who processed the subsequent order or accepted the cheque.

DiCorp took the position that the credibility issues made this matter unsuited to summary judgment.  That's a tough argument following the recent Supreme Court decision in Hryniak.  The judge decided to approach the case taking the employer's case "at its highest and best":  Even if Smith did what he was accused of doing, it increased the delinquent accounts by a 'trifling' amount, and had to be considered in light of Smith's lengthy service and positive performance reviews.  It would be a singular mistake and a relatively trivial one at that.  Particularly in the absence of evidence of a clear and properly documented warning, DiCorp didn't have just cause.

Commentary

This is a good decision.  In the face of a written contract signed by both parties, it would take something pretty compelling to justify not treating the parties as having reached an agreement as to the document's terms.  Of course, there could be other issues of enforceability, but saying "We never signed an agreement" can't really survive well in the face of "Well, there's your signature on the agreement."  (My guess?  The negotiations with Drillwell ended without requiring an employment agreement to be signed, but by that time the agreement was probably already in the works, and nobody actually killed it.)

There's a bit of superficial ambiguity, with the motion judge saying firstly that she'll take DiCorp's case at its "highest and best", and then proceeding on the basis that they had not given him a clear written warning, despite their claims to have done so.

I'm not troubled by this, though.  Firstly, in the absence of a copy of the warning, it's impossible to assess whether or not the warning was sufficiently clear to warrant termination for subsequent infractions.  And the onus is on the employer.  If DiCorp had provided a written warning, then they should have been able to provide a copy of the warning, ideally with his signature on it acknowledging receipt of the warning.  Without any record of the warning they claim to have given (and if they had it, they should have led it in evidence), there's no reason to think that the employer might be able to meet its onus.  Even if one assumes that DiCorp did, in fact, give a written warning, their evidence at its best and highest is that there was a written warning, with no indicia that it had the requisite clarity that the employer could rely upon it to justify termination.

A written warning should not be "fire and forget".  Process is important, for exactly this reason:  If you need to rely on it, you need to prove what it said, when it was given, and that it was provided to the employee.

All things considered, the evidence is far from establishing the kind of wilful insubordination that might justify termination, and particularly given the relatively trivial nature of the misconduct, for a 20-year employee, dismissal seems really heavy-handed.

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

Tuesday, April 15, 2014

Real Estate Litigation Over Non-Disclosures...of Ghosts

Okay, here's a crazy one.

In September 2010, 1784773 Ontario Inc. purchased a commercial property from the Kitchener-Waterloo Labour Association.  A few months later, one of the Labour Association's directors remarked to a reporter that the building was "haunted" - specifically that there are apparitions in a third floor office, and "we used to make jokes that Jimmy Hoffa was in the basement".

And so the purchaser sued them.

Sigh.

The allegations were of non-disclosure of a latent defect concealed by the vendor - namely, of a death or murder at the subject property.  It wasn't specifically pleaded, but the implication of the claim was that the building actually was haunted.

On a motion for summary judgment, the action was dismissed:  Firstly, there was no evidence that there was actually a death or murder at the subject property.  Secondly, there was no real evidence of haunting.  The Director's own comments were based on double-hearsay - joking over beers at the local watering hole, by people who didn't really believe the place was haunted.

And, the kicker from the judge:  "There is no evidence before me as to how the plaintiff would prove the existence of a ghost."  (Because, on a motion for summary judgment, a plaintiff would really need to explain what expert they would put on the stand to testify...or, put another way, "Who ya gonna call?")

In some contexts, the 'stigmatization' of property is an interesting debate.  Remember the episode of the Simpsons where Marge sells the Flanders family the "murder house"?  There's some thought that there should be an obligation to disclose a history of homicide or suicide, but there's very little jurisprudential backing for such a notion.  The judge notes a Quebec Small Claims Court case where the court expressed "a great deal of difficulty in agreeing that elements whose importance depends on the sensitivity, phobias, sentiments or purely personal and subjective apprehensions that are not related to the quality of the building should be subject to compulsory disclosure."

