Posts by Shafik Bhalloo

Shafik Bhalloo
Thursday, October 8th, 2015    Posted by Shafik Bhalloo (posts) and Alisha Parmar (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.

When an employee is wrongfully dismissed and the court determines that the employee is entitled to damages in lieu of reasonable notice, the employer will almost always argue that the employee was required to mitigate those damages and failed.  In essence, the employer will allege that the employee failed to take reasonable steps to obtain alternative employment, and that if the employee had taken those steps, then the damages suffered by the employee from wrongful dismissal would have been reduced.  If the court agrees that there was a failure to mitigate, then the employee may be barred from recovering a portion of the damages arising from wrongful dismissal on the basis that those damages could have been prevented by the employee.  Notably, mitigation does not require the employee to accept just any offer of employment in an effort to mitigate – as an example, the court will not find a failure to mitigate where a CEO declines to accept employment as a cashier at a fast-food restaurant, since those two positions are not at all comparable.

An interesting situation arises when the former employer offers the employee re-employment on the same terms.  The question then becomes whether a reasonable person in the employee’s position would have accepted the employer’s offer of re-employment.[1]  In Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357 (“Fredrickson”), the British Columbia Court of Appeal recently considered that scenario and held the employee did not fail to mitigate by declining an offer of re-employment, where the offer did not fully compensate her for lost income, and where the trust relationship between the employee and employer had deteriorated because of the employer’s actions.

The Decision                                          

In Fredrickson, the plaintiff employee was employed as a dental technician assistant by the defendant company, for a period of eight and a half years.  The plaintiff had a good working relationship with the owner of the defendant company, her “boss”, and they worked closely together in a small office.

In 2011, the plaintiff came under stress resulting from her husband’s illness and her son being involved in an accident, both of which her boss was aware of.  On April 28, 2011, the plaintiff went on a medical leave of absence without informing the defendant that she was doing so.  While the plaintiff was on leave, the defendant disputed her entitlement to take leave and there was some contention that the defendant did not properly respond to the plaintiff’s request to complete Employment Insurance forms. During this time, the plaintiff’s boss surreptitiously recorded two conversations with the plaintiff, which were later used by the defendant at trial.

On July 20, 2011 the plaintiff returned to work after her doctor advised her that she was fit to do so.  On the same day, the defendant informed her that she was laid off because of insufficient work, and provided the plaintiff with a record of employment and a letter of reference.  The plaintiff, through counsel, sent a demand letter to the defendant on September 9, 2011.  In that letter, the plaintiff took the position that she had been wrongfully dismissed when she was laid off in July.

The defendant responded to that letter with an offer of re-employment, with re-employment commencing September 26, 2011, and stated that the plaintiff had an obligation to mitigate her damages by accepting re-employment.  Then, on October 19, 2011, shortly after the plaintiff had commenced her action against the defendant claiming wrongful dismissal, the defendant made a second offer to re-employ the plaintiff including an offer to pay her unpaid wages from July 20, 2011 until September 26, 2011.  Following this, on October 25, November 4, 2011, and April 19, 2012, the defendant made three further offers to re-employ the defendant, including payment of lost wages from July 20, 2011 to September 23, 2011 (the date the first re-employment offer was made), at the same position, with identical salary and benefits, as before.  The plaintiff declined all of these offers.

At trial, the plaintiff was successful at showing that she was wrongfully dismissed, and in fact, the defendant acknowledged that it had dismissed the plaintiff without cause and without reasonable notice in its closing submissions.  Thus, the only issue that remained was whether the plaintiff had failed to mitigate her damages.

The plaintiff tendered evidence that she had applied for nearly 100 jobs, and was not successful obtaining any of those positions, until she eventually secured a position as a bookkeeper in August 2012.  However, the trial judge concluded it would have been reasonable for the plaintiff to accept re-employment by the defendant and that by failing to do so she had failed to mitigate her losses.  As a result, the plaintiff was only awarded damages from the period between July 20, 2011 and September 23, 2011, the date the first offer was made.

The plaintiff appealed, and the Court of Appeal overturned the trial judge’s finding on mitigation.  The Court of Appeal held that the trial judge erred by (1) “failing to accord significance to the incomplete nature of the offer” and by (2) “failing to reflect the intangible element of mutual trust, commensurate with the nature of employment, that flows like a current in the employment relationship”.[2]

On the first point, the Court of Appeal stated that none of the offers made by the defendant were “make whole” offers, in that the offers did not fully compensate the plaintiff for her lost income following July 20, 2011.  The first offer did not include an offer to compensate the plaintiff for the income she had lost between July 20 and September 26, 2011.  The second offer did not compensate the plaintiff for the lost income between September 26, 2011 to October 18, 2011, and each of the other offers left a similar gap in the compensation being offered to the plaintiff.   As such, the “offers coming from Newtech to Ms. Fredrickson never caught up to her loss of income situation”.[3]  The Court of Appeal held the trial judge did not give adequate consideration to the gap in income between the plaintiff’s claim for wrongful dismissal and the defendant’s offers of re-employment, since even the earliest offer for compensation resulted in the plaintiff losing 8% of her annual income.[4] Further, if the plaintiff accepted the offer of re-employment, she would have a very difficult time maintaining a claim for the lost income.[5]

