Out of hundreds of employment law cases published by Ontario Courts each year, only a handful will set precedents that will be cited for years into the future. In 2021, we saw the Courts continuing to apply legal concepts and policies which only surfaced because of the COVID-19 pandemic. Conversely, more “precedented” issues in employment law such as wrongful dismissal, overtime pay, and the interpretation of employment contracts were still being litigated and decided by the courts.
The following top employment cases of 2021 have either interpreted a new legal issue or added important clarity to existing legal principles within employment law. All the cases listed below have the potential to significantly impact the rights of employees and the duties of employers in Ontario.
In 2021, Covid-related layoffs remained one of the hottest topics in employment law. On March 19, 2020, the Ontario Employment Standards Act, 2000 (ESA) was amended to include infectious disease emergency leave (the IDEL), retroactive to January 25, 2020. Among other things, IDEL prevents employees from complaining that they have been “constructively dismissed” to the Ministry of Labour. The IDEL regulation declares that workers who were laid off shall not be deemed to have been laid off, but instead are on emergency leave.
The courts remain divided on whether legislations such as IDEL bar employee’s common law constructive dismissal claims following layoff. The following cases demonstrate the unsettled state of COVID-related employment law.
In Ristanovic, Justice Dunphy of the Ontario Superior Court found that two employees, aged over 60 with nearly three decades seniority, were entitled to 22 months’ notice following their temporary layoff in February 2020, at the beginning of the pandemic.
In Coutinho, Justice Broad found that the IDEL regulation does not take away a laid-off employee’s common-law right to sue for constructive dismissal.
Shortly after the decision in Coutinho, Justice Ferguson rejected the same argument in Taylor and held that the IDEL disarms employees of the common-law right to sue for constructive dismissal.
Overall, in IDEL case, the Courts’ decisions find in the employee’s favour. While Taylor stands out, it is not binding but merely persuasive on other judges of the Superior Court, and may be eclipsed by many other cases which reached the opposite conclusion. In fact, two days after the Taylor decision, the Court refused the employer’s motion for leave to appeal the judgment in Coutinho.
Unauthorized Overtime Is Not Unpaid Overtime
In Ali, Monkhouse Law’s Andrew Monkhouse successfully established that an employer may be liable to pay overtime even if it was not aware the work was occurring, so long as the employer reasonably ought to have known the employee was working overtime, and fails to take reasonable steps to prevent the employee from working those hours. Based on phone records, the employer’s compensation policies, and employee testimony, the Court held the evidence was sufficient to demonstrate that the employer ought to have known the employee was working overtime.
Requirements for Establishing Job Abandonment
In Nagpal, the Ontario Court of Appeal affirmed the lower court’s finding that job abandonment requires clear, objective evidence of an employee’s intention to no longer be bound by the employment contract. In this case, the employee failed to return to work after his short-term disability benefits were denied but indicated that he intended to return to work. The Court held in favour of the employee and agreed that the employee’s failure to return to work did not amount to voluntary resignation.
Sophistication, Legal Advice, and Negotiation Does Not Affect the Enforceability of Termination Clause
Livshin established that legal advice, sophistication, and negotiation are irrelevant to the enforceability of a termination clause. If a termination clause is ambiguous in its compliance with employment laws, it is simply unenforceable.
In Livshin, the Court dealt with an employment contract dispute between two businesses, both owned by sophisticated businesspeople. Both parties were represented by lawyers and received legal advice prior to signing the contract. The employer argued that it should be allowed to rely on the otherwise invalid termination provisions in the contract because the employee was sophisticated and received legal advice. The Court rejected the employer’s argument, concluding that even in the case of a particularly sophisticated employee, who might be seen as balancing the scales of a typically power-imbalanced relationship, this is no reason to permit an employer to draft and rely on clauses that contravene the ESA.
A little over a week after the decision in Livshin, Justice Black in Campbell-Givons issued a similar decision. Justice Black reiterated the Court’s position that analyzing the employee’s “sophistication” when determining the enforceability of a termination clause is problematic because “a termination clause cannot comply with the ESA for some employees but violate the ESA for others. It either violates the ESA or does not, and it either enforceable or not” (para 46).
Workers’ Compensation Legislation Does Not Bar Harassment-Related Dismissal Claims in Ontario
In Morningstar, the Ontario Divisional Court overturned the Workplace Safety and Insurance Appeals Tribunal (“WSIAT”)’s previous decision regarding whether an employee would be statute-barred from pursuing a constructive dismissal claim in the Superior Court if the facts of the case stemmed from an injury linked to workplace harassment. The Court determined that, in the aforementioned circumstances, employees can pursue constructive dismissal and other related damages in the Superior Court.
Employer Actions in Conducting a Wrongful Dismissal May Invalidate a Termination Clause
Humphrey established that the employer’s bad faith may invalidate the termination clause in the contract.
In Humphrey, the employee’s request for a salary review led to the CEO of the company suspending her two weeks. At the end of the suspension period, the company would decide whether to terminate or demote the employee to a non-executive position. The employee responded to the Suspension Letter through her lawyer, indicating that she would not be accepting a demotion. The employer then terminated the relationship on a with-cause basis citing alleged serious performance failures, despite never having previously engaged in formal performance management with the employee. The employee sued for wrongful dismissal. The employer abandoned its cause allegations almost one year after asserting them, claiming that the evidence of the employee’s alleged misconduct had been destroyed in accordance with the company’s document retention policy and sought to rely on the without cause termination provision in the Employment Agreement instead.
The Court found that employer’s conduct during dismissal was so significant and egregious that it demonstrated an intention to no longer be bound by the employment agreement. As such, the Court held the employer to be disentitled from relying on the “without cause” termination provision.
A contract is repudiated when a party to the contract breaches a fundamental term or condition of the agreement. In Perretta, the Court found that the employer’s actions post-termination demonstrated an intention to no longer be bound by the terms of the employment contract, and therefore the employer could not later rely on the contract to limit the employee’s entitlements at termination.
In this case, the employer insisted that a dismissed employee execute a release in favour of the employer prior to receiving contractual termination entitlements. Although the employer later claimed the requirement of a release to be a mistake, the Court held that the employer’s conduct amounted to a repudiation of the employment contract, which rendered a termination clause unenforceable.
The Distinction Between Damages Under Employment Agreements and Under Shareholder Agreements in Ontario
In Mikelsteins, the Court of Appeal confirmed its earlier 2019 ruling, which distinguished between shareholder agreements and employment agreements.
In this case, the employee’s compensation package included a shareholder agreement that entitled him to purchase company shares and receive an annual share bonus. Under the agreement, upon dismissal the employee would be deemed to have sold his shares to the company. After his dismissal, the employee received compensation for the shares. However, the employee argued that he was entitled to the value that the shares increased and the annual share bonus, which occurred over the 26 months after his termination.
The Court of Appeal disagreed with the employee. It found that the shareholders’ agreement was a contract, but not one governed by the common law developed specifically around employment contracts. The employee had agreed to a contract where the deemed sale of his shares was triggered by notice of termination, a specific point in time, and not at the end of the notice period. Mikelsteins confirmed that unlike an employment agreement or equity compensation plan, a shareholder agreement need only state that equity-related rights end upon termination to avoid wrongful dismissal damages.
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