I might feel sympathetic to a superstitious family driven out of their new home because they think it's haunted by the poltergeists of murder victims...but this is a commercial property, and I think that's kind of the clincher:  We're talking about corporations dealing with a commercial property for commercial use.  Campfire stories have no place in the discussion.

Very recently, the Court of Appeal dismissed the appeal, largely on the basis of the absence of evidence of damage:  No evidence of economic loss flowing from the stigma, no evidence that ghosts were observed.

As a side comment, even if there were an issue arising from stigma, the fact that the stigma arises from the defendant's representations of haunting, rather than from an objective phenomenon or event (such as it being a 'murder house'), would seem to me to make it something other than a non-disclosure cause of action - after all, the stigma didn't exist until after closing, so how could there be an obligation to disclose?

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

Employment Standards Officers Coming to Newmarket (and beyond): Are You Ready?

The majority of investigations by the Ministry of Labour are prompted by complaining employees, but the Ministry does maintain a practice of proactive workplace inspections.  And, courteously enough, they warn us in advance what kind of inspections they're going to be doing with this handy "blitz" schedule.

In June and July of 2014, the areas north and west of Toronto - York Region, Peel Region, Dufferin County, and Simcoe County - are targeted for an Employment Standards blitz for veterinary clinics and security services.

In other words, it's really important for such businesses to ensure that they are ESA-compliant asap.

There are a number of things that the inspector will be looking at, including (but not limited to):

  • Is the Employment Standards poster properly posted?
  • Are you providing proper wage statements to your employees?
  • Are you making any unauthorized deductions from your employees' wages?
  • Are you keeping all the appropriate records?
  • Are you complying with the "hours of work" and "eating periods" parts of the ESA?
  • Are you providing overtime pay as required?
  • Are you paying your employees at least minimum wage?
  • Are you complying with the requirements related to public holidays?
  • Are you paying vacation pay as necessary?
The inspector will look at a number of documents, including schedules, timesheets, payroll ledgers, wage statements, etc., as well as interviewing employees.

If problems are identified, then the employer may be subject to a full audit.  In addition, the inspector may issue orders to comply, orders to pay compensation to employees, and offence notices for contraventions of the ESA, which can include fines or more serious penalties.

Other Blitzes

Addressing a growing controversy in recent years, the Ministry of Labour is now in the middle of a Province-wide blitz targeting unpaid internships in the Marketing/Public Relations, Software Development, Retail, Media, Film, and Entertainment industries, as well as a range of other employment standards and OHS blitzes in other industries.


*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

Friday, April 11, 2014

Newmarket Legal News: Newmarket Plaza Can't Collect Judgment

In non-employment news, there's a new decision from the Divisional Court in 962789 Ontario Limited v. Newmarket Plaza Limited.

Background

The case is a little stale, dealing with a dollar store (a franchise of "Dollar Plus") operated by the numbered company (run by John Serrago) at Newmarket Plaza from 1991 until 2002.

Remember BiWay Stores?  There was one at Newmarket Plaza, and when they became bankrupt in summer of 2001, the trustee in bankruptcy assigned some of its leases to the Dollarama chain.  Thus, a larger and better-established direct competitor of Dollar Plus opened in Newmarket Plaza in April 2002, causing Dollar Plus' revenues to plummet, and Dollar Plus fell behind on its rent.  In August 2002, the landlord served a notice of 'distress' claiming arrears of over $33,000.  Then, in October, the landlord gave notice to terminate and changed the locks.

In 2003, the numbered company begin legal proceedings against Newmarket Plaza, alleging wrongful termination of the lease and 'breach of good faith' based on conduct leading to the termination.  Newmarket Plaza counterclaimed for arrears of rent.

In examinations for discovery, Serrago gave evidence that the numbered company "had had no business or income since 2002", and Newmarket Plaza brought a successful motion for security for costs, which meant that $15,000 had to be paid into court before the action could continue.  Serrago paid these funds out of his own pocket.  (This is a mechanism to protect against frivolous lawsuits by impecunious litigants - otherwise, a corporation with no assets would have nothing to lose by bringing a law suit.  Rather, in such a case, the defendant may be able to compel the plaintiff to cough up some money up front, in case they're ultimately required to pay costs.)

