Our 2022 Year in Review began by noting how March 17, 2022, marked two years since the start of the COVID-19 pandemic. Now, as we enter into March 2024, you’d be in good company if you can’t quite believe that the pandemic started almost four years ago.
The pandemic brought with it many employment-related developments, including the normalization of remote work and a corresponding battle between those who want to work from home and managers who want people in the office, disputes over layoffs, mask and vaccine mandates, and much more. Some of those issues remain front and centre in the workplace, while others are working their way through the courts.
Many of 2023’s important decisions show that courts remain preoccupied with fairness in the context of employment contracts and dismissals. Some memorable cases addressed the “24-month cap” on common law notice of dismissal and when it can be exceeded, while others addressed Stuart’s favourite topic: just cause for dismissal. It turns out that destroying your employer’s property, even digital property, is not advisable and can disentitle you to termination pay.
Other key takeaways include:
- Employers who did not get their employment agreements reviewed regularly paid a heavy price in 2023.
- The change of substratum doctrine still applies: in one case, an employment agreement was found to no longer apply because of the employee’s substantially changed role.
- A one sentence long outdated termination clause put the employer on the hook for a significant amount of common law notice.
- Unnecessary fixed-term employment contracts continued to hurt employers.
- The Court of Appeal affirmed that silence does not amount to consent in the context of temporary layoffs – employers risk a constructive dismissal claim when laying off employees without a clear right to do so.
- While employees continued to be favoured by the Courts, employees who breach a settlement agreement generate less sympathy.
- For all the law nerds out there, we saw Alberta recognize the new tort of harassment.
Without further ado, here is the Rudner Law summary of the top HR Law developments of 2023.
Saving Provisions Will Not Save a Bad Termination Clause
In Tan v Stostac Inc. (“Tan”), the attack on termination clauses continued. In this Ontario Superior Court of Justice case, the impugned termination clause was one sentence long, stating that the employee’s employment could be terminated without notice “for any just cause.”
As previously reported, the Waksdale decision has confirmed that a termination for cause clause that allows for summary dismissal without any notice or compensation based on the common law standard of just cause has the potential to breach the Employment Standards Act, 2000 (“ESA”). As a result, such a clause is unenforceable and will render an accompanying termination without cause clause unenforceable as well. This is true even if there is a “saving provision”.
This decision, and others like it, make it clear that the onus is on employers to draft carefully, as courts will strictly scrutinize agreements for any attempted derogation from minimum statutory requirements. This is good news for employees. For employers, it underscores the importance of having employment agreements reviewed routinely to ensure adherence to the latest case law.
Wilful Misconduct Illustrated
Waksdale and other cases focus on the difference between “just cause” at common law and “wilful misconduct” under the ESA. In the Superior Court of Ontario decision, Park v Costco (“Park”), the employer terminated the employee’s employment for wilful misconduct, a standard that requires a level of bad conduct on behalf of the employee that goes beyond the common law standard of just cause. It is notoriously difficult to prove wilful misconduct. Indeed, a recent decision ruled that slapping a female coworker on the backside, then laughing about it with other coworkers did not amount to wilful misconduct (see Render v ThyssenKrupp). That decision had many employment lawyers scratching their heads. Park is notable because it provides a clearer picture of the type of conduct that falls within the definition of wilful misconduct.
In Park, the employee built a website for the employer’s internal usage. By all accounts, the website was a hit, but the employee felt he did not receive adequate recognition. In response, he deleted the website twice, the second time after it was put back online by the employer’s IT team. The employee then lied about deleting it even though the IT team proved otherwise. He also sent several emails to his superiors that the Court described as condescending and disrespectful, undermining their authority. The Court ruled that the employee’s conduct amounted to wilful misconduct under the ESA.
