Posts Tagged ‘employment law’

Shafik Bhalloo
Monday, January 7th, 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.

By Shafik Bhalloo

In a recent criminal decision, R. v. Cole[1], the Supreme Court of Canada provided much needed guidance on when an employee may reasonably expect  data stored on his work issued computer will be treated as private. In this case, a high school teacher, who also worked with the school’s IT department in supervising computer use by students and staff, had authority to remotely access the data stored on student computers connected to the school network and accessed a student’s email account. The teacher found nude photographs of another student and copied them onto the hard drive of his school-issued laptop. Under the school’s Acceptable Use Agreement (“UA”), the teacher was allowed to use his work-issued laptop for both work and personal purposes. When a technician employed by the school, while performing regular maintenance work on the teacher’s laptop, discovered a hidden folder on the teacher’s laptop containing the said photographs, he notified the school’s principal. Pursuant to the latter’s instructions, the technician copied the pictures to a compact disc. The principal, subsequently, seized the laptop and, thereafter, the technician copied, on a second compact disc, temporary internet files from the laptop. The laptop was then turned over to the police, together with the two discs. The police, without obtaining a search warrant in advance, examined the contents of the laptop and the two discs and created a mirror image of the laptop’s hard drive. The teacher was later charged with possession of child pornography.

At trial, the teacher applied and was successful under section 8 and subsection 24(2) of the Canadian Charter of Rights and Freedoms to have the evidence against him excluded on the basis that it was obtained in a manner violating his constitutional rights under the Charter. On appeal by the Crown, the Ontario High Court of Justice reversed the lower court’s decision, finding that the trial judge erred in law in concluding that Mr. Cole had an objectively reasonable subjective expectation of privacy stating that the judge erroneously ignored the following contextual factors:

  • The teacher’s acceptance of the employer’s UA as terms of his employment, which afforded him knowledge that the data and information on the computer and drives assigned to him by the employer were not private;
  • The teacher also worked with the school’s IT department staff to supervise and monitor both the computer use by students and staff of the high school and the overall integrity of the school’s network, and, in this supervisory capacity, the teacher had domain-wide privileges which demonstrated to him that the data on his computer drives was accessible by employer representatives such as himself;
  • In light of the first two points above, indicators such as the teacher’s password and his exclusive possession of the laptop as part of his employment were not privacy indicators;
  • The teacher’s knowledge that the hardware and software in and connected to the laptop belonged to the employer.

On appeal by the teacher, the Court of Appeal of Ontario set aside the latter decision in part holding that the disc containing the temporary internet files, the laptop and the mirror image of its hard drive should be excluded. The Court of Appeal reasoned as follows:

[76] … the fact that the discs and laptop in this case had been lawfully seized by the principal and the school board and delivered to the police does not affect the continuing privacy expectations of the appellant. Police are not relieved from the stringent standard of obtaining judicial authorization to conduct a search or seizure based on reasonable and probable grounds, simply because they are provided with evidence in circumstances where the accused’s Charter rights were either not engaged or were not infringed in the initial gathering of that evidence….

[77] …The appellant’s privacy interest with respect to his laptop continued throughout its transfer to police, notwithstanding that it was the property of the school board, and already lawfully seized by them. Personal information was also stored on the laptop.

The police conducted a search and seizure of the laptop and seized the mirror image of the hard drive, capturing every piece of personal information the appellant may have stored on it, including the photographs of his wife, without a warrant.

[78] The appellant also had a privacy interest in his personal internet browsing history and what it revealed about his personal predilections and choices. In R. v. Morelli, 2010 SCC 8 (CanLII), [2010] 1 S.C.R. 253, at para. 3, the Supreme Court referred to this as ‘the electronic roadmap of your cybernetic peregrinations, where you have been and what you appear to have seen on the Internet’. Because the appellant had a continuing privacy interest in this information, the transfer of the disc with the temporary internet files to the police was a ‘seizure’ within the meaning of s. 8 of the Charter.

[79] The police search of the laptop and the disc with the temporary internet files is therefore prima facie unreasonable. The onus shifts to the Crown to establish that this warrantless search by police was nonetheless reasonable. There were no exigent circumstances. Both the school environment and the evidence were secure; the teacher was suspended and the police were in possession of the discs and the laptop. The school board had no authority to consent to the search. This warrantless search was not reasonable. Therefore, the police violated the appellant’s s. 8 rights when they searched the laptop and the disc with the temporary internet files.