The Trial Decision

The matter went to trial in 2006 (decision here).  The numbered company was largely unsuccessful:  The bottom line is that the lease didn't prevent the landlord from permitting Dollarama to set up a store.  Justice Loukidelis wasn't impressed with Newmarket Plaza's "lack of forthrightness", saying that they were "somewhat callous", but "there is no denying that it had the right to lease the vacated premises to any dollar-type store."  That said, it was improper for the landlord to exercise its right of re-entry while the Notice of Distress was still in effect, and accordingly the numbered company was awarded $10,000 in general damages.

However, the defendant was also successful in its counterclaim (or at least partly successful), obtaining a judgment against the numbered company for over $36,000.

However, there was no order as to costs.  And there's the rub.

The New Decision:  What Happens to the Money Held as Security for Costs?

The $15,000 paid into court as security for costs had never been dealt with.  Newmarket Plaza argued that, as an execution creditor of the numbered company, it should be entitled to the money.  Serrago argued that the money was his, that it was to be applied against any costs order in favour of Newmarket Plaza, and that since there was no such costs order, the money should be returned to him.

The Divisional Court agreed with Serrago:  The money had never really belonged to the numbered company, and so has to be returned to him.

Commentary

It may seem a little unjust at first glance - Newmarket Plaza got a judgment, but no costs order; and the principal of the numbered company gets to hide behind the corporate veil to get his money back.

But I think the decision is ultimately correct, and I would be concerned had it gone otherwise:  You see, the "security for costs" provisions in the Rules only allow a defendant to seek security for costs from a plaintiff, and not the other way around.  If I'm suing you, I can't seek to block you from defending without security for costs.  In this way, it's clear that the provision is not intended to stand as (and shouldn't be used as) 'security for judgment'.  (This is by contrast, for example, to the review process for orders to pay under the Employment Standards Act.  Let's say my employee claims unpaid wages, and I am ordered to pay.  I can go to the OLRB to challenge the order, but in order to do so I need to provide the money first to the Director of Employment Standards in trust.  In this way, the process ensures that the Ministry and the employee won't have to fight appeals and nonetheless be unable to collect if successful.)

The fact of the counterclaim is more or less unrelated to the order for security for costs.  Success on the counterclaim shouldn't give Newmarket Plaza access to funds held as security for costs, any more than it would give access to any of the numbered company's other creditors.

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

Wednesday, April 9, 2014

Office Stabbings in North York - Could this happen in your office?

According to media reports, Chuang Li was arrested this morning after stabbing multiple co-workers after being fired from his job at Ceridian.  Last I heard, all the victims were in stable condition, though one had suffered life-threatening injuries.

Ceridian is a payroll and human resources support company, so I would hope and expect that they would have the appropriate policies and processes in place to maintain their own workplace safety and manage high-risk terminations.  And maybe they do - sometimes, even the best efforts can't prevent a tragedy.  But if they didn't, it wouldn't be the first time human resources experts operate on the basis of "Do as I say, not as I do."  (Lawyers in particular are notorious for that.)

Still, there's a certain irony, with this happening at a company that offers third-party EAP services.

You see, firing an employee isn't simply a matter of walking in and saying "You're fired."  A proper dismissal is a planned performance.  You have the termination letter prepared beforehand, you call the employee in, you have one management representative conducting the meeting and a second observing and taking notes, you stick to the script, explaining in broad terms the decision that has been made, telling the employee the contents of the letter, reminding them about EAPs and other services that are available, and suggesting that they get legal advice if you're offering a separation package.

That's what the employee sees, but even that is a fraction of the process.

First of all, consider what else you need to do to transition the employee out.  Cancelling security passes, recovering keys and company equipment, etc.  To the extent that you can do so in or at the time of the meeting, that's best.  Ideally, you should have IT terminate the individual's computer access during the termination meeting.  (That way, there's no risk of them returning to their terminal and sabotaging files, stealing files, or sending a venting mass email throughout the workplace.)

