McGuinty v 1845035 Ontario Inc (McGuinty Funeral Home) 2019 ONSC 4108
This past summer, the Ontario Superior Court issued an important judgment that illustrates the enormous financial risks that employers run when they choose to hire employees pursuant to fixed-term, rather than indeterminate, employment contracts, particularly when those contracts contain no specific termination clause.
In this case, the employee was the owner of a funeral home business, who had sold it and then entered into a 10-year fixed-term employment contract with the purchasers. His fixed-term employment contract with the new owners of the funeral home contained no termination clause.
Relations quickly soured between the new and former owners of the business. The new owners made changes to the former owner’s working conditions and compensation. One year into the fixed-term employment contract, he resigned from his new employment, and sued his former business for constructive dismissal.
The Court found in his favour: it ruled that he had indeed been constructively dismissed. In its Decision, it reiterated the longstanding legal rule that in the absence of a valid contractual termination clause, any employee who is dismissed (constructively or otherwise) from fixed-term employment, is normally entitled to all the remaining money that would otherwise have been paid to him over the remaining life of the fixed-term contract.
By application of this legal rule, the Court awarded the former owner/employee the remaining 9 years of salary and benefits that still remained owing to him pursuant to his 10-year fixed term contract, in the amount of nearly $1.3 million.
Additionally, the Court found that without a valid mitigation clause, the employee was entitled to full and immediate payment of this entire $1.3 million sum, regardless of what other, future, employment income he might earn, in his next job, over the next 9 years.
This court Decision serves as a reminder to all employers of the need to be extremely careful when hiring anyone pursuant to an employment contract whose term is for a fixed period of time, as opposed to an indeterminate period of time.
When doing so, it is absolutely vital that the employer ensure that the employment contract include a properly drafted termination clause, and that the wording of that clause be carefully vetted by an employment lawyer to ensure that it fully complies with the wording of the Employment Standards Act. Otherwise, you could automatically be on the hook for tens of thousands, if not many hundreds of thousands, of dollars if and when you try to terminate that fixed-term employee’s employment.
Even when such a termination clause is inserted into the contract, if its wording inadvertently conflicts, in any way, with the Act, Ontario courts will invariably refuse to enforce the clause, and will order you to pay your former employee the full amount of salary and benefits that would otherwise have been paid to him over the life of his contract.
As this case demonstrates, it is vital that employers ensure that they insert enforceable termination clauses into their employment contracts, failing which they may be required to pay massive severance payments that they never anticipated or budgeted for.
Nagpal v IBM Canada Ltd 2019 ONSC 4547
This past summer, the Ontario Superior Court issued another Decision, this time emphasizing how important it is for Ontario employers to be careful when dealing with employees who fail to come into work. The Court ruled that employers are precluded from automatically treating their employees as having resigned from their positions when such employees fail to immediately return to work upon the scheduled expiry of a medical leave of absence.
In this particular case, a long-serving employee had taken a leave of absence due to anxiety and depression. After obtaining disability benefits for a period of time, the employer’s disability insurer terminated his disability benefits. His employer’s longstanding written policy, circulated to all employees, expressly provided that if and when any employee’s disability benefits were definitively denied, they must immediately return to work, failing which they would be deemed to have abandoned, or resigned from, their employment.
When the employee’s disability benefits were terminated, he refused to return to work on the grounds that he was still too sick to do so. Instead, he wrote to his employer advising that while he could not yet return to work, he was not abandoning or resigning from his employment and would eventually return to work, at some future date, with necessary accommodations.
Despite the employee’s advice that he still intended to eventually return to work, the employer insisted, in strict compliance with its longstanding written policy, that the employee’s employment had ended because he had abandoned his position.
The employee thereupon sued the employer for wrongful dismissal damages on the grounds that the termination of his employment had been carried out without his consent, and without just cause.
The Superior Court ruled against the employer, and found that it had wrongfully dismissed the employee. In its Decision, the Court emphasized that no resignation, or abandonment of employment, is legally effective unless and until the employee has evinced a clear and unequivocal intention to resign. In its Decision, it also chastised the employer for sticking to the strict wording of its policy and for failing to take active steps to accommodate the employee after his disability leave, especially when the employee indicated that it was his desire to eventually return to work once able to do so.
