Employment, Labour and Equalities Law Webinar Series: 2024 in review

ELISA SCALI: I think we'll get started and we'll just allow people to join slowly. Before we begin our program today, I'd like to acknowledge that because we are all based in different cities and provinces across Canada, we are located in different traditional Indigenous territories, some of which are covered by treaties. I encourage all of us to take a moment to reflect upon and acknowledge the land upon which we are living. If there are Indigenous people attending this webinar, please feel welcome.

 

On behalf of the Gowling WLG Employment, Labor and Equalities Group, I'd like to welcome you to our final webinar of our 2024 webinar series. It's hard to believe that we're coming to the end of 2024, and we're doing our annual recap, but here we are. And I'm happy to say that we have our terrific trio back together again. We have Neena Gupta, Andrew Bratt, and Mark Josselyn. These are all familiar faces I'm sure to everyone. Neena, Andrew, and Mark are experienced legal counsel employment law lawyers that are members of our employment, labor, and equalities team.

 

Neena can be found in our Waterloo office, and when she's not in the Waterloo office she can be found relaxing on her lovely farm among all her farm animals. Andrew is in our Toronto office. He is our fearless leader of our national ELE practice group. And when he's not leading our team, he's being super dad to his two beautiful daughters. And finally, Mark. Mark is in Ottawa. When he's not in his office, you can find him exploring Canada in his new RV with his lovely wife and his puppy, Teagan.

 

So before we begin our program, I do have a few housekeeping items. There will be a PowerPoint presentation today, and a copy of that PowerPoint presentation will be sent to you following the webinar. The webinar is also being recorded. A copy of the webinar recording can also be accessed on our website. It will be posted on the page following the webinar. If you would like to see any of our earlier webinars, you can also visit our web page. All of our previous webinars are posted on our page.

 

Today, we will do our best to answer your questions. We do have a Q&A period at the end of the webinar, so please feel free to add your questions in the Q&A. Again, please try to keep your questions high level and not too detailed to give us an opportunity to answer them during the webinar today. Finally, I want to clarify that there was a misprint on the invite, which indicates an end time of 10:00 AM. Our webinars are usually 1.5 hours, 1 and 1/2 hours, so we will be ending the webinar at 9:30 today, just to clarify that.

 

And finally, just a little legal disclaimer. The presentation is not intended to be legal advice. This is intended to be a high level overview. It's impossible to cover all the relevant details. So for any specific advice, we do recommend that you consult your trusted legal advisor before making any decisions or taking any action. So now that we've got that over with, let's start our program.

 

We're going to kick off this morning session with one of our favorite topics, the enforceability of termination provisions. There are two notable cases this year that we want to discuss with you. One that made us sigh in despair, and the other one that gave us a little glimmer of hope, thinking, oh, perhaps a termination provision may be enforceable. So to start us off, Andrew, would you like to discuss the Dufault decision.

 

ANDREW BRATT: Yeah, thanks Elisa. Good morning, everybody, and thank you for joining us this morning. So I might be somewhat biased, but I think Dufault is probably the most significant employment law case of the year. It's certainly the case that rocked the Ontario employment bar the most of all the decisions.

 

And frankly, it really follows a series of cases that as I'm sure many of you are familiar with, that seem to be a constant attack by our trial courts on the validity of restrictive termination provisions. So there's this constant tension between our appellate courts that have consistently held that there's nothing wrong with an employer trying to limit entitlements upon termination, and trial courts saying, well, we appreciate that legally you can do that, but it's grossly unfair. We don't like it when you employ or try to restrict an employee's entitlements to, for example, the statutory minimums.

 

So Dufault is yet another example of the courts finding creative ways to read invalidities or potential violations of the Employment Standards Act into what I would describe described as a perfectly clear termination provision. So the clause in question, which is reproduced on the slide, Section 4.02 of the employment agreement said, the Township may, at its sole discretion and without cause, terminate this agreement and the employee's employment thereunder at any time upon giving the employee written notice as follows.

 

There are two really critical parts of the termination provision that the court took issue with. One was the terminology sole discretion, and two was the at any time language. Now, admittedly, it's not immediately clear to me from the decision whether it's the sole discretion at any time or the combination of those two phrases that caused the court to say that this was invalid.

 

But the key paragraph of the decision that garnered the most attention, I think, is paragraph 46. And that's where the court sort of summarizes the plaintiff's argument, which was that article 4.02 misstates the Employment Standards Act, when it gives the employer sole discretion to terminate the employee's employment at any time. And the court ultimately agreed with the submission saying that the Employment Standards Act doesn't permit an employer to terminate one's employment at any time, and gave a couple of examples where you can't terminate at any time.

 

So, for example, when an employee is returning from a leave of absence, a job protected leave under the Employment Standards Act, there is an obligation to reinstate to the same position if it exists, or a comparable one if it doesn't, or for example, as a reprisal for attempting to exercise a right under the act.

 

The reason why I take such issue with this decision is twofold. Number one, it's not true that you can't terminate at any time, you can. You can terminate an employee who's on a leave of absence, provided the decision to terminate is unrelated, completely unrelated to the leave itself. Obviously, you can't terminate an employee as a reprisal for trying to exercise their right under the act. But it doesn't mean that you can't terminate somebody who's on a job protected leave, or who has attempted to exercise their right under the ESA, again, provided that the decision to terminate is entirely unrelated to that, so I am not persuaded that the court got it right when it referred to at any time language.

 

The other issue I have with the decision is that it necessarily implies that language that says, at its sole discretion, means for any reason, and that is not true. It would be true if the provision said that the employer can terminate at any time, for any reason, that would be a violation of the ESA. But sole discretion, at least to me, means that the decision is made by the employer, i.e. the employee has no input. And there's a lot of case law that talks about the employer's obligation to exercise discretion in good faith. And I don't know why the court necessarily is reading into this provision that discretion will be exercised in bad faith, i.e. in violation of the Employment Standards Act.

 

So there has been a lot of attention around this decision. A lot of strong opinions, one way or the other. A lot of us management side lawyers feel that the court has essentially taken a very technical approach yet again, and tried to find a creative way to bend over backwards to invalidate this provision. As many of you will know the case is currently under appeal. The appeal was heard last Friday. Plaintiff counsel, I'm told that appellant counsel impressed upon the court the significance of this decision to the employment bar and why it is so critically important that they actually weigh in because our Court of Appeals sometimes has an act for taking the easy road and not necessarily weighing in on matters that are of what I would refer to as public importance to at least to the employment bar.

 

And so there are many of us who are concerned that the Court of Appeal will say, well, the provision was invalid for many other reasons, and therefore we don't need to deal with whether or not the sole discretion or at any time language is problematic. We're hopeful that's not the case. We don't know when the decision will be released, but we are expecting it at some point over the next few months. So for now, we've recommended to all of our employer clients that they update their termination provisions to make sure that there are no references to sole discretion and there are no references to at any time.

 

There are lots of different ways of doing it, but what I've been doing is to say something to the effect of we can terminate in circumstances permitted by the ESA and applicable law as follows. So that's Dufault and we'll see what comes of it in the coming months.

 

MARK JOSSELYN: So Andrew, good morning folks. We do have a question dealing with the Canada Labor Code, which I think we can get to now. But before we go there, I just want to add that in addition to the 4.02 discussion, and that's the sole discretion at any time, there was also paragraph 4.01, which I would describe as a vintage Waksdale. That was for cause termination provision that went on to define and include a failure to perform as cause. And we all know that that's not sufficient to get us past the statutory threshold, which is in regulation 28, which entitles employees to their statutory entitlements upon termination, where they've been found guilty of willful misconduct, disobedience, or willful neglect of duty that is not trivial and has not been condoned by the employer.

 

So there were two aspects to this agreement that were problematic. And so now we're going to have to wait to see whether or not the Court of Appeal is going to overturn Madam Justice Pierce. Andrew, did you want to respond to the question about Dufault apply to the Canada Labor Code?