However, the Court of Appeal viewed the disc containing images of the student differently, stating:

Given that the photographs were taken from the school’s network, using the school’s computer and were the subject of the privacy interest of a student, the appellant had no personal privacy interest in the data. The photographs were found by the technician in plain view, while engaged in permissible access. They were lawfully seized by the principal and transferred to police. As the functional equivalent of photographs in an envelope, the police did not need to conduct a further search of this evidence. Because the appellant had no privacy interest in the photographs themselves (as opposed to the presence of those photographs in the laptop), the delivery of the disc to police was not a seizure.

On Appeal by the Crown, the Supreme Court of Canada, while agreeing with the Court of Appeal that the teacher had a reasonable expectation of privacy in the circumstances and the police infringed the teacher’s privacy protected under section 8 of the Charter, allowed the appeal and set aside the decision of the Court of Appeal. In arriving at this conclusion, Mr. Justice Fish, writing for the majority of the Supreme Court, delineated the following instructive principles:

  • Whether at home or in the workplace, computers are reasonably used for personal purpose and contain information that is meaningful, intimate and touching on the user’s biographical core;
  • The user may reasonably expect privacy in the information contained on their computer particularly where personal use is permitted or reasonably expected;
  • While ownership of the computer and workplace policies are relevant considerations, neither is determinative of a person’s reasonable expectation of privacy;
  • The totality of all the circumstances will need to be considered to determine whether privacy is a reasonable expectation in any particular case;
  • Workplace policies and practices may diminish an individual’s expectation of privacy in a work computer; however they may not in themselves remove the expectation entirely;
  • A reasonable, though diminished expectation of privacy, is nonetheless a reasonable expectation of privacy, protected by s. 8 of the Charter and subject only to state intrusion under the authority of a reasonable law.

Applying the above principles to the facts in this case, Fish J. stated the operational realities of the teacher’s workplace consisted of factors that pulled in competing directions. In particular, Fish J. noted that while the written policy, and actual practice at work, permitted the teacher to use his work-issued laptop for personal purpose, the policy and technological reality deprived him of exclusive control and access to the personal information he recorded on the laptop. More particularly, Fish J. noted that the written policy of the school, of which the teacher was reminded by the principal annually, provided that the data and messages generated on or handled by the employer’s equipment was owned by the employer and he was aware that the contents of his hard drive were available to all other users and technicians with domain administration right. On the totality of the circumstances, Fish J. concluded that the teacher had a reasonable subjective expectation of privacy in his internet browsing history and the informational content of his work-issued laptop; it contained information that was meaningful, intimate and touching on his biographical core.

Having said this, however, the Supreme Court did not find the school to have acted unreasonably or in breach of s. 8 of the Charter when its technician inspected the teacher’s laptop in context of routine inspection or when the school subsequently seized the laptop at the instruction of the principal because the school’s principal had a statutory duty to maintain a safe school environment. However, the school’s lawful authority did not afford the police lawful authority to conduct a warrantless search and seizure of the computer material and examine its contents, according to the Supreme Court. In particular, Fish J. reasoned:

[67] In taking possession of the computer material and examining its contents, the police acted independently of the school board (R. v. Colarusso, 1994 CanLII 134 (SCC), [1994] 1 S.C.R. 20, at pp. 58-60). The fact that the school board had acquired lawful possession of the laptop for its own administrative purposes did not vest in the police a delegated or derivative power to appropriate and search the computer for the purposes of a criminal investigation.

[73] The school board was, of course, legally entitled to inform the police of its discovery of contraband on the laptop. This would doubtless have permitted the police to obtain a warrant to search the computer for the contraband. But receipt of the computer from the school board did not afford the police warrantless access to the personal information contained within it. This information remained subject, at all relevant times, to Mr. Cole’s reasonable and subsisting expectation of privacy.

Having found that the police breached the teacher’s privacy rights under section 8 of the Charter, Fish J. embarked on an inquiry under s. 24(2) of the Charter, namely, whether the unconstitutionally-obtained evidence by the police should be excluded. Here, Fish J. considered a three-part balancing test set out in the Supreme Court’s decision in R. v. Grant[2]. In particular, Fish J. considered (i) the seriousness of the Charter-infringing conduct of the police; (ii) the impact of the breach on the Charter-protected interest of the teacher; and (iii) the society’s interest in the adjudication of the case on its merits. In setting aside the decision of the Court of Appeal and allowing the unconstitutionally-obtained evidence, Fish J. stated with respect to the first part of the Grant test:

[84] Regarding the seriousness of the Charter-infringing conduct, the courts below focused on the actions of Detective Constable Timothy Burtt, the officer who took possession of the computer material, who searched the discs, and who sent the laptop away for forensic examination. The trial judge concluded that this officer’s actions were ‘egregious’ (para. 26), and the Court of Appeal considered his conduct serious enough to favour exclusion.

