MGT3010 EMPLOYMENT LAW
See Yates Chapter 12 Employment Contracts
Introduction
The employment relationship goes back to antiquity. It is certainly traceable
to fourteenth century England when legislation was passed to regulate the
wages of employees. The problem was that, because of the plague (Black
Death), labour shortages created the risk of higher wages. The Master
Servant Act of 1867 (later adopted by Canada) placed limits on the length of
time a contract bound the parties, and defined relationships between the
parties. Workers’ Compensation legislation was established in Great Britain
in 1897 and in the early 20th Cenury extended to Canada.
Apart from this legislation, the Common Law (judge-made law) determined
the relationship between the parties. While commercial contracts are based
on the idea of equal parties, employment contracts have never attained such
a form. Indeed, the legal concept of employment embodies “control” by the
employer. There is also an obligation on employers, that of vicarious
liability for the legal wrongs of their employees, in the course of their
employment. More recently, statute law has placed more legal obligations on
employers and employees. Such statutes (mainly provincial, except for those
industries under federal jurisdiction) include human rights, employment,
standards, occupational health and safety, and workers’ compensation.
The Employment Relationship
The common law contract of employment requires the essential elements of
consensus, consideration, legality and intention to create legal relations. An
employment contract usually involves the payment of wages in exchange for
services, but may involve other remuneration instead of, or in addition to,
wages. Such other remuneration may include food, shelter, shares in the
company, contributions by the employer into a pension plan etc.
The law distinguishes the employment relationship from that of the
independent contractor, which also involves the exchange of services for
remuneration. An example of the latter is an individual with a window
cleaning business who contracts with various home owners or businesses to
clean their windows once a month in exchange for remuneration. The
relevance of the distinction between an employee and an independent
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contractor lies in the different legal responsibilities imposed on the
respective parties by both the common law and statute law. The distinction is
sometimes unclear.
In the earlier part of the 20th Century, the test used by courts to distinguish
the employee from the independent contractor was that of “control”. The
party that decided what work was to be done, and where, when, how and by
whom it was to be done, was typically viewed as an employer and his
workers employees. As work became more complex, the “control” test did
not resolve all uncertainty about whether an employment relationship existed
and courts came to examine factors other than the presence or absence of
control of the work. The fourfold test described by the court in City of
Montreal v. Montreal Locomotive Works Ltd. et al. [1947] 1 D.L.R. 161
includes the statement:
In earlier cases a single test, such as the presence or absence of
control, was often relied on to determine whether the case was one of
master and servant, mostly in order to decide issues of tortuous
liability on the part of the master or superior. In the more complex
conditions of modern industry, more complicated tests have often to
be applied. It has been suggested that a fourfold test would in some
cases be more appropriate, a complex involving (1) control; (2)
ownership of the tools; (3) chance of profit; (4) risk of loss. Control in
itself is not always conclusive.
More recently, courts have recognized the limitations of their fourfold test
and are attempting to develop an organization test. This focuses on the
relationship of the provider of services to the business itself. The latter test
considers whether the services provided are an integral part of the business
or is adjunct or accessory to the normal activities of the employer. See Cooperators Insurance Association v. Kearney (1964), 48 D.L.R. (2d) 1;
Armstrong v. Mac’s Milk Ltd. (1975), 7 O.R. (2d) 478.
In Mayer v. J. Conrad Lavigne Ltd. (1979), 27 O.R. (2d) 129, the plaintiff
sold television time for the defendant on a straight commission basis. He
was required to attend regular sales meetings of the defendant each day and
file sales reports. Some direction of the plaintiff’s activities was carried out
by the sales manager, but this was generally limited to where and to whom
to sell. When the defendant failed to pay the plaintiff salesman vacation pay,
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he instituted legal proceedings. The relationship passed both the control and
the organization test.
Modern cases have generally less to do with vicarious liability and more to
do with the distinction between employees and independent contractors. A
significant difference is that, in matters not specified in the contract, an
independent contractor has the right to exercise his/her discretion on how,
when etc. the work is done. However, even this distinction has become
blurred. One reason for the blurring is that professional or expert employees
frequently exercise significant discretion with respect to when, where and
how their work is done in the course of their employment. In such cases, the
organization test is necessary but not necessarily sufficient to determine the
status of the relationship.