 

ANDREW BRATT: Sure. Yeah. I think there is at least one case that we're aware of where under the Canada Labor Code, where an adjudicator has applied the rationale and Waksdale, despite the fact that it was an Ontario decision. And so the reason I'm mentioning that is while Dufault was clearly a case that was adjudicated under the Employment Standards Act and is therefore Ontario specific, there really is no good reason why it couldn't apply. So it's not necessarily binding on an adjudicator hearing a case under the Canada Labor Code.

 

But whereas in Waksdale it would have been a little bit more difficult, I think, for an adjudicator to apply that to the Canada Labor Code, considering the Canada Labor Code uses the terminology cause, whereas the Employment Standards Act doesn't. Dufault simply takes issue with at any time and sole discretion language, which in theory can be problematic for any provincial statute or under the Canada Labor Code.

 

There's also the fact that under the Canada Labor Code, once you have, once you have a certain amount of service 12 months specifically, you automatically become entitled to what I call quasi just cause protection. And so it's probably a moot point in any event, given that you can't really restrict entitlements under the Canada Labor Code. Again, unless you have-- unless you fall into one of the exemptions where you have cause, or it's a lack of work, or a discontinuance of a function. But in theory, there's no reason why an adjudicator couldn't apply the logic in dufault to a cantilever code termination provision.

 

MARK JOSSELYN: I agree. We just don't see that many of them because as you point out, after 12 months, everybody except senior managers has the right to seek the remedies under Section 240, the unjust dismissal provisions of the Canada Labor Code and so we don't see as much litigation on issues like the Dufault and Waksdale issues. I think we're finished with that slide, and we're into Bertsch and Datastealth.

 

NEENA GUPTA: As Elisa suggested, there is a glimmer of good news in this area. So Justice Colin Stevenson, who is a reasonably recently appointed judge, found that he was, in fact, able to uphold the enforceability of an ESA only termination provision.

 

What is noteworthy is this agreement. This clause is very simple. If your employment is terminated with or without cause you will be provided with only the minimum payments and entitlements, if any, owed to you under the ESA and its regulations, and then goes on including but not limited to. And what is interesting is this particular matter was decided on a preliminary motion. It's called a rule 21 motion. What that means is that the court decides it on the pleadings and the documents that are referred to in the pleadings only. There's no evidence, there's no affidavit, it's just determined on its face.

 

And naturally, the plaintiffs suggest, oh, no, no, we can't possibly determine an issue like this on a rule 21 motion. What's interesting in this case, because even if you have a perfect termination clause-- and you should know that this decision is being appealed, so we don't we'll report next year as to what happens with the appeal. But even if you have a perfect termination clause, it is possible for a employee to argue that the clause should not be applied. What's interesting is that was not pled in the reply.

 

So I wanted to talk about some things that even if you have this perfect clause that we've replicated on the slide, it's quite possible for a plaintiff employee to say, well, yes, but I signed this after the start of employment. I signed it, but you had already-- we'd already agreed to what the contract terms were, so there was no fresh consideration for this. My job changed a lot so this agreement is obsolescent.

 

So all of those types of factual disputes would have had to go either to a different kind of motion, called a rule 20 motion, or to trial. This is a rare example of how termination clauses should work on behalf of management. I haven't necessarily replicated exactly what is in the Bertsch and Datastealthinc precedent in my contracts, but I certainly use this decision as a checklist when I am now drafting termination provisions.

 

So good news. I don't know what else I can say. There's some good news. It's going to go to the Court of Appeal. We'll see what the Court of Appeal says, but there is a glimmer of hope. And you can be assured, even with the appeal, that if you have this kind of clause in your agreement and you get a demand letter, you are going to be in much better bargaining position than if you had a Waksdale type of clause, which is self-evidently not enforceable. So that's all I wanted to say on Bertsch and Datastealth. So good news, at 8:20 in the morning in December, there not a lot of cases like this out there.

 

ANDREW BRATT: Yeah. And if I can just add a couple of quick points to that, I certainly echo Neena's comments about this being good news. And in fact, I wrote a quite lengthy article not long ago about this particular decision and how it compares to Dufault and other decisions and how I often get the question from clients, well, if the court's going to find ways to invalidate our termination provisions, what is the point? Why do we bother?

 

Well, Bertsch is the example as to why you bother, because there is still some hope that if the provision is drafted clearly. And to Neena's point, there are no procedural defects in terms of the way it was rolled out. There is still a world in which a court will enforce that termination provision so that is absolutely good news. But with that being said, I think there was a lot of optimism in the days after Bertsch was released that well, runs contrary to Dufault. And that's not true because Dufault, as Mark mentioned, had two issues with it. Number one, it had a Waksdale problem.

 

But more importantly, even if you just look at the without cause termination provision in Bertsch and you compare it to the one in Dufault, Bertsch doesn't say at any time. Bertsch doesn't say within your sole discretion. It is a very well drafted provision, very clear, unequivocal, and it was frankly, just impossible for the trial court to get around it. There was absolutely nothing wrong with it.

 

But I just want to remind people that you've got to be mindful. There are so many different, unique arguments that plaintiff counsel could make to try to invalidate termination provisions, whether it's a failure to reference benefit continuation vacation pay during a statutory notice period, severance pay. Thankfully, the one in the clause in Bertsch, which is up on the screen, appears for now to have had all of the elements the courts looking for, and so it's a model that we do use when drafting provisions going forward.

 

ELISA SCALI: Thank you. And we know that when a provision is invalidated, the consequences that reasonable common law notice does apply. And Mark, we know that there is no notional cap, or no official cap on reasonable notice, but there's always been this notional cap of 24 months, but we saw two cases in 2024 where the court seemed to blow through this cap for long service employees. Can you tell us about these cases, Mark?

 

MARK JOSSELYN: Sure. And can we please go to the next slide. So we decided that we were going to talk about the two cases. One is called Milwid versus IBM and the other one is Lynch versus Avaya. But we decided we would talk about the two of them together because they both deal with this so-called 24-month common law cap in Ontario.

 

So by way of background, we have to go back to 2006 and the decision of Justice Cronk of the Ontario Court of Appeal in a decision called Lowndes, Lowndes versus Summit Ford. And that case stood for the proposition that while there's no hard cap on the limit of reasonable notice, notice periods in excess of 24 months are only going to be awarded in exceptional circumstances.

 

And after Lowndes, for a very long time, Lowndes was applied in other cases, including another Court of Appeal decision, Do versus Equitable Life, where the trial decision of 30 months was reduced down to 24 months on appeal. So now, we've got two new decisions that we need to talk about, both of the Ontario Court of Appeal, where the cap has been exceeded. But first of all, Milwid. So this matter proceeded by way of summary judgment. And Neena's explained to you what that is.

 

In terms of the bardal factors in that case, we were dealing with a 62-year-old with 38 years of employment. And from my perspective, that's not exceptional. I would describe that person as being in his prime. Anyway, his base salary was approximately $170,000 plus he participated in their long term incentive program and he had a modest annual discretionary bonus.

 

The Court of Appeal appeared to hang their hats on the fact that the plaintiff's skills were not transferable because they related almost exclusively to the employer's products, and that made the situation exceptional. Although well, enough to justify a 26-month award and the motion judge increased the 26 months to 27 to reflect the circumstances of the COVID pandemic, giving it sort of a one month COVID bump.

 

So let's jump now to the Lynch decision, please. Next slide. And Lynch versus Avaya, another decision of the Ontario Court of Appeal. We're dealing with an engineer who had 38.5 years of service, 63 years of age. Again, from my perspective, another person in their prime.

 

Court of Appeals, said that they were able to discern the exceptional circumstances that the motion judge relied upon, including the fact that Mr. Lynch specialized in the design of software control, unique hardware. He developed one or two patents a year, he was a key performer, and he lived in Belleville, where similar comparable employment would be scarce. And putting all that into the mix, they were prepared to uphold a 30-month award. Anyway, I'm not sure that I'm able, at this point in time, to tell clients what is and is not exceptional. Andrew.

 

ANDREW BRATT: Yeah, I completely agree. I'm left scratching my head after these two decisions. And frankly, when you look at Milwid and Lynch, they both had 38, 39 years of service. I appreciate their age was a little bit different, but-- and they had a bit of some of the different factors. But frankly, why does one get 26 or 27 months, one get 30? So not only do I not understand what exceptional circumstances means, I also don't understand when exceptional circumstances will justify an award of 26, 27, 28, 30 months.

