Wednesday, September 28, 2011

Third Party Insurers can (sometimes) rely on Post-Employment Releases

An employee always has to be careful when signing a full and final release, for a few reasons.  The recent decision in Zelsman v. Meridian Credit Union is an excellent example of this.

Ms. Zelsman's employment was terminated, following which she applied for long-term disability benefits to the LTD insurer, Great West Life.  This application was denied.  Ms. Zelsman proceeded to litigate the termination of her employment via the Human Rights Tribunal, resulting in a settlement achieved at the mediation, involving a payment to Ms. Zelsman of $90,000, which appears largely to be compensation for the loss of her LTD insurance due to the denial of the LTD benefits.

Then, retaining a different lawyer, Ms. Zelsman appealed the denial of her LTD benefits, and was eventually successful...however, after granting her LTD application, resulting in a hefty lump sum of retroactive benefits in excess of $46,000, Great West Life found out about the full and final release, and - moreover - found out that it contained a term releasing Great West Life from any such liabilities, and reversed the payment.

Normally, if you're not a party to a contract, you don't get to benefit from it.  In this context, however, because the release so expressly released Great West Life, the Court was prepared to conclude that Great West Life could rely on it; in other words, the LTD benefits were toast.

So how does this happen?  The biggest question is this:  How did Ms. Zelsman get to the point of litigating against Great West Life after signing such an express release?  Indeed, after getting the LTD benefits, Ms. Zelsman would have been happy to resile from the minutes of settlement, but that's not usually possible to do - particularly without $90,000 cash in hand to refund the employer.

Every management-side lawyer appears to have a different way of dealing with Minutes of Settlement and Full and Final Releases, but the one consistent fact is that they are all quite comprehensive, releasing anything and everything.  In fact, usually the releases go well beyond the subject-matter of the current dispute, which adds real value to them for employers, but the consequence is that employee-side counsel have to be careful to ensure that their clients understand that they can't proceed with other claims afterward.

Indeed, given the extremely final nature of these Full and Final Releases, I've occasionally had to go back to employer counsel to get exemptions inserted for such things as pensions - so we're dealing with pay in lieu of notice, but the employee still has a tidy sum tied up in an employer pension plan to be dealt with (which usually isn't in dispute, so my client doesn't need to pay me to help deal with it).  The response I usually get is "Well, of course the intention isn't to waive these entitlements", whereupon I respond, "Then you won't mind expressly saying so."

Simply, these releases envision a completely cut cord, saying "We're done dealing with you, and we won't deal with you again."  If there is an unforeseen dispute down the road, I don't want these releases getting in the way.  But that isn't always the case.  So the releases have to be tailored.

Most of the time, it's a matter of saying to the client, "If you sign this, you don't get to come back and sue for more, you don't get to make a Human Rights Application, you don't get to make a claim for any more wages due, etc."  Every so often, this shocks the client, because they thought they'd hired a lawyer just to deal with one isolated aspect of their relationship with their employer, and thought very cleverly that they'd get money now then come back for more money later on a different aspect.

In this case, the first lawyer assisting with Ms. Zelsman knew that there had been an unsuccessful application for LTD benefits, and presumably opined that it was better to go after the employer for it than to take on the insurance company.  The second lawyer didn't realize that a settlement had been reached, and agreed to take on the insurance company.  (They both were pretty successful in their respective tasks, it seems, but it was really one or the other.)

This is the other thing that can happen when you change counsel too many times:  Facts get lost.  It takes time, effort, and often money for your new lawyer to achieve the same level of familiarity with the file that your previous lawyer had.

Was Ms. Zelsman not told that the Minutes of Settlement would prevent her from going after Great West Life?  Perhaps she was told, but didn't fully appreciate it?  Or did at the time, but forgot?  Or thought that she'd pull a fast one and try to proceed with her claim anyways (she very nearly pulled it off, after all)?  As outside observers, we can't know.  What seems almost certain is that, had she gone back to her first lawyer afterwards and said, "Now I want to go after the insurer", the first lawyer would have said, "Sorry, with the release you signed, you really can't."  (Maybe this happened, and the client didn't listen.  Who knows.)  But retaining a second lawyer means increased legal fees of her own appealing the denial, increased legal fees (with a third lawyer) in making the Court Application, plus there's now a good chance that she'll end up having to pay several thousand dollars toward the insurer's legal fees.

The lesson to clients is:  Tell your lawyer everything, and make sure you listen to what they say.  The lesson to lawyers is not to take anything for granted.  Maybe you think that the client has accepted your advice not to go after the insurer, but you never know if in the back of their own minds they're thinking that they'll be clever and try for both.


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.

Sunday, September 25, 2011

Withholding Unearned Vacation from an Employee's Final Pay

This topic recently came up in a discussion group I'm part of on LinkedIn, and I thought it deserved some attention on this blog.  Essentially, the question is this:  If your employee takes unearned paid vacation then quits before earning it, can you withhold the pay from his final pay cheque?

The answer is, in true lawyer's form, a firm "Maybe".

It happens often enough, sometimes because an employer just wants to be generous, but more often where employees are permitted to take vacation in the year in which it is earned.  Suppose I earn three weeks of vacation per calendar year, and am expected to take it in the year earned:  Unless my last week of the calendar year is a vacation week (which would unduly restrict the scheduling freedom of both the employee and employer), it's inevitable that some of my vacation will be pre-taken.

So supposing I took all three weeks of vacation in the first part of the year, and quit at the end of August...I've received three weeks of vacation pay, but only earned two weeks, so I've gotten a week's pay out of my employer that I'm not entitled to.  Of course, my last pay will usually contain a week or two (or more) worth of wages, so my employer can just take what I'm owed out of that, right?

Usually, the Ontario Labour Relations Board is really finicky about employers withholding sums owing out of money owed.  There are certain circumstances in which it is permitted.  But outside of those specific circumstances, it is not.  So there have been cases in which the employer has suspected an employee of theft, fraud, or damaging employer property, and fired the employee, withholding any wages due as partial compensation for the damages the employer has suffered.  The employee goes to the Ministry of Labour, and the Ministry then tells the employer something to the effect of, "As far as payment for wages earned goes, we don't care if he walked away with a full cash register; you still have to pay him the money.  If you want to sue him separately, that's your own business."  And the OLRB will come to the same conclusion.

Withholding an overpayment of vacation pay is different, however, because vacation pay is *also* a form of wages.  In essence, cutting my vacation overpayment from my last pay is like saying, "Oh, we've already paid you that portion of your last pay."  And the OLRB will frequently accept that.