Aside from this, the Court of Appeal found the trial judge erred by not considering the trust relationship between the plaintiff and defendant.  The Court stated that whether or not a reasonable person would accept an offer of re-employment includes an assessment of the obligations of good faith or fidelity on the part of the employer and employee, since mutual trust is an important aspect of the employment relationship.[6]   The Court held that the plaintiff’s trust in the defendant had been eroded by the defendant’s actions in at least two ways.  First, as stated previously, the plaintiff’s boss had secretly recorded conversations with her and then used those conversations at trial.  Second, her boss had engaged in conversation with another employee, in which he agreed that the plaintiff would be too embarrassed to return to work with the defendant.  Interestingly, the Court found that whether or not the plaintiff felt “embarrassed” was inconsequential, and what mattered was that her boss had breached the confidence of the plaintiff by having this conversation, particularly in the context of a small workplace.  The Court found that as a result of the defendant’s actions, “any chance of repairing the employment relationship was irretrievably lost”.  The Court of Appeal’s reasoning suggested that even if the offers had been “make whole” offers, the trial judge’s finding would still not have been upheld because the employee no longer trusted the employer. Thus, the decision illustrates in some situations, it will not matter that re-employment was offered, since the damage has already been done.

[1] Fredrickson at para. 29

[2] Fredrickson at para. 23

[3] Fredrickson at para. 24

[4] Fredrickson at para. 26

[5] Fredrickson at para. 27

[6] Fredrickson at para. 29

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Shafik Bhalloo
Friday, June 26th, 2015    Posted by Shafik Bhalloo (posts) and Alisha Parmar (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.

One of the most significant mistakes a business owner can make when it comes to engaging a worker is classifying that worker incorrectly.  Many business owners are aware that misclassifying an employee as an independent contractor can come with heavy repercussions, including being held liable for the various statutory deductions that should be made for an employee (see our previous post on determining employment status here).

However, fewer business owners seem to be aware that an intermediate category of worker exists between employee and independent contractor.  Where a worker is not an employee but is sufficiently economically dependent on a particular client, that worker may well be a “dependent contractor”.  The key factor to consider whether a worker is a dependent contractor rather than an independent contractor is “exclusivity”.  If the contractor relies heavily on a single client, for a long period of time, this points towards dependent contractor status.[1]

One area in which the distinction between an independent and dependent contractor matters is notice of termination.  Where a worker is a dependent contractor, in contrast to an independent contractor, she will be entitled to reasonable notice of termination.[2]   Where no such notice is given, the business owner may be held liable for damages in lieu of notice.  The Ontario Superior Court’s recent decision in Keenan v. Canac Kitchens (“Keenan”) demonstrates just how significant these damages can be.[3]

In Keenan, the two plaintiff workers had worked for the defendant company for 33 and 26 years respectively.  The defendant was in the business of supplying kitchen cabinets.  For the first eleven and four years, respectively, the plaintiffs were engaged as employees of the defendant.  For part of that time, the plaintiffs were employed as foremen.  This initial period of employment ended when the defendant company decided to enter into a new arrangement with the plaintiffs.  Under this new arrangement, the plaintiffs would be responsible for and had to pay workers who would install the cabinets, and further, were required to provide some of their own equipment.  The defendant also suggested that the plaintiffs incorporate a company through which to provide these services (although the plaintiffs never did) and the plaintiffs were permitted to work for, and did in fact work for, a competing company after the new arrangement commenced.  All of these factors seemed to suggest independent contractor status.

So, when the defendant company started experiencing financial difficulties it gave the plaintiffs very little notice that their services were being terminated.   According to the defendant, under the terms of the new agreement the plaintiffs were not entitled to any notice – let alone reasonable notice.

The court disagreed, finding that the plaintiffs were in fact dependent contractors.  Even though the plaintiffs worked for a competing company and despite all of the other factors that pointed towards independent contractor status, the plaintiffs primarily worked for the defendant and most of the plaintiffs’ revenues were attributable to the defendant.   As a result of this reliance on the defendant, the plaintiffs were entitled to reasonable notice of termination.   Due to the length of service, the court found that the plaintiffs were entitled to 26 months’ notice – equivalent to damages of $124,484.04.

Thus, Keenan emphasizes that whether or not a worker primarily works for a single client is a critical factor when it comes to determining whether a worker is entitled to reasonable notice from that client.  Even if other factors indicate independent contractor status, if the worker is mostly working for one client then termination without reasonable notice may come with a heavy price.

