Posts Tagged ‘contract’

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
Monday, September 10th, 2012    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

 

By Shafik Bhalloo*

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

Section 79(2)(b) provides:

79

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

(a) terminate employment, or

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

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

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

(b) in a comparable position.

 

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

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

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

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

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

[7] BC EST #D534/02

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

 

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

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

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

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

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

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

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

Tags: , , , , , ,

Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment, Other | ....
Shafik Bhalloo
Wednesday, July 4th, 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.

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.)

Tags: , , , , , , ,

Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment | ....
Shafik Bhalloo
Monday, August 22nd, 2011    Posted by Shafik Bhalloo (posts) and Gareth Carline (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

The importance of careful and accurate drafting of business contracts cannot be stressed enough.  However, as careful as a party may be in drafting the contract and as clear as the contractual terms may appear to the parties at the time they are signing the contract, at some point during the operation of the contract, there may arise a dispute between the parties as to the meaning of an ambiguous term in the contract-a term that is open to more than one meaning.  What is the court to do in such case?

The British Columbia Court of Appeal, in a quartet of cases – Grace Residences Ltd. v. Whitewater Concrete Ltd.[1]; Group Eight Investments Ltd. v. Taddei[2], Chuddy v. Merchant Law Group[3], and Gilchrist v. Western Star Trucks Inc.[4]– has delineated instructive principles of contractual interpretation.  These principles may be summarized as follows:

1.     The words of the agreement are the starting point and the most significant tool for interpretation.[5]

2.     The Court must interpret the words objectively, referring to the plain and ordinary meaning, unless it would lead to an absurdity.[6]

3.     The proper “plain and ordinary” meaning must take into consideration the contract as a whole, the intention of the parties expressed within the contract, and the circumstances at the time the contract was entered into[7];

4.     The Court’s will assume that each particular word was selected for a purpose and may reject an interpretation that renders a provision ineffective[8].

5.     Only if the plain and ordinary meaning of the words still results in an ambiguity such that there remain two plausible interpretations, the Court may consider extrinsic evidence regarding the intention of the parties[9].

6.     If extrinsic evidence is relied upon, the Court should interpret the words in a manner consistent with sound commercial principles and good business sense and avoid any commercially absurd meaning[10].

Following these guidelines will assist in avoiding pitfalls when drafting and, if a dispute does arise, in understanding how a Court may decide.


[1] 2009 BCCA 144

[2] 2005 BCCA 489, 57 B.C.L.R. (4th) 278

[3] 2008 BCCA 484, 300 D.L.R. (4th) 56

[4] 2000 BCCA 70

[5] Gilchrist, supra, paragraph 17

[6] Grace Residences Ltd, supra, paragraph 23-25, Group of Eight Investments Ltd., supra, paragraph 20

[7] Chuddy, supra, paragraph 207, Grace Residences Ltd., supra, paragraph 23-25

[8] Grace Residences Ltd, supra, paragraph 23-25, Group of Eight Investments Ltd., supra, paragraph 20

[9] Chuddy, supra, paragraph 207

[10] Chuddy, supra, paragraph 207, Group of Eight Investments Ltd., supra, paragraph 21

Tags: , , ,

Posted by Shafik Bhalloo (posts) and Gareth Carline (posts) | Filed under Other | ....