Author: Stacey R. Ball

Understanding Inducement in Employment Termination

When wrongfully dismissed, employees may be entitled to common law reasonable notice depending on their contract of employment. If an employee is entitled to such reasonable notice, the length of the notice period is dependent on various factors. One factor among many is whether or not the employee was induced to leave a previous job and join their new employer. 

An employee may have been induced to leave a former job with promises of things like secure employment, improved work conditions, or increased pay. If they are subsequently terminated with the new company, the fact that they were induced to leave their old work and come to their new employer is a factor worth considering when assessing the notice period. Courts take the position that it is unfair for the new employer to simply lure employees away from secure employment with promises for better work only to then dismiss the employee with very little notice. Consequently, inducement is a factor that tends to increase the length of notice an employee may be entitled to.

Case Spotlight: Miller v. Alaya Care Inc.

In a recent case before the Ontario Superior Court, an employee argued that they had been induced to leave their secure job and join new employment with the defendant. In determining whether the employee had been induced, the Court first analyzed the enforceability of the employment contract. After assessing the language used in the employment agreement, the Court determined the termination clause was unenforceable for violating the Employment Standards Act. Additionally, the Court also looked towards the terms of the offer letter which was argued to be the relevant governing document. However, the letter itself did not unambiguously contract out of the employee’s entitlement to common law reasonable notice. Additionally, the offer letter did not address things like bonuses or benefits, which also made it unenforceable. Since the contract of employment did not contract out of common law, the employee was entitled to reasonable notice. 

How Inducement Affects Notice Periods

When assessing the length of the notice period, typically the length of employment is a significant factor in determining the notice period. However, the employee had only been employed for roughly 8 months prior to her termination. On its face, the short period of employment might suggest a lower notice period. However, the Court also found that the employee had in fact been induced. In assessing whether she had been induced, the Court pointed towards several factors to consider, including:

1. The reasonable expectations of both parties;
2. Whether the employee sought out work with the prospective employer;
3. Whether there were assurances of long-term employment;
4. Whether the employee did due diligence before accepting the position by conducting their own inquiry into the company;
5. Whether the discussions between the employer and prospective employee amounted to more than the persuasion or the normal “courtship” that occurs between an employer and a prospective employee;
6. The length of time the employee remained in the new position, the element of inducement tending to lessen with the longevity of the employment; and
7. The age of the employee at termination and the length of employment with the previous employer.

When applied to the facts of the case, the Court held that the employee was in fact induced. She was “lured” by the employer to leave her 12-year job at a competitor and advised that she would help to grow the company. Additionally, the employer was pursuing an “aggressive growth strategy” and promised to defend the employee if her previous employer tried to litigate against her for joining the company. 

Given all the relevant factors, including the fact that the employee had been induced to join the company, the Court found that reasonable notice for the employee was 14 months. Over that time frame, she was entitled to not only her salary, but also pro-rated bonus for the time worked, bonus over the notice period, and pro-rated RSUs which would have vested during the notice period.

Unjust Dismissal for Federal Employees

Most federally regulated employees rely on the Canada Labour Code as their employment standards legislation, which confers onto them protections for occupational health and safety and protections against unjust dismissal. Under the Code, non-unionized federally regulated employees may be entitled to expansive remedies if they have been unjustly dismissed, which could include things like reinstatement and compensation. For any remedy to be provided under the Code, the first requirement is that the employee actually be dismissed. While this might seem obvious, dismissal can itself be highly controversial, as has been seen in a recent decision at the Canada Industrial Relations Board.

Case Background – Maruschak

The Board recently released a ruling on an unjust dismissal case. In Maruschak, the complainant alleged that he had been unjustly dismissed after he had a performance review meeting with his manager. The complainant advised his manager that he was recording the meeting and was told to end the recording. However, the complainant did not end the recording until he left the meeting. Shortly after the meeting, the complainant alleged he was again approached by his manager who was angrily shouting at him, told him he was faking an injury, called him a slow driver, told him to “finish the day, you’re done”, and that the manager would hire a new driver. After this encounter, the complainant believed he was terminated from his work. The employer contacted him afterwards to ask where he was, telling him that he was not dismissed and that he should report back to work, failing which he would be deemed to have abandoned his employment. Despite this, the complainant did not return to work, believing that he had been terminated and was under no obligation to return to work given the way he was terminated.