[1] Keenan v. Canac Kitchens, 2015 ONSC 1055 (“Keenan”) at para. 20

[2] Ibid, see also Khan v. All-Can Express Ltd. 2014 BCSC 1429

[3] Keenan, supra note 1

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Posted by Shafik Bhalloo (posts) and Alisha Parmar (posts) | Filed under Labour & Employment | ....
Shafik Bhalloo
Monday, April 27th, 2015    Posted by Alisha Parmar (posts) and Shafik Bhalloo (posts)
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

The Potter Decision – When an Administrative Suspension Goes Too Far


By Alisha Parmar and Shafik Bhalloo


The Potter Decision – When an Administrative Suspension Goes Too Far

Constructive dismissal is a fascinating concept for employment lawyers, employees, and employers alike.   When an employer is found to have “constructively dismissed” an employee, it means that the law characterizes the employer’s conduct as amounting to dismissal.  Whether or not the employer intended to dismiss the employee, a finding of constructive dismissal can have significant consequences – an offending employer will be liable for damages in lieu of the notice that ought to have been provided to the employee when she was dismissed.   Thus, it seems all the more important that the law governing this legal creature be well-defined, lest an unwitting employer accidently “dismiss” an employee. 

In Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (“Potter”), the Supreme Court of Canada recently provided an in-depth examination of how the test for constructive dismissal is to be applied and the rules of evidence for each branch of the test.  Further, in the context of administrative suspensions, the decision explicitly recognizes that an employer must provide legitimate business reasons for suspending an employee – otherwise the employer might be constructively dismissing the employee.

As background, an administrative suspension is the broad ability of an employer to temporarily discontinue an employee’s work in a non-union workplace for administrative reasons.[1] This stands in contrast to a suspension for disciplinary reasons.  Further, in this case, the administrative suspension was not for administrative reasons unrelated to the employee’s conduct.  To clarify, the reason for an administrative suspension may be that there is an economic downturn or something else unrelated to the employee – this was not the case in Potter.[2]

The Two Branches of the Legal Test for Constructive Dismissal

Previously, in Farber v. Royal Trust Co., [1997] 1 SCR 846 (“Farber”), the Supreme Court of Canada had held that:

A constructive dismissal occurs where an employer makes a unilateral and fundamental change to a term or condition of the employment contract without providing reasonable notice of that change to the employee.[3]

In Potter the Court further recognized that there are two branches of the test for constructive dismissal.  First, the employee may demonstrate that the employer breached an express or implied term of the contract and then show that the breach was serious enough to constitute constructive dismissal.[4]  The majority explained that a sufficiently serious breach is one which “substantially alters an essential term of the contract” or evinces an intention on the part of the employer to no longer be bound by the contract.[5]  As explained in Farber, this involves asking the question whether a reasonable person in the same situation as the employee would feel that the essential terms of the contract were altered.[6]

Under the second branch, the employee may prove more generally that the employer intended not to be bound by the employment contract, even without showing that there was a breach of a specific term.[7]  This branch takes a retrospective look at whether the employer’s cumulative past acts evince an intention to no longer be bound by the contract.[8]  The question under this branch is whether a reasonable person in the position of the employee, in light of all the circumstances, would conclude that the employer no longer intended to be bound by the contract.[9]

Constructive Dismissal in the context of an Administrative Suspension

Notably, the majority explained that under the first branch in the case of an administrative suspension, the burden shifts to the employer to show that a breach of the employment contract has not occurred.[10]  In order to do this, the employer must show that there were legitimate business reasons for the suspension:

In my view, legitimate business reasons constitute a requirement for a finding that an administrative suspension based on an implied authority to suspend is not wrongful.  Other than in the context of a disciplinary suspension, an employer does not, as a matter of law, have an implied authority to suspend an employee without such reasons.  Legitimate business reasons must always be shown, although the nature or the importance of those reasons will vary with the circumstances of the suspension.[11]

Thus, without legitimate business reasons for the administrative suspension, the employer fails the first part of the test, and the analysis moves onto whether the unauthorized suspension constitutes a substantial breach.  This involves considering whether a reasonable person in the employee’s circumstances would have perceived, inter alia, that the employer was acting in good faith to protect a legitimate business interest, and that the employer’s act had a minimal impact on her in terms of the duration of the suspension.[12]

Application to the Facts

In Potter, the plaintiff employee was appointed the Executive Director of the New Brunswick Legal Aid Services Commission for a seven year term.  About half-way into the term, the plaintiff and the defendant began negotiating for a buyout of the plaintiff’s employment contract.  However, prior to the conclusion of these negotiations, the plaintiff delegated his responsibilities to another director and went on medical leave.

Following this, the defendant unilaterally decided to put a deadline on the buyout negotiations.  If the negotiations were not resolved prior to a certain date, the defendant’s plan was to make a request to the Lieutenant-Governor in Council to revoke the plaintiff’s appointment for cause.  A week before the plaintiff was scheduled to return from medical leave and unbeknownst to the plaintiff, a letter was sent to the Minister of Justice by a representative of the defendant requesting that he be dismissed for cause.  On the same day, the defendant’s solicitor sent the plaintiff’s solicitor a letter which effectively placed the plaintiff on an indefinite administrative suspension without any explanation, but with pay.  Meanwhile, the defendant designated a replacement for the plaintiff.  Two months after being suspended, the plaintiff commenced an action for constructive dismissal.  The defendant contended that by commencing the action the plaintiff had voluntarily resigned, and stopped paying his salary and benefits.

