A Year in Review – 2021 Employment Law Cases
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As we look back on 2021, there were some developments and emerging trends in case law. Here are a few of the noteworthy decisions from 2021:
a) Termination Clauses
Following the Ontario Court of Appeal’s “just cause” clause decision in Waksdale v. Swegon North America Inc., the validity of termination clauses in many existing Ontario employment contracts became doubtful. The denial of leave to appeal by the Supreme Court of Canada earlier this year, confirmed their fate until the Rahman v. Cannon Design Architecture Inc. decision provided some hope. In Rahman, which was released on September 15, 2021, Justice Dunphy of the Ontario Superior Court (found the following termination clause to be valid:
CannonDesign maintains the right to terminate your employment at any time and without notice or payment in lieu thereof, if you engage in conduct that constitutes just cause for summary dismissal.
This finding was made in the following circumstances:
- the termination provisions were the object of specific negotiation with the benefit of time and independent legal advice between reasonably sophisticated parties with neither compulsion nor marked disparity in bargaining power;
- the negotiations resulted in material improvements for the benefit of the prospective employee in excess of ESA minima; and
- the offer letter contains an explicit “for greater certainty clause” recognizing that the employer’s “maximum liability … for common law notice, termination pay, benefits continuation, severance pay, or payment in lieu of notice” shall be limited to the greater of the notice required in the Officer’s Agreement or the minimum amounts specified in the ESA.
However, the Rahman case is an anomaly with numerous cases in Ontario since Waksdale invalidating termination clauses for failing to recognize the higher “wilful misconduct” standard under the ESA:
- Sewell v. Provincial Fruit Co. Limited (Superior Court – July 17, 2020)
- Ojo v Crystal Claire Cosmetics Inc. (Superior Court -February 26, 2021)
- Perretta v. Rand A Technology Corporation (Superior Court – March 22, 2021)
- Pavlov v. The New Zealand and Australian Lamb Company Limited (Superior Court – November 5, 2021)
- Lamontagne v. J.L. Richards & Associates Limited (Divisional Court – December 8, 2021)
In addition to the cases above, two cases decided by Justice Black published since the Rahman decision have considered the issue of the sophistication of the employee and not followed Justice Dunphy’s rationale. As stated by Justice Black in his October 25, 2021 decision in Campbell-Givons v. Humber River Hospital:
 It is also problematic, in my opinion, to engage in a detailed analysis about the level of sophistication of an employee and whether or not they had time and opportunity to obtain legal advice. A termination clause cannot comply with the ESA for some employees but violate the ESA for others. It either violates the ESA or does not, and it either enforceable or not.
Similarly on October 14, 2021, Justice Black in Livshin v. The Clinic Network Canada Inc. was not persuaded that the sophistication of the contracting employee changed the outcome:
 … While Livshin may be more sophisticated than many employees, and notwithstanding that he was represented by counsel, I can see no reason why the clause at issue had to be drafted in a way that on its face contravenes the ESA. Further, in my view the goal that employers be encouraged to draft clauses that comply with the ESA trumps the suggestion that Livshin may have been better able than many or most employees to recognize the potential peril.
Pre-Waksdale many employers included just cause provisions in employment contracts unaware that their compliance would be questioned. For new contracts, it is easy to adjust the contract language. For existing contracts, the solution is not as simple as asking employees to sign new contracts. The old contracts will continue to be litigated and 2022 will likely determine whether Rahman carves out an exception from Waksdale for sophisticated contractors with generous termination clauses, or if Justice Black’s one size fits all approach is preferred.
b) Fixed Term Contracts and Invalid Termination Clauses
What happens when a “just cause” clause in a fixed term contract is invalidated? Without an early termination clause, an employee with a fixed term contract is entitled to be paid to the end of the contract term. Further, without a mitigation clause, there is no obligation for the employee to mitigate their damages by finding alternative employment. See the 2016 Ontario Court of Appeal decision in Howard v. Benson Group (The Benson Group Inc.).
In Livshin v. The Clinic Network Canada Inc., Justice Black found that the “just cause” provision in a fixed term contract invalidated the early termination clause. The contract did not include a mitigation clause. The employee was awarded full compensation to the expiry of the contract. This amounted to 20 months for an employee with less than 2 years’ service.
c) Abandonment of Employment
Three cases from 2021 confirm that there is a high burden on employers to prove that an employee has abandoned their employment.
In Wong v. Polynova Industries Inc., the employee called in sick to work in March 2020 and then stopped communicating with his employer. The employer attempted in April to reach the employee but was unsuccessful. When the employee returned to work in June, the company refused to reinstate him to his duties. He threatened to sue the company and they offered to reinstate him in July 2020. He refused reinstatement on the basis that the employment contract was repudiated when the company refused to return him to work in June.
The Supreme Court of British Columbia found that the employer is required to take steps to determine the reason for an employee’s continued absence from work. The employer should not assume that the employee has abandoned their job – the employer needs clear, objective evidence of their employee’s intention to no longer be bound by the employment agreement.
Similarly, in Hettrick v Triple F Paving, the plaintiff requested a leave of absence for medical reasons and was off work for two years. The employer requested a doctor’s note that was not provided. They did not follow up or contact the employee thereafter. When the employee sought a graduated return to work, the employer cited job abandonment. The Court found that the employer failed to “establish that Ms. Hettrick’s words or conduct clearly and unequivocally indicated an intention to abandon her employment.”
In third case, an employee who absent from work on a medical leave disagreed with a short-term disability insurer’s assessment of their ability to return to work and remained away from work. The employee informed the employer through counsel that he remained unwell but had no intention of resigning. The Ontario Court of Appeal found that the employer could not assert abandonment in the face of the employee’s stated intention to continue employment, regardless of the insurer’s view of the employee’s medical condition. See Nagpal v. IBM Canada Ltd.
d) Duty to Investigate
In McCallum v. Saputo the employer dismissed an employee for taking product from a customer’s store without authorization. No investigation was conducted before the decision to terminate. At trial, the employer proved misappropriation and the court upheld the termination for cause. On appeal, the plaintiff asserted he was owed damages due to the employer’s failure to investigate. The Manitoba Court of Appeal disagreed finding that there was no “free-standing” legal duty to investigate.
Of course, employers who terminate for alleged misconduct that has not been properly investigated risk additional damages. That can be the case even where the termination is on a not-for-cause basis. In an recent decision, McGraw v. Southgate (Township), the Superior Court of Justice awarded $190,000.00 in general, punitive, moral and human rights damages to a volunteer firefighter who was terminated based on unfounded sexist allegations that were gender-biased.
e) Employer Actions in Dismissal May Invalidate a Termination Clause
There is conflicting case law on whether an employer’s actions in conducting a termination can repudiate the employment contract such that the contract’s termination provisions are no longer enforceable. In 2021, two Ontario decisions found that the conduct of an employer in the termination process could invalidate the termination clause.
In Humphrey v. Mene, the court held that egregious employer behaviour in the conduct of a constructive dismissal or a failed allegation of just cause may represent a bad faith repudiation of the employment contract that precludes the employer’s reliance on an otherwise enforceable termination clause.
In Perretta v. Rand A Technology Corporation, the court held that an employer’s mistaken insistence that a dismissed employee execute a release in favour of the employer prior to receiving contractual termination entitlements amounted to a repudiation of the employment contract. Further, the repudiation rendered the termination clause unenforceable.
f) Other Cases of Note
- Exclusive jurisdiction of labour arbitrators over human rights issues confirmed– In Northern Regional Health Authority v. Horrocks, the Supreme Court of Canada confirmed that a dispute regarding the termination of an employee for attending at work under the influence of alcohol fell squarely within the mandate of a labour arbitrator despite the employee raising a discrimination complaint. The Manitoba Human Rights Code did not disclose a legislative intent to displace the exclusive jurisdiction of a labour arbitrator.
- Refusal to apologize for inappropriate conduct is just cause for termination – In Hucsko v. A.O. Smith Enterprises, the Ontario Court of Appeal overturned a lower court decision and found that the employer had just cause to terminate because the refusal to apologize “resulted in an irreparable breakdown in the employment relationship that could not be tolerated by the employer.”
- Restructuring after sale of business is not an automatic constructive dismissal – In Costello v. ITB Marine Group Ltd, the British Columbia Court of Appeal found that that employees should wait to see how their employment is affected by a sale of business before asserting constructive dismissal.
- Immigration status is not included in protected ground of citizenship in Ontario – In Imperial Oil Limited v. Haseeb, the Divisional Court found that an individual’s immigration status, is not captured under the protected ground of “citizenship” in Ontario’s human rights legislation. In that legislation “citizenship” refers only to one’s membership in the Canadian state, as defined in the Citizenship Act, R.S.C. 1985, c. C-29.
- Workers’ compensation legislation does not bar harassment-related dismissal claims in Ontario – As previously reported, in Morningstar v. WSIAT, Ontario’s Divisional Court clarified that entitlement to workers’ compensation benefits for injuries stemming from workplace harassment does not bar an employee from seeking wrongful dismissal or constructive dismissal remedies at common law.
- Severance pay entitlement in Ontario is based on employer’s global payroll – as previously reported, in Hawkes v. Max Aicher (North America) Limited, Ontario’s Divisional Court clarified that an employer’s entire global payroll is considered in calculating employer payroll for the purpose of determining whether Ontario severance pay provisions apply to an employee termination.
The article in this update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hunter Liberatore Law LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hunter Liberatore Law LLP. ©