Posts Tagged ‘employment stadards act’

Shafik Bhalloo
Tuesday, April 29th, 2014    Posted by Shafik Bhalloo (posts) and Devin Lucas (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.
Devin Lucas
Devin Lucas maintains a general civil litigation practice with a focus on corporate and commercial litigation and landlord tenant and real property disputes. His commercial litigation experience includes contractual disputes, employment matters, and debtor-creditor law.

INTRODUCTION

The steps to receiving a suspension when appealing a determination of the Director of Employment Standards (the “Director”) to the Employment Standards Tribunal (the “Tribunal”) can be confusing and full of potholes, so it is best to plan ahead and know the terrain.  For applicants wanting to map out their route, this article will provide a brief primer of the law governing a suspension request when appealing a determination by the Director.  It will also serve as a practical guide for adjudicators who are reviewing these applications.  Part I examines the statutory scheme behind this remedy.  Part II documents a number of previous decisions where suspensions have been ordered and where they have been refused, as well as decisions regarding reconsideration of appeals and suspension orders rendered moot.  Part III sets out five common errors made by applicants and seven instructive principles for consideration by both applicants and adjudicators.

PART I.         LEGISLATIVE FRAMEWORK

Section 113 of the Employment Standards Act (the “Act”) and Rule 31 of the Tribunal’s Rules of Practice and Procedure (the “Rules”) govern requests to suspend a Director’s determination.  The two provisions are complementary and should be viewed collectively by an applicant seeking a suspension of a determination:

Director’s determination may be suspended

113     

(1)        A person who appeals a determination may request the tribunal to suspend the effect of the determination.

(2)        The tribunal may suspend the determination for the period and subject to the conditions it thinks appropriate, but only if the person who requests the  suspension deposits with the director either

(a)        the total amount, if any, required to be paid under the determination, or

(b)        a smaller amount that the tribunal considers adequate in the circumstances of the appeal.

Rule 31           Request to Suspend a Determination

Requirements for application to suspend a determination

(1)        In order to request a suspension under s. 113 of the Act an appellant or applicant must, in writing, at the same time as filing the appeal or application for reconsideration:

(a)        state the reasons for the request to suspend the determination;

(b)        state the amount to be deposited with the Director; and

(c)        if that amount is less than the amount required to be paid by the Director, state the reasons why depositing a lesser amount would be adequate in the circumstances.

Notice of suspension request

(2)        The Tribunal may notify the other parties of the request to suspend the determination and set a time limit for responding to the request.

Suspension decision

(3)        If the request is not otherwise resolved, the Tribunal will advise the parties in writing of its decision on the request.

Section 113(1) of the Act grants an applicant appealing a determination the ability to seek a suspension of a determination pending an appeal; subsection (2) gives the Tribunal the authority to consider such an application.  The language of subsection (2) is permissive and vests in the Tribunal the sole discretion to grant a suspension.  As such, a suspension is not granted by the Tribunal as a matter of course.  Further, respondents are given the opportunity to file submissions in response to an applicant’s suspension request.

Subsection (2) holds that the Tribunal is to exercise its discretion to suspend a determination subject to terms and conditions considered sufficient by the Tribunal.  The Tribunal has the option of ordering either the total amount, if any, required to be paid under the determination to be deposited with the Director, or a smaller amount that the Tribunal considers appropriate in the circumstances of the appeal.  The amount is held in trust by the Director pending a further order by the Tribunal on the merits of the appeal.

Rule 31(1) goes further and explains the procedural requirements governing a suspension request.  It requires the applicant to submit in writing, “at the same time as filing the appeal or application for reconsideration”, the reasons for the request to suspend the determination, the amount the applicant is willing to deposit with the Director, and if that amount is less than the full amount ordered by the Director in the determination then the reasons why the lesser amount would be adequate in the circumstances.

It is important to note that an applicant is only permitted to request the Tribunal to suspend a determination that was issued pursuant to section 79 of the Act.  Section 113 does not apply in respect of a determination issued under section 119.  Section 119 deals with reciprocating jurisdictions under the Act and allows an employee in a reciprocating jurisdiction to have an order from that jurisdiction enforced in British Columbia.  Pursuant to section 119, a determination can be appealed, but only to the Supreme Court of British Columbia and not to the Tribunal.  Accordingly, only the Supreme Court of British Columbia has the authority to suspend a section 119 determination.