The majority analyzed the facts in Potter using the first branch of the test for constructive dismissal and held that the defendant had in fact constructively dismissed the plaintiff. 

Under the first step, the majority found the defendant did not have express or implied authority to suspend the plaintiff.  The reasons for this finding included the fact that the suspension was of indefinite duration, the defendant had failed to act in good faith, and that it had concealed the intention to have the plaintiff’s employment terminated.[13]  The majority pointed out that as the analysis under this step was conducted from an objective point of view, it was appropriate to consider the letter sent on behalf of the defendant to the Minister of Justice requesting the plaintiff’s dismissal.

The majority further accepted, under the second step, that a reasonable person in the position of the plaintiff would view the breach as substantial, despite the fact the defendant continued to pay the plaintiff.  The defendant had a duty to provide the plaintiff with work, and moreover the suspension was neither reasonable nor justified, since inter alia, no reasons were provided to the plaintiff.[14]  However, the majority emphasized that at this point in the test, it was not appropriate to consider the letter requesting the plaintiff’s dismissal, because it was completely outside the realm of the plaintiff’s knowledge at the time.[15]


There a number of important takeaways in this decision:

  1. Acting within the confines of the employment contract:  Where an action is not expressly authorized by the employment contract, a careful analysis should be conducted as to whether the action is impliedly authorized or consented to by the employee – if not, the employer runs the risk of having constructively dismissed the employee.
  2. Legitimate business reasons:  Employers do not have the implied authority to place an employee on non-disciplinary administrative suspension without legitimate business reasons.  If the employer desires to have this ability, it should be provided in the contract.
  3. Continuing to pay is insufficient:  There is a duty for employers to continue to provide work.  When this duty is interfered with, continuing to pay the employee may be insufficient to show that the employee was not constructively dismissed.

[1] Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (“Potter”) at para. 68

[2] Ibid at paras. 69 -70

[3] Farber v. Royal Trust Co., [1997] 1 SCR 846 (“Farber”) at para. 34

[4] Potter, supra note 1 at para. 32

[5] Ibid at para. 34 to 35

[6] Ibid at para. 26

[7] Ibid at para. 33

[8] Ibid at para. 33

[9] Ibid at para. 42

[10] Ibid at para. 41

[11] Ibid at para. 98

[12] Ibid at para. 45

[13] Ibid at para. 46

[14] Ibid at para. 81, 99

[15] Ibid at para. 63

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Posted by Alisha Parmar (posts) and Shafik Bhalloo (posts) | Filed under Labour & Employment | ....
Shafik Bhalloo
Tuesday, October 28th, 2014    Posted by Shafik Bhalloo (posts) and Alisha Parmar (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.

By Alisha Parmar and Shafik Bhalloo


Non-competition clauses are hardly a rarity in employment contracts. The classic non-competition clause seeks to protect the business of an employer by prohibiting a former employee from, generally speaking, competing with the employer once the employment relationship is terminated.

It is well-established that courts are unsympathetic towards non-competition clauses. It has been recognized under the doctrine of restraint of trade that non-competition clauses are contrary to public policy, since they “interfere with individual liberty of action and because the exercise of trade should be encouraged and should be free”.[1] As a result, non-competition clauses are prima facie unenforceable, unless the party trying to enforce the clause is able to demonstrate that it is reasonable. In Aurum Ceramic Dental Laboratories Ltd. v Hwang (“Aurum”), the Court summarized the criteria to be met to find a non-competition clause reasonable:

(a)    the clause protects a legitimate proprietary interest of the employer;

(b)   the restraint is reasonable between the parties in terms of:

  1. temporal length;
  2. spatial area covered;
  3. nature of activities prohibited; and
  4. overall fairness;

(c)    the terms of the restraint are clear, certain and not vague; and

(d)   the restraint is reasonable in terms of the public interest with the onus on the party seeking to strike out the restraint.[2]

Failure to meet any one of the criteria above renders a non-competition clause unenforceable. However, until recently, the state of the law was ambiguous as to whether more nuanced clauses would even be considered non-competition clauses, and therefore whether or not such clauses could avoid the reasonableness test completely. For example, where a clause is not prohibitory per se, but instead imposes some other burden on the employee for competing, it was unclear whether it would be considered a non-competition clause at all. The BC Court of Appeal recently addressed this issue in Rhebergen v Creston Veterinary Clinic Ltd. (“Rhebergen”), and clarified that a creative non-competition clause is still a restraint of trade.[3]

The Facts of Rhebergen

Rhebergen involved an employee, Dr. Stephanie Rhebergen, and her employer, Creston Veterinary Clinic (“CVC”). CVC is exceptionally isolated in that the closest clinics to CVC are 60 miles away and require a trip over the Canada-US border. The majority of CVC’s business is drawn from a handful of dairy farms located in the Creston, British Columbia area.