 

But I take more issue with Lynch and I'll explain why. In Milwid, I can understand. I don't necessarily agree, but I can understand what the court's saying. You've got 38 years service. You're 62 years of age, despite the fact that you're in your prime of your career, as Mark said. The skills were very specific to IBM, and so I can appreciate why it would be more difficult for the plaintiff to secure other employment, which, of course, is what the bardell factors are really getting at. Availability of similar employment given market conditions, skills, experience, qualifications, et cetera.

 

But then Lynch, when you look at the four bullet points that you see on the slide. So the fact that Mr. Lynch developed one to two patents a year and was a key performer. So what? That's what he's being paid for. That's his job. How does that speak to the availability of similar employment? The fact that you were-- if anything, the fact that you were a wonderful performer should make it easier for you to secure other employment.

 

The fact that his skills were specialized to Avaya's products. Well, how would that have been different if Mr. Lynch had 20 years of service and was 10 years younger? And so really, what the court is getting at, I think, is that when somebody has exceptional service, i.e. 30, 35, 40 years, that's where they blow through the cap. And if that's the case, they should really just say exceptional circumstances will apply if you more than x number of years of service.

 

I'm not convinced that it's because of the unique skills, or because you're a key performer, or because it's hard to find work in Belleville, because frankly, that would have been the case for Mr. Lynch whether he had five years of service or 20 years of service. So yeah, like Mark, I don't understand what exceptional means other than I tell my clients, if you've got somebody that has more than 30 years of service, there's a chance that you'll get dinged for exceptional circumstances.

 

ELISA SCALI: Thanks Mark and Andrew. So those two cases kind of left us scratching our head in terms of reasonable notice periods. And I'd like to switch now gears to a different topic, not employment agreements and termination provisions and reasonable notice, but conduct on termination and employers conduct on termination and failing to comply with employment standards on termination, and how that could lead to a consequence for an employer. And, Andrew, could you lead us in that discussion?

 

MARK JOSSELYN: Actually, Elisa, I think I'm going to take the lead on that.

 

ELISA SCALI: Sorry, apologies.

 

MARK JOSSELYN: That's all right. It's another case about the enforceability of contractual termination provisions as well. It was a motion for summary judgment involving a 52-year-old plaintiff who had only worked for the defendant for a period of 4.5 months as an executive assistant. So the termination with cause provision was, again, a vintage Waksdale, in that it included a list of things that amounted to just cause, including, by way of example, unacceptable performance standards.

 

And again, that doesn't meet the statutory thresholds set out in regulation 288 of the Employment Standards Act, which again, requires the employee be guilty of willful misconduct, disobedience, or willful neglect of duty that's not trivial and has not been condoned by the employer. And so the termination for cause provision was unenforceable.

 

And as for the termination without cause provision, the court focused on Section 60 of the Employment Standards Act, which says that an employer cannot reduce wages, or alter any other term, or condition of employment during the section 57 notice period. In other words, employees are entitled to their regular wages and the continuation of all employee benefits during that period.

 

In this case, the provision did not include vacation pay, bonus, and other benefits that the plaintiff was entitled to under the employment contract, including life insurance. Additionally, the court found that the provision required the employee to execute a release in order to receive the ESA entitlements, which was a violation of the Employment Standards Act. And then lastly, the court held that the so-called saving provision, which is found in any number of employment agreements, can't save the contractual provision that attempts on its face to contract out of the Employment Standards Act.

 

In this particular fact situation, the court went on to find that the defendant engaged in egregious conduct sufficient to warrant punitive damages in failing to meet the ESA obligations, not paying the minimum entitlements, issuing a late record of employment, not reimbursing the employee for legitimate business expenses, and failing to rectify all of that despite repeatedly being notified of these deficiencies, and in that case, the punitive damages were assessed at $10,000. Andrew, do you have any other thoughts with respect to the Wild's decision?

 

NEENA GUPTA: I actually think it's--

 

MARK JOSSELYN: Oh, it's Neena, sorry.

 

NEENA GUPTA: Yes, I actually think it's me. So my only comment is I really thought it was interesting because in this case, this is a summary judgment motion. And Ms. Wild's tried to get $10,000 for mental distress damages. And she simply said, I was-- I'm paraphrasing, but the phrase was, "I was depressed-- I was stressed and I was mentally distressed because of their abhorrent behavior."

 

And remember, what their abhorrent behavior is, is that they're essentially withholding monies that she's absolutely entitled to under the Employment Standards Act. And so the plaintiff's counsel, Ms. Wild's counsel, obviously thought that was enough. And what's interesting is the judge in this case said, look, that's not good enough. A conclusory sentence saying that I suffered mental anguish because of the behavior of the employer is not enough to cross the evidentiary bar to get to mental distress damages. So that's an interesting one.

 

I think if I could, I'll just take it to the next case where there was, in fact, a successful argument for mental distress damages. And that's Krmpotic, and I may not be pronouncing it right, Thunder Bay Electronics Limited. Now, this is a complicated fact pattern, so I want to take a little bit of time with it. Mr. Krmpotic performed a job that really was physically demanding. And after an inordinate amount. This is another one where long service employer.

 

He had over 30 years of service. He was found to be loyal and trustworthy. There was an issue as to whether or not his own injuries were caused by his work or other factors. He starts in 1983 with this employer, and he works as a building supervisor. He's up on ladders, he's on the roof, he's bending. He's doing work. After about 30 years of work, or 28 years of work, he goes out on medical leave.

 

He is cleared to return to work and he is fired within hours. Not weeks, within hours of returning from medical leave. And there was a natural inference that the reason he was terminated was either related to his medical condition or for having taken a medical leave, which has protected under the Ontario Human Rights code.

 

At the termination meeting, they offer him 16 months in exchange for a release. Interestingly, by the time that he is, goes to-- get to court, the employer has actually paid the 16 months, without a release. So what we're fighting over, what Mr. Krmpotic was asking for was eight extra months. All right, so that's number one. But he was also asking for mental distress damages for $100,000.

 

Now, the way I have been taught is that if you're going to claim mental distress damages, you need to put in some medical evidence. It may not be a doctor's expert report, but at least prescription drug records, doctor's notes, something to prove the medical distress. Mr. Krmpotic did not do so. Instead, he and his spouse testified as to the impact of the sudden termination had on him and his family, including his self-reported feelings of anxiety, depression, poor sleep, frustration, feelings of helplessness, and the court awarded $50,000 in aggravated and moral damages. I think there was also exposure to punitive damages because there was an independent actionable wrong in my view, that could have been argued, which was the violation of Ontario Human Rights code.

 

Now, although this is a case where the employer is cast in a very bad light, the evidence shows that even after his clearance for medical leave from medical leave, Mr. Krmpotic continued to suffer significant medical restrictions, and it is a question in my mind as to whether he could have performed his job duties.

 

The moral of this story is, if you're concerned when somebody is returning from medical leave as to whether he could or could not do the job, you do not terminate them even with a package. Instead, you engage in a process by which you obtain medical evidence as to what the restrictions are, how long they're expected to continue, and then make a good faith analysis as to whether or not they could actually be accommodated or not.

 

There is, in my mind, a real question as to whether or not there could have been an argument that Mr. Krmpotic's employment was frustrated due to no fault of his own because of his lingering, long standing medical issues. In fact, even when this was heard, he continued to have severe medical restrictions. If employment is frustrated, as some of you may know, the exposure may have been or would have been his ESA entitlements.

 

So this is a case where in my view, the trigger was pulled way too fast by the employer. And while on paper, this looks like a victory for the employee, if you read the cost decision Mr. Krmpotic incurred somewhere in North of $120,000 in legal fees for a claim of eight months, for-- oh, sorry. Yeah, eight months, which was roughly worth $50,000.

 

So his legal fees were double his actual claim for notice. And I suspect, this is just my guess, is the judge was very well aware that if he gives the eight months that's claimed for Mr. Krmpotic would be left nothing after legal fees. So maybe the moral of this particular litigation is that this is a case that was crying out to be settled because of the relatively small dollar at issue, because Mr. Krmpotic was not a highly paid person.