New Role, New Contract
In Celestini v Shoplogix the employee argued that his employment contract no longer applied because his role had changed substantially since he signed it. The employee relied on the change of substratum doctrine, which holds that an otherwise valid contract will no longer apply when an employee’s role changes materially compared to what they were originally engaged for. In 2023, the Court of Appeal for Ontario upheld the trial decision, which found that the employee’s responsibilities “fundamentally and substantially increased” over the years. Consequently, the terms of his contract were no longer enforceable. It is important to note that parties can contract out of the substratum doctrine by including a clause stipulating that the contract will remain in force no matter what changes occur.
Fixed Term Contracts
The notable cases involving fixed term contracts highlight the risks employers face when using these kinds of agreements. We are reminded that terminating these prematurely can result in a windfall for the employee, and a costly loss to the employer, as the employer is generally on the hook for the balance of the term, and the employee has no obligation to mitigate. The cases below underscore that these contracts should be used sparingly and carefully.
An Unsuccessful but Creative Use of Waksdale
Ontario’s Superior Court of Justice saw the employer get creative in the unpublished decision of Kopyl v Losani Homes. In this case, the employee signed a fixed term contract and was terminated early into the term; she sued for the balance of the contract. Interestingly, this was an unusual case in which the employer argued that the termination provision was unlawful and that the fixed term of the contract should also be void. Essentially, the employer tried to rely on Waksdale to void the fixed term of the contract, characterizing that as a termination provision that should be void since the contract contained a problematic early termination clause. The Court disagreed and ruled for the employee, allowing her to claim the balance of the term.
A Duty to Mitigate for Contractors, Fixed Terms Still Risky
Monterosso v Metro Freightliner Hamilton Inc. is the kind of case that had many employment lawyers asking themselves: “why?!” This decision really stresses the costly risks employers face in using fixed term contracts. Monterosso, an independent contractor, signed a fixed term contract with Metro Freightliner Hamilton Inc. The term was for 72 months and had no early termination provisions. The company terminated the contract after 7 months, and of course, Monterosso sued. The Court of Appeal upheld the judgment in Monterosso’s favour, which saw him receive an award of $552,500.00 + HST. Notably, the Court recognized that unlike employees, independent contractors have a duty to mitigate their damages when fixed term contracts are terminated. That said, the Court disagreed with the company’s argument that the contractor had failed to mitigate.
Non-Transferable Work Experience Justifies > 24 Month Notice Period
Our courts have confirmed that in the absence of exceptional circumstances, no one will be entitled to more than 24 months of notice or pay in lieu. However, we have seen a handful of exceptions in recent years.
In our Year in Review for 2022, we wrote about Currie v Nylene Canada Inc. (“Currie”), a case that saw a notice award above the “unofficial” cap of 24 months. Currie was upheld on appeal despite a conflicting decision holding that Currie’s exceptional circumstances were not enough to award greater notice than 24 months. In 2023 we saw two important decisions that affirmed Currie and awarded notice amounts greater than 24 months.
In Milwid v IBM, a 62-year-old employee was terminated after 38 years of service. He was awarded 27 months of pay in lieu of notice at trial and the Ontario Court of Appeal upheld the decision. Since Ontario courts have confirmed that 24 months is the limit on notice in the absence of exceptional circumstances, it is instructive to note that in this case, the Court recognized as exceptional the employee’s unique and highly specialized skill set, which had limited application outside of IBM, making his experience not easily transferable. The Court also found that his termination at the outset of the pandemic, as the global economy was shutting down, was also exceptional. To read more about the background of the decision at first instance, and the jurisprudential context, see our blog post titled “Expect the Unexceptional When it Comes to Reasonable Notice”.
The Court of Appeal upheld another decision awarding a notice period beyond 24 months in Lynch v Avaya Canada. In this case, the notice award was for 30 months for a non-managerial employee with 38.5 years of service who was 64 years old. The employer appealed and argued that the motion judge erred by not specifying which factors were relied on as exceptional. The Court rejected the argument and stated that it is not necessary to specify as they were easy to discern. Nonetheless, the Court noted that the employee was a key member of Avaya, where he developed highly specialized skills working exclusively with Avaya hardware, making his experience untransferable. The Court also took notice of the fact that there were few opportunities for comparable employment in Belleville, despite there being many in Toronto or Ottawa. Given the employee’s age, it was unreasonable to expect him to move to look for alternative employment.
