The stakes were high for both parties in a recent case before the Ontario Superior Court of Justice. In Tarras v. The Municipal Infastructure Group Ltd., the plaintiff was employed as the director of a company. In that capacity, he was involved in the drafting of his employment contract which contained a termination clause. Despite his involvement with drafting this clause, the court was tasked with determining whether the clause could be enforced. 

This is a unique situation compared to typical contract disputes, in which the sophistication of the parties involved and their involvement in drafting would have weighed in favour of permitting enforcement by the defendant employer.

Employee terminated without cause two years before contract set to end

The case of Tarras v. The Municipal Infastructure Group Ltd., dealt with a wrongful dismissal claim made by the plaintiff employee who was the director of The Municipal Infrastructure Group Limited (the “employer”). The employee sold his interest in the employer company alongside other former owners in December 2019 to an international engineering firm. The employee had arranged an employment agreement with the employer to hold the role of vice-president until December 2022. The agreement provided for an annual salary of $250,000 with benefits and other forms of compensation.

The employee was terminated in November 2020 without cause. The employee brought this case before the court through a motion for summary judgment.

The employment agreement had its own termination clauses

The employment agreement touched on the terms of termination in section 11. The relevant paragraphs of the termination clause are as follows:

“11 (a)   Termination for Cause. TMIG may terminate Employee’s employment hereunder for “Cause” immediately upon delivery of a written termination notice to Employee. “Cause” means the repeated and demonstrated failure on Employee’s part to perform the material duties of his/her position in a competent manner, which Employee fails to substantially remedy within  a reasonable period of time after receiving written warnings and counseling from TMIG; Employee engaging in theft, dishonesty or falsification of records; Employee willful refusal to take reasonable directions after which Employee fails to substantially remedy after receiving written warnings from TMIG; or any act(s) or omission(s) that would amount to Cause at common law. In the event that Employee’s employment hereunder is terminated pursuant to the provisions of section 11 (a), Employee shall not receive payment of any kind, including notice of termination or payment in lieu thereof, or severance pay, if applicable, save and except accrued and outstanding salary and vacation pay.

(b)   Termination Without Cause. TMIG may terminate Employee’s employment in it’s sole discretion for any reason whatsoever without Cause or upon expiry of the Term, by providing Employee with notice of termination, or payment in lieu thereof, or a combination of both, and severance pay, if applicable, pursuant to the Ontario Employment Standards Act, 2000. In addition, TMIG will continue to pay its share of employees benefits, if any, for the duration of the notice of termination., pursuant to the employment standards act of 2000. TMIG will also provide Employee any accrued and outstanding salary and vacation pay.”

The minimum employment standards employers must meet in Ontario

The Employment Standards Act sets out the minimum standards which employers owe their employees. Although employers are able to offer their employees employment contracts that exceed these minimum standards, employers cannot conversely contract out of those standards. 

Employers should also consider the regulations which outline additional standards that must be met. For instance, Ontario Regulation 288/01 provides that employees who are found to be “guilty of willful misconduct, disobedience or willful neglect of duty that is not trivial and has not been condoned by the employer” don’t have the same entitlements. These employees do not have to receive notice of termination, termination pay, or severance pay.

Employment disputes are decided differently than contract disputes

In considering the motion, the court first began by examining what the employment agreement contemplated for an employee to be terminated “for cause”. The court looked at the terms used in section 11(a) of the employment agreement and determined that it did not use wording contained in the Employment Standards Act, it instead contained phrases like “any acts or omissions that would amount to cause at common law”. While employers can terminate employees through agreements like the one in this case, courts continue to hold that provisions that contravene the Employment Standards Act render an entire employment agreement void.

The employer submitted that the employee had helped draft his own employment agreement, had legal counsel to assist throughout negotiations, and has “significant commercial experience.” These arguments may have been more persuasive in a contract dispute, but disputes involving employment contracts work differently. In employment law, courts have acknowledged the inherent power imbalance that exists between employees and employers. Employment cases that have ruled otherwise have been found to be an error of law.

Court finds termination clause unenforceable

Because the termination provision at section 11(a) conflicts with the standards set out in the Employment Standards Act, the court found the termination clause in its entirety to be unenforceable. The motion for summary judgment was found in favour of the plaintiff. The plaintiff was awarded his salary for the balance of the contract (23 months), which amounted to $479,166.67. 

The parties were left to arrange the quantum of vacation pay, incentive compensation plan, and other benefits for that same period.

