Navigating Ontario’s Employment Standards Act: Part II (Employment Standards Act Exemptions)

Apr 21, 2014

Navigating Ontario’s Employment Standards Act: Part II ( Employment Standards Act Exemptions )

Ontario’s Employment Standards Act (the ESA)

The ESA sets out the minimum terms of employment for most employees in Ontario. It is also full of exemptions. This article deals with five (5) of the Employment Standard Act exemptions.

Exemptions from Five Minimum Standards

Applicability – Generally, the Act applies to an employee and his or her employer if the employee’s work is to be performed in Ontario.

The Act does not however apply to federally regulated employers like the banks and the federal government. Ontario government employees are also exempt from many sections of the Act but not the notice of termination and severance pay provisions.

Overtime pay – Generally, an employer shall pay an employee overtime pay of at least one and one-half times his or her regular rate for each hour of work in excess of 44 hours in each work week.

Certain professionals however are not entitled to be paid overtime pay such as:  architects; dentists; lawyers; doctors; engineers, accountants, and veterinarians and students in these professions. In addition, a person whose only work is supervisory or managerial in character is not entitled to overtime pay. Local and highway drivers are only entitled to overtime pay after 50 and 60 hours, respectively.

Hours of Work – Generally, no employer shall require or permit an employee to work more than eight hours in a day or 48 hours in a work week unless the employer obtains approval from the Director of Employment Standards.

In addition to the above-noted professionals, and persons whose only work is supervisory or managerial in character, this minimum standard does not apply to funeral directors, and the superintendent of a residential building who lives in the building.

Public holiday pay – Generally, an employee is entitled to receive nine (9) paid public holidays and the pay is calculated as follows: the total amount of regular wages earned and vacation pay payable to the employee in the four work weeks before the work week in which the public holiday occurred, divided by 20.

An employee is not entitled the public holiday pay, however, if he or she fails, without reasonable cause, to work all of his or her last regularly scheduled day of work before the public holiday or all of his or her first regularly scheduled day of work after the public holiday.

Termination pay – Generally, an employee who has been continuously employed for three months or more is entitled to receive notice of termination (or pay in lieu of this notice). There are however numerous exemptions to this requirement including: (i) an employee on a “temporary” lay-off as defined in the Act; (ii) an employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer; (iii) an employee whose employment is terminated after refusing an offer of reasonable alternative employment with the employer; and (iv) a construction employee.

Additional Information about the ESA

For an overview of the ESA, click here.

For a discussion of when interns are entitled to be paid, click here.

For a discussion of how complaints are investigated under the ESA, click here.

For a discussion of how proposed amendments to the ESA could affect small businesses, click here.

Lessons to Be Learned

  1. Being aware of the Employment Standards Act exemptions that permit employers to legally avoid complying certain minimum standards. For example, did you know that IT professionals are exempt from the hours of work, and overtime pay sections of the Act?
  2. Some employees call in sick the day before or after a long holiday weekend to extend the weekend. An employer is not required to pay for the public holiday if the person was not really sick.
  3. There are MANY exemptions from the obligation to provide termination pay. An employer should always make sure that none of the exemptions apply before paying out termination pay.

If you have any questions about Employment Standards Act exemptions, or other employment standards, please contact our managing partner, Doug MacLeod, 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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