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 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 Alvin Leung | Feb 9, 2018 | Blog Post, Income tax
Employee deductions and expenses as an owner-employee.
While employees at arms-length have been permitted to deduct certain employment expenses pursuant to section 8 of the Income Tax Act, the Canada Revenue Agency has taken issue with employees who are also shareholders of the corporate employer. That is, employees who are sole directors, shareholders and officers of the corporation have been increasingly scrutinized by the CRA.
Back in 2009, the case of Adler v. R, 2009 TCC 613 (informal procedure), the Tax Court of Canada held that since the appellant was the sole officer, director and shareholder of his employer, a refusal to incur the job related expenditures would yield no adverse consequences for him. On the basis of this reasoning, the Court dismissed the appeal.
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So can I deduct my employment expenses?
It is arguable that this case should be limited to its facts and possibly not applicable in all situations. Firstly, the decision in Adler is silent on whether there was an employment contract in place explicitly requiring the employee to incur certain costs. Secondly, the Courts interpretation of “adverse consequences” is quite narrow indeed, appearing to be limited to an action for breach of contract, disciplinary action, and / or poor performance review – quite simply, this cannot be true as there may be negative financial consequences such as lost profits, inability to meet third party obligations, or the inability to pay salary to arms length employees.
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What is required before I deduct employment expenses?
One thing is certain, section 8 of the ITA details some specific requirements before any employee can deduct certain employee expenses – among other things, a good starting point is to always have an employment contract with specific provisions detailing what are the requirements of the job is and what expenses the employee may be responsible for without reimbursement.
If you are a sole director, shareholder, and officer of a corporation and are considering becoming an employee of your corporation, let the lawyers at Erudite Law LLP assist you in reviewing your options. Please feel free to contact us – https://eruditelaw.com/#contact.
