It’s after the end of the world, Don’t you know that yet? – Sun Ra
Amazingly, March 17, 2022 marked two years since the COVID-19 pandemic brought Canadians to a sudden and crashing halt. As a society we have mostly weathered the pandemic and things continue to reestablish themselves as a return to “normal” inches forward. Of course, it will be a “new normal”.
One of the more interesting consequences of the pandemic is a dramatic re-evaluation of the nature of work and the workplace. Remote work, hybrid workplaces, and work-life blending (as opposed to balance) have become the norm, and studies show that many job-seekers prioritize flexibility over compensation. After years of discussion about things like whether layoffs constitute constructive dismissal and whether employers can mandate vaccination or masking, the most prevalent issue now is who decides where work is done and whether employers can insist that workers return to the workplace.
As always, our legal system struggles to apply long-standing legal principles to new and unprecedented circumstances. The common law is intended to evolve as society changes and societal norms develop, and we will have to wait and see how the courts approach many of these issues. As is always the case, the courts in 2022 rendered decisions which clarified, corrected, and in some cases changed the law.
At the same time, legislation continues to evolve in order to address long-standing issues and more recent developments. Many changes to statutes across the country have provided employees with greater rights to things like paid sick leave and protection from wage-fixing.
A perennial topic in our year in review is the law regarding terminations and post-termination compensation, and in 2022 we saw further evolution regarding the earth-shattering change that was Waksdale v Swegon North America Inc. As we have often commented, the end-result is that the majority of contractual termination clauses that we see would be deemed invalid if challenged in a court of law.
Finally, the impact of COVID-19 and the changes put into place to address this once-in-a-century event continue to work their way through the judicial system. While we continue to lack final and definitive answers to many of the big questions surrounding COVID-19, like whether a refusal to comply with a vaccine policy was enough to support a dismissal for cause, some decisions have been rendered which begin to provide guidance with respect to how the Courts will approach these issues.
So without further ado, here is the Rudner Law summary of the top HR Law Developments in 2022.
The Courts and Tribunals
Termination Clauses
The impact of the Court of Appeal’s decision in Waksdale v Swegon North America continues to resonate through the Ontario court system.
In Henderson v Slavkin et al, the employee was subject to an employment agreement which included a termination clause as well as a confidentiality clause and conflict of interest clause. The termination clause complied with the holding in Waksdale and was upheld. However, both the confidentiality and conflict of interest clauses included a provision that permitted the employer to dismiss the employee without notice and for cause in the event he breached either. The Court struck the employment agreement, noting that it was possible to breach either of these in a manner that did not justify a dismissal for cause. The bottom line: employers need to review their contacts and check every mention of just cause – not just the termination clause; even if their termination clause is bullet-proof, other sections can render it invalid. Read Nadia Zaman’s interview on this case here.
In the trial judgment of Rahman v Cannon Design Architecture Inc., the Court found the termination provision in the employee’s employment agreement breached the holding in Waksdale, but nevertheless let this stand due to the plaintiff being a sophisticated party who had consulted with a lawyer before signing it. As we wrote at the time, this decision was widely seen as being out of step with Waksdale, and would most likely be overturned on appeal. The plaintiff took a similar view of the trial decision and appealed, claiming that their level of sophistication was irrelevant to the Court’s examination of the termination provision. As we predicted, the Court of Appeal agreed, striking the employee’s termination provision and remitting the matter to the lower court to determine appropriate remedy. Read Alex Minken’s blog post on this case here.
More than Twenty-Four Months of Notice is ok in Exceptional Circumstances
There is no official “cap” or upper limit on a notice period. Despite this, multiple courts have indicated that the unofficial upper limit on notice is twenty-four months, and an award of notice may exceed that only in exceptional circumstances. Some recent cases have tried to provide guidance on what constitutes exceptional circumstances.
In the trial decision of Currie v Nylene Canada Inc. the Court awarded a twenty-six month notice period, citing the employee’s senior role, long years of service, and advanced age at the time of dismissal as these “exceptional circumstances”. This was upheld on appeal – despite the Court of Appeal for Ontario having already stated in Dawe v Equitable Life Insurance Company of Canada that such supposed “exceptional circumstances” were not enough to breach the unofficial “cap” on notice. The impact of these two conflicting decisions has yet to materialize – and whether it will become a problem in the future is yet to be seen.
Clarification of the Duty to Mitigate
In most cases, a wrongfully dismissed employee has the obligation to look for alternate employment in a comparable position to the one they lost – this is called the duty to mitigate.
An employee who fails to meet the duty to mitigate risks the Court reducing their notice period. In Toy v 0954516 BC Ltd. the Supreme Court of British Columbia provided a concrete reminder of this, reducing the employee’s notice period by two months for his failure to mitigate, as he had only applied for three jobs while unemployed and would likely have been re-employed sooner had he made a better effort. Watch Stuart Rudner’s video blog on the case here.
