by eruditelaw | Mar 6, 2024 | Blog Post, Employment Law
Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029: Employers may not have “sole discretion” in terminating an employee without cause.
In recent years, employers have been dealt blow after blow as Ontario Courts continue to find ways to void termination provisions in employment contracts. Last month, the Ontario Superior Court of Justice continued this trend by finding that an employment contract was unenforceable because, among other reasons, it allowed the employer to terminate the employee’s employment in its “sole discretion” and “at any time”.
The employee, Karen Dufault, entered into a fixed-term employment contract of two years with the defendant employer, The Corporation of the Township of Ignance. The employer subsequently terminated her employment, without cause, two months into the employment relationship.
Ms. Dufault then brought an action against the Township for salary and benefits for the remaining term of the employment contract. She argued that the termination clauses in the employment contract violated the Employment Standards Act (“ESA”). Specifically, Ms. Dufault argued that:
- the “for cause” termination clause allowed for termination without notice in broader circumstances than permitted by the ESA;
- the “without cause” termination clause suggested that the employer could pay less payment in lieu of notice than would be required by the ESA; and
- the “without cause” termination clause opened the door to allow the employer to terminate employment in its “sole discretion” and “at any time”.
The Court accepted Ms. Dufault’s arguments and held that the employment contract was not enforceable because:
- the employment agreement would have allowed the employer to terminate the employment relationship “for cause” for reasons that did not meet the standards under the ESA for termination without notice;
- the employment agreement attempted to limit the payment in lieu of notice to “base salary”, which is less than the requirement amount pursuant to the
Finally, and perhaps most problematic of all for lawyers and employers is that the Court held that the termination “without cause” provision was invalid because it allowed the employer to terminate an employee in its “sole discretion” and “at any time”:
[46] Thirdly, the plaintiff submits that Article 4.02 misstates the ESA when it gives the employer “sole discretion” to terminate the employee’s employment at any time. I agree with this submission. The Act prohibits the employer from terminating an employee on the conclusion of an employee’s leave (s. 53) or in reprisal for attempting to exercise a right under the Act (s. 74). Thus, the right of the employer to dismiss is not absolute.
The Court reasoned that this would allow an employer to terminate an employee even if they were returning from protected leave or due to reprisal for the employee exercising their legal rights.
As a result, Ms. Dufault was entitled to her salary and benefits for the remainder of the fixed term employment contract.
Takeaways
While it remains to be seen whether this decision will be appealed, the growing body of case law voiding termination provisions are becoming increasing strict. Employers and their lawyers should be mindful of these new developments and review their employment agreements regularly to determine whether their contracts require revisions for both new and existing employees.
A copy of the decision is linked here: Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029
The contents of this blog is not legal advice. If you would like your employment contract reviewed, contact our team of lawyers at Erudite Law LLP for a consultation.
by Syrah Yusuf | Aug 11, 2021 | Blog Post, Contracts, Employment Law
“I hope this finds you well during these unprecedented times.”
This is a phrase I’m sure most Canadians are sick of reading and sick of typing.
During these unprecedented times, Canadian workers have taken the time to re-evaluate their needs and priorities. We are asking ourselves if we want to continue living our lives the same way we did “PP” Pre-Pandemic. We’ve transitioned to work from home models, closed physical offices, are considering a 4-hour workweek. The landscape of employment is changing as people want more control, more autonomy and more flexibility.
In light of this, many people are considering a switch from being an employee to being an independent contractor. Below are some preliminary considerations when making this transition.
Benefits of being an independent contractor
- Determining your own work/life balance.
- Setting your own schedule.
- Seeing a direct correlation between the time spent and the money earned.
- Working for multiple companies at once.
Downsides of being an independent contractor
- No employment benefits.
- No guarantee of consistent income.
- No protection under the Employment Standards Act.
- Taxes are not withheld on your behalf.
Things to consider before getting started
- Do you require liability insurance?
- Do you need to be registered with WSIB?
- Do you require any licenses to complete your work?
- Are you required to charge H.S.T. on your goods/services?
- Are you providing goods/services to individuals or businesses?
