Having Your Cake and Eating It Too

You may recall back in August I made an entry about a local union decertification case, in which an employee, Mr. Anger, applied to terminate the Union's bargaining rights, and the Union responded by rather cleverly taking the position that nobody was doing bargaining unit work on the day of the Application. For complicated labour relations reasons, in the construction industry, that's the test - only people doing bargaining unit work on the day of the Application are entitled to vote, so if nobody's doing bargaining unit work that day, nobody is entitled to vote, so the Application can't succeed.

The basis for the Union's position is that the employer is based in Tillsonburg, and the Union's certificate of bargaining rights only refers to the Counties of Oxford, Middlesex, Bruce, Elgin, Perth, and Huron. Not Norfolk. And all the work the employer was doing at the time was in Norfolk. So, even though the terms of the collective agreement were being applied, and union dues were being collected, technically that was all voluntary on the employer.

Now, had the employer decided unilaterally to, say, stop collecting Union dues in respect of Norfolk projects, the Union could likely have taken the position that it had been voluntarily recognized as having bargaining rights in Norfolk, and that the employer was estopped from taking a contrary position. So when the employer saw that the Union was taking the position that it didn't have bargaining rights in Norfolk, it took that opportunity to secure a 'with prejudice' admission from the Union that there were no bargaining rights in Norfolk.

On August 30th, therefore, with everyone agreeing that Norfolk wasn't part of the definition of the bargaining unit, the OLRB dismissed Mr. Anger's Application. So Mr. Anger wrote back to them and said something to the effect of, 'Wait, you're saying that all this work I've been doing in Norfolk wasn't unionized? Well, in that case, I want my union dues back retroactively.' That seems a natural position to take - there's a certain logic to it. The Union's saying "We never had bargaining rights in Norfolk." Presumably, if there were a grievance in respect of Norfolk work, that position would mean that they would be unable to represent the employee. Yes, the employer was voluntarily giving the employees wages, etc, in accordance with the collective agreement, but lot's of non-union employers pay wages in accordance with industry standard collective agreements.

So, in respect of work in Norfolk, what was the Union getting paid for? Absolutely understandable for Mr. Anger to ask for his money back.

The OLRB's response, however, was to say (and I'm paraphrasing): "We've already dealt with your Application. We dismissed it. It's over. If you want to bring a new Application, you can. But there's no Application you can bring for a refund of your dues." So the OLRB, for its part, is refusing to do anything on the basis of that letter.

A tricky and unusual fact pattern. It would be interesting to see what Mr. Anger does next.

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The Employment Standards Enforcement Process

There are changes coming to the Employment Standards complaint enforcement process, with Bill 68. I'll explain the consequences of the changes in another post, and how the changes put employees in a more difficult position, possibly giving employers less incentive to comply with their legal obligations up front. But first I'll explain the process itself.

Most people are aware of the existence of the Employment Standards Act, 2000, and of the availability of a complaints process to the Ministry of Labour. I have the impression that many employees think that a complaint to the MoL is sort of like a complaint to the police - i.e. that there's a certain moral aspect to it but, even if something happens, the complainant gets no real benefit from it, and is open to reprisal from the subject of the complaint.

Quite the contrary: For most matters, a complaint by an employee to the Employment Standards branch of the MoL initiates a legal proceeding against the employer - it is much like suing the employer, but the process is different (easier, more cost-effective) than that of the courts. If the complaint is well-founded, the complainant can expect to be compensated for losses suffered by reason of the employer's breaches of the statute.

Several caveats:
(1) The Employment Standards complaint process, for most matters (but with some exceptions), caps recovery at $10,000.00.
(2) The Employment Standards complaint process cannot compensate a complainant for wrongs other than breaches of the ESA. If the employer isn't paying wages as required, the Ministry can remedy that. If the employer is paying wages, but the rate of pay is below the applicable minimum wage, the Ministry can remedy that. But if the complaint is of some other unfairness, discrimination in breach of the Human Rights Code, etc., which isn't captured by the ESA, then the remedy for that lies elsewhere (Courts, the Human Rights Tribunal, or whatever other tribunal might be applicable under the circumstances).
(3) In circumstances such as dismissal, where your ESA entitlement (i.e. to termination pay) might be less than your 'common law' entitlement, the Ministry can only compensate you for the ESA minimum, and you cannot subsequently sue in Court for the rest of your common law entitlement.

Caveats aside, the Employment Standards complaints process does have its uses, especially if you're still employed with the employer: Inquiring about your rights, or initiating/participating in a complaint under the ESA (among other things), triggers an anti-reprisal clause in the ESA. If the employer takes a negative action against the employee because, for example, the employee filed a complaint, then the employer can be in quite a lot of trouble for that.

I know what you're thinking: "Okay, so I make a complaint against my employer, and my employer then fires me because of some trumped up disciplinary allegation. How can I ever prove that it was really because of my complaint?"

Herein lies the beauty - or the terror, depending on your perspective - of the provision: The onus isn't on the employee to prove reprisal. If an employee brings a reprisal complaint against the employer, it's on the employer to disprove the allegations. And if the termination (or other negative conduct) followed on the heels of some sort of Employment Standards complaint, it's a hard onus for the employer to meet.

And it isn't just termination that can offend the anti-reprisal provision. Anything from disciplining a late employee to declining a short-notice vacation request can put an employer in a difficult position defending against reprisal allegations from an employee who has brought an Employment Standards complaint - even if the complaint itself turns out to be without merit.

Mind you, there are ways for an employer to protect itself from reprisal complaints. It involves implementing and consistently following policies and procedures for discipline and other discretionary matters. Retaining a qualified lawyer (such as myself :) or a qualified Human Resources consultant to help develop these policies and procedures can put an employer in a much stronger position. This has to be pre-emptive, though, implemented before you run into other Employment Standards problems, in order to be really useful. The idea is that, if you refuse that short-notice vacation request to an employee who previously brought a complaint against you, and the employee brings a reprisal complaint as a result, you want to be able to point to a long consistent pattern of refusing vacation requests with too little notice.

Also, as another peripheral note, ESA minimum entitlements are not subject to mitigation. Meaning: If an employee gets fired, and finds a new job the next day, the employee can still pursue the statutory minimum termination pay.

So, put briefly, here's how the process works:

Employee files a complaint. Complaint gets assigned to an Employment Standards Officer. The Officer then contacts the employee and employer and investigates the complaint. At the end of the investigation, the Officer either finds merit to the complaint and issues an Order to Pay against the Employer, or doesn't and declines to issue an Order.