The Employer’s Duties
The common law provides implied contractual duties of an employer.
These include the duty to (a) pay wages; (b) provide a reasonably safe
workplace; (c) reasonable notice of termination of employment without
cause. However, many more duties have been imposed on employers by
legislation through the late 19th and early 20th centuries.
(a) Occupational Health and Safety
Legislation requires the employer to create and administer safe workplace
practices, safety equipment and clothing, provide training in safety practices
and knowledge of risks to health and safety from dangerous noise levels,
chemicals and other substances, physical injuries, workplace bullying and
harassment.
Breaches of occupational health and safety legislation can lead to fines
against the employer. Interestingly, these can be tax deductible. Liability is
strict, that is, the employer’s only defence is that it exercised “due diligence”
to avoid the breach. See for example the case The Queen in Right of
Ontario v. London Excavators & Trucking Limited (1998), 40 O.R. (3d)
32. A sub-contractor was excavating a construction site and was informed by
the general contractor that no services were buried in the area. The subcontractor’s back-hoe struck concrete encasing a hydro duct causing an
explosion. The sub-contractor was convicted of breach of the provincial
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occupational health and safety legislation and fined. Reliance on the general
contractor’s advice was insufficient to prove due diligence.
Note that conviction of individuals or corporations under the Criminal
Code is possible, though unusual. The difficulty here is proving that the
individual charged had a guilty mind – that is that he intended to perform the
act or omission that caused injury to another or that he was reckless or
grossly negligent. Recent amendments to the Criminal Code of Canada by
Bill C-45 may have increased the risk of corporate liability by aggregating
the fault of different employees and representatives of an organization. It is
no longer necessary to identify the organization’s “directing mind” when
someone is injured by recklessness or gross negligence. Consider
circumstances where a middle manager directs an employee to undertake
certain risky work that requires training, qualifications and experience.
Senior management knows that, due to a labour shortage, it is not
uncommon for middle management to assign work to unqualified
employees. Senior management does nothing to stop the practice of allowing
unqualified employees to perform the risky work. Another employee is
seriously injured by an explosion caused by the failure of the unqualified
employee to follow basic rules pertaining to the performance of the work.
The organization’s board of directors had been informed about a previous
explosion involving similar activity, but where no one was injured. In such
circumstances, the organization would almost certainly be criminally liable
for the aggregation of the action and inaction of the employee who
performed the work, middle management, senior management and the board
of directors. It is even possible that the board of directors of the organization
could be held personally criminally liable for failing to take action to prevent
the occurrence of the risk of which they were aware. What makes
prosecution unlikely is not the law but the culture of excusing white collar
crime.
(b) Employment Standards Legislation
Each province and the federal jurisdiction have legislated minimum
standards of hourly wages and overtime pay, public holidays, vacations,
vacation pay, leave of absence (unpaid) for parents of new-born or adopted
children. Laws also place a daily or weekly ceiling on hours worked. These
differ among jurisdictions.
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(c) Human Rights legislation
Provincial and federal human rights law prohibit discrimination by
employers in their hiring practices and in the employment contract on
grounds of age, race, creed, colour, place of origin, sexual orientation, sex,
nationality, physical or mental disability, ethnic origin, and in some
jurisdictions (e.g. Quebec) criminal record. The discrimination may not
necessarily be on grounds of the employee’s race or creed. An employer
refusing to hire a qualified individual because of his wife’s or partner’s race
would be in breach of the legislation unless it could establish a defence to
the charge.
Grounds in Alberta are race, religious beliefs, colour, gender, physical
disability, mental disability, age, ancestry, place of origin, marital status,
source of income, or family status of that person or of any other person.
Sexual orientation is also prohibited in view of the Supreme Court of
Canada decision in the Vriend case. Age applies only to persons over 18.
There is no upper limit on age in the Alberta Act but an employee’s
employment may be limited by the terms of an employer’s pension plan.
Ontario has a ban on mandatory retirement on grounds of age.
The courts have established that discrimination under human rights
legislation need not be intentional on the part of the employer. That is,
the act may be breached by an act, rule, policy or standard imposed by
the employer that has the effect, but not the intention, of discriminating
against an employee or job applicant on grounds of religion, disability,
sex etc.