The employer’s side of events varied significantly. In particular, the manager stated he was very calm and professional during the performance review meeting. He denied meeting with the complainant afterwards and denied telling the complainant he was faking his injury or that he told him he was “done”. He reached out to the complainant after the weekend to ask if he was coming to work, only for the complainant to reply he was not since the manager fired him the Friday before. The manager asked what he was talking about and told him to report to work, but the complainant did not respond. The complainant did not respond to any phone calls from the manager. Ultimately, HR contacted the complainant to tell him to return to work or else he would be deemed to have abandoned his employment. The entire issue before the Board came down to whether the complainant was unjustly dismissed in the first place or whether he had merely abandoned his employment, hence disentitled to any remedy under the Code. 

Credibility

The Board had to engage in a credibility analysis, as it held that neither the complainant nor his manager proved particularly credible without some documentation corroborating their version of events. The Board noted that assessing credibility requires a consideration of “the witness’ motives, the witness’ relationship to the parties, the internal consistency of their evidence and inconsistencies, and contradiction in relation to other witness’ evidence”. In addition, the Board referred to factors considered by the British Columbia Court of Appeal, which include “opportunities for knowledge, powers of observation, judgement and memory, ability to describe clearly what he has seen and heard” to assess credibility. The Board took issue with the complainant’s testimony in that it conflicted with both the recording of his performance review meeting and with a telephone call he recorded with a friend the same day he had been terminated. As for the manager, his testimony was also inconsistent as he initially denied having met with the complainant after the performance review meeting, only to acknowledge he may have done so. Additionally, the manager’s testimony was inconsistent about his temper in interactions with the complainant. The only witness the Board found credible was the HR manager, who was not present during the alleged termination incident. Nevertheless, given the complainant’s own credibility issues, the Board determined that the complainant ultimately abandoned his employment.

Dismissal or Abandonment 

Ultimately, the Board determined that the complainant had not been dismissed. In the Board’s view, a reasonable person would not believe the complainant had been dismissed. Firstly, the complainant’s manager had no authority to dismiss anyone on his own, he would need HR authorization. Additionally, the language of “you’re done” was determined to be a frequent phrase which the manager used for ending conversations. These, and the effort to contact the complainant and have him return to work, convinced the Board that the complainant had not actually been dismissed, but had abandoned his job. Since the complainant was not dismissed, he was not entitled to any remedy for unjust dismissal.  

Most federally regulated employees rely on the Canada Labour Code as their employment standards legislation, which confers onto them protections for occupational health and safety and protections against unjust dismissal. Under the Code, non-unionized federally regulated employees may be entitled to expansive remedies if they have been unjustly dismissed, which could include things like reinstatement and compensation. However, non-unionized federally regulated employees would do well to be aware of the differences in procedure for dismissals pertaining to human rights violations. 

Procedure under the Canada Labour Code

Under the Code, non-unionized federally regulated employees may file a complaint with Employment and Social Development Canada if they believe they have been unjustly dismissed. To do so, the employee must have worked for 12 consecutive months and not be unionized, pursuant to s. 240 of the Code. If the complaint cannot be settled at this stage, they can request that the matter be referred to the Canada Industrial Relations Board. For many employees, their complaint would proceed through the standard unjust dismissal procedure, and if not settled, result in a hearing and adjudication by the Board.

However, there are administrative procedural limitations before the Board can consider an unjust dismissal complaint. These limitations are outlined in s. 242(3.1) of the Code. The first is that no complaint shall be considered by the Board if the employee is laid off due to lack of work or discontinuance of function. The second limitation is that no complaint shall be considered by the Board if a procedure for redress has been provided under Parts I or II of the Code or under any other Act of Parliament. It is this second limitation that causes issues for employees who have been terminated for human rights issues. 

Kaseke v. Toronto Dominion Bank, 2025 FCA 8

In a recent case before the Federal Court of Appeal, Kaseke v. Toronto Dominion Bank, the complainant filed an unjust dismissal complaint before the Board which was ultimately dismissed. The Board ruled that the complaint should be addressed under the Canadian Human Rights Commission rather than by the Board. In doing so, the Board cited s. 242(3.1) as a limit to their jurisdiction. The complainant applied for judicial review before the Federal Court of Appeal. 