PART II.        HELPFUL DECISIONS DEALING WITH SECTION 113 AND RULE 31

Numerous Tribunal decisions have considered section 113 applications.  The practice that has emerged recently with respect to these decisions is for the Tribunal to issue its reasons on an application to suspend the effect of a determination separately from the reasons regarding the actual merits of an applicant’s appeal.

A.        Suspensions Ordered

The 1997 Tribunal ruling in Tricom Services Inc.[1] is a leading decision on the factors that a Tribunal must evaluate when considering a suspension of a determination request.  In that decision, a security business appealed a determination by the Director, whereby the employer was ordered to pay the total sum of $34,076.82 representing unpaid wages and interest.  The employer, Tricom Services Inc. (“Tricom”), also sought a suspension of the determination pending the outcome of the appeal.

The Tribunal released an initial decision regarding the employer’s request to suspend the determination.  The Director strenuously objected to the suspension request because the company was in a financially precarious position.  The Director raised the concern that if the determination was suspended without any monetary deposit the employees would be severely financially prejudiced.  In response, the employer stated that although it was able to pay the full amount of the determination, such payment would have a significant negative effect on its cash flow and, on the basis of its strong meritorious appeal, the suspension ought to be ordered with no, or very little, money being deposited.

In its preliminary decision on the suspension request, the Tribunal made reference to two earlier Tribunal decisions.  First, the Tribunal distinguished Motion Works Group Ltd.[2], where the Tribunal ordered the suspension of a determination (in the amount of $16,039.58) upon deposit of the sum of $5,000.  In Motion Works Group Ltd., the Tribunal issued an order suspending the determination primarily for the reason that the determination appeared to overstate the unpaid wage entitlement of the employees.  The Tribunal, in Tricom, noted that, unlike the case at bar, the allegation had been particularized in Motion Works Group Ltd.  In that regard, the Tribunal stated:

… Tricom simply makes a general assertion that the Determination may be in error as to the calculation of the amounts due to the various employees.  However, given that the Determination was based on Tricom’s own payroll records, I would have thought it not a Herculean task for the appellant to more fully particularize its claim that the Determination contains calculation errors.

Despite the lack of particularity regarding the Director’s apparent overstatement of wages, the Tribunal was satisfied that the employer’s appeal may be meritorious.  The Tribunal went on to consider the Tribunal decision in TNL Paving Ltd. et al.[3]  In TNL Paving Ltd. et al., the Director had opposed a suspension request on the basis that if the determination was suspended, an ongoing investigation would be prejudiced.  The Director had issued a determination that the records pursuant to an earlier Demand by the Director could be utilized in an investigation into whether the employers had complied with its statutory obligations.  This was a unique case as the determination did not involve a monetary order.  The Director, in response to the applicant’s request, had opposed it as it submitted only determinations for a specific monetary sum could be suspended.  The Tribunal noted that section 113(2)(a) referred to depositing with the Director the “total amount, if any…”.  In the Tribunal’s opinion, the words “if any” specifically contemplated an applicant seeking a suspension of a determination that did not involve the payment of money.  Further, the Tribunal found that the Director’s submission that it would be prejudiced if a suspension was granted failed for lack of particularity.  The Director had not established how it would be prejudiced if the determination were to be suspended.

Similarly, the Tribunal in Tricom Services Inc.[4] found that the general claim of prejudice on the part of the employer regarding its cash flow was insufficient to justify an order to suspend the determination upon deposit of little or no monetary security.  According to the Tribunal, the adequacy of any proposed deposit must be viewed not only from the perspective of the employer, but from the point of view of the employees as well, as their rights could be affected by a suspension order.  The Tribunal took into account the fact that Tricom appeared to be having financial difficulties and there was a risk that the employees would not be able to recover their unpaid wages. The Tribunal ordered that the determination be suspended until the appeal had been heard or decided, or until further order of the Tribunal, on the condition that Tricom deposited with the Director the full amount of $34,076.82 required to be paid under the determination.