 

But again, warning to all of you, the plaintiff does not need to incur expensive expert fees in order to prove that they suffered mental distress and are entitled to aggravated damages. So that's a warning, I think, to all of us as to how we deal with employees who may be still quite frail after they are cleared to return to work. Many doctors are not aware of the physical demands of a job and clear people to return to work, when in fact, they probably still have significant restrictions.

 

MARK JOSSELYN: I'll just throw in my two cents and underscore Neena's point. Remember that in this case, the court awarded $50,000 in aggravated moral damages on the affidavit evidence of the plaintiff, his wife, and his son. Again, there was no expensive medical reports, no doctors called, and the court relied on the affidavit evidence of the family to make a finding that this plaintiff was plagued by anxiety, depression, fear, poor sleep, frustration, and feelings of helplessness.

 

And here's the key language, beyond the normal stress and hurt feelings from dismissal as a result of the manner of the dismissal. So that's for me, the key takeaway. Courts no longer require expert medical evidence in order to establish these sorts of damages, where the defendant has been guilty of unfair, or bad faith, or they've engaged in untruthful, misleading, or unduly insensitive behavior, that's enough to get you into the category. And now all you need is compelling evidence. It doesn't need to be from a doctor.

 

NEENA GUPTA: And if I could just point out something that's very interesting, is that in summary judgment motions you have affidavits, but you have cross examinations on those affidavits. So if the defendant wanted to challenge, they could have asked for production of prescription drug records, medical notes and records. I suspect that counsel to the employer realized all I'm going to do is create more evidence against my employer, so I'm not going to ask for that. I'm not actually going to ask for more evidence.

 

So I agree with the strategy. It didn't work-- it didn't necessarily work as well as defendant's counsel may have hoped, but I think the strategy of not asking for things that help the other side is a really good strategy.

 

MARK JOSSELYN: I think we're going to see Neena lot more from plaintiff's counsel because of some of the language that the Court of Appeal used here. We all know that normal distress and hurt feelings are not compensable. But here the court said that mental distress is a broad concept which is not limited to diagnosable psychological conditions. There's a spectrum along which a person can suffer mental distress. And where the harm exceeds normal hurt feelings, it can be compensable if it was caused by the conduct of the employer, if that conduct amounts to bad faith in the dismissal process, so I can see a lot of imaginative demand letters coming our way.

 

NEENA GUPTA: I have one on my desk right now, where somebody was terminated during their probationary period and she shocked and appalled that she wasn't properly trained and/or wasn't given warning or coaching and so she wants some ridiculous amount for mental distress. And I'm not particularly impressed with it, but the fact is plaintiffs are being very creative post-competition.

 

MARK JOSSELYN: And you're neither shocked nor appalled.

 

NEENA GUPTA: I've been at it for a while, perhaps I'm become callous and hardened, maybe that's the answer.

 

ELISA SCALI: Thank you. So we're going to switch gears now. And we're going to discuss a important case dealing with terminations with cause. And we know that the threshold for proving cause is a high one, that has not changed. And it is very rare to come across a case where a court will actually uphold a cause termination. However, this year we had after the very persuasive arguments of our own, Neena Gupta, the court did agree that the employer had cause for termination, and it's my pleasure to have Neena here to tell us about this case.

 

NEENA GUPTA: Thank you. So this is an interesting case because Mr. Arora was a bank executive. He was an assistant vice president, but there was a finding by the trial judge that Mr. Arora was not a fiduciary. So the whole case really deals with the obligations of what I will call an ordinary regular employee.

 

Mr. Arora was in charge of a very specific line of business, and he had two direct reports, and he had-- in Canada, he had an indirect report, and then he had five to seven reports in India. And what he was dealing with is students who were coming from India and other places in South Asia or Southeast Asia, who were coming to Canada. And these students have to provide proof to the Canadian government by law, by depositing a bond, or a line of letter of credit, or cash, at that time approximately $25,000.

 

Now, that may not sound like a huge amount, but if you have thousands of students depositing $25,000 and doing all their banking, all their rupees to Canadian dollars exchange it, it starts to add up to quite a nice, lucrative line of business, and he was in charge of that. While he was an employee of ICICI bank, he incorporated a corporation with his two direct reports.

 

And he did it under the Canadian Business Corporations Act, where you describe the purposes of the business. And he described a completely competitive. He was going to actually take this line of business and do it as a consultant and provide services to other banks and financial institutions. Moreover, he created a slide deck and presented that slide deck to other banks and institutions using confidential information that he had obtained in the course of his employment at ICICI bank.

 

How did this all come about? This comes about because he starts downloading information in large quantities and sending them to his personal email, banks, law firms, accounting firms. All professional firms have data protection algorithms and that sent up alert. When somebody reviewed the alert, they saw odd, confidential information being sent, as well as the emails to other about the incorporation to and to potential clients outside of the bank.

 

The bank did conduct an investigation. They interviewed him. There were lots of challenges as to the propriety of that investigation, the fact that the bank did not interview witnesses outside of the bank's employment, so they didn't go to rival financial institutions to conduct their interview. It wasn't a thorough forensic review. The alleged imperfections in the investigation, however, was not found to detract from the finding of just cause. And this is something that Mark and I have, I think, in Andrew, have always agreed, doesn't matter what your investigator says, it doesn't matter what your investigation report is. At the end of the day, what matters is what can you prove at trial.

 

The investigation, I think, is useful to a, make sure you're doing the right thing before you terminate a long service employee, and two, to show that you had good faith that you didn't just jump to a conclusion. The court ultimately upheld the dismissal for cause, finding that the breaches identified were serious, serious and went to the heart of the employment relationship, engaging basic, basic duties of loyalty and honesty even though he was found not to be a fiduciary.

 

And what is interesting is the bank was up against a lot of law, which says even a fiduciary can dream about his future and plan his future while an employee. The court found that this what? He was not a fiduciary, but the court found that he did far more than just plan his future. He incorporated a company, was pitching potential clients. The employee also argued it shouldn't matter because he didn't make any money while he was doing this.

 

And so I'm sitting there and going, OK, that's a emotionally compelling argument. The guy did all of this, made no money, and is now out of a job. But on the other hand, I don't think a client has to wait to incur damages before they actually decide to terminate a faithless employee. So ultimately, that argument was successful. It was not self-evident that we were going to be successful. But my client, I think, really believed strongly that it could not encourage this kind of behavior and so it went to court and it was not appealed. So it is a rare cause case that stands on the books and stays there.

 

MARK JOSSELYN: So I'm not going to say much more about this case given Neena's success, other than I often joke that when you're on for defendants, it's more about damage control than winning. So yeah, more often than not, we get the silver medal, so it's nice when you don't come in second. Well done Neena. One of the aspects of this decision that I found particularly interesting was the discussion that you just finished with about the investigation into the conduct of the plaintiff.

 

And I'm just going to read from Justice Brownstone's decision. In this case, I do not find that the investigation was particularly flawed. I find it was adequate. The bank had no reason based on the information Mr. Arora provided to seek information from Mr. Singh, Mr. Gupta, or Mr. Brown further. Having heard Mr. Gupta and Mr. Brown testify, I conclude that the information provided by them would have hurt, not helped, Mr. Arora's position in the investigation.

 

The investigation uncovered as much of the misconduct as it was able to do given Mr. Arora's lack of full transparency. I find that Mr. Arora's dishonesty in and after the interview was a reasonable and appropriate consideration in the bank's analysis of whether Mr. Arora should be dismissed for cause. So for me, the bottom line takeaway from that is that when an employer is investigating misconduct that may or may not amount to just cause, if the respondent in the investigation is untruthful, that lack of truthfulness becomes part of the analysis as to whether or not the conduct amounts to just cause. Do you agree with that, Neena?

 

Absolutely. And I don't want to brag too much, but my cross-examination on his lies. So the interview was taped and the judge heard the tape and he did lie. And in fairness, he was given no forewarning. He was just brought into a boardroom and asked. And so his justification for it was, I was shocked, I was under stress, I was worried about my career and so I lied.