The Court outlined the long-standing principle that employees who believe their termination is a result of human rights violations must follow the procedure outlined under the Canadian Human Rights Act, rather than the one under the Canada Labour Code. The Court noted that the jurisprudence for this issue has followed this principle for over fifty years. Unfortunately, the complainant believed that she could find a fulsome remedy by following the procedure under the Code. She raised in her judicial review the fact that the denial of her complaint would cause her significant prejudice at this stage, since she had missed the necessary time frame to file a complaint under the Canadian Human Rights Act. However, the Court pointed out that she had been advised by the Board early on in her complaint that there would be a jurisdictional issue. Had she filed under the Act, and the Commission determined that the Board would be better suited to handle the issue for her, the Commission could have referred the matter to the Board to deal with. The Court reaffirmed that this is the correct procedure for terminations associated with human rights complaints. The Board must deny jurisdiction over the matter, as the Commission retains primary jurisdiction. Only if the Commission decides to refer the matter to the Board will the Board have jurisdiction to address a termination violating human rights.

Another issue raised by the complainant was that the Canadian Human Rights Act does not provide for the same remedies as those outlined under the Code. The Court rejected this argument. The Court examined relevant jurisprudence showing how the Code operates under a “make whole” philosophy, with the intention to restore an unjustly dismissed employee to the same position they would have been in had they not been unjustly dismissed. However, the Court also indicated that the remedies outlined under the Canadian Human Rights Act are also “make whole” remedies, including orders to cease the discriminatory practice, prevent discrimination in the future, reinstate the complainant, compensate the complainant for expenses and lost wages, and further compensation for pain, suffering, and willful or reckless discrimination. 

Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952

The Ontario Superior Court recently reaffirmed the decision reached last year in Dufault v. The Corporation of the Township of Ignace. In that case, it was decided that the employment contract’s termination provisions violated the Employment Standards Act. In particular, the employment contract’s “With Cause” provision purported to allow the employer to terminate the employee for cause without any payments, contrary to the Employment Standards Act. Additionally, the “Without Cause” provision purportedly provided the employer “sole discretion” to terminate the employee. The Court took issue with this language in Dufault and noted that it is a violation of the Employment Standards Act to terminate an employee while they are on any of the protected leaves outlined in the act. 

The Importance of Precedent

The Court acknowledged that it could depart from previous decisions issued from the same level of Court on occasion. In doing so, the Court referred to the Supreme Court’s decision in R v. Sullivan outlining the value of precedent in the Canadian legal system. Departure from precedent is only to occur in very narrow circumstances; namely if:

1. The validity of the judgement has been affected by subsequent decisions;
2. The judge overlooked some binding case law or a relevant statute; or
3. The decision was otherwise made without full consideration.

The Court then turned to consider whether the decision in Dufault fell under any of the outlined circumstances. It held that none of these circumstances operated in the case of Dufault. Consequently, the Court reasoned that the decision in that case must be adhered to on the basis of precedent. 

In the present case, the employee faced a very similar set of termination provisions to those found in Dufault. The Court turned its attention towards the “Without Cause” provision first. In this case, the contract purportedly allowed the employer to terminate the employee at any time. The employer attempted to argue that this language is distinct from that found in Dufault. However, the Court did not countenance such arguments. Instead, the Court determined that the purported ability to terminate an employee at any time violated the ESA just as it did it Dufault. The Court likewise indicated that it was bound to adhere to the reasoning in Dufault due to its precedential status. Consequently, the Court ruled that the “Without Cause” provision of the employment contract was unenforceable.

The Court then turned to consider the “With Cause” provision of the employment contract. In the “With Cause” provision, the employer purported to be allowed to terminate the employee on the basis of just cause without providing any termination or severance pay. Like with Dufault, the Court found that this language violated the Employment Standards Act, as it set too low of a standard than that set by the Employment Standards Act regarding when termination without payment could be made. The Court also indicated that, even if the “Without Cause” provision was individually enforceable, the “With Cause” provision’s violation of the Employment Standards Act renders all termination clauses unenforceable.

In Mata, 2024 CIRB 1141, the employee complained that she had been constructively dismissed by her employer after she was placed on a leave without pay for failing to adhere to the employer’s vaccination policies. While Vice-Chairperson Love ultimately determined the employee had not been constructively dismissed, he walked through the principles of constructive dismissal for federal employees covered by the Canada Labour Code. 