As a newly licenced veterinarian, Dr. Rhebergen decided to enter into an associate agreement with CVC, wherein she would be paid to work with CVC for three years. The agreement provided that Dr. Rhebergen would be paid $65,000 for each of the three years. It also stated that Dr. Rhebergen would have to pay CVC if, within three years after the agreement was terminated, she set up practice in Creston, or within a 25 mile radius of CVC’s place of business in Creston (the “Clause”). Specifically, Dr. Rhebergen would have to pay $150,000 if her practice was set up within one year of terminating the agreement, $120,000 if her practice was set up within two years, and $90,000 if it was set up within three years.

A little over a year into the agreement, differences arose between Dr. Rhebergen and CVC, and the agreement was terminated. A few months later, Dr. Rhebergen sought a declaration that the Clause was unenforceable, so that she could “set up a mobile dairy veterinary practice in Creston and vicinity”.

Summary of Trial Decision

Mr. Justice Betton gave brief reasons and found that the Clause was in fact a non-competition clause, even though it did not directly prohibit Dr. Rhebergen from competing. The judge then applied the criteria from Aurum and found that the Clause did not meet the test for reasonableness because it was ambiguous, and therefore unenforceable. CVC appealed the decision, including appealing the finding that the Clause constituted a restraint of trade to begin with.

The Court of Appeal

Although the majority of the Court allowed the appeal, the minority and majority only differed on whether the Clause met the criteria for reasonableness. Notably, the majority of the Court of Appeal endorsed Mr. Justice Lowry’s reasoning that the Clause was indeed a non-competition clause.

The decision of Mr. Justice Lowry is illuminating, as it includes an extensive review of the English and Canadian authorities regarding whether a clause is a restraint of trade or not. In reviewing the jurisprudence, Mr. Justice Lowry commented that two strands of authority have been established by modern jurisprudence: the “formalist” approach and the “functionalist” approach. The formalist approach was relied on by CVC to argue that because the Clause does not prohibit Dr. Rhebergen from practicing outright, it cannot be a non-competition clause.

Mr. Justice Lowry noted that this approach requires a clause to be structured as a prohibition in order to constitute a restraint of trade. Under this view, clauses that simply impose a burden on the employee cannot be non-competition clauses. This may be counterintuitive, as “mere disincentives to post-employment competition are not sufficient to trigger the doctrine, even if those disincentives operate as effectively at dissuading competitive conduct and participation in the marketplace as a prohibition”.[4] In conducting a review of the various authorities, Mr. Justice Lowry noted that the jurisprudence in Ontario favours the formalist approach.

The functionalist approach, on the other hand, asks whether “the clause at issue attempts to, or effectively does, restrain trade, in which case it will be captured by the doctrine and subjected to reasonableness scrutiny”.[5] Mr. Justice Lowry noted that the functionalist approach has been widely accepted in English law, and that it is clear that a strict prohibition is not required for the doctrine of restraint of trade to apply. Mr. Justice Lowry then went on to determine that the functionalist approach is the preferred approach:

In my view, the functionalist approach established in English law is to be preferred as the legal basis for determining whether clauses that burden employees with financial consequences, whether by payment or forfeiture, they would not otherwise have for engaging in post-employment competition constitute a restraint of trade. In the words of Lord Wilberforce, it is a matter of the effect of the clause in practice over its form.[6]

In applying this reasoning to the Clause, Mr. Justice Lowry found that it was a non-competition clause because “it compromises the opportunity to compete with the clinic Dr. Rhebergen would otherwise have”.[7] The majority agreed with Mr. Justice Lowry’s finding that the Clause was a non-competition clause, and the Court of Appeal unanimously accepted that the functionalist approach governs in British Columbia.


Although the Clause in Rhebergen was ultimately allowed to stand by the majority, the decision and the unequivocal adoption of the functionalist approach has implications for employers.

For one, the BC Court of Appeal has now made it clear that it will be the effect and not the form of the clause which will be determinative. Employers intending to restrain the post-employment activities of their employees will not be able to disguise the proverbial wolf in sheep’s clothing – a non-competition clause by any other name will still be unenforceable if it is unreasonable.

A second possible effect of Rhebergen is that the functionalist approach will capture a larger range of restrictive clauses. Recall that the test under the functionalist approach captures even those clauses that “attempt to” restrain trade. Although only time will tell exactly what type of clause this will apply to, proactive employers will want to think carefully about and exercise caution in imposing post-employment burdens on employees, lest they be deemed non-competition clauses.

[1] Shafron v KRG Insurance Brokers (Western) Inc. 2009 SCC 6 at para 6

[2] Aurum Ceramic Dental Laboratories Ltd. v Hwang (1998) 77 A.C.W.S. (3d) 161 (BC SC) (“Aurum”) at para 11

[3] Rhebergen v Creston Veterinary Clinic Ltd., 2014 BCCA 97 (“Rhebergen”)

[4] Ibid, at para 29

[5] Ibid

[6] Ibid, at para 42

[7] Ibid, at para 43

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Shafik Bhalloo
Monday, September 29th, 2014    Posted by Shafik Bhalloo (posts) and Alisha Parmar (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.
Alisha Parmar
Alisha joined Kornfeld LLP as an associate in 2015 after completing her articles with the firm.



