Top 10 employment law developments in 2019

By Torys’ Employment Practice

2019 brought many interesting legislative and judicial developments in employment law. We outline 10 of the key developments below.

1. Continued scrutiny of failsafe clauses in termination provisions

In Andros v. Colliers Macaulay Nicolls Inc., the Court of Appeal for Ontario found a termination clause to be unenforceable because it failed to provide entitlement to the minimum notice, severance, and benefits entitlements under the Employment Standards Act, 2000 (ESA)1. The Court put an emphasis on grammar and sentence structure in interpreting a failsafe provision. The fatal flaw in the provision was its placement in the middle of the termination clause, and how it split up the failsafe with the other options laid out in the termination clause. Because of this “split”, the clause was considered both ambiguous and offside the ESA. The Court took a consistent approach to its 2018 decision in Amberber v. IBM Canada Ltd., which emphasizes the importance of having the failsafe provision at the end of a termination clause in order for the failsafe to extend to the entire clause2. More recently, in Rossman v. Canadian Solar Inc., the Court of Appeal adopted the Andros approach to failsafe provisions and again emphasized the importance of clarity in termination clauses for employees during their moments of stress and uncertainty3.

2. No presumptive entitlement to discretionary bonus during notice period

In Manastersky v. RBC Dominion Securities, the Court of Appeal for Ontario set aside the damages awarded by the trial judge for a terminated employee’s lost opportunity to continue to earn compensation under a discretionary profit-sharing plan during the employee’s notice period4. The Court held that the trial judge erred by concluding that the employee was presumptively entitled to common law damages in respect of the plan merely because the payments under it had previously constituted a significant form of compensation to him. It held that the trial judge should have instead considered what the employee would have earned in respect of the plan had the employer not breached the contract of employment, which required a “case-specific” analysis of the employee’s eligibility under the terms of the plan during the notice period.

Using this case-specific approach, the Court upheld an employee’s entitlement to incentive plan compensation during the notice period in other cases, including in O’Reilly v. IMAX Corporation5.The Supreme Court of Canada is expected to consider whether employees are entitled to incentive plan compensation during the notice period in 2020, in Ocean Nutrition Canada Ltd. v. Matthews6.

3. Bona fide resignation restarts the clock on length of service—even when rescinded

In 2019, the Court of Appeal for Ontario clarified the consequences of “resignations”. In Theberge-Lindsay v. 3395022 Canada Inc., the Court held that the employer’s acceptance of the employee’s “unequivocal” resignation restarted the clock on length of service for the purposes of determining entitlements under the ESA, even though the employee subsequently rescinded her resignation during her notice period and continued her employment7. The Court determined that when the employee was subsequently terminated without cause in 2012, the employer was required to provide notice measured from the date on which the employee was rehired. In another case addressing resignations, Ariss v. NORR Limited Architects & Engineers, the Court of Appeal for Ontario held that the employee’s resignation (and waiver of length of service and corresponding entitlements) as a pre-condition for transitioning towards part-time hours did not restart the clock on length of service for the purposes of determining entitlements under the ESA8. The Court concluded that the resignation was an attempt to break the employee’s years of continuous service and thereby contract out of the ESA, contrary to s. 5(1). The distinguishing feature between the two cases appears to be that for a resignation to have the legal effect of ending the employment relationship such that the clock restarts for the purposes of determining entitlements under the ESA, both parties must intend for the resignation to be bona fide.

4. No common law tort of harassment

The Court of Appeal for Ontario held that the tort of harassment does not exist in Ontario. The Court’s decision in Merrifield v. Canada (Attorney General) marked the first time a Canadian appellate court weighed in on whether a common law tort of harassment exists9. In overturning the trial judge’s finding that there was a freestanding tort of harassment in Ontario, the Court found that no Canadian legal authority supported the existence of such a tort, nor did any foreign judicial authority, academic authority, or compelling policy rationale support the establishment of a new tort. The Court relied strongly on the “incremental” nature of changes to Canadian law, concluding that the facts did not “cry out” for the creation of a new tort. Rather, the Court recognized that the tort of intentional infliction of mental suffering is well established in Ontario and may be asserted as a basis for claiming damages for mental suffering, including in the employment context.