Next, consider the timing of the dismissal.  Recognize that the employee will have to leave the workplace, and will reasonably want to recover his personal effects.  It is best if that can be arranged at a time when minimal people are in the workplace - that minimizes the stress and discomfort for all involved.  What I've sometimes seen done in small workplaces is a 4:00pm termination meeting, while everyone else in the office is sent home.  (On the other hand, being able to address the termination, and the next steps moving forward, with other staff promptly is also important...and don't count on them not finding out right away - the office rumour mill is all-knowing.)  Day of the week is also something to consider.  Fridays are generally considered poor choices.

And another highly important pre-termination step - arguably obligatory under the Occupational Health and Safety Act - is to assess whether or not it will be a "high-risk" termination, and to take additional precautions accordingly.

Bear in mind that it's not necessarily easy to tell how a person will react to being fired.  It's an incredibly stressful event for most people.  I've dealt with many many dismissed employees, and while their reactions vary, it's really common for people to say that they don't clearly remember the termination meeting - a combination of shock and disbelief, and things get pretty hazy.  Of those who were permitted to gather their belongings immediately, it's almost unheard of for people to not forget something.  It often sounds almost dissociative, which is pretty scary when you think about it.

So, while you can't overtly act like you expect every dismissed employee to go on a violent rampage, and while such violent incidents are quite rare, it's a possibility you always need to be prepared for.

How to Approach a High-Risk Termination

There are a number of steps that you can take to address a high-risk termination.  Not a comprehensive list, but a sampling of the kinds of steps that you can take to minimize risks.  I am able to assist employers on a case-by-case basis to help develop a strategy that suits the particular needs of their workplaces.

(1) Ensure little-to-no contact with colleagues

It's a soft rule of terminations to minimize post-termination contact with colleagues in the workplace.  That becomes a much firmer rule for high-risk events.  If there's something that the employee needs now from their workstation - jacket, medication, keys, etc. - have a manager get them.  Beyond that, make other arrangements, either for the individual to come back after hours (with discreet supervision, of course), or for somebody else (a friend in the workplace, perhaps?) to gather his or her effects.  See them out the door with as little fanfare as possible.

(2) Offer support to the employee

This is a good idea generally, but all the more important for high-risk terminations:  Provide EAPs, offer a taxi chit to get them home safely, and make an effort to make the transition easier for them.

(3) Keep the meeting room safe

Lawyers who meet with high-risk clients know well that you never put the client between you and the exit.  (Ahem...do as I say, not as I do...)  I've had colleagues who have had near-misses that way.  This is similar.  For a high-risk termination, as much as you don't want to make the employee feel cornered, safety comes first, so take the seat nearest the door.  That way, if things become unpleasant, there's a safe escape route.

(4) Have security on-hand

Not every employer has on-site security.  That's not a problem - there are third-party service providers that provide security services for precisely this kind of event.  Use them.  Had Ceridian retained such services, that likely would have prevented this incident, or reduced its severity.

What Happens If You Fail?

There are a lot of consequences to an incident like this.

Where there's a death or serious injury in the workplace, the Ministry of Labour has to be notified.  They will investigate, and determine whether or not to lay charges.  Fines for serious offences are severe, routinely into the hundreds of thousands of dollars.  And the burden on an employer to prevent such incidents is high.

As well, expect your policies and programs to be closely scrutinized.  Many employers have still not complied with their obligations to implement policies and programs dealing with harassment and violence in the workplace, and even those who have are often sadly unaware of the obligation to review these policies annually.  Failure to comply with these obligations can cause trouble at the best of times, but the consequences will be particularly severe if a violent incident occurs.

I am able to assist employers to develop and maintain the appropriate policies and programs.

Beyond that, there could well be civil liabilities to the injured employees and families of employees, not to mention disruption and lost productivity in the workplace (relatively minor issues in the scheme of things, but still a significant cost).  Even if the employer successfully defends against such claims, that's a significant cost - consider the Giant Mine explosion of 1992.  The employer was ultimately found not to be liable, but it took close to 20 years of litigation to get to that point.

Ceridian's likely to be under the microscope after this event.  As I said, it's entirely possible that they did everything right.  Nonetheless, the Ministry is generally pretty good about finding something wrong.