Legal Basis for Constructive Dismissal Under the Canada Labour Code

Firstly, Vice-Chair Love indicated that, although the Code does not explicitly use the term “constructive dismissal”, this form of dismissals is ultimately incorporated into the Code. Citing the Federal Court of Appeal’s decision in Srougi v. Lufthansa German Airlines, Vice-Chair Love indicated that dismissal under the Code is “the implementation by the employer of his intention to unilaterally terminate the contract of employment binding him to his employee”. In other words, the concept of an unjust dismissal under the Code includes the idea of a constructive dismissal. Having determined that the Code’s unjust dismissal provisions also apply for constructive dismissals, Vice-Chair Love moved on to outline the legal test to determine whether a constructive dismissal has occurred.

Tests for Constructive Dismissal

As Vice-Chair Love indicated, there are two potential methods whereby a constructive dismissal may occur. The first is when the employer makes a single unilateral change that constitutes a substantial breach of the employment contract. The second is when the employer engages in a series of acts that demonstrates it no longer intends to be bound by the contract of employment. In either circumstance, the employer will have repudiated the employment contract through its conduct, hence the employee will have been constructively dismissed. 

Beyond the two potential avenues for constructive dismissal, Vice-Chair Love also cited the Supreme Court’s decision in Potter regarding the two-stage analytical process used for constructive dismissal. Vice-Chair Love indicates that the two-stage process applies for instances of a single unilateral breach. The first stage requires the decision maker to determine whether the employer breached the contract, considering whether the employer had the authority to make the changes to the contract, and whether the employee essentially condoned the change. The second stage considers whether a reasonable person in the same situation as the employee would have felt that the essential terms of the contract had been changed. In circumstances where the constructive dismissal arises from a series of acts, the question revolves around whether the cumulative effect of the acts shows the employer no longer intends to be bound by the employment contract.

Application to the Facts of the Case

After laying out the fundamental principles underlying constructive dismissal in a federal context, Vice-Chair Love examined how the law might apply to the facts of the case. In particular, the complainant was concerned that she had been constructively dismissed when she was put on a leave without pay in response to her vaccination status. While unpaid suspensions can in some contexts demonstrate a constructive dismissal, it is important in the first place to determine whether unpaid suspensions were contemplated in the contract of employment. In other words, if an employment contract provides for unpaid suspensions, it may limit the ability to pursue a constructive dismissal case. In this case, while unpaid leaves were not originally part of the employment contract, they did become part of the employment contract through the employer’s ability to make reasonable rules affecting the workplace. 

As Vice-Chair Love indicates, an employer has the right to make reasonable rules for the management of its workplace, but there are some constraints to these rules in the context of unjust dismissals. Rules that are introduced to the workplace follow the KVP test. In particular, unilaterally introduced rules in the workplace:

1. Must not be unreasonable;
2. Must be clear and unequivocal;
3. Must be brought to the attention of the affected employee before the employer can act on it;
4. The employee must be notified that the breach of such a rule could result in discharge, if it is used as a foundation for discharge; and 
5. The rule should be consistently enforced from the time the employer introduced it.

It is precisely these features that Vice-Chair Love considered regarding the new leave without pay policy. In short, Vice-Chair Love noted that the employer made a reasonable rule for the health and safety of its employees in requiring vaccination status to be reported. Furthermore, he noted that the rule was clear and unequivocal and had been brought to the complainant’s attention. On top of that, the employee was notified that breach of the rule could result in discharge, and that the rule had been consistently enforced as others were also placed on leaves without pay. Ultimately, however, Vice-Chair Love noted that the employee was never dismissed, as she was later permitted to, and actually did, return to work after updating her vaccination status. Nevertheless, this case provides helpful insights to constructive dismissal issues in federal workplaces.

A recent case in Alberta has helpfully reviewed the laws of contractual interpretation in an employment law context. In Plotnikoff v. Associated Engineering Alberta Ltd., 2024 ABKB 706, the judge engaged in a thorough review of case law regarding contractual interpretation.

Standard of Review for Contractual Interpretation

First and foremost, the judge noted the particular standard of review for contracts on appeals. In particular, contractual interpretation entails issues of mixed fact and law, hence it is reviewable on the standard of palpable and overriding error. Absent such an error, a reviewing court is not entitled to review the lower court’s interpretation of a contract.

