TevlinGleadle Employment Law Strategies - Perspectives from Vancouver

2012-01-10T14:57:00.000-08:00

I learned recently of a proposal to amend the Worker’s Compensation regime of this province to include workplace bullying as grounds for compensation. WCB has this to say about bullying:

The proposed changes are referred to in this article (and are a welcome addition to the law of British Columbia):

The article makes reference to additional costs of $10-18 million per year as a result of the changes. This should not be regarded as a straight loss.
Under the current regime, a person faced with bullying and intimidation may elect to assert a constructive dismissal. This is ordinarily a difficult claim to bring as it can be expensive, and is often subject to conflicting witness evidence.

The proposed changes could provide a welcome middle ground. Often, people do not wish to assert a constructive dismissal, preferring continued employment to the uncertainty of the litigation process. Providing relief for bullying in this manner could present an alternative which is much more realistic to many people.

Presumably anyone pursuing their rights under the new provisions would be afforded the same whistleblower protection currently outlined by the Workers Compensation Act.
It is unclear to me how the $10-18 million estimate was derived, but I wonder whether it accounts for corollary savings in court expenditures, not to mention the potential for some much-needed relief in British Columbia's currently-clogged court system. Especially when coupled with potential increases in the accessibility of justice to victims of bullying and harassment, this is an expense that I do not oppose.

TevlinGleadle Employment Law Strategies will keep abreast of all developments in this area.

Szczypiorkowski v. Coast Capital Savings (Bonus Claim, Mitigation of Damages, 18 month notice period)

2011-11-11T14:42:00.000-08:00

In this recent BC employment law case, the plaintiff recovered wrongful dismissal damages after long service. Just cause was not alleged at trial, but had been considered based on the plaintiff's sending offensive jokes of a sexual nature by email.

Facts: (the court wrote)

[2] The plaintiff is 62 years old. He was employed by the defendant for approximately 18 and a half years and, at the time of his termination, was a Senior Manager, Commercial Real Estate Lending. The defendant is one of Canada's largest credit unions. When the plaintiff was terminated, his total remuneration was in the range of $100,000 to $150,000 per year.

[11] Since the defendant is not relying on just cause as a defence to the claim for wrongful dismissal, the issues to be decided are:
1) What is a reasonable notice period in these circumstances?
2) What measure of compensatory damages is appropriate? Under this heading, I must consider not only salary, but also:
a) whether in assessing damages, the Court should include in Mr Szczypiorkowski's total remuneration the bonuses he had been receiving over the years;
b) whether the Court should reduce the amount because the plaintiff has failed to mitigate his damages; and
c) whether the Court should apply a discount to the notice period contingent on the likelihood that the plaintiff will find work before the end of the notice period.
3) Has the plaintiff established that the Court should award punitive damages?

Findings:

Reasonable Notice: The court found that in the circumstances an 18 month notice was appropriate, given the plaintiff's age, length of service, and the character of his employment.

Bonus Claim:

The court applied the normal test for awarding bonuses - whether the bonus was a benefit that was an "integral part of the employee's wage or salary structure". The court concluded that in this case the test was satisfied:

[71] On this point, in Gillies v Goldman Sachs Canada Inc. 2000 BCSC 355 (CanLII), (2000), 2000 BCSC 355, 49 C.C.E.L. (2d) 236 at para. 63 ["Gillies"], the Court confirmed four factors in deciding whether a bonus was an integral part of a plaintiff's compensation. The Court should consider, in the words of that decision, whether
1) A bonus is received each year although in different amounts;
2) Bonuses are required to remain competitive with other employers;
3) Bonuses were historically awarded and whether the employer had never exercised his discretion against the employee; and
4) The bonus constituted a significant component of the employee's overall compensation.
[72] The employee bears the onus of persuading the Court that had the employee worked throughout the notice period, he would have been entitled to receive a bonus as a matter of contract, on the basis that "past history establishes that it has become an integral part of the plaintiff's wage structure." He must also show the basis for assessing the amount of any such bonus. See Sandelson v. International Vintners Ltd. 1987 CanLII 2978 (BC SC), (1987), 18 B.C.L.R. (2d) 86 at 90, 6 A.C.W.S. (3d) 882 (S.C.).
[73] In considering a wrongfully dismissed employee's entitlement to bonuses, the Court in Hansen v. Altus Energy Services Partnership,2010 ABQB 820 (CanLII), 2010 ABQB 820, 86 C.C.E.L. (3d) 297 concluded at para. 30:
[30] A bonus scheme that has historically become an integral part of an employee's wage or salary structure gives rise to a reasonable expectation of a bonus. Such a bonus is a benefit that has a value and should form part of the calculation of the employee's damages. In the case of quasi or non-formula bonuses, if they are routinely awarded in a certain amount or in a certain range, they should be included in the assessment of damages, just like any other fringe benefit. Hansen had received bonuses in all but 2-4 of his 23 years of employment and therefore the bonuses could be considered as routinely awarded.

This case also involved an issue as to whether a dismissed employee, who was not working at the time a bonus would have been payable, should receive compensation for a bonus in any event, both before the dismissal and for the notice period. The court rejected the defendant's argument on the basis that the bonus would have been payable if the employer had given proper working notice. This is consistent with the general course of authority in BC courts.

The court said on this point:

[65] Turning to the defendant's first argument, I find this position without merit for the simple reason that had CCS not wrongfully dismissed the plaintiff, Mr. Szczypiorkowski would have been employed and entitled to his bonus. Based on Mr. Szczypiorkowski regularly receiving a bonus in the past, it is reasonable to assume he would have continued to receive a bonus if he had continued his employment with the defendant. InFerguson v. Kodak Canada Inc., [1992] B.C.J. No. 2545 (S.C.), when considering a similar argument with regard to the award of dividends to a wrongfully dismissed employee, the court stated:
In my view the clause was not designed to meet the situation of a wrongfully dismissed employee who was deprived of the opportunity to work. He is entitled to be compensated by an award of damages

Another interesting issue was as to the amount of the bonus that should be awarded. The defendant's argument that larger bonuses in prior years should be excluded as they were extraordinary, but the court refused to accept this submission. The court assessed the bonus claim on the basis of a projection of historical averages, including higher and lower periods alike, writing:

[74] In my opinion, there is no reason to exclude the 2006 bonus or the $10,000 bonus from 2008 in this calculation. These facts differ fromReynolds v. First City Trust Co. reflex, (1989), 27 C.C.E.L. 194 at 200 (B.C.S.C.), where McKenzie J. concluded that one very large bonus of $70,000 "did not fit any pattern so far as amount was concerned," and did not include a bonus more than 11 times the average in his calculation of a bonus award within compensatory damages.

The defendant also argued that the amount of any bonus should have been reduced to reflect the fact that the employer might have placed the employee on a "performance improvement plan" if working notice had been given. The court rejected this argument, writing:

[66] With regard to the defendant's second argument, I find Mr. Berg's assertion that he would "probably" have put the plaintiff on a performance improvement plan if he had not been dismissed to be mere speculation. Mr. Berg's conjecture does not undermine the fact that the plaintiff received bonuses in the past on a continuous basis, and there was no evidence of prior misconduct or poor performance evaluations.
[67] Similarly, Ms. Fordy asserted that Mr. Szczypiorkowski would have been rated as "needs to do better" in "interpersonal-communications-related competencies." This is not certain enough, nor clear enough in its explanation of the rating categories and their relative values, for me to conclude that he would not have been considered to be doing a "good job" in four out of five core competencies—which is all that is required for an employee to be eligible for a bonus as far as job performance is concerned.
[68] Again, I am satisfied the reasonable probability is that, had the plaintiff not been wrongfully terminated in November 2010, he would have continued to receive a bonus.

Mitigation of Damages:

The court adopted a 2 part test, commonly followed in BC wrongful dismissal cases, requiring the employer seeking a deduction from notice period damages to discharge an onus that, firstly, efforts made by the plaintiff were not adequate and, secondly, that if extra effort had been made, earnings would have resulted. The court wrote in this regard:

[88] In Forshaw v. Aluminex Extrusions 1989 CanLII 234 (BC CA), (1989), 27 C.C.E.L. 208 at 212-213, 39 B.C.L.R. (2d) 140 at 144 (C.A.), our Court of Appeal addressed the issue of mitigation:
The duty to "act reasonably", in seeking and accepting alternate employment, cannot be a duty to take such steps as will reduce the claim against the defaulting former employer, but must be a duty to take such steps as a reasonable person in the dismissed employee's position would take in his own interests - to maintain his income and his position in his industry, trade or profession. The question whether or not the employee has acted reasonably must be judged in relation to his own position, and not in relation to that of the employer who has wrongfully dismissed him.
[89] On this point, I am mindful of Burnyeat J.'s description in Smith v. Aker Kvaerner Canada Inc. and Kvaerner Power Inc, 2005 BCSC 117 (CanLII), 2005 BCSC 117 ["Smith v. Aker"], of the dismissed employee's duty to search for new employment. At para. 31, he said:
[31] In seeking and accepting alternative employment, the plaintiff has a duty to act reasonably and to take such steps as a reasonable person in the plaintiff's position would take in his own interest to maintain his income and his position in his industry, trade or profession. The duty involves a constant and assiduous application for alternative employment, an exploration of what is available through all means....
[90] However, the defendant must prove that the terminated employee has failed to mitigate damages. This onus is "by no means a light one" (Red Deer College v. Michaels (1975), 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324 at 332, 57 D.L.R. (3d) 386 at 391). The defendant must establish, first, that it would have been reasonable for the plaintiff to do more in an attempt to find new employment and, second, that if the plaintiff had done more, he would have been successful in obtaining employment. See Jorgenson v. Jack Cewe Ltd., (1978), 93 D.L.R. (3d) 464, [1979] 1 A.C.W.S. 138 (B.C.C.A.), aff'd 1980 CanLII 177 (SCC), [1980] 1 S.C.R. 812, 111 D.L.R. (3d) 577; Sifton v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd, 2010 BCSC 353 (CanLII), 2010 BCSC 353, aff'd 2010 BCCA 541 (CanLII), 2010 BCCA 541; and Smith v. Aker at para. 32.
[91] In my opinion, the plaintiff has attempted to find work in his field. He has monitored and applied for offers of similar employment. As well, even if the defendant was correct that Mr. Szczypiorkowski could have found the same job postings as did Mr. French, I am still not satisfied that there is sufficient evidence to conclude that these postings should be considered comparable job offers: again, there was no indication of the salary level offered for any of these positions (see Edge v. Kilborn Engineering (B.C.) Ltd. [1987] B.C.J. No. 992 aff'd [1998] B.C.J. No. 807).
[92] Moreover, turning to the second part of the mitigation test, given the plaintiff's present circumstances, it is highly unlikely that even if Mr. Szczypiorkowski had made substantially greater efforts, he would have succeeded in finding "comparable alternative employment" (see Carlysle-Smith v. Dennison Dodge Chrysler Ltd., 1997 CanLII 972 (BC SC), (1997) 33 C.C.E.L. (2d) 280 (B.C.S.C.) at para. 38). This is especially so when Mr. Szczypiorkowski's employer of the last 18 and a half years has exercised its right not to provide him with a letter of reference.
[93] I also bear in mind Burnyeat J.'s comments on similar circumstances in Systad v. Ray-Mont Logistics Canada Inc., 2011 BCSC 1202 (CanLII), 2011 BCSC 1202 at para. 31. I must regard Mr. Szczypiorkowski's "physical and mental condition": while he did not suffer an illness himself, he had just given care to two people with serious conditions for many months. I also take into account "the reasonable period of time" needed "to get over the shock of having his employment terminated." See also Smith v. Aker at para. 35.

