Year in review - The most significant developments in Canadian employment law

By Stuart Rudner and Nadia Zaman

Every year, we say the same thing: “Surely, by now, the law of employment would be relatively settled.” And yet we continue to see precedent-setting court decisions, ongoing unpredictability, and significant legislative changes. 

In 2017, we saw the Ontario government announce the most dramatic changes to employment standards legislation in decades, the Court of Appeal continue the uncertainty regarding the enforceability of termination clauses, ongoing confusion regarding the entitlement to bonuses after dismissal, and a tidal wave of sexual harassment scandals impacting well-known celebrities.

We have done our best to identify the developments in 2017 that we think had, or will have, the most significant impact upon Canadian employment law. They are reviewed below, and as usual, we refuse to be limited to a “top 10” format.

1. Bill 148 introduces sweeping changes

The Fair Workplaces, Better Jobs Act, 2017 (Bill 148) introduced sweeping changes to the Employment Standards Act, 2000 (as well as the Labour Relations Act), including minimum wage increases, equal pay for equal work regardless of the employee’s status (part-time, casual, temporary, or seasonal), an onus on organizations to prove the independence of “contractors”, enhanced leave and vacation entitlements, and increased rights of workers to request schedule changes. Many of the requirements were set to come into effect as early as Jan. 1, 2018. 

Employers must review and update their policies and procedures in order to ensure compliance with the new laws. In addition, employers should assess their budget in light of anticipated labour cost increases. 

Read more about this topic in our blog post and Stuart’s comments in Canadian Lawyer Magazine. Furthermore, Rudner Law has prepared a Guide to Bill 148.

2. No end to the unpredictability of termination clauses

In recent years, we have seen courts approach the enforceability of termination clauses in seemingly contradictory ways. After years of unpredictability and cases which seemed to reject clauses for seemingly minor drafting issues, in 2016 the Ontario Court of Appeal in Oudin v. Le Centre Francophone de Toronto adopted a more purposive approach, upholding the termination clause in question even though it was not perfectly drafted (the provision potentially offered a notice period below that required by the Employment Standards Act, 2000 (ESA), did not provide for benefit continuation, and failed to mention severance pay). In doing so, the court relied on a severability clause. The decision seemed to signal a more common-sense approach, where the intent of the parties would be followed despite technical shortcomings in a clause. 

However, in 2017, the Ontario Court of Appeal struck down a termination clause in Wood v. Deeley which did not expressly provide for benefit continuation during the notice period, and also failed to mention severance pay. Although the employer had, in fact, continued to pay for the employee’s health and dental plan and offered to contribute to her RRSP during the notice period, the court confirmed that a breach or potential breach of the ESA will render a termination clause invalid, regardless of the actual impact on the employee. 

While seemingly at odds with Oudin, the contract in this case did not have a saving clause and, to the contrary, seemed to attempt to say that there would be no entitlements other than those explicitly referenced. 

Most recently, in North v. Metaswitch Networks Corporation, the Ontario Court of Appeal followed Wood v. Deeley and struck down a termination provision which attempted to limit the employee’s entitlements upon termination without cause to the ESA minimums. However, it also included the following statement: “In the event of the termination of your employment, any payments owing to you shall be based on your base salary, as defined in the agreement.” 

The employee argued that this provision was void as it excluded his entitlement to his commission, while the employer argued that the severability clause should be used (as in Oudin) to sever this statement from the termination provision. Again, the court confirmed that “where a termination clause contains ‘even one’ instance of contracting out of an ESA employment standard, the clause is void.” The severability clause could not save the termination provision - it was struck down, and the common law applied. 

Both Wood and North confirm that a breach or potential breach of the ESA will render a termination clause invalid. This is particularly relevant where an employer uses language making the clause inclusive of the employee’s entitlement on termination and states that the employee will have no entitlements beyond those set out in the contract. A better solution is to use a “saving provision” that explicitly states that if the clause currently or in the future falls below the requirements of the applicable legislation, it should be interpreted so as to comply with those obligations. 

We note that just before finalizing this review, we learned of yet another Ontario Court of Appeal decision on this issue. More details to follow in a forthcoming blog post.

a) Maybe probationary clauses don't have to be perfect

Contrary to popular belief, most employees in Canada do not automatically have a probation period during which they can be let go without cause or notice. If employers want to impose such a period, they must do so via contract. Historically, the view has been that to be enforceable, a probation clause must be detailed and unambiguous.

However, in Nagribianko v. Select Wine Merchants Ltd, the Ontario Court of Appeal affirmed the decision of the Divisional Court which found that a very brief probationary clause simply stating “Probation…six months” was enforceable, and that the employee was not entitled to anything more than the one week of pay in lieu of notice of dismissal pursuant to the Ontario Employment Standards Act, 2000. 

Although earlier case law had required more explicit wording, the court stated as follows:

“Unless the employment contract specifies otherwise, probationary status enables an employee to be terminated without notice during the probationary period if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided the probationary employee was given a fair and reasonable opportunity to demonstrate their suitability”.

To learn more about this case, read our blog post.

3. New tort of harassment in Ontario

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4. The #metoo movement: Sexual harassment is no longer tolerated

The last few months of 2017 have seen a dramatic shift in the landscape with respect to sexual harassment. While harassment has been a focus for years, including Bill 168, the Jian Ghomeshi scandal, and Bill 132, the fall of 2017 has seen the fall of countless stars and industry leaders across North America. Virtually overnight, we have gone from a society where the consequences of sexual harassment were often treated as a cost of doing business to one where organizations will cut ties with anyone at the hint of a sexual harassment scandal. 

The shift began with the Harvey Weinstein scandal, and has caused celebrities including Charlie Rose, Matt Lauer, Kevin Spacey, Louis C.K., and Gregg Zaun, to name a few, to be unceremoniously “dropped”. While most employers do so out of fear of bad publicity, not taking disciplinary action can also put the employer on the hook for future liability, as employees may come forward with harassment complaints which can result in extraordinary damages against the employer, especially if it can be proven that they knew about the harassment and did nothing to stop it. 

The #metoo movement was a response to the new focus on sexual predators in the workplace, and it has demonstrated, sadly, the prevalence of sexual harassment in our society. Finally, victims feel that they have a voice and will be heard, and organizations are responding and penalizing offenders. 

Interestingly, in Colistro v. Tbaytel, a decision released in June of this year, the trial Judge found that the company knowingly hired an executive who had previously sexually harassed the plaintiff. The court held that this constituted a constructive dismissal and awarded damages against the company. Additionally, the judge awarded extensive damages ($100,000) for the company’s bad faith conduct. This decision is a useful reminder that “the Damages Formerly Known as Wallace”, which we now typically refer to as moral, bad faith, or Honda damages, are still relevant. 

Last year, Bill 132, which amended Ontario's Occupational Health and Safety Act (OHSA), came into force in Ontario, creating new obligations for employers to take reasonable steps to prevent and address sexual harassment in the workplace. In light of Bill 132 and the recent change in the social climate, employers would be wise to be proactive in ensuring their workplaces are free of harassment. 

As Stuart asserted in an earlier blog post, in order to take significant steps toward eliminating sexual harassment from the workplace, we have to remove any notion that it is simply a cost of doing business. In a subsequent post, Stuart noted that the historically low damages awards in sexual harassment and related cases in Canada send the wrong message. We are working with many of our clients to update their policies and procedures in order to address these issues.

5. Discriminatory dress codes are not on the menu

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6. Damages awards are getting bigger

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7. High time for marijuana in the workplace

Marijuana in the workplace has been a hot topic this year, and that does not surprise us. Stuart and other members of our team have led several seminars on this topic, written about it, and coached our clients on how to address it. 

In recent years, we have seen the acceptance and proliferation of medicinal marijuana, which has been legal in Canada for a while. Use of medicinal marijuana significantly impacts the workplace, as employees have the right to be protected against discrimination on the ground of disability and employers have a duty to accommodate employees up to the point of undue hardship. 

Further, given that we are getting closer to the legalization of recreational marijuana use, anticipated to occur in the summer of 2018, employers need to be prepared to differentiate between different types of marijuana users that they may encounter, as each will have different entitlements to accommodation. For instance, there is no need to accommodate casual/recreational users, but those with addictions must be accommodated. Like alcohol, marijuana should never be allowed to interfere with an employee’s duties. However, employers may have to accommodate those who use marijuana for medicinal purposes. 

There is widespread misapprehension of the impact of marijuana on the workplace, and many employers react viscerally to a subject they don’t fully understand. They often fail to realize that even now, they may have employees that use marijuana recreationally, and they may also have employees that come to work impaired by prescription medication. Marijuana is, in many respects, no different. 

In light of the above, employers should ensure that their drug and alcohol policies are drafted to address the relevant issues, and must avoid hasty reactions or responses based on prejudice or stereotypes. A proper procedure for responding to requests for accommodation is critical.

8. Guidance on medical documentation in disability-related accommodation requests

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9. Not all mitigation income is created equal

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10. The debate over entitlement to bonuses after dismissal continues

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11. Employees are protected from unintentional dismissals

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12. New requirements under the Accessibility for Ontarians with Disabilities Act, 2015

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13. Bill 127 expands WSIB benefits for mental stress

The Stronger, Healthier Ontario Act (Budget Measures), 2017 was passed in May, and it included amendments to the Workplace Safety and Insurance Act, 1997 (WSIA). The changes recognize “chronic mental stress” as a compensable injury and broaden the meaning of “traumatic mental stress.” The Workplace Safety and Insurance Board (WSIB) introduced new policies in this regard. 

As of Jan. 1, 2018, workers will become entitled to WSIB benefits for chronic or traumatic mental stress “arising out of and in the course of the worker’s employment”. However, these amendments may limit an employee’s right to sue his or her employer for workplace harassment and bullying, including for damages pursuant to the tort of harassment or the tort of intentional infliction of mental suffering. For further details, visit the Work-Related Chronic Mental Stress Policy Consultation page.

Conclusion

The whirlwind of developments last year goes to show yet again that employment law is still a work in progress. As the social climate continues to change and the law continues to evolve, employers must stay up to date and take proactive steps to minimize their risks rather than waiting for something to go wrong and then trying to minimize the damage.

In 2018, it will be even more important for employers to develop a good working relationship with employment counsel. That way, they can ensure that they comply with legislative changes, adopt a strategic approach to HR, and develop processes to minimize liability.

Both employers and employees should seek legal advice before making any decision that could impact their legal position. No one should make assumptions regarding what the law “must be”. Doing so can mean that an individual sacrifices their rights (by, for example, signing an oppressive contract) or leaves money on the table at a time when they have lost their source of income, and it can expose employers to significant risk with respect to legal liability, public perception, and staff morale. If all employment law issues were “obvious”, then we would not see so many important decisions and developments each year.

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