This important Decision confirms that before concluding that employees have resigned, Ontario employers have a legal duty to explicitly confirm with them that it is in fact their unequivocal intention to resign, and that failure to obtain such confirmation will result in the employer having to pay the employee wrongful dismissal damages.
Linklater v Essar Steel Algoma Inc 2019 HRTO 273
Earlier this year, the Ontario Human Rights Tribunal released one of its rare, definitively pro-employer, Decisions; clarifying for Ontario employers that they have no duty to accommodate their employees until informed that such accommodation is in fact necessary.
In this particular case, the employee was a shift worker who had suffered a work-related injury that prevented him from fully performing all his regular job duties. As a result, his employer temporarily transferred him to a desk job that required him to work a different schedule from the shifts that he regularly worked.
The employee was dissatisfied with this transfer to a desk job. The transfer involved the loss of the lucrative shift premium that he had earned while doing shift work. Also, his new hours at the desk job interfered with his child custody arrangements for his children. Accordingly, he filed a Human Rights complaint claiming that his employer’s decision to transfer him to the desk job adversely impacted him, in a discriminatory way, by prejudicing his ability to see his children.
At the Tribunal, the employer argued that pursuant to the Human Rights Code, it had not discriminated against its employee by transferring him away from his shift work to a desk job because he had never advised them about his child access schedule.
The Tribunal agreed with the employer’s argument. In its Decision, it ruled that Ontario employers have no legal obligation to accommodate their employees unless and until informed of the potential need to do so. Employers cannot be found to have engaged in discrimination if they had no knowledge of the employee’s potential need for accommodation.
For employers, the key takeaway of this important Decision is that they cannot be faulted for failing to accommodate their employees unless and until they are either told, or provided with facts that clearly indicate, that such accommodation may be necessary.
This Decision also serves as an important reminder that an employer’s legal obligation to accommodate its employees is never one-sided: employees who wish to avail themselves of their legal right to be accommodated at work also have to discharge certain legal duties, including the duty to fully cooperate with their employer’s attempts to accommodate them.
Pursuant to the Code, an employee is not legally entitled to whatever accommodation he or she pleases: rather it is the employer who gets to choose what form of reasonable accommodation measures to provide to its employees. So long as an employer can satisfy the Tribunal that its choice of accommodation measures was not unreasonable, the Tribunal will not second-guess, or interfere with, that choice by the employer, no matter how much those measures may disappoint or displease the employee.
Dawe v The Equitable Life Insurance Company of Canada 2019 ONCA 512
Earlier this year, the Ontario Court of Appeal released a Decision, favourable to employers, effectively stemming the tide of lower court decisions that have recently ordered Ontario employers to provide as much as 24-30 months of pay-in-lieu of notice to sexagenarian, managerial employees who are dismissed shortly before retirement, after many decades of loyal service with the company.
In this case, the sexagenarian employee was a Senior Vice President, and had worked for the employer for a whopping 37 years (his entire career). Significantly, he was terminated only a couple of years shy of his likely retirement date.
The employee’s lawyers argued that he was entitled to 30 months’ pay-in-lieu of notice because of his very senior position within the company, his longstanding service to the company and above all, his advanced age.
At first instance, the Ontario Superior Court agreed that the employee should be awarded 30 months’ notice, principally because he had been terminated so close to his likely retirement date. The Court even opined that it might have awarded even more notice, possibly as much as 36 months, had this only been requested by the lawyers!
On appeal, the Court of Appeal vehemently disagreed with the Superior Court and reduced the employee’s notice from 30 to only 24 months. It did so on the grounds that an employee should never be awarded more than 24 months of notice, absent circumstances that are truly ‘exceptional’. The Court ruled that the mere fact of being terminated shortly before one’s likely retirement date is never one of those ‘exceptional’ circumstances because no employer has any legal obligation to keep any of its employees employed until their intended retirement date.
This recent Decision of the Court of Appeal confirms that in almost all cases, 24 months continues to be the maximum notice period that an Ontario employer must normally provide to its employees, in 2019-20, no matter how long they have worked, how senior their position, and how old they may be.