Posts Tagged ‘employee’

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 comes to Kornfeld LLP from University of British Columbia as an Articling Student. Her primary area of interest lies in: general corporate commercial law.

 

INTRODUCTION

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.

JONES V TSIGE

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”.

EVANS V THE BANK OF NOVA SCOTIA

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”.

COMMENTS

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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Shafik Bhalloo
Tuesday, August 6th, 2013    Posted by Shafik Bhalloo (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.

Limiting Common Law Notice in Employment Contracts

By Shafik Bhalloo and Devin Lucas

It is settled law in Canada that an employer may displace an employee’s right under the common law to reasonable notice of termination by contracting to a lesser notice or severance entitlement. However, the notice or severance period must meet the statutory notice requirements outlined in the applicable provincial employment standards legislation; otherwise it will be of no effect. In British Columbia for instance, Section 4 of the Employment Standards Act provides that the requirements of the Act are minimum requirements and any agreement to waive those requirements has no effect In Machtinger v. HOJ Industries Ltd.[1], where the employer had contracted to give its employees notice or severance below the minimum provided in the Ontario Employment Standards Act, the Supreme Court of Canada declared the provision null and void for all purposes and held that the provision could not be used to interpret the parties’ intentions with respect to notice entitlement upon termination. The Court then went on to conclude that the employees were entitled to reasonable notice because the presumption of reasonable notice was not rebutted. In so concluding, the Court reasoned that such a conclusion was consistent with the legislative intent of the Act which expressly preserved the civil remedies otherwise available to an employee against his or her employer and provided employers an incentive to comply with the minimum statutory provisions of the Act. Not only must the notice provision comply with the minimum applicable employment standards legislation, it must be drafted carefully if the employer is to successfully limit the common law notice. In British Columbia, in McLennan v. Apollo Forest Products Ltd.[2], the province’s Supreme Court considered a wrongful dismissal action brought by Marvin McLennan, a former “bin chaser” at a sawmill.  Part of Mr. McLennan’s employment contract was contained in an employee handbook.  The handbook contained the following termination provision:

The terms and conditions of employment at Apollo Forest Products Ltd. are in accordance with the Employment Standards Act and other legislation of the Province of British Columbia governing the Employer/Employee relationship in the workplace.

Upon being dismissed, Mr. McLennan brought a wrongful dismissal action against his employer arguing that he was entitled to common law severance pay.  In response, the employer argued that the two weeks’ pay that was provided as severance pay pursuant to the Employment Standards Act[3] was adequate.  The B.C. Supreme Court held that the express provisions of the contract did not restrict the notice to the minimum set out in the Employment Standards Act; therefore, making it necessary and appropriate for the Court to determine the reasonable notice period to which the employee was entitled at common law.

McLennan provides support for the proposition that an employment contract, which incorporates provisions of employment standards legislation by reference, will not be sufficient to provide the clarity of intention required to rebut the presumption that reasonable notice in accordance with the common law applies.  In order to do so, the contract would have to go further and clearly limit the reasonable notice period to the applicable statutory legislation.

Recommendations for Employers

It is recommended that employers, when attempting to limit common law notice or severance, do not violate the minimum provincial employment standards legislation. Where the employer is trying to limit the notice to the minimum in the employment standards legislation, it is recommended that the employer draft the limiting clause in very clear and unambiguous terms limiting to such statutory notice or payment in lieu of notice.


[1] [1992] 1 S.C.R. 986

[2] 1993 CarswellBC 1250.

[3] R.S.B.C. 1996, c. 113.

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Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment | ....
Shafik Bhalloo
Tuesday, October 9th, 2012    Posted by Shafik Bhalloo (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.

*By Devin Lucas and Shafik Bhalloo

In Fasken Martineau DuMoulin LLP v. British Columbia (Human Rights Tribunal)[1], the equity partner, John Michael McCormick, entered into a partnership agreement with Fasken Martineau DuMoulin LLP, an international law firm operating as an extra-provincial limited liability partnership registered pursuant to the Partnership Act of British Columbia. Under this agreement, which governs the relationship of all of Fasken’s partners, McCormick was required to retire as an equity partner on January 31, 2011, the financial year end of the firm in which he turned 65.

The partnership agreement provided at section 9.2:

(a) Each Equity Partner shall retire as an Equity Partner at the end of the Year in which the Partner reaches the age of 65, but as provided in paragraphs (d) and (e) of this Section 9.2 may be permitted to continue working with the Firm.

