1
1. What is Employment Law? Introduction ....................................................................................................... 6
Three Regimes of Work Law in Canada (David Doorey, 2020) ................................................................................... 6
Common Law Regime ...................................................................................................................................................................... 6
Regulatory (or Statutory) Regime .................................................................................................................................................... 7
Collective Bargaining Regime ......................................................................................................................................................... 7
Employment Law or Labour Law?................................................................................................................................. 7
What’s Distinctive about the Contract of Employment? .............................................................................................. 8
1. Employment is a Relation, not a Transaction ............................................................................................................................... 8
Ditchburn v Landis & Gyr Powers Ltd (1995) Ont Gen Div ....................................................................................................... 8
Discusses the difference between employment and transactional commercial contracts ....................................................................................................... 8
2. Work is Integral to One’s Identity ................................................................................................................................................ 9
Reference re Public Service Employee Relations Act (Alta) (1987) SCC; ................................................................................. 9
Slaight Communications Inc v Davidson (1989) SCC: ............................................................................................................... 9
Wallace v United Grain Growers (1997) SCC; ........................................................................................................................... 9
Justifies addition to a wrongfully dismissed employee’s award of reasonable notice where the manner of dismissal is callous, insensitive, or evidence
shows bad faith on part of the employer; creates, in essence, a whole new head of damages given the special nature of work to one’s identity.................. 9
3. Employment is Marked by Market Inequality ............................................................................................................................ 10
Machtinger v HOJ Industries (1992) SCC ................................................................................................................................. 10
A contractual term that falls below the legislative minimum is invalid; acknowledges inferior bargaining power of employees to justify departing from
usual rules of contract interpretation .................................................................................................................................................................................. 10
The Employment Relationship in Historical Perspective: From Status to Contract ............................................... 10
The Legally Defining Characteristic of Employment: Control ...................................................................................................... 11
The Default Structure of the Employment Relationship at Common Law ..................................................................................... 11
Stein v British Columbia Housing Management Commission (1992) BCCA ........................................................................... 11
2. The Law of Work / Employee Status ............................................................................................................ 11
Employee or Independent Contractor? ........................................................................................................................ 11
Employee Status: Why does it matter? ........................................................................................................................................... 11
Sagaz Industries (2001) SCC; .................................................................................................................................................... 11
Ontario Employment Standards Act, 2000: Section 5.1.................................................................................................................. 12
Section 5.1 ........................................................................................................................................................................................................................... 12
Employee or Independent Contractor: Determining Factors .......................................................................................................... 12
Braiden v La-Z-Boy Canada Ltd (2008) ONCA ....................................................................................................................... 12
Court followed Sagaz and determined that Braiden was an employee and not an independent contractor ......................................................................... 12
Dependent Contractors .................................................................................................................................................. 12
McKee v Reid’s Heritage Homes Ltd (2009) ONCA ................................................................................................................ 12
Affirms category of dependent contractor and set out two-part test .................................................................................................................................... 12
Keenan v Canac Kitchens (2016) ONCA .................................................................................................................................. 13
Deals with the issue of dependent contractors; exclusivity is to be assessed over life of relationship and cannot be determined on a “snapshot approach”
............................................................................................................................................................................................................................................ 13
Thurston v Ontario Children’s Lawyer (2019) ONCA .............................................................................................................. 14
Plaintiff will demonstrate sufficient economic dependency with evidence of “near-complete exclusivity” – near-exclusivity requires substantially more
than 50% of income. ............................................................................................................................................................................................................ 14
The Changing World of Work: Employee Status and the Gig Economy ....................................................................................... 14
Uber Technologies Inc v Heller (2020) SCC ............................................................................................................................. 14
3. Recruitment, Hiring and the Creation of the Contract of Employment ................................................... 15
Human Rights Issues in Hiring ..................................................................................................................................... 15
Discrimination and the Common Law............................................................................................................................................ 15
Bhaudauria v Seneca College (1981) SCC ................................................................................................................................ 15
Allegation of discrimination in hiring – there can be no common law tort of discrimination. ............................................................................................. 15
Human Rights Legislation: Brief History..................................................................................................................... 16
Ontario Human Rights Code, RSO 1990, c. H.19 (Current) ...................................................................................... 16
Section 5(1) .................................................................................................................................................................................... 16
Protected Grounds in Ontario ......................................................................................................................................................... 16
Human Rights Prohibitions Against Discrimination in Hiring .................................................................................. 18
2
Haseeb v Imperial Oil Ltd (2018) HRTO 957 ........................................................................................................................... 18
Deals with discrimination based on citizenship (less commonly litigated ground); shows us the importance for employers to ensure their requirements do
not discriminate ................................................................................................................................................................................................................... 18
“Lookism” ...................................................................................................................................................................................... 19
Issues in Contract Formation, Part One: Misrepresentation ..................................................................................... 19
Queen v Cognos (1993) SCC .................................................................................................................................................... 19
Tort case – negligent misrepresentation by employer; sets out the elements of the tort of misrepresentation in pre-employment recruitment processes ... 19
Islip v Coldmatic Refrigeration (2002) BCC 255 ...................................................................................................................... 20
Fraudulent misrepresentation by a job applicant; the requirements for negligent and fraudulent misrepresentations are essentially the same, except for
with the latter, we also have the intent to deceive ................................................................................................................................................................ 20
Issues in Contract Formation, Part Two: Creation and Modification ...................................................................... 21
Employment Contract Essentials .................................................................................................................................................... 21
Rejdak v The Fight Network (2008) ONSC .............................................................................................................................. 21
Discusses consideration in employment context – contains three key lessons re: offer and acceptance of employment contracts ...................................... 21
Hobbs......................................................................................................................................................................................... 22
Globex Foreign Exchange v Kelcher (2005) ABCA ................................................................................................................. 22
Deals with whether continued employment, on its own, can constitute fresh consideration to support a modification or amendment to an employment K.
Controversial case with a strong dissent ............................................................................................................................................................................. 22
Dissent: ............................................................................................................................................................................................................................... 23
4a. Employment Standards Legislation ............................................................................................................ 23
Overview of the Ontario Employment Standards Act ................................................................................................... 23
Employment Standards Act, 2000, S.O. 2000, c. 41 ...................................................................................................................... 24
Claim Procedure: ............................................................................................................................................................................ 24
Notice of Termination and Severance Pay ................................................................................................................... 24
Terminology ................................................................................................................................................................................... 24
Notice of Termination .................................................................................................................................................................... 25
No termination without notice ................................................................................................................................................... 25
Prescribed employees not entitled ............................................................................................................................................. 25
Ontario Regulation 288/01: Termination and Severance of Employment ............................................................................................................................ 25
Employer notice period ............................................................................................................................................................. 25
Pay instead of notice .................................................................................................................................................................. 25
Oosterbosch v FAG Aerospace Inc (2011) ONSC .................................................................................................................... 26
An employer might have just cause to terminate without notice or severance under the Act, but the standard is higher than it is at common law – under
the Act, it is necessary to find the added element of intentional wrong doing: wilful misconduct or neglect of duty ........................................................... 26
Notice – 50 or more employees (Mass Termination) ..................................................................................................................... 26
Ontario Regulation 288/01: Termination and Severance of Employment (continued…) .......................................................... 26
Notice, 50 or more employees ................................................................................................................................................... 26
Ontario Regulation 288/01: Notice, 50 or more employees................................................................................................................................................. 27
Important Note: ................................................................................................................................................................................................................... 27
Woods v CTS of Canada Co (2018) ONCA .............................................................................................................................. 27
How to determine notice entitlements when there’s a mass termination – clarifies the employers’ obligations in the case of mass terminations; tells us
what can constitute “working notice” ................................................................................................................................................................................. 27
Entitlement to Severance Pay ......................................................................................................................................................... 27
4b. Human Rights Legislation ........................................................................................................................... 28
The Test for Discrimination and BFOR/Accommodation .......................................................................................... 28
The two Step Approach .................................................................................................................................................................. 28
Stewart v Elk Valley Coal Corp, 2017 SCC 30 ......................................................................................................................... 28
British Columbia (Public Service Employee Relations Commission) v. BCGSEU, [1999] 3 SCR 3 (Meiorin) ...................... 28
Accommodation......................................................................................................................................................................... 29
Undue Hardship ......................................................................................................................................................................... 29
5. Express, Ancillary and Implied Terms ......................................................................................................... 30
Interpretation of Express Terms ................................................................................................................................... 30
The Contract of Employment: Principles of Interpretation ....................................................................................... 30
The Parole Evidence Rule .............................................................................................................................................................. 30
Contra Proferentem ........................................................................................................................................................................ 30
Machtinger ..................................................................................................................................................................................... 30
3
5a. Express Terms ............................................................................................................................................... 30
Termination Provisions .................................................................................................................................................. 31
Wood v Fred Deeley Imports Ltd (2017) ONCA ...................................................................................................................... 31
Employers’ actual compliance with the ESA does not cure an unlawful clause’s deficiencies – an unlawful clause cannot be remedied after the fact;
application of contra proferentem ....................................................................................................................................................................................... 31
Defending Arguments .......................................................................................................................................................................................................... 31
North v Metaswitch Networks (2017) ONCA ........................................................................................................................... 32
“where a termination clause contracts out of one employment standard, the court is to find the entire termination clause to be void, in accordance with
S. 5(1) of the ESA” – doesn’t matter if there is a severability clause................................................................................................................................... 32
Nemeth v Hatch (2018) ONCA ................................................................................................................................................. 32
Silence in the termination clause with respect to severance entitlement did not constitute contracting out of the ESA, however the ambiguity gave rise to
two interpretations; adopted interpretation that awarded more generous entitlement to employee .................................................................................... 32
Rossman v Canadian Solar Inc (2019) ONCA .......................................................................................................................... 33
(1) A potential violation of the ESA can undermine the enforceability of a termination provision; (2) if an employer violates the ESA, they cannot rely on
a saving provision or a severability clause to re-write or strike out the offending portions of the clause or the contract  it’s all or nothing ................. 33
Waksdale v Swegon North America (2020) ONCA .................................................................................................................. 34
Most recent case dealing with the Machtinger issue and termination provisions under indefinite term contracts .............................................................. 34
Fixed Term Contracts .................................................................................................................................................... 35
Ceccol v Ontario Gymnastics Federation (2001) ONC ............................................................................................................. 35
A string of fixed term contracts do not necessarily amount to an indefinite term contract; however, the court will insist on clear evidence from the
employer that the contract under which the employee was most recently hired was indeed a fixed term contract if the employee is claiming an indefinite
term contract and seeking common law damages. ............................................................................................................................................................... 35
Termination of Fixed Term Contracts ............................................................................................................................................ 36
Howard v Benson Group (2016) ONCA ................................................................................................................................... 36
An employee who has had their employment terminated prior to the end of a true fixed term K is not presumed to be under a duty to mitigate – they are
only under a duty to mitigate if the K expressly imposes such a duty .................................................................................................................................. 36
Restrictive Covenants ..................................................................................................................................................... 37
Three Main Types of Restrictive Covenants .................................................................................................................................. 37
Reasonableness in Restrictive Covenants ....................................................................................................................................... 37
Elsey v JG Collins Insurance (1978) SCC ................................................................................................................................. 37
Common law test to help in the assessment of the “reasonableness” of a restrictive covenant ........................................................................................... 37
Shafron v KRG Insurance Brokers (2009) SCC ........................................................................................................................ 38
Employers cannot rely on courts for assistance to save restrictive covenants – they must draft it correctly the first time and ensure the language and
contents of a restrictive covenant is sufficient and reasonable in order to be enforceable .................................................................................................. 38
Martin v Concreate USL (2013) ONCA .................................................................................................................................... 39
Not purely an employment law case – duration of the restriction was unreasonable because it was for an indeterminate period of time; there was no
fixed, well-defined time period ............................................................................................................................................................................................ 39
Rhebergen v Creston Veterinary Clinic (2014) BCCA ............................................................................................................. 40
Deals with a clause that’s unlike the traditional restrictive covenant clause; doesn’t outright prohibit competition, but seeks to discourage it ................ 40
5b. Ancillary Terms ............................................................................................................................................ 40
Dawson v FAG Bearings Ltd (2008) ONSC ............................................................................................................................. 41
Failure to establish that employee handbook was a valid part of the employment K ........................................................................................................... 41
ASM Corrosion Control Ltd v George (2002) ABPC ............................................................................................................... 41
Another example of an employer who successfully incorporated the terms of an ancillary handbook into the contract of employment .............................. 41
5c. Implied Terms ............................................................................................................................................... 42
Terms Implied in Fact .................................................................................................................................................... 42
Terms Implied by Law – Duty of Good Faith and Fair Dealing ................................................................................ 42
Lloyd v Imperial Parking (1996) ............................................................................................................................................... 42
One of the earliest Canadian cases to recognize an implied common law duty – a fundamental implied term of any employment relationship is that the
employer will treat the employee with civility, decency, respect, and dignity ...................................................................................................................... 42
Antunes v Limen Structures (2016) ONCA............................................................................................................................... 43
Implied duty of good faith and fair dealing in contract law ................................................................................................................................................. 43
Terms Implied by Law – Termination of Employment: Reasonable Notice ............................................................. 44
Overview of Forms of Termination at Common Law .................................................................................................................... 44
Termination with Notice ............................................................................................................................................................ 44
Termination for Just Cause ........................................................................................................................................................ 44
Frustration of Contract (Unit 7) ................................................................................................................................................. 44
Constructive Dismissal .............................................................................................................................................................. 45
Resignation ................................................................................................................................................................................ 45
Wrongful Dismissal and Reasonable Notice .................................................................................................................................. 45
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Common Law Implied Term of Reasonable Notice .................................................................................................................. 45
History of Reasonable Notice ......................................................................................................................................................... 45
Carter v Bell Sons (1936) ONCA: ............................................................................................................................................. 45
The Bardal Factors ......................................................................................................................................................................... 45
Bardal v Globe & Mail Ltd (1960) ONSC ................................................................................................................................ 45
Famous case which lays out the factors to be considered and weighed for determining “reasonable notice” at common law ........................................... 45
The First Bardal Factor: Character of Employment ....................................................................................................................... 46
Cronk v Canadian General Insurance (1995) ONCA ................................................................................................................ 46
One of the first cases to take on the assumption that managerial employees should be entitled to more notice .................................................................. 46
Minott v O’Shanter Development Company Ltd (1999) ONCA ............................................................................................... 46
Effectively blew the lid off the unwritten rule of 12 months capped notice for low level employees by awarding 13 months notice – opened the door for
rethinking the nature of the character of employment and how to balance that with the other Bardal factors .................................................................... 46
Di Tomaso v Crown Metal Packaging Canada (2011) ONCA .................................................................................................. 47
Any uncertainty or ambiguity about the date that termination is to be effective will lead the courts to construe this in employee’s favour when
determining reasonable notice ............................................................................................................................................................................................ 47
Love v Acuity Investment Management Inc (2011) ONCA ...................................................................................................... 47
Character of employment must be given its due weight, and particularly, we need to recognize the high level of an employee and award them with a
suitably longer notice period than might be suggested by just the other Bardal factors ...................................................................................................... 47
Second Bardal Factor: Length of Service ...................................................................................................................................... 48
Third Bardal Factor: Employee’s Age at Time of Dismissal ......................................................................................................... 48
Fourth Bardal Factor: Availability of Similar Employment .......................................................................................................... 48
Irrelevant Factors that Courts have Rejected .................................................................................................................................. 48
Michela v St Thomas of Villanova Catholic School (2015) ONCA .......................................................................................... 49
Employers should not consider an employer’s individual financial situation when assessing length of reasonable notice ................................................. 49
Dowling v City of Halifax (1998) SCC ..................................................................................................................................... 49
“near cause” is not relevant to the assessment of the Bardal factors – also sometimes referred to as “doctrine of moderated damages” ........................ 49
6. Just Cause for Dismissal at Common Law ................................................................................................... 50
General Principles .......................................................................................................................................................... 50
Just Cause ....................................................................................................................................................................................... 50
McKinley v BC Tel (2001) SCC ............................................................................................................................................... 50
Leading case on just cause – “the test is whether the employee's dishonesty gave rise to a breakdown in the employment relationship” – emphasizes the
contextual approach and measuring proportionality ........................................................................................................................................................... 50
The Contextual Approach .............................................................................................................................................................. 51
Belyea v Syncrude (2018) ABQB ............................................................................................................................................. 52
Recent example of the contextual approach in action – employee’s behaviour after the impugned misconduct is also important ...................................... 52
Other General Principles ............................................................................................................................................... 52
After-Acquired Cause..................................................................................................................................................................... 52
McIntyre v Hockin (1889) ONCA ............................................................................................................................................. 52
“It is now settled law that if a good cause of dismissal really existed, it is immaterial that at the time of dismissal the master did not rely or act upon it,
or even know of its existence, or that he acted upon some other cause in itself insufficient. The main question always is, were there at the time of the
dismissal facts sufficient in law to warrant it.” ................................................................................................................................................................... 52
Van den Boogard v Vancouver Pile Driving Ltd (2014) BCCA ............................................................................................... 52
Shows modern example of after-acquired cause .................................................................................................................................................................. 52
Cumulative Cause and Progressive Discipline ............................................................................................................................... 53
Atkinson v Boyd, Phillips & Co (1979) BCCA ......................................................................................................................... 53
Requirements to make out a case of cumulative cause or culminating incident ................................................................................................................... 53
Laszczewski v Aluminart Products Ltd (2007) ONSC .............................................................................................................. 53
With something as subjective as management style, and also with conduct that can be traced to cultural or personality differences or a lack of training,
courts will look at employers’ efforts for progressive discipline before finding that the impugned conduct amounts to just cause ..................................... 53
Condonation ................................................................................................................................................................................... 54
Specific Grounds for Dismissal...................................................................................................................................... 54
Dishonesty and Conflict of Interest ................................................................................................................................................ 54
Incompetence and Safety Violations .............................................................................................................................................. 55
Balzer v Federated Co-operatives Limited (2018) SKCA ......................................................................................................... 55
Example of safety violations – where safety is an issue and where the employee creates a significant safety risk to themselves, others or the environment,
courts are more likely to uphold that as just cause. ............................................................................................................................................................. 55
Babcock v C&R Weickert Enterprises (1993) NSCA ............................................................................................................... 55
Example of incompetence or performance issues as being just cause for dismissal – employer’s failure to not just warn, but to also provide a reasonable
opportunity for the employee to correct the performance problems meant the employer could not rely on these problems as just cause ........................... 55
Insolence and Insubordination ........................................................................................................................................................ 55
Henry v Foxco Ltd (2004) NBCA ............................................................................................................................................. 55
Example of insolence and insubordination – a single, isolated case of insolence will justify dismissal only in three circumstances .................................. 55
Harassment and Violence ............................................................................................................................................................... 56
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Van Woerkens v Marriott Hotels of Canada (2009) BCSC ....................................................................................................... 56
Deals with workplace sexual harassment ............................................................................................................................................................................ 56
Absenteeism and Lateness .............................................................................................................................................................. 57
Off-Duty Conduct........................................................................................................................................................................... 57
Kelly v Linamar Corporation (2005) ONSC ............................................................................................................................. 57
Deals with off-duty conduct – found to amount to just cause. the test is whether the employee’s behaviour threatened the employer’s business interests. 57
Off-Duty Conduct on Social Media ............................................................................................................................................... 57
7a. Resignation .................................................................................................................................................... 58
Upcott v Savaria Concord (2009) ONSC .................................................................................................................................. 58
When an employee announces they quit in an emotional outburst, employers should allow for a “cooling off period” for the employee to change their
mind and take back their resignation – such utterances may not constitute an immediately valid resignation. ................................................................... 58
Wrongful Resignation .................................................................................................................................................... 59
Reasonable Notice .......................................................................................................................................................................... 59
Tree Savers International v Savoy (1992) ABCA ..................................................................................................................... 59
Example of a case where the Court found a longer period of notice to be appropriate for an employee resignation – 9 months held to be appropriate,
given the status and seniority of the employee ..................................................................................................................................................................... 59
Consbec v Walker (2016) BCCA .............................................................................................................................................. 60
Example of wrongful resignation damage calculations – Court held that financial losses from resignation did not exceed the amount of money the
employer saved by not having to pay the employee during notice period ............................................................................................................................ 60
RBC Dominion Securities v Merrill Lynch (2008) SCC ........................................................................................................... 61
Example of employer success in recovering for wrongful resignation without notice – didn’t touch on this case much in class. ........................................ 61
7b. Constructive Dismissal ................................................................................................................................. 61
Farber v Royal Trust Co (1997) SCC ........................................................................................................................................ 61
Where an employer unilaterally makes a fundamental or substantial change to an employee's contract of employment — a change that violates the
contract's terms — the employer is committing a fundamental breach of contract that results in its termination and entitles the employee to consider
himself or herself constructively dismissed. ......................................................................................................................................................................... 61
Elements of the Cause of Action .................................................................................................................................... 62
Second Potter Branch: Breach of an Essential Term................................................................................................... 62
Substantial Breach of an Essential Term – Past Examples ............................................................................................................. 62
Changes to Compensation ......................................................................................................................................................... 62
Changes to Position and Responsibilities .................................................................................................................................. 62
Change in Work Location .......................................................................................................................................................... 63
Leave of Absence and Suspensions ........................................................................................................................................... 63
o
Carscallen v FRI Corp (2006) ONCA; ............................................................................................................................. 63
o
Potter v New Brunswick Legal Aid Services Commission (2015) SCC; ......................................................................... 64
First Potter Branch: Employer Behaviour that Makes Continued Employment Intolerable .................................. 64
Shaw v Xerox Canada (2000) ONCA ........................................................................................................................................ 64
Establishing a case of constructive dismissal where there is no easily identifiable contractual term that has been breached (Demeyere doesn’t think this
was decided well) *decided before Potter* ......................................................................................................................................................................... 64
Colistro v TbayTel (2019) ONCA ............................................................................................................................................. 65
Employee able to make out a claim of constructive dismissal based on her employer’s decision to re-hire a man who had sexually harassed her in that
same workplace years earlier. ............................................................................................................................................................................................. 65
Wronko v Western Inventory (2008) ONCA............................................................................................................................. 65
Sets out the options that are available to an employee who believes they have been constructively dismissed; spells out the legal consequences of each of
these options. ....................................................................................................................................................................................................................... 65
8. Damages for Wrongful Dismissal .................................................................................................................. 67
Step 1 – Quantify the Amount of Notice to Which the Employee was Entitled ............................................................................. 67
Three Categories of Damages in Wrongful Dismissal Claims ....................................................................................................... 67
Compensatory Damages................................................................................................................................................. 68
Potential Heads of Compensatory Damages................................................................................................................................... 68
Salary and Commission ............................................................................................................................................................. 68
Benefits & Perks ........................................................................................................................................................................ 68
Company Vehicles ..................................................................................................................................................................... 68
Insurance Benefits ..................................................................................................................................................................... 68
Stock Options ............................................................................................................................................................................ 69
Bonus ......................................................................................................................................................................................... 69
Paquette v TeraGo Networks Inc (2016) ONCA; ...................................................................................................................... 69
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If an employer wants to make it so that a dismissed employee is not entitled to bonus payment, or compensation for loss of bonus payments during the
notice period, the employer will need to point to clear, explicit language in the contract which takes away this entitlement during the notice period.
Merely requiring “active employment” for the entitlement is not enough. .......................................................................................................................... 69
Matthews v Ocean Nutrition (2020) SCC .................................................................................................................................. 70
Unanimous decision which underscores the point that, to limit an employee’s common law entitlement to a bonus during the notice period, employers are
required to use unambiguous language in the contract or in the bonus plan (echoes Paquette). ........................................................................................ 70
Aggravated and Punitive Damages ............................................................................................................................... 71
Wallace v United Grain Growers (1997) SCC .......................................................................................................................... 71
Pre-Honda Keays approach to “bad faith dismissal ........................................................................................................................................................... 71
Problems with the Creation of Wallace Damages .......................................................................................................................... 73
Honda Canada Inc v Keays (2008) SCC ................................................................................................................................... 73
Kills the arbitrary “Wallace damages”. As a consequence of Wallace and Keays, an employee can recover aggravated damages – or “moral damages”
or “bad faith damages” – if the Court finds that the manner of dismissal (not just the fact of dismissal itself) caused the employee real physical or
psychological harm. ............................................................................................................................................................................................................ 73
Recent post-Keays Cases Dealing with Aggravated and Punitive Damages .................................................................................. 75
Pate Estate v Galway-Cavendish & Harvey Township (2013) ONCA ...................................................................................... 75
Focus on punitive damages – example of a sizeable award of punitive damages in cases involving pretty egregious employer misconduct ...................... 75
Boucher v Wal-Mart Canada Corp (2014) ONCA .................................................................................................................... 76
Deals with punitive damages and aggravated damages – fair summary of the current state of the law with respect to punitive damages in wrongful
dismissal actions. ................................................................................................................................................................................................................ 76
Galea v Wal-Mart Canada Corp (2017) ONSC ......................................................................................................................... 76
Aggravated and punitive damages discussion – another very sizeable award ..................................................................................................................... 76
Extra Cases Beyond Course Readings............................................................................................................................................ 77
Bailey v Service Corporation International (2018) BCSC ......................................................................................................... 77
*extra case – does not introduce any new ideas, but rather further examples of aggravated and punitive damages........................................................... 77
Ruston v Keddco Manufacturing Ltd (2019) ONCA................................................................................................................. 77
*extra case - does not introduce any new ideas, but rather further examples of aggravated and punitive damages ........................................................... 77
Mitigation of Damages ................................................................................................................................................... 78
The Duty to Mitigate – what is the Standard of Mitigation that is Required? ................................................................................ 78
Forshaw v Aluminex Extrusions (1989) BCCA ........................................................................................................................ 79
Articulation of the test of what counts as “reasonable efforts” in mitigation. ..................................................................................................................... 79
Evans v Teamsters Local 31 (2008) SCC .................................................................................................................................. 79
Duty to mitigate requires an employee to accept a job offer from the former employer if a reasonable person in the employee’s position would have
accepted the employer’s offer – two pre-requisite conditions. ............................................................................................................................................. 79
Brake v PJ-M2R Restaurant Inc (2017) ONCA ........................................................................................................................ 80
Clarifies a number of issues re: mitigation after dismissal and also made the limitations clear on an employer’s ability to rely on mitigation earnings to
reduce it’s liability; provides a breakdown of which sorts of earnings that an employee has during the notice period which are in fact deductible. ......... 80
1. What is Employment Law? Introduction
Three Regimes of Work Law in Canada (David Doorey, 2020)
1.
2.
3.
Common law regime
Regulatory regime (or statutory regime)
Collective bargaining regime
Common Law Regime
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The law of contracts and torts
o Mostly the common law of contracts is relevant; it is at the legal core of the employment relationship
A contract is an exchange of promises (“quid pro quo”)
In cases of employment, we might simplify the exchange to a “work for wages exchange”; the worker promises to work and in
exchange, the employer promises compensation in the form of wages, and sometimes through other benefits
Contract of employment is what binds an employer and the individual employee – it is at the heart of the employment
relationship
o Often referred to as an “individual contract of employment,” which helps to distinguish it from a collective agreement
The common law is what governs the individual contract of employment between the individual employee and the employer
The common law’s treatment of the employment relationship as a contract is sometimes problematic and has been subject to
much criticism and debate
Questions to think about:
o Does the common law truly treat the employment relationship as a contract?
o Should the common law be used to govern the employment relationship?
Big question often raised concerning the common law of contract – the relevance of the principle of freedom to contract
o Everyone should be free to contract with whomever they want, on whatever terms they want, etc.
7
o
o
o
This lies at the heart of the common law of contract
However, the employment relationship poses some challenges for this idea, given the inequality of bargaining power
that exists between many employers and employees. Many instances of employment law actually tend to restrict the
individual’s freedom to contract
Because of this, it often doesn’t make sense to think of an employment contract as a voluntary agreement
Regulatory (or Statutory) Regime
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Legislative attempts to respond to and mitigate the inequality of bargaining between employer and employee
Imposing obligations on employers and conferring rights upon employees
Often, these legislative interventions are justified on the grounds of inequality in bargaining power, which does generally exist
We’ll focus on two categories of legislative involvement in this course:
1. The Ontario Employment Standards Act (2000)
2. The Ontario Human Rights Code
What do these have in common? They all restrict the freedom of contract and impose things like minimum standards,
employment conditions, etc. that overpower the common law
These statutes are administered by tribunals; though we will see that they continue to be relevant to the common law of
employment in various ways
Other relevant pieces of legislation: Occupational Health and Safety Legislation, Tax Legislation, etc.
Federally regulated employees are governed by the Canada Labour Code
Collective Bargaining Regime
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Beyond the scope of this course
However, it is helpful to discuss briefly to understand what falls within the scope of employment law and what does not
The regime of collective bargaining is an attempt to address the inequality of bargaining power by conferring more power on
workers to improve their bargaining power
o Sets out a regime that enables groups of workers to use their collective strength and bargain collectively with their
employer – also known as “labour law”
Labour law sets out, mostly through statute, the rules for formation and administration of unions, collective bargaining and
industrial conflict in the form of strikes and lockouts, and workplace disputes which are enforced by labour relations boards
and arbitrators
Employees represented by unions have their employment governed by a collective agreement, and workplace issues are decided
through a grievance arbitration procedure
o Statutes such as the ESA and HRC from the regulator regime do still apply to collective agreements, but the grievance
arbitration procedure is what sets out the dispute resolution process, rather than the separate tribunals established by
those acts
Employment Law or Labour Law?
Employment law: General consensus is that employment law refers to the body of laws, both common law and statutory, that govern
the individual contract of employment (the non-unionized work relationship)
Labour law: Refers to law that governs the unionized work relationship from unionization, to collective bargaining, to strikes and
lockouts, and the administration of the collective agreement
 When working between the two areas, it is very important to be cognizant and “stay in your lane”
 Generally, in North America, the common law regime plus the regulatory regime are grouped together as employment law; the
legal regime that governs unionization, collective bargaining and collective agreements is referred to as labour law
 Note:
o In Canada, sometimes “industrial relations” or “labour relations law” are used to refer to the collective bargaining
regime
o In the UK, “industrial relations” is used to refer to labour law
o Sometimes you’ll also still see references to “master and servant law” in common law jurisdictions, which is individual
employment law
o To make things more confusing, sometimes labour law is used as an umbrella term for both labour law and
employment law, and vice versa
 Recently, we see more references to “the law of work” or “workplace law”
 As a practical matter, it’s important to know when you’re faced with a workplace dispute, whether the employee or employees
in question are represented by a union
o If so, their dispute falls to be decided under the collective agreement
o If not, then the common law of contract and any relevant legislation will apply directly
 Another practical matter to always consider is the relevant jurisdiction – provincial, territorial or federal
8

Only use employment law case law when dealing with a non-unionized workplace issue, and only use labour law case law (i.e.
arbitration decisions under a collective agreement) when looking at a unionized worker problem
o There are common issues, but there are important differences between the two
 The most notable is in cases of dismissal and where the employee challenges their dismissal from
employment
 The non-unionized employee’s remedy is at common law or statute, whereas the unionized employee’s
remedy is through the collective agreement
o Remedies can also be very different
 In employment law, the remedy for wrongful dismissal is almost always damages; courts do not order specific
performance or reinstatement of the dismissed employee to their position
 Typically, tribunals also do not order reinstatement either, although they are empowered to do so
 In labour law however, reinstatement is quite common – it’s not uncommon for an employee to be discharged
and reinstated more than once before the discharge manages to stick and an arbitrator is satisfied that the
disciplinary record warrants the discharge
What’s Distinctive about the Contract of Employment?
Otto Kahn-Freund: The contract of employment is “the cornerstone of the modern employment relationship”
Notes about Employment Contracts
 Like all contracts, employment contracts are subject to the rules of contract formation (offer, acceptance, consideration, etc.)
 They are subject to liability for misrepresentation in the course of bargaining
 Overall, employment contracts have undeniable contract features and there’s no question that traditional contract rules should
apply
Three distinguishing features identified by courts and commentators as setting the employment contract apart from other contracts:
1. Employment is a relation, rather than a transaction
2. Labour, unlike other commodities, is special because it’s integral to an individual sense of identity and self-worth
3. Most employment relationships are marked by a disparity in bargaining power that favours the employer
1. Employment is a Relation, not a Transaction



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Unlike an ordinary commercial contract, employment is not a discrete transaction
Absent evidence of the parties’ intentions to the contrary, the employment contract is presumed to be of indefinite duration
o Because they are deemed to be of indefinite duration, their terms are necessarily vague and fluid; the relationship
between employer-employee is continually evolving (wage increases, promotions/demotions, etc)
In light of this long term and fluid nature, it has been suggested that the employment relationship is better understood as a
relational contract
o The relationship arises through mutual agreement in the same way as other contracts, but given its long-term nature,
the agreement is not expected to anticipate all possibilities and instead provides only a general framework for the
parties’ relationship
o Because of this, the precise rights and obligations of the parties often can’t be traced back to an express agreement or
a set of promises at the time of the relationships’ creation/contract formation
o As the relationship develops, rights and obligations change within the basic framework established at the relationships
creation and the modification of the parties’ rights and obligations may not be the result of any clear agreement or
exchange of promises, but instead is the result of gradual changes only implicitly agreed to by the parties in the spirit
of continuing and developing the relationship they have created for themselves
As a relational contract, it can be said that the employment relationship differs from the one-off commercial transactions and
the rights, obligations and reasonable expectations of employers and employees may change over time and often in the absence
of express agreement.
Ditchburn v Landis & Gyr Powers Ltd (1995) Ont Gen Div
Discusses the difference between employment and transactional commercial contracts
Facts:
 Ditchburn was a sales executive with 27 years of exemplary service. The employer implemented some workplace changes that
required sales employees to rely more on computer skills and less on interpersonal skills.
 D was demoted to a less prestigious and less demanding position. D formed the intention to resign and arranged to meet with
a client during business hours to “tie up some loose ends.”
 D and the client had lunch, consumed several beers, and then continued drinking for several hours at a strip club.
 Upon return to the client’s place of business, D and the client had a physical altercation resulting in injuries to both.
 Upon learning of the altercation, the Employer dismissed D without notice.
 Ditchburn sued for wrongful dismissal.
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Issue: Did the employer have just cause to dismiss Ditchburn without notice?
Trial Judge: Employer had dismissed Ditchburn without just cause; would have awarded damages in the amount equivalent to 22 months
salary in lieu of reasonable notice and an additional 2 months because the employer refused to provide a positive reference letter, and
also an additional $15,000 in damages for mental distress.
 Trial Judge, Justice Epstein, said that facts of the case must be examined “in light of the concept of the evolution of contractual
rights and obligations inherent in a relationship contract of this nature”
o Suggested that after 27 years of exemplary service, D could reasonably expect much more from his employer than
when he had first joined the company
 Described the employer’s obligations to D:
o “To an employee of almost 60 years of age who had devoted one half of his life to his employer; to a man who had
made a significant contribution to the company; to a man who had no previous history of bad judgment exercised on
the job; in a situation where the company was clearly not injured in any way – the employer has considerable
obligations, even in the face of a breach of company policy. It owes the employee more than the benefit of the doubt.
In a situation as this, it owes a response of loyalty, support and then additional support if the employee proves to have
a problem for which he or she requires assistance.”
 Note that this is an older case, and the rules of damages for wrongful dismissal have now changed quite a bit
ONCA: Upheld the 22 months notice award and the additional $15,000 damages for mental distress.
 Employer had breached obligation to provide reasonable notice of termination in the absence of just cause, and also an implied
term to support and provide assistance to a dedicated, long-term employee in an effort to continue their relationship
Reasoning: Justice Gouge held that Ditchburn’s breach of company policy did not amount to just cause given his long and unblemished
record of service with the company, and the reasonable notice award of 22 months was appropriate given Ditchburn’s senior position,
age, record of service and the bleak prospects for re-employment
Takeaways:
 ONCA agreed that the employment contract had evolved to such a point that we could say that the employer owed these
obligations to Ditchburn by the time of his dismissal
 Reveals how the contract of employment differs from commercial transaction contracts
o Importance of relationship development and history – the same employee conduct that may amount to contract
repudiation earlier in the life of the relationship may not have the same effect once the relationship proves to be longterm and unblemished
o Courts are willing to read into employment K’s an obligation on employers and employees to cooperate and support
one another in the spirit of continuing their relationship
 Note that the court looked to examine the special nature of the employment relationship here, rather than solely focusing on
traditional black and white contract law doctrine to justify reading in the implied term of extended obligations the employer
owed to Ditchburn at the time of his dismissal.
2. Work is Integral to One’s Identity
Reference re Public Service Employee Relations Act (Alta) (1987) SCC;

“Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support
and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of
identity, self-worth and emotional well-being.” – Dickson J
Slaight Communications Inc v Davidson (1989) SCC:

Dickson J, adding to his famous comments in the Ref re Public Service Employee Relations Act:
o “Viewing labour as a commodity is incompatible with such a perspective.”
Wallace v United Grain Growers (1997) SCC;
Justifies addition to a wrongfully dismissed employee’s award of reasonable notice where the manner of dismissal is callous,
insensitive, or evidence shows bad faith on part of the employer; creates, in essence, a whole new head of damages given the special
nature of work to one’s identity
Facts:
 Persuaded by the employer’s promise of secure and rewarding employment until retirement, W left a secure position with his
previous employer to accept a sales position.
 After 14 years of successful service, W was summarily dismissed (means dismissed without notice or explanation).
 W sued for wrongful dismissal.
 The employer maintained vague allegations of just cause up until day of trial, but never stated what said cause was.
 At trial, the employer ended up conceding there was no just cause. W suffered mental distress and damage to reputation.
Issue: Did this harsh and unfair manner of dismissal entitle Wallace to some form of extended damages?
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Held: Award of 24 months reasonable notice for Wallace and an additional 12 months notice to reflect the employer’s insensitive and
callous manner of dismissal
 In so doing, the SCC departed from a long line of cases that said there was no basis to justify an extension to a reasonable
notice award
Ratio:
 The employment contract has “unique characteristics” and governs a “special relationship.” “For most people, work is one of
the defining features of their lives.” “The loss of one’s job is always a traumatic event.” The manner in which one’s employment
is terminated “is equally important to an individual’s identity as the work itself.” The law ought to encourage employer conduct
that “minimizes the damage and dislocation (both economic and personal) that result from dismissal.”
Reasoning:
 “Although these decisions are grounded in general principles of contract law, I believe, with respect, that they have all failed
to consider the unique characteristics of the particular type of contract with which we are concerned. Namely, a contract of
employment. Similarly, there was not an appropriate recognition of the special relationship which these contracts govern.” –
Iacobucci J
Note: This viewpoint of employment contracts as special in comparison to the standard commercial contract continues to be frequently
cited by courts in support of a more nuanced application of contract law in cases involving employment contracts
3. Employment is Marked by Market Inequality
Typically, employers have superior bargaining power and employees often find themselves in situations of “take it or leave it” type
negotiations where there is no room provided for them to bargain.
Katherine Swinton, “Contract Law and the Employment Relationship: The Proper Forum for Reform”
“The terms of the employment contract rarely result from an exercise of free bargaining in the way that the paradigm commercial
exchange between traders does. Individual employees on the whole lack both the bargaining power and the information necessary to
achieve more favourable contract provisions than those offered by the employer, particularly with regard to tenure.”
Machtinger v HOJ Industries (1992) SCC
A contractual term that falls below the legislative minimum is invalid; acknowledges inferior bargaining power of employees to justify
departing from usual rules of contract interpretation
Facts:
 M and L were employed by the Employer dealership for 7 years when they were both dismissed without cause. Both employees
had signed employment agreements specifying the amount of notice of termination to which they would be entitled.
 Both agreements were standard form contracts with blank space left for the number of weeks of notice.
 On M’s agreement, the number “0” had been written in the blank and on L’s agreement, the word “two” had been written
 The Employer paid each employee four weeks notice, in accordance with the legislative minimum requirement (at that time).
Issue: Do these written contracts rebut the presumption at common law that an employee is entitled to reasonable notice of termination?
 Both contracts had specified a period of notice well below the statutory minimum under the Ontario ESA and also well below
the likely notice period at common law
Held: Iacobucci – notice provisions under the contracts are invalid. They do not comply with the minimum requirement of 4 weeks
under the ESA (at that time). Restores trial judge decision: M awarded 7 months notice and L awarded 7.5 months notice
Ratio: A contractual term that falls below the legislative minimum is invalid
Reasoning: “Individual employees, and in particular non-unionized employees, are often in an unequal bargaining position in relation
to their employers.” … “Accordingly, an interpretation of the Act which encourages employers to comply with the minimum
requirements of the Act, and so extends its protections to as many employees as possible, is to be favoured over one that does not. In
this regard, the fact that many individual employees may be unaware of their statutory and common law rights in the employment context
is of fundamental importance.”
 The harm which the ESA seeks to remedy is the fact that individual employees, and in particular non-unionized employees, are
often in an inequal bargaining position compared to their employers.
Note: No claims of duress or unconscionability plead by M or F. But for Justice Iacobucci, the inferior bargaining power of
employees generally and not the intentions of the contracting parties, in this case, was the deciding factor.
The Employment Relationship in Historical Perspective: From Status to Contract
There are various ways of describing employment, but its legally defining feature boils down to the existence of control (“right to give
orders and instructions,” “power to command and a duty to obey,” etc) by the employer over the employee.
 The law defines the contract of employment as a hierarchical relationship, in which the employer enjoys the right of control
over the worker, how the work is performed, and how the workplace is managed
 The worker, in turn, is subordinate to the employer’s right of control
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The Legally Defining Characteristic of Employment: Control


Control is key to the legal definition of the employment contract; it is a key factor in determining whether the work relationship
falls within the scope of employment law and is built right into the common law of employment
Once an individual worker is found to be an employee, rather than an independent contractor, the law of employment entitles
that person to certain rights and benefits
o Employee status is the gateway to the rights and protections under employment standards legislation, and the gateway
to common law entitlement of reasonable notice as well
The Default Structure of the Employment Relationship at Common Law
The subordinate-superior hierarchal structure is achieved at common law through two default, co-relative implied terms:
1. The employee’s implied “duty to serve”
o Sometimes referred to as the duty of loyalty or the duty of fidelity
o Duty to respect the employer’s authority and to faithfully obey the employer
2. The employer’s implied right of “managerial prerogative”
o Managerial prerogative is an implied term that the employer is the one that has the authority to manage the labour
process in its workplace
Stein v British Columbia Housing Management Commission (1992) BCCA
“An employer has a right to determine how his business shall be conducted. He may lay down any procedure he thinks is advisable so
long as they are neither contrary to law, nor dishonest, nor dangerous to the health of the employees and are within the ambit of the job
for which any particular employee was hired. It is not for the employee nor for the court to consider the wisdom of the procedures. The
employer is the boss and it is an essential implied term in every employment contract that, subject to the limitations I have expressed,
the employee must obey the orders given to him.”
 Employment is a relation, not a transaction. Employment is a relation of subordination.
 Work is integral to one’s identity. Work is integral to one’s identity because it requires her to submit to the control of another.
A worker gives more than just work.
 Employment is marked by market inequality and legal inequality.
2. The Law of Work / Employee Status
Employee or Independent Contractor?
This is the “threshold question” – lots of factors can turn on the answer to the question of whether one is an employee or an independent
contractor. Essentially, this question asks whether the law of employment applies to a particular workplace relationship or arrangement.
To conclude that a worker is indeed an “employee” is to conclude that the law of employment applies.
Employee Status: Why does it matter?
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

Also relevant in determining vicarious liability in tort
o When workers cause damage to others in the course of their work, the employer may be held liable for damages
o This is because an employee is acting on behalf of an employer, and under their control
o However, a company is not likely to be found vicariously liable for damage caused by workers who perform work as
independent contractors
Tax law implications
o Independent contractors = businesses, and thus permitted to claim expenses
o Employers of employees = responsible for collecting Canada Pension contributions, insurance premiums, income tax
deductions from the amounts they pay their employees, but not their independent contractors
Terminology
o Employee is said to complete work under a “contract of service,” whereas an independent contractor performs work
under a “contract for services”
o Sometimes, independent contractors are referred to as being “self-employed”
Sagaz Industries (2001) SCC;
“Although there is no universal test to determine whether a person is an employee or an independent contractor … the central question
is whether the person who has been engaged to perform the services is performing them as a person in business on his own account [or
for another company].”
 The above passage from Sagaz emphasizes how unpredictable and arguably subjective this legal inquiry is.
 Note: In making the employee or independent contractor determination, several factors must be considered (these factors are
non-exhaustive; see chart below)
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Ontario Employment Standards Act, 2000: Section 5.1
Section 5.1
(1) An employer shall not treat, for the purposes of this Act, a person who is an employee of the employer as if the person were not an
employee under this Act,
(2) If during the course of an employment standards officer’s investigation or inspection or in any proceeding under this Act, other than
a prosecution, an employer or alleged employer claims that a person is not an employee, the burden of proof that the person is not
an employee lies upon the employer or alleged employer.
Note: We tend to see this shifting burden of proof even at Common law


Common law courts tend to take a similar approach, even though the plaintiff in a wrongful dismissal action typically bears the
burden of proof and needs to make out all the elements of the cause of action
We see the courts are often willing to take up an invitation to question the worker’s employee status and to insist upon clear
evidence from the employer who insists the worker is not an employee
Employee or Independent Contractor: Determining Factors
Factors that Suggest Employee Status
The company sets working hours and assigns work.
The company owns the tools needed to do the job.
The company controls how the work is done and closely supervises the
work.
The customers/clients are the company’s.
The worker works exclusively for the company.
The work is performed at the company premises.
The worker has no personal assets invested in the company.
The worker must perform assigned tasks himself or herself.
Regular employee deductions are made from pay.
Factors that Suggest Independent Contractor Status
The worker has considerable discretion over when and how to perform
work.
The worker owns the tools needed to do the job.
The worker receives little direct supervision by the company.
The worker has a variety of customers/clients.
The worker advertises his or her services on the open market.
The worker has his or her own office and pays own expenses.
The worker has invested in his or her own money in the business, so is
at risk of loss but could earn a profit.
The worker can hire others to perform work.
The worker issues invoices to the company; no employee deductions are
made.
Note: These all focus on essentially the same themes: control, hierarchies, who’s business is the worker working for?
Braiden v La-Z-Boy Canada Ltd (2008) ONCA
Court followed Sagaz and determined that Braiden was an employee and not an independent contractor
Facts:
 Braiden worked for lazy boy for 22 years as a sales representative. The contract stated that B was “an independent sales and
marketing consultant” and not an “employee” of Lazy Boy.
 B was required to incorporate a business and to submit invoices to lazy boy reporting his sales each month.
 B worked mostly from a home office, paid his own expenses and was paid solely on the basis of commission.
 Lazy Boy set prices, sales territories, and sales targets. B was prohibited from selling other products and from assigning his
work (“subcontracting”) for Lazy Boy to other workers (very significant factor).
Held: The court followed Sagaz Industries and determined that Braiden was an employee, and not an independent contractor.
 No universal test – Sagaz
 Considered several factors outlined on the chart above
Dependent Contractors
“Dependent contractors” represent an intermediary category between
“employee” and “independent contractor”.
Employment law has evolved beyond the traditional “employee or
independent contractor” dichotomy, and Courts now recognize there is a
continuum with employer-employee relationship at one end, independent
contractors at the other, and dependent contractors in between.
McKee v Reid’s Heritage Homes Ltd (2009) ONCA
Affirms category of dependent contractor and set out two-part test
Facts:
 McKee owned a business called “Nu Home”. In 1987, signed a sales and advertising agreement on behalf of her company with
the defendant, Reid’s Heritage homes.
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
According to the contract, McKee agreed to advertise and sell 69 homes in Guelph for which she would charge Reid’s a fee of
$2500 per home she sold.
 Stated that Reid’s would have almost exclusive use of Nu Homes services, and that either party could terminate the agreement
for any reason upon 30 days.
 After the first 69 homes were sold, McKee continued to sell homes for Reid’s without a new agreement in place. Reid’s supplied
stationery and forms for selling homes, and McKee was given the title of “Sales Manager”.
 Reid’s paid McKee through her company Nu Homes.
 McKee hired, trained and managed her own sub-agents with which she split her commissions on her sales, and did this entirely
through her company Nu Homes without any involvement by Reid’s.
 In 2004, Reid’s restructured its salesforce after death of original owner.
 In 2005, McKee was told that her sub-agents would work for Reid’s as direct employees. Around this time, negotiations
regarding the terms of McKee’s own relationship with Reid’s broke down, and McKee, 64 years old at the time, sued Reid’s
for wrongful dismissal.
 Reid’s maintained that McKee was an independent contractor and therefore not entitled to notice of dismissal
At Trial: Found that McKee was an employee; her activity of selling homes was an integral part of the defendant’s business. Awarded
damages of reasonable notice equal to 18-months pay. Reid’s appealed
ONCA:
 Court asked whether there exists an intermediate position of “dependent contractor” between employee status and independent
contractor status
o This idea had been floating around the common law for many years, and here was an opportunity for the court of
appeal to confirm such a category and to define its scope and purpose
 Dependent contactor status may apply where the person is not an employee, but nevertheless a relationship of economic
dependency is present
 Given the presence of economic dependency, it makes sense to entitle these workers to reasonable notice of termination at
common law
 Evidence of economic dependency would usually occur where the contract work is exclusively or nearly exclusively for the
company in question
Held: ONCA did not disturb the lower courts finding that McKee was in fact an employee.
 Pointed to the fact the McKee was subject to Reid’s control as to where she sold homes, what promotional methods to use,
what to sell and how much to sell it for
 She used model homes provided by Reid’s, stationery and forms supplied by Reid’s, and was financially dependent from Reid’s
in that she relied on fixed commissions without any further chance for profit and she did not risk any significant capital herself
 The fact that McKee operated through her own business and hired sub-agents who reported to her did not outweigh the other
factors according to both the TJ and ONCA
Ratio: ONCA explained that determining whether a worker does fall within this “dependent contractor” category should be thought of
as a two-step test:
1. Ask whether the person is an employee or a contractor?
a. Requires asking the kinds of questions we saw working in the Braiden case (see chart above)
2.
If the worker is found to be a contractor, the second question is whether that contractor is “independent” or “dependent”?
(Court didn’t have to address this second step in this case)
a. Focuses on the degree of economic dependence
b. If a contractor works exclusively for the company, or is otherwise economically dependent on the company, the
contractor will likely be considered dependent and therefore entitled to reasonable notice just like employees are at
common law
Keenan v Canac Kitchens (2016) ONCA
Deals with the issue of dependent contractors; exclusivity is to be assessed over life of relationship and cannot be determined on a
“snapshot approach”
Facts:
 Keenan worked for defendant, Canac Kitchens, for approximately 32 years. Although his job title changed, his main role was
to supervise the delivery, installation and service of Canac’s kitchen cabinets.
 Keenan’s wife was also employed with Canac – she was a foreperson for Canac and had worked for them for 25 years.
 Up until 1986, the Keenan’s were considered employees of Canac. However, in 1987, they were informed they would no longer
be employees of Canac but would then on be considered independent contractors.
 They were told they should incorporate and were required to sign a document stating that they were subcontractors of Canac.
 Between this change in 1987 and 2007, the Keenan’s worked almost exclusively for Canac. Each wore shirts with company
logos, had Canac business cards, enjoyed employee discounts, Mr. Keenan had received a 20-year ring for loyal service to the
company, etc.
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
In 2007, business slowed down, and the Keenan’s did do some work for one of Canac’s competitors, Cartier Kitchens. However,
most of their work up until their termination in 2009 was with Canac.
Issue: Were the Keenan’s entitled to reasonable notice of termination? If employees, they are. If independent contractors, they are not.
Held: The Keenan’s are dependent contractors. Upheld by ONCA. Awarded 26 months reasonable notice.
Reasoning:
 Pointed to several factors which tipped the scale in favour of a dependent contractor relationship, rather than an independent
contractor relationship
o There was occasional weekend work performed for other companies, but the Keenan’s were mostly exclusive to Canac
o Canac maintained control over the business, including the setting of deadlines and the flow of work
o While the Keenan’s owned some of their own tools, they also used Canac’s business premises, phones, filing cabinets
etc. for their service
o They were very much part of the Canac business; required to wear Canac shirts, had Canac business cards
 Canac took issue with the lower Court’s finding of exclusivity: acknowledged that the Keenan’s had worked exclusively for
the company up until the end of 2006, but argued that exclusivity is a matter to be determined at the time of termination of the
relationship and the Keenan’s were less exclusively working for Canac at that time
o ONCA rejected this view, and stated that exclusivity cannot be determined on a snapshot approach – it is
integrally tied to the question of economic dependency.
o In other words, exclusivity must therefore be determined with consideration of the full history of the relationship
 Context:
o Keenan’s had worked exclusively for Canac from 1976 to 2007, and even when working for another company after
2007, the substantial majority of their work continued to be with Canac
o Of the 32 years for Mr. Keenan and 25 years for Mrs. Keenan working at Canac, all but two of those years were
exclusively served to Canac
 For ONCA, this degree of exclusivity supported the finding of dependent contractor status.
Thurston v Ontario Children’s Lawyer (2019) ONCA
Plaintiff will demonstrate sufficient economic dependency with evidence of “near-complete exclusivity” – near-exclusivity requires
substantially more than 50% of income.
Facts:
 Thurston was a sole practitioner lawyer who provided legal services to the Office of the Children’s Lawyer for 13 years.
 Each year, the office of the children’s lawyer had Ms. Thurston and its other lawyers sign a fixed-term contract.
 The work she did for the office made up about 40% of Thurston’s annual income.
 According to the contract she signed with the office, the office made no guarantee of the total value or volume of work that she
would receive, and also stated that the office could terminate the contract in any circumstance without notice.
 When the office decided not to renew Thurston’s contract in 2015, she claimed she was a dependent contractor and therefore
entitled to 20 months notice of termination.
Issue: Was Thurston a dependent contract of the Office of the Children’s Lawyer?
Held: Claim of dependent contractor status allowed at trial, reversed at ONCA.
Reasoning:
 A worker claiming dependent contractor status must lead evidence showing a minimum economic dependency on the contract
 The plaintiff will demonstrate sufficient economic dependency with evidence of “near-complete exclusivity”
o Pointed to the McKee decision and its emphasis on exclusivity for the dependent contractor status
 Turning to Thurston’s case, ONCA said she failed to establish the required degree of exclusivity to demonstrate her economic
dependence on the Office of the Children’s Lawyer
o Thurston maintained an independent legal practice throughout her time with the Office of the Children’s Lawyer, and
her work with the office only constituted about 40% of her annual billing = hardly exclusive service
 ONCA confirmed that near-exclusivity necessarily requires substantially more than 50% of the billings. While the office
was an important client for her, their relationship fell short of one of economic dependence and as such, she was deemed to be
an independent contractor and not entitled to notice of termination
The Changing World of Work: Employee Status and the Gig Economy
Uber Technologies Inc v Heller (2020) SCC
SCC struck down clause in the contract between Uber and their drivers stating that all disputes must go to arbitration in the Netherlands,
which effectively ousted the jurisdiction of Canadian courts and tribunals and also imposed a pretty hefty price on going to arbitration.
Immediate implication is that the case can proceed in the Courts. Next step would seem to be a motion for certification of Heller’s claim
as a class proceeding on behalf of Uber drivers, and then maybe some ultimate determination on the merits of whether the drivers’
relationship with Uber is governed by the ESA.
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3. Recruitment, Hiring and the Creation of the Contract of Employment
Human Rights Issues in Hiring
1.
2.
Common law responses to claims of discrimination in hiring (Bhadauria v Seneca College)
Human rights legislation (Haseeb v Imperial Oil)
Discrimination and the Common Law







The common law regime has very little to say about discrimination during recruitment and the hiring process. However, this
fact actually says a fair bit
Remember, the common law of contracts is committed to the principle of freedom of contract (individual contractors should
be free to choose with whom they want to contract, on what terms, or to refuse to contract altogether)
For these reasons, the common law typically “butts out” of the pre-contractual stage, instead focusing on things like dishonesty,
misrepresentations, etc which threaten the integrity of the contract as a free and voluntary set of rights and obligations
Around the 1950s in Canada, we started to see the introduction of various anti-discrimination laws designed to prohibit direct
discrimination, such that employers could not refuse to hire individuals for things such as race
Prior to this, the principle of freedom of contract ruled the day
The case of Christie v York Corporation (1940) SCC stands for that common law proposition
o Not an employment law case, instead involved the refusal by a tavern to serve Christie on the basis that he was black.
Christie sued, claimed damages for the mental distress and humiliation he suffered. Case went all the way to the SCC.
Court held in favour of the tavern.
o Reasoning was that the freedom of contract was decisive. In the absence of any legislative prohibition against a refusal
to serve certain individuals/groups, there was no basis in law to interfere with the contracting freedom of the business.
It wasn’t until Bhadauria v Seneca College (1981) SCC that this proposition from Christie was really tested
Bhaudauria v Seneca College (1981) SCC
Allegation of discrimination in hiring – there can be no common law tort of discrimination.
Facts:
 Bhadauria was a woman of East-Indian origin who had applied 10 times for a position as an Instructor at Seneca College.
Although she was well qualified for the position, she was never once invited to even interview.
 She brought a common law action in the courts, alleging she had been discriminated against on the basis of her race.
 Her Counsel suggested that (1) the court should recognize a new tort: a tort of discrimination, prohibiting discrimination in
hiring decisions, or (2) alternatively, a right to bring a common law claim based on the Ontario Human Rights Code (which by
this time, prohibited discrimination in hiring on numerous grounds, including race).
ONCA: Agreed – pointing to the HRC as evidence that an anti-discrimination norm was part of modern Canadian public policy, said it
was time for the courts to recognize a new tort of discrimination.
SCC: Disagreed and re-affirmed the common law’s commitment to the principle of the freedom of contract.
Reasoning:
 A refusal to enter into contractual relations, or perhaps more accurately, a refusal to even consider the prospect of such relations,
has not been recognized at common law as giving rise to any liability in tort.
o So, because there wasn’t already such a tort, there shouldn’t be such a tort.
 SCC considered whether they should nonetheless develop the common law to recognize a tort of discrimination:
o “The view taken by ONCA is a bold one and may be commended as an attempt to advance the common law. In my
opinion, however, this is foreclosed by the legislative initiative which overtook the existing common law in Ontario
and established a different regime which does not exclude the courts but rather makes them part of the enforcement
machinery under [human rights legislation] … Not only does the Code foreclose any civil action based on an
invocation of the public policy stressed in the Code. The Code itself has laid out the procedures for vindication of that
public policy, procedures which the plaintiff respondent did not see fit to use.”
Demeyere:
 So, Bhadauria could bring a complaint under Human Rights legislation and use the enforcement scheme created under the
legislation which establishes a separate administrative tribunal, but she had no claim against Seneca at common law
 Moreover, it seems that the existence of Human Rights legislation was taken by the SCC to mean that the common law could
not ever develop or evolve in a way so as to recognize any such claim
o Demeyere thinks this was wrong and took an overly narrow view of the court’s jurisdiction, and a limited view for the
potential of the common law to grow and develop on its own terms alongside any legislative initiatives Parliament
may adopt
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There have been some legislative changes to expressly give courts some jurisdiction over human rights matters in recent years,
but this decision itself has not been overturned or revisited by the courts. We’ll see it come up again when we look at damages,
and again it seems the SCC takes a very narrow view of the Court’s jurisdiction and the common law’s capacity to evolve
Another side note about Bhadauria:
 It has most often been interpreted as also preventing the recognition of a common law tort of sexual harassment
 Sexual harassment is recognized as a form of sex discrimination under HR legislation, and as such, most plaintiffs seeking
common law damages for sexual harassment have had their claims shut down on jurisdictional grounds
 In order to survive the likely jurisdictional objections that Bhadauria seems to raise, a victim of sexual harassment who seeks
common law damages would therefore be well advised to rely on known causes of action (i.e. assault, battery, defamation,
infliction of emotional distress, etc.) rather than allege a tort of harassment or sexual harassment
 Often, the facts of specific cases in these contexts can be seen to fit under these causes of action
o i.e. Discrimination and harassment can involve threatening tortious behaviour that causes mental distress, and there
may also be contract based claims such as constructive dismissal or breach of an express or implied duty of fair
treatment
Human Rights Legislation: Brief History


Precursors to the modern Ontario Human Rights Code was a series of pieces of legislation introduced after WWII, including
things such as the 1951 Fair Employment Practices Act
o Prohibited discrimination in employment on the grounds of race, religion, nationality, ethnicity etc.
o However, remedies under that legislation and others like it were pretty weak; an employer could be fined, but there
was no power to compel an employer to reinstate an employee and there was no compensation available.
o Discrimination was regarded as a wrong to be punished by fine; it wasn’t until around late 1960’s, early 1970’s that
sex and martial status were added as prohibited grounds too
Ultimately, legislation was developed in this very piecemeal fashion; around this time in the 1960s-70s, Canadian jurisdictions
started to consolidate these various pieces of anti-discrimination law dealing not only with employment but also housing and
other services into consolidated Human Rights Codes along with the creation of human rights tribunals and commissions to
administer the legislation and to promote awareness of human rights issues
o These new bodies were given remedial powers: they could order reinstatement, damage payments, reorganization of
workplaces to remove discriminatory barriers, and also order employers implement training and education in the
workplace
Ontario Human Rights Code, RSO 1990, c. H.19 (Current)
Section 5(1)
“Every person has a right to equal treatment with respect to employment without discrimination because of race, ancestry, place of
origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, gender identity, gender expression, age, record of offences,
marital status, family status or disability.”
 This right to equal treatment spans the whole of the employment relationship, from formation to termination
 It applies to recruitment and hiring decisions, and also to existing employment relationships and the employers’ duty to
accommodate
o Duty to accommodate can also apply to prospective employees (i.e. An employer may not refuse to hire an individual
on the basis of an occupational requirement that, while neutral on its face, adversely effects individuals by virtue of
their membership to one of these protected groups, unless that occupational requirement can be shown to be a bona
fide occupational requirement (BFOR)
o Part of establishing that a BFOR is not discriminatory is showing that it is impossible to accommodate the differences
without undue hardship to the employer
o That is, that the employer cannot alter or relax the requirement to make the employment accessible without the
employer suffering undue hardship.
Prohibited grounds vary a bit across jurisdictions in Canada, but for the most part, the kinds of grounds that are recognized are the same
even if the terminology differs
 Remember Vriend
o Omission from the Alberta Human Rights Act of the ground of sexual orientation; found to violate S. 15 of the Charter;
SCC read sexual orientation as a prohibited ground of discrimination into the Act
o These kinds of instances have helped to ensure a greater degree of consistency across jurisdictions
Protected Grounds in Ontario
Section 10 – Definitions:
Age – defined, for the purposes of employment discrimination, as being 18 years old or older.
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

Used to be defined as being between the ages of 18-65, but the upper limit was removed
When you hear about the elimination of mandatory retirement in Ontario, this refers to the definition of age under the Code
before it was changed to allow a claim of age discrimination to anyone over 18 including those aged 65 or older
Disability – very broadly defined in the Code; includes not just physical disability but also mental impairment, developmental disability
and learning disability
 Disability is the ground of discrimination most frequently raised in HR claims; sex is a close second
 Prohibition against disability discrimination also captures discrimination based on the perception that a person is disabled – a
“perceived disability” – or that they were disabled in the past
o S. 10(3) makes explicit that perceived and past disability fall within the scope of disability
Drug and alcohol addictions
Family status – defined as being in a parent-child relationship, whether you are the parent or the child
Marital status – defined as being married, single, widowed, divorced/separated or in a common law relationship
Record of offences – refers to a conviction for “an offence in respect of which (A) a pardon has been granted under the Criminal
Records Act and has not been revoked, or (B) an offence in respect of any provincial enactment”
 Applies to only criminal offences for which the worker has received a pardon (a “record suspension”) and to any provincial
offences such as traffic offences, etc.
Sex – S.10(2) states that sex discrimination includes pregnancy discrimination, the right to equal treatment without discrimination
because a woman is or may become pregnant
 This issue actually went all the way to the SCC (Brooks v Canada Safeway)
o Found that the employers disability benefit plan discriminated on the basis of sex by denying certain benefits in cases
where the inability to work was related to or even just coincided with pregnancy
o Employer argued that there was no violation of HR legislation in this case (Manitoba Human Rights Act) because the
Act did not prohibit discrimination on the basis of pregnancy
o Moreover, they argued the employers plan treated all pregnant employees the same
o Both arguments were eventually rejected by the SCC on the basis that pregnancy and the capacity for pregnancy are
inextricably linked to a person’s sex
Sexual harassment – similar story as sex; now the Ontario Code and legislation in other provinces expressly prohibit sexual harassment,
but the first complaints were brought as cases of sex discrimination
 This went all the way to the SCC in Janzen v Platy Enterprises
o SCC held that two women who were sexually harassed by a co-worker were victims of sex discrimination
o Court recognized that sexual harassment places a burden on the shoulders of working women and is linked to their
sex; this justifies treating it as a case of sex discrimination.
 Many Codes now explicitly prohibit sexual harassment as a form of discrimination, but the above precedent from the SCC
states that sexual harassment constitutes a form of sex discrimination as well
Other grounds are not defined in the Code, so we turn to tribunal and judicial interpretations when needed. A couple are worth
mentioning:
 Sexual orientation, gender identity, gender expression
o Latter two are relatively recent additions; they capture differences in how people experience and express their gender
o So far, it’s been held not to apply to personal fashion or grooming choices (i.e. hairstyles, tattoos, etc.)
 Religion or creed
o Here, HR tribunals and courts have applied the test of sincerely held belief
o As long as a complainant holds a sincere belief that a practice or obligation has a nexus with religion, then the case
may fall in the scope of creed or religion
o In the employment context, religion or creed has been raised with respect to employer uniform requirements
o It’s a bit of an emerging issue whether things like veganism or vegetarianism amount to a creed
Section 23(1):
Makes it clear that it applies to discrimination on prohibited grounds during the recruitment process; refers to both directly and indirectly
discriminatory job invitations.
 “The right… to equal treatment with respect to employment is infringed where an invitation to apply for employment or an
advertisement in connection with employment is published or displayed that directly or indirectly classifies or indicates
qualifications by a prohibited ground of discrimination.”
o Note that this means an employer must refrain from gendered terms (i.e. waitress, waiter)
o Must be careful about the questions they ask
 i.e. Instead of asking “Are you a Canadian citizen?” they must ask “Are you legally entitled to work in
Canada?”
 i.e. Instead of asking “Have you ever been convicted of a crime?” they must ask “Have you ever been
convicted of a criminal offence for which a pardon has not been granted?”
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o
Must be careful to ensure that applications don’t directly or indirectly ask for things related to date of birth, marital
status (i.e. asking for a maiden name), asking if an applicant has children or plans to have children, etc.
Notes:
 Under the Code, note that one is not required to establish there was an intention to discriminate, or that there was any bad faith
on part of the employer
 But if the prospective employer is aware of the candidates’ membership in a protected group, it is possible that it may influence
their decision, or it may be perceived to have influenced their decision
 For this reason, employers are well-advised to ensure that their recruitment and hiring processes (i.e. applications, interviews)
are structured in such a way that precludes the gathering of information that might identify an individual’s membership to a
protected group.
Human Rights Prohibitions Against Discrimination in Hiring


Discrimination at the hiring stage is very difficult to prove. Tribunals have held that if the refusal to hire is based at least in
part on discriminatory grounds, that is sufficient to be a violation of the Code – it need not be the sole reason.
However, it is still very difficult to prove that a non-hiring decision was not made on some sort of other, non-discriminatory
grounds when hiring processes are so subjective.
Haseeb v Imperial Oil Ltd (2018) HRTO 957
Deals with discrimination based on citizenship (less commonly litigated ground); shows us the importance for employers to ensure
their requirements do not discriminate
Facts:
 Imperial Oil recruited engineers – needed to be able to work in Canada on permanent basis (residency or citizenship)
 Required applicants to provide birth certificate, citizenship certificate or permanent residence certificate as proof
 Rationale was not intentionally discriminatory: because of time energy and expense of training new recruits, they wanted to
retain them and have them grow into senior positions  screened new recruits based on ability to permantently work in CAN
 Haseeb  international student ... not Canadian citizen or residency, however, was part of immigration project, was going to
obtain a PGWP for 3 year fixed term after graduation
 He applied, and lied about ability to work in Canada on permanent basis (was well qualified and top candidate)
 He was offered position and when couldn’t provide proof, Imperial Oil rescinded the offer
 Haseeb had gotten the PGWP for 3 years on the start date. When the offer was rescinded, H filed a human rights claim alleging
discrimination on the basis of citizenship
Held: Permanence requirement was discriminatory on the basis of citizenship. A requirement that a worker be legally able to work in
Canada is not discriminatory, but mandating the ability to work permanently in Canada is discriminatory on the basis of citizenship.
Reasoning:
 It was not a legal requirement for the work, it was just the employers’ preference due to their investment and resources placed
in the training program
 Tribunal considered whether the permanence requirement was a BFOR
o First, found that the BFOR defence was not available for Imperial Oil in this case, because this was a case of
direct discrimination and not a case of indirect or systemic discrimination; the employers were directly distinguishing
applicants on the basis of citizenship
 Tribunal found that even if the BFOR defence was available, it could not successfully establish the elements of the defence
 Noted that Imperial Oil had in fact on occasion waved the permanence requirement in the past
o Therefore the requirement was not a necessary requirement for the job that could not be waived without undue
hardship on the employer – as is required by the BFOR test
Demeyere: The idea that the BFOR defence is only available in cases of indirect or systemic discrimination is a bit questionable.
 We’ll see in Meiorin that the court says, as a matter of law, there’s no difference between direct and indirect discrimination
and that the same BFOR should apply in either case
 Often these decisions are just a matter of semantics, nothing significant hangs on making a classification between the two
Kartuzova v HMA Pharmacy Ltd. (2012, HRTO)
Complaint of discrimination on multiple grounds in job interview upheld
- K applied for a position as a pharmacy technician and was interviewed by Patel, a co-owner of the Pharmacy
- During the interview, P posed questions about K’s financial situation, her family and marital status, and how she came to
Canada
- K testified that she reluctantly answered the questions and felt that her answer negatively affected the interview
- P denied K’s claim that P had said “I will hire you” before asking the personal questions
- Adjudicator found K’s testimony more credible
- Adjudicator found that K had established a prima facie case of discrimination:
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o She was qualified for the job but was not hired;
o The person selected for the job was no better qualified than her;
o The person selected for the job lacked the complainant’s distinguishing Code-related feature
Onus then shifted to P to provide a “credible and rational explanation demonstrating, on a balance of probabilities, that its
actions were not discriminatory”
Adjudicator found for K and awarded $500 for wage loss and $4,000 in compensation for injury to dignity, feelings, and selfrespect and ordered the respondent to complete the OHRC’s online training module
“Lookism”