Contact the Employment Lawyers at Bader Law to Help Employment Contract Disputes

The trusted employment lawyers at Bader Law help demystify employment and human rights laws for both employees and employers. Our team helps simplify the law to help clients understand all of their options and make informed decisions. Our lawyers regularly advise employees and employers on discrimination, accommodation of disability and illness, harassment, wrongful dismissal, severance packages, and more. Call us at 289-652-9092 or contact us online to schedule a consultation with a member of our experienced employment law team.

Every person has a right to equal treatment in their employment and to be free from discrimination on the basis of protected grounds. These include race, sex and disability. This protection covers every aspect of the employment relationship, from recruitment to dismissal. It also covers the rate of pay.

This article looks at the recent decision of the Court of Appeal for Ontario in Ontario (Health) v. Association of Ontario Midwives. The Association of Ontario Midwives claimed that the Ministry of Health and Long-Term Care had engaged in systemic sex discrimination with respect to compensation practices. 

The Ministry of Health and Midwives Association adopted compensation principles in 1993

Midwifery has been a regulated health profession in Ontario since 1994. A joint working group of the Ministry of Health and Long-Term Care and the Association of Ontario Midwives was created to determine payment levels. A compensation expert was retained in 1993 to develop compensation principles. These principles included an evaluation of midwives’ skill, effort, responsibility, and working conditions compared to other healthcare professionals (specifically primary care nurses and family physicians working in community health clinics). The parties agreed that the salary range for midwives would fall between a community health clinic (CHC) nurse and a CHC physician.

From 1994 to 2005, midwives’ salaries were frozen, although all other CHC workers had their salaries frozen from 1992 to 2003. In 2005, the parties reached a three-year agreement increasing midwife compensation. 

The Association of Ontario Midwives became concerned that a compensation gap had developed between midwives and community health clinic physicians. A joint compensation study in 2010 confirmed the ongoing relevance of the 1993 compensation principles. However, the study found that nurses at the bottom end of their range were now paid the same as level one midwives, and CHC physicians were now paid well above midwives. The report recommended a 20% compensation increase.

Midwives Association brought claim after Ministry of Health abandoned compensation principles

The Ministry of Health disagreed with the report and advised that the negotiations would be governed by the government’s policy of compensation restraint. There were a series of negotiations and attempts to compromise. Eventually, the parties reached a funding agreement in 2013, but it was entered into on a without-prejudice basis.

The Association of Ontario Midwives applied to the Human Rights Tribunal of Ontario, alleging that midwives had experienced systemic gender-based discrimination in compensation. It claimed discrimination on the basis of sex under the Ontario Human Rights Code and sought an increase in compensation retroactive to 1997.

Human Rights Tribunal decided compensation practices were discriminatory 

The Adjudicator found that the 1993 compensation principles were designed to ensure that midwives’ compensation was not affected by “harmful assumptions and stereotypes concerning the value of women’s work”. She was satisfied that the parties maintained a connection to the principles until 2005, concluding there was insufficient evidence of discrimination up until that time.

However, after the Ministry of Health abandoned the principles following the 2010 report, the Adjudicator “found that this left the compensation of midwives exposed to the well-known effects of gender discrimination on women’s compensation”. She concluded that sex was more likely than not a factor in the treatment, including the compensation gap that developed between midwives and community health clinic physicians, which was a male comparator.

The Adjudicator found that the Ministry of Health was liable for discrimination, ordering a compensation adjustment of 20% to 2011 and $7,500 compensation for injury to dignity, feelings, and self-respect per eligible midwife. The Ministry appealed.

Reasonableness is standard of review for Human Rights Tribunal Decision: Court of Appeal

Associate Chief Justice of Ontario Fairburn noted that the standard of review of the Human Rights Tribunal’s decision was reasonableness. She explained that the Court’s starting point was judicial restraint and respect for the distinct role of administrative decision-makers such as the Tribunal.

The Court of Appeal found the Adjudicator correctly articulated the test for discrimination, with the claimant required to prove:

• They are a member of a group protected by the Human Rights Code
• They have been subjected to adverse treatment; and
• Their gender was a factor in the adverse treatment. There need only be a connection between the prohibited ground and the adverse treatment. 

Court of Appeal found it was reasonable to conclude adverse treatment of midwives based on gender

The Court of Appeal acknowledged that midwifery is “the ultimate sex-segregated profession: women providing a service for women in relation to women’s health”. 

