Posts Tagged ‘employment relationship’

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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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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Shafik Bhalloo
Friday, March 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.

In Raymond Giza v. Sechelt School Bus Service Ltd., Randy Gould[1], the employer, Sechelt School Bus Service Ltd., employed Mr. Giza as a bus driver starting in September 2005. Over the course of the next 5 years, the employer grew disenchanted with Mr. Giza’s conduct and on September 30, 2009, about 5 years into his employment, terminated his employment without cause by giving him 5 weeks’ working notice under the Employment Standards Act. Mr. Giza, who was 61 years old at the time of the termination of his employment, did not take it well and decided not to return to work to serve his working notice. Instead, he commenced a wrongful dismissal action in the BC Supreme Court claiming, inter alia, damages for wrongful dismissal. While the Supreme Court found that 5 weeks’ notice was inadequate, the Court held that when Mr. Giza did not return to work to serve out his working notice, he repudiated the employment agreement and effectively quit and therefore, he was not entitled to damages for wrongful dismissal.

On appeal of the Trial decision by Mr. Giza, the Court of Appeal disagreed with the Trial Court’s conclusion that failing to work during the notice meant that Mr. Giza lost his entitlement to reasonable notice or damages in lieu thereof. Instead, the Court of Appeal reasoned that the employer breached its contract of employment with Mr. Giza when it gave him inadequate notice of termination. Relying on the decision of the Supreme Court of Canada in Hadcock v. Georgia Pacific Securites Corp.[2], the Court of Appeal concluded that Mr. Giza’s right to damages in lieu of reasonable notice had accrued when he received inadequate notice by the employer. While Mr. Giza’s subsequent failure to work during the notice period amounted to a repudiation of his contract of employment and brought it to an end, the Court of Appeal said it did not take way or extinguish Mr. Giza’s cause of action for damages in lieu of notice. However, the Court of Appeal recognized the fairness of taking into account the notice, however inadequate, the employer provided Mr. Giza (during which he could have worked and been paid), and reduced that notice period from the 6 months reasonable notice the Court concluded Mr. Giza would otherwise be entitled to.

In this case the employer apparently mistook the appropriate notice Mr. Giza was entitled to as one delineated in the Employment Standards Act. It is important to note that unless an employer has a properly drafted employment contract restricting the employee’s entitlement to notice upon termination of employment to the minimum statutory notice provided in the Employment Standards Act, the employer will be exposed to a potential claim for common law reasonable notice, which indubitably far exceeds the minimum in the Employment Standards Act.


[1] 2012 BCCA 18

[2] [1999] 3 S.C.R. 425)

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Shafik Bhalloo
Friday, February 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.

Can an employer discipline or terminate an employee for cause for her off-duty conduct? This question, no doubt, was at the forefront of some employers’ thoughts after the Stanley Cup riot in Vancouver, particularly after viewing their employees pictures in the local newspapers or police website or seeing them prominently featured on live or taped videos on local news shows and You Tube.

At the time of writing this blog, the police had recommended at least 100 charges to the Crown and 43 individuals have been charged with a criminal code offence. The first of the reported convictions occurred in early January 2012.

In some cases, employers were bombarded with emails from potential consumers threatening to boycott their businesses after the media identified their employees as participants in the riot. In the case of one car dealership whose employee was reported to have allegedly looted during the riot, the employer terminated her employment after receiving angry emails about her from consumers.[1]

Whether the off-duty conduct of an employee involves participating in a riot or other offensive activity, can an employer discipline or dismiss an employee for cause? In Re Emergency Health Services Commission -and- CUPE, Local 873[2], arbitrator Black referred to two Canadian labour arbitration decisions delineating principles, which guide arbitrators in such a situation. The cases are Re U.A.W., Local 195 and Huron Steel Products Co. Ltd[3] and Re Millhaven Fibres Ltd., Millhaven Works, and Oil, Chemical & Atomic Workers Int’l Union, Local 9-670[4]. From the former, Arbitrator Black referred to the following oft-quoted passage:

It has been held in many arbitration cases that under normal circumstances an employer is only properly concerned with an employee’s due and faithful observance of his duties on the job. However, no hard and fast rule can be laid down, and in each case the determination of three questions of fact will determine the issue. These are:

(1)  Was the employee’s conduct sufficiently injurious to the interests of the employer?

(2)  Did the employee act in a manner incompatible with the due and faithful discharge of his duty?

(3)  Did the employee do anything prejudicial or likely to be prejudicial to the reputation of the employer?…

If one or more of the above questions must be answered in the affirmative on all the evidence, then the company is properly concerned with the employee’s conduct regardless of whether it occurred on or off the company property or in or out of working hours, and depending on the gravity of that conduct, the company will be justified in taking appropriate disciplinary action.

From the latter decision, Arbitrator Black referred to the following passage:

…if the discharge is to be sustained on the basis of a justifiable reason arising out of conduct away from the place of work, there is an onus on the Company to show that:–

(1)     the conduct of the grievor harms the Company’s reputation or product

(2)     the grievor’s behaviour renders the employee unable to perform his duties satisfactorily

(3)     the grievor’s behaviour leads to refusal, reluctance or inability of the other employees to work with him

(4)     the grievor has been guilty of a serious breach of the Criminal Code and thus rendering his conduct injurious to the general reputation of the Company and its employees

(5)    places difficulty in the way of the Company properly carrying out its function of efficiently managing its Works and efficiently directing its working forces.

The onus is on the employer, in disciplining or terminating the employment of its employee for off-duty conduct, to show that there is a connection between the off-duty conduct of the employee and harm or injury to its business. As indicated by Arbitrator Black, the employer need not adduce evidence of an affirmative answer to each of the questions delineated in the Re Air Canada or the Huron Steel Products decisions. Further, whether off-duty conduct of the employee warrants termination of her employment or some lesser discipline will depend on the degree of impact on the employer or the employer’s business. In the case of the dealership referred to above, if the alleged conduct of the employee resulted in threats of boycott to the employer’s business and it is established, on a balance of probabilities, that the employee indeed was involved in the alleged conduct then the dealership may be able to justify its conduct in dismissing the employee.

Having said this, it should be noted that employers should be careful in considering dismissing an employee because of a criminal conviction arising from off-duty conduct. Section 13(1) of the B.C. Human Rights Code prohibits employers from both refusing to employ and refusing to continue to employ a person because of a criminal or a summary conviction offence that is unrelated to the employment or intended employment of that person. For example, if a sales employee of a clothing shop is convicted of drinking and driving off-duty, the employer will not be able to justify termination of her employment.


Published in the Jewish Independent  

[2] (1988), 35 LAC (3d) 400

[3] (1964), 15 L.A.C. 288 (Reville)

[4] (1967) (quoted in Re Air Canada and Int’l Assoc. of Machinists, Lodge 148 (1973), 5 L.A.C. (2d) 7 (Andrews)

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Shafik Bhalloo
Tuesday, October 11th, 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.

If you are an employer and you have made an overpayment to your employee, whether or not that overpayment was “wages” or benefits, can you unilaterally deduct that overpayment from the employee’s wages?

Section 21 of the Employment Standards Act (“ESA”) provides that “an employer must not, directly or indirectly, withhold, deduct or require payment of all or part of an employee’s wages for any purpose”, unless it is permitted or required by any enactment of British Columbia or Canada.  “Any purpose” in section 21 includes the scenario where the employer wants to deduct an employee’s wages to recoup overpayments made to an employee.

However, where the deduction is for something that is permitted by an enactment of British Columbia or Canada such as income tax; Employment Insurance premiums or Canada Pension Plan contributions then the employer is allowed to make a deduction without the employee’s consent.

Also, section 22 of the ESA identifies several instances in which the employer may, as a result of the written assignment by the employee, deduct wages from the employee’s wages. Section 22 states:

Assignments

22

(1) An employer must honour an employee’s written assignment of wages

(a) to a trade union in accordance with the Labour Relations Code,

(b) to a charitable or other organization, or a pension or superannuation or other plan, if the amounts assigned are deductible for income tax purposes under the Income Tax Act (Canada),

(c) to a person to whom the employee is required under a maintenance order, as defined in the Family Maintenance Enforcement Act, to pay maintenance, and

(d) to an insurance company for insurance or medical or dental coverage.

(3) An employer must honour an assignment of wages authorized by a collective agreement.

(4) An employer may honour an employee’s written assignment of wages to meet a credit obligation.

How is the employer then to recoup overpayment of wages to an employee? In HEABC V. B.C. Nurses’ Union[1], the Court of Appeal, in upholding an arbitrator’s award declaring that the employer in that case was prohibited from unilaterally recovering overpayment of wages from the wages of its members, stated that the employer:

“ is still able to recover overpayments from employees where that employee agrees to the deductions, or where a statute or collective agreement expressly authorizes the employer’s unilateral action. Where no such agreement or statutory authorization exists, the employer has the option of recovering overpayments in other ways such as pursuing a grievance, or bringing a claim against the employee.”

Therefore, it is advisable that an employer tries to obtain an employee’s express written authorization or consent to deduct the latter’s wages to recoup any overpayment.  If the employer is unsuccessful in obtaining the employee’s written authorization, the employer may proceed with a debt claim against the employee in the provincial (small claims) court assuming the overpayment is under $25,000. If the employer is unionized, the employer may be able to pursue the claim by lodging a grievance application.


[1] [2005] BCA 343

 

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