The takeaway from these two decisions is that while 24 months is the cap, courts will award more for long-service employees where they are seen as having developed a non-transferable skill set during their lengthy tenure.
Moral Damages Ordered for Bad Faith Termination
The Superior Court of Justice ordered the employer in Teljeur v Aurora Hotel Group to pay $15,000 in moral damages for bad faith conduct in the manner of dismissal. This case has a unique wrinkle in that the employee surreptitiously recorded the termination meeting. At that meeting, the employer promised to give written notice of termination, and promised a certain amount of severance pay. Despite several follow ups from the employee, the employer never gave written notice and paid a lower amount of severance pay than stated at the meeting. The employer also refused to reimburse the employee for various expenses he incurred, delayed paying out his ESA termination pay, and mislabeled his Record of Employment, delaying his Employment Insurance benefits. The employer also previously encouraged the employee to resign. This conduct caused the employee mental and financial distress.
When Asset Purchases Don’t Interrupt Employment
In Manthadi v ASCO Manufacturing, ASCO bought the assets of the vendor employer. Manthadi, who had been employed since 1981, signed a release with the vendor in exchange for her termination entitlements, and was then hired by ASCO. Six weeks later, ASCO laid her off and she sued for wrongful dismissal. The Superior Court found that ASCO bought the business as a going concern, because it continued to operate the business without interruption, and Manthadi’s terms of employment remained the same. Consequently, ASCO was actually a successor employee, inheriting Manthadi’s length of service, and liability for any entitlements upon termination. The Court awarded her 12 months of notice despite only working at ASCO for 6 weeks.
This case is a warning to potential buyers. Generally, in an asset purchase (unlike a share purchase) the vendor remains liable for employee-related matters unless agreed otherwise. However, when the business is purchased as a going concern, the purchaser becomes a successor employer, making it similar to a share purchase.
Employee Silence Does Not Condone a Layoff
Ontario’s Court of Appeal addressed the issue of condonation in constructive dismissal in Pham v Qualified Metal Fabricators Ltd. In this case, the employer laid off the employee in March 2020, at the outset of the pandemic. The employer’s claim that the employee condoned the layoff was successful on a motion for summary judgment. The Court of Appeal disagreed and allowed the appeal. Having found that the employer had no express or implied right to layoff the employee, the employer had to show that the employee condoned the layoff. In that regard, the Court held that condonation requires a positive act that expresses consent to the layoff; an employee’s silence does not constitute condonation.
This decision highlights the importance for employers to ensure that their employment agreements have clauses clearly expressing their right to layoff. Employees who did not agree to being laid off might have a claim for constructive dismissal.
Confidentiality Is Not Just Boilerplate
The Human Rights Tribunal of Ontario’s decision in L.C.C. v M.M. confirms that parties must abide by the terms of a settlement agreement, particularly confidentiality. M.M. was the Applicant in a workplace sex discrimination claim against her employer and a co-worker. The parties settled the claim and filed the agreement with the Tribunal. The settlement agreement included standard non-disparagement and non-disclosure clauses, the latter requiring strict confidentiality, and permitting M.M. to respond to inquiries only by stating that “the matter has been resolved.”
Shortly after the settlement, M.M. breached the confidentiality provision by posting on LinkedIn. The post stated that her workplace “sex discrimination claim” was resolved, and identified both L.C.C. and L.C., her employer and co-worker, by name. Despite requests to delete the post and honour the agreement, M.M. kept the post up. Consequently, L.C.C. and L.C. filed a contravention of settlement Application. The Tribunal ruled in favour of L.C.C. and L.C., emphasizing the reputational harm M.M. caused by disclosing the sex discrimination claim. In accordance with the breach provisions of the settlement agreement, M.M. was ordered to pay back the settlement funds.
Looking ahead: the Tort of Harassment?