The unsuccessful party can choose to apply for review to the Ontario Labour Relations Board, and gets a hearing de novo there. (i.e. a full new hearing of all the evidence, without reference to the evidence before the Officer.) Matters will frequently go to that level. There is the availability of judicial review to a Court beyond that level, but that's more expensive, more complicated, and often more difficult. (Essentially, at the Divisional Court you're not arguing directly the merits of the complaint, but rather you're arguing that the OLRB made a mistake. And the Courts like to defer to tribunals like the OLRB, if they can find a reason to.)

I've seen a lot of employers get away with breaching the ESA for long periods of time, for several reasons, most of which are related to the natural imbalance of power and sophistication between the employee and employer:
(1) Employees may not know their rights;
(2) Employees may be conflict-averse and prefer positive relations with the employer rather than getting their rights respected;
(3) Employees may be worried about job security (unaware, or not, of the anti-reprisal provision);
(4) Employees may be unaware of the recourse available through the complaint process, and can't afford to get legal advice on the point (indeed, frequently the cost of a lawyer is prohibitive to an employee with a legitimate ESA complaint); or
(5) Even an employee aware of their rights and recourse may be intimidated by the prospect of initiating legal proceedings against the employer.

So I would suggest that it is a fair inference that the actual complaints that go to the Ministry are just the tip of the iceberg on the actual violations of the ESA in the Province.

Tomorrow: Why Bill 68 will aggravate this disparity.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

So you've been canned for discriminatory reasons...now what?

The simple answer is: Get a lawyer. If your employer is asking you to sign a release, you want legal advice before you sign anything. If your employer *isn't* asking you to sign anything, it's likely because you're not getting any more than your statutory minimums, and on most not-for-cause terminations, statutory minimums aren't enough, even where there isn't a breach of the Human Rights Code. (If you have been fired "for cause" and paid nothing...the threshold for just cause is high, and you should get legal advice on that point anyways.)

But the point of this post is to discuss a question that I've been pondering for a while now: Now that you can seek a remedy for a Code breach in Court...should you?

THE HISTORY

For many years, litigants were trying to get the Courts to provide a remedy for Code breaches, or recognize a common law tort of discrimination, etc.

In the Bhadauria case in 1981, the Supreme Court of Canada resolved this question with a firm "No". The Code provided a comprehensive system for remedying Code breaches, leaving no jurisdiction for the Courts.

That wasn't the end of it, of course. For many years, the Human Rights system in Ontario was notoriously broken, and so other avenues were sought. In fact, labour arbitrators were found to have jurisdiction to apply the Code, as were other administrative tribunal adjudicators. However, the Courts always held firmly that the Courts should not be burdened with Human Rights matters.

Every so often, somebody would come back to argue that the Courts should recognize a common law tort, or try to characterize a human rights breach differently so as to get the Courts to award damages for it. Most recently - as in, June 27th, 2010, in Honda v. Keays, the Supreme Court again faced an argument in favour of a common law tort of discrimination, and upheld Bhadauria. The more interesting challenge in that case is the fight for punitive damages.

...by way of legal background, let me explain that breach of contract cases (such as wrongful dismissal cases) were not historically considered appropriate for awards of aggravated or punitive damages. A couple of niche exceptions grew around this doctrine, and in a wrongful dismissal case you would need to show a "separate actionable wrong" in order to be able to claim on that basis. (See Vorvis.) Basically, unless you could show that the employer had done something else beyond the wrongful dismissal itself, you couldn't get aggravated or punitive damages.

However, this wasn't too big of a problem for plaintiffs for many years, as the Courts as a matter of course would award "Wallace damages", being increases to damage awards based on employer breaches of its duty of good faith and fair dealing.

Eventually, in 2006, in the Fidler v. Sun Life case, the Supreme Court removed the "separate actionable wrong" analysis from aggravated damages. In Honda, they essentially scrapped Wallace damages, saying that if you can't prove aggravated damages, you can't get anything. And the test for punitive damages is very high in any event.

For punitive damages, however, the lower Courts in Honda (including the Ontario Court of Appeal) found that breaches of the Human Rights Code, even though they couldn't ground a civil Court claim, nonetheless constituted a separate actionable wrong. They found such a breach and awarded hefty punitive damages. (The doctrine is flexible enough that this actually made sense.) The Supreme Court, however, suggested in obiter that it doubted the correctness of this, that in fact Bhadauria was a complete bar to an award of damages by the Courts for a breach of the Code. However, the Supreme Court found that Honda had actually behaved reasonably towards the employee, and that punitive damages simply weren't warranted.

What's really interesting, though, is that amendments to the Code became effective 4 days later, reversing Bhadauria in Ontario. Now, on the express terms of the statute, the Courts have jurisdiction to hear Human Rights complaints which are ancillary to other claims. It seems built for wrongful dismissal cases.

THE OPTIONS

So a wrongfully dismissed employee with a Code dimension to the claim has at least two options, the two most obvious being a civil suit seeking damages reflecting reasonable notice plus human rights damages (including "injury to feelings, dignity, and self-respect"), or going to the Human Rights Tribunal seeking full compensation for the loss of employment, including lost wages.

At the end of the day, from a principled perspective, the monetary values should end up being the same, if successful. While lost wages for a Code breach should have the potential to run much higher than reasonable notice, one would expect the Court to apply the same analysis to it as the Tribunal. The Court power is still too new to know for certain. On the one hand, awarding speculative loss-of-income is nothing new to the Courts, such as in a personal injury context; whereas administrative tribunals tend to cut off damages as at the date of the hearing (which is awfully arbitrary), we might expect to see Courts anticipating further damages past the trial date, in the right factual circumstance. (In any event, it'll take longer to get to Court.) On the other hand, Courts tend to be relatively constrained when awarding damages. If a plaintiff is showing up in Court three years after being fired, still unemployed, the Court is likely to take a pretty long hard look at mitigation efforts, even though mitigation is traditionally a relatively low threshold for a plaintiff to meet.

There are other differences as well.

Process and Costs

First of all, the Human Rights Tribunal process is easier, more user-friendly, cheaper, and there are free legal resources (namely, the Human Rights Legal Support Centre) available to access it. There is no jurisdiction at the HRTO to award a successful party a contribution to costs (unlike the Courts), but a smart Applicant shouldn't incur much in the way of costs to get there.

That being said, I don't have any data regarding the HRLSC's effectiveness. The Centre is only a little over two years old, and I did see some figures regarding volume of work, etc, after the first year - the numbers suggested a particularly overwhelming volume of service requests in South-Western Ontario - but I don't know how they're faring today. I've sent a few prospective clients their way. I haven't heard any complaints yet, for what that's worth.

And while you've seen me go on about self-represented litigants before, the HRTO process is far easier to navigate than the Courts. If the HRLSC weren't there, I'd instead have told some of those above-noted prospective clients that they might consider handling the matters themselves.