The Tribunal in Miller[5] provided a useful summary of the governing principles in a section 113 application.  In this decision, the Tribunal Member approved of a two-stage analysis for adjudicators considering section 113 suspension applications.  First, the Tribunal should determine whether it should suspend the determination.  If the Tribunal decides that a suspension is warranted, it should then contemplate what terms and conditions are appropriate in the circumstances.  In considering whether it should suspend the determination, the Tribunal should consider whether the grounds of appeal appear to raise a “justifiable issue” based on any of the three statutory grounds of appeal.  Moreover, at this stage, the Tribunal ought to consider whether the applicant will likely endure unreasonable financial hardship if a suspension order is not granted and whether one or more of the respondent parties will be unjustly prejudiced if a suspension order is granted.  If the Tribunal is satisfied that a suspension order is justified, the “default” order is that the full amount of the determination be paid into trust with the Director pending the outcome of the appeal.  If, however, the applicant seeks an order that a lesser sum be deposited, the applicant must establish why that would be appropriate taking into account all the relevant circumstances.

The Tribunal Member recognized that an appeal from a decision of the Director does not grant a right to the applicant for a fresh trial.  On this basis, he advised that the Tribunal should not suspend a determination if the applicant’s appeal documents fail to raise, on their face, an arguable case that the appeal might succeed on one or more of the enumerated grounds of appeal pursuant to section 112 of the Act.  As such, the Tribunal Member warned that a general claim that the Director failed to observe the principles of natural justice in making the determination will not be adequate.  The Tribunal Member identified that the applicant is the party that bears the burden of satisfying the Tribunal, on a balance of probabilities, that a suspension order is warranted.

In light of these principles, the Tribunal found in Miller[6] that the applicant raised an arguable case, but had failed to provide any support for its contention that the award would raise undue financial hardship.  Therefore, the Tribunal Member ordered that the suspension order should be granted provided the appellant deposit the full sum required to be paid under the determination.

The Tribunal in Kootenai Community Centre Society[7] was asked to consider a request for suspension of a determination requiring a non-profit society to pay $18,171.74, representing wages and accrued interest owed to a former employee and an administrative penalty in the amount of $500.00.  The society deposited the amount of $7,359.75 with the Director in its appeal.  This amount reflected what the society submitted was the employee’s entitlement less statutory deductions.  The society also gave an undertaking to pay out the outstanding balance of the award, if necessary, following the Tribunal’s decision on the merits.  The Tribunal found that the society’s submissions regarding the substantive aspects of the appeal had merit.   Further, the Tribunal considered the fact that neither of the respondents had taken a position with respect to the suspension application and found that the granting of the suspension would not be prejudicial towards these parties.   In the end, the Tribunal concluded that a suspension order was warranted and that the lesser amount was sufficient to act as security pending the outcome of the appeal.

In many section 113 suspension application decisions, the Tribunal takes a middle of the road stance that seeks to balance the competing interests of the applicant and the respondent.  This was illustrated in the Tribunal decision of Wen-DI[8], in which the Tribunal fashioned a creative remedy that sought to satisfy the interests of both the applicant and the respondent.  In that case, the applicant employer requested that the determination ordering the applicant to pay $10,451.36 be suspended upon the deposit of $1,200 with the Director pending the appeal.   The applicant raised the issue of potential cash flow problems. In response, the Director submitted that the full amount ought to be deposited.  The Tribunal felt neither proposal was appropriate.  The Tribunal framed an order that secured the employee’s claim while, at the same, did not unduly constrain the employer’s cash flow.  The Tribunal accomplished this by ordering the applicant to provide to the Director an irrevocable letter of credit in favour of the Director for the full amount ordered to be paid under the determination.