A defence that an employer may have to its alleged breach of the Act is
that the job requirement or standard that cannot be met by the
employee is a bona fide occupational requirement (BFOR). The burden is
on the employer to establish that a BFOR exists. For example, an
employee’s job may require her to drive a motor vehicle for 10 hours a
week. If the employee becomes legally blind, the employer can show that it
is a BFOR that a higher level of vision is required for the job than that
possessed by the employee. That is, the requirement of a certain level of
vision is required of the employee for reasons of safety and efficiency. For
example, the employer can show that there is a rational connection between
that standard of vision required and the nature and purpose of the job.
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In the past, the establishment of a BFOR would normally entitle the
employer to dismiss the employee because of her inability to perform an
important function of her job. Since the Meiorin case (on the class website),
an employer has a further burden beyond demonstrating a BFOR of the job.
The employer must also demonstrate that it would be undue hardship for it
to accommodate the disabled worker by, for example, assigning her other
work, modifying the job description and requirements, providing technology
to assist the employee in performing certain tasks of the job, etc. A human
rights tribunal will take into account the resources available to an employer
in determining whether accommodation would be an undue hardship.
Accommodation may be required in circumstances beyond disablement. An
employer might have to organize a worker’s shifts to allow him to attend
religious ceremonies, or to allow her as a single parent to avoid working
night shift. Undue hardship depends substantially on the financial cost or
the level of organizational disruption that accommodation would cause
within the workplace. In Ontario (Ministry of Community and Social
Services) v. O.P.S.E.U. (2000), 50 O.R. (3d) 560, the employer had a policy
of religious accommodation of employees that allowed absence from work
for two paid days, and a rescheduling of work to permit one additional day
in a three week work cycle period. An employee who was required to
observe 11 holy days asked permission to take all eleven days without pay.
The employer refused but offered various other work schedule options in an
attempt to accommodate the employee. The employee lodged a grievance
alleging discrimination on grounds of creed. The Court of Appeal held that
the employer’s suggested accommodation was sufficient to meet its legal
duty of accommodation, short of undue hardship.
Human rights tribunals typically view addiction to drugs or other substances
as a disability. This raises at times the legal propriety of mandatory random
drug testing of employees, and of the dismissal of employees for failing to
submit to a drug test or for testing positive in such a drug test. In certain jobs
involving relatively high risk to the safety or life of oneself and others, such
as a firefighter, bus driver, police officer etc., an employer may argue
successfully that submission to mandatory drug testing is a BFOR. However,
employers have to establish that the results of the test prove impairment of
the employee, not always an easy task. Further, the duty to accommodate an
employee with a disability may make it necessary for an employer to assist
the employee in curing his addiction, even if a BFOR is established.
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Harassment
If an employee is harassed or bullied by supervisors, fellow employees or
even clients or customers on one or more of the protected grounds, for
example race, colour, sexual orientation, or disability (e.g. obesity), an
employer may be liable under human rights legislation for failing to provide
a workplace environment free from discrimination. Turning a blind eye to
such activities is not an option for employers. Such wrongs can be remedied
through occupational health and safety legislation, the human rights act, or
in court for breach of contract. Where employees are covered by a collective
agreement negotiated between the employer and the trade union, a grievance
can be filed and ruled upon by an arbitrator if no negotiated settlement is
made.
Pay Equity
In all common law provinces, private sector employers are not permitted to
pay a female employee less than a male employee (and vice versa) when
they are performing the same job. Quebec, Ontario and the Federal
jurisdiction also have pay equity legislation, which obliges an employer to
provide equal pay for work of equal value. This is designed to ensure that
pay is based on the skill, responsibility, qualifications, and degree of dangers
and demanding working conditions of the job, rather than traditional
stereotypes that “female” work is ipso facto less valuable than that
performed by males. Pay equity legislation also exists in some provinces
(such as Manitoba, and Saskatchewan) for public sector workers. So the job
of community health nurse employed by a local authority in such
jurisdictions might have skills, responsibilities etc. equal to those of a police
officer working for the same local authority. The relevance of such
comparison is that typically a substantially larger proportion of nursing jobs
are performed by females while most police officers are male. If the value of
their jobs is equal but their pay substantially unequal, the employer is
required to redress the pay inequity, including providing back pay for
previous discrimination. Public sector (such as the Federal Government or
Canada Post) and private sector employers (such as Telus) typically fight
tooth and nail to avoid or delay payment and redress of the pay inequity.