Finally, the HRTO is faster. Their target time to deal with a matter is under 1 year. In my experience, the administrative side of the Tribunal is pretty close to being on top of that. They'll schedule hearings in a pretty timely manner. However, I have found that the adjudicative side of the Tribunal can be slow. The consequence of that is that the expediency of the process can be derailed by Requests for Orders during Proceedings, seeking anything from disclosure of documents to addition or removal of Respondents (or, in one case I worked on, addition of Applicants) or the raising of other jurisdictional or procedural issues...the matter can't proceed substantively until the RFOP is dealt with, and the RFOP can take quite a few months.

(Essentially, you make a Request and the other side gets to respond. After this, the Tribunal has to decide how to handle the Request. On some occasions, it can look at the Request and Response and deal with it summarily. Even in this kind of summary disposal of the request, I've seen it take over three and a half months from the filing of the Request to the release of a decision. In other cases, the Tribunal decides it needs more elaborate written submissions, or needs an in-person hearing. Occasionally, the more elaborate written submissions, once received, make it clear that an in-person hearing of the issue is necessary. A back-and-forth between the adjudicative branch of the Tribunal and the parties can easily lengthen the process.)

Even then, though, it looks like a longer Tribunal process is on par with a shorter Court process.

Differences in Jurisdiction

Both the Tribunal and the Courts can remedy a violation of the Code. However, they do have differences in what they can do. First of all, the Courts can only provide a remedy if the claim based on a Code breach is ancillary to another civil claim. Not too difficult - when dealing with wrongful dismissal, it will be a rare case where you can't make out a civil claim, but can make out a Code breach.

The converse is also true. And this is a bigger issue: The Tribunal can not order a remedy unless a Code breach is established, even if there are other clear civil entitlements.

Suppose I'm wrongfully dismissed, and my reasonable notice period would be 6 months, but I'm unemployed for 12 months. If I go to the Tribunal arguing that my termination was in violation of the Code, and am unsuccessful on that issue, then the Tribunal will give me nothing, even though it is clear that I'm entitled to 6 months' wages.

Being at the Tribunal changes the whole nature of the issues in contention: At Court, discrimination only affects quantum of damages. If a Plaintiff loses on that, he gets less. At the Tribunal, the question of discrimination/harassment is a jurisdictional question. If an Applicant loses on that, she gets nothing.

Other differences include that the Tribunal cannot award punitive damages, and the Courts can...though usually won't.

Unlike the Court, the Tribunal cannot remedy other peripheral non-Code breaches. If an employer didn't pay overtime, as a matter of practice, but should have, then usually you will not be able to tack on an overtime pay claim to an HRTO Application; you'd have to make a separate complaint to the Ministry of Labour. (NB: Do *not* claim termination pay at the Ministry of Labour without first getting legal advice. If you do so, you will lose your entitlement to sue in Court for wrongful dismissal. It may leave open the possibility of an HRTO Application...but you have to be careful on that. Get legal advice first.)

The Tribunal has an express power to order public interest remedies - ordering future compliance with the Code. This is actually a potent threat in some circumstances which encourages settlement; no business wants the Tribunal looking over its shoulder on a moving-forward basis. The Courts do not have this jurisdiction (though in some narrow circumstances they might be able to draw similar powers from their equitable jurisdiction...never mind - legal abstraction).

Now this is important: You can not do both. If you make a claim based on a Code breach at Court, you cannot subsequently make an Application to the HRTO based on the same allegations. The converse is also true. It's one or the other.

...well, sort of. It is possible to have your cake and eat it too, but extremely tricky, and you wouldn't want to do it without a skilled employment lawyer at the helm.

Essentially, if you can bifurcate the issues in the dispute between human rights-related and non-human rights-related, it's possible to claim relief for the Code breaches at the HRTO, and seek relief for other civil wrongs at Court. So I could sue for wrongful dismissal without raising the allegations of Code breaches, and go on to make the Code-based allegations at the Tribunal.

There are a few difficulties with this:

(1) If I'm suing, I want to throw everything including the kitchen sink at my employer. To not raise the Code breaches and accuse my employer of misconduct takes restraint...and for good reason: If the allegations are well-founded, it's good ammunition, and makes the Court less sympathetic to the employer.

(2) If the employer has breached its duty of good faith and fair dealing in other non-Code-related ways, for which I suffered mental health type injuries, I can't really claim for those in Court under this circumstance. Trouble is that, if I frame it to avoid depriving either body of jurisdiction, it will create a causation problem: I'm telling the Tribunal that my injuries are the consequence of the human rights abuses, and I'm telling the Court that my injuries are the consequences of non-Code-based matters. So I can't claim for aggravated damages on that basis at Court, so if I don't prove the Code breaches...well, I lose out. (Also, there's the possibility of a bold employer going to the Tribunal saying "The injuries weren't the consequence of Code breaches; they were the consequence of this myriad other ways in which we treated the employee unfairly.")

(3) The natural sequence would be to go first at the HRTO, and second at Court. Under most circumstances, an HRTO win in this scenario would make most of the Court issues moot. By contrast, a Court win likely wouldn't have the same effect of making the Human Rights Application moot. However, the Courts don't really have a deferral process, and after a certain degree of delay litigants have to start jumping through hoops to start justifying why the litigation isn't moving forward. By contrast, the Tribunal does tend to defer where necessary to avoid inconsistent adjudicated decisions. There's a good argument to be made that, if the pleadings have been carefully drafted, deferral would be inappropriate...but there's also a good chance that the argument would have to be made, which brings us to the next point...

(4) This approach is just asking for motions and Requests for Orders seeking dismissal or deferral of one or the other proceeding. This compromises the expediency advantage of going to the Tribunal...and given that I'd be loathe to advise a client to use two separate lawyers for the separate proceedings, and the HRLSC would not help with a civil wrongful dismissal action, it undermines the cost advantage (and actually backfires in that regard).

CONCLUSION

Going back to the original question: Now that you can seek a human rights remedy at Court, should you? The answer is that it depends. Weaker human rights complaints should definitely be built into a civil claim: You don't want to risk your whole civil remedy by going to the Tribunal for a tenuous discrimination argument. (Whether that will colour how the Courts deal with it, that they end up seeing the weaker discrimination arguments, should be interesting to watch.)

But where there's a stronger discrimination argument, and/or a relatively limited standalone civil remedy, the HRTO might be the way to go. It's a tricky and risky question to be asked on a case-by-case basis.

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Unconstructive Dismissal

Let's talk about two concepts: Constructive dismissal, and the duty to mitigate.

What is Constructive Dismissal?

Most people have heard of constructive dismissal. They have some vague idea that it means that, if they're mistreated, they can quit and still seek a payout. That understanding is pretty simplistic, overstated at the water cooler, but underclaimed in practice.

Essentially, the doctrine of constructive dismissal arises from the legal principle that the employer is not permitted to unilaterally make substantial changes to essential terms of the employment contract.