In Chatzispiros[9], the Director issued a determination against a number of related companies, including 553334 B.C. Ltd., for $435,905.05 on account of unpaid regular wages, statutory holiday pay, vacation pay, individual compensation for length of service and group termination pay owed to 64 former employees of an intermediate care facility.  A subsequent determination was issued against Kosta Chatzispiros, in the amount of $121,253.56, in his capacity as a director and officer of 553334 B.C. Ltd.  In his suspension request, Mr. Chatzispiros claimed that if he was required to pay the full amount of the determination, he would be forced to file for bankruptcy.  According to Mr. Chatzispiros, a deposit of $1,000 would be suitable in the circumstances of the appeal.  The Director took the position that 10 percent of the determination would be an adequate, being $12,125.  The Tribunal agreed with the Director’s proposal given the fact that $1,000 was inadequate security for the 64 complainant employees, the lack of merit of Mr. Chatzispiros’s appeal, and that it appeared the applicant had no intention of paying the determination amount should it be upheld on appeal.  As such, the Director ordered that the determination be suspended provided the applicant deposited $12,125 with the Director.

In Holt[10], William Holt was found personally liable for two months of unpaid wages, in the total amount of $11,786.67.  The Director had found that Mr. Holt, as a director or officer of a software company, had breached the Act by failing to pay regular wages to a former employee.  Mr. Holt appealed the determination and requested a suspension of the determination.  Counsel for Mr. Holt submitted that Mr. Holt was retired and requiring a deposit of any amount would cause a considerable hardship to the applicant.  The Tribunal found that Mr. Holt had made out an arguable case, and that his appeal had some merit.  On this basis, the Tribunal suspended the effect of the determination.  Because of the fact that Mr. Holt was retired, the Tribunal considered it appropriate that the entire amount be suspended pending the result of the appeal.

B.        Suspensions Refused

In the Tribunal decision in RTS[11], an employer requested a suspension of the effect of a determination, in the amount of $4,346.78, pending the outcome of a hearing and a final decision made by the Tribunal.  The Tribunal quoted with approval a passage from the leading decision of Tricom Services Inc.[12], where the Tribunal stated:

… it is important to note that the legislature has provided, as a first proposition, that a suspension should only be ordered if the ‘total amount’ of the determination is posted; a ‘smaller amount’ should only be ordered if such lesser amount would be ‘adequate in the circumstances of the appeal’.

The Tribunal Member noted that there was not any indication in the appeal that the employer deposited any amount with the Director that was required to be paid pursuant to the determination.  Without some indication that that this condition has been fulfilled, or that the Tribunal approved of a lesser amount being deposited, the Tribunal was not prepared to exercise its discretion under section 113 and issue a suspension of determination.

In Strauss[13], an employee filed a complaint pursuant to section 74 of the Act based on the allegation that her employer, Strauss Herb Company, had failed to pay her annual vacation pay, statutory holiday pay and compensation for length of service.  The employee was ultimately successful and was awarded vacation pay, statutory holiday pay, and compensation for length of service.  Further, the employer was ordered to pay interest and three administrative penalties.  The company subsequently appealed on the basis that the Director failed to observe the principles of natural justice in making the determination and also requested that the Tribunal suspend the determination.  Contrary to the principles espoused in Miller[14], the applicant failed to provide an arguable case for the appeal on its merits, and instead relied on a bare allegation that the Director had failed to comply with the principles of natural justice in making its determination.  Moreover, the applicant did not provide any written submissions in support of its suspension request, nor deposit any amount with the Director.  Given that the applicant had the onus of establishing the basis for suspension, the Tribunal quite rightly refused suspension.  The Tribunal Member stated that “it is not for the Tribunal to divine the basis of an applicant’s suspension application.  The onus is clearly on the applicant to persuade the Tribunal on a balance of probabilities, the merits of its suspension request.”

The decision in Golden Crown[15], underscores the confusion that applicants, and their counsel, encounter when requesting a suspension of a Determination.  The applicant in this case had been ordered to pay a former employee $4,158.74, representing wages, annual vacation pay and interest.  Prior to submitting a suspension request, the applicant’s counsel had requested an explanation of the process governing the suspension of a determination.  An officer of the Tribunal responded to the applicant’s request and clarified the process.  The officer clearly laid out what was required if the applicant intended to proceed with the suspension request.  The applicant’s counsel was told the applicant was required to provide written submissions as to why the suspension should be granted.  As well, counsel for the applicant was informed that the applicant would be required to explain if any deposit would be offered to the Director in respect of the determination and if not, the reason why.  Despite receiving these instructions, the applicant failed to make any written submissions whatsoever.  The Tribunal Member found, in the circumstances, the applicant had abandoned the suspension request.  In any event, the Tribunal Member would have denied the applicant’s request for suspension as the applicant failed to discharge its burden that a suspension order was warranted in the circumstances.