[85] I am unable to share either conclusion.

[86] The police officer did not knowingly or deliberately disregard the warrant requirement. As events were unfolding in this case, the law governing privacy expectations in work computers was still unsettled. Without the guidance of appellate case law, D.C. Burtt believed, erroneously but understandably, that he had the power to search without a warrant.

[87] He did not act negligently or in bad faith. Nor does his conduct evidence insensitivity to Charter values, or an unacceptable ignorance of Mr. Cole’s rights under the Charter. The officer did not rely exclusively, as the courts below suggested, on his mistaken belief that the ownership of the laptop was necessarily determinative. While this was an important factor underlying his decision not to obtain a search warrant, the officer also turned his mind to whether Mr. Cole had an expectation of privacy in the laptop (p. 130). He was alert to the possibility that the hard drive contained private or privileged material (pp. 130-31 and 164). And he testified that he intended to respect Mr. Cole’s privacy interest in this regard (p. 131).

[89] …Where a police officer could have acted constitutionally but did not, this might indicate that the officer adopted a casual attitude toward — or, still worse, deliberately flouted — the individual’s Charter rights (Buhay, at paras. 63-64). But that is not this case: The officer, as mentioned earlier, appears to have sincerely, though erroneously, considered Mr. Cole’s Charter interests.

[90] Accordingly, in my view, the trial judge’s finding of ‘egregious’ conduct was tainted by clear and determinative error (Côté, at para. 51). On the undisputed evidence, the conduct of the officer was simply not an egregious breach of the Charter. As earlier seen, the officer did attach great importance to the school board’s ownership of the laptop, but not to the exclusion of other considerations. He did not ‘confuse ownership of hardware with privacy in the contents of software’ (trial reasons, para. 29).

With respect to the second part of the Grant test, Fish J. stated:

[91] Turning then to the impact of the breach on Mr. Cole’s Charter-protected interests, the question relates to ‘the extent to which the breach actually undermined the interests protected by the right infringed’ (Grant, at para. 76). In the context of a s. 8 breach, as here, the focus is on the magnitude or intensity of the individual’s reasonable expectation of privacy, and on whether the search demeaned his or her dignity (R. v. Belnavis, 1997 CanLII 320 (SCC), [1997] 3 S.C.R. 341, at para. 40; Grant, at para. 78).

[92] In his s. 24(2)analysis, the trial judge neglected entirely to consider the diminished nature of Mr. Cole’s reasonable expectation of privacy. Likewise, the Court of Appeal overlooked the fact that the operational realities of Mr. Cole’s workplace attenuated the effect of the breach on his Charter-protected interests.

[93] Moreover, the courts below failed to consider the impact of the ‘discoverability’ of the computer evidence on the second Grant inquiry. As earlier noted, the officer had reasonable and probable grounds to obtain a warrant. Had he complied with the applicable constitutional requirements, the evidence would necessarily have been discovered. This further attenuated the impact of the breach on Mr. Cole’s Charter-protected interests (Côté, at para. 72).

Finally, with respect to the third part of the Grant test, Fish J. stated:

Finally, I turn to the third Grant inquiry: society’s interest in an adjudication on the merits. The question is ‘whether the truth-seeking function of the criminal trial process would be better served by admission of the evidence, or by its exclusion’ (Grant, at para. 79).

[95] Not unlike the the considerations under the first and second inquiries, the considerations under this third inquiry must not be permitted to overwhelm the s. 24(2) analysis (Côté, at para. 48; R. v. Harrison, 2009 SCC 34 (CanLII), 2009 SCC 34, [2009] 2 S.C.R. 494, at para. 40). They are nonetheless entitled to appropriate weight and, in the circumstances of this case, they clearly weigh against exclusion of the evidence.

[96] The laptop, the mirror image of its hard drive, and the disc containing Mr. Cole’s temporary Internet files are all highly reliable and probative physical evidence. And while excluding it would not “gut” the prosecution entirely, I accept the Crown’s submission that the forensic examination of the laptop, at least, is “critical”: the metadata on the laptop may allow the Crown to establish, for example, when the photographs were downloaded and whether they have ever been accessed.

[97] In sum, the admission of the evidence would not bring the administration of justice into disrepute. The breach was not high on the scale of seriousness, and its impact was attenuated by both the diminished privacy interest and the discoverability of the evidence. The exclusion of the material would, however, have a marked negative impact on the truth-seeking function of the criminal trial process.