As midwives are almost exclusively women, they have a characteristic protected by the Code. The Court of Appeal decided that it was rational for the Adjudicator to conclude that midwives experienced adverse treatment and that sex/gender (terms used interchangeably by the Court) was more likely than not a factor. The parties were alive to systemic discrimination in agreeing to the 1993 compensation principles, which the Ministry of Health later abandoned, along with the use of community health clinic physicians as a comparator. The Ministry of Health did not substitute them with a new methodology for determining the appropriate and fair compensation for midwives.

As a result, the Court of Appeal held that it was reasonable for the Human Rights Tribunal to find gender was a factor in developing the 1993 compensation principles and the 2010 report.

Community Health Clinic physicians appropriate comparator group for compensation

The Court of Appeal also found that community health clinic (CHC) physicians were an appropriate comparator. While CHC physicians became female-dominant over time, they remained an appropriate male comparator because their pay aligned with a male-dominated group.

Given the above findings, the Court of Appeal held that the decisions of the Human Rights Tribunal were reasonable and dismissed the Ministry of Health’s appeal.

Bader Law: Providing Human Rights & Employment Law Advice in Mississauga

The skilled employment lawyers at Bader Law help demystify employment and human rights laws for employees and employers. We simplify the law to help clients understand their options and make informed decisions. Bader Law regularly advises employees and employers on discrimination, accommodation of disability and illness, harassment, wrongful dismissal, severance packages, and more. To schedule a consultation with a member of our experienced employment law team, call us at 289-652-9092 or reach out online.

Since COVID-19 vaccinations have become widely available across Canada, there has been a rise in claims by employees alleging they were wrongfully dismissed on the basis of their unvaccinated status. Over the past year, many private sector employers implemented vaccine mandates and deemed an employee’s failure or refusal to become vaccinated as just cause for dismissal. But what is “just cause”, and how is it established when an employee is terminated from their job?

“Just Cause” Termination

In Ontario, an employer may terminate an employee for just cause where the employee’s misconduct gives rise to a breakdown of the employment relationship. Just cause termination is known as “the capital punishment” of employment law, as an employee terminated for just cause is not provided with notice of dismissal or a severance package. An employee will also not be eligible for Employment Insurance benefits, and it may be more difficult for the employee to find new employment.

Given that an employee is denied these entitlements and may be hindered in securing a new job, just cause termination has a high threshold for employers to establish and is typically reserved for only the worst workplace violations.

There are several types of misconduct that may be grounds for dismissal for cause. The following are common grounds for just cause dismissal:

• dishonesty (e.g., fraud, theft, breach of trust, deception etc.)
• breach of trust
• workplace harassment and violence
• criminal conduct
• insubordination and insolence
• culpable absenteeism and lateness

Common Law Standard for “Just Cause”

The employer bears the evidentiary burden of proving, on a balance of probabilities (i.e. it was more likely than not), that it had cause for terminating the employee. Typically, to establish just cause, an employer must prove that an employee’s act or omission was so significant that the effect of the employee’s misconduct repudiated the employment contract. The employee’s actions must be so incompatible with the employee’s duties that it is prejudicial to the employer’s interest, making it virtually impossible for the employment relationship to continue.

In the seminal case of R. v. Port Arthur Shipbuilding Co. et al., the Ontario Court of Appeal stated that an employer may terminate an employee’s employment for just cause if the employee is:

“guilty of serious misconduct, habitual neglect of duty, incompetence, or conduct incompatible with his duties, or prejudicial to the employer’s business, or if he has been guilty of wilful disobedience to the employer’s orders in a matter of substance.”

“Just Cause” Under Ontario’s Employment Standards Act

While each employment law case is considered on its own particular set of facts, the Ontario Employment Standards Act establishes a standard for termination with cause. To establish just cause for termination, the Act requires the employer to establish that the employee’s misconduct was both serious and wilful. For misconduct to be serious, demonstrable harm must have been done to the employer’s operation such that the misconduct amounts to a rejection or breach of the employment relationship. Finally, wilful misconduct requires intentional or deliberate misconduct on the employee’s part or behaviour so reckless that it would be considered intentional.

The Ontario Superior Court of Justice has held on several occasions that the standard to terminate an employee without notice pursuant to the Employment Standards Act is higher than the common law standard to terminate an employee for cause.