Unilateral is simple enough to understand: If you agree to a change in your contractual terms, it's not unilateral, and not constructive dismissal.

But what of the rest? Understand that employers naturally have significant discretion in controlling the workplace. They can assign new duties to employees, they can implement new policies, they can even modify compensation packages. If you're hired to do payroll, and you're asked to take on some tasks from accounts payable, answering "That's not in my job description" would be insubordination under most circumstances. The employer can rewrite your job description at will, within limits. And the limits are shown in that, if you're hired to do payroll, and your boss reassigns you to a janitorial role, that likely will be constructive dismissal. Demotions and changes which significantly reduce the prestige of a role are often constructive dismissal.

Likewise, what changes to remuneration are acceptable is entirely a matter of scale. I once saw a presentation by Matthew Certosimo in which he reviewed the jurisprudence and proposed a general principle that changes in remuneration of less than 10% will not be regarded as fundamental changes to the employment contract, reductions of greater than 15% will be, and anything between...are in a grey area, and would be fact-specific.

Constructive dismissal can also result from harassment and other ill treatment, but again, it's a matter of scale.

Matters of scale leave large grey areas, and lots of uncertainty. In constructive dismissal, uncertainty is deadly. If you think you're entitled to quit your job and seek a payout, and you do so, but the Court disagrees, you get nothing. You'll have your own legal fees, and likely have to contribute to the employer's legal fees as well. There you are, unemployed, mistreated, with no entitlements, and massive legal debts.

And there's another hitch too which is growing in the jurisprudence.

Mitigating Losses

When somebody breaches a contract or commits a tort, the innocent party has an obligation to mitigate his losses - that is, to take reasonable steps to prevent additional damages from occurring. If I contract to purchase 100 widgets from you at $10 each, and the market price drops to $8 each before the transaction is complete, then I might back out of the contract since I feel I'm overpaying. Let's suppose you wait an additional year before trying to sell the widgets, and by that time the market has completely fallen out and the market price is only $1 each.

What are your damages for my refusal to close the transaction? Well, the compensation principle says that you're entitled to be put into the same position you would be in but for my breach. If I hadn't breached, you would have had $1000. Following my breach, you only realized $100 from the widgets. So your damages are $900, right?

Not necessarily: the mitigation principle kicks in here, and says that you should have liquidated the widgets promptly so as to avoid incurring further loss. You had only lost $200 - not $900 - when I breached, and you could have and should have sold then. To the extent that you took a risk and didn't, why should I bear the burden of that risk?

That's what mitigation means. Put into the employment context, it means that an employee who has been terminated without sufficient notice needs to try to find a new job. That is, he or she should take reasonable steps to procure equivalent replacement employment. A high-powered executive doesn't need to take a job flipping burgers to mitigate, but should be checking out other executive-level positions in the area.

Essentially, the point of mitigation is that a wronged party cannot recover for a loss which he could have avoided. So if you fail to mitigate, then your recovery will be limited.

How Do You Mitigate Constructive Dismissal?

The answer in many cases seems to be: Don't quit.

This isn't a new proposition. In 1989, the Ontario Court of Appeal ruled in the Mifsud case that the plaintiff employee was constructively dismissed by a demotion, but...

"Where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious (as in this case) it is reasonable to expect the employee to accept the position offered in mitigation of damages during a reasonable notice period, or until he finds acceptable employment elsewhere."

In other words, he was constructively dismissed, but it was nonetheless unreasonable for him to quit his job, and accordingly he could not recover.

Next up, Evans v. Teamsters, in which Mr. Evans was terminated, but the company offered him his job back on a contract basis up to the end of the notice period he was claiming. The Supreme Court of Canada followed Mifsud and concluded that it was unreasonable for him not to have accepted the job back.

And that's the way the jurisprudence is going now. See Loehle v. Purolator, which has similar facts to Mifsud: An employee was constructively dismissed by a demotion, refused the demotion and left, and the Court found that this was unreasonable - he should have kept the old job until he found a new one.

My Thoughts

I'm going up against some pretty tall authorities here (though even the Evans decision wasn't unanimous), but I think there is a big problem with this approach: When you can find that an employee has been constructively dismissed - as in, the employer has unilaterally made such a substantial change to the terms of the contract that it can be said to have fundamentally repudiated the contract - but the employee should keep the new job anyways, there's a disconnect. It becomes a right without a remedy. An obligation on the employer without recourse for its breach. Completely meaningless.

The standard for mitigation has traditionally been quite low. The employee is usually afforded a great deal of discretion. The employee is not expected to accept the first job that comes along. The employee is entitled to search for something equivalent to the old job. Aside from these "employment with the same employer" cases, I know of no authority which has ever suggested that an employee is obligated to mitigate by taking a lesser job on a temporary basis while searching for an equivalent job. So why are these cases any different? Why are the Courts in this narrow niche of cases telling employees, "Yes, you're entitled to treat the contract as repudiated, but you still have to stick it out until you find something new"?

In fact, I know of no principled reason why the standard for equivalency of employment for mitigation should be any different from the standard for equivalency in changing terms of the employment contract...and if there were a difference, I would think that the standard for mitigation would be easier to satisfy.

This is my proposal in a nutshell: If I am demoted in such a way that the demotion would meet the test for constructive dismissal, then the resulting job offer (i.e. of the lower position) prima facie fails to meet the standard of equivalent replacement employment, such that there is no obligation on the employee to accept it in mitigation.

Ultimately there is only one question here: Is the employee entitled to quit and seek reasonable notice? There is no reason whatsoever to need to apply both a constructive dismissal framework and a different mitigation framework to it. These should be consistent and lead to consistent results, rather than have inconsistent results rendering the other analysis meaningless.

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

And on the other hand...

I once heard a joke that everyone wants a one-handed lawyer, because legal advice is so often qualified by "...but on the other hand..."

Last night I posted about the Human Rights Tribunal finding that, where a Union had settled a grievance on behalf of an employee (without the employee's consent and, in one case, over the employee's objections), the employee is bound by the settlement and can't subsequently initiate a Human Rights proceeding.

Today a new decision was published on CanLII in a different case, Parliament v. Metro Ontario (think 'grocery store' Metro).

Ms. Parliament alleged that the employer turned her down for a promotion because of her physical limitations. She filed a grievance.

For non-Union readers, you should understand that grievance processes usually have a series internal steps in which employer representatives will hear the case and determine whether or not the employer wants to accept the grievance. If the employer decides to reject the grievance, then the Union has the option of referring the dispute to arbitration.

This grievance was rejected by the employer, and the Union decided to accept the employer's decision and declined to refer the grievance to arbitration.

Ms. Parliament, however, didn't accept this, so she made an Application to the HRTO. Metro took the position that (a) the subject matter of the proceeding had been appropriately dealt with in the grievance and (b) in the alternative, the Application should be deferred until a final disposition of the grievance.