In today’s workplace, privacy is an evolving issue and Canadian privacy law is developing rapidly. Perhaps surprisingly, only a handful of Canadian jurisdictions, (including British Columbia, Saskatchewan, Manitoba and Newfoundland) have privacy legislation that creates a statutory tort or civil right of action for invasion of privacy. Until recently, most Canadian jurisdictions could only rely on legislative schemes that applied in very specific contexts – there was no general remedy for an invasion of privacy, unless the claimant managed to successfully establish the existence of a common law right to bring a civil action.

That changed when the common law tort of invasion of privacy was given teeth by the Ontario Court of Appeal in Jones v Tsige, 2012 ONCA 32 (“Jones”), wherein the Court definitively recognized the common law cause of action for intrusion upon seclusion. In Jones, the tort of intrusion upon seclusion enabled the plaintiff to recover not insignificant damages for the invasion of her privacy where no legislative scheme applied and where she had suffered no pecuniary loss.

But the bite of Jones and the tort of intrusion upon seclusion do not stop there. This year, the Ontario Superior Court of Justice relied on Jones to certify a class action proceeding against an employer for, inter alia, vicarious liability of an employee’s tort of intrusion upon seclusion. While the case, Evans v The Bank of Nova Scotia, 2014 ONSC 2135 (“Evans”), has yet to proceed to trial, the decision is one to watch out for. Whether or not the employer is ultimately found liable for the employee’s breach of privacy, Evans serves as a reminder that the law around breach of privacy is progressing swiftly and that employers must keep up.


The Facts

The plaintiff, Ms. Jones, and the defendant, Ms. Tsige, were both employees of the Bank of Montreal (“BMO”). Another coincidental common factor was that Ms. Jones’ former husband had formed a common law relationship with Ms. Tsige. However, Ms. Jones and Ms. Tsige did not know each other, and they worked at different branches of the BMO in different positions.

By virtue of her position with the BMO, Ms. Tsige had access to Ms. Jones’ personal information, and on at least 174 occasions, using her computer at her workplace, Ms. Tsige did in fact access Ms. Jones personal information. The information included Ms. Jones’ date of birth, marital status, language spoken, residential address, and details of her financial transactions in her personal accounts with the BMO.

The BMO discovered Ms. Tsige’s activities and confronted her. Ms. Tsige admitted to the BMO that she had no legitimate reason for accessing Ms. Jones’ personal information. Instead, Ms. Tsige explained she had been accessing Ms. Jones’ information since she was in a financial dispute with her common law spouse (Ms. Jones’ former husband) and wanted to find out if he was paying Ms. Jones child support. Notably, Ms. Tsige did not make any copies of or disseminate Ms. Jones’ personal information.

The BMO disciplined Ms. Tsige by meting out a five-day suspension and denying her a yearly bonus. The BMO also issued her a warning that future repetition of her conduct would result in termination of her employment. Ms. Tsige was asked to review and discuss the BMO privacy principles and standards.

The Ontario Superior Court

Ms. Jones lodged an action in the Ontario Superior Court of Justice asserting that her privacy interest in her confidential banking information was “irreversibly destroyed” and claimed damages of $70,000 for invasion of privacy and breach of fiduciary duty, and punitive and exemplary damages of $20,000 against Ms. Tsige.

The Court held there was no fiduciary duty owed by Ms. Tsige to Ms. Jones and dismissed the breach of fiduciary duty claim, finding there was no fiduciary relationship between them in the traditional or non-traditional sense.

With respect to the invasion of privacy claim, the Court rejected the notion that in Ontario a common law tort of invasion of privacy exists. As a result, the privacy claim was also dismissed. The Court stated that in spite of the dismissal, Ms. Jones was not without remedy because she could bring an action for invasion of privacy under the federal Personal Information Protection and Electronic Documents Act, 2000 c. 5 (“PIPEDA”).

The Ontario Court of Appeal

Ms. Jones appealed the Superior Court’s ruling to the Ontario Court of Appeal only on the ground that Ontario law does not recognize the tort of invasion of privacy. The Court of Appeal reversed the lower Court’s decision, recognized the tort of intrusion upon seclusion, and awarded Ms. Jones damages.

In order to come to the conclusion that the tort of intrusion upon seclusion exists in Ontario, the Court of Appeal conducted an extensive review of Canadian, American, and English jurisprudence on the tort of invasion of privacy. The Court found the comments of Professor Prosser particularly compelling, and stated that if Ms. Jones did have a cause of action for the invasion of her privacy, it would fall in Professor Prosser’s first category of invasion of privacy, namely intrusion upon seclusion.[1]

For her case, Ms. Tsige submitted that the existing Ontario and federal legislative framework addressing privacy is an adequate basis for the Court to refuse to recognize the emerging tort of intrusion upon seclusion. To that end, Ms. Tsige argued that expansion of the law in the area should be left to Parliament and the legislature.