But not always.  There's a line of cases in which the employer never suggested that overpayments of vacation pay would be recovered until after the employee made a complaint to the Ministry regarding other unpaid amounts - essentially making an ex post facto assertion that their obligations were satisfied or offset by those vacation overpayments.  The OLRB rejected the employer's asserted entitlement to withhold the overpayment in these cases, and there's a certain logic to it.  When the relationship was working well, the employer was perfectly happy to let the employee take a couple of extra vacation days in a year without feeling the need to conduct a reconciliation of it.  It's the same underlying logic as a discretionary bonus - you give the employee more than they're entitled to because you're happy with the job they're doing, and you want them to be happy to stay in the job.  Then, down the road, the relationship breaks down, and the employer goes back and says, "Oh, you remember all those perks I gave you?  I want you to compensate me for them now."  It seems wrong.

There's an easy way around this, however.  Keep track of vacation entitlements on a regular basis.  Maintain a good vacation policy that asserts that overpayments must be reconciled, and will be deducted from the employee's final pay if the employee leaves before earning the vacation taken, and have the employee agree to that policy.  When an employee requests vacation time that isn't already earned, make sure that, if you approve the request, the approval contains a reminder of the policy, that if they leave before earning the vacation pay they'll be responsible for the overpayment and it will be deducted from their wages.

I've heard HR and bookkeeping professionals say that this sort of policy is *necessary* to recover an overpayment - i.e. it's inappropriate to withhold an overpayment unless you have such a written policy in place or told the employee in writing that it would be the consequence.  That's not strictly true.  It probably arises from the Carlisle case, in which the employee was entitled not to have a deduction for vacation pay that she overtook *right before her effective resignation*, and the OLRB justified the "harsh" result by pointing out that the employer could have avoided the situation through proper use of a policy.  (Or by refusing the vacation she had requested after putting in her two weeks notice.)

However, I would opine that the current state of the law is set out more concisely by Brown Bear Day Care case, in which there was an 'understanding' of pre-taking vacation, once discussed in a staff meeting but never reduced to writing.  The Board summarized the existing case law on the point and came to the following conclusion:

The circumstances before me most closely resemble the situation in MenuPalace.  On the evidence before me, Hollander (and all other employees) were made aware well before Hollander’s employment ended that there would be an annual reconciliation of vacation days taken and vacation days earned.  It cannot be said that she was lulled into thinking that the overpayment would not be recovered, which is a consideration that seems to have affected the decisions in Modern Niagara and Hillis, and which also finds currency in the comment in MenuPalace that the reconciliation of the overpayment must occur “within a reasonable time”.   I find that the Employer here was permitted recover the overpayment it had made to Hollander, and did not require her written authorization to do so.  On the basis of the same reasoning, it was also permitted to recover the overpayment it had made to Hollander in respect of paid sick leave, and did not require her authorization to do so.


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.

Tuesday, September 20, 2011

When will the HRTO refuse to defer an Application?

"The Tribunal will generally defer an application where there is an ongoing grievance under a collective agreement based on the same facts and issues."

That sentence has been part of literally hundreds of decisions from the Human Rights Tribunal of Ontario.  Because the Supreme Court (in the Parry Sound decision) found in 2003 that labour arbitrators have parallel jurisdiction to interpret and apply human rights legislation, it is common practice for any bargaining unit member feeling that their human rights have been violated to both grieve the issue and make an application to the HRTO.  This is legitimate.  However, because the HRTO doesn't want to proceed with parallel proceedings, it takes the position that, if there's a grievance moving forward, it will let the grievance go first.

There's a certain logic to this.  Firstly, grievances often include matters above and beyond human rights-based allegations, which the HRTO can't deal with.  So if only one proceeding needs to proceed, it will usually be the grievance.  Secondly, the HRTO is well-positioned to evaluate after the completion of the grievance process whether or not there are outstanding human rights issues that need to be dealt with.  Thirdly, labour arbitrators are privately paid by the parties (i.e. the union and the employer), whereas the HRTO is government-funded with limited resources, so to the extent that it can defer part of its caseload to others, it will.

To applicants, however, there are certain advantages to the HRTO.  Yes, they have the union to assist them in the grievance process, but there are also free legal services available to applicants to the HRTO.  Ultimately, the big difference is that the individual applicant drives an HRTO proceeding, whereas it's the union (taking into account the needs of the grievor but also the rest of the bargaining unit) driving grievance proceedings.

So for a grievor who has grown disillusioned with his or her union representation (which happens fairly frequently), it's a bit of a kick in the face that they are forced to proceed with the grievance before they can move forward with the HRTO application.  And as an added bonus, if the union and the employer reach a settlement of the grievance - even over the objections of the grievor - there is a good chance that the HRTO will conclude that the subject matter of the proceeding has been "appropriately dealt with", and not proceed with the application.  (See Rysinski v. Aecon Industrial.)

It is in this context that I find the recent HRTO decision in Dalrymple v. 412506 Ontario Ltd. interesting.  Ms. Dalrymple worked for St. Jacques Nursing Home, and her claims are apparently as follows:  On June 30th, 2009, she suffered an injury in the workplace, and provided a doctor's note substantiating her absence from work to August 10th, at which point there was a follow-up appointment scheduled.  Due to a family emergency, she was unable to attend that appointment, but ended up getting back to the doctor 3 days later for a note addressing the relevant period.  In the mean time, the employer immediately jumped on her temporarily-unsubstantiated absence and terminated her employment.  After she began a Labour Market Re-entry program under the WSIA, the employer suddenly contacted her (no doubt finally having received better legal advice) to offer her accommodated work, which compromised her position in the Labour Market Re-entry program.

Ms. Dalrymple initiated a grievance in September 2009.  There is no word as to what happened to the grievance since then, except that the union has indicated that it has now decided to refer the grievance to arbitration and the employer has agreed to waive the timeframes for referral of the grievance.  The HRTO decision notes that Ms. Dalrymple "asserts that the union has not represented her very well."  In June 2010, she commenced the HRTO application.

Now, with the grievance potentially moving to arbitration (as well as some related issues that may be going to WSIAT), the employer has asked to defer the HRTO Application.  And those who may have thought that deferral is automatic...have been proven wrong.

[15]           I do not find it appropriate to defer this Application because of the outstanding grievance.  The grievance was filed almost two years ago and the union has recently advised that it has decided to refer the grievance to arbitration.  As of the date of this Interim Decision, the Tribunal has not been advised of any date set for arbitration and has not been provided with documentation showing that the grievance has in fact been referred to arbitration.

[16]           The referral to arbitration is also well after the Tribunal’s process was initiated.  The parties have filed substantive pleadings and a mediation has been held.  At this stage of the Tribunal’s proceedings I do not find it appropriate to defer the Application because of the outstanding grievance.


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.

Saturday, September 17, 2011

Back to Basics: Is this contract enforceable?

Having yesterday posted about why you should use an employment contract, it's worth noting that there are a lot of ways to go wrong when drafting or executing an employment contract.  In addition to making sure that the terms of restrictive covenants are enforceable, there are issues that can invalidate termination clauses or even entire written contracts.  This is not an exhaustive treatment of the subject, but just some of the red flags.