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Duties of Employees
The contract of employment will frequently specify certain duties of the
employee. For example, workplace rules may prohibit smoking on the job,
require punctuality, and specify rules for the safe performance of the job.
There are also implied terms of the contract of employment, which can be
replaced by specific terms but often are not replaced.
There is an implied duty to obey all reasonable orders within the scope of
employment. There is a duty of confidentiality of information obtained
during the course of employment. The employee must work the agreed
time and the employer must reap the profits of work done in that time.
The employee is free to work for his own profit in his own time, provided it
does not disadvantage his employer.
If an employee indicates he has a special skill or ability and is hired for this,
she must exercise the skill with reasonable efficiency. Failure to do so may
make the employee liable for damage caused through negligence.
While loyalty of all employees to the employer is implied, high level
executives seem to have a higher duty of loyalty. See Helbig v. Oxford
Warehousing Ltd. et al. (1985), 51 O.R.(2d) 421 where a senior executive
was hired to improve profitability of a group of companies. He invented a
way of improved handling of materials then engaged in a protracted legal
disagreement with his employer as to ownership of the invention. The court
found that the employee’s fiduciary duty to the employer justified the
employer’s firing of the employee.
See also Canadian Industrial Distributors Inc. v. Dargue et al. (1994), 20
O.R. (3d) 574 where a senior employee and several other employees left
their employer and purchased a competitor company of their employer. They
solicited customers of their former employer. This broke the duty of loyalty
to the employer. A higher fiduciary duty belonged to the senior exemployee, but the others were also liable for damage caused to the
employer. This rules out secret profits of the employee while working for the
employer.
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Termination of Contract of Employment
There must be reasonable notice of termination without cause or pay in lieu
of notice.
Wrongful dismissal occurs if the employer dismisses without cause and fails
to provide the notice (or pay in lieu of notice) required by the employment
contract. If the contract does not explicitly specify the period of notice, the
court will decide the appropriate notice if the employee brings a wrongful
dismissal suit. The Bardal case outlines factors the courts take into account
when determining appropriate notice. These include age, seniority, degree
of difficulty in obtaining similar employment. While cases vary, a
standard of around one month’s notice per year of employment is often
required by courts. As the Wallace v. United Grain Growers case illustrates,
courts may increase the notice required if the employer has dismissed the
employee in a grossly unreasonable or humiliating fashion.
Very occasionally if the employer behaves in a reprehensible or malicious
fashion, the court will award punitive damages. To award punitive damages,
the court must find an independent wrong beyond the wrongful dismissal
itself. These are not compensatory but rather an expression of the court’s
revulsion at the employer’s conduct. See Keays v. Honda recently ruled on
by the Ontario Court of appeal now under appeal to the Supreme Court of
Canada. The award of half a million dollars in punitive dames was reduced
by the court of Appeal
Note that courts will not reinstate into his job an employee who has been
wrongfully dismissed. Damages are the only remedy given. Reinstatement
is a remedy available to arbitrators of collective agreement grievances.
Human rights tribunals are also empowered to reinstate an employee
dismissed in contravention of the Human Rights Act. The Canada Labour
Code also provides for possible reinstatement of dismissed employees, under
individual contracts of employment. Unionized employees do not have
access to this.
Constructive dismissal
Note too that employees must provide notice of termination as required by
the contract or what courts consider reasonable notice. Notice is not required
if the employee is constructively dismissed. If an employee is subject to
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demotion, harassment, non-payment of wages, unsafe working conditions,
she may treat the contract as at an end, leave her employment, stop
performing her obligations under the contract and sue the employer for pay
in lieu of notice. The employee must have sufficient cause to quit otherwise
she may be liable for failure to provide reasonable notice of termination.
Misrepresentation
If an employer misrepresents the nature of employment and this induces the
person to enter into an employment contract that works to the employee’s
detriment, the employee may sue for fraudulent or negligent
misrepresentation. See Queen v. Cognos where Queen was not informed in
his interview that the funding for his job had not been approved by senior
management. The result was that he was soon dismissed with notice in
accordance with the contract. However he had been led to believe that the
job was secure for a lengthy period of time. The employer was held liable
for the misrepresentation. Damages were awarded under the law of tort.
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