For the above reasons, Fish J. did not exclude the evidence unlawfully obtained by the police.

While the case is a criminal one and engages an individual’s privacy rights under s. 8 of the Charter since it involves state (police) intrusion of an individual’s privacy rights, the privacy principles articulated by Fish J. will undoubtedly be considered by courts in future employment law cases and employers should be mindful of those principles in structuring their relationship with their employees.

It is recommended that employers should implement clear policies that define, in unequivocal terms, the employer’s expectations surrounding workplace computer use, including smartphone use, if employers provide such equipment to employees in an employment context. Although Fish J., in R. v. Cole, stated that workplace policies are not determinative of a person’s reasonable expectation of privacy, if properly drafted a workplace policy combined with consistent employer actions in the workplace, may diminish, objectively, the employee’s reasonable expectation of privacy. For example, where both the employer’s workplace policy and the employer’s actions in the workplace are consistent in prohibiting any personal use by employees of employer-issued computers or smartphones and where the employee has acknowledge receipt of employer’s policy that provides that any data sent, stored or received using the employer’s computer or smartphone is the property of the employer and the employer reserves the right to perform random checks or audits of the employee’s computer or smartphone use, the employee may be hard pressed to argue that he or she has a reasonable expectation of privacy.


[1] 2012 SCC 53

[2] 2009 SCC 32

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Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment | ....
Shafik Bhalloo
Tuesday, October 23rd, 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 Globex Foreign Exchange Corporation v. Kelcher[1], three employees, David Kelcher, Mark MacLean, and Luciano Oliverio entered into employment contracts with Globex Foreign Exchange Corporation, a business engaged in foreign currency exchange. In 2003, each employee signed a non-competition and non-solicitation agreement comprising restrictive covenants.  MacLean agreed to the restrictions as part of his initial employment. Both Kelcher and Oliverio agreed to the restrictions during their employment, but did not receive any additional benefits as a result. In March 2005, the three employees were asked to sign more burdensome non-competition and non-solicitation restrictive covenants.  Objecting to these new restrictive covenants, Kelcher resigned and MacLean was fired.  Oliverio signed the new agreement, but resigned shortly thereafter. All three employees joined a rival firm.  In April 2005, Globex filed suit, claiming damages from loss of clients.

The Alberta Court of Queen’s Bench ruled against Globex and held that MacLean had been wrongfully dimissed and was therefore relieved of the restrictive covenants he had consented to.  Further, the Court found that the restrictive covenants were unenforceable as against Kelcher and Oliverio for want of consideration, as the agreements were signed by both employees during the course of their employment, but had received nothing in return.  The Court found that consideration could be present in instances where there is mutual understanding between employer and employee that the employer will not exercise its right to lawfully terminate the employment if the employee agrees to the restrictive covenant; however, the Court found that such mutual understanding did not exist in this case. If such consideration had been present, the Court held that only Kelcher’s non-solicitation clause would have been enforceable because Oliverio’s non-solicitation clause was overly broad and thus unenforceable.

Globex appealed the decision to the Alberta Court of Appeal.  Madam Justice Hunt, writing for the majority, dismissed Globex’s appeal. In so holding, Madam Justice Hunt affirmed the trial court’s ruling that the wrongful dismissal of an employee will render that employee’s restrictive covenants unenforceable. 

Madam Justice Hunt provided a number of legitimate reasons for this longstanding principle of employment law.  The Court said:

Most particularly, to hold otherwise would reward employers for mistreating their employees. For example, an employer could hire a potential competitor, impose a restrictive covenant on the employee, then wrongfully dismiss her a short time later and take advantage of the restrictive covenant. This would be a highly effective, but manifestly unfair, way of reducing competition. A second justification (alluded to by Simon Brown L.J. in Rock Refrigeration) may be that enforcing a restrictive covenant in the face of wrongful termination prima facie negates the consideration (whether continued employment or something else) given by the employer to the employee when she accepted the restrictive covenant.

Madam Justice Hunt also affirmed the trial court’s conclusion that some fresh consideration must be provided by the employer when employees accept restrictive covenants during their employment.

In order for an employer to validly enforce a restrictive covenant against a departing employee, the Alberta Court of Appeal held that three criteria would have to be met.  First, the restrictive covenant has to be reasonable with respect to the geographic scope, length of time and the activity that is restricted.  Second, an employee must be dismissed either with cause or notice or, alternatively, the employee must have resigned. Third, if the employer imposes a more stringent restrictive covenant during the course of employment, the employer must provide fresh consideration such as a raise or bonus. Alternatively, there must be some understanding that the employment would continue as a result of the employee agreeing to the addition or amendment of the restrictive covenant.