In Quesnelle v. Camus Hydronics Ltd., the Court considered the impact of moving to a remote area where jobs are few and far between in the context of the duty to mitigate and found that people can move wherever the like, employers should not bear the cost, so the notice period can be reduced when the employee chooses to move somewhere that will negatively impact their ability to find new work.
In Miranda v. Respiratory Services Limited) and Lake v La Presse (2018) Inc., the Court considered what will not constitute a comparable job for purposes of mitigation and how widely (in terms of types of jobs) the former employee must look and apply in order to have fulfilled the duty to mitigate. Read Geoffrey Lowe’s blog on these cases here.
Applicability of Non-Competition Clauses
In December 2021, the Ontario Employment Standards Act, 2000 (the “ESA”) was revised to ban non-competition clauses in non-executive employment agreements effective October 25, 2021. Not initially clear was whether this prohibition applied to an employment agreement prior to October 25, 2021. In Parekh et al v. Schecter et al Justice Sharma provided some much-needed clarification, confirming that the revision to the ESA only applied to a non-competition clause entered into on or after October 25, 2021. The bottom line is most non-competition clauses are unenforceable, as we have written about repeatedly, but in the past there was no harm in including them as a deterrent; now, it is unlawful in Ontario to even include a non-competition clause in new contracts for non-”C suite” employees.
Post-Termination Compensation
Whether an employee’s post-dismissal compensation includes a bonus has long been a point of contention at law. In Ontario, under the ESA, a bonus that is based on an employee’s hours, production, or efficiency is deemed to be a non-discretionary bonus, and forms part of the employee’s wages – so it must be paid. A truly discretionary bonus will not be deemed to be part of an employee’s wages – and may or may not form part of the employee’s post-dismissal compensation at common law. In Bowen v. JC Clark Ltd. the Court of Appeal for Ontario provided some clarification on discretionary bonuses, holding that the employer may exercise discretion in assessing bonus entitlement – but must do so reasonably. Read Stuart Rudner’s article on this case here. The default position at common law is that all compensation must continue during the notice period, but well-drafted contracts and policies can change that.
Right to Sue for Harassment-Based Constructive Dismissal
In 2021, the Ontario Divisional Court struck the Workplace Safety and Insurance Appeals Tribunal’s (“WSIAT”) decision in Morningstar v WSIAT. As we wrote about at the time, this decision meant that an employee would now have the right to sue their employer for constructive dismissal in situations where their claim is linked to chronic mental stress arising from workplace harassment. Several cases have since been heard by the WSIAT regarding a similar set of facts to Morningstar – constructive dismissal based on injury to the employee’s mental health. Since Morningstar, the WSIAT has consistently held that the employee is permitted to proceed with a claim of constructive dismissal – but not for a claim of intentional infliction of mental stress.
The long-term impact of this decision remains unclear. Given that the same facts usually underlie a claim of constructive dismissal due to harassment and a claim for intentional infliction of mental stress, the potential exists for two different adjudicative bodies (the Court and the WSIAT) to assess the same set of facts in separate proceedings. This could lead to conflicting decisions as well as duplicative legal proceedings.
Deductibility of CERB from Reasonable Notice Damages
An unsettled point going into 2022 was whether the Canada Emergency Relief Benefit (“CERB”) was deductible from an award of damages for reasonable notice in a wrongful dismissal matter. As we know, employment insurance benefits must be repaid if the employee receives pay in lieu of notice for the same period. While many assumed that CERB would be treated in the same way, early court decisions were inconsistent. In Ontario, several 2021 court decisions addressed this and reached conflicting conclusions – some indicated it was to be deducted, some did not. The Court appears to have settled on the position that CERB damages are not deductible from an award of reasonable notice; see, for example, the August decision in Henderson v Slavkin et al.
In Western Canada we have had two appellate court decisions on this point. In late November we received the first: Yates v. Langley Motor Sport Centre Ltd., where the Court of Appeal for British Columbia found that CERB is not deductible from an award of reasonable notice. In early January 2023, the Court of Appeal for Alberta released its decision in Oostlander v Cervus Equipment Corporation. The Court reviewed and applied the decision in Yates to find that CERB was not deductible from reasonable notice. The Court also concluded that broader policy considerations militate against the deductibility of CERB from damages for wrongful dismissal.
Neither case appears to have yet been applied in Ontario – but as the first appellate-level decisions to address the subject, this appears to be a matter of time.
Constructive Dismissal: When to Object When You’re Objecting
As we have previously written about, a constructive dismissal occurs where an employer implements a substantial change to a significant term of employment. This is only half of the equation. Not only must the employer make a change, the employee must object to the change, and give the employer an opportunity to reinstate the original terms of employment. Without the objection and chance to make things right, an employee may be unable to later claim that these changes were a constructive dismissal. Instead, the employer may be able to claim that the employee condoned the changes – and that no constructive dismissal occurred.