(b) A Partner who retires from the Firm shall be deemed to have withdrawn from the Firm as at the date of his or her retirement, which date shall be his or her date of withdrawal.

(c) Upon reaching the age of 62, each Partner shall prepare and deliver to the Firm Managing Partner a practice transition plan.

(d) Agreements for working past age 65 are at the discretion of the firm Managing Partner and will be the exception rather than the rule. The criteria for approval shall include the value of the individual in coaching, business development, client relations, mentoring and community profile. Such agreements shall either be approved by the Board or be within any written policy established by the Board for this purpose.

(e) Partners who wish to continue in the practice of law with the Firm after age 65 may enter into an individual arrangement with the Firm as an employee or a Regular Partner as determined by the Firm Managing Partner and, if the Firm Managing Partner so decides, such individual may have the title of “Counsel” to the Firm. The Firm Managing Partner may at any time on three months’ prior written notice revoke, in his or her discretion, the right of such individual to continue in the practice of law with the Firm, whether as employee or Regular Partner, or to be Counsel to the Firm.

In December 2009, McCormick filed a complaint with the Human Rights Tribunal alleging that Fasken discriminated against him by forcing his retirement as an equity partner in 2011, contrary to s. 13 of the Human Rights Code of British Columbia.

In response, Fasken brought an application to dismiss the complaint pursuant to ss. 27(1)(a) and (c) of the Code, on the basis that that the Tribunal did not have jurisdiction to hear the complaint and there was no reasonable prospect that it would succeed.  The root of Fasken’s argument was that McCormick was not an employee of the firm and there was no employment relationship that could be the subject of a complaint under s. 13.

The Tribunal ruled against Fasken stating that it had jurisdiction over the complaint on the ground that the firm, for the purpose of the Code, employed McCormick.  According to the Tribunal, in the context of human rights legislation, a partnership may be considered as a separate legal entity from its partners and as the employer of a partner.

Fasken appealed the decision to the British Columbia Supreme Court claiming that the Tribunal did not have jurisdiction to hear the complaint, since in law a partnership is not a separate entity from its partners, and cannot in law employ a partner.  The chambers judge upheld the Tribunal’s ruling. The chambers judge held that that the governance and management system of the firm met the criteria of an employment relationship for purposes of the Code, applying factors of “utilization”, “control”, “financial burden” and “remedial purpose” as held in Crane v. British Columbia (Ministry of Health Services).[2]

Once again, Fasken appealed the decision to the British Columbia Court of Appeal.  The Court of Appeal in reversing the Tribunal and chamber’s judge decisions stated:

…the principles of interpretation of the Human Rights Code, R.S.B.C. 1996, c. 210, which mandate a broad, liberal approach consistent with its remedial purposes, do not change underlying legal relationships to the extent found by the Tribunal and the chambers judge.  In particular, they do not extend to overriding the fundamental and well-established principle of law that a partnership is not, in law, a separate entity from, but is a collective of, its partners, and as such, cannot, in law, be an employer of a partner.

The Court of Appeal also observed that a partnership may employ other persons and, in those employment relationships, it normally makes no legal or commercial difference whether the partnership is seen as a separate body or a collective of the partners.  According to the Court of Appeal, third parties, including employees of the partnership, are generally entitled to the same rights and obligations as against a partnership as they are against a corporation or a proprietorship, including protection from discriminatory employment practices. The court then drew the distinction between that of an employer-employee relationship and the relationship among all of the partners.  The Court said:

In this case, one of the supposed parties to the relationship, the firm, while a “person” for the purpose of the Code, is not separate from any individual equity partner such as Mr. McCormick.  The only relationship that exists, in law and in fact, is among Mr. McCormick and all of the other partners of the firm. And the relationship among them cannot be one of employer and employee, as they are all equal in their rights and obligations with respect to the business of the firm.

It is important to note that McCormick was one of approximately 60 full-equity partners at Fasken. McCormick has an ownership interest in the firm; therefore, he is entitled to a share of the profits of the firm and is personally liable for its debts. Further, he is permitted to participate in the meetings of the partners and to vote on various issues affecting the firm’s management. Conversely, employees do not enjoy any of these rights or obligations.