As the Tribunal points out, the positions are contradictory. Either the grievance process is done or it isn't. (It's kind of like defending a criminal proceeding by making an identity defence and an affirmative defence. "You're Honour, my client has an alibi, and was in Cuba at the time of the offence; in the alternative, in case that you don't believe the alibi witness, I'll be leading evidence to establish that the victim was charging at my client with a knife at the time. Even though my client was 4000km away.") Still, I kind of see the logic: There isn't a formal end to grievance processes if you stop short of arbitration without a settlement. There are time frames within which the matter needs to proceed, but arbitrators have jurisdiction to relieve against these time limits. So it isn't certain that the proceeding is dead. But, by choosing not to refer to arbitration within the timeframes, or even thereafter, the Union has abandoned the grievance, making the Human Rights Application an abuse of process.

I see the logic. I don't agree with it, but I could make that pitch.

The HRTO ruled that the failure to refer the grievance to arbitration didn't mean that the subject matter of the proceeding has been appropriately dealt with, for the following reason:

There is no information before me suggesting that the parties reached a settlement, that the applicant had any role to play in the Union’s decision-making, or that the applicant understood and agreed that her concerns had been appropriately dealt with through the grievance process.

This Tribunal has generally accepted that where a grievance dealing with substantially the same subject matter as an application has been settled by the parties, section 45.1 may apply to bar all or part of an application. Conversely, the Tribunal has held that the requirements of section 45.1 are not met where a grievance has been withdrawn unilaterally by a union....

So how do the 'settled without grievor participation' cases fit into this framework? Well, they're distinguishable from this case, in that money was paid, there was a settlement, which might tend to move it more towards the class of grievances 'settled by the parties'...but with the grievor not being involved in the settlement, it still seems more akin to a unilateral move by the union - unilateral in at least one of the relevant senses, in that the grievor is not a participant.

(I should also note that unilateral withdrawal by a Union from OLRB proceedings following after a Board mediation are usually held to be "with prejudice", meaning that the matter can't be raised again. Not particularly relevant, but an interesting side note in context.)

Let me cast it in this light:

You and I both grieve allegedly discriminatory treatment. Your grievance has real merit; mine has no merit whatsoever. The Union lacks the will and resources to fight either case, and so simply walks away from mine, and manages to extract a small settlement for your case (because the Employer recognizes the merits of your case), but one that does not nearly approach your entitlements or create a meaningful remedy to the discrimination. You rigourously object to the Union settling your grievance on this basis, but the Union persists.

What's the result? I get to go to the HRTO because my grievance was simply abandoned. You don't get to go to the HRTO because the employer saw enough merit in yours to offer money. I call that an incoherent result, where the meritorious claim gets killed but the nonsense one goes forward.

This is a conflict in the HRTO jurisprudence which will have to be worked out. Either Unions have the authority to raise and dispose of Human Rights disputes on behalf of the bargaining unit members, or they don't. It's that simple. In fact, it's simpler than that in my mind, because if it were the former it would undermine the purposes of the Code. So the answer ought to be that they don't. If the employee can't be said to have voluntarily agreed to dispose of a potential human rights claim, then they shouldn't be blocked by that purported settlement from making an Application to the Tribunal.

But that's my opinion, and clearly it's at odds with the opinions of the HRTO adjudicators, whose opinions are far more important than mine in this sort of thing. (I might be interested in hearing what the opinion would be of the judges of the Divisional Court, given the right fact pattern, though.)

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Can your Union give away your Human Rights?

When a Union is certified as your collective bargaining agent, that displaces the common law freedom of contract. You can no longer deal with your employer on a one-on-one basis. You can't sue your employer in Court. Rather, the Union and the Employer will (and must) put together a collective agreement with an arbitration clause. Disputes prior to that stage, or other limited types of disputes, end up going to the Ontario Labour Relations Board. Only the Union or the Employer can refer disputes to arbitration; individual employees cannot.

The Union owes a duty of fair representation to the bargaining unit members, but they're given a lot of latitude in deciding how best to fulfill that duty. So if I complain to my union rep about being passed over for overtime, and the union brass figure that it's better for the whole bargaining unit (including me) not to stir up conflict with the employer over it, then there isn't likely much that I can do about that. (The one exception is with discharge grievances: If I've been fired, it doesn't do me any good whatsoever that the union wants to maintain positive relations with the employer, so the union can't refuse to advance my grievance.)

What if I'm suffering discrimination at the hands of my employer on the basis of, say, race? And my union rep says that stirring up racial tensions in the work place isn't worth the trouble, so they won't help me with my grievance...then what?

Well, the Human Rights Tribunal is one of the few places where you can go directly against your employer, bypassing the Union entirely. In times long past, there has been litigation about whether or not the collective agreement can contract out of human rights legislation...and the answer is not only that you can't contract out of human rights legislation, but that ensuring human rights compliance is the responsbility of both the Union and the Employer. So if a person needs an accommodated schedule for reasons of disability, then the fact that somebody of higher seniority may be put out by it won't ground a grievance. You can't absolve yourself of the duty to accommodate on the basis that the specific accommodation would breach the collective agreement.

It goes a step further, or at least it did: Let's say you grieve your discharge, and enter into a monetary settlement. Then you make a complaint that your employer discriminated against you in firing you, and try to get a human rights process going. The fact of the settlement won't necessarily block the proceeding. This is one of the reasons that the traditional full and final release has language expressly stating that any human rights claims are satisfied. You can't enter into a contract not to stand on your human rights, and if a release doesn't clearly set out that your human rights are satisfied, then adjudicators were prepared to say that it wouldn't block the human rights proceeding.

This is a very special place that Human Rights had in the law. Or at least, it was. Recent jurisprudence from the Human Rights Tribunal of Ontario suggests that this is changing. In particular, they're finding that grievance settlements can bar subsequent human rights proceedings even if the grievor didn't authorize or sign the settlement.

In Park v. Waterloo, it's a bit of a less clear case: The employee had a grievance and a complaint with the Commission going forward at the same time in 2008, but the Commission complaint was never acted on, and the employer never became aware of it. The union settled the grievance, money was paid to Ms. Park, and then in June 2009 she tried to continue to advance the human rights proceeding. This was the first time the employer became aware that she wasn't happy with the settlement.

So maybe Ms. Park isn't all that sympathetic.

But I'm deeply concerned about Rysinski v. Aecon Industrial:

Rysinski is physically disabled, and was fired by Aecon when it decided that they couldn't accommodate his disability anymore. Rysinski grieved the termination through his union, IBEW.