In 0708964 B.C. Ltd. [16], the Tribunal considered a request to suspend a determination by an applicant that owned property on which a school was situated.  The applicant requested a suspension on the basis that the Director made an error in law and further that it would be required to sell the property in order the raise the necessary funds to post security.  While the Tribunal was not prepared to characterize the appeal as destined to fail, it did not accept the applicant’s argument that selling the land was the only practical option open to the applicant.  In addition, the Tribunal noted that the applicant was the only likely source of recovery of the complainants’ unpaid wages.  On this basis, the application to suspend the effect of the determination was refused.

Another Tribunal decision where suspension was refused occurred in Wren.[17]  The applicant applied for an order pursuant to section 113 of the Act suspending the effect of the determination pending the result of the appeal.  The applicant asserted a strong case on the merits and, accordingly, submitted that the determination should be suspended without him having to pay any funds, or alternatively, only a nominal sum.  The Tribunal briefly reviewed the merits of the appeal, as well as the financial circumstances of the applicant.  The Tribunal noted that the applicant had failed to provide any corroborating information about his financial circumstances.  The Tribunal also emphasized the fact that the applicant did not appear to have any close personal connections to the province of British Columbia apart from keeping a business office, that he “rarely visits”, in New Westminster.  The Tribunal thus concluded that a suspension order was not appropriate.

In the decision of Judy Harvey and Melvin Martin operating as The Sportsman Country Inn[18], the Tribunal refused the applicant’s suspension request.  At the time the Tribunal heard the suspension request, the Director had already taken steps to collect on the amount ordered to be paid under the determination.  In particular, the Director had issued a garnishment order on the applicant employer’s bank account.  The appeal hearing had been originally scheduled at an earlier date but was subsequently adjourned at the request of the employer.  At that time, no collection action had been commenced by the Director.  However, the Director stated that subsequently it had learned that the applicant was diverting funds into another company and that the applicant was actively trying to sell the operation.  In these circumstances, the Director felt justified in taking action on collecting on the determination.  The Tribunal noted that the employer did not respond to the submissions of the Director, nor did it offer any particulars to support the application apart from its claim that the garnishment created a financial hardship.   The Tribunal held that the applicant had not met its burden that the determination should be suspended.

In Pacific Western Costal Constructors Ltd.[19], the Tribunal considered a suspension request by the applicant employer who appealed a determination of the Director ordering it to pay $51,056.60, representing wages and accrued interest to 30 former employees.  The applicant was a subcontractor that had commenced proceedings in the British Columbia Supreme Court against the developer as the applicant alleged it was due unpaid amounts.  The applicant did not dispute that the employees were entitled to wages.  However, the applicant took the position that the disputed funds in respect of the Supreme Court action included the outstanding wages and that it was not in a position to deposit any funds with the Director.  The applicant had filed a lien against the property and the funds in dispute had been paid into the Supreme Court by the developer pending a trial.  The applicant submitted that the Director should attach the funds in Court to recover the outstanding wages instead of pursuing the applicant company.  The Director had already commenced collection procedures against the applicant, and submitted that an order to suspend the collection would unduly prejudice the collection of the unpaid wages.  The employees argued that the dispute between the applicant and the developer should not preclude them from seeking payment of their wages.

In denying the application to suspend the determination, the Tribunal was convinced that the appeal had no merit.  The Tribunal found that a dispute with a third party could not result in depriving the employees of their wages.  Further, the Tribunal emphasized the risk that the employees would never completely recover their wages given the fact that the employer had stated it had no funds to deposit pending the appeal of the determination.

In Lowan[20], the applicants appealed a determination issued by the Director ordering the applicants to pay their former employee the sum of $15,664.01 on account of unpaid wages and interest.  The applicants’ counsel requested that the determination be suspended without any deposit with the Director.  In response, the Director submitted that the determination should be suspended only if the applicants deposit the full amount required to be paid under the determination.  The applicants’ submission that a suspension order was warranted in the circumstances rested primarily on the fact that the applicants’ business was no longer operating and both applicants had limited liquid financial assets.  The Tribunal came to the conclusion that a suspension was not appropriate given the legitimate concern of whether the applicants would be able to pay the determination should it be confirmed on appeal.