Wrongful Dismissals for “Just Cause” Lead to Higher Notice Periods

An employee who believes they were wrongfully dismissed for just cause can challenge the employer’s dismissal. Courts in Ontario have routinely held that where an employee was wrongfully terminated on the basis of just cause, they are entitled to a notice period at “the outer end of what is reasonable to reflect the additional challenge of finding new employment.” Given the potential of having to pay an employee dismissed for cause even greater notice than they would have been entitled to had notice been provided (as well as the costs of any litigation), it is imperative that employers be certain they have met the threshold for establishing a just cause dismissal.

Terminations in the Time of COVID-19

As with most other things in life, terminations for just cause have been impacted by COVID-19. Employers who have implemented a vaccine mandate may face challenges when dismissing an employee for failing or refusing to be vaccinated against COVID-19.

Changes to Record of Employment Codes

In response to dismissals arising from employer vaccination policies, Employment and Social Development Canada (ESDC) issued guidelines for the preparation of Records of Employment for employees who breach a workplace vaccine mandate.

These guidelines state that when an employee doesn’t report to work because they refuse to comply with an employer’s mandatory COVID-19 vaccination policy, employers are to use code E (quit) or code N (leave of absence). This suggests that the ESDC will treat employees who do not comply with an employer’s mandatory vaccination policy as having quit their employment and are therefore not entitled to receive Employment Insurance benefits.

Just Cause and Vaccination Status

The next few years will determine whether courts across Ontario and Canada will come to a consensus on whether a failure to comply with an employer vaccination policy amounts to just cause. Vaccine mandates should be clearly articulated to employees, so they understand their rights and consequences under the policy. Employees with concerns about the fairness of their employer’s vaccination policy or who feel they have been wrongfully dismissed pursuant to such a policy should seek legal advice on the potential remedies available to them.

Bader Law Provides Skilled Advice & Representation to Employees in Wrongful Dismissal Claims

At Bader Law, our experienced employment lawyers counsel employees on their rights under Ontario’s employment laws. We resolve workplace disputes as efficiently and amicably as possible and advocate for employees at all levels of court and before tribunals when the relationship is beyond repair. To schedule a consultation, contact us online or by phone at 289-652-9092.

We have previously written about Bill 27, Working for Workers Act, 2021 in November. Since the last time we wrote about it, Bill 27 has received Royal Assent. Employers now have a limited amount of time to ensure that they are in compliance with certain new provisions, including non-compete agreements and the right to disconnect policies. Other provisions such as those requiring licensing for temporary help agencies and access to washrooms for delivery drivers will be coming into force in the coming months, though advance preparation will ease the transition for affected businesses. 

Non-competes Are Void As of October 25, 2021

As we wrote in November, employers need to review existing employment agreements that contain non-compete clauses. Having received Royal Assent, Bill 27 has effectively amended the Ontario Employment Standards Act, 2000 (“ESA”) to prohibit non-compete agreements. The probation on non-competes comes into force on October 25, 2021.

Under Bill 27, a non-compete is defined as “an agreement or part of an agreement, between an employer and an employee that prohibits the employee from engaging in any business, work, occupation, profession, project or other activity that is in competition with the employer’s business after the employment relationship between the employee and the employer ends”. 

Bill 27 does provide for two exceptions from the prohibition on non-competes as follows:

1. If the non-compete relates to the sale of the business and is entered into between a purchaser and a seller; or
2. Executives are also exempt and employers are able to subject their executives to non-compete clauses. Bill 27 provides that an executive is “any person who holds the office of chief executive officer, president, chief administrative officer, chief operating officer, chief financial officer, chief information officer, chief legal officer, chief human resources officer or chief corporate development officer, or holds any other chief executive position”.

Employers should consider reviewing their standard employment agreements and consider whether, in light of the changes imposed by Bill 27, changes need to be made to any provisions in employment agreements relating to non-solicitation, confidentiality or similar provisions that could afford employers continued protection in the case of the departure of a key employee. A thorough review of job titles and responsibilities should also be undertaken as quickly as practicable. A job title alone is unlikely to allow an employer to restrict an employee’s future job-seeking prospects. There may also be situations where an employee is very senior but does not have the appropriate title that would reflect the responsibilities. Therefore, it will likely be a worthwhile exercise to undertake a thorough review of all senior jobs and standard agreements used for those positions to ensure that there is no mismatch between the legislation, the employer’s intent, and the actual executed agreements. 