IBEW settled the grievance on Rysinski's behalf, and was entitled to do so under the terms of the collective agreement. The settlement was for the sum of $10,000. Rysinski didn't approve the settlement or sign a release. He did cash the cheque, but characterized it as "partial damages". He believed that he was entitled to something more in the ballpark of $65,000. (The 'partial damages' argument is somewhat coherent, actually: I'd more expressly do it under protest, but if I'm taking the position that you owe me $2, and you give me $1, what is the more reasonable thing for me to do? Pocket the loonie and ask for another one? Or throw it back at you and demand a toonie? Some doctrines would lead to the notion that refusing a partial payment waives the same. If I had a client bring in a cheque, I'd send a letter acknowledging receipt of the money, saying "This money will be deposited into my firm's trust account pending resolution of the outstanding issues", and expressly stating that the deposit of the cheque was without prejudice to my client's right to further pursue said issues.)

Rysinski then applied to the OLRB, accusing IBEW of failing in its duty of fair representation. However, the test requires some evidence that the Union acted in a manner which was "arbitrary, discriminatory, or in bad faith", and, when the only thing to go on was Rysinski's belief that he was short-changed, the OLRB found that he hadn't made a prima facie case.

Which brings us to the above-noted HRTO decision. Rysinski's next step was to bring an Application against the employer at the HRTO. So the question becomes whether or not the existing settlement gets in the way.

In the old days, the question would have been whether or not Rysinski understood and voluntarily accepted that the settlement was in satisfaction of any human rights-based claims. On these facts, the answer would have been a clear-cut "No"; the settlement wouldn't have bound him - not only did he not agree to it voluntarily; he never agreed to it at all!

But the HRTO went the other way on this. It found that the grievance procedure had appropriately dealt with the substance matter of the Application, through the settlement entered into by the Union on the grievor's behalf.

(There was also an Application against the Union for discrimination...this was more clearly estopped, given that he had already argued that unsuccessfully before the OLRB. The OLRB decided that there had been nothing discriminatory about the Union's actions, so the HRTO wasn't going to revisit the question. Neither here nor there.)

This is worrying to me. Recourse for breach of human rights was always an exception to the Union's exclusive right of representation. They couldn't contract out of the process (or the substantive rights), and they couldn't prevent a bargaining unit member from going to the HRTO. But now they can block a HRTO Application, and, so long as their actions aren't obviously capricious or in bad faith, the employee may find himself without any recourse as against either the Employer or the Union.

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Termination of Employment: For Cause or not For Cause?

An employer with a misbehaving employee has a difficult question: Terminate on a "for cause" basis, without notice? Or terminate the employee without cause and pay notice?

It's a tough question. Just cause is a high threshold, and only significant misconduct meets it. Further, alleging cause wrongfully can expose an employer to additional damages. There are few clear-cut "cause" cases, and terminating for cause frequently invites litigation. Even if an employer wins such a suit, legal expenses are significant.

Particularly when dealing with long-term employees who might have lengthy common law notice entitlements, it's tempting for an employer to terminate, pay out the statutory minimums, and hope that the employee goes away, or maybe offer a small additional amount in exchange for a full and final release...then, if you get sued and have to pay out the legal expenses anyways, to allege cause and say that you shouldn't have to pay anything at all.

Trouble is that it doesn't work that way. When you're terminating, you pretty much have to make a decision as to whether or not it's "for cause". Even if you don't say so expressly, you're going to have to engage in conduct which tends toward one or the other - namely, in most cases, payment or non-payment of statutory minimum notice entitlements, and/or filling out the reason for issuing the Record of Employment. You can't just fence-sit until you know if you're getting sued.

Why not? Why should a bad actor get away with the misconduct and walk away with a golden parachute just because you tried to pay him a bit to go away in the first place?

Justice Thompson answered this effectively in 1964, in Tracey v. Swansea Construction Co. Ltd., [1965] 1 O.R. 203, in a passage which has been quoted a few times in the decades since:

The simple position appears to me to be this. The defendant desired to dismiss the plaintiff. If there was misconduct or default sufficient to justify discharge it had one of two courses open to it. It could have summarily dismissed for cause or it could have decided to overlook, waive or condone the misconduct and terminate upon notice, or payment in lieu of notice, in accordance with the provision of the contract for termination implied by law. It could not do both, for one would operate as a repudiation of the contract for a breach thereof, and the other, conversely, would operate as an affirmation of the contract and the adoption of its provisions for termination. The fact that the defendant was in error as to the length of, or sufficiency of, the notice given could in no way alter the effect of its intention as expressed by its conduct.

By paying notice in the first place, an employer acknowledges that the contracts continues to exist despite the employee's misconduct. You can't retroactively repudiate a contract.

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Simcoe Landlord Tenant Board Orders Return of Rent Deposit

In a recent case heard locally at the Landlord Tenant Board, the Board found that the landlord was retaining a rent deposit unlawfully.

The facts are put concisely: The tenants completed a rental application and paid a deposit on January 20. The landlord replied that their references would have to be checked before the landlord would agree to rent to them. A few days later, the landlord said that their references were okay and they could rent the place. The tenants replied that they were no longer interested and wanted their deposit yet. The landlord refused, so the tenants brought this application, and got back the deposit and the application fee.

The facts that *aren't* here include what exactly was on the rental application, or what other conversations might have been had between the parties. However, the Board finds that it was understood that the landlord would require them to sign a written tenancy agreement before giving them the keys to the unit.

So the real question is this: Had a contract formed between the parties? In this case, the Board said no. Had the Board said yes, then it is quite possible that the landlord would have been able to pursue the tenants for additional damages for breaching the contract. I don't know what all the evidence was here, but you sometimes get tricky cases along these lines.

Notwithstanding that the tenant here was successful, the fact that they had to litigate over the deposit carries a lesson: When discussing a prospective rental agreement, be careful. Don't make any firm commitments if you aren't prepared to honour them. I would never recommend providing any sort of deposit until you're actually entering into the binding contract itself. Some landlords may insist on receiving the deposit with the application; the rental housing market around here isn't so difficult that a tenant will necessarily have to accede to such a demand.

I've heard about cases where the tenant thought he was providing the deposit "to hold the place", and ultimately was found to have entered into a contract and had to pay additional damages for having breached the contract.

Also, carefully read the text of anything you're asked to sign. When I first moved to Simcoe, I looked around at a few places. One landlord asked me to fill out an Application. I wasn't sure I wanted to stay there, and still had other places to check out, but I reviewed the Application carefully and determined that the Application only contained basic personal information and consent to check references, and contemplated a written lease which would have to be signed to take possession of the place. I was able to satisfy myself that by filling out the Application I was not going to bind myself into something I wasn't prepared to accept.

Legally, you can't accidentally enter into a contract, but sometimes the evidentiary questions are tricky, and it is far easier to enter into a legally binding contract than many people realize. Oral contracts are legally binding. Contrary to popular belief, a signature is not required, nor even a handshake. The real trouble is that, where there's nothing in writing, the fight becomes over who said what. And, especially if money has changed hands, that will often weigh in favour of finding that a contract has formed.