C.        Reconsideration of Appeals

In The City of Surrey[21], the Tribunal Panel considered a suspension request from a determination, whereby the applicant municipality applied for a reconsideration of a decision issued by the Tribunal.  In this case, the City of Surrey (the “City”) had applied for a reconsideration of a determination that was confirmed on appeal requiring it to pay approximately $205,000 to the Director, to cover wages and other statutory entitlements to 32 persons receiving firefighting instruction.  In connection with its reconsideration application, the City applied under section 113 of the Act to have the Tribunal suspend the effect of the determination pending the outcome of the reconsideration proceedings.  The Director and the Surrey Firefighter’s Association both objected to the City’s section 113 application.

The City submitted in support of its suspension request that it did not wish to be in the position of having to recoup significant amounts of money from a number of individuals in the event that the reconsideration application was successful.  Moreover, the City confirmed that there was no issue in respect of its ability to pay.  In response, the Director submitted that a suspension request was not available pending a reconsideration application and, further, the Director maintained that the City had not followed through with an earlier promise to have funds paid to the Director.  The City responded that it was prepared to deposit the full amount with the Director in trust pending the outcome of the reconsideration provided the Director would not disburse the funds until after a decision was made.  The Tribunal first addressed the threshold question of whether it had the legal authority to suspend the effect of a determination pending a reconsideration decision.  The Tribunal held that the language, context and legislative intent of section 113 was that the power exercised by the Tribunal ought to be only exercised in the context of appellate proceedings over which it has exclusive jurisdiction.  The Tribunal then cited two earlier Tribunal decisions for the following proposition:

The language should not be read so as to permit the Tribunal to encroach on the role of      the courts or other adjudicative bodies merely because a person has appealed sometime in          the past: see Re New Pacific Limousine Service Inc.[22] and Re Paradon Computer Systems.[23]

The Tribunal rejected the Director’s narrow interpretation of the legislation whereby section 113 would only apply in the period between the determination and the original Tribunal appeal decision.  Instead, the Tribunal took a middle ground approach and interpreted the provision to read that a “person who appeals” a determination may make a section 113 request at any point while the statutory appeal process, including the reconsideration process, is ongoing.  The Tribunal felt the broad authority given to the Tribunal to suspend a determination under section 113 to ensure justice is done during an appeal supported this view.  According to the Tribunal, to exclude section 113 from the reconsideration process would prevent the Tribunal from ensuring that justice is done with respect to reconsiderations.

The Tribunal found the Director’s submissions to be more convincing with respect to discretion than that of jurisdiction.  The Tribunal identified two factors that become particularly important when a suspension request is made in the context of a reconsideration application.  First, the suspension request will generally occur prior to the Panel even making a decision on the preliminary issue of whether to even engage in the reconsideration process.  Second, the application will arise from a considered appeal decision by an Adjudicator.  In consideration of those factors, the Tribunal took the position that for the Tribunal to allow a suspension request in the context of a reconsideration application, an applicant must make a “clear and compelling” case to the Tribunal that it will suffer prejudice if a suspension order is denied.  As such, the party requesting a suspension should demonstrate to the Tribunal that it has contacted the Director in good faith, was not able to reach an agreement with respect to payment and disbursement pending the reconsideration, and that the Director’s stance pending the outcome of the reconsideration will cause them serious hardship.

Applying those principles to the case at bar, the Tribunal found that a mutually agreeable situation was available whereby the City would forward the funds to the Director on the condition they would not be paid until after the reconsideration decision was made.  It was not clear on the evidence, however, whether the City had actually forwarded the funds to the Director.  On this basis, the Tribunal encouraged the parties to resolve the disbursement issue.  In any event, the Tribunal was not prepared to suspend the determination pending the reconsideration process.  The Tribunal noted that it did not have sufficient evidence regarding the prejudice that the City would suffer if the money were paid out to the employees, nor did it have clear evidence that the Director was insisting on ordering the funds disbursed prior to the reconsideration decision.

