Common Employment Law Issues

Feb 23, 2016

I speak with human resources professionals every day about various employment law issues. This blog deals with five of the most common issues that arise in my practice.

Termination Pay

In many organizations, labour costs often account for more than 50% of the cost of doing business. Reducing head count is one way to reduce labour costs. I am often asked how to minimize the termination costs associated with an employee termination. There are many factors that an employment lawyer can take into account. In my experience, the more lead time you provide your employment lawyer about a potential termination the better. I have written about employee termination in earlier blogs.

Employment Contracts

Not all employment contracts are created equal. If you are using an employment contract you obtained on the internet then you likely are getting what you paid for. I strongly recommend that every new hire be required to sign a properly drafted employment contract with an enforceable termination clause. It is an extremely powerful management tool and can significantly reduce your termination costs. Given changes in statute law and the common law, I suggest that you review your employment contract every year or two. Did you know that Ontario courts have recently concluded that certain termination clauses are not enforceable and in wrongful dismissal actions employees are routinely claiming their termination clause is not enforceable? I have written about employment contracts in earlier blogs.

Accommodating Disabled Employees

Over the last 2 or 3 years, I would say this is the fastest growing area in employment law – particularly employees with mental disabilities. On January 1, 2016 the Employment Standards under the Accessibility for Ontarians with Disabilities Act took effect. Among other things, it requires certain employers to prepare individual accommodation plans for an employee who seeks accommodation. In addition, I am seeing many human rights complaints alleging discrimination on the basis of mental disability. .I have written about disabled employees in earlier blogs.

An Employer’s Obligations under the Employment Standards Act Vis a Vis the Common Law

Many small employers think the Employment Standards Act (ESA) sets out its only obligations toward employees. For example, an employer is required to provide a minimum amount of notice of termination to employees under the ESA but unless an employee has signed a contract with an enforceable termination clause then the employee is generally entitled to “reasonable” notice of termination which is almost always more than the ESA minimums. Similarly, an employer is entitled to temporarily lay off an employee under the ESA but unless the employee has agreed that an employer has the right to temporarily lay her off in her employment contract then this kind of layoff is generally an employee termination which requires notice of termination. I have written about the ESA in earlier blogs.

Harassment Complaints

There are two kinds of harassment complaints. One is harassment under the Ontario Human Rights Code, such as sexual harassment. The other is workplace harassment under the Occupational Health & Safety Act. There are different obligations and legal exposure for each type of complaint. Accordingly, I suggest a different response to each kind of complaint. I do however recommend that an employer take all “harassment” complaints seriously and investigate them promptly. I have written about harassment complaints in earlier blogs.

For more than 25 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]

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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