Wrongful Dismissal & Canadian Employment Law



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This page contains general information only. It is not intended to create a solicitor-client relationship. You should not act on this information without obtaining proper legal advice. It is however, information that may assist you in determining if your particular circumstances warrant seeking professional legal advice.

You may contact Stacey Reginald Ball,  B.A. LL.B., author of the legal treatise Canadian Employment Law (published by Canada Law Book) at srball@82scollard.com for advice and to determine the strength of your case.  Mr. Ball practices employment and labour law on behalf of both employees and employers in Toronto, Canada.

CANADIAN AND ONTARIO EMPLOYMENT LAW (FAQ's):

A. Wrongful Dismissal 

B. Cause For Dismissal 

C. Constructive Dismissal 

D. Unjust Dismissal 

E. Bad Faith Discharge 

F. Employment Contracts 

G. Restraint Of Trade Clauses 

H. Non-Competition Agreements 

I. Notice Period 

J. Severance Pay and Packages 

K. Good Faith and Fair Dealing 

L. Employee Or Dependent Contractor? 

M. Human Rights 

N. Sexual Harassment 

O. Non-solicitation Agreements and Restrictive Covenants

P. Defamation and Loss of Reputation

Q. Canadian Employment Law - Stacey R. Ball, Author

WRONGFUL DISMISSAL AND CAUSE FOR DISMISSAL:
Many are not aware that the relationship between an employer and employee is a type of contract. The dismissal of non-unionized employees (unionized employees are subject to "labour law" and their collective agreements), contrary to the rules that exist in Ontario and Canadian employment law may be a breach of a condition of the employment contract. Employers must have a legitimate reason to dismiss their employees for "just cause." If not, this type of breach may be known as a "wrongful dismissal". Employers must comply with Canadian employment law requirements concerning how they deal with their employees during and after dismissal. Employers may be sued and the former employees may be awarded monies for the failure of the employer to provide reasonable notice and not having just cause for dismissal.

Canadian employment law requires a fairly high standard to dismiss an employee for just cause. An employer or employee may be wise to contact specialized legal counsel to determine if there is enough "cause" for the court to consider there to be just cause for dismissal without notice, or whether the employee will be able to sue for wrongfully dismissal.

See: Slater v. Sandwell (1994), 5 C.C.E.L. (2d) 308 (Ont. Ct. (Gen.Div.); Machinger v. HOJ (1992), 55 D.L.R. (4th) 401 (S.C.C.)

McKinley v. BC Tel (2001), 9 C.C.E.L. (3d) 167 (S.C.C.)

CONSTRUCTIVE DISMISSAL:
Constructive dismissal is an Ontario and Canadian employment law concept concerning situations where an employee has not been dismissed but their employment has changed significantly. The change may relate to, among other things, compensation, title, the employee’s position, or the employee’s duties. Recent case law suggests abusive behavior by an employer may be a constructive dismissal.

Remedies for constructive dismissal are similar to those found in a wrongful dismissal suit. Employment law treats such a fundamental change as though the employee has been dismissed.

Constructive dismissal is an extremely complex area of employment law, and professional advice should be sought.

See Farber v. Royal Trust Co. [1997] 1 S.C.R. 846.

While there is no generally recognized common law action for breach of privacy, an employer without cause and secretly placing a camera in an employee's office was considered a constructive dismissal.  See Colwell v. Cornerstone Properties Inc. [2008] O.J. NO. 5092 (SC)

UNJUST DISMISSAL:
Employers working for a federally regulated employer may seek the extraordinary remedy of re-instatement with back pay. Under the Canada Labour Code, R.S.C. 1985, employees working for federally regulated industries such as banks, airlines, cable companies, and railways have special protections which does not exist at common law.

Employees under both federal and provincial jurisdiction may still sue their employers in a common law claim for wrongful dismissal regardless whether the provisions of the Canada Labour Code apply to them. Whether they file an unjust dismissal complaint, or sue for wrongful dismissal, employees are best advised to obtain appropriate legal advice.

Employees need to be aware that there is a 90 day limitation period to file an unjust dismissal complaint with HRDC and therefore they need to be very prompt in pursuing their rights.

BAD FAITH DISCHARGE, GOOD FAITH AND FAIR DEALING:
Employers are obligated by law to treat their employees fairly and to act in good faith. The Supreme Court of Canada in the recent case of Wallace v. United Grain Growers Ltd. confirmed this obligation. Mr. Ball of Ball & Alexander was the lawyer acting on behalf of the winning party in this landmark case. The court stated: " in the course of dismissal the employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive." The case may be found at 152 D.L.R. (4th) 1, (1997) 3 S.C.R. 701.