(1)  Lack of Consideration

In law, a contract requires "consideration" - something of value flowing from each party in exchange for the promises of the other.  Now, you might think that, in an employment relationship, consideration is easy.  The employee gives the employer his labour; the employer reciprocates by giving the employee a paying job.

Not so much.

Oh yes, in theory, that's fine.  The challenge arises, however, when the employee already has the job, whether they've just recently created an oral contract or the employee has been there for 20+ years.  Because when the employer puts a contract to an existing employee, unless there is "fresh consideration" in the contract - something they're getting now that they weren't getting before - even the signed contract is, in law, just a meaningless piece of paper for lack of consideration.

It's quite common for a written contract to be put to an employee after they've already started in the job, and accordingly to be of no force and effect.  However, the difficulties are more onerous than that: even having the employee sign on day 1 or earlier doesn't necessarily get you around the consideration problem.  An agreement that is capable of forming a contract (i.e. with consideration and sufficient certainty as to its terms) is formed simply by offer and acceptance.  So there are cases, such as Alishah v. 1582557 Ontario Ltd., in which the employer offered a position, the employee accepted it, and the contract that was subsequently, though still before the start date, put to the employee and was signed was unenforceable.  (In that case, Alishah had quit his previous job after getting the job offer but before getting the contract.  That kind of reliance isn't strictly necessary, but is strong evidence of the existence of a contract.)

What about the employer argument that "Well, I didn't fire the person, as I would have had he refused to sign the contract."  Isn't that consideration?  The Ontario Court of Appeal has wrestled with this question a few times.  In the 2001 Techform decision, the Court found that, where the employer has at least tacitly promised to forbear from exercising its right to terminate the employee for a reasonable period of time, that constitutes consideration.  However, in the subsequent Hobbs v. TDI Canada Ltd. and Braiden v. La-Z-Boy Canada Limited cases, the Court construed that decision very narrowly.  It isn't enough that, in hindsight, the employer didn't fire the employee for a time after the signing of the contract, but rather it is necessary that the employer make a promise in advance not to fire for a reasonable period of time.

So what should an employer do?  With new hires, never communicate an offer without making it clear that the offer is subject to them accepting the terms of the written contract.  The best way is to make sure that the offer is in writing, with the contractual terms appended.  It's okay to call and say "We're sending you an offer with a written contract."  It is not okay to call and say "The job's yours if you want it" and then to unexpectedly send them the contract afterward.

With existing employees, give them something.  It doesn't have to be much - a small raise, a token signing bonus, even a peppercorn would do.  That said, it is theoretically possible that, with nominal consideration depriving the employee of substantial rights, there may be an argument to be made that the contract is 'unconscionable'.

(2)  Statutory Non-Compliance

If the termination clause does not adhere to the minimums under the Employment Standards Act, 2000 (again, speaking of Provincially-regulated businesses in Ontario), it is void.  If it's going to be a fixed amount of notice that doesn't change over time, it has to match or exceed the highest statutory minimum that might arise (i.e. 8 weeks).  If there's a formula, it has to match or exceed the statutory minimum in every instance.

Indeed, I think it's best to key the language to the statute directly, but even then you have to be careful:  In the British Columbia case of Waddell v. CINTAS Corporation, the employee had started employment in Ontario and his contract tied his entitlements to the Ontario ESA...then he transferred to B.C., where he worked until the termination of his employment.  The B.C. minimum entitlements are defined slightly differently from Ontario's and in some instances may be greater.  Thus, keying the entitlements of a now-B.C. employee to Ontario's statutory minimums had the result that the provision was void.

Conversely, in another B.C. case, Boule v. Ericatel Ltd., language keying the entitlement to "the applicable provincial law" was found too vague to be enforceable.  These are tricky, which is why it's very prudent to hire a lawyer with employment law expertise to draft your employment contracts.

(3)  The "Substratum" Argument

This is a less common issue (and becoming less so), but far easier to deal with.  Picture this classic scenario, where a person who started off in the mail room rose through the ranks to eventually become an executive.  Now imagine that, when starting in the mail room, he signed a contract with minimalistic entitlements.  The substratum argument is that the character of the employment has changed so much over the course of the relationship that the parties can no longer be held to the original contract; the parties could not have reasonably expected when signing the contract for a mail room assistant that it would apply to an executive.

But, as I said, it's easy to deal with:  Every time a person gets promoted, they should sign a new contract.  It should be made into a practice.  Of course, keep in mind the tips above about fresh consideration, but it shouldn't be too difficult since the promotion (and raise that would usually accompany it) would constitute fresh consideration.


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.

Friday, September 16, 2011

Back to Basics: Why should we use an employment contract?

Most sophisticated employers use (or should use) written contracts for their employees.  The advantages are myriad, in terms of setting out expectations for how the employment relationship should move forward, including remuneration, yet the most significant advantages arise upon termination of the employment relationship.

Termination by the Employee

This is a minor point, but not unimportant.  Many employees wrongly think that 2 weeks notice of resignation is just a courtesy.  Only in certain narrow circumstances is it statutorily required in Ontario, but under common law an employee must give "reasonable notice" of resignation.  That's contextually based, and not the subject of much case law, but it's safe to say that 2 weeks isn't always the magic number.  (If you have a great deal of responsibility, and you expect the employer to need time to assign your duties elsewhere, you might consider giving more notice.)

So the advantages of having a clause addressing this in the contract are two-fold:  Firstly, it tells the employee in no uncertain terms that they are, in fact, required to give notice, rebutting the myth that they can leave at will if they want to.  Secondly, it determines how much notice is required.  If the employer thinks that 4 weeks is necessary to make the transition, 4 weeks notice can be required.  Or longer, in the right case.  Employees seldom feel very empowered to negotiate the terms of an employment contract, and even less so as regards termination clauses.  (See this earlier entry regarding negotiating termination clauses.)

That being said, insisting on too much notice may send the wrong message to the employee.  I have seen contracts requiring employees to give three months of notice, but in one of those contexts (being a contract that was being put to me personally by a prospective employer) it was coupled with other red flags that told me that the firm was having difficulties with employee retention, which factored significantly into me not accepting the offer.

Termination by the Employer

This is, by a large margin, the most common issue to arise from employment contracts.  As I discussed in detail in this recent entry, when terminating an employment relationship without just cause, an employer is likewise obligated to give notice or pay in lieu thereof.  There's the statutory minimum, which creates a floor for most employees, yet the implied term requiring an employer to give "reasonable notice" usually makes for much more significant liabilities.

So, once again, there are two advantages to the termination clause:  It can be used to reduce liabilities to as low as the statutory minimum, and it also provides some degree of certainty.  Calculating "reasonable notice" is not an exact science, and an employer shouldn't be surprised if the employee's lawyer is demanding a significantly higher amount of money than the employer's own lawyer opines they should need to pay.  Just negotiating a settlement is going to drive up legal fees, and it gets even more expensive if it has to go to litigation.

