Morningstar v Hospitality Fallsview Holdings Inc (Decision No 1227/19), 2019 ONWSIAT 2324
Towards the end of 2019, the Ontario Workplace Safety and Insurance Appeals Tribunal (“the WSIA Tribunal”) released a revolutionary decision effectively preventing future constructive dismissal claims, that are based on mental stress, from being made against Ontario employers. This key decision should be a tremendous boon to Ontario employers in warding off all such court claims from their employees, in 2020 and beyond.
In this particular case, the employee, Ms. Morningstar, had sued her employer in the Ontario Superior Court for constructive dismissal damages. In her lawsuit she claimed that her co-workers and superiors had harassed her, thereby causing her such mental stress that she had been unable to continue working.
Her employer applied to the WSIA Tribunal for an Order dismissing her civil lawsuit in the Ontario Superior Court. It did so on the basis that the substance of that civil lawsuit was a workplace injury claim that, if proved, would be compensable not by her employer, but rather by Ontario’s workers’ compensation fund, pursuant to the Workplace Safety and Insurance Act. In support of its Application to the Tribunal, the employer argued that the constructive dismissal damages that Ms. Morningstar had claimed in her civil lawsuit, in court, all arose from the mental stress injury that she had suffered in the workplace.
The Tribunal accepted the employer’s argument that Ms. Morningstar’s claim against her employer should be dismissed on jurisdictional grounds. It ruled that, in Ontario, claims of workplace mental stress constitute claims of workplace injury that are compensable not by employers, but rather by the Workplace Safety and Insurance Board itself (“the WSIB”), and that henceforth such claims cannot be advanced against employers. In so ruling, the Tribunal found that although Ms. Morningstar had characterized her lawsuit as a constructive dismissal claim, all of her alleged damages arose from injuries that she had suffered as a result of the mental stress that she had experienced in the workplace. As a result, it ruled that her claim was for a workplace injury – that is to say, a WSIB claim for workers compensation from the Ontario workers compensation fund. To her employer’s delight, the Tribunal therefore declared that she could not proceed with her civil claim against her employer and directed her to file a WSIB claim for compensation from the Ontario fund.
Unless and until overturned, this ground-breaking decision of the Tribunal effectively precludes employees, across Ontario, from suing their employer for constructive dismissal damages, based on workplace mental stress. Given the exponential increase, over the past few years, in the number of such constructive dismissal claims, arising from alleged workplace harassment, this is wonderful news for Ontario employers!
Rossman v Canadian Solar Inc, 2019 ONCA 992
At the end of 2019, the Ontario Court of Appeal released a decision that has very significant future ramifications for all employers whose employment contracts contain termination clauses restricting pay-in-lieu of notice to the statutory amounts prescribed in the Employment Standards Act (“ESA”).
In this particular case, the employee’s employment contract contained a termination clause in which the employer sought to limit its liability for his pay-in-lieu of notice, on termination, to the minimum statutory amounts in the ESA. Unfortunately for his employer, the wording of the termination clause conflicted with the ESA and was therefore legally unenforceable. However, the termination clause also contained a contractual saving provision that stipulated that even if the termination clause contravened the ESA, the employee should be paid only his minimum statutory amounts.
The employer, Canadian Solar Inc., terminated the employee, Mr. Rossman, who then sued for pay in lieu of notice, on the grounds that the termination clause was legally unenforceable. The employer’s defence to that lawsuit was that even if that were so, the contractual saving provision limited his entitlements to the minimum statutory amounts prescribed by the ESA.
The Court of Appeal rejected the Employer’s argument. It ruled that the wording of the contractual saving provision was ambiguous. It noted that the provision was located in the middle of the termination clause, and was followed by a final sentence that unlawfully limited Mr. Rossman’s benefits on termination to a finite period of time, in contravention of the ESA. Since the contractual saving provision preceded that unlawful portion of the termination clause, there was ambiguity as to whether it was intended to apply to, and ‘save’, that last portion of the clause. Having determined that there was therefore ambiguity on this issue, the Court interpreted that ambiguity against the employer, in accordance with the contra proferentem rule, whereby ambiguities in employment contracts are usually to be interpreted in the employee’s favour, and against the interests of the employer.
Having therefore ruled that the termination clause and the associated contractual saving provision were both legally unenforceable, the Court ordered the employer to provide Mr. Rossman with full common law pay-in-lieu of notice equal to 5 months’ salary and benefits, and to pay him much of his legal costs.