As non-compete provisions are now void under the ESA, and not just viewed as unenforceable under the common law, continuing to include non-compete provisions in non permitted agreements could impact the enforceability of other provisions in these agreements. This is a great opportunity to revisit the entire employment agreement, especially if there are restrictive covenants included. 

Mandatory Written Policy on Disconnecting From Work

Under the new requirements of Bill 27, employers with 25 employees or more as of January 1, 2021, will be required to create and maintain a written policy outlining “disconnecting from work”. The term is defined as “not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work”.

Employers will only have until June 2, 2022, to put the policy in place.

Introduction of Licensing for Temporary Help Agencies and Recruiters

Bill 27 introduces a new licensing requirement for Temporary Help Agencies and recruiters. Further, the Bill also includes language prohibiting “against knowingly engaging or using the services of an unlicensed temporary help agency or recruiter”. 

We will continue to monitor the requirements that will apply to the licensing process and will update our readers as the application process is unveiled. 

It should be noted that Minister McNaughton has been quoted as saying that “employers who used “deceitful recruiters” could be required to repay workers for illegal fees charged”. Therefore, if you operate or work at a business that uses the services of a Temporary Help Agency or Recruiter, this change could have a significant impact on your operations as the licensing process is rolled out. 

Introduction of the Requirement to provide Washroom Access to Delivery Drivers

Under Bill 27, and subject to a small subset of exemptions, business owners would be required to provide “access to a washroom […] to a worker who is present at the workplace to deliver anything to the workplace, or to collect anything from the workplace for delivery elsewhere”.

This requirement will come into force on a date to be announced in the future, however, business owners may wish to consider the options available to them to ensure that they are able to comply once the requirement comes into force, as there may not be a lot of time provided for compliance after such an announcement is made. 

Employment Lawyers Helping Employers and Employees Ensure Compliance with Legal Obligations

The Mississauga employment lawyers at Bader Law regularly assist business owners and entrepreneurs in ensuring compliance with their legal and financial obligations. Contact us online or at (289) 652-9092 to learn what we can do for you and your business.

In April 2021, the Ontario government introduced a paid sick leave program in the province in response to the ongoing COVID-19 pandemic.

It currently provides three paid sick leave days per employee. Employers are required to provide employees with up to $200 of pay for each of the three days where the employee misses work because of COVID-19. As part of the program, employers may then apply to the Workplace Safety and Insurance Board to obtain reimbursement for the expense.

Prior to the introduction of this program, employees were not entitled to any paid sick days. Currently, under the Employment Standards Act, employees who have been employed for at least two weeks are entitled to three unpaid days off of work for sick leave per calendar year for reasons of “personal illness, injury or medical emergency”. The employee who takes sick leave is required to give notice to the employer prior to taking the leave, or as soon as possible. The employer is entitled to ask for evidence that the employee is entitled to take the leave.

In October, a member of the NDP party had introduced Bill 8, the Stay At Home If You Are Sick Act, 2021 which proposed to replace the current provisions under the Employment Standards Act relating to sick leave, family responsibility leave and bereavement leave, with a new section that would entitle employees to 10 days of paid leave per year for personal emergency leave due to a personal illness, injury or medical emergency, death, illness of a listed family member or certain urgent matters. The Bill further proposed to amend the current provision on unpaid leave in situations related to declared emergencies and infectious disease emergencies to allow employees 14 paid days for the leave.

However, last week, the Bill was voted down.

Thus, as things stand, the three paid sick days in Ontario are set to end on December 31, 2021.

British Columbia To Introduce Five Paid Sick Days as of January 1, 2022

Currently in British Columbia, under the Employment Standards Act, employees who have been employed for at least 90 days are entitled to take up to three unpaid days off from work per calendar year for personal injury or illness leave.

However, last week, the government announced that it will introduce a new permanent policy that will come into effect on January 1, 2022, that will give all employees covered by the Employment Standards Act, including part-time workers, five paid days off for sick leave.

Canadian Government Announces 10 Paid Sick Days for Federal Employees

On November 26, 2021, the Federal government announced the introduction of Bill C-3 which proposes to amend the current provision on sick leave in the Canada Labour Code.

Under the current legislation, federal employees who have been employed for more than three months are entitled to take up to five days of absence for personal leave to, among other things, treat an illness or injury. The first three of the five days are paid. Employees are also entitled to take up to 17 weeks of unpaid medical leave. Employees may take this leave for personal illness or injury, organ or tissue donation, or for medical appointments during working hours. Employees are also entitled to take up to 16 weeks of unpaid medical leave as a result of quarantine.