As well, there are related advantages in terms of limiting the employer's responsibilities.  When setting out the terms of the remuneration package in the written contract, Courts have held in some circumstances that terms requiring 'active employment' as of certain dates for bonus eligibility can be enforceable.

Post-Employment Obligations

A written contract at the outset of employment is really the best time to set out any restrictive covenants.  If you're going to require non-solicitation or non-competition clauses, that's the place for them.  Of course, there are certain requirements for restrictive covenants to be enforceable (which I previously discussed here).

Tomorrow, how to make a written employment contract binding.


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.

Back to Basics: I've been fired for no reason! How can they do that?

Occasionally in this blog, I start talking about things like reasonable notice in fairly cursory ways.  And judging from the search terms people use to find this blog, I'm fairly confident that many of my readers don't need any further elaboration of the concept.

However, it's also clear that some of my readers are not experienced in employment law, and are looking for information about the legal framework surrounding dismissal.  So let's back up for a moment and talk about what a dismissed employee, without just cause, is entitled to.

As a beginning qualification, let's be clear that I'm talking here about the non-union context.  In union contexts, not-for-cause terminations are usually limited to layoffs, and have a different framework.

Practicing employment law, it is not at all uncommon to get a call from a prospective client who says, outraged, "They fired me without any reason at all!  They even said they didn't have a reason!  How can they do that?"

People like to think that they have job security, that they can't get fired unless they do something wrong.  That's not true at all; without just cause, an employee can be fired on notice (or pay in lieu thereof).  I would say that upwards of 85% of the terminated employees I have seen were terminated on a not-for-cause basis.  (It's also true that the *vast* majority of not-for-cause terminations involve some employer dissatisfaction with the employee - poor productivity, poor chemistry with co-workers or managers, misconduct that the employer isn't confident rises to the level of "just cause" is exceedingly rare to have a purely economic decision for a layoff.  But that doesn't really matter to the analysis.)

Employment as Contract

Even when there isn't a formal written contract, the provision of service in exchange for wages is still contractual in nature.  Let's suppose I hire you to work for me, and all I tell you is the job title, a brief summary of the job duties, your wages, your hours, and where you have to go to report for work in the morning.

That's all the important stuff, right?  That's enough for you to accept the job, show up for work, and start doing the job.  But what about other matters?  The tools that will be made available to you to do your job?  The extent of contact you're going to have with clients, or the extent to which you will be supervised in your duties?  What about vacation time?  Overtime?  Breaks?  And, importantly for our purposes, how does either party terminate the contract?

These things are defined by a couple of different sources.  So let's start with the most authoritative source, the Employment Standards Act, 2000.  This is the Provincial statute that applies to employment relationships within the jurisdiction of the Province - some employers are Federally regulated, and they fall under a different statute (the Canada Labour Code), but the principles are largely similar.

The Employment Standards Act, 2000

The ESA sets minimum entitlements for employees.  There are provisions in the ESA that state that any contractual provision giving more than the minimum to the employee is enforceable, but any contractual provision giving less to the employee than the minimum is void.  The easy example to understand is "minimum wage".  If I offer to pay you $8/hour, yet the minimum wage under the circumstances is $10.25/hour, then you could take the job, then insist on $10.25 even notwithstanding that you agreed to $8.

So the ESA sets minimums for paid vacation, unpaid lunches, overtime pay.  It also creates entitlements for employees in the sense of creating maximum numbers of hours that can be worked over a period of time.  And it sets a minimum standard for notice of termination and severance pay, based on a formula taking into account length of service and, in some cases, the size of the employer's Ontario operations.  (See below.)  Note that the Regulations under the ESA create a number of exemptions to these entitlements.

The Common Law

Where the government hasn't enacted a law speaking to a point (i.e. in the ESA), and where the parties haven't reached a binding contract in respect of the point, the point is governed by the common law.  Over centuries, judges have looked at fact-patterns and decided the most just resolution.  These cases become precedents, and subsequent cases are likely to be determined similarly.

So the Courts have looked at a lot of employment relationships, and they have read in certain "implied" terms, and in particular an implied term that neither party will terminate the employment relationship without giving the other party "reasonable notice".  (While the employee is, strictly speaking, required to give reasonable notice, it's relatively rare that there is any litigation flowing from this, and what's "reasonable" for the employee to have to give is very different from the "reasonable" notice required of the employer.  So from here on in, when I discuss "reasonable notice", it's the notice required of the employer.

Let's be clear that the common law can be displaced by a binding contract.  So if there's an enforceable termination clause in the contract (see my discussion of the ESA above...there are other pitfalls to enforceability as well), then that will have replaced the "implied" term with an express term, and there will be no entitlement to "reasonable notice" as defined by common law.

Reasonable notice of termination is defined with reference to several factors.  The usual four (though they are not an exhaustive list) are age, length of service, character of employment, and availability of replacement employment.  So a young person who has spent a few months in a front-line service position has fairly minimal entitlements, whereas an older person who was fired from a CEO position held for many years will likely have significant entitlements.  Either way, common law reasonable notice entitlements are usually measured in months (seldom exceeding 2 years).

One more important point is that common law notice entitlements are subject to an obligation to "mitigate".  Suppose an employee is terminated without cause and without notice, and has a reasonable notice period of 12 months.  During the notional notice period, the employee is obligated to try to find equivalent replacement employment.  (Failing to take reasonable efforts can result in a loss of entitlements.)  Now suppose that the employee obtains a new position at 90% the pay rate after 4 months.  He is entitled only to be 'topped up' to what he would have received over the whole notice period.  (So the first four months pay in full, and then over the remaining 8 months he gets only the 10% extra that he would have gotten in his old job.)


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


Ontario's Employment Standards Act, 2000:  Minimum entitlements on termination for most employees

The first entitlement (again, provided no exemption applies) is notice of termination.  This minimum entitlement can be satisfied by either actual notice or pay in lieu thereof - they can tell you, "Your employment is terminated effective x weeks from now", or they can say "Your employment is terminated effective immediately, but we will continue paying you for x weeks."

This is entirely based on length of service:

Nil to 3 months of service:  No minimum entitlement.
3 months of service to 1 year of service:  1 week notice
1 year to 3 years of service:  2 weeks notice
3 years to 4 years of service:  3 weeks notice
4 years to 5 years of service:  4 weeks notice
5 years to 6 years of service:  5 weeks notice
6 years to 7 years of service:  6 weeks notice
7 years to 8 years of service:  7 weeks notice
8 years of service and up:  8 weeks notice.

(For simplicity, I've abbreviated the language.  In truth, 2 weeks notice is what you get if you have 1 year of service but less than 3 years of service, meaning that if you're fired without cause on your 3rd anniversary, you get three weeks notice.)

The second entitlement, in some cases, is to severance pay.  This cannot be satisfied by notice, but must be provided by way of pay, though it too is measured in terms of number of weeks, meaning that entitled employees must be paid the equivalent of x weeks pay, in addition to their notice entitlements.