5. Viability of sexual harassment and discrimination class actions clarified

Appellate courts in Ontario, Québec and British Columbia provided some clarity around the viability of sexual harassment and discrimination class actions this year10.The majority of the Québec Court of Appeal overturned a first instance judgment granting certification of a proposed sexual harassment class action where the claim was brought against an individual rather than an organization. The Court distinguished the case from those brought against organizations. It held that resolution of the allegations would be individual and that without a common policy or practice, the claim could not be certified. In Ontario, the Court of Appeal upheld the lower court’s decision refusing certification, in part, where the claim appeared to seek enforcement of human rights legislation. Without an independent cause of action, the claims raise no viable cause of action. An exception to this trend is the British Columbia Court of Appeal’s decision in Lewis v. WestJet Airlines Ltd11.

In Lewis, a former flight attendant commenced a proposed class action on behalf of all present and former flight attendants seeking damages for breach of contract and systemic gender-based discrimination. The claim alleges that WestJet’s failure to properly investigate and respond to claims of sexual harassment amounts to a systemic breach of employees’ employment contracts, which incorporate the company’s Anti-Harassment Policy. The British Columbia Court of Appeal upheld the motion judge’s decision dismissing WestJet’s motion to strike. Unlike other proposed discrimination class actions, the claim against WestJet included a breach of contract claim in light of the terms of WestJet’s employment contracts which incorporated its Anti-Harassment Policy. As a result, the Court held that the plaintiffs’ claim fell within the jurisdiction of the courts as well as the Canadian Human Rights Tribunal. The Court reasoned there was no basis to infer that the Canadian Human Rights Act ousts the jurisdiction of the courts.

6. Changes to Ontario Employment Standards Act and Canada Labour Code

2019 saw multiple changes to both the ESA and the Canada Labour Code. A non-exhaustive sample is described below. For provincially-regulated workplaces, the most significant changes took place at the beginning of the year with the rollback of a number of the previous government’s modifications to the ESA. On January 1, 2019, Bill 47 (Making Ontario Open for Business Act, 2018) repealed or reworked many of the amendments that had been made under Bill 148 (Fair Workplaces, Better Jobs Act, 2017). For example, Bill 47 held the minimum wage to $14 per hour (but will impose its first annual inflationary adjustment to the minimum wage on October 1, 2020). Paid personal emergency leave was replaced with three annual unpaid leaves for personal illness, injury or medical emergency; bereavement; and family responsibility. Bill 47 also repealed a series of scheduling rules, though it did leave intact the three-hour rule created by Bill 148, which requires employers to pay three-hour wages to an employee who arrives to work for a regularly scheduled shift of three hours or more but has his or her shift cut short of three hours by the employer absent a stipulated reason. Further, Bill 47 eliminated Bill 148’s prohibition on paying employees who perform the same work differently based on employment status (e.g., full-time, part-time, permanent, temporary, or seasonal) and returned to workers the burden to prove they are misclassified as an independent contractor and are in fact an employee.

Changes to the Canada Labour Code came into effect on September 1, 2019 and affect federally-regulated employers and employees. Among other amendments, employees with five consecutive years of employment are now entitled to three weeks of vacation time and employees with ten consecutive years or more of employment are now entitled to four weeks of vacation time. New paid and unpaid leaves of absence include leaves for victims of family violence, court or jury duty, personal leave, and traditional Aboriginal practices, while sick (now “medical leave”), maternity and parental, bereavement, and reservist leaves were modified. Changes to scheduling rules include the requirement to provide employees with their work schedule in writing at least 96 hours before the start of the first shift, 24 hours’ required notice for shift changes, the right for employees to refuse overtime for family responsibilities, and unpaid breaks for medical reasons or nursing. Employees with six months of continuous employment now have the legal right to request flexible hours arrangements, and employers must respond in writing within 30 days of receiving one (with reasons for the decision if denying the request or granting it in part). Further, holidays may be substituted for another day provided the affected employee consents or 70% of all affected employees consent. Holiday pay calculations were changed to be at least 1/20th of an employee’s wages (excluding overtime) for the four-week period preceding the holiday. Finally, federally-regulated employers should update their workplace posting of Schedule II to the Canada Labour Standards Regulations, which has been updated to reflect the changes to the Canada Labour Code.

7. WSIAT bars civil action for claims arising from workplace mental stress

In Morningstar v. Hospitality Fallsview Holdings Inc., the Workplace Safety and Insurance Appeals Tribunal barred a civil action commenced by an employee against her former employer, claiming constructive dismissal and punitive, aggravated and/or moral damages, as a result of alleged bullying, abuse, harassment and a poisoned work environment12. The tribunal’s decision was premised on the fact that the relief sought was effectively a mental stress claim within the scope of the Workplace Safety and Insurance Act, 1997 (WSIA). While the WSIA does not generally bar an employee’s right to bring a wrongful dismissal action, in this case, the employee’s allegations were “inextricably linked” to her alleged workplace mental stress, and therefore within the scope of—and barred by—the WSIA.