This obligation exists during and after employment. The amount the courts award depends on the circumstances of the case.

The employer duty of good faith and fair dealing has now been extended to not merely the termination of employment, but the existing relationship prior to termination.  See Colwell v. Cornerstone Properties Inc. [2008] O.J. NO. 5092 (SC)

The breach of the implied obligation of good faith and fair dealing can provide the dismissed employee not only damages for mental distress and loss of reputation, but also economic losses engendered by the manner of the dismissal (See discussion in Soost v. Merril Lynch Canada Inc (2009), 77 C.C.E.L. (3d) 157 (Alta. Q.B.).

EMPLOYMENT CONTRACTS:
Many are not aware that the employment relationship between an employer and employee is a type of contract. Employment contracts in Canada and Ontario are often much more complicated than most contracts since many special employment law imposed rules are grafted upon them. An employment contract exists between an employee and the employer even if it has never been placed in writing. Due to the special nature of employment contracts, not all terms of the agreement are enforceable by operation of law. Often employment agreements contain clauses that are not binding on the employee or the employer. Examples include improperly drafted notice of termination provisions and other unfair or "unconscionable" terms.

See Slater v. Sandwell (1994), 5 C.C.E.L. (2d) 308 (Ont. Ct. (Gen.Div.); Machinger v. HOJ (1992), 91 D.L.R. (4th) 491 (S.C.C.)

RESTRAINT OF TRADE CLAUSES, NON-COMPETITION AGREEMENTS, AND RESTRICTIVE COVENANTS:
It is often assumed that if a provision is included in an employment contract then that contract seals the fate of how an employee must act in the future. This is not at all true. Employment contracts may be unenforceable completely or in part. One common misconception is the restraint of trade agreement or clause, non-competition agreement or clause, and restrictive covenant. These clauses attempt to limit the employee’s ability to work in the same area or industry as the employer or solicit the employer’s customers once they leave their employment.

Canadian and Ontario employment law heavily regulate post-employment competition. These types of clauses are often unenforceable. Many factors contribute to the degree of enforceability. These types of clauses, as well as others, should not automatically be considered enforceable even when agreed upon. Employers should be aware that a great deal of skill is required in drafting an enforceable post-employment restraint.

See e.g. Terra Engineering Ltd. v. Stewart (1994), 56 C.P.R. (3rd) 77 (B.C.S.C.); and Lyons v. Multari, (2000), 50 O.R. (3d) 34 (C.A.)

The Supreme Court of Canada, in yet another recent case reversing the British Columbia Court of Appeal, has confirmed that the court will not rewrite an ambiguous or vague restraint (See Sharon v. KRB Insurance Brokers (Western) Inc., [2009] S.C.J. No.6).  In the employment context the courts are now sensitive to the generally accepted imbalance in power between employee and employer which justifies more rigorous scrutiny of restrictive covenants, as opposed to those contracts which exist for the sale of a business.  The party seeking to enforce a restraint must now show it is reasonable.

NOTICE PERIOD:
The amount of notice the employer must give the employee when dismissing them from employment depends on many factors. The notice period is important as it will determine the amount of "severance" owed to the employee. According to the Ontario and Canadian common law, there are many factors that should be considered when determining the notice period. Among other things, the courts consider: the length of employment, the position of the employee, the reason for their dismissal, the employee’s compensation, how the employee first became involved with the employer, and whether the employer acted in good faith and fairly, to name a few.

Employment law cases relevant to this area of law include: Wallace v. United Grain Growers Ltd. (1997), 152 D.L.R. (4th) 1, (1997) 3 S.C.R. 701; Machtinger v. Hoj Industries (1992), 91 D.L.R. (4th) 491 (S.C.C.); Bardal v. Globe & Mail (1960), 24 D.L.R. (2d) 140 (H.C.)

Normally, 24 months is the maximum notice period, although this amount may be extended in truly exception cases.

SEVERANCE PAY AND PACKAGES:
"Severance" at common law is tied to the amount of notice the employee should have been given. The amount of a severance package that an employer should pay to a terminated employee depends on a number of factors. Relevant factors include, among other things: length of service, age, the true reason for dismissal, the position the employee held within the company, the employee’s compensation, whether the employee was recruited, and the general economy.

Severance exists under provincial legislation in Ontario (see Employment Standards Act, R.S.O. 1990, as amended, but common law remedies tend to be much greater for most employees in Ontario. To obtain a common law remedy it is normally best to see legal counsel.