However, under the proposed Bill, federally regulated employees would become entitled to 10 paid medical leave days per year. More specifically, the Bill would amend the Canada Labour Code to provide employees who have one month of employment with one paid day off for medical leave each month, to a maximum of 10 days per year.

It should be noted that while the Bill has received its first reading, it has not yet been introduced into law at the present time.

Saskatchewan Bill Proposes Sick Leave for Workers

Under current legislation, there is no sick leave in Saskatchewan.

However, the NDP recently introduced Bill 606, the Saskatchewan Employment (Paid Sick Days) Amendment Act, which proposes to entitle employees to 10 paid sick days each year and 14 paid sick days during the COVID-19 state of emergency.

As of publication, no vote has been held on the Bill.

Sick Leave in Other Jurisdictions

Below is a summary of sick leave entitlements under employment legislation in the remaining Canadian jurisdictions:

• Alberta: Under the Employment Standards Code, employees who have been employed for at least 90 days are entitled to up to 16 weeks off from work for an unpaid leave due to illness, injury or quarantine.
• Manitoba: Under The Employment Standards Code, employees who have been employed for at least 90 days and who are seriously injured or ill are entitled to take an unpaid leave of absence for up to 17 weeks per year.
• New Brunswick: Under the Employment Standards Act, employees who have been employed for more than 90 days are entitled to unpaid sick leave for up to five days per year.
• Newfoundland and Labrador: Under the Labour Standards Act, employees who have been employed for a continuous period of 30 days are entitled to up to seven days unpaid sick leave.
• Nova Scotia: Under the Labour Standards Act, employees are entitled to up to three days of unpaid leave, with no specified qualifying period, due to the sickness of a child, parent or family member, or for medical, dental or similar appointments during work hours.
• Prince Edward Island: Under the Employment Standards Act, an employee who has been employed for a continuous period of at least three months is entitled to up to three days of unpaid sick leave in a year. Also, an employee who has been employed for at least five years is entitled to one day of paid sick leave per year in addition to the five unpaid days.
• Quebec: Under the Act respecting labour standards, employees are entitled to up to 26 weeks unpaid, with no qualifying period, per year for all of the following reasons: sickness, organ or tissue donation for transplant, accident, domestic violence or sexual violence. In addition, an employee with three months of employment will be paid for the first two days of the leave.
• Northwest Territories: Under the Employment Standards Act, employees with 30 days of employment are entitled to 5 days unpaid sick leave per year.
• Nunavut: None specified.
• Yukon: Under the Employment Standards Act, employees are entitled to one unpaid day of sick leave for each month they have been employed, up to a maximum of 12 days per year.

Contact Bader Law for Experienced Advice on Employment Matters Including Sick Leave

At Bader Law, our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at (289) 652-9092 to learn how we can help.

In a recent decision, an Ontario court considered both the meaning of “just cause” in employment cases as well as the impact of the parties’ sophistication on the enforceability of the employment agreement’s termination provisions.

Employee Sells Business to Employer

The employee has a medical degree and worked for many years in the healthcare industry before founding a medical practice in 2016 that operated through a numbered company.

In 2018, the employer, which owns and operates a number of pain and cannabis clinics and related facilities across Canada, expressed interest in acquiring the employee’s business through the purchase of the numbered company’s shares.

During the ensuing negotiations, and as part of the overall transaction, it was proposed that the employee would stay on as the employer’s employee for a term of three years. The employment agreement also provided for payment and notice pursuant to the  Employment Standards Act (“ESA”) if he was terminated without just cause. It also provided a provision stating: “Termination by the Company for Just Cause – The Company has the right, at any time and without notice, to terminate your employment under this Agreement for just cause.”

Both parties were represented by lawyers in the negotiation and execution of the transaction and the employment agreement.

Employee Begins Working for Employer

The parties signed the employment agreement in September 2018. However, the share purchase was only completed in March 2019.

Even though the employment agreement stated that it would only take effect when the share purchase was completed, the employee began working in the role of vice president in September 2018 and was paid a base salary of $120,000, as well as other benefits. Thus, the employee was essentially working under an unwritten employment contract until the completion of the share purchase in 2019. Upon the share purchase closing, the employee was paid the signing bonus contemplated by the employment agreement and was paid outstanding amounts for “pre-employment Contract work”.

