Code of conduct can protect employer’s reputation

May 13, 2013

This is an excerpt from an interview Doug conducted with AdvocateDaily.com

While some believe limiting a person’s right to comment on an employer in their private time amounts to a violation of freedom of expression, one negative Tweet or Facebook post by an employee can tarnish a company’s brand or reputation, says Toronto employment lawyer Doug MacLeod.

The code of conduct reportedly in place at Statistics Canada, which includes the expectation that employees will refrain from making personal remarks about the organization or the government on social media, even if the comments are made during their personal time. The code of conduct also contains policies relating to dress and personal hygiene, and is similar to codes being established at other federal departments and agencies, according to reports.

“I don’t think an employee should be able to disparage their employer in social media. It is biting the hand that feeds you. Many organizations spend a lot of money building a brand or a good reputation,” says MacLeod.

When it comes to codes of conduct in general, MacLeod says their contents depend on the nature of the organization and the interests it needs to protect – essentially, there is no ‘one-size-fits-all’ code of conduct

“A code of conduct is a generic term and normally includes policies that are important to a particular employer. It can include a dress code, a social media policy, a conflict of interest policy, etc.” says MacLeod. Professional athletes, for example, often have morals clauses in their contracts, while some codes of conduct contain a conflict of interest policy, which MacLeod says is important if an employee can receive ‘gifts’ from customers.

From an employer’s perspective, MacLeod says a code of conduct should explain that a violation of the code can result in discipline up to and including termination.

“The courts will generally decide whether the violation amounts to just cause for termination. In one case, a trial judge found that an employee who accepted $1,000 from a supplier had violated a conflict of interest policy in a code of conduct but concluded that the misconduct did not amount to just cause. On appeal, the Court of Appeal overturned the trial judge and concluded that the employer did have just cause to terminate the employee,” he says.

There are many ways to attack the termination clause in an employment contract. 

I am now surprised if employee counsel does not claim that their client’s  termination clause is not legally enforceable - usually because the termination clause does not allegedly comply with the Employment Standards Act.

This blog considers a case, McKercher v Stantec Architecture Ltd., 2019 SKQB 100, where an employee successfully attacked the termination clause in his contract because he did not explicitly agree to it after being promoted. 

The Facts

In 2006, Mr. McKercher commenced employment as a staff architect. The termination clause in his employment contract stated: 

Termination other than for cause will be with notice or pay in lieu of notice, based on your length of service. If the Employer terminates your employment for other than just cause you will receive the greater of:

  1. a)   Two weeks notice or pay in lieu of notice during the first two years of employment increasing by one week for each additional completed year of employment to a maximum of three months notice or pay in lieu of notice.

      or

  1. b)   The minimum notice of termination (or pay in lieu of notice) required by applicable statutes.

Eleven years later, when Mr. McKercher was employed as a Business Centre Sector Leader, his employment was terminated. The employer paid him the three months termination pay he was owed under his employment contract.

 

Another way to attack a termination clause: What is the changed substratum doctrine?

An Ontario judge in a 2012 case, MacGregor v National Home Services, 2012 ONSC 2042 (CanLII), described this legal doctrine as follows: "The changed substratum doctrine … provides that if an employee enters into an employment contract that specifies the notice period for a dismissal, the contractual notice period is not enforceable if over the course of employment, the important terms of the agreement concerning the employee’s responsibilities and status has significantly changed."

 

The rationale for this doctrine has been described by one judge, Schmidt v AMEC Earth & Environmental Ltd., 2004 BSCS 2012 (CanLII), as follows: "In my view, it was incumbent on the defendants to advise Mr. Schmidt that they intended to continue to rely upon the termination provision set out in the Agreement when substantial changes in his employment occurred. This would have allowed him to consider the matter and to negotiate for other terms. If the defendants wished to continue to rely on the termination provisions there ought to have been a ratification of the provisions as the nature of Mr. Schmidt’s employment changed."

 

Decision

The judge hearing this case relied on the following factors when deciding not to enforce the termination clause in the employment contract: ”...there is no evidence that (the employer) made it clear to the (employee) that the notice of termination provisions were intended to apply to the positions to which he was promoted. The employment agreement contains no express wording to this effect, nor does it contain any wording to support the inference of such an intent. Further, and in keeping with the analysis in Schmidt, the Court received no evidence that, as it promoted the plaintiff, SAL reasserted its understanding and expectation that the notice of termination limit would remain in effect.”

 

Lesson to be learned:

An employer should make it clear that the termination clause in an employment contract applies when an employee is promoted. This expression of this intent should be in writing and should be clear and unambiguous. I recommend that an organization’s employment be reviewed by an employment lawyer every year or two. If your employment contract does not address this issue then think about doing so the next time it is reviewed.

 

For 30 years, Doug MacLeod of   the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

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