 

But what was interesting is that he was given an opportunity to essentially either re-interview or provide any additional information. And when he was providing the additional information, he doubled down on his lies. And so whatever sympathy you may have about somebody who's kind of shocked about being caught, a week later or 10 days later when you write down and continue the false narrative, then I think it was actually after that when it was palpably not the case.

 

And this is a case where getting your witnesses really matters. There were a number of witnesses who were subpoenaed, who were not ICICI employees. Those are notoriously difficult to control, as you know, and a bit of a risk factor. But they were summonsed and they told the truth as they remembered it. And as the judge found, they were credible and did not hurt-- did not help Mr. Arora's case. And so maybe the moral of the story is take it this was a very risky venture for Mr. Arora. And quite frankly, probably should have gotten some legal advice before he started his business.

 

ELISA SCALI: So, Neena, I think you should get full bragging rights on this case. It was a job well done and a win for employers and a win for you, so I think job well done for sure.

 

NEENA GUPTA: Thank you.

 

ELISA SCALI: Now, the next case that we're going to be reviewing focuses on a completely different topic. And it does highlight the importance of communicating policies to your employers, or sorry, your employees, and basically highlights that you can't know what you don't know. So who would like to lead us in a discussion on this next case, Boyer.

 

MARK JOSSELYN: I'll take the lead on this one. This case involves an interesting fact situation, where the plaintiff who was a vice president, gave 18 months notice of his intention to retire after approximately seven years of employment. But he left several months earlier than planned, and he alleged that he had been working in a toxic work environment that amounted to a constructive dismissal.

 

He then issued a claim seeking damages for wrongful dismissal, accrued vacation, deferred bonus, and the value of the stock options. So thinking quickly, the defendant defended and issued a counterclaim seeking $150 million for breaches of fiduciary duties.

 

The Court of Appeal dismissed the counterclaim, which it described as bald and unsubstantiated, so maybe that wasn't a great strategy. The matter was then sent back to Justice Kavanaugh, who ultimately dismissed the claim for constructive dismissal, but found for the plaintiff on all of the important issues. So on the, I'll call it, the use it or lose it vacation issue, the court held that there was no such policy, use it or lose it policy, that was ever communicated to the plaintiff. And so in failing to communicate that policy to the plaintiff, they entitled him to accrue vacation, and he was entitled to 22 weeks of accrued vacation in the amount of $93,000.

 

Moving to the bonus issue, the defendant, again, argued that there was a policy that the employee needed to be employed by the employer at the time of the payment of the bonus, but there was no evidence that the plaintiff ever agreed to such a policy as a condition of his employment, and so the court awarded damages in lieu of bonus in the amount of $525,000.

 

And then lastly, with respect to the value of the stock options, the plaintiff led evidence of an oral agreement between him and his supervisor as to how these stock options would be treated upon retirement in the face of a document which was silent on the issue. So there was-- it's not that he was trying to contradict a contractual stipulation, rather there was none, and so he was able to lead evidence as to an agreement that he had with his supervisor. And his testimony was that his supervisor confirmed that all stock options would vest upon his retirement, and as a result, he was awarded something in the range of $1.2 million for the value of his lost stock options. Throw all that together, plus a cost award of $273,000, and it was a very good day for Mr. Boyer.

 

ANDREW BRATT: Again, if I can just add a-- I hope everyone can hear me. I've been having some technical issues, but I'm on my phone now. So to me the most, maybe not the most interesting, but the most surprising part of this decision was not so much around the way the court interpreted the forfeiture provisions and bonus plans, or stock option agreements. I mean is more of the same that we've seen since the Supreme Court of Canada weighed in Matthews.

 

But frankly, it was the it was the conversation around the vacation policy. And I think it's really important because a lot of employers have a vacation policy. And somewhere in that vacation policy, which is typically buried in an employee handbook, it talks about what happens to what I will call the gratuitous or the contractual vacation, which is really just the vacation time that you offer over and above the statutory minimums.

 

So, for example, if you offer an employee four weeks when you're only statutorily obligated to offer for two weeks, the additional two weeks that you've offered is the contractual or gratuitous amount. But if you have a policy, as you should, that says that if you don't use that additional two weeks, you lose it, which is perfectly fine as long as it's not the statutory amount, that policy has to be properly communicated to employees. And if it's buried in a handbook on page 74, and the forfeiture language that I'm referring to is buried on page three of that vacation policy on page 74, it's going to be very, very difficult to prove that you communicated it effectively to employees.

 

So the moral of the story is, whenever you have what I would refer to as restrictive terms, be it forfeiture provisions in a bonus plan, forfeiture language in a vacation policy, ideally it should be enshrined in the employment agreement. But if it's not in the employment agreement, at the very least have a reference to the vacation policy or whichever policy it is that you're hoping to rely upon in the future within the employment agreement, so it's incorporated by reference. And if your vacation policy is in an employee handbook, but there are important provisions that address entitlements on termination, have a separate sign off for that policy.

 

So it's one thing to have an acknowledgment for the entire handbook, but if you're going to rely on very specific language in a vacation policy, have a separate sign off or acknowledgment that the individual has read, understand, and agrees to abide by the terms of that vacation policy. So for me, that's the part that stood out, because this comes up all of the time, and it's not something we see every day that the courts weigh in on forfeiture language in a vacation policy. Again, typically we're looking at forfeiture language in bonus plans, stock option plans, RSU plans, et cetera.

 

So really important, highlight it as much as you can, get initials, get sign offs, do what you got to do so that when the case becomes litigious, you can unequivocally prove to a court that yes, I brought this to the employees attention, he or she understood, signed off on it.

 

NEENA GUPTA: I know I'm not scheduled to speak on this, but we have to be mindful of the Employment Standards Act requirements now. One of the-- I've lost track of which Working for Workers Act legislation. Maybe I can't count beyond five or something. But there is now a requirement that we have to disclose as employers in writing and get an agreement as to how vacation pay is paid.

 

So even if you're just saying continuing paying somebody via payroll as opposed to a lump sum at the time of vacation, which is the default assumption, which I'm sure was appropriate for factory workers in 1952, you have to put that in writing. It's also really good practice on an annual basis to give a vacation statement. Employees can demand it, but it's a very good idea to just do it so that they know what's been forfeited or not.

 

And we should also be aware that there are certain provinces in which forfeiture is not permitted of the gratuitous amounts. BC in particular, has taken a different position than Ontario. So if you've got a cross Canada practice, you need to think about what works in Ontario versus what might or might not work in other provinces. So vacation pay is one of those things that keeps me up at night, Andrew, because as we know could probably do a whole webinar on payroll and vacation pay issues.

 

ANDREW BRATT: The only other point that I'll make quickly before I move on to the next case only because I saw that we got a question that came in about unlimited vacation policies, and these are becoming fairly popular, especially in the tech industry. And I don't know. I mean, to Neena's point, we can have a whole seminar just on unlimited vacation policies. And so without getting too much into the weeds, I mean, I think the short answer to the question is, yes, you can have an unlimited vacation policy, but if the benefit of having an unlimited vacation policy is that administratively it's going to be easier to lump all pay time off together, you're not going to track time, that's not going to work. Because you have to be able to show that an employee used at least his or her statutory minimum vacation entitlements.

 

But the reason I'm bringing this up now is that the second part to that question was, if we have a policy that clearly delineates that anything over and above the statutory minimum is gratuitous and will be forfeited if not used, and it's not-- there's no cash value, will that work? In theory, yes. If the proper language is used in the contract and subject to Neena's comments about certain provinces having different rules.

 

But this goes back to the decision that we were just talking about, which is if you're going to have that policy, it's not just having the right language in the policy, it's also demonstrating that you brought that to the employees attention and that they understood what that means. Because the vast majority of employers say we're going to roll out an unlimited vacation policy. Employees love that. It's the flavor of the month, but we're not going to explain what that means, and we're not going to explain what their statutory entitlements are and what happens if they don't use their statutory or gratuitous amount.