Key Principles of Employment Contract Interpretation

Moving forward, the judge reflected on the sets of principles that apply specifically to the interpretation of employment contracts.

Inequality of Bargaining Power in Employment Contracts

First and foremost, the judge noted that courts have recognized the inequality of bargaining power inherent in the employment relationship and the limited opportunity of employees to negotiate contractual terms. Consequently, certain principles for contractual interpretation have developed in the employment contract context. 

Doctrine of Contra Proferentem in Employment Law

One particular aspect of contractual interpretation in the employment law context is the doctrine of contra proferentem, which interprets ambiguities in the employment contract in favour of the employee. Citing case law, the judge notes that “in employment law, uncertainty ought to be resolved in favour of the employee”, and that given “a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee”. In other words, the contract is interpreted against the employer who drafted the contract, because the employer is presumed to be in a position of sufficient sophistication to draft the contract to say precisely what they want to say. 

Presumption of Reasonable Notice in Employment Contracts

In addition to this principle, the judge also added that employment contracts are presumed to contain an implied term requiring employers to provide employees with reasonable notice of dismissal. Of course, such an implied term can be modified or replaced with explicit limitations to entitlement to reasonable notice. However, there are various requirements around any attempt to limit notice entitlements. 

Requirements for Limiting Notice Entitlements

One such requirement is that any attempt to limit entitlements in breach of employment standards legislation is a breach of the law and is hence unenforceable. Another requirement, which the judge noted is that “an enforceable employment contract must contain clear and unequivocal language to extinguish or limit an employee’s common law rights”. Failure to meet this requirement permits the employee to pursue common law reasonable notice. In relation to the above principle that ambiguities are resolved in favour of the employee, the judge noted that, in fact, there is a presumption that the employee is actually entitled to common law reasonable notice, and only if the contract unambiguously removes or limits that right will that presumption be defeated. 

The judge’s thorough-going analysis of the general principles of contractual interpretation pertaining to employment contracts provides a very helpful summary to workers hoping to understand their entitlements and what to look for in their own employment contracts.

How Contractual Interpretation Applied in the Case

The judge went on to apply these principles of contractual interpretation to the particular termination clause in this case. The termination clause stated:

“Termination without Cause: The Company may terminate employment without cause upon providing the Employee with notice as may be mandated by the Employment Standards legislation or such additional notice as the Company, in its sole discretion, may provide or, at our option, pay in lieu of such notice”.

The judge in this case upheld the trial judge’s interpretation of the termination clause as not limiting Mr. Plotnikoff’s entitlement to reasonable notice. In reaching this conclusion, the judge cited both the Supreme Court of Canada’s decision in Machtinger, but also numerous Ontario cases to outline how the clause did not actually limit entitlements. Particularly, the judge ruled that the clause only indicates that the worker would receive employment standards notice. But notice under employment standards legislation is only a minimum standard. 

No maximum standard is outlined in employment standards legislation, nor does the employment standards legislation remove the presumption of common law reasonable notice. In other words, the judge found that the clause did not unambiguously remove or limit Mr. Plotnikoff’s entitlement to reasonable notice. 

Additionally, the judge noted that the employer even contemplated providing more than the minimum standards through the language of “additional notice as the company, in its sole discretion, may provide”. The judge found that such a contemplation also indicated that there was no unambiguous limit of notice to that outline in the employment standards legislation.

The case of Maximenko v. Zim, 2024 ONSC 5540, helpfully illustrates some of the nitty-gritty details of a wrongful dismissal case. In particular, it provides some helpful guidance on issues of mitigation and elements of compensation. Workers who have been terminated should be aware of what elements of their compensation they may be entitled to during a period of reasonable notice. Likewise, issues of mitigation can be tricky and can often make or break a wrongful dismissal case, hence it is helpful to have a sense of what the courts have found to be adequate mitigation efforts.