This case provides a useful guide with respect to the factors a court will look at when determining the enforceability of restrictive covenants in employment agreements.


[1] 2011 ABCA 240

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Posted by Shafik Bhalloo (posts) | Filed under Corporate Governance, Labour & Employment | ....
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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Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment, Other | ....
Shafik Bhalloo
Monday, September 10th, 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 Shafik Bhalloo*

Like the mythical sasquatch, the Loch Ness monster, or the abominable snowman, most of us have heard of it and some of us have read about it, but never have we seen the remedy of reinstatement in section 79(2)(b) of the Employment Standards Act (the “Act”) actually occur.

Section 79(2)(b) provides:

79

(2) In addition to subsection (1), if satisfied that an employer has contravened a requirement of section 8 or 83 or Part 6, the director may require the employer to do one or more of the following:

(b) reinstate a person in employment and pay the person any wages lost because of the contravention

Colloquially described as a “make whole” remedy, section 79(2)(b) gives the Director of Employment Standards (the “Director”) the discretion to order an employer to reinstate an employee and pay he or she any lost wages, if the employer has contravened one or more of sections 8 (employment-related misrepresentations to the employee), 83 (termination of employment in retaliation for an employee’s enforcement or an inquiry as to his rights under the Act), or Part 6 of the Act (refusal to allow an employee to return to work following a statutorily mandated pregnancy leave[1], parental leave, family responsibility leave, compassionate care leave, reservists’ leave,  bereavement leave or jury duty).

 While reinstatement is not a remedy that is ordinarily available at common law, it is more commonly sought and awarded in a union context, where an employee grieves an unjust dismissal. This remedy, undoubtedly a powerful one if awarded, enables the employee to make up not only their past wage loss and to continue to receive the economic benefits of their employment in the future, but also restores any psychological benefits they derive from their job.  Therefore, the transference of the remedy of reinstatement from the union experience to the non-union sector in British Columbia, in the form of a statutory remedy under section 79(2)(b) of the Act, at first glance should be a welcome option for employees in the non-union sector as providing a comparable remedy to reinstatement available to their counterparts in the union sector.

However, in practice, in British Columbia, the statutory remedy of reinstatement has yet to make an appearance in an award by the Director or the Employment Standards Tribunal (the “Tribunal”), although dismissed employees have sought it in several cases. Partly, the absence of this remedy may be attributed to the limited circumstances in which it may be available or can be sought in the non-union sector in British Columbia, namely, it may only arise if the Director is satisfied that one or more of sections 8, 83 and Part 6 of the Act[2] were breached (limitations that do not exist in the union sector). It may also be that in some cases it is impossible or impractical to order reinstatement of the wrongfully discharged employee who otherwise satisfies one or more pre-requisites of the reinstatement remedy in section 79(2)(b) of the Act. Examples of this would include circumstances where the employer ceases operations[3] or the employee has secured alternate employment[4] after filing a complaint or left B.C., and not expressed any interest in being reinstated to their former position[5].

In such cases, there is an alternative “make whole” remedy that can be found under section 79(2)(c) of the Act, i.e. to pay a person compensation instead of reinstating the person’s employmentwhich the Director has been relatively more willing to award.  The Tribunal in Afaga Beauty Service Ltd.[6] delineated a list of non exclusive factors in determining appropriate compensation for loss of employment which included: “length of service with the employer, the time needed to find alternative employment, mitigation, other earnings during the unemployment, projected earnings from previous employment and the like.” While clearly not as extensive and as fulsome a remedy as reinstatement under section 79(2)(b) of the Act, the remedy under section 79(2)(c) seeks, as far as is economically possible, to return the employee to the position he or she would have been in had the employer’s misconduct not occurred. As described by the tribunal in Photogenis Digital Imaging Ltd./PDI Internet Café Incorporated[7], the compensation awarded under this section  “must be commensurate, in an economic sense, with reinstatement”.

Having said this, in my view, the apparent reticence of the Director in declining to grant the remedy of reinstatement cannot be fully attributed to the rationale offered earlier or the existence of the alternative to the remedy of reinstatement available in section 79(2)(c). If one refers to the Director’s online Interpretation Guidlines Manual (the “Guidlines”) for the Act, published on the website of the Employment Standards Branch[8], the following explanation in relation to the reinstatement remedy in section 79(2)(b) is offered:

Reinstatement is rarely appropriate as the relationship is usually too damaged for reinstatement to be successful. Therefore, to create a “make whole” solution to a contravention of these provisions, the director considers the following

  • wages lost; which may include wages from previous employer or due to missing another employment opportunity
  • recovery of reasonable out-of-pocket expenses caused by the contravention and the search for employment. Out-of-pocket expenses does not include the cost of obtaining legal advice, or of retaining legal counsel.