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

Small Claims Court - Written Statements and the Right to Cross-Examine

There is a recent case out of the Hamilton Small Claims Court, Birch Paving & Excavating Co., Inc. v. Clark, which is an interesting decision for a number of reasons, but most so for a couple of procedural matters.

Until recently, very few Small Claims Court decisions were reported publicly, with the result that there hasn't been a large base of precedents to deal with routine procedural issues.

The facts were fairly typical:  In 2009, Birch was hired to repave a driveway, did the job, and didn't get paid.  So he sued.  What made it less-than-straightforward was that it wasn't entirely clear who hired him.  There was no written contract or purchase order, which isn't unheard of (I still insist it's a bad idea, but I've had contractor clients tell me "If I had to get every customer instruction signed in writing, I'd spend all my time doing paperwork, and none of it doing actual work").

He dealt primarily with an individual named John Clark, who worked for Premier Fitness and reported to John Cardillo.  (For background, Cardillo was the founder of Premier Fitness, which had a fairly lengthy history of getting sued by creditors, as well as hefty fines from the Ministry of Labour for failing to pay employees on time, fraud investigations, and a rather condemning piece from CBC's Marketplace.  It eventually went into receivership in 2012.)

The driveway itself was on a residential property owned by Cardillo's wife, which was behind a Premier Fitness club.  (Looking at Google's Street View, the driveway appears to go in behind the house, and also appears to be shared with the neighbouring house, which Cardillo owned.)

Birch was aware that Clark was getting instructions from someone else, but never asked whom.  A cheque - which was subsequently dishonoured - was received from Cardillo's corporation.  So the difficult question was:  Who gets sued?  Birch went after Clark and Cardillo's wife.

As further procedural background, the action started as a construction lien action in the Superior Court, but was pushed by the pre-trial judge into Small Claims Court because of its low value - a decision that doesn't really surprise me, but nonetheless seems questionable in light of the fact that it deprived the plaintiff of substantive statutory remedies.

Procedural Issues

Both defendants used one lawyer - the same lawyer who represented Cardillo and Premier Fitness in litigation by other creditors.  None of the defendants showed up at court, which is irregular, but their lawyer was able to present their defence nonetheless.  He wanted to present the case by way of written statements.  This is permissible within the Rules of the Small Claims Court, subject to certain conditions, and it makes sense - the Small Claims Court is designed to be expeditious and cost-effective, and getting in evidence by written statement without necessarily requiring witnesses to take the stand...makes sense in many cases.

Therefore, it's very common for parties to introduce written statements from third-party witnesses.  There are a number of good tactical reasons to do so, and I've periodically used them myself.  But I've routinely seen them from opposing parties, and they very often do not comply with the Rules.  Among other things, the statement has to come with the name, telephone number, and address for service of the witness.  Therefore, opposing counsel is able to contact the witness and serve a Summons, so as to be able to cross-examine the witness on the contents of the statement.  The opportunity to cross-examine, testing the accuracy and thoroughness of evidence, rather than accepting it at its face, is a fairly critical element of procedural fairness.

So I've had scenarios where details weren't provided regarding witnesses, or where service could not be effected at the address provided.  (In such cases, I write to the other party and put them on notice that, if they don't produce the witness at trial, I will object to admission of the statement into evidence.)

The defence wanted to use four witness statements - one from each defendant, one from John Cardillo, and one from a law clerk.  John Cardillo and the law clerk were there to be cross-examined, so their evidence was admitted.