It remains to be seen, however, whether or not a partnership would be considered as a legal entity distinct from its non-equity partners for the purposes of human rights legislation?  If a partnership may be treated as a separate legal entity from its non-equity partners, does it then follow that a non-equity partner is an employee of a partnership, which purportedly, he or she is a member?  Applying the factual criteria of “utilization”, “control”, “financial burden”, or “remedial purpose” from Crane would appear to affect equity partners differently than non-equity partners.  The crux of this distinction is whether the controls exercised by the firm’s management apply equally to all of the partners.  If the controls are applied differently based on whether a partner is an equity or non-equity partner, it stands to reason that this would vary the relationship from one of partners collectively running a business to one of employment by equity partners over non-equity partners.  This is still an open question at this point; however, it is an interesting issue that could have wide-ranging implications for partnerships and non-equity partners reaching the age of mandatory retirement.


[1] 2012 BCCA 313

 

[2] 2005 BCHRT 361, rev’d on other grounds, 2007 BCSC 460.

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Shafik Bhalloo
Wednesday, September 19th, 2012    Posted by Shafik Bhalloo (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.

 

When a manager is not a manager: Employers beware of liability for overtime or extra pay

                                                                        By Shafik Bhalloo*

 

Section of the British Columbia Employment Standards Act (the “Act”) delineates overtime wage requirements for employees who work over 8 hours per day or 40 hours per week.  It states:

40. (1) An employer must pay an employee who works over 8 hours a day, and is not working under an averaging agreement under section 37,

(a) 1 1/2 times the employee’s regular wage for the time over 8 hours, and

(b) double the employee’s regular wage for any time over 12 hours.

(2) An employer must pay an employee who works over 40 hours a week, and is not working under an averaging agreement under section 37, 1 1/2 times the employee’s regular wage for the time over 40 hours.

(3) For the purpose of calculating weekly overtime under subsection (2), only the first 8 hours worked by an employee in each day are counted, no matter how long the employee works on any day of the week.

However, section 40 of Act does not apply to employees who are “managers” as Section 34(f) of the Employment Standards Regulation (the “Regulation”) specifically excludes managers (and some other categories of employees) from hours of work and overtime requirements.  It states:

 

34. Part 4 of the Act does not apply to any of the following:

(f) a manager;

Having said this, simply calling an employee a “manager” will not exempt her from overtime compensation under Section 40 of the Act.  It is not the job title but the job duties that determine whether or not the employee is exempt from overtime compensation under the Act.  Section 1(1) of the Regulation provides an exclusive definition of  “manager” as follows:

1. (1) “manager” means

(a) a person whose principal employment responsibilities consist of supervising or directing, or both supervising and directing, human or other resources, or

(b) a person employed in an executive capacity;

In 429485 B.C. Limited Operating Amelia Street Bistro (“Amelia Street Bistro”)[1] the Employment Standards Tribunal considered several previous cases of the Tribunal on the definition of “manager” and concluded as follows:

The task of determining if a person is a manager must address the definition of manager in the Regulation….Typically, a manager has a power of independent action, autonomy and discretion; he or she has the authority to make final decisions, not simply recommendations, relating to supervising and directing employees or to the conduct of the business.  Making final judgments about such matters as hiring, firing, disciplining, authorizing overtime, time off or leaves of absence, calling employees in to work or laying them off, altering work processes, establishing or altering work schedules and training employees is typical of the responsibility and discretion accorded a manager.  We do not say that the employee must have a responsibility and discretion about all of these matters.  It is a question of degree, keeping in mind the object is to reach a conclusion about whether the employee has and is exercising a power and authority typical of a manager.  It is not sufficient simply to say a person has that authority.  It must be shown to have been exercised by that person.

If you are an employee hired in a “managerial” or “executive” position, you should examine your day-to-day duties and determine whether your primary job duties are supervisory or managerial  in character – do you have authority to make final decisions?  Do you supervise and direct employees?  Do you hire and fire employees?  Do you discipline employees?  Do you have discretion and authority to independently set or change employees’ schedules and make decisions to call in or layoff employees?  If your primary job duties includes some or most of these tasks, you may be a manager but if your primary duties do not include these tasks or if you rarely or irregularly perform these tasks, you may not be a manager within the meaning of the Regulation.  In such case, you may be entitled to overtime pay for any extra hours you work over and above 8 in a day and 40 in a week.

If, however, you satisfy the definition of “manager” in the Regulation, is your employer exempt from paying you any additonal pay for extra hours worked?  The Tribunal, in a few cases, has indicated that some managers can claim pay at “straight time” rates for extra hours worked[2] – that is, beyond 8 hours daily or beyond 40 hours weekly, if working those extra hours was not an agreed term of your employment relationship or included in your base pay.