How much time needs to pass before the employee will be said to have condoned the changes? In Kosteckyj v Paramount Resources Ltd., the Court of Appeal for Alberta provided some clarity. Here, the employee, after seven years of service, saw her salary decreased by 10%, the suspension of her employer’s contributions to her RRSP, and possible changes to her bonus structure. The employee continued to work for three weeks after the change was announced without objecting to the change. She was dismissed several weeks later as part of a broader round of cuts. At trial, the Court determined she had been dismissed when these changes were announced, despite her not having resigned, and calculated her severance entitlement on this basis.
The employer successfully appealed this point, with the Court of Appeal finding that the employee, by continuing to attend work, had condoned the change. The Court also found that the reasonable period for someone to have made this objection was no more than ten business days. The lesson? If your employer makes a change, object immediately (or at least within ten business days).
Human Rights Tribunal has Concurrent Jurisdiction in Labour Matters
Until 2022, a unionized employee in Ontario who felt their rights under the Human Rights Code (the “Code”) had two options: file a grievance through their collective agreement or let the matter drop. Access to the Human Rights Tribunal of Ontario (“HRTO”)’s standalone system was off limits.
In Northern Regional Health Authority v. Horrocks the Supreme Court of Canada addressed this question and established a two step test to determine whether a piece of legislation (such as a labour relations statute) had exclusive jurisdiction over a matter. Exclusive jurisdiction meant just that – all matters had to be addressed under the legislation, and no other avenues were available.
Weilgosh v. London District Catholic School Board appeared to be the type of situation that the test in Horrocks was designed to address. Two unionized employees (a teacher and a police officer) encountered matters which they felt breached their Code rights. Both filed applications with the HRTO (the two matters were unrelated but consolidated by the HRTO to address the point of law). Their respective employers resisted, asserting that each matter was properly addressed by an arbitrator through the grievance process. The HRTO reviewed the governing statutes (the Labour Relations Act, 1995 and the Police Services Act) and determined that an arbitrator hearing a claim of a unionized teacher or police officer had exclusive jurisdiction over a human rights claim within a collective agreement.
Despite this, the HRTO reviewed the Code, and found that Section 45, which permits the HRTO to defer an Application and Section 45.1, which permits the HRTO to dismiss an application if its subject matter had already been addressed, signaled a legislative intent for the HRTO to maintain concurrent jurisdiction over a matter with another adjudicative body. The HRTO also emphasized that it retained discretion in this regard, and can continue to dismiss applications where another entity has jurisdiction.
This means that, in theory at least, a unionized employee in Ontario has the option to file a human rights Application with the HRTO and does not need to remain within the grievance framework established by their collective agreement.
Cross-Country Statutory Changes
2022 also saw a number of changes to employment statutes, ranging from the substantive (the creation of a criminal penalty for a non-poaching agreement) to the procedural (establishing new policy requirements). Each of these is important in its own right – and several demonstrate a strong movement towards a more employee-friendly employment law regime.
Ontario
(No) Right to Disconnect?
In December 2021 the changes to the ESA and the Occupational Health and Safety Act (the “OHSA”) brought about by Bill 27, the Working for Workers Act, 2021 came into effect.
Prominent among these changes was the introduction to the ESA of the so-called “Right to Disconnect” policy. No “right to disconnect” existed prior to the enactment of Bill 27 – and as Brittany Taylor’s article on this topic (here) outlines, none existed after. Contrary to popular belief and the headlines on the topic, instead of providing a substantive right, the change to the ESA was limited only to a procedural requirement for an employer with more than 25 employees as of the first of the year to have a written policy in place regarding disconnecting from work. As the Ministry of Labour’s own website states, “However, the ESA does not require an employer to create a new right for employees to disconnect from work and be free from the obligation to engage in work-related communications in its policies.”
The bottom line is that even if you must have a policy, there are no substantive requirements regarding what it says; as we often say somewhat facetiously, your policy can state that “employees are not required to respond to email between 2am and 3am on Wednesdays”, and it would comply with the legislation.
Progress for Gig Workers
As so-called “gig workers” become more prevalent, we have seen substantial legal battles regarding their status (employee or otherwise) and the extent of their protection under law. In April, the Ontario Legislature passed Bill 88, the Working for Workers Act, 2022. This made further changes to the ESA and the OHSA and established the Digital Platform Workers’ Rights Act, providing some basic rights for workers in the gig economy where none existed before. This has yet to come into force. The bottom line is that this legislation provides some protection for gig workers but does not bring them in line with employees. Watch Geoffrey Lowe’s video blog on Bill 88 here.