 

So all of that to say, in theory, yes, you can have an unlimited PTO policy. It's tricky. It requires some massaging and some proper advice and some structuring. But at the end of the day, you're never going to get around having to track, and you're never going to get around having to properly communicate and explain what the plan means to your employee population.

 

MARK JOSSELYN: And one last comment on that. When you are reconciling, as Neena has suggested you should be doing on an annual basis, remember that it's 4% or 6% of wages, not base salary. And the definition of wages includes things like non-discretionary bonuses that are based on metrics and calculations. And lots of employers out there have found themselves in trouble because when they give 4% or 6% of basic salary, they're not including some of the other things that fall into the definition of wages under the Employment Standards Act.

 

ANDREW BRATT: Don't be the next big class action lawsuit on that. There's already enough of them out there.

 

ELISA SCALI: I don't want to turn this into a mini webinar on vacation, but we did have two questions come in, and I thought maybe we could quickly address those before we move on to the next case. The first question is, would it be considered appropriate notice if you send out email reminders for employees to use their vacation before the year end with language on the carryover entitlements? Presumably, if there's-- I'm assuming there might be forfeiture, so what they're entitled to carry over and what they might lose. Does anyone want to?

 

ANDREW BRATT: Sure, I'll take that. I mean, I think it's like everything. I mean, the more that you do to alert employees to the requirement to use their vacation and to the consequences of not doing so, the better. I still think that you need a proper policy with proper language. You can't just rely on an email that you send after the fact.

 

If you didn't warn employees at the outset, at the beginning of the year, what would happen if they didn't use their vacation. And you send an email on November 15 saying, hey, by the way, you've got 66 weeks to use it or else. The argument's going to be, well, had I known, I would have used it sooner. I was banking it for the purposes of carrying it over, so I think you've got to be careful with the emails.

 

But the fallback to all of this is under the Employment Standards Act, the employer has both the right and frankly, the requirement to schedule a vacation. And so in theory, if you don't want to run into this problem, yeah, you should have your managers making sure they know who has taken vacation and who hasn't, tracking it as you go throughout the year, and reminding employees at certain intervals, if you don't use it, it's not that you're going to lose it. We're going to unilaterally schedule it for you and force you to take it. That, in theory, is how it should work.

 

Practically speaking, it doesn't always work that way, but the Employment Standards Act was written from the perspective that everybody manufactures widgets in a factory and everybody uses their vacation. It hasn't kept up with technology in the times and so we've got to adjust, and we have to find ways to be creative to ensure that we don't have this accruing liability. So I would not rely entirely on an email sent late in the year is the short answer to that question.

 

ELISA SCALI: Yeah, I like to suggest quarterly reminders so that you can stay on top of it. So there's one other question on vacation. This person writes, I was on a webinar with the ministry of labor, and they said that clawing back of accrued vacation time that has been taken is not allowed. That might be--

 

MARK JOSSELYN: You're not allowed to deduct from wages without a specific written authorization to do so. So if somebody leaves your organization in an overtaken position. So they've taken 10 days of vacation, but they've only earned six. And notionally, they owe you four. You can't just deduct the four days of vacation from the last pay statement because you don't have a written authorization under the Employment Standards Act to do that.

 

ELISA SCALI: Yeah, I think the best approach to that is having them sign a form when they're taking an advance of vacation, so that it's clear that if their employment is terminated and they're still owing that vacation time, that it can be deducted and they authorize that deduction from the wages.

 

MARK JOSSELYN: I agree.

 

ANDREW BRATT: The only thing I would add to that is-- and I'm fairly certain of this, don't quote me on this. I'd have to double check, but I'm pretty-- and it varies from province to province. But in Ontario, I'm fairly certain there is case law that says an advance on vacation is not considered to be wages, and therefore you can't. It's kind of making a payment in error. If you were to overpay someone on a bonus, for example, you can deduct it from wages because it wasn't money they were technically entitled to.

 

So there is an argument that an advance on wages can be clawed back, but why put yourself in that position? Especially because we know how the ministry of labor operates. We know that employment standards officers are obviously going to lean in favor of employees. The ESA is remedial legislation. You don't want to be having to make that argument and rely on the one or two cases that are out there. So yes, I agree that you should either have an authorization at the time people take their vacation in advance, or in an employment contract, or frankly, both.

 

ELISA SCALI: Yeah, I think the problem in those cases is that it wasn't clear that it was an advance. Yeah, that's where you have to be clear that it's being advanced. And I think in many cases, practically speaking, that never happens unless you put it in writing.

 

ANDREW BRATT: I think that's right. The employees generally don't understand that vacation only accrues after they complete 12 months of service, and they just assume that they accrue all of their vacation entitlements on January 1, and don't-- to your point, Elisa, they don't realize that they're actually using time that hasn't yet accrued.

 

ELISA SCALI: OK, that's it for our vacation questions. Let's move on to our next case. This case deals with a different topic, the enforceability of restrictive covenants. And I will turn it over to Mark, I believe--

 

MARK JOSSELYN: Yes.

 

ELISA SCALI: --to discuss this case.

 

MARK JOSSELYN: Yes it is. And you are correct, it is a case all about the enforceability of a restrictive covenant. In the context of a sale of a business, and as we all know, that is to be distinguished from a restrictive covenant in a purely employment context. This was a bit of a hybrid, because in this case, the plaintiff, Dr. Sims, was the purchaser of a dentistry business in Hamilton that had been owned by Dr. Cooke.

 

There was a purchase price of $1.1 million in July of 2017. So this is a practice which Dr. Cooke had operated for approximately 30 years. And when he sold his business to Dr. Sims, there were a number of terms and conditions, including that Dr. Cooke was going to stay on and practice as an associate dentist for a minimum period of two years, subject to a termination by either party on 90 days notice.

 

So we get two years post closing, and Dr. Sims gives 90 days notice of termination. And then a few months after that, Dr. Cooke communicates, through his lawyer, his intention to work at a dental practice 3.3 kilometers away from Dr. Sims practice. And that was notwithstanding a covenant in the sale agreement which prohibited him from directly, or indirectly engaging in the practice of dentistry, or permitting his name to be used in such a practice for a period of five years following his association with the practice within a radius of 15 kilometers.

 

Dr. Cooke took the position that this was an unenforceable provision, and he in fact, he actually started his practice in November of 2020, and he continued with that practice until doctor Sims obtained an interlocutory injunction in April of 2021. So the only issue in the litigation was the enforceability of the restrictive covenant.

 

And again, we've all come to understand that courts are going to grant more latitude in the enforceability of these covenants when they are negotiated as part of the sale of a business. When looking at its reasonableness in terms of geographic scope, duration, and the activities covered, those are the three things that courts look at. The defendant attempted to argue that the 15 kilometer radius included markets that were unconnected with the trading area from where the patients came, and the court was unpersuaded by this argument, as well as the argument that the value of the goodwill should be compared to the geography. Court didn't like that argument either.

 

Ultimately, the court found that the geographic area, the defined period, and the activity covered were all reasonable and the restrictive covenant was accordingly enforceable. Who else would like to chirp in?

 

NEENA GUPTA: If I could just chirp in briefly. Many of you have heard that the Employment Standards Act was recently amended to prohibit non-competition clauses, except in the case of certain limited exceptions. Most of us are aware of the exceptions for senior executives the chief executive officer, the chief financial officer, the chief human resources officer. But there is also an exemption for when there it involves a sell and purchase or even a lease of a business or a portion of a business. So this is an example of a case, which is not prohibited by the Employment Standards Act.

 

So I just thought that for those of you who might be wondering about, well, how does this square with our statutes? The other thing is dentists are typically don't treat themselves as employees, so there's a whole issue about whether those rules apply. And just a couple of evidentiary points. What was interesting is that in the case is that 15 kilometer radius had been used previously by the dentist and other transactions. So there was evidence that geographic area or ambit had been considered reasonable by both parties on basically the history of dental transactions.

 

So I just thought that was a very interesting case. I did try to get by the way, the trial decision or the Superior Court decision. It was only given orally. I do have a transcript because my friend was on the case, but it's a number of reasons as to why the judge at the first instance found it was fair to do this. And so although this is getting a little bit outside of the employment world, it does show we can still do a business and have a fair and reasonable restrictive covenant to protect the goodwill because the purchasing dentists paid real money for that client base, and now you're going to try to siphon that client base away. So no wonder we got that.

