Posts Tagged ‘employment’

Shafik Bhalloo
Supreme Court rules that employees have a reasonable expectation of privacy in the workplace
Monday, January 7th, 2013    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
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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Shafik Bhalloo
Enforceability of Restrictive Covenants in the Employment Context
Tuesday, October 23rd, 2012    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
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
When a manager is not a manager: Employers beware of liability for overtime or extra pay
Wednesday, September 19th, 2012    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

 

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

                                                                        By Shafik Bhalloo*

 

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

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

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

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

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

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

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

 

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

…

(f) a manager;

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

1. (1) “manager” means

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

(b) a person employed in an executive capacity;

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

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

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

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

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

[1] BC EST #D479/97

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

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Shafik Bhalloo
Employment Contracts: Key Issues for Employers to Consider*
Wednesday, July 4th, 2012    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
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.

Importance of Employment Contracts

The importance of having a written and executed employment contract is invaluable for both the employer and the employee as it provides a written account of the agreement between the parties and affords the parties a clearer understanding of their duties, responsibilities and obligations to each other in their employment relationship.

Employment contracts may be created through a verbal agreement or implied by the behaviour and conduct of the parties[1]. More often than not, employers will enter into a verbal agreement with their employees based on a handshake. Absent a written employment agreement, if a conflict arises between the parties particularly with respect to the terms of their agreement, the situation can very fast turn into the employer’s word against the employee’s.  In such case, there is a real risk that the employer may be saddled with an obligation it never meant to undertake. Therefore, having a written contract of employment setting out clearly the essential terms of the agreement between the parties will go a long ways to curtail the possibility of a dispute between the parties later in their relationship.

Key Clauses in contracts

There are a number of key clauses that should be included in an employment contract. However, it should be noted that this discussion is not exhaustive and the requirements for different industries may vary.

It is suggested that employment contracts at minimum contain the following key terms:

(a)                Parties – although it may appear to be obvious, it is critical to identify the correct parties to the contract. For example, if an employee is technically an employee of a subsidiary versus the parent company, this information needs to be correctly reflected in the employment contract. The parent may not want to unwittingly take on an obligation to the employee, although much will depend on how the relationship of the employee plays out with the parent company and the degree of the relationship between the parent and subsidiary companies in practice as there is, at common law, the doctrine of common employer that allows the court to treat different entities as one employer for the purpose of attributing to liability for damages flowing from such actions as wrongful dismissal[2].

(b)               Term- the duration of the relationship between the parties should be worded to reflect the agreement between the parties. We caution employers from using a specific end date unless both parties are clear that the employee will be engaged for a fixed term. If the parties agree on a fixed term and an employee ends up working for the employer beyond the end date of such term the courts will determine that the employee was intended to be a permanent employee. In the event that the courts make this type of determination, the limits on the employer’s obligations contained in the employment contact may be nullified. For example, in terms of termination notice, the employer in such case may be held responsible to provide the employee reasonable notice of termination or pay in lieu of such notice.

(c)                Hours and location– the employment contract should specify whether the employer is expecting the employee to devote full working time and attention to the business affairs of the employer. For greater clarity, the employer may want to specify in the contract the number of hours an employee shall be required to work each week and the location of work. In some industries and in some positions, the hours of work the employee will be required to work may be irregular or vary. The contract should specify this so that there is no misunderstanding on the part of the employee

(d)               Title and Job Description – the employment contract should include the employee’s title and a description of an employee’s duties; however, this description should include some flexibility in the language to allow for additional duties to be assigned and to avoid the possibility of a constructive dismissal claim.[3]

(e)                Compensation and Benefits – the employment contract should specify the employee’s remuneration. More particularly, the contract should delineate the employee’s gross annual salary and how it will be paid-for example, in equal bi-monthly or semi-monthly instalments. If there is any bonus plan and the terms of that plan, whether there are any milestones that need to be achieved to earn the bonus and if the employee must be employed at the time the bonus is payable and such other requirements for earning a bonus.

(f)                 The contract should also specify any benefit plans such as health and welfare benefits the employer may be providing directly or arranging through a third-party or outside provider. The contract should specify if there is any obligation on the employee’s part to pay any premiums for any benefit plans and if there is any eligibility requirements such as a waiting period before the employee is eligible for the benefits. If any benefits are provided by an outside third-party then the employer may want to make sure to state in the contract that the employee’s rights under these benefit plans shall be determined entirely by the terms and conditions of the plans and the employee shall have no independent rights as against the employer in connection with the said benefits. This may prevent the employee who is denied coverage or had their claim for benefits denied by the third-party provider to pursue the employer for their losses.

(g)                Probation period – if the employer has no previous experience with the employee and wants to make sure that the employee is suitable for the position, the employer may want to include in the employment contract a probation term. Probation term is essentially a trial period during which the employer will assess and evaluate the employee to determine if she is suitable for long-term employment with the organization.

(h)                Vacation – the amount of vacation time that an employee shall receive should be included in their employment contact.

(i)                  Expenses – if an employee should receive reimbursement for their expenses, the contract should set out what sorts of expenses are reimbursable and the process the employee is required to follow (submit receipts within a set period) to obtain reimbursement.

(j)                 Manuals or Policies – if the employer has a policy or procedures manual that they wish the employee to follow, the manual should be incorporated by reference into the employment contract.  The employer should provide such manual to the employee as soon as they are hired. The employer should also provide the employee with any updates to the manual within a reasonable period of time.

(k)               Confidentiality – if the employee has access to confidential information in connection with the employer’s business, the employment contract should contain express terms regarding how the employee will treat such information so that the employer’s confidential information is not at a risk of being misused or getting in the wrong hands or disclosed to competitors.