Should discrimination based on physical attractiveness be prohibited in hiring and employment under human rights legislation?
Can this sort of discrimination be captured by human rights legislation?
o It’s been suggested that if you are denied employment because of how you look, you may be able to allege
discrimination if you can link it to age, sex, ethnic background or physical disability, or even ancestry (arguing that
your genes are part of your ancestry)
This issue has been litigated increasingly in the USA under title 7 of their Civil Rights Act. Claims of discrimination based on
“lookism” and a fair bit of commentaries have been written on the topic
Not much yet on this topic in Canada, however. Demeyere thinks it’s an emerging issue that is worth thinking about
o The issue also sheds light on the “pigeon-hole approach” of human rights law
o To establish discrimination, you must “pigeon-hole” your claim into one of the grounds of discrimination
o There is no “analogous grounds” language in the Code like there is in the Charter, so you must work with the
categories named in the legislation or challenge the constitutionality of the legislation (as Vriend did) and have the
ground read in.
Issues in Contract Formation, Part One: Misrepresentation
*Note there is some overlap between tort and contract terminology when it comes to issues of misrepresentation.
 The issue here is the duties owed by employer and employee during the hiring process (i.e. communications with each other
through applications, resumes, interviews, etc.)
 If either party deliberately lies or misleads the other with respect to a material fact (i.e. an important condition of employment,
a qualification that the employee claims to have), they may be liable in tort for damages
 The tort is commonly referred to as the tort of deceit, although it is also known as fraudulent misrepresentation
 Where the misrepresentation is not intentional, it may also be caught by the tort of negligent misrepresentation
 If an untrue statement or representation induces the other party to enter into the employment K, the innocent party may seek to
rescind the contract
o This is a contract law claim in equity to have a return to the status quo; contract is treated as void and damages may
be awarded to return the wronged party to the position they would had been in had the contract not been punitively
formed
o However, the innocent party may also seek damages in tort – maybe they don’t want the k to be rescinded, and instead
want to enforce it but claim damages they have incurred by result of the misrepresentation
 Negligent misrepresentation – established in Hedley Byrne case
Queen v Cognos (1993) SCC
Tort case – negligent misrepresentation by employer; sets out the elements of the tort of misrepresentation in pre-employment
recruitment processes
Facts:
 Q had job in Calgary when applied for job with C located in Ottawa
 Interviewer told Q that the job would involve working on new projected (did not tell Q that it was conditional on n funding)
 Q accepted employment, resigned from old job and moved to Ottawa
 K was signed and included right for C to dismiss Q for any reason with 1 month notice
o C also had right to re-assign him to other projects as needed
 Funding was not given and after moving Q around for 17 months, they decided to terminate his employment
 Q sued C alleging tort of negligent misrepresentation
Issues:
1. Does the tort of negligent misrepresentation apply to the pre-employment recruitment process?
2. If so, had Cognos committed this tort by failing to disclose to Queen that the job for which he had applied was, at that time,
contingent on funding that had not been secured by the time the offer of employment was made?
Held: Q awarded 50k for loss of income, 12k for damages (purchase of new home), 250 for job search, 5000 for mental distress
1. Yes – the tort of negligent misrepresentation applies to employment interviews, as in this case.
2. Yes – Cognos had committed the tort of negligent misrepresentation.
Ratio: Set out the elements of the tort of misrepresentation in pre-employment recruitment processes:
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1. There must be a duty of care based on a “special relationship” between the representor and the representee;
2. The representation in question must be untrue, inaccurate, or misleading;
3. The representor must have acted negligently in making the representation;
4. The representee must have relied, in a reasonable manner, on the negligent misrepresentation; and
5. The reliance must have been detrimental in the sense that damages resulted
Reasoning:
1. Satisfied – Johnston, as a representative of the employer speaking on behalf of Cognos, was in a special relationship with
respect to the job applicant such that a DOC existed
2. Satisfied – the representation (in this case, an omission – failing to tell him of the contingency of funding) was untrue.
a. The position for which Queen was being considered was represented as being available – no suggestion it was
contingent on anything else. No mention of funding or any chances the project wouldn’t go ahead
3. Satisfied – Johnston knew the project hadn’t acquired approval, and he knew it wasn’t guaranteed; this omission of not telling
Queen was negligent. Court described DOC in this situation saying:
a. “A DOC with respect to representations made during pre-contractual negotiations is over and above a duty to be honest
in making those representations. It requires not just that the representor be truthful or honest, it also requires that the
representor exercise such reasonable care as the circumstances require to ensure that the representations made are
accurate and not misleading.”
i. Johnston/Cognos failed to meet this standard; he should not have led Queen to believe that the multi-view
project was a reality; he knew very well that financial support was essential to the project, and it was not
secured
ii. Thus, he left Queen with the false impression that the job was secure when it was not
b. Note: Employer argued no negligence as Johnston had been honest – Johnston testified he honestly believed the project
would go ahead; court rejected this
4. Cognos advanced two arguments in favour of the conclusion that Queen’s reliance was not reasonable, and these two provisions
should have tipped Queen off that his employment was not secure; neither of these arguments were entirely persuasive, and the
Courts ultimately rejected
a. K stated that Cognos had the right to terminate Queen’s employment with one month’s notice
b. Also, term in the K gave Cognos the right to “manage the workplace and make necessary changes in the interests of
efficiency and productivity”
5. Yes, reliance was found to be detrimental and damaged had been incurred
Demeyere:
 This case doesn’t mean the contract can’t ever be relied upon by an employer to defeat a claim of negligent misrepresentation
 Contract could, for example, contain an express clause stating that the terms of the K are paramount and would override any
representations made during the interview or at any other point
o This is often referred to as an “entire agreement clause”
 To rely on such a clause, likely the court would insist on evidence that the employee knew or ought to have known about the
clause’s existence and its significance
o In a case where there is inequality as between employer-employee, courts will look for very clear evidence on that
point
 Also worth noting that not every representation made in the pre-employment context will be a misrepresentation
 A misrepresentation is an untrue representation of fact; so, an expression of a mere prediction or an opinion does not
amount to a misrepresentation even if it turns out to be wrong
o However, if the prediction or opinion implies a fact, then there could be a claim for misrepresentation.
Islip v Coldmatic Refrigeration (2002) BCC 255
Fraudulent misrepresentation by a job applicant; the requirements for negligent and fraudulent misrepresentations are essentially the
same, except for with the latter, we also have the intent to deceive
Facts:
 Coldmatic sought to hire Islip away from a competitor; offered Islip a two-year contract, which included the use of a truck and
the right to purchase the truck for a nominal amount ($1) at the end of the contract.
 During the negotiations, Islip told Coldmatic that his salary in his current job was $75,000/year, when in fact it was just
$64,000/year. Based on what Islip had told them, Coldmatic offered him $75,000/year; Islip accepts, and begins working
 Coldmatic then takes back its promise to sell Islip the truck for $1. Islip claimed this was a unilateral, fundamental change to
his employment contract and thus amounted to constructive dismissal.
 He sought damages for wrongful dismissal plus damages for the value of the truck.
 In defence, Coldmatic argued that Islip had committed fraudulent misrepresentation when he lied about his previous salary and
therefore could not claim damages under the K which he induced them to enter into under false pretences.
Issue: Did Islip’s misrepresentation of his previous salary disentitle him to claim any damages under the contract?
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Held: No, this did not disentitle Islip from relying on the K. Ordered Coldmatic to pay Islip damages equal to one-year’s salary, as the
K entitled Coldmatic to terminate Islip’s after one year. Plus $20,500 to compensate Islip for the lost value of the truck.
Reasoning:
While Islip deliberately made a false statement about a fact with an intent to deceive Coldmatic, it wasn’t the case that Coldmatic had
actually been induced to enter the K on the basis of that representation; Coldmatic would have hired him anyway. Therefore, employer
could not establish reliance and therefore no claim for fraudulent misrepresentation.
 Employer alternatively argued there was just cause for the dismissal and therefore they had no obligation to give Islip notice
and therefore Islip had no basis for damages for notice
o Court disagreed; said that the misrepresentation was not of such a serious nature as to afford grounds for dismissal
without notice
Demeyere:
 If an applicant knowingly makes false representations that induce the employer to hire them, it could amount to fraudulent
misrepresentation
 So what happens when an employer learns after hiring someone that the employee misrepresented some aspect of their
application during the hiring process?
 What is most likely to happen (more likely than a tort action) is the employer will simply dismiss the employee and allege the
dismissal is for “just cause” based on the employee’s dishonest conduct in the hiring process
o Then, if there is a wrongful dismissal action, employer would argue that because of the employee’s dishonesty, the
dismissal was for just cause and therefore no notice is owed
o Another argument could be that the employee’s misrepresentation voids the contractual requirement to give notice
Issues in Contract Formation, Part Two: Creation and Modification
Employment Contract Essentials


We need offer, acceptance and consideration
o The fictitious “meeting of the minds” – consensus ad idem
In the employment context, sometimes the timing of the offer of employment and the starting of employment can cause issues
concerning consideration and the enforceability of any written K that is signed
o The issue of consideration as a requirement in contract formation and modification is continually evolving; it is an
especially hot topic right now in employment law and contract law more generally
o By result, the law seems to be in a bit of a flux and some cases are hard to reconcile with others
Rejdak v The Fight Network (2008) ONSC
Discusses consideration in employment context – contains three key lessons re: offer and acceptance of employment contracts
Facts:
 Fight Network rep made oral offer to employment to R over the phone on Friday (terms included salary, title, and start date)
 No discussion of how much notice of termination required (this is not uncommon)
 Offer made and accepted on that Friday, and R quit job and began work at FN on Monday
 On first day, gave R written K and asked him to sign it – returned it signed the following day
 K contained termination provision with no notice during probation period – R ended up getting terminated during probation
 R sues for wrongful dismissal (no notice) – wrongful dismissal = claim that contractual notice entitlement was breached
o Claim that employer, by failing to give notice, had failed to give notice to which he was entitled to under K
 R argued that original oral K was the relevant K, and not the written one he signed (written one included termination prov)
 First oral K said nothing about notice, meaning that the common law applied term of reasonable notice had been rebutted
Issue: Is Rejdak entitled to common law notice of termination? Was the second written contract transferrable?
Held: Found in favour of Rejdak. He had been wrongfully dismissed and was entitled to reasonable notice at common law in an amount
equal to four months pay.
Reasoning:
 Oral offer on Friday was accepted during phone call – no discussion of notice of termination or any kind of probationary period
 Terms of oral K represented terms of the K when R began work
 Written K did not replace the oral K nor amend the terms of it, because it contained no consideration
 R received no value in exchange for giving up right to reasonable notice and being subject to probationary period
 Employer argued that there was consideration and that there were 2 benefits
o Entitled him to 2 weeks vacation and health benefit plan
 Court said that neither of these factors amounted to fresh consideration (vacation was what he was entitled to under ESA)
 As to benefit plan, this was standard benefit provided to all employees and R could have reasonably expected to be entitled to
it upon accepting the original offer
 Oral K was relevant K, and none of changes introduced were binding on any of the parties.
Demeyere: This case offers three lessons about formation of the K of employment:
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1. Amendments to an employment K are enforceable only if there has been mutual consideration
a. Note in 2018, the BCCA held that mutual consideration isn’t always required to support a modification of a K as long
as both parties agree to the change and there is no duress or any policy reasons not to treat the amendment as binding
(Rosas v Toca); this was not an employment case, but it has some people speculating that the law might be moving
in the direction of eliminating consideration for the modification of all contracts, including employment K’s
b. Demeyere – there’s reason to think this holding won’t be extended to employment K’s because the employment K is
unique (inequal bargaining power, potential for employer to exert pressure on the employee to agree, etc.); however,
in the dissent in Globex we see a judge making the case that it should
2. A verbal offer by an employer can create a binding K if accepted; it doesn’t have to be in writing
3. If an employee commences work before having signed a written K of employment, then the written K represents an
offer to modify the original implied contract
a. Unless the original offer of employment was clearly made conditional on the signing of the written K
Hobbs
-
Salesperson, accepted employment with TDI
K that expected 60,000/year but silent on commission rates – to be agreed in separate document (verbally agreed)
1 week after starting employment, H was given solicitors agreement (non-negotiable and had to sign it before any payments
made)
o This agreement acknowledged the parties agreed to rates, but that they were subject to change at sole discretion of
employer – any changes also not deemed to be a change in any term of the solicitors agreement
 Also commissions only payable to any money received During term
 Also stated if employment terminated, company would only pay commissions that were due as of the date of
termination
 Also stated if terminated or resigned, had no claim for commissions
o Signed agreement cause felt he had no choice
- After 3 months, had received no commissions (thought he would be paid quarterly)
- However, employer said he would be paid only when it reached his value of the annual draw
- Another month passed, even though his sales exceeded 60,000 annual draw – still no payment
- Accepted employment elsewhere (at that point he earned 80k in commissions but only paid 35k)
Was solicitors agreement enforceable?
- Tj ruled it was onerous, but still enforceable
- TJ also ruled, if it was a new contract, consideration was still provided (something of value)
o The consequence of termination if didn’t sign did not make it invalid
- COA ruled TJ erred
o COA gave 3 reasons for concluding SA was a separate K
 1. Initial letter gave no indication that it was part 1 of the contract, and nothing in hiring letter indicated
having to sign this document
 2. SA was inconsistent with previous agreement – purported to give employer right to change rights at any
time
 3. Looked at verbal agreement and offer of employment, and found there was already a complete K of
employment, so the SA was not necessary
o COA held it was an amendment of the contract
o COA also held terms were unenforceable because there was no fresh consideration
 Disagreed with TJ --- promise of continued employment does not count as consideration
 Used Francis v CIBC
Globex Foreign Exchange v Kelcher (2005) ABCA
Deals with whether continued employment, on its own, can constitute fresh consideration to support a modification or amendment to
an employment K. Controversial case with a strong dissent
Facts:
 Three employees had signed K’s containing restrictive covenants; they were existing employees and had been asked to agree
to non-competition clauses that restricted their activities after the employment relationship.
 One of the three had signed it at the beginning of their employment, while the other two signed it after being employed at
Globex for some time.
 All three employees ended up leaving Globex and joining a competitor.
Issue: Were the restrictive covenants enforceable at all? Did they lack consideration?
Trial: The two employees who signed after starting work were not bound by the agreements; there was no fresh consideration given to
them in exchange for their agreeing to these post-employment restrictions
23

On appeal, on this issue, the employer argued that continued employment of these two workers was consideration; in exchange
for not having their employment terminated, they agreed to be bound by the restrictive covenant
ABCA: Mere continued employment does not provide consideration for the new terms. The employer is already required to continue
the employment relationship until there is grounds for dismissal or reasonable notice of termination is given
Dissent:
 The employer agreeing to forebear from exercising its right to terminate an employee can be valid consideration for an
amendment to the employment K
o The employer always has the right to terminate the relationship with sufficient notice as long as the termination isn’t
for discriminatory reasons, in which case it would be caught by human rights legislation
 This case had a tacit, implied agreement – the employer tacitly agreed to forbear from lawfully terminating the relationship
with notice in exchange for the employees expressly agreeing to the new restrictive covenant
 Dissent then went further and questioned the whole need for the consideration inquiry in the first place:
o “Courts should not bend over backwards to find that agreements between the parties, when the parties believe them
to be enforceable, to find them to not actually be enforceable because of the doctrine of consideration”
o Claimed that all parties in this case, the employer and all employees, thought of the agreements as enforceable – there
was disagreement on whether there had been breach, but the parties acted as though they were believed to be bound
by them
o “In applying the law of consideration, the court should refrain, if possible, from relieving the parties of covenants
freely entered into, absent some overriding policy consideration”
 Urged that courts should relax the requirement for consideration on the basis that the parties had clearly intended to be bound
by the covenant. Evidence of parties’ intentions should trump the technical requirements of contract formation and
modification.
Demeyere:
 Definitely divisiveness on this issue of consideration; perhaps we’ll see that Rosas v Toca will end up being applied to
employment law cases, as the dissent here seems to think would be the right thing to do.
 Demeyere thinks the majority decision accurately represents the current state of the law: fresh consideration is required for
modification of the contract of employment, and merely continuing to employ the worker is not sufficient.
 One other issue the court dealt with in Globex was the question of whether an employer who has been found to have wrongfully
dismissed an employee can nonetheless rely on the K of employment even though the employer has breached a term (the
obligation to give notice)
o Majority of the Court of Appeal upheld the current state of the law, which says no
o An employer who has wrongfully dismissed an employee and therefore has breached a term in the K cannot then turn
around and rely on other terms in the K
o Otherwise, there would be too much potential for abuse by employers; provided the example of the possibility of an
employer hiring an employee from a competitor, having them sign a restrictive covenant, then wrongfully dismissing
them while still imposing the terms of the restrictive covenant
 In this case, they would have held that the employer couldn’t rely on a covenant even if there hadn’t been a problem with
consideration; again, the dissent disagreed with this
o The dissent reasoned that just because the employer had breached the K, that doesn’t give the employee the right to
breach the K – the consideration problem shouldn’t have rendered the covenant unenforceable, nor should the fact
that the employer breached the K by wrongfully dismissing the employees have rendered the covenant unenforceable
Quach v Mitrux Services Ltd. (2020, BCCA)
Second contract purporting to replace original fixed term contract not enforceable because unsupported by fresh consideration
- Conveys that requirement of fresh consideration for contract variation is a bit up in the air or that courts might be prepared to
dispense with requirement some day
- Opportunity to follow Nav Canada, but they declined to follow / otherwise relax requirements of fresh consideration
o Variation was seen as much more significant than the variation in previous non-employment cases
 Court specifically noted that the variation here was much more extensive than series of minor variations
from Rosas
4a. Employment Standards Legislation
Overview of the Ontario Employment Standards Act

Ontario Employment Standards Act
o Applies to all provincially-regulated employers in Ontario
o Other provincial jurisdictions have their own employment standards legislation
24

Part 3 of the Canada Labour Code
o Applies to all federally-regulated employers in Canada
Interpretation of Employment Standards Legislation
 SCC has characterized the ESA as “remedial in nature”
o It must therefore be interpreted broadly and generously in favour of employees (Re Rizzo & Rizzo Shoes)
 SCC held that the termination and severance provisions needed to be interpreted broadly and generously such
that those benefits were also payable to employees who lose their employment as a result of the employers’
bankruptcy
 Note that a lot of important details are found not just in the ESA itself, but in the regulations
o Regulations are generally used in statute drafting to fill in the details of how the legislation will actually function, who
it covers/does not cover, etc.
 Your queue to look into the regulations are the words “as prescribed”
Employment Standards Act, 2000, S.O. 2000, c. 41




How legislation such as the Ontario ESA works is to restrict freedom of contract with respect to certain aspects of contracts of
employment
This is made clear in S. 5(1) of the ESA:
o No contracting out
 “Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee
shall contract out of or waive an employment standard and any such contracting out or waiver is void”
Where the parties do purport to contract out of the minimum standards, that contracting out is void (i.e. Machtinger)
With that being said, the parties can agree to greater entitlements or greater employee benefits than those under the act
o Greater contractual or statutory right
 5(2) If one or more provisions in an employment contract or in another Act that directly relate to the same
subject matter as an employment standard provide a greater benefit to an employee than the employment
standard, the provision or provisions in the contract or Act apply and the employment standard does not
apply.
Claim Procedure:





When civil proceeding not permitted
o 97 (1) An employee who files a complaint under this Act with respect to an alleged failure to pay wages or comply
with Part XIII (Benefit Plans) may not commence a civil proceeding with respect to the same matter
Same, wrongful dismissal
o (2) An employee who files a complaint under this Act alleging an entitlement to termination pay or severance pay
may not commence a civil proceeding for wrongful dismissal if the complaint and the proceeding would relate to the
same termination or severance of employment.
Amount in excess of order
o (3) Subsections (1) and (2) apply even if,
a) the amount alleged to be owing to the employee is greater than the amount for which an order can be issued
under this Act; or
b) in the civil proceeding, the employee is claiming only that part of the amount alleged to be owing that is in
excess of the amount for which an order can be issued under this
Withdrawal of complaint
o (4) Despite subsections (1) and (2), an employee who has filed a complaint may commence a civil proceeding with
respect to a matter described in those subsections if he or she withdraws the complaint within two weeks after it is
filed.
When complaint not permitted
o 98 (1) An employee who commences a civil proceeding with respect to an alleged failure to pay wages or to comply
with Part XIII (Benefit Plans) may not file a complaint with respect to the same matter or have such a complaint
investigated
Notice of Termination and Severance Pay
Terminology
“Reasonable notice” is synonymous with common law notice (not statutory notice)
 What is reasonable depends on the factors that the courts have recognized at common law over the years (as we have discussed)
“Notice of termination” is not a term of art, but this is the language the Act uses
 When you hear this, that should signal the notice specified under the legislation
The ESA also provides for a separate entitlement on top of notice of termination called “severance pay”
25


Language of “severance pay” is often used quite loosely to denote any kind of payment that an employer makes to an employee
upon severing their relationship
Common law damages for reasonable notice are sometimes referred to as severance or part of a severance package; however,
“severance pay” under the ESA has a very precise meaning
o It is an entitlement that is available to certain employees in limited circumstances on top of notice of termination
Notice of Termination
No termination without notice
54 No employer shall terminate the employment of an employee who has been continuously employed for three months or more unless
the employer,
(a) has given to the employee written notice of termination in accordance with section 57 or 58 and the notice has expired; or
(b) has complied with section 61.
 Note there is no entitlement to notice of termination during the first three months of employment
 Often referred to as a “probationary period”
Prescribed employees not entitled
55 Prescribed employees are not entitled to notice of termination or termination pay under this Part.
 Queues us to look at the regulations; must look at the regulations to find out who “Prescribed employees” are
o See Regulation 288/01: Termination and Severance of Employment (below)
Ontario Regulation 288/01: Termination and Severance of Employment
Employees not entitled to notice of termination or termination pay (Exceptions)
 2(1) The following employees are prescribed for the purposes of section 55 of the Act as employees who are not entitled to
notice of termination or termination pay under Part XV of the Act
o (1) Fixed term contract employees
o (2) Employees on temporary layoffs
o (3) Employees guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial
 Recall Ditchburn case; long service employee with excellent record and the incident was an abnormal error
in judgment – no just cause
 Oosterbosch Case
Employer notice period
57 The notice of termination under section 54 shall be given, [...]
 Outlines various notice requirements based on ranges of employee tenure
 Remember that parties can agree to greater entitlements or greater employee benefits than those under the Act
 (a) at least one week before the termination, if the employee’s period of employment is less than one year;
 (b) at least two weeks before the termination, if the employee’s period of employment is one year or more and fewer
than three years;
 (c) at least three weeks before the termination, if the employee’s period of employment is three years or more and fewer
than four years;
 (d) at least four weeks before the termination, if the employee’s period of employment is four years or more and fewer
than five years;
 (e) at least five weeks before the termination, if the employee’s period of employment is five years or more and fewer
than six years;
 (f) at least six weeks before the termination, if the employee’s period of employment is six years or more and fewer than
seven years;
 (g) at least seven weeks before the termination, if the employee’s period of employment is seven years or more and
fewer than eight years; or
 (h) at least eight weeks before the termination, if the employee’s period of employment is eight years or more. 2000, c.
41, s. 57.
Pay instead of notice
61 (1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57
or 58 if the employer,
a) pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive
under section 60 had notice been given in accordance with that section; and
b) continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to
which the employee would have been entitled had he or she continued to be employed during the period of notice that he or
she would otherwise have been entitled to receive.
26
o
o
o
o
o
54(b) tells us there is no requirement for an employer to give notice, or as much notice, if complied with S. 61
Requires them to pay out the employee, or a lump sum of the amount they would earn during the period of notice
Employers may also opt for “working notice” so they get the benefit of the employee’s work during the notice period;
however, employers will often just prefer to dismiss the employee with pay in lieu of notice instead of having a
disgruntled employee around
Employees who are given working notice cannot refuse and instead insist on pay in lieu of notice
If the employee refuses to work during the notice period, it is possible that the employee may be found to have resigned
 In this case, it would be the employee who has terminated the relationship in which case the employer would
be relieved of the obligation to give notice as its no longer the employer doing the terminating
Oosterbosch v FAG Aerospace Inc (2011) ONSC
An employer might have just cause to terminate without notice or severance under the Act, but the standard is higher than it is at
common law – under the Act, it is necessary to find the added element of intentional wrong doing: wilful misconduct or neglect of
duty
Facts:
 O was dismissed by the employer after 19 years of full-time employment. Employer’s position was that there was just cause
for the termination and therefore they didn’t provide either working notice or pay in lieu of notice.
 Employer relied on its progressive discipline policy to establish just cause. Pointed to several warnings for poor performance,
lateness etc.
Issue: Did the employer have just cause to dismiss Mr. O without providing either contractual notice or statutory notice?
Held: Mr. O entitled to termination and severance pay under the Act.
1. The employer had satisfied the common law standard of just cause for Mr. O’s dismissal
2. However, Mr. O’s cumulative record of poor performance and lateness did not rise to the level of “wilfulness” as required
under the legislation, more specifically under Regulation 288/01, in order to disentitle Mr. O from statutory notice and
severance pay
Reasoning:
1. Cumulative pattern of poor performance and lateness; there had been sufficient warnings given to Mr. O and there had been no
improvement in response to these warnings
a. Thus, the employer had no obligation at common law to provide notice or pay in lieu of notice.
2. “It is my opinion that the plaintiff demonstrated a sustained course of casual and careless conduct that was inconsistent with
the continuation of his employment, but I do not accept the defendant’s submission that his conduct was wilful. All of the
leaders who testified indicated that the plaintiff was an experienced, competent machine operator with an apparent attitude
problem but none suggested his misconduct was intentional … He was undoubtedly careless and the persistence of the
carelessness justified his dismissal. I would not, however, characterize his offending behaviour as “wilful misconduct,
disobedience or wilful neglect of duty” that would disentitle him to receipt of termination and severance payments under the
provisions of the Employment Standards Act, 2000.”
Takeaways: Shows an employer might have just cause to terminate without notice or severance under the Act, but the standard is higher
than it is at common law
 Under the Act, we need to find the added element of intentional wrongdoing – that wilful misconduct or neglect of duty
Notice – 50 or more employees (Mass Termination)
Ontario Regulation 288/01: Termination and Severance of Employment (continued…)
Context for Woods: The ESA sets out special rules for notice of termination that may apply when the employment of 50 or more
employees is terminated at an employer’s establishment within a 4 week period (this is what is referred to as “mass termination”)
 S. 54 referred us to S. 57 and 58 for the amount of notice
 S. 57 sets out the entitlement of 1 week per year of service to a maximum of 8 weeks
 S. 58 deals with the exceptional case of mass terminations
 Note that S. 58(1) and 58(2)(a) uses the word “prescribed” – our queue to look to the regulations
Notice, 50 or more employees
58
(1) Despite section 57, the employer shall give notice of termination in the prescribed manner and for the prescribed period if
the employer terminates the employment of 50 or more employees at the employer’s establishment in the same four-week
period.
(2) An employer who is required to give notice under this section,
(a) shall provide to the Director the prescribed information in a form approved by the Director; and
(b) shall, on the first day of the notice period, post in the employer’s establishment the prescribed information in a form
approved by the Director.
(3) The information required under subsection (2) may include,
27
(a) the economic circumstances surrounding the terminations;
(b) any consultations that have been or are proposed to take place with communities in which the terminations will take
place or with the affected employees or their agent in connection with the terminations;
(c) any proposed adjustment measures and the number of employees expected to benefit from each; and
(d) a statistical profile of the affected employees.
(4) The notice required under subsection (1) shall be deemed not to have been given until the Director receives the information
required under clause (2) (a).
Ontario Regulation 288/01: Notice, 50 or more employees
3. (1) The following periods are prescribed for the purposes of subsection 58 (1) of the Act:
1. Notice shall be given at least eight weeks before termination if the number of employees whose employment is terminated
is 50 or more but fewer than 200.
2. Notice shall be given at least 12 weeks before termination if the number of employees whose employment is terminated is
200 or more but fewer than 500.
3. Notice shall be given at least 16 weeks before termination, if the number of employees whose employment is terminated is
500 or more.
Important Note: Remember the “prescribed” form that is required by S. 58 as well; the employer must submit this to the Director of
Employment Standards, and any notice to the affected employees would not be considered given until that form is received by the
Director.
 In addition to providing employees with individual notices of termination, the employer must post a copy of the form on the
first day of the notice period
Woods v CTS of Canada Co (2018) ONCA
How to determine notice entitlements when there’s a mass termination – clarifies the employers’ obligations in the case of mass
terminations; tells us what can constitute “working notice”
Facts:
 Company advised group of 77 employees April 17 2014 that they would be terminated on March 27, 2015
 Termination extended to June 28, 2015 for most employees
 Company failed to file Form One until May 12, 2015 (less than 8 weeks prior to termination date
 Class action brought on behalf of several employees claiming notice period could not commence until the form was received
ONSC: Found in favour of the severed employees; confirmed the working notice provided prior to the delivery of the Form was
ineffective.
 Court said the ESA mass termination provisions require the company to serve notice and post the Form of notice on the same
day
ONCA: Overturned the ONSC analysis of the Form. Said an employer is only required to serve and post the Form at the beginning of
the statutory period of notice
Reasoning:
 “The purpose of the ESA is to protect the interests of employees by requiring employers to comply with certain minimum
standards … not to impose requirements on employers in excess of the statutory minimums.”
o Here, 8 weeks notice was what was statutorily required; but, since the employer failed to serve and post the Form at
least 8 weeks prior to the termination date, the employees were entitled to pay in lieu of notice for the balance of the
statutory notice period
 Found that parts of the working notice period should be invalidated, since some of the employees had worked excess overtime
hours during that notice period which is in violation of the ESA
o Found that this notice was in violation of the Act because it failed to consider the quality of the employees’ opportunity
to find alternate employment
o Employer is not allowed to rely on the credit for the working notice for any week in which the overtime had been
worked because it had a “significant adverse effect on the ability of the employee to look for new employment”
Entitlement to Severance Pay
Entitlement to severance pay
64 (1) An employer who severs an employment relationship with an employee shall pay severance pay to the employee if the employee
was employed by the employer for five years or more and,
(a) the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment
and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period
as a result; or
(b) the employer has a payroll of $2.5 million or more.
o Note the limiting condition; employee must have been employed for at least 5 years
28
o
o
There are also more conditions, where either one of two things must be true (see (a) and (b))
Also note that Regulation 288 has a similar exception for severance pay on the basis of employee’s wilful misconduct
Calculating severance pay
65 (1) Severance pay under this section shall be calculated by multiplying the employee’s regular wages for a regular work week by the
sum of,
(a) the number of years of employment the employee has completed; and
(b) the number of months of employment not included in clause (a) that the employee has completed, divided by 12.
o Like notice of termination, it is one week’s pay per year of service
o Unlike notice of termination, there is no cap
4b. Human Rights Legislation
The Test for Discrimination and BFOR/Accommodation
The two Step Approach


Step One (Elk Valley) – The complainant must establish a prima facie case of discrimination:
o 1. that he or she has a characteristic that is protected by a prohibited ground in the human rights legislation;
(enumerated ground)
o 2. that they have experienced an adverse impact; and
o 3. that the protected characteristic was at least a factor in the adverse impact (it does not need to be the only factor)
Step Two (Meiorin) – The onus shifts to the employer to establish a bona fide occupational requirement (BFOR):
o 1. that the employer adopted the standard for a purpose that is rationally connected to the performance of the job
o 2. that the employer adopted the standard in an honest and good faith belief that it was necessary to the fulfillment
of that purpose; and
o 3. that the standard is reasonably necessary to the accomplishment of that legitimate purpose which requires the
demonstration that it is impossible to accommodate the employee without imposing undue hardship on the
employer.
o Note
 Meiorin did away with direct vs indirect discrimination
 Discrimination in effect is still discriminatory
Stewart v Elk Valley Coal Corp, 2017 SCC 30
Facts:
 EE was loader at coal mine in dangerous work environment. ER adopted policy requiring EEs to disclose drug addictions
 If disclosed, ER would offer treatment options without negative consequences.
 If did not disclose and later tested positive in workplace accident, they would be terminated
 S did not disclose of cocaine use on days off. Later involved in accident, tested positive, and was terminated
 S filed HR complaint claiming that he was addicted to cocaine and it constituted a disability and prima facie discrimination
 ER argued that he was terminated for breaching drug policy and not due to his addiction
Issue: Did S make out a prima facie case of discrimination?
SCC: No prima facie discrimination
 Step 1: Drug addiction constitutes a disability – protected ground under HR legislation
 Step 2: Adverse impact – his termination
 Step 3: However, S failed to demonstrate that the termination was related to his disability
o Agreed with ER that S failed to comply with drug policy
o S had the same opportunity to comply with policy but he decided not to
o Expert evidence: although symptom of addiction can be denial of addiction, the Court found that S had the capacity
to comply with the policy – Addiction was not reason for failure to comply
 Note: Mandatory random drug and alcohol testing policies will constitute prima facie case of discrimination if there are
adverse impacts associated with failing a test and ER treated EEs failing test as if they are addicted
o Thus, this demonstrates that even perceived disabilities may fall under prima facie discrimination (when ER treats
EE as addicted but they aren’t actually)
British Columbia (Public Service Employee Relations Commission) v. BCGSEU, [1999] 3 SCR 3 (Meiorin)
Facts:
 M hired as forest firefighter. BC gov then introduced new fitness standard. M couldn’t pass 2.5km in 11 mins (45 secs over)
 Terminated for failure to meet standard, and filed grievance alleging discrimination based on sex
 Often overlooked fact: 2 men previously challenged standard as unfair rules and standards
o Arbitrator found standards to be reasonable exercise of management rights
29
 Evidence that standards were discriminatory because women less likely to pass (35% of women passed compared to 65%)
 Arbitrator found that the standard was discriminatory and ordered reinstatement, appealed eventually to the SCC
Issue: whether the fitness standard discriminated against women and if so, could it be justified as a BFOR?
Held: Decision of Arbitrator upheld.
 1. Rational Connection
o Inquiry here is general: don’t look at particular standard, just the general purpose
o Here, was requiring firefighters to meet fitness standards rationally connected to performance of work? Yes
o First 2 steps almost always satisfied
 2. Good faith
o Whether ER adopted the standard in an honest and good faith belief that it was necessary for fulfillment of purpose
o Looks at ER’s motive and state of mind – in absence of evidence of good faith, will likely be met
 3. Accommodation to undue hardship
o Must ask whether it would be possible for ER to accommodate worker without undue hardship
 If accommodation short of undue hardship, it cannot be said that standard was reasonably necessary for
performance of work
 This is where we find ER duty to accommodate
o ER failed to demonstrate that running 2.5k in 11 mins was reasonably necessary to safe and efficient performance of
firefighting
o Evidence did not establish that a different (more lenient standard) was applied, that the safe performance of job
would not be possible
o M had already proven herself to be a very competent firefighter
Accommodation




To promote removal of barriers that prevent participation in workplace based on protected groups
May require ER to change or relax workplace standard or how work is performed
Some hardship is to be expected from ER, only undue hardship is when ER no longer owes duty to accommodate
Ex. Rescheduling from night to day shifts, purchasing adaptive software, rearranging work hours, reassignment of job
responsibilities
Undue Hardship




Recognizes that some hardship to be expected while also balancing the ER’s business interests
Only reached when all reasonable accommodation measures have been attempted and provided and that further
accommodation would cause too much hardship on ER
Factors (Canadians with Disabilities v Via Rail, 2007, SCC)
1. Safety
 Safety to complaint and co-workers and general public
2. Size of ER’s operations
 More accommodation from larger ERs
3. EE morale
 Must be significant – more than mere preference and must have large impact
4. Interchangeability of the workforce and facilities
 Related to size and resources of ER – can ER adapt to changes?
5. Cost
 Needs to be significant – must impact financial viability of business and proven with clear evidence
6. Collective agreement
 Not applicable to us
Application of factors is highly fact specific and must take into consideration the nature of position, responsibilities, etc.
Commentary
 Some people see accommodation as an exception that imposes costs on ER for certain individuals
 However, Demeyere’s perspective: DTA simply asks ER that its workplace rules and standards are reasonably necessary
o To do so, must demonstrate that it inquired into different rules and different ways of performing works that wouldn’t
negatively impact ER’s enterprise
o In Meiorin, gov couldn’t show that the fitness standard was necessary for work performance of any fire fighter
 It can be argued that Meiorin is too highly emphasized for its discriminatory basis on sex, but really, the ER
just couldn’t demonstrate necessity for the firefighting occupation as whole
o Therefore, it is possible to completely articulate what makes a BFOR (satisfying all 3 steps) with just reference to
contract of employment and what is required for performance of work without talking about special exceptions for
EEs
30

Point of Meiorin: No firefighter was required to pass the test, not just females, but gender was required in order to ground
the prima facie case of discrimination (remember, this case failed on the basis of management rights previously)
5. Express, Ancillary and Implied Terms
The Contract of Employment: Principles of Interpretation
The Parole Evidence Rule





This is a rule of contract interpretation
Where a contractual term is unambiguous (capable of only one reasonable interpretation), the parole evidence rule
applies
Prevents the parties from adducing external evidence in order to support an alternative interpretation of the contractual language
o i.e. Oral representations, etc
In other words, a court is limited to the text before it, and must stay within the four corners of the contract
When a contractual term is ambiguous (i.e. capable of multiple interpretations), a court may welcome evidence about what the
parties intended the contractual language to mean
o Can include things like oral representations during negotiations, how the term has been applied in the workplace in
the past, etc
o Contract ambiguity creates an exception to the parole evidence rule
Contra Proferentem



Applies to ambiguous contract terms
Principle of contract interpretation which states that where a contract term is ambiguous, the court will adopt the
interpretation that is most favourable to the party that did not draft the ambiguous term
o In other words, it will construe the ambiguity against the drafter of the language (typically the employer).
On top of this principle, we have seen how the courts have pointed to special features of the employment k in order to justify
an interpretation or a holding in favour of employees
o i.e. Courts may ground their decision entirely or at least in part on the special nature of the k of employment, due to
the inequality of bargaining power or the general vulnerable nature of employees
Machtinger



Illustrates the judicial approach to the special nature of the employment relationship; mindfulness of the vulnerability of
employees, especially upon termination
Therefore, this approach often extends as much protection to the employee as possible and promotes as much incentive as
possible for employers to look out for employees in a manner that is consistent with their relationship as contracting parties.
The cases we are going to look at dealing with termination clauses all come after Machtinger, and require the courts to consider
the significance of Machtinger in different scenarios
o i.e. Different termination clauses; which ones are caught by Machtinger and violate the ESA? Which are not and are
therefore enforceable?
Notes:
 Generally, we see courts holding termination clauses to a very high standard, insisting that they very clearly address all the
employee’s entitlements upon termination under the ESA
 However, there are some cases where the bar is set lower, and the jurisprudence surrounding this topic is sometimes hard to
reconcile
 There is always that “personal element” in employment law cases – Demeyere
o However, the bar is not always set consistently
5a. Express Terms
Interpretation of Express Terms
Three common issues in employment law litigation regarding express terms:
1. Termination provisions
2. Fixed term contracts
3. Restrictive covenants
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Termination Provisions
We will look at five cases in this area. Basically, the facts are more or less the same; someone gets fired, and there is a subsequent
dispute about how much the employer owes them in terms of notice or pay in lieu of notice.
 Wood v Fred Deeley (ONCA) 2017
 North v Metaswitch Networks (ONCA) 2017
 Nemeth v Hatch (ONCA) 2018
 Rossman v Canadian Solar (ONCA) 2019
 Waksdale v Swegon North America (ONCA) 2020
Wood v Fred Deeley Imports Ltd (2017) ONCA
Employers’ actual compliance with the ESA does not cure an unlawful clause’s deficiencies – an unlawful clause cannot be remedied
after the fact; application of contra proferentem
Facts: (similar to Rejdak case)
 W offered and accepted position on April 17 (phone) and employer later emailed copy of K
 April 23 first day. On second day, signed a written copy of K that was emailed to her with the termination clause
 “[The company] is entitled to terminate your employment at any time without cause by providing you with two week’s notice
of termination or pay in lieu thereof for each completed or partial year of employment with the company. If the company
terminates your employment without cause, the company shall not be obliged to make any payments to you other than those
provided for in this paragraph… The payments and notice provided for in this paragraph are inclusive of your entitlements to
notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000.”
 Employment later terminated. Even though employer paid severance package, W brought action for reasonable notice
Note: The employer paid more than the clause seemed to require; gave Wood 21 weeks of paid notice, and she claimed she was entitled
to reasonable notice which would be in the range of 12 months pay and the employer therefore owed her the difference
Wood’s Arguments:
1. The whole K was unenforceable
a. Timing issue (similar to Rejdak); introduction of the termination clause was after she had accepted her offer on the
phone and signed on her second day of work
b. Claim was that this was a modification of the k because the k had already been formed at that point during the previous
phone call
c. So, without fresh consideration, the written k is unenforceable since it was introduced after the k had been formed
2. Even if the K is enforceable, the termination provision (above) was unenforceable
a. Claim is that it improperly excluded the employer’s statutory obligation to make benefit contributions during the
notice period; this is contrary to S. 60-61 of the ESA
Defending Arguments
1. The word “pay” in the termination provision was broad enough to include both wages and benefits; it did not represent an
attempt to contract out of the ESA
2. The 21 weeks of combined notice and pay in lieu of notice paid to Wood exceeded her entitlements under the ESA, even though
the K didn’t specify severance entitlements under the act as such
Note: Conclusion in her favour for either of these arguments would have her entitled to reasonable notice at common law, because there
would be no enforceable written K or at least no enforceable written termination K to rebut the common law presumption of reasonable
notice
Held:
1. Disagreed. A written k is not unenforceable merely because the employee signs it after he or she starts work. As long as the
material terms of the k were a part of the original employment relationship, there is no fresh consideration needed to introduce
these later terms into the k.
a. Fact that Woods signed the K after starting to work for Deeley was just “a matter of administrative convenience” and
had no bearing on the enforceability of the contract”
2. Clause is unenforceable. Employer had improperly tried to contract out of the ESA.
a. The word “pay” was at best ambiguous
b. Applying the doctrine of contra preferentem, they adopted an interpretation most favourable to Wood
o Concluded that “pay” referred only to wages and did not include benefits.
c. The termination clause was also deficient because the employer combined its separate obligations to give notice and
to pay severance pay; by result, the clause permitted the employer to discharge all of its statutory obligations by way
of working notice
o Under this scenario, Wood would have received more notice than entitled to under the ESA but would not
have received any severance pay
o Severance pay is a lump sum payment; the K by referring only to notice failed to ensure her the entitlement
to severance pay, and as such permitted the employer to convert severance pay into an addition to working
notice
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
Note: the employer didn’t actually do this here, but on one interpretation, this clause would permit
it to happen; note that we are construing the clause against the employer and holding the
ambiguity against them means reading it this way – violated the act and permitted severance to
be treated the same as notice of termination
Award: The clause is void for violating the Act; thus, the defendant has not rebutted the common law presumption of reasonable notice
and Wood can succeed in her claim for common law damages of wrongful dismissal. Wood awarded 9 months of reasonable notice at
common law.
Demeyere:
 Just as in Machtinger, the employers’ actual compliance with the ESA did not cure the clause’s deficiencies. An unlawful
clause cannot be remedied after the fact
 Remember Iacobucci in Machtinger; the point of ESA legislation is to protect employees, and to provide incentive for
employers to do that
North v Metaswitch Networks (2017) ONCA
“where a termination clause contracts out of one employment standard, the court is to find the entire termination clause to be void, in
accordance with S. 5(1) of the ESA” – doesn’t matter if there is a severability clause
Facts:
 N was paid fixed salary + commissions. Dismissed without cause, and there was a dispute about what he was owed
 Should it be what Ks purported to provide, or something more in the way of common law damages for reasonable notice?
 Termination Clause read: “In event of termination, any payments owing to you shall be based on your base salary”
 N argued this termination clause was void because of the last part; breached ESA by expressly limiting payment of wages upon
termination to just base salary and excluding his commissions
 N argued this fell below protections afforded by ESA for notice of termination
ONSC: Lower court judge agreed that the provision violated ESA, but went on to find that nonetheless, that part of the clause could
simply be severed from the rest of the contract because of a severability clause
 17(a) “If any part of the Agreement is found to be illegal or otherwise unenforceable by any court of competent jurisdiction,
that part shall be severed from this Agreement and the rest of the Agreement’s provisions shall remain in full force and effect.”
ONCA: Disagreed with ONSC. The whole clause was void; employee could claim common law damages for reasonable notice.
Reasoning:
 “… where a termination clause contracts out of one employment standard, the court is to find the entire termination clause to
be void, in accordance with S. 5(1) of the ESA. It was an error in law to merely void the offending portion and leave the rest
of the termination clause to be enforced.”