- If you are providing goods/services to individuals, are you compliant with the Consumer Protection Act?
- What warranties will you provide?
Independent Contractor Agreements
Any experienced contractor will tell you that scope creep is one of the primary issues they face in ensuring that they are paid fairly for their efforts. Independent contractor agreements are useful tools to clarify the scope of work and protect you from scope creep. Additionally, having a formal written contract will clarify cost, time lines, warranties, and more. This can prevent disagreement and clarify any ambiguity between the parties regarding what was agreed upon and can save significant costs in the event of litigation. When it comes to these contracts, we typically see is contractors using a “master agreement” which sets out their terms and conditions which apply to all jobs, followed by shorter subsidiary contracts which set out the specific scope of the current project, as well as any project-specific elements. Regardless of the format, an independent contractor agreement is a key part of your upfront cost, which can save you the headache and cost of unpaid services to clients and litigation in the event of a disagreement.
If you would like to learn more about independent contractors or would like to speak to one of our lawyers regarding your independent contractor agreement, contact us by phone at 905-471-6161 or email us at info@eruditelaw.com.
Author: Syrah Y. Yusuf
by Alvin Leung | Jul 23, 2021 | Blog Post, Contracts, Employment Law
Last year, the Ontario Court of Appeal in Waksdale v. Swegon North America Inc., 2020 ONCA 391, slapped employers across the face causing an upheaval in employment law, resulting in the possibility that your employment contract might no longer be enforceable. Specifically, employers may be required to review and revise their termination provisions with their employees, otherwise, upon termination, the employer may find themselves paying a lot more to the employee than anticipated.
In Waksdale, the employer terminated Mr. Waksdale “without cause”. Pursuant to his employment agreement with the employer, the termination clause provided that the employer only had to pay him the minimum statutory entitlement set out in the Employment Standards Act. Mr. Waksdale was only employed for eight (8) months, thus under the ESA, he was only entitled to one (1) week pay-in-lieu of notice. Rather than accept this, Mr. Waksdale brought an action against his employer for six (6) months pay-in-lieu of notice under common law.
At trial, counsel for Mr. Waksdale argued that the termination clause was void, and thus the employment contract was unenforceable. Specifically, that a separate “termination for just cause” clause elsewhere in the employment agreement contravened Regulation 288/01 of the ESA Regulations. The Ontario Court of Appeal agreed and held that the wording in the “termination for just cause” section was inconsistent with the ESA Regulation, and that alone voided the remaining termination provisions in the employment contract.
“That’s Fine, I have a Severability Clause” No, apparently it is not fine. Despite the employment agreement in Waksdale having a severability clause, the Court of Appeal declined to apply it since it would not have any effect on a contract term which was void by statute.
What Is Just Cause Then?
The Courts have held that “just cause” includes actions where an employer can terminate an employee without paying reasonable notice at common law. These include actions by the employee such as dishonest conduct, insubordination, violence, sexual harassment, harassment, repeated breached of employee policies etc. However, even though the employee is not entitled to common law reasonable notice, they still entitled to be paid ESA notice and severance.
Employers may only terminate an employee without pay where the employee has been guilty of, “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.” In order for your employment agreement to be enforceable, it must explicitly distinguish between termination for “just cause” and termination for “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.” Because of the decision in Waksdale, your “termination without cause” clause may also be unenforceable, and that the termination provisions in an employment agreement must be read as a whole to determine whether it violates the ESA, rather than on a piecemeal basis.
Revising Your Employment Agreements
As a result of the decision in Waksdale, as an employer, you should consider immediately reviewing your existing employment agreements to ensure that they are in compliance with the ESA.
In the event that the employment agreement violates the ESA, you should consider entering into a new employment agreement with an enforceable termination clause. However, you must always remember that if you are amending the employment agreement, you must offer fresh consideration such as pay increase, bonus, promotions, additional vacation time, or some other benefit to the employee.
To find out more about how to protect yourself or if you need assistance navigating your employment agreement, contact us by phone at 905-471-6161 or email us at info@eruditelaw.com.
by Alvin Leung | Jul 20, 2021 | Blog Post, Employment Law
To begin, it is important to note that an employer cannot require an employee to be vaccinated for COVID-19. The federal and provincial governments have not made it mandatory for all people to be vaccinated; as such, an employer’s workplace policies cannot make it mandatory.