Systad v. Ray-Mont Logistics (18 month award for 65 year old Container Lift Operator)

2011-09-12T15:42:00.000-07:00

A 65 year old Container Lift Operator, with no supervisory duties was awarded 18 months notice after 18 years service, in spite of the employer's argument that 8 weeks' notice was enough given his (allegedly) non-responsible job duties.

The full text of the reasons for judgement are available here.

Character of Employment:

The judge dismissed the employer's arguments based on its allegation that Mr. Systad's "character of employment" was such that only statutory notice was required to comply with the BC Employment Standards Act.

"[19] There is no evidence to suggest that an employee with the responsibilities of Mr. Systad will have an easier time finding suitable alternate employment than an employee having more "senior" duties. I am satisfied that there are very few situations where the "character of employment" will be of paramount relevancy in the consideration of the appropriate notice period to be ordered. I adopt the statements that giving undue attention to the character of employment represents "antiquated social values" and is "antithetical to the law's ultimate goal, namely egalitarian justice". Character of employment is merely another matter which I take into account along with the other factors set out in Bardal, supra."

Employment Standards Acts minimums NOT adequate notice in most circumstances:

Judge Burnyeat in strong language concluded that for Mr. Systad the minimum notice requirements of the Employment Standards Act were inadequate.

[23] Mr. Systad has approximately ten years in excess of the period of employment that would entitle him to a maximum of eight weeks notice provided under the Act. At the same time, the employment of Mr. Systad was not that of a young, low-service employee with an "entry level" job. Mr. Systad was paid over $75,000 for his efforts, his hourly rate of approximately $36.80 far exceeded that of forklift drivers who he says earn $14 per hour, and he was entitled to eight weeks paid vacation. As well, Mr. Systad trained less experienced drivers and he had been asked by the Terminal Manager to supervise other employees when the Terminal Manager was absent.

[24] The decision in Pelech, supra, is clearly distinguishable. Based on his age, his responsibilities, and his compensation, he could not be described as a young entry-level employee. I reject the submission of Ray-Mont that the statutory notice provisions under the Act are appropriate in this case. It will be a rare case where someone of this age, compensation, years on the job, and duties will only be entitled to the compensation provisions set out under the Act. This is not such a case. While Mr. Systad had few remaining supervisory functions, he nevertheless was being paid commensurate with considerable responsibilities.

This decision underlines the severe limitations on application of the Pelech principle to very young and short service employees with entry level jobs.

Relevance of Physical or Mental Disabilities to Length of Notice Period:

The court accepted and applied submissions by plaintiff's counsel that the length of notice period could in proper circumstances be extended by particular problems facing the plaintiff in terms of re-employment. Mr. Systad had knee problems with both knees. When dismissed, he was just about to go off work for left knee surgery, and at the time of trial he had not yet returned to an active job search because he was still unable to drive. He faced the prospect of further surgery on his other knee, a factor complicating his return to active employment.

Defence counsel argued that these circumstances were irrelevant and ought not to be taken into account when assessing the notice period. The court disagreed.

[25] Mr. Systad is 65 years-old and, while provincial legislation has been changed so that age 65 is no longer the date for mandatory retirement, I am satisfied that it will nevertheless be difficult for Mr. Systad to find employment in competition with a younger applicants for employment. I also take into account that his recent operation and the possibility that he will require further operations will make it more difficult for him to compete in finding comparable employment. As well, the availability of similar employment having regard to his experience, training and qualifications may not be available and he may be required to settle for jobs having considerable less remuneration. The possibility that he may require further surgery may well make him less desirable as a potential employee. Taking into account all of the factors set out in Bardal, supra, I am satisfied that the reasonable notice period is 18 months.

Modest Contingency Reduction for Damage Assessment Early in Notice Period:

The judgement was rendered only 6 months after the dismissal, thus 12 months remained during the notice period, and the defendant asked for a large deduction for the contingency that remunerative employment might be found during that period. The court only reduced the 18 month notice period by two weeks to reflect the contingency that Mr. Systad might earn income during the notice period.

[27] Taking into account the notice period of 18 months, the age of Mr. Systad, the number of years of his service, the type of work that he was undertaking, the possibility that his experience as a Container Lift Operator is specialized so that his skills and abilities are not readily transferable to other areas of employment, the level of responsibility, his efforts to date to find employment, and the information before the Court that his future employment may well be limited to employment at $14 per hour and not the $36.80 hourly wage that he was earning, I am satisfied that some contingency should be in place to reflect the possibility that Mr. Systad will find employment in the 12-1/2 months subsequent to this summary trial.

[28] Ray-Mont submits that the period of reasonable notice should be reduced by two months. There is very little information available regarding available employment given the skills of Mr. Systad. What is available allows me to conclude that what may be available will pay Mr. Systad less than 40% of what he was earning with Ray-Mont. In the circumstances, I provide a contingency equivalent to two weeks of his former salary. This contingency reflects the possibility of finding future employment but at a greatly reduced hourly wage. If I had any confidence in predicting that Mr. Systad would find employment at the salary he was receiving, I would have assessed the contingency factor at six weeks.

Mitigation of Damages:

The court refused to make any reduction in the notice period in spite of defendant's arguments of failure to mitigatge, writing:

[29] A further question which Ray-Mont raises is whether Mr. Systad failed to mitigate his damages. In Koos v. A&A Contract Customs Broker Ltd., [2009] B.C.J. No. 857, Rice J. set out the nature of this obligation as follows:

The plaintiff has an obligation to mitigate her loss, that is, to take such steps as a reasonable person in the plaintiff's position would take in her own interest to maintain her income and her position in her industry, trade or profession: see Smith v. Aker Kvaerner Canada Inc., 2005 BCSC 117, at para. 31. The onus is on the defendant to prove that the plaintiff has failed to mitigate or failed to take reasonable steps to mitigate. The defendant must show not only that the plaintiff failed to take steps to mitigate but also that had the plaintiff taken those steps she could likely have found equivalent employment: see Jorgenson v. Jack Cewe Ltd. (1978), 93 D.L.R. (3d) 464, 9 B.C.L.R. 292 at 296 (C.A.), aff'd [1980] 1 S.C.R. 812, 111 D.L.R. (3d) 577. (at para. 35)

[30] There was no evidence that, with diligent effort, Mr. Systad could have already secured alternative employment. Mr. Systad is only now able to work, having just recently recovered from his knee surgery. I think it highly unlikely that Mr. Systad would have been in a position to compete with those who could have started employment immediately when he would have not have been in a position to return to work until he has sufficiently recovered from his knee operation and until he could drive a vehicle again – not only to get to work but to operate comparable equipment in any new employment.

[31] Regard must be made to his physical and mental condition: Pereira v. Business Depot (c.o.b. Staples Business Depot), [2009] B.C.J. No. 1731 (S.C.) at para. 110. It is also appropriate to take into account the reasonable period of time to get over the shock of having his employment terminated: Smith v. Aker Cavaner Canada Inc. [2005] B.C.J. No. 150 (S.C.) where the following statement was made:

...I am satisfied that it is not necessarily a failure to mitigate where a finding could be made that a plaintiff has not immediately commenced a job search. I am satisfied that any employee should be given a reasonable period of time of having their employment terminated, to organize their thoughts as to how best to go about obtaining new employment, and to undertake the necessary research and preparation of resumes so that they are in a position to compete for available positions. (at para. 35)

[32] After his employment was terminated, Mr. Systad made only minimal efforts to find employment. As well, he did not take up the offer made to assist him in finding employment. When I combine the initial period of shock with the immobility caused by the necessary operation on his right knee, I conclude that Ray-Mont has failed to meet the onus of showing that Mr. Systad has failed to mitigate his damages. In this regard, I also take into account that reasonable mitigation efforts must take into account not only his current knee operation but the possibility that he will require further operations.

Not Appropriate to Deduct amounts for Employment Insurance premiums, Canada Pension Plan premiums, or Old Age Pension payments:

The court rejected the argument by defence counsel and deductions should be made for these premiums and payments.

McCormick v. Faskens (Age Discrimination Complaint against National Law Firm)

2011-06-02T11:53:00.000-07:00

Today, the BC Supreme Court handed down a landmark decision in the claim by Mitch McCormick against Fasken Martineau, upholding the decision of the BC Human Rights Tribunal on the fundamentally important questions of jurisdiction.

The Reason for Judgement are available on the TevlinGleadle website.

The Honourable Madam Justice Bruce's reasons contain a sweeping, purposive analysis of the threshold issue of whether Mr. McCormick, an equity partner in a large international law firm, was entitled to the protections afforded against age discrimination under the BC Human Rights Code.

BC Human Rights Tribunal Grants Discrimination Award for "Sexting" (Sexual Harassment)

2011-04-21T14:19:00.001-07:00

The British Columbia Human Rights Tribunal's ruled in McIntosh v. Metro Aluminum Products Ltd ., that an employer and its owner were liable for substantial damages because of unwanted sexually suggestive text messages, sometimes referred to as "sexting".

FACTS:

For a time after starting work at Metro, Ms. McIntosh participated in a consensual sexual relationship with Metro's owner, one Mr. Augustynowicz. In the course of their relationship, the parties exchanged sexually explicit texts.

Months after the claimant ended the relationship Mr. Augustynowicz continued to send inappropriate text messages. The messages became more offensive over time. Mr. Augustynowicz continued to send messages until eventually, Ms. McIntosh threatened to report the matter to the police.

ANALYSIS:

The Court's analysis is contained in the following paragraphs (referring to the BC Human Rights Code) from the reasons:

[99] Ms. McIntosh filed her complaint under s. 13 of the Code, which provides:

(1) A person must not

(a) refuse to employ or refuse to continue to employ a person, or

(b) discriminate against a person regarding employment or any term or condition of employment

because of ... sex...

...

(4) Subsections (1) and (2) do not apply with respect to a refusal, limitation, specification or preference based on a bona fide occupational requirement.

[100] The onus is on Ms. McIntosh to establish, on a balance of probabilities, that the Respondents, or any of them, discriminated against her on the basis of sex (sexual harassment).

[101] Sexual harassment is a form of sex discrimination: Janzen v. Platy Enterprises Ltd., 1989 CanLII 97 (S.C.C.), [1989] 1 S.C.R. 1252, [1989] S.C.J. No. 41 (Q.L.). The Supreme Court of Canada defines sexual harassment broadly as:

... unwelcome conduct of a sexual nature that detrimentally affects the work environment or leads to adverse job-related consequences for the victims of harassment. It is...an abuse of power. When sexual harassment occurs in the workplace, it is an abuse of both economic and sexual power. Sexual harassment is a demeaning practice, one that constitutes a profound affront to the dignity of the employees forced to endure it.... (para. 56)

[102] The Court went on to quote with approval the following descriptions of sexual harassment:

...Sexual harassment is any sexually-oriented practice that endangers an individual's continued employment, negatively affects his/her work performance, or undermines his/her sense of personal dignity...

...Harassment behaviour may manifest itself blatantly in forms such as leering, grabbing, and even sexual assault. More subtle forms of sexual harassment may include innuendos, and propositions for dates or sexual favours.... (para. 49)

[103] The Supreme Court of Canada also commented on the scope of circumstances that might constitute sexual harassment:

...Sexual harassment is not limited to demands for sexual favours made under threats of adverse job consequences should the employee fail to comply with the demands. Victims of harassment need not demonstrate that they were not hired, were denied a promotion or were dismissed from their employment as a result of their refusal to participate in sexual activity. This form of harassment, in which the victim suffers concrete economic loss for failing to submit to sexual demands, is simply one manifestation of sexual harassment, albeit a particularly blatant and ugly one. Sexual harassment also encompasses situations in which sexual demands are foisted upon unwilling employees or in which employees must endure sexual groping, propositions, and inappropriate comments, but where no tangible economic rewards are attached to involvement in the behaviour (para. 52).

[104] There is no dispute between the parties that there is sexual content in the various text messages. The issue is whether Mr. Augustynowicz's sexualized text messages were unwelcome.

[105] The test for determining whether conduct is unwelcome is an objective one: would a reasonable person, taking into account all the circumstances, know that the comments were unwelcome.

[106] In Mahmoodi v. University of British Columbia (1999), 36 C.H.R.R. D/8 (B.C.H.R.T.); petition for judicial review dismissed 2001 BCSC 1256 (CanLII), 2001 BCSC 1256, the Tribunal set out the following considerations when assessing whether conduct is unwelcome:

i) A complainant is not required to expressly object unless the respondent would reasonably have no reason to suspect it was unwelcome;

ii) Behaviour may be both tolerated and unwelcome;

iii) Not only overt, but also subtle indications of unwelcomeness may be sufficient to communicate that conduct is unwelcome; and

iv) The reasons for submitting to conduct may be closely related to the power differential between the parties and the implied understanding that lack of co-operation could result in some form of disadvantage. (paras. 140-141).

The Tribunal found that Ms. McIntosh had proven that she was subjected to sexual harassment in the workplace. Mr. Augustynowicz was in a position of authority and responsible for the terms and conditions of Ms. McIntosh's employment. He was the person responsible to maintain a workplace free of sexual harassment. He failed in this responsibility by repeatedly making sexual comments and propositions that were "offensive, inappropriate, and unlawful in an employment context."

While the Tribuanal stated that the parties were entitled to enter into a sexual relationship while working together, once the employee communicated that she no longer wanted to engage in communications or conduct of a sexual nature, Mr. A knew, or ought to have known, that the text messages were not welcome and were impacting the work environment.

REMEDY:

The Tribunal:

ordered Metro and Mr. Augustynowicz to cease all discriminatory conduct and
granted a declaration that the conduct was discriminatory and contrary to the Human Rights Code (British Columbia).
awarded the claimant:

$14,493.80 as compensation for lost wages;
$2,900.85 as reimbursement for expenses incurred in pursuing the claim, and
$12,500 as damages for injury to dignity, feelings and self-respect.

BC Supreme Court Dismisses Just Cause Defence (Breach of Fiduciary Duty, Insubordination, Conflict of Interest, Disobedience, Incompetence)

2011-04-21T09:00:00.000-07:00

The Honourable Madam Justice Loo of the British Columbia Supreme Court recently dismissed a defence of just cause in a wrongful dismissal case, with a comprehensive and thoughtful analysis of recent leading cases which guide the court on subjects including just cause, fiduciary duty of employees, incompetence, conflict of interest, insubordination, condonation, conflict of interest, and quantification of damages for failiure to give reasonable notice.

This decision was handed down in October, 2010, but the discussion about issues surrounding the just cause defence in a wrongful dismissal case is worth thoughtful review.

In Kokilev v. Picquic Tool Company Inc. the court wrote:

[142] In order to establish cause for dismissal without notice, the employer must prove that the employee's conduct, when viewed in all of the circumstances, was seriously incompatible with his or her duties, and that the conduct went to the root of the employment relationship: Panton v. Everywoman's Health Centre Society (1988), 2000 BCCA 621. An employer has a heavy onus to overcome.

[143] The approach to assessing whether the employee's conduct provides cause for dismissal is objective. Mr. McKenzie's view that the conduct was sufficient to establish cause (or the employee's view that it is not) is not determinative.

[144] The approach is not only objective, it is also contextual: the Court must consider "the particular circumstances surrounding the employee's behaviour ... factors such as the nature and degree of the misconduct, and whether it violates the 'essential conditions' of the employment contract or breaches an employer's faith in an employee" (McKinley v. BC Tel, 2001 SCC 38 (CanLII), 2001 SCC 38, [2001] 2 S.C.R. 161, at para. 39). This balances the employer's right to dismiss an employee for cause with the importance of both the work and the manner of dismissal to an employee's self-worth.

[145] Mr. Justice Iacobucci in McKinley, at paras. 53-54, outlined the principle of proportionality that underlies the contextual approach:

[53] Underlying the approach I propose is the principle of proportionality. An effective balance must be struck between the severity of an employee's misconduct and the sanction imposed. The importance of this balance is better understood by considering the sense of identity and self-worth individuals frequently derive from their employment, a concept that was explored in Reference Re Public Service Employee Relations Act (Alta.), 1987 CanLII 88 (S.C.C.), [1987] 1 S.C.R. 313, where Dickson C.J. (writing in dissent) stated at p. 368:

Work is one of the most fundamental aspects in a person's life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person's employment is an essential component of his or her sense of identity, self-worth and emotional well-being.

This passage was subsequently cited with approval by this Court in Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (S.C.C.), [1992] 1 S.C.R. 986, at p. 1002, and in Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (S.C.C.), [1997] 3 S.C.R. 701, at para. 95. In Wallace, the majority added to this notion by stating that not only is work itself fundamental to an individual's identity, but "the manner in which employment can be terminated is equally important".

[54] Given this recognition of the integral nature of work to the lives and identities of individuals in our society, care must be taken in fashioning rules and principles of law which would enable the employment relationship to be terminated without notice. The importance of this is underscored by the power imbalance that this Court has recognized as ingrained in most facets of the employment relationship. In Wallace, both the majority and dissenting opinions recognized that such relationships are typically characterized by unequal bargaining power, which places employees in a vulnerable position vis-à-vis their employers. It was further acknowledged that such vulnerability remains in place, and becomes especially acute, at the time of dismissal.

[146] Picquic also suggests that Mr. Kokilev was terminated on the basis of insolence and insubordination.

[147] The law relating to termination without notice on the basis of insubordination was discussed in Adams v. Fairmont Hotels & Resorts Inc., 2009 BCSC 681 (CanLII), 2009 BCSC 681, at paras. 277-279:

[277] Conduct amounting to insubordination sufficient to establish cause for dismissal was described half a century ago by Lord Evershed in the oft-cited decision of Laws v. London Chronicle (Indicator Newspapers), Ltd., [1959] 2 All E.R. 285 at 287 (Eng. C.A.):

[S]ince a contract of service is but an example of contracts in general, so that the general law of contract will be applicable, it follows that, if summary dismissal is claimed to be justifiable, the question must be whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service. It is, no doubt, therefore, generally true that wilful disobedience of an order will justify summary dismissal, since wilful disobedience of a lawful and reasonable order shows a disregard – a complete disregard – of a condition essential to the contract of service, namely, the condition that the servant must obey the proper orders of the master and that, unless he does so, the relationship is, so to speak, struck at fundamentally.

[278] As noted in Laws, insubordination will not constitute cause unless the employer establishes that the employee breached an "essential condition of the contract of service". That may occur, said the Court in of Appeal in Panton at para. 33, where the employee has wilfully defied a "clear and unequivocal" instruction or refused "to carry out a policy or procedure well known by the employee to be central to the fulfillment of the employer's objectives".

[279] The Court in Panton also cited its earlier decision in Stein v. British Columbia (Housing Management Commission) 1992 CanLII 4032 (BC C.A.), (1992), 65 B.C.L.R. (2d) 181, 41 C.C.E.L. 213 (C.A.) where, after citing Laws, Southin J.A. said the following at 4:

I begin with the proposition that an employer has a right to determine how his business shall be conducted. He may lay down any procedures he thinks advisable so long as they are neither contrary to law nor dishonest nor dangerous to the health of the employees and are within the ambit of the job for which any particular employee was hired. It is not for the employee nor for the court to consider the wisdom of the procedures. The employer is the boss and it is an essential implied term of every employment contract that, subject to the limitations I have expressed, the employee must obey the orders given to him.

[148] Picquic also relies on the preceding passage from Stein, and the one that immediately follows it:

It is not an answer for the employee to say: "I know you have laid down a rule about this, that or the other, but I did not think that it was important so I ignored it."

[149] In Stein the plaintiff was Regional Manager of the defendant on Vancouver Island. The purpose of the defendant was to provide public housing to those in need. The plaintiff was aware that housing was to be allocated on the basis of a written policy and procedure that implemented a point score system. The plaintiff knew he was to implement the point score system but failed to do so. The Court of Appeal, in dismissing his appeal from the trial judgment (dismissing his wrongful dismissal action) found that the plaintiff had fundamentally disregarded an essential condition of his contract of employment.

[150] However, Stein cannot be said to stand for the proposition that disobeying every lawful order of an employer amounts to cause for dismissal. In that case Madam Justice Southin, in dismissing the employee's appeal, quoted the following passage from Laws v. London Chronicle (Indicator Newspapers) Ltd. with approval:

I think that it is not right to say that one act of disobedience, to justify dismissal, must be of a grave and serious character. I do, however, think (following the passages which I have already cited) that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think, that one finds in the passages which I have read that the disobedience must at least have the quality that it is "wilful": it does (in other words) connote a deliberate flouting of the essential contractual conditions.

[151] I do not think it can be said that Mr. Kokilev ever refused to carry out the tasks that were essential conditions of his contract of employment.

[152] Picquic relies on Smith v. Peace Arch Community Services (1999), 89 A.C.W.S. (3d) 519 (B.C.S.C). However, the facts in that case are clearly distinguishable; the plaintiff employee expressly knew that his wife was prohibited from being paid from public funds because of a conflict of interest.

[153] Picquic does not suggest that any of the incidents viewed separately gives rise to just cause to terminate Mr. Kokilev's employment. Rather, it argues that the incidents viewed cumulatively afford grounds for just cause on the basis of the principles enunciated in Atkinson v. Boyd, Phillips & Co. 1979 CanLII 478 (BC C.A.), (1979), 9 B.C.L.R. 255 (C.A.) at paragraphs 45 and 46 where the Court agreed with the following quote from Ross v. Willards Chocolates Ltd., [1927] 2 D.L.R. 461 at 469-470 (Man. K.B.):

It is not always easy for an employer who finds an employee thoroughly unsatisfactory and deficient in obedience or competence to point to a single instance which would justify his summary dismissal. But I do not think it is necessary to rely upon such a single instance where the employee's conduct shows a general laxity and disregard of instructions in a business requiring energy, accuracy of accounts, and strict adherence to instructions, such as this business required.

[154] However, the performance and misconduct of the employee in that case was much more egregious than Mr. Kokilev's. There, despite repeated warnings to improve, the plaintiff's conduct and attitude alienated the defendant's clients, caused the defendant to lose business and other employees to quit. The plaintiff also refused to carry out the defendants specific instructions.

[155] Picquic also relies on Lowery v. Calgary (City), 2002 ABCA 237 (CanLII), 2002 ABCA 237, where the Alberta Court of Appeal stated at para. 3:

[3] ... Summary dismissal for incompetence is justified by significant breach of contract on the part of an employee. Where the employer alleges cumulative cause for such dismissal, it must prove on the authority of Atkinson v. Boyd, Phillips & Co. Ltd. 1979 CanLII 478 (BC C.A.), (1979), 9 B.C.L.R. 255, with which we respectfully concur on this point, that:

1. The employee was given express and clear warnings about his performance.

2. The employee was given a reasonable opportunity to improve his performance after the warning was issued.

3. Notwithstanding the foregoing, the employee failed to improve his performance.

4. The cumulative failings "would prejudice the proper conduct of the employer's business".

[156] In the case at bar, Mr. Kokilev was given a warning after the David Bonner incident on November 5, 2002 and his performance improved and his salary was increased.

[157] Mr. McKenzie concedes that he did not give Mr. Kokilev a written warning after the flood incident to communicate that he considered Mr. Kokilev's conduct had "undermined" his plans. There is no evidence that the flood incident in November 2003 was ever raised with Mr. Kokilev until this litigation was commenced, and even then the flood incident is not referred to in the statement of defence or in the further and better particulars delivered in February 2010.

[158] Mr. McKenzie agrees that after the flood Mr. Kokilev worked long hours and provided the necessary financial details and documents required by the insurance adjusters in order to substantiate the company's loss. He agreed that at that time they "had a reconciliation" and he was glad that Mr. Kokilev was employed by the company because he did a professional job and supported the company with the challenges that it faced after the flood.

[159] Mr. McKenzie also agreed that from that time forward until May 4, 2007 their relationship improved, and it was a reasonably good relationship. There were several instances of minor disagreements, but "none that caused me to want to fire you".

[160] Mr. Kokilev argues that it is too late to rely on the David Bonner incident or the flood incident on the basis of condonation. I agree.

[161] The principle of condonation is explained in the frequently cited passage from McIntyre v. Hockin, [1889] O.J. No. 36, 16 O.A.R. 498 (Ont. C.A.), at para. 13:

[13] It may be proper, however, to add a few words on the subject of condonation. When an employee becomes aware of misconduct on the part of his servant, sufficient to justify dismissal, he may adopt either of two courses. He may dismiss, or he may overlook the fault. But he cannot retain the servant in his employment, and afterwards at any distance of time turn him away. It would be most unjust if he could do that, for one of the consequences of dismissal for good cause is, that the servant can recover nothing for his servant's services beyond the last payday, whether his engagement be by the year or otherwise: Smith's Law of Master and Servant, 4th ed., p. 220; Boston Deep Sea Fishing Co. v. Ansell, 39 Ch. D. 339. If he retains the servant in his employment for any considerable time after discovering his fault, that is condonation and he cannot afterwards dismiss for that fault without anything new. No doubt the employer ought to have a reasonable time to determine what to do, to consider whether he will dismiss or not, or to look for another servant. So, also, he must have full knowledge of the nature and extent of the fault for which he cannot forgive or condone matters of which he is not fully informed. Further, condonation is subject to an implied condition of future conduct, and whenever any new misconduct occurs, the old offences may be invoked and may be put in the scale against the offender as cause for dismissal.

[162] Mr. McKenzie may not have liked Mr. Kokilev's response to his assigned tasks at the meeting of May 4, 2007 but I do not agree that he was insubordinate or insolent. He may have made some negative comments, from Mr. McKenzie's point of view, but there is no evidence that he failed to carry out his assigned task.

[163] At the meeting of October 25, 2007 Mr. Kokilev may not have explained why the bonus plan was in a deficit position, but again, at worst, Mr. Kokilev may have exercised poor judgment or made inappropriate comments (from Mr. McKenzie's point of view). But he cannot be said to have repudiated an essential condition of the contract of employment. Mr. McKenzie said that he asked for "input". He received input, and cannot now complain that Mr. Kokilev was disobedient or insolent.

[164] The meeting of January 30, 2009 was unfortunate because Mr. Kokilev was left in the dark before the meeting. Without being told the purpose of the meeting, he was put on the spot and asked for his views when Mr. McKenzie knew that he thought it was not financially prudent for the company to change carriers. While Mr. Kokilev may not have provided the comments that Mr. McKenzie wanted to hear, his response was not surprising.

[165] I conclude that none of the incidents, relied on either separately or cumulatively, establish just cause.

[166] I find that Mr. Kokilev genuinely believed that changing carriers was not in the best interest of the company. Simply because Mr. Kokilev may have been upset at the meeting and said things that were not to Mr. McKenzie's liking, does not amount to a conflict of interest or breach of fiduciary duty. Nor can it be said that Mr. Kokilev "undermined" Mr. McKenzie or Picquic.

[167] The word "undermine" is defined in the 9th edition of The Concise Oxford Dictionary as to "injure (a person, reputation, influence, etc.) by secret or insidious means" (Oxford: Clarendon Press, 1995, at 1522).

[168] The Gage Canadian Dictionary defines "undermine" as to "injure or damage by secret or unfair means: The editorial was obviously intended to undermine her influence in the community" (Toronto: Gage Educational Publishing Company, 1983, at 1598).

[169] Picquic suggests that Mr. Kokilev was acting in a conflict of interest because he wanted Mrs. Kokilev to remain the broker. Mr. Kokilev admitted in cross-examination that he was aware that his wife received a commission (it was approximately $2,000) that formed a part of their household income. Mr. Kokilev was never asked the question, but no doubt he would have preferred that his wife remain the broker, but again, that does not create a conflict of interest.

[170] Black's law Dictionary, 9th ed. (St. Paul, MN: West, 2009) contains the following definition:

conflict of interest. (1843) 1. A real or seeming incompatibility between one's private interests and one's public or fiduciary duties. 2. A real or seeming incompatibility between the interests of two of a lawyer's clients, such that the lawyer is disqualified from representing both clients if the duel representation adversely affects either client or if the clients do not consent [at 341].

[171] In Pirie v. Armstrong, 2004 BCSC 1346 (CanLII), 2004 BCSC 1346, Bouck J. stated at para. 14: "An allegation of conflict of interest appears to be more in the nature of a political term than it is a legal one. A better legal term seems to be a breach of a fiduciary duty."

[172] The Canadian Oxford Dictionary defines "conflict of interest" as "the situation of a politician, corporate officer, etc., whose private interests might benefit from his or her public actions or influence" (Toronto: Oxford University Press, 1998, at 297).

[173] I have already concluded that Mr. Kokilev was not a fiduciary, and even if he was, Picquic has not established any breach of fiduciary duty.

[174] I conclude that Picquic has failed to establish that it had just cause to terminate Mr. Kokilev's employment. The next issue is therefore the appropriate period of notice or salary in lieu of notice.

SUMMARY AND CONCLUSION

Once again, the courts of British Columbia have taken a contextual approach to just cause, with a focus on proportionality in the scope of permissible discipline, and a long term employee who did not conduct himself entirely appropriately has yet not been found liable to dismissal without any notice. For summary dismissal to be possible, the defendant employer must be able to produce very clear evidence that the employment relationship has been repudiated by some conduct on the part of the plaintiff employee.

This will not be an easy onus to discharge.

Can an Employer Monitor Employee's Computer for Private Material

2011-03-29T09:52:00.000-07:00

A recent Ontario case involving a criminal charge against a teacher for possession of child pornography has garnered significant media attention.

Ontario Supreme Court Decision

Ontario Court of Appeal Decision

This is in part because of a wide interest by employees about the privacy of information they choose to keep on computers at work.

Workplaces often have little or no express policy regarding private use of computers at work.

This particular case involved portable computers provided for the use of teachers, where the teachers were allowed to use computers for personal purposes.

In these circumstances, the Ontario courts decided that in a criminal investigation for possession of child pornography (the accused was found in possession of a nude photographe of a grade 10 student) a police search of the teacher's laptop without a warrant was a breach of his Charter rights, in spite of the School Board having permitted the search.

The implications for employees and employers are significant, not only for criminal cases, but claims involving employment law principles and disciplinary steps up to dismissal. Inappropriate searches of employee computers might in some cases amount to a constructive dismissal, leaving the employer exposed to a wrongful dismissal claim.

Employers and employees would both be served by a workplace with express policies regarding the personal use of computers by employees.

Employers who wish to ensure an unfettered ability to search computers (used by employees) without limitation might want to establish and communicate clear written policies which set the ground rules.

Employers might for example take steps such as ensuring all computers they wish to monitor are employer owned, establishing and communicating clear written policies which inform employees of the employer's right to monitor all communications, to prohibit private use of computers (should that be appropriate), or if private use by employees is permitted, at least to expresssly restrict the use of computers for inappropriate purposes.

Russo: working for the company you are suing

2011-03-01T15:32:00.000-08:00

Russo v. Kerr, 2010 ONSC 6053, a decision of the Ontario Superior Court, addresses some of the more esoteric elements of the interplay between wrongful/constructive dismissal and mitigation of damages. Russo is noteworthy for the approach it takes to the question of an employee’s right to sue for damages during a period of working notice.

Mr. Russo was a 53 year-old employee who had given 37 years of service to the Defendant. When the Defendant ran into financial difficulties, it hired an analyst to make recommendations geared toward returning the Defendant to profitability. The analyst recommended an across-the-board wage deduction, but singled out four employees, Mr. Russo included, for an even greater reduction in wages. Mr. Russo had a compensation package well in excess of $100,000 reduced to about $60,000.

Mr. Russo’s lawyer informed the employer that Mr. Russo did not acquiesce to this reduction in pay. The difficulty most plaintiffs face in such a situation, however, is that leaving the job might be viewed as quitting. Accordingly, leaving a job (even as a result of constructive dismissal) can reduce an employee’s claim for damages or even extinguish an employee’s chance to sue for wrongful/constructive dismissal. On the advice of counsel, Mr. Russo voiced his objections to the terms of the new contract but continued to work. He commenced a lawsuit claiming constructive dismissal while serving working notice with the Defendant, and well before the expiration of a reasonable notice period.

Interestingly, Russo contained no analysis of the common law principle that an employee can effectively quit during a working notice period by suing for constructive dismissal (see, for example, Suleman v. British Columbia Research Council, 1990 CanLII 746 (BC C.A.)). The Defendant appears not to have taken that position in Russo.

The Supreme Court of Canada made clear in Evans v. Teamsters 2008 SCC 20 that a constructively-dismissed employee might owe a duty to continue working for the employer in order to mitigate damages. In Russo, the parties agreed there had been a constructive dismissal.

The court found that Mr. Russo was constructively dismissed. Damages were payable in an amount representing the difference between what Mr. Russo would have earned during a reasonable notice period (22 months in these circumstances) and what he would earn under the altered agreement.

In an article published by the Law Times, counsel for the Defendant in Russo is quoted as saying the decision makes clear that Mr. Russo’s employment will be over at the end of a 22 month notice period. With respect, I do not agree with that statement.

Gray, J. wrote the following:

“As applied to this case, the plaintiff can remain in the workplace under the changed terms as a means of mitigating his damages, but only for the period of reasonable notice. If he elects to remain in the workplace under the changed terms beyond the period of reasonable notice, with the consent of the defendant, it must then be concluded that he has accepted a new contract of employment under the changed terms after the expiry of the period of reasonable notice.”

This excerpt specifically contemplates employment beyond a period of reasonable notice. It seems to me that Gray, J. was saying that a plaintiff’s non-acquiescence in a constructive dismissal cannot create an indeterminate period of damages. Rather the period of damages is limited by the traditional concept of a reasonable period of working notice. Continuing to work after a reasonable notice period would indicate that Mr. Russo accepts the reduced remuneration going forward.

Evans states that a dismissed employee has a duty to attempt to mitigate damages, and that duty can sometimes be discharged by taking a different job with the old employer. Framed as mitigation (instead of acquiescence), the new contractual arrangement is no different from obtaining employment with a new company. If Mr. Russo were terminated at the end of the 22 month period, I would submit he would be entitled to sue based on the new contract just as he would be if he had been terminated after 22 months with a new employer.

Russo showcases two parties that found an arrangement which eludes so many others in the employment law context. Mr. Russo would work and be paid for that work. Viewing the relationship as terminated after the notice period would be an unfortunate result indeed. It seems the foundation of the working notice arrangement was recognition by both parties of continued mutual benefits. I see no reason why Mr. Russo could not continue working under the new contract until such mutual benefits cease.

BC Court of Appeal on Mitigation, Quit v/s Dismissal, and Damages for Bad Faith Dismissal

2011-02-25T15:05:00.000-08:00

On February 18, 2011, in Beggs v. Westport Foods Ltd., 2011 BCCA 76 the BC Court of Appeal handed down reasons case which involved issues which often arise in a wrongful dismissal claim.

The plaintiff was a long service permanent part-time clerk in the defendant's grocery store. She had in the past taken substantial periods of time off work for personal reasons and had returned to work without difficulty. After a fire at her residence, the plaintiff became disabled due to anxiety and depression. She stayed off work, without telling her employer why, and after a month the employer issued an ROE on the basis that she had quit.

The plaintiff succeeded.

The court considered the appropriate legal test as to whether employment has ended by a resignation (a quit) or an actual dismissal. The court said that a dismissal must be proven on an "objective" standard but a quit involves both an objective and subjective element. That is, there must be satisfactory proof that leads the court to conclude the employee intended to quit. That was lacking in this particular case.

The court also decided that the employer's offer to have the employee return to work was not an offer which the employee was required to accept in the circumstances, referring to Evans v. Teamsters Local Union No. 31, 2008 SCC 20, [2008] 1 S.C.R. 661. The essential reason the court decided the possibility of a return to work had been effectively foreclosed by conduct of both parties and their lawyers.

The BCCA overturned an award of damages by the trial judge on the basis of bad faith conduct at the time of dismissal. The Court referred to Honda Canada Inc. v. Keays, 2008 SCC 39 for the proposition that in suitable circumstances, employees may be awarded damages as a result of the bad faith conduct of the employer at the time of discharge, but found these circumstances lacking in the particular facts. On the facts found by the trial judge, there was no malice or lack of good faith on the part of the employer. The dismissal was essentially found to be the result of a failure to communicate.

$20,000 Punitive Damages Award for Bad Faith Dismissal

2010-07-20T11:27:00.000-07:00

Madam Justice Linda Loo of the British Columbia Supreme Court has handed down reasons for judgment in Nishina v. Azuma Foods (Canada) Co., Ltd. which are an important interpretation of recent decision of the Supreme Court of Canada.

The Supreme Court of Canada decided in Honda Canada Inc. v. Keays, 2008 SCC 39 (CanLII), 2008 SCC 39. In that decision the SCC had directed a return to the principles laid out in Hadley v. Baxendale (1854), [1843-1860] All E.R. Rep. 461: at the time the contract was made, could the employer have reasonably foreseen that if it dismissed the employee in the manner that it did, that the employee would suffer mental distress? If so, and if the dismissed employee could prove mental distress, the court could award damages not based on an increase in the notice period, but as actual non-pecuniary compensation as a separate head of damages.

Commentators had questioned whether Honda v. Keays meant that non-pecuniary damages could only be awarded when a diagnosed illness in the nature of mental distress could be established, possibly even requiring medical evidence.

Judge Loo noted that the court in Honda v. Keays recognized that Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), remains the leading case on punitive damages.

In Whiten, the Supreme Court of Canada clarified that the independent actionable wrong necessary to ground punitive damages may be established not only by a tort, but also by breach of a separate contractual provision or other obligation. Wallace confirmed an employer’s obligation of good faith in the manner of dismissal; this obligation carried through in Honda v. Keays, though now damages to compensate for bad faith in dismissal are awarded as a separate lump sum rather than as an extension of the period of reasonable notice. Following Honda, bad faith dismissal is capable of grounding a cause of action in damages, not just an additional factor to be considered under another head of damages.

Judge Loo went on to award $20,000 in circumstances where the employer exhibited bad faith conduct leading up to and in the manner of dismissal, in the absence of a diagnosed medical illness.

The decision is well reasoned, founded on the leading cases in the area from the Supreme Court of Canada, and should have important implications for employment law in British Columbia and across Canada.

TevlinGleadle Commences Catalyst Class Action

2010-05-12T11:26:00.000-07:00

Over the past years we at TevlinGleadle have acted for a large number of employees of Catalyst Paper Corporation. Catalyst is a company operating a number of pulp and paper mills in British Columbia and elsewhere.

Darryl Somerville has worked for many years at Catalyst's mill in Powell River, British Columbia.

On behalf of Mr. Somerville, TevlinGleadle has commenced an action against Catalyst which claims remedies resulting from the employer's refusal to pay a bonus (STIP, or Short Term Incentive Plan)for the 2009 calendar year, and its unilateral rollback of other valuable benefits including the right to participate in a Defined Benefit Pension Plan, valuable vacation benefits, and other benefits.

The action has just been started. Once Catalyst enters its Statement of Defense, it is anticipated that an application will be brought to the BC Supreme Court for an order "certifying" the action as a class proceeding.

An Overview of Vehicle Benefits

2010-01-13T09:36:00.000-08:00

Many terminated employees seek the replacement of vehicle benefits which they enjoyed as a part of their job. I thought it would be useful to review this issue, and provide a comprehensive summary.

Sometimes vehicle benefits are awarded in wrongful dismissal suits, other times they are not. Though on first glance the case law seems erratic, a careful review of this area reveals substantial consistency. In order to understand whether compensation for vehicle benefits should be awarded, one must simply understand the principles underlying damage awards in wrongful dismissal suits.

Stated briefly, when a plaintiff receives judgment in a wrongful dismissal case, the monetary award is supposed to place that plaintiff in the position she would have been in had she received proper working notice.

EXAMPLE 1: Y fired X. While employed by Y, X had been authorized to use Y’s truck to run personal errands. In order to maintain that benefit, X must now pay $400 per month out of his own pocket. In court, X wins a wrongful dismissal suit and the court determines that he was entitled to six months’ notice. X would then receive 6 x $400 = $2, 400 for his lost truck allowance.

EXAMPLE 2: B fired A. While A worked for B, B compensated her $0.30 for every kilometer she drove in her own car for work purposes. On average, she drove 1, 000 km per month on business, and was reimbursed $300 per month accordingly. At trial, B proves she was wrongfully terminated, and was entitled to six months’ notice. Since she is no longer employed, however, she now drives 0 km for work purposes. Thus, unlike X, A would probably recover nothing for lost use of her car. A did not receive a car allowance, but compensation for use of the vehicle for business purposes.

The difference between A and X in the above examples is that X proved he was spending money to replace a benefit. His personal vehicle use had been compensated during his employment, and it continued after his termination. In A’s case, she had only been compensated for business use, which obviously ceased as soon as she was terminated.

While some cases do not follow the principles outlined herein, most cases do. The following list summarizes what one must generally establish in order to claim vehicle benefits upon termination. The presence of all of the following factors strongly suggests that compensation for the loss of vehicle benefits is appropriate. The absence of any of these factors suggests that no benefits are recoverable. This list is not entirely comprehensive, and I note that certain cases defy the generalities outlined below:

• The employee was wrongfully terminated (i.e. the employer did not have just cause to terminate, nor did it provide reasonable notice).
• The termination resulted in the employee losing some personal vehicle benefit which had previously been paid for by the employer.
• The employee replaced that benefit and incurred some expense in doing so.

Pension Plan Expenses

2009-08-28T13:11:00.000-07:00

On August 7, 2009 in Kerry (Canada) Inc. v. DCA Employees Pension Committee the Supreme Court of Canada upheld the Ontario Court of Appeal's 2007 decision.

The case will be welcome to employers with pension plans, and serves to clarify the ground rules about use of pension funds to pay pension expenses and take contribution holidays.

The Supreme Court made the following key determinations:

Contribution Holidays: Where a pension plan has both defined benefit ("DB") and defined contribution ("DC") components, surpluses in the plan may be used by the employer to take contribution holidays from its DC contributions, so long as certain requirements are met.

Pension Plan Expenses: Employers can use pension trust monies to pay reasonable and bona fide plan expenses unless it separately committed clearly that such expense would be paid by it. This even includes "in-house" administration expenses. Even if the originating pension plan documents contain an "exclusive benefit" clause, expenses can ordinarily be taken from the trust fund, and the employer can lawfully amend a pension plan to permit use of trust funds to pay expenses.

While the decision deals with an Ontario employer and plan, the principles will have general application in Canadian courts.

Limits on Employer's Ability to Use Trust Funds for Expenses

The implications of the decision are wide, but there are still limits on an employer's ability to use trust funds in some situations.

In the first place, where a pension trust is created with an express requirement that some or all expenses be paid by the employer, this would likely govern, and it would be necessary to carefully review any reserved amendment power to determine if changes would be effective.

In Kerry, a distinction was drawn between "trust expenses" and "plan expenses".

Secondly, the court only determined that certain expenses were permissible , in particular, such expenses as were bona fide, necessary and reasonable. The court decided that certain consulting fees were not expenses that could properly be paid from the pension fund.

This leaves open actions by employee groups that wish to challenge the conduct of pension plan administrators on the basis that improper expenses have been taken from trust funds, but only in certain circumstances, which are more clearly defined now, but more limited that had been thought under prior decisions.

2009-08-28T10:13:00.000-07:00

On August 7, 2009 in Kerry (Canada) Inc. v. DCA Employees Pension Committee the Supreme Court of Canada upheld the Ontario Court of Appeal's 2007 decision.

The case will be welcome to employers with pension plans, and serves to clarify the ground rules about use of pension funds to pay pension expenses and take contribution holidays.

The SCC made the following key determinations:

Contribution Holidays: Where a pension plan has both defined benefit ("DB") and defined contribution ("DC") components, surpluses in the plan may be used by the employer to take contribution holidays from its DC contributions, so long as certain requirements are met.

Pension Plan Expenses: Employers can use pension trust monies to pay reasonable and bona fide plan expenses unless it separately committed clearly that such expense would be paid by it. This even includes "in-house" administration expenses. Even if the originating pension plan documents contain an "exclusive benefit" clause, expenses can ordinarily be taken from the trust fund, and the employer can lawfully amend Vis-à-vis payment of pension plan expenses, unless an employer has clearly committed to paying a plan expense, it is not obliged to do so and it is not unlawful to charge reasonable and bona fide expenses to the pension trust fund (including bona fide expenses of the employer for "in-house" administration).

The amendment of a pension plan to allow the employer to charge reasonable plan expenses to the plan trust fund is not prohibited merely because the trust agreement or pension plan (or both) contains an "exclusive benefit" clause.

While the decision deals with an Ontario plan, the principles of the SCC's ruling should have application in respect of other pension standards laws outside of Québec, subject to specific prohibitions in those laws.

Facts

In 1954, the Canadian Doughnut Company Ltd., which later became DCA Canada Inc., established a defined benefit plan, the assets of which were held in trust. In 1994, DCA Canada Inc.'s parent sold all of its shares to the parent of Kerry (Canada) Inc. ("Kerry") and Kerry acquired all assets and liabilities of DCA Canada Inc.

Before 1975, the pension plan document had no provision for the payment of plan expenses. It provided that all contributions made by the employer "were irrevocable" and could only be used "exclusively for the benefit of" members. The trust agreement provided that "no part of the corpus or income of the fund shall revert to the Company or be used or diverted to purposes other than for the exclusive benefit" of the members. The expenses incurred by, and all other charges and disbursements of, the trustee were to be paid by the employer. It also provided that no amendment "shall authorize or permit any part of the Fund to be used for, or diverted to, purposes other than for the exclusive benefit" of members unless approved by the Minister of National Revenue.

In 1975, the employer amended the plan to allow it to direct fees of the trustee, investment counsel and other fund manager to be paid from the plan fund as well as other expenses reasonably and properly incurred by the fund manager or the employer. In 1987, this provision was amended to allow for the payment of all normal and reasonable expenses incurred in the plan's operation, including those for actuarial, consulting, administrative, investment management and auditing services, and government filing fees. In 2000, Kerry further expanded this provision to provide the payment of all costs and expenses incurred by the employer as administrator of the plan or by its agents and advisors, including actuarial, consulting, legal and accounting fees and disbursements, expenses relating to the addition of a defined contribution option and expenses incurred in the winding up of the plan.

From 1954 to 1985, the employer made all required employer contributions. In 1965 the terms of the pension plan were amended to specifically refer to actuarial discretion in determining the employer's contribution obligations. However, it was not until 1985 when the employer commenced a lengthy contribution holiday.

From 1954 to 1984, all plan expenses were paid by the employer. After 1983, certain plan expenses were paid out of the plan fund. In 1994, DCA reimbursed the plan fund for trustee fees paid from the plan fund before 1994. After its assumption of the plan, Kerry continued to have plan expenses, other than trustee fees, paid from the plan fund.

In 2000 Kerry amended the pension plan to add a DC component. The plan was thus made up of Part 1 for DB plan members and Part 2 for DC members. Existing plan members were given a one-time option to convert their DB accruals to DC benefits and all new employees became DC members. The DC component featured employee accounts and these accounts were maintained pursuant to an insurance policy which presumably consisted of a contract between the insurer and Kerry. The plan provisions seem to have provided that DC members were not entitled to benefit under the original pension fund (which was restricted to DB members). The plan provisions also provided that the employer was permitted to take contribution holidays in respect of the DC members from the trust fund.

Certain plan members objected to a number of activities by Kerry in respect of the plan, including the implementation of the DC component and ultimately the proposed employer contribution holidays. They also took issue with certain plan expenses which Kerry had paid from the pension trust fund.

On April 22, 2002, the Superintendent of Financial Services issued two notices of proposal ("NOP") under section 87 of the PBA. In the first NOP, the Superintendent proposed to refuse to make certain orders requested of him relating to the 2000 pension plan amendments, including the refusing to register the plan amendments which added the DC component and to challenge Kerry's ability to take a contribution holiday under the plan. The second NOP proposed an order requiring Kerry to reimburse the plan fund for all expenses paid out of the plan fund after January 1, 1985 and for all income that the plan fund would have earned had the expenses not been paid from it. With respect to the first NOP the employee group requested, and with respect to the second NOP Kerry requested, a hearing before the Financial Services Tribunal.

Summaries of pre-SCC Decisions

The following summary of the Tribunal and lower courts decisions are restricted to the issues of the DC contribution holiday and plan expenses. The issues of the standard of review of the Tribunal's decision and orders on costs of the plan members from the pension fund are discussed only in the review of the SCC decision.

Tribunal Decision

On the issue of the contribution holidays, the Tribunal noted that the contribution holidays were not taken until after the plan amendment in 1965 had been adopted. It identified salient case law, and ruled that the legislation was permissive with regard to DB contribution holidays and that the 1965 amendments were valid and effective to allow the employer to take a DB contribution holiday. Accordingly, the DB contribution holidays taken from 1985 were lawful. With respect to the DC contribution holidays, the Tribunal noted that the 2000 plan amendments were not effective to permit lawful contribution holidays since the structure of the amended plan was such that the DC members were not included as beneficiaries of the pre-existing trust fund. Allocating assets from the trust fund to the member accounts under the DC provisions would result in the allocation of assets from the trust fund in violation of the "exclusive benefit" provision in the trust agreement. The "exclusive benefit" provision forbids the use or diversion of assets in that trust fund:

to purposes other than for the exclusive benefit of such persons or their beneficiaries or personal representatives as from time to time may be designated in the Plan except as therein provided. [emphasis added]

The Tribunal also opined that the terms of the pension plan could be amended, with retroactive effect, to include the DC members as beneficiaries of the trust fund. Provided this was done, DC contribution holidays would be lawful because the terms of the trust agreement and the plan text contemplated that the class of beneficiaries could be amended to include other persons "designated in the Plan", and retroactive plan amendments are permitted under ss. 13(2) of the PBA. Accordingly, the Tribunal directed the Superintendent to deny registration of the 2000 plan amendments and, if the plan was not amended within 90 days of the order to make the DC members beneficiaries of the trust fund, Kerry would be required to re-imburse the pension fund for all DC contribution holidays taken since 2000.

On the issue of expenses, the Tribunal held that expenses relating to the plan were for the exclusive benefit of members in the sense of the terms of the trust. It reasoned that this term means expenses for the "primary benefit" of the members "since no such expense can fairly be said to be for the exclusive benefit of the members on a strict literal view of that expression." The only expenses that the Tribunal found not to be for the primary benefit of members were consulting fees relating to the addition of the DC option to the plan in 2000.

Divisional Court

With respect to the DC contribution holidays, the Divisional Court took the view that the Tribunal erred in its conclusions, largely because it determined that there were two pension plans, not one, since 2000. It concluded that, because there were two pension plans the use of surplus in the DB component was an unlawful "cross-subsidization" of one plan from another and determined that the remedy of revising the 2000 plan amendments was not permitted as it resulted in an unlawful revocation of the 1954 trust by adding as beneficiaries of the trust persons who were not even members of the plan to which that trust related.

On the topic of expenses, the Divisional Court also disagreed with the Tribunal, holding that the power to amend was subject to the "exclusive benefit" proviso and that the plan amendments were therefore invalid because they purported to revoke the trust in whole or in part.

Ontario Court of Appeal

On the topic of the DC contribution holidays, the OCA disagreed with the Divisional Court and sided with the Tribunal. It held that there was only one pension plan and that there was no reason to disturb the Tribunal's proposed remedy of amending the plan terms to make clear that the DC members are beneficiaries of the trust fund. The OCA gave five reasons for so concluding: (1) consistent with the approach outlined in the Schmidt case³ there was nothing in the plan terms which precluded employer contribution holidays, (2) section 9 of the regulations under the PBA contemplated DC contribution holidays on a full conversion from a DB plan to a DC plan and, while the Kerry plan was not the subject of a full conversion, this feature of the PBA signalled that the legislation did not preclude DC contribution holidays, (3) Kerry had authority under the plan documents to unilaterally amend the plan to add a new category of plan member, (4) if a new category of member was added, Schmidt allowed a contribution holiday, and (5) "cross-subsidization" was not precluded by the trust agreement, as what was precluded was using assets of the trust for other than the exclusive benefit of beneficiaries. Once the amendments outlined by the Tribunal were made, the DC members became beneficiaries of the trust.

On the topic of expenses, the OCA found that the PBA did not contain any provision governing the payment of pension plan expenses, and no principles of law require the employer to pay such expenses. It stated as a starting point that "if, in the documentation, the company undertook to pay the Plan Expenses, it must do so, unless that undertaking was validly amended." The OCA found that, although the employer had undertaken to pay the trustee's fees and expenses in the trust agreement, it had not done so in respect of the other services such as actuarial, accounting and investment functions that a pension plan of this nature might require. As neither silence nor the employer's voluntary assumption of plan expenses for a period of time created a legal obligation, the trust fund would bear the expenses in accordance with general trust law and principles.

Supreme Court of Canada

The SCC ruled on several issues, and the court's rulings are discussed in the order of appearance in its decision.

Standard of Review

On this topic, the SCC reviewed recent administrative case law and determined that in the matter at issue, because it involved a review of pension plan documentation and, in respect of the costs issue, the Financial Services Commission of Ontario Act, the applicable standard of review was reasonableness. This is to be contrasted with the higher standard of review of "correctness" which the SCC ruled applicable in the Monsanto decision⁴ a few years ago. As a practical matter, this means that so long as the Tribunal's decision is found to be reasonable the courts will not overturn it. This part of the decision is interesting since the SCC in Monsanto had concluded that the standard of review for the Tribunal in interpreting subsection 70(6) of the PBA, relating to surplus distribution on partial wind up was the higher standard of correctness. It is interesting, however, that one of the reasons given for the lawfulness of the DC contribution holidays is that the PBA does not prohibit it, which naturally involves the application of and, presumably, the interpretation of the PBA.

Plan Expenses

The SCC agreed with the OCA on the disposition of the expenses issue. It agreed that the trust agreement merely required the employer to pay for trust expenses but was silent on the issue of plan expenses. It also agreed that these are distinct types of expenses and concludes that, while the overall pension program consists of the plan and the pension trust fund, these are different elements of a whole. However, the SCC noted that the Tribunal was justified in looking at expenses individually rather than lumping everything to do with the pension plan in the same category and agreed that the consulting fees which the Tribunal had excluded from permitted expenses should not be payable from the pension fund. The SCC rejected the employee committee's arguments that charging plan expenses to the trust fund violated an amendment made to the trust agreement made in 1958 (which added reference to the employer paying taxes, interest and penalties incurred by the trust), and constituted a benefit to the employer and so violated the "exclusive benefit" provision of the trust agreement. On the latter point, the SCC agreed with the OCA that the term "exclusive benefit" does not mean that the only persons who may benefit are the employees and noted that there is always some incidental benefit to an employer in having a pension plan (such as attracting and retaining employees) and to the employees' families in the income security the plan provides. Ultimately, the existence of the plan is a benefit to the employees, the payment of expenses is necessary to continue the plan and so for the purposes of the "exclusive benefit" clause, the expenses may be said to be for the exclusive benefit of the plan participants.

In another important element of its decision, the SCC, like the OCA, rejected claims that the payment of plan expenses from the pension fund constituted a "revocation of trust" and concluded that payment of reasonable fees for services necessary in the administration of the plan "whether the services are provided by third parties or the employer itself" are not prohibited. The SCC found that payment of in-house administration expenses of an employer charged to the fund do not constitute an unlawful encroachment on the assets of a pension trust fund as long as the employer did not commit to bear these expenses itself and the expenses are bona fide, necessary and reasonable.

DB Contribution Holidays

The SCC found that while the 1965 plan amendments were valid and explicitly included actuarial discretion thus fitting within the tests for valid DB contribution holidays enunciated in Schmidt, even the 1954 plan provisions implied the notion of actuarial discretion since such discretion was called for to determine "such amounts [of employer contribution] as will provide" for the benefits. Accordingly, the SCC found DB contribution holidays were permitted under the plan terms.

DC Contribution Holidays

On the issue of the use of surplus by the employer to fulfill its DC contribution requirement, two justices would have ruled that such contribution holidays were unlawful. The main point of divergence consists of a disagreement over the nature of the plan. The majority agreed with the OCA that there was a single pension plan at issue, while the minority concluded that there were effectively two distinct pension plans.

The Majority

The majority concluded that the DB and DC components were part of a single plan for the following reasons: (1) on the facts it found that there was an intention that there be a single plan, (2) nothing in the PBA or at common law prevents a plan with DB and DC components, (3) trusts may have different classes of beneficiaries, (4) the case law relating to plan mergers, which the employees argued provides that commingling of assets from two separate plans was not permitted, was not applicable since the addition of the DC component did not result from merger and there was a unified category of plan members — employees of Kerry or its predecessor.

The majority also concluded that the PBA regulations do not prohibit taking a DC contribution holiday. It found support for the proposition that DB surplus can be applied to DC contribution holiday in subsection 7(3) of the PBA regulations. The SCC also ruled that a retroactive plan amendment is permitted by subsection 13(2) of the PBA and so the remedy proposed by the Tribunal was lawful. The majority ruled that the proposed plan amendment could be distinguished from the "re-opening" of a closed pension plan which was criticized in the Buschau line of cases. Like the OCA, the SCC concluded that the pension trust in the instant case was not for a closed group of plan members and it was within Kerry's power of amendment to add the DC plan members as beneficiaries of the pension trust fund.

One issue the majority does not seem to focus on in detail is how the DC funding vehicle is to be held. The court focuses on the plan amendments which are sufficient to allow the DC contribution holiday and does not prescribe how the DC funding vehicle is to be held.

The Minority

The minority would have ruled against the DC contribution holiday and would have required Kerry to contribute to the trust fund an amount equal to the foregone contributions for the following reasons: (1) there were two distinct plans and two distinct trust funds, (2) the notion of surplus is foreign to a DC plan, (3) the only instance in which the PBA allows a contribution holiday is on a full plan conversion (pursuant to subsection 7(3) of the PBA regulations), (4) the DC contribution holiday violates the "exclusive benefit" provisions of the trust agreement as there is no discernible benefit to the DB members (which, the minority concluded, remain the sole beneficiaries of the DB trust fund), (5) the amendments which purported to effect the addition of the DC members as beneficiaries of the trust fund were invalid despite the PBA provisions allowing retroactive amendments because to allow this would violate the exclusive benefit clause, and (6) even if the amendments were valid, there would still be an impermissible transfer of assets out of the pension trust fund to the DC funding vehicle which would constitute an unlawful revocation of the trust.

Costs

The SCC upheld the Tribunal's decision that it had no authority to order costs from the pension fund since it has only the power afforded by its constating statute and can only order costs payable by a "party" before it. As the pension trust fund was not a party before it, the Tribunal concluded it could not order costs payable from it.

On the issue of the cost award against the employee group, the SCC upheld the OCA's order and rejected the employee group's assertion that costs should be payable from the pension trust fund. The SCC based its ruling on a number of points but most importantly found that where the proceedings are not merely aimed at the "due administration of the pension trust fund" and may be characterised as "adversarial", that cost awards should not be paid from the trust fund and should follow the normal rules of costs to the successful litigant. The court characterised the proceedings in Kerry as adversarial since not all beneficiaries would have a common interest or take the same position (e.g. here the DC members would not seem to benefit from the relief requested by the DB members).

Conclusions to be Drawn

With respect to DC contribution holiday issue, provided that (i) there is a single, ongoing pension plan with both a DB and a DC component, (ii) the members of both components are beneficiaries of the same pension trust fund, and (iii) the employer may lawfully take contributions holidays in respect of the DB component, it is not unlawful under the PBA or the common law to also apply the surplus in the trust fund to the employer's contribution obligations under the DC component.