It may surprise many people, but most jurisdictions in Canada don’t allow people to sue for harassment. However, we are seeing some evolution in that area, and in 2023, the Alberta Court of the King’s Bench recognized the tort of harassment. In Alberta Health Services v Johnston, a mayoral candidate engaged in conduct such as threats, insults, and other meanspirited communications directed towards Alberta Health Services and its employees. Alberta Health Services sued for defamation and tortious harassment. Without getting into the weeds of how the common law recognizes a new tort, it is important to highlight that the Court based its decision on the fact that Ontario recognizes the tort of internet harassment. The ability to sue for online harassment but not “offline” harassment is something the Court found nonsensical. Consequently, the Court took the opportunity to recognize harassment as a tort in Alberta.
Legislative Updates
We now turn to some legislative updates to be mindful of this year.
Federal
Canada Labour Code Amendments
As of February 1, 2024, important changes to the Canada Labour Code came into effect. Employees in federally regulated workplaces have greater notice requirements upon termination. Previously, after 3 months of service, employees were entitled to only 2 weeks of notice, regardless of length of service. Now, employees with 3 months to 3 years of service get 2 weeks and employees with 3 years get 3 weeks plus and one week for each additional year up to a maximum of 8 weeks. Lastly, employers must now provide terminated employees with a written statement regarding their benefits. This is to include items such as wages, vacation entitlements, benefits and bonuses, and severance. The latter requirement already exists for group terminations, so now all federally regulated workplaces must provide such a statement for individual terminations. Group termination requirements remain unchanged.
Ontario
Bill 79
Bill 79, the Working for Workers Act, 2023, received Royal Assent on October 26, 2023. Here are some key changes that came into force:
- Employees who work remotely are now included in the ESA’s mass termination provisions. When an employer terminates 50 or more employees within a 4-week period, remote workers are now considered in the count and are eligible for the same termination entitlements. Employers must also provide the terminated employees with the same Form 1 that they must provide to the Director of Employment Standards.
- The maximum fine for employers convicted of violating the Occupational Health and Safety Act has been increased from $1.5 million to $2 million.
- New licensing standards have been imposed on Temporary help agencies and recruiters. As of July 1, 2024, these types of agencies must be licensed to operate in Ontario; however, this licensing requirement is currently paused while the Government of Ontario revamps the licensing process. Knowingly using an unlicensed agency or recruiter makes a business liable for fines ranging from $15,000 to $50,000. The government has created a database of licensed temporary help agencies and recruiters for businesses to reference.
Bill 149
On November 14, 2023, Ontario introduced Bill 149, the Working for Workers Four Act. It proposes several expanded protections for employees, including:
- Pay transparency in job postings, the use of Artificial Intelligence (“AI”) and Canadian Work Experience – publicly advertised job postings are to state the expected salary range for the posted role, disclose to what extent AI is being used in selecting candidates, and a ban on requiring Canadian work experience for a given job unless permitted otherwise by law;
- Prohibition on unpaid trial periods – employers would be required to compensate employees for any work done during a trial period, as they are required to during training;
- Expanding the already strict prohibition on deducting from employee wages or tips when an employer suffers theft or other loss. For example: dine and dash or gas and dash. Bill 149 would bar employers from essentially making an employee pay when a customer does not. Ontario already takes a dim view of an employer withholding an employee’s wages – this would expand the explicit circumstances where an employer is not permitted to do so;
- Employers with tip-sharing policies would be required to post the tip-sharing policy in a visible area of the workplace, where employees are likely to see it. This would apply to workplaces where tip sharing policies exist, such as restaurants; and
- WSIB benefits would be indexed above the annual rate of inflation.
Ban on Non-Disclosure Agreements in Workplace Sexual Misconduct Settlements
Ontario announced that it would be launching consultations regarding the ban on non-disclosure agreements (“NDAs”) for workplace sexual misconduct settlements. While the ban on NDAs is not yet part of upcoming legislative changes, it would represent a significant change. If the change becomes law, perpetrators of sexual misconduct would not be able to hide their identities by using NDAs in the settlement agreements. While the purpose would be to prevent victims of sexual harassment or violence from speaking up and telling their stories, there is a concern that it could have a chilling effect on settling cases. We will continue to monitor this proposal as it continues to develop and provide further details.