KEY TAKEAWAYS
• Employers cannot require employees to be vaccinated.
• Employers may ask if an employee has been vaccinated.
• Employers must be mindful of privacy and human rights concerns.
However, an employer may ask an employee if they have been vaccinated. And while this may be regarded as a violation of privacy rights, an employer has an obligation under law to maintain a safe workplace. This obligation overrides any privacy concerns. Having knowledge of which employees have been vaccinated can help an employer determine, among other things, how to assign duties and roles, and which employees are best suited for face-to-face contact with clients. Safety, not only for employees, but for customers as well, is a chief concern for employers who wish to avoid potentially serious liability. Interacting with employees that either lie about or do not wish to disclose their vaccination status or dealing with customers who sue because they contracted COVID-19 after interacting with an infected employee are but a few of the new challenges that businesses are faced with. Thus, it is crucial for an employer to know whether an employee has received any of the recommended vaccination shots.
When collecting such personal information from employees, employers should clearly communicate their reasons, and are advised to be reasonable in their approach, gathering only the amount of information that is necessary. More importantly, an employer must avoid creating a workplace in which non-vaccinated employees are stigmatized, harassed, or bullied. Employers must be mindful that some of their workers may have legitimate reasons for not getting vaccinated – reasons which may be protected under human rights law (e.g., medical or religious reasons).
The collected information is to be kept private and cannot be shared without the consent of the employee. For example, as businesses across Ontario begin to open up, customers may ask about the vaccination status of certain employees, particularly in the hospitality, personal care, and retail sectors. An employer must be cautious not to divulge the personal information of employees that have not consented.
The new COVID-19 landscape is forcing companies to adjust their workplace policies. Moreover, it is forcing business owners to ask uniquely tough questions. For example, can an employer require a new hire to be vaccinated? Can employees be incentivized to get vaccinated? What is the extent of the duty to accommodate and how does it apply to employees who refuse to get vaccinated?
Whether you are an employer or an employee, we would be glad to go into further detail on these recent issues and address any of your concerns.
Feel free to send us an e-mail at info@eruditelaw.com or call us at 905-471-6161 to speak with one of our Employment Law and Civil Litigation practitioners.
Authors: Ben Brillantes
by Jimmie Chen | Sep 10, 2020 | Blog Post, Employment Law
In Ontario, an employee can be dismissed in one of two ways:
- Termination for cause; or
- Termination without cause.
Termination for cause
When an employer terminates an employee for cause the employee will not be entitled to any compensation with regards to the dismissal. At law, this form of compensation is typically referred to as “reasonable notice”, “common law notice” or “termination pay”. Given that termination for cause is extremely prejudicial to the former employee, it has been labelled as being an extremely severe and punitive measure to be taken only in the most serious circumstances. As such, the courts have established a very high standard for an employer seeking to terminate an employee for cause.
Standards for terminating an employee with cause
There are two different standards that can be applied to determine if “just cause” for termination has been established:
- Under the Employment Standards Act: the employee was guilty of “wilful misconduct…that is not trivial and has not been condoned by the employer” ; or
- Under Common Law: the employee was guilty of basis prolonged incompetence and/or serious misconduct which led to “just cause” for termination.
The standard applied depends on whether or not there is an enforceable termination clause in the employment agreement.
If there is an enforceable, binding employment agreement, with an enforceable termination clause, that is in compliance with the Employment Standards Act, the standard of “willful misconduct” will apply. Alternatively, in the absence of an enforceable employment agreement, the common law standard of “just cause” will apply.
In the case of Plester v. PolyOne Canada Inc. 2011 ONSC 6068, the Ontario Superior Court of Justice made the following assertions on the difference between termination for cause under the Employment Standards Act (“wilful misconduct”) and at common law (“just cause”):
“Just cause involves a more objective test, albeit one that takes into account a contextual analysis and therefore has subjective elements. Wilful misconduct involves an assessment of subjective intent, almost akin to a special intent in criminal law.”