“The problem with this approach is that, to the extent that it effectively rewrites or reads down the offending provisions, it has
the very effect referred to by Iacobucci J in Machtinger – employers will be incentivized to contract out of the ESA but include
a severability clause to save the offending provision in the event that an employee has the time and money to challenge the
contract in court.”
Demeyere:
 Consistent with Wood v Deeley
o In both cases, court was mindful of inequality in bargaining power and mindful of the need to protect employees,
interpreted the termination clauses strictly and construed any ambiguity against the employer
 In Metaswitch, ONCA also took the opportunity to address one of its earlier decisions – Oudin v Centre Francophone de
Toronto (2016) – case in which a severability clause was used to fix an otherwise unlawful termination provision
o ONCA said this Oudin approach was incorrect (second quote expresses this) – it would cause employers to contract
out of ESA and also have severability clause in event that employee can challenge that specific section
Nemeth v Hatch (2018) ONCA
Silence in the termination clause with respect to severance entitlement did not constitute contracting out of the ESA, however the
ambiguity gave rise to two interpretations; adopted interpretation that awarded more generous entitlement to employee
Facts:
 EE 19 years of service dismissed with 8 weeks notice and 19.5 weeks salary as severance pay
 ER continued benefits through the statutory notice period
 Termination Provision in K:
o “The Company’s policy with respect to termination is that employment may be terminated by either party with notice
in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice
required by the applicable labour legislation”
 EE sued for wrongful dismissal alleging that provision did not rebut common law presumption of reasonable notice
ONSC: Disagreed. Contractual term was binding – no further damages owed.
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
Employee appealed; argument was that because the clause did not mention his severance entitlement under the ESA, this
represents an attempt to contract out of the Act. Therefore, employee should be entitled to claim common law damages as in
Machtinger.
ONCA: Disagreed with this claim, but the employer was ordered to pay an additional 11 weeks notice for a total of 19 weeks.
Reasoning:
 This case is unlike Wood v Deeley; ONCA said this case is entirely distinguishable
 Pointed to its earlier decision in Roden v Toronto Human Society (2005)
o Termination clause was silent with respect to the continuation of benefits
o Court held it didn’t violate the ESA acfs the employer was still obligated to continue the employee’s benefits and
comply with the Act; the failure to mention that the employer continued the benefits during the notice period did not
render the term void
 Following this reasoning, ONCA held that the silence in the termination clause with respect to severance entitlement did not
constitute contracting out of the ESA
 However, the court found that the clause was ambiguous – could give rise to two interpretations:
1. Could limit the employee’s notice entitlement to the ESA entitlement, which caps out at 8 weeks
2. Could provide 19 weeks’ notice, as the 4 weeks that was given just a minimum; the clause didn’t state a maximum.
 ONCA construed this ambiguity against the employer and held that the interpretation which provided the more generous
entitlement to the employee was to be adopted
Note: Even though the termination provision here was not struck down, it was read in a way that the employee was entitled to more.
Employer had paid 8 weeks as required under the ESA, but the contractual language supported an interpretation which entitled them to
more than that.
Rossman v Canadian Solar Inc (2019) ONCA
(1) A potential violation of the ESA can undermine the enforceability of a termination provision; (2) if an employer violates the ESA,
they cannot rely on a saving provision or a severability clause to re-write or strike out the offending portions of the clause or the
contract  it’s all or nothing
Facts: Rossman was terminated after 3 years of employment on a without cause basis. A dispute arose over his entitlements under the
employment contract. The employment K contained a “saving provision,” which seems to function as a fallback in the event the
termination clause was found to fall below the ESA minimum. This provision read as follows:
“In the event the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that
provided in this agreement, such statutory requirements will replace the notice or payments in lieu of notice contemplated under
this agreement.” …
… “Benefits shall cease 4 weeks from the written notice”.
Issue: Employee claimed the benefits provision (second part) contravened the notice provisions of the ESA
 Employer argued that the benefits provision complies with the ESA since it provided a greater benefit to Rossman’s specific
circumstances. Although he was only entitled to 3 weeks notice under the ESA based on service, the benefits provision provided
him with 4 weeks notice.
Held: Found that the benefits provision had the potential to violate the ESA, and this is enough to render it void. Potential is what is
most relevant to the analysis here.
Ratio:
(1) A potential violation of the ESA can undermine the enforceability of a termination provision.
a. Here, terminating the benefits after 4 weeks would violate the ESA for any employee with 5 or more years service,
because they would be entitled to 5 weeks notice
b. Thus, a termination clause may not be void at its inception, but if it has the potential to violate the ESA, either with
the passage of time (as in this case) or if the employer adopted a particular interpretation (as in Wood), that’s enough
to render the clause void for violating the ESA
(2) Saving provisions will not be upheld to save a non-compliant cause; if an employer violates the ESA, they cannot rely on a
saving provision or a severability clause to re-write or strike out the offending portions of the clause or the contract  it’s all
or nothing
a. This is how we can best protect employees and ensure employers comply with the ESA from the outset
Notes from ONCA re: “Saving Provisions”:
 [39] I make a final observation. Employees need to know the conditions, including entitlements, of their employment with
certainty. This is especially so with respect to an employee’s termination – a fragile moment of stress and uncertainty.
 [40] In this context, saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s
minimum standards. Holding otherwise creates the risk employers will slip sentences, like the four-week benefits clause, into
employment contracts in the hope that employees will accept the terms. This outcome exploits vulnerable employees who hold
unequal bargaining power in contract negotiations. Moreover, it flouts the purpose of the ESA – to protect employees and to
ensure that employers treat them fairly upon termination: Machtinger, at pp. 1002-3
 [41] While employers are entitled to contractually amend the ESA’s notice requirements, as long as they respect the minimum
standards, they are not entitled to offend them. Employers must have an incentive to comply with the ESA’s minimum notice
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requirements. They cannot be permitted to draft provisions that capitalize on the fact many employees are unaware of their
legal rights and will often refrain from challenging notice provisions in court: Machtinger, at p. 1004. Attempting to reconcile
the provisions of the Termination Clause with the benefit of hindsight runs counter to the remedial purpose of the ESA.
Waksdale v Swegon North America (2020) ONCA
Most recent case dealing with the Machtinger issue and termination provisions under indefinite term contracts
Facts:
 W terminated after 8 months. Written K he signed had 2 discrete provisions re: notice of termination
o “Termination of Employment with Notice: In the event employment is terminated without cause, shall receive 1
week notice or pay in lieu of such notice, in addition to minimum notice or pay in lieu of such notice and statutory
severance pay that may be required by ESA. All reimbursements shall cease as of the date of termination of you
employment, however, you shall be reimbursed for legit business expenses that have been incurred and submitted, but
not yet paid to you. Terms of this section continue to apply notwithstanding any changes hereafter to terms of your
employment, including job title, duties/responsibilities, reporting structure, compensation or benefits.
 Eventually ER provided EE with 2 weeks pay (only 1 required under ESA)  so employer paid additional week
 However, K also had termination provision for just cause (wasn’t relied upon for this case, but was in the K)
o Included long list of grounds that constitute termination with cause and without notice, and it indicated that wages and
benefits would cease as of the date of termination
o However, some of these would be unlikely to meet threshold of ‘wilful misconduct or neglect of duty” under the ESA
o The contractual clause in this case mentioned many things such as “unsatisfactory job performance, breach of duties,
etc”  THIS was in violation of ESA as it set a much lower standard for establishing just cause (NO INTENTION)
 At trial, ER conceded this second clause violated the ESA and was unenforceable; however, argued it didn’t matter because
the employee in this case was terminated with notice.
Two Issues:
(1) How a provision dealing with dismissal for just cause can run afoul of the ESA, and therefore be caught by the Machtinger
problem and be found unenforceable
(2) Further to the courts position on saving provisions and severability provisions, the court arguably took this a step further here
and said that if part of a provision violates the ESA, not only can it not be struck or severed from the contract, but it may affect
the enforceability of other provisions
a. In this case, the offending just cause provision caused an otherwise valid without cause provision to be found
unenforceable
Held: Because the termination for-cause provision was in violation of the ESA (which the employer conceded), it was unenforceable
and so too was the termination with notice provision as a result
Reasoning:
 Employer also pointed to a severability clause in the contract; claimed the termination with notice clause is therefore untainted
by the illegality by the termination with cause provision  lower court agreed on this point; ONCA disagreed and outlined
three points:
(1) Reminded us that the ESA is remedial legislation that is to be interpreted broadly so as to protect as many employees
as possible
(2) The law should encourage employers to draft termination clauses that will always comply with ESA termination
requirements
(3) The test is whether contract termination provisions could conceivably permit termination that violates the ESA; not
whether the employer actually did violate the ESA at the time of termination.
a. Also added that the court ought to adopt an interpretation of employment contracts that recognizes the power
imbalance between employers and employees and should hold employers to a very high standard of contract
drafting.
 “An employment agreement must be interpreted as a whole and not on a piecemeal basis. The correct analytical approach is to
determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the
power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should
focus on whether the employer has, in restricting an employee’s common law rights on termination, violated the employee’s
ESA rights. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination
provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions
are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.
Here the motion judge erred because he failed to read the termination provisions as a whole and instead applied a piecemeal
approach without regard to their combined effect.
 The Court notes that employers may benefit from illegal clauses even if they never directly rely upon them because employees
may believe that the terms are enforceable and adjust their behaviour accordingly. Nor does the severability clause help the
employer here, because “a severability clause cannot have any effect on clauses of a contract that have been made by statute.”
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Overall Takeaway: Here, we saw that the effect of a termination clause being found to be unenforceable by violating the ESA
means that it is struck in its entirety from the contract, even in the face of a severability clause, even if the employer had in fact
complied with the ESA, and even if the provision in whole or in part doesn’t apply to the case at hand. With the clause being
struck or found to be unenforceable, the employer may be liable for common law damages for wrongful dismissal.
Fixed Term Contracts




The common law presumption of reasonable notice is an implied term in contracts of employment of indefinite duration (i.e.
where no end date is specified)
A contract for a fixed term, or a fixed task, ends when the term or the task is done so nothing more is required to bring about
the termination; no notice is required – in effect, notice of termination is given on contract formation as the term is settled upon
at the outset
This means that the common law presumption of reasonable notice does not apply to fixed term contracts.
Two issues that are raised by fixed term contracts:
1. Whether the contract truly is a fixed term contract, or whether in reality, it is an indefinite term contract
a. If fixed, no notice requirement to terminate it
b. If it’s indefinite, then notice is required, and the default implied term is the common law standard of
reasonable notice (Ceccol)
2. Damages for early termination of a fixed term contract, and the related issue of the duty to mitigate
a. Howard v Benson
Ceccol v Ontario Gymnastics Federation (2001) ONC
A string of fixed term contracts do not necessarily amount to an indefinite term contract; however, the court will insist on clear
evidence from the employer that the contract under which the employee was most recently hired was indeed a fixed term contract if
the employee is claiming an indefinite term contract and seeking common law damages.
Facts:
 C worked at OGF for 16 years  15 1-year contracts. Each K identical and subject for renewal or termination
 After last renewal, OGF said they weren’t renewing K and employment would expire at end of the 1-year K
 C brough action for wrongful dismissal, seeking reasonable notice of termination (usually fixed term = no reasonable notice)
 C argued she was an indefinite term employee, therefore OGF was obliged to provide CL damages for failure to provide RN
Issue: Was the employment contract for an indefinite term, therefore requiring reasonable notice? Or was it for a one-year fixed term,
in which case no notice is required?
Held: Employment contract was for an indefinite term, subject to renewal and termination in accordance with the other provisions in
the contract. Ceccol awarded damages for 16 months reasonable notice; however, deducted 4 months from this because she had failed
to take reasonable steps to mitigate her losses.
Reasoning:
 Classification is ambiguous. One clause said it was only a one-year K, but other parts suggested it could be for longer than that
 Court agreed to hear parole evidence to assist with resolving this ambiguity:
o In their testimony, witnesses indicated that at the time Ceccol was first hired, it was clear the intention and expectation
was that Ceccol was being hired on a full-time, permanent basis and not just for a one-year contract. This is how the
parties also behaved during the subsequent 16 years during which she was employed
 “Fixed-term contracts of employment are, of course, legal. If their terms are clear, they will be enforced … However, the
consequences for an employee of finding that an employment contract is for a fixed term are serious: the protections of the
common law principle of reasonable notice do not apply when the fixed term expires…
 It seems to me that a court should be particularly vigilant when an employee works for several years under a series of allegedly
fixed-term contracts. Employers should not be able to evade the traditional protections of … the common law by resorting
to the label of 'fixed-term contract' when the underlying reality of the employment relationship is something quite
different, namely, continuous service by the employee for many years coupled with verbal representations and conduct
on the part of the employer that clearly signal an indefinite-term relationship…
 I conclude that the employment contract was for an indefinite term, subject to renewal and termination in accordance with the
other provisions in the contract”
Notes:
 Employer had pointed to a clause in the K that the parties had agreed to abide by the ESA with regards to notice of termination
of employment
o Court rejected this argument; said the provision was not sufficiently clear to rebut the presumption that Ceccol was
entitled to reasonable notice under common law
o Seemed to suggest that explicit language rebutting the common law was required
 Demeyere: Ambiguous because saying they will abide by the ESA is not as clear as saying they will abide by the ESA and
only the ESA
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o

Court construed this ambiguity against the employer as well. Meant the termination clause was void for potentially
violating the ESA and thus was struck from the employment K, which the court now conceived of as an indefinite
term employment K, and therefore the implied term of common law notice that applies to indefinite term K’s had not
been rebutted in this case
Fixed term vs. Indefinite term issue
o The ambiguity was the employer’s downfall
o If the employer had taken steps to make it clear that the fixed term was to be a fixed term contract, subject to renewal,
the court may have not found Ceccol’s status to be ambiguous
o However, it was the same K that was renewed year after year, everyone expected it to be renewed, and the impression
given at the outset was the Ceccol was a full-time and permanent employee
Takeaway: A string of fixed term contracts do not necessarily amount to an indefinite term contract; however, the court will insist on
clear evidence from the employer that the contract under which the employee was most recently hired was indeed a fixed term contract
if the employee is claiming an indefinite term contract and seeking common law damages.
 Employer could take steps to try and ensure that the fixed term contract is respected as such.
o Could ensure that it doesn’t expressly or implicitly convey that the employee is permanent or indefinite term employee
(as was the case here), and shouldn’t do anything to suggest that the renewal of the fixed term contract is a sure thing
(there was an element of this here as well).
o If the employer had instead held an official performance evaluation or official meeting to discuss renewal, this would
strengthen the notion that the relationship was truly a fixed term contract because renewal was not really automatic.
o Employer could explicitly state the precise dates, instead of vaguely saying this is a one-year contract.
Termination of Fixed Term Contracts
Howard v Benson Group (2016) ONCA
An employee who has had their employment terminated prior to the end of a true fixed term K is not presumed to be under a duty to
mitigate – they are only under a duty to mitigate if the K expressly imposes such a duty
Facts: Parties had entered into a fixed term K for 5 years; commencing September 2012. Howard (the employee) terminated without
cause after only 23 months. Clause in the K stated the employer could terminate the K early, in which case any amount paid to the
employee shall be in accordance with the ESA:
8.1 “Employment may be terminated at any time by the Employer and any amounts paid to the Employee shall be in accordance
with the Employment Standards Act of Ontario.”
Employer gave Howard two weeks notice, which was the minimum under the ESA given his length of service. Howard sued for damages,
claiming that he was entitled to compensation for the balance of the fixed term K (what he would have earned for the remaining 37
months).
Issue: Was the employer required to pay Howard the damages for the lost wages of the remainder of the fixed term K?
Held: Yes. This is a well settled principle that early termination of a fixed term K means the employer is liable for damages of the
remaining period of the fixed term K, unless the K allows for early termination.
 Employer liable for lost wages and benefits for a period of 37 months (remainder of the 5-year contract)
Reasoning:
 Considered Clause 8.1.
o Found this to be ambiguous. Applying contra preferentem, the court adopted an interpretation most favourable to
Howard
o Said 8.1. was ambiguous because it wasn’t clear whether the notice was limited to the ESA, or whether it simply stated
that whatever notice is given would be at least equal to the ESA
o Further, it was not clear whether benefits would be paid during the notice period since it only referred to amounts paid
 So, Court said this was consistent with the employer failing to continue benefits as it was required to do under the ESA. As
such, the clause was void for violating the ESA; more precisely, purportedly permitting a potential violation of the ESA
Notes:
 This case is also significant for what it says about mitigation in cases of termination of fixed term K’s
 Normally, a wrongfully dismissed employee is subject to a duty to mitigate (take reasonable steps to mitigate their losses)
o In the context of employment, this means that an employee who has been wrongfully dismissed must take reasonable
steps to find alternative employment
o If successful, whatever they earn during the notice period in that alternative position will be deducted from any liability
from the previous employer
o However, a failure to take reasonable steps to mitigate may also result in a deduction to the notice period (as we saw
in Ceccol)
 With fixed term contracts, however, ONCA says here that an employee who has had their employment terminated prior
to the end of the fixed term is not presumed to be under a duty to mitigate. They are only under a duty to mitigate if the
K expressly imposes such a duty, and this K did not.
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Important Takeaways
 Lesson in Ceccol that a series of fixed term contracts may be found to be in fact an indefinite term employment relationship =
raises presumption of common law notice
 In the case of a true fixed contract there is no presumption of common law notice; instead, an employee who is dismissed before
the end of the term is presumed to be entitled what he would have earned in the balance of the fixed term period, AND that
employee under the fixed term contract is presumed not to be under a duty to mitigate
o Note “presumed” – the parties do remain free to agree to their own terms, as long as what they agree to does not create
a potential for a violation of the ESA.
 We’ve seen that in determining whether such terms are indeed enforceable, a court will employ the doctrine of contra
preferentum to construe any conceivable ambiguity against the employer
 We also see the reliance on Machtinger and other cases in which the vulnerability of employees and the need to incentivize
employers to ensure that their contracts comply with the act, are key considerations that often tip the scales in favour of the
employee
Restrictive Covenants
Restrictive Covenant: A contractual provision which is an attempt to limit or control the employee’s ability to compete with their
employer after their employment has come to an end
Three Main Types of Restrictive Covenants
1.
Non-disclosure: prohibits a former employee from disclosing information in which the employer has a proprietary interest
a. “Upon termination of this contract, the employee shall not retain, remove from the employer’s property, or destroy
any document or computer file containing confidential information, and shall not at any time disclose to any person
any confidential information relating to the employer.”
2.
Non-solicitation: prohibits an employer from attempting to persuade the employer’s customers or clients to stop doing business
with the employer and instead do business with the departing employee
a. “The employee agrees not to solicit business by any means from any existing or former client of the employer for a
period of one year after the termination of this contract.”
3.
Non-competition: seeks to prohibit the former employee from entering into a competing business with the employer
a. “Upon termination of this contract, the employee shall not retain, remove from the employer’s property, or destroy
any document or computer file containing confidential information, and shall not at any time disclose to any person
any confidential information relating to the employer.”
Reasonableness in Restrictive Covenants


Restrictive covenants can be controversial and “give rise to tension in the common law between the concept of freedom of
contract and public policy considerations against the restraint of trade.” (Shafron)
o The common law has historically regarded with suspicion and have held that clauses are contrary to public policy and
therefore are prima facie void
However, the courts, in the interest of freedom of contract, have carved out an exception that, for when restrictive covenants
can be said to be reasonable, they will be found not to violate public policy and will therefore be enforceable
o “The public have an interest in every person’s carrying on his trade freely: so has the individual. All interference with
individual liberty of action in trading, and all restraints of trade themselves, if there is nothing more, are contrary to
public policy and therefore void. That is the general rule. But there are exceptions… It is sufficient justification if the
restriction is reasonable.” (Nordenfelt)
 “Reasonableness” shows there is not going to clear cut rules or a clear dividing line between those restrictive
covenants that are enforceable because they are reasonable and those that are unenforceable because they are
not
The common law has developed a test to help in the assessment of the “reasonableness” of a restrictive covenant…
Elsey v JG Collins Insurance (1978) SCC
Common law test to help in the assessment of the “reasonableness” of a restrictive covenant
1. The covenant protects a real “proprietary interest” worthy of protection, such as trade secrets, confidential business information,
or key business connections and customer lists and is not simply an attempt to restrict health competition;
2. The covenant is reasonable as to geographical and temporal (time) scope, considering the specific type of work and the interests
involved
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a.
3.
4.
In determining reasonableness of geographic scope, courts will look at the type of work involved and ask what is
reasonable to protect the employer’s business interests in each case; thus, this needs to be assessed on its facts
The covenant is reasonably necessary to protect the legitimate interests of the former employer, and no alternative measure that
is less restrictive on the former employee could protect the employer’s interests; and
a. Generally, courts have been more accepting of non-solicitation and non-disclosure clauses then they have been of
broader, more sweeping non-competition clauses
b. If the employer’s business interests could have been protected by a non-solicitation clause or a non-disclosure clause,
the court will be more likely to strike down a non-competition clause as being unreasonably excessive in the
circumstances
The covenant is unambiguous such that its scope is clear and understandable
Note: Restrictive covenants also come up in the sale of a business (i.e. to prevent a vendor from competing with a purchaser)
 Compared to this context, when they are used in employment contexts to preclude a former employee from competing with
their former employer, restrictive covenants are subject to greater scrutiny and the court is less likely to enforce a restrictive
covenant against the employee
Shafron v KRG Insurance Brokers (2009) SCC
Employers cannot rely on courts for assistance to save restrictive covenants – they must draft it correctly the first time and ensure the
language and contents of a restrictive covenant is sufficient and reasonable in order to be enforceable
Facts: Plaintiff had sold his shares in his insurance company to KRG; KRG renamed the business “KRG Insurance Brokers”. Plaintiff
worked for the defendant following the sale of the shares; following the next 12 years, the plaintiff had entered several employment
contracts with the company and these agreements always included a non-competition clause:
12. “Shafron agrees that, upon his leaving the employment of MSA or KRG Insurance for any reason save and except for
termination by KRG Insurance without cause, he shall not for a period of three (3) years thereafter, directly or indirectly, carry
on, be employed in, or be interested in or permit his name to be used in connection with the business of insurance brokerage
which is carried on within the Metropolitan City of Vancouver.”
Note, there isn’t really anything called the “Metropolitan City of Vancouver”. Shafron left KRG in 2001 to work for a competitor in
Richmond. KRG commenced an action to enforce the restrictive covenant against Shafron
Trial: TJ dismissed the action; said that the “Metropolitan City of Vancouver” was unreasonable and unenforceable because there was
no such thing
BCCA: BCCA agreed with the TJ; however, BCCA substituted for this phrase what it took to be a reasonable interpretation of that
choice of language
 Settled on “The City of Vancouver, the University of British Columbia, Richmond and Burnaby”
 Effectively re-wrote the clause for the parties so as to remove the ambiguity
Issue at SCC: Was the BCCA correct in re-writing the clause to remove the ambiguity?
Held: SCC overturned BCCA decision. The BCCA erred in choosing to re-write the covenant in this way. Restrictive covenant was
unreasonable due to the ambiguities and therefore is unenforceable. Took the opportunity to review the evolution of case law on
restrictive covenants.
Reasoning:
 Said the “Metropolitan City of Vancouver” was ambiguous, and that ambiguity in any respect – whether activity, time,
geographic scope – renders the restrictive covenant unenforceable
o Said there was no evidence available to assist in resolving this ambiguity (i.e. that the parties unquestionably would
have agreed to remove the “Metropolitan City” language or that this addition was a mistake)
 It was inappropriate for the BCCA to re-write the geographic scope in the covenant into what the BCCA thought was reasonable
 Discussed doctrine of severance in the context of restrictive covenants in employment contracts. There are two kinds of
severance, and both need to be cautiously applied to restrictive covenants to render one that is otherwise illegal as legal
1. Blue pencil severance
a. Refers to striking out an offending portion of a contract, leaving the rest of the agreement intact
2. Notional severance
a. Reading down a contract’s illegal provision to make it legal. Not just a discrete striking out, but more of a
re-writing
 Notional severance (what was applied by BCCA)
o SCC says notional severance “has no place in the construction of restrictive covenants in employment contracts …
because there is no objective bright line rule that can be applied in all cases to render the covenant reasonable …
Applying notional severance in these circumstances simply amounts to the Court re-writing the covenant in a manner
that it subjectively considers reasonable in each individual case”
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o
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
Furthermore, SCC said that allowing the use of notional severance just invites the employer to impose an unreasonable
restrictive covenant on the employee with the only sanction being, if the covenant is found to be unreasonable, the
court will still enforce it to the extent of what might validly have been agreed to
For these reasons, SCC says that notional severance should not be applied to restrictive covenants in employment
contracts
Blue pencil severance
o Occurs when part of the K can be removed by “running a blue pencil through it”
o Court stated that this form of severance should be resorted to sparingly, and only in the cases where the part
being removed “is clearly severable, trivial and not part of the main purpose of the restrictive covenant”
o Emphasized that the general rule must be that a restrictive covenant in an employment contract that is ambiguous or
unreasonable will be void and unenforceable
SCC said this wasn’t a good case for blue pencil severance because it wasn’t clear that simply striking the word “Metropolitan”
would have reasonably represented what the parties themselves would have unquestionably agreed to; it seems they intended
more than just the City of Vancouver by including this language or failing to omit it
o Thus, striking this out would be too invasive by the Court
SCC again cautioned that in the context of unreasonably wide restrictive covenants, the possibility of any kind of severance
invites employers to draft overly broad covenants because if it comes down to it, the Court can just sever or read down any
portions found to be unreasonable
o Thus, in light of the expensive litigation and the inequality of bargaining power between most employers and
employees, severance has to be used as sparingly as possible; it must be used as an exceptional remedy
Rectification: SCC also considered if the ambiguity could be addressed via rectification; a common law doctrine used by
courts to correct errors in written agreements
o SCC cited the three-part test for rectification from Performance Industries:
1. Existence and content of an inconsistent prior oral agreement must be shown
2. Must be shown that the party seeking to uphold the terms of the written agreement knew or ought to have
known about the lack of correspondence between the written document and the oral agreement in
circumstances amounting to fraud or the equivalent of fraud
3. The precise form in which the written instrument can be made to express the prior intention must be readily
ascertainable
SCC held the KRG was unable to show a prior oral agreement that would explain the meaning of the term “Metropolitan City
of Vancouver”
o Also no indications the parties had agreed on a reasonable geographic scope and then mistakenly included something
else in the contract
o Thus, SCC refused to invoke rectification
Martin v Concreate USL (2013) ONCA
Not purely an employment law case – duration of the restriction was unreasonable because it was for an indeterminate period of time;
there was no fixed, well-defined time period
Facts: Martin worked for Concreate and had a minority shareholder interest in the company, and also had an interest in a related business
Steel Design Fabricators. Concreate and Steel Design were purchased by Tri-West Construction; Martin retained his minority interest
in both Concreate and Steel Design. When Concreate sold its assets to the entity controlled by Tri-West, he maintained 25% of the
outstanding limited partnership units of Tri-West. As part of the sale and his continued employment, Martin entered into agreements
containing restrictive covenants relating to non-competition and non-solicitation, and relating to the use of confidential information. The
non-competition and non-solicitation covenants stated they would end 24 months after Martin sold his shares, and also stated he couldn’t
sell those shares without first gaining company approval and from their lenders. Martin’s employment was terminated 6 months after
the sale; began at a competing company 8 days after that. Concreate sued Martin claiming breach of the restrictive covenants and his
fiduciary duties; sought damages and an injunction against him. Martin took the position that the covenants were not enforceable
Issue: Were the non-competition and non-solicitation covenants in the agreements ambiguous or unreasonable and therefore
unenforceable?
 Note: This was a restrictive covenant entered into in the context of the sale of a business, not as purely part of an employment
contract; means the standard is not as high as it would be in a pure employment law case
 Even in this context, the covenant has to be reasonable to be enforceable.
Held: Restrictive covenants are unenforceable. Fails to meet the standard of reasonableness.
Reasoning:
 Failed on the temporal element (time element)
o The duration of the restriction was unreasonable because it was for an indeterminate period of time; there was no
fixed, well-defined time period
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o

Rather, the duration depended upon when Martin sold his shares, which in turn depended on him acquiring the consent
of third parties
Therefore, the temporal element was not clearly defined, unreasonable, and unenforceable
Rhebergen v Creston Veterinary Clinic (2014) BCCA
Deals with a clause that’s unlike the traditional restrictive covenant clause; doesn’t outright prohibit competition, but seeks to
discourage it
Facts: Newly qualified vet, Rhebergen, entered into an agreement with the vet clinic; she was to work as an associate at the clinic.
Agreement contained a clause which looked a lot like a restrictive covenant, however, it didn’t prohibit competition. It said that if she
“set up a veterinary practice in Creston, BC or within a 25-mile radius, she would owe certain levels of compensation to the clinic”. If
she set up a practice within 1 year of the termination of her K, she would be required to pay $150,000 to the clinic; within 2 years would
be $120,000; within 3 years it would be $90,000. After 14 months, she resigned from the clinic, the relationship soured and the parties
went their separate ways. 5 months later, Rhebergen brought an action seeking an order to declare this clause as unenforceable as she
wanted to set up a mobile veterinary practice in the area.
Held: Clause upheld. No ambiguity and not unreasonable – therefore enforceable
 Found this despite several arguments made about the language; in particular, what does “setting up a clinic” include and not
include?
Reasoning:
 The language is not ambiguous just because it fails to imagine every possible scenario (such as a mobile clinic, as she was
proposing)
 Court also noted that there was no evidence that Rhebergen didn’t understand the significance of the clause at the time she
agreed to be bound by it
o Court wasn’t worried about any undue pressure or inequality in bargaining power between the parties
Notes:
 We see here a clause that did not prohibit, but merely inhibited post-employment competition or solicitation and then set out a
requirement to compensate the company based on the relevant time period
 Court found these not to be liquidated damages or “penalties”, but rather compensation for the expenses that the company
would have put into Rhebergen’s training during her time as an associate at the clinic
Demeyere:
 This case seems to suggest that, while they will still be held to a standard of reasonableness, the courts might be willing to
enforce these kinds of clauses that put a price on competition, rather than barring it completely
 However, the courts will always be mindful of inequality in bargaining power or lack of awareness of appreciation for the
significance of these clauses; neither of these elements were found to be at issue here
 An employer that wants to use this kind of clause should be careful to have a clear basis for the amounts of compensation that
it includes in these clauses
o In this case, the employer based the amount on its cost to mentor, train and provide equipment to R, as well as an
estimate of the effect of the competition by the employee on the volume of business and goodwill
 For an employer that does want to try and control post-employment competition by using a compensation clause such as this,
rather than a traditional restrictive covenant, they’d be well-advised to be able to justify their numbers in terms of compensation
to the employer rather than as a penalty imposed on the former employee
5b. Ancillary Terms
Ancillary terms include documents such as employee handbooks, HR policy manuals, retirement plans, benefit plans, etc
 These documents may contain rules regarding things such as termination of employment, discipline, benefits entitlements, etc
 Sometimes the courts are asked to decide whether these rules and representations made in these separate documents are legally
enforceable
 This is essentially asking the same questions that we ask about contract formation:
o Has there been an offer, acceptance, consideration and intention to create legal relations?
 At a minimum, both parties must be aware of the document and there must be evidence that the parties agreed to the terms
and understood and intended that the document would be legally binding
 If the document exists at the time the employment relationship is first established, then it can be expressly incorporated into
the contract with clear language
o i.e. “The enclosed employment handbook forms part of this employment contract as part of the offer letter”
 There must be some kind of evidence that the terms in the ancillary document have been incorporated into the contract of
employment
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