This decision of the Ontario Court of Appeal sends a clear message to Ontario-based employers that the precaution of adding a ‘catch all’ saving provision to their employment agreement templates will not necessarily ensure that their termination clause will be enforced by Ontario’s courts, if and when that clause is challenged by employees, following their termination. The Court’s decision serves as an urgent reminder to all employers that they must ensure that their employment lawyer regularly reviews, each year, the termination clauses, and saving provisions, in their employment agreement templates to ensure that none of those provisions are ambiguous or contravene the ESA, thereby rendering them void.
Over the past year or two, further recent developments in Ontario caselaw have caused many such clauses to have become legally unenforceable. Operating your business without currently enforceable termination clauses in your employment contracts can ultimately prove to be very costly to your company’s bottom line. Without such a clause, your company may be obliged to pay 1 or 2 months of salary per year of service, and sometimes more, every time it terminates an employee!
Canadian Union of Postal Workers v Foodora Inc dba Foodora, 2020 CanLII 16750 (OLRB)
In February 2020, the Ontario Labour Relations Board (“the OLRB”) released a precedent-setting decision on when workers in the new ‘gig’ economy are to be classified as dependent contractors, rather than as independent contractors, for the purposes of both the Ontario Labour Relations Act (“OLRA”) and the common law. The ‘gig’ economy refers to organizations that provide work, or ‘gigs’, (typically through apps or technology platforms) to individual contractors who can choose when and how much to work. As a result of this decision, these groups of contractors, who previously enjoyed no employment law rights, have now garnered the protections of certain statutory and common law principles, thereby creating new associated obligations for their employers.
This case involved workers who delivered food for a food courier service, Foodora, who wanted to unionize. To do so, they applied to the OLRB for certification, as all workers must do pursuant to the OLRA.
Their employer, Foodora, brought an application challenging the workers’ right to unionize on the grounds that they were not employees but rather independent contractors. Foodora argued that as independent contractors they were not entitled to be treated as “employees” pursuant to the OLRA, nor therefore entitled to unionize.
The OLRB rejected this argument on the basis that the workers appeared to be dependent, rather than independent, contractors, and that they were therefore to be treated as employees and were entitled to unionize pursuant to the OLRA. In so doing, the OLRB applied the same traditional factors used in determining whether or not a worker is a true independent contractor, which factors they adapted for workers in the new ‘gig’ economy. In particular, some of the factors emphasized by the OLRB included:
- It is irrelevant how the employer characterizes its workers, whether as employees or contractors, because this is not legally determinative of whether or not they truly are contractors;
- Even though the couriers provided almost all of their own tools, including the bicycle, helmet, backpack, and in some cases vehicle, to do their work, the fact that they were fully dependent on the employer’s App, which is the most important part of the delivery process, demonstrated that they were more akin to employees than independent contractors; and
- The fact that the couriers were capable of working simultaneously for multiple businesses, including competitors of Foodora, was not conclusive of whether they were independent contractors. The OLRB found that this did not denote entrepreneurial activity (a precondition to being an independent contractor). As stated by the OLRB, such activity was comparable to an employee working multiple part-time jobs.
This decision serves as an important reminder to employers that they must ensure that they don’t misclassify their workers. Recognizing when your workers are “employees” and when they are “independent contractors” is vital to avoiding significant future claims, and penalties, from the Canada Revenue Agency (“CRA”), the Ontario Ministry of Labour, and from those workers themselves. If your workers are in fact employees, then you owe them, and the CRA, a number of financial and legal obligations, including the obligation to provide them with reasonable pay-in-lieu of notice, statutory termination pay upon termination of their work, the obligation to deduct and remit income tax from their pay and the obligation to pay into statutory compensation funds like EI, EHT, and the WSIB. Your failure to honour those legal obligations, in the mistaken belief that the worker is an independent contractor, exposes your company to the risk of being ordered to pay all the accumulated unpaid arrears that you failed to pay, as well as significant financial penalties, when it is later proven that the worker is, and always was, your employee.
As in many areas of law, an honest but mistaken belief, on this issue, is no defence to the consequences of your mistake. For this reason, you need to remember that whether or not your workers are employees, independent contractors, or dependent contractors depends on the substantive nature of their work for you, rather than on what you, and they, may choose to call themselves. Just as something that quacks, swims and waddles like a duck, is a duck, even though it may call itself a rooster, so too a worker who behaves like an employee, is an employee even though he or she may call themselves a contractor.