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Month: January 2020

HOW TO RESTRICT A DEPARTING EMPLOYEE FROM TAKING CLIENTS FROM BUSINESS

by Stacey R. Ball| | Employment Law

Taking Clients From Former Employers

A common issue when employees leave a company for a competitor or start their own business is whether they can take clients with them. Soliciting clients from one’s former organization can be highly irritating to the employer.

Fortunately for former employers, provisions in the employment contract can prohibit the solicitation of clients should the employee move on to another company at a later time. If there is no contractual provision in the agreement regarding the solicitation of clients, the employer can be at risk of losing its prized assets. However, the non-solicitation clauses should be as reasonable as possible, otherwise, they are vulnerable to be considered unenforceable by a court.

 Use Restrictive Covenants Clauses in the Employment Contract

While the courts seek to protect the employers right to its clients, departing employees are also protected in terms of maintaining their career. Employees holding non-managerial and who are not “key employees” crucial to your business are allowed to make their services available to former clients.

However, restrictive covenants could be drafted into the employment contract to show exactly what a departing employee can or cannot do. Our blog article, What You Should Know About Non-Solicitation and Non-Competition Clauses, fully discusses such restrictive covenants clauses in the employment context with their usage and enforceability.

Fiduciaries and Common Law Duty of Good Faith and Fidelity

Employees may be considered fiduciaries if they have considerable control and responsibility over the former employer. These types of employees have the ability to affect their former employer’s business because of the role they had with the former employer. They were likely entrusted with more important aspects of the organization that could be detrimental to the employer should the employee use the information or take the clients to another company. Simply, the departing employee has a responsibility to put the interests of the former employer of their own interests. This responsibility or strict obligation can last long after leaving their former employer due to the serious harm they could cause the organization.

Post-Employment Fiduciary Obligations

Fiduciaries obligations continue after employment has ended and do not cease merely because of resignation or dismissal by the employer. It is stated that fiduciary obligation was a larger more exacting duty than simply the duty to respect the former employer’s trade secrets and the confidentiality of its customer lists. While ordinary employees only have a duty to respect trade secrets and not property such as customer lists, the fiduciary has a duty not to direct solicit the former employer’s customers for a reasonable period of time. As a general rule, when it comes to former clients, a fiduciary must wait until they come to him or her of their own initiative. A breach of fiduciary obligation after termination of the employment relationship will be actionable even if the employer has not suffered damages

What is Considered a Misuse of Confidential Information?

Employees are prohibited from using confidential information from their employer, at their new place of work. A trade secret is an example of confidential information. For instance, an employee from soft drink company A cannot take the secret recipe to soft drink company B. This is stealing an employer’s confidential information. The recipe did not belong to the employee. It belonged to the employer.

Most employment contracts will have provisions regarding restrictions on using confidential information outside of the company. This restriction is considered to be indefinite.

How to Secure Your Business and Your Employee From the Legal Issue and Court

The first step an employer can take to secure their business is to ensure the relevant issues are dealt with in the employment contract. Employers will typically have provisions in the employment agreement that deals with the following:

  1. Employees competing with their employer;
  2. Soliciting clients from their employers; and
  3. Misusing the employers’ confidential information.

However, employers (and employees) should be aware of the limitations of each of the contractual provisions.

Provisions in the employment contract that deals with an employee competing with their employer are known as non-competition clauses. An employer may include this type of clause in the employment agreement. That being said, non-competition agreements are pre-emptively unenforceable in court. They are seen as a restriction of trade which is contrary to public policy. A non-competition agreement may be found to be enforceable only if the employer would be extremely vulnerable to competition from the employee (ex., If they are a fiduciary) and if it is properly limited in scope. This refers to what specific activities, the time period they cannot compete for, and the geographic scope of the clause. It is impossible to indefinitely prevent a former employee from competing.

Non-solicitation provisions are also common in employment agreements. These are important to include in the contract from the outset, especially if the employee does not owe a fiduciary duty to the employer. Similar to non-competition clauses, non-solicitation provisions are presumed to be unenforceable. However, it is easier to enforce a non-solicitation agreement based on the reasonableness in comparison to non-competitions.

Lastly, employment agreements will also commonly touch on the misuse of confidential information. These provisions will restrict the employee from using confidential information, like trade secrets, outside of the company. Unlike non-competition provisions, restrictions on the use of confidential information is indefinite.

If an employee breaches the terms of the agreement on the above issues, employers do have legal recourse in the form of an injunction. An injunction will require the employee stops what they are doing until the employer’s lawsuit goes through the various stages of litigation.

A successful injunction must satisfy the test:

  1. There is a serious issue to be tried;
  2. There is a threat of irreparable harm to the former employer if the prohibited activity continues;
  3. The balance of convenience favours the employer — which party will suffer the most harm from either the granting or refusing of the injunction.

It is important for employers to understand the limitations they can put on their employees who may leave the company at a later date. If an employer is unsure of how to secure their business from potential legal issues, please contact Ball Professional Corporation to receive the quality advice you need.

A Case in Point

 In the case of Computer Enhancement v J.C. Options, 2016 ONSC 452, two former employees were ordered to pay their employer $132,581 in damages for breach of contract and fiduciary duties. In this case, the employees resigned and began soliciting clients of the employer. The court held that both employees, one who was a junior salesperson and the other who was a “key employee” with fiduciary responsibilities breached their common law duty to not solicit clients of the employer.

Unless the employee is found to be a key employee with a fiduciary duty, solicitation may occur if there is no contractual clause limiting such action.  Ultimately the case reveals the importance of requiring salespersons to sign employment agreements with enforceable non-solicitation or non-competition clauses and shows the importance of keeping track of lost revenue when former employees have solicited your clients.

In determining whether an employee is a fiduciary, the court will analyze the employee’s position and go beyond mere job titles. This is a complex matter. It is strongly suggested that you should seek legal advice in this aspect. If you come across any legal issue in connection to the solicitation of clients from previous employers, Top Toronto employment lawyer Stacey Ball can help you explore your legal options. Please contact our office at 416-921-7997 extension 227.

Termination for Poor Performance

by Stacey R. Ball| | Employment Law

Guide on How to Terminate an Employee for Poor Performance

Under the Canadian jurisprudence, the threshold of terminating an employee for just cause due to their poor performance is extremely high. This often results in an unfortunate position for some employers where they fail to establish just cause for termination. They not only have to pay severance packages to the terminated employee but also aggravated damages in some cases. In this blog, we would like to address the issue of terminating an employee for poor performance.

Employers will sometimes terminate their employees for poor performance. From the employers perspective, poor performance can constitute “just cause” dismissal. Despite just cause termination, the threshold to establish “just cause” for poor performance is high under both the Employment Standards Act and under the common law. In some cases, termination for just cause when none exists may allow a judge to order the employer to play aggravated damages in addition to termination pay.

To establish poor performance or incompetence, the employer must show that the employee fails to perform the essential conditions and duties of their job and that this has occurred on an ongoing basis. Isolated incidents of poor performance will not justify “just cause” dismissal.

Employers who want to establish just cause for poor performance must ensure that they have established objective standards of performance. Courts will also consider mitigating factors such as work volume, whether the employee hired was experienced in the job and whether or not training was provided.

If the employer finds there are further issues of performance despite training being given, progressive discipline and warnings must be given prior to termination. Warnings should be in writing and should include concerns related to performance and/or consequences that may occur if performance issues are not rectified. Support for improving should also be provided to the employee with a reasonable time limit for improvement. This will allow for an objective standard to be created and will show the court that the employer took active steps to help the employee rectify their performance issues. If the employer finds that the employee has failed to correct their issues within the required time frame, courts will look positively to the objective performance standards created by the employer in justifying termination.

In Cottrill v. Utopia Day Spas and Salons Ltd. 2019 BCCA 26, the plaintiff was a skincare specialist. The defendant began a review of the plaintiff’s work and found out that she was underperforming. The defendant took active steps to warn the plaintiff about her performance issues and gave her three months to improve. If she did not improve, she would be terminated. The plaintiff over the course of three months significantly increased sales and established a new client base. Despite her improvement, the defendant terminated her “for cause” because she had not met all performance standards and because the defendant felt she had attitude problems.

The defendant argued that the plaintiff failed to meet all performance standards despite the warning while the plaintiff argued that the standards set to determine her performance were not a reasonable opportunity for her to improve. The court stated that failing to meet all performance standards does not justify “just cause” dismissal in all circumstances. Ultimately, the court held there was no just cause and that it was unreasonable of the employer to establish new performance standards it had not previously required of the plaintiff.

The court also noted that the defendant failed to provide a reasonable and fair assessment of the plaintiff’s performance and that the employer could not rely on vague statements of bad attitude to dismiss the plaintiff. Objectively, the plaintiff met her performance criteria and increased sales and this entitled her to damages in lieu of notice as well as aggravated damages for the defendant’s failure to consider her enhanced performance during the three months and for the defendant’s breach of the duty of good faith.

Progressive Discipline and Warnings Needed Prior to Termination

When it comes to terminating an employee who has failed to achieve their performance goals, immediate dismissal of the employee is often unwarranted. Before finding termination for cause, courts often require employers to show that they have taken extra steps to notify employees of their shortcomings and give them reasonable amount of time to rectify them. Therefore, progressive discipline and warnings directed at these employees are needed prior to termination. It is advisable for employers to follow the following steps before terminating an employee for poor performance so that they could avoid liability issues in wrongful dismissal claims.

Few Steps to Follow Before Termination:

a. Performance Standards Created and Expectations Clearly Communicated

Employers must formulate a clear performance policy at the workplace. When an employee is found to have an ongoing work performance issues, employers should clearly communicate this issue to the employee and notice them of workplace performance expectations.

It should be pointed out to these employees that a progressive discipline policy has been established and corrective actions are expected of them. If they continue to fail to achieve these goals, termination will take place. However, employers should bear in mind these improvement goals should be reasonably attainable when they put the employee on a Performance Improvement Plan (PIP).

b. Documentation is the Key

Employers should document any feedbacks or coaching that have been offered to the employee. Any written warnings issued to the employee should be put on the employee’s record. These carefully documents can be instrumental in defending a wrongful dismissal claims when the terminated employee brings the issue to the court.

c. Be Consistent in Applying Performance Standards and Providing Feedbacks

Employers should be consistent in applying performance standards to employees so that it will not be considered as arbitrary by the court. It is the same case when it comes to providing feedbacks to the employees who are on the PIP.

If an employee’s performance is consistently substandard even when they are on the PIP, make this clear to the employee. If the employer fails to warn the employee of their substandard performance, this could be construed as condonation by the court, which can bar the employer from any attempt to terminate this employee for cause in the future.

d. Allowing the Employee to Have Reasonable Amount of Time to Improve

Employers should not jump at the opportunity to terminate an employee for cause if their performance remains substandard. They should give the employee reasonable amount of time to improve their work performance.

Employers should issue further warnings and document them if the employee fails to improve after a certain amount of time. Employers should alert the employee of the danger associated with consistent substandard performance that could lead to termination of their employment. There is no fixed number as to reasonable amount of time. It is case specific.

 Duty to Accommodate

Before terminating an employee for poor performance, employers should also fully consider their duty to accommodate under relevant human rights legislation. If the employee’s performance issue is related to a prohibited ground of discrimination such as age or disability, it is essential for the employer to accommodate such an employee to the extent of hardship before it considers any termination of the employment.

If you are seeking to terminate an employee for poor performance, contact top Toronto employment lawyer, Stacey Ball, to ensure your organization has engaged in the requisite steps to establish an objective standard. If you are an employee who has been terminated on this basis, our office can help you challenge your employer’s decision. Call 416-921-7997 extension 225 to book a consultation.

Employment Insurance Entitlements after Termination

by Stacey R. Ball| | General

Employees are usually terminated with two classifications. Either the termination is with cause or without cause. The latter is usually due to a restructuring or lack of work.

EI was instituted for the purpose of ensuring that terminated employees are covered until their next job. If your termination of employment was without cause, ensure that you apply to collect employment insurance (“EI”) benefits through Service Canada’s online portal.

How Can I be Eligible for EI?

To be eligible for EI benefits, you need to meet the following criteria:
a. You were employed in insurable employment;
b. You lost your employment through no fault of your own;
c. You have been without work or pay for at least seven consecutive days in the last 52 weeks;
d. You have worked for the required number of insurable hours in the last 52 weeks or since the start of your last EI claim (whichever is shorter);
e. You are ready, willing and able to work each day;
f. You are actively looking for work.

When Should I Apply for EI?

You should apply for EI as soon as you stop working. If there is a delay beyond four weeks, you may lose EI benefits.

Should I Still Apply for EI if I am Terminated with Cause?

If you had a “with cause” termination, obtaining EI can be difficult. However, despite this, it is best to apply given the high threshold to establish a just cause termination. Under the Employment Standards Act, 2000 (“ESA”), the threshold to terminate for just cause must show that the employee engaged in “wilful misconduct”. This occurs where an employee has exhibited serious wrongdoing or has breached trust and loyalty with their employer.

After you apply for EI following a termination due to misconduct, a government agent will call the employer to gather information about the reasons for the termination. The employer will be obligated to justify why they terminated the employee which may require evidence of a breach of contract, employment condition or policy.

Can I Apply for EI if I Quit My Job?

If you resign from your employment, you are not entitled to receive EI benefits unless there was provable just cause for leaving your employment. These may constitute a constructive dismissal or incidences where there was harassment, discrimination or dangerous working conditions.

What is a Record of Employment (ROE)?

A ROE provides information on your employment history. The most common way to prove that you lost employment through no fault of your own is through your ROE.

Employers must issue an ROE each time an employee experiences an interruption in earnings. This is defined as the period of time when an employee has had or is anticipated to have seven days with no insurable earnings from their employer.

What are the Common Reasons for Issuing an ROE? What does Service Canada Do with the Information on the ROE?

Block 16 of the ROE allows the employer to state a reason for why they are issuing an ROE which will either be because they terminated your employment or laid you off.

If you lost your job due to a “Shortage of Work” or experienced a temporary lay-off, Code A will be used. If you were terminated, the employer will use Code M for a dismissal in Block 16.

In Block 18, your employer will specify if your termination was for cause or without cause. A description is not necessary. However, if your ROE is marked with Code M, Service Canada will likely require that you fill out a survey about your termination allowing you to provide reasons. Service Canada will then contact the employer to determine the correct code. If your application for benefits is denied, you should file a Request for Reconsideration within 30 days. This is another chance for you to give reasons why your termination does not amount to wilful misconduct.

What is the EI rate? How long can I receive EI Benefits?

The basic rate for calculating EI benefits is 55% of your average insurable weekly earnings for the previous year. As of January 1, 2021, the maximum annual insurable earnings for which you can obtain EI benefits is $56,300. This means the maximum benefit you can receive is $595 per week. You can receive benefits from 14 weeks to a maximum of 45 weeks depending on the unemployment rate in your region at the time you file your claim and the amount of insurable hours you have worked during the last 52 weeks or since your last claim, whichever is shorter.

If you are experiencing issues in connection to your EI entitlements after termination, Top Toronto employment lawyer, Stacey ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Can Your Employer Reduce Your Salary?

by Stacey R. Ball| | Constructive Dismissal

Employers cannot alter a fundamental term of your employment without first letting you know. If they do, they put themselves at the risk of being faced with a constructive dismissal lawsuit. An employee’s salary is a fundamental term of the employment relationship. If your pay is reduced or significantly altered, you may choose to leave and claim that you have been constructively dismissed.

The remedies available to a constructively dismissed employee are common law notice. This is payment in lieu of income you would have received had you worked during the notice period. Several factors such as age, your credentials, position and continuity of service will be looked to by the courts when deciding how much damages they will award you.

In some rare circumstances, a unilateral reduction of an employee’s salary will not amount to a successful constructive dismissal lawsuit. Company’s that are facing financial hardship and who reduce the salaries of employee’s may be able to defend against these types of claims.

If your employer has significantly reduced your salary, contact top Toronto employment lawyer, Stacey Ball, to help you initiate your constructive dismissal claim. We can be reached at 416-921-7997 extension 227.

Can Employers Change Your Work Schedule?

by Stacey R. Ball| | Constructive Dismissal

Different workplaces have differing expectations of an employee’s schedule of work. An employee who has been with a company for longer may be well adjusted to their schedule after they are told by their employer that changes to the work schedule are about to come. Do employer’s have a legal right to change work schedules?

Employers are permitted to determine hours of work and to make some limited alterations to your schedule. Workplaces are not fixed and employers may require their employee’s to work beyond regular working hours. However, if your employer makes a major change to your schedule without your consent, a constructive dismissal lawsuit may be your remedy. This will occur in circumstances where your employer requires you to work evenings and weekends regularly and where such information was not previously disclosed to you at the start of your employment.

If you refuse to accept the altered changes to your work schedule, your employer may terminate you. If this occurs, you can get a severance package. Even if you are not terminated, you can resign from your position and demand a fair severance package, as if your employment was terminated.

It is ultimately the employee who has the onus of establishing that they were constructively dismissed from their employment. Each case has its own specific facts and court decisions are based on whether the employee had other obligations or faced circumstances where changes in hours of work were onerous.

If your employer has altered your hours of work or is now requiring you to work well into the evenings and on weekends contact top Toronto employment lawyer, Stacey Ball, to set up a consultation. We can be reached at 416-921-7997 extension 227.

Bringing Claims After An Executed Release

by Stacey R. Ball| | Severance Packages & Pay Lawyer

After a termination has occurred, employers are quick to offer their dismissed employees a full and final release to be signed whereby the terminated employees agrees to accept the terms of the release and withdraws the right to bring any further action against the employer. Employers after receiving these executed releases will remain content for approximately two years that they are safe. However, there are some instances whereby an employee can still bring a court action even if they signed a release.

One case in point is the Ontario decision of Swampillai v. Royal & Sun Alliance Insurance Company of Canada, 2018 ONSC 4023 whereby the Ontario Superior Court dismissed the employers motion for summary judgment for the Plaintiff’s claim for LTD benefits. The Plaintiff was employed by the Defendant and went on LTD. After some period of time, the Defendant terminated him and denied him his LTD benefits. The Plaintiff signed a termination package that had a full and final release that denied the Plaintiff any claim for LTD benefits. Just short of two years, the Plaintiff commenced an action.

Interestingly, the claim was not for wrongful dismissal but for LTD benefits. As any Defendant would do, a motion to dismiss the claim was brought on the basis that a full and final release had been signed. The motion commenced and the legal issue for the court was whether there was any equitable or legal basis on which the claim may proceed. In this case there was a doctrine of unconscionability. If the release was unconscionable, especially in regards to the LTD benefits, then the courts will void the release. To set aside the transaction the courts looked to the doctrine of consideration and whether consideration was given by the parties to uphold the agreement. If consideration was inadequate given the bargaining power of the parties, the agreement would be set aside.

To find unconscionability, four criteria must be present: a. there must be a grossly unfair and improvident transaction; b. the victim must have had a lack of independent legal advice or other suitable advice; c. there must be an overwhelming imbalance in bargaining power caused by the victim’s ignorance or illiteracy or disability and d. the other parties knowingly took advantage of that vulnerability.

Ultimately the court found that not only did the Plaintiff waive his right to a wrongful dismissal lawsuit by accepting a severance package, he also waived his right to LTD benefits to which he received no valid consideration for that part of the release. The courts found the terms of the contract to be unfair such that they would overturn the release. Furthermore, the Plaintiff had not received legal advice and the court commented that the Defendant failed to bring to the Plaintiff’s attention that he would be giving up his right for LTD benefits if he signed the release. There was an extreme disadvantage and unfair bargaining power between the parties which the Defendant took deliberate advantage of.

The lesson here for employers is that if there are any suspicions of unconscionability rising to the legal threshold, your full and final release may not in fact protect your organization from future claims. Ensure that you bring such clauses to the attention of dismissed employees. If you are an employee, seek legal advice from your wrongful dismissal lawyer as to what you are signing. Top Toronto employment lawyer, Stacey Ball can help you ensure you are getting a fair package. Contact us or call at 416-921-7997 extension 227.

No Interruption in Employee’s Length of Service Despite “New” Corporate Structures

by Stacey R. Ball| | Employment Contracts

The Ontario Court of Appeal released its decision and confirmed that courts will overlook the differing corporate structures utilized by companies to skirt around an employee’s length of service and continuity in employment. Call Employment contracts lawyer for consultation.

Facts

In Theberge-Lindsay v. 3385022 Canada Inc. (Kutcher Dentistry Professional Corporation), 2019 ONCA 469, a dental hygienist was employed with the defendant for 19 years approximately until she was dismissed without cause. During the employment relationship, the plaintiff was asked to sign several different employment contracts with two separate corporate entities. All of the contracts limited the plaintiff’s rights on termination to statutory minimums under the Employment Standards Act, 2000 (the “Act”). The defendant altered the corporate structure of his practice in “various ways to minimize income taxes and split income”, which included using a management company and afterwards a professional corporation.

About 12 years into her employment, the plaintiff provided her notice of resignation to the defendant, which was to take affect three months later. However, about one month into her notice of resignation, she changed her mind and both parties agreed that she would continue working for the defendant. When the plaintiff’s employment was terminated in 2012, the defendant only gave her one week’s pay. This was consistent with the Act if the plaintiff was seen as an employee with one year of service working under the new professional corporation, which had an employment agreement, executed in 2011.

Trial Decision

The trial judge concluded that at all times and for the totality of the employment relationship, the plaintiff was employed by the defendant. She worked at the same location, performing the same job duties and was managed by the defendant for the entire 19 years that she was employed. The court also determined that neither of the employment contracts was enforceable, as fresh consideration did not exist when the contracts were given to the plaintiff. The court noted that the plaintiff was simply being given “continuing employment”. Lastly, the court noted that the plaintiff’s resignation did not impact her continuity of service, as there was no actual break in service. A 15-month notice period was awarded to the plaintiff.

Ontario Court of Appeal

The defendant appealed the decision and argued that the trial judge failed to take into account the plaintiffs resignation. The ONCA upheld the trial judge’s decision and the finding that the 2011 contract was not binding on the plaintiff. Despite this, the ONCA did agree with the defendant that the plaintiffs 2005 resignation was a break in service (even though there was no real gap in the plaintiff’s employment).

The Court determined that the plaintiff’s offer to continue being employed after she had initially resigned and the defendant’s acceptance was valid consideration for the new employment contract signed in 2005. As a result, the plaintiff’s service was to be calculated per the terms of the 2005 contract, which ultimately limited her notice entitlements to statutory minimums. The 15-month award was thus reduced to 7.5 weeks.

Takeaway

This case is a reminder for employer’s that the total length of service will be considered in calculating an employee’s notice period, unless there is an obvious break in service or a valid new contract (with fresh consideration) that limits common law notice. These principles apply even if the corporate structure has been altered, but job duties have remained substantially the same. It should be noted that even if an employee signs a new employment contract, the agreement could be void for lack of consideration. Employees should also be reminded that a resignation would be viewed as a break in service in the employment relationship, even if in actuality there were no break. It is best practice if you have a “new” employment relationship, to get confirmation in writing from your employer that prior service is recognized.

If you are concerned about breaks in service in your employment relationship, contact top Toronto employment lawyer, Stacey Ball to book a consultation. We can be reached at 416-921-7997 extension 227.

Bonus Payments During Notice Periods

by Stacey R. Ball| | Severance Packages & Pay Lawyer

In the case of Singer v. Nordstrong Equipment Limited, 2017 ONSC 5906, the court held that while the Plaintiff was able to receive payment of his bonus up to the termination date, he was ineligible for bonus for the 17-month common law notice period. The Plaintiff appealed the denial of his claim for bonus for the 17-month notice period and the Defendant appealed the notice period arguing that the actual notice period should be 12-15 months. Stacey Ball to ensure a fair severance package.

As part of his compensation scheme, the Plaintiff was to receive a yearly bonus of 5% of the Defendant’s yearly pre-tax profits. The Defendant argued that the Plaintiff’s entitlement to bonus and the amount was a matter of “pure discretion”. There was no employment contract that was signed and while there was a policy document that gave information on how bonuses were to be paid, the document did not restrict the Plaintiff’s entitlements to bonus on termination.

At trial, the court agreed with the Plaintiff that bonus was not solely discretionary, as the Defendant had claimed. Despite this, the court did not award damages in lieu of bonus for the notice period given the “purpose” of which bonus was awarded was to “maximize efforts to generate profits.” Thus, the Plaintiff could not have had a reasonable expectation to be given bonus for 2017 or 2018.

The Ontario Court of Appeal (“ONCA”) upheld the 17-month award and gave the Plaintiff damages in lieu of his bonus during this period. The trial decision is interesting in that it was a departure from the principles set out of Paquette v. TeraGo Networks Inc., 2016 ONCA 618, where the ONCA set a two-part test to determine an employee’s eligibility for bonus during the notice period:

(a) Was the bonus an integral part of the employee’s compensation package, triggering a common law entitlement to damages in lieu of bonus

(b) If so, is there any language in the bonus plan that would restrict the employee’s common law entitlement to damages in lieu of a bonus over the notice period?

Given the trial court’s failure to use this test, the Plaintiff argued that an error of law had occurred when his claim for bonus during the notice period was dismissed. The ONCA agreed and stated that had the test in Paquette been applied properly, it would be determined that bonus was an integral part of the Plaintiff’s compensation scheme. Furthermore, having looked at the policy document (in line with part two of the test), there was no language that restricted bonus during the common law notice period. As such, as long as the two-part test was met, bonus would be awarded as part of wrongful dismissal damages for the common law notice period.

If you are an employer, it is important to ensure that your policies regarding bonus are clear an unambiguous and establish contractual limits to when and for how long bonus may be claimed. Even if bonus is a significant part of your employee’s compensation, you can avoid liability by clearly drafted policies. If you are an employee who has been denied bonus during the duration of your notice period or if you have a contract that limits your bonus entitlement to the date of termination, contact top Toronto employment lawyer Stacey Ball to ensure your receive a fair severance package that include total compensation. Call us at 416-921-7997 extension 227.

Not All Contract Breaches

by Stacey R. Ball| | Cause For Dismissal

A B.C. Court recently held that an employer did not have just cause to dismiss an employee even though the employee breached the employment contract. The Court stated that not all breaches of employment agreements allow an employer to dismiss an employee without providing notice. This is especially true where the breach is in relation to performance issues.

In the case of Avelin v. Aya Lasers Inc., 2018 BCSC 2313, the Plaintiff was employed by the Defendant as a sales representative for approximately seven months. The Plaintiff’s employment was pursuant to an employment agreement which had a term requiring her per quarter sales to be a minimum of $250,000. During her seven months, the Plaintiff only made about $75,000. Given her low performance, the Defendant terminated the Plaintiff’s employment and the Plaintiff was paid only one week’s pay.

The Plaintiff then brought a wrongful dismissal action. The Defendant alleged that it was allowed to terminate the Plaintiff for cause given the fact that the Plaintiff had not achieved her contractual sales performance requirements. The Court determined that the Plaintiff was in breach of contract but held that breach of the performance standard did not justify summary dismissal as the breach did not go to the “heart of the employment relationship.” The Court noted that misconduct that does not go to the heart of the employment relationship can amount to just cause where the employer establishes that the employee was warned and given time to improve, but still persisted with bad behaviour. Despite this conclusion, the Court held that there was no evidence that the Plaintiff had been warned about potential termination if she did not improve sales.

The Plaintiff was awarded moral damages for the Defendants bad faith conduct in the manner of termination. In coming to its decision, the Court looked to the Defendants motive when it brought a separate action in Ontario, the Plaintiff’s economic vulnerability and the way it terminated her. The Court concluded that the defendant failed to deal with the Plaintiff “fairly and in good faith” and that it was foreseeable that the Plaintiff would suffer harm.

Takeaway

Ultimately, not every contract breach will justify termination. Each case is fact specific and a contextual approach must be taken. This case illustrates the importance of a breach going to the heart of the employment relationship to justify summary dismissal, and, if the breach does not go to the heart of the contract, then prior warning and a failure to rectify the misconduct should be given.

If you are in breach of a term of your employment contract and are at risk of being terminated for such breach, contact top Toronto employment lawyer, Stacey Ball to help you challenge potential terminations. If you are an employer seeking to terminate an employee for breach of a fundamental term, call us at 416-921-7997 extension 227 to ensure that a procedure of warnings has been established and your employees are aware that termination may result if they do not reach their contractual sales performances.

Absenteeism and Lateness in the Workplace

by Stacey R. Ball| | Employment Law

Most employers have established workplace attendance policies that set out the steps an employee must take when they are reporting late or not coming in for work. This often requires the employee to report their non-attendance before they start a shift or to provide doctor’s notes when an absence is due to an illness that requires several days of being off work.

Discipline will likely be instituted if there is repeated non-compliance with attendance policies or repeated lateness without valid reasons. Employers may even try to dismiss an employee for cause.

What are some of the examples where cause for dismissal can be established by the employer for absenteeism?

When an isolated, unauthorized absence is brief, the court normally finds that the employee deserves a second chance. An absence which is intentional as opposed to one caused by misunderstanding or unintentional conduct will be regarded more seriously by the court.

The consequences of absenteeism will be examined by the court. Circumstances where cause for dismissal may be warranted include situations where the employee’s absence was deliberate after they received repeated warnings. It also includes the situation where the employer’s business was severely affected by the employee’s absence. For example, in the case of Aeichele v. Jim Pattison Industries Ltd. [1992] B.C.J. No. 1952 (S.C.), the employee disobeyed a specific instruction to attend the final day of an important sale in which the employer had committed a significant investment. The court ruled that the employer had just cause for summary dismissal.

Is lateness a ground for dismissal for cause?

To dismiss an employee for lateness, a higher threshold must be met such that it can be established that there was “willful disobedience” of the employer’s policy.

It must be shown that lateness hindered the employee’s ability to fulfill their essential job duties. Furthermore, other factors will be looked at such as whether or not the employee stayed at work later or came in earlier next time to make-up for lost time.

If the employer has tolerated lateness and early departures, it will not be allowed to dismiss employees on this ground unless it clearly states that it will forthwith require strict adherence to a stated work schedule.

Is an employee’s absenteeism due to illness cause for dismissal?

Absenteeism due to illness is not cause for dismissal unless it is so severe as to amount to frustration of the contract of employment. Even when the illness is brought on by imprudence, the resulting absence from work will not be cause for summary dismissal.

If an employee’s lateness or absenteeism is due to an illness, disability, or other “prohibited grounds” under the Ontario Human Rights Code, reasonable accommodation should be put in place. It is always advisable for the employer to consult an employment lawyer before terminating such an employee.

If you are looking for legal advice in connection to absenteeism and lateness in the workplace, Top Toronto employment lawyer, Stacey ball can advise you on your legal options. Please call us at 416-921-7997, extension 227.