Alberta
Bill 5
Significant regulatory changes might be on the horizon in 2024 for some Alberta employers. On November 1, 2023, Bill 5 passed its first reading, while the second reading was adjourned on November 21. If Bill 5 becomes law, it will rescind the existing regulatory framework for a vast swathe of public sector employers who are currently regulated by Alberta’s Reform of Agencies, Boards and Commissions Compensation Act. This includes entities such as public schools, post-secondary institutions, public agencies, and health authorities. The changes are meant to limit employers’ ability to make decisions regarding the compensation of non-unionized employees and board members. The Government of Alberta would in turn have more discretionary powers in regard to the compensation of these employees.
British Columbia
Pay Transparency Act
Employers in British Columbia will have to provide pay transparency information. The province passed a regulation under its Pay Transparency Act, which came into force on October 23, 2023, requiring employers to collect information they must include in pay transparency reports. Thankfully for employers, the program will be implemented over a number of years, giving time to understand their new obligations. The pay transparency reports employers will have to provide includes information largely relating to gender-based compensation. The goal of this initiative is to address gender-based pay disparities and discrimination.
As of November 1, 2023, employers must state a specific hourly pay or salary range in public job postings, reflecting what they expect to pay an employee in the advertised position, rather than language such as: “$15 per hour and up”.
Minimum Wage Increase
The government increased the minimum wage via an Order in Council, tying the increase to the consumer price index. As of June 1, 2023, the general minimum wage in the province increased from $15.65 to $16.75.
Good News for BC Gig Workers
On November 30, 2023, the provincial government passed Bill 48, which imposes a host of minimum standards for app-based workers who are normally considered independent contractors. The legislation aims to provide a fairer playing field for gig workers through its proposed changes. For instance, gig workers would be characterized as employees and have a minimum wage set at 120% of the provincial minimum wage for “engaged time” (time spent from the start of a delivery to the end of the task, rather than time in between tasks). The proposed changes also include termination pay and better overall compensation, although not every employment standard will be made to apply to gig workers. Notably, overtime, paid leave, vacation pay, and hours of work requirements are not part of the proposed changes.
Quebec
Minimum Working Age
The government of Quebec passed Bill 19, which modernizes the province’s child labour laws. On June 1 2023, most of its provisions came into force. Previously, there was no minimum working age for children, but there were requirements including obtaining parental consent, and a prohibition on children working during school hours. Bill 19 modernizes the provisions in the laws governing child labour by capping weekly hours of work at 17 and introducing a minimum working age of 14, with some exceptions. For example, children under 14 can work as babysitters, tutors, or camp counselors. Employers must obtain parental consent for the exceptions to apply. Employers who fail to observe these new provisions are subject to fines.
Pith & Substance
The legal developments from 2023 generally skewed in favour of employees. And 2024 has already seen a dramatic decision which will not be welcomed by employers: a judgment which invalidated a termination without cause provision which said the employer could dismiss the employee at its sole discretion[NW1] , which is fairly common contract language (spoiler alert: expect to see this case in our 2024 Year in Review).
There is no reason to think that the trend will change: courts are likely to continue to be protective of individuals, while legislatures appear focused on modernizing employment statutes to be more in line with the realities of work in the 21st century.
In such an employment law landscape, knowledge is power, and ignorance is costly – whether you are an employer or an employee, making assumptions about your rights can be very risky. Given the many developments of the past year, it is prudent to seek counsel before making any significant moves. It is also crucial that all employment agreements be drafted or reviewed by an employment lawyer; most of the ones we see are not worth the paper they are printed on.
We will continue to work with new and existing clients to help them understand their rights and obligations, so that they can be proactive. As always, we are available to help you navigate this landscape, and make strategic decisions. To paraphrase Stuart, employment law advice is both good insurance, and a good investment.