As with contract formation, there is also the requirement of consideration – if the document is introduced after contract
formation (aka the creation of the employment relationship), this will represent a modification of terms and require fresh
consideration
Two main reasons why ancillary documents are found to not have been incorporated:
1. No evidence the parties intended it to be legally binding
2. Or it amounted to a unilateral alteration in the terms and is unsupported by fresh consideration
Dawson v FAG Bearings Ltd (2008) ONSC
Failure to establish that employee handbook was a valid part of the employment K
Facts: Sometime after commencing her employment with FAG, Dawson was given an employee handbook and told to review it. There
was no written contract in place, so she was hired pursuant to a verbal conversation and then commenced work; later, she was given this
handbook. Contained in the handbook was an explanation of the company’s progressive discipline policy. Some years later, Dawson
was terminated for cause and sued for wrongful dismissal
Issue: Was there cause for the dismissal? Was the discipline policy part of Dawson’s employment contract?
Held: No, the handbook fails to be a part of the employment contract. Two reasons:
1. No evidence of intention to create legal relations; that it was intended to be legally binding on the parties
2. Even if it was regarded as contractual terms, it had failed to be incorporated into their unwritten employment contract up until
that point
a. Would have represented a unilateral introduction of new terms, unsupported by fresh consideration
Reasoning:
 Employer wanted to rely on the handbook in order to make out its defence of just cause
 Courts conclusion on this issue is in paragraphs 31-32 of the judgment:
o [31] It would have been possible for FAG to incorporate the terms of the Employee Handbook into the employment
contract if it had been made clear in the offer of employment that the offer was conditional upon Dawson agreeing to
accept some or all of the terms as contained in the Employee Handbook.2 Furthermore, the introduction to the
Handbook, in my view, makes it clear that it is not intended to form part of the employment contract. The final
paragraph in the introduction states:
“The handbook contains the general rules and guidelines for employees to understand and follow. Developed
over the years in cooperation with our Employees’ Committee, the handbook will serve to guide us in our
daily activities and will, as time and needs warrant, be reviewed and updated to ensure they remain current.”
o [32] The reference to the Handbook containing general rules and guidelines is inconsistent with it being a contractual
document. In addition, the indication that it will be revised from time to time means that there would be many different
employment contracts applicable to different employees depending on the version of the handbook which existed at
the time of the commencement of employment.
 For two reasons here, we see the progressive discipline policy was found not to be a part of her contract:
1. No consideration
a. If they were terms, they were introduced after K formation and would need to be supported by fresh
consideration
2. Parties themselves didn’t regard the handbook terms as contractual terms
a. Language of the handbook suggesting “general rules and guidelines”; this isn’t up to the level of formal
contractual terms
b. Further, the “revisions from time to time” suggests these rules and guidelines may have been different from
someone else who may have been hired later; suggests the employer didn’t actually regard these as
contractual terms
Demeyere:
 Rules regarding ancillary terms are pretty straightforward
 For an example of a successfully incorporated ancillary document, see Johnson v Global TV (2008) BCCA
o Pension plan; Court found the retirement provisions in the plan formed part of the employment K
ASM Corrosion Control Ltd v George (2002) ABPC
Another example of an employer who successfully incorporated the terms of an ancillary handbook into the contract of employment
Facts: Employee didn’t have a written K, there was only a manual. Took a course in Texas that the employer paid for. A month later he
resigned. Policy in the employee handbook stipulated that if you resign then you must pay the employer.
Issue: Is the policy in the handbook enforceable?
Held: Yes, the policy in the handbook was enforceable.
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Reasoning: The employer had given all of the employees a copy and had them sign an acknowledgement. The employer took steps to
ensure employees were aware it was binding, and there was a new acknowledgement signed with every update to the manual. Policy
was also not unconscionable, as the employee had the choice whether to take the course or not.
Demeyere: “The issues concerning ancillary terms are pretty straightforward (the main point is simply that the same rules for contract
creation and modification apply to manuals, handbooks etc.) and the ASM Corrosion case provides an example of an employer who
successfully incorporated the terms of an ancillary handbook into the contract of employment … “
5c. Implied Terms
There are two categories of implied terms:
1. Terms Implied in Fact
a. Based on the presumed intentions of the parties
b. Two tests that courts have employed over the years:
i. Business efficacy test
ii. Officious by-stander test
2. Terms Implied by Law
a. Terms read into the contract; implied based on operation of law
i. Reasonable notice
ii. Managerial prerogative
iii. Duty to serve
o Sometimes called the duty to obey of the duty of fidelity; sometimes said to include a duty to
advance the employer’s interests ahead of the employees own (this is on a sliding scale; the more
senior the employee  the more they’ll be held to this fiduciary duty)
iv. Good faith and fair dealing
Terms Implied in Fact
Idea is that by implying the term, the court is merely giving expression to the agreement that the parties intended to make.
One test used to do this is the business efficacy test
 Based on this test, a term can be read into the K if it’s necessary to make the K work (i.e. as if the parties would have agreed
to this because they wanted their contract to work)
 Note this test is about efficacy – what would make it work, not efficiency
Other test used is the officious by-stander test
 “That which in any contract is left to be implied and needn’t be expressed is something so obvious that it goes without saying,
so that if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in
their agreement, they would testily suppress him with the comment “oh, of course!””
 Again, this is essentially just the court fleshing out what the parties themselves would have agreed to, had their attention been
drawn to the matter
Courts use both of these tests, and they essentially do the same thing. Presumably, parties wish to agree to the obvious things that make
their K’s work.
There are other bases on which terms can be implied in fact:
 If there’s a custom or industry norm that applies to a workplace
 Past practices or patterns of behavior in the workplace; if the parties engage in conduct for a period of time without objection,
eventually this conduct can give rise to an implied term
Terms Implied by Law – Duty of Good Faith and Fair Dealing
Where we see development in the common law in recent years is concerning the employer’s implied duties. Some of this comes from
within employment law (i.e. Duty to provide a safe and harassment free workplace), and some of this comes from contract law more
generally (i.e. Recent emergence and growth of the duty of good faith).
Lloyd v Imperial Parking (1996)
One of the earliest Canadian cases to recognize an implied common law duty – a fundamental implied term of any employment
relationship is that the employer will treat the employee with civility, decency, respect, and dignity
Facts: Lloyd had resigned from his employment after being subject to many months of verbal abuse and constant threats by his
supervisor. Lloyd claimed he had been constructively dismissed (i.e. a repudiatory breach of the contract thereby releasing the employee
from any further obligations to perform under the K – this has since been spelled out more broadly in recent jurisprudence). At this
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point, the definition of constructive dismissal was much narrower, and was essentially limited to only breaches of a fundamental term
of the K. Argument was that the bullying and harassment left him with no choice but to resign.
Held: In favour of Mr. Lloyd
Ratio: A fundamental implied term of any employment relationship is that the employer will treat the employee with civility, decency,
respect, and dignity
Reasoning:
 [40] It is well-recognized that in the absence of cause, any fundamental breach by the employer of a major term of the
employment relationship allows the employee to take the position that a constructive dismissal has occurred. In order for a
constructive dismissal to exist, the breach must be in relation to a fundamental term of the employment relationship
rather than just a minor or incidental term. There must be a fundamental breach of a fundamental term of employment
before one can claim to be constructively dismissed.
 [41] A fundamental implied term of any employment relationship is that the employer will treat the employee with
civility, decency, respect, and dignity. The standard that has to be adhered to by the employer is dependent upon the particular
work environment. This appears to be part of the trend to establish a duty upon an employer to treat employees “reasonably”
in all aspects of the labour process.
 [42] In this case, a fundamental implied term of the employer/employee relationship has been breached. [The supervisor]
did not treat Mr. Lloyd with the civility, decency, respect, and dignity to which he was entitled. The abusive pattern of behaviour
during 1993 was in contravention of this requirement.
Demeyere:
 Around the same time, the SCC decided Wallace v United Grain Growers, which also raised issues about an employer’s
obligation to treats employees fairly
o SCC majority declined to recognize a general duty of good faith and fair dealing
o However, the court got more creative with wrongful dismissal damages – Wallace damages – which essentially did
the same thing in principle
 Following Lloyd, we did have other judicial recognition of this implied term of decency
Antunes v Limen Structures (2016) ONCA
Implied duty of good faith and fair dealing in contract law
Facts: When hiring Antunes, Lima (the employer representative, and actually a family friend of Antunes), represented to Antunes that
Limen Structures, in his opinion, was worth $10 million. As part of his compensation, he offered Antunes shares worth 5% of Limen’s
worth ($500,000). Antunes said he knew or believed, given his relationship with Lima, that the company was in fact this successful
because he trusted him. Antunes began work as an SVP with the company believing he would be entitled to this amount. Shares never
materialized, and Antunes was fired 5 months after he commenced employment. Commenced a wrongful dismissal action.
Held: Antunes awarded pay in lieu of dismissal and $500,000 (value of the promised shares). Court found that Antunes was
contractually entitled to this even though the contract was silent about the value of the shares. Due to the representation from Lima plus
the expectation that contractors will deal with each other honestly, the Court decided to put Antunes in a position commensurate with
his expectations.
 Limen had failed to deal with Antunes honestly during negotiations; Antunes had relied on the untrue representations made by
Lima
Reasoning:
 Award not given due to misrepresentation, but due to the “general duty of good faith and honest performance in contracting”
to support the damage award
 ONCA started its analysis by acknowledging that parties to a contract must not lie or otherwise knowingly mislead each other
about matters directly linked to the performance of that contract
o “A party to a contract must be able to rely on a minimum standard of honesty from the contracting partner in relation
to performing the contract with the reassurance that if the contract does not work out, they will have a fair opportunity
to protect their interests.” – Bazen
Context:
 Key to the court reaching this decision was the invocation of the generalized duty of good faith and honest performance in
contracting which originated in the SCC’s decision in Bazen
 Bazen (2014) SCC
o SCC declared there to be an “organizing principle in the law of contract based on good faith and fair dealing”
o Bazen has been said to introduce a general duty of honest contractual performance into all contracts
o In terms of actual duties this organizing principle imposes on contractors, the SCC limited it to just a general duty of
“honest contractual performance”
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Terms Implied by Law – Termination of Employment: Reasonable Notice
Overview of Forms of Termination at Common Law
There are various ways through which an employment relationship can come to an end…
Termination with Notice
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Recall
o
ESA sets minimum notice requirements; after 3 months of employment, its 1 week for each year of service up to a
maximum of 8 weeks
o ESA expressly says that this can take the form of actual notice (advanced warning) called “working notice”, or the
employer can opt to give the employee pay in lieu of notice
o Doesn’t have to be entirely one or the other; employer can meet minimum requirements via a combination of working
notice and pay in lieu of notice
The same goes for common law; just as under the ESA, at common law the employer can choose to provide working notice,
pay in lieu of notice, or some working combination
One option for an employer who wishes to terminate the relationship with notice is to offer a lump sum which reflects both
ESA minimums and the common law requirements
o Note: Could be a very large sum at once; if dismissed employee goes on to find another job quickly, employer doesn’t
get the benefit of the employee’s mitigation
o Whereas, if employer continues employee’s salary and benefits instead, and the employee finds a new job before
notice period ends, the employer can then discontinue the salary payments for the common law portion of the notice
o However, because it does effectively remove the duty to mitigate, some employees might prefer to receive a lump
sum and therefore might be willing to settle for a lesser amount
Another option is for the employer to continue the employee’s salary and benefits during the notice period
o Parties should agree in writing that these payments include any statutory entitlements under the ESA
o Could also agree that if the employee finds new employment during notice period, the salary continuation will come
to an end
o Arrangement could provide that the employee will still receive a final lump sum payment equal to 50% of the amount
the employee would have received in the remainder of the notice period if they find a job earlier
 This approach might motivate the employee to find a new job, and also potentially lowers the total payout
the employer must pay
Note that salary continuation (i.e. working notice, etc) also includes benefits
Employee is also entitled to other compensation that they would have earned during the notice period (commissions, stock
options, bonuses and other perks such as gym memberships, company vehicle use, employee discount, etc.)
Recall: Common law implies into every contract of indefinite duration, an obligation to provide reasonable notice of
termination
o This is the implied term, and it is a rebuttable presumption
o Parties can rebut this presumption with a contractual term of their own creation
Analysis – always start with looking at the contract itself:
o What have the parties agreed to?
o What have the parties said in their K about how much notice is required?
o If nothing, the common law implied term applies
 Note that an employee doesn’t have to seek common law notice, they do have the choice of seeking to file
an ESA complaint as well (faster, cheaper); ESA is designed to protect employees and is interpreted broadly
and generously, so employee may receive a more favourable outcome
 That said, the common law entitlement stands to be much more than the ESA minimum; if employee is in a
position to pursue this, there is definitely an incentive since it does tend to be in the ballpark of one month
per year of service with no upper cap (in theory)
Termination for Just Cause
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
Where employer is not obligated to provided notice of termination; they have “just cause” to terminate the K
ESA also creates an exemption for just cause:
o Employee will lose their entitlement to termination and severance pay under the ESA where they are caught by this
exemption
o ESA exemption is more employee-favouring than the common law standard is; remember, ESA standard talks about
the required element of “wilfulness” and/or “intentional wrongdoing”
Frustration of Contract (Unit 7)

A contract that is frustrated comes to an end because something unforeseeable and unexpected happens which prevents one or
both parties from performing
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
In these cases, there is no obligation for the employee or employer to provide notice or pay damages
Constructive Dismissal
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

Where an employee is not dismissed outright; employer never says “you’re fired”
But, through its conduct, the employer evinces an intention to no longer be bound to the K
Employer in these cases is taken to have repudiated the K, and the employee will be entitled to treat the K as at an end and sue
for damages by result of failure to provide notice
o Constructive dismissal is still a dismissal, so a constructive dismissal without notice is still a wrongful dismissal
o Difference is that in constructive dismissal, it’s an employee that announces their intention explicitly to treat the K as
at an end
Resignation


Where an employee quits; employee terminates the K
Just as there is wrongful dismissal, there is such thing as wrongful resignation – a resignation given without sufficient notice
o Only rarely brought up; we will look at notice requirements for resignation in Unit 7
Wrongful Dismissal and Reasonable Notice
Common Law Implied Term of Reasonable Notice
“At common law, a contract of employment of indefinite duration is presumed to be terminable by either party, in the absence of just
cause, only upon reasonable notice”
Key components:
 At common law (contractual entitlements, as opposed to ESA minimums)
 Contract of employment (not, for example, an independent contractor relationship – another threshold you must establish
before getting into common law damages for reasonable notice; must be an employee or dependent contractor)
 Contract is one of indefinite duration (no requirement of reasonable notice for fixed term K’s – parties already know in
advance when the K will terminate)
 Presumed (this is only a presumption – it is rebuttable; if parties haven’t agreed to terms with respect to notice of termination,
they will be presumed to have agreed to reasonable notice; however, may rebut that presumption with a term of their own
creation)
 Terminable by either party (recall there is also an implied obligation on part of the employee to provide reasonable notice of
resignation; typically much less the amount that a court considers to be reasonable for a resignation as compared to a dismissal,
but the point is this obligation works both ways)
 In the absence of just cause (where the employer can establish some sort of just cause; i.e. misconduct, wrongdoing or
behaviour on part of the employee which amounts to just cause on the CL standard, employer has no obligation to provide
notice of termination – it’s really the employees conduct which repudiates the K)
 Reasonable notice – how do courts assess what is reasonable?
History of Reasonable Notice
Carter v Bell Sons (1936) ONCA:
First time the Court clearly stated the rule that “there is implied in the contract of hiring an obligation to give reasonable notice of an
intention to terminate the arrangement”
All along, it’s been recognized to be a presumption only; Courts have respected freedom of parties to negotiate their own terms regarding
termination, as long as they meet the requirements for contract formation, do not violate any applicable statutes, etc.
In Canada, the presumption is that the employment K is terminable only upon reasonable notice. The case we turn to for the
determination of what is reasonable is Bardal (1960, ONSC).
The Bardal Factors
Bardal v Globe & Mail Ltd (1960) ONSC
Famous case which lays out the factors to be considered and weighed for determining “reasonable notice” at common law
Facts: Bardal was an advertising manager with 16 ½ years of service when his K was terminated; employment K was silent on issue of
how much notice was required.
Issue: How much notice was required for employer to lawfully terminate Bardal’s K?
Held: 1 year is reasonable notice (12 months)
Reasoning:
 Famous passage for the reasonableness factors:
o “There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness
of the notice must be decided with reference to each particular case, having regard to the character of employment,
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the length of service of the servant, the age of the servant and the availability of similar employment, having
regard to the experience, training and qualifications of the servant.”
Demeyere:
 Notice the Bardal factors do not mention intention of the parties, or what the parties would have agreed to at the time of contract
formation. This is usually where the relevant focus is when we deal with implied terms
 Here, the focus is on the time of termination
 When looking at reasonable notice, ONCA has mentioned several times that the process for determining reasonable notice
is an “art, not a science – there is no one right figure for reasonable notice”
o Can be seen reflected in Bardal when saying “there can be no catalogue laid down as to what is reasonable notice…”
 ONCA has addressed the argument that there is, in effect, an unwritten rule of thumb that reasonable notice is one month per
year of service (although Demeyere says this is pretty much the unwritten rule of thumb, for the most part)
o ONCA claims there is no such rule, and there can be no such rule, because it depends on the facts of each case – it’s
an art, not a science.
The First Bardal Factor: Character of Employment



This factor comes first in the famous Bardal quote, and is also one of the most difficult factors to grapple with
Traditionally, with this factor, the idea was that more senior/managerial/highly skilled/high-level executive employees are
entitled to more notice than junior/non-managerial/less skilled employees
o Assumption is that higher class employees deserved greater protection
In modern employment law, distinction is justified on the basis that managerial and higher-level employees will have a harder
time finding alternative employment than will lower level employees
o Until recently, presumption created an unwritten rule that managerial employees were entitled to upwards of 24
months notice whereas non-managerial employees were capped at under 12 months
o Now, there are several departures from this rule
Cronk v Canadian General Insurance (1995) ONCA
One of the first cases to take on the assumption that managerial employees should be entitled to more notice
*ONCA wasn’t the one who actually challenged the assumption, but rather restored it in this case
Facts: Cronk was a 55-year-old insurance clerk who was dismissed after 30 years of service; she sued for wrongful dismissal, and
sought reasonable notice in the amount of 20 months – well above unwritten standard of 12 months for non-managerial employee.
Trial: Lower court challenged the assumption. Said it could not be assumed that non-managerial employees such as Cronk would have
an easier time finding another job. Said given Cronk’s age and skillset she might actually have a harder time finding another job.
 Held at Trial: Awarded 20 months notice
ONCA: Overruled the ONSC decision. Reduced award to 12 months notice
Reasoning:
 Reaffirmed the “established principle that clerical employees are generally entitled to a shorter notice period than senior
management or specialized employees who occupy a high rank in the organization”
 Refused to challenge the assumption that these higher-level employees would have a harder time finding new work
 Basically, did this because it would be too disruptive for employers and their lawyers:
o “The lower court decision has the potential of disrupting the practices of the commercial and industrial world wherein
employers have to predict with reasonable certainty the cost of downsizing or increasing their operations particularly
in difficult economic times. As well, legal practitioners specializing in employment law and the legal profession
generally have to give advice to employers and employees in respect to termination of reasonable notice.”
Demeyere:
 One of the problems with ONSC attempt to advance the common law and challenge this assumption was that MacPherson J
based his decision on a study that he conducted on his own (wasn’t something that employee counsel produced on their own);
found an empirical study that clerical employees do not have an easier time finding a new job
 This was found by ONCA to be an improper exercise of judicial notice
 Issue did keep coming up afterwards, and Courts including ONCA have continued to deal with this assumption
Minott v O’Shanter Development Company Ltd (1999) ONCA
Effectively blew the lid off the unwritten rule of 12 months capped notice for low level employees by awarding 13 months notice –
opened the door for rethinking the nature of the character of employment and how to balance that with the other Bardal factors
Held: Awarded non-managerial maintenance worker with 11 years service at time of dismissal with 13 months reasonable notice.
Effectively blew lid off the unwritten rule capping notice for non-managerial employees at 12 months.
 Distinguished from Cronk in saying that Cronk dealt with clerical workers, and not all non-managerial workers
 In this case, we had a maintenance worker, not a clerical worker; held this was sufficient for distinguishing
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Reasoning: “Having a cap might detract from the flexibility of the Bardal test, and would restrict the ability of the courts to take account
of all the factors relevant to each case and of changing social and economic conditions.”
Demeyere:
 Demeyere thinks this was distinguished on pretty flimsy grounds; opened the door for rethinking the nature of the character of
employment and how to balance that with the other Bardal factors
 Effectively blew the lid off the unwritten rule of 12 months capped notice for low level employees by awarding 13 months
 Also planted the seed for future challenges to the rule by questioning whether there should be a cap for non-managerial
employees
Moving Forward: The following two cases revisit Cronk and Minott and look at this idea of there being a cap at 12 months for all nonmanagerial employees and a 24-month cap for all managerial employees, and generally at the importance of the Bardal factor of
character of employment…
Di Tomaso v Crown Metal Packaging Canada (2011) ONCA
Any uncertainty or ambiguity about the date that termination is to be effective will lead the courts to construe this in employee’s
favour when determining reasonable notice
Facts: Di Tomaso worked for over 33 years as a mechanic at Crown Metal Packaging (so, a non-managerial employee). In September
2009, employer told D his employment would be terminated on November 6, 2009. However, over the next 6 months they kept extending
the termination date via written notice. It wasn’t until February 24, 2010 that he was given his final notice of termination and was told
it would be effective 2 days later, on February 26. Employer, upon dismissal, paid D a total of 26 weeks of statutory severance pay. This
reflected their ESA obligation. Di Tomaso was age 62 at time of dismissal; sued for wrongful dismissal.
Demeyere:
 Long service and elderly employee with a long and drawn out termination process. Di Tomaso was seeking a pretty sizable
reasonable notice award
 Employer argued 24 months was far too steep – pointed out that he was a low-level worker (mechanic) and unskilled; at most,
common law damages should be 12 months
o ONCA didn’t accept this argument
 Employer also argued it should get some credit for earlier notice it gave to the employee, even though it was extended numerous
times
o Court said there was no certainty until that last termination letter, and this uncertainty rendered the earlier notices
ineffective
Held: Upheld award of 22 months notice for Di Tomaso. Agreed with Di Tomaso’s argument that all of the extensions made the working
notice equivocal; only the final letter actually provided notice of termination.
 In effect, having received the final 2 days notice of termination, Di Tomaso had been terminated with pretty much no notice.
Reasoning MacPherson (judge from Cronk case)
 Said the court needs to apply Bardal factors. Considered earlier decisions starting with Cronk and also Minott
 Concluded that there is no automatic cap on reasonable notice damages for non-managerial employees
 MacPherson cited Minott case which ordered 13 months, and then restated what he said earlier in Cronk
o Said “there is no logical reason why the court should assume unskilled employees deserve less notice because they’ll
have an easier time finding alternative employment … the empirical validity of that proposition cannot simply be
taken for granted”
o Said that in each case it must be assessed on its own facts, without making assumptions about whether managerial
employees will have a harder time finding new employment than will non-managerial employees
 Referred again to Minott; held that the character of employment has now become a factor of declining relative importance and
that the proposition that junior employees have an easier time finding alternative employment is no longer, if it ever was, a
matter of common knowledge
 Essentially said that if this argument is going to be made, it must be made with specific evidence advanced by the employer
Takeaway? Any uncertainty or ambiguity about the date that termination is to be effective – courts will construe this employee’s favour.
Love v Acuity Investment Management Inc (2011) ONCA
Character of employment must be given its due weight, and particularly, we need to recognize the high level of an employee and
award them with a suitably longer notice period than might be suggested by just the other Bardal factors
Facts: Love was a chartered accountant, and one of two SVP’s – reported directly to CEO. Two years into his employment, he became
a 2% equity holder and one of 9 shareholders. He had sole responsibility for managing investment clients and the business they brought
to the company. Value of his total compensation package and shares was over $600,000/year.
Held: Notice period increased from 5 months to 9 months.
 ONCA held that the trial judge had erred in awarding only 5 months notice; substituted 9 months notice period
o This was for an employee with only 2 and a half years service
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Reasoning: Trial judge in setting the award lower at 5 months had put too much emphasis on the length of service factor, and failed to
give sufficient weight to the character of employment factor and availability of similar employment
 When TJ assessed reasonable notice, he compared Love’s case to other cases with similar lengths of service, but were not
similar on other factors.
 Also failed to consider Love’s very senior level and the executive character of his employment
 ONCA also criticized the TJ for focusing on the fact that Love didn’t supervise or manage other workers
o Said this was a rather narrow view of what constituted a “managerial employee” entitled to the upper amount of
reasonable notice
o Failed to place sufficient weight on other important facts, for example that Love reported directly to CEO,
responsibility for a huge chunk of the business, was one of 9 owners of the company, etc.
 ONCA held TJ had also failed to give consideration to availability of similar employment
o Love’s substantial annual compensation and perks would make it very difficult to find similar employment with a
similar level of compensation
o This also points to a longer notice period
Demeyere: Here we see ONCA saying that character of employment must be given its due weight, and particularly we need to recognize
the high level of an employee and award them with a suitably longer notice period than might be suggest just by the other factors.
Second Bardal Factor: Length of Service
At common law, length of service works the same way as the ESA insofar as the longer the service, the longer the notice requirement.
However, there is no rule of thumb. Length of service is just one factor. It’s more complicated at common law than it is under the ESA.
That said, Demeyere tends to use this factor as the starting point by assuming one month per year of service, and then bumps up
or down based on the other factors.
An issue related to length of service is inducement (sometimes referred to as “allurement”); Courts have extended notice period when
an employee had been induced to leave their previous job to join the employer who is now terminating them
 Can help to justify longer notice periods, essentially giving them recognition for their previous length of service
 However, at some point, inducement ceases to be relevant (i.e. if employee has been with an employer for a specific length of
time)
Third Bardal Factor: Employee’s Age at Time of Dismissal
Assumption is that older workers will have a more difficult time finding alternative employment than will younger workers. Age 50
seems to be the point at which courts consider an employee to be older, and therefore entitled to more notice.
As far as Demeyere knows, the factual assumption underlying this factor has not been challenged in the courts.
 Certainly, Demeyere thinks you could argue that younger employees might have a harder time finding alternative work since
they lack the work and life experience and proven record of employment that older employees can offer
 However, the assumption seems to be that older and advancing age points to a longer period of reasonable notice
Fourth Bardal Factor: Availability of Similar Employment
Looks at the labour market that the dismissed employee will be entering and searching for another job, and looks at the skills the
employee will be bringing to the job search.
 Highly specialized skills – expected to have a harder time finding another job (presumption)
 Skills that are in high demand – easier time finding another job (presumption)
There is some uncertainty about whether the courts should consider the particular labour market conditions in weighing this factor.
 In some cases, Courts have added an extra month or two to the notice period in difficult economic times, recognizing it may
take longer than normal to find similar employment
 However, there is not clear statement about how and whether the strength of the economy should be considered here
We do have one recent ONCA case which tells us quite clearly that the employer’s financial situation should not be considered when
assessing the length of reasonable notice. In other words, the award should not be reduced to give a break to an employer in financial
struggle.
 See Michela v St Thomas of Villanova Catholic School (2015) ONCA
Irrelevant Factors that Courts have Rejected
1.
2.
Employer’s financial position
a. Not relevant to the assessment of reasonable notice
b. This proposition comes from Michela v St. Thomas of Villanova Catholic School (2015) ONCA
Employee’s misconduct being “near cause”
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Michela v St Thomas of Villanova Catholic School (2015) ONCA
Employers should not consider an employer’s individual financial situation when assessing length of reasonable notice
Facts: Three teachers, Michela and 2 others, worked at St. Thomas Catholic School. Enrollment was down, so the school informed these
three teachers their contracts would not be renewed for the upcoming year. All three sued for wrongful dismissal and reasonable notice.
It was decided they were in fact indefinite term employees, and were entitled to reasonable notice – referred to Ceccol (series of 1-year
fixed term contracts deemed to be indefinite term). One had their K renewed for 13 years, another for 12 and one for 8. Sought 12
months reasonable notice. Appealed TJ decision saying employer’s financial situation is irrelevant.
Issue: Should financial circumstances of the employer play a role in determining what constitutes reasonable notice?
TJ Decision: TJ ruled 6 months was reasonable notice period. TJ settled on this as reasonable notice, citing the school was in a difficult
financial position, and speculated about availability of other teaching judge
 Said “employers’ financial position is something the courts should consider under the Bardal factor of “character of
employment”
o Said if all employees were awarded 12 months notice, employer wouldn’t be able to reduce its financial deficit
o Also said a period of 6 months would end around the time of the Christmas holidays, and speculated that around this
time, other teaching positions may come available for the new term in January
o This supposed availability of alternatives further supported lesser reasonable notice
ONCA: Unanimously agreed that the factor of character of employment considered the nature of the position held by the employee (i.e.
level of responsibility, expertise required, etc.) and does not consider employer’s financial position.
Held: Notice period increased to 12 months.
Reasoning:
 Reasonable notice is intended to allow employees a reasonable amount of time to find replacement work, and wrongful
dismissal damages are designed to compensate employees during the losses they incur during the notice period
 ONCA stated that, as with all Bardal factors, focus is on the circumstances of the wrongfully dismissed employee, NOT the
employer
 Though an employer’s financial situation may be the reason for terminating employment, it is simply not relevant in calculating
the notice period.
 Also said the suggestion that more jobs will be available by Christmas was purely speculative and did not support a reduced
notice period.
Dowling v City of Halifax (1998) SCC
“near cause” is not relevant to the assessment of the Bardal factors – also sometimes referred to as “doctrine of moderated damages”
Context: Some courts had been reducing the reasonable notice award where the employee had committed some form of misconduct
that didn’t quite amount to just cause at common law (which would mean no reasonable notice), but that could be labelled as “near
cause” to acknowledge the employee had engaged in some misconduct or wrongful behaviour and reduce the notice period.
Held: SCC in a very brief judgement (one line) killed this idea of “near cause” and said that “near cause” is not relevant to the assessment
of the Bardal factors.
 Also sometimes referred to as the “doctrine of moderated damages”
Wrap-up: How to Deal with Predicting Reasonable Notice in Practice
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Research cases that are factually similar on the Bardal factors
Recall that ONCA said we must look at all of the factors
o We might find cases with similar lengths of service, but if the character of employment is significantly different, the
court will likely distinguish due to this
o Find cases that are as similar as possible to the case at hand in terms of all Bardal factors
One place to look is employment textbooks and treatises
o Some contain charts (called “meat charts”) which set out the names of the case and the key facts from the Bardal
factors; sometimes organized by character of employment (helps to sift through if you have a mechanic, chartered
accountant, etc.)
Can also look to online tools and databases – several law firms include some form of database on their websites where you can
insert some of the Bardal factors and it will give you an estimate for likely amount of reasonable notice
Always best to provide clients with a reasonable range as opposed to a single figure – otherwise they may get locked into that
one figure as their “minimum”
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6. Just Cause for Dismissal at Common Law
General Principles
Sometimes referred to as “summary dismissal”, because it’s a dismissal without notice. Where the employee’s conduct amounts to just
cause for dismissal, the employer has no obligation to provide notice for dismissing the employee.
Just Cause


Just cause is a defence to a wrongful dismissal action that is brought by an employee; states that employer had no obligation to
provide any notice because the employee’s conduct amounts to just cause
Remember that a wrongful dismissal case is essentially a suit for breach of k for failure to provide notice; how much notice is
adequate depends on the terms of the k; if k is silent, we turn to reasonable notice
McKinley v BC Tel (2001) SCC
Leading case on just cause – “the test is whether the employee's dishonesty gave rise to a breakdown in the employment relationship”
– emphasizes the contextual approach and measuring proportionality
Facts:
 McKinley was a chartered accountant who worked for BC Tel.
 Suffered from high blood pressure and had some related health issues. Doctor told him to take a leave of absence from work.
 Employer accommodated this leave so he could attend to his health issues. There was some back and forth for quite some time
where he’d attempt to return to work, requiring accommodations.
 At some point, McKinley’s doctors told him that he might be able to return to work if he took a drug known as a “beta blocker”
– at that time, this was an experimental drug to help with high blood pressure.
 McKinley refused to try them.
 He didn’t disclose this option to his employer and instead simply asked for his employer to accommodate his health issues by
returning him to work in a less stressful position or set of responsibilities.
 Employer denied this request and instead dismissed McKinley without notice. McKinley sued for wrongful dismissal.
Trial:
 Employer argued that it had just cause to dismiss McKinley because he had not disclosed the doctor’s advice to return to his
old job while taking the Beta Blocker. Argument was that McKinley’s dishonesty about his condition and the options available
to him amounted to just cause for dismissal.
Issue:
Was the dishonesty, the withholding of medical information, sufficient to justify summary dismissal by the employer (was there just
cause for dismissal without notice)?
 Is dishonesty of any degree by an employee just cause for their dismissal?
o Employer pointed to a line of cases which seemed to suggest yes; honesty is so integral to the employment relationship;
without trust, the relationship simply cannot function
o These ideas carry back to the days of master-servant
 At the same time, there was a line of cases which state that not all acts of dishonesty amount to just cause
Held: In favour of McKinley. Dishonesty amounting to just cause really depends on the context and the circumstances of the dishonesty.
McKinley awarded 22 months reasonable notice.
 Note: this case was decided after Wallace, but before Keays
o Two SCC decisions
 Wallace created a new basis of extended reasonable notice damages, and then Keays overruled that decision
o So, the 22 months in McKinley includes a Wallace “bump up” – need to bear this in mind when we consider the
damage award in this case
 NO LONGER ENTITLED TO WALLACE BUMP UP (there was a period of time where an employee who
was dismissed was entitled to an addition to reasonable notice (this was called Wallace bump up)
 Also overturned TJ’s award of aggravated and punitive damages (we will discuss this later in the course)
Reasoning (Iacobucci)
 The underlying issue is whether dismissal without notice is a proportional response to the employee’s dishonesty:
o “I am of the view that whether an employer is justified in dismissing an employee on the grounds of dishonesty is a
question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether
the employee's dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed
in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an
essential condition of the employment contract, breaches the faith inherent to the work relationship, or is
fundamentally or directly inconsistent with the employee's obligations to his or her employer.”
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“Underlying the approach … is the principle of proportionality. An effective balance must be struck between the
severity of an employee’s misconduct by considering the sense of identity and self-worth individuals frequently derive
from their employment.”
States this contextual approach and the balancing act is necessary given the vulnerability of employees at the time of
dismissal. We must look at all facts of the case (degree and nature of the dishonesty, along with any aggravating or mitigating
factors) and decide each case on its own facts
o Cannot adopt rules such as “any dishonesty amounts to automatic just cause for dismissal”
While McKinley was not completely straightforward with his employer, his dishonesty did not rise to the level of a dishonesty
or untrustworthiness that was incompatible with the continuation of the employment relationship
o


How do we make sense of the McKinley approach to just cause?
 It is a contextual approach and applies not only in cases where the alleged misconduct takes the form of dishonesty, but in all
cases of alleged just cause
 In terms of contract law, we should ask whether the alleged misconduct amounts to a breach of contract – a breach of an express
or implied obligation that the employee owes under the contract
 Demeyere thinks the way to read McKinley and the proportionality principle is that it puts the contract of employment at the
centre of the inquiry; this is the basis for what is the proportional response, not what is a fit penalty – rather, has there been a
breach of k that undermines the relationship as a whole?
o So, we need to ask whether the conduct that is alleged to amount to just cause interferes with or ruptures the k of
employment?
 What have they agreed to, what does the k require of the employee, what are the employee’s responsibilities,
what do they owe to their employer, what are the employers reasonable expectations under the k?
 We must ask all these questions to determine if there is just cause to terminate the k
McKinley has been later interpreted as establishing a 2-step test:
1. Did the employee engage in misconduct that breaches an implied or express term of the contract?
a. Does the evidence establish this in the affirmative?
b. Standard here is the balance of probabilities, though courts will often use a sliding scale when it comes to the standard
of proof; where the alleged conduct has a criminal or quasi-criminal character to it, a court might insist on something
higher than BOP
2. Did the employee’s breach give rise to a breakdown in the employment relationship?
a. If there was a breach of K, court must determine whether the seriousness of the conduct warrants summary dismissal
b. Generally, only serious conduct which causes the employer economic or reputational harm, or harm to the employer’s
business interests somehow, will be upheld as just cause
c. Courts consider all circumstances; will look at length of service, consider employees past record, whether conduct
was pre-meditated or provoked, employee’s personal circumstances which might explain or excuse the conduct, or
any other circumstances which might shine light on the behaviour and its consequences for the employer
Notes: Demeyere doesn’t think it’s particularly helpful to lay it out as a two-step test; there are other formulations as well.
 In the end, the key thing from McKinley is that the court stresses we need to consider the context and the circumstances;
dishonesty in itself is not automatically cause for summary dismissal
 McKinley also stands for the more general principle that courts must adopt a contextual approach and consider the degree of
the misconduct and the surrounding circumstances in all cases of alleged just cause in defence of a summary dismissal
The Contextual Approach
List of how to think about the factors that courts will consider in assessing just cause…








Nature of employee misconduct
Nature of employee’s position
o Did they hold a position of trust or high level of responsibility? Etc.
Nature of employer’s business
o Certain sorts of businesses may be able to insist on higher standards of trustworthiness (i.e. banks, care providers,
services to children or other vulnerable sectors, etc.)
Off-duty conduct (is there a nexus)?
o Is there a link or connection between off duty conduct and the employee’s responsibilities at work?
Employee’s length of service and disciplinary record
Contractual language and workplace rules
Single incident or culminating incident
o Was this an anomaly or a pattern of behaviour?
Progressive discipline or condemnation from the employer
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Belyea v Syncrude (2018) ABQB
Recent example of the contextual approach in action – employee’s behaviour after the impugned misconduct is also important
Facts:
 Belyea was employed as a crane operator for 10 years. B had received positive work evaluations but also had a history of
aggressive behaviour at work.
 B was terminated in 2012 following a violent outburst in the lunchroom (B yelled at a junior employee who was sitting in his
favourite chair and at one point threw a chain at the other employee).
 The employer conducted a full, thorough investigation and concluded that B had committed just cause for the termination of
his employment.
Held:
 Court held in favour of the employer. The court concluded that there was just cause for the dismissal because B had “violated
an essential condition of his employment contract and breached the trust necessary in his work relationship with Syncrude”
Reasoning: Factors the employer considered:
 Syncrude’s Treatment of Employees Policy
 Previous incidents of aggressive behaviour for which B had been disciplined
 B’s lack of remorse and refusal to accept any responsibility; continued to be dishonest about the incident throughout the
investigation
Demeyere: Good example of how broadly the context is to be construed; the employee’s behaviour afterwards is also important.
 Here, the lack of remorse and continued dishonesty and hostility during the investigation gave further evidence that the
relationship was irreparably harmed and that the employer was justified in having dismissed the employee by having lost all
confidence in their ability to be a productive member of the workforce.
 Remember: Contextual approach applies not just to dishonesty, but other grounds of dismissal as well such as violence in the
workplace here in Belyea
Other General Principles
Other general issues which arise in just cause cases:
 After-acquired cause
 Cumulative cause
 Condonation
After-Acquired Cause
McIntyre v Hockin (1889) ONCA
“It is now settled law that if a good cause of dismissal really existed, it is immaterial that at the time of dismissal the master did not
rely or act upon it, or even know of its existence, or that he acted upon some other cause in itself insufficient. The main question
always is, were there at the time of the dismissal facts sufficient in law to warrant it.”
 Essentially says that where an employer dismisses someone without notice, if the employee brings a wrongful dismissal action,
the employer can rely on misconduct that it has discovered after the dismissal to support their defence of just cause
 Can also change their grounds for dismissal; i.e. if the dismissal was in fact motivated by incompetence, but the employer later
discovers the employee had committed theft, the employer could raise both of these issues or simply rely on the issue of theft
 Idea here is that the employees fundamental breach of k relieves employer obligation to provide notice; doesn’t matter that the
employer only learns about it later on and after the decision to dismiss an employee
 This arguably creates an incentive for employers to keep investigating the employee right up until the date of trial if there is
one; allows the employer a “fishing expedition” – dismiss and then find dirt later if the employee commences legal action
Van den Boogard v Vancouver Pile Driving Ltd (2014) BCCA
Shows modern example of after-acquired cause
Facts:
 V hired as PM for VPD in 2011 into senior management position responsible for safety at job site (heavily regulated industry)
 Duties included: workplace safety, safety training, enforcement of drug prohibition policies
 Participated in creation of core values statement of company regarding safety/legal/regulatory risks in industry
 Dismissed without cause Feb 2013  got 4 weeks pay in lieu of notice and asked to return company cellphone
 V ended up suing VPD for wrongful dismissal  by the time he brought suit, they found many texts sent by V soliciting illegal
drugs from other people including another employee working in his supervision
 In response to this claim VPD raised defence of just cause because of the info they acquire AFTER termination
 V, at trial, admitted to using the cellphone for that purpose and admitted to consuming drugs with some employees
 ER argued actions amounted to gross breach of employment K, and therefore had just cause for termination
 Misconduct undermined safety of job site & prevented him from overseeing risk and safety management (required for his role)
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TJ: Agreed with employer – there was just cause for the dismissal. Asking a direct subordinate to get drugs for him was incompatible
with his duties as a project manager responsible for safety matters at this high-risk job site. His misconduct went to the heart of the
employment relationship.
BCCA: Upheld trial decision. Misconduct here exhibited a serious lack of judgment in a safety sensitive workplace which justifies
termination of his employment for just cause.
Demeyere:
 We see here the McKinley approach at work
o Court looked at circumstances, especially the nature of the employee’s work and his role in the company in assessing
whether there was just cause
o Key to this decision was the nature of his job; managerial position responsible for safety in the workplace including
safety risks created by drug use in the workplace
 Also emphasizes that employers may rely on employee misconduct that they discover post-termination in support of their
argument that termination was for just cause
o Dismissals can be upheld, even if at the time of dismissal an employer doesn’t know about the misconduct and its
discovered after
Cumulative Cause and Progressive Discipline
A single breach of contract by the employee can amount to just cause, though generally it must be very serious and most often wilful
 e.g. Theft, fraud, violations of privacy or confidentiality, serious violence or safety violations, conspiracy against employer,
etc.
Sometimes an employer can seek to rely on an accumulation of less serious conduct rather than a single wrongful act – this is known as
cumulative just cause or culminating incident.
 A breach of contract that would alone not be cause for dismissal can serve as the “proverbial straw that breaks the camel’s
back” if employee has committed previous similar breaches of the employment contracts
Atkinson v Boyd, Phillips & Co (1979) BCCA
Requirements to make out a case of cumulative cause or culminating incident
Ratio:
1. The employee was given clear and express warnings about their performance or behaviour
a. Important requirement – employer must provide a warning and a period of time to alter their behaviour
b. Based on corrective theory – employer should seek to correct wrongdoings instead of jumping to the ultimate sanction
of termination without notice
c. For this reason, the consistent application of a progressive discipline policy will improve the likelihood of summary
dismissal being established based on a cumulative cause
i. This requires that employers use lesser forms of disciplines; i.e. starting with verbal/written warnings then
working up to suspensions before ultimately dismissing an employee
2. The employee was given a reasonable opportunity to improve after the warnings
3. The employee failed to improve notwithstanding those warnings and being given a fair chance to improve
4. The cumulative failings of the employee harmed the employer’s business
Laszczewski v Aluminart Products Ltd (2007) ONSC
With something as subjective as management style, and also with conduct that can be traced to cultural or personality differences or a
lack of training, courts will look at employers’ efforts for progressive discipline before finding that the impugned conduct amounts to
just cause
Facts:
 After just 3 months, employer dismissed L for several incidents of abusive conduct towards subordinates.
 L was hired into a managerial position which required management of unionized employees (something he hadn’t done before).
 Employer turned out to not like his management style, found him harsh and abusive and not familiar with expectations of
employees working under a collective agreement in a unionized workplace.
 At the same time, employer didn’t give L any training on their preferred management style and how to deal with employees
represented by a union and governed by a collective agreement.
 They didn’t bring many complaints about L’s behaviour to him (although there had been many) so L was not aware that his
conduct was inappropriate and wasn’t given an opportunity to correct his behaviour.
 Employer did have a progressive discipline policy but failed to follow it.
Held: For L.
Reasoning: “Aluminart did not follow its own written policies when it dealt with L. Progressive discipline was not even attempted. A
number of complaints were not even mentioned to him. Most were not the subject matter of formal employee warning reports which
were discussed with him. Instead, Aluminart acted in a precipitous fashion regarding a senior employee whose style offended the
sensitivities of human resource professionals involved. L had immigrated from Poland and having never worked in a unionized
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environment, was unfamiliar with the do’s and don’ts. While he was handed a copy of the CA, no attempt was ever made by Aluminart
to train him in dealing with unionized employees.
 Particularly, with something as subjective as management style, and also with conduct that can be traced to cultural or
personality differences or a lack of training, courts will look at employers’ efforts for progressive discipline before finding
that the conduct amounts to just cause
 In this case, there was no just cause; insufficient warnings and no opportunities to change conduct, with the guidance of clear
expectations of what proper management behaviours would be
Condonation
Also involves a look at the history of the employment relationship and the employee’s previous record and employer’s response to the
employee’s previous performance.
An employer that is aware of employee misconduct but then allows an extended period of time to pass without taking any steps to
discipline the employee or warn them that their behaviour is unacceptable or needs to change or that they may face dismissal, will be
prevented from relying on that employee misconduct as the basis for just cause.
This is called condonation – as in, the previous behaviour has been condoned.
 In essence, kind of like a form of promissory estoppel; by not objecting to the misconduct that might be in breach of k or part
of a pattern which could culminate in just cause, the employer suspends its rights to rely on that misconduct down the road
unless the employer provides notice of its intention at some point moving forward to rely on that sort of behaviour
 Then, normal expectations regarding progressive discipline and cumulative cause will apply
Example?
 Employee is constantly late for work and employer is aware of this but doesn’t express dissatisfaction with the employee being
late. The employer cannot rely on a string of latenesses, no matter how long, to justify just cause until it puts the employee on
notice that the lateness is unacceptable
 Employer would have to show that once it became aware of the issue, it started to issue warnings and implement a pattern of
progressive discipline before being able to rely on cumulative cause.
There is no precise amount of time that will give rise to condonation, just as there’s no magic numbers regarding number of incidents
for any particular kind of misconduct that will get an employer to the point of cumulative cause.
 Again, a court will look at all the circumstances to determine whether the employer objected within a reasonable time
 This is a very well settled principle of law
For issues of condonation, we can cite the following passage from McIntyre v Hockin (1889) ONCA:
 “When an employer becomes aware of misconduct on the part of… a servant, sufficient to justify… [a just cause] dismissal,
he may adopt either of two courses. He may dismiss, or he may overlook the fault… If he retains the servant in his employment
for a considerable time after discovering his fault, that is condonation, and he cannot afterwards dismiss for that fault without
anything new.”
Specific Grounds for Dismissal
*Note there is no universal set of categories for misconduct leading to just cause. We will be touching on a handful of cases and a selection
of categories
Dishonesty and Conflict of Interest
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We’ve seen dishonesty as grounds for dismissal in McKinley; court told us that not every dishonest act gives the employer
grounds for dismissal
One of the key issues here will be the employees’ position:
o If they have a lot of autonomy or hold positions of authority, requiring special trust (bankers, care providers, childcare
workers, etc.) they may be held to a higher standard
o Theft, fraud, etc are other forms of dishonest conduct which might give rise to a just cause dismissal
 Typically, employer will need to establish intention in these cases, and that the fraud or theft was not mere
oversight
Conflict of interest refers to the general duty on part of the employees’ implied duty to serve, and employers can reasonably
expect their employees to not compete with the employer, for the employee not to otherwise pursue their own personal gain at
the employer’s expense
o Ties into this category of dishonesty; the grander scale that the conflict of interest is, the more likely it will amount to
a just cause for dismissal
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Incompetence and Safety Violations
Balzer v Federated Co-operatives Limited (2018) SKCA
Example of safety violations – where safety is an issue and where the employee creates a significant safety risk to themselves, others
or the environment, courts are more likely to uphold that as just cause.
Facts:
 B dismissed for cause after 6 years on basis of serious violations of safety rules
 B received extensive safety training as propane coordinator, and knew that violation could result in dismissal
 No prior incidents of misconduct until this incident
 One morning, while filling propane he violated many safety rules, and there was a 30 minute leak, with 5000L of propane in
environment. During leak, he went to get a wrench, left gate unsecured, and dint report the leak
 Even after he stopped the leak, he left for an hour lunch and didn’t report problem
 When employer learned about this, terminated B on basis he violated 5 safety rules and caused significant risk
SKCA: applied McKinley approach; found that dismissal was proportionate to the misconduct.
Reasoning:
 He had violated known safety protocols, his actions resulted in a very dangerous situation
 He didn’t take the situation seriously by not reporting it to anyone, going ahead with his lunch break
 There were no mitigating factors the court could identify
o Nothing to explain or justify the breach of the safety protocols
 Even though it was just one incident in an otherwise good 6 year history of service, these actions were sufficient to amount to
just cause
Demeyere: where safety is an issue and where the employee creates a significant safety risk to themselves, others or the environment,
courts are more likely to uphold that as just cause. Particularly where the employee is clearly aware of the rules and evidences wanton
disregard for the rules with no mitigating factors to be offered in their defence.
Babcock v C&R Weickert Enterprises (1993) NSCA
Example of incompetence or performance issues as being just cause for dismissal – employer’s failure to not just warn, but to also
provide a reasonable opportunity for the employee to correct the performance problems meant the employer could not rely on these
problems as just cause
Facts:
 B manager of Canadian Tire in April 1990. Did well, but started to go off rails. October, received report saying that employees
lost confidence in his effective management. ER approached B and told him he needed to address those problems
 ER told him that his performance would be renewed in new year (took vacation at beginning of new year)
 While on vacation, managers held meeting and agreed oto give B 45 days to improve his performance
 When B returned to work several weeks later, he was dismissed outright without 45-day period
Issue: Was there cause for Babcock’s dismissal?
Held: No. There was not just cause based on the performance issues. Owing to the employer’s failure to not just warn, but to also provide
a reasonable opportunity for the employee to correct the performance problems meant the employer cannot rely on these problems as
just cause
Reasoning: In order to find just cause for dismissal, the onus is on the employer to demonstrate that Babcock had been warned his
performance must improve or that he can be dismissed. Employer would have to further show that Babcock understood the warning and
that he was given a reasonable opportunity to improve these deficiencies in his performance
 NSCA said in this case, he had been warned and there was evidence he had understood the warning, but the employer failed
to give him reasonable time to improve
 Also noted that this short period of time included the busy months of the Christmas season, so he wouldn’t have any time to
take on additional training or try out different management tactics. Moreover, it also included his scheduled vacation time in
January
 Also noted that the employer itself initially decided to give him a 45-day period beginning in January to improve his behaviour,
but then didn’t give this period.
o This is evidence that the employer recognized their obligation to give him an opportunity to improve his behaviour
Insolence and Insubordination
Henry v Foxco Ltd (2004) NBCA
Example of insolence and insubordination – a single, isolated case of insolence will justify dismissal only in three circumstances
Facts: Henry was fired after seven years of employment without notice. One day, Henry’s supervisor Graham asked Henry why he was
taking so long to do a certain task and told him to hurry up. Henry got upset with Graham and asked him what his problem was. Graham
told Henry that he could quit if he wasn’t happy. Henry yelled back “If you want to fire me, go ahead” and repeated this several times.
Graham, in turn, fired Henry. Henry treated this as having been dismissed and sued for wrongful dismissal. Employer raised defence of
just cause on the basis of Henry’s insolent behaviour (talking back to the supervisor):
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Held: Judgement for Henry. Henry’s behaviour did not amount to just cause for dismissal. Awarded 6 months reasonable notice.
Reasoning: A single isolated case of insolence would justify dismissal only in three circumstances:
1.
2.
3.
It would have to be shown that the insolence destroyed the ability of the employee and the supervisor to maintain a working
relationship
The incident undermined the supervisor’s ability to manage the workforce
The incident caused the employer financial or reputational loss
None of this happened in this case:
 “The employer did not establish that Mr. Henry’s insolence led to irreparable harm to the working relationship. It did not
establish that this isolated incident rendered an impossible or impracticable for Henry and Graham to maintain a working
relationship … there is no evidence to suggest that the verbal confrontation had a prejudicial effect on Graham’s ability to
supervise the workplace effectively, or that the employer’s financial or business interests were prejudiced by result of the
incident … many things are said and done in the heat of the moment that, on reflection, are regretted by all. And this is one of
those cases.”
Demeyere: Again, we see the contextual approach at work. The court does acknowledge that a single incident of insolence or talking
back to one’s superior or insubordination and refusal to follow orders could amount to just cause, but it would still need to be shown
that on the facts of the case it is reasonable to conclude that the relationship had been destroyed. That the supervisor would be unable to
have a working relationship with the employee or otherwise unable to effectively manage the workforce, OR that the supervisor had
suffered financial or reputational loss. None of this was true in this case; the single incident of insolence was insufficient to amount to
just cause.
Harassment and Violence
*Also recall Belyea dealing with violence in the workplace
Van Woerkens v Marriott Hotels of Canada (2009) BCSC
Deals with workplace sexual harassment
Facts: V was a director of sales and marketing at Marriott Hotels; worked there for 22 years with no incidents. In December 2006, he
was at the company’s holiday party in Vancouver. As a senior level employee, he was expected to monitor alcohol consumption by
employees and make sure nobody became too drunk and causes a risk to themselves or others. One female employee, M, became quite
drunk. After the party, a group of the employees including M and V went to a hotel room to continue the party. When they were in the
hotel room, M went into the bathroom and V followed her and groped her. A couple weeks later, V phoned M at work and asked her
out and if she would meet him at a local bar to have a “special meeting”. M declined the invite, and then reported the incidents to senior
management. Management investigated the case and concluded that V had sexually harassed M, and that the harassment was serious
enough to provide grounds for dismissal. V denied the allegation of groping M in the bathroom of the hotel, but the employer didn’t
find his denial at all plausible.
Held: Employer had just cause to terminate V without notice.
Reasoning:
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These were two serious incidents of harassment
Following an obviously drunk and vulnerable subordinate employee into the bathroom and touching her without her consent,
and afterwards trying to pursue a relationship with her amounted to just cause
V was a manager in a position of power, and the court noted he was dishonest in denying the incident despite witnesses
o Court suggested this dishonesty really undermined his trust
It didn’t matter that there was a progressive discipline policy in place, or that V had a 22-year history of problem-free
employment; this was serious misconduct, enough to give the employer just cause for immediate dismissal.
Note: Some have said that despite McKinley and its requirement for a contextual approach (“no clear cut rule that all incidents of
dishonesty amount to just cause for dismissal), there is in effect, a zero-tolerance standard when it comes to sexual harassment in the
workplace.
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Demeyere doesn’t know if this is true; thinks those that think this might not recognize the seriousness of sexual harassment
itself
It is serious misconduct and is particularly harmful when perpetuated by someone in a position of power; it’s hard to identify
any factors in this case that would have mitigated his behavior. She doesn’t think anything in this case suggests the courts failed
to employ a contextual approach. Given the seriousness of this issue, they arrived at the right decision.
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Absenteeism and Lateness
Culpable vs Non-Culpable
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Important to distinguish between culpable and non-culpable lateness and absences
If the absence or lateness is non-culpable, it is sometimes referred to as innocent absenteeism or lateness
o Employee is not to blame; could be related to disability, religious reasons, childcare or eldercare responsibilities
o These kinds of absences cannot be disciplined, as prohibited by the HRC
 Innocent absenteeism can result in contracts being frustrated, however
 There is a duty on the part of the employer to accommodate things like disability or religious beliefs that might cause the
employee to be absent from work
Generally, it will take several incidents of culpable absenteeism or lateness for an employer to establish just cause.
 Where the absenteeism is coupled with insubordination (i.e. outright deliberate refusal to report to work when ordered to in
accordance with the employee’s contractual obligations, dishonesty about reasons for absences or lateness) the employer may
have a stronger case
o Perhaps strong enough to support dismissal, perhaps after just one incident
o Again, it’s a contextual approach and the court will look at all factors
Off-Duty Conduct
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Just cause can include conduct that the employee does when not at work; either not at the workplace, or not during working
hours
When the employees off-duty conduct potentially threatens the employer’s economic or reputational interests, or interferes
with the ability of the employee to perform their job, then it might amount to just cause
Court will look for a nexus or link between the employee’s off-duty behaviour and some sort of prejudice to the employer’s
legitimate business interests (could be economic, reputational, etc.)
o Finding this link may turn on the particular position or responsibilities held by the employee
o For example, immoral behaviour by a teacher or a child counsellor while off duty might have a greater negative impact
on the employee’s ability to work than it would if the employee was a forklift operator
Kelly v Linamar Corporation (2005) ONSC
Deals with off-duty conduct – found to amount to just cause. the test is whether the employee’s behaviour threatened the employer’s
business interests
Facts: Kelly was a long service, well respected managerial employee. However, he was arrested for possession of child pornography
which he accessed off hours on his home computer. Employer, Linamar Corporation, was very involved in the community and supported
several local children’s organizations. This arrest of a senior level management employee for child pornography charges was widely
reported in the local media. Employer felt they had no choice but to dismiss Kelly. Kelly then filed suit for wrongful dismissal.
Issue: Did the arrest for child pornography on Kelly’s home computer constitute just cause for his dismissal?
Held: Yes. Court agreed with the employer’s position and upheld the dismissal with cause.
Reasoning: The test is whether the employee’s behaviour threatened the employer’s business interests. In this case, the morally
offensive nature of the misconduct and the notoriety attracted in the local media combined with the employers visible role in the local
community as an advocate and supporter of children’s activity created the required nexus to link the off-duty conduct and the employer’s
legitimate business interests.

[30] “The [employer] argues that an employee in the position of Philip Kelly, who is required to work with the general public
both acquiring product from suppliers and supplying product to customers, who is required to manage, instruct and discipline
people working under him, and who is required to interact collegially with many peers at the management level, has a duty to
ensure that his conduct does not adversely impact on any of those activities. It is argued that permitting himself to be placed
in the position where he would be charged with possession of child pornography, which fact became almost immediately
known to his management peers, co-workers and people who reported to him, and which ultimately became known to the
general public when at a later stage the identity of his employer was disclosed, he has failed to discharge the duty that he has
to his employer.”
Off-Duty Conduct on Social Media

There aren’t many wrongful dismissal cases dealing with this issue, as few employee’s have actually turned around and sued
their employers for wrongful dismissal
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
However, this is another example of off-duty conduct to consider and one of the important issues will be whether the social
media activity causes harm to or otherwise prejudice to the employer’s legitimate economic or reputational interests, or
interferes with the employee’s ability to perform their job effectively
o i.e. Damian Goddard – Sportsnet broadcaster and anti-gay comments
o i.e. Employee of Mr. Big and Tall – posted very offensive comment on Facebook page dedicated to Amanda Todd
(young girl who committed suicide after years of bullying)
 Was eventually traced to him and reported to his employer
Of course, a contextual approach will need to be applied here for off-duty conduct on social media and all relevant factors must
be considered, like any other context
What to do on an Exam Question:
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Identify relevant factors; strengths and weaknesses of the case for whichever party you’re representing
Look at the context broadly; look at the history of the relationship (not just the incident itself)
o Also look at the behaviour of employer and employee following the incident which gave rise to the dismissal for cause
Also look for mitigating factors; factors that show that the just cause conduct didn’t actually cause any harm or only minimal
harm to the employer, or that explain or justifies or excuses the employee’s behaviour
Also look at factors that are aggravating factors and underscore the damage to the employment relationship and the harm to the
employer’s interests that really call into question the employee’s ability to discharge their duties and maintain the trust of their
employer
7a. Resignation
This is where the employee resigns or quits. Just as there is wrongful dismissal, there is wrongful resignation
What makes a resignation wrongful, just as what makes a dismissal wrongful, is failure to provide adequate notice
Where would we look to determine the amount of notice required for a resignation? First, look to the employment k itself…
o Some provinces set out standards of notice for resignation in their employment standards legislation (Manitoba,
Saskatchewan, Alberta, Newfoundland and Nova Scotia)
o In most cases, the ESA standard is in the range of 1-2 weeks
o Ontario legislation does not set a minimum for amount of notice an employee must provide for resignation
If the employee quits, employer has no obligation to provide notice or pay in lieu of notice
The employee also gives up their entitlement to notice and severance pay under the ESA
For that reason, because an employee is forfeiting these entitlements, Courts have required that the resignation be a clear and
unequivocal expression of the employee’s intention to resign
o Test is objective: would a reasonable person conclude that the employee had unequivocally and voluntarily resigned?
 An employee who simply says they’re unhappy, or that they are simply looking around for another job, is
insufficient – it needs to be clear, unequivocal and voluntary
 If the employer gives the employee an ultimatum (i.e. “either quit or you’re fired”), this is not voluntary and
would not amount to resignation
 The same goes for sudden emotional outbursts by frustrated employees. If someone gets really pissed off and
in the heat of the moment shouts “I quit!” – Courts in these cases have said the resignation is not immediately
effective. Instead, there should be a “cooling off period” during which an employee may change their mind
and take back what they said
 See Upcott
Upcott v Savaria Concord (2009) ONSC
When an employee announces they quit in an emotional outburst, employers should allow for a “cooling off period” for the employee
to change their mind and take back their resignation – such utterances may not constitute an immediately valid resignation.
Facts:
 U was manager for 8 years, having a bad day and was filling in for absent employee when he had confrontation with coworker who complained about him to HR.
 HR asked about It and he responded “Im Done!” Threw keys on desk of manager and took off – also told others he was done
 In a later phone call, management told U that the ER accepted resignation, and U responded that he never resigned
 Suing for wrongful dismissal
Issue: Had Upcott resigned or was he dismissed?
Held: For Upcott. He had not resigned, and the employer later dismissed him by not allowing him back to the workplace. For a 54year old manager with 8 years of service, the appropriate reasonable notice period was 7 ½ months. Damages for wrongful dismissal
awarded to Upcott in that amount.
Reasoning:
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
“The law is clear that where an emotionally upset and angry employee exclaims "I quit", the issue of whether he/she has
resigned is not clear cut. The law recognizes that such utterances may not constitute a valid resignation. Nor should such a
declaration be accepted without question by the employer. Rather, the onus is on the employer to not accept such a
spontaneous declaration without proper deliberation.” – para. 30
 Court said that the employer seemed to have rushed to treat Upcott’s actions as a resignation
 What the employer should have done, and what would have been reasonable in the circumstances, would have been to
recognize that Upcott was having what the Court deemed a “juvenile fit of anger,” and should have recognized this was just a
spur of the moment reaction and that he would soon return to work
 Court concluded this case was a wrongful dismissal
Demeyere:
 In this case, the employer really snapped up the resignation and this was found to be a dismissal. Since it was without notice,
it was a wrongful dismissal
 This puts employers in a tricky situation when an employee announces they quit – they must be careful not to snap up the
resignation, and instead they should allow for some cooling off period for the employee to change their mind and take back
their resignation
Wrongful Resignation
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An employee’s duty to provide notice also comes from the implied common law duty to provide reasonable notice; this duty
applies to both employers and employees
Again, this is an implied term, but its rebuttable
We need to look at the employment contract to see if the term has been rebutted
o Have the parties included their own term regarding notice of termination?
o In jurisdictions like Ontario where there is no statutory minimum, we don’t need to worry about the term violating
the legislation and therefore for being void (e.g. like the Machtinger situation)
If the parties have agreed to the amount of notice required for resignation, the agreement will be valid as long as it is
enforceable in all respects (e.g. part of an enforceable contract supported by consideration, etc)
Reasonable Notice
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We know that Courts assess reasonable notice for dismissal using the Bardal factors; idea behind these factors is to determine
the expected time that it would take for the employee to find another job
Reasonable notice for resignation is for the flip side; how long would it take for the employer to find a replacement?
o This is typically a shorter period of time than it would take the employee – had it been a dismissal – to find
alternative employment
How long is reasonable depends on the nature of the job
o e.g. A relatively low-skill level factory worker, someone who stocks shelves, etc – a replacement will typically be
easily found. This will point to a lesser amount of notice to be required for resignation in these cases
Some courts have said that ordinarily, two weeks notice of resignation is appropriate, except for more senior management
employees where it is suggested that reasonable notice is more in the range of four weeks
Occasionally, Courts have found a longer period of notice for resignation to be appropriate, sometimes even in the range of
ten months to a year
o These are rather exceptional cases, but help to show this measuring exercise can be rather unpredictable
o The Bardal factors for assessing reasonable notice for dismissal may be subjective and prone to manipulation, but
they at least provide us with some measure of predictability
Tree Savers International v Savoy (1992) ABCA
Example of a case where the Court found a longer period of notice to be appropriate for an employee resignation – 9 months held to
be appropriate, given the status and seniority of the employee
Facts: Two employees who left together to go into competition with their employer. There weren’t any restrictive covenants in place,
so this was not an issue. It was solely the wrongful resignation without notice that the employer sought to sue for.
Held: Court said these were senior level employees, and this meant a longer notice period for resignation. They didn’t specify a
concrete amount, but the range given was nine months to a year.
Reasoning:
 Court looked at the employer’s losses which flowed from the lack of notice, and set them at $73,000 per employee
 This included costs related to recruitment, which necessitated travel and associated expenses to find replacements for the two
employees
*Didn’t talk about this case any further beyond simply stating what the Court held.
Demeyere: If an employee gives working notice of the resignation (i.e. “I plan to leave in two weeks”), and then the employer
responds saying they can leave immediately, then the resignation becomes a dismissal.
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One way to think of it is as the employee offering to terminate the relationship with two weeks notice, and the employer can
either accept this or “counteroffer”
o If they counteroffer with “leave now” rather than staying for two weeks as the employee has offered, then the
employer has terminated the relationship and will be the one who owes reasonable notice of dismissal which is
assessed on the Bardal factors
o Again, this will generally be much longer than what the employee would have owed in terms of notice
If the employee fails to give notice, the employer may sue for wrongful resignation. But the measure of damages is the harm
that the lack of notice caused the employer
So, the measure of how much notice is reasonable is the time that it would take the employer to find a replacement, but the
assessment of damages is based on the actual cost – the expenses to the employer that flow from the employee’s failure to
give notice of their resignation
o Some costs of a resignation will be there whether an employee gives notice or not (e.g. recruitment and training of a
new employee – this will need to be done regardless of whether notice was given)
o Damages for wrongful resignation (the failure to give notice for the resignation) must be linked to the harm caused
by the lack of notice. What might this include?
 The employer’s sudden loss of the employee’s production during the period until a replacement could be
found
 If the employer must pay a temp agency to send a replacement on short notice
 If there are costs incurred such as having to temporarily transfer an employee from another location, etc.
In reality, it’s often not worth it for an employer to sue for wrongful resignation. There are very few cases where this
has happened
o Even if there are losses that can be attributed to the employee’s failure to provide notice, they’re rarely significant
enough to justify commencing litigation
o Remember, what we’re talking about here are contracts damages – therefore, the employer is asking to be put in the
position as though the employee had provided adequate notice
o While the lack of notice might have costed the employer some expenses, the employer was also relieved from the
obligation of paying the employee for what would have been the notice period of resignation. Therefore, this needs
to be offset in calculating any damage award
 We see this in Consbec v Walker (2016)
Consbec v Walker (2016) BCCA
Example of wrongful resignation damage calculations – Court held that financial losses from resignation did not exceed the amount of
money the employer saved by not having to pay the employee during notice period
Facts: Walker quit his position without notice after 5 years service. As a result of the sudden resignation, the employer had another
employee relocate from Sudbury to Kamloops to take over Walker’s position for one month. Later, the employer had a different
employee permanently relocate from Sudbury to Kamloops. The employer sued Walker for breach of contract for wrongful
resignation based on his failure to provide notice of his resignation, and claimed Walker should have to pay for all of the expenses that
the employer incurred as a result of his resignation without notice.
Held: Employee not liable for any damages.
Reasoning:
 In deciding the amount of notice, courts need to consider the employee’s duties and responsibilities, salary, length of service,
and the time it would reasonably take the employer to have others handle the employee’s work or to hire a replacement
o In this case, the Court said this amount of time was one month
o The award is not one-month’s salary though, because we aren’t trying to compensate the employee’s lost income.
Instead, we are trying to compensate the losses that the employer has suffered by result of the employee’s breach of
contract.
 Turning to assess damages, the Court said that the employer needed to demonstrate that it suffered losses by result of the
wrongful resignation and that those losses exceeded the amount of money it saved from not having to pay Walker’s wages for
the one month notice period
o Walker earned $6000 a month
o Expenses the employer incurred by bringing in the temporary replacement were $5875
 Court said the employer couldn’t claim the cost of moving the permanent replacement, because this cost is not linked to the
lack of notice
 If notice had been given, the employer would have still needed to find a replacement
 So, the employer’s costs were less than its savings, so it had no damages to claim
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RBC Dominion Securities v Merrill Lynch (2008) SCC
Example of employer success in recovering for wrongful resignation without notice – didn’t touch on this case much in class.
Notice period for resignation by Senior Management of Investment was found to be 2.5 weeks, so a relatively short period of notice
for resignation
However, still in such a short period of time, the Court accepted that the employer’s losses in that 2.5 week period was equivalent to
$40,000 per employee.
7b. Constructive Dismissal




Constructive dismissal looks like a resignation, but it is a forced resignation and so it is not a true voluntary resignation by
the employee
o A dismissal without notice is a wrongful dismissal. A constructive dismissal without notice is therefore also a
wrongful dismissal
It is, as the name indicates, a dismissal, but it is not an outright dismissal – it’s a constructive dismissal, as though the
employee was actually dismissed.
So, when an employee sues for constructive dismissal, they are suing for wrongful dismissal. BUT, they must establish the
additional element of the cause of action: showing that the employer’s conduct should be deemed a dismissal
In short: Constructive dismissal is a unilateral change by the employer in the terms or conditions of employees
o Not just any change – it must be significant or fundamental, or somehow strike at the core of the relationship.
Farber v Royal Trust Co (1997) SCC
Where an employer unilaterally makes a fundamental or substantial change to an employee's contract of employment — a change that
violates the contract's terms — the employer is committing a fundamental breach of contract that results in its termination and entitles
the employee to consider himself or herself constructively dismissed.
Facts: Farber was a regional sales manager. He supervised 21 offices and over 400 employees. The employer restructured and then
eliminated Farber’s position. They offered Farber his previous position as a manager of just a single branch, and this branch was not a
very good one. They also changed his pay structure, saying it would now be based on commissions alone. Farber figured this would
basically amount to a 50% pay cut (commissions only and being assigned to a single branch, and a poor one at that). Rather than
report to the new job, Farber quit and sued the company for constructive dismissal.
 Note: As it turned out, that single branch did in fact perform better than Farber thought it would. So, that pay cut was not as
significant as he thought it’d be.
Held: There had been a fundamental and unilateral change in Farber’s employment contract. He was justified in considering himself
to have been constructively dismissed. He was awarded 12 months reasonable notice.
Reasoning:
 SCC said that it was well established in the case law that a demotion to a less prestigious position could amount to a
constructive dismissal
 At the time of the offer to transfer Farber to an underperforming branch, it was reasonable for Farber to think this was a
major change to his compensation
o This is the time that is relevant = the time of the change (not looking back in hindsight)
 Didn’t matter that, as it turned out, the underperforming branch didn’t suck as much. What actually happened after he quit is
irrelevant – how is he supposed to know the branch would unexpectedly perform well?
 “… where an employer unilaterally makes a fundamental or substantial change to an employee's contract of employment — a
change that violates the contract's terms — the employer is committing a fundamental breach of the contract that results in its
termination and entitles the employee to consider himself or herself constructively dismissed.” – para 33
Demeyere:
 Constructive dismissal is based on the idea of a repudiation of the employment contract
 A repudiation of contract occurs when a party behaves in such a way that demonstrates that they know longer intend to be
bound by the terms of the contract
 When this happens, the innocent party can elect to treat the contract as terminated, which entitles that party to claim for
damages for any loss resulting from the breach, and relieves them from any obligation to continue performing under the
contract
o The repudiatory contract doesn’t automatically bring the contract to an end; it really depends on how the innocent
party responds
o There will only be constructive dismissal when the employee accepts the employer’s repudiation, and they do this
by resigning
 The language of accepting the repudiatory conduct is confusing; it doesn’t mean they accepted as in they’re okay with it, it
means that the employee is making it known that they are accepting that the employer has terminated the contract and that the
employee is treating the contract as at an end
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
It’s important that the employee make this explicitly known to the employer. If the employee doesn’t, and they just keep
working under the conditions, a Court may find that the employee has condoned the employer’s breach (similar to
condonation in the context of just cause).
o At some point, failing to object and assert one’s legal rights under the contract can effectively alter the terms of the
relationship. It’s as if the employee has implicitly agreed to the change
Elements of the Cause of Action
Note: Onus is on the employee to establish that there has been a constructive dismissal
Potter v New Brunswick Legal Aid Services Commission (2015) SCC; SCC recognizes two branches of constructive dismissal
*Note: Spoke about this case in more detail later.
1. Employer behaviour or conduct that may not breach a term of the k, but that makes continued employment intolerable
2.
Substantial breach of an essential term (the classic, and perhaps more common cases of constructive dismissal; the kind we
see described in the Farber passage above)
a. In a way, this second branch simply just restates the Farber test; this is how constructive dismissal has been thought
of for a while
Second Potter Branch: Breach of an Essential Term
To establish a constructive dismissal, court will ask the following three questions:
1.
2.
3.
Did the employer breach an express or implied term?
a. Involves identifying an express or implied term that has been breached.
If the employer breached a contractual term, was the breach “substantial” and detrimental to the employee? Would a
reasonable employee in the employee’s circumstances conclude that the employer’s breach of contract has substantially
altered an essential term of the contract?
a. In answering this question, the courts apply an objective test
b. Ask whether a reasonable employee in the employee’s circumstances would conclude that the employer’s breach of
contract has substantially altered an essential term of the contract
i. Look at the extent of the change – was it substantial?
Did the employee “accept” the repudiation and treat the breach as having terminated the contract?
a. “Accept” does not necessarily mean accepting the change, but accepting the repudiation – that the contract is now at
an end, owing to the employer’s repudiatory conduct
Note: Most often, it’s the second question that is the key point of focus. What is “substantial”?
Substantial Breach of an Essential Term – Past Examples
Changes to Compensation



Saw this in Farber; they changed his compensation structure and Farber reasonably believed this would result in a significant
pay cut
Generally, case law shows that a pay cut of 15% or more will almost certainly count as substantial; if less than this, it will
depend on the circumstances
Courts have said that if the cut, which is less than 15%, is a result of genuine financial difficulties faced by the employer (i.e.
could make the difference between the employee having a job or not), it might not count as a substantial change that could
give rise to a constructive dismissal
Changes to Position and Responsibilities

An employer might want to re-assign an employee to a different position, and in asking whether such a reassignment amounts
to a constructive dismissal, the first thing that must be asked is whether the employment contract gives the employer the right
to reassign the employee to a new position? Some k’s will have such a clause
o Recall The Queen v Cognos case; example of a K which contains a clause that entitles employer to make changes to
the employee’s job position
 Employer representation failed to mention funding for the project had not yet been secured. Recall, one of
the defences the employer raised was that there was a term in the employment k which said that the
employer had the right to assign the employee to a different project at any point. Employer argued this
clause should have made it known that the position was not secure, and so the effect of the clause was to
correct any misrepresentation made during the hiring. SCC rejected this argument, because how the
employee would have viewed the k in its terms would be affected by the misrepresentation about the
security of the project during the hiring process.
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



Even without such a clause, Courts have recognized that employer’s have an implied right to make reasonable changes in
assignments and job responsibilities as needed
o It might be regarded as the implied term of managerial prerogative – Courts have held that as long as the employer
acts in good faith and for legitimate business reasons, the employer can make changes, within reason, to the
employee’s position
A change that amounts to a demotion is more likely to be found to be a constructive dismissal – especially if there are
changes to not only responsibilities in the job title, but also to the reporting structure and the level of prestige attached to the
position (this was the case in Farber)
Again, for a constructive dismissal, it needs to be a substantial change
o Generally, lateral moves are not considered to be constructive dismissal, as long as they remain in the general skill
set for which the employee was hired
o Ultimately, these things will depend on the circumstances of the case, and if it goes to Court, there will be some
subjectivity involved based on the judge
Something to remember is that if the employer does want to make changes to the employee’s position, or some other aspect
of the job, the employer does have the option to terminate the contract and offer the new terms as a new k
o As long as the employer terminates the existing k with sufficient notice, then it won’t be liable for wrongful
dismissal or constructive dismissal because it’s not a unilateral change to the k, but an offering of a whole new k
which the employee can accept or not
o Note, however, that this would not amount to a “clean slate”. The employee’s length of service would not go back to
zero. If a wrongful dismissal claim arose down the road, the court will follow the Bardal factors and consider the
employee’s entire time with the employer
Change in Work Location


Where the employer is moving, or wants the employee to move to a different location, what is a reasonable exercise of an
employer’s implied right to make changes will again depend on a number of factors
o Is it in good faith?
o Is it for legitimate business reasons?
This will also depend on the nature of the job. For some jobs and in some industries, relocation is a lot more common
Leave of Absence and Suspensions




This is another category of cases with claims of constructive dismissals that have emerged relatively recently – those cases
where the employer orders an employee not to return to work for a period of time
o Can be for disciplinary reasons
o Can be a temporary layoff for financial reasons, etc
Layoffs
o If there isn’t an express or implied term in the contract entitling the employer to lay off an employee, a layoff
without pay will most likely be found to be a constructive dismissal
o If the right to impose a layoff cannot be tied to a contractual right, making this fundamental change will likely
amount to constructive dismissal
Disciplinary suspensions
o Courts have held that a short, paid suspension is okay, but a longer-term and unpaid suspension will amount to a
constructive dismissal. Again, it depends upon the terms of the contract in the end
o ONCA considered whether there could be an implied term permitting unpaid disciplinary suspensions in the
contract, and they concluded that there was not (Carscallen v FRI Corp, 2006)
o Carscallen v FRI Corp (2006) ONCA; court refused to read in an implied term allowing unpaid disciplinary
suspensions – such an implied term wasn’t necessary in order to give business efficacy to the k (remember this is
one of the tests for implied terms)
 Facts: Employee who was required to ship some materials to her boss at a conference overseas, and failed
to do this. Employer was upset and suspended her indefinitely. She sued them for constructive dismissal.
Employer argued there was an implied right to discipline an employee for poor performance, and this could
be done by way of an unpaid suspension. Employer also argued that the failure to perform the task
amounted to just cause.
 Held: Court rejected both arguments. Employee succeeds in claim for constructive dismissal, awarded 9
months reasonable notice.
 Reasoning; If an employer wants to have the right to discipline with unpaid suspensions, it must be
expressly agreed to in the employment k. This one incident was not serious enough to amount to just cause
for dismissal.
Administrative suspensions (sometimes referred to as administrative leave of absence)
o Periods of time where the employer orders the employee not to return to work. However, this is not because of a
shortage of work or some other disruption in the workplace, and not disciplinary in nature
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o
o
o
o
o
o
o
o
An employer may order one of these leaves if it wants to investigate a complaint it has received about the employee
or where the employer otherwise has reason to suspect the employee has committed some sort of misconduct
 If this is the case, Courts have held that an employer does have the right to order an administrative leave,
but it must be with pay
 Have also said that an administrative suspension can’t be for just any reason – it must be a reason that is
connected to the employee’s ability to perform the work, or that is otherwise connected to some legitimate
business interest of the employer
 e.g. An employee accused of theft or harassment: An employer will be justified in ordering an
employee not to return to work pending an investigation. However, if the leave is without pay, the
employer is risking liability for constructive dismissal.
Usually, disciplinary suspensions or layoffs are without pay, but administrative suspensions (which aren’t tied to a
lack of work or to discipline) are with pay – or should be, if an employer wants to avoid a claim of constructive
dismissal.
Potter v New Brunswick Legal Aid Services Commission (2015) SCC; an employer does have the right to place an
employee on a paid administrative leave, if it does so in good faith AND if the leave is both reasonable and justified
in the circumstances.
Facts: Potter was employed by New Brunswick Legal Aid Services Commission as Executive Director and was
appointed for a seven-year term. Unfortunately, the relationship between the Commission and Potter soured, and the
parties began to negotiate an early end to Potter’s contract. Before the negotiations could be completed, Potter left
work on sick leave. The Commission decided that if the buy-out negotiations with Potter were not completed by a
certain date, the Commission would ask the Lieutenant-Governor in Council to revoke Potter’s appointment for
cause. Accordingly, just before Potter’s return to work and unbeknownst to him, the Commission wrote to the New
Brunswick Minister of Justice recommending that Potter be terminated for cause. At the same time, the Commission
advised Potter that he “ought not to return to the workplace until further direction from the Commission.” Seven
weeks later, Potter commenced an action for constructive dismissal. The Commission took the position that Potter
had therefore resigned from his employment.
Issue: Had Potter been constructively dismissed?
Held: Employer failed to satisfy the necessary requirements for a good faith and reasonably justified administrative
suspension.. Employer had not been honest with Potter about the reason for the leave, and there was further bad faith
because the employer was also just looking for ways to terminate the contract. They were even looking into whether
they could manufacture a case of just cause against the employee.
Ratio:
1. Establishes two-branch constructive dismissal test (as outlined above)
2. An employer does have the right to place an employee on a paid administrative leave, if it does so in good
faith AND if the leave is both reasonable and justified in the circumstances.
Demeyere:
 The cases and the kinds of changes that we have discussed so far involve relatively well-defined and
distinct changes (a change in compensation, job responsibilities, geographic job location, or the imposition
of a suspension or a leave of absence)
 These kinds of cases fit within the second branch of the constructive dismissal test set out in Potter.
First Potter Branch: Employer Behaviour that Makes Continued Employment Intolerable



Lower courts had struggled with cases where an employee’s working conditions had changed and had become
poor/intolerable, but the Court couldn’t point to a term in the contract – whether express or implied – that had been breached,
to then ask whether the breach was substantial enough to amount to constructive dismissal
o These cases didn’t fit within the classic definition of constructive dismissal, which requires the employee to point to
a term which had been breached and then ask the Court to assess whether a reasonable person would regard this as a
substantial alteration to their employment conditions
So, the first branch in Potter which refers to employer behaviour that may not breach a term of the contract, but makes
continued employment intolerable is meant to capture these kinds of cases
In Potter, the court discusses Shah v Xerox Canada (2000) ONCA
Shaw v Xerox Canada (2000) ONCA
Establishing a case of constructive dismissal where there is no easily identifiable contractual term that has been breached (Demeyere
doesn’t think this was decided well) *decided before Potter*
Facts: Employee suffered from harassment and false allegations from her employer for 6 months, until she couldn’t take it any longer.
Held: Shah had been constructively dismissed.
Reasoning: Seemed to carve out an exception by saying that to make out a case of constructive dismissal, it wasn’t necessary for the
employee to be able to point to a breach of a particular term in the contract
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
If the employer’s conduct makes continued employment intolerable, as judged on a reasonable person standard – would a
reasonable person conclude that the employer no longer intended to be down by the k by making the employee’s continued
employment intolerable? – then there has been a constructive dismissal.
Demeyere:
 Demeyere feels that the court did not need to make an exception to the doctrine of constructive dismissal here
o They didn’t present it as being an “exception”, but that’s essentially what they did, and made it as though they
needed to clarify this whole second branch
 Demeyere also doesn’t think they had to say that it wasn’t necessary to point to a term that had been breached, just because in
this case there was no express term in the contract saying the employer wouldn’t be a jerk, harass employees or generally be a
very unpleasant employer
o Court could have said that it was an implied term of the contract, and the employer had breached it
o When an employee agrees to work for an employer, the employee does not agree to be subject to harassment
o It may be agreed to that there will sometimes be times of adversity, but there should be an implied agreement that
there will be a harassment free workplace
 At this time, Courts had already been recognizing employer duties of decency and good faith, so the court of appeal could
have reached the same conclusion here in that there was a constructive dismissal based on an implied term for the employer
to act in good faith, with decency and respect, etc. and this amounted to a significant change in working conditions
 But now, we have this second branch instead – while maybe unnecessary, it does provide clarity and it is now arguably
easier for an employee to establish a case of constructive dismissal where there is no easily identifiable contractual term that
has been breached
Colistro v TbayTel (2019) ONCA
Employee able to make out a claim of constructive dismissal based on her employer’s decision to re-hire a man who had sexually
harassed her in that same workplace years earlier.
Facts: Employer decided to re-hire an employee who had sexually assaulted a female employee in that same workplace years earlier.
The female employee objected, but the employer went ahead and re-hired him anyways and offered to transfer her to a different office.
She refused this offer and quit.
Issue: Was this a constructive dismissal?
Held: Yes, this was a constructive dismissal – 12 months reasonable notice awarded to the female employee, plus an additional
$100,000 in damages because of the employer’s bad faith conduct.
Reasoning: The employer knew that re-hiring this male employee would cause her severe trauma and would render continued
employment intolerable, and decided to do so nonetheless.
Demeyere:
 It’s not clear that, were it not for the claim of constructive dismissal, that the employee would have had any other remedy
here
 Perhaps if the harasser returned to work and she could establish that it gave rise to a hostile work environment, she could
establish that it gave rise to a hostile work environment and could bring a complaint under HR Legislation
 But without the claim of constructive dismissal, there would have been no remedy available if she had chosen to resign to
protect herself
 Even if this first branch of Potter is not strictly necessary, because the Court could always find an implied term that had been
breached, when the facts are tricky (as in this case) and it’s not clear whether the Courts would be willing to find an implied
term in the contract that has been breached, the second branch provides an avenue for the employee. Demeyere thinks this is
a good thing
Wronko v Western Inventory (2008) ONCA
Sets out the options that are available to an employee who believes they have been constructively dismissed; spells out the legal
consequences of each of these options.
Facts: Wronko was the VP of National Accounts and Marketing, AND worked for the employer for 17 years. His employment k
entitled him to two years salary plus bonus upon termination. When a new President took over, he attempted to change the
employment k to provide for 3 weeks pay for each year of service, to a maximum of 30 weeks. Wronko refused to accept this
proposed amendment. They couldn’t come to an agreement, so the employer gave Wronko 2 years notice that the provision in this
contract would be amended unilaterally. Wronko never agreed to the change, but he was given notice of the employer’s intention to
change the term with or without his consent in 2 years. After the 2 years, the employer sent an email to Wronko telling him the k had
been amended, the new agreement is now in force, and if you don’t accept the change then we don’t have a job for you. At this point,
Wronko considered himself constructively dismissed. He requested his 2 years salary in accordance with the termination provision in
his k. Employer refused and Wronko sued for wrongful dismissal.
TJ: Held that the employer had a unilateral right to amend the termination clause in the employment k because Wronko was given the
requisite notice of the change. Wronko had resigned – no constructive dismissal.
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ONCA: Disagreed. Awarded Wronko two years of pay in accordance with the termination provision.
 The employer cannot unilaterally change a fundamental term of the k if the employee does not accept that change. Wronko
was effectively terminated by that email.
 Added that Wronko was not under a duty to mitigate because the termination provision provided him with a lump sum
payment, not salary continuation
Reasoning: ONCA also laid out the possible scenarios for where an employer wants to introduce a change in the terms or conditions
of employment (at paras 34-36):
1.
“First, the employee may accept the change in the terms of employment, either expressly or implicitly through apparent
acquiescence, in which case the employment will continue under the altered terms
2.
Second, the employee may reject the change and sue for damages if the employer persists in treating the relationship as
subject to the varied term. This course of action would now be termed a “constructive dismissal” …
3.
Third, the employee may make it clear to the employer that he or she is rejecting the new term. The employer may respond
to this rejection by terminating the employee with proper notice and offering re-employment on the new terms. If the
employer does not take this course and permits the employee to continue to fulfill his or her job requirements, then the
employee is entitled to insist on adherence to the terms of the original contract. In other words, if the employer permits the
employee to discharge his obligations under the original employment contract, then – unless proper notice of termination is
given – the employer is regarded as acquiescing to the employee’s position”
Demeyere:
 In other words, the employer doesn’t have a unilateral right to change a contract. An employer can’t attempt to make such a
change by forcing an employee to either accept the change or quit
 What the employee did right in this case is that he made his objection clear and known, and he maintained it through the
supposed notice period
 What the employer did wrong is they maintained the position that this was a change in terms, and not the termination of one
contract and the offer of another
o Setting aside the particulars of the termination provision in this case, an employer could give notice sufficient to
terminate the existing k and offer a new contract to take effect at the conclusion of the notice period
o However, here the termination provision entitled Wronko not to notice, but to a lump sum payment equal to two
years pay. So, the k did not give the employer the option of ending the contract with working notice
o The parties had agreed to a different term; they specified the amount (2 years) and the manner in which it was to be
fulfilled (by pay in the form of a lump sum payment)
 Employer could have paid off the first contract, giving Wronko two years pay, and then offered a new contract. Then, it
wouldn’t have violated the first contract and Wronko would have been in a position to decide whether he wanted to accept
the second contract
 We saw a similar case in our unit covering the issue of consideration, looking at the creation and modification of the contract
of employment – the Lansai v Park Dentistry
o Employer wanted to introduce written contracts for all of its employees, and one of the issues was whether the
introduction of a written k amounted to a constructive dismissal
o Court said it did not, because the employer in this case had given 18 months notice for the introduction of the
written k
o It had given the employee a copy of this written contract 18 months in advance, and the employee reviewed it and
returned it within a few days
o So, there was notice of the change, but what really happened was the employer lawfully terminated the unwritten
contract by giving 18 months notice and offering a new written contract which would take effect in 18 months
o Here in Lansai, it was not a change in terms, it was a whole new contract; this was clear because there was actually a
new contract to point to  went from no contract, to a formal written contract
 The termination provision being modified in the change from the old contract to the new contract was that
we were replacing the common law implied term of reasonable notice (in the old contract, because there
was no written contract rebutting the term) and replacing that implied term with a new written and express
term in the written contract
 The implied right to reasonable notice at common law is a right to notice or pay in lieu of notice, so the
employer might have alternatively paid the employee 18 months’ pay instead of giving 18 months
reasonable working notice IF the employer had wanted the new contract to take effect immediately
 Demeyere said reasonable notice probably wouldn’t have been 18 months here in Lansai
 By giving 18 months working notice, the employer was probably erring on the side of generosity
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
If it wanted to buy its way out of the first unwritten contract with the implied term of reasonable
notice, it probably could have given less working notice or pay in lieu of notice based on what a
Court would likely say is appropriate based on the Bardal factors.
8. Damages for Wrongful Dismissal
Note: Remember that the breach of contract which gives rise to a wrongful dismissal claim is the employer’s failure to provide
sufficient notice of the dismissal. It’s not the fact of dismissal that makes it wrongful – it’s the failure to give notice.
Step 1 – Quantify the Amount of Notice to Which the Employee was Entitled
We have seen that the starting point for determining this is the contract of employment:
1. Indefinite term relationship
a. Look at the contract to see if the parties have rebutted the common law implied term of reasonable notice. If they
have not, use the Bardal factors to assess the amount of reasonable notice.
2.
Fixed term relationship
a. Look at what the parties themselves have agreed to in the contract with respect to notice of termination. If they
haven’t addressed it, or if what they have agreed to is unenforceable for some reason, then the default will be that
the employee is entitled to be paid for the balance of the term of the contract.
In assessing damages, the first question we ask is “What are the employee’s losses as a result of the employer’s breach of contract
(failure to provide sufficient notice) in accordance with either the express or implied terms of the contract?”
 Recall that, as a breach of k, the measure of damages for breach of k is what would be required to put the plaintiff in the
position they would had been in had the k been performed
 So, the position the employee would be in had the employer given sufficient notice. What we’re trying to determine then is:
o What money and other benefits would the employee have earned had they worked during the notice period?
Note: Specific performance is not available as a remedy for wrongful dismissal at common law. This is an equity-based remedy,
and is sometimes awarded in breach of contract cases in lieu of damages. Usually in the case where a monetary award would be
inadequate (e.g. something special about what the plaintiff stood to gain under the contract – perhaps a work of art, a specific piece of
real estate, or something else that cannot be replaced with money). This is not available in employment law cases at common law. As
a remedy for wrongful dismissal, specific performance would be an order that the employer re-hire the employee for the period of
notice. Courts won’t do this. They won’t order the parties to return to the employment relationship, as this would inconsistent with the
idea of freedom of contract (e.g. imposing a contractual relationship on a party against their wishes).
In the regulatory regime, and in the collective bargaining regime, reinstatement is an available remedy.
 Regulatory Regime:
o Reinstatement may be ordered under human rights legislation, under employment standards legislation, or
occupational health and safety legislation
 Collective Bargaining Regime:
o Arbitrators deciding cases of unjust dismissal award reinstatement all the time
o In this context, it’s presumed that reinstatement will be the award for a finding of unjust dismissal
o This is one of the key features which distinguishes the unionized context from the non-unionized context, which is
governed by the common law and reinstatement or specific performance is not available as a remedy.
Three Categories of Damages in Wrongful Dismissal Claims
1.
Compensatory Damages
a. Ordinary damages for breach of contract
b. Recall that the measure of contract damages is the reasonable expectations of the parties – what would it take to put
them in the position they would had been in had their reasonable expectations – the terms of their bargain – been
fulfilled.
c. In this case, it’s the expectation that the employer would have provided sufficient notice.
2.
Aggravated Damages (note that terminology is not always consistent here)
a. Damages for emotional pain and suffering that flow from a result of a harsh, insensitive, callous, dishonest or bad
faith dismissal by the employer, or something about the manner in which the employer carried out the dismissal.
b. May give rise to aggravated damages or damages for emotional distress.
3.
Punitive Damages
a. Punitive damages go beyond compensation. Instead, they are aimed at denunciation and punishment of the
employer.
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b.
Where the employer has engaged in conduct which the Court thinks should be denounce. The sort of conduct that
can be described as reprehensible, egregious or outrageous.
Compensatory Damages
The first thing we need to determine is the required amount of notice:
 Look first to the employment contract itself
 If the common law implied term of reasonable notice has not been successfully rebutted, the employee will be entitled to
reasonable notice at common law  turn to Bardal factors to determine the likely notice period.
Once we have the notice period, we can begin calculating what the employee would have earned during that notice period.
 What wages, salary or other benefits would the employee have earned during the notice period?
 Damages for wrongful dismissal are calculated from the date at which the employer breaches the contract (e.g. the date they
dismiss the employee without notice).
 If the employer has constructively dismissed the employee, damages will be calculated from the date that the employer made
the unilateral and substantial change to the contract of employment (the day the constructive dismissal occurred).
Potential Heads of Compensatory Damages
Note that this list is non-exhaustive. The below factors provide a general idea of what the measure of damages may be. Again, we are
trying to put the employee in the position as though the employer had provided sufficient notice so the employee could have worked
and continued to earn everything they were entitled to under the contract during that notice period.
Salary and Commission



Usually wages and salary are easy to calculate. Court might engage in some averaging exercise where the salary or hours of
work are inconsistent, in order to determine what the employee likely would have earned during the notice period based on a
BOP
Will also consider whether the employee would have been entitled to a raise during the notice period, or overtime pay, and
will make sure they are compensated for that loss of opportunity. Again, must be established on BOP
For commissions: any payment that would have come due during the notice period, or that the employee could show on a
BOP that they would have earned had they been given working notice
o In the case of commissions, the employee will want to lead evidence to assist the Court in this assessment
o It will help the Court to know what commissions had been earned in the past, any trends over the years or trends in
the market, etc. These are all kinds of things that can be used to come up with a figure for commissions or other
fluctuating elements of the employee’s compensation package
Benefits & Perks



Any benefits that an employee is entitled to (e.g. club memberships, rent-free residences, room and board, meal expenses,
subsidized mortgage, professional fees or employee discounts), the value of these benefits can be calculated by determining
the difference between the market value of these benefits and what an employee would have paid for them during the notice
period
Employee is also entitled to the “personal use” aspects of benefits, such as a car allowance or club memberships.
Employee is not entitled to include benefits that relate to job performance only (such as the use of a company vehicle
provided for business purposes only) in the calculation of wrongful dismissal damages.
Company Vehicles


As noted above, the employer is not required to compensate an employee for the use of a company vehicle if it was provided
to the employee exclusively for company purposes.
However, if an employee has use of a company vehicle for personal as well as work purposes, or if the vehicle was agreed
upon by the parties to form part of the employee’s total compensation, then the employer must compensate the employee for
the loss of its use during the notice period
Insurance Benefits



For example, life insurance, disability insurance, dental, drug, medical plans, etc.
Employers must continue to provide coverage for insurance benefits throughout the notice period if possible, and if not, they
must compensate the employee for the loss of those benefits
o If possible? This is because in some cases, disability insurers will require that employees be actively employed with
the employer in order to enjoy coverage under the group plan with the insurance company
o They are required to continue coverage during the period of employment standards notice, but there is no obligation
for the insurance company to make the coverage available to an employee who is not actively employed beyond that
ESA period of notice.
If an employee is no longer actively employed during a reasonable notice period, an employer can reimburse the employee
for the cost of attaining their own coverage during the remainder of the notice period.
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
Employer should take time to consider this when coming up with a severance package at the time of dismissal, or anticipate it
as a head of damages in a wrongful dismissal action, because this can be a significant amount of money (i.e. Canac Kitchens)
o In Canac Kitchens, the employee was diagnosed and treated for cancer after the end of the statutory notice period
(throughout which the benefit coverage had been maintained). During the remainder of the reasonable notice period,
he had his diagnosis and treatment. Court found that he was entitled to 22 months of reasonable notice, and it was
during this time (once the 8-week statutory notice period was up) that he was into the balance of the 22-month
notice period that his diagnosis occurred.
o The employer was ordered to pay over $200,000 for the short-term disability and long-term disability benefits that
the employee would have received had the benefit coverage been maintained throughout the common law
reasonable notice period.
 Even though the insurance company would have terminated the employee’s coverage upon completion of
his employment, followed by the 8 weeks statutory notice period and would not continue it beyond that into
the remainder of the 22 month reasonable notice period, it fell to the employer to compensate the employee
for that loss of benefits.
Stock Options


An employee dismissed without cause may continue to accrue and exercise stock options until the end of the reasonable
notice period, unless the employment contract or the stock option plan unequivocally states otherwise
Courts approach to stock options, as with other benefits, is pretty clearly exemplified in two cases on bonuses: Paquette v
TeraGo Networks Inc (2016) ONCA and Matthews v Ocean Nutrition Canada Ltd (2020) SCC
Bonus



It’s important to distinguish between discretionary and non-discretionary bonuses, because it will fall on the employee as the
plaintiff to show that the damages they are claiming on a BOP reflect losses that they would have experienced during the
notice period.
o So, if it’s an entirely discretionary bonus, it makes it more difficult to establish that the employee would have been
awarded the bonus, because it would have been during the notice period (a time when both parties know the
relationship is coming to an end).
Courts will recognize, at a minimum, a requirement that an employer have exercised the discretion in good faith. The Courts
will not accept the employer’s argument that it would not have given the bonus solely on the grounds that the employee was
leaving.
If the employer could establish there was likely deficiencies with their performance, and that this was the criteria on which a
bonus had been awarded or denied in the past, the employer will be more likely to be successful to defeat the claim for
damages for a discretionary bonus.
Paquette v TeraGo Networks Inc (2016) ONCA;
If an employer wants to make it so that a dismissed employee is not entitled to bonus payment, or compensation for loss of bonus
payments during the notice period, the employer will need to point to clear, explicit language in the contract which takes away this
entitlement during the notice period. Merely requiring “active employment” for the entitlement is not enough.
Facts: Paquette had been wrongfully dismissed and was awarded 17 months reasonable notice at trial. TJ, in assessing damages, did
not compensate Paquette for a lost bonus payment during the notice period. Bonus provision in the k required the employee to be
“actively employed on the date of the bonus payout” in order to be entitled to the bonus. TJ concluded that while Paquette was
“notionally” an employee during the reasonable notice period, he was not actively employed at that time. So, as per the terms of the k,
he was not entitled to the bonus.
Issue: Is Paquette entitled to the bonus?
Held: Yes
Reasoning: Disagreed with TJ decision.
 The requirement in the contract of “active employment” did not exclude compensation for bonuses to which the employee
would have been entitled during the reasonable notice period.
 “The basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation
for all losses arising from the employer’s breach of contract in failing to give proper notice.” – para 16
Set out a two-part test:
1. Was the bonus an integral part of the employee’s compensation package, thereby triggering a common law entitlement to
damages in lieu of the bonus?
2. If so, is there any language in the bonus plan (or the contract) that would clearly restrict the employee’s common law
entitlement to damages in lieu of a bonus over the reasonable notice period?
Turning to Paquette’s case, ONCA said that instead of focusing on whether the dismissed employee was “actively employed” within
the meaning of the bonus plan, the issue instead is what compensation Paquette would have been entitled to “but for” the wrongful
dismissal.
 Had he received reasonable notice of 17 months, he would have been actively employed when the company’s bonuses were
paid
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
According to ONCA, this is the proper way to look at it, and so, this would mean that the TJ had erred by looking at the
bonus provision on its own instead of in the context of the damages inquiry which is aimed at compensating the employee
during the notice period
 Only if the bonus plan’s wording unambiguously altered or removed the employee’s contractual rights, should it be said that
an employee is not entitled to be compensated for the loss.
Takeaways: If an employer wants to make it so that a dismissed employee is not entitled to bonus payment, or compensation for loss
of bonus payments during the notice period, the employer will need to point to clear, explicit language in the contract which takes
away this entitlement during the notice period. Merely requiring “active employment” for the entitlement is not enough.
Matthews v Ocean Nutrition (2020) SCC
Unanimous decision which underscores the point that, to limit an employee’s common law entitlement to a bonus during the notice
period, employers are required to use unambiguous language in the contract or in the bonus plan (echoes Paquette).
Facts: Matthews was a senior executive who had been with Ocean Nutrition for 14 years. As part of his compensation package, he
participated in the company’s long-term incentive plan which awarded employees for their past and ongoing contributions to the
company. Under the plan, a sale of the business triggered a realization event that would entitle qualifying employees to a bonus. In
2007, the company hired a new COO and he had begun reducing Matthews responsibilities within the company. By June 2011,
Matthews resigned and later claimed he was constructively dismissed. About 13 months after his resignation/constructive dismissal,
the company was sold and so triggered that realization event under the company’s long-term incentive plan.
 Language of the plan:
o 2.03 CONDITIONS PRECEDENT:
 ONC shall have no obligation under this Agreement to the Employee unless on the date of a Realization
Event the Employee is a full-time employee of ONC. For greater certainty, this Agreement shall be of no
force and effect if the employee ceases to be an employee of ONC, regardless of whether the Employee
resigns or is terminated, with or without cause.
o GENERAL:
 The Long Term Value Creation Bonus Plan does not have any current or future value other than on the date
of a Realization Event and shall not be calculated as part of the Employee’s compensation for any purpose,
including in connection with the Employee’s resignation or in any severance calculation.
Issue: Is Matthews entitled to this bonus payment, triggered by a realization event that occurred following his resignation, which was
found to be a constructive dismissal, and in the notice period?
 Company’s Position: Since Matthews was not actively employed on the date of the realization event, he was not entitled to
the bonus payments.
Trial: Judge held that Matthews had been constructively dismissed; awarded 15 months notice. Held that Matthews would have been
a full-time employee entitled to the bonus payment when the realization event occurred, had he not been constructively dismissed.
Therefore, TJ awarded Matthews payments for what he would have been entitled to under the plan.
COA: Upheld decision that Matthews had been constructively dismissed, and affirmed 15 months notice period. Reversed TJ decision
on entitlement to bonus.
SCC: Overturned COA decision and restored decision of TJ, and awarded Matthews his full bonus (valued at over $1,000,000)
Reasoning: Employees have a common law right to their bonuses during the notice period. Endorsed the two-part test articulated by
ONCA in Paquette to determine whether an employee should be entitled to damages for unpaid damages:
1. Was the bonus an integral part of the employee’s compensation package, thereby triggering a common law entitlement to
damages in lieu of the bonus?
2. If so, is there any language in the bonus plan (or the contract) that would clearly restrict the employee’s common law
entitlement to damages in lieu of a bonus over the reasonable notice period?
The SCC also emphasized the high standards to which contractual clauses that purport to limit an employee’s entitlements will be
held.
 Any contractual provision that purports to limit an employee’s common law rights should be brought to the attention of the
employee, and must comply with employment standards minimums
 Courts will scrutinize these clauses closely for enforceability and clarity in the language
 Matthews would have been eligible for a bonus had he continued to work for the employer during the notice period.
Therefore, because the realization event occurred during the notice period, Matthews is entitled to compensation for the loss
of the bonus.
Takeaways:
 SCC affirms that employees have a common law right to everything that would have received had they worked through the
notice period.
 This includes bonuses where the employee entitlement to the bonus is triggered during the notice period
 To limit an employee’s common law right to a bonus during the notice period, employers must use clear and unambiguous
language in their employment contracts or bonus plans.
Demeyere:
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



The plan in this case, as in Paquette, did not unambiguously limit or restrict Matthews’ common law right to his bonus
during the notice period
o Here, the Court did not have the language of “active employment” to parse
o However, they found that in the absence of clear language taking away the entitlement to the bonus, the employee
was presumed to be entitled to it.
Once again, we see how Courts will strictly construe contractual provisions which seek to limit or restrict employee
entitlements  language must be really clear and unambiguous if the employer seeks to limit or restrict what the employee
would otherwise be entitled to under the k.
In Matthews, the SCC said that to be unambiguous, the contract “must clearly cover the exact circumstances that have arisen”
o Employers can’t count on receiving assistance from the Court via a generous interpretation of the language; it really
needs to be clearly worded and clearly apply to the exact circumstances in the case
Again, merely stating that “active employees are eligible for a bonus” without more will be ineffective in limiting an
employee’s bonus entitlement that accrues during a reasonable notice period.
Aggravated and Punitive Damages
Note that the terminology is not particularly consistent in the areas of aggravated and punitive damages either.
 Aggravated damages have seen some significant changes over the last decade or so
o Sometimes called “moral damages”, damages for emotional distress, or bad faith damages.
o Sometimes, however, it seems that each of these terms are used to refer to something more precise
o So, cases can get confusing in certain areas due to years of inconsistent terminology.
It can be helpful to know that, in the background here is the idea that in contract law generally, that emotional stress which follows
from breach of contract is generally not compensable. The paradigmatic contractual relationship is one of economic exchange, and
hurt feelings or disappointment upon breach are irrelevant .
 This was the traditional view for a long time. The Courts had recognized that such damages could flow from the breach of
contract where the very matter contracted for was emotional well-being or peace of mind (e.g. contracts involving vacation
travel), but the contract of employment was not historically regarded as falling into that category.
 Rather, it was seen as a relationship that was based more on economic exchange.
Still, contract law doesn’t think of the employment relationship as all that different when it comes to damages.
 Courts have not explicitly recognized that one of the benefits that workers stand to gain through employment, and that they
stand to lose through dismissal, are those intangible things such as emotional satisfaction, self-esteem, a sense of self and the
satisfaction of being a productive member in one’s community
 The Courts have recognized that this is true in employment and often bear this in mind in deciding how to interpret
employment contracts (e.g. resolving ambiguity in contractual language, how to deal with a contract which violates
employment standards legislation), but the link has not been drawn between those features of employment and the ordinary
rules for contract damages in employment.
 Rather, compensation for emotional distress that flows from dismissal is seen as rather exceptional – the bar for
recovery has, in recent years, been set quite high to reflect this.
Wallace v United Grain Growers (1997) SCC
Pre-Honda Keays approach to “bad faith dismissal
Facts:
 W (45 years when started work). D enticed him to leave secure employment to join UGG (reluctant and worried about fair
treatment in his renumeration)  asked employer and they assured him he wold continue to be well paid and treated well
 Told him if he performed well he could be employed until retirement  he started employment with UGG in 1972
 Great success at company top salesman every year.
 14 years later (1986) terminated without notice and explanation. Days before, he was complimented on his work
 One week after dismissal, W received letter stating main reason as “inability to perform duties satisfactorily”
 At dismissal, W (59) employed for 14 years. Termination/allegations caused emotional difficulties – psychiatric treatment
 Unsuccessful at finding similar work, was in poor financial shape, and declared personal bankruptcy
 W sued for wrongful dismissal. ER alleged dismissal for cause and maintained that defence for over 2 years
 ER defence was withdrawn the day trial was set to begin and admitted they didn’t have a defence of just cause, this was just
strategy to drain W in hopes he did not pursue the action
 W still unemployed, suffering from profound distress, worried about reputation, going through bankruptcy
Issue: Should Wallace be compensated for his suffering? Should the employer be punished for its conduct?
 Aggravated damages to compensate for the emotional suffering?
 Punitive damages to punish the employer?
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Held: For Wallace. Creation of the infamous “Wallace damages” (which are now extinct). Justice Iacobucci increased Wallace’s
reasonable notice award from 12 months (based on Bardal factors – age, length of service, character of employment and availability of
similar employment), and then says it would be appropriate to bump this up to 24 months.
Reasoning:
 Iacobucci noted the special nature of employment, and suggested that “the law has to be mindful of the vulnerability of
terminated employees”
 Court considered aggravated and punitive damages very briefly. Seems that they were dissuaded from going this route
because they couldn’t find an independent actionable wrong
o Note: an independent actionable wrong in this case, or in any case, could be a tort or a breach of a contractual
provision – one that is independent of the contractual obligation to provide notice (the main breach). The
independent actionable wrong would need to be a breach of a separate term that is independent of this breach, or a
breach of statute
o These are the three categories of independent actional wrongs: (1) tort, (2) breach of some other contractual term,
or (3) breach of some other applicable legislation
 The SCC does entertain some of these candidate independent actionable wrongs, but find that none of them had been made
out in this case = therefore, no “hook” for them to hang aggravated and punitive damages
o Quite frankly, the SCC didn’t try all that hard – Demeyere
o Demeyere thinks part of the blame for this goes to employee counsel
 Employee counsel had argued that one candidate for an independent actional wrong was a new tort of bad faith discharge.
They argued the Court should recognize a novel cause of action here – the tort of bad faith discharge.
o Employee counsel had been writing about this and had been urging the courts to recognize this new tort in the past
 Demeyere thinks there really wasn’t much of an argument made in support of the judicial recognition of
such a new tort.
o He argued that it was employer conduct that should be discouraged, and it imposes harms and losses that should be
compensated – however, there wasn’t much more to the argument to justify why it should be newly recognized.
o Did not successfully convince the courts
 Iacobucci gave very short attention to the tort of bad faith discharge argument
 Another candidate independent actionable wrong was the breach of a separate contractual term
o Remember this case was in 1996 (so this is a bit novel still), but it could be argued there’s an implied term of good
faith in the contract and the employer breached this term. This could be an independent actionable wrong – it’s a
separate term in the k, something over and above the failure to provide notice, that the employer breached in this k.
 Iacobucci (Demeyere says surprisingly) doesn’t use this decision as an opportunity to recognize such an implied term; in fact,
he says that while the legal recognition of such a term might be a good idea, it would be “too intrusive for the court to read it
in” – it’s something better left for the legislature to do.
 Even though Iacobucci couldn’t find an independent actionable wrong (and didn’t try very hard to do so), instead of using
aggravated and punitive damages – and therefore skipping the independent actionable wrong analysis altogether, not having
to recognize a new tort or an implied term of the sort (which has now been recognized) – he says that in cases like this,
where you have an employer who has conducted a dismissal in a manner that is particularly harsh, callous or unfair
to the employee, the Court may respond by adding to the period of reasonable notice that is used in quantifying
damages.
o Thus, after figuring out reasonable notice on the Bardal factors, the court could then increase the number of months
to reflect the manner of dismissal
o This is exactly what he did here
 Iacobucci increased Wallace’s reasonable notice award from 12 months (applying Bardal – age, length of service, character
of employment and availability of similar employment); then says it would be appropriate to bump this up to 24 months.
o In doing so, Iacobucci talks about there being an employer obligation to act in good faith in the manner of dismissal
 Says breach of this obligation will be compensated through the addition to the notice period
 This has come to be known as “Wallace damages” or the “Wallace bump up”
Demeyere: It’s not clear what the source of this obligation is – it doesn’t seem to be a tort duty or a contractual term, and yet
Iacobucci says there is this obligation which when breached, gives rise to a claim for additional damages.
 Conceptually, this creation of the Wallace bump-up is a bit of a mystery
 It’s also not clear what this bump up was meant to do: was it merely meant to compensate, or is it punitive in nature instead
or as well?
 Iacobucci didn’t provide a formula or measure for calculating the bump up. Wallace’s damages went from 12 months to 24
months – was it just doubled? Or was it just an additional year? Does it depend on how bad the employer’s conduct was? Or
does it depend on the harm caused by the employer’s conduct?
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Problems with the Creation of Wallace Damages
Overall: Conceptually, it’s not very clear how Wallace damages are tied to the employment relationship – whether it’s damages for
breach of an obligation in tort or contract. Nor is it clear on the nature of these damages – whether they are compensatory, punitive or
a bit of both
Other Problems
1. Mitigation – important difference between aggravated and punitive damages on the one hand, and reasonable notice damages
on the other
o Reasonable notice damages are subject to mitigation – means that whatever the employee earns in mitigation will be
deducted from the reasonable notice damages
 If the employee has the good luck of finding another job before the reasonable notice period is up, then
they don’t get the balance of the reasonable notice damages (assuming the same level of compensation in
the new job as in the old – if they’re earning less, they can be compensated for the difference).
o So, this could mean that if Wallace found a job at or before the 12 month mark at the same rate of pay, he wouldn’t
see a penny of the bump up because he would mitigate away those losses and the second half of his notice period,
and therefore the portion of the award that was meant to compensate and/or punish the employer would be mitigated
away.
o In some cases after Wallace, courts noticed this issue and some courts ruled that Wallace damages shouldn’t be
subject to mitigation. However, this rule wasn’t universally recognized or applied by the courts.
2. As a practical matter, Wallace damages were very problematic because it meant that in practice, nearly every single wrongful
dismissal claim included a claim for Wallace damages as well – why not take the chance?
o With all of the uncertainty surrounding Wallace damages (Will they get double? Just a few extra months?
Nothing?), it made it hard for employees and employers to negotiate settlements outside of court
o Or perhaps it encouraged settlements, particularly for employers, because of the uncertainty – they wouldn’t be able
to confidently predict their potential liability for Wallace damages
o In any event, the Wallace decision really shook up employers
Overall, lots of problems with how this remedy was fashioned – both conceptual and practical. Not all that surprising that the SCC
made the decision they did in Honda Keays. Demeyere thinks the main reason that leave to appeal was granted in Honda was to
revisit the law of damages for wrongful dismissal, address these Wallace issues, and to ultimately get rid of Wallace damages.
Demeyere:
 Very clear that Iacobucci’s heart was in the right place and he wanted to find for Wallace. Clearly the employer had behaved
very poorly, and clearly Wallace had suffered as a result. He was a very sympathetic plaintiff.
 Note that as the law was at this time, it was necessary for both aggravated and punitive damages to first find an independent
actionable wrong. You needed to have some other legal wrong that the employer had committed, which could serve as the
“hook” on which to hang these damages
o Demeyere: These damages are “parasitic” in nature – you can’t just sue for aggravated damages or punitive
damages; they attach to common law actions in tort or contract. They are like “parasites” on the breach of contract
claim. Once the breach is established, compensatory damages flow and in exceptional cases, these parasitic or
extended damages may be awarded
o Because they are extended and exceptional damages, Courts have set a high threshold, and this is where the
independent actionable wrong requirement comes in.
 The law has evolved since then, but it’s not entirely clear
o While an independent actionable wrong seems to be required for punitive damages, its not clear whether its required
for aggravated damages
o It might be that these damages have been reconceptualized as ordinary compensatory contract damages
o There is case law and judicial analyses supporting more than one conceptualization of these damages
Demeyere thinks it is fair to say that the independent actionable wrong requirement is not required for damages for emotional
distress, moral damages, aggravated damages – whatever you want to call them – while it is still required for punitive
damages.
Honda Canada Inc v Keays (2008) SCC
Kills the arbitrary “Wallace damages”. As a consequence of Wallace and Keays, an employee can recover aggravated damages – or
“moral damages” or “bad faith damages” – if the Court finds that the manner of dismissal (not just the fact of dismissal itself) caused
the employee real physical or psychological harm.
Facts:
 K, employee of H was diagnosed with chronic fatigue system – H had disability program to deal with employees with
disabilities for accomodations etc, and the program permitted K to miss work with doctors note confirming reason
 H got frustrated with K’s frequent absences, and the doctors notes became more cryptic
 ER was suspicious and questioned whether K had the dsability and whether it justified his absences
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 ER asked K to take medical assessment with approved doctor and K refused without getting more information and purpose
 ER ordered K to meet with doc or he would be fired – took it as insubordination and therefore just cause for dismissal
 Gave him ultimatum... K didn’t return back to work and he was dismissed without notice  K sued for wrongful dismissal
ONSC: Found in favour of Keays – wrongful dismissal. Awarded 15 months’ notice (based on Bardal factors) and an additional 9
months Wallace damages on the basis of Honda’s harsh conduct leading up to the dismissal. Also gave Keays an unprecedented
$500,000 in punitive damages (the largest amount ever granted in Canadian employment law history) for Honda’s “high handed and
outrageous behaviour”.
 In support of that punitive damages award, ONSC pointed to breach of the human rights code and the employer’s failure to
accommodate Keays’ disability as required by human rights legislation.
o This was the “hook” – the independent actionable wrong which grounded the claim for punitive damages
ONCA: Reduced the punitive damages from $500,000 to $100,000 – upheld the rest of the damage awards. Appealed to SCC.
SCC: No cause for dismissal. Accepted TJ’s award of 15 months reasonable notice on the Bardal factors. Took away 9 months
Wallace bump up and the punitive damage award
Reasoning:
 Refusal to see the employer’s doctor was not cause for dismissal.
 While damages are recoverable for a bad faith conduct in the manner of dismissal, those damages should not take the form of
an addition to the notice period.
 Instead, the general rule of contract damages will apply – this is the rule from the classic contracts case of Hadley v
Baxendale – says contract damages are recoverable if they were within the reasonable contemplation of the parties at the
time the contract was formed
o “It follows that there is only one rule by which compensatory damages for breach of contract should be assessed: the
rule in Hadley v. Baxendale. The Hadley test unites all forms of contractual damages under a single principle …
Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of
the parties, those damages will be awarded not through an arbitrary extension of the notice period, but
through an award that reflects the actual damages” (para. 55-59)
 This paragraph kills the arbitrary Wallace damages
 We do still sometimes find some lower courts, from time to time, extending the notice period in a Wallace
fashion to reflect the employer’s bad faith conduct upon termination. But, officially, Keays killed the
Wallace approach and replaced it with the general rule of contract damages that losses can be compensable
if they are reasonably within the contemplation of the parties at the time of contract formation.
 SCC held that Honda had not acted in bad faith in the manner of dismissal. There was nothing malicious or unduly
insensitive in the manner in which the employer managed the dismissal.
o Therefore, Keays was not entitled to aggravated damages – or “moral damages” or “Keays damages” or whatever
you want to call them – nor was he entitled to punitive damages.
 Speaking to punitive damages issue:
o There was no independent actionable wrong, as required for punitive damages.
o Keays’ counsel had argued that Honda had breached the Human Rights Code by failing to accommodate his
disability, and this gave Keays an independent actionable claim under human rights legislation and this could be the
independent actionable wrong required for punitive damages
o SCC said that, even if the conduct was sufficiently vindictive and reprehensible as to warrant punitive damages,
there wasn’t an independent actionable wrong in this case on the basis of human rights legislation because human
rights legislation can’t be an independent actionable wrong, due to the courts earlier decision in Bhadauria v Seneca
College.
 Recall in this case, the SCC declined to recognize cause of action based on violation of HR legislation, or
on a novel tort of discrimination, saying that the existence of HR legislation and HR tribunals left common
law courts without jurisdiction to decide human rights matters.
o Breach of human rights legislation cannot serve as an independent actionable wrong for punitive damages.
 Demeyere thinks this is wrong and takes a much too narrow view of the common law Court’s jurisdiction.
Also makes too much hang on the independent actionable wrong requirement for punitive damages.
Nevertheless, this is the Court’s latest word on this issue.
 Demeyere would not be surprised if this ruling gets challenged at some point soon.
Notes:
 Demeyere: The Hadley standard is a difficult standard to work with. How can it be shown that the parties, at the time of
hiring and contract formation, had a bad faith dismissal and the harms and losses it would cause within their contemplation?
o By result, it’s just going to turn on whether the courts think it is reasonable to say that these parties reasonably
contemplated for losses flowing from a bad faith dismissal at the time that they first entered the employment
contract
 Interesting because the Court incorporated the Wallace decision into this new approach in an indirect way
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o
Perhaps recognizing that establishing a bad faith dismissal as something that is reasonably foreseeable at the outset
of the relationship is something that is hard to do, the Court said it is because of Wallace that this kind of loss is
reasonably foreseeable. Said that since the Wallace decision 10 years earlier, there has been an expectation by both
parties that employers will act in good faith in the manner of dismissal, and a recognition that failure to do so can
lead to compensable damages.
o Because Wallace damages had been available and were awarded for a decade, this raised awareness of bad faith
dismissal, its consequences, and the potential for legal liability as a result. While the Wallace approach is now dead,
it seems to have played an important role in the evolution of the law.
Takeaway: As a consequence of Wallace and Keays, an employee can recover aggravated damages – or moral damages or bad faith
damages – if the Court finds that the manner of dismissal caused the employee real physical or psychological harm. The length that
needs to be drawn is between the manner of dismissal and the harm. Important to note, this cannot be the fact of dismissal itself.
Dismissal can obviously be a bummer and cause emotional distress, but it’s the consequences of the manner of dismissal for which the
damages are being awarded. As with any damages claim, the employee will have to establish the harms and losses on a balance of
probabilities, and they will need to lead evidence to demonstrate these losses.
 No denying that it’s now harder to get damages for bad faith dismissal or harsh dismissal under the Keays approach as
compared to the Wallace approach
o Under Wallace, the employee didn’t have to prove losses or actual harm
 Now, under Keays, as with any contract damages (by return to the more traditional contract law principles of Hadley), the
employee must provide evidence of those losses to substantiate a damage claim and must prove the employer’s conduct
caused the actual harm, and that it’s related to the manner of dismissal and not just general feelings of upset from being
dismissed
o Under Wallace, these damages were entirely based on employer’s conduct. Now, employees must establish actual
harms and losses that they suffered and must also show that it was reasonably within the parties’ contemplation at
the time of contract formation that those harms and losses could flow from a bad faith dismissal
 One of the benefits for an employee who can establish that link, and can provide evidence of the harms they’ve suffered, is
that Keays damages actually compensate for the harms
o Rather than an arbitrary addition to the notice period, the Court can now fashion a damage award that reflects the
extent of the employee’s actual losses
o It’s now clear that these are more clearly designed to be compensatory, whereas it wasn’t entirely clear what
Wallace damage were. They seemed to be punitive in nature because they focused more on employer conduct than
on employee losses
 Also note the change in terminology here
o While the Court says there’s no difference between aggravated damages and moral damages, where aggravated
damages compensate for ordinary emotional distress resulting from breach of contract and moral damages
compensate for the emotional distress that flows from the manner of the breach of contract, the language of moral
damages has now been introduced into the wrongful dismissal context
o Demeyere says the way to understand this is as being synonymous with damages for bad faith dismissal and
aggravated damages and emotional distress damages – they are all one in the same.
Example of a post-Keays case in dealing with these damages: Calistro (ONCA) case that we previously discussed in the unit on
constructive dismissal had generous Keays damages that were awarded. $100,000 awarded for the mental suffering experienced by the
female employee who had been constructively dismissed when the employer re-hired a man who had, years earlier, sexually harassed
her.
Recent post-Keays Cases Dealing with Aggravated and Punitive Damages
Pate Estate v Galway-Cavendish & Harvey Township (2013) ONCA
Focus on punitive damages – example of a sizeable award of punitive damages in cases involving pretty egregious employer
misconduct
Facts: Pate was the Chief Building Inspector for the township, and was confronted by the employer for an alleged building fee
discrepancy. Was told that if he resigned immediately, the matter would not be reported to the police. He was not given any
particulars, an opportunity to respond or explain the discrepancy, and so he refused to resign. His employment was subsequently
terminated, and criminal charges were laid. After a four-day trial, Pate was acquitted of the criminal charges and then sued the
township for wrongful dismissal and malicious prosecution. At trial, it came out that certain pieces of exculpatory information had
been withheld from the police, and the responsible officer would not have proceeded with the charges if he had been aware of that
information the employer withheld. Even still, the trial judge dismissed the malicious prosecution action. Note that the parties had
agreed to 12 months reasonable notice in advance, and the TJ awarded $25,000 for punitive damages. TJ indicated he would have
awarded more, but was bound by the principle of proportionality. On appeal, ONCA ordered a new trial on the issue of punitive
damages and also on malicious prosecution. After two separate re-trials, TJ found the township guilty of malicious prosecution and
also increased punitive damages to $550,000. Township appealed, which brings us to this case.
TJ: Awarded $550,000 in punitive damages, on the basis that the employer had engaged in “significant misconduct.”
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They had spearheaded criminal proceedings against the employee over a period of more than 10 years. Judge determined that
the employer had acted intentionally, and it had a devastating impact on the employee, including his prospects for finding
alternative employment as well as on his marriage and personal life.
ONCA: Reduced punitive damage award to $450,000. Pate, who had passed away prior to this appeal, did not find another job before
he died. But his estate was also awarded the reasonable notice damages, along with these punitive damages.
Boucher v Wal-Mart Canada Corp (2014) ONCA
Deals with punitive damages and aggravated damages – fair summary of the current state of the law with respect to punitive damages
in wrongful dismissal actions.
Facts: Boucher was an assistant manager at Wal Mart. At some point, her manager asked her to falsify a report (a temperature log)
and she refused. This then began a six-month long period of verbal harassment and intimidation directed at Boucher. Boucher
complained to upper management, but this only increased the harassment she suffered from her manager. He would swear at her and
call her stupid in front of her colleagues, and even said to the HR Manager upon being told to back off, that he would not stop until
she “fucking quits.” Wal Mart had undertaken an investigation in response to Boucher’s complaints, but concluded that they were
unsubstantiated and that she was just trying to undermine her supervisor, and the she actually needed to stop what she was doing.
Boucher then quit and sued for constructive dismissal. She suffered physical symptoms of emotional distress that were diagnosed by a
doctor as being linked to stress. Wal mart continued to pay her salary and benefits for 8 months, even though her contract only entitled
her to just 20 weeks notice. She was successful in her wrongful dismissal claim, and a jury awarded her punitive damages against the
manager in the amount of $150,000 as well as another $150,000 for damages for the tort of intentional infliction of emotional distress.
Jury also awarded $200,000 against Wal Mart, plus an additional $1,000,000 in punitive damages against Wal Mart. All of these
damages were appealed.
Issue: Had the jury erred in awarding such sizeable aggravated and punitive damages against the manager and Wal Mart?
Held: Upheld the tort award against the manager, but reduced the punitive damages against him from $100,000 to $10,000. Upheld
the aggravated damages award of $200,000 against Wal Mart. Reduced the award of punitive damages against the employer from $1
million to $100,000.
Reasoning:
 The manager’s behaviour was a “marked departure from the ordinary standards of decent human behaviour” and therefore
warranted punitive damages, but when combined with the tort award of $150,000, the jury’s punitive damage award was
excessive
o Punitive damages are meant to punish and deter, and it was not necessary to award $100,000 on top of the tort
damages. The tort damages will be able to achieve the goals of punishment and deterrence with respect to the
manager.
 Found bad faith in Wal-Mart’s manner of dismissal to justify the Keays/aggravated damages award of $200,000. The
employer didn’t take Boucher’s complaints seriously, and they took the manager’s side and told Boucher to stop undermining
him, and threatened her with discipline if she didn’t stop.
 Punitive damages against Wal-Mart:
o Found there was an independent actionable wrong by breaching the implied duty of good faith and fair dealing in
employment contracts, which since the time of Wallace, had become more well-established in employment law
thanks in part to Bhasin (not an employment case, but recognized duty of good faith in all contracts)
o Said that $1 million in punitive damages was unnecessarily high and not rationally connected to the objective of
deterrence and denunciation, given that Wal Mart was already liable to pay $200,000 in aggravated damages, plus
being vicariously liable for damages awarded against the manager.
ONCA also provided guidance on how to award punitive damages in a case like this. In order to obtain a punitive damages award,
an employee must establish that:
The employer’s conduct is reprehensible, meaning that it is “malicious, oppressive and high-handed” and that it reflects “a
marked departure from ordinary standards of decent behaviour”; and
2. Notwithstanding any other compensatory award (e.g. wrongful dismissal damages), the punitive damages award is “rationally
required to punish the [employer] and to meet the objectives of retribution, deterrence and denunciation”; and
a. Considerations here could also end up resulting in a damage reduction, as it did in this case
3. There is an “independent actionable wrong” that was committed by the employer aside from the wrongful dismissal itself
(e.g. breach of duty of good faith and fair dealing, intentional infliction of mental distress, etc.)
Demeyere: This is a fair summary of the current state of the law with respect to punitive damages in wrongful dismissal actions.
1.
Galea v Wal-Mart Canada Corp (2017) ONSC
Aggravated and punitive damages discussion – another very sizeable award
Facts: Ms. Galea was hired as a District Manager in training at Wal Mart in 2002. Over the course of her employment, she received
numerous promotions and was considered a very valuable employee. Throughout her time, she was consistently praised and rewarded,
and it seemed as though she was being groomed for a higher leadership position. In 2008, she was promoted to VP, General
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Merchandise. Then, in 2010 she was informed that position was being removed by result of restructuring. Wal mart told her she was
still a valuable employee, and they would find her another position. However, they didn’t end up doing this. At one point, Wal Mart
announced in front of 500-600 people that Ms. Galea would be working as SVP, Merchandising and Strategic Initiatives – a demotion
from her previous position. Nonetheless, this position didn’t actually materialize, nor was she assigned any responsibilities or further
roles within the company. She was put in an ad-hoc position with no defining duties, and she was effectively red circled – she was
flagged as not being eligible for promotions, yet all this time there were assurances being made to her that she was a valuable
employee with a sustained future in the company. Then, when Ms. Galea returned from an 8-week course at Harvard (related to work)
in the fall of 2010, she discovered her personal effects had been packed up and moved to a different office, and that he work telephone
had been disconnected. Her employment was soon after terminated. Wal Mart paid her salary for 11 ½ months following her
termination. Galea brought an action for wrongful dismissal, and also claimed for aggravated and punitive damages.
Held: Aggravated damages of $250,000 awarded, as well as punitive damages in the amount of $500,000.
 Demeyere: this remains one of the highest, if not the highest, awards in an employment law case in Canada
Reasoning:
 Wal Mart had breached its implied duty of good faith to Galea, causing her serious mental distress
 In the course of litigation, court also found that Wal Mart either purposely or indefinitely delayed matters throughout
litigation, which caused her additional emotional distress beyond that of the termination itself
 Court found Wal Mart’s conduct was misleading at best, and dishonest at worst in the way it had treated Galea
 Court also found that Wal Mart’s treatment of Ms. Galea was callous, high-handed and reprehensible
o Summed up the behaviour by saying: ” It is not that Wal-Mart set Ms. Galea up to fail; it is that Wal-Mart built her
up, only to let her down that much more. That corporate behaviour was not just unduly insensitive, it was mean.” –
para 290
 So, court awarded a higher amount of punitive damages to deter Wal Mart from behaving in a similar manner in the future.
Extra Cases Beyond Course Readings
Bailey v Service Corporation International (2018) BCSC
*extra case – does not introduce any new ideas, but rather further examples of aggravated and punitive damages
Held: Employee was awarded $110,000 in punitive damages when the employer terminated him while on sick leave. Employee
actually found out about the termination when his wife was told by the insurance company. Then, the employer falsely maintained that
it had just cause for dismissal.
Overall: Particularly egregious employer misconduct.
Ruston v Keddco Manufacturing Ltd (2019) ONCA
*extra case - does not introduce any new ideas, but rather further examples of aggravated and punitive damages
Facts: Ruston was hired by Keddco as a Sales Representative in 2004, and quickly moved up the ranks. Keddco was then acquired by
another company in 2011 and Ruston was named President of Keddco. He was then terminated in 2015 (after 11 years’ service), and
he was informed that the dismissal was for cause. The employer alleged fraud, but never gave any details of these allegations.
Employer just threatened that if Ruston sued for wrongful dismissal, that it would counter-claim and it would be very expensive for
him. Ruston, however, was not discouraged and sued for wrongful dismissal. Employer counter-claimed for damages of $1.7 million,
and $50,000 in punitive damages claim.
TJ: Upheld wrongful dismissal claim, and dismissed the outrageous counter-claim
 Ruston awarded damages for 19 months reasonable notice, and given $100,000 of punitive damages and $25,000 in
aggravated damages
 Keddco appealed
ONCA: Dismissed appeal; trial judges’ decision upheld
 Said that reasonable notice damages of 19 months were justified based on the years of service, the age of the employee, the
level of his education (just grade 12) which would have a bearing on his prospects for alternative employment, as well as the
serious nature of allegations made against him.
 Said that punitive damages should be upheld on the basis that the employer’s conduct was egregious, deliberately deceitful
and purely an intimidation tactic.
 Also upheld the aggravated damages award on the basis that the employer’s conduct was designed to cause stress, and did in
fact result in mental distress to Ruston
Notes:
 Employer argued this was an error; he shouldn’t be able to get both aggravated and punitive damages based on the same
conduct
o This argument was dismissed. ONCA said the two awards do not amount to “double recovery” or “double
punishment”
o Aggravated damages are aimed to compensate a plaintiff for damages caused by the manner of the breach, while
punitive damages seek to punish and denunciate inappropriate or unfair conduct
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Takeaways: This case shows that while a Court should consider the combined effect of compensatory damages and punitive damages
in coming up with an amount for punitive damages that is sufficient but not excessive, it’s not “double recovery” for an employee to
get both. These two kinds of damages still have very distinct purposes.
Mitigation of Damages
Generally, in breach of contract cases, there is a duty on part of the plaintiff to take steps to mitigate avoidable losses. This duty
generally applies in wrongful dismissal cases, but it is necessary to look at the contract in question in order to determine whether the
employee owes a duty. We need to look at what the parties have agreed to.
 When a contract states a specific amount of notice, or pay in lieu of notice, to which an employee is entitled to upon
termination, the employee is under no obligation to mitigate their losses unless the contract contains an express term
requiring the employee to do so.
o For example, if the contract says “the employer shall provide the employee with 3 months notice of termination or
pay in lieu of notice” – this is the employee’s entitlement.
o Without more, and no mention of a duty to mitigate, the employee is entitled to this notice.
o It doesn’t matter if the employee finds a job the next day, they get their contractual entitlement from the employer
who dismissed them in addition to whatever pay they may receive from their new employer in subsequent positions
 The same is true of a fixed term contract – we saw this in Howard v Benson Group
o Where the employer terminates a fixed term contract before the end of the term, the employee is entitled to the pay
he or she would have earned for the balance of the term and there is no duty to mitigate, unless the contract
expressly states there is.
o The difficulty comes where we are dealing with a dismissal where the employee is owed reasonable notice (where
the duty to give notice flows from the implied common law duty of reasonable notice).
 In these cases, assuming the contract doesn’t say other wise, the employee is under a duty to mitigate
 This means that an employee who is dismissed without reasonable notice, but claims they are entitled to
reasonable notice, must take reasonable steps to limit the damages that they suffer as a result from not
receiving reasonable notice
 What are reasonable steps?
o The issue of mitigation is largely an exercise of assessing reasonableness of employee’s actions
o Simple example:
 Suppose a Court finds that an employee who was wrongfully dismissed was entitled to 3 months reasonable
notice. Then, the Court will look at what happened in those 3 months following dismissal (remember, if
this is at Court, typically it’s well past that 3-month period).
 If the dismissed employee found another job, whatever they earn in that new job will be mitigating their
damages in full or in part.
 If they find a job after the one-month mark (suppose at the exact same rate of pay), they would
only be entitled to one month of reasonable notice from their employer because they have
“mitigated” their losses in months two and three.
 Suppose they find another job right away, but it pays slightly less ($4000 a month instead of $3500 a
month), they will be able to claim the difference of $1500 as damages. They have “mitigated away” the rest
o In these examples, the employer actually benefits from the employee’s successful mitigation efforts
o However, note that the employer can also benefit if the employee does nothing at all
 Suppose the employee took no steps to find another job after being wrongfully dismissed – the Court may
find that the employee has failed to discharge the duty to mitigate, and make a deduction from the damage
award to reflect that
 The Court may do this by speculating about what the employee could have reasonably expected to earn had
they actually tried to find a job, and deduct that from any damages owed by their former employer.
 This is kind of a “Catch-22” situation for the employee – they must take reasonable steps to mitigate their losses, and if
successful, any earnings they make in mitigation will work to the benefit of the employer. But if they don’t take steps to
mitigate their losses, this can also work to the benefit of the employer.
The Duty to Mitigate – what is the Standard of Mitigation that is Required?
The burden is on the employer to establish that the employee could have mitigated their losses but failed to do so. This may mean
demonstrating that the employee did not take reasonable steps to find another job, or that they failed to accept a job offer that, if
accepted, would result in a mitigation of damages.
 In practice, this means that employers will want to have evidence of job vacancies or job opportunities that were available
during the notice period for which the employee was qualified and could have applied for.
 This can be useful information for settlement discussions, and in trial, the employer may also cross-examine the employee on
what steps they took, asking them about particular job advertisements and whether they applied for them, and so on.
An employee is not required to accept any job.
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The duty is to take reasonable efforts to mitigate their losses.
Everything turns on reasonableness – these cases are very fact specific, and depends on what the court finds reasonable in a
particular case.
Forshaw v Aluminex Extrusions (1989) BCCA
Articulation of the test of what counts as “reasonable efforts” in mitigation.
Ratio: “The duty to act reasonably … must be a duty to take such steps as a reasonable person in the dismissed employee’s position
would take in his own interests – to maintain his income and his position in the industry, trade or profession. The question of whether
or not the employee has acted reasonably must be judged in relation to his own position and not in relation to that of the employer who
has wrongfully dismissed him. The former employer cannot have any right to expect that the former employee will accept lowerpaying alternate employment with doubtful prospects.”
 This means that, what counts as reasonable will really depend on the facts of each individual case.
 In particular, we need to look at the employee’s position in assessing what is reasonable in their job search efforts following
their dismissal – their income, position with the former employer, their status in the particular industry.
 Note that this means an employee can reasonably decline job opportunities that would result in a substantial step backwards
from their previous job in terms of pay or status
 An employee is not expected to apply for jobs they aren’t qualified for, or to accept a part-time position to replace a full-time
position
In some cases, if job opportunities are scarce for the employee, then reasonable mitigation might include:
 Returning to school
 Acquiring new training to put the employee in a position to find secure employment down the road
 May require that the employee re-locate if no jobs are available locally
o Courts will be very mindful of the employee’s position though, including their age, personal circumstances, the
extent to which they’re mobile, consideration of family commitments, etc in deciding what is reasonable
 Opting to start a new business and become self-employed rather than finding a new position might be found to be reasonable
mitigation, but not if it’s a risky venture and if secure alternate employment opportunities were available at the time
o Again, no clear-cut rules here – depends on what is reasonable in the circumstances.
What about where the employer who has dismissed the employee then offers them a position? (e.g. the duty to mitigate with a job
offered by the same employer who has just dismissed the employee)
 A lot of litigation about this recently, particularly following the SCC’s decision in Evans v Teamster Local Union 31 (2008)
 Courts have held that an employee may be expected to accept that position, or to stay in a position with the employer who has
just dismissed them (perhaps constructively dismissed them) in order to satisfy the duty to mitigate.
Evans v Teamsters Local 31 (2008) SCC
Duty to mitigate requires an employee to accept a job offer from the former employer if a reasonable person in the employee’s
position would have accepted the employer’s offer – two pre-requisite conditions.
Ratio: Set out two conditions that would be met so that a court can conclude a reasonable person would have accepted a job offer
from the same employer in satisfaction of the duty to mitigate:
1. The salary offered is the same, the working conditions are not substantially different or the work demeaning, and the personal
relationships are no acrimonious;
2. Returning to the old workplace would not place the employee in an “atmosphere of hostility, embarrassment or humiliation”
Note: One thing an employer can do to try and minimize, or eliminate entirely, their liability for a wrongful dismissal, is to offer a
dismissed employee a job opportunity during the notice period.
 By staying on, they would mitigate their losses
 If they refuse, as long as it’s not the case that the relationships are acrimonious or that it would be embarrassing or
humiliating to return to the workplace in the position offered, the employee may be found to have failed to discharge the duty
to mitigate
o This can result in reduction or even elimination of their damages for wrongful dismissal.
Demeyere:
 The Evans decision that an employee may be required to mitigate by staying on with the employer who has just fired them
has been subject to some criticism.
o Abella J, in her dissenting opinion, thought this ruling was unfair
 The requirement to mitigate in a job from which you’ve just been wrongfully dismissed permits the
employer “to unilaterally transform their unlawful treatment of the employee into a lawful dismissal in
which the employee is entitled to no notice”
 So, depending on the facts of the case, the Evans ruling may give employers a way to avoid liability for what would
otherwise be a wrongful dismissal
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It’s important to note that an employee who chooses to stay with their former employer, as Evans seems to require them to at
least consider to do, they should make it clear that this is what they are doing – choosing to stay on with the employer purely
to mitigate their losses.
o This is especially important in cases of constructive dismissal
o If the employee chooses to stay on in the altered position in satisfaction of the duty to mitigate, the employee should
make it known to the employer that those are the conditions on which they are staying – it is not because the accepts
or condones the employer’s unilateral changes (as this could undo a finding of constructive dismissal).
OVERALL: Howard v Benson shows that in the case of fixed term contracts, there is no duty to mitigate unless the contract
specifically says so. The same is true in an indefinite term contract where it specifies a precise amount of notice or pay in lieu of
notice that must be given. If the contract does not obligate the employee to mitigate their losses, there is no duty. When we talk about
the duty to mitigate, we’re talking about cases where the employee is entitled to reasonable notice pursuant to the common law
implied term.
Brake v PJ-M2R Restaurant Inc (2017) ONCA
Clarifies a number of issues re: mitigation after dismissal and also made the limitations clear on an employer’s ability to rely on
mitigation earnings to reduce it’s liability; provides a breakdown of which sorts of earnings that an employee has during the notice
period which are in fact deductible.
Facts: Brake was a 20-year employee of PJ M2R Restaurants. Brake managed the employer’s McDonald’s franchise in Ottawa, and
she also worked part-time at Sobey’s while she was a manager at the McDonald’s. After several years of very strong performance, she
was placed on a 90-day performance improvement plan. At the end of the program, she was told she had failed and was given the
choice of a demotion to assistant manager or a termination. She refused the demotion and was terminated. Brake sued for wrongful
dismissal. Following her dismissal, she continued to work at Sobey’s but wasn’t able to find a comparable position to that which she
held as manager at the McDonald’s. She found what the Court characterized to be a “substantially inferior” position as a cashier at
Home Depot.
TJ: Found the complaints about Brake’s performance did not amount to just cause. Therefore, it was a wrongful dismissal, and the
court set the notice period at 20 months. Employer appealed.
ONCA: Dismissed the appeal, upheld the TJ’s decision about constructive dismissal through the demotion. Majority also upheld the
notice period of 20 months.
 Much of the decision focused on issues relating to the mitigation of damages
Reasoning:
 Majority found that Brake was not obligated to accept the demotion in order to mitigate. The Court followed the criteria from
the Evans decision and upheld the trial judge’s finding that it would have been humiliating for Brake to accept the demotion.
o Therefore, this was not something that a reasonable person would be expected to do in mitigation of damages.
 Agreed with the general principle that an employee may have wrongful dismissal damages reduced by whatever they earn
during the notice period. However, none of the earnings in this case should be deducted.
o Unclear that the income she had during the notice period should offset the employer’s liability
o With respect to the Sobey’s job, the Court characterized this as “supplemental income” which she would have
earned anyways had she continued to work at McDonald’s, so it shouldn’t be deducted.
o Also looked at the cashier position at Home Depot, and the earnings were quite modest. The Court said this amount
should also not be deducted because the character of employment was substantially different.
 Speaking to the substantially inferior position at Home Depot:
o “When a wrongfully dismissed employee accepts new employment during the notice period, the question of
whether or not to deduct those earnings depends on the trial judge’s assessment of mitigation. If the trial judge
finds that the new job is comparable to the old one, the earnings should be deducted as mitigation of damages. If the
trial judge finds that the new job is vastly inferior to the old one, such that the employee would not be in breach of
the duty to mitigate if she turned it down, the earnings should not be deducted … In this case, the employee was not
an executive who could afford to live during the notice period without a salary. It was in her interest to try to obtain
a comparable managerial position, but she was not able to do so, and because she could not afford to earn nothing,
she had to take the only job she could find. The trial judge determined that the job she found was in no way
comparable to her managerial position with the appellant. As a result, it did not have the effect of mitigating
the damages she suffered from her wrongful dismissal by the appellant employer and should not be deducted.” –
paras 159-161
Demeyere: Take a look at the case for the categories of income that will be excluded from consideration as mitigation income.
 Employment insurance income, income during the statutory notice period, as well as the positions in this case (supplemental
income, substantially inferior positions) will not be deducted.
 While this decision has received some criticism for drawing a distinction between certain positions where the income would
be deductible and others where it would not be (e.g. where the new position is substantially inferior), Demeyere says the
passage above is quite persuasive.
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Wrap-Up:
 The idea of the duty to mitigate is quite simple, although there may be disagreements about some of the finds of what is
reasonable and what is not, what is substantially inferior and what is not, etc.
 These cases are all very much fact driven and turn on the court’s assessment of reasonableness.