In summary, in order for an employer to terminate an employee under the Employment Standards Act, the employer will have to demonstrate that the employee intentionally engaged in serious misconduct. In the absence of an enforceable termination provision or an employment agreement, the burden to establish termination for cause at common law is lowered as the employer is only required to prove the act of serious misconduct.
Termination Without Cause
Termination without cause refers to when an employer terminates an employee without providing a reason for terminating the employee. To put it simply, termination for cause is when an employer dismisses an employee for reasons that are usually not related to serious workplace misconduct.
When an employee is dismissed without cause they are entitled to reasonable notice of termination – that being a reasonable amount of time in which the employee should be notified that their employment will be terminated.
What is reasonable notice?
There are two ways in which reasonable notice can be provided to the dismissed employee:
Working Notice – the amount of time the employee will working prior to the set termination date; or
Pay in lieu of Notice – payment equal to the amount of working notice the employee should have received.
Common law notice or statutory notice
The length of reasonable notice afforded to employees dismissed is determined by whether or not they are receiving statutory notice or common law notice. The length of statutory notice is determined by the Employment Standards Act, whereas common law notice is determined by evaluating several factors, which are discussed below.
Statutory notice is applicable when the employee has a valid employment agreement, with a valid termination clause, which limits the notice period to the notice period provided in the Employment Standards Act.
Reasonable notice under the Employment Standards Act
The reasonable notice periods under the Employment Standards Act are as follows:
Amount of notice required if an employee has been continuously employed for at least three months:
Period of employment Notice required
Less than 1 year 1 week
1 year but less than 3 years 2 weeks
3 years but less than 4 years 3 weeks
4 years but less than 5 years 4 weeks
5 years but less than 6 years 5 weeks
6 years but less than 7 years 6 weeks
7 years but less than 8 years 7 weeks
8 years or more 8 weeks
Reasonable notice requirements at common law
An employee who receives statutory notice may claim that they were wrongfully terminated as they did not receive sufficient notice and seek common law notice as the common law notice period is typically longer. An employee who is terminated without reasonable notice is entitled to damages for breach of contract asserted on the employment income the employee would have earned during the reasonable notice period. The length of reasonable notice is determined by the following principles as listed in the case of Paquette v. TeraGo Networks Inc., 2015 ONSC 4189:
- The character of employment. A longer notice period is provided for senior management or highly skilled and specialized employees and a shorter period is provided for lower rank or unspecialized employees
- The length of employment. Generally, the longer the duration of employment, the longer the notice period;
- The age of the employee at termination. A longer notice period will usually be justified for older long-term employees; and
- The availability of similar employment having regard to the experience, training and qualifications of the employee. Economic factors such as a downturn in the economy or in a particular industry or sector of the economy can also play a factor as they may indicate that an employee may have difficulty finding another position and may justify a longer notice period.
It is important to note that the determination of what period constitutes reasonable notice of termination is a principled art and not a mathematical science that turns on the particular facts of each case. There is no “right” figure for reasonable notice. Most cases yield a range of reasonable figures;
Conclusion
It is crucial for employers and employees alike to understand their rights and responsibilities as set out both in statute and in common law.
Employers should be cautious in drafting their employment agreements as particular language and reference to the Employment Standards Act is required to limit notice period to the statutory minimum. Invalid termination clauses can cause expensive litigation for both parties.
If you have questions regarding your employment contracts, whether or not you have been provided adequate notice, or any other employment issue contact by phone at 905-471-6161 or email us at info@eruditelaw.com.
by eruditelaw | Mar 18, 2020 | Blog Post, Contracts
COVID – 19 (Coronavirus) and Force Majeure or Act of God Clauses
As Ontario declares a State of Emergency and begins shutting down many businesses in light of the continued spread of COVID-19 across Ontario, many companies and individuals are left asking whether or not they are required to honour their contractual commitments.
The question we are being asked again and again, is whether or not COVID-19 can be deemed a force majeure event, specifically, whether COVID-19 constitutes an “Act of God” sufficient to discharge a party’s contractual obligations. Here are the essential questions that need to be considered in order to determine if COVID-19 affects your contractual obligations:
Does your contract have a “Force Majeure” or “Act of God” clause?
A thorough review of your contract is necessary to determine whether there is a clause which can be interpreted as a “Force Majeure/Act of God Clause”. In the absence of an express contractual term stating that a party will not be required to honour their obligations in the event of a Force Majeure event or an Act of God, to date, Canadian courts have been unlikely to interpret the contract to have an implied Force Majeure Clause. This is not to say, that in the aftermath of COVID-19, we may see changes to this in common law. However, as the situation currently stands, if you do not have an express Force Majeure/Act of God Clause, you should not rely on COVID-19 as a reason for not honouring your contractual commitments.
Does your Force Majeure/Act of God Clause Cover COVID-19?
If your contract contains a Force Majeure/Act of God Clause, then it must be determined if the clause applies to the circumstances surrounding COVID-19. The Force Majeure/Act of God Clause will typically list the specific events which will be covered by the clause. If the clause does not specifically state “pandemic”, “disease” or something which can be applied to COVID-19, Canadian Judges may be required to rely on common law to determine if the clause covers COVID-19.
The Supreme Court of Canada, in Atlantic Paper Stock Ltd. v. St. Anne-Nack, [1976], was forced to do just that and held that the “common thread” in all the events listed in the clause was an event that is “unexpected, something beyond reasonable human foresight and skill” and applied the clause to an event which was not specifically named in Force Majeure/Act of God Clause as being covered as it fit this criterion.
Even if you intend to rely on a Force Majeure/Act of God Clause, it is important to note that you must always do your best to mitigate/reduce your damages, and take all reasonable steps you can to comply with your contractual obligations. If an event can be mitigated, courts may consider the event to be one that is not beyond the control of the party.
What if your contract does not have a Force Majeure Clause, or your Force Majeure clause does not apply?
In the event that you cannot rely on a Force Majeure/Act of God Clause to discharge your obligations under a contract, you may be able to rely on the Doctrine of Frustration. Frustration of contract takes place when an unforeseen event, at the fault of neither party, significantly changes the nature of the parties’ obligations or abilities to perform the contract.
For example, you enter into an agreement to rent a property and the property burns down, at the fault of neither party. The purpose of this contract, to rent the property, is frustrated by the lack of a property to rent. As such, the parties cannot reasonable be expected to comply with their contractual obligations.
The onus is on the party seeking to rely on the force majeure clause to prove that the force majeure event has hindered, delayed or altogether prevented the performance of the contract.
Drafting Suggestions
The language used is key when drafting a Force Majeure clause in a contract. Parties who seek to broaden the scope of the clause, specifically regarding COVID-19 or other pandemics, should include phrases such as “communicable disease outbreak” rather than simply stating “epidemic” or “pandemic”.
On the other hand, parties may seek to limit the risk of COVID-19 triggering a Force Majeure event might consider implementing language that solely describes Force Majeure as an “act of God” with no additional events stated. With COVID-19’s long existence, people can better prepare, lowering the chances of an event being declared an “act of God” by the courts.
Further, the language of the contract should address the threshold of impact in clear language. Courts have found uncertainty occurs where a force majeure clause does not precisely define the impact required from the event. As an example, “preventing” performance may be too strict of a standard, whereas “hindering” performance can be considered too lenient.
Lastly, in order to ensure the party seeking to rely on the clause notifies the other party, a notice provision must be drafted. This provision outlines the time within which notice must be given, the facts the notice must contain, and where the notice should be served.
It is important to note that many Canadians are being affected by COVID-19, we can all do our part to work together to reduce the financial burden on individuals and businesses. Some contracts can be delayed or extended by mutual agreement, and parties may choose not to enforce certain contractual provisions immediately. We always strongly recommend seeking independent legal advice prior to taking any definitive actions with respect to your contracts.
To find out more about how to protect yourself or if you need assistance navigating your contracts, contact us by phone at 905-471-6161 or email us at info@eruditelaw.com.
Authors: Syrah Y. Yusuf, Alvin W. Leung, and Tiana Terrigno