With respect to expenses, the absence of any reference to some or all expenses in the original plan and trust documentation allows the employer to 'clarify' its precise payment obligations. Whether plan documentation can be amended where there is no such gap is unclear. The payment of expenses by the pension fund does not amount to a revocation of trust even where such payment is made to the employer for in-house administrative services.

As for the ability to amend a plan to change responsibility for payment of plan expenses, it is difficult to say how this decision may apply. The OCA's statement that an employer that has undertaken to pay expenses must do so "unless that undertaking was validly amended" suggests that it may be possible to provide for the payment of plan expenses by the pension fund even where the plan documentation was not originally silent on the point. The general power of amendment typically reserved in the plan documentation may be sufficient to allow this if, as in some of the cases reviewed by the SCC in Schmidt, the power of amendment is broad and subject only to the proviso that no amendment may reduce members' entitlement to accrued benefits.

The way that the SCC distinguishes Markle⁵ suggests that it may be possible to use a broad power of amendment to have future "employer" costs paid from the fund, particularly if actual payment of each expense remains "subject to the approval, of the trustee". However, this issue remains far from settled and the answers will turn on the facts of each case.

Footnotes

1 Large portions of this update are based on "Pensions: Limited Clarity Concerning The Payment of Pension Plan Expenses" by Lorraine Allard, also of McCarthy Tétrault LLP.

2 Kerry (Canada) Inc. v. DCA Employees Pension Committee (Kerry), 2009 SCC 39.

3 Schmidt v. Air Products of Canada, (1994), 115 D.L.R. (4th) 631

4 Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152.

5 Markle v. Toronto (City) (2003), 63 O.R. (3d) 321.

Jamieson v. Finning International Inc.

2009-08-02T17:52:00.000-07:00

On June 12, 2009, the BC Supreme Court awarded a 53 year old "Millyard Systems Manager" with slightly more than 20 years' service, damages based on a 19 month notice period, with a one month deduction for the possibility of mitigation earnings, as the decision was handed down well in advance of the expiry of the notice period.

The full decision is at Jamieson v. Finning 2009 BCSC 861.

Reference was made to the specialization of the plaintiff's skills which were focused on forestry millyard equipment in the depressed economy.

Mr. Jamieson was awarded lump sum damages to compensate for the loss of a car allowance including a component to reflect ongoing lease commitments for a leased truck not needed after the termination.

Judge Cohen undertook a thorough review of recent British Columbia cases where the courts have given decreased weight to the factor of character of employment - where employees not in senior management ranks are increasingly able to obtain lengthy notice periods.

The plaintiff was also compensated for loss of Employee Share Purchase Plan ("ESPP") benefits during the notice period in spite of language which said such benefits ended when the employee was dismissed for "any reason". Regardless of this language, damages were found appropriate as the termination of the plaintiff was not lawful, but a breach of contract. In effect the judge found that the employment agreement should be read as if written "any lawful reason".

Jamieson's claim continues in regard to pension losses. He is advancing a claim that Finning unlawfully decreased the earnings upon which it agreed to pay pension benefits, and a further pension claim because his pension is less after the wrongful dismissal than it would have been if he had received proper notice.

BC Supreme Court - $100,000 Punitive Damage Award

2009-04-01T10:00:00.000-07:00

In Marchen v. Dams Ford Lincoln Sales Ltd. 2009 BCSC 400, the Honourable Mr. Justice Goepel of the British Columbia Supreme Court handed down a significant decision on March 26, 2009, involving employment law issues.

The defendant car dealership dismissed an apprentice mechanic without alleging cause but because of an honestly held but completely unfounded belief that he may have been involved in dishonest activity on the part of his brother.

The court refused to order "moral damages" following Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R 362, because at the time of dismissal, the employer's conduct could be explained as, at least, a belief in possible misconduct.

However, the court awarded $100,000 in punitive damages because, when the action was commenced, the defendant embarked on a course of action intended to mislead the plaintiff and eventually the court itself as to the real reasons for dismissal.

The defendant falsely claimed that the dismissal was for lack of work, which would have been a legitimate way to end the apprenticeship contract.

The defendant's conduct after the dismissal was found to be blameworthy pursuant to the principles in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002]1 S.C.R. 595.

The case is an example of an instance where an individual is wrongfully dismissed during the currency of an apprenticeship contract and receives additional damages for "loss of status" and "loss of training".

Supreme Court of Canada Overturns BC Court of Appeal on Restrictive Covenants

2009-01-27T11:21:00.000-08:00

In Shafron v KRG Insurance Brokers (Western) Inc. 2009 SCC 6, the Supreme Court of Canada re-affirmed strict requirements on enforcing restrictive covenants (non-competition clauses) in employment contracts. In 2004, The Supreme Court of Canada approved a concept to “save” illegal contracts by reading the offending terms down to a permissible level. In the 2004 case (Transport North American Express Inc. V. New Solutions Financial Corp. 2004 SCC 7, the contract provided for an interest rate above 60% which offended the criminal interest rate provisions of the criminal code. The Supreme Court “read down” the interest rate to the maximum permissible rate and avoided striking out the interest provision altogether. This concept was called “notional severance”.

At the appeal level of the Shafron case, the British Columbia Court of Appeal sought to apply this “notional severance” by “reading down” the geographic scope of a restrictive covenant because the phrase “Metropolitan City of Vancouver” was ambiguous. The BC Court of Appeal enforced a geographic scope that had not been agreed by the parties and substituted their interpretation on the ambiguous phrase. In a unanimous decision, the Supreme Court of Canada reversed the Court of Appeal decision and held that a restrictive covenant must be unambiguous in order to be enforced and rejected the concept of notional severance in employment law cases.

The Supreme Court also put strict limits on other forms of severance that might be called in aid of sloppy or overreaching covenants by limiting any form of severance to situations where offending terms are “clearly severable, trivial and not part of the main purport of the restrictive covenant”.

No Overtime Class Actions in BC

2008-11-05T15:25:00.000-08:00

In the province of British Columbia workers are entitled to be paid overtime pay for work in excess of 8 hours per day or 40 hours per week, pursuant to the Employment Standards Act. Some exceptions exist for categories of workers (eg. high tech workers, articled law students, etc.) but the statutory minimums are of wide application.

In rare situations, individual employment agreements may contain actual contractual clauses that require the employer to pay overtime pay for overtime work. Contractual obligations to pay overtime arise due to express agreement, on occasion, or a practice where the employer pays overtime.

Grey areas may arise where it is hard to determine if a practice of paying overtime justifies a finding of an agreement to pay overtime, or simply reflects the employer's compliance with the statute. The clearest example of a contract of this sort is where there is practice of paying overtime when the statute does not apply.

Employees in BC have been restricted for many years from advancing a claim for overtime pay in the courts.

A number of court cases dating from at least the '80's interpreted established the proposition that a court action for overtime pay can only be justified when there is an underlying contract to be enforced. Claims based solely on statutory rights from the Employment Standards Act had to be advanced following the claims procedure prescribed by the Act.

In our experience, there are a great many situations where employers fail to pay required overtime pay, but employees do not take any action. No doubt, employees who continue to work for employers who fail to pay overtime feel that if they advance a claim, they might be risking their jobs.

Also, even if employees do make statutory claims for overtime, there is a prohibition in the BC Act against going back more than 6 months. Beyond that, actions are barred.

Because of these systemic problems, TevlinGleadle attempted, successfully at the BC Supreme Court Level, but unsuccessfully at the BC Court of Appeal level, to advance an overtime class action for a group of employees who could not ground their overtime claim on anything other than the statute.

In Macaraeg v. E-Care Payments Systems Madam Justice Wedge of the BC Supreme Court agreed with submissions by plaintiff's counsel that due to developments in Canadian law (the Supreme Court of Canada decisions in Parry Sound, and Machtinger v. HOJ Industries) a class action to enforce overtime rights was possible.

The British Columbia Court of Appeal overturned Madam Justice Wedge's decision, because of its view that the legislature in the Employment Standards Act only intended to create an overtime right that was enforceable via the mechanism of the Act.

TevlinGleadle sought leave to appeal the matter to the Supreme Court of Canada, but the application was refused without reasons.

This is an area that cries out for reform. The BC legislature has enacted a requirement that overtime pay be paid, for overtime work. Yet, the enforcement mechanisms are inadequate, in our view. The staff at the BC Employment Standards Branch do not have the resources to undertake significant investigations of abuses of overtime rules.

And, there is a fundamental practical block for current employers to advance claims against their employers.

The Class Proceedings Act preserves anonymity and if this approach was available for employees, we feel that the objects of the Act regarding overtime pay would be achieved.

Honda v. Keays (Back to the Future)

2008-10-21T16:49:00.000-07:00

Recent employment law decisions by Canadian Courts mandate a return to basics when measuring damages for breach of employment contracts.

For many years, after Wallace v. United Grain Growers, Canadian courts struggled with the task of awarding damages to dismissed employees based on what might be regarded as egregious conduct at the time of or in the manner of dismissal. In that case, the Supreme Court of Canada directed that in a suitable case, where the employer's conduct was sufficiently inappropriate, a trial court could award extra damages, but measured by reference to an increased notice period.

In Honda v. Keays, the Supreme Court of Canada has determined that this approach is not to be followed. Instead, applying Hadley v. Baxendale, the SCC has directed that if an employee suffers foreseeable loss or damage by reason of the inappropriate conduct of the employer, damages are to be assessed in the normal way - that is, without reference to any arbitrary notice period increase, and that the "injured" employee should receive full compensation for proven losses.

The implications of this new approach remain to be determined. Trial courts will need to decide what the new approach means, in the context of individual cases.

Supreme Court of Canada - RBC Dominion v. Merrill Lynch

2008-10-21T16:43:00.000-07:00

On October 9, 2008, the SCC overturned the decision of the BC Court of Appeal, and reinstated the trial decision in its most significant aspect.

This decision deals with the duties owed by employees to their employer when in the process of leaving to join a competing business. The Supreme Court of Canada held that even non-fiduciary senior management employees had signficant duties to avoid orchestrating a wrongful mass departure to a competitor, and that in the event of breach, substantial damages might be required.

The reasons are at RBC v. Merrill Lynch