In The City of New Westminster[24], the Tribunal considered a suspension request, in conjunction with an application for reconsideration brought by the City of New Westminster (the “City”).  The City applied for reconsideration of an Adjudicator’s decision confirming a determination finding that the City had breached the Act when it charged job applicants a $50 non-refundable fee as part of the application process.  In support of its suspension application, the City submitted that it had a meritorious appeal, that its conduct throughout the investigation process had been excellent, and that it was financially solvent.  Further, the City submitted that it would suffer prejudice because of the difficulty the City would face in recovering the amount ordered in the determination from the individuals in the event the Tribunal cancels or varies the determination.  In response, the Director raised a preliminary objection that a suspension pending a reconsideration decision was not contemplated by section 113 of the Act.  The Director also submitted that the matter was at a point at which the full amount of the determination should be deposited with the Director.  Finally, the Director submitted that at the reconsideration stage, the employer should interact directly with the Director, as a statutory fiduciary, responsible for enforcement under the Act, with respect to disbursement of funds collected.

The Tribunal dispensed with the preliminary objection that a suspension order was not available on a reconsideration application by following the identical analysis that the Tribunal undertook in The City of Surrey.[25] The Tribunal then considered the facts in the present case.  In dismissing the suspension application, the Tribunal found that the City had failed to raise any compelling reason as to why it had failed to offer to deposit the full amount with the Director.  Moreover, the Tribunal found that the City had failed to provide any basis for its submission that the Director had taken a position to the City’s prejudice with respect to the issue of disbursement during the reconsideration process.

D.        Suspension Orders Rendered Moot

In circumstances where the Tribunal releases a decision regarding a suspension request at the same time as issuing its decision on the merits of the appeal, the suspension order will be rendered moot.  This situation was illustrated by the Tribunal decision in More Group.[26] In that case, three related companies, More Marine Ltd., More Management Ltd., and Morecorp Holdings Ltd. (collectively,  the “More Group”), appealed a determination of the Director in the amount of $4,710.37.  The Tribunal’s decision specifically related to the unpaid wages of one of its former employees.  The More Group sought a suspension of the determination pending the appeal and advised the Tribunal that it was prepared to place the amounts ordered in the determination in the trust accounts of its legal counsel.  The Tribunal was convinced that the appeal had merit with respect to More Marine Ltd. and More Management Ltd.; however, because the Tribunal ordered that the determination be cancelled as against these two companies in the same decision, the suspension issue was rendered moot.  With respect to Morecorp Holdings Ltd., the Tribunal denied the application to suspend the determination as it was not persuaded that its appeal had any merit.

PART III.      INSTRUCTIVE PRINCIPLES ARISING FROM TRIBUNAL DECISIONS

Upon reviewing a number of decisions on the suspension of a determination, it became apparent to the Author that applicants are often times confused by the process and do not adequately prepare for this application.  One plausible explanation is that applicants are primarily focus on the substantive aspects of the appeal to the detriment of the suspension application.  This may be exacerbated by the requirement set out in the Rules, whereby an applicant must file written submissions in respect of the application for suspension at the same time as filing the appeal or request for reconsideration.  No matter the reason, applicants are cautioned against taking a casual approach to these applications given that it is the applicant who bears the onus of satisfying the Tribunal that a suspension is warranted.

In many cases, applicants have relied on the strength of their appeal on its merits in support of their submission to post little or no money with the Director.  In the Author’s view, this reliance is misplaced.  In considering what terms and conditions should be placed on the suspension order, Tribunal Members place more weight on whether depositing money with the Director will have a prejudicial effect on the applicant.  Although the strength of an appeal on its merits is helpful in seeking a lesser amount to be deposited, especially if the lesser amount is supported by an applicant’s own calculations, the overriding factor that a Tribunal will consider in determining whether a lesser amount is justified is whether the applicant will be prejudiced.

Based on the decision in Tricom Services Inc.[27], applicants should be cautioned against claiming that they are able to pay the full amount under the determination, while also making a general assertion that they will be unduly financially prejudiced.  The Tribunal in that case highlighted this inconsistency and noted that without some “unique prejudice flowing from having to post the full amount of the Determination” it was of the view that a determination should only be suspended if the full amount of the determination is deposited with Director.