Employee Laid Off During Pandemic, Then Fired for “Just Cause”

On March 27, 2020, owing to a substantial COVID-19 pandemic-driven decline in the employer’s business, the employee was advised that he was being temporarily laid off from his employment. He was told that the layoff was temporary and that his group employee benefits would continue during the temporary layoff. He was provided with a Record of Employment so that he could apply for Employment Insurance benefits as well. Subsequently, his temporary layoff was converted to a deemed Infectious Disease Emergency Leave, with retroactive effect to the first day of the temporary layoff.

Then, on August 31, 2020, the employee received a further letter, advising him that his employment was being terminated, effective immediately. The employer further advised the employee that the employment agreement entitled him to 24 weeks of termination pay in lieu of notice if he executed a full and final release in favour of the employer. 

However, the employee refused to sign the release and was only paid two weeks of termination pay.

The employee applied to court, arguing that the “Termination by the Company for Just Cause” provision was contrary to the ESA and, as such, invalidated the other components of the termination clause.

Court Reviews Meaning Of “Just Cause” Under Common Law and ESA

The court began by noting that the employment agreement did not provide a definition of “just cause”. The court, therefore, set out to survey the meaning of “just cause” in common law and under legislation.

The court began by observing:

“[T]he phrase [just cause] is understood as a common law notion connoting a basis, from an employee’s performance or conduct, justifying termination of the employee’s employment without the need for advance notice.”

However, the court noted that “just cause” may be contrasted with the requirements of the ESA. Specifically, the court noted that under s. 2(1), para. 3, of the ESA’s Termination and Severance of Employment regulation, an employer can only withhold termination pay, severance pay and the continuation of relevant benefits in response to workplace conduct that amounts to “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”.

Thus, the court observed that what constitutes behaviour or performance that falls under “just cause” under common law will not necessarily meet the more stringent standard under the ESA. To illustrate its point, the court observed that, for instance, an employee’s termination for incompetence may meet the common law definition of “just cause”, but would not meet the ESA standard of “wilful misconduct, disobedience or wilful neglect of duty”.

The court then set out to review recent case law on the matter, ultimately concluding that employment agreement provisions should clearly comply with the ESA and that if they do not, they are invalidated. The court noted that this is especially true where there is an imbalance of power between the employee and employer in negotiating the contract.

Court Considers Impact of Parties’ Sophistication and Representation by Counsel

The court then considered the employer’s argument about the impact of both parties’ sophistication and representation in the negotiation of the employment agreement alongside the share purchase. The employer submitted that there was no imbalance of power present in the case and relied on the Supreme Court of Canada’s decision Payette v. Guay inc., in which the court stated:  

Thus, the common law rules for restrictive covenants relating to employment do not apply with the same rigor or intensity where the obligations are assumed in the context of a commercial contract. This is especially true where the evidence shows that the parties negotiated on equal terms and were advised by competent professionals, and that the contract does not create an imbalance between them. 

However, the court was ultimately not persuaded by the employer’s argument, finding that, despite both parties’ relative sophistication and representation by counsel in the share purchase, there was no compelling reason why the employer should be permitted to rely on termination provisions that did not comply with the ESA.

In the result, the court found that the termination provisions in the employment agreement were void and awarded the employee the balance of the three-year fixed term. However, the court also deducted the employee’s CERB payments received during the balance of the term.

Contact Mississauga Employment Lawyers For Experienced Advice on Employment Matters

At Bader Law, our knowledgeable employment lawyers can counsel you on all your termination matters, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at (289) 652-9092 to learn how we can help.

In a recent decision, Morningstar v. WSIAT, the Divisional Court overturned a decision of the Workplace Safety and Insurance Appeals Tribunal (“WSIAT”), finding that the Workplace Safety and Insurance Act (the “WSIA”) does not bar claims for civil constructive dismissal related to workplace harassment and allowed a claim for related aggravated, moral and punitive damages.  

Ontario’s No-Fault Workplace Insurance Scheme 

The Ontario workplace insurance scheme provides no-fault benefits based on collective employer liability.  Under the WSIA, workers receive insurance benefits by proving that their injury or disease is work-related, without having to prove that their employer was at fault for their injury or disease.  In exchange, employers are protected against civil suits for work-related injuries by paying into the accident insurance fund, thus diluting, and reducing liability for any individual claim. The WSIAT, an appellate forum that hears appeals from final decisions of the Workplace Safety and Insurance Board, has the exclusive jurisdiction of the WSIA to determine whether an employee has a right to sue an employer listed in Schedule 1 of the WSIA. 