New Rules for IT and Business Consultants
Bill 88 changed the ESA to include exemptions for some Information Technology and Business Consultants. Under this new exemption, an IT or Business consultant who meets the following criteria is exempt from the ESA:
- Consultant provides services through a corporation of which they are a director or shareholder or via a sole proprietorship where the consultant is the sole proprietor; and
- Is compensated pursuant to an agreement in place at a rate of equal or greater than $60 per hour.
“Somebody’s Watching Me” – Electronic Monitoring Policies
With the rise of remote work came a renewed focus on what employers can do in order to monitor them while they are supposed to be working. With measures such as keystroke and mouse movement monitors and counter-measures such as software which automatically moves your mouse all expanding, Bill 88 was included an amendment to the ESA; it requires an employer with more than 25 employees in Ontario to introduce a policy disclosing whether it electronically monitors its employees. This policy must also disclose the means by which this electronic monitoring is conducted, and the use to which the employer puts the information gathered through monitoring. However, the bottom line is that even if you have to have such a policy in place, the legislation does not include any restrictions on the types of monitoring you use; you have to disclose them, but you do not have to justify them. Read Brittany Taylor’s article on the topic here.
Still No Sick Leave
The pandemic brought about extensive debate on the availability of paid sick days for employees, with our Prime Minister encouraging employers to provide ten paid sick days each year. Unfortunately for Ontario employees, none of the changes to the ESA brought about paid sick leave. Currently, the only paid sick leave in Ontario is the up to three days available to an employee under the ESA COVID-related absences. These were initially scheduled to lapse at the end of July 2022. In July 2022, the Ontario Legislature enacted O. Reg 464/22, further amending O. Reg 280/20, the Infectious Disease Emergency Leave, to extend the end date for these days until March 31, 2023. To date, there has been no indication of a further extension.
Occupational Health and Safety Act: New Fines and Limitation Periods
Bill 88 also amended the OHSA to include new fines for corporations and directors where there has been a breach of the OHSA. A director or officer now faces a maximum fine of $1,500,000.00, up from the previous maximum of $100,000.00. All other individuals face a maximum fine of $500,000.00, also up from the previous maximum of $100,000.00. Finally, Bill 88 also increased the limitation period for initiating a prosecution under the OHSA from one year to two.
OHSA: Naloxone Kits
Bill 88 also amended the OHSA to create a requirement for certain employers to have a naloxone kit in the workplace. Read Brittany Taylor’s article on mandatory naloxone kits here.
British Columbia – Five Paid Sick Days
In January 2022 British Columbia became the first province in Canada to implement mandatory paid sick leave, providing each employee with up to five paid sick days per year, in addition to three days of unpaid sick leave.
Quebec – Mandatory use of French in Employment
In 2022 the Government of Quebec implemented a number of changes to the Civil Code of Quebec in yet another effort to “protect the French language”.
New Rules for Some Employment Contracts
The most prominent of these changes pertains to the applicability of a contract which is not subject to negotiation and is imposed on an individual (referred to in the law as an adhesion contract). In other words, this applies to standard-form contracts for non-executives where there is no negotiation. Under the amendment to the Civil Code of Quebec, an adhesion contract must be presented to an employee in French even if all parties are anglophones and prefer to work in English, following which the parties may agree to a translated English version to be used.
New French Language Requirements
A Quebec employer is also now prevented from requiring an employee to speak or work in a language other than French unless the employer can show that it has assessed the language related to the job requirements, confirmed that the language known by its existing staff was insufficient for these requirements, taken steps to limit the number of jobs that require a language other than French to function. Read Stuart Rudner’s article on these changes here.
Saskatchewan – Protection against COVID-related Claims
On January 1, 2022, several changes to the Saskatchewan Employment Act came into effect. The most significant of these was the introduction of a new General section which is titled Protection from Liability re employers and COVID-19 measures. Under this section, no action may be brought against an employer if the employer acted or made a good faith effort to comply with COVID legislation.
Federal
Expanded Sick Leave for Federally Regulated Employees
In November 2022, the Federal Government announced the final set of regulations to provide every federally regulated employee (that is, employees governed by the Canada Labour Code) with ten paid sick days. A federally regulated employee now has access to the highest number of statute-mandated paid sick days in the country. Read Brittany Taylor’s article on these changes here.
Changes to the Competition Act
2022 also saw a substantial update of the Competition Act. This is a federal piece of legislation which governs all companies doing business in Canada. In 2022 the federal government enacted changes to the Competition Act which will come into effect in June 2023 which make it a criminal offence for employers to enter into wage fixing or no poaching agreements, with a potential penalty of up to fourteen years in prison and/or a fine to be set at the Court’s discretion. Read Brittany Taylor’s article on these changes here.
Enhanced EI Sickness Benefits
Finally, as of December 15, 2022, the federal government increased the maximum length of employment insurance sickness benefits from fifteen to twenty six weeks.