Eligibility for severance entitlement, again subject to various exemptions in the regulations, requires two criteria be met:

(1)  The employee must have five years of service or more, and
(2)  The employer's Ontario payroll must be in excess of $2.5 million, OR the severance is part of a mass layoff where the employer is terminating all or part of its business at an establishment resulting in 50 or more layoffs in a six month period.

The quantum of severance pay is one week's pay per completed year of service, up to a maximum of 26 weeks.

Thursday, September 15, 2011

Web 2.0 in the Workplace: Facebook@Work

When is it appropriate for an employee to use Facebook on their computer at work?  Or other personal web resources, such as Twitter, personal email, etc.?

Employers can and should implement policies for appropriate use of computers in the workplace, which can and should provide a clear answer to this.  But which of the following is the best policy?

(A)  Whenever the employee wants?
(B)  Whenever the employee has 'down time'?
(C)  Whenever the employee is on an officially sanctioned break?
(D)  Never, except as may be directly required for the performance of their job duties?

As a common practice, many employers tolerate such usage on the basis of "C" or even "B".  But for a number of reasons, employers should stick with "D".  It's easy for an employee to forget that the computer is not, in most cases, the employee's own property, but it is a tool belonging to the employer which is supplied to the employee to accomplish his or her work goals, so the employer is technically within its rights to insist that it only be used for work purposes, and in fact there are problems that can arise from not doing so.

One might ignore the legal issues which could hypothetically arise from too much informal generousity to employees - CRA attention to non-cash benefits or employee claims that a perk constituted a part of their compensation package - because these are likely to be quite trivial in this context, but it is harder to ignore the potential threat to IT security posed by too much casual computer use.  The technical aspects aren't my expertise - talk to your IT professional about this - but while my understanding is that facebook and hotmail themselves are reasonably benign, they can easily link to websites which are more malicious.  Careless use - or use by people who aren't web-savvy - of these resources can easily lead to computer viruses or other malware that could compromise your security and the privacy of your network.

Not only are your files proprietary, but as most computer networks have some client information on them, they aren't all yours to share.  If your network is compromised and your clients' personal information is hacked, you may be liable in the event that you have not taken all reasonable precautions to prevent this.  If it turns out that the security breach was a consequence of your receptionist, with your blessing, surfing facebook and inadvertently clicking a malicious link, then that's a problem for you.  Not only are you potentially liable to third parties, but employee discipline in such a context would be inappropriate:  If you have communicated to employees - expressly or impliedly - that it is acceptable to be surfing the net in such a manner on work computers, then you can hardly blame them for having done so.

Here's the other catch:  Having a good policy isn't enough.  You need to actually enforce the policy.  If it comes to your attention that a certain employee or group of employees isn't adhering to the policy, then you need to implement a program of progressive discipline.  It's all well and good to say "Our policy prohibits this", but if managers turn a blind eye to such conduct, the employer can be said to have "condoned" the conduct nonetheless.


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. 

Monday, September 12, 2011

Web 2.0 in the Workplace: Caught Red-Handed

Sometimes, people seem to think that a post on Facebook is like a secret whisper to a confidante.

It isn't.

Not only is it visible, potentially to countless people, but it's in writing, and is essentially indestructible.  It's like carving something in stone and then prominently displaying it on the town square.  I once saw somebody convicted criminally for an offence, where the Crown relied heavily on the fact that the person admitted to the crime on Facebook.  Also, in personal injury suits, there is increasing jurisprudence requiring plaintiffs to produce their Facebook records, and if those records don't mesh with your tearful tale of how lonely and inactive you've been since the accident, guess what happens?

In the employment context, the main lie that Facebook could give up relates to "abuse of sick leave".  You've called in sick, faked your best cough, told your boss that you're just going to lie in bed for the day...then your best friend posts and tags a cell phone photo he takes of you when you catch a foul ball at the Jays game, inconveniently incorporating a datestamp into the corner of the image.  Or worse, you're on a paid or unpaid leave from work, saying that you can't perform the essential functions of your job because of a disability, and you start posting statuses about how much you're enjoying playing hockey, or golfing, or white water rafting.  It's bound to raise eyebrows if anyone at work catches wind of it.

I've seen fact patterns involving a fellow off work with back pain, who ended up in the local paper when he won a golf tournament.  Oops.  Or another individual who was off work because of a knee injury, but a local paper ran a community interest story about people skating at the local community centre, and he happened to be caught in the photograph they ran.  These are fundamentally similar.  And the conclusion is usually that the employee is in deep trouble when this happens.  Or how about the teacher who, while off on disability leave, took another teaching position with a different school board?

As always, whether or not this sort of thing constitutes just cause for termination is deeply contextual.  The fact that somebody is alive when not at work is not, in and of itself, misconduct, and even where there is misconduct, its severity will vary significantly.  An employer, getting word that an employee seems to be doing something incongruous with their claimed illness, needs to investigate, but should not immediately jump to conclusions.  As I recall, the fellow with the knee trouble ended up getting reinstated because it was concluded that his failure to return to work when he was able was not bad faith - when his doctor gave him a note saying that he needed x days off, he figured he'd go back to work after x days, and didn't realize that he should have returned to work immediately upon becoming able.  Another relevant factor is whether the leave is paid or unpaid.  Where an employee is on an unpaid disability leave and working for another employer, it's usually just dishonesty.  Where the employee is on a paid disability leave and working for another employer, it is usually fraud - the employee is, for all intents and purposes, stealing from the employer (or the disability insurer), which is much more severe.

The two main challenges for an employer are, firstly, that the employer will not always know the nature of the medical condition, and in fact is not entitled to know the nature of the medical condition, and secondly that the employer will occasionally have difficulty establishing that the employee understood their obligations in respect of their sick leave.  I've seen arguments made that "The employer didn't contact me to return to work, so I thought I was okay."

So an employer, faced with prima facie evidence that the employee is abusing sick leave, must move cautiously.  Surveillance evidence, under these circumstances, has usually been found in Canadian jurisprudence to be admissible, so talk to a lawyer about getting a PI on the case to flesh out the case beyond the strict contents of the facebook status, photo, or other report.  Remind the employee of his obligation to report for work if he is able to do so.  Conduct an interview with the employee to establish/confirm the specific medical limitations which prevented him from attending work, and ask him what extra-curriculars he engaged in while off work (give him the opportunity to be truthful...or not), and consider getting an independent medical expert to determine whether or not the activities he engaged in were consistent with the medical limitations he described.  (The golfer argued that his doctor had suggested golf as a treatment for his back problems.  The argument didn't fly in that context, but the underlying principle is sound:  Perhaps I have a physical job that a disability prevents me from doing...well, just maybe the kinetics of sport x are not the same, and therefore my limitations on working may not apply in the same way to my sport.)


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. 

Sunday, September 11, 2011

Web 2.0 in the Workplace: Editorializing

In the Web 2.0 introduction on Friday I mentioned a website called "Please Fire Me", in which employees gripe anonymously about their employers.  One gripe caught my eye, as follows:
Please fire me. I am not friends with my boss on Facebook, so he has his other employees who are friends on Facebook to show him my statuses. Then he gives me s*** about them.
Sounds like Please Fire Me isn't the first venue this employee tried for griping about his boss.  But it's a good example of the dangers of posting online.  (I also think it shows an interesting workplace dynamic; I generally advise against adding co-workers and especially subordinates to Facebook friends lists.)  Facebook is one example.  Issues commonly arise with personal blogs, as well.

There are three categories of posts that can raise questions.  There are posts which disparage the employer or its employees, posts which compromise employer confidentiality, and posts which threaten to bring the employer into disrepute because of its affiliation with the employee.

Disparaging the Employer or Others in the Organization

I never fail to be astonished by the casual manner in which people will disparage their employer or co-workers, by name, for the world to see.  There's nothing private about the internet, so posting in a blog or on twitter about how much you hate your workplace, your boss, or your co-worker is almost bound to come back to you, and it's never good.  Posting it on facebook is almost as bad, and worse if you have any co-workers who are on your friends list.

Note, though it is not the central purpose of this post, that actions for libel can be brought and have been brought based on defamatory internet postings.  Here, however, I will consider the workplace consequences.

The severity of such conduct depends on a few factors:  What did you say, who is the potential audience, and how did you identify yourself and the others involved?  And, most importantly, did it harm the employer?

Griping, in and of itself, is going to be a minor infraction at best.  People gripe about their jobs.  It's a reality, and the Courts understand that.

This issue was considered in the Saskatchewan case of Caudle v. Louisville Sales & Service Inc. in 1999, and Justice Laing made the following observation about griping:
The employer has the right to expect that employees will not disparage their immediate supervisors or other employees in the course of their employment, and certainly not to clients or customers of the employer. However, griping is not exactly unusual in a work place, and the type of conduct alleged against the plaintiff would not justify dismissal the first time it came to the employer’s attention, if he had been guilty of such conduct while performing only his own job function. In my brief review of the case law, it seems uniform that one or more warnings to an employee must be given before it can be said such activity “fractures” the employment relationship. Where dismissal does result after one or more warnings, the category of misconduct can be said to change from one of poor attitude to one of disobedience or insubordination.
The context in that case involved a bodyshop foreman/assistant manager who was forced to undertake the additional duties of bodyshop manager, who complained about the additional workload in front of staff and customers.  Thus, we see that griping in the workplace can be disciplinable, but even in the workplace it is relatively minor misconduct.

The more recent Nunavut case of Butschler v. Waters made an important distinction between the griping cases, determining that "an employee is entitled to complain about management to his co-workers so long as the complaints do not harm the well-being of the company", and complaints which harm the company.  In that case, there was evidence that the employee had complained and sworn about the management in front of co-workers and others, but in the absence of harm, and despite a provision in the contract that "public criticism" was grounds for dismissal, the Court found that there was no just cause.

Moving from simple griping to internet griping, let's look at a case where the employee did not name names:  In Wasaya Airways LP v. Air Line Pilots Association, Intl (Wyndels grievance), the grievor posted on facebook, "You know you fly in the north when...", and listed ten items which, while not reproduced in the decision, were apparently highly disrespectful to First Nations, which upset First Nation co-workers.  (As a side note, it does not appear that the grievor was actually disgruntled, but the post was a misguided attempt at humour.)  While the Union acknowledged that discipline was appropriate, it successfully argued that termination was not the appropriate response.  The Arbitrator noted that the note did not identify the airline, or anything specific to the airline, so unknown third parties reading the Facebook post would have had no reason to identify it with Wasaya.  However, the racist content of the post, given the demographic of the airline's employees and clients, justifiably created concerns for the airline, so the employee was not reinstated but rather compensated in lieu of reinstatement.

When we come to the posts that name names, however, we are into a very different framework.  Consider the case of Alberta v. Alberta Union of Provincial Employees, 174 L.A.C. (4th) 371, a grievance arbitration in which the arbitrator concluded:
While the Grievor has a right to create personal blogs and is entitled to her opinions about the people with whom she works, publicly displaying those opinions may have consequences within an employment relationship.  The Board is satisfied that the Grievor, in expressing contempt for her managers, ridiculing her co-workers, and denigrating administrative processes engaged in serious misconduct that irreparably severed the employment relationship, justifying discharge.
That a blog is a form of public expression is, or ought to be, self-evident. Unless steps are taken to prevent access, a blog is readable by anyone in the world with access to the internet. The Grievor took no steps to prevent access. On the contrary, the tone of her blogs placed them very much in the public arena and suggested that the Grievor relished addressing a wider audience.
Similarly, in Chatham-Kent (Municipality) v. National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW-Canada), Local 127 (the Clarke grievance), an employee of a nursing home was terminated, and the termination was upheld, because she set up a web site, accessible to all, in which she disclosed information about the residents, posted photos of the residents, and made crude disparaging remarks about management and co-workers.
Having reviewed the evidence the conclusion that must be reached in this case is that by her actions Ms. Clarke has provided the employer with just cause to impose discipline on a number of grounds, and that the basis for the just cause are those reasons set out in the Employer's letter of termination. First, by a breach of the confidentiality agreement and disclosing residents' personal information on a blog accessible to the public. Second, by making insubordinate remarks about management, work procedures, management decisions, and the general running of the Home and placing these on a blog available to members of the public. Third, that the nature of her comments, their hostility, and the language used to express them, demonstrated a disregard for residents' need for care, and that this was conduct unbefitting a Personal Care Giver in a Home for the Aged, as well as it being inappropriate for her to make the critical comments that she did on a public blog about some of her fellow employees.
So, by contrast to employees who gripe quietly, employees who announce to the world their discontentment could well be saying goodbye to their jobs.

Posts Which Compromise Employer Confidentiality

Confidentiality, for most employers, is a serious matter.  This was a component of the above-noted Clarke grievance.  As with all confidentiality breaches, the employer will have to establish that there was a duty of confidentiality in respect of the information shared.  When the breach involves an internet post, however, certain elements of the case become much easier, in the sense that it is not difficult to establish the content of what was shared, and sharing confidential information with the world wide web will usually be pretty egregious.

As always, however, these things are contextual.  Depending on the nature of the information shared, and the reason for sharing it, the nature of the discipline called for will vary on a case-by-case basis.