If you are an employer desiring to curtail your exposure to pay extra to your manager for any additional hours of work, then you should consider have a binding employment contract in place that specifically addresses this issue.  More particularly, you want an employment contract that clearly specifies that the manager is expected to work in excess of 8 hours in a day and 40 hours in a week and that the manager’s base salary includes or is intended as compensation for all hours worked.


[1] BC EST #D479/97

[2] Re Fort St. John, BC EST # D265/03

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Shafik Bhalloo
Tuesday, August 23rd, 2011    Posted by Shafik Bhalloo (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.

The Employment Standards Act (“the Act”) delineates the minimum standards that apply in most workplaces in British Columbia. It governs the employment of all employees -casual, probationary or temporary- within provincial jurisdiction, whether employed in a full time or part time capacity.

The Act will not apply where the employee is a person excluded from the provisions of the Act under Employment Standards Regulation (“the Regulation”) such as doctors, lawyers, architects and others whose professions are specifically regulated by provincial legislation. Also other non-professionals, under specific circumstances, are excluded from the application of the Act. These include, but are not limited to, persons engaged in government sponsored work programs, sitters, and newspaper carriers.

The Act also does not apply to employees whose work falls within federal jurisdiction such as banking, defence, interprovincial or international transportation, interprovincial and international shipping, air transport as well as employment with the federal government and crown corporations.

If you are or have been a director or officer of a corporation within provincial jurisdiction, it is important that you understand your potential exposure under section 96 of the Act. Section 96(1) states:

 

Corporate officer’s liability for unpaid wages

96 (1) A person who was a director or officer of a corporation at the time wages of an employee of the corporation were earned or should have been paid is personally liable for up to 2 months’ unpaid wages for each employee.

 

Under section 96(1) each director or officer of the corporate employer is liable personally to pay up to a maximum of two months’ wages for each employee, even where more than two months’ wages is owed.

This section only comes into play where the employee successfully lodges a complaint under the Act against her corporate employer for the latter’s failure to pay her wages and the Director of Employment Standards issues a determination against the employer which determination is not satisfied by the employer. In such case, the Director of Employment Standards will employ section 96(1) to issue a determination against one or more directors or officers of the corporate employer to obtain payment of wages owed to the employee by the corporate employer.

The director or officer, to be liable under section 96(1), must have been a director or officer of the corporate employer, at the time the wages were earned or should have been paid by the corporate employer.

It is also important to note that where there is more than one director or officer, nothing in section 96(1) or in any other section of the Act requires the Director of Employment Standards to apportion, pro-rate or divide the liability for wages owed to the employee between the directors or officers[1].

Where the employee is owed more than two months’ wages, the Director of Employment Standards may issue a determination against each director and officer of the corporate employer for two months wages. Just because one of the Director’s or officer’s pays the employee two months’ wages under a section 96 determination does not extinguish or discharge the liability of other directors and officers under their section 96 determinations, since the employee is still owed wages. In such case, since the Director of Employment Standards is not required to collect equally from all directors and officers, he may collect from the other directors or officers only that which is necessary to pay the balance of wages outstanding and no more. For example, if the employee is owed 3 months’ wages, once the director has collected from the first director 2 months’ wages, he may only collect one additional month’s wages from the second director.

What constitutes wages for the purpose of section 96? Wages, under section 96, refers to normal wages including applicable vacation pay. It does not include length of service, termination pay or money payable in relation to individual or group terminations, if the corporation is in receivership.[2]

Directors and officers are also not personally liable for (i) wages of an employee if the corporate employer is subject to action under section 427 of the Bank Act (Canada) or to a proceeding under an insolvency Act[3], (ii) vacation pay that becomes payable to an employee after they cease to hold office[4], or (iii) money that remains in an employee’s time bank after they cease to hold office[5].

Pursuant to section 45 of the Regulation, directors and officers of charities are exempt from the liability created in section 96 of the Act, if they only receive reasonable out-of-pocket expenses and no other remuneration for services performed for the charity. If you are not such a director or officer and section 96 of the Act applies to you, you may want to ask the corporate employer whose Board you are serving on if they have a directors and officers “error and omissions” insurance that sufficiently protects you from such liability.  Such enquiry is advisable in advance of getting on the Board of any corporate employer.

 

 


[1] Rajinder Brad, a Director or Officer of Skynet Travel Inc., BC EST #D056/07

[2] Section 96(2)(a) of the Act

[3] Section 96(2)(b) of the Act. Section 1 of the Act defines insolvency Act” to mean “Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or the Winding-up and Restructuring Act (Canada)”

 

[4] Section 96(2)(c) of the Act

[5] Section 96(2)(d) of the Act

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Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment | ....