September 2021 - Stacey R. Ball

Is it Possible to Work Without an Employment Contract in Ontario?

by Stacey R. Ball| September 29, 2021August 12, 2023 | Employment Contracts

You do not need to sign an employment contract in order to work in Ontario. However, it is also not possible to be working in Ontario without a contract. This is because it is impossible to be in an employment relationship without also being in a contractual relationship. In Ontario, a contractual relationship exists the moment an employment relationship exists. All employment relationships are contractual, regardless of whether or not you have signed a contract. The following will explain how this works.

What Happens When You Do Not Sign a Contract?

If you have not signed a contract specifically setting out the terms and conditions of your employment, then those terms and conditions will by default be defined by law. In Ontario, this means that the terms and conditions of your employment will be governed by the Employment Standards Act, the Human Rights Code, and the common law.

For example, even where there is no signed employment contract, you cannot be paid less than the applicable minimum wage. You cannot be required to work longer than 48 hours in a week. You cannot be fired on a without cause basis without your employer providing you with proper notice or adequate termination pay. This all remains true regardless of whether or not you have signed an employment contract.

Benefits of Signing an Employment Contract

It is not necessary to have signed an employment contract to work in Ontario. However, there are many reasons why it might be a good idea to have one anyway. The terms and conditions provided by Ontario legislation such as the Employment Standards Act are minimum terms and conditions, not maximums. For instance, the Employment Standards Act sets out the minimum wage, not the maximum wage. Employment agreements enable employees to negotiate for terms and conditions that are greater than their minimum entitlements. Significantly, written employment contracts reduce uncertainty in employment relationships. The duties and obligations of the employee and employer are often plainly set out.

For employers, employment agreements are particularly useful. The common law often provides employees with rights that employers would rather they not have. Employment agreements offer the solution. A properly drafted employment agreement can remove many of those common law entitlements. Perhaps most significantly are the entitlements employees have under common law to reasonable notice or termination pay. These can be quite high and therefore quite expensive for employers. A properly drafted termination clause could limit termination pay from what might be 24 months’ pay under common law to just 8 weeks’ pay, thereby saving the employer a lot of money. Employers might also find it useful to include non-competition, non-solicitation, and non-disclosure provisions.

Employment Contracts are Not Always Enforceable

An employee who has entered into a contract that limits their entitlements might nevertheless walk away with their common law entitlements if they can show that, for whatever reason, the contract they signed is not enforceable. This might be the case where, for instance, the contract was entered into without proper consideration (i.e., a contract might be unenforceable if it was given to the employee after they had already started working). A contract that does not comply with the minimum standards set out by Ontario legislation will also be unenforceable.

Where a contract or contractual provision is shown to be unenforceable, it will be replaced by the relevant common law entitlement.

Careful Scrutiny

Whether you are an employee or an employer, the terms of any employment contract must be carefully scrutinized. That contract, including any errors contained within, will inevitably alter the very terms and conditions of the employment relationship.

Employment Abandonment

by Stacey R. Ball| September 29, 2021August 12, 2023 | Employment Law

Abandonment occurs where the words or actions of an employee, viewed objectively, would lead a reasonable person to conclude that the employee had abandoned the contract of employment. Job abandonment reveals the intention of the employee to no longer be bound by the employment contract and consequently results in that contract being repudiated. Once the employee abandons the employment relationship, the employer likewise is no longer bound by that relationship. Abandonment is functionally the same as a resignation, with the difference being that abandonment is implicit and a resignation explicit. For the employee, this means they lose their entitlement to termination notice and / or termination pay.

**Case Study: Betts v. IBM Canada Ltd., 2015 ONSC 5298**

This case involved an employee seeking wrongful dismissal damages and an employer seeking summary judgment to the effect that the employee abandoned his employment and consequently was not entitled to damages. The employee was 35 years old at the end of his employment and had been with the employer for fifteen years – a rather substantial portion of his life.

The employee originally worked in Nova Scotia before he was transferred in 2002 to the province of New Brunswick. However, he frequently visited the province of Ontario to teach at the employer’s office in Markham and to visit his fiancée who lived in Mississauga. In 2013, the employee moved from New Brunswick to Ontario to live full-time with his fiancée. The employee made this decision without informing his employer.

Prior to the move, the employee also suffered from very serious depression. The employee testified that his symptoms became unbearable and forced him to stop reporting to work in October 2013, one month prior to his move to Ontario.

His employer did not automatically treat his failure to appear to work as a resignation or abandonment. Instead, the employer provided him with a series of five letters setting out his options and deadlines to return to work. The employer unilaterally provided many extensions to these deadlines despite being under no obligation under law to do so.

After five letters and 8 months of absenteeism, the employer decided to treat the employee’s refusal to return to work as a voluntary resignation. The employer relied on a number of objective factors (recall that the test for abandonment is an objective one) to support their decision, including:

a) the employee’s failure to report to work and fulfill his employment obligations for over 8 months; and,
b) a voluntary and undisclosed relocation from New Brunswick to Ontario coupled with a lack of intention to return to New Brunswick for work.

Holding

The motion judge agreed with the employer. Although there is no doubt the employee suffered from depression, he was nevertheless aware of his responsibilities and what was expected of him. The employer sent numerous letters advising the employee of his options and even extended the courtesy of extensions to return to work. The motion judge drew a comparison between the employee’s unilateral decision to relocate to Ontario and a hypothetical situation where the employer had changed the terms of the employee’s employment and forced him to relocate to a new province as a condition of continued employment. The latter would be a constructive dismissal. Why, asked the motion judge, would the former not produce the same result?

In the end, the motion judge held that the employee had indeed abandoned his employment. As a consequence, the employee’s claim for wrongful dismissal damages was dismissed.

Interestingly, the motion judge found in obiter that if the employee had not abandoned his employment and had indeed been terminated he would have been entitled to 10 months’ pay in lieu of notice – an amount resembling approximately $50,000 in damages. Not only did the employee lose out on these damages, they were also ordered to pay to the employer $42,500 as legal costs. Abandonment can potentially be a costly mistake for an employee – in this case, it certainly was.

Government of Canada COVID-19 Support Extension

by Stacey R. Ball| September 27, 2021August 10, 2023 | General

Although approximately 67% of Canadians are fully vaccinated as of August 2021, the Government of Canada is aware that COVID-19 continues to have serious consequences for Canadian businesses. To that end, on July 30, 2021, the Government of Canada announced the extension of certain COVID-19 support measures with the goal of continuing to provide for workers and businesses in need. Among these extensions are the Canada Emergency Wage Subsidy, the Canada Recovery Benefit, the Canada Recovery Sickness Benefit and the Canada Recovery Caregiving Benefit. These will be extended until October 23, 2021.

“Throughout the pandemic, our government has been committed to doing whatever it takes to support Canadians and Canadian businesses. Our economies are safely and gradually reopening but many small businesses and workers are still getting back to business. Extending these supports—which have been lifelines for many—is needed. This is of particular importance for those workers and businesses that have been hit hardest by the pandemic and are still reopening and rebuilding. Our government will continue to be there for Canadians and make sure that all workers and businesses are well positioned to come roaring back.”
- – The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance

Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy was introduced to help employers pay the wages of their employees. Ideally, the subsidy will help employers re-hire employees and prevent job losses and job abandonment despite potentially massive losses of revenue as a consequence of COVID-19. The Emergency Wage Subsidy is known to have helped more than 5.3 million Canadians keep their jobs. Originally this subsidy was scheduled to expire In June 2021, but was extended until September 25, 2021. Now, the Government proposes to extend it further to October 23, 2021. In addition, the maximum rate for the wage and rent subsidies was expected to be 20% between August 29 and September 25, 2021, however this rate has been increased to 40%. The maximum weekly benefit per employee provided by the subsidy would therefore be $452. The maximum rate for the extension into October will be set at 20%.

As of August 2021, over 4 million applications for the Canada Emergency Wage Subsidy have been approved, amounting to over $90 Billion of subsidies.

Canada Recovery Benefit

The Canada Recovery Benefit is administered by the Canada Revenue Agency and is intended to provide income support to employed and self-employed individuals who are affected by COVID-19. Originally, it was expected that individuals would be eligible for a total of 50 weeks of support between September 27, 2020 and September 25, 2021. However, the Government of Canada is now proposing to extend that by another 4 weeks to October 23, 2021. The maximum number of weeks would therefore be 54 weeks. The rate would be $300 per week.

As of August 2021, over 25 million applications for the Canada Recovery Benefit have been approved. This has resulted in over $24 Billion in support. It is likely that the additional four weeks of support will result in a further 1.2 million applications being approved.

Bonus After Termination

by Stacey R. Ball| September 27, 2021August 10, 2023 | General

Many employees ordinarily receive a bonus in addition to their base salary. If such an employee is terminated from their employment prior to receiving the bonus they expect to receive, they may be wondering whether or not they are still entitled to that bonus. In many cases, they will be.

When will you be entitled to your bonus?

When an employee is terminated on a without cause basis, they will be entitled either to a working notice period or to pay in lieu of notice. The amount of compensation an employee earns through pay in lieu of notice should reflect what the employee would have earned during the notice period had they actually worked it. Whether or not bonuses should form part of this compensation was addressed by the Ontario Court of Appeal in Paquette v TeraGo Networks Inc (2016 ONCA 618), which was later approved by the Supreme Court of Canada in Matthews v Ocean Nutrition Canada Ltd (2020 SCC 26).

In determining whether a dismissed employee continues to be entitled to their bonus, the Supreme Court of Canada says two questions must be asked:

Would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period?
If so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?

If the answer to the first question is yes, and the answer to the second is no, then the employee should continue to be entitled to their bonus.

The effect of an “active employment” clause

In Paquette, the Ontario Court of Appeal considered whether a dismissed employee could be denied their bonus because the contractual terms of the bonus required that they be “actively employed.” In the lower court, the motion judge denied the employee damages for lost bonus because the employee was not “actively” employeed during the notice period. On appeal, the Court held otherwise. The employee’s claim for damages was not for the bonus itself, but rather was for the income the employee would have received had the employer not breached the employment contract by failing to give reasonable notice. The result is that an “active employment” requirement does not prevent a dismissed employee from recovering that bonus if they would have received the bonus during the notice period.

Bonus Paid Outside Notice Period?

Based on the above, an employee should receive their bonus if they would have earned it in any event had they worked through their notice period. However, what happens if an employee is on track to receive their bonus but their notice period ends slightly before that bonus becomes available? Imagine, for instance, that the notice period ends the day before the bonus becomes available. Should that employee nevertheless receive their bonus? According to the Ontario Court of Appeal in Andros v. Colliers Macaulay Nicolls Inc. (2019 ONCA 679), not allowing such an employee to seek at least a pro rata (i.e., proportional) share of their bonus would result in untenable unfairness. Instead of asking whether the bonus would have been received, the better question, therefore, is whether the bonus was earned (or even partially earned). The employee should receive the share of the bonus they earned had the employer not breached the employment contract. As a result, despite the notice period not actually reaching the day the bonus would ordinarily be paid, the employee should still be compensated.

When Can An Employee Rescind Their Resignation?

Ideally, you would never resign from a job unless you were absolutely sure that you wanted to. But mistakes happen. Is it possible to “take back” (or rescind) your resignation after it has already been given?

Submitting a Valid Resignation

In order for this issue to even arise, you must have submitted a resignation. However, a resignation must meet certain requirements to be enforceable in the first place. If your resignation was not valid to begin with, it would not have been a true resignation and there would be nothing to rescind.

To be enforceable, a resignation must be:
1) Voluntary;
2) Clear and unequivocal; and
3) Accepted by the employer on the same terms proposed by the employee (i.e., it must be accepted as offered).

To be voluntary, the employee must have the mental legal capacity to resign. Furthermore, the resignation will not be voluntary if it is given as a result of a constructive dismissal or if the employee was told to “quit, or be fired”.

To be “clear and unequivocal”, there must be employee conduct that makes it very clear, without any doubt, that the employee intends to resign. This will not be the case where the resignation is conditional on something happening (i.e., “I will resign if you ask me to work on Saturday”). The emotional state of the employee also is a factor to consider. If the employee emotionally or angrily declares “I quit!”, there is the chance they did not truly mean what they said. In that case, the employer would be obligated by their duty to act in good faith in terminating employment to take further steps to determine what the employee truly meant. Context is very important.

Rescinding a Valid Resignation

Let’s assume now that the submitted resignation was valid. Under what circumstances can that valid resignation be taken back (or rescinded)?

Rescinding a valid resignation was easier in the past. It was traditionally held that employees could rescind resignations even after the employer had accepted them provided that the employer had not yet relied on the resignation to the employer’s detriment. However, this approach faced criticism for being contrary to established contract law. It has subsequently been rejected.

Today, an employee is unable to rescind a validly submitted resignation if:
a) The resignation has already been accepted by the employer, or

b) The employer has not yet accepted the resignation but has nevertheless
relied on the resignation to its detriment.

However, if the employer consents to the employee rescinding the resignation, then the resignation may be taken back notwithstanding either of the above.

Recent Case Law: English v Manulife

In a relatively recent decision by the Ontario Court of Appeal, an employee was permitted to rescind a resignation on the grounds that it was not clear and unequivocal, and therefore not enforceable. Interestingly, it was the employer’s conduct in this case that made the resignation unenforceable. When the employee submitted her resignation, her supervisor told her that she could always change her mind before the resignation date. The resignation was otherwise valid.

By promising the employee that she could change her mind at a future date, the supervisor effectively made the resignation equivocal. The resignation was now conditional on the employee not changing her mind before the stipulated resignation date. As we know, resignations that are conditional on something happening are not enforceable. Because of the supervisor’s mistake, the employee did not resign and instead the employer was found to have terminated her without cause. The employer was then ordered to pay 12 months’ salary in lieu of notice.

When it comes to resignations, it is important to be sure of your decision. In fact, it is necessary. As demonstrated by English v Manulife, an employer should also be very careful to accept and rely only on resignations that are clear and unequivocal.