 

ELISA SCALI: Andrew, did you-- I thought you were wanting to make a comment. No, OK. OK. So we'll move on to the next case. This case has to do with COVID and vaccination policies. COVID seems like a lifetime ago and I don't even like talking about COVID.

 

NEENA GUPTA: Sorry, I just had COVID again in the beginning of November, so it's not a lot.

 

ELISA SCALI: No, yes. So I'm going to hand this over to I believe, Andrew, to talk about this case, which was much debated I remember when COVID first hit us all and the debate over these vaccination policies, and we've got some clarity from the court now, so over to Andrew.

 

ANDREW BRATT: Yeah, it's funny. I think I swore to myself last year that I was done talking about COVID at these year in review sessions, but here we are again. The Court of Appeal has finally made a decision about a mandatory vaccination policy. And I suppose that while we're in 2024 and there aren't many of these policies that remain anymore and nobody really cares about them anymore, the fact of the matter is, this was from some time ago, and of course it took some time to make its way through the court system.

 

So without further ado, the appellant was employed as a systems technician by VuPoint. VuPoint is a federally regulated employer that provides residential satellite and smart home installation services almost exclusively for Bell. So if you're having a smart home installation like an alarm system, or a satellite service from Bell, they will contract it out to VuPoint. Somebody will come to your home and do that installation.

 

And most of the work is done in customers' homes, in Bell's customers' homes. On September the 8, 2021, Bell, like many other provincially and federally regulated employers, announced that they were imposing a mandatory COVID-19 vaccination policy on all of its vendors and contractors, so that would include VuPoint. And the policy required that all subcontractors or other agents who visited any Bell location or interacted with any in person with any of Bell's customers, had to be fully vaccinated against COVID-19.

 

Obviously, Bell wanted to be able to communicate to their folks, to their employees, to their customers, don't worry if anybody comes into your home we've confirmed that they are vaccinated against COVID-19. And non-compliance, this is the important part, non-compliance with Bell's policy would effectively terminate the services agreement between Belle and the supplier. So VuPoint knew that if they didn't comply with Bell's policy on COVID vaccination, that they would lose their contract with Bell, which of course, was quite lucrative.

 

So two days later, on September 10, VuPoint implemented its own mandatory COVID-19 vaccination policy, which not surprisingly, was very closely aligned with Bell's The appellant, Mr. Croke, failed to disclose his vaccination status to VuPoint, therefore making him unable to continue working on the Bell account. Since VuPoint had no other work to provide the appellant and had no control over Bell's policy, they couldn't tell Bell, I'm sorry, but we're not going to comply. They considered the appellant's employment contract to be frustrated and therefore terminated his employment with no notice of termination.

 

The Court of Appeal ultimately upheld the motion judge's ruling that the appellant was not wrongfully dismissed and that his contract had in fact, become frustrated. Specifically, the Court of Appeal accepted the motion judge's finding that Bell's policy was the unforeseeable event that ultimately frustrated the contract and held that, frankly, the conduct of the employees, in this case, Mr. Croke, wasn't relevant at all to Bell's policy. So it didn't matter what Mr. Croke's position was. It didn't matter why he wasn't getting vaccinated, whether it was a personal choice, whether it was due to a medical or religious reason. The bottom line was there was an unforeseen event that rendered the employment contract frustrated because by, I guess, by no fault of either party VuPoint or Mr. Croke, Mr. Croke was unable to fulfill his obligations under the contract, which were to provide services to Bell's customers.

 

So ultimately, what the case tells us is, number one, it confirms that an employee's refusal to comply with a mandatory COVID-19 vaccination policy may give rise to frustration of contract. The reason I say may is because, again, the facts were somewhat unique in the sense that the court wasn't looking at specifically at VuPoint's mandatory COVID-19 vaccination policy, they were looking at Bell's. And so we don't know what the court would have done if this was VuPoint saying it's our policy that you be vaccinated. They were rolling out their own policy to align with Bell's.

 

However, the court did confirm that the doctrine of frustration certainly can apply in a variety of circumstances where an unforeseen third party requirement is imposed on the employer and which prevents the parties from fulfilling the terms of the employment contract. And then, of course, the court confirmed that in these circumstances, where there is a frustration of contract, i.e. a no fault termination that is not related to illness or disability, then there is no obligation to provide notice or severance.

 

And I carved out and qualified it by saying, unrelated to disability or illness, because in certain provinces, Ontario being one of them, we know the Employment Standards Act requires at least ESA termination pay and severance pay, where the frustration of contract is caused by an illness or an injury.

 

So I can't tell you unequivocally that this means that if you have legacy cases where you have terminated people for not complying with your mandatory vaccination policy, that this will win the day. Again, because it was very unique in the sense that it was if they didn't comply with Bell's policy, they would have lost the contract. But it certainly suggests which way the wind has been blowing, and so it's at least somewhat refreshing to see the court say, hey, we understand why you rolled out this policy, and we're not going to require that you pay termination pay and severance pay if an employee refused to be vaccinated and your alternative was losing a massive contract.

 

ELISA SCALI: So I still have a number of legacy vaccine cases and this will be very helpful. I did find that the Court of Appeal kind of tried to dodge the central issue, which is what if the employer had imposed this? In other words, what if Mr Croke had been a direct employee of Bell Canada and was challenging the vaccine policy? The court seemed to take some comfort that it was Bell Canada, somebody external to VuPoint, who had imposed the requirement and threatening the loss of the contract. And I felt that was almost intellectually the easy out. They should have just addressed the issue of mandatory vaccine policies during this era.

 

For those of you who imposed similar policies due to either federal, provincial, or municipal mandates, we may be able to use this kind of logic, i.e. we didn't impose this. We were required to impose this by law. So interesting that we still have a number of COVID cases working its way through our court system.

 

ANDREW BRATT: And the last thing I'll say about this, what I found really interesting is the Court of Appeal very specifically said that it did not matter whether an employee conducting installations for Bell chose not to get vaccinated, or could not get vaccinated due to religion or medical reason. And the reason I say that's important is because we know that, if there is a discriminatory requirement that a company imposes on one of their suppliers or vendors, that doesn't give the supplier or vendor the right to then in turn discriminate against their employees.

 

And so I thought it was interesting that the Court of Appeals said, well, it doesn't really matter why Mr. Croke couldn't become vaccinated, because if the reason why Mr. Croke couldn't be vaccinated was because he, for example, had a medical disability that prevented him from becoming vaccinated, well, then I would imagine that would change the dynamic. In that case, VuPoint would have a legal obligation to accommodate.

 

So I thought it was interesting that the court did, to Neena's point, take the easy road, which by the way, coming back full circle is why we are skeptical that the court will do what we want them to do in Dufault, and why we think they will take the easy road, so we'll see.

 

MARK JOSSELYN: We'll see.

 

ELISA SCALI: Yes, we'll see. OK well, so we've come to our final case of the session. And this case kind of brings us full circle in terms of a termination that doesn't make it to the courts. And the parties actually do get to a settlement. And this case focuses on the issue of is your settlement full and final? And are all the parties on the same page? I think Mark's going to start off the discussion with this case.

 

MARK JOSSELYN: Yeah, and I want to start by saying, while I'm always happy to see a W in the win column for a defendant employer, I have real sympathy here for the position of Justice Callahan, who was the motions judge on this matter, and it was his decision that was overturned by the Court of Appeal.

 

So let me give you the facts. The appeal was all about the value of certain vested stock units, which Justice Callahan felt were not released under the terms and conditions of certain settlement documents. Relying on the actual claim, which did not include a claim for the stock units, which the plaintiff apparently believed were automatically deemed redeemed on termination.

 

So I actually find Justice Callahan's reasoning entirely sound, where he says, it would make no sense for this plaintiff to sign a $100,000 settlement and give up $75,000 invested units. Clearly, the plaintiff didn't think that's what he was doing. He thought he was settling other aspects of his entitlements and not the vested stock units, which, according to the plan document, automatically vested on termination.