Mitigation

Workers who have been wrongfully dismissed have a duty to mitigate their damages. In other words, workers must take reasonable steps to minimize their losses resulting from their termination by looking for new employment. If a worker fails to take these reasonable steps, compensation awarded for reasonable notice may be reduced in proportion to the worker’s failure to mitigate. The judge outlined the test for proving that a worker has failed to mitigate their damages. Specifically, the onus is on the employer to prove that “(1) the employee failed to take reasonable steps to mitigate damages, and (2) if reasonable steps had been taken, the employee would have been expected to secure a comparable position reasonably adapted to their abilities”. The judge went on to add that workers’ mitigation efforts are not held up to a standard of perfection. 

In the circumstances of this case, Ms. Maximenko applied for over 70 jobs between the day she was dismissed and the day her case was heard by the court (i.e., 18 months). Despite this, the employer argued that her efforts to find new employment were inadequate. In particular, the employer had sent Ms. Maximenko numerous job links after having dismissed her. However, Ms. Maximenko provided notes of these potential jobs noting that some were no longer available, some required qualifications she did not have. The court took note of Ms. Maximenko’s engagement with the employer-provided job links, holding that she had actually followed up on each posting, even if she ultimately determined the jobs were not the right fit for her. 

Additionally, the court took relevant notice of Ms. Maximenko having family care obligations for her ill mother, who later passed on. The judge acknowledged that Ms. Maximenko’s job search efforts decreased during that timeframe to assist with her mother’s illness and passing. Ultimately, the court determined that, while Ms. Maximenko’s mitigation efforts may not have been perfect, they were reasonable. The court pointed towards the 70 applications she did pursue, as well as the difficulty for older employees, as she was in her 60’s by the time of the hearing, in finding new employment. Beyond that, the court took note that the employer did not demonstrate that Ms. Maximenko could have been successful if she took reasonable steps.

Elements of Compensation

Ultimately, the judge determined the reasonable notice period was 24 months. Then, the judge moved to focus on the constituent elements of Ms. Maximenko’s compensation. Helpfully, both the employer and Ms. Maximenko agreed on these elements, entailing annual salary, bonuses, car allowance, health insurance, and defined pension benefit plan. All of these elements formed part of Ms. Maximenko’s total compensation and should be covered under the reasonable notice period. While someone’s annual salary is generally not challenged for compensation, other elements of compensation like bonuses can occasionally result in further dispute during a wrongful dismissal case. 

Despite the employer claiming that the annual bonuses were discretionary, the judge determined that Ms. Maximenko was entitled to her bonus throughout the notice period. However, due to evidence advanced at trial, there was a discount applied to the bonus. In particular, the employer paid out no bonuses in 2023, hence Ms. Maximenko could not receive a bonus that year. However, this was the only year with evidence showing a bonus was not paid out. In sum, the court applied a 3-year average to determine the amount of Ms. Maximenko’s bonus, with a particularized discount to reflect the missing 2023 bonus payout. 

When ascertaining the value of the pension benefits, the court noted that, absent evidence on the present and commuted values of the pension, the value of the pension contribution is assumed to be a reasonable measure of the damages. To determine the reasonable measure of damages in this case, the court doubled the pension adjustment amount from Ms. Maximenko’s 2020-2022 T4 returns to reflect the 24-month notice period.

Federal Court of Appeal Orders Redetermination

The Federal Court of Appeal recently ruled that an adjudicator’s decision in an unjust dismissal case was unreasonable. In doing so, the court ordered the case to be redetermined by another adjudicator. 

Background: Maternity Leave and Job Elimination

The facts of the case are rather particular. The complainant took a maternity leave, during which time her business analyst position was backfilled. Upon returning from her maternity leave, the complainant worked alongside her fellow business analyst who previously backfilled her position. The employer then engaged in corporate downsizing, and determined it only needed one business analyst, choosing to lay off the complainant.

Adjudicator’s Decision: Employer Acted in Good Faith

The adjudicator determined the employer engaged in a good faith restructuring. Further, the adjudicator found that the employer decided to retain the complainant’s fellow employee because the fellow employee had more seniority, and the employer believed they also had more experience in the position. The adjudicator determined that the complainant was reinstated after her leave, and that her maternity leave was not a factor in the decision to terminate her.

Complainant’s Argument: Discriminatory Impact of Selection Criteria

However, the court noted that the adjudicator failed to consider another argument that the complainant made. Namely, the argument that the employer’s decision was ultimately discriminatory because the selection criteria adversely affected the complainant due to her maternity leave, hence the dismissal was unjust. The complainant argued that discounting time she spent on maternity leave was discriminatory. Furthermore, she argued that there cannot be proper lay off for shortage of work or discontinuance of function if that lay off violates the maternity leave protections of the Canada Labour Code, which requires an employee’s employment and seniority be deemed continuous through maternity leave.