Cardillo's wife was not present, and the plaintiff's lawyer objected because her 'address for service' with her statement was in Barbados.  The Small Claims Court does not provide any authority for summonsing somebody from outside of Canada.  The Deputy Judge didn't consider this to be a problem, for three reasons:
  • The plaintiff had not even taken the step of obtaining a Summons to Witness to serve upon Ms. Cardillo.  (On its own, this would be a highly dubious proposition.  Why should a plaintiff incur the time and expense of obtaining a Summons when there is no mechanism for serving it?  Nonetheless, the Deputy Judge has sent a message to go through the motions.)
  • Because the witness in question was a party, the plaintiff could have served a Summons on the lawyer of record.  (This is probably not correct.  A Summons is required to be served "personally" - in other Rules, it specifies that alternatives to personal service are not acceptable...that qualifier is not present in the Small Claims Court rules, but even if it were, service on a lawyer requires the lawyer to accept service in order to be effective.)
  • Cardillo's wife's evidence was not contradicted by any aspect of the plaintiff's evidence, and reiterated "what we already knew" from Birch's own evidence.  (I'm not sure what to make of this:  Not being 'contradicted' doesn't excuse the absence of an opportunity to cross-examine.  Especially given the issues here, if her evidence is to the effect of "I never knew about or permitted the re-paving", then that state of negative knowledge obviously isn't something that Birch could contradict, but it shouldn't be accepted as fact.  If her evidence wasn't merely uncontradicted, but corroborated by the plaintiff's evidence, then it doesn't matter whether or not it's admitted.)
Clark, however, was another story:  The defence lawyer admitted that he had lost track of Clark and couldn't get in contact with him.  This lack of contact completely abrogated the right to cross-examine, so the statement wasn't admitted.  (There's a bigger problem here, since Clark was a party:  The defence lawyer had represented to the court that the non-presence of the parties wasn't a problem because he had "clear instructions" on the defence he was to present.  Then he later admitted that he had lost contact with one of the clients he was there to represent.  The Deputy Judge highlighted this as a possible Professional Responsibility issue, with possible costs consequences.  Let's see if there's a reported follow-up.)

Liability of Clark

John Cardillo's evidence was that he had authorized Clark to enter into the contract, and Clark did so on his behalf - this is an admission he made with impunity at this point, since the limitations period has run its course.

The Deputy Judge found Clark to be personally liable, concluding that the contract existed as between Birch and Clark.  Birch was aware that Clark was reporting to somebody else, but didn't know whom, and was given Clark's name and Clark's cell phone number (I'd be careful how much to read into that, frankly, but in light of the fact that Clark never advised of the identity of his employer, it makes a certain amount of sense to hold him responsible for the contract he entered into).

Liability of Cardillo's Wife

Cardillo's wife, the homeowner, never entered into a contract with Birch.  That's true - no contract claim can be made against her personally.  There's no 'privity', as we call it.  The claim against her was made on equitable grounds, on the basis of unjust enrichment - that she was enriched, to Birch's corresponding detriment, with no juridical reason.

The Deputy Judge rejected the unjust enrichment claim, comparing it to a scenario where a contractor works on the wrong property by mistake:  "the law would be unlikely to enforce any claim for the work as there was no connection to the owner", and the mistake amounts to a 'juridical reason' for the enrichment.  That's probably true, but that's really not the situation here.  The absence of privity of contract cannot, in and of itself, create a juridical basis for an otherwise-unjust enrichment.  That's kind of the point of unjust enrichment - it fills in the gaps of contract law.  And to say that there's "no connection" to the owner is untrue - Clark was employed by a corporation which was owned by the homeowner's husband.  Under those circumstances, it is reasonable to presume the work was sought in order to enhance the use of the property by, if not the owner herself, others whom the owner permitted to use the property.

If Cardillo's wife gave evidence to the effect that she didn't want the work done, and that her husband had overstepped by contracting for the work to be done, then you'd end up in a situation more akin to a tenant who has the floors replaced without the landlord's permission:  Is the landlord unjustly enriched by the work?  It's a much more nuanced question.

Additional Comments

This case is worth only a modest amount, and there are a lot of irregularities in it - it's been nearly five years, and there's no doubt that the parties have all spent too much money on it already.  But, given that the plaintiff is left with a judgment against an individual who they may or may not be able to find, I wonder if we might see an appeal of both the procedural and substantive conclusions.

Nonetheless, this is an illustration of how challenging Small Claims Court really is:  This case dealt with some very nuanced and complex issues of procedure and law, and I'm not altogether convinced that the conclusion was right.

I have handled employment-related and commercial litigation claims at the Small Claims Court (among others), with very positive results, and am well-acquainted with its process.  If any readers require assistance with Small Claims Court issues, I would encourage you to contact me for information regarding my rates and services.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

Monday, April 7, 2014

Can I Ask Existing Employees to Sign a Contract?