A number of common mistakes made by applicants have emerged in a number of Tribunal decisions.  Five common errors are set out below:

  • Failing to deposit the full amount that is required to be paid under the determination with the Director, or some lesser amount with the Director which the Tribunal would think adequate in the circumstances; [28]
  • Neglecting to provide written reasons for why a suspension of the determination should be ordered;[29]
  • Failing to provide corroborating  documents in support of a contention of undue financial hardship;[30]
  • A bare and unspecified claim that the Director failed to observe the principles of natural justice in reaching its determination; [31] and
  • Failing to set out the nature of the prejudice in requesting a suspension on the ground of prejudice.[32]

The following seven instructive principles for both applicants and adjudicators are set out as follows:

  • Adjudicators should review section 113 applications through a two-stage analysis[33]:

(1)        The Tribunal should determine whether it should suspend the determination.

(2)        If a suspension is warranted, the Tribunal should then consider what terms and conditions are suitable.

  • It is the applicant’s burden to show why a determination order should be suspended;[34]
  • If there is a risk that employees will not be able to fully recover what is owed to them, the Tribunal is unlikely to grant a suspension request made by an employer;[35]
  • A suspension of a non-monetary determination is permitted;[36]
  • A suspension will not be granted where it appears the company is trying to actively avoid collection actions;[37]
  • A Tribunal will view the adequacy of a proposed deposit not just from the perspective of the applicant employer, but also from the perspective of any employees whose rights may be affected by the granting of a suspension order;[38] and
  • For a Tribunal to award a suspension in conjunction with a reconsideration application, an applicant must demonstrate a “clear and compelling” case that it will suffer serious prejudice if a suspension order is not granted.[39]

CONCLUSION

The issuance or denial of a suspension may have serious financial consequences for both the applicant and respondent in a dispute.  The granting of a suspension is a discretionary remedy and applicants should not assume their request will be approved as a matter of course.  With careful planning, however, chances for a successful outcome are significantly increased.  Prior to initiating a request, an applicant must ensure compliance with the legislative framework and provide a detailed evidentiary record for all submissions.



[1] Tricom Services Inc., BC EST #D420/97

[2] Motion Works, BC EST #D345/946

[3] TNL Paving Ltd. et al., BC EST # D002/97

[4] Tricom Services Inc., supra

[5] Miller, BC EST # D090/10

[6] Miller, supra

[7] Kootenai Community Centre Society, BC EST # D001/12

[8] Wen-Di, BC EST # D307/99

[9] Chatzispiros, EST #D520/98

[10] Holt, BC EST #D123/06

[11] RTS, BC EST #D070/03

[12] Tricom Services Inc., supra

[13] Strauss, BC EST # D095/10

[14] Miller, supra

[15] Golden Crown, BC EST # D010/09

[16] 0708964 B.C. Ltd., BC EST # D126/10

[17] Wren, BC EST #D099/10

[18] Judy Harvey and Melvin Martin operating as The Sportsman Country Inn, BC EST #D411/00

[19] Pacific Western Coastal Constructors Ltd., BC EST D#074/08

[20] Lowan, BC EST D#254/00

[21] The City of Surrey, BC EST #D049/99

[22] Re New Pacific Limousine Service Inc., BC EST D#054/96

[23] Re Paradon Computer Systems, BC EST D#221/98

[24] The City of New Westminster, BC EST D#518/98

[25] The City of Surrey, supra

[26] More Group, BC EST #D078/08

[27] Tricom Services Inc., supra

[28] RTS, supra

[29] Strauss, supra

[30] 0708964 B.C. Ltd., supra

[31] Strauss, supra

[32] TNL Paving Ltd. et al,, supra

[33] Miller, supra

[34] Strauss, supra

[35] Pacific Western Coastal Constructors Ltd., supra

[36] TNL Paving Ltd. et al., supra

[37] Judy Harvey and Melvin Martin operating as The Sportsman Country Inn, supra

[38] Tricom Services Inc., supra

[39] The City of Surrey, supra

Tags: , ,

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

Tags: , , , , , , , ,

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

Tags: , , , ,

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

Tags: , , , , , , ,

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

Tags: , , , , , , , , , , ,

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