It would appear that the Director has a somewhat somber perspective on the reinstatement remedy in the Guidelines that favours the alternative in section 79(2)(c)-lost wages sans reinstatement. Admittedly, it is hard to refute that in most, if not all cases, where an employer has dismissed an employee the relationship between the parties is, at some level, bruised or fractured and there is undoubtedly a loss of trust and confidence between the parties and reluctance, whether large or small, by the employer to take the employee back even where a determination has been made that the employee was dismissed under harsh, unjust or unreasonable circumstances, contrary to one or more of sections 8, 83 or Part 6 of the Act.

In the cases considered in preparing for this article, it was difficult to find any one case that stood out as a clear example of a “relationship… too damaged for reinstatement” in contradistinction to the “ordinary” case of a bruised relationship between an employee and their employer who terminated their employment in contravention of the Act.  In a few cases the Tribunal delineated the Director’s reasons for the determination in greater detail offering more insight into why the Director decided against reinstatement such as in Photogenis Digital Imaging Ltd./PDI Internet Café Incorporated[9] where the Tribunal pointed out that the principal of the employer was “angry” or “accusatory” towards the two employees who filed complaints against the employer and berated one of them before terminating the employment of both as a retaliatory measure. However in most other cases the Tribunal simply reports, with little or no explanation, that the Director concluded the “relationship had broken down”[10] or the “employer did not want the employee”[11] or “reinstatement of the employee was not appropriate in this case”[12], and in two cases stating that the Director could have made the employee whole by way of a reinstatement order coupled with an order to recover lost wages[13] but instead ordered compensation in lieu of reinstatement. The lack of sufficient explanation why the reinstatement remedy was not awarded in most cases may very well be because the Tribunal did not find any real analysis or explanation for why the Director opted against the reinstatement remedy in the reasons for the determinations under appeal.

In the writer’s view, to deny the reinstatement remedy (where the employee wants it and has otherwise met the requirements of section 79(2)(b)) only because the employer is reluctant to take back the employee, or does not want the employee, or because there are some bruised feelings between the parties will only serve to reinforce the conclusion that the reinstatement remedy is a fiction and detract from any deterrent value the remedy may have with employers, who otherwise might be inclined to dismiss employees in contravention of the Act (particularly in circumstances contemplated in section 79(2)(b)). Surely the legislators in enacting this very powerful remedy must have envisaged that it would have “teeth.”

Having said this, it would be irresponsible to end this paper without mentioning two empirical studies by academicians on how the remedy of reinstatement has fared in the non-union sector. While not suggesting by any means that either of the studies, methodologically or otherwise, should be uncritically accepted, the findings in both are interesting and contribute to one’s understanding of what could make reinstatement, in the non-union sector, a more attractive remedy. The first is a study of the post-reinstatement experience of non-union federal workers in Quebec conducted in circa 1991 by Professor Trudeau[14] of the Faculty of Law at the Université de Montréal. In his study, Professor Trudeau reported that a survey of non-union employees reinstated under the federal Canada Labour Code (the “Code”) revealed that only 54 percent of the employees returned to work; 67 percent of those believed they were “unjustly” treated by their employer after returning to work; and approximately 38 percent had thereafter resigned from their employment at the time of the study. Professor Trudeau hypothesized that the apparent ineffectiveness of the reinstatement remedy in the non-union sector was due to the lack of union presence to monitor and oversee the employer’s conduct and protect the reinstated employee from harassment and discrimination.

Professor Eden[15] of the School of Public Administration at the University of Victoria conducted a subsequent empirical study to assess the effectiveness of reinstatement of non-union employees under the Code from the perspective of the employer. In her study, written questionnaires were sent to employers whose cases had been decided by an adjudicator under the Code and reinstatement was ordered.  Out of 106 awards between January 1, 1983 and December 31, 1991, she received responses from 37 employers (or about 35 percent). She summarized the responses of the employers as follows:

In summary, out of 37 employer respondents, just over one-half indicated that complainants either did not return to work (12 respondents) or were reemployed for less than three months (7).

Of those who returned to work (25), 14 respondents rated reinstatement unsuccessful. Only seven evaluated as successful. Thus, overall, the remedy of reinstatement appears to have been effective in only 30 percent of the cases.