Posts Which Otherwise Threaten to Bring the Employer into Disrepute

This is part of a larger framework as well.  The idea is that, while an employer does not usually have the ability to discipline for misconduct not related to the workplace, there is some conduct which is so reprehensible that the employer's reputation will be damaged simply by being associated with the employee.  In the union context, the test is set by the 1967 Millhaven Fibres Ltd. case:

In order to justify the discharge of an employee for off-duty conduct, there are five factors to consider:
(1) the conduct of the grievor harms the Company's reputation or product
(2) the grievor's behaviour renders the employee unable to perform his duties satisfactorily
(3) the grievor's behaviour leads to refusal, reluctance or inability of other employees to work with him
(4) the grievor has been guilty of a serious breach of the Criminal Code and, thus, rendering his conduct injurious to the general reputation of the Company and its employees
(5) places difficulty in the way of the Company properly carrying out its function of efficiently managing its works and efficiently directing its work forces.

This test was considered in the above-noted Wyndels grievance, and factored into the severity of the punishment which was called for in that case.

The Bottom Line

Employees are perfectly entitled to carry on an online existence, and the employer generally cannot assert total control of what they do online.  (I have seen occasional circumstances where a position requires a certain public image, which would likely be an exceptional case.)  Ultimately, however, employees must be careful not to conduct themselves in ways that will compromise the reputation of the employer or alienate co-workers.


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.

Saturday, September 10, 2011

Web 2.0 in the Workplace: Recruitment

As a job applicant, I give my potential employer the information I want them to have, and only the information I want them to have.  My resume, which plays up my strengths in relation to the position I'm applying for.  My cover letter, which sells me to the employer.  Reference letters on request, from the employers who most loved me in the past.  And then I show up for the interview with a tidy haircut and a nice suit, ready to turn on my best shine for the recruiters.

That's the game.  We all know it.  Especially recruiters.  So it has come into vogue for tech savvy recruiters to search the internet for information regarding potential employees, to try to find out what they aren't being told.  They check facebook, they google the name, and what they find can influence their decision.  If they find dirt - party photos, vulgar posts and comments, evidence of immature and unprofessional behaviour - then this can factor into the decision-making progress.

So job-seekers need to manage their online images.  Pay attention to facebook privacy settings.  But even that isn't enough:  To be really safe, you need to take down any compromising information, and un-tag yourself from any photos others may have posted.  Ask yourself, "Is this something I would be comfortable putting on my resume?"  If the answer is no, remove it from the internet, to the extent you can.  In fact, once something is online, it is there forever to a skilful enough searcher, so people are well-advised to exercise caution in what they're putting online in the first place.

Similarly, tasteful photographs of outings with friends, conservative vacation photos, images of you at Vimy Ridge or meeting the Dalai Lama, or playing in your casual hockey league...these are usually going to be posts you want recruiters to see.  Because they don't just look online to rule out candidates; they're looking online to try to find positive information, too.  Showing that you are an interesting person with interesting hobbies is something that will usually make you more attractive as a candidate.  Having a life, involving responsible fun, is seldom regarded as a bad thing.

I had one classmate in law school who, whenever job-hunting time rolled around, changed his facebook profile photo to text to the effect of "Dear law firm recruiters, please hire me."  Cheeky.  But clever.

Recruiters take heed, though, of the dangers inherent in these searches:  You may get information that you don't need, that you don't want, and that you are legally prohibited from using in coming to a decision.  Be cognizant of the Human Rights Code.

Under most circumstances, the Code prevents recruiters from asking certain questions of candidates, relating to prohibited Code grounds.  Mind you, not everyone abides by these rules, even by lawyers and HR Professionals who should know better.  I was once contacted by a professional headhunter for a law firm whose first three questions were my age, marital status, and family status - questions which were echoed several times by the firm's partners.  Suffice it to say that, though I received an offer from the firm in question, I declined it.  I once heard an anecdote from a law clerk about interviewing with a lawyer who asked her if she had any plans to get pregnant in the near future.  Or sometimes, a recruiter will raise a prohibited ground just in the way of small talk - for many parents, it becomes natural to talk about their kids and ask others, "Do you have any children?"

These questions, in and of themselves, are illegal.  It isn't just that you can't make a decision based on these factors, though that's true too.  You can't even ask.  And the reason for that is to protect unsuccessful candidates from the potential dispute about whether or not the reason they weren't hired related to their answer to those questions.

Of course, that protection isn't universal.  A candidate comes to an interview, and it is immediately a simple matter of determining, with some margin of error, their age, race, and marital status.  But there are many other things that you don't know about.  Religious beliefs.  Mental illness or other non-obvious disabilities.  Or, similarly, though based in the Labour Relations Act instead, union affiliations.  And the more you know, the more exposed you are to allegations that you discriminated on the basis of a prohibited ground.  If the candidate can convince a Tribunal that even a part of the reason for not hiring them was related to a prohibited ground, significant liabilities can result.

The risk may not be significant in every case, but it's something to be careful about.  Larger organizations might consider tasking a Human Resources Assistant, with no role in the decision-making process, with conducting the internet searches and redacting materials related to prohibited grounds, before giving the remainder to the decision-makers.


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.

Friday, September 9, 2011

Lawyers Getting Sued

Don't worry, the Web 2.0 in the Workplace series will continue tomorrow, as planned.

In recent months, there has been a series of major law firms getting sued by former employees.  Last month I made an entry about a first year associate of a major New York firm suing for wrongful dismissal.  A few months ago, Mathews Dinsdale & Clark LLP, a major Toronto firm and a major player in Canadian labour law, made headlines because of various issues and litigation continuing from apparently inappropriate behaviour at a wild and crazy party it hosted in 2007, after its annual labour arbitrarion competition.  (See this Law Times story for details.)  Before that, there was Jaime Laskis, who worked at the New York office of Osler, Hoskin & Harcourt, which is one of Canada's largest law firms, and who made headlines litigating against the firm, alleging gender discrimination.

In fact, over the last year or two, there have been myriad claims made against a variety of major law firms across the country, based in sexual harassment, discrimination on the basis of sex, and poisoned work environments.

Pinkofskys, the most notable Canadian criminal law firm (now known as Rusonik, O'Connor, Ross, Gordham & Angelini...against the grain, when most firms are shortening their names) has been added on the list, as former office assistant Tracy Francis is suing in wrongful dismissal.  The firm's statement of defence alleges that Francis had engaged in persistent and vexatious disparaging remarks about one of the lawyers in the firm, calling him, acccording to the Toronto Star story on the topic, "“tyrant,” “idiot,” “weasel,” “snivelling b---h,” “dump truck” — a term referring to lawyers who plead out clients rather than litigate — and an “ass.”".  In the plaintiff's Reply, Francis denied those allegations, and noted that it was the firm's lawyers themselves who maintained a culture in which disparaging marks were acceptable.

Really, it isn't uncommon for assistants to badmouth lawyers.  I've heard the assistants use some pretty harsh words about them (and not always without good reason).  And I'm sure I haven't heard the worst of it.  That said, while I've never heard the term "dump truck" in quite that context, it sounds like it would be a litigator's insult for another, and it is hard to imagine why an assistant would be using it as a pejorative.