The Court of Appeal considered and rejected this argument, pointing out the various deficiencies in the legislative framework with respect to Ms. Jones’ case. Namely, the legislation that Ms. Jones could use, PIPEDA, only deals with “organizations” that are within federal jurisdiction and does not address the existence of a civil cause of action for invasion of privacy within provincial jurisdiction. In addition, Ms. Jones would only be able to use PIPEDA to lodge an action against the BMO, not Ms. Tsige, and the statute would not permit her to recover damages. Further, the Court of Appeal identified that existing Ontario legislation does not provide for a private cause of action between individuals; it merely addresses individual privacy rights in the context of governmental and other public institutions.

The Court of Appeal then confirmed the existence of a right of action for intrusion upon seclusion, reasoning as follows:

Recognition of such a cause of action would amount to an incremental step that is consistent with the role of this court to develop the common law in a manner consistent with the changing needs of society.

For over one hundred years, technological change has motivated the legal protection of the individual’s right to privacy. In modern times, the pace of technological change has accelerated exponentially…

It is within the capacity of the common law to evolve to respond to the problem posed by the routine collection and aggregation of highly personal information that is readily accessible in electronic form. Technological change poses a novel threat to a right of privacy that has been protected for hundreds of years by the common law under various guises and that, since 1982 and the Charter, has been recognized as a right that is integral to our social and political order.

The Legal Elements of Intrusion upon Seclusion

The Ontario Court of Appeal expressly adopted the key features of intrusion upon seclusion as delineated in the Restatement (Second) of Torts (2010). The legal elements are that:

  1. The defendant’s conduct must be intentional, which includes reckless conduct;
  2. The defendant must have invaded, without lawful justification, the plaintiff’s private affairs or concerns; and
  3. A reasonable person would regard the invasion as highly offensive causing distress, humiliation, or anguish.

The Court of Appeal opined that recognizing intrusion upon seclusion as a cause of action does not pose a serious risk of opening the proverbial “floodgates”. The Court stated only “deliberate and significant invasions of personal privacy” are caught by the tort and not de minimus cases:

Claims from individuals who are sensitive or unusually concerned about their privacy are excluded: it is only intrusions into matters such as one’s financial or health records, sexual practices and orientation, employment, diary or private correspondence that, viewed objectively on the reasonable person standard, can be described as highly offensive.

Nonetheless, the Court indicated that a plaintiff is not required to establish actual loss or damages as part of the cause of action. In this respect, the tort of intrusion upon seclusion is similar to the statutory causes of action for invasion of privacy which exist under the legislative schemes implemented in the four provinces, including British Columbia.

Having said this, the Court stated that where the plaintiff has suffered no pecuniary loss, only “symbolic” or “moral” damages are appropriate to acknowledge the wrong done. After considering Ontario case law and the Manitoba Privacy Act, the Court of Appeal established the upper range for damages where no pecuniary loss is suffered at $20,000. The Court then awarded Ms. Jones $10,000, the mid-point of the range, stating that Ms. Tsige’s conduct was “highly offensive to the reasonable person and caused humiliation, distress and anguish”, but that it did not qualify as “exceptional circumstances” meriting an award of punitive or exemplary damages – those awards were to be left for “truly exceptional circumstances”.


The Facts

Evans also involves another major bank, the Bank of Nova Scotia (“BNS”), where an employee illegitimately accessed customer information. The employee, Mr. Wilson was a mortgage administration officer for the BNS, and as such had access to highly confidential customer information.

Over the course of approximately one year, Mr. Wilson accessed the files of 643 customers of the BNS and forwarded private information to his girlfriend. His girlfriend then distributed the information to individuals who used it to commit identity theft and other fraud. Unlike Jones, it was law enforcement and not the bank that uncovered the scheme. The arrangement and Mr. Wilson’s involvement was exposed by the Calgary Police in the course of executing a search warrant against individuals who were attempting to use the information to perpetrate fraud in Alberta. Mr. Wilson was confronted and confessed to improperly printing and accessing customer profiles for individuals who had applied for mortgages.

The BNS gave notice to the 643 individuals whose profiles had been accessed by Mr. Wilson (the “Notice Group”). Over 130 individuals from the Notice Group have since informed the BNS that they have been victims of identity theft or fraud. The BNS compensated those individuals for their financial losses and offered each individual in the Notice Group a complimentary subscription to credit monitoring and identity-theft protection service.

In spite of these efforts, the BNS, in addition to Mr. Wilson, was named as a defendant in a class action, with the class being the entire Notice Group. The Ontario Superior Court certified the Notice Group’s class action for, inter alia, the BNS’ vicarious liability for intrusion upon seclusion.

Vicarious Liability and Intrusion Upon Seclusion

The Ontario Superior Court relied on the Supreme Court of Canada’s decision Bazley v Curry, [1999] SCR 534 (“Bazley”) for the rationale to impose vicarious liability on an employer. In Bazley, McLaughlin J (as she then was) stated:

The fundamental question is whether the wrongful act is sufficiently related to conduct authorized by the employer to justify the imposition of vicarious liability…

In determining the sufficiency of the connection between the employer’s creation or enhancement of the risk and the wrong complained of, subsidiary factors may be considered. These may vary with the nature of the case. When related to intentional torts, the relevant factors may include, but are not limited to, the following:

    1.  the opportunity that the enterprise afforded the employee to abuse his or her power;
    2.  the extent to which the wrongful act may have furthered the employer’s aims (and hence be more likely to have been committed by the employee);
    3.  the extent to which the wrongful act was related to friction, confrontation or intimacy inherent in the employer’s enterprise;
    4.  the extent of power conferred on the employee in relation to the victim;
    5.  the vulnerability of potential victims to wrongful exercise of the employee’s power.

[Emphasis in original]

The Ontario Superior Court further specified that “vicarious liability ‘is strict, and does not require any misconduct on the part of the person who is subject to it’: Straus Estate v Decaire, 2011 ONSC 1157, 84 C.C.L.T. (3d) 141 at para. 49.”

Applying this legal test to the conduct of the BNS, the Court found that, at least to the extent required to certify the class action, the BNS had enabled Mr. Wilson to commit the tort of intrusion upon seclusion:

[BNS] created the opportunity for Wilson to abuse his power by allowing him to have unsupervised access to customer’s private information without installing any monitoring system… Wilson was given complete power in relation to the victims’ (customers) confidential information, because of his unsupervised access to their confidential information. Bank customers are entirely vulnerable to an employee releasing their confidential information. Finally, there is a significant connection between the risk created by the employer in this situation and the wrongful conduct of the employee.

Furthermore, the Court’s decision to certify the class action for the tort of intrusion upon seclusion was not influenced by the BNS’ admission of responsibility to compensate the Notice Group for any financial losses. The BNS submitted that it accepted liability for the pecuniary losses of the individuals, as evidenced by the BNS’ willingness to financially compensate the members of the Notice Group that came forward as being victims of fraud. The Court refused to accept the BNS’ argument that it was not liable for further damages through vicarious liability for the tort of intrusion upon seclusion. Conversely, the Court distinguished the two types of damages and stated that the BNS’ “admission of responsibility to pay for the pecuniary damages suffered is a different situation from the absence of claim for compensatory damages”.


Jones and Evans raise a number of thought-provoking issues for employers to consider, and the ramifications of the two cases extend well beyond Ontario.

Though it has yet to proceed to trial, Evans clearly brings to light the necessity of employers to keep up with the demands of privacy law. Employers who are neglectful in this regard may be held liable for not only the pecuniary damages associated with illegitimate access or use of private information, but also the moral or compensatory damages that may flow from a successful claim of vicariously liability for intrusion upon seclusion or applicable statutory causes of action for invasion of privacy.

In an increasingly technological world, employers have the responsibility to adequately supervise employees in their access to confidential or private information when such access is granted by virtue of employment. To this end, employers should have up-to-date privacy policies in place and ensure that employees are aware of what constitutes unauthorized access or use of private information. Employers should take active measures to ensure that these policies are implemented and followed, and it is recommended that the policies include mechanisms to monitor employee access to private information in order to identify potential abuse. Being proactive and having effective policies in place may assist employers in decreasing liability in the event that a claim of vicarious liability for an invasion of privacy is brought against the employer, or, in any event, may reduce the number and severity of potential claims by exposing unauthorized access sooner rather than later.

In addition, while the courts in British Columbia are not bound by the decisions of Ontario courts, the decision of the Ontario Court of Appeal in Jones and that of the Ontario Superior Court in Evans may still be relied upon as persuasive authority. In particular, the two decisions may be used to delineate the scope of privacy protection afforded in other jurisdictions, including provinces with general privacy legislation, since “privacy” is not defined in the statutes.

Moreover, Jones is a well-reasoned decision with an extensive overview of the relevant jurisprudence, legislation and authoritative academic literature on the tort of invasion of privacy. The Ontario Court of Appeal took judicial notice of the role of technological change and the growing threat it poses for privacy, making a highly persuasive case for other courts to “develop the common law in a manner consistent with changing society”.

Finally, the tort of intrusion upon seclusion may affect individuals outside of Ontario even before a decision is made to import the new cause of action to other jurisdictions. The Notice Group in Evans includes individuals who are residents of British Columbia and New Brunswick. The BNS attempted to argue that as against those 35 individuals, the claim of vicarious liability for intrusion upon seclusion could not disclose a reasonable cause of action, since the two jurisdictions have not yet recognized the tort.

The Ontario Superior Court chose not to preclude these individuals from utilizing the cause of action and instead commented that “[w]hile the Courts in British Columbia and New Brunswick have not as of yet recognized the tort of intrusion upon seclusion, I was not given caselaw to suggest that they have definitively shut the door on this cause of action.” In the end, the courts of British Columbia may decide to open the door to intrusion upon seclusion, and employers should be prepared for if, and when, they do.

[1] William Prosser, Law of Torts, 4th ed. (West Publishing Company, 1971) at p. 389:

  1. Intrusion upon the plaintiff’s seclusion or solitude, or into his private affairs.
  2. Public disclosure of embarrassing private facts about the plaintiff.
  3. Publicity which places the plaintiff in a false light in the public eye.
  4. Appropriation, for the defendant’s advantage, of the plaintiff’s name or likeness.


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