Professor Eden concluded that her study supported Professor Trudeau’s conclusion that the remedy of reinstatement “has not fulfilled its promise in the non-union sector.” She also concludes, “(t)he presence of a union may be a key variable in the effectiveness of reinstatement as a remedy.”

If, in British Columbia, the Director at all shares the concerns articulated in the conclusions of Professors Trudeau and Eden, and if those concerns are factors influencing him from refraining from employing the reinstatement remedy in section 79(2)(b), then perhaps a statutory presumption in favour of reinstatement in the Act, combined with an enforcement or monitoring mechanism may serve as an equalizer or substitute for the missing watchful eyes of a union in the non-union sector. In this regard, the constructive comments of Professor Eden below are apt and I would argue her recommendations equally apply in context of the reinstatement remedy in the Act:

In the absence of a union, workers ordered reinstated to the workplace would have to be provided with greater support. To some degree, this may be achieved through a follow-up mechanism directed by the governmental agency that administers the statute. For example, the same inspector who tried to resolve the dispute between the parties prior to adjudication could contact the complainant after issuance of the adjudicator’s order to ensure employer compliance with the reinstatement order. Failure to comply on the part of the employer would result in this agency, not the complainant, initiating the procedure for enforcing the remedy…

Having an enforcement mechanism such as that suggested by Professor Eden to monitor and oversee the compliance of the reinstatement remedy after it is given will only add to its effectiveness as a remedy and perhaps bring it out of obscurity in British Columbia in the non-union sector.


[1] In the case of pregnancy and other leaves permitted under Part 6 of the Act, section 54 of the Act additionally imposes on the employer specific duties not to terminate the employee’s employment and to return her to her position at the end of the leave:

54. (1) An employer must give an employee who requests leave under this Part the leave to which the employee is entitled.

      (2) An employer must not, because of an employee’s pregnancy or a leave allowed by this Part,

(a) terminate employment, or

(b) change a condition of employment without the employee’s written consent.

       (3) As soon as the leave ends, the employer must place the employee

(a) in the position the employee held before taking leave under this Part, or

(b) in a comparable position.

 

[2] Re Irina Berezoutskaia, BC EST #D082/08; Jim Pattison Chev-old, A division of Jim Pattison Industries Ltd., BC EST #D643/01; Re Allan Pope, BC EST #D007/05

[3] Wang Wei-Ming also known as Wendy Wang carrying on business as Ming Spa, BC EST #D012/11

[4] VCS Hytek Air-Conditioning Inc., BC EST #D201/98; The Cash Store Inc., BC EST #D087/09

[5] Afaga Beauty Service Ltd., BC EST #D318/97

[6] Ibid.,, p. 5; W.G. McMahon Canada Ltd., BC EST #D386/99

[7] BC EST #D534/02

[8] http://www.labour.gov.bc.ca/esb/igm/esa-part-10/igm-esa-s-79.htm

 

[9] Supra, footnote 7, p. 7.

[10] Quigg Development Corporation, BC EST #RD047/08 Reconsideration of BC EST #D014/08; Rose Miller, Notary Public, BC EST #D062/07

[11] In The Cash Store Inc.[11], supra, footnote 4, it is noteworthy that the Tribunal, in upholding the lost wage award of the Director made to the employee whose employment was terminated for requesting a family responsibility leave pursuant to section 52 of the Act, observed that the Director dismissed reinstatement as a viable remedy not simply because the employee had secured an alternative employment but also because the employer “did not want her back”.

[12] Skyline Estates Ltd. doing business as “Traveller’s Inn”, BC EST #D210/03;  Maltesen Masonry Ltd., BC EST #D070/10

[13] Rite Style Manufacturing Ltd. and M.D.F. Doors Ltd., BC EST #D105/05; Orr Hotel limited and Golden Tree Lumber Inc, Associated Companies pursuant to Section 95 of the Employment Standards Act, operating as Dominion Hotel and Lamplighter Pub, BC EST #D094/01

[14] G. Trudeau, “Is Reinstatement a Suitable Remedy to At-Will Employees?” (1991), 30 Ind. Re. 302

[15] G. Eden, Reinstatement in the Nonunion Sector: An empirical Analysis” (1994), 49 Ind. Re. 87

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Shafik Bhalloo
Tuesday, July 3rd, 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.

In Bowes v. Goss Power Products Ltd.[1], the employee, Peter Bowes, entered into a written employment contract with Goss Power Products Ltd. in September 2007.  Under this contract, which was drafted by Goss, Bowes was hired in the position of Vice-President, Sales and Marketing. His employment was subsequently terminated by Goss, without cause, in April 2011.