Judicial Review and the Federal Court’s Overreach

After the adjudicator decided that the complainant was not unjustly dismissed, she pursued a judicial review at the Federal Court. The Federal Court ultimately upheld the adjudicator’s award but did so by making a decision on the arguments which the adjudicator ultimately did not. The Federal Court of Appeal rightly noted that a reviewing court is limited in its functions on judicial review in an unjust dismissal case. In citing the Supreme Court’s decision in Vavilov, the Federal Court of Appeal noted that “a reviewing court should not step in and decide issues of significance that are relevant to the outcome that were argued before the administrative decision maker that the decision maker neglected to consider”. Unfortunately, that is precisely what the Federal Court did in its decision. Instead, the Federal Court should have focused on the reasons given by the adjudicator and determined whether the adjudicator properly considered the arguments before them. In this case, the Federal Court of Appeal noted that, had the Federal Court done so, “it would have been apparent that the adjudicator’s decision was unreasonable for its failure to address important arguments advanced by the appellant”.

Federal Court of Appeal’s Decision: Unreasonable Ruling Warrants Redetermination

The Federal Court of Appeal noted that the complainant’s arguments regarding discrimination and violation of the maternity leave provisions in the Code were substantive and formed an important part of her case. While the Court did acknowledge that adjudicators do not need to respond to every possible line of analysis, failure to consider key issues or central arguments raised by the parties can undermine the reasonableness of an adjudicator’s decision. The Court also acknowledged that case law supported the argument that decisions are discriminatory if one of the factors it relied on was discriminatory. Further, the Court indicated that the employer’s approach to the Code violates the statutory protections of the minimum standards legislation. Nevertheless, the Court did not determine these issues, indicating that to do so would place it in the same error that the Federal Court made. Instead, the Court ordered that the complaint be considered by a different adjudicator for the alternative arguments she raised which had not been considered by the adjudicator. 

The Court of Appeal has recently issued a decision reaffirming its previous decision in Wacksdale v. Swegon North America Inc., 2020 ONCA 391. In that case, the Court of Appeal made a landmark decision that “for-cause” termination provisions that violate the Employment Standards Act are illegal, and that breach of the Employment Standards Act in one termination provision means all other termination provisions are likewise invalid.

Why the “For Cause” Termination Provision Was Deemed an Unenforceable Termination Clause

In the present case, the Court of Appeal was asked to review the lower court’s decision on the validity of both the “without cause” and for cause” termination provisions. At the outset, the Court of Appeal indicated that the “for cause” termination provision is illegal. This provision stated that the employer could terminate the employee’s employment without notice or pay for “cause”, while defining “cause” in a very broad manner beyond the exceptions in the Employment Standards Act. Consequently, the clause was found illegal. As the Court explained, because the Employment Standards Act is remedial legislation, courts should favour interpretations of the act which encourage employers to comply with the act. Failure to do so may result in making the act ineffectual. As the Court noted, “if the only consequence for an employer of drafting a termination clause that does not comply with ESA minimums is an order that they comply, employers will have little incentive to draft a lawful termination clause”. Another element that the Court indicated regarding unenforceable termination clauses is that compliance with the ESA at termination does not fix a termination clause that was unenforceable from the beginning of the employment relationship. 

The Court reminded that failure to comply with the high standard of misconduct outlined in the ESA in drafting a termination clause can lead to such a clause being unenforceable. In this case, that is precisely what occurred. The “for cause” termination provision purported to terminate the employee for cause without payment as long as the employee engaged in a much lower standard of misconduct than that outlined in the ESA. Consequently, the clause was found to be unenforceable. Beyond the mere fact that the cause stipulated was of a lower standard, the clause itself was also an “inclusive” clause. The clause also used the phrase that cause “shall include but is not limited to the following”, a phrase which the Court held permitted the employer to expand and deem as “cause” things that were not listed in the contract, making the definition of “cause” even more expansive beyond the narrow and high standard as outlined in the ESA.