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

He who acts as his own lawyer has a fool for a client

My last entry having been about the things you can do without a lawyer, it seemed prudent to talk about some things that you really should get a lawyer for, though you might feel like you can do it yourself.

The Supreme Court just refused leave to appeal a decision from the Alberta Court of Appeal. Briefly, Mr. Rejzek was busted by a police officer posing as a prostitute. He represented himself at trial and was convicted. He then appealed on the basis that the trial never advised him of his right to be represented at trial.

This would be a rarity. Let me explain a few things about self-reps.

Self-reps are a nuisance to the Court. They don't understand the process, the rules, the appropriate and usual ways that things are done in Court. And most of them have watched way too much TV. They'll lead large amounts of evidence completely unrelated to the matters at issue, because they don't have the legal training to understand the importance of legal principles like 'relevance'. (Of course, I'm speaking in generalities here.)

Worst of all, they sometimes take unreasonable and untenable positions, and waste everyone's time and everyone else's money. I've done a number of cases against self-reps; the cases are usually relatively easy, and I seldom have to worry about them making sophisticated legal arguments, but they're situations where my client shouldn't have to pay for me to go to Court, because the 'right' and 'wrong' of the cases, legally speaking, is quite straightforward. Lawyers only need the Court's assistance when the right answer isn't reasonably clear to both of them. Self-reps think that everybody should get his day in Court, and then wonder why they end up with costs awards made against them.

But on top of that, they can be unpredictable. In one case, I served a Notice of Application on a person, and the supporting affidavits. She didn't serve a Notice of Appearance (which is technically necessary to have a right to respond at all to an Application) or any other supporting materials...but showed up on the Court date wanting to argue her case, and bringing a sheaf of documents with her (which were not relevant to the case...but anyways). I wasn't surprised by this, of course. I could have taken the position that she should not even be allowed to address the Court...but the problem is that the Court will bend over backwards for self-reps, knowing how inaccessible and arcane the procedural requirements are. So had I argued for her complete exclusion, I would have just looked like an overly aggressive lawyer. So instead I took a position that was quite reasonable, and easy for the Court to agree with: "She hasn't filed a Notice of Appearance or any supporting materials. It isn't surprising that she would want to make submissions, but I would object to her attempting to lead any evidence." The judge allowed her to make submissions, and while she did attempt to raise new issues, I flagged in my response that those matters weren't in evidence (though I did state my client's positions on the issues), and the judge appears not to have considered them in his final decision. Then, after I made my costs submissions, the judge asked her if she had any submissions on the point, and appeared a little frustrated by her roundabout answers. (Not surprising, of course, that she wouldn't understand the points to argue when discussing costs.)

Anyways, the point is that, especially in complicated matters, the Court wants the assistance of competent counsel on all sides, and doesn't want to have to babysit a self-rep who doesn't understand the process. So normally, especially in a criminal matter, the judge will try hard to convince the accused to retain counsel.

Digression ended.

The Court of Queen's Bench overturned the conviction and entered an acquittal. The Alberta Court of Appeal restored the conviction. Basically, the finding is that the trial was fair nonetheless. Self-representation isn't grounds for appeal.

But I think most of us know that, when fighting criminal charges, hiring a lawyer is a good idea.

A couple days ago I blogged about civil remedies that you might pursue yourself - not necessarily because a lawyer wouldn't help, but because the lawyer's help is more expensive than what it's worth. It's easy to see the value of a lawyer in adversarial proceedings, but what about when everyone's getting along?

When to seek proactive legal advice is challenging to determine for even the most sophisticated laypeople. Employers can get themselves into pretty deep trouble pretty easily, acting without good legal advice. I took a call from an employer who had an employee in charge of a remote operation simultaneously put in her notice of resignation (of several weeks!) and make an accusation of human rights offences. How does an employer respond to that? Well, I can list off about 50 potential wrong answers. Don't fire the employee. Don't breach any of the employee's contractual entitlements. (She was contractually entitled to a performance evaluation a couple weeks out, with a raise depending on certain factors, which under the circumstances would have weighed in favour of a raise. I recommended offering to carry through with the performance evaluation and providing a raise.) Don't fail to discipline for any bona fide performance concerns, but do so carefully, and bear in mind that you may have to justify your actions to an adjudicator. If you must waive her notice, make sure to pay her through the whole thing. Etc.

The 'right' answer is "very carefully". I helped the employer craft his response to the employee. It isn't cheap; I ended up charging a fee in the high 3 digits for my time. But it reduces the probability of facing a Human Rights Application at the end of the day (the defence of which would run in the 4 to 5 digit range), and significantly reduces the probability of having a successful Human Rights Application made against them (the liability for which could easily run well into the 5 digit range). Many employers working without legal advice in that situation could have easily made some very expensive missteps. Even assuming that there hadn't been any inappropriate conduct to date (and of course in my client's situation there hadn't been...no, seriously, I've worked with some questionable fact patterns, but I believe that this client was pretty clean), it's still really easy to run awry of the Human Rights Code by taking actions that might be seen as reprisal for her standing on her rights.

So was my service expensive? Yes, absolutely. Especially considering that it primarily consisted of a few phone conversations and emails going back and forth. But that client certainly got good value for that money.

Contracts. Another time when getting proactive legal advice can be important. As a general rule, the question is: "What's the worst that could happen?" You can have a binding contract written on a napkin, or based in a handshake, or less, but if it's not written by a lawyer, there's a real risk that you won't get what you think you're contracting for. The question you have to ask is whether or not that's a risk you're willing to bear.

If the contract is a repayment plan on a $500 loan to your cousin, then your worst case scenario is that you're out $500. Paying a lawyer for a few hours' work to (a) meet with you about it, (b) draft and/or review the contract, and (c) advise you on the terms and possible amendments...well, it's a no brainer: It ain't worth it. But if you're making a $500,000 loan to your cousin, which you want to be secured by a mortgage...then paying a grand or two to a lawyer to help you protect your investment is a no-brainer.

Parties to a commercial lease should generally get legal advice. Parties to a matrimonial agreement or separation agreement should (and often must) get legal advice.

What about employment contracts? For the employer, yes, absolutely, in all cases. An employer need not consult a lawyer before making any hiring decision, but the contract template should be drafted or at least reviewed by a lawyer, and an employment lawyer should explain to you how to make the terms enforceable.

Let's say you're gainfully employed and have been working for your employer for 10 years, but you're looking for greener pastures...you apply for an opening that I'm offering, I bring you in for an interview, and it seems like a good fit. I call you to offer you a job, you put in your two weeks notice, then you report for work. With all the orientation materials, I also put in front of you your employment contract. It says that you're on a 3-month probationary period, limits your entitlements on termination, and has a non-competition clause. There's a real risk that none of these clauses will be enforceable. The key problem is this: You already have the job. You're not getting anything else out of the contract but what you already have, and therefore the contract may not be binding.

There are a lot of ways of challenging the terms of an employment contract upon termination, and the only way to really protect against that and reduce the risk of litigation upon termination (which, again, is really expensive) is to get good legal advice at the inception of the employment relationship.

What about an employee? Should an employee get legal advice on an employment contract? Well, employees looking to be hired seldom have much bargaining power. If you're in a position to really negotiate your substantive terms, then maybe. If you're not in a position to negotiate, then the only real question for you will be whether or not a term is legal. But if it's not legal, then it isn't usually going to be enforceable, so you can leave that question until later.

When dealing with severance packages at the end of employment, both sides should always get legal advice. An employer needs to know its obligations to a dismissed employee up front. An employee shouldn't sign off on the package until they know their rights, too.

Here's the rub: If an employee hasn't had an opportunity to get legal advice on the package, it may not be enforceable. Or it may be. So an employee wants legal advice because the agreement might hold up either way; an employer wants the employee to get legal advice because of the risk that it won't hold up otherwise. It's common practice for an employer to offer a contribution to the cost of obtaining legal advice, as part of the package.

Bottom line: Proactive advice is often worth the expense. A stitch in time saves nine.

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Dismissed Employee Receives Millions in Wrongful Dismissal Action

Under most circumstances, an employer's liability to a wrongfully dismissed employee will be limited to what the employer would have paid the employee (or to the employee's benefit) for a period of time. Sometimes there will be a bit on top of that for moral damages. But every so often you get a circumstance where an employer's liability will increase immensely on the basis of what a third party would have provided based on continuation of employment through the notice period.

Some pension plans have threshold dates for benefits; if you wrongfully fire someone without notice, and their notice period would have crossed a pension threshold, then the employer could be liable to top up the pension indefinitely.

Likewise, if an employer prematurely terminates an employee's long-term disability benefits, and the employee becomes disabled during the notice period, the employer could be liable for payment of what the LTD benefits provider would have paid, until the employee is healthy again. If ever.

A recent case decided by Justice Parayeski is a slightly different breed, but puts damages on a whole different level.

Mr. Taylor worked as an engineer for Research in Motion. You know, the Waterloo tech company that developed the Blackberry, which has since become a staple for most business folks throughout the world? Yeah, that's right, the company owned by Jim Balsillie, who has been trying to get another hockey team into this part of the Province... (Hey Jim, just so you know, I'm behind you on that one. My team hasn't won during my lifetime, and if you were to bring an NHL team to K-W, or even Hamilton...or how about Simcoe?...I'd cheer them on.)

Part of Mr. Taylor's remuneration included stock options which were to vest as of March 3, 2005. The option granted the right to purchase up to 40,000 shares at a share price of $5.78. That's right, $5.78 for RIM shares. As of March 3, 2005, the market value of a RIM share was $68.20. 40,000 of those. I'll let you do the math.

Trouble is that Mr. Taylor was fired in November 2004.

Let's set up a cast of characters here: At trial, Mr. Taylor was represented by Howard Levitt, whom I think it fair to say is Canada's foremost employment law expert. RIM was represented by Glenn Christie, of Hicks Morley, which is one of the more significant management-side labour/employment law firms in the Province, especially outside of Toronto. The Judge was Justice Parayeski, a fairly new judge. I had the pleasure of appearing before Justice Parayeski a few weeks ago; he seemed very reasonable. (And he ruled in favour of my client, so he must be a good judge, no?)

By the time trial came around (the decision indicates a trial date of October 2010...but I have a sneaking suspicion - don't ask me why - that this is an error, and should be October 2009), RIM was not taking the position that the termination had been for cause (the way this is phrased in the decision suggests that RIM had originally alleged cause). Everyone agreed that the notice period would have gone past the stock option vesting date. Everyone also agreed that Mr. Taylor would have exercised the stock option. (...I can't imagine why...)

There didn't appear to be any fight over what kind of damages might be payable in lieu of reasonable notice, or whether or not the employer should have to pay out for breaches of its duty of good faith and fair dealing (as used to happen quite often when an employer initially alleged cause but dropped the argument during litigation)...I suspect that any disagreement on such entitlements were so miniscule by contrast to the rest of the case that it wasn't worth fighting over.

The only issue was this: How are Mr. Taylor's damages quantified? The value of the stock options as of March 3, 2005? Or what the stock would be worth today? After accounting for a "gross-up" to reflect the differential tax treatment of pay in lieu of notice rather than the exercise of stock options, his damages as of March 3, 2005 would have been approximately $4.4 million. Calculated on the basis of the share value today (or rather, on October 2010 [sic]), the damages would have been approximately $11.6 million.

Justice Parayeski looked at the financial planning advice Mr. Taylor had received, and Mr. Taylor's motivations, and concluded that he would have cashed out $2.1 million immediately but held on to whatever was left. (He left the arithmetic to the lawyers to work out.)

Points to Consider

RIM would have had to have paid a significant amount in Mr. Taylor's exercise of the stock options in any event, but ended up having to pay an additional 46% for the gross-up. With these amounts, that is a vast amount of money by most standards.

That an action for this amount of money could be dealt with in a two-day trial, focusing only on the one truly contentious issue, is an indicator of the experience and reasonableness of counsel on both sides. I know lawyers who, if given the opportunity to represent RIM in such a matter, would have made none of the concessions that Mr. Christie made. Even faced with certain defeat, some lawyers may have still made the pitch for "just cause". (Sometimes, the logic is as much to disparage the plaintiff as for any real possibility of success; even if the threshold isn't met, you get to rip into the other side to try to get the judge's sympathy. It's pretty dirty, really drags out the proceedings with peripheral and relatively unimportant factual issues, increases everybody's legal costs significantly, and I would doubt its effectiveness.) Likewise, such lawyers would have made the alternative argument that the notice period would not have encompassed the vesting date, and that alternatively Mr. Taylor would not have exercised the stock option. Because really, who wants that much money, right? Making arguments with no chance of success don't serve anyone's interest, and reduce counsel's credibility even when making arguments that may have merit. So by making reasonable concessions, Mr. Christie did a real service to his client. (Of course, I'm assuming that Mr. Christie was correct in assessing those arguments as having a low chance of success, but I would not be in any position to second-guess that judgment.)

RIM has its own in-house legal department, but I would expect most of them to practice Intellectual Property law. Still, you have to wonder what events transpired that left a company like RIM ending up in a position like this, having to pay a 7-digit gross-up, with a Court saying that it "now concedes that the dismissal was without just cause".

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This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.