Morningstar v. WSIAT 

Background

Ms. Morningstar (“the employee”) was employed by Hospitality Fallsview Holdings Inc. (“the employer”) in its housekeeping department. In 2018, the employee brought a civil action under the Employment Standards Act, 2000, for constructive dismissal. She alleged that harassment, bullying and abuse she endured during her employment created mental distress and forced her to resign from her position. In response, the employer filed an application under section 31 of the WSIA for a declaration that the employee’s civil action was statute-barred as it was effectively a claim for chronic mental stress which was governed by section 13(4) of the WSIA.

Section 13(4) of the WSIA provides that “a worker is entitled to benefits under the insurance plan for chronic or traumatic mental stress arising out of and in the course of the worker’s employment.”

History of the Case 

In responding to the employer’s application, the WSIAT agreed with the employer that the fundamental nature of the employee’s civil action was a claim for personal injury arising from a work accident, namely the workplace harassment suffered by the employee. As it was a workplace injury, the claim fell within the exclusive jurisdiction of the WSIA, and no civil claim could be pursued. According to the Tribunal, however, not all claims for wrongful dismissal and constructive dismissal are statute-barred by the WSIA. An employee can bring a claim for wrongful dismissal and constructive dismissal when the cause of action is “inextricably linked” to the work injury” governed by the WSIA. The Tribunal’s decision was further upheld by the Vice-Chair on appeal.

Divisional Court Decision 

The employee sought judicial review from the Divisional Court alleging that her claim for constructive dismissal had been improperly barred by the WSIAT. The Divisional Court partially overturned the WSIAT decision. In reviewing the policy behind the WSIA and the “historic trade-off” of the workers’ compensation regime, it found that the purpose of section 31 was to prohibit would-be plaintiffs from trying to disguise their cause of action as a tort claim and attempt to side-step the guiding policy behind the WSIA. Constructive dismissal claims, however, which are grounded in the employment relationship and a different legislative scheme, are different. According to the Court:

“Bona fide claims for constructive/wrongful dismissal should be permitted to proceed, as they are not tort actions and are distinct from personal injury claims, and attract damages for which the Act offers no compensation.”

In considering the employee’s claim, the WSIAT had failed to consider that the employer’s alleged treatment of the employee could also be construed as a constructive dismissal and an intention to no longer be bound by the employment contract. The remedy for wrongful dismissal is damages in lieu of notice and the WSIA does not provide this remedy. A cause of action for wrongful dismissal is therefore not within the purview of the WSIA. As the Court stated:

“…so long as a plaintiff does not sue in constructive dismissal improperly to get around the limitations of the Act, the claim should be permitted to proceed, even where tort aspects of a claim are barred.”

Therefore, while the employee’s claim for harassment was statute-barred by the WSIA, her claim for constructive dismissal and aggravated, moral and punitive damages could proceed.  

Redefining the “Inextricably linked” Test 

In finding for the employee, the Court redefined what it means for facts to be “inextricably linked” to workplace harassment, such that a cause of action would be statute-barred. The Court stated that an action for personal injury can be properly statute-barred, but it would be unreasonable to bar an action for constructive dismissal “simply because the same facts that relate to that action also incidentally support an action for personal injury.” The Court found that the purpose of the workers’ compensation regime and the wording of the WSIA requires more analysis than simply a test involving a mere “factual linkage.”

What Does This Mean for Employers?

In overturning the WSIAT decision, the Court effectively narrowed the types of claims that may be statute-barred under the WSIA. It specifically recognized that the WSIA does not bar claims and remedies founded in employment or contract law. This may make it more difficult for employers to successfully argue that an employee’s claim for constructive dismissal based on workplace harassment, or another claim grounded in employment law, is entirely statute-barred by the WSIA. Despite past decisions of the WSIAT in favour of employers and limiting claims based on section 31, employees may cite this case as giving them the “right to sue” their employer for wrongful or constructive dismissal where the nature of their claim is chronic mental stress arising from workplace harassment. 

Contact Mississauga Employment Lawyers for Constructive Dismissal and Workplace Harassment Matters

At Bader Law, our Mississauga employment lawyers have considerable experience representing employees in workplace disputes. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

At Bader Law, our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at (289) 652-9092 to learn how we can help.