(l)                  Post employment restrictive covenants – if an employer is concerned that the employee may leave the employer and compete with the employer or solicit business in competition with the employer from the employer’s customers, the employer may consider including in the employment contract properly drafted post employment restrictive covenants. Two common types of restrictive covenants in employment agreements are non-competition and non-solicitation covenants. A non-competition covenant is intended to prohibit a departing employee from competing with her former employer and a non-solicitation covenant prohibits the departing employee from actively soliciting her former employer’s clients. The latter is narrower in scope and more likely to be upheld. Having said this, it is important to note that if any restrictive covenant goes beyond what is reasonably required to protect the employer’s proprietary interests-client relationships, confidential pricing information, client lists, and such-the courts will not enforce the clause. It is important that the employer discuss with their legal counsel what proprietary interest they need to protect so that counsel may best advise on the type of post employment restrictive covenant to include in the contract.

 

(m)              Termination - it imperative that an employment contract sets out the termination provision for an employee and particularly the amount of notice that an employee is entitled to receive if they are terminated without cause. Under no circumstances should the termination clause violate the notice provisions of the provincial Employment Standards Act, otherwise such a clause will be unenforceable and the employer may be exposed to a greater notice or severance requirement at common law-reasonable notice. It is also important to note that if the employer wants to curtail its notice obligations to the minimum provided in the provincial Employment Standards Act, the employment contract should contain clear language expressing that intent otherwise the employer will be at risk to provide reasonable notice to the employee where the employer is dismissing the employee without cause.

If the employer wants to avoid disruption to its business when the employee decides to quit, the employer may want to include in the employment contract a notice requirement or obligation on the employee. For instance, if the contract provides that the employee must give 30 days notice of termination of her employment, the employer may have sufficient time to hire her replacement and not suffer any disruption in its business as a result of the departing employee.

(n)                Termination - it imperative that an employment contract sets out the termination provision for an employee and particularly the amount of notice that an employee is entitled to receive if they are terminated without cause. Under no circumstances should the termination clause violate the notice provisions of the provincial Employment Standards Act, otherwise such a clause will be unenforceable and the employer may be exposed to a greater notice or severance requirement at common law-reasonable notice. It is also important to note that if the employer wants to curtail its notice obligations to the minimum provided in the provincial Employment Standards Act, the employment contract should contain clear language expressing that intent otherwise the employer will be at risk to provide reasonable notice to the employee where the employer is dismissing the employee without cause.

If the employer wants to avoid disruption to its business when the employee decides to quit, the employer may want to include in the employment contract a notice requirement or obligation on the employee. For instance, if the contract provides that the employee must give 30 days notice of termination of her employment, the employer may have sufficient time to hire her replacement and not suffer any disruption in its business as a result of the departing employee.

 

(o)               Entire agreement – employers should consider including a statement that the employment contract constitutes the entire of the agreement between the parties. The purpose for including this clause is to ensure that there are no outside discussions imported into the employment relationship.

Drafting Errors

The use of plain language in drafting any type of commercial contract is recommended, and it is especially important in the context of employment contracts where there is, in many cases, a significant imbalance in the sophistication levels between the parties with the employers having the upper hand. Having said this, it is critical that both parties understand the terms of the employment contract. There is often confusion and errors made by employers in connection the use of ambiguous language. Drafting errors can lead to significant consequences for employers because the courts will often favour the position of the employee versus the employer due to the power dynamic between the parties. Therefore, both employment lawyers and employers need to mindful of what they are trying to convey in their employment contracts.

Recommendations / Conclusion

Beyond having a binding a legal agreement in place between the parties, an employment contract carefully drafted by an employment lawyer should provide both parties with a point of reference that clearly set out each party’s obligations for the term of the contract. In the event that the parties have not entered into a written employment contract, the Canadian courts acknowledge that they will often look to the intent of the parties to import the rights and obligations that they view as appropriate in the context of an employment relationship. [4] As a result, in the absence of an employment contract, an employer may potentially end up having more obligations to an employee than either party intended.  Therefore, it is advisable that employers take the time and expend the necessary resources prior to an employee joining their team and thus reduce or curtail the possibility of later litigation.  The costs of litigation will always outweigh the costs of having an employment contract prepared.

 

* The author thanks Sarah Sidhu for all her assistance in co-authoring this paper.

[1] Canada Square Corp. v. VS Services Ltd., [1981] O.J. No. 3125, 34 O.R. (2d) 250 at 260 – 61 (Ont. C.A.).

[2] In Sinclair v. Dover Engineering Services Ltd., 1987, CanLII 2692, the BC Supreme Court, in determining who was the employer of the employee in context of a wrongful dismissal action where one company hired him and another, a holding company, paid his salary, stated:

As long as there exists a sufficient degree of relationship between the different legal entities who apparently compete for the role of employer, there is no reason in law or in equity why they ought not all to be regarded as one for the purpose of determining liability for obligations owed to those employees who, in effect, have served all without regard for any precise notion of to whom they were bound in contract. What will constitute a sufficient degree of relationship will depend, in each case, on the details of such relationship, including such factors as individual shareholdings, corporate shareholdings and interlocking directorships. The essence of that relationship will be the element of common control.

 

[3] Faber v. Royal Trust Co., 145 D.L.R. (4th) 1 [1997] 1 S.C.R. 846

[4] [2001] O.J. No. 1574, 8 C.C.E.L. (3d) 204 at 210 (Ont. C.A.), leave to appeal refused [2001] S.C.C.A No. 339 (S.C.C.)

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Shafik Bhalloo
Off-duty conduct of an employee may constitute just cause for dismissal
Friday, February 10th, 2012    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
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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