I've regularly posted about the importance to employers of having written employment contracts, and the pitfalls regarding their enforceability.  (Consider the recent Wellman case I discussed, where a contract could have held the employee to as little as one week's pay in lieu of notice - or about $1800 - but there was a problem with the existing written contract rendering it unenforceable, and the employer ended up on the hook for 4 months, being over $31,000 - and that's without even talking about legal fees.)

One of the major pitfalls is what we call "consideration":  For a contract to be legally enforceable, there has to be something flowing from each party to the contract.  In other words, if you want an employee to give up common law contractual rights, you have to give them something for it.  And the Ontario case law has generally come down on the side that "continued employment" isn't usually enough.

So the best time to put into place an employment contract is at the outset of the employment relationship - i.e. to put the terms of employment in an offer letter, or in a written contract put to the employee together with the offer.

There's a common practice of having employees sign off on all the 'paperwork', including an employment contract, in the first week of employment.  That generally doesn't work.  Even if it's the very first thing the employee does on the very first day of work, it may not be effective.  Indeed, there have been cases where contracts signed prior to the first day of work have not been enforced, because the operative question is whether or not the employment contract existed before the written contract was signed, and oral contracts are surprisingly easy to enter into.

There's a logic to this, too:  Suppose I offer you a job, and you accept.  You then put in your notice with your existing employer, perhaps make arrangements to move (notify your existing landlord you're leaving; sign a new lease), etc.  Then I put a contract in front of you with terms we haven't discussed before, with a probationary period, minimalistic entitlements to pay in lieu of notice, and onerous non-competition and non-solicitation terms.  It's the old 'bait and switch'.  Now that you've already given up your old job and can no longer afford to turn me down, I'm showing you that this job may not leave you in the position you had hoped.

So a lot of these contracts turn out to be unenforceable for a lack of consideration.

Is there any way to make a contract enforceable for an existing employee?

Sure there is.  Two ways, actually.  They're both conceptually very simple, but nuanced in practice.

The first way is to simply use "fresh consideration".  The classic way of improving or updating a contract is to attach it to a discretionary bonus or raise.  Thus, the bonus or raise becomes 'consideration' for the new contractual term.  (For other reasons, it is a good practice to have existing employees sign new contracts whenever you give them a promotion.)

Strictly speaking, consideration can be something pretty nominal - the classic law school example is a peppercorn.  In theory, one could imagine a scenario where you've worked for me for thirty years, would be entitled to 2 years' pay in lieu of notice at common law, but I ask you to sign a contract one day limiting you to 8 weeks' pay in lieu of notice of termination, and I give you a peppercorn as a signing bonus.  It likely solves the consideration problem, at least, but it's still not airtight:  Further imagine that I fired you the next day, and paid you out only your 8 weeks.  On the face of the contract, that should be fine.  But I have little doubt that the courts would find a justification to not enforce the written contract under those circumstances, and award you pay in lieu of reasonable notice.  Because, let's face it, it would be a travesty to let me get away with that one.

So it's a good idea not to use symbolic consideration, and it's also probably wise to ensure that they don't come out behind for having signed the contract (i.e. by getting fired shortly on the heels of signing the contract).  Whichever way you go, once you've decided that you want to be rid of an employee, it's probably too late to implement a new written contract.

The second way is to terminate the existing contract and present a new one.  There are a few nuances here - illustrated by the Wronko v. Western Inventory Service Ltd. case; an employer cannot simply amend the existing contract unilaterally in a fundamental way, even on reasonable notice.  If an employee refuses to sign a new contract, then you have to actually terminate the existing one and present a new one.  It is not enough to say, "Effective x months from now, these amended terms will take effect."  So a termination on full notice, together with the presentation of an offer of new employment, is often the appropriate solution.

Employer Takeaway

There's no time like the present to start addressing workplace law issues.  We can help draft contracts for your new and existing employees, and help you to ensure that they are implemented in such a way as to maximize their chances of being enforced by the courts.

This issue exemplifies the saying that "a stitch in time saves nine".  Having an enforceable employment contract not only tends to limit your post-employment liabilities, but also improves certainty and reduces the need to expend significant legal fees.

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.