 

Anyway, the Court of Appeal overturned Justice Callahan and said that it's not proper to evaluate the economic benefits of a settlement, especially in light of the language of the release document that was quite specific about stock options and other share awards. The Court of Appeal said that the settlement documents had to be given their ordinary meaning, and the court shouldn't allow an interpretation of the factual matrix to overwhelm the actual wording of the settlement documents.

 

So, turning to the specifics of the case, at the time of termination, the plaintiff had approximately 5,000 vested and 4,500 unvested stock units, and no one was disputing the value of the vested stock units, which was approximately $75,000 or $76,000. So additionally, the deferred share plan provided upon termination of employment, vested stock units will be automatically redeemable and any unvested stock units would be forfeited.

 

So on termination, the plaintiff received a letter telling him that he could exercise his vested stock units in accordance with the plan. It also provided him with a severance offer, which he rejected. He subsequently pursued a claim for wrongful dismissal, and in that claim he claimed damages in lieu of reasonable notice. He claimed for a bonus during the notice period, but he did not claim anything with respect to the vested stock units, presumably because he thought that was a concluded issue.

 

So the parties ultimately settled the action for a little bit more than 100,000, and they execute settlement documents. So on the same day that the plaintiff executed the settlement documents, he emailed the defendant requesting that his vested stock units be paid out. The defendant didn't respond before executing the documents and then months later took the position that in settling the dismissal, the plaintiff had released his claim to the vested documents.

 

The problem for the plaintiff was that the settlement documents were very comprehensive about all the claims that were being raised, could have been raised, pursuant to statute, contract, common law, including any bonus, share award, stock options, deferred shares, or similar incentive plan offered by, or on behalf of the releases. In other words, it was a very well drafted document. Neena, over to you.

 

NEENA GUPTA: Oh, I will tell you that release is very similar to the releases that we use. We use comprehensive releases like that for this very reason. We weren't involved in the litigation, but I have to tell you that as counsel, it's the kind of case that gets you to report to law pro. Because if, in fact, the intention of employee was that this $100,000 is on top of the vested stock options, then the minutes of settlement or the documentation should have shown, yes, I know we've always agreed on this. Like benefits will continue the stock option, but when we do minutes of settlement, they're intended to be comprehensive and they cover off all the terms, and one of the terms should have been the plaintiff being allowed to exercise his vested stock options, the balance being forfeited. So it's the kind of case that insurance is for.

 

I mean, I have to tell you, when I read it, I couldn't-- I had a great deal of sympathy for plaintiff's counsel. Let's put it this way, because that-- so I leave it at that. That's why we have insurance, I guess.

 

MARK JOSSELYN: Elisa, do we have time for a question or two?

 

ELISA SCALI: Yeah, well, we have one question. I think we've handled all the questions in the Q&A, there is a question about whether the presentation is going to be shared. And yes, it will be. That was an easy one to answer. And we have one question that deals with an employee. So an employee's position that they currently have is being relocated to a location that's far from where the employee lives.

 

The employer offers this employee a different position, which is considered to be a promotion. The employee doesn't want that position, the new position. They don't want to terminate the employee's employment so what do they do with this employee? Their current job is being relocated so far away that they can't continue in that job. They're offering them a different job, but they don't want it.

 

ANDREW BRATT: I'm happy to take a stab at it. So I think where I begin the analysis is, and we would need some more information, but is to figure out whether or not the move to a different location is sufficient to constitute a constructive dismissal. And the law is, quite frankly, all over the place on that issue. I think the prevailing view is that if the move. And I don't know that you can just look at it based on distance, it really depends on the employees commute, because sometimes moving the office can actually could much further away into a different area of the city could actually be easier for employees to commute to.

 

But if we operate on the assumption that the transferred to another location is going to constitute a breach of the employment contract, a constructive dismissal, then you can't force an employee to accept another role in lieu of the transfer. What you might be able to do is provide the employee with sufficient notice, and not notice of the change, but notice of termination on the terms and conditions that currently govern the employee's employment. And that notice would have to be, it would be working notice, it would be in the same location, in the same role, and it would be akin to what common law notice would be in the event of a termination.

 

And at the same time, you would offer an offer of new employment on the revised terms, either in the new location or the promotion. And then the employee could either accept, in which case they would move into this new role as of the effective date, or they could reject that offer, in which case you've already provided adequate working notice. You might have to provide severance pay under the Employment Standards Act, but that's one way of handling it.

 

Another way is you can put the offer in writing and try to argue that there was a failure to mitigate by not accepting the promotion. But I think the analysis always begins with, doesn't necessarily end with, but begins with, is this a unilateral change to a fundamental term of the employment relationship? And a lot of the case law on moves to different sort of locations actually suggest that you can make a decision to move the office.

 

And even if it's-- as long as we're talking about the same city. I mean, if you're moving to a different city, that's a different story. But there aren't as many cases as one would like, probably because these matters tend to resolve themselves. But the case law that's out there, which is somewhat archaic, admittedly, does tend to suggest that if the move is within the same city, it's fine.

 

I'm not sure I'd want to take that case to court because courts are very sympathetic, especially knowing how traffic can be in certain cities. And if you're asking somebody to go from one end of the city to another end of the city, and their commute is now going to be two hours instead of an hour, or 45 minutes instead of five minutes, that is a material difference, and so you can't force it. But there are ways that you can mitigate the risk so that you don't end up in a scenario where you're dealing with a constructive dismissal lawsuit and paying months and months and months of termination pay and severance pay.

 

NEENA GUPTA: If I could add one thing, there's a lot of evidence that this is a remote only position, I think, is the premise. And then essentially requiring somebody to move to be in an in-person office position, there is case law that is a significant difference. There's statistics showing the cost of commute is significant and ends up being something like a $6,000 pay cut.

 

So I just think that when we're moving from remote to in-office, even if it's within a reasonable commute, we do have to be very careful and give lots of notice because I think judges are sympathetic to claims that is a form of constructive dismissal, location of work. And I just point out that either today or yesterday I read-- I think yesterday I read an article that the commutes in Toronto and Vancouver are the worst in North America. So the two major cities that we service worst in North America, we are number one in something in Toronto, so there you go.

 

ANDREW BRATT: We have surpassed LA, if you can believe it or not.

 

NEENA GUPTA: And New York. We have surpassed LA and New York. My New York relatives, so driving in New York City, and we're going it's not so bad. We can manage this, so there you go.

 

ANDREW BRATT: And just to be clear that was the legal answer. But what you can do, the practical answer is, and in my experience this tends to work is, you give people sufficient time to adjust. You modify their compensation package either to provide a travel stipend or an increase to base salary over-- to compensate for the $6,000, give or take, that Neena was just referring to. And you figure out a way to make them whole and give them time to adapt and get used to the idea, that generally-- I mean, constructive dismissal is a concern, don't get me wrong. But at the end of the day, it does require an employee walking away from otherwise secure employment, which more often than does not happen.

 

So my advice is always to work with employees to understand what their concerns are, and to see if those concerns can be addressed. If the concern is financially based, this is going to cost me an extra $5,000, find a way to make them whole. If the concern is I want a job that I work from home and I'll never, ever go into an office that's harder to obviously to overcome.

 

ELISA SCALI: Yes. Thank you. That's all very good information. And I'm very pleased to say that we're right on time. We're maybe a couple minutes over, but we've-- excellent job. Thank you. I'd like to thank Mark, Neena, and Andrew. This was a very informative review of our important, some of them depressing cases of 2024.

 

Hopefully 2025 will be better and we will be back again, of course, in 2025 with more webinars. But for this webinar we would love to hear your feedback, so please take some time. It will only take you a few minutes if you hold your phone up to that QR code and scan that. It'll take you to a survey, and we'd ask you just to take a few minutes to complete the survey for us. So we are planning our 2025 webinars, stay tuned, and I wish everyone a very happy holiday and rest of the 2024. I hope it's wonderful for everyone and we will see you in 2025.

 

ANDREW BRATT: Happy holidays, everybody. Thank you for joining.

 

MARK JOSSELYN: Cheers.

 

NEENA GUPTA: Happy--

 

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