Impact of an Unenforceable Termination Clause on Employment Contracts

Beyond the cause provision, the Court was also asked to review the lower court’s decision on the without cause provision. The Court of Appeal refused to make a ruling on this provision, determining that because the “for cause” provision violates the Employment Standards Act, the entire set of termination provisions are entirely invalid. The Court of Appeal determined that it would be best to leave the question of the without cause provision for a case whereby determination of that question would directly affect the outcome of the case. 

The Ontario Court of Appeal recently provided some clarity around the frustration of an employment contract and the consequences arising therefrom. In Croke v. VuPoint Systems Ltd., the Court of Appeal dealt with a case around a mandatory vaccination policy. The employer was contracted to provide services for Bell Canada and Bell ExpressVu, who provided 99% of their customer base. Bell introduced a new policy requiring mandatory vaccination against COVID-19 for personnel working at or visiting Bell locations or otherwise interacting with Bell customers in-person. VuPoint had to introduce a similar policy to ensure it could continue providing services to Ball. There were no alternatives to vaccination, and non-compliant employees of VuPoint were prohibited from doing work with Bell and were told they may not receive the assignment of jobs. 

The employee was informed of the requirement to get vaccinated, and began applying for new jobs which did not require vaccination. He was later given two weeks’ notice of his termination, during which period he informed his employer that he would not comply with the requirement and believed it to be discriminatory. After providing this summary of facts, the Court of Appeal went on to determine the employment contract was in fact frustrated.

Frustration of Contract

The Ontario Court of Appeal set out the test for frustration of contract as developed by the Supreme Court. Specifically, frustration occurs when “a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes ‘a thing radically different from that which was undertaken by the contract’”. To establish frustration, a party needs to show there was a “supervening event” that a) radically altered the contractual obligations, and b) was unforeseeable and not contemplated in the contract, and c) was not caused by the parties. 

The employee argued that the frustration was caused by his own voluntary decision not to comply with the vaccination policy. However, the Court of Appeal held that the contract was frustrated through Bell’s vaccination policy as the intervening event, which prevented any non-vaccinated worker from working on Bell locations or interacting in-person with Bell customers. The Court of Appeal likened this new policy to a new regulatory requirement: “absent vaccination, VuPoint employees were ineligible to work on Bell Projects”. The Court also indicated frustration was not self-induced simply because VuPoint was open to allow the employee to continue working for them if he changed his mind and got vaccinated. The Court mused that if the policy were a merely temporary or emergency measure, or if the employee intended to become vaccinated but could not do so in time, the fundamental obligations in the employment agreement may not have been radically altered.  

Nevertheless, the Court of Appeal agreed with the lower court that there was no default in the employment agreement between the employee and employer. Instead, Bell’s vaccination policy was the supervening event, and the analysis then turns towards if performance of the employment contract became radically different than what the parties contracted for, and whether the change was foreseeable. 

Regarding whether the Bell policy radically changed the terms of employment, the Court of Appeal again agreed with the lower Court. Due to the Bell Policy, the employee was completely unable to perform his duties for VuPoint for the foreseeable future. Further, this was unforeseen and not contemplated by either party when they entered into the contract. The Court indicated that the focus of the foreseeability question is when the contract is signed and must be considered from that timeframe. In this case, the contract was entered in 2014, and neither party at that time could have foreseen a global pandemic which would cause Bell to implement its vaccination policy. 

Termination of Employment

The Court of Appeal went on to consider the employee’s argument that he had actually been terminated for just cause rather than because the employment contract was frustrated. The employee insisted that other, non-disciplinary, or lesser disciplinary actions should have been taken by VuPoint instead of termination. The Court determined that VuPoint’s only basis for termination was frustration of contract, and such terminations are no-fault terminations releasing the parties from any further obligations to perform. In other words, an employee would not be entitled to damages for wrongful dismissal. In keeping with this determination, the Court reiterated that when an employment contract is frustrated, there is no fixed legal requirement that an employee be given advance notice that the employment relationship has been frustrated. Additionally, there is no requirement that an employee must be provided with an opportunity to rectify their non-eligibility to work before they can be terminated via frustration of contract. However, an employer that does not do these things, depending on the situation, may be unable to establish the supervening event that radically altered the fundamental obligations of the contract. Given the employee’s failure to indicate that he needed more time to become vaccinated, the Court found that the termination of his employment was appropriate for frustration of contract.