Relevant common law cases include Wallace v. United Grain Growers Ltd. (1997), 152 D.L.R. (4th) 1, (1997) 3 S.C.R. 701; Suttie v. Metro Transit Operating Co., (1983), 1 C.C.E.L. 123; Kreager v. Davidson (1992), 44 C.C.E.L. 261

EMPLOYEE OR AN DEPENDENT CONTRACTOR?:
The determination whether or not an individual is an employee or an dependent contractor may make a difference as to what law applies to their situation. Often people are considered employees in the eyes of Ontario and Canadian employment law when they felt they where an independent contractor. Even when a written contract states that one of the parties is an independent contractor, they may in fact be an employee in Ontario employment law. Relevant employment law cases include Jaremko v. A.E. LaPage Real Estate Services Ltd. (1989), 60 D.L.R. (4th) 762 at p. 763; Ready Mix Concrete (South East) Ltd. V. Minister of Pensions and National Insurance, (1968) 2 Q.B. 497 at pp. 512-13.

Even if an individual is not found to be an employee by the court, he or she may be entitled to damages is he or she is considered to be an "independent contractor" (See Moseley-Williams v. Hansler Industries Ltd. [2008] O.J. No. 4457 at para 27 (S.C.).  Individuals such as , for example, sales agents who are not necessarily employees may benefit from the protections associated in this third legal category.

HUMAN RIGHTS:
Ontario (the Ontario Human Rights Code, R.S.O 1990, as amended) and Canadian legislation (The Canadian Human Rights Act, R.S.C. 1985, as amended) prohibits discrimination on the basis of sex, gender, age, national origin, sexual orientation, and medical handicaps (conditions). Human rights cases relating to the workplace most often fall into two broad categories: sexual harassment and discrimination.

Ontario common law may also indirectly provide additional remedies for discrimination, human rights abuses and sexual harassment. Remedies may include wrongful dismissal, constructive dismissal, assault, and the tort of the intentional infliction of nervous shock or suffering.

The determination of whether or not the legal elements for a human rights, discrimination or sexual harassment case are present depends on the circumstances surrounding the incident.

SEXUAL HARRASSMENT:
The existence of sexual harassment in the workplace is still quite common despite social unacceptability. It can range from verbal comments to unreasonable solicitations and touching to forcible intercourse. Human rights legislation in Ontario and in Canada exists to prevent sexual harassment. There are also common law employment law remedies in Ontario to deal with sexual harassment. These remedies may range from torts such as assault, and the infliction of nervous shock and mental suffering, to actions for wrongful dismissal, constructive dismissal and breach of the implied obligation of good faith and fair dealing.

The determination of whether or not the legal elements for a “sexual harassment” case are present depends on the circumstances surrounding the incident.

DEFAMATION AND LOSS OF REPUTATION
In an employer makes an intentional misstatement, a reckless misstatement, the former employee can sue for loss of reputation. If the former employer gives a negligent reference or makes a negligent misstatement which causes the employee damages, the employee can sue in a separate action for negligent misstatement. (See e.g. Spring v. Guardian Assurance (1994), 16 C.C.E.L. (2d) 147 (H.L.). See also Young v. Bella (2006), 261 DLR (4th) 516 (S.C.C.)


CANADIAN EMPLOYMENT LAW
Information of interest to the legal community is addressed in Mr. Ball's excellent legal text Canadian Employment Law From Carswell Store (Published by Canada Law Book).

The Canadian Bar Review, Vol. 77, 1998 states: "Ball's text is the most comprehensive text on employment law in Canada.  It is carefully constructed and accurate."

Citing over 6500 cases, this one-stop reference provides you with a thorough survey of the law.  It clearly analyzes current law and developing trends, suggests potential avenues of attack, as well as identifies potential weaknesses in the law.

Updated 3 times per year, Mr. Ball's text is designed to keep you up-to-date on this rapidly changing area of law. 

The text covers:

  • wrongful dismissal
  • human rights
  • fiduciary obligations
  • tort law and vicarious liability issues
  • restraint of trade
  • developing causes of action
  • employment contracts
  • remedies
  • constitutional issues
  • occupational health.... and much more.

Click on the following title Canadian Employment Law (Canada Law Book) to order.


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Scales of Justice

Stacey R. Ball
Barrister & Solicitor
Updated: March 2013

 

Stacey Reginald Ball, BA LL.B
Barrister and Solicitor
Ball Professional Corporation
Employment & Labour Law
82 Scollard Street,
Toronto, Ontario M5C 2W7
Telephone: (416) 921-7997 Ext. 225
Fax: (416) 640-1756
Email: srball@82scollard.com