It's probably not true that all of these cases are well-founded.  But likewise, it probably isn't true that none of them are, either.  Law firms have a terrible reputation when it comes to human-rights-related sensitivity.  Even though female law grads are as numerous (if not moreso) as men, all the studies continue to show that the legal profession is having a hard time retaining women.  It's a real problem that the profession on the whole needs to overcome, and these major firms need to be taking the lead in the culture shift.


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. 

Web 2.0 in the Workplace: Introduction

For those readers unfamiliar with the term Web 2.0, let me borrow a definition from Wikipedia:  "The term Web 2.0 is associated with web applications that facilitate participatory information sharing, interoperability, user-centered design,[1] and collaboration on the World Wide Web."

Whereas "Web 1.0" was a mechanism by which the general public received information over the internet, much like television or radio, Web 2.0 is interactive, allowing the general public to define the contents of the internet.

Wikipedia itself is a classic example of a Web 2.0 website, which permits user contribution and editing to its entries, with certain guidelines for sourcing and contribution and a discussion page for users to debate specific contents of the entry.  While it isn't wholly reliable, it provides a good starting point for understanding...well, just about anything, these days.  To fully understand the power of Web 2.0, note that there are a total of over 19 million Wikipedia articles in approximately 270 languages, totalling over eight billion words.  (In English alone there are over 3.7 million articles with over 2 billion words.)

Other Web 2.0 sites include Blogger, Facebook, Twitter, social networking sites, and even comment sections in online newspaper publications.  All of these are soapboxes for anyone with an internet connection to announce to the world anything they like, from their stance on upcoming elections to what they had for breakfast that morning.

Another site which recently came to my attention is called "Please Fire Me", a site for disgruntled employees to complain about their jobs anonymously.

The impacts of Web 2.0 on the workplace are myriad.  Many people do not really think about who might read the materials they post.  They think of blogs as journals, and of facebook statuses as announcements to their 500 closest friends, regardless of how their privacy settings may be configured.  These issues cannot be ignored by either employers or employees.

So stay tuned for several entries to come on Web 2.0 in the Workplace:

(1)  Recruitment:  How should job-seekers manage their online image?  Should employers Google prospective employees?

(2)  Editorializing:  When can an employer discipline an employee for online posting?  Is posting about the boss, co-workers, or the workplace itself inappropriate? 

(3)  Caught red-handed:  What happens when an online post admits, expressly or impliedly, to workplace misconduct?  (The classic case is the employee who calls in sick, then posts a photo of himself at the ball game.)

(4)  Facebook@Work:  Appropriate use of work computers.


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.

Sunday, September 4, 2011

Does an employer need to pay the bonus due during the notice period?

It's simple and well-established law that the employer who dismisses an employee without notice and without just cause must provide pay in lieu of notice. How much notice should be provided is often complicated, but a question that is sometimes equally complicated is what compensation aspects should be figured into the calculation.

Salary's easy, but what about bonuses? Health benefits? Company car?

The default answer is...everything. But bonuses are more complicated than that. Purely discretionary bonuses can be difficult for an employee to pursue, but if there's a consistent pattern of bonuses in the past, or a fixed mechanism for calculating bonuses, then there's a chance. If there's a bonus structure worked into the employee's contract, and/or if the bonus can be said to be an integral part of the compensation package, the employee is in a very good position to make a claim for the bonus.

However, these are all common law defaults, subject to the freedom of contract, and it is not uncommon to see contractual language or language in the policy establishing the bonus structure that states that employees must be actively employed as of a particular vesting date in order to be entitled to the bonus for that period of time. (For example, if you want your annual bonus, you have to be actively employed as of December 31st of that year. If you quit your job on December 30th, you get nothing.)

However, if the employee hasn't been made aware of that limitation, then the employer can't rely on it. In the recent case of Poole v. Whirlpool Corporation, Mr. Poole was on international assignment when the Bonus Plan was implemented in 2005, and was never advised of the 'active employment' requirement until after his termination in 2010. Accordingly, he remained entitled to his bonus throughout the notice period, which the Court found was 19 months. This bonus entitlement ultimately amounted to more than $100,000 through the notice period.

Other points of interest in this case include the choice of proceeding: While it was certainly not a Simplified Procedure case (the overall judgement ended up being in excess of half a million dollars), the plaintiff moved for summary judgment, leading affidavit evidence. The main issues appear to be the length of the notice period, entitlement to the bonus, and entitlement to other benefits, but there were no major factual disputes. Neither party cross-examined the other side on their affidavits, and so the proceedings were relatively expeditious. However, "relatively expeditious" is still expensive - the Court ended up awarding the plaintiff partial indemnity costs in the amount of $25,000.

Thoughts on Bonus Limitations

Where the bonus limiting language exists, and the bonus is not established to be an integral part of the compensation structure, the limtation can be upheld. However, I believe that there are difficulties with this approach that have not been explored in the jurisprudence.

We start, as I have said, with the default position that the employee is entitled to receive, as pay in lieu of notice, compensation for anything he would have received had his employment been continued through the notice period. When there is bonus language implemented in a manner insufficient to constitute a binding term of the contract, it cannot rebut that common law presumption - when you are terminated, your entitlement to damages for pay in lieu of notice continues to include everything you would have received had you been actively employed through the notice period. This issue is similar to the one I argued when dealing with the share repurchase agreement in Love v. Acuity Investments, in a previous blog I maintained. (See footnote below.)

Where there is ostensibly binding contractual language stating that an employee must be actively employed at certain dates, such that the bonus will not be payable if terminated prior to such dates, then this must be seen in light of certain restrictions surrounding entitlements on termination: The Employment Standards Act, 2000 sets minimum requirements for notice periods which cannot be contracted out of, and these minimum requirements have only one relevant exclusion, being for purely discretionary bonuses "that are not related to hours, production or efficiency." In other words, where bonuses are not purely discretionary, or are based at all upon hours, production, or efficiency, any contractual provision which purports to relieve the employer of the obligation to provide such bonuses on termination would be void.

All that being said, I think such language should generally be sufficient to avoid any pro rata calculation of bonuses: If the notice period proceeds past the vesting dates, the employee gets the bonus. If not, he doesn't. (This is usually reflected in the existing law, though I note that my other thoughts may not be.)


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.

Love v. Acuity Investments footnote:

Put briefly, the Court of Appeal in Acuity held that a termination without notice (in the absence of just cause) is, in and of itself, a contractual breach, ending the employment immediately and entitling the employee to damages...and therefore, a separate share repurchase agreement allowing the employer to repurchase employee-owned shares at the end of employment could be triggered immediately upon such termination, without waiting for the end of the notice period, and therefore the employee has no claim to damages based on subsequent appreciation in the value of the shares. I would argue that this decision is simply internally inconsistent: If the employer has no contractual right to terminate the employment relationship immediately, then the compensation principle entitles the employee to monetary damages to put him into the same position he would have been in but for the breach of contract - i.e., had he been allowed to continue to hold the shares to the end of the notice period.