8. Mandated employee whistleblower regime introduced under Bank Act

In December 2018, Bill C-86, Budget Implementation Act, 2018, No. 2, received royal assent. Bill C-86 introduces significant changes to the Bank Act, including: a) a new obligation on banks to implement a whistleblowing program for their employees (and to ensure that employees of third parties who sell bank products have a whistleblower program available to them as well); b) a prohibition on disciplining or otherwise retaliating against whistleblower employees; and c) a requirement to keep confidential the identity of any whistleblower. Throughout 2019, banks have been considering how to amend their policies and procedures in order to comply with the amendments. The amendments raise several issues from an employment and investigative perspective, including:

  • Consistency in approach: How will banks ensure they learn about (and have an opportunity to address, in a consistent manner) whistleblower reports that are made to third parties who sell bank products (as noted above, such third parties are required to have their own whistleblower programs)?
  • Investigation procedures: In light of the strict confidentiality obligations (which prevent disclosure of the identity of the whistleblower), how will banks investigate reports of wrongdoing involving two parties where there are no other witnesses (i.e., reports about supervisors who are pressuring salespersons to sell bank products)?
  • Employee confidentiality obligations: What amendments must be made to bank policies, employment agreements, confidentiality agreements and releases in order to ensure employees are not prohibited from making whistleblower reports in accordance with the Bank Act?

9. Shareholders’ agreement governs employee’s share rights on termination

The Ontario Court of Appeal confirmed in Mikelsteins v. Morrison Hershfield Limited, that the terms of a shareholders’ agreement govern an employee’s rights with respect to his or her shares on termination, not the common law13. The Court concluded that the terminated employee’s entitlement to damages for wrongful dismissal was distinct from his contractual entitlements respecting his shares. The employee’s entitlement to compensation in respect of his shares should not, therefore, be calculated at the end of the notice period, but rather, in accordance with the shareholders’ agreement. In this case, the employee was entitled to be paid the fair value of his shares as of the transfer date, which was 30 days from the day he was notified of the termination of his employment.

The Court of Appeal also rejected the employee’s alternative argument that the shareholders’ agreement termination provisions violated section 60(1)(a) of the ESA and were therefore void. Section 60(1)(a) of the ESA provides that “[d]uring a notice period…the employer…shall not reduce the employee’s wage rate or alter any other term or condition of employment”. The Court found that the shareholders’ agreement did not alter any term or condition of employment, noting that this argument similarly conflated the employee’s entitlement to reasonable notice and his contractual entitlements under the shareholders’ agreement.

10. SCC to rule on enforceability of arbitration clauses in employment agreements

In Heller v. Uber Technologies Inc., the Ontario Court of Appeal held that if Uber drivers are found to be employees, the mandatory arbitration clauses in their agreements with Uber impermissibly contract out of the ESA and are thus unenforceable14. The Court’s decision was premised on its determination that the arbitration clause eliminates the right of an employee to make a complaint to the Ministry of Labour, which the Court determined was an “employment standard” under the ESA. For that reason, the Court concluded, the clause violated section 5(1) of the ESA which prohibits contracting out of the statute. Uber obtained leave to appeal to the Supreme Court of Canada.

The Supreme Court of Canada heard Uber’s appeal in November 2019 and its decision is pending.

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1 Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679.

2 Amberber v. IBM Canada Ltd., 2018 ONCA 571.

3 Rossman v. Canadian Solar Inc., 2019 ONCA 992.

4 Manastersky v. RBC Dominion Securities, 2019 ONCA 609.

5 O’Reilly v. IMAX Corporation, 2019 ONCA 991.

6 Ocean Nutrition Canada Ltd. v. Matthews, 2018 NSCA 44.

7 Theberge-Lindsay v. 3395022 Canada Inc., 2019 ONCA 469.

8 Ariss v. NORR Limited Architects & Engineers, 2019 ONCA 449.

9 Merrifield v. Canada (Attorney General), 2019 ONCA 205.

10 See for example: Rivers v. Waterloo Regional Police Services Board, 2019 ONCA 267 and in early 2020: Rozon c. Les Courageuses, 2020 QCCA 5.

11 Lewis v. WestJet Airlines Ltd., 2019 BCCA 63.

12 Morningstar v. Hospitality Fallsview Holdings Inc., 2019 ONWSIAT 2324.

13 Mikelsteins v. Morrison Hershfield Limited, 2019 ONCA 515.

14 Heller v. Uber Technologies Inc., 2019 ONCA 1.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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