The contract of employment provided in paragraph 30(c):

30.      The Employee’s employment may be terminated in the following manner and in the following circumstances:

(c)        By the Employer at any time without cause by providing the Employee with the following period of notice, or pay in lieu thereof:

Six (6) months if the Employee’s employment is terminated prior to the completion of forty-eight (48) months of service

As Bowes was employed less than 48 months at the time of the termination of his employment, the letter of termination Goss issued to him stated that he would be paid his salary for six months but he would be required to seek alternate employment during this period and keep Goss apprised of his efforts.

Two weeks after the termination of his employment, Mr. Bowes secured alrternative employment at about the same salary he was earning with Goss. Once Goss became aware that Bowes had secured alternative employment, Goss took the position that Mr. Bowes had mitigated his loss and therefore, only entitled to three weeks’ salary under the Employment Stadards Act of Ontario and paid him such.

Consequently, Mr. Bowes brought an application in the Superior Court of Justice of Ontario to have the termination provision of the employment contract interpreted arguing that the contract delineated the termination pay he was due and owing and he had no duty to mitigate to obtain that termination pay. He also argued that the termination pay should be paid to him as a lumpsum at the time of the termination of his employment.

The application judge ruled against Bowes stating where the contract of employment contains a fixed severance entitlement, the contract is subject to a duty to mitigate unless the agreement, directly or indirectly, relieves the employee of this obligation. According to the application judge, since the contract in this case did not provide an exemption from the duty to mitigate and since Bowes had found alternate employment, Bowes was not entitled to the full amount under the contract as he had mitigated his loss. The judge further held that severance payment is not required to be paid as a lump sum.

Mr. Bowes appealed the decision to the Ontario Court of Appeal. The Court of Appeal in reversing the Application Judge’s decision stated:

…the application judge erred in deciding that an agreement specifying a fixed notice period, in the event of dismissal without cause, was akin to damages in lieu of reasonable notice at common law. This mischaracterization led him to wrongly conclude that there was a presumption that the appellant had a duty to mitigate and that, since the agreement was silent in respect of mitigation, the presumption had not been rebutted.  On this basis, he determined – wrongly in my view – that the parties intended, at the point of contracting, that mitigation would be applicable to the calculation of damages upon termination.

The Court of Appeal also observed that while there is some confusion about the law on this issue as a result of trial decisions going both ways, at the appellate level the decisions support the principle that mitigation is an irrelevant consideration where an employment contract contains a fixed severance entitlement on termination without cause, particularly where there is not an express contractual requirement to mitigate imposed on the employee. The court then succinctly and very persuasively summarized the justification for its conclusion as follows:

  • By contracting for a fixed sum the parties have contracted out of the Bardal “reasonable notice” approach or damages in lieu thereof.  There is no material difference whether the quantum contracted for is fixed or readily calculable from the terms of the agreement.
  • By specifying an amount, the stipulated quantum is characterized as either liquidated damages or a contractual sum.
  • Mitigation is a live issue at law only where damages are at large, i.e. damages in lieu of reasonable notice.  Mitigation is not applicable if the damages are either liquidated or a contractual sum.
  • It would be unfair to permit an employer to opt for certainty by specifying a fixed amount of damages and then allow the employer to later seek to obtain a lower amount at the expense of the employee by raising an issue of mitigation that was not mentioned in the employment agreement.
  • It is counter-intuitive and inconsistent for the parties to contract for certainty and finality, and yet leave mitigation as a live issue with the uncertainty, lack of finality, risk and litigation that would ensue as a consequence.
  • Thus, where an agreement provides for a stipulated sum upon termination without cause and is silent as to the obligation to mitigate, the employee will not be required to mitigate.
  • Moreover, a broad release in an employment agreement, as here, demonstrates an intention to avoid resort to the courts, confirms a desire for finality, and bolsters a finding that the parties intended that mitigation would not be required unless the agreement expressly stipulates to the contrary.

While courts in British Columbia are not bound by the decisions of courts in other provinces, where the decision of courts in other provinces is well reasoned and persuasive as this Ontario Court of Appeal’s decision is, British Columbia Courts may rely on it. Having said this, where an employer in British Columbia wishes to provide their employee a fixed termination notice in excess of the minimum provided in the Employment Standards Act of British Columbia, it is advisable that they include in the employment contract an express obligation on the employee to mitigate, as the obligation to mitigate may not arise otherwise.


[1] 2012 ONCA 425

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