Employment Law – Important Developments in a Changing Economy

In the current economic climate, continued employment and employment relationships are more critical than ever. Loyal and productive employees will provide an employer its best chance to emerge unscathed at the end of this lengthy recession. During these uncertain times, economic pressures may require an employer reorganize or restructure its workforce. Doing so properly, and in accordance with the law, will ensure continued survival of your business, your profitability and your reputation.The laws regarding employment standards have changed little in recent years. Still, you must know them when considering leave, layoffs and terminations.What’s Old?The Employment Standards Act is the corner-stone of most Canadian employment relationships, although in recent years, the common law is being applied much more often in the determination of reasonable notice for termination.The purposes of the Act are to ensure basic compensation and conditions for employees and to ensure fair treatment. The Act applies to all employees other than those excluded by regulation (such as certain professionals, enumerated jobs and where collective agreements speak to certain rights). The minimum requirements of the Act cannot be waived (except regarding hours of work and overtime for managers and certain employees).Amongst many other rights and protections, the Act provides for overtime pay, statutory holiday, vacation leave and various other leaves of absence from employment and for penalties for breaches of these and other rights.Most importantly, and subject to exceptions set out in the law, the Act provides at sections 63 and 64 for the liabilities of employers to provide notice or pay in lieu of notice. After three months of employment, an employee who is terminated is owed one weeks’ wages on termination. After 12 months of service the entitlement rises to two weeks wages. Finally, after three years of service to three weeks’ wages and an additional weeks pay for each year of service thereafter to a maximum of eight weeks’ wages on termination. In addition, where more than 50 employees are to be terminated in any two month period, certain modified rights to special notice arise and rise further if more than 100 employees are to be affected and further still if more than 300 employees are impacted.The Director appointed under the Employment Standards Act, and the Employment Standards Tribunal are charged with enforcement and remedies under the Act. The Director has full investigatory and prosecutorial powers to ensure compliance and to enforce stiff penalties.However, there are limits to their powers which are important to know in order to protect your company from wrongful intrusion by Provincial officers.Employers may also be liable for wrongful dismissal and/or constructive dismissal at common
law as will be discussed below. The liability at common law for wrongful dismissal can be up to three times higher the awards statutorily mandated under the Act. Doing things right matters.Employment contracts remain the key way to record and protect the all-important employment relationship. Properly drafted, they protect both parties, ensure compliance with the relevant laws and ensure peace in the workplace. This is especially the case for employees such as managers and professionals to which the Act does not apply; a properly drafted contract and policies are the only way that the parties can record their rights and relationship.What’s New?In addition to the Act and proper contracts as discussed above, the Supreme Court of Canada has been busy hearing employment law cases in 2008 and in 2009. The Supreme Court has delivered several recent judgments of relevance to employment law generally and concerning procedural fairness, unionized settings, damages for wrongful dismissal, aggravated and punitive damages, duties of departing employees and restrictive covenants. Here, we focus on three groundbreaking decisions.Keays v. Honda Canada Inc., [2008] 2 S.C.R. 362 on damages from wrongful dismissal.The Court in Keays had an opportunity to revisit damage awards for wrongful dismissal. The Court was clear that the Bardal factors continue to govern the reasonable length of notice required. The Bardal factors include the age of the employee; length of service, the character of the employment and the availability of alternative employment having regard to training, qualification and experience. The Court had an opportunity to revisit and to clarify its previous decision in Wallace in which it held that bad faith in the manner of dismissal would aggravate or lengthen the notice period. The Court now favours a strict forseeability test to damages: in other words “what did the contract of employment promise?”. Typically, it does not promise peace of mind but rather that an employee could be terminated with appropriate notice. If an employee can prove that it was foreseeable that damage of the sort suffered (such as mental distress) was in the minds of the parties entering the contract then damages may be awarded; regardless of any discussion of aggravated or punitive damages. Spelling out expectations at the time of contracting has never been more important.RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc. (2008), SCC 54 on employment relationships and duties of employees to employers.In RBC, the Court considered the elements of the employment relationship and the duties of regular employees, being those who did not owe fiduciary duties to the employer. The Court held that regular employees are free to compete against the former employer after terminating their employment. During employment and any notice period the employees owe general duties of fidelity and good faith, and indeed often duties to provide proper notice of termination, but otherwise after termination are free to compete.The Court recognised that fairly drafted and reasonable restrictive covenants concerning competition and solicitation of clients may be enforceable: but these clauses were absent in this case. Are they in your contracts?KRG Insurance Brokers (Western) Inc. v. Shafron (2009), SCC 6 on the reasonableness of restrictive covenants.In Shafron the Court had occasion to determine the proper approach to severance in employment contracts. In this case, the Court examined a restrictive covenant purporting to prevent an employee from competing for three years after termination in “the Metropolitan City of Vancouver”. There is no such legal description for the City of Vancouver.The Court decided that it was not its role to either blue-line (meaning to strike out part of the clause to make it legal) or to engage in notional severance (meaning to read down or interpret a clause to save it) particularly in the case of employment contracts. In fact, the Court found that notional severance would not be used in employment contracts at all. The lesson is that any restrictive covenant must be drafted with the utmost of care to ensure certainty and unambiguity or it may be stuck out, leaving no protection of the employer’s business interests. An interesting question then is whether describing the geographical radius as the “Lower Mainland of BC” is also unclear and ambiguous. We are now challenging a number of restrictive covenants which employ this term to describe the South Coast of BC.Understanding and appreciating these important Court rulings are key to maintaining proper employment relations, protecting your business and ensuring that your business does not end up on the wrong side of the law.Why This MattersYour business survives on its profitability and on its reputation. Ignorance of the law of employment can cut into your profitability with the potential for large damage awards. If that is not enough, then think of the large damage award with a sensationalized headline in your local paper. Customers and clients are making choices about service providers today in many instances based on value